Friday, April 28, 2017

Global Shale Law Compendium: Shale Governance in Germany

Written by Chloe Marie – Research Fellow

The Global Shale Law Compendium series addresses legal developments and other issues related to the governance of shale oil and gas activities in various countries and regions of the world. In this article, we will highlight governance actions taken by Germany to develop policies specific to shale gas development.

Shale gas deposits in Germany, totaling 17 Tcf of technically recoverable resources, are located in regions of Lower Saxony and Baden-Württemberg in northwestern and southwestern Germany, respectively. Although German Chancellor Angela Merkel has not ruled out the possibility of importing U.S. shale gas as a means to transition away from German reliance upon nuclear energy, the German government has demonstrated a reluctance to develop its own shale gas resources. Interestingly though, the use of hydraulic fracturing in Germany is not new as the technique has been utilized since the late 1960s in the production of tight gas – also called “conventional fracking.” By 2011, the responsible mining authority had granted several permits regarding the exploration of shale gas for commercial purposes. The German public, however, raised environmental objections to shale gas development, expressing worries about the potential impairment of the drinking water supplies. This public resistance has contributed to the lack of shale gas development in Germany as of the present date.

The regulatory framework governing mining activities in Germany is comprised of the Federal Mining Act and the Federal Water Act. This regulatory framework does not specifically address the details of hydraulic fracturing used for shale gas extraction. The Federal Mining Act provides for the granting of two licenses – one granting the exclusive right to explore and freely exploit mineable resources, such as natural gas, and the second allowing for the operation of mining activities. In addition, the German Mining Law and its Ordinance on Environmental Impact Assessments Concerning Mining Projects provides that operators carrying out gas exploitation projects with a daily production level of more than 500,000 cubic meters are required to submit an Environmental Impact Assessment (EIA) pursuant to the EU Directive on EIAs. For projects not falling within the scope of the German Mining Law, the German government retains discretion in deciding whether to conduct an EIA for deep drilling projects. Interestingly, projects relating to shale gas production do not require an EIA, which led to concerns about the lack of public participation and transparency in the decision-making process.

Operators also must comply with the Federal Water Act and request the proper permits or approvals each time exploratory or production mining activities require the use of water bodies or may have an impact on drinking water resources. Shale gas reservoirs generally are located at more shallow depths in Germany as compared to the tight gas reservoirs which, again, led to the expression of public concerns. Local communities, especially in the German States of North Rhine-Westphalia and Lower Saxony, expressed concerns about health and environmental issues due to the potential for contamination of drinking water sources caused by leakage and chemical products.

In response to these concerns, the Federal Ministry for the Environment and the Federal Economics Ministry began working together in February 2013 to address shale gas development using hydraulic fracturing. The ministries began preparation of a joint proposal to the German Parliament amending the Federal Water Act and the German Ordinance on EIAs Concerning Mining Projects. This proposal included a general prohibition on using hydraulic fracturing for shale gas development in drinking water protection areas and a mandatory EIA for deep drilling for extraction of mineral resources using hydraulic fracturing. The proposal, however, was the subject of sharp criticism from the opposition political parties and, as the federal election approached, Angela Merkel and her government coalition agreed in June 2013 not to introduce the proposal before the German Parliament. Instead, they commissioned studies to further understand the environmental implications of using hydraulic fracturing in Germany.

Following this decision, in June 2014, both German ministries introduced a new combined framework document to address hydraulic fracturing. The framework document prohibits commercial shale gas production at depths below 3,000 meter in order to avoid groundwater pollution. Nonetheless, above 3,000 meters, the use of hydraulic fracturing may be allowed, but only for scientist and exploration purposes. In November 2014, the Federal government issued a revised version of the framework document which further refined the restrictions to allow for commercial shale gas production in case of successful test measures, where confidence exists that all environmental impacts can be handled properly, and with the agreement of the involved German states.

On April 1, 2015, a draft law was introduced to the German Parliament allowing commercial shale gas production using hydraulic fracturing for exploration purposes at depths more shallow than 3,000 meters. The hydraulic fracturing technique however could be used for the purpose of scientific research. In this respect, the Federal government commissioned an independent expert group to assess the impact of hydraulic fracturing on the environment and a first report is expected in summer 2018. Until then, shale gas production for commercial purposes was not to be allowed in any case. In addition, the new regulation was to set up mandatory monitoring and reporting for surface and groundwater as well as water disposal wells and well integrity. Moreover, the proposed regulation was to require compulsory disclosure of chemical used for hydraulic fracturing operation and was to prohibit the use of hydraulic fracturing in water protection areas as well as in nature reserves and national parks.

Surprisingly, in early June 2016, the Federal government took a different approach and presented a cabinet bill to the German Parliament banning for five years the use of hydraulic fracturing for shale oil and gas development. On June 22, 2016, the German Parliament voted in support of this cabinet bill. The ban is to be revisited in 2021 in the light of new scientific discoveries. The new law, however, does contain an exemption that will authorize a maximum of four test wells using hydraulic fracturing for scientific purposes. Interestingly, “conventional fracking” is still allowed. The German Federal Council adopted the cabinet bill in July 2016.

Prior articles in the Global Shale Law Compendium series:
·        France (March 30, 2017)
·        England (April 6, 2017)

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