Legal

Campaigner launches crowdfund for legal challenge over oil and gas clean-up costs

190503 Eddie Thornton

Eddie Thornton at Westminster rally, 5 March 2019. Photo: DrillOrDrop

A campaigner from North Yorkshire is seeking to raise £10,000 to take the oil and gas regulator to court over who pays for decommissioning.

Eddie Thornton, who opposed fracking by Third Energy at Kirby Misperton, said he wanted to prevent the oil and gas industry “offloading clean-up costs on the public”.

He is preparing to bring a legal challenge in the High Court against the Oil & Gas Authority (OGA).

His case centres on the sale in July 2019 of Third Energy’s North Yorkshire gas business to York Energy.

Mr Thornton said:

“Third Energy have millions of pounds worth of defunct infrastructure which signifies massive decommissioning costs.

“The only thing we know about this new company based in the Cayman Islands is that it has just £10 in the bank.

“It’s astonishing that the government has permitted this takeover which threatens to leave the taxpayer with a huge clean-up bill. We believe the Oil and Gas Authority has failed to follow the law and we are ready to take our case all the way to the High Court.”

Third Energy’s assets include well sites, pipelines and a power station. Among the well sites are Kirby Misperton, where Third Energy planned to frack in autumn 2017 but did not pass the government’s later financial resilience test.

171216 KM Eddie Thornton

Third Energy’s fracking site at Kirby Misperson in North Yorkshire, 16 December 2017. Photo: Eddie Thornton

Mr Thornton said:

“The OGA has a duty under the law to consider whether approving such sales will leave the taxpayers holding the bag for the costs to clean up after these companies if they duck their duties or go bust.

“But the OGA claims it did not need to approve the change of control of Third Energy’s licence to drill and frack its wells.

“We are challenging this decision as my legal team consider that the OGA have acted unlawfully in determining that no approval was needed and conducting a shoddy and limited financial analysis.”

He said:

“The OGA has not said who will pick up the bill for decommissioning 20 well pads, 150km of pipelines and Knapton Power station if York Energy fails, but it’s not hard to see that it will almost certainly be left to us – the taxpaying public.”

Mr Thornton said Third Energy did not seek the OGA’s written permission for the change of control of the licence to explore or produce gas. Nor, he said, did the OGA ask for an application for change of control of ownership to York Energy.

“Under the OGA’s own guidance, this constitutes a very serious breach of the licence, requiring immediate revocation.

“Should the challenge be successful, the OGA would have to reconsider its position and would have to justify any decision not to revoke the remaining oil and gas licences that were part of the Third Energy/York Energy deal.”

Mr Thornton launched a fundraiser with Crowdjustice.com this morning, with an initial target of £10,000 to be reached by 2 November 2019. He said the case would cost more than this but the target would allow his legal to team to prepare and file court papers.

Mr Thornton’s legal team comprises Estelle Dehon, of Cornerstone Barristers, Marc Willers QC, at Garden Court Chambers, and Matthew McFeeley and Paul Stookes, solicitors at Richard Buxton Environmental and Public Law.

DrillOrDrop invited the OGA to comment on the case. This article will be updated with any response.

16 replies »

  1. Third Energy would have valueless defunct infrastructure, which would cost a few million to decommission.
    This if it went bust and a buyer had not turned up and carry on ( for a £1 say ).

    The tax payer ( public and business ) would be on the hook for decommissioning if Third Energy or the next company went bust. Nothing new there.

    So, why question the decision by the OGA, if in either case going bust, the outcome is the same?

    Unless Third Energy had the money, and have sold the business to one that has not?

    Meanwhile has the council been squirrelling away the business rates for such a rainy day?

    Nearby no doubt there will be some thought on who pays up if Sirius goes bust ( a deep hole in the ground, a tunnel to nowhere and so on ). Should a new buyer turn up with cash to carry on once the £161 Million is spent, ( for £1 ), then should they be welcomed or turned away, maybe on the principle that if they too go bust, then the shaft would be deeper, the tunnel longer and the surface plant larger?

    The state does not own ( or licence ) the polyhalite, so is not so interested in funding any reclamation costs, compared to oil and gas, where the taxpayer has benefitted from the tax harvest for years ( as the resource is owned by the state ).

  2. I understand the allegation is that the OGA has failed to comply with the law in the transfer of the licence and that York Energy may have insufficient funds to remediate the various sites. There is a real risk to tax payers if a company with insufficient funds is set up in such a way that the terms of the contract are too remote from the parent company. In such circumstances it means funds cannot be recovered from the parent company, which usually holds the funds. It is one thing if a company goes bust when it was unforeseen and all due diligence was carried out prior to the granting of a licence, it is another if due diligence was lacking or absent. One can only presume that lawyers have been considering such issues before going public and must consider there is a case to be answered. The clean up costs of contaminated land can be significant and it is wrong that the tax payer should have to meet such costs.
    As for tax, I would presume that tax will be payable from both the potash mine as well as oil and gas sites, though I seem to recall the government granted a very favourable tax regime for fracking? And if a company is making profits, the profits will be higher than any tax paid.

    • Kat T

      Thanks for the reply.

      If Third Energy have sold on to a company that can not afford to decommission the sites ( when TE can ) then it certainly needs looking into.

      Re Sirius, I am sure that they will get additional funding ( the polyhalite is there for sure and they have forward sold a lot ). One to keep an eye on.

      Re making profits and tax. In the case of UK offshore oil, tax take was once far greater than profit due to PRT. This was in the days of high oil prices and low production costs. Nowadays costs are higher, hence the reduction in PRT.

      I would be sure that the gas field in the vale of Pickering would not be in that position, but if profits are low or non existent, then the company will pay more tax than its profits due to business tax ( and any tax paid on consumables and via payroll ).

      https://en.m.wikipedia.org/wiki/Petroleum_Revenue_Tax

      • Many thanks Hewes62 – very interesting. I wonder how the sums work out overall in terms of the additional revenue and the tax payer contribution to decommissioning in the North Sea?

        • KatT

          Up to 2012 the tax take for the oil and gas industry was 300 Billion

          https://www.dailyrecord.co.uk/news/politics/britain-gained-300billion-tax-north-6390332

          Decommissioning costs are i the region of 35 Billion, funded mainly be the industry ( and as it’s an expense, set against tax ), with an additional rebate from the treasury ( we want the cash when you are making it, you can have a bit back later when you are not producing a bean….trust us, better with us than yourselves ).

          So I suspect there is a spectrum of field from those who have paid more in tax than profits, including decommissioning, to others that never produced much and therefore did not contribute to the treasury as much. They( the rich ones ) are likely to all be oil platforms, though West Sole Alpha, commissioned in 1967 is still producing. But being gas platform it was and is not as remunerative as oil, but decommissioning costs will be peanuts compared to the steady income stream ( profit and tax) it has provided for 52 years

          http://abarrelfull.wikidot.com/west-sole-gas-fields

    • Martin

      Indeed. I am sure they will find finance to continue as the polyhalite is there and customers await its production.

  3. I believe they have a £50m fund set aside for re-instatement. Part of the planning process in their case?? Or, maybe, just part of their engagement to get locals on-side?? Can’t recall which.

    But, in respect of this crowd funding. What happens if the campaigner loses and costs are awarded against??? Do the “crowd” have to accept that as part of their onward responsibility?

  4. Having no proper funds for clean up surely renders a business unethical. We see companies go bust every day. Some see it happening before it happens and close down with care for their customers, creditors and the public; these are the ethical ones and are few and far between. Others just seem to wake up one day and go ‘fu@k it’ and drop the whole lot into boiling oil leaving everyone to fend for themselves. They are the unethical ones and the onshore fracking industry fall into that category. They make a social and ecological mess even if nothing goes ‘wrong’, and worse than that, they have no social, ecological and economic heart and therefore do not see themsleves as responsible for anything other than their own profit; ‘run guys, the whole lot’s on fire’! Profit, private profit overrides, every time, and it’s the public the picks up the tab.

  5. Deborah Gibson, how many of the so called ‘unethical’ onshore fracking companies have gone bust so far, leaving wells abandoned and the tax payer with the decommissioning costs?

  6. I think you might find Deborah that one or two “alternative” energy suppliers have gone bust and left the clean up to others but no on-shore fracking companies within the UK.

    Equally-who is going to pay for the disposal of all these spent batteries when electric cars are scrapped, or batteries need replacing before the cars are scrapped?? Mr. Musk?? Wouldn’t hold your breath-he would need to make a profit first or borrow some more, and I suspect the market is getting a bit tired of that. The public will have to pick up that tab. Might just be why most of the public are slow to embrace such enlightened thinking.

  7. ‘Scuse me gentlemen. Ms Gibson did not claim any fracking companies had yet left well infrastructure un-decomissioned. She did point out they are unethical. If I lived near PNR and had had my home damaged by Cuadrilla, who then sent an unqualified person to inspect, and denied liability, I think I would consider that to be leaving me, the public, to pay for remedying their damage.

  8. I think Denby there are plenty of appeal options via house insurance to check validity of claims-just like there are with car insurance regarding issues such as whiplash claims.

    Heaven forbid that some claimants may be claiming for more than is warranted!! Nah, never happens, does it?

    Meanwhile, in the real world those companies testing fracking in UK are operating according to strict criteria, and when they breach, then they are pulled up and forced to comply. They are paying money to local communities, even before production, and contributing to local causes. I have had two punctures in the last few weeks that have been caused by roofing nails picked up off the road outside the local building site. Annoying, £40 out of my pocket, but not unknown or unethical.

  9. DENBY,

    Moving past the MARTIN waffle.

    ” In the real world ” home insurance in Fracking areas won’t be that simple .

    If you are able to obtain buildings insurance cover. You could use your PALTRY payment from the Fracking Company to part cover your increased insurance premium for one year .

    90% of residents living close to the Cuadrilla site received an eye watering , life changing £150 . YES I did say £150 .

    Although if you are sitting right on top of the Fracking rig , the EPICENTRE , you could of received , now wait for this , are you sitting down comfortably DENBY ?????? You could of received a mind-boggling payment of £2000.

    https://www.theguardian.com/environment/2017/nov/06/fracking-payouts-shale-gas-cuadrilla-lancashire

    BUT seriously DENBY , would you be able to obtain buildings insurance, to cover Fracking damage in the first place and at what cost ???????

    https://www.yorkshirepost.co.uk/news/latest-news/fracking-could-see-home-insurance-premiums-rise-for-thousands-in-yorkshire-1-9033713

    https://www.butterworths-solicitors.co.uk/is-damage-caused-by-fracking-covered-by-insurance-policies/

    AS some insurance companies WON’T want to cover you at any cost. You then have to further consider what this will do to the value of YOUR home. If you can NOT obtain buildings insurance, your home would be ” unmortgageable.”

    https://www.independent.co.uk/news/uk/home-news/householders-affected-by-floods-face-insurance-double-whammy-if-they-live-nearby-planned-fracking-a6804476.html

    YOU COULD ALWAYS try and pursue the Fracking company for compensation directly , but taking note on how Cuadrilla have set the benchmark, sending round unqualified staff who may have been nothing more than toilet cleaners or errand boys to check the damage to properties after the recent 2.9 magnitude earthquake .

    I would prefer to take my chances trying to find a real pot of gold at the end of the rainbow, than put my hopes on receiving a Cuadrilla compensation payment .

    https://drillordrop.com/2019/09/26/cuadrilla-sent-office-staff-to-check-property-damage-from-uks-biggest-fracking-earth-tremor/

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