by Paul Stafford of Ten Old Square
Fracking, the extraction of natural gas from beneath the earth by the process known as hydraulic fracturing, has transformed the US economy within less than a decade. It has tapped into massive reserves of US continental shale gas and reduced the price of gas for industry and consumers to a third of what it was before fracking began. The UK too has abundant reserves of shale gas, whose exploitation is now government policy and whose extraction involves not only the niche operators Cuadrilla and IGas but also the gas major, Centrica, which in June 2013 acquired a 25 % stake in Cuadrilla’s Bowland shale exploration licence in Lancashire. Work on the government’s 2015 licence round is under way. UK fracking is becoming big business.
The English law of fracking has yet to be developed. Politicians and industry appear confident that the environmental problems caused by fracking in the US will not happen here due to improved technology and the ability of central and local government to use environmental and planning controls for the protection of communities in areas where fracking takes place. What remains, however, are the property law issues, where the differences between the US and the UK are striking. In the US, shale gas belongs to the landowner whereas in the UK it belongs to the Crown. English law provides a large measure of protection to landowners while the small size of English landholdings means that the number of landowners affected by a single drilling well is likely to be substantial. If the drilling company proceeds without their consent and co-operation, it could face delays in starting or continuing to drill or it could find itself unable to drill or continue drilling at all.
The common law and statutory rights available to landowners are extensive and complex, and mean that in the majority of cases landowners will be able to extract financial compensation from and have their costs paid by the drilling company. Existing case law offers guidance on how the courts will approach some of the issues involved, including those associated with horizontal drilling. But so far it offers little if any guidance on others such as the courts’ attitude to disturbance caused or likely to be caused to the substrata of adjoining owners or to the position of owners of mineral rights.
Apart from the drilling companies and owners of the land on which the rig and site will operate, the parties interested in the development of each and every site will include:
Like the railway boom of the 1840s, fracking lies at the interface of advancing technology and land ownership, and it offers both challenges and opportunities to drilling companies and landowners. Just as railway construction developed the law with the principles of compulsory purchase and compensation in the Lands Clauses Consolidation Act 1845, fracking is likely to have a similar effect. But this time the law will be more complicated and the costs will be much higher.
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