Trespass by Well Drilling in the UK

This post was written by Siobhan Hayes.

In a number of the recent UK Government publications on shale gas the statement has been made that land owners in the UK do not own the mineral rights to petroleum under their land (under the relevant statute this includes mineral oils, hydrocarbons and natural gas in their natural condition in sub surface strata). Potential exploiters of shale gas will be granted licences by the Government to explore and exploit shale gas reserves but their project planning will need to understand that without proper procedures being followed it is possible for them to be exposed to actionable trespass even where wells are drilled under licence.

Historically, property owners in England and Wales own the surface of the land and the heavens above and strata below. How far down that ownership extends has been the subject of recent case law (Star Energy v Bocardo in 2010). In the Star Energy case, the Supreme Court ruled that an oil company had trespassed on an owner’s land by drilling from a well head close to the boundary of the two properties diagonally downwards and under the adjoining land. One of the strange features of trespass is that damages are paid to the occupier or owner whether or not they have suffered damage.

The oil company had not negotiated any consent from the neighbour and they had not applied for the relevant statutory rights to do so. The land owner was therefore entitled to damages. The good news outcome for those extracting oil or gas onshore is that compensation was assessed on the least costly basis. It was assessed as the value that would be paid if the right to drill had been compulsorily acquired. There was a procedure under which the oil company could have made a claim for a statutory right to drill the well but they had not done this. The compensation did not depend on the value that the oil company got from using the wells. It was a hard fought battle that resulted in a 3:2 split between the Supreme Court Judges.

The legislation which gives oil companies the rights to extract oil and gas in practice was drafted before there were thoughts of shale gas development and the shale gas industry may want to consider seeking a change in this part of the law to address concerns specific to shale gas exploration.