The Department of Energy and Climate Change (DECC) estimates that fracking activity will pick up “quite quickly” in response to two recent initiatives concerning 1) onshore petroleum exploration and development licences (PEDLs) and 2) underground access rights.
DECC estimates that these initiatives will lead to the creation of 6 shale gas well centres, or pads, per year from 2023 onwards. By 2035, annual production of shale gas is predicted to be approximately 6 billion cubic metres.
The Petroleum Licensing (Exploration and Production) (Landward Areas) Regulations 2014, which have been laid before Parliament, set out model clauses for PEDLs. The regulations include:
- New provisions for Retention Areas, which will oblige licensees to submit a Retention Area Plan describing the proposed exploration and appraisal activities and the timescales for conducting those activities within the area covered.
- New provisions for Development Areas, which will require licensees to state the latest date by which oil or gas will be recovered from that area.
These regulations will modernise the existing model, which currently requires half of a licensed area to be surrendered after the exploration phase. This former model is ill-suited to fracking as shale gas tends to be dispersed over wide areas rather than concentrated in the way of conventional oil and gas resources.
Underground Access Rights
DECC has entered into consultation on the introduction of a statutory right of underground access for shale gas operations below 300 metres. DECC has indicated that it expects the industry to enter into voluntary arrangements for a community payment of £20,000 per lateral well and to notify the public of the payment and the land concerned. These arrangements might be made compulsory if they are not adopted voluntarily.
The Issuing of New Licences
Once these new initiatives are confirmed, applications will be assessed on the following criteria:
- The financial viability of the applicant and its financial capacity to carry out activities permitted under the licence.
- The technical capability of the applicant.
- The way in which the applicant proposes to carry out the activities.
- Any inefficiency or irresponsibility displayed by the applicant in operations under other Petroleum Act licences.
Applicants will be required to submit an Environmental Awareness Statement demonstrating their understanding of the UK’s onshore environmental legislation and the broad environmental sensitivities of the acreage for which they are seeking a licence. DECC expects that the new licences will be awarded next year.
More information can be found in the article “14th Licensing Round: Recent Developments” written by our colleagues Paul Brennan and Richard Glover available here.