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
Sounds to me like the wheels have fallen off Third Energy’s frack wagon. I won’t be suprised if they do go into adnminstration, all the signs are there…;
“I have also asked the Infrastructure and Projects Authority to assess the financial resilience of the applicant, including its ability to fund decommissioning costs”
If the Gvt had implemented a proper bond system, like other countries, investors would be warier of the fiscal risks.
Typical extremist website blog reaction to news that TE got the go-ahead from Clark, subject to meeting financial accounts conditions.
Here’s a mainstream accounting of the same story….from the Times “Fracking could start within weeks after the government said that a company had met safety and environmental requirements and needed only to prove its financial resilience.” Quite a different story from “minister delays fracking decision….” I would say. But if you’re going to be an extremist website it is imperative that you generate extremist headlines!
There may be more than one way of telling this story.
Third Energy were ready to frack on 8 November, and wrote to local residents detailing how they were laying out the frack equipment. At this point many people thought the approval from the Secretary of State was a formality.
10 weeks on and Third are still waiting, and have now been told to get their financial house in order before they can begin the fracking process. I would suggest this is an unexpected delay – and must be costing Third some cash as they have the equipment all on site ready to go. In addition, in another new development, the company will be scrutinised for its ability to pay decommissioning costs.
Yes, Third have passed all 13 technical requirements – but they must have thought they had done this 10 weeks ago when they were getting ready to frack, so this is hardly news.
We can have a disagreement over what the story really is, and who is falling for what spin, but to go on from this to talk about an “extremist” website is just plain silly in my opinion.
EKT, I wouldn’t call DoD extremist but I would suggest they sway heavily onto the anti side, but that is ok with me as they do provide up to date information on all cases and if they want to have a little dig or alter a headline a tad then so be it. Don’t be too disheartened Paul, we are simply taking our frustrations with the way the UK is going on you guys but we don’t mean it personally.
In the opinion of an extremist, that is! The story is clearly favorable to TE according to mainstream outlets. But an extremist blog feels it was nothing but a delay. No need to apologize for your bias, Paul. .
This is brilliant news , this could also be the case for other companies who are up to their necks in debt , thank you Paul
“A company’s competence and financial viability” … Lord Henley? “Financial resilience” … Mr Clark? Please have a fresh look at the other on-shore exploration companies, gentlemen — including the earthquake makers and super debt shufflers, Cuadrilla.
Muriel, perhaps have a fresh look yourself at Cuadrilla’s accounts. I find zero debt. Where do you get your misinformation?
All quiet on the Muriel front. I just wonder why? It’s so much fun to make sensationalist claims until someone calls you out on the, am I right?
Pretty sensible. Should hardly be a problem for Barclays Bank. Debt is no problem, as long as it is secured-otherwise most of the Premiership clubs would be out of business.
Do these tree huggers really think that this application will fail on financial grounds unbelievable, even it the company itself can,t fund the project. they will simply take a farm in partner most likely Ineos so don,t start celebrating yet.
Is that the INEOS that owes as much money as it’s ‘leader’ has in his personal bank account – including two tax payer financed yachts, who has invested millions to bring in shale gas from the US to make 40% more plastic that no one wants?
So, they pay the £160k into the fund (if they haven’t already) complete their accounts, and off we go.
If it was that simple John Dewar who has described fracking at Kirby Misperton as his “crowning glory”, would not have ‘retired’ at the crucial moment.
The dominoes are falling…..
It is grossly incompetent in my opinion that this development has got this far only for the O&GA/government to delay the frack. This does not show a robust regulatory regime, it shows anything but. The equipment, presumably hired and at a considerable cost has been sitting on the site since October I believe. Given that this company was in debt when it was granted planning consent, surely to find itself in this position at this late stage is a complete farce. And the industry/UKOOG spin is quite frankly an insult to our intelligence. There is nothing to be pleased about from the industry perspective. An industry mired in controversy, facing public opposition, this was supposed to be a shining example of the UK unconventional industry’s professionalism, competence and gold standards. Instead you have this highly embarrassing and shambolic example exposed to the country and the world. And if Barclays is so keen to fund this, why haven’t they? One suspects there is even more to this than meets the eye but either way it is one wholly mess.
Lol and all the numpties like John P that push for North Sea oil. You do realise that it’ll be the tax payer that foots the bill for a decommissioning costs up there? And I can assure you that the costs for putting those back in order make the onshore stuff look like sweetie money!
Double standards by a weak government once again.
So here is an insight into the future.
If obvious members of the O&G industries are assuring us that the North Sea restoration costs will be born by the tax payer and not the companies that operate them, then by default the same for the onshore…..you have just let the cat out of the bag GBK.
Cuadrilla have so far failed to plug and abandon sites required by planning conditions….looks like they are your starter for ten……
Sher, actually the onshore O&G should be promoted by you lot as it is the offshore stuff that you should really be worried about! The regulations for onshore are far far far more robust trust me! Simply due to the fact we can all see what is going on unlike out at sea! The same goes with offshore windfarms, you would be surprised just how short the lifespan of a turbine is out there due to……salt erosion! Or is it?
Greggie is a Greenie nerd and a closet environmental activists. He is playing up to the eco Warrior to win votes. Yes very weak government got very scared by a small but vocally aggressive group. Politically it looks as though this government and its energy policy have been shouted down by the nimby and anti fracker. No wonder they are doing poorly with getting agreement on Brexit and the poll. Labour is having a good chance now because of indecision and weak cohesion in Tory leadership.
TW, through the grapevine, TE are about to get the go ahead however, Mr Clark is wanting to demonstrate he didn’t just make his decision overnight and is trying to appease the green brigade, however they will never be happy. I honestly don’t know what the greens want but it is certainly not what the masses want. Have a little more faith and you will see exploration kick off shortly. Been a long journey but one positive is that when TE get the go ahead the rest will be a million times smoother as there is a set list of protocols to be followed. Ineos sure doesn’t have any financial worries!
“Fracking could start within weeks after the government said a company had met safety and environmental requirements and needed only to prove its financial resilience”.
I think I will be more inclined to take Ben Webster’s slant on events. Not so exciting for the easily excited, but in light of Carillion, perfectly sensible, and I expect a policy that will be rolled out into many other industries.