Earlier this month, the Prime Minister announced a temporary ban on fracking. But what is fracking, and how does the ban affect property owners?
Fracking, also known a hydraulic fracturing, involves drilling into the earth’s surface and cracking deep-rock formations with highly-pressured fluids to extract natural gas, particularly shale gas. In the US, hydraulic fracturing makes up 43% of oil production and 67% of the natural gas production. The shale gas industry grew by 45% between 2005 and 2010 – since 2008, there’s been exploration in the UK for onshore fracking.
Although fracking has been hailed by some as the answer to diminishing fossil fuels, environmental groups have listed potential issues including threats to wildlife, contamination of water supplies and the possibility of earthquakes.
In 2011 fracking at a Lancashire site was suspended owing to minor earthquakes, but commenced again in 2012 following the introduction of more stringent regulations. Fracking at a site in Preston was halted in 2018 when 47 earthquakes in the area were reported.
In March 2019, a High Court judge found the government had acted unlawfully when issuing their ‘Shale Gas and Oil Policy’ document which included the following statement:
"Shale gas can create a bridge while we develop renewable energy, improve energy efficiency and build new nuclear generating capacity. Studies have shown that the carbon footprint of electricity from UK shale gas would likely to be significantly less than unabated coal, and also lower than imported Liquefied Natural Gas.
The government therefore considers that there’s a clear need to seize the opportunity now to explore and test our shale potential."
This policy was to be taken into consideration by local planning authorities when deciding whether to grant planning permission for fracking sites.
On 2 November 2019, the government announced a temporary ban, with business secretary Andrea Leadsom saying the ban would be upheld 'until and unless' extraction is proved safe, but what does this mean for residents whose property has been affected by fracking, or people looking to purchase homes in those areas?
The properties most affected have been in the North-West, in areas where drilling had already commenced. There are also a number of areas where there are licences for fracking in place, but where planning permission hasn’t yet been granted. It’s unlikely now that any such planning permission will be granted.
For homeowners, there's great uncertainty where fracking has commenced. Earthquakes may still occur in the future, and the environmental concerns still remain. The government haven’t banned fracking outright, and undoubtedly the energy companies involved will be doing their utmost to provide evidence of the safety of their activities. Additionally, given the timing of the announcement, many in the political world consider this to be an election stunt to win green votes.
Moreover, for homeowners, their properties may not be as saleable as they once were, and we’ve seen purchasers pull out from transactions over this issue.
For buyers, the issue of whether a property is in an affected area will become apparent through their environmental search results. These results may recommend a further energy and infrastructure search. Buyers' legal advisers will be able to guide them on these risks. Not least, that a future purchaser may be put off the property. Mortgage lenders may also decline to lend on affected properties or reduce the valuation of the property, leading to a dip in property prices.
So what of the future? Uncertainty continues for those who have been affected by fracking and it is unclear what the UK’s long term policy will be about the practice. Although this temporary ban has been cause of much celebration, the bad feeling the government has created in residents will be hard to undo with many, such as Susan Holliday, chair of the Preston New Action Group, claiming "We have been guinea pigs".
Whilst the outlook in the short term may appear to be more positive, the longer term position still remains unclear. This lack of certainty may still be problematic for those looking to sell or to refinance. For those looking to buy in areas affected by fracking, it's paramount that they receive sound legal advice so they're aware of the potential risks and options before committing to the purchase.
Published: November 2019
A monthly briefing from Irwin Mitchell
November 2019
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