Documents considered by the Committee on 26 February 2014 - European Scrutiny Committee Contents


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


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

Legal base
Documents originated22 January 2014
Deposited in Parliament(a) 29 January 2014

(b) 30 January 2014

DepartmentEnergy and Climate Change
Basis of considerationEM of 11 February 2014
Previous Committee ReportNone
Discussion in CouncilSee para 3.16 below
Committee's assessmentPolitically important
Committee's decisionFor debate in European Committee A, with the Commission Communication on EU climate and energy policy from 2020 to 2030

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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