Benjamin Dean v The Secretary of State for Business, Energy and Industrial Strategy Dart Energy (west England) Plc (Interested Party)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Holgate |
| Judgment Date | 14 August 2017 |
| Neutral Citation | [2017] EWHC 1998 (Admin) |
| Date | 14 August 2017 |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | Case No: CO/4951/2016 |
[2017] EWHC 1998 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
PLANNING COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon. Mr Justice Holgate
Case No: CO/4951/2016
— and —
David Wolfe QC (instructed by Friends of the Earth Limited) for the Claimant
Robert Palmer (instructed by Government Legal Department) for the Defendant
The Interested Party did not appear and was not represented at the hearing
Hearing dates: 22 nd June 2017
Approved Judgment
Introduction
The Claimant, Mr. Benjamin Dean, lives in the village of Tarvin, near Chester. He is a parish councillor. He applies by judicial review for an order quashing a deed dated 28 June 2016 which varied a Petroleum Exploration and Development Licence (referred to as "PEDL 189") granted under section 3 of the Petroleum Act 1998 ("the 1998 Act") on 3 September 2008. Alternatively, the Claimant seeks a declaration that the variation is of no legal effect.
The deed of variation was made between the Defendant, the Secretary of State for Business, Energy and Industrial Strategy, and three companies who together constitute the licensees. One of those companies, Dart Energy (West England) Limited ("Dart") has taken part in these proceedings as an Interested Party. The written submissions by Mr. James Maurici QC on behalf of that party prepared for the substantive hearing, explain that Dart holds PEDL 189 as the operator and licence administrator on behalf of itself and the two other licensees, Engie E&P UK Ltd and INEOS Upstream Limited.
The overall duration of the licence granted by PEDL 189 is divided into three periods. Originally the licence provided for an Initial Term of 6 years, beginning on 1 July 2008, followed by a Second Term of 5 years and then a Production Period of 20 years. On 4 December 2013 PEDL 189 was altered by a deed of variation so that the Initial Term was increased from 6 to 8 years (expiring on 30 June 2016) and the Second Term was reduced from 5 to 3 years. The Second Term would still expire on 30 June 2019 and the Production Period remained unaltered. Consequently, the overall duration of the licence remained the same.
The effect of the 2016 deed of variation challenged by the Claimant was to increase the Initial Term from 8 to 10 years and to reduce the Second Term from 3 years to 1 year. Once again, the Production Period and the overall duration of the licence remained unaltered.
The Claimant submits that in agreeing to enter into the 2016 deed of variation so as to alter the length of the Initial Term the Defendant acted ultra vires. The Claimant says that a licence granted under section 3 of the 1998 Act, such as PEDL 189, is a purely statutory licence. The 1998 Act is a complete statutory code governing such licences. It gives the Secretary of State an express discretion as to what terms or conditions to include in the initial licence, including provisions which may allow subsequent variations to be made to the licence. However, the 1998 Act does not confer on the Secretary of State any power to make a variation in the terms of a licence once it has been granted. The Claimant also submits that the conditions of PEDL 189 do not allow for the length of the Initial Term (or the Second Term) to be varied, unlike the duration of the Production Period. In that context, it is to be noted that the Claimant accepts that it would not have been unlawful in 2008 for the Defendant to have granted a licence with a term explicitly allowing for such a variation in the length of the Initial Term (or the Second Term) to be made. The Claimant contends that because no such term was included in PEDL 189, the length of the Initial Term cannot be varied.
On the other hand, the Defendant and the Interested Party submit that a licence granted under the 1998 Act to search for, bore and get petroleum is a contractual relationship involving the grant of property rights, and is therefore capable of being varied by agreement between the parties according to standard principles of the law of contract. Such a document is not a statutory licence governed exclusively by the statutory regime based on the 1998 Act.
Mr. David Wolfe QC, who appeared on behalf of the Claimant, stated that if the Court should decide that a licence granted under section 3 of the 1998 Act is contractual in nature, then the first and main part of the challenge falls away. But he then raises an alternative argument, namely that the Defendant was not empowered in any event to enter into the deed of variation on behalf of HM the Queen in whom the ownership of petroleum has been vested. As he accepted, the implication of his argument is that the document could only have been entered into by the Queen, rather than by the Secretary of State purporting to act on her behalf.
Even if the Court should decide that a licence granted under the 1998 Act is a statutory licence and not a contract, the question was posed during argument whether it nevertheless follows that a consensual variation of such a licence must be treated as ultra vires. In that event the Court would also need to consider whether the 1998 Act includes an incidental power to enter into an agreement with a licensee to vary the terms of a licence. Licences granted under the 1998 Act apply to the exploration and getting of petroleum not only on land but also at sea. The activities licensed are intrinsically risky. These risks include completely unforeseen, and sometimes unforeseeable, changes in circumstance. Such changes may necessitate a variation in the licence if the process of exploration and/or extraction is to continue in the interests of both licensee and the Crown as grantor. Indeed, if it were to be held that such variations are ultra vires, then perhaps commercial interest in taking on such risks could be affected, or the returns that operators would expect to earn would increase.
According to the witness statements of Mr. Mark Young, Technical Director of IGAS, the original Work Programme for PEDL 189 was based on exploration for and production of coal bed methane ("CBM"). Survey work and studies revealed that prospecting for CBM would not in itself be viable and so the focus shifted to evaluating PEDL 189 and other licensed areas for shale gas exploration. Studies were undertaken between October 2014 and May 2015 but the 2D seismic surveys carried out were insufficient. A much more detailed 3D seismic survey had to be undertaken over an area of 110km 2 between September and November 2015. The data obtained was analysed during the first half of 2016. Under the deed of variation entered into in 2013, the Initial Term was due to expire on 30 June 2016 and so the licensees sought a further variation to extend this period.
During the period relevant to these proceedings Mr. Simon Toole was the Director of Licensing and Legal at the Oil and Gas Authority ("OGA"), the executive agency responsible for taking decisions on behalf of the Defendant in relation to petroleum exploration and development licences (until 30 September 2016). He explains in his witness statement that in order to allow sufficient time for the licensees to apply for and obtain planning and environment permits for a "fracking" process for shale gas within the licensed area, the Defendant agreed to the licensee's proposal that PEDL 189 be varied, so that the Initial Term will end on 30 June 2018 instead of 30 June 2016.
Mr. Toole also states that the licensees had bought land and had received planning permission to be able to drill a well at Duttons Lane. Protestors occupied that site between 2014 and 2016, preventing the preparation of the site and the drilling of the well. This formed part of the explanation for the delay in the licensees carrying out the Work Programme and hence the need for the duration of the Initial Term to be extended.
I should emphasise that in these proceedings the Court has not been asked to address, and is not concerned with, the merits or demerits of the fracking proposal, or with the environmental concerns of objectors. In this case the Court is only concerned with the legal issues which I have summarised above.
This judgement is arranged under the following headings:-
(i) The statutory framework;
(ii) The licensing system;
(iii) The terms of the licence PEDL 189 and the deeds of variation;
(iv) Whether a licence granted under the 1998 Act is governed entirely by the statutory code relating to such licences;
(v) If the licence is governed entirely by the statutory code relating to such licences, whether there is an incidental power to vary it;
(vi) If the licence can be varied, whether the Secretary of State lacked any power to enter into the 2016 deed of variation;
(vii) The Interested Party's submission that the Court should refuse to grant relief under section 31(6) of the Senior Courts Act 1981.
(i) The statutory framework
According to the long title the Petroleum (Production) Act 1934 ("the 1934 Act") was passed in order "to vest in the Crown the property in petroleum and natural gas within Great Britain and to make provision with respect to the searching and boring for and getting of petroleum and natural gas …".
Section 1 of the 1934 Act provided:-
"(1) The property in petroleum existing in its natural condition in strata in Great Britain is hereby vested in His Majesty, and His Majesty shall have the exclusive right of searching and boring for and getting such petroleum …
(2) For the purpose of this Act the expression "petroleum" includes any mineral oil or relative hydro-carbon and natural gas...
To continue reading
Request your trial
-
R (TP) Secretary of State for Work and Pensions
... ... 238 R (Tigere) v Secretary of State for Business, Innovation and Skills (Just For Kids Law ... claimants and (instructed by Central England Law Centre ) for the third claimant. Edward Brown ... Claim allowed. Benjamin Weaver Esq , Barrister F1 Universal Credit ... ...