On 22 January 2014, the European Commission (Commission) published a “Recommendation on minimum principles for the exploration and production of hydrocarbons (such as shale gas) using high volume hydraulic fracturing” (Recommendation). The Recommendation sets out minimum core principles for the exploration and production of hydrocarbons (e.g., shale gas) using high-volume hydraulic fracturing. The Recommendation is intended to complement existing EU legislation.
It is accompanied by a “Communication on the exploration and production of hydrocarbons (such as shale gas) using high volume hydraulic fracturing in the EU” (Communication) outlining the potential new opportunities and challenges stemming from shale gas extraction in Europe, as well as an Impact Assessment that examined the socio-economic and environmental impacts of various policy options.
The Recommendation and the Communication are the culmination of the online stakeholder consultation and stakeholder meeting held by the Commission last year concerning shale gas developments in the EU (please see our earlier Environment and Energy Alert for more information on the consultation).
The Recommendation
The Recommendation aims to ensure that proper environmental and climate safeguards are in place for the exploration and production of hydrocarbons, including shale gas. In the preamble to the Recommendation, the Commission suggests that EU environmental legislation is outdated with regards to new exploration methods such as hydraulic fracturing. The Recommendation is intended to assist EU member states that allow hydraulic fracturing in their jurisdictions in addressing the health and environmental risks in regards to this method of shale gas exploration and improve transparency for citizens.
In particular, the Recommendation invites EU member states to
- Plan ahead of developments and evaluate possible cumulative effects before granting licences;
- carefully perform strategic environmental assessments and assess risks;
- ensure that the integrity of the well is up to best practice standards;
- capture methane emissions;
- check the quality of the local water, air, and soil before operations start in order to monitor any changes and deal with emerging risks;
- control air emissions, including greenhouse gas emissions, by capturing the gases;
- inform the public about chemicals used in individual wells; and
- ensure that operators apply best practices throughout the project.
The Recommendation is not legally binding. EU member states are still free to, for example, introduce or maintain a ban on shale gas exploration, or introduce or maintain detailed national measures on shale gas exploration. As a result, the area of unconventional hydrocarbons exploration and development remains, to a large extent, un-harmonized at the EU level.
In the accompanying Q&As, the Commission explained that the choice of a non-binding recommendation, as opposed to a binding measure such as a directive or regulation, was dictated by the urgency of the situation. A recommendation to EU member states has the advantage of being applied faster, while at the same time providing a common reference for action at the national level.
Next Steps
The Recommendation will soon officially be published in all official languages of the EU. EU member states are invited to make the principles of the Recommendation effective within six months from the date of its publication. From December 2014 onwards, EU member states shall inform the Commission annually about the effectiveness of the Recommendation.
The Commission will closely monitor the implementation of the principles set out in the Recommendation. Furthermore, the Commission will review the effectiveness of this approach in 18 months. Based on this review, the Commission will decide whether or not it is necessary to put forward legislative proposals with legally binding provisions on the exploration and production of hydrocarbons using high-volume hydraulic fracturing.
Impact
The Recommendation from the Commission on hydraulic fracturing shall be of great interest to all entities already active or planning to get involved in this sector in the EU. Successful application of the Recommendation may avoid or postpone the adoption of binding EU rules, and, therefore, allow EU member states with shale gas potential, like the UK, Poland, or Romania, to preserve greater influence on their domestic energy policies. Despite the non-binding character of the Recommendation, EU member states are very likely to follow the rules set out therein. As a result, companies active in the shale gas sector should be prepared to integrate the principles of the Recommendation into their environmental regulatory compliance policy and strategic business planning.