Skip to content

Shale Gas: Implications for landowners and trustees

With the UK relying so heavily on imported energy, attention is increasingly turning to its extensive reserves of shale gas. This is big business in the USA, where such gas has been extracted for several decades, through a process known as "fracking" (shorthand for hydraulic fracturing). Fracking effectively began in the UK in 2011 at a site near Blackpool, and extraction is also expected to start at sites in Lancashire and Sussex in the near future.

What is fracking?

Fracking involves blasting pressurised water, chemicals and sand down a well to fracture rocks, thereby releasing natural gas. The process has its problems - it is likely that earth tremors which occurred near Blackpool were caused by fracking, and there is clearly some risk of environmental pollution, particularly to groundwater. However, given concerns over sources of energy, the House of Commons Select Committee on Energy has backed shale gas extraction, subject to tough regulation.

Who owns the shale gas deposits?

Under the Petroleum Act 1988, shale gas belongs to the Crown and not to the landowner and a Government licence is needed to extract it. The licence holder can obtain ancillary rights under the Mines (Working Facilities and Support) Act 1966 - for example, to occupy land, to obtain a water supply, to dispose of effluent, to erect buildings and to lay pipes. Such rights will be granted by the court if it is not reasonably practicable to obtain them by private negotiation. The landowner is entitled to compensation. However, the 2011 trespass case of Bocardo SA v Star Energy Ltd has established that the measure of such compensation will be what the grantor (the landowner) is losing rather than what the grantee (the licence-holder) is gaining. Nevertheless, the 1998 Act provides for a very favourable costs regime in favour of those from whom ancillary rights are sought under the provisions of the 1966 Act.

What should landowners do?

Landowners cannot afford to ignore the grant of a shale gas extraction licence under their land or adjoining property. Some useful information is available - the Department of Energy and Climate Change website has a map showing the areas covered by existing licences. Trustees may have a duty to take reasonable steps to establish whether there are potential shale deposits below the trust land. While some landowners may wish to apply for a licence jointly with a drilling company or other investor, there are risks involved and it is therefore unlikely that many trustees will feel it advisable to do so, certainly at this stage. However, all landowners need to be ready to maximise compensation for the granting of ancillary rights. It is also important to check that such rights will not adversely affect easements, manorial rights (which need to be registered at the Land Registry by 12 October 2013) or mineral rights.

To view more recent articles, click here or visit our Twitter page

How to find us:
London Bankside

Bankside Office

240 Blackfriars Road
London
SE1 8NW
DX 53 Chancery Lane

Telephone: +44 (0)20 7629 7411
Fax: +44 (0)20 7629 2621
Email: bh@boodlehatfield.com

London Mayfair

Mayfair Office

6 Grosvenor Street
London
W1K 4PZ

Telephone: +44 (0)20 7629 7411
Fax: +44 (0)20 7629 2621
Email: bh@boodlehatfield.com

Oxford

Oxford Office

6 Worcester Street
Oxford
OX1 2BX

Telephone: +44 (0)20 7629 7411
Fax: +44 (0)20 7629 2621
Email: bh@boodlehatfield.com

Bankside Office

240 Blackfriars Road
London
SE1 8NW
DX 53 Chancery Lane

Telephone: +44 (0)20 7629 7411
Fax: +44 (0)20 7629 2621
Email: bh@boodlehatfield.com

Get directions

Contact us