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. Cool. So an anti fracking campaigner is trying to force a condition whereby drilling companies will have to drill their wells promptly and within the original timescales of their agreements. No more extensions.

    Outcome: companies will have to drill the wells over the shorter time period, so less mucking about and holding licenses without drilling them.

    Sounds good to me. I can get behind the anti fracking groups when they actually increase the amount of wells being drilled 🙂

    • Excellent challenge by Mr Dean and David Wolfe QC. A struggling unpopular industry which may well hold no exploration or development licence.

      Very clever and well organised groups and individuals stopping this industry in it’s tracks.

      Plenty more challenges on the way.

  2. To the anti-fracking brigades any decision or activities from the government or local councils or companies are illegal. They are like the ‘environmentalist’ or ‘protectors’ from Leith Hill protest swampy camp site. They have their own laws and health/safety standards.

    • They aim to “protect” the country by populating it with large-scale, expensive, and inefficient solar and wind farms, industrializing the landscape, and destabilizing the grid. They’ll “protect” the population by forcing obscene numbers into fuel poverty, killing many, and encouraging suffering for large portions of the population. They aim to “protect” by allowing the UK to grow even more reliant on gas imported from far away lands – supporting despots and terrorists, increasing fugitive methane emissions, and sapping the country of wealth and opportunity. They will “protect” the UK by increasing retail energy costs so that manufacturing jobs and investment flee the country and the UK continues to lose ground to the rest of the world. Is it any wonder that the Russians are so supportive of the “protectors”?

    • Another alarmist. Join the club Fibonacci. I prefer pragmatism and sustainability myself. When the laws have to be bent, power corrupted and the environmental/ and climate impacts denied to the extent that they have been in the USA it’s high time that newer, better models emerged. Bear in mind too that the States are desperate catch up with their debt. China now underpins so much of the U.S. Fed Reserve that the Yuan has now been made an international reserve currency.

      Funny how you imagine the emerging high tech solar, wind and other sustainable technologies, improving all the time, connected to agile smart grids and various storage technologies, is somehow worse than the dirty brute force practice of fracking, where 60% 70% of the gas (per well) is gone in the first year, leading to an ever creeping, unwieldy, leaky infrastructure that just becomes a liability after a few years, and leaving a toxic legacy for future generations.

  3. You have to love the irony of someone holding up such a sign! I am sure Wolfey could make a fortune out of fighting a case that this is a request that exploration companies should not have to pay any costs and can do it anywhere. Or maybe the guy is a terrible capitalist, who will then sell his sign to Cuadrilla?

    (Should QCs not operate like the football leagues? If they keep losing they get relegated and then in the lower leagues their costs are much reduced? I know, “I am a dreamer but I am not the only one”.)

  4. Looks like the campaigner is right. For a company to start work knowing that they will overrun an agreed licensing period, taking it for granted that extensions would follow (as an assumption or right), just makes a mockery of the licensing system.

    Still, it’s quite a novel idea to assume that the law has something to do with justice. I wish him luck.

  5. Interesting that USA, where we all “know” fracking has been a total economic and environmental disaster, are now to significantly reduce their Strategic Oil Reserve, now that their energy security is protected from the whims of OPEC+ Russians. In so doing, freeing up $billions.

    Almost as profitable as recent investment into UKOG, refracktion, the sort of company where” the private investor is taken for a ride”. Yep, you were right, by a taxi to a bank (Barclays?) this week.

    • See my response to Fibonacci above Martin.
      Meanwhile – sad to witness the market traders’ version of what constitutes the health and wealth of a nation. So narrow, so short term, so selfish. Try unpicking your sentence which conflates economy and environment. Offset the environmental/climate impacts with economic gains and you will see that the net losses are huge.

  6. I see a rise in pro fracking users on this site with the antis diminishing. As for the court case, an interesting one, not as confident it will be dismissed as I am on the Hungarian ‘Frackmans’ case but I still think it will not bode well for the chap with the electrocuted hairstyle.

    • No mobile signal underground so the subterranean antis unable to post for the last couple of days. In reality I doubt the swampys even look at this website.

  7. I suspect one key component will be whether good reasons could be given why the licence could not be fulfilled within the original timescale.

    I would not expect a court to give licence to protestors to delay the timescale until the operators licence expired, even if action at other sites was the catalyst..

  8. License is for 3 years. Council planning approval takes 2 years and legal challenge and judicial review from the ‘protectors’ delay another year. So you got about 1 day to carry out the work.

  9. Further confirmation from Bloomberg of why the Russians are so supportive of the “protectors”
    …..https://www.bloomberg.com/news/articles/2017-06-23/gazprom-smells-opportunity-after-closure-of-u-k-gas-store?utm_source=yahoo&utm_medium=bd&utm_campaign=headline&cmpId=yhoo.headline&yptr=yahoo

    “We see an appetite from major players in the U.K. for additional volume of contracted gas,” Deputy Chief Executive Officer Alexander Medvedev said in an interview in Prague on Thursday, declining to provide further details on negotiations. “Our supplies to the U.K. increased substantially in the course of the last two years.”

    “The world’s biggest gas producer sees an opportunity to sell more of the fuel after Centrica Plc announced it would close its Rough storage facility in the North Sea and the nation plans to stop using coal-fired plants by the middle of next decade. Medvedev expects Britain to increase imported volumes by 8 billion to 12 billion cubic meters a year by 2025.”

    • Will be interesting to see if the US Senate puts an end to Russian energy. The tensions are not going away anytime soon.

  10. Based on today’s update by UKOG it may be fortunate the swampies didn’t dig any deeper, by candle light.

    Little surprised (only a little) the news is not on here, as it has every potential to make the Weald jigsaw far more complete. If that happens, then I would predict one of the big players will buy in rapidly, and such delaying tactics as seen recently will be somewhat pointless. Looking forward to the weekend’s papers. They could be very interesting.

    Yes, GBK. Merkel v Trump, round 2. She may go down in the third. Attended a seminar recently for people who wanted to invest going forward (I was there for the free lunch). Some pretty wealthy individuals who wanted to avoid investing anywhere near the German market unless just for the short term, and for very sound reasons, not least of all being Germany v USA in the industrial stakes is a rematch, and it was pretty one sided last time.

    • It is now officially posted:

      “UK Oil & Gas Investments PLC (London AIM and NEX: UKOG) is delighted to announce that mobile light oil has been observed seeping from open natural fractures in Kimmeridge Limestone 4 (“KL4”) core samples at its 100%-owned Broadford Bridge-1 (“BB-1″) exploration well. The KL4 samples, at a measured depth of around 4080 feet, exhibit a strong oil odour plus the rock matrix is oil saturated and heavily oil stained. Wet gas readings also increased significantly at the top of the KL4. Both the KL4 and overlying shales exhibit a high degree of natural fracturing. Coring operations continue through KL4.”

      There is something significant in this press release relating to the potential productivity of the well – can anybody tell me??? How about Phil C or Philip P or any other “experts” out there?

      • Klimmeridge has nothing to do with this particular post Paul as far as I can tell. I’ve not been arguing for or against that particular exploration which is about oil not gas. Why don’t you guys start your own site – a glee club where these little triumphs can lead to moments of shared ecstasy and not get confused with the other issues, namely fracking (a much bigger issue in my books), which this post is about.

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