There was a lot of hype last week when oil exploration company, UK Oil & Gas Investments PLC (UKOG), announced it had found an estimated 158m barrels of oil per square mile underneath the Weald Basin in Sussex.
The amount of oil in the Weald is in question, but what might it mean for landowners and what should you do if an oil company comes knocking?
Farmers Weekly talked to the CLA’s energy advisor Tom Beely and chief surveyor Andrew Shirley – here is their advice:
What rights do I have as a landowner?
- Oil and gas reserves are owned by the Crown, so landowners do not receive royalties from any oil extracted.
- Landowners can however, lease their land to an oil company for surface works to take place (see below for more detail).
- A landowner can refuse access for drilling on their land, but the oil company can then apply for compulsory purchase (see more below).
- Legislation brought in by the coalition government now allows fracking companies to drill horizontally under land without the permission of the landowner. It is unclear whether this legislation will be used for more conventional oil extraction.
- If used, this means a farmer could refuse access to their land for surface works (vertical drilling) but still have their land drilled horizontally from a neighbour’s land with permission from that landowner.
- Look out for planning notices, as the new legislation does not require companies to notify landowners individually if their land is to be drilled horizontally.
What if I want to refuse oil drilling on my land?
- Your neighbour could grant the company permission to drill on their land. While this might seem preferable, it may depend on where the proposed well would sit in relation to your land.
- Bear in mind that as the neighbouring landowner, you will not have the right to negotiate terms and ensure that there are proper precautions in place to cover things such as contamination crossing to your land, access to the site and the termination of contracts.
- Get advice from a legal professional and surveyor about the risks of not having control of the process.
- The oil company could apply to the Secretary of State to compulsorily purchase your land. This can be quite a difficult process, although it can depend on how supportive the incumbent government is of the oil industry.
- To compulsorily purchase your land, the oil company must prove it is of national interest for them to drill that individual well. This can be quite difficult and so they may be more likely to go to your neighbour.
- They must also demonstrate that no agreement could be reached with you as the landowner.
What if I want to lease my land for oil drilling?
- Be very careful and take proper advice from legal professionals and surveyors. They should be people who regularly deal with land and the oil industry so that they can advise you effectively.
- Once you sign an agreement you are stuck with it – and the next generation will be too.
- Properly weigh up the risks (such as possible contamination of water and land, changes to the development potential of your land, the value of your land and other assets such as houses) as well as the pros (income and control of the terms).
- With advice, negotiate a strong agreement. In particular, make sure you do not bear any cost or liabilities should yours our others’ land/water become contaminated or damaged in any way. Ensure that there is always someone there to pay these costs in the future – if the company folds or is bought up, its liabilities should be passed on to the new company or another one involved in the well.
- You could insist that the oil company has adequate insurance to cover any possible problems.
- Ensure there are proper provisions in place for the land to be returned to you in good condition – get baseline tests done prior to any drilling and insist on monitoring.
- Material will be brought to the surface during drilling – consider what waste management provisions will be in place and who will ensure the site is properly managed
- An oil well will have to be maintained and monitored for ever more. Ensure the contract clearly state’s the oil company’s responsibilities for maintaining and monitoring the well and transfer of that responsibility should the company cease to exist.
- Negotiate clear access rights to the well, so there is no risk of things such as livestock being let out. Access may require a tarmac road and use of large vehicles, at least at the beginning
What if my land becomes polluted from an oil well?
- Bear in mind that contamination of land can happen decades after the well has been drilled (see above point about the importance of this in negotiating contracts).
- It is likely to be easier to get redress if the well is on your land, as long as you have a strong agreement with the oil company. If it is on your land, check the terms of your contract to see what level of responsibility the oil company has – if you agree strong terms at the beginning, the oil company should cover all of the liability, and for a long time (see above).
- It the well is not on your land, you still have redress, but it can be more difficult than if you had a contract with the company. You will have to prove the source of the contamination and put in a claim, while also proving what level of compensation you need.