A Green Light For Unconventional Oil And Gas?

In 2010 the Supreme Court dismissed the appeal brought by Mohammed Al-Fayed's company, Bocardo SA, against the Court of Appeal's decision to award only minimal damages for trespass by an oil company which laterally drilled 800m under the appellant's land without its consent.

While for energy companies this removed the worry of large compensation payments, it nevertheless confirmed the principle that such incursions were, potentially, actionable trespass. As levels of public and protestor opposition have risen (to hydraulic fracturing in particular), so have the number of parties and action groups looking to use the trespass argument as a possible means to thwart or delay future projects. The new Infrastructure Act 2015 gives various automatic rights to access petroleum or deep geothermal energy, subject to various conditions and requirements.

The Act is, however, not quite (yet at least) the 'silver bullet' that it looks like at first blush. There are significant questions left open in terms of how the regime will work, and it will be a brave company which commences full-scale operations following the anticipated result of the 14th licensing round without further regulations from the Secretary of State (as envisaged by the Act) and/or Department of Energy and Climate Change (DECC) guidance in terms of how the anticipated compensation schemes are to work.

National (economic) interest factor

Securing a country's long-term affordable energy supply is clearly key to economic and political stability.

Since the peak of North Sea oil production in the late 1990s/early 2000s, we have seen a decrease of roughly 2.4 million barrels per day in domestic production and a corresponding increase in net import dependency (with the renewables industry so far only being able to slow the rate of that dependency rather than start to claw back the difference). According to DECC's 2013 figures, net natural gas imports to the UK account for around 44% of supply.

Given carbon reduction targets and climate change, it is generally accepted that there is a fine balance to be struck between (a) reducing our reliance on fossil fuels while (b) establishing and safeguarding the country's future energy supply at predictable/affordable prices, thereby enabling the UK to remain a globally competitive economic entity.

We know what can happen when significant supplies are jeopardised by aggressive foreign policy or competing economic interests. The blackouts and civil unrest caused by the nationalisation of Iranian oil in 1951, the Egyptian Suez crisis in 1956, together with more recent political upheavals, highlight dramatically to producers and consumers alike the dangers of an energy policy massively reliant on imports.

At the time of writing, the uncertainty of factors such as:

international foreign and trade policy; the (one would assume) untenably high and continued supply levels; low oil prices; and a consequently depressed renewables market, means that the necessity of hedging fuel costs and, wherever possible, reducing dependence on foreign supplies will continue to be of paramount importance.

In light of the continued low oil price, the government has decided that domestic oil and gas producers need assistance to continue to remain competitive in the market...