Legal Consequences of EC Recommendations on Minimum Principles for Shale Gas in Poland

On 22 January 2014 the European Commission published Recommendations specifying minimum principles for the exploration and production of hydrocarbons using high volume hydraulic fracturing[1]. The Recommendation is primarily the result of over two years of works and analyses related to the issue of protection of human health and the environment in connection with the growing development of prospection, exploration and production of unconventional hydrocarbons in Member States of the European Union. The works involved mainly public consultation[2] on the European level as well as relevant actions in the European Parliament and the Council.

What are recommendations?

First, it should be specified what the legal nature of recommendations as a source of European legislation is. They are adopted pursuant to Article 292 of the Treaty on the Functioning of the European Union[3] and basically they form one of the non-binding secondary legislation acts that may be also adopted directly by the European Commission. Given their non-binding nature, there are no sanctions that would result in Member States being obliged to adopt and implement such recommendations. However, according to decisions of the Court of Justice recommendations should be taken into consideration, for example, in the process of adjudication by national courts, in particular if the recommendations refer to the clarification of internal law provisions or supplement binding provisions of the EU legislation. Such position stems from the principle of solidarity valid in the EU legislation[4]. Consequently, a recommendation forms a specific interpretation directive for courts and national administrative authorities involved in formal legal processes related to shale gas in our country.

Furthermore, it should be noted that the European Commission expects the minimum principles set out in the Recommendation to be implemented within six months from the publication date (i.e. the deadline expires on 22 July 2014) and Member States to annually inform the Commission about the implemented measures (starting from December 2014). Based on the collected data the European Commission will review the effectiveness of the measures put in place by Member States 18 months after the Recommendation's publication date. The failure to implement the minimum principles laid down therein may result in the Commission putting forward legislative proposals with legally-binding provisions on the exploration and production of hydrocarbons using high volume hydraulic fracturing.

Minimum principles

As for the minimum principles presented on 22 January in respect of processes related to hydraulic fracturing, it is worth noting that the European Commission has put an emphasis on the following issues: public participation in the decision making processes to a greater extent than so far, protection of groundwater, seismicity, monitoring of the relevant components of the environment potentially affected by high volume hydraulic fracturing as well as adequate control of chemical substances used and rational use of water. More importantly, the Recommendation shows that the Commission aims at developing binding best industry practices and at promoting the exchange of available information between authorities, business operators and representatives of local communities concerned.

In order to protect groundwater against potential impacts related to hydraulic fracturing Member States should establish minimum depth limitations between the area to be fractured and groundwater (paragraph 3(2) of the Recommendation) and implement the requirement of risk assessment before the commencement of any operations related to the exploration and production of hydrocarbons, anticipating geological layers separating the reservoir from groundwater (paragraph 5(3)(b) of the Recommendation) and respecting the aforementioned minimum vertical distance between the zone to be fractured and groundwater (paragraph 5(3)(c) of the Recommendation).

The need for determining the status of the existing fractures and individual geological layers before starting operations is particularly important since it helps in evaluation of potential emissions of substances during fracturing (e.g. it will result in taking geological layers with higher permeability into consideration, which in turn may affect the location of particular wells).

The need for the analysis of seismicity and its constant monitoring (before, during and after fracturing operations) is one of the aspects of environmental protection so far omitted in the legislation of Member States. It should be indicated that the United Kingdom is the only state which has adopted a regulation imposing an obligation on the operator to carry out seismic monitoring on a permanent basis. Its inclusion in the Recommendation’s minimum principles should be viewed positively (determining a baseline for seismicity - paragraph 6(2)(f) of the Recommendation; pressure control and adjustment during hydraulic fracturing operations – paragraph 9(2)(d) of the Recommendation; regular monitoring of the installation and the underground area before, during and after hydraulic fracturing – paragraph 11(1) of the Recommendation).

Moreover, requirements concerning comprehensive monitoring of the relevant components of the environment on a current basis have been introduced. It has been also emphasised that such monitoring (carried out before, during and after fracturing operations) should include information about the precise composition of the fracturing fluid used for each well, the volume of water used for the fracturing of each well, the pressure applied during fracturing, the return fluids as well as air emissions of methane and other volatile organic compounds. The monitoring results should be each time reported to the competent authorities.

One of the most controversial issues related to the fracturing operations is the composition of the fracturing fluids used. Only few Member States have implemented a requirement to disclose components of those substances. In the Recommendation under consideration the European Commission has emphasised again that manufacturers, importers and downstream users are obliged to comply with their obligations under the REACH[5] Regulation concerning the Registration, Evaluation, Authorisation and Restriction on Chemicals. Quite often operators conducting hydraulic fracturing operations ignore, for example, the requirement to verify whether the substance used by them has been properly registered. Additionally, the relevant information on the chemical substances used should be publically disseminated – this obligation has been imposed directly on well operators but also indirectly on the competent national authorities (paragraph 15 of the Recommendation).

The Recommendation includes also requirements concerning the need to determine so‑called baseline. Interestingly, the Recommendation provides also guidelines suggesting that well integrity tests (conducted at all stages of operations) should be reviewed and evaluated by an independent and qualified third party. Moreover, the Recommendation offers a ground for developing an information database of best practices in the mining industry. It is worth noting that this solution is quite common in the Unites States of America where the mining industry provides and maintains so-called good practice databases.

Quick applications of recommendations

With reference to Poland, it should be noted that in the legislative sphere the Commission’s proposals may be soon adopted under the procedure of amendment to the Geological and Mining Law conducted by the Minister of the Environment. As for the organisational sphere, there are at least two tools available that after certain modifications could be used for adopting the Recommendation’s provisions. First, the permanent monitoring of wells carried out, irrespective of licensees, by the Polish Geological Institute. Second, a public communication programme titled "Together about shale gas" has been already implemented and after its extension to the area of all licences and introduction of the principle of full transparency of actions taken by both operators and national authorities this programme may meet the Recommendation’s provisions. As a local platform for the exchange of knowledge, it would give organised groups of local communities a chance to participate in legal procedures.

To sum up, it should be emphasised that the European Commission has decided to take actions relating to the exploration and production of hydrocarbons using high volume hydraulic fracturing in the form of non-binding legal acts, thus casting new light on the interpretation of already existing provisions of law. This non-binding form does not mean that Member States would not have to actually adapt to the minimum principles set out in the Recommendation. One gets the impression that the Commission has only postponed more restrictive legislative proposals concerning shale gas in Europe until it finds additional arguments for the need to develop detailed regulations for this industry. In Poland, people responsible for the shale project execution may now focus on working out the measures to implement the Recommendation in a way preventing the Commission from finding such arguments. What can be done to achieve it? It seems that the following may be of help:

• amendment to the Geological and Mining Law;
• extension of the monitoring of wells with new locations under the programme implemented by the Polish Geological Institute;
• use and modification through extension of the public communication programme "Together about shale gas."

Michał Tarka is a Partner at BTK Legal in Warsaw.