- Clearing the Way for UK Shale (and Deep Geothermal) Exploitation: Infrastructure Bill Update (2)
- November 18, 2014
- Law Firm: Dentons Canada LLP - Toronto Office
In the previous post we looked at the new right to exploit deep-level land for petroleum extraction and deep geothermal projects that is now included in the Infrastructure Bill. Here we report on the associated financial provisions and some proposals on shale-related matters that have so far not found their way into this part of the Infrastructure Bill.
The Infrastructure Bill provides for secondary legislation about "payment schemes". The Government favours the voluntary scheme proposed by industry, under which a one-off payment of £20,000 would be made to communities for each unique horizontal well that extends by more than 200 metres laterally. So although Ministers will be able to make regulations requiring payments to owners of land over which the new right is exercised (and other persons for the benefit of areas in which such land is situated), the Government currently intends to use these powers only if the voluntary scheme "is not honoured".
Regulations may also require notice to be given where the new statutory right to use deep-level land for petroleum extraction or deep geothermal projects is to be exercised, including notice of any applicable statutory payment scheme. The secondary legislation powers are to be reviewed after five years and must be repealed after seven years if they have not been used and the Secretary of State is satisfied that they are no longer required.
The principle behind the clauses on the new right was not seriously opposed in the House of Lords debate. Amendments were put forward proposing to exclude National Parks and other areas protected for nature conservation or heritage reasons from exercise of the new right, and to require DECC to publish a report on fugitive green-house gas emissions from onshore energy extraction. Like most of the responses to the Government’s consultation on the new right, these were treated as merely general warnings about potential impacts of shale development that the existing regulatory frameworks are fully capable of addressing. However, it is always possible that they may re-surface at a later stage in the passage of the Infrastructure Bill, when they can be voted on (by convention there are no votes at the Lords Grand Committee stage which has just concluded).
A separate shale-related amendment was proposed by the Conservative Peer Lord Hodgson of Astley Abbotts. Drawing on the example of Norway (like the Scottish National Party in the run-up to the Independence Referendum), Lord Hodgson advocated the establishment of a shale sovereign wealth fund. This would receive "no less than 50% of any revenue received by the United Kingdom Government from any activity connected with the extraction and sale of shale gas," and its assets would be "deployed to serve long term public objectives other than those connected with monetary and exchange rate policy". Lord Hodgson argued that it is imprudent and - from an inter-generational perspective - unfair for all tax revenues from major natural resources such as UK shale gas to be spent when they are received. So far, the Government response to is that the industry is too immature and the Treasury might need to spend 100% of the revenues from shale gas when it receives them, especially in view of the declining North Sea revenues.