Government departments paid no compensation to UK shale gas companies over the restoration of the fracking moratorium, even though the industry warned of a multi-million pound court action.
In November 2022, there were reports of a “mammoth legal challenge”, with companies seeking up to £1 billion in damages.
The reports were published a month after the new prime minister, Rishi Sunak, reversed the brief lifting of the moratorium by Liz Truss.
Shale gas companies were said to be considering the launch of one or multiple cases.
Rumours persisted of an industry-wide legal challenge.
But a series of freedom of information (FOI) requests by DrillOrDrop revealed:
- Only one company took the first step towards a challenge against the departments responsible for the moratorium
- This company backed down after a response from government lawyers
- The departments paid no compensation to the industry
- The departments did not take up an industry offer of alternative dispute resolution
“No legal action is underway”.
We asked whether the department of energy security and net zero (DESNEZ) or the former department of business, energy and industrial strategy (BEIS) had received a “letter before claim”, the initial stage of a legal action, about the moratorium. DESNEZ said it had.
We asked whether DESNEZ or BEIS had received any legal claims. DESNEZ said “No”.
We asked for the case number of any legal action. DESNEZ replied:
“No legal action is underway so no case reference number can be given.”
DESNEZ later confirmed the “letter before claim” had come from IGas, the holder of 292,100 acres of shale gas licences, mainly in Cheshire, the east midlands and south Yorkshire.
In a separate response, DESNEZ said:
“the Department has not paid compensation over the reinstatement of the fracking moratorium to IGas, Ineos Upstream, Egdon Resources, Aurora Energy Resources or Cuadrilla Resources.”
It also said:
“the Department has not taken part in any dispute resolution processes over the reinstatement of the fracking moratorium with IGas, Ineos Upstream, Egdon Resources, Aurora Energy Resources or Cuadrilla Resources.”
“Reserve right to recover losses”
The moratorium on fracking in England was introduced in November 2019 because of earthquakes caused by operations at Cuadrilla’s Preston New Road shale gas site near Blackpool.
Key figures in the UK shale gas industry welcomed the lifting of the moratorium announced by Liz Truss on 8 September 2022.
But seven weeks later, Ms Truss’s replacement, Rishi Sunak reversed the decision on his first full day in office (26 October 2022).
The moratorium was formally reinstated a day later. A written ministerial statement (WMS) to parliament referred to a report by the British Geological Survey. This said:
“forecasting the occurrence of large earthquakes and their expected magnitude owing to shale gas extraction remains a challenge with significant uncertainty”.
There would be a presumption against issuing further HFCs but future applications would be considered on their own merits, the WMS said.
IGas responded:
“we reserve the right to pursue any legal process available to us to recover the losses that we have incurred.”
A month later, the Daily Mail reported:
“The fracking industry is exploring a mammoth legal challenge between £500m and £1 billion against the Government after it suddenly re-banned shale gas extraction last month.”
A spokesperson for the industry body, UK Onshore Oil & Gas, told the paper “no option” was off the table.
IGas takes first step to claim
The FOI responses revealed that two days before Christmas 2022, IGas lawyers, Eversheds Sutherland, submitted the letter before claim, describing the decision to reinstate the moratorium as “unlawful”, “unjustified”, “irrational” and “unfair”.
It listed eight proposed grounds for a legal challenge against the government. These included:
- The decision was ultra vires – it was beyond the secretary of state’s legal power or authority
- The reinstatement of the moratorium created an inflexible policy not to grant hydraulic fracturing consents (HFCs) unless new evidence came to light.
- It failed to take into account relevant considerations, including the war in Ukraine and restrictions on gas supply
- There had been an unjustified breach of legitimate expectation
- The government had behaved irrationally and unfairly
- The decision unlawfully interfered with IGas’s rights under the European Convention of Human Rights to peaceful enjoyment of possessions and protection from discrimination
IGas had onshore exploration licences “of which it cannot make any meaningful use”, the letter said, because of the “effective ban on the grant of further HFCs” by the government.
The company through its lawyers said it was now in a “catch-22” situation”. The government had imposed a condition which was not possible to satisfy, IGas said. It could not provide “compelling evidence” to displace the presumption against fracking without drilling more exploratory sites.
The letter said the company reserved the right to claim for damages for losses caused by the reinstatement of the moratorium.
It asked the government to:
“Withdraw the October 2022 Decision and revert to the September 2022 Decision.
“Alternatively, withdraw the October 2022 Decision, and commit to a proper lawful reconsideration of the matter.”
IGas’s legal team asked the government to disclose briefing documents and advice on fracking and the moratorium, as well as internal minutes or memos.
The letter also said:
“The Claimant [IGas] is happy to consider any alternative dispute resolution process which the SSBEIS [business secretary] wishes to advance.”
The letter said a reply was required by 6 January 2023.
Government reply
The government’s litigation group replied on 25 January 2023.
It described the proposed “ultra vires” ground as “entirely without merit” based on an “erroneous factual premise”.
There was “no basis” to the contention that the secretary of state failed to consider the wider geopolitical situation, it said.
On the “legitimate expectation” ground, government lawyers said the reinstatement of the moratorium was “not in anyway inconsistent with the latest scientific advice”.
One of the human rights grounds was “embarrassing for want of particularity”, the government response said.
It disagreed that the change of policy was irrational or that the presumption against further HFCs was inconsistent with continuing to assess applications on their merits.
It said:
“iGas have not submitted an application for a HFC or sought to adduce compelling new evidence which addresses the concerns around the prediction and management of induced seismicity.
“If iGas submitted an application for a HFC it would be considered on its merits.
“iGas is not in a catch-22 situation and there is no impediment to it making an application and/or submitting technical evidence, without the need for an application for judicial review.”
The response added that its letter provided “a complete answer to the proposed claims” and it declined to release the documents requested by IGas.
In March 2023, DrillOrDrop reported a statement from IGas that it had decided “not to pursue legal recourse” over the return of the moratorium.
The company did not respond to our invitation to comment.
DRILL OR DROP? 
This country’s political system is softer than marshmallows!! What an embarrassing nation!
Political party voting #noneoftheabove #NOTA
Unbelievable in its audacity !
No one asked these Companies to frack for dirty fossil fuels they did it solely for potential profit .
How dare they quote their human rights when they trampled all over the human rights of local communities forced to face living in a gas field at PNR site .
Local communities and individuals were forced to fund raise thousands of pounds and dedicate years of their lives to fighting attempts to put a frack site within 300 Metres of peoples homes at pNR . Who protected the ordinary persons rights ?
I know because I was chair of PNR action group in Lancs throughout the 5 years of taking Cuadrilla through every legal challenge .
Communities under the NPPF were given the right to shape and determine their Communities . Yet fracking was enforced at PNR by Government pressure. Despite The voice of locals saying NO .
As we predicted due to fault lines the land was unsuitable and an earthquake ensued . So much for their mitigation strategies ? This led to the moratorium on fracking which should be permanent
IMe horrified this Industry has the gall to persist when thousands of people have voiced opposition to this Industry .
We said NO in Lancashire we meant it !
Looks like shale gas hopefuls made a ‘mammoth’ mistake when they thought they had a chance against well organised communities and government lawyers. These companies may receive millions……….of letters from angry broke shareholders.