On 22 January 2014 the European Commission adopted a Recommendation with non-binding minimum principles for shale gas instead of the binding Directive as initially sought.
The Netherlands has been a large producer and consumer of natural gas following the development of the Groningen Gas field in the 1960s, the largest of its kind in Western Europe. A lack of natural gas has historically been a key driver behind shale gas development, and, given the abundance of resource in the Netherlands, there has unsurprisingly been no extraction of shale gas to date. Given that current forecasts predict a significant decline in gas revenues over the next decades, there is a greater potential relevance for shale gas in the future.
According to the U.S. Energy Information Administration, the Netherlands has approximately 17 trillion cubic feet of technically recoverable shale gas reserves. In 2009 EBN ("Energie Beheer Nederland") mentioned that the stocks could even rise to 500 trillion cubic feet. However, currently the stocks are estimated around 500 billion cubic feet.
Dutch political sentiment has historically been largely pro-shale gas. The Dutch Energy Council (the Dutch government's senior advisor on energy matters) also voiced its support for shale gas in February 2011. The first setback came in 2011, when the Dutch District Court of Den Bosch ruled that the local authority Boxtel, who had granted a company permission to conduct test drilling, did so unlawfully. That has sounded a cautious note for the exploration and production of shale gas.
Concerns have been raised by Dutch environmental groups, civilians as well as enterprises such as brewing groups and water companies that drinking water could be contaminated, earthquakes could be triggered and methane could be released as a result of hydraulic fracturing ("fracking"). The Netherlands has traditionally had access to clean drinking water, the supply of which is of prime importance to these companies.
In addition to the environmental concerns, the economic viability of shale gas extraction in the Netherlands has also been questioned. The initial estimate is that the Dutch shales lay much deeper than those in the U.S.A., at approximately three to four kilometres below the surface. Other factors impacting the viability of shale gas production in the Netherlands include its dense population and infrastructure as well as the presence of natural reserves.
Ministry of Economic Affairs Report August 2013
In August 2013 the Dutch Ministry of Economic Affairs published a report on the potential risks and side effects of shale gas extraction. The report takes the view that the environmental risks associated with extraction are manageable, so long as the correct guidelines are in place. One example is the risk of water contamination; which the report concluded could be managed by regulating the storage of chemical waste, arguing that stronger regulation would prevent methane escaping via water systems. The report, which also concluded that the risk of earthquakes would be minimal, has been heavily criticised by the public.
NCEA Advice September 2013
Following the publication of its report in August 2013, the Minister of Economic Affairs requested advice from the Netherlands Commission for Environmental Assessment (NCEA) on the scope and quality of the findings. The opinion was published on 19 September 2013 and the NCEA recommended a mandatory (local) environmental impact assessment for each individual shale gas project. Moreover, the NCEA advised, among other recommendations, that fracking should be avoided in certain areas, such as those where faults in the earth's crust are present.
Announcement Minister November 2013
Following from the NCEA's report, the Minister announced on 13 November 2013 that the actions set out below will be taken:
- A strategic environmental assessment (structure vision)
The Minister commissioned a strategic environmental assessment, in which a long term spatial planning strategy is to be developed. The purpose of this approach is to gain insight into the most suitable locations in the Netherlands for extraction of shale gas. The social costs and benefits, as well as the energy transition will also be incorporated in the structure vision. The Minister aims to have the vision ready by the end of 2014, or beginning of 2015.
- Adjustment of the Dutch mining act
The Minister intends to adjust the Dutch Mining Act so that fracking will be explicitly identifiable in the Act. The process of adjusting the Act has already been put in motion. According to the Minister, the amended law will be in force per 1 July 2014. Moreover, the Minister also looks into the possibilities to introduce structure visions as an evaluation framework as part of the Mining Act.
- Innovative technologies to reduce risks
During the development of the above two points, the Minister will consider and discuss possibilities to reduce the identified risks, that is, by the development and/or use of new technologies before taking a formal decision. This research is expected to be ready mid-2014.
- Compensatory measures
The Minister intends to develop a model which offers sufficient compensatory measures for the region where extraction of shale gas might take place in the future. The Minister finds it of great importance that society is fully involved in the whole process. What kind of measures should be offered is not made clear yet by the Minister. The model will be published together with the structure vision mentioned under the first bullet.
Assignment Environmental Impact Assessment Minister January 2014
In order to gain insight into the most suitable locations in the Netherlands for extraction of shale gas an environmental impact assessment has to be conducted. (so-called plan MER). This environmental impact assessment will form the basis for the eventual structure vision as described above (Announcement Minister November 2013). On 20 December 2013, the Minister awarded Arcadis - a global natural and built asset design and consultancy firm- with the assignment of the environmental impact assessment.
The first steps of this assessment will consist of a memorandum regarding the scope and level of detail setting out the subjects that will be investigated and the areas which will be covered. The Minister expects this memorandum to be ready in April 2014. The Minister announced that it will give each party the opportunity to reply to the memorandum and will also request the NCEA for advise.
Many stakeholders in the discussion find the assignment of the environmental impact assessment to Arcadis controversial. According to the stakeholders, Arcadis itself has substantial interests in the shale gas sector. The company offers, for example, full suite of service to shale gas operators in the U.S. and Canada. It is said, therefore, that Arcadis is not an appropriate party to conduct the environmental impact assessment as it is not able to conduct an impartial research.
At present all drilling is on hold and no new licenses for the extraction of shale gas are issued until a formal decision has been made. Therefore, no extraction of shale gas is expected in the Netherlands in the near future. It is worth noting, however, that the Minister has issued permits for exploratory drilling of geothermal resources, even though the producers of geothermal energy also use the controversial fracking method. However, the fracking method used for geothermal energy is said to be less intrusive and is applied on a smaller scale.
If shale gas production is approved, there will be other implications. Following the advice of the NCEA, the Minister decided that a local environmental impact assessment is needed for each shale gas project. If the results are negative, that is, the extraction of shale gas in that specific area cannot be conducted in a safe and responsible manner, the application will be rejected. Moreover, the municipality in question will have to issue a declaration of cooperation, formally agreeing to the extraction of shale gas. So far, 33 of 400 local authorities declared that they are opposed to shale gas extraction. If one of these municipalities refuses to issue the declaration, it is, however, possible for the Dutch government to overrule the municipality through the so-called Rijkscoördinatieregeling, which gives the state the power to push through vital infrastructural projects.
On 22 January 2014, the European Commission (Commission) published a Recommendation on minimum principles for the exploration and production of hydrocarbons using high volume hydraulic fracturing (Recommendation) aiming to ensure that proper environmental and climate safeguards are in place for fracking.
The Commission initially sought to introduce a directive to regulate fracking for shale gas. However, a number of Member States are currently in the process of granting of have granted concessions and/or exploration licenses. The Commission was, therefor, requested to act urgently. According to the Commission it decided to favor a Recommendation over a Directive as it has the advantage of being applied faster, while providing a reference for action at national level.
The Recommendation invites Member States to follow minimum principles when applying or adapting their legislation applicable to hydrocarbons involving high volume hydraulic fracturing. The main suggestions made in the Recommendation are to ensure that:
- A Strategic Environmental Assessment and Environmental Impact Assessment are undertaken;
- A site specific risk characterization and assessment is carried out (suitability of site);
- A baseline study of the environmental status (e.g. of water, air, land use) is conducted;
- The public is informed of the composition of the fluid used for hydraulic fracturing on a well by well basis as well as on waste water compensation, baseline data and monitoring results;
- The well is properly insulated from the surrounding geological formations;
- Venting is limited to most exceptional operational safety cases, flaring is minimized, and gas is captured for its subsequent use;
- Operators use the best available techniques.
For the purpose of the Recommendation high volume hydraulic fracturing means injecting 1000 cubic metres per fracturing stage or 10000 cubic metres during the entire fracturing process.
Furthermore, Member States should apply the provisions on environmental liability to all activities taking place at an installation site, including those that currently do not fall under the scope of Directive 2004/35/Ec. In addition, operators need to provide a financial guarantee covering the permit provisions and potential liabilities for environmental damage.
The Commission also published a Communication on the exploration and production of hydrocarbons using hydraulic fracturing that outlines opportunities and challenges stemming from shale gas extraction in Europe. Moreover, it published an Impact Assessment that examines the socio-economic and environmental impacts of a range of policy options.
The Commission will closely monitor the application of the Recommendation, comparing the situation in different Member States on a publicly available scoreboard.
Member States are invited to inform the Commission of measures they have taken under the Recommendation by 22 July 2014. By 22 July 2015 the Commission will review the implementation of the Recommendation and will consider making the Recommendation legally binding.
Finally, the Commission is reviewing the existing reference document on extractive waste under the Mining Waste Directive so as to cover notably the management of waste from hydrocarbon exploration and production involving high volume hydraulic fracturing. Moreover, the Commission will establish a European Science and Technology Network on Unconventional Hydrocarbon Extraction.