Summary

The recent EU Commission recommendation on minimum principles for hydraulic fracturing was generally reported as averting the threat of setting legally binding EU environmental regulations for unconventional developments. However, the EU Commission has indicated it will reconsider the need for such regulation "after 2015" (i.e. after the EU Parliament elections), thus seeding a degree of uncertainty.

Overview

The EU Commission published (on 22 January 2014) a recommendation on minimum principles for exploration and production using hydraulic fracturing.
 
Member States are under no legal obligation to implement, but those using hydraulic fracturing are told that they "should" implement within six months, with implementation progress to be monitored on the basis of a public scoreboard and a review of the recommendation's effectiveness by the Commission in 18 months (mid-2015).
 
The recommendation is not detailed in its drafting. It is not limited to onshore, and applies to fracturing more than 1,000m3 of water per stage or 10,000m3 in total per well (which would seem to necessitate forward-looking application at the planning stage, given backward-looking survey etc. requirements).

The recommendation includes:

  • environmental impact assessment (and public opportunity to participate in strategy before licensing);
  • risk assessment (based on "best available technologies" and anticipating geological and other changes from fracturing, interestingly with reference to the "reservoir", which is a term typically associated with conventional reserves);
  • baseline study and monitoring (determining baseline environmental status, albeit without prescribing a minimum period but including status of infrastructure and buildings, together with on-going monitoring);
  • production infrastructure (seemingly to encourage operators to share rather than duplicate infrastructure to minimise environmental and other impacts, which coincidentally echoes recent Wood Report recommendations: see the Wood Review website);
  • operational requirements (requiring promotion of "responsible use of water" and operators to use "best available techniques" after information exchange between other EU states, therefore not seemingly linking to shale learning from the US beyond those present generally in good industry practice);
  • use of chemicals (requiring chemicals to be searchable by reference to "hydraulic fracturing" under the relevant chemicals database (REACH) and with chemical use and waste minimised "wherever technically feasible");
  • environmental liability and financial guarantee (most notably requiring a financial guarantee or equivalent including "potential liabilities for environmental damage" which is at odds with the UK's choice not to require mandatory financial security for environmental damage provided for in the EU Environmental Liability Directive (2004/35/EC));
  • administrative capacity (to avoid a regulator's conflict of interest between regulatory and economic development functions, again echoing the recent Wood Report's recommendation for a split regulator in the UK where maximising UKCS economic recovery becomes a priority); and
  • information dissemination (the thrust of which is aimed at public compliance disclosures).

The recommendation was generally reported as averting the threat of setting legally binding EU environmental rules for unconventional developments. From the UK Government's point of view, it may be helpful not to have to negotiate and implement binding EU rules while the UK shale industry is still in its infancy. In any event, UK domestic regulation already largely complies with the contents of the recommendation. However, the EU Commission has indicated that it will reconsider the need for binding regulation "after 2015" (i.e. after the EU Parliament elections). So a proposal for a Directive or Regulation may yet emerge from Brussels at a later stage, which may not be welcomed by the UK unconventional industry. Moreover, looked at from a wider EU perspective, the current lack of binding EU legal regulations may not necessarily benefit the industry in the longer term, if it means EU member states cannot rely upon an EU framework of regulation to justify the approval of domestic hydraulic fracturing developments, which otherwise may be subject to domestic, popular opposition.