Fracking fears and the potential impact for property owners

There are prospective shale gas reserves underneath parts of Kent, Surrey and Sussex and the recent Fracking debate has led many to ask what protection they have against unwanted mining operations. So where do you stand, and how can you be sure you are protected? Thackray Williams look at the potential impact of Fracking on you and your property.

What is Fracking?

Fracking is “hydraulic fracturing”; the process of drilling holes and pumping high pressure water and chemicals into them, splitting underground rocks and thereby releasing the shale gas within. The UK government believes shale gas could boost the UK’s economy and provide increased energy independence for the country. However opponents claim that it is a harmful practice which causes minor earthquakes, water contamination and will reduce the UK’s momentum towards using sustainable energy sources.

Fracking under your land

The state owns all the shale gas in the UK by default, and grants licences to explore for it and to mine it. For those worried about Fracking there is some comfort in the fact that planning consent is required to commence operations, and any planned exploration or drilling should be on the public record.

As a starting point, mining companies cannot access what is under your land without trespassing on it. However if they cannot get your permission to mine then a licence holding company can apply for rights of access under your land which are deemed necessary to reach the gas. If these rights were granted you would be paid compensation as though the state had compulsorily purchased the rights from you. Unfortunately, nobody would ever expect you to use the land that far down, so you would only get a very limited amount for them when compared to the profits made from Fracking. This was confirmed by the recent case of Bocardo, where a drilling company was held to trespass under a landowner’s property because they hadn’t first applied for the access rights. Far from getting a desired percentage of the profits, the landowner was merely entitled to the value of the rights lost.

Practically speaking this all means that Fracking can take place under your property, but there is currently a burden of red tape and some expense involved. The UK Government is now discussing measures to streamline the process. The measures to be proposed will reportedly remove some or all liability for trespass where companies mine under private land.

The Impact on Property Prices

The effect on the property market is extremely hard to predict, as the full extent of any damage that Fracking may cause is not yet known. In the USA it is a more established practice, and house prices near to drilling sites have often suffered long term devaluation. The reported consensus here is that the market will follow public opinion. If the process proves continuously damaging and unpopular once operations begin in earnest, then values are likely to drop and not recover while it continues. If the operations prove less damaging then prices will recover as fears diminish.

Forewarned is Forearmed

For those about to buy a property, your solicitor will undertake property searches and can carry out a specific search to cover Fracking and other mining activities and refer the results of that search to you and your lender and/or surveyor for their professional opinion. There are now property searches available to find out about existing and planned hydrocarbon exploration within 500m of the property you own or are proposing to buy. You will also need to ensure that you can secure buildings insurance if Fracking is a real risk.

For those who already own property, you will also need to make sure you are covered against the risks posed by Fracking. The common fear is that Fracking will cause earthquakes or subsidence. Some buildings insurance providers cover this risk as an add-on to your policy, some exclude it and some cover it as part of existing cover for “ground movement”.

For more information contact Yildiz Betez.