Courting Shale: The Shale Debate in the European Courts and in the Court of Public Perception

Very few topics in the fossil fuel industries could be said to be as uncertain as shale gas. A resource marred by heady debate and vigorous dissent, the often misunderstood gas continues to face challenges at every step: in the court of public perception, at a legislative level, in its exploitation and its production. This dissent is all the more surprising when one considers how obscure a resource it was until recently.

“It’s a very fast-moving area, illustrated by the fact that around 18 months ago, very few people were talking about shale gas,” Elizabeth Shepherd said at the recent SMI Shale Environmental Summit.

Ms. Shepherd, a partner in the regulatory group of international law firm Eversheds, whose clients include British Gas parent Centrica, says the legislation surrounding the unconventional resource is now the subject of much debate in Europe, both in Brussels and in the individual member states of the EU.

“The EU legislative framework is very complex, because, in looking at shale gas, you are covering a wide spectrum of activities which require regulation. You’re looking at mining and hydrocarbons; you’re looking at work health and safety; you’re looking at chemicals; and of course at environmental concerns generally.”

Various existing EU directives already cover a host of potential issues and areas where shale gas activity may have an impact, she says. There are water directives, for example, as well as chemical directives, a noise and waste directive, an environmental impact directive, and directives applicable to habitats, birds, and conservation areas. There is also the environment liability directive which is based on the principle of “polluter pays”—“if you damage it, you have to pay for it to be put right,” she explains.

“But just because it’s complex, doesn’t necessarily mean it is inefficient or impracticable,” Ms. Shepherd says. “It broadly works. Some adjustments may be necessary, for example to ensure early public consultation and to look at thresholds for environmental impact assessments But broadly, the conclusion reached by the  European Commission study published by Philippe & Partners earlier this year was that the existing regulatory framework in the EU is adequate for current shale gas activities.”

Despite much of the prevailing fear on the adequacy of regulation of shale gas in the European Union and the implementation of several European moratoria, there is no need for any urgent revision of existing EU legislation, Ms. Shepherd says. 

“The European Commission study was very clear; a new directive for shale gas is not immediately required. For now, in the exploratory stage, what we have is perfectly adequate.  In fact, it is often overlooked that the procedures to be followed to authorise shale gas activities are the general procedures every operator has to follow to explore/exploit conventional hydrocarbons.”

But public concerns continue and these concerns, she agrees, can and should be tackled head-on.

Speaking to Natural Gas Europe after the conference, Ms. Shepherd said that the responsibility for assuaging public fears comes down to both government and industry. She says that each has a role to play in addressing the concerns of a sometimes sceptical public.

“Increasingly industry is reaching out and working with the government and the public on each of these concerns, whether it’s environmental concerns or the adequacy of the regulatory regime or any other issue.

“Across the EU we see increasing studies into different aspects of shale gas.  At EU level, two draft reports were issued recently by Committees of the European Parliament, into the industrial, energy and other aspects of shale gas and oil, and the environmental aspects respectively. Neither of these draft reports call for new regulation, but both see disclosure of chemicals used in fracturing fluid as a key issue. 

“In addition, technical studies on the socio-economic impacts of shale gas and climate impact are underway, commissioned by the European Commission.  At member state level too, governments are increasingly looking to be better informed in relation to shale gas. The UK is arguably the best informed member state, in that it was the first to carry out a detailed study. For example, a UK Select Parliamentary Committee report in May 2011 concluded that there is no direct risk to water aquifers, so long as the well-casing is intact. Most recently in the UK, DECC (the Department of Energy and Climate Change) has concluded a consultation process on its draft report on seismic activity in the north west of England in April/May 2011, which recommended that hydraulic fracturing be allowed to continue with appropriate safeguards and mitigation measures.

“In Germany, two studies by experts into the environmental impact of hydraulic fracturing have been commissioned by the Federal Ministry for the Environment and the State of North Rhine-Westphalia respectively, and these studies are likely to inform Germany’s approach to regulation. This reflects the fact that increasingly across the EU, the policy and decision makers are looking to have the debate influenced by fact, not emotion.”

She acknowledges that, even with the best efforts, some people will not be convinced, no matter what information is at hand. There are conflicting agendas; for example there is a view that much of the opposition to shale gas stems from a concern that it will hold back renewables.  Member states take very different positions on shale gas; politics and concerns about energy security are key drivers in this.

 With moratoria implemented in France, Bulgaria, Northern Ireland (though no fracking licences have been applied for there), two German states, and Romania and a two-year moratorium proposed in the Czech Republic, the political support for shale varies across countries.

However, Ms, Shepherd points out, the proposed moratorium in the Czech Republic may have less to do with a disapproval for the activity and more to do with weak current legislation in the country.

On the other side of the coin, Poland is keen to pursue its shale gas opportunities on a commercial scale, with more concessions for exploration granted than in any other EU country. The Netherlands and the UK also appear, at least, more open to shale.

“In Poland, a new tax is proposed on hydrocarbon production, to ensure what they see as a fair return for Poland without discouraging investment from foreign companies who have the means and knowledge to help them take this forward,” she says.

“They have been talking about this for a little while. It’s being worked on by the Ministry of Finance and the Ministry of the Environment, but they haven’t actually produced [at time of writing] their design goals yet. They are due to produce them for consultation very soon.

“Poland’s enthusiasm for shale gas is reflected in the fact that new regulation in Poland is more designed around managing shale gas arrangements than on imposing additional controls,” she told the SMI Summit in May.

“One example is new legislation giving companies which find shale gas priority when applying for a mining permit. This has been controversial, but that’s where Poland stands at present.”

Certainly, Poland is currently seen as the member state likely to be the first to exploit its shale gas reserves on a commercial scale.

On the other side of the coin, there is a risk that taking action too quickly at a member state level could prejudice the extraction of natural resource in general, not just shale gas.  A recent example is Bulgaria, which had to change the wording of its moratorium to allow the extraction of conventional gas. However, Ms. Shepherd says, most governments are taking a measured approach.

“Bulgaria had its own issues, under political pressure as well as public pressure to introduce a moratorium, for reasons which we can only speculate about.  It is encouraging though that in Romania, the Prime Minister has said that shale gas should only be discussed after the general election in the autumn, to allow a rational, fact-based debate and to prevent propaganda on shale gas being used for political gain by all sides during the campaign season.”

So with such diverse and heated opinion surrounding shale, what does she recommend in a regulatory context for both industry and government? Is there anywhere either needs to focus more?

“From a legal point of view, one of the most topical issues around shale gas activity is chemical disclosure,” she says. There are misunderstandings about how the chemicals legislation, REACH, applies to shale gas, in that REACH (which focuses on individual substances and their associated risks) is not the mechanism to address public disclosure concerns about the chemical constituents of hydraulic fracturing fluid.

She points to FracFocus, a web-based national registry (fracfocus.org) in the US, run by the US Groundwater Protection Council and US Department of Energy, which allows the public to access information on a well-by-well basis on exactly which chemicals are being used. This disclosure of chemicals by operators on FracFocus is a legal requirement in some states—Colorado and Texas are the two that immediately come to mind.

 “Representatives of the EU institutions are receptive to an EU FracFocus-style website,” she says, “and consensus is building around FracFocus-like reporting in the EU. It is a very welcome development in the EU that actually this is being discussed”.

“It may take some time for it to be introduced in the EU on an overarching Brussels/EU level; there’s talk of a pilot project in Poland. This is a good example of industry coming forward and saying, ‘This is your concern. This is what we’re proposing to do about it.’”