What has been announced?

On 22 January 2014 the European Commission released a Communication on shale gas1 and an accompanying recommendation on shale gas regulation (the Recommendation).2

The Recommendation sets out non-binding minimum principles for Member States who wish to carry out hydrocarbon exploration and production using “fracking” (as it is commonly referred to in Europe, in the US, it is more commonly referred to as “high volume hydraulic fracturing” (HVHF)). Member States are “encouraged” to apply the minimum principles.

Background

The Commission has been developing its approach to shale gas regulation for a number of years, and has acknowledged that fracking/HVHF activities are already regulated by a broad range of existing EU Directives. It has been considering its options ranging from prescriptive legislation to voluntary guidance.

The Recommendation falls far short of the prescriptive legislation anticipated and sets out a voluntary approach to fracking/HVHF aimed at ensuring a minimum standard. It is therefore likely to be more favourably received by proponents of shale gas than a more onerous legislative proposal would have been. In that context, the Recommendation can be seen as a “victory” for the pro-shale gas movement.

Key elements of the Recommendation

The Commission’s intention is that the Recommendation will foster a harmonised approach to regulation of shale gas activities across the EU.

The Recommendation applies to “fracking/HVHF”, which is defined as the process of injecting 1,000m3 or more of water per fracturing stage or 10,000m3 or more of water during the entire process into a well.

Key elements of the Recommendation are that it invites Member States to ensure that:

  • a strategic environmental assessment is carried out prior to granting licenses for hydrocarbon exploration and/or production which are expected to lead to operations involving fracking/HVHF.
  • a site specific risk characterisation and assessment is carried out, relating to both the risks underground and above ground.
  • baseline reporting (e.g. of water, air, seismicity) takes place, in order to provide a reference for subsequent monitoring or in case of an incident.
  • the public is informed of the composition of the fluid used in the process on a well by well basis as well as on waste water composition, baseline data and monitoring results.
  • drilling wells are properly insulated from surrounding geological formations.
  • venting (release of gases into the atmosphere) is limited to exceptional operational safety cases, flaring (controlled burning of gases) is minimised, and gas is captured for subsequent use (e.g. on-site or through pipelines).
  • operators provide a financial guarantee (or equivalent) covering the permit provisions and potential liabilities for environmental damage prior to the start of operations.

Member States are also recommended to ensure that operators apply best available techniques (BAT) and good industry practices to prevent, manage and reduce the impacts and risks associated with exploration and production of shale gas.

Environmental impacts/legislation

The Commission is also reviewing the current reference document (BREF) on extractive waste under the Mining Waste Directive3. The aim is to ensure that the BREF covers the management of waste from hydrocarbon exploration and production involving fracking/HVHF, in order to ensure that waste is appropriately handled and treated and the risk of water, air and soil pollution is minimised. It will also propose that the European Chemicals Agency makes certain changes in the existing database of registered chemicals under the REACH Regulation4 (which regulates chemicals) so as to improve and facilitate the search of information on registered substances used in the process.

Further, a European Science and Technology Network on Unconventional Hydrocarbon Extraction will be established. This is intended to bring together practitioners from industry, research, academia and civil society and will collect, analyse and review results of exploration projects. It will also assess the development of technologies used in unconventional gas and oil projects.

The Commission will monitor the implementation of the Recommendation through a comparison of Member States’ activities and the use of a “scoreboard”, which is designed to increase transparency and assess progress in each Member State on applying the principles of the Recommendation.

How legally binding is a Recommendation?

The use of recommendations allow EU institutions to express a view or statement on a particular issue and call upon an addressee (in this case, the Member States) to act in a particular way. They are non-binding and, unlike Directives or Regulations (which are alternative types of EU legislative instruments), recommendations do not impose any legal obligations on addressees. They are therefore only of persuasive value, but can be a pre-cursor to legally binding legislation.

We note that the Recommendation provides that its effectiveness will be reviewed 18 months after its publication. Subsequent to the review, the Commission will decide whether it is necessary to put forward legislative proposals with legally-binding provisions on the exploration and production of hydrocarbons using fracking/HVHF.

Reactions to the Recommendation

The flexibility enshrined in the Recommendation is likely to be popular with proponents of shale gas, who are reported to have been worried about the implications of a more onerous legislative proposal. Environmental groups and NGOs, many of whom are concerned about the environmental impacts of shale gas extraction, are likely to be concerned that the Recommendation does not go far enough to protect against potential environmental impacts.

The Recommendation’s flexibility will permit Member States to tailor their regulatory programmes to their own circumstances, much like individual states in the United States which have tailored their approaches to the issues the Recommendation addresses. For example, only a few States have required baseline reporting of water quality prior to fracking/HVHF operations, and most of those have required it only for a limited distance from the well bore. Nearly all States now require disclosure of chemical additives used in the fracturing process, while protecting certain disclosure of additives that are “trade secrets.” But none has required disclosure of the additives before fracturing operations, because additives can be changed immediately before and even during the operation itself. Before operations begin, operators are well-advised to engage Member States on the details of the Recommendations.