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Court of Appeal refuses permission in Petroleum Exploration and Development Licence Fracking Judicial Review

DATE: 12 Apr 2018

The Court of Appeal (Sales LJ) yesterday refused permission to appeal against the decision of Holgate J. in Dean v Secretary of State for Energy [2017] 4 W.L.R. 158. That ruling brings this litigation to an end.

Mr Dean sought judicial review of a deed of variation made between the Secretary of State for Business, Energy and Industrial Strategy, and three companies, including  Dart Energy (West England) Limited (“Dart”), who together constitute the licensees.

Mr Dean sought to quash a deed dated 28 June 2016 ("the 2016 deed") 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. The effect of the 2016 deed of variation challenged by the Mr Dean was to increase the Initial Term from 8 to 10 years and to reduce the Second Term from 3 years to 1 year. The Production Period and the overall duration of the licence remained unaltered.

Mr Dean argued that in agreeing to enter into the 2016 deed of variation so as to alter the length of the Initial Term the Secretary of State acted ultra vires. It was contended that a licence granted under section 3 of the 1998 Act, such as PEDL 189, is a purely statutory licence and that the 1998 Act is a complete statutory code governing such licences. It was thus said that while this 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, it did not itself confer on the Secretary of State any power to make a variation in the terms of a licence once it has been granted.

The Judge rejected the claim ruling (at para. 132) that “…a licence granted under either the 1934 Act or the 1998 Act is not governed entirely by the statutory code relating to such licences. Rather it is a grant of exclusive rights to search for, bore and get petroleum, in other words a grant of exclusive property rights, which contains the normal incidents of property ownership, in so far as they are not excluded or modified by the terms of the legislation or the relevant licence. Those rights include the right to assign the interest created by the licence and the ability of the parties to the licence to agree to vary its terms. Neither the legislation to which the Court has been referred, nor the terms of PEDL 189, prohibited the variation which was made by the deed dated 28 June 2016. For all these reasons, that variation was lawful.”

Mr Dean sought permission to appeal from the Court of Appeal.

Sales LJ refused permission. He described Holgate J’s judgment as “careful and thorough” and disclosing no arguable error of law. He endorsed in particular the Judge’s reasoning at paras. 92 – 132 of the judgment and his alternative reasoning at paras. 133 – 138 saying “The statutory regime exists alongside the usual law of property with respect to assignment of property rights in petroleum products which are to be mined. The grant of rights under a deed of licence can be varied by agreement of the parties by a further deed of licence. Such a procedure is not ultra vires the Secretary of State”. 

James Maurici QC acted for the Interested Party Dart, instructed by Eversheds Sutherland.