On 6 October 2016, the UK's Secretary of State for Communities and Local Government, Sajid Javid, overruled local councillors on appeal and approved Cuadrilla's plans to explore for shale gas in Lancashire. Cuadrilla has been granted planning permission, which is subject to certain conditions, to drill and use hydraulic fracturing for four horizontal wells at its Preston New Road site. A second opportunity to drill four further wells at its Roseacre Wood site could soon be granted, subject to Cuadrilla providing further evidence on road safety. As applications for both sites were rejected by Lancashire County Council last year, the decision signifies a shift in the political support for shale gas in the UK, although it remains a highly debated topic.
The approval is only the UK's second, and follows the approval granted to Third Energy in May this year to extract shale gas from an existing well (for more details, please see a previous briefing here).
Regulatory developments paving the way for shale
In recent years, incremental changes have been made to the UK's regulatory regime to progressively remove certain legal and practical hurdles to the development of the UK's onshore petroleum resources.
Prior to the entry into force of the Infrastructure Act 2015 ("IA 2015"), companies seeking to drill onshore for shale gas were required to obtain the consent of multiple landowners to gain underground access, often through protracted negotiations, or risk committing trespass [1]. The IA 2015 amended this position and permits the exploitation of petroleum or geothermal energy in "deep-level land" (i.e. at least 300 metres below the surface) by operators, without the requirement to obtain prior consent of surface landowners. The operator will still be required to obtain a Petroleum Exploration and Development Licence, planning permission and other necessary consents.
The IA 2015 also contains environmental safeguards which were brought into force on 6 April 2016, namely requiring a well consent to impose a condition prohibiting associated hydraulic fracturing [2] at a depth of: (i) less than 1,000 metres; and (ii) 1,000 metres or more unless consented to by the Secretary of State (together, a “hydraulic fracturing consent”) . A hydraulic fracturing consent can only be issued by the Secretary of State once certain conditions have been met, which include the meeting of: (i) safeguards relating to environmental impacts and health and safety; and (ii) additional conditions set out in section 4A(6) of the IA 2015. The Secretary of State is also required to satisfy itself that it is appropriate to issue the well consent.
With regards to gas transportation, all onshore gas producers in the UK (whether conventional, unconventional or bio-methane) were previously required to hold a transporter licence under the Gas Act 1986, unless specifically exempted for a defined period. This was identified as a barrier to the development of the UK onshore gas sector, and a class exemption was therefore introduced to cover all forms of onshore gas production. This exemption removed the requirement to hold a gas transporter licence where a person conveys gas from an onshore gas processing facility to a pipeline system, provided that the length of pipeline through which the gas is conveyed does not exceed 16.043 kilometres.
A bright future for UK shale?
In recent years, there has been a clear shift towards a more permissive regulatory regime for shale gas exploration and exploitation in the UK. The decision to allow Cuadrilla to carry out hydraulic fracturing for shale gas marks a significant step for the UK’s shale gas industry, and for the future of energy security in the UK as an alternative to importing gas from abroad [3]. With a decision looming on the horizon in respect of IGas's application for shale gas exploration in north Nottinghamshire, expected this November, we will shortly have a clearer steer on whether 2016 will be the year UK shale moved to full steam ahead.
1In Bocardo SA v Star Energy UK Onshore Ltd and another [2010] 3 All ER 975, it was held that the landowner could sue for underground trespasses.
2"Associated hydraulic fracturing" is defined in the IA 2015 as fracking for shale gas that is: (i) carried out in connection with use of a well to search, bore for or get petroleum; and (ii) involves (or is expected to involve) the injection of more than 1,000 cubic metres of fluid at each stage or more than 10,000 cubic metres of fluid in total.
3The first shipment of US shale gas arrived in the UK for use at Ineos’ Grangemouth refinery in Scotland on 27 September 2016.
