The debate surrounding the development of the shale gas industry in Europe has to date been dominated by concerns about its environmental impact. However, whilst the risks to environment of shale gas drilling have been focused on, little attention has been paid to the fact that Europe has some of the most stringent environmental protection laws in the world and that most European countries have regulations that are able to deal with the growth of the shale gas industry.

This article considers how various European countries have responded to the debate about shale gas and the environment, before looking at examples of environmental and other relevant laws and regulations that currently apply in European countries and in accordance with which shale gas producers will have to comply.

The UKPSC report

The UKPSC inquiry into shale gas has resulted in the publication of perhaps the most comprehensive and balanced of studies so far conducted in Europe on the potential impact of the shale gas industry. The inquiry gathered, heard and considered evidence submitted from various industry sources and interest groups from both sides of the shale gas debate. The committee received 24 submissions of written evidence and heard oral evidence from various witnesses, including the Minister of State for the Department Energy and Climate Change, other departmental representatives, the Environment Agency, WWF-UK, the Tyndall Energy Centre, the British Geological Survey and the Geological Society, and Cuadrilla Resources, which is currently exploring for shale gas (and conducting fracs of test wells) in NW England. In addition the committee travelled to the US, where it visited areas affected by the shale gas industry and spoke with local regulators and industry representatives about the lessons that had been learned a result of the rapid growth of the industry.

The UKPSC’s remit was to conduct a wide-ranging study as to the prospects for the development of shale gas in the UK, including the possible implications for and effects on the environment and the UK’s energy and climate change policy. As part of this the UKPSC considered whether there is a case for calling a moratorium on shale gas exploration until the local-pollution and global-environmental impacts are better understood.

The UKPSC published its report on 23 May 2011 and made 26 recommendations to Parliament, including issues relating to the environmental risks of shale gas and the current regulatory framework governing shale gas drilling and exploration. Importantly, the UKPSC concluded that, on the basis of the available evidence, there was no current need for a moratorium on fracing in the UK.

The perceived environmental risks of shale gas received the largest amount of attention from the UKPSC. This included consideration of the risks of aquifer contamination, the management and disposal of waste water from the fracing process, as well as potential strain imposed on local water resources by fracing. The UKPSC concluded that the fracing itself does not pose a direct risk to surface water or water aquifers and that it is the integrity of the well and the well casing which is paramount in preventing any leakages of fracing fluid and gas into water supplies. It would appear that a key factor in leading the UKPSC’s to reach this conclusion was that it was persuaded that the process of drilling for shale gas (and of ensuring that aquifers and water supplies are not contaminated) is the same as in "conventional" oil and gas exploitation, where wells must also have adequate casing cemented into place. The fact that people have largely accepted the risks involved in drilling for "conventional" hydrocarbon resources is something which appears to have been all too often forgotten in the debate in the media as to the environmental impact of shale gas.

As to water disposal, the UKPSC recommended that the toxicity of flowback fluids should be monitored by the Environment Agency and that all companies involved in hydraulic fracturing should declare the type, concentration and volume of the chemicals they are using in fracing fluids.

The UKPSC recognised the potential problems that could be caused by the demands for water resources from the shale gas industry. On this, the UKPSC received evidence that an average fracing job for a well in the US was estimated to use 3.5 million gallons of water. However, whilst these quantities of water may sound alarming, to put it into perspective it was pointed out that four million gallons of water alone are used to irrigate a single golf course for 28 days. It was concluded by the committee that there is only a small risk that UK water supply will be affected by fracing.

Developments in other European countries

To some extent, these conclusion are explained by the fact that the shale gas industry in England is likely to be small-scale due to the UK’s comparatively limited shale gas reserves. This is contrast to Poland and France, which are estimated to have the first and second largest shale gas reserves in Europe, respectively – the US Department of Energy’s Energy Information Administration recently reported that Poland had an estimated 3,740 BCM and France 3,600 BCM (as compared to the UK’s more modest 560 BCM) in technically recoverable reserves. Indeed, the UKPSC recognised that it is important for the UK to monitor the development of shale gas exploration and regulation in Poland, which it dubbed "the ‘barometer of Europe’ on this issue."

Whilst the chair of the UKPSC, Tim Yeo, questioned Poland’s ability to maintain high environmental and regulatory standards without any EU-wide enforcement regime (describing Poland as "as one of the recalcitrant, backward-looking EU members in that respect"), the Polish government has committed itself to the development of the industry despite the environmental risks. Reacting to the French parliament’s approval of a bill that would ban shale gas drilling in the Polish Foreign Minister, Radek Sikorski, told a conference on the topic that Poland should look to future technological advances to help manage the environmental risks.

One explanation for the comparatively positive attitude of Polish and British politicians to the risks associated with shale gas development is that public opposition has been relatively muted. This also appears to explain, to some extent, the French attitude as the issue of shale gas development and the risks to the environment gave rise to high-profile public protests and became highly politicised.

Conversely, although Germany and Sweden have also seen public opposition to shale gas exploration, it does not appear that moratoria are going to be imposed there yet. Again, this appears to reflect the relatively low reserves, and consequent environmental impact, of shale gas in these countries.

The current European regulatory framework

In considering the environmental regulatory framework in various European countries, it is important as a starting point to note that the environmental regulations of EU member-states must comply with relevant EU laws. There are numerous EU environment-related directives which will impact on the shale gas industry. For example, all of the following may have a direct impact on a given shale gas drilling site: the Drinking Water Directive; the Groundwater Directive; the Dangerous Substances in Water Directive; the Environmental Impact Assessment Directive; the Air Quality Directive; the Noise from Outdoor Equipment Directive; the Habitats Directive; Wild Birds Directive.

The EU requires Directive to be introduced by member-states’ national government using any method that they see fit, so a national government retains a discretion as to how to implement a given Directive and whether to implement laws that are more stringent than may be required by the EU. The same applies to the methods for the enforcement of EU laws, which remain in the hand of each member-state. Nonetheless, the existence of common EU-wide environmental laws and principles means that there is a base-line standard across the EU which will apply to the shale gas industry. It also means that, to some extent, environmental laws and regulations in most European countries are in broad terms reasonably similar.

In the UK the existing regulatory framework involves several bodies with related and overlapping areas of responsibility for regulating oil and gas E&P activity, which necessarily will be responsible for the regulation of the shale gas industry. An application by a company seeking to explore for gas on-shore in the UK would be considered by the Department of Energy and Climate Change, a local governmental planning authority, the Environment Agency (in England), and the Health and Safety Executive (the HSE). In considering an application, the HSE, for example, will consider whether the proposed well design (including casing design) is safe and fit for purpose, whereas the Environment Agency is responsible for issuing the necessary environmental permits. This may include the issue of a permit under the Environmental Permitting Regulations 2010, which provides that a permit is required where fluids containing pollutants are injected into rock formation that contain groundwater, or if the activity poses a risk of mobilising natural substances that could then cause pollution. The decision to require a permit is made on a case-by-case basis, and the permit, if granted, will specify limits on the activity and any requirements for monitoring. Other licences granted by the Environment Agency include any necessary water abstraction licences, or permit for any activities associated with surface works if these involve emissions to surface or groundwater (eg. as may be necessary if surface storage in pits of water for fracing is envisaged). Breaches of environmental permits or of the law can result in either criminal or civil sanctions being imposed on a wrongdoer.

The UKPSC report concluded that UK regulations were already sufficiently robust to deal with the issues posed by shale gas exploration. Given the similarly stringent nature of environmental protection laws in France, the rationale for the French parliament’s decision to ban shale gas exploration due to the potential environmental risks appears unpersuasive. When applying for environmental permit in France, a person is required to include an environmental impact study and a risk assessment study as part of the application. This must analyse the effects on the environment and health produced by proposed activity and describe the potential risks of accidents. In essence these are similar requirements as are imposed in the UK, and as in the UK, criminal sanctions for breaches of environmental laws can be imposed.

In Poland, the Environment Protection Law governs the procedures for obtaining environmental permits, fees and fines, which provide for authorities to carry out similar functions as in England and France. However, environmental protection laws that may prove to be of particular application in Poland are the Habitats Directive and the Wild Birds Directives. These directives provide for certain areas to be designated as Special Conservation Areas (also know as Natura 2000 sites), and in Poland a number of shale gas licences overlap with such designated sites. The effect of this is that proposed developments in Special Conservation Areas are subject to more stringent permitting requirements. The Directives allow for activity to take place in designated Areas if it can be shown that it meets an overriding public interest and that there is no alternative. However, any damage or disruption caused to the environment in the Area as a result of the activity must be offset by a compensatory scheme set up by the company conducting the activity in another area.

Conclusion

Notwithstanding the existence of a regulatory framework that is already equipped to deal with some of the specific issues related to the development of the shale gas industry in Europe, as prefaced by the UKPSC report, it is inevitable that there will be a legislative reaction to the growth of the industry. To some extent, European legislators will monitor development in the US, where the industry is at a far more advanced stage of development, but it would not be unexpected for European environmental standards to end up being more stringent than those imposed in the US. A trend in this direction can already be seen from the UKPSC’s recommendation that shale gas explorers be required to disclose precise details of the chemicals used in fracing wells (which is currently not a requirement with federal application in the US). However, it remains to be seen how quickly and to what extent European countries will take steps to introduce new laws and regulations in response to the development of shale gas.

 

—- By Michael Darowski, senior associate, UKPSC