ANNEX 3

Understanding for the Facilitation of Coal Bed Methane Exploitation in Great Britain

This understanding is made between the Coal Authority (“the Authority”) and the Department of Trade and Industry (“the Department”), collectively referred to as “the parties”.

The Authority (in addition to its statutory duties towards the coal industry) has a statutory duty under Section 3 (5) of the Coal Industry Act 1994 to have regard to the desirability of the exploitation, so far as that is economically viable, of Coal Bed Methane (cbm) in  Great Britain. The Department also attaches importance to facilitating the development of this industry by virtue of the power under Section 2 of the Petroleum (Production) Act 1934 to grant petroleum licences.

The parties agree to co-operate, and as far as possible to adopt a collegiate approach, for the purpose of facilitating, to the greatest practical extent, and consistent with their statutory duties, the economic development of both the coal bed methane industry and the coal mining industry. The parties also agree to be as open as possible towards the two industries.

For this purpose the parties agree to a full exchange of relevant information available to them relating to coal access agreement matters and to petroleum licensing matters (including geological data) in so far as they have relevance to the coal industry and, as far as appropriate, also to make this information available to the industries.

The parties agree to meet as necessary and, in any event, at least quarterly, and to maintain close contact on all relevant matters.

Subject to their statutory duties, the parties will regard the following as matters for agreement through these arrangements:-

i.  The drawing up of a map (and any variation to it) from time to time, indicating the areas where access to coal for the purposes of cbm exploitation is most and least likely to be restricted.

ii. The drawing up of standard conditions of access to coal for cbm exploitation, any variations to the standard conditions, and any granting of access on non-standard terms.

iii. Decisions, in the light of the framework set by the map, whether or not to grant access to coal for cbm exploitation.

iv. General arrangements and principles involved in the processing of cbm access applications and in the charges made in the light of the map.

v.  General arrangements and principles involved in decisions as to whether to publicise applications for the access to coal for cbm extraction purposes prior to the taking of decisions on the applications themselves.

vi. The establishment or alteration of any areas offshore where holders of petroleum licenses will be required by the Authority to sign the Interaction Agreement as a condition of gaining access to or through coal seams or mine workings.

The Authority has a policy not to entertain applications for coal access agreements for cbm except from holders of petroleum licenses covering the areas concerned.

In the spirit of the approach outlined above the Department intends:-

i. To consult the Authority in advance of any onshore licensing rounds or of granting individual licensing applications in coal areas.

ii. To ensure that its licensees are aware of the need to secure the agreement of the Authority for any drilling into coal.   To encourage those who will be seeking petroleum licenses for the purposes of cbm exploitation to consult the Authority at the earliest possible stage about coal access aspects.

iii. To make licensees or prospective licensees aware of any material indications arising from discussions with the Authority that are relevant to those aspects.

The parties believe that, with this approach, the successful development of the two industries will be mutually compatible.