The government is delaying a decision on Third Energy’s fracking plans at Kirby Misperton in North Yorkshire until the company has filed its latest accounts.
Under the Infrastructure Act, the Business Secretary has to give the final consent before hydraulic fracturing can go ahead.
In a written statement this afternoon, Greg Clark said the company must submit its accounts for the year ending 2016 before he would announce his decision. The accounts are nearly four months overdue.
He has also added two further financial checks before giving the final go-ahead to Third Energy. In future, all companies that want to frack will be assessed for their financial resilience.
Three month wait to frack
Third Energy announced on 8 November last year that it was ready to start fracking the KM8 well (DrillOrDrop report).
The government then moved to close a loophole in the Infrastructure Act, which would have allowed the company to start fracking without final ministerial approval because it was drilled before 2016 (DrillOrDrop report).
Since then, Third Energy has been waiting for Mr Clark’s decision.
In today’s statement, the Secretary of State says he is satisfied that Third Energy has met thirteen technical requirements, set out in section 4A of the Petroleum Act 1998 .
The statement then continues:
“I also consider that an equivalent assessment should be undertaken of the financial resilience of companies proposing to carry out hydraulic fracturing operations so that stakeholders can have confidence in the company’s ability to meet its commitments.
“I note that as of 24 January Third Energy UK Gas Limited and other related companies had yet to submit their accounts for the accounting period ending in December 2016, despite a statutory deadline of 30 September 2017 for them to do so. I have therefore asked the Oil and Gas Authority to seek further financial information from the company, including the required set of up-to-date accounts, to inform my decision.
Mr Clark added an extra check on Third Energy before the final decision was made. The statement said:
“I have also asked the Infrastructure and Projects Authority to assess the financial resilience of the applicant, including its ability to fund decommissioning costs. Once I have received this assessment I will inform the Oil and Gas Authority whether I am satisfied with the application as required by the 1998 Act.
At the planning meeting which approved Third Energy’s plan and at a Judicial Review, opponents argued, unsuccessfully, that Third Energy should be required to provide a financial bond to cover the costs of decommissioning the site. Instead, the planning permission included a legal agreement, which required Third Energy to pay a deposit into a fund intended to cover the cost of site restoration and aftercare.
Last month, a fund of £160,000 was agreed by North Yorkshire County Council and the company.
Third Energy Response
A spokesman for Third Energy said:
“After almost four years of planning and preparation, we are delighted that the Secretary of State is satisfied that Third Energy has met all of the thirteen technical requirements set out in section 4A of the Petroleum Act 1998.
Our annual accounts are being finalised and we will now be working with the Infrastructure and Projects Authority and the Oil and Gas Authority towards achieving hydraulic fracturing consent from the Secretary of State.”
Mr Clark’s statement comes in the wake of the collapse of the large construction and services company, Carillion. The government was criticised for continuing to grant contracts to Carillion even after it appeared the company was in financial difficulties.
Opponents of Third Energy have criticised the company’s connection, through a director, with Carillion.
Keith Cochrane, who sits on the board of Third Energy Onshore, is also the chief executive of Carillion.
The government has ordered an investigation into the Carillion directors.
Financial viability key to oil and gas licences
Last week, the energy minister, Lord Henley, told the former Thirsk and Malton MP, Baroness McIntosh, that a key criteria for awarding oil and gas licences was a company’s competence and its financial viability and capacity. (Link)
Responding to the Ministerial statement, Guy Shrubsole, campaigner at Friends of the Earth said:
“This is further confirmation of the shaky foundations that this industry is built on. Third Energy are again late filing their accounts and questions remain about their ability to restore their fracking site if it goes wrong, as well as their wider financial health.
“Given also that one of their directors has just left, and another is the Carillion chief executive, this is not the company to inspire confidence. It’s time for Barclays to stop supporting this company, as they said they’d do at their AGM last year and, more significantly, it’s time government stopped backing this industry.”
Ken Cronin, Chief Executive of the industry body, UK Onshore Oil and Gas, said:
“We are pleased that the Secretary of State is satisfied that Third Energy has met each of the thirteen conditions laid out in section 4A of the Petroleum Act 1998 as they prepare to hydraulically fracture in North Yorkshire. Final ministerial consent for any hydraulic fracturing is part of the robust regulatory regime we work within, and we therefore look forward to Third Energy working with the Oil and Gas Authority and the Infrastructure and Projects Authority to satisfy the additional requirements requested of them.”
25/1/18 Updated to include reaction from Friends of the Earth, UKOOG, and Third Energy