Legal

Anti-fracking campaigner files High Court challenge over oil and gas clean-up costs

191023 Eddie Thornton Helen Chuntso

Campaigner Eddie Thornton speaking to reporters outside Third Energy’s gas site at Kirby Misperton, 23 October 2019. Photo: Helen Chuntso

Legal papers were submitted this morning in a challenge against the shale gas regulator about who should pay for decommissioning sites.

It came on the day that a report by the government’s spending watchdog raised concerns over clean-up costs for fracking. The investigation by the National Audit Office concluded that the government had been unable to explain who would meet decommissioning costs if a shale gas operator went out of business and landowners were unable to pay.

The legal challenge has been brought by Eddie Thornton, a campaigner and resident of Ryedale in North Yorkshire, where Third Energy sought to frack at Kirby Misperton in 2017.

His case concerns the sale of Third Energy to York Energy (UK) Holdings Ltd, whose only financial filings show it has assets of £10. Under the deal, York Energy has taken on responsibility for 20 gas wells, 150km of pipeline and a power station.

Mr Thornton, who has raised more than £10,000 to take his case to the High Court, said the regulator, the Oil & Gas Authority (OGA), had not said who would pick up the bill for decommissioning the Third Energy assets if York Energy went out of business. He said he wanted to prevent the oil and gas industry “offloading clean-up costs on the public”.

The challenge centres on whether the OGA followed the rules over change of control of companies. Mr Thornton will argue that Third Energy did not seek written permission from the OGA and the OGA did not ask for an application for the change.

He said today:

“Our legal team is confident that the Oil & Gas Authority has broken the law and we’re ready to take our case all the way to the High Court.

“By not properly scrutinising the takeover of Third Energy, the regulator has failed to follow its own rules and has put the public at huge financial risk.

“If our challenge is successful in court, the only remedy I can see is the revocation of Third Energy’s exploration licence, which would mean our community is no longer under threat from fracking.”

Matthew McFeeley, a solicitor with Mr Thornton’s legal team, said:

“The National Audit Office report makes it abundantly clear that the public will be left to foot the bill if the government allows fracking companies to be bought and sold without close oversight to ensure that the new owners are able to cover the costs of safely plugging wells and cleaning up and restoring sites.

“Despite previous assurances that the Environment Agency would be able to pursue responsible parties if companies went bust, the government now admits that is not the case.

“The judicial review claim filed today seeks to ensure that the Oil & Gas Authority properly scrutinises such sales to protect the tax-paying public.”

Mr Thornton is represented by 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 will report on the progress of the challenge. Earlier this month, we asked the OGA to comment on the case but it did not respond. We repeated this invitation today and will update this article with any response.

Contradictory evidence on decommissioning

The National Audit Office (NAO) report revealed contradictory evidence on who would become liable for decommissioning costs.

The Department for Business, Energy and Industrial Strategy (BEIS) said in May 2019 that powers under environmental directives could be used to pursue landowners or former operators for decommissioning costs.

But the Environment Agency told the NAO it “had since considered the extent of these powers and determined that it is unable to use them to pursue either insolvent operators or landowners”.

DrillOrDrop asked BEIS to explain the contradiction. A spokesperson said:

“Since May the Environment Agency has concluded that there are statutory powers other than those initially identified that could be applied to pursue insolvent operators and landowners.

“On 16 October 2019, the Department updated the Committee to clarify the powers which the EA has concluded can be used, but this came too late to be reflected in the NAO report.”

We asked BEIS who would ultimately pay for decommissioning if it was difficult to pursue landowners or former operators. We also asked why the government had resisted taking on the ultimate responsibility for onshore decommissioning when it was the decommissioner of last resort for offshore wells.

The spokesperson said:

“The Government has always said shale gas exploration can only proceed as long as it is safe and environmentally responsible. The Oil and Gas Authority will soon publish a finalised scientific assessment of recent industry data and we will set out our future approach as soon as we have considered the findings.”

4 replies »

  1. AS Third Energy previously did not frack, whilst with Barclays, and the new outfit has specified they do not intend to frack, someone seems to be confused.

  2. I think that the key issue is in the last part of the comment by Matthew McFeeley. Does the OGA scrutinise the ability of new oil and gas companies to decommission the existing infrastructure.

    This issue applies to all onshore oil and gas wells and is not specific to fracked wells.

    That the BEIS is ducking the issue is not surprising. It has not been an issue for >98%of onshore wells so far, so they have not had to think about it too much.

    It will be interesting to see how this pans out.

    1. Have the OGA broken the law
    2. Will BEIS agree ( fess up ) that the taxpayer is indeed on the hook for decommissioning and cleanup costs should an oil and gas company go bust?

  3. I think the other question is do the courts scrutinise the ability of individuals to pay the costs of the court case(s) before the process commences?

    Would seem to be an equitable balance-but not going to happen.

    As you indicate hewes62, it has not been an issue with on shore oil in the UK to any significant degree. It has not been an issue at all with UK fracking. Third Energy has not fracked and shows no intention of doing so. Can’t see this going anywhere, although I suspect there will be tight control of those who might apply for authority to conduct fracking going forward that they have funding reserved to re-instate. I note Sirius Minerals have a reserve to do exactly that and that seems to be a sensible solution and has helped obtain local support.

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