By John Kemp
LONDON Dec 14 Her Majesty Queen Elizabeth II
could be in line for a windfall now that her government is
prepared to start granting licences to frack for shale gas
In her capacity as the Duke of Lancaster, the Queen owns
more than 50,000 acres and subsurface rights to tens of
thousands more across northern England, the part of the country
that has drawn the most interest from companies hunting for
shale gas. Fracking firms will have to pay to put wells on her
property or to drill through the subsurface mineral layers that
Potential payments to the Duchy are just one example of a
wider phenomenon. The prospect of widespread fracking, or
hydraulic fracturing, has helped set off something of a rush
among the owners of ancient mineral rights to register them
ahead of an October 2013 deadline set by the Land Registration
Act, in order to claim possible compensation.
THE DUCHY OF LANCASTER
The Duchy of Lancaster, which dates back to the 14th
century, is separate from the Crown Estate, historical land
holdings and other royal possessions. Revenue from that property
goes to the government in exchange for an annual payment to help
cover the costs of running the monarchy.
The Duchy holds assets in trust to provide an income for the
Queen and her successors as sovereign. In March 2012, it had
assets valued at 405 million pounds ($653.5 million) and was
providing an annual income of 13 million pounds, which the Queen
uses to meet her private expenditure and official expenditure
incurred as sovereign.
The Duchy has valuable commercial property in central London
(clustered around the ancient manor of the Savoy around the
Embankment and the Strand) as well as in northern England.
But the major part of its landholding, in terms of surface
area, is held as rural estates spread across the counties of
Lancashire (10,000 acres), Yorkshire (16,000 acres), other parts
of northern England and the Midlands.
In addition, over the centuries when the Duchy sold off some
of its holdings, it reserved ownership of the subsurface mineral
rights. As a result, it also owns mineral rights beneath tens of
thousands more acres across the north of England, even though
the surface is now owned by others.
ANCIENT LORDS OF THE MANOR
Mineral rights and royalties produced an income of just
$270,000 in the year ended March 2012. However, like other major
landowners, including the Church of England, the Duchy has been
busy registering its historic ownership of these mineral rights
ahead of the deadline set by the Land Registration Act.
"Mineral interests are a relatively small element of the
Duchy portfolio, but windfall opportunities do emphasise the
importance of protecting these interests," the Duchy explained
in its annual report.
"The Land Registration Act has necessitated mineral owners
to register their titles with the Land Registry, and the Duchy
has been doing this in respect of both its surface and mineral
Fracking has set off a modern land rush. According to the
"Daily Telegraph" newspaper: "The Duke of Northumberland, Duke
of Bedford and Earl of Lonsdale have all registered manorial
rights. Ordinary people who live in manor houses or old
rectories may also have 'lordships of the manor' and therefore
own mineral rights in the area." ("Lords of the manor to cash in
on fracking" November 2012)
DRILLING AND ANCILLARY RIGHTS
Like other private landowners, the Duchy of Lancaster does
not own the oil and gas found under its estates or as a result
of its reserved mineral rights.
In contrast to the United States, where oil and gas deposits
are in private ownership and the owner receives royalties from
fracking firms for extracting them, in the United Kingdom
petroleum resources are in state ownership.
Under the 1934 Petroleum Production Act, all oil and gas
deposits are owned by the Queen in her official capacity as "the
Crown", which in practice means they are government property.
Section 1 of the Act states: "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", which means oil and natural gas.
Licences to explore and exploit oil and gas resources
onshore are granted by the government. But "the rights granted
by the landward licences do not include any rights to access,
and the licensees must also obtain any consent under current
legislation, including planning permission," according to the
British Geological Survey.
So anyone wanting to get at the oil and gas must negotiate
with the surface owner for permission to drill a well and build
other facilities such as access roads and storage tanks. If the
surface owner refuses, the driller must apply for a court order
under the 1966 Mines Act to acquire the ancillary rights needed
to get access to the oil and gas and pay what the court rules to
be appropriate compensation.
As a major landowner in the north of England, the Duchy of
Lancaster will be able to charge anyone who wants to drill on
surface land it owns. Under a recent court ruling, however, it
may also be able to charge anyone who wants to drill through the
underground areas it owns, even if they build surface facilities
on someone else's land.
DEVIATED WELLS, SUBSURFACE OWNERS
In 2009, in a case that pitted Star Energy against Bocardo,
a company ultimately owned by well-known businessman Mohammed
Al-Fayed, the Court of Appeal ruled that Star had to pay
compensation for trespass for drilling a deviated (angled) oil
well under Bocardo's property, even though the well started on
someone else's land and was at least 800 feet below the surface
when it entered the area under Bocardo's land.
"I reach this conclusion with reluctance," the judge
explained. "The trespass is purely technical, because it did not
interfere with Bocardo's use or enjoyment of its land one iota.
Moreover, Bocardo has lost no rights because it neither owned
the oil that has been removed from strata within its land; nor
did it have the right to search, bore for and get such
petroleum. Those rights belonged exclusively to the Crown and
its licensee (Star)".
Nonetheless, even though Star possessed a licence, it still
needed to negotiate Bocardo's permission to drill through all
the other layers and minerals Bocardo owned underneath its
property or apply to court and pay compensation. Having failed
to do either, Star was ordered to pay £1000.
But that was for using three pipelines beneath Bocardo's
land at depths between 800 and 2800 feet below the surface, and
extending just 500-700 metres below Bocardo's Oxted estate.
Fracking will employ much longer horizontal wells and affect
much bigger areas of the subsurface. The compensation required
could be correspondingly larger.
Since the Duchy of Lancaster owns the mineral rights across
large swathes of the north of England, frackers will have to
negotiate appropriate payments to drill through all the strata
it owns (including for example the coal deposits it has been
In contrast to conventional oil and gas fields, which have a
fairly limited impact on the surface and cover a restricted
underground area, fracking involves drilling a much larger
number of wells with horizontal sections extending thousands of
feet. It has a very large footprint on both the surface and the
subsurface, and a corresponding increase in compensation
payments to a large number of land owners.
Revenues from fracking are unlikely to put the Queen's
personal income on a par with the sultan of Brunei, and she
should probably not starting ordering a new Royal Yacht, but
they could make a small addition towards the cost of running her