The Blog

Roaming Freely in Search of Shale

Few topics arouse such strong opinions in the UK as much as the question of whether we should exploit the nation's potential onshore shale gas and oil reserves through fracking...

Few topics arouse such strong opinions in the UK as much as the question of whether we should exploit the nation's potential onshore shale gas and oil reserves through fracking. The Government hopes that:

• Commercially exploitable reserves exist; and

• Exploiting those reserves will lead to lower energy prices and reduced dependence on imported energy supplies.

If the UK is to develop a successful shale gas and oil industry, one of the key issues that needs to be overcome is underground land access.

Every law student is taught that the English common law provides a landowner with "ownership of the space up to the heavens and down to Hades". This principle worked well until the invention of powered flight. After that, Parliament and the Courts had to modify the law to prevent aircraft operators committing a trespass every time they flew over a different property.

The Courts have taken a rather different approach underground. In 2010 the English Supreme Court ruled that an oil company drilling under land without the landowner's permission had committed a trespass. It awarded the landowner £1,000 in damages - hardly a significant sum, but the judgment nonetheless reflected the fact that, as the law stood, the company should not have been drilling under the land without permission.

Many landowners have therefore publicly announced that they will refuse access to drilling beneath their land, highlighting the dissatisfaction with the current state of the law. According to the current framework:

• The Government has chosen to nationalise oil and gas reserves, but the underground strata in which those hydrocarbons are contained belong to the surface landowners.

• Companies wishing to exploit resources must obtain surface landowners' consent to drill underground, even though they may hold a licence from the Government granting them the exclusive right to exploit all hydrocarbons in that area.

• Where a surface landowner refuses permission for drilling under their land, there is a procedure whereby the company seeking access can apply to the Secretary of State for Energy and Climate Change and the Courts for an order granting access, but this can take up to two years.

If drilling for shale gas and oil in the UK is going to happen any time soon, the law of trespass clearly needs to change. The Government has set out its proposal for this in a consultation paper published in May 2014 and, depending on the outcome of this, the proposal will be taken forward in the Infrastructure Bill announced in the Queen's Speech on 4 June 2014. However, given that there is only one proposal, the outcome of the consultation seems a foregone conclusion.

Both companies extracting hydrocarbons and companies drilling for geothermal energy in land at least 300 metres below the surface would be given a statutory right of access in return for making a voluntary "community payment" of £20,000 for each horizontal well longer than 200 metres and issuing a public notice of their proposals for drilling.

Regardless of the rights or wrongs and the potential environmental risks of drilling for onshore hydrocarbons and geothermal energy, property rights are not the best legal means for controlling drilling activities. The UK has well-developed planning and environmental regulatory regimes which are far better suited to that task. From that perspective, the proposal is sensible.

We also need to remember that there is a precedent for granting access to underground areas. The Coal Industry Act 1994 gives licensed coal mining companies an immediate statutory right to use underground land. There is no obligation on them to pay for this right, so the proposed £20,000 "community payments" seem generous in comparison.

The only obvious thing missing from the proposal is the setting up of a compensation scheme for landowners whose properties are damaged as a result of underground drilling. In the case of coal mining, this damage is normally caused by subsidence. The risk of subsidence or earth tremors caused by shale oil and gas and geothermal drilling might be small, but that is not the point.

A compensation scheme would provide landowners with the comfort that if something should go wrong (however unlikely that might be) and their property is damaged as a result, they will be compensated. In many cases that could mean the difference between opposition and support.