Shale gas companies have received refunds on their onshore licence fees because of the moratorium on fracking in England.
The industry regulator has confirmed that it waived fees totalling £640,000 following the moratorium, imposed in November 2019, which left shale gas licences in limbo across the north of England and the midlands.
But the North Sea Transition Authority, known until this week as the Oil & Gas Authority, appears to have used its discretion in granting refunds and not all the applicants got their money back.
News of the waivers emerged following a freedom of information request by DrillOrDrop.
The NSTA told us:
“Applications for a waiver of licence rental fees have been received by the North Sea Transition Authority from holders of onshore oil and gas licences with shale potential.
“Waivers for licence rental fees have been granted for licences with shale development potential for reasons including those set out in the Written Ministerial Statement issued by the BEIS Secretary of State on 4 November 2019 concerning the development of licences with shale potential.”
The FOI response said the then OGA received £778,000 in licence rentals for the 12 months from 1 April 2020 to 31 March 2021.
It repaid a total of £640,000 for licence rentals for the periods 1 April 2019-31 March 2020 and 1 April 2020-31 March 2021.
DrillOrDrop understands that companies with shale gas potential had to pay the rental fee and then claim it back.
The NSTA told us successful applications for rental waivers required confirmation from the treasury.
And licences that got a refund would not necessarily be successful again. The NTSA said:
“These waivers were granted without prejudice to the question of whether any waivers will be given for future years.”
In a follow-up question, we asked whether the then OGA had been threatened with legal action by shale gas operators over the moratorium.
A spokesperson said:
“We do not comment on legal action or threats of legal action if, or when, received.”
DrillOrDrop reported last year that the onshore shale gas industry had issued a letter before action, the first formal stage in a legal challenge, to the Department of Business, Energy and Industrial Strategy.
In the past few months, ministers have come under pressure from the industry and a small number of Conservative backbenchers to lift the moratorium.
We also asked NSTA whether the then OGA had any discretion on allowing the waiver or on the amount refunded.
The spokesperson said:
“Licensees can apply for a rental waiver to the NSTA. The NSTA considers these requests and not all waivers are granted”.
In another follow-up question, we asked what regulations oblige the government to waive rental fees for shale gas licences.
The spokesperson said:
“Rental waivers for shale licences were granted on the basis of the Written Ministerial Statement issued by BEIS Secretary of State on 4 November 2019 and were given without prejudice for future years.
“The licences were granted to the licensees for the purpose of exploring for and developing shale gas. The introduction of the moratorium means that those licensees cannot currently carry out such activities.”
The spokesperson said Annex 4.10 of the UK government’s Managing Public Money sets out information regarding the granting of waivers.
The response to our FOI request also confirmed that licence waivers were not granted to operators that had no shale development potential.
In licences where there is both shale and non-shale gas potential, the NTSA said:
“the relevant waivers were granted on the basis that rentals will be reinstated on a pro rata basis should any of the licensees seek to develop the site for non-shale purposes.”
27/3/22 Acronym for regulator corrected to NSTA – thanks Phil C