Shale Gas & Fracking ToolkitPlanning

Part 3

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Part 3: PlanningIn 2013, the Prime Minister publically backed the burgeoning shale gas industry in the UK:

“If neighbourhoods can see the benefits – and are reassured about its effects on the environment – then I don’t see why fracking shouldn’t receive real public support.... We want people to get behind fracking and a transparent planning process is an important ingredient.” David Cameron, Daily Telegraph, 11 August 2013

More recently, in his speech to the Conservative Party Conference, the Chancellor publically pledged his Party’s support for the industry.

“[The party fully intend to exploit] the extraordinary shale gas reserves untouched beneath our feet.” Conservative Party Conference, 29 September 2014

Minerals Planning PolicyMinerals planning policy is set out in paragraphs 142-149 of the National Planning Policy Framework (NPPF) which requires Minerals Planning Authorities (MPAs) to identify and include policies for extraction of mineral resources in their area. This encompasses the extraction of unconventional hydrocarbons such a shale gas and the legal regime relating to hydraulic fracturing or ‘fracking’ of potential shale gas reserves in the UK, discussed in this Toolkit.

“Minerals are essential to support economic growth.”NPPF, 2012

1 www.pinsentmasons.com/shale

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Shale Gas Toolkit | Shale Gas & Fracking Toolkit: Part 3

Planning practice guidance for hydrocarbonsOn 19 July 2013, the Department for Communities and Local Government (DCLG) published a 29 page document entitled “Planning Practice Guidance for Onshore Oil and Gas”. This guidance was welcomed by many who desired greater clarity and certainty regarding the planning process for shale gas exploration and extraction.

The guidance set out advice on planning issues associated with three identified phases of hydrocarbon extraction:• Exploration• Testing (appraisal)• Production.

The introduction specifically stated that it was not intended to be a source of definitive legal advice, nor was it intended to replace the need for judgment by MPAs and those making applications. As a result, some in the industry found that the guidance was in certain areas lacking; for example, in its failure to tackle key questions such as how planning boundaries should be drawn for directional and horizontal drilling once the appropriate rock formation is reached, how to deal with issues arising where the surface and subsurface are in different ownership and the way in which the guidance dealt with the consideration of ‘alternatives’ in the context of need and demand.

The guidance did, however, provide a basic run-through of the three phases of hydrocarbon extraction, with broad descriptions of what each entails and the timescales involved before going on to discuss in greater detail the regulatory function of the planning process in relation to each of the phases.

On 6 March 2014, DCLG announced the launch of a new online planning practice resource to support the NPPF. The new online guidance cancelled DCLG’s 2013 guidance and replaced it with “Planning for hydrocarbon extraction.” The new guidance broadly mirrors the 2013 guidance. It also encourages MPAs to make appropriate provision for hydrocarbons in Local Plans, highlighting areas where new proposals may come forward and managing potential conflicts for land use.

The minerals planning authority and the statutory frameworkThe requirement for planning permission is one of a number of regulatory consents which are required to authorise the shale gas extraction process. MPAs are expected to ensure that mineral extraction (be it through fracking or an alternative process) does not have an unacceptable adverse impact upon the environment or human health. This responsibility is carried out through the minerals planning process.

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The applicable statutory framework for obtaining planning permission for fracking operations is currently the Town and Country Planning Act 1990 in England and Wales and the Town and Country Planning (Scotland) Act 1997 in Scotland.

In England and Wales it is the MPAs in the first instance who will determine planning permission. In Scotland, it is the local planning authority and in Northern Ireland, the Minerals Unit has responsibility. In the majority of cases, the MPA is the County Council or Unitary Authority, however a National Park Authority is also an MPA.

A multi-stage processPlanning permission will be required at a number of stages throughout the lifetime of the fracking process from the initial exploratory phase through to the full development and production stage and finally abandonment.

As noted in part 1 of the Pinsent Masons’ Fracking Toolkit, there are 6 main stages to the process of shale gas extraction: • Stage 1 – Identification• Stage 2 – Exploration• Stage 3 – Appraisal• Stage 4 – Initial development• Stage 5 – Full development and production• Stage 6 – Production and abandonment

Stages 2 to 6 – the exploration, appraisal and production stages – can only be carried out in specified areas where the Department of Energy and Climate Change (DECC) has issued a Petroleum Exploration & Development Licence (PEDL) under the Petroleum Act 1998.

Planning policy & regulation – the main stages of the processThe Planning Context

Each of the 6 stages is considered in turn below setting out the key planning requirements and issues which need to be addressed.

1. IdentificationDeveloper identifies suitable sitesAs discussed above, the NPPF requires MPAs to identify and include policies for extraction of mineral resource of local and national importance in their area. Given that shale gas exploration and exploitation or fracking is still an emerging industry in the UK it is unlikely that many Local Plans will have specifically considered the potential for shale gas reserves and fracking operations in the Local Plan process.

The Local Plan is, therefore, unlikely to be of specific assistance in identifying shale gas reserves and sites for possible fracking operations in many areas. However, as Local Plans catch up with industry, MPAs will need to identify potential shale gas reserves and PEDL areas on their proposals maps and in criteria-based policies for stages 2 to 6 and the exploration, appraisal and production phases for shale gas fracking and extraction. Indeed, 2014 planning practice guidance encourages

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Shale Gas Toolkit | Shale Gas & Fracking Toolkit: Part 3

MPAs to do so. The initial identification phase will largely be undertaken through the gathering and assessment of existing geological data (e.g. information gathered from earlier drilling and also through various geological surveys and reports that are published).

2. ExplorationThe drilling of exploratory holesDuring the exploratory phase, the promoter and developer will carry out seismic surveys, exploratory drilling and hydraulic fracturing in order to ascertain whether shale hydrocarbons and reserves are present in the land.

Whilst some of the initial seismic work may have deemed planning permission (i.e. when planning permission is not required as it is deemed to be granted under Part 22 of Schedule 2 to the Town and Country Planning (General Permitted Development) Order 1995) it is likely that the drilling of exploratory holes will require planning permission. The reason for this is two fold: firstly, it constitutes a change of use of the land which in many cases will be agricultural and secondly, the extent of drilling, both in terms of the number of holes and the length of time required for the drilling, is likely to be significant (certainly when compared to conventional hydrocarbons).

Whether the exploration phase will require an Environmental Impact Assessment (EIA) will depend on whether the nature, size and location of the operations will have a likely significant effect on the environment.

In the majority of cases an EIA will not be required, but the prudent approach would be to seek a screening opinion from the MPA as to whether or not an EIA should be carried out. However, there could be circumstances where it could be beneficial to carry out an EIA and these may not necessarily be due to the applicable tests for an EIA being met. For instance, carrying out an EIA could be one way of being seen to be “open” about the potential environmental impacts of a proposed project. An EIA would explain in more detail the proposed drilling operations and what is involved, and thus could assist in alleviating concerns that the local community may have about the processes involved. It is interesting to note that the planning applications submitted to MPAs to date have been accompanied by an EIA.

Infrastructure BillThe Bill is currently making its way through the Parliamentary process. The Labour Party tabled amendments to the Bill in August 2014 that would, if enacted, have meant that EIA would be required for all applications for planning permission (including for sites of less than 1 hectare) “for the purposes of extracting shale.” However, these amendments were not officially moved forward and are not included in the current version of the Bill to be debated by the House of Lords.

3. AppraisalDrilling of wells to assess commercial viability of gas production. Gas produced at this stage can be used for small-scale commercial electricity generationThe appraisal stage arises where shale gas has been identified and proved but further evidence is required in order to clarify the extent of the deposit or its production characteristics to assess whether or not it is economically viable. This stage may involve significant works, including longer term testing and additional drilling, further wells and hydraulic fracturing.

Planning permission will be required at this stage of the process for drilling operations and any associated infrastructure such as drilling platforms.

The potential nature and extent of operations during the appraisal stage means that it is critically important to consider whether an EIA is required. Any assessments and assumptions which were carried out in connection with the exploration phase will need further consideration and may require refreshing or additional assessments to be carried out.

Again, a screening opinion should be sought from the MPA at this stage of the process.

If the appraisal shows positive results, the well will be safely isolated while consideration is given to the need for more appraisal drilling or the potential for a permanent development. If the developer does wish to proceed with a permanent development, they will then proceed to the initial development stage discussed in more detail below.

If the appraisal stage shows that either hydrocarbons are not present or are present in quantities that are not commercially viable, the well will be “abandoned” at this point. See stage 6 below for further details relating to the abandonment process.

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4. Initial Development First production wells constructed as well as necessary infrastructure to facilitate the sale of shale gas. Early sales revenue generated and project tailored to maximise productionIf the appraisal stage yields positive results and the developer decides to proceed to a permanent development, it must submit a Field Development Plan to the MPA and DECC, outlining its planned method for hydrocarbon extraction. Only once consent has been given by both the MPA and DECC can the developer install the equipment to extract the trapped hydrocarbons at the site. The planning application at this stage is an application for commercial exploitation, but not on a large scale. In order for DECC to approve any Field Development Plan submitted, the MPA must have firstly granted planning permission in consultation with the Environment Agency (or Natural Resources Wales in Wales and SEPA in Scotland) and the assessment would have considered the need for an EIA and environmental permits.

The initial development stage takes place prior to full development and production stages and provides the developer/operator with a greater understanding of production trends as well as an opportunity to tailor the well design to fit the specific circumstances of the project.

As with the appraisal stage the nature of the works are now more significant and therefore similar strategic considerations will apply to the approach to be adopted in respect of EIA.

5. Full Development and ProductionDrilling of production wells across licence area and construction of commercial production facilities and infrastructure for large volumes of shale gasPlanning permission will be required for large scale commercial drilling of production wells and further site upgrades (e.g. the construction of associated equipment such as pipelines, processing, facilities and temporary storage tanks). In some cases, the production life of a gas field can be in excess of 20 years plus. Consequently, careful consideration will need be given to the potential impact of the proposed development and operations on the surrounding area and the local community.

In terms of strategy, developers will need to carefully consider whether or not to submit a comprehensive planning application to cover as many of the associated elements of the proposed project as possible or whether separate planning applications should be submitted for development proposals such as the pipelines. However, developers will need to be careful not to fall foul of the EIA Directive and accused of “salami-slicing”.

6. AbandonmentWell plugged and surrounding area rehabilitated in accordance with prescribed standardsWhen production at a site ceases it will be necessary for the site or sites to be restored or in some cases put to a new appropriate use.

As shale gas exploration and fracking has a limited impact above ground it is unlikely to be subject to the detailed restoration conditions which apply in relation to mining operations such as quarries which are normally subject to onerous landscaping restoration conditions. The specific conditions that require restoration works will have been contained in any planning permission authorising full development. In practice, there are likely to be requirements for the submission to the MPA of specific details and plans for restoration so that the MPA can grant its approval.

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Shale Gas Toolkit | Shale Gas & Fracking Toolkit: Part 3

Key issues to considerThere are a number of common key issues which are relevant throughout the planning process.

Pre-application engagement and consultation Effective pre-application engagement and consultation will be essential. Such engagement must be deployed at a serious level in advance of even the early stages of the planning process and should continue and develop as the planning applications relate to more significant development.

An engagement and consultation strategy should be drawn up at the outset and subjected to critical analysis before it is deployed. Whilst the more onerous consultation process under the Planning Act 2008 does not currently apply, it would seem sensible to adopt a similarly robust approach in any planning applications. For instance, consultation should be undertaken with local communities and interested bodies in addition to the MPA and mandatory consultees.

Environmental Impact Assessment As noted above, EIA will be a key consideration at all stages of the fracking process.

The nature of the environmental information to be considered as part of the planning applications will be wide ranging and may include the following which is not an exhaustive list: geological data, ecology, water, transportation, access flood risk, archaeological, contamination and landscape character. Where an EIA is to be undertaken, a scoping request should be submitted to the MPA to ensure that the EIA addresses the relevant environmental issues.

Given that there are several elements to the fracking process each of these will need to be consented separately with the exception of abandonment which will be covered by the full development and production consent. This raises an interesting question over the extent of your environmental assessment – if you are carrying out an EIA for the exploratory stage – do you need to include in that assessment the appraisal stage? To answer this question, you have to consider whether the whole fracking process from stage 1 to stage 6 is a single project, or whether there is more than one project in that process. If all stages constitute a single project and you artificially sub-divide it into two or more projects, with each then being put forward in isolation, this is likely to fall foul of the EIA Directive’s requirements. Also, if the effect of sub-division is to mean that an EIA does not assess the full cumulative effects of the individual application, then the EIA will not be Directive-compliant. However, recent case law has shown that courts accept that some infrastructure proposals would be constructed in stages and this would not necessarily make them a single project which could only ever be assessed as such. Furthermore, the whole point of the exploratory stage is to ascertain whether there is a more permanent project, which would suggest that any EIA at the early stages of the process would not need to assess later stages.

Government Support The Government is supportive of fracking and has unveiled a number of incentives to ensure that it happens. This support is unsurprising given the benefits it will bring in being able to produce low cost gas in the UK whilst at the same time reducing greenhouse gas emissions. Whilst planning decisions will initially be considered on a local level, such support will play an important role should applications be determined by the Secretary of State either on appeal or call-in inquiry.

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Legal Challenge and Risk At all stages of the fracking process there is a risk of legal challenge against any of the planning permissions which may be granted. It is therefore imperative that a robust approach is taken in applying for planning permission at each stage of the fracking process. A successful legal challenge against any of the elements could have serious knock-on effects on the project as a whole.

The potential for legal challenge also reinforces the importance of carrying out effective pre-application engagement and consultation in order to try to allay any concerns that local residents/interested bodies may have about the proposed development. As explained above, careful consideration of the extent of your EIA is also recommended given EIA is one of the hottest areas for third parties to challenge.

Planning Performance Agreements (PPA) It is not mandatory to use a PPA, although as with any complex planning application serious consideration should be given to the use of one.

Interaction with other Regulatory Regimes The role of the planning system is to consider whether the development and use of the land is acceptable. This defined role is different from other regulatory regimes, for instance the requirement for an Environmental Permit, but at the same time will be complementary.

MPAs should take into account any relevant comments or information from other regulatory regimes where issues relate to the development and the land use. Otherwise, MPAs should assume that the other regulatory regimes will operate effectively.

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Status as nationally significant infrastructure projectsThe Government confirmed in June 2013 that shale gas and fracking developments would not be treated as Nationally Significant Infrastructure Projects (NSIPs) under the Planning Act 2008. This means that planning applications will continue to be made to the MPA rather than to the Secretary of State.

For many this was viewed as a lost opportunity to include shale gas and fracking expressly within the scope of the NSIP regime and the Planning Act 2008. It would have allowed applications for development consent for shale gas extraction to be made directly to the Secretary of State with the benefit of the streamlined examination procedure and the possibility of wrapping up other consents. Greater certainty for projects would have been forthcoming with the benefit of national policy underpinning projects and schemes.

If fracking were brought within the remit of the Planning Act 2008 regime, it would seem plausible that stages 4, 5 and 6 could potentially be brought within the NSIP regime, with earlier stages remaining under the Town and Country Planning Act 1990 process.

Planning application notification requirements simplified for onshore operatorsFollowing DCLG’s 2013 consultation on simplifying and streamlining planning application requirements for onshore oil and gas operators, the Town and Country Planning (Development Management Procedure and Section 62A Applications) (England) (Amendment No.2) Order 2013 came into force in January 2014. The Order amends the procedures and requirements for planning applications associated with underground oil and gas operations. The changes have introduced a new national standard planning application form. Also, for onshore oil and gas planning applications (including exploratory drilling) applicants are no longer required to notify owners when soley underground operations are envisaged.

Shale Gas Toolkit | Shale Gas & Fracking Toolkit: Part 3

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Shale Gas Toolkit | Shale Gas & Fracking Toolkit: Part 3

This note does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered.

Bob RuddimanPartner and Sector HeadEnergy & Natural ResourcesT: +44 (0)1224 377 925E: bob.ruddiman@pinsentmasons.com

Paul RicePartner and Head of Client RelationshipsEnergy & Natural ResourcesT: +44 (0)20 7490 6282E: paul.rice@pinsentmasons.com

For further details and queries relating to Shale Gas or other matters, please contact:

Richard GriffithsPartnerPlanning & Environment Energy & InfrastructureT: +44 (0)20 7490 6981E: richard.griffiths@pinsentmasons.com

Richard FordPartnerPlanning & Environment Energy & InfrastructureT: +44 (0)20 7490 6241E: richard.ford@pinsentmasons.com

Robbie OwenPartnerPlanning & Environment Energy & InfrastructureT: +44 (0)20 7490 6420E: robbie.owen@pinsentmasons.com

Michael PocockPartnerPlanning & Environment Energy & InfrastructureT: +44 (0)161 250 0223E: michael.pocock@pinsentmasons.com

10

5606www.Out-Law.comwww.pinsentmasons.com

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