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Shale gas development in Europe requires regulatory certainty

A lack of regulatory clarity in Europe is hindering shale gas development

The European Union is taking strides to increase the use of renewable energy across the continent as it looks to drastically cut its carbon emissions over the coming decades. As wind and solar energy sources struggle to overcome intermittency challenges, it is increasingly clear that renewable power generation will have to be backed either by nuclear or gas-fired plants. In the post-Fukushima global energy landscape, gas appears to be the fuel of choice for Europe.

Natural gas production in Europe, though, is declining, which has sparked increased interest in the EU’s unconventional gas potential. Unconventional gas production, from shale, coal-bed methane and other sources, can potentially satisfy Europe’s appetite for energy and contribute to the three major pillars of EU’s energy policy: sustainability, security of supply and competitiveness.

But it has raised the question of just how much commercial shale gas can be produced in Europe? Estimates have varied widely. Texas-based Baker Institute for Public Policy suggested in a July 2011 report that shale gas could make up over 30 per cent of European gas production by 2040. Reports for Chatham House and the Oxford Institute of Energy Studies (OIES), both released in 2010, have been more reserved – Florence Geny of OIES estimated that unconventional gas would not provide more than 5 % of European gas consumption before early 2020s.

Unconventional gas production has not started yet in Europe, but the regulatory issues are already at the centre of intense policy debates across Europe, both in Brussels and national capitals. Attitudes towards the development of shale gas differ from one EU Member State to another. France and Bulgaria have introduced a moratorium, while Poland is pioneering shale gas exploration. Public opinion, though, remains polarised within European countries. Even in Bulgaria and France, industry experts and the general public are divided on the issue of hydraulic fracturing, with many questioning the necessity of a temporary ban.

The debate is similarly split at European Institutions. The European Commission (EC) has not yet expressed its opinion and is currently studying the potential risks to the environment from shale-gas exploration.

One can argue that Europe already has all necessary legal and policy tools to regulate shale gas exploration and production.

They include among others:

• REACH (Regulation 2006/1907/EC on the usage of chemicals) – relevant to hydraulic fracturing (fracking).

• Water protection legislation (adopted in 1991, 2000 and 2006)

• Directive on environmental liability (2004)

• Mining Waste Directive (2006)

• “Annex I projects” (Directive 85/337/EC) requiring a positive Environmental Impact Assessment (EIA) before the permitting process can start.  

European politicians that favour increased shale-gas exploration say that these regulations are sufficient. The EU is “better equipped than the United States to ensure that shale gas would be exploited in a safe way,” Boguslaw Sonik, a Polish member of the European Parliament  said in a recent interview with EurActiv.

Nevertheless, many are calling for regulations specific to unconventional gas exploration in Europe.

This scepticism is driven by fears of water contamination, fracking-related seismic activity and the life-cycle carbon footprint of unconventional gas. The issue of greenhouse gas emissions is especially relevant in Europe where every source of energy or energy consuming equipment is assessed according to its carbon footprint.     

The EP released a report in June 2011, put together by consultancy Ludwig-Bölkow-Systemtechnik GmbH,  which concluded that current EU regulations on hydraulic fracturing have a number of gaps. For example, the threshold for EIAs to be carried out “is set far above any potential industrial activities of this kind, and thus should be lowered substantially.” This was one of the issues behind the introduction of a moratorium on shale gas drilling in North Rhine-Westphalia, Germany in March 2011.

The EC, though, disagreed with the EP report findings. In January of this year, an EC study, based on the analysis of the regulatory framework in France, Germany, Poland and Sweden, concluded that “there are no significant gaps in coverage in the current EU legislative framework, at least for regulating the current level of shale gas activities.”

All these developments create regulatory uncertainty that could be damaging both for industry and environmental protection. Steady development of EU shale gas depends on cost, geology and  environmental concerns. It also depends on a stable regulatory regime. 

Any development of shale gas in Europe will require regulatory clarity in order to minimize potential environmental damage and allow industry to develop unconventional deposits in a safe and commercially attractive way. This regulation has nothing to do with an EU-wide fracking ban or forbiddingly strict regulation. It should rather aim to provide a level playing field for energy companies, while guaranteeing environmental protection.

If shale gas is going to play a major role in the EU’s move towards a de-carbonised electricity system, it will need to agree a way to measure the environmental impact of unconventional gas production without sinking the sector. Reports on the full-cycle impact of shale-gas development should take into account the “realities on the ground” and be adapted to the geological realities of developed unconventional gas basins.

Industry should also lead the way by demonstrating responsible behavior. As the executive director of the International Energy Agency Maria van der Hoeven said; If the social and environmental impacts are not “addressed properly, there is a very real possibility that public opposition to drilling for shale gas and other types of unconventional gas will halt the unconventional gas revolution in its tracks.”

*Danila Bochkarev is an EastWest Institute fellow. The views expressed here are those of the author and are not necessarily shared by the organisation, its board of directors or other staff.

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