Legal challenges work better than protests to slow fracking in U.K.
By Bloomberg News
Published: Saturday, Oct. 19, 2013, 9:00 p.m.
Campaigners desperate to prevent the birth of a U.K. shale gas industry have glued themselves to walls, barricaded country lanes and climbed drill rigs. Yet their most potent weapon is more prosaic: lawyers.
Anti-shale groups including Friends of the Earth and Greenpeace are using environmental and property law to challenge drilling at every turn, and it's working. Production is now likely to start in 2018, two years later than originally envisaged, partly because getting permission to explore has been so slow, said John Williams, senior principal at Poyry Plc, an energy consultant in Oxford.
The delay is frustrating Prime Minister David Cameron's goal of boosting economic growth and cutting energy prices through developing shale resources. For the protesters, no good can come from hydraulic fracturing — the process that uses a mix of pressurized water and chemicals to extract fuel out of shale rock. They say it pollutes water and contributes to greenhouse-gas emissions.
“There is a broad range of legal and commercial dynamics for the nascent U.K. shale industry to navigate,” said Jon Clark, head of oil and gas transaction services at Ernst & Young LLP. “Lobby groups are scrutinizing and applying challenges in many of these areas.”
The U.K. isn't the only country where the law is stopping explorers trying to repeat the success of the industry in America's shale fields. France's highest court upheld a ban on fracking last week, while drillers face a legal battle to develop fields in South Africa. On Oct. 10, the European Parliament voted to tighten regulation on shale drilling.
Greenpeace recently started a campaign that encourages U.K. landowners to use trespass laws to block exploration. The group says drilling horizontally under people's land — a technique widely used in shale production — is illegal unless the property owner gives permission.
“There's no doubt the breadth and depth of fracking opposition across England is proving problematic for the government and the industry,” said Greenpeace energy campaigner Leila Deen. “Anti-fracking groups are very switched on, very well-networked and prepared to use a range of means to stop fracking, including legal.”
At Balcombe, a village south of London that saw raucous anti-shale protests this summer, Cuadrilla Resources Ltd. mothballed a well it spent more than a month drilling to resubmit a planning application because of ambiguity related to the boundaries of the work. Earlier it had been made to seek a mining waste permit after Friends of the Earth wrote to the Environment Agency in June, a move that held up the start of drilling.
The challenges from campaigning groups have made Cuadrilla cautious elsewhere. Drilling at a site in Lancashire in northwest England was delayed by almost a year so the company could carry out a full environmental impact assessment. This month, the company announced it would abandon the site because of concerns it would endanger migrating birds.
Because exploiting shale relies on horizontal wells that stretch thousands of feet through narrow layers of rock, drilling will typically pass under several properties and companies may require the consent of all landowners involved.
In 2008, Mohamed al-Fayed, the businessman who once owned Harrods department store, successfully sued Star Energy U.K. Ltd. under laws of trespass for drilling under his estate in Surrey, England, without seeking permission.
“It is unlawful if companies don't obtain consent from landowners or follow the statutory process for compulsory acquisition of the rights,” said Emma Bissett, an associate in the energy and natural resources team at Squire Sanders LLP in Leeds, England. “If they continue drilling without this, they risk being sued for trespass and open themselves up to the risk that the court may grant an injunction to stop the drilling.”
Cuadrilla said the issue shouldn't be a bar to developing shale fields in the U.K.
“All of our existing subsurface underground rail, water, gas, telecommunications and electric development has historically succeeded in legal coexistence with surface property rights,” Cuadrilla Chief Executive Officer Francis Egan said Oct. 14. “We are confident that new subsurface shale development that safely offers energy security, skilled jobs and community benefits will be no different.”
The U.K. said in June the Bowland basin that stretches from the east to the northwest of England may hold as much as 1,300 trillion cubic feet of gas. An extraction rate of 10 percent, typical in U.S. fields, will allow U.K. demand to be met for almost 50 years. The government has encouraged explorers through lower tax rates as it tries to cut reliance on imports and spur the economy amid declining reserves in the North Sea.
“Fracking has become a national debate in Britain — and it's one that I'm determined to win,” Cameron wrote in the Daily Telegraph in August. “If we don't back this technology, we will miss a massive opportunity to help families with their bills and make our country more competitive.”
A government consultation paper published last month proposed limiting the number of landowners from whom it's necessary to seek permission before drilling. Only those property holders directly affected by above-ground work would need to give consent, the proposals said.
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