Friday, March 17, 2017

Global Shale Law Compendium: Shale Governance in the European Union

Written by Chloe Marie – Research Fellow

The Global Shale Law Compendium series will address legal developments and other issues related to the governance of shale oil and gas activities in various countries and regions of the world. For our first article, we will highlight governance actions within the European Union generally to address legal and policy aspects of shale development. Issues related to governance within individual EU Member States will be addressed in future articles.

While the shale gas revolution experienced in the United States has not yet translated to corresponding activity in Europe, the European Commission has been following the issue of potential development very attentively for several years. Some EU Member States have shown a strong interest in encouraging development of their shale resources while others have demonstrated opposition to any level of development due to concerns about the potential impacts of hydraulic fracturing on the environment and public health. Given the wide disparity in the viewpoints of Member States, the European Commission has undertaken significant activities to determine the precise extent to which shale development should be governed at the EU-level. 

Pursuant to Article 4(2) of the Treaty of the Functioning of the European Union, the energy area is of shared competence between the European Union and the Member States. Member States are free to set their own energy priorities and retain the power to regulate the exploitation of energy resources. All Member States, however, must comply with a number of directives addressing environmental protection standards affecting the extractive industries. Those directives have been transposed to legislation within each of the Member States. These EU directives include the Strategic Environmental Assessment (SEA), the Environmental Impact Assessment (EIA), Natura 2000, and the Environmental Liability directives, which establish EU environmental compliance requirements within the Member States. All extractive industries also are required to meet the environmental standards of the Mining Waste, Carbon Capture and Geological Storage, Industrial Emissions, and Seveso II directives. With regard to more specific issues relating to water and chemical use, each Member State must satisfy the requirements of the Water Framework and Groundwater directives as well as the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) regulation. Finally, the European Commission has developed the Hydrocarbons directive to ensure non-discriminatory access to energy sources and markets through licensing bids.

These directives impose numerous standards and requirements for environmental protection, but they are focused on exploration and production of hydrocarbons using conventional technologies, rather than modern unconventional techniques such as high-volume hydraulic fracturing. The absence of a specific legal framework raised concerns as to whether more governance was needed to address the perceived scientific uncertainty, social implications and environmental issues of shale development. To better understand the concerns raised by the public and stakeholders, from 2011 to 2014, the European Commission requested multiple studies and reports from various external consultants to address shale gas development and the use of high-volume hydraulic fracturing. Those studies and reports questioned the effectiveness of the existing European environmental regulatory framework and pointed out that the operational realities and impacts from unconventional gas activities were very different than those from conventional development. Their conclusions implied that Member States might have experienced issues in interpreting the existing general European regulatory framework to properly govern the development of their shale gas resources. In this context, the question arose as to whether the European Commission should consider new legislation.
On January 22, 2014, the European Commission published a Recommendation on minimum principles for shale gas development aimed at guiding Member States that were carrying out or planning to carry out shale gas prospects using hydraulic fracturing. The principles, however, were not legally binding, and the European Commission merely invited Member States to adopt the substance of the Recommendation to be utilized along with their existing legislation on conventional hydrocarbons for more interpretive clarity. Those Member States that had chosen to allow the exploration of shale gas were to reflect the Recommendation in their legislation by July 28, 2014, and they also were asked to provide annual information on the extent to which the principles had been applied in their national laws and regulations.
The European Commission also informed Member States and stakeholders that it would be reviewing the Recommendation approximately eighteen months after its publication. As part of the review process, an online survey questionnaire was made available for Member States to provide feedback from their experiences with the implementation of the Recommendation in their national legislation. Member States were to indicate their positions concerning shale gas development and changes made in their legislation by December 1, 2014.
In February 2016, the European Commission published a final report assessing the application of the Recommendation in relevant Member States based on data collected and analyzed from January 2014 to August 2015. The Commission found that only 11 out of 28 Member States replied to the questionnaire indicating whether or not they granted or were planning to grant authorizations to pursue development of their shale gas reserves. These Member States included Austria, Denmark, Germany, Hungary, Lithuania, Netherlands, Poland, Portugal, Romania, Spain, and the United Kingdom. The final report showed that there have been changes made to the planning and permitting process in only three countries – Lithuania, Portugal and the UK.
Recently, in December 2016, the European Parliament and Council submitted a report to the European Commission on the effectiveness of the Commission Recommendation and declared that “Member States differ in their interpretations of some provisions of relevant Union environmental legislation” before adding that “while existing legislation establishes a legal framework for shale gas activities, the objective of providing legal certainty and predictability to competent authorities and operators is . . . not fully met.” As a result, the Commission intends to “focus on . . . increasing transparency and monitoring . . . fostering the correct and uniform application of relevant provisions across Member States . . . addressing the environmental impacts and risks of hydrocarbon exploration and extraction; and . . . filling research gaps on health impacts and risks of hydrocarbon extraction.” The European Commission made a commitment to “reassess” the effectiveness of its Recommendation “at the latest every three years.”
Our next article will discuss the legal, policy, and governance issues related to shale gas development in France.

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