2012 EC reports
In an effort to ensure that policymakers across Europe proceeded from an informed baseline, the EC published three important reports on 7 September 2012 that considered the economic, environmental and climate change impacts associated with potential shale gas exploitation in the European Union. The tone of the reports was broadly supportive of shale gas.
The first of these reports, Unconventional Gas: Potential Energy Market Impacts in the European Union,1 focussed substantially on the benefits that shale gas exploitation could bring to the European energy market. It covered both practical issues relating to physical access to resources and markets, and economic issues relating to market regulation and liberalisation. The report estimated that Western Europe holds 12 trillion cubic meters of shale gas (TCM) and Eastern Europe 4 TCM. This compares with the 20 TCM in the USA (which in 2014 became the world’s largest natural gas producer2 ) and 21 TCM in China. The global technically recoverable resource (TRR) estimate for conventional natural gas was 425 TCM.
The second EC report, Climate impact of potential shale gas production in the EU,3 considered the potential contribution of shale gas production to greenhouse gas (GHG) emissions in the EU. The report did not conclude that shale gas would be a major contributor to GHG relative to other hydrocarbon sources, such as conventional gas or coal.
The third report, Support to the identification of potential risks for the environment and human health arising from hydrocarbons operations involving hydraulic fracturing in Europe,4 examined the environmental impact and risks associated with shale gas development in Europe through all stages of the well lifecycle. This report identified a number of potential gaps in a number of European regulatory regimes, including those relating to environmental impact assessments, water frameworks, integrated pollution prevention and environmental liability.
In retrospect, the most significant aspect of these reports was that they did not, in aggregate, include anything that would halt the exploitation of shale in Europe in its tracks. The economic report was positive (how could it not be, when the US experience of shale was so transformative?); the climate change report was at worst neutral (compared to coal most if not all other sources of hydrocarbons look ‘clean’); and although the environmental report flagged concerns these were no more than informed political and industrial groups would have expected to exist.
Following the publication of the 2012 reports, the European Commission launched a public consultation that canvassed opinion from individuals, companies & organisations and public authorities concerning various aspects of shale gas exploitation across Europe. The consultation ran from December 2012 to March 2013; its results were published in October 2013. Perhaps most strikingly, survey results from individual people suggested that:
- 32.5% of individuals believed that unconventional fossil fuels (e.g. shale gas) should be developed in Europe without the need for further regulation or legislation;
- 28.9% of respondents believed that unconventional fossil fuels should be developed in Europe only if proper health and environmental safeguards were in place; and
- 37.5% of respondents believed that unconventional fossil fuels extraction should not be developed in Europe at all.
(Rounding to one decimal point accounts for the total being 99.9% rather than 100%.)
At first sight, this finding appears to show broad consensus amongst Europeans for proceeding with shale gas development. That view, however, masks some substantial flaws in the data that were collected. The survey was entirely voluntary and therefore potentially biased towards those individuals who felt strongly enough to comment. Moreover, of the total 22,122 responses received from individuals, 92.4% came from just five countries (France, Poland, Romania, Spain and Germany) with over half of the individual responses (11,714) from Poland alone, where well over 90% of responses were in favour of shale gas exploitation. Of the other 28 counties from which responses were received, there were only 340 responses from the United Kingdom, 13 from Denmark and 3 from Greece. The results were further skewed by the fact that the Polish responses were dramatically more in favour of shale gas exploitation than any other nation: well over 90% of Polish responses were in favour. There were only four other European nations where the proportion in favour was greater than 50%.
Despite these flaws, this was a formal European survey so the results will likely be influential for policymakers, especially those who do not bother to dig behind the headline results. To the extent that its results can be relied upon we might conclude that the Polish are much more keen than the rest of Europe to exploit their shale gas reserves but that there is significant resistance to proceeding with that exploitation elsewhere on the continent. But mostly its results should be regarded with suspicion.
EU-level legislative and regulatory proposals: resistance to change
In January 2012, the European Commission published a report on the legal and regulatory framework for shale gas exploration and exploitation activities in the EU,5 considering licensing and permitting procedures, with the focus on four Member States (Poland, France, Germany and Sweden). It concluded that the current European regulatory framework was adequate, with no significant gaps as regards the then present level of shale gas activities involving early exploration, although it considered that this conclusion may need re-assessment as activities move towards larger-scale operations and commercialisation.
The European Commission’s Directorate-General for the Environment was involved in the publication of two further reports in 2013.
The first report, Regulatory provisions governing key aspects of unconventional gas extraction in selected Member States,6 was submitted to the Commission on 1 July 2013. Its remit was wider than the 2012 report described above. It examined the relevant regulatory regimes governing unconventional gas extraction in Bulgaria, Denmark, Germany, Lithuania, Poland, Romania, Spain and the United Kingdom with the aim of understanding how these countries had so far chosen to regulate the field. Broadly speaking it found that those Member States relied mainly on general mining, hydrocarbons and environmental legislation and its related permitting procedure, with very few extra requirements specific to shale gas, although it also noted that several Member States were at the time reviewing their existing regulations to develop guidance focussed on unconventional gas developments. Although it flagged areas of potential uncertainty and of difference in approach in connection with unconventional gas extraction it did not expressly identify any need for new regulation at the pan-European level.
The second report, Assessment of the use of substances in hydraulic fracturing of shale gas reservoirs under REACH, was published in September 2013.7 It assessed the substances used for hydraulic fracturing under the (European) Registration, Evaluation, Authorisation and Restriction of Chemicals Regulation (REACH) and examined what chemical and other substances were being used in connection with REACH-registered reservoirs where hydraulic fracturing was used. A common theme in environmental concerns about fracturing is how ground water might be contaminated by the release of fracturing chemicals and to that end the shale gas industry has been encouraged to be transparent about the chemicals it uses. This report found that more could be done to publicise that information, including by the addition of a new environmental release category that could be introduced into the current use descriptor system and the development of a more relevant model for environmental exposure assessment.
Measures along those lines were enacted shortly afterwards. In October 2013 the European Parliament voted – by a margin of 332 votes to 311, with 14 abstentions – in favour of the proposal that exploration and exploitation of unconventional hydrocarbons, including shale gas, should be subject to mandatory environmental impact assessments.8 This was followed later in October by a speech from the EC Environment Commissioner, Janez Potocnik, stating that robust regulatory proposals would be advanced by early 2014 to put rigorous controls on the potential environmental impact of shale gas.9
Since then, several European countries have resisted attempts to enact a European Directive designed to place environmental restrictions on the shale gas industry. In December 2013 British Prime Minister, David Cameron, wrote to José Manuel Barroso, President of the EC, stating that: ‘It is essential the EU minimise the regulatory burdens and costs on industry and domestic bill payers by not creating uncertainty or introducing new legislation.’10 In January 2014, the UK, Poland, Hungary, the Czech Republic and others were successful in defeating a proposed directive. It has since been replaced by a non-binding set of recommendations covering the potential health and environmental risks associated with shale gas.11 This is a significant setback for advocates of tighter regulation on the shale gas sector.
However it should be noted that in its current impact assessment12 the EC states that these recommendations may not be a long-term solution and that they may only be effective if accompanied by a more robust regulatory regime. The impact assessment states that while there is a large degree of uncertainty in predicting the future shale market, its recommendations may lead to a limited gas price decrease or avoided increase and help mitigate against declining conventional gas capacities. That said, the publication of the recommendations, in conjunction with the lobbying of a number of Member States, will certainly delay (and has in fact already delayed) the introduction of comprehensive regulation(s).
The picture that emerges from this discussion about developments at a European level is that there has so far been much deliberation and talk, but very little action. The upshot is that much of the day-to-day regulation of shale gas exploitation in Europe is being conducted via national laws (which of course will be informed by European rules) with whatever shale-specific regulation each nation sees fit to impose.