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What fracking means for landowners

The Government’s controversial decision to allow wide-scale fracking has concerned many environmentalists. But the reaction from landowners has been more mixed, especially with so much uncertainty surrounding the practical and financial consequences of this policy. Some commentators have spoken of a ‘new gold rush’, but, sadly for the landowners concerned, this outcome appears unlikely. Fracking-short for hydraulic fracturing-is the procedure of blasting pressurised water, industrial additives and sand down a well to fracture rocks and thereby release natural gas from the geological formation.

Critics argue that this process may lead to environmental damage such as earthquakes- as has happened in Blackpool- and water pollution. Landowners don’t actually own the shale gas under their property-the Crown does, as it does the coal and oil deposits in this country. The shale-gas extraction process begins with the energy company getting a licence from the Department of Energy and Climate Change (DECC), which grants exclusive rights in set areas. After any access and ancillary rights have been agreed with the landowner, the energy company must ‘obtain planning permission and, in most cases, an Environmental Permit,’ explains Alan Hamilton of Savills Minerals and Waste Management (01245 293246). ‘And further DECC and Health and Safety Executive consents are also required before exploratory drilling can commence. The process is repeated if the energy company wants to convert the exploratory drill or well into a production facility.’ One widespread misconception is that the energy companies need to pay the mineral-rights holder of a piece of land for permission to extract shale gas.

As shale gas isn’t considered a mineral under law, who holds the mineral rights on a piece of land is irrelevant. This is despite some commentators urging those who may hold mineral rights over land to register these before the October 12, 2013, deadline, so as to share in any potential shale-gas bonanza. There are good reasons to register these rights, but the potential to make money from shale-gas excavation does not appear to be one of them.

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Another misconception is that landowners can prevent shale gas being extracted from their land. An energy company has to agree access rights to the land with the landowner, and it will probably need to agree some ancillary rights as well, such as the right to obtain and dispose of water and the right to erect buildings. But the landowner can’t refuse to grant these. If they and the energy company can’t agree a fee for the rights, it will be determined by the courts.

‘There is much confusion,’ states Hugh Devas, a partner at law firm Boodle Hatfield (020- 7079 8174). ‘This is relatively uncharted territory. The misconception is that having shale gas deposits is some sort of golden key. It’s not, although, indirectly, money may be made by landowners out of this.’

A landowner is, of course, perfectly entitled to strike whatever financial deal he can with the energy company, and even to try to enter into a joint-venture agreement. But, ultimately, all the energy company is required to do is to compensate the landowner for any damage and for loss of earnings and amenity. As drilling for shale gas can be done horizontally and at an angle as well as vertically, it’s possible to extract gas from under someone’s land without ever having to set foot on it.

However, as trespass is being committed, the landowner concerned should be informed in advance that the procedure is going to happen and grant appropriate rights. Again, all this landowner is due is compensation relating to loss of earnings and amenity, but ‘as it hard to see what of value is actually being lost, any sum is likely to be nominal,’ advises Mr Devas.

‘There is too much money involved, let alone issues concerning energy security-which always interest governments- for this matter to go away,’ explains Mr Devas. ‘There is information publicly available as to where shale-gas deposits are believed to be, and any landowner who believes they may be affected should take advice as to what problems and opportunities may arise from this.’

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