United Kingdom
Constitutional, Damages, Property, Administrative, Licences, Standing, Permits
The Petroleum (Production) Act (PPA) of 1934 (UK) vested in the Crown the property in petroleum “existing in its natural condition in strata in Great Britain” and gave the Crown the exclusive right to search and bore for and get such petroleum. The same Act authorized the Crown to grant licences to others to engage in that activity. Star Energy held such an exclusive licence to an area that included lands underlying Bocardo’s farm. But Star Energy did not drill from a surface location on Boacardo’s property Instead it drilled a number of wells directionally from a surface location on an adjacent property, but the wells (two producing wells and an injection well) all had bottom hole locations under Bocardo’s land. At no point did Star Energy acquire any sort of right from Bocardo although the PPA provided that it did not confer upon the Crown or any licensee any other rights to “enter on or interfere with land.” Indeed, other legislation incorporated by reference in the PPA authorized a Crown petroleum licensee to acquire other “ancillary rights” from owners of property other than the petroleum that would permit working operations subject to the payment of compensation for a way-leave of equivalent. It was broadly accepted that Star Energy’s operations did not “interfere ‘one iota’ with Bocardo’s enjoyment of the land”. The questions at issue in this litigation were two-fold: (1) was this a trespass, and (2) if so, what would be the correct measure of damages? The trial judge held that this was a continuing trespass (with a limitations defence precluding recovery beyond six years) and that significant damages should be awarded (£621,180). The Court of Appeal also held that this was a trespass but reduced the damages to a mere £1,000. The Supreme Court held unanimously that this was a trespass. The court split on the assessment of damages. The Court held that the owner of the surface is the owner of the strata beneath it, including the minerals that are to be found there, unless there has been an alienation of them by conveyance, at common law or by statute, to someone else.As the paper title carries with it title to the strata below the surface, Bocardo must bedeemed to be in possession of the subsurface strata too. There is no one else who is claiming to be in possession of those strata through Bocardo as the paper owner. Lord Hope held that substantial damages should be awarded, calculated by reference to the incremental amount of oil that was obtained by the trespassory directional drilling into the apex of the reservoir. Lord Brown (Lords Walker and Collins concurring) held the award of the Court of Appeal should stand; damages should reflect the value of the right to the owner of the land and not the person acquiring the interest; the way-leave interest had little value but for Star Energy’s “scheme.” Lord Clarke would have preferred an assessment of damages that gave some recognition to the fact that Bocardo’s land had some special value (independent of Star Energy’s “scheme”) because of its strategic location over the apex of the reservoir. In sum, the majority of the Supreme Court upheld the Court of Appeal’s assessment of damages at £1,000.