A Judge has ordered a full hearing into a government decision to allow the sale of the troubled fracking company Third Energy – the company that is licensed to frack in Ryedale, North Yorkshire.

At stake is whether the government properly considered the risk to the taxpayer that the new owners would not meet the clean up costs.

Ministerial correspondence has revealed a government department “worked with” Barclays on the “orderly disposal” of Third Energy.

Government collusion with Barclays to drop “hot potato” liability for fracking clean-up costs

The crowdfunded case,  brought by North Yorkshire campaigner Eddie Thornton, challenges the Oil and Gas Authority’s decision to allow the sale from a Barclays Bank subsidiary to York Energy.

Incorporated in February 2019, York Energy is an affiliate of Alpha Energy, a US company which invests in “overlooked conventional fields”. It has no history of operating in the UK, has a share value of just £10, and appears to have been incorporated solely for the purposes of this takeover.

The Oil and Gas Authority supported the sale, despite identifying the risk that after the sale Third Energy will be unable to pay for decommissioning activity from the Ryedale fracking site at Kirkby Misperton.

Eddie Thornton’s legal challenge has discovered that the Oil and Gas Authority even informed the Department of Business Energy and Industrial Strategy of

“… risks associated with allowing the Transaction… and the OGA cannot provide any assurance that [Third Energy] will ultimately be able to meet its licence commitments, including decommissioning”

A few years ago, when we still had banks in Hebden Bridge, Calderdale Against Fracking campaigned against Barclays’ involvement in fracking and Third Energy.

In 2017 Calderdale Against Fracking celebrated Barclays’ decision to withdraw their financing of Third Energy. But we didn’t anticipate this would lead to the government’s collusion with Barclays putting its financial interests above the public interest.

Estelle Dehon, from Cornerstone Barristers said:

“This is not robust regulation. Nor was it lawful, given the OGA’s legal duty to assess whether fracking companies have financial capacity to discharge their decommissioning obligations.”

 Barclays offloaded Third Energy like hot potato

Though the transaction was described as a ‘sale’, Barclays forgave £80 million of Third Energy’s debt and paid an additional £12 million to offload the company.

There is a significant risk that the new owners, York Energy, will use the funds on a risky bid to strike new oil or gas, leaving the company with nothing in the bank if they fail. This would leave taxpayers on the hook for the cleanup costs of the company’s drilling sites in its licence areas, potentially running to tens of millions of pounds.

Fracking in the UK may be on hold for the moratorium (though the Government has recently clarified that it considers fracking under 10,000 litres is not subject to the moratorium), but the need to decommission and clean up any accidents arising from it continues to be big business. In the US, for instance, companies are going bust and US taxpayers are picking up the tab to the tune of billions of dollars.

Fracking regulator’s inadquate scrutiny of sell off

This is what led Eddie Thornton to be concerned when the fracking licencee in his area, Third Energy, sold up to York Energy.

Scrutiny of the deal proved to be unsatisfactory, and in October 2019, Thornton issued a claim for Judicial Review. This was granted this week when Mr Justice Supperstone ordered a rolled up hearing of the Judicial Review application. At a full hearing lasting 1-2 days, a High Court judge will now consider the grounds of challenge and whether the Oil and Gas Authority’s decision to allow the sale was lawful.

Mr Thornton launched the challenge on behalf of his community after he claimed the government failed to carry out the adequate financial assessments of the companies in the transaction.

The details of the transactions were revealed in the company’s accounts, and through bringing the legal challenge against fracking regulator the Oil and Gas Authority.

Mr Thornton said:

“Given that existing legislation places the burden for decommissioning onshore assets onto the taxpayer if the licence holder goes bust, Barclays have dropped this like a hot potato, even giving away money to get rid of Third Energy.
The government regulator is completely ignoring its duty of care towards our community. My legal team believes the Oil and Gas Authority failed to follow the law when it neglected to carry out the requisite thorough financial assessments before waving through this takeover. The public could now face a huge bill for decommissioning all the old wells and pipelines across the entire suite of licences in North Yorkshire if this new company goes bust.”

Mr Thornton is fundraising for the costs needed to bring the case.

There is more information about government shenanigans with the Third Energy sale in this Drill or Drop report, here.

In 2017 Upper Calder Valley Plain Speaker reported on Barclays’ decision to stop financing the Ryedale fracking company, Third Energy,  here.