The government is being urged to change the law to protect people whose property is damaged by fracking.
An advisory group representing more than 30 North Yorkshire communities wants shale gas companies to be required to pay for pre-commencement structural surveys on all properties that could be affected by fracking.
The firms should also be made strictly liable for all damage caused, the group said. And if companies went out of business, the government should step in as insurer.
The South Hambleton Shale Gas Advisory Group asked one of its legal specialists to investigate the current law on liability for damage. The group’s chair, Christopher Stratton, said:
“The result is of great concern and means the burden of proof rests on the householders.”
There has been no high-volume hydraulic fracturing in North Yorkshire. But operations near Blackpool, by Cuadrilla, in August 2019 caused more than 130 earth tremors. DrillOrDrop understands there have been about 100 reports of damage to property. Some householders have said the recent fracking-induced tremors caused cracks to their house walls but Cuadrilla had not accepted liability.
The South Hambleton report concluded that the current law works against people whose property has been damaged:
“Legal liability is highly complex and potentially fraught with anxiety and great expense.
“It is incumbent on government, as a matter of priority, to grasp the details of this question and deal with it by the introduction of effective legalisation.”
Christopher Stratton said:
“We think that a change in legislation is required and that the industry should be required to fund pre-drilling structural surveys of all property likely to be affected, which could be within a wide radius from the well site, depending upon the geology and extent of horizontal drilling.
“We have recently presented these findings to the local MP, Kevin Hollinrake. He recognised our concerns and has forwarded the report to the business secretary, Andrea Leadsom. Her response is awaited.”
Mr Stratton also said attempts by the industry to relax the regulation of seismic activity caused by fracking should be resisted to avoid what he described as more widespread and severe property damage.
‘Hurdles to damage claims’
According to the report, householders affected by fracking damage could face a range of problems:
- Difficulty proving fracking caused the damage
- Cost and stress of litigation and the time it takes to achieve judgement
- Significant risk that a claim was thwarted by the operator becoming insolvent
- Risk of insurance premiums rising and/or cover being excluded in fracking areas once subsidence claims start being made
- Absence of industry or government indemnity or insurance scheme to ensure compensation is paid
The government has suggested that claims would be covered by insurance policies or that claims could be made against shale gas operators. But, the report said, ministers had not clarified how claims would be made:
“There are very significant legal and practical hurdles to overcome in relation to such actions.
“Given that fracking will undoubtedly cause disruption and some economic loss (e.g. fall in house prices) to local communities anyway, it seems very unfair that people who also suffer actual physical damage to their property, should not have a straightforward means of obtaining financial compensation.
“To achieve this will require new legislation, either to provide a new type of strict liability claim and/or to set up some alternative compensation fund.”
‘New legislation needed’
The report said the 1966 Party Wall Act, which aims to resolve disputes on neighbours’ boundaries, could be a model for carrying out surveys before fracking begins. But it acknowledged there could be significant up-front costs which might be wasted if no damage resulted. It said:
“There could instead be a presumption introduced by statute that any subsidence damage occurring in a fracking area has been caused by fracking unless the fracking operator can prove otherwise.”
The report also identified the risk to householders of fracking companies going out of business when faced with claims for damage.
During the passage of the 2015 Infrastructure Act, ministers rejected proposals for a government-backed contingency fund. It said there should, instead, be an industry scheme that would step in and pay any liabilities. So far, there has been no announcement of any such scheme.
The report said a central indemnity fund would benefit both people whose property had been damaged and landowners who faced liability when the operator went out of business.
There were alternative legal routes, but most of these involved significant difficulties, the report identified. A case for private nuisance, for example, would have to prove that the activity was unreasonable and that the damage was foreseeable. A negligence claim could fail if the operator showed it had complied with regulatory permissions and standards.
The report also identified a future loophole on liability. The government has been considering whether to make major fracking schemes Nationally Significant Infrastructure Projects, or NSIP. Under section 158 of the 2008 Planning Act, projects authorised under the NSIP regime are deemed to have statutory authority, which provides a defence in civil or criminal proceedings for nuisance. The report said:
“This was not referenced in the government consultation paper and has not apparently been picked up in commentary but is potentially of major significance”.
The government’s response to a public consultation on the NSIP proposals, which closed in October 2018, has not yet been published.
On insurance, the report said householders could find it difficult to prove to an insurance company that damage being claimed for was caused by fracking and not by a failure to maintain the property.
It said there were concerns that a significant number of successful claims could have an impact on premiums and then the availability of cover.
Fracking operators and landowners permitting fracking may also struggle to secure adequate insurance cover because the level of possible claims was uncertain, the report added.
“This is why there have been calls for the Government to act as an ‘insurer of last resort’, which so far have been ignored.”