Infrastructure Act 2015 & Fracking in Focus

26th March 2015

The Infrastructure Act 2015 (the Act) received Royal Assent on 12 February 2015, with the overriding intention of boosting investment in development projects and making it easier and quicker to ‘get Britain building’.

The Act creates Highways England (HE), tasked with ensuring investment in, and improvements to, the country’s major roads. In addition, the legislation introduces a right to buy scheme for local renewable energy projects and streamlines procedures for Nationally Significant Infrastructure Projects (NSIPs), to boost uptake. A number of the Act’s provisions are particularly ‘headline-grabbing’ – such as the replacement of the Highways Agency (HA), bringing an estimated saving of £2.6 billion over ten years and the introduction of provisions aimed at encouraging shale gas exploitation.

The practical and commercial implications of the new measures are extensive and wide-ranging. We take a look, in particular, at provisions which should not be ignored by property owners, occupiers and developers.

Background

The Act received its first parliamentary reading in June 2014. Despite uncertainty whether it would be sidelined ahead of May 2015’s General Election, Transport Secretary Patrick McLoughlin highlighted the Act’s ongoing importance: “This act will hugely boost Britain’s competitiveness in transport, energy provision, housing development and nationally significant infrastructure projects.  Cost efficient infrastructure development is all part of the government’s long term economic plan, boosting competitiveness, jobs and growth”.

The Act is divided into eight main parts:

• Part 1: Strategic highways companies
• Part 2: Cycling and walking investment strategies
• Part 3: Powers of British Transport Police
• Part 4: Control of invasive non-native species
• Part 5: NSIPs, planning, the Land Registry and building regulations for off-site carbon abatement measures
• Part 6: Community right to buy into local renewable electricity generation facilities, maximising petroleum recovery in the UK, onshore petroleum and geothermal energy, renewable heat incentives, and reimbursement following payment for electricity connections
• Part 7: Enabling abolition of the Public Works Loan Commissioners
• Part 8: All connected purposes

Many of the changes come as little surprise, having formed the subject of various consultations in recent months. For instance, the Department for Communities and Local Government (DCLG) launched its ‘Technical Consultation on Planning’ on 31 July 2014. As part of this, public opinion was sought on the practical approach for the ‘deemed discharge’ procedure for planning conditions – such as the exemptions and appropriate time-frames to be applied. Similarly, the Department of Energy and Climate Change (DECC) held a twelve-week consultation on underground access for gas, oil and geothermal energy extraction. The report, released in October 2014, outlined the changes the Government are taking forward.

Key Provisions

Highways and Transport

• The HA will become a government-owned, arms-length company and will no longer form part of the Department for Transport. Working under the title of HE from 1 April 2015, long-term sustained funding has been secured to provide for the company’s operation and work in delivering the government’s road investment strategy.
• It is envisaged approximately £15 billion will be spent delivering over 100 schemes by the end of the next Parliament. Accountability of HE to Parliament and road users is to be increased.
• A new cycling and walking investment strategy will also be introduced, to be reviewed at least once every five years.

Planning Procedure

• There will be a reduction in ‘red tape’ to allow surplus and redundant public sector property/land to be sold more quickly. The Homes and Communities Agency and Greater London Authority now have the same powers as local authorities in this regard. It is hoped the amount of previously-used land available for new homes will thereby increase.
• The Mayor of London has new powers to make Mayoral Development Orders – so it is possible for the Mayor to grant planning permission for development on specified sites in London.
• Changes are to be made to the Town and Country Planning Act 1990 to streamline elements of current planning procedure, with the intention of ending unreasonable and excessive delays on projects that already have planning permission, thus accelerating house-building.
• A new ‘deemed discharge’ procedure for planning conditions is being introduced, for use where:
  • local planning authorities fail to respond to an application to discharge certain conditions within the prescribed period; and
  • the relevant landowner / developer has notified the authority they intend to use the procedure.
• Relevant time-frames and exclusions for ‘deemed discharge’ are to be set-out in secondary legislation. However, DCLG confirmed in November 2014 that a number of conditions would be exempt, including conditions:
  • attached to development subject to an environmental impact assessment;
  • attached to development likely to have a significant effect on a qualifying European site;
  • for managing flood risk;
  • that require entry into a Section 106 Agreement (planning obligations) or Section 278 Agreement (highway works);
  • requiring approval of details under reserved matters planning approval;
  • relating to investigation and remediation of contaminated land;
  • pertaining to highway safety;
  • for Sites of Special Scientific Interest; and
  • relating to investigation of archaeological potential.

NSIPs

• Technical and administrative improvements will be made to the Planning Act 2008, to aid the efficacy of the NSIP regime.
• Although a number of minor alterations were suggested during the Government’s consultation in late 2014, only three have been included in the Act. These are:
  • appointment of examiners for NSIP examinations at an earlier stage in the process;
  • appointment of two-person panels of inspectors to decide NSIP applications, as opposed to the current position where just a single person or a panel of three to five can be appointed; and
  • a streamlined procedure for the making of material and non-material amendments to approved Development Consent Orders.

Invasive Non-Native Species

• New powers are included in the Act to compel landowners to:
  • take action in relation to invasive non-native species (INNS); and
  • permit others to enter the land and undertake works for eradication of INNS.
• INNS such as Japanese knotweed and Himalayan balsam are amongst those that create particular difficulties within the UK, bringing adverse economic impact for the agriculture, construction, infrastructure and development sectors. Eradication currently relies on voluntary agreements between landowners and the Department for Environment, Food and Rural Affairs.

Land Registry

• Changes are permitted to the Land Registry’s existing service provision, so that:
  • a digitised local land charges register can be created to improve data-access and turnaround times; and
  • new services may be introduced to improve and add efficiency to the conveyancing process.

Energy

• Communities will now have the right to buy a stake in renewable energy generation projects in or near their community, such as wind or solar farms.
• The Act enables creation of an allowable solutions scheme, to give house-builders a cost effective way of meeting their obligations to provide zero carbon homes. Where building regulations impose actions as a result of carbon ‘issues’ on-site, the emissions can now be offset via other measures – such as by making payment to a fund, the proceeds of which would then be used to pay for carbon mitigation measures elsewhere.
• An automatic right of access is given to “deep level” land (300m or lower) for the purposes of exploiting petroleum or deep geothermal energy, i.e. for general petrol extraction and specifically unconventional extraction or hydraulic fracturing / fracking. This means surface landowners will no longer be able to unduly object to or frustrate initiatives on the basis of works amounting to trespass.
• In addition, there is the right to leave the deep level land in a different condition than before the right was exercised. This includes by leaving any substance or infrastructure in the land. Liability for any loss or damage attributable to the exercise of these rights by another person is expressly removed from resting with the landowner.
• Alongside this a number of provisions are made to protect the environment and ensure appropriate health and safety where petroleum / geothermal energy extraction is undertaken. For instance, certain conditions will have to be satisfied before the Secretary of State can grant a fracking licence, taking into account the need for operators to consider environmental impact, cumulative effects, notifying the public and providing for regular monitoring and inspections.

Comment

The Act lays the foundations for a number of changes and new initiatives. Much is couched in terms that “the Secretary of State may, by regulations, require…”. The finer details will therefore only become clear when secondary legislation is introduced. For instance, further regulations are awaited to provide details of the relevant community groups / qualifying individuals who may take advantage of the ‘right to buy’ provisions for renewable energy projects. In some instances it may be the case that the Secretary of State does not introduce further regulation or guidance at all. For example, notification of and compensation payments to landowners who find their land subject to automatic drilling rights will initially be voluntary – pending the introduction of secondary legislation. However, it seems likely that the Secretary of State will wait to gauge the success of voluntary schemes before deciding on additional control via the DECC.

The Government’s emphasis is certainly on the numerous advantages of the changes. Relating to the opportunities for future development of the shale industry, the Act’s accompanying press released noted “the potential to create jobs, making us less reliant on imports from abroad and help us tackle climate change”.  However, it will be interesting to see whether the positive effects are as wide-ranging as envisaged.  The change relating to trespass for extraction only relates to subsoil below 300m, so an operator must still secure land where the well is to be drilled and gain landowners’ consent to initially access this depth. For every site, much preliminary work will also need to be done (and expenses incurred) before reserves can be extracted. The ‘deemed discharge’ procedure for planning conditions also raises concerns. This may encourage local authorities to refuse to discharge more often, without proper consideration, if they feel there is insufficient time to give discharge applications proper consideration within the statutory time-frames.

It will remain to be seen whether any aspects of the legislation are changed if a different incoming government is in power after the General Election. While most of the Act’s provisions were not vehemently opposed by front benchers and represent ‘baby steps’, rather than introducing sweeping changes, the actions of a new Parliament can never be second-guessed.

Fracking in Focus

A highly debated feature of the Act was the proposed introduction of provisions aimed at encouraging shale gas exploitation. Resistance came both in the form of concern for the environmental impact and the ‘not in my backyard’ attitude which is prevalent in relation to developing this particular industry.

The position prior to the Act

Prior to the Act, landowners retained a final level of control over whether their subterranean land could be used by third parties, requiring consent in the same way as if such access were required across their surface land. In some cases, this essentially amounted to an underground ‘ransom strip’ capable of stifling a project completely and recent years have seen an increasing number of mines and minerals registrations seemingly being sought for the sole purpose of extracting financial settlements from developers looking to avoid trespass claims.

Section 43 of the Act helps would-be frackers overcome this hurdle by granting a statutory right to use deep-level land for the purposes of exploiting petroleum or deep geothermal energy in England and Wales. Provided such use occurs at a depth of at least 300 metres below the surface within a landward area, energy companies will be free to extend their activities across lands outside the boundary of their ownership, subject still to receipt of the requisite planning and environmental permits, but free from the requirement for landowner consent (unless surface access is also required, in which case the usual position will apply).

Some limitations (albeit they are quite broad-reaching) as to the scope and purpose of this right have been included at section 44 of the new legislation, relating to:

• drilling, boring and fracturing;
• the installation, keeping and use of infrastructure; and
• the placement and removal of substances into deep-level land.

These limitations apply for the purpose of initial investigative works to full exploitation and right through to the decommissioning stage of any fracking operations.

Protection for landowners

The provisions do provide certain protections for the landowner. The landowner is protected from liability in respect of any loss or damage caused to its surface land and buildings contained upon it caused by the exercise of the right of use of the deep-level land, although this will not apply where the particular damage or loss is caused by a deliberate omission on the part of the landowner. In terms of providing a benefit to landowners subject to the forced use of their sub terrain, the Act confers powers upon the Secretary of State to issue regulations requiring companies to make payments in return for the right of use. It is likely, however, that any such payment regime would be akin to the compensatory payments applicable in compulsory purchase scenarios, as opposed to the profit share approach as taken in the notable case of Wrotham Park v Parkside Homes [1]. Landowners are unlikely to receive the level of pay off which may have been achievable through private negotiation, although the extent of any payment regime is yet to be seen.

The Secretary of State has also been given the power to make regulations requiring energy companies to give notice to persons affected by the use of a section 43 right, including what information should be given to give such persons (for example, details of any payment scheme available). This would avoid a landowner being unknowingly trespassed upon at depths of 300 metres.

Environmental concerns

A key concern for many campaigners prior to the implementation of this Act was the environmental impact of the potential surge in fracking activity and calls were made for a prohibition on fracking in areas of scientific interest or outstanding natural beauty. The safeguards put in place by the Act are unhelpfully not so precise, preventing fracking from taking place in “protected groundwater source areas” and “other protected areas”. The Secretary of State is, however, obliged to specify the meaning of these terms by way of Regulations to be issued prior to 31 July 2015.

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[1] [1974] 1 WLR 798