Shale Gas in the EU - to Regulate or Not to Regulate?
Shale gas continues its regulatory roller coaster ride in the EU. Earlier this year, a study published by the European Commission concluded that there is already an adequate regulatory framework in Europe for shale gas activity as it currently stands, however the debate rages on.
Member State level
Across Member States, the approach to further regulation ranges from the UK, where existing environmental regulation is seen as stringent enough to accommodate shale gas, to Germany where there are growing calls for increased regulation. In Poland, new regulation is focused more on the management of shale gas arrangements (for example giving companies which find shale gas priority when applying for a mining permit) and taxation of hydrocarbon production, than on imposing additional controls.
The UK is still arguably the best informed Member State, in that it was the first to carry out a detailed study. This may explain its broadly favourable stance to shale gas. The head of the UK's Environment Agency, Lord Smith, has just given his support to hydraulic fracturing in the UK. This follows last month's report issued by DECC (Department of Energy and Climate Change) which recommended that hydraulic fracturing should be allowed to continue, with appropriate safeguards and mitigation measures.
Other Member States are commissioning studies into shale gas which may inform their approach to regulation. In Germany, the results of a comprehensive study by experts into the environmental impact of hydraulic fracturing, commissioned by the Federal Ministry for the Environment and the State of North Rhine-Westphalia, are expected this summer. In the meantime, there are growing calls for increased regulation at Federal level, and an informal moratorium on hydraulic fracturing has just been introduced in the State of Hesse pending publication of the environmental study.
In France, the Government published its expert study into shale gas in March 2012, which was clearly in favour of exploration. At the same time it issued a decree setting up a National Commission to evaluate the environmental issues involved in shale gas. This was the first sign of positive movement in the shale gas debate in France since the ban introduced in July 2011. It remains to be seen however how the election of President Hollande will affect this, bearing in mind his stated opposition to shale gas during his election campaign.
In other Member States, shale gas continues to be controversial. In Bulgaria shale gas exploration through hydraulic fracturing has been banned following widespread protests (although there are concerns that the decision was made too hastily). A ban in Romania currently looks likely, but only until the results of EU studies into environmental impacts of the technology are known (see further below). There is talk of a similar ban in the Czech Republic, but this is in the context of a concern that its legislation is extremely out-of-date and a ban would allow time to amend all necessary provisions.
EU level
At EU level, policy and decision makers continue to monitor the situation to assess whether further regulation is necessary. Two draft reports have just been issued by Committees of the European Parliament on different aspects of shale gas. Both are non-legislative reports, and their purpose is to enable the European Parliament to set out its political position on the issue ahead of any new regulation or policy being proposed by the European Commission.
The draft report by the ITRE Committee (Industry, Energy and Research) on “Industrial, energy and other aspects of shale gas and oil” is broadly favourable. It recognises the crucial role of worldwide shale gas production in ensuring energy security and diversity in the long term, including in Europe and its contribution to achieve the EU’s goal of reducing greenhouse gas emissions by 80-95% by 2050 compared to 1990 levels (the basis of the EU Energy Roadmap for 2050).
The second draft report, on “The Environmental impacts of shale gas and shale oil extraction activities” is by the ENVI (Environment) Committee, whose members are less favourably inclined. Even so, it confirms that the risks are well-understood and can be effectively managed with existing technology and best practices. In particular, it stresses that wellbore integrity is key to preventing groundwater contamination.
Neither draft report calls for new regulation, but the ENVI report takes the stance that further screening is needed of both European and national law to assess their adequacy, with “improvement measures” to be taken where necessary.
Disclosure of chemicals used in fracturing fluid is a key issue for both reports, with the ITRE Committee urging full disclosure, and the ENVI Committee calling for disclosure on a mandatory basis. There is increasing interest within industry in exploring the possibility of adopting a procedure in the EU along the lines of FracFocus in the US. FracFocus is a web-based national registry, run by the US Groundwater Protection Council and US Department of Energy. It allows the public to access information, on a well by well basis, on chemical constituents used in hydraulic fracturing. In some US states, disclosure on FracFocus is a mandatory legislative requirement post application of the relevant fluid.
At the same time, there are many studies ongoing into REACH (the chemicals regulation), and the completeness of registration dossiers on a broad basis, not just in relation to shale gas activity. Whilst there is an understanding at EU level that REACH is not the tool to give the public access to the information it is looking for, correct information must be provided in the registration dossiers when the time comes for registration to ensure that appropriate risk management measures are in place.
Ongoing activity
Final versions of the European Parliament Committee reports will be published later this year, once they have been voted on in the Parliament. In the meantime other studies have been commissioned by the European Commission into other aspects of shale gas, for example the socio-economic impacts of shale gas and the climate impact of shale gas.
The IEA (International Energy Association) is currently due to issue its “Golden Rules on Unconventional Gas Projects” at the end of this month. These rules will aim to set out best practice and help to “reassure a sceptical public” that shale exploration is safe. Whilst these rules will not have regulatory status as such, they are highly likely to influence how shale gas regulation moves forward at EU and Member State level.
What is welcome is the increasing acknowledgement that decisions around shale gas should be based on fact, not emotion, with consideration of existing studies and commissioning of new studies as necessary to ensure that the debate is properly informed.
Elizabeth Shepherd is Partner & Head of Environment
at international law firm Eversheds, specialising in environmental law. She and her team are experienced in advising on existing and incoming environmental legislation, often on a multi-jurisdictional basis, where an understanding of the legislative and political climate in the EU as well as individual Member States is key. Elizabeth can be reached at Tel: 0845 497 8215 (Intl: +44 121 232 8215) elizabethshepherd@eversheds.com.