We recently acted on the acquisition of affordable units at a site in Grimsby and, as part of our due diligence, discovered an onsite petroleum exploration licence. This article may be useful for private developers and housing associations building and acquiring homes in such locations.
The starting point is that any petroleum deposits (including shale gas) that exist below ground are owned by the Crown, irrespective of land ownership. A licence is required to carry out any oil or gas exploration activity. A Petroleum Exploration and Development Licence (“PEDL”) is a licence issued by the government which permits the operator to explore for, or produce, oil and gas in England.
A PEDL grants exclusive rights to explore drill and produce petroleum within a specified area for a specified time.
A useful interactive map is provided on the Oil & Gas Authority’s website which shows the locations of existing PEDLs. The majority are in the north east and north west of England, with some running along the south coastal areas. They cover large swathes of the country.
A PEDL doesn’t mean that an operator will be extracting oil or gas from that site, but an operator may be considering that location or others in the area as potentially viable. Once the appraisal phase has proved that the extraction of oil or gas is commercially viable, the operator may want to progress matters.
If an operator wishes to continue with the extraction of oil or gas, then various consents will be required. The operator will have to apply for and obtain planning permission from the local authority in order to proceed with any development. Further, all necessary environmental permits will be required. An environmental impact assessment will also need to be submitted as part of the planning application. This should identify any environmental or health risks associated with the proposed operations and detail how those risks will be managed. The operator should involve the local community in discussions.
Finally, the operator would require consent from landowners whose land would be affected by the exploration. However, pursuant to the Infrastructure Act 2015, consent will not be required from the owners of surrounding properties under which any horizontal drilling will take place at depths of 300 metres or more.
Where activities over and above horizontal drilling at depths of 300 metres are required, then landowner consent will need to be sought. However, the Infrastructure Act does enable the operator to exercise statutory rights similar to those of compulsory purchase. If consent with the landowner cannot be reached, then in those circumstances, the developer will be liable to pay compensation to the landowner based on compulsory purchase principles.
In proceeding with any transaction within a PEDL affected area, the developer must be aware of the existence of the PEDL and alert to any possible future planning application by an operator relating to the extraction of gas from the area.