The land of Scotland and the common good: report

Section 10 - Publicly Owned Mineral Rights

1 The land under Scotland's land surface is also an important resource because of the economic value and potential of the material or 'minerals' that can be extracted from it. ^[1]

2 'Mineral rights' are a distinctive component of Scotland's system of land ownership. In this context, mineral rights might be summarised as a type of property right covering the authority to quarry, mine or otherwise extract sub-surface materials.

3 While the starting point in Scots law is that the owner of land owns everything above and below land, mineral rights can be owned separately from the surface of the land. Thus, generally, the mineral rights go with the land unless they have been sold or reserved by a previous owner, who may subsequently have sold them. Reserving the mineral rights has, for example, often been the practice of large private estates when selling land.

4 There are very few other examples in Scotland's system of land ownership of property rights in or over land that can be owned separately from the land itself (as a 'separate tenement' in legal terms). After mineral rights, the other conspicuous example of a right capable of being held as a separate tenement is the right of salmon fishing which is discussed in Section 31. Other examples are a number of Crown property rights discussed in the following section.

5 The 'mineral rights' that might be reserved or sold is a general right and not specific to any particular mineral. However, the rights to a number of specific minerals are held in the national interest. They are the right to gold and silver, the right to petroleum (oil and gas) and the right to coal. The public ownership of the rights to these natural resources is a very important part of public land ownership in Scotland. Therefore, the nature of the ownership and management of each is described briefly below.

Gold and Silver

6 The right to gold and silver in all land in Scotland was reserved by the Crown early in the country's history and this continues to be the case. The current legislation, the Royal Mines Act 1424, is the oldest Act still in force from Scottish Parliaments before 1707. ^[2] The other current legislation related to the right is an Act of 1592 and thus also amongst the oldest Acts.

7 The Crown in Scotland still owns the right to gold and silver throughout Scotland, except for over a few areas where the ownership was conveyed to others in ancient grants ( Fig. 8). Scotland's Crown right to gold and silver is administered by the Crown Estate Commissioners ( CEC) as part of the UK wide Crown Estate and discussed further in Section 11.

Oil and Gas ^[3]

8 During the First World War, when the British Government wanted to encourage companies to drill onshore for oil, the Petroleum (Production) Act 1918 was passed to confer on the Crown the right to control exploration and production in Great Britain and to grant licenses for that purpose.

9 The Board of Trade was made responsible for managing the Crown's right, with 'petroleum' defined in the Act to include " any mineral oil or relative hydrocarbon and natural gas existing in its natural condition in strata, but does not include coal or bituminous shales".

10 The Petroleum (Production) Act 1934 repealed the 1918 Act, while reaffirming that legal title to petroleum existing in its natural state in Great Britain was vested in the Crown. The Act provided for the Government to continue to license other persons to search for and get oil.

11 When the United Nations Conference on the Law of the Sea's Continental Shelf Convention 1958, was enacted into UK law by the Continental Shelf Act 1964, the rights over the UK continental shelf to the 200 nautical mile limit were vested in the Crown. The Act also applied the licensing provisions of the 1934 Petroleum Act to the UK continental shelf.

12 The Petroleum Act 1998 consolidated a number of the earlier enactments and contains the legislation that currently determines matters such as the vesting of ownership of oil and gas within Great Britain and its territorial sea in the Crown, the granting of oil licences and rules relating to submarine pipelines and the decommissioning of offshore installations.

13 Today, the UK Government issues licences for oil and gas through the Department of Energy and Climate Change. An annual rental is charged under each licence, but there is no longer a royalty regime on production. This was abolished on 1st January 2003. The UK Government raises the majority of its revenue from oil and gas through taxation.

14 Thus, while all Crown property rights in Scotland belong to Scotland as a sovereign territory, the Crown's ownership of 'petroleum' in Scotland is administered by the UK Government.

Coal

15 The ownership of mineral rights in Scots law included coal until the 1942. That year, the British Government nationalised coal reserves in the UK into the ownership of the Coal Commission. Coal in the Forest of Dean was an exception to protect the ancient rights of the Free Miners of the Forest of Dean. The Coal Commission had been constituted as a statutory corporation under the Coal Act in 1938. ^[4] In 1946, the coal industry was nationalised and the Coal Commission replaced by the National Coal Board ( NCB).

16 The coal industry was subsequently privatised through the Coal Industry Act 1994. In that year, to replace the NCB, the Coal Authority was also established as a non-departmental public body under the Department of Energy and Climate Change ( DECC). " The Coal Authority owns, on behalf of the country, the vast majority of the coal in Great Britain, as well as former coal mines". ^[5] Amongst other responsibilities, it grants licenses for coal exploration and extraction.

17 The ownership of Scotland's coal reserves in Scotland was therefore nationalised to the UK Government through the Coal Commission and its successor, the Coal Authority. This position appears to reflect the fact that the nationalisation of the coal industry in the 1940s involved the UK Government in substantial expenditure in acquiring the rights to existing mines and compensating the private owners. In that situation, claiming ownership of any unknown reserves through the legislation was an obvious step to take at the same time. However, the ownership of a separate property right across Scotland by the UK Government, as with coal reserves and the Coal Authority, appears to be unique. All other such presumptive property rights to particular assets in Scotland seem to be owned within Scotland by either the Crown or Scottish Ministers, rather than the UK Government.

18 The Review Group also noted this 'disconnect' in the current issues over restoring opencast coal mining sites in Scotland. The issues have arisen where a private owner mining a site has gone into administration and the insurance bonds placed with the local authority for the restoration of the site are inadequate to meet the costs. There are a number of these opencast sites in Scotland where this is currently an issue, with an estimated potential shortfall of £200 million. ^[6] In this situation, where it appears there will be a need for public funds to contribute to the restoration, the Group considers there may be role for the Coal Authority.

19 The history of opencast or surface coal mining in Scotland has been relatively short. It was introduced as an emergency measure during the Second World War and grew to a peak of 21 million tonnes in 1991. ^[7] While production has declined significantly since, surface mining exceeded deep mining production for the first time in 2005. As the deep mining decline has continued, surface mining's percentage share of production has grown. However, surface mining production is itself down to less than 5 million tonnes. ^[8] As part of this decline, and contributing to issues over site restoration, the number of opencast coal mines producing coal in Scotland halved between 2000 and 2008. ^[9]

20 The Coal Authority is, as described above, responsible for granting licences and leases for coal mining. In doing this, the Coal Authority seeks various securities from the operators to cover liabilities. However, while these include factors such as ground subsidence as a result of the mining, they do not include provisions for site restoration after surface mining. This is because, while "the Coal Authority owns the coal and abandoned underground coal working, once a surface mine is worked, the Coal Authority does not own any void that may be created or left above any seams". ^[10] Therefore, with surface mining, it is the local authority that is responsible for putting in place securities for the site restoration through insurance bonds.

21 This position means that, while the Coal Authority requires payment for every tonne of coal mined, none of that income from surface mining contributes towards site restoration if there is a shortfall in the securities. All the money that the Coal Authority collects from these coal payments is remitted to the Treasury, except a small percentage retained by Authority to carry out its licensing function. ^[11] It has been calculated that since privatisation in 1994, some £15.1 million has been collected for coal worked in Scotland, mostly from surface mined coal. ^[12] In early 2014, the Scottish Government wrote to the UK Government to ask that "at least some" of the levies raised from coal produced in Scotland, should contribute to the shortfall over opencast site restoration costs. ^[13]

22 The £15 million raised by the Coal Authority is a relatively small amount in relation to the overall costs of restoration. The real issue within the current debate is the shortcomings of the bonds. Having said this, the Review Group finds the degree of 'disconnect' between coal revenue and expenditure to be unacceptable and within the context of devolution, suggests it would be more appropriate for Scotland's coal reserves to be owned by Scottish Ministers and the licensing responsibility to be devolved to the Scottish Government.

23 While coal mining is a contracting industry within Scotland, it is still important in some areas. The Group considers making the proposed change would enable a substantially closer integration of the licensing and planning consents governing coal mining in Scotland, as well as a wider integration of coal mining with other aspects of public policy in Scotland.