UK Shale Legislation: Will It Kick-Start Test Drilling?
Unless test drilling commences in the UK, and the commercial viability of shale production is proven relatively quickly, further funding for shale development may not be forthcoming.
According to reports by the BBC and the Financial Times, Whitehall sources have indicated that the Government plans to propose a new Infrastructure Bill in the Queen’s Speech on 4 June 2014. The Bill may provide for automatic access rights for certain shale developments below a minimum depth, and establish a landowner notification and compensation procedure (with a compensation cap). Although the focus is expected to be on the facilitation of installation of export pipelines under private land, the legislation may also be relevant to horizontal drilling, well completion and stimulation techniques.
Discussions on horizontal drilling rights in the UK are, however, now well rehearsed. Drilling under private land without the owner’s consent is a trespass; compulsory access rights and compensation mechanisms already exist; but they are untested in the shale context, they involve potentially lengthy procedures, and their application could be subject to judicial review. In the US, directional drilling techniques have been used (e.g. under Dallas Fort Worth Airport) to avoid unleased land and “set-back” restrictions. Although the UK already has a long-established conventional onshore industry, such directional drilling techniques are not yet cited as a potential solution (and would not prevent the need to obtain a neighbour’s land access consent).
The land access issue is nevertheless often cited in the UK as a significant reason why, so far, early shale investments and recent consolidation amongst developers have not yet translated into drilling permit applications. All appreciate that, unless test drilling commences in the UK, and the commercial viability of shale production is proven relatively quickly, further funding may not be forthcoming. No wonder the Government is keen to be seen removing perceived blocks to development.
Whilst trespass is important, it is perhaps interesting that less focus has revolved so far around related land issues, such as residual and decommissioning liabilities, insolvency, remediation and security concerns. Therefore, if any Infrastructure Bill only tackles the issue of providing greater certainty to developers in relation to land access, there may remain some way to go in encouraging more wholesale shale developments by those who would welcome a further regulatory comfort blanket to overlay the existing, largely comprehensive framework of regulation.