Politics

Competency and financial viability – key criteria for awarding fracking licences, says Minister

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Workover at Kirby Misperton KM8 well, 28 November 2017. Photo: Kirby Misperton Protection Camp

Fracking Week in Parliament

Companies that apply for oil and gas exploration licences are judged mainly on their ability and their finances, a government minister has confirmed.

In a written parliamentary answer, Lord Henley (below, left) said:

“The key criteria considered when assessing licence applications are the proposed operator’s competency, financial viability and financial capacity.”

He was replying to a question from Baroness McIntosh of Pickering (below, right) on how fracking licences were granted.

Baroness McIntosh is the former Conservative MP for Thirsk and Malton in North Yorkshire. The constituency includes the Kirby Misperton site, which is awaiting a decision from the Business Secretary on whether the UK’s first hydraulic fracture since 2011 can go ahead.

The site is operated by Third Energy UK Gas Ltd, which has been criticised by the local campaign group, Frack Free Ryedale, for being nearly four months overdue filing its company accounts.

In a judicial review in 2016, the group and Friends of the Earth argued unsuccessfully that the company should have been required to pay a financial bond to cover any clean-up costs at the site. The most recent accounts, to the end of 2015, showed the company made a loss of £3.854m and had net current liabilities of more than £50m. This included more than £44m to the parent company, Third Energy Holdings Ltd.

Baroness McIntosh also asked the minister why responsibility for exploration licences had been removed from the energy department.

Lord Henley explained that a review by Sir Ian Wood had recommended a new independent body should supervise the UK oil and licensing process.

“Given the many synergies with aspects of the regulation of onshore oil and gas activities (including shale gas) the Review also highlighted the strong rationale for a single regulator to manage the licensing regime for onshore reserves as well.

“On the basis of these recommendations, the Oil and Gas Authority [OGA] assumed responsibility for all licensing functions related to offshore and onshore oil and gas in October 2016.”

Responsibility for licensing in Scotland and Wales were being transferred to the Scottish and Welsh governments, he said. The Oil and Gas Authority, a government company with one shareholder (the Business Secretary), remains in charge of licensing in England.

Well regulations and fracking at KM8

The KM8 well at Kirby Misperton, which Third Energy wants to frack, was also the focus of a question by the Green Party MP, Caroline Lucas (above left).

She asked whether Third Energy had adhered to Regulation 19 of the Offshore Installations and Wells (Design and Construction) Regulations 1996 during drilling and workover phases on the well.

This regulation (link) requires the operator to provide information to the Health and Safety Executive on drilling and work operations. The details include the depth and diameter of a borehole, its identifying number, any casing installed and the density of drilling fluid.

Under the Infrastructure Act, operators must comply with this regulation before ministerial consent can be granted for fracking.

Sarah Newton (pictured above right) is a minister at the Department of Work and Pensions, which oversees the HSE. She said the operator at KM8 had complied with regulation 19.


Transcripts

Thanks to TheyWorkForYou.com for the transcripts

Question by Baroness McIntosh of Pickering, Conservative

To ask Her Majesty’s Government whether responsibility for the procedure for issuing Petroleum Exploration and Development Licences for hydraulic fracturing was removed from the Department of Energy and Climate Change and passed to the Oil and Gas Authority; and, if so, why.

Reply by Lord Henley, Energy Minister, Conservative

In June 2013 the then Secretary of State for Department of Energy and Climate Change (DECC) asked Sir Ian Wood to conduct an independently led review of UK Continental Shelf (UKCS) oil and gas recovery, specifically looking at how economic recovery could be maximised.

A key recommendation of the Wood Review was the creation of a new independent body, responsible for operational regulation of the UKCS, focused on supervising the licensing process and maximising economic recovery of the UK’s offshore oil and gas reserves in the short, medium and long terms. Given the many synergies with aspects of the regulation of onshore oil and gas activities (including shale gas) the Review also highlighted the strong rationale for a single regulator to manage the licensing regime for onshore reserves as well. On the basis of these recommendations, the Oil and Gas Authority assumed responsibility for all licensing functions related to offshore and onshore oil and gas in October 2016.

In accordance with the Smith Commission Agreement and St David’s Day Agreement and the resulting Scotland Act 2016 and Wales Act 2017, we are currently in the process of making and laying regulations, which will transfer powers for onshore oil and gas licensing within Scotland and Wales to the Scottish and Welsh Governments respectively. The responsibility for onshore oil and gas licensing in England will remain with the Oil and Gas Authority.

Parliamentary written question, 17 January 2018 link to transcript

Question by Baroness McIntosh of Pickering, Conservative

To ask Her Majesty’s Government what criteria the Oil and Gas Authority uses in granting Petroleum Exploration and Development Licences for hydraulic fracturing.

Reply by Lord Henley, Energy Minister, Conservative

Before a company can carry out exploration for oil and gas onshore it needs to apply to the Oil and Gas Authority for a Petroleum Exploration & Development Licence (PEDL). PEDLs do not give permission for operations. Rather, they grant exclusivity to licensees, in relation to hydrocarbon exploration and extraction (including for shale gas but also for other forms), within a defined area. The key criteria considered when assessing licence applications are the proposed operator’s competency, financial viability and financial capacity.

Parliamentary written question, 17 January 2018 link to transcript

Question by Caroline Lucas, Green, Brighton, Pavilion

To ask the Secretary of State for Work and Pensions, pursuant to the Answer of 4 December 2017 to Question 115696 on fracking: Ryedale, whether Regulation 19 of the Offshore Installations and Wells (Design and Construction) Regulations 1996 has been adequately adhered to in relation to both the drilling and workover phases of the KM8 well in Ryedale as required under section 4A of the Petroleum Act 1998.

Reply by Sarah Newton, Work and Pensions Minister, Conservative, Truro and Falmouth

The Health and Safety Executive has received the reports required by Regulation 19 of the Offshore Installations and Wells (Design and Construction, etc.) Regulations 1996 for both the drilling and workover operations carried out on the KM8 well. The operator has therefore complied with the requirements of Regulation 19.

Parliamentary written question, 15 January 2018, link to transcript

14 replies »

    • You can’t make this up:

      “Sarah Newton (pictured above right) is a minister at the Department of Work and Pensions, which oversees the HSE. She said the operator at KM8 had complied with regulation 19.”

      So let’s try and get this right, the Department of Work and Pensions, oversees the HSE??

      The Health and Safety Executive are overseen by a department who are in charge of jobs and pensions?

      Well that level of work and pensions must surely have all the safety at work expertise required to establish if an industrial process represents a danger to life and limb and contribute to global climate change acceleration damage don’t they?
      I hardly think that knowledge of the intricate ins and outs of pension management constitutes an expert knowledge of whether a poisonous process such as fracking can seriously damage the operators and nearby unwilling residents?
      It’s like putting a n oil and gas nearly bankrupt incompetent cost cutting regulation avoiding urine extraction operator in charge of a highly toxic high level nuclear waste facility borehole dumping site?
      Totally inadequate isn’t it?
      Oh, hang on a minute? That is exactly what they have done!

  1. I can’t believe the arrant tosh that Lord Henley has said – he truly expects us to swallow lies so blatant that a blind man wearing sunglasses could pick them out from 20 miles. Companies are chosen according to their ability and finances? It’s plain to see why Henley’s a Lord – he must have been drunk as one when they slipped that little nugget onto his desk. Chosen on ability? Cuadrilla had previously never drilled so much as a plank of wood and when awarded S licence drilled 1 well, caused 2 earthquakes, ovalled the well casing rendering it useless then hid the truth from the Environment Agency for 6 weeks then failed to restore sites as required under their permits but continually asked for those permits to be varied. At their current site they have continually breached their conditions and failed to realise that rain might leave water on the ground. On this standard for competence it’s unsurprising the Tories deem themselves to be in control. Then judged to be financially sound? Third Energy have consistently failed to file their accounts as required by law and on inspection all these fracking companies are seen to have lost untold millions every year. One of Third Energy’s directors was also CEO of Carillon when it crashed. Competence indeed!!

  2. If that is the case then to-date the levels of competency and financial viability have been set at extremely low levels. One would hope that there are additional issues to be considered. For example climate change, protecting the environment, protecting the health of the people and all other living entities. Clean air, water and food are the essential basics of all life. Protection of these must be absolute.

  3. OGA cites 4 x Financial Viability Criteria. Last time I looked, Igas, Angus & Third Energy all failed on at least one of the four. Third Energy has a track record of not filing accounts on time.

    Discuss!!!

  4. Meanwhile, the exploration continues. And hey ho, exploration costs money and by definition, there is no income-now, that’s a real shocker.

    Hell hath no fury, like an anti scorned, but it seems limited ability at the moment to excite the easily excitable, apart from the odd ones at KM who seemed concerned they had blinked and missed “Armageddon”!

  5. These companies are going no where anyway. The antis should not worry as they now have their toy boy Greg Clark on their side blocking the road for them. Greggie is more than Green than the antis realise.

  6. Sorry TW, you are wrong in your first sentence, although your second is probably true. If you feel the Tories are strong enough to start a fight with Ineos, I would have to disagree. And if I am correct in that, then the minnows will swim along behind them-slowly, but a minnow does that.

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