Owners of fracking sites may be liable for the clean-up if project backers go out of business, MPs said in a report published today.
The Public Accounts Committee, which has been investigating oil and gas decommissioning, said it had been told by the government that landowners could ultimately be held responsible for the costs.
Today’s report said the onshore industry carried greater risks than offshore operations:
“fracking is conducted by smaller companies, with less financial backing, meaning they could be short lived.”
The Department of Business, Energy and Industrial Strategy (BEIS) told the committee it would consider the ability of a company to meet decommissioning costs when deciding whether to give consent for operations. BEIS could require operators to put money aside for the work, it added.
BEIS also said the Environment Agency would consider decommissioning when granting a permit to oil and gas sites.
In a letter to the committee, BEIS said:
“the Environment Agency will not allow surrender of a permit until sites have been returned to satisfactory condition. As part of this, the Environment Agency has the ability to impose conditions on permit holders, further mitigating the risk of pollution. ln the event the permit holder company is no longer in existence, the Environment Agency would have the ability to pursue former directors from that company.
“Ultimately, should all these safeguards fail, the Environment Agency would carefully consider the specific circumstances of the case, and identify if there were other appropriate parties who could bear responsibility, for example, the landowner.”
“Some landowners, having entered into leasing arrangements for extractive activities to take part on their land, will have insurance in place in order to mitigate the risks associated with these activities.”
“Worrying lack of understanding”
The report said it was concerned that determining liability may not always be as straightforward as the BEIS believed and that liability could fall to the government.
“The department has a worrying lack of understanding of the potential for government liability to decommission assets used in fracking.
“The department must ensure it sets the terms for how fracking assets are decommissioned before the industry grows further.”
It asked BEIS to explain, by the end of June 2019, the decommissioning arrangements for fracking. The committee also called for:
“a full and clear explanation of the responsibility for subsequent costs once licences have been returned to the Government, and what it is doing to prevent liabilities falling to taxpayers.”
“Government support may become incompatible with climate objectives”
The report also concluded that government support for oil and gas may become incompatible with its long-term climate change objectives.
It urged BEIS to set out, as part of the energy white paper expected during 2019, how government support for oil and gas would remain compatible with wider energy objectives.