Shale Gas: Update on recent events

Shale Round-Up

There have been a number of shale related news developments since our Shale Workshop in October:

• On 7th November the Energy Minister made a speech further emphasising the importance of Shale and that Government is “working hard to make shale happen”
• There is a Government Consultation running from 24th October to 5th December 2014 on proposed arrangements to allow 100% retention by local government of business rates on shale oil and gas sites
• On 6th and 7th November the High Court heard a judicial review by residents of Balcombe against a planning permission granted to Cuadrilla in April 2014; and
• This week Lancashire County Council announced that it would be further delaying the local planning decision on two Cuadrilla sites for an extra two months.

Energy Minister’s Speech

On 7th November the Energy Minister (The Rt Hon Matthew Hancock MP) gave a wide ranging review of the onshore gas extraction industry, emphasising the national interest of Shale gas to energy security, economic benefits, and in decarbonising the economy. He referred to steps already taken and proposed (such as publishing the Regulatory Roadmap in December 2013, introducing competitive tax regime, clarifying the environmental permitting process, new rules for underground access). Shale was also described as a way of cutting emissions and buying time for the UK to develop new nuclear, more efficient renewables and carbon capture and storage. The concluding message was that Government is “working hard to make shale happen”.

Business Rate Retention

Over the last year the Shale industry has announced a number of initiatives aimed at improving community acceptance and support; the Government also announced further support via business rates. The Government is now holding a consultation (closing 5th December 2014) on draft regulations to enable 100% local retention of business rates for shale oil and gas sites, during both exploration and production stages. Local authorities will be allowed to retain their shares of the Shale oil and gas business rates for the duration of the projects.

The detailed regulations will result in the following local sharing of business rates:

• Unitary Authorities and Metropolitan Authorities which are not also Fire Authorities will retain 99%
• Unitary Authorities which are also Fire Authorities will retain 100%
• County Councils which are also Fire Authorities will retain 60%
• County Councils which are not also Fire Authorities will retain 59%
• Shire Districts will retain 40%
• London Boroughs will retain 80%; and
• The Greater London Authority will retain 20%.

Government’s intention is to have the new regulations in effect from 1st April 2015.

The consultation document is available here.

Balcombe Judicial Review

At Balcombe (Lower Stumble), Cuadrilla was granted consent by West Sussex County Council in April 2014 to complete flow testing at the site. Permission was sought for exploration and appraisal of the recently drilled "hydrocarbon lateral borehole" together with a new 14 metre high flare on the site. The application had clearly shown the extent of Horizontal Well being tested, and had been accompanied by a statement from Cuadrilla that the rock was naturally fractured and there was no need for hydraulic fracturing. Nonetheless, the planning permission is being challenged by “Frack Free Balcombe Residents Association” (FFBRA) who are claiming that the planning permission was unlawful. Opponents of the site have voiced concerns related to aquifer pollution and flaring from oil wells. The judicial review seems to show that opponents of “fracking” may continue to challenge shale gas exploration sites even where hydraulic fracturing is not proposed, or does not form part of the specific application under consideration. The High Court decision is awaited shortly.

Cuadrilla planning applications in Lancashire

The Cuadrilla applications for Exploration sites at Preston New Road and Roseacre Wood in Lancashire were submitted in May and June 2014, with the planning decisions now programmed for end-December 2014 and end-January 2015 respectively (in each case being delayed a further two months from the previous target decision dates). The applications are of interest because they specifically include proposals to hydraulically fracture at the sites, in addition to drilling and testing of the flow of gas. Both application schemes featured post-consultation reductions on water usage, duration of pump hours, and height of flare stack.