Legal

“Government’s extension of gas exploration licence was unlawful”, court told

ben-dean

An anti-fracking campaigner claimed in the High Court today that the government had acted unlawfully when it gave IGas more time to drill for gas near his home in Cheshire

Benjamin Dean argued that the Energy Secretary had no power to extend the initial term of the company’s exploration licence in 2016 for another two years. He asked the court to quash the extension.

The government defended the decision arguing that the extension of licences was accepted practice.

If the case goes against the government, IGas’s licence could, theoretically, be at risk.

There could also be implications for another 10 licences across England which were similarly extended at the same time.

Petroleum Exploration and Development Licences (PEDLs) give oil and gas companies the exclusive right to explore for hydrocarbons, subject to planning and environmental permissions.

pedl189

PEDL189

PEDL189 at the heart of this case was issued in 2008 to Dart Energy (West England) Ltd, later taken over by IGas. Under the conditions of the licence, the initial term for exploration should have ended after five years in 2013.

But the government extended the initial term for another three years to give the company more time to carry out an agreed exploration programme. A further two years were added in 2016.

Licence or contract?

Today’s case, a judicial review at the Royal Courts of Justice, centred on whether in law a PEDL was a licence or a contract.

David Wolfe QC, for Mr Dean, argued that a PEDL was a statutory licence. He said the statute allowed the Secretary of State to impose conditions on PEDL189 and vary them – but only in specific circumstances. He said the conditions at the time did not allow for a variation to the length of the initial term and so the Secretary of State had no right to make the extension.

Richard Palmer, for the Secretary of State, argued that the PEDL was “in substance and form a contract” and the terms could be varied by agreement between the parties, like any other contract.

“Private agreement would undermine the directive”

Dr Wolfe said that PEDL licences were issued under an EU regime, the hydrocarbon licensing directive, designed to create an open, transparent and competitive application process.

He said the licence application made it clear that if companies did not complete the work by the end of the initial term they would lose the licence.

“What is contemplated by the Secretary of State here is entirely antithetical to those requirements. It would completely undermine the operation of the directive if a licence which had been advertised, applied for and granted on one basis could later be varied simply by private agreement between the parties.”

Dr Wolfe said applicants needed to take care not to promise more in their work programme than they could realistically deliver because if they did not complete the work programme in time the licence would expire.

“The carefully calibrated mechanism would be entirely undermined if, in practice, the Secretary of State could and might extend the initial term despite the licence holder failing to complete their work programme in that period.”

He added that it was not good enough to rely on private knowledge that the term could be extended.

“Industry well aware of potential for variation”

But Mr Palmer said it was well known in the industry that the duration of an initial term could be extended.

The court received a statement from Simon Toole, the former Director of Regulation at the Oil & Gas Authority, the agency which now awards licences. He wrote:

“The PEDL licensee and others would have been well aware of the potential for variation of the Licence by Deed and I am certain that this potential for risk mitigation would have been seen as an important part of the system that attracted companies and persuaded them to accept a licence”.

Mr Palmer added:

“To spell out that in this country contracts can be varied is artificial in the extreme”.

He said the ability to vary the initial period of a PEDL allowed flexibility where a licence-holder could not complete work for reasons beyond its control. He said:

“There is no interest at EU level to create that inflexible result.”

Mr Dean had asked IGas how it would complete the work programme by the new end date of 2018. The company’s solicitors said the work was expected to be finished by mid 2019-mid-2021. They added:

“While this falls outside the current expiration of the initial terms, our client would apply to the Oil and Gas Authority, as it has in the past, for an extension of the initial term … to enable our client to complete the work programme within a timeframe that enables our client to retain PEDL189.”

Other issues

Dr Wolfe argued that previous court cases had already held that oil and gas licences were not contracts. Mr Palmer argued that these cases were not relevant.

Dr Wolfe added that in issuing oil and gas licences the Secretary of State was acting on behalf of the crown.

“If this is a contract, it is a contract between Her Majesty and the interested party [IGas]. The Secretary of State has no common law power to vary an agreement to which he is not a party.”

He said if a PEDL were a contract it would expose the Secretary of State to damages – and this had not been parliament’s intention when passing the Petroleum Acts.

Mr Palmer responded that the legislation made the searching and boring for petroleum a matter of private law, contractually permitted by Her Majesty, and the contract could be amended.

  • Mr Justice Holgate reserved judgement in the case. DrillOrDrop will report on his decision when it is handed down, in what is expected to be several weeks.

Reporting from this hearing was made possible through individual donations of readers to DrillOrDrop.com  Donations can be made by PayPal by following this link

29 replies »

  1. I think you will find PhilipP that the USA leads, and will continue to lead, the world on new energy technologies. It may be that the cheaper oil price and energy security that fracking has afforded them will give them an increasing financial ability to forge ahead in these areas-like one company about to mop up the world’s output of lithium.(look around that market and you will find another UKOG-perhaps.) It also means they can control the revenue the Russians can accrue out of oil, which is a pretty large strategic plus.Their carbon emissions have been declining and will continue to do so. At the moment it is not a case of either or, just a case of the new administration refusing to fund others inaction, or lack of technical infrastructure. The same will apply to NATO, USA will continue to be part of it but will not fund it where others will not. The Marshall Plan, and the reasons for it, are long gone. Trump recognises that, others will.
    Anyway nice to see you still here and not off to Glastonbury to sit at the feet of the idle Jeremy. I suspect you will be our one lone anti still around for the weekend, even “Homer” and “Marge” seem to have decamped (without the benefit of fossil fuel I hope.)
    I wonder if come Monday, it might be seen that it was not just the Europa bailiffs who saw a window of opportunity?

  2. Paul-I think Glastonbury will be entertaining many of our “experts” this weekend. Apart from the usual attractions, they will now have Jezza and, I suspect, a new selection of sawdust latrines. Whilel the cats are away, the mice will play-to paraphrase.

  3. Come on PhilipP! It is the antis who have deliberately confused the Weald with fracking. Just go back through the various sections on DOD about the Weald and it is perfectly evident.

    I know it is a little cruel of me to have fun at the expense of your guru of economics, but I find it irresistible. Even Corbyn will eventually be exposed into a position where his economic nonsense is taken apart, others should expect it to be sooner if they follow the same path, because they don’t have a howling mob to shout down the questioner. Not during the Glastonbury Festival anyway.

    • Why these games Martin? Am I an anti? am I a Corbynista? You just throw all these names together as if they (we?) are just a one-track single minded easy-to-discredit group. I would like to think I am debating with a more intelligent opposition and not involved in some neanderthal rock hurling contest.

      • Philip P – I asked a simple question, I agree that it is not directly related to this specific post, but as Ruth has not reported the UKOG Well update, why not post it? Can you answer the question? Anyone with experience / knowledge of the oil industry and petrophysics will be able to. And you may be happy with the correct answer.

  4. Not really a game PhilipP. I welcomed you as our lone voice of dissent, expecting you might be a pretty lone voice for the reasons given. So far, I would say I have been correct. However, I also did address the points you raised but for some reason you want to avoid that. Please, if you wish, as a start, explain how it has NOT been the voices against exploration for on land oil and gas that have driven the attempt to confuse the Weald with fracking. Not hurling any rocks at all, you know me, I do try and get the debate back to facts.

    It is obvious why the confusion would be attempted, and it is obvious it has been. Personally, I have no agenda against that because it will ultimately be exposed and will support development.

    • Some have obviously confused the weald with fracking. Have I? I don’t think so. But if you look closely at Paul’s quote from the UKOG statement it refers to the shale fractures, oil and wet gas. … begging the fracking question anyway. What do you think they will target? Maybe the confusion wasn’t so misplaced after all. Depends who will buy them out and what they would target I guess.

          • No, not all, just a technical question. I doubt anyone on here (apart from perhaps Prof. Smythe, but only perhaps) will pick up on:

            “mobile light oil has been observed seeping from open natural fractures in Kimmeridge Limestone 4”

            My experience is that if you pull a core and it still has oil seeping out of it at surface and is not “flushed” then the rock is very tight, low permeability, and low PI. Most wells we cored with oil running out when the core was at surface were not commercial……

            So perhaps it will need fracking????

  5. Yes, Paul my dear, thank you for the clarity. First acid fracking and then hey, let’s branch out into the lovely mudstone all about. You could of course call the micrite strata lime-contaminated mudstone if you felt so inclined. Shale is such a sullied word.

    We are so grateful to UKOG for now mentioning so transparently the Kimmeridge clay between the four thin limestone-rich strata. Poor UKOG, strung on a tightrope between investors and communities. It must be so hard to know what to say.

    Unconventional shale extraction is now clearly on the table, then. Of course it already was – unless one slavishly follows nonsensical National Minerals Planning Guidance and accepts the false 2013/2014 definition of ‘conventional’ as ANY source in limestone or sandstone. Indeed, anyone could have told UKOG that the (unconventional) Kimmeridge limestone was more than likely to be of very low permeability. In Balcombe we bought the well data from the mid-80s for the non-commercial acidised Balcombe 1 well. Lateral drilling will improve the seep, but acid fracking and hydraulic fracking was clearly always the commercial end game. It had to be.

    Ah, Glastonbury. The festival-long Leitmotif #ohjeremycorbyn! Our son is home, the JC earworm still buzzing – it was indeed festival long. We were not all there. Some of us were manning the barricades (in truth and metaphore, respectively) in Broadford Bridge and West Chiltington. But many of us oldies are singing along.

    Look across the channel at the new ban… Thank god JC is on the march.

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