3 High volume hydraulic fracturing (fracking)
in the EU
| (a)(35757)5706/14
+ ADDs 1-5
COM(14) 23
(b)(35759)
5700/14
C(2014) 267
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Commission Communication on the exploration and production of hydrocarbons (such as shale gas) using high volume hydraulic fracturing in the EU
Commission recommendation on minimum principles for the exploration and production of hydrocarbons (such as shale gas) using high volume hydraulic fracturing
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| Legal base | —
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| Documents originated | 22 January 2014
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| Deposited in Parliament | (a) 29 January 2014
(b) 30 January 2014
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| Department | Energy and Climate Change
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| Basis of consideration | EM of 11 February 2014
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| Previous Committee Report | None
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| Discussion in Council | See para 3.16 below
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| Committee's assessment | Politically important
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| Committee's decision | For debate in European Committee A, with the Commission Communication on EU climate and energy policy from 2020 to 2030
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Background
3.1 The Commission says that the main driver of EU
energy policy is to achieve a supply which is sustainable, affordable,
secure and reliable, but that there are a number of challenges,
both now and in the near future, particularly as regards natural
gas, which accounts for about one-quarter of the EU's primary
energy consumption, and which could contribute to a reduction
in greenhouse gas emissions, should it replace more carbon-intensive
fuels. However, it observes that production from conventional
sources has steadily declined over the last two decades, as a
result of which the EU's import dependency has risen to 67% (and
is still increasing), with this also having contributed to increasing
prices, now some three or four times higher than those in the
United States.
3.2 The Commission points out that technological
progress has given access to unconventional fossil fuel previously
too costly to extract, and that, as a consequence, gas from that
source currently accounts for 60% of domestic production in the
United States, with shale gas showing the higher growth rates
(and resulting in lower gas prices). It adds that potential reserves
of natural gas from indigenous shale formations have led to expectations
within the EU that their exploitation (by means of "fracking")
can provide a possible substitute for more carbon-intensive fossil
fuels, and reduce dependency on non-EU energy suppliers, thus
causing some Member States to actively pursue exploration. At
the same time, however, it notes that the risks involved —
some of them of a cross-border nature — have triggered concerns
about the health and environmental effects, with the general public
also perceiving an insufficient level of precaution, transparency
and consultation, leading some Member States to ban fracking,
or establish moratoria. It also says that there have been requests
for action at EU level, with the European Parliament having adopted
two resolutions to that effect in November 2012, and that it has
therefore agreed to develop a framework for safe and secure hydrocarbon
extraction.
The current documents
3.3 The Commission has accordingly produced these
two documents, which follow a public consultation and a series
of studies — (a) a Communication setting out the potential
new opportunities and challenges stemming from shale gas extraction
in Europe, and (b) a non-binding Recommendation setting minimum
principles which should apply to it.
COMMISSION COMMUNICATION
EU shale gas potential
3.4 The Commission says that unconventional hydrocarbon
reserves in the EU are thought to be significant, with shale gas
formations having the highest potential, and with the technically
recoverable resources having been estimated at 16 trillion cubic
metres,[17] though there
is significant uncertainty as to how far this would be economic.
It also observes that, whilst there have been a few pilot projects,
there has so far been no commercial production of shale gas in
the EU, although this could start in 2015-17 in the most advanced
Member States: and it believes that, whilst the EU will not becomes
self-sufficient, natural gas production from shale could, at least
partially, compensate for the decline in its conventional gas
production and avoid an increased reliance on gas imports. However,
it suggests that the direct price effect is likely to remain modest,
compared with that in the United States, due to the relatively
low volume and higher production costs expected, and the fact
that prices are still largely set through long term oil-indexed
contracts, although it also accepts that even a moderate decrease
(or avoided increase) in gas prices would benefit Member States,
and in particular those heavily reliant on imports, as well as
energy intensive industries.
3.5 The Commission adds that shale gas activities
can bring direct or indirect economic benefits, for example through
investment in infrastructure, employment opportunities, and public
income through taxes, fees and royalties. In addition, it says
that it has the potential to produce climate benefits if it substitutes
more carbon intensive fuels, and does not replace renewable energy,
although it also notes that, if this benefit is to be realised,
emissions associated with the extraction process, notably methane,
need to be properly mitigated.
Environmental risks and public concerns
3.6 The Commission says that it is generally agreed
that shale gas extraction has a larger environmental footprint
than conventional gas development, as it requires a more intensive
technique, mainly takes place onshore, would cover much wider
areas, and would require more wells to be drilled, as productivity
is generally lower: also, some of its impacts, for example water
and air pollution, could have cross-border implications. It goes
on to point out that, whereas experience in Europe has been focused
on low volume, vertical hydraulic fracturing, operators are now
testing further the high volume, essentially horizontal, drilling
adopted in North America, and it notes that one of the environmental
concerns has been the risk of ground and surface waters becoming
contaminated, notably as a consequence of the chemicals used,
due to poor well design or casing, uncontrolled induced fractures,
or existing faults, as well as poor management of waste water.
In addition, it notes that the process will have an impact on
water demand, as it requires large volumes (not all of which can
be recovered) on local ecosystems, on soil quality, and on land
use: and it says that fugitive methane emissions can have an adverse
impact on climate and local air quality, as can emissions from
transport and on-site equipment.
3.7 The Commission comments that these environmental
risks also give rise to health hazards, which have led to varying
degrees of public concern, not infrequently resulting in outright
opposition to projects. Those concerns have been reinforced by
an impression that the public has not been well informed, particularly
as regards the geological conditions under which fracking takes
place, compounded by doubts over the effectiveness of relevant
EU legislation: and, although the Commission says that a range
of good technical and regulatory practices have emerged, it is
of paramount importance that the risks and public concern about
safety of operations should be addressed if the potential benefits
are to be reaped.
Protecting the environment, climate and public
health
3.8 The Commission says that, although both general
EU legislation and specific pieces of environmental legislation
apply to shale gas activities, Member States have started to interpret
this in different ways, and to develop specific national rules,
resulting in differing requirements and a fragmented and increasingly
complex operating framework. It also points out that, since EU
environmental legislation was developed when fracking was not
used in Europe, it does not address a number of issues associated
with the practice.
DRAFT RECOMMENDATION
3.9 The Commission notes that the International Energy
Agency has confirmed the need for robust and clear rules to reduce
and manage the risks from shale gas production, and says that,
as existing guidance is not considered sufficient, it has adopted
a Recommendation (document (b)), outlining minimum principles
enabling shale gas activities, whilst ensuring that climate and
environmental safeguards are in place, and that the public is
informed.
3.10 More specifically, it seeks to ensure that:
· a strategic environmental impact assessment
is carried out prior to the granting of licences for hydrocarbon
exploration and/or production likely to involve fracking, in order
to address cumulative impacts and possible conflicts with other
uses;
· a site-specific risk characterisation
and assessment is carried out, related to both the surface and
underground, to determine whether an area is suitable for safe
and secure exploration or production of hydrocarbons using this
method, and to identify risks of underground exposure pathways
(such as induced fractures, existing faults or abandoned wells);
· there is baseline reporting of elements
such as water, air and seismicity in order to provide a reference
for subsequent monitoring or in the case on an incident;
· the public is well informed of the composition
of fluid used for fracking on a well-by-well basis, as well as
on water composition, baseline data, and monitoring results, so
as to ensure that factual information on potential risks and their
sources is available (and public acceptance is facilitated);
· wells are properly insulated from surrounding
geological formations, so as in particular to avoid contamination
of groundwater;
· in order to mitigate the impact of emissions
on the climate and local air quality, the release of gases into
the atmosphere (venting) is limited to the most exceptional operation
safety cases, that controlled burning of gases (flaring) is minimised,
and that gas is captured for subsequent use;
· Member States should ensure that permitting
authorities have sufficient resources and knowledge to achieve
adequate risk management, that procedures are appropriately coordinated,
and that consultations are carried out before fracking operations
start.
3.11 The Commission also recommends that Member States
should ensure that companies apply best available techniques and
good industry practice, and says that, as well as reviewing the
existing reference document under the Mining Waste Directive to
ensure that extracted waste is appropriately handled and treated,
it will ask the European Chemicals Agency to make certain changes
to the database of registered chemicals under the REACH Regulation
(1907/2006/EC) to facilitate the search for information on substances
used in connection with fracking. In addition, the Commission
says that, in order to increase knowledge on unconventional hydrocarbon
extraction technologies, it will establish a European Science
and Technology Network to bring together practitioners to collect
and analyse results from exploration projects, and it points out
that further research in this area is set out in the 2014-15 work
programme for Horizon 2020.
3.12 The Recommendation invites Member States to
give effect to these principles within six months of publication,
and to inform the Commission of any measures they put in place
on an annual basis, and for the first time by December 2014. The
Commission says that it will closely monitor the implementation
of the Recommendation through a publicly available comparison
of the situation in Member States in the form of a scoreboard,
and will review its effectiveness 18 months after its publication.
The Government's view
3.13 In his Explanatory Memorandum of 11 February
2014, the Minister of State at the Department for Energy and Climate
Change (Michael Fallon) says that, like the Commission, the Government
is committed to ensuring that all hydrocarbon exploration and
production activities are undertaken in a safe and environmentally-responsible
manner, and that, although a good regulatory framework is already
in place in the UK to ensure this happens, it will look to refine
that framework further as the industry develops and moves towards
the production phase.
3.14 The Minister adds that the UK practises, or
requires, much of what is recommended, most of which falls within
the remit of existing Directives. However, he says it has some
general concerns about the Recommendation, which he notes extends
to the exploration and extraction of conventional as well as unconventional
hydrocarbons, covering both onshore and offshore operations; purports
to extend some existing EU obligations, notably those relating
to the Environmental Liability Directive (2004/35/EC); and contains
some provisions which impact on land use planning issues. The
Government will therefore be working to ensure that the Commission
does not go beyond its competence in putting forward any proposals
for legislation.
3.15 He also believes that the 18 month timeframe
for assessing the effectiveness of the Recommendation is unlikely
to be sufficient to enable an evidence-based assessment, and says
that, as the Recommendation is non-binding, the UK will continue
to regulate the shale gas sector safely under national legislation
and existing EU obligations.
3.16 The Minister concludes by saying that there
is likely to be an exchange of views at the March Energy Council
and the June Environment Council, but that the Recommendation
does not require formal endorsement by the Council.
Conclusion
3.17 These two documents clearly address a subject
of considerable topical interest, with the Communication providing
a useful analysis of the economic potential of fracking, as well
as its associated environmental risks and public concerns. Likewise,
although it contains a number of points which the Government intends
to pursue, the Commission Recommendation — which is non-binding
— appears in general to advocate measures in line with exiting
UK practice. Given the likely level of interest among Members,
we refer these documents for debate in European Committee A, with
the Commission Communication on EU climate and energy policy from
2020 to 2030.
17 Compared with 3 trillion cubic metres for tight
gas, and 2 trillion for coal bed methane. Back
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