The determination of some European Union states to develop their shale gas resources shows no signs of waning, despite concerns about the regulatory environment in the industry.
Poland last month released its long-awaited regulatory and tax regime for the upstream oil and gas sector designed to spur investment in, and remove uncertainty around, its nascent shale gas sector. Meanwhile, the UK government has signalled plans for a generous tax regime for its emerging shale gas industry.
The plans have fuelled a debate in Europe over the development of the region’s shale gas resources, and came as the European Commission released three reports into the impact of shale gas on Europe’s energy market and environment.
Environmental impact
The Commission’s reports indicate that exploitation of Europe’s shale gas resources could help the region to maintain energy security. However, the Commission believes shale gas extraction could lead to a rise in greenhouse gas emissions and, on a large scale, risk surface and groundwater contamination, water resource depletion, air and noise pollution and disturbance to biodiversity.
It has also identified more than 20 gaps or possible inadequacies in EU legislation that should be filled in order to ensure that high-volume shale gas operations have a minimal impact on the environment and human health.
Hydraulic fracturing (fracking) – the method used by oil firms to extract shale gas – involves pumping a mixture of water, sand and chemicals at high pressure deep underground. The practice is governed by 19 pieces of EU legislation as well as national regulations, including the Water Framework Directive, the Mining Waste Directive and the Environmental Impact Assessment (EIA) Directive.
“Regulatory frameworks must be assessed and if necessary adjusted before the start of operations rather than afterwards,” says Mark Johnston, senior policy adviser at WWF. “We are pleased that the European Commission has started to do this.”
Legislative gaps
Legislative gaps identified in the report include the exemption of high-volume fracking operations from the EIA Directive and inadequacies in the Mining Waste Directive over the treatment of fracking fluids during and after fracturing. It recommends the Commission consider these gaps and evaluate EU member states’ interpretation of EU legislation with respect to fracking.
The report also suggests that specific risk management measures with respect to the siting of shale gas developments, air and noise pollution, water depletion and increased traffic movements, among others, should be developed for the shale gas sector.
The report’s recommendations echo the positions of the European Parliament’s Industry and Energy Committee and its Environment Committee, both of which have indicated support for more robust regulation in the shale gas sector.
The oil sector is less convinced of the need for additional legislation, particularly as the industry in Europe is still in the exploration phase. “Our issue at the moment is that we do not know the resource base in Europe and whether or not it is commercially attractive,” says Rachel Bonfante, interim director of EU Affairs at the International Association of Oil and Gas Producers (OGP). “We want to get on with exploration… regulations governing extraction are a long way off.”
Bonfante also points to an earlier report from the Commission released in early 2012, which concluded that additional regulations governing the shale gas sector were not needed. “Our opinion is that regulations are sufficient… given current levels of activity,” says Bonfante.
Mitigating risks
The OGP also believes that risks associated with shale gas extraction can be mitigated. “Over the past year there have been around 50 studies and none points towards a risk that cannot be managed,” notes Bonfante.
Like many European governments, oil companies and environmental organisations, OGP has been closely examining experiences in the US shale gas industry to see what can be learned. The gradual development of legislation over there – including regulations governing the capture of methane from wells and disclosure of chemicals used – means the industry is used to such rules and will be able to apply them in Europe, says Bonfante.
Siân Crampsie is a freelance journalist
This article first appeared in Utility Week’s print edition of 2nd November 2012.
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