Background

Shale Gas exploration and exploitation activities have resulted in a controversy in France and intense lobbying actions against their development in the French territory, in particular those using the hydraulic fracturing technique[1].

After having granted a series of exploration permits to petroleum companies, the French Government has finally decided to reverse its position and to considerably restrict Shale Gas exploration due to environmental concerns.

I - The prohibition of hydraulic fracturing by Law No.2011-835

On July 13, 2011, France enacted Law No. 2011-835 aimed at prohibiting the exploration and exploitation of liquid or gas hydrocarbon mines using hydraulic fracturing and repealing exclusive exploration permits including projects involving such technique (the "Law").  This Law was initiated by a bill that had been submitted to the Parliament by the majority party.

According to Article 1 of the Law, the exploration and exploitation activities using the hydraulic fracturing technique are now prohibited.  This prohibition is grounded on the 2004 Environmental Charter ("Charte de l'environnement") and on the principle of preventive and corrective action set forth by Article L.110-1 of the Environment Code.

It should be noted that, as many observers noted in July, especially opponents to any Shale Gas exploration activities, the Law does not prohibit Shale Gas exploration itself but only the technique of hydraulic fracturing.  As a consequence, the Law leaves the door open to the development of alternative techniques by petroleum companies allowing them to be granted Shale Gas exploration or exploitation permits.

According to Article 3 of the Law, the holders of exclusive exploration permits had to provide the administration which granted the permits with a report specifying the techniques used or contemplated in connection with their exploration activities within two months from the enactment of the Law.  Failing such report to be duly provided or should the report refer to the effective or potential use of the hydraulic fracturing technique, the exclusive exploration permits concerned were to be repealed.

II - The repeal of several exploration permits decided by the French Government on October 3, 2011

Three exploration permits, which had been granted to US company Schuepbach in Nant (Aveyron) and Villeneuve-de-Berg (Ardèche) and to French company Total in Montélimar (Drôme), were repealed on October 3, 2011.

Although the report required by the Law had been duly provided to the Government, the latter considered that its content justified the repeal decided.

The Minister in charge of Environment, Nathalie Kosciusko-Morizet, declared that both Schuepbach reports referred to the use of the hydraulic fracturing technique whereas Total  report did not but was considered by the Minister as not being "credible".

In response, Total declared to be very surprised by the Government decision and has requested explanations from it in order to understand the legal basis for such annulment of its exploration permit.  Since Total apparently indicated in its report that it would not use the hydraulic fracturing technique and was envisaging alternative techniques, it cannot be excluded that the validity of the repeal could be challenged under administrative law if not justified by an appropriate reasoning of the Government in view of the Law.  In this respect, one may wonder whether the Law allows the Government to ground the repeal of a permit on the lack of credibility of the report provided to it whereas the Law only refers as a ground for repeal to the indication of the "effective or potential" use of the hydraulic fracturing technique.

Theoretically and without expressing an opinion on the respective merit of the Government and petroleum companies' arguments, the latter may decide to challenge the Government order and lodge an administrative petition for annulment ("recours pour excès de pouvoir") and/or indemnification ("recours de plein contentieux").

It should be noted that 61 other exploration permits were not repealed as the Minister considered that "the holders do not contemplate to explore Shale Gas or Oil or have waived such exploration in order to focus only on conventional deposits.  They have all formally committed not to use hydraulic fracturing."  The Minister announced that inspections would be carried out in order to ensure that hydraulic fracturing is not used.

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Moreover, it should be noted that the National Assembly discussed between October 6 and October 11, 2011 a bill[2] which had been submitted by the parliamentary opposition aimed at prohibiting all exploration and exploitation activities relating to non conventional hydrocarbons whatever the techniques used.  This bill had multiple flaws and was not consistent with the recent Law of July 13, 2011.  It was rejected on first examination by the National Assembly on October 11, 2011.

However, the debate may not be definitely closed and Shale Gas related activities will certainly be discussed again during the examination by the Parliament of the bill[3], filed by the Government with the National Assembly on April 13, 2011, intended to ratify the Ordinance No.2011-91 of January 20, 2011 relating to the codification of the legislative part of the Mining Code.  This bill includes in particular new procedures of consultation of the public prior to the grant of the mining exploration permits and prior to the renewal of exploration permits or concessions.

To date, Shale Gas exploration and exploitation in France have been considerably restricted and their future will depend on the development of alternative drilling techniques complying with  environmental requirements.[4]