Cuadrilla has confirmed that it will not be returning 50% of the area of its exploration licence in Lancashire as had been expected when the first term expires at the end of this month.
In a statement, the company said the government had changed the requirements of the licence. As a result, it would be handing back only a small section of the licensed area.
Opponents of Cuadrilla’s plans said the new rules were to the detriment of residents and would deepen distrust and anger towards the government.
The area of Petroleum Exploration and Development Licence (PEDL) 165 covers the Fylde area around Blackpool. It includes Cuadrilla’s proposed fracking sites at Preston New Road and Roseacre Wood. Planning applications for these are being considered by a planning inspector and will be decided by the Secretary of State for Communities and Local Government.
PEDL 165 was issued in 2008 and the first term of the licence ends on 30 June 2016. Local anti-fracking campaigners had expected the company to be required to return 50% of the area under the original licence rules before continuing to a second term.
But Cuadrilla said it would be keeping all but 63 km2 in the north east of the licence. PEDL 165 is more than 1,000 km2 so the relinquished section amounts to about 6%. The relinquished area includes the Forest of Bowland Area of Outstanding Natural Beauty.
In a statement, the company said:
“Cuadrilla confirms that it wrote to the Oil and Gas Authority (OGA) on the 25th May 2016, to continue the term of its Lancashire shale gas exploration licence agreement PEDL 165.
“The original licence was granted under the Government’s 13th round licence terms, and the OGA has now varied the licence to update it to its new model licensing terms.
“Cuadrilla will continue exploring in the licence for a second term.
“Under the new OGA terms, Cuadrilla is not required to surrender 50% of its licence acreage and instead was required to nominate the areas it plans to retain and surrender the remaining part.”
The company said it has surrendered what it describes as “a relatively small part of the licence” and:
“An area that Cuadrilla has determined to not be geologically prospective for shale gas exploration.”
The statement continued:
“The OGA has confirmed receipt of Cuadrilla’s proposed second term licence plan and are processing the surrender area.”
DrillOrDrop understands that local campaigners in Lancashire had previously been told that Cuadrilla would have to surrender 50% of PEDL 165.
Responding to Cuadrilla’s announcement, John Powney, of Frack Free Lancashire, said:
“It is concerning that once again, the goalposts have shifted with regards to fracking and Cuadrilla’s license acreage. These ‘new’ OGA terms appear to have been renegotiated behind closed doors, to the benefit of the industry and the detriment of many residents who are still under the threat of this unwanted industry.
“DECC confirmed that a 50% of surrender of acreage was a condition for a progression to a Second Term. That should still be the legal case and altering licenses out of public view will only serve to further cultivate a deeper distrust and anger over the government’s blind dash for gas.”
Another 44 PEDLs issued under the 13th round are coming to the end of their first term this month. Like PEDL 165, they have already had a two-year extension of their first term.
One of the licences involved is PEDL 234 in West Sussex, which UK Oil and Gas Investments announced earlier this month it was buying from Celtique Energie and Magellan Petroleum UK Ltd.
Under the original rules, to continue to a second term, the licence operators must have completed the commitments in the work programme. This often includes drilling at least one well and carrying out seismic surveying.
No wells have been drilled in PEDL 234 so under the rules the licence should be relinquished. UKOG has said its deal depended on the OGA agreeing an extension of the first term for at least another year.
In north west England, no wells have been drilled in at least four licences where the first term is due to expire this month.
In a written answer on 4 May to the City of Chester MP, Chris Matheson, the Energy Minister, Andrea Leadsom, said the operator, Dart Energy (West England) Ltd, has requested an extension to allow additional time to drill at well in PEDL 189.
Questions to the OGA
DrillOrDrop put a series of questions to the OGA about the licence rules and the expiry of the first terms.
- Has the OGA updated the terms of all the existing 13th round PEDL licences which reach the end of their first term on 30 June 2016?
- Which PEDLs does this involve?
- Please confirm whether the new terms no longer require the licence operator to hand back 50% of the licence area at the end of the first term but instead identify acreage that the operator no longer requires.
- Please give the reasons for this change in the licence term.
- Please give details of any other changes to the licences.
- Which PEDLs that reach the end of their first term on 30 June 2016 will be relinquished because the operators have not met the commitments in the work programme?
The OGA replied on 27 June 2016 with this statement:
“Several licensees proposed amendments to their Licences, either to extend the Initial or Second Term of their licences, or to adopt the latest Model Clauses (set out at Schedule 2 of the Petroleum Licensing (Exploration and Production) (Landward Areas) Regulations 2014 (see http://www.legislation.gov.uk/uksi/2014/1686/contents/made). Licensees adduced a range of grounds for their proposals.
“In those cases where OGA agreed the proposals, it has drafted and sent Deeds of Variation to the licensees for their signature. When the process is complete, OGA will place a list of the variations, and of the licences that will end on 30 June, on its website.
“The 2014 Model Clauses implemented certain changes from previous Model Clauses: principally that the retention of acreage is made subject to the agreement of Retention and Development Areas (clauses 16, 19 and 43), and there is a reduced confidentiality period for certain information about hydraulic fracturing (clause 32). While no Retention Areas or Development Areas have yet been agreed, Clause 5(3)(b) can modify the condition relating to a surrender of 50% of the initial Licensed Area where Retention Areas or Development Areas exist.”
Updated 27/6/2016 with reply by the OGA
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