The legal & regulatory framework for shale gas exploration and exploitation activities in the EU
Results of the study carried out for the European Commission
Cécile Musialski, Senior Associate Lawyer, Philippe & Partners Berlin, 25 October 2011
Disclaimer
The views expressed in this presentation are the views of Philippe & Partners only
Outline •
Purpose and scope
•
Specificities of shale gas activities
•
State of play in the four Member States of scrutiny
•
Legal & regulatory framework: an overview
•
Legal & regulatory framework: some results
•
Conclusions
Outline •
Purpose and scope
•
Specificities of shale gas activities
•
State of play in the four Member States of scrutiny
•
Legal & regulatory framework: an overview
•
Legal & regulatory framework: some results
•
Conclusions
Purpose and scope •
Purpose –
Analysing and assessing the legal framework applicable to shale gas activities • Is it appropriate? • Is it practical?
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Focus on core-procedure: • No assessment of appropriateness and/or practicality of environmental legislation e.g. • Not an assessment of whether the relevant EU Directives are well transposed into national law!
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Scope – Shale gas “activities”, i.e. • Exploration • Exploitation/production • Other upstream issues such as access rights to gas infrastructure/network, competition issues, etc. are out of scope – “Shale gas” • Other unconventional sources of natural gas are out of scope
•
Member States of scrutiny: DE, FR, PL & SE
Outline •
Purpose and scope
•
Specificities of shale gas activities
•
State of play in the four Member States of scrutiny
•
Legal & regulatory framework: an overview
•
Legal & regulatory framework: some results
•
Conclusions
Specificities of shale gas activities •
Some identified specificities: –
“Diffuse” source of gas • Numerous wells needs to be drilled and analysed • Some projects start on a small scale basis but, in case of positive results, can become large scale
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Low underground permeability • Hydraulic fracturing (i.e. high pressure injection of fluids, often mixed with some chemicals) • Horizontal drilling • But hydraulic fracturing and horizontal drilling are well-known from geologists…
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What may be viewed as new is the extensive use of the combination of the above techniques
Outline •
Purpose and scope
•
Specificities of shale gas activities
•
State of play in the four Member States of scrutiny
•
Legal & regulatory framework: an overview
•
Legal & regulatory framework: some results
•
Conclusions
State of play in the four Member States of scrutiny •
In a nutshell: –
Some exploration activities have started • Seismic surveys • Exploratory drillings • In some cases, hydraulic fracturing
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No exploitation activities have started
Outline •
Purpose and scope
•
Specificities of shale gas activities
•
State of play in the four Member States of scrutiny
•
Legal & regulatory framework: an overview
•
Legal & regulatory framework: some results
•
Conclusions
Legal and regulatory framework: an overview
•
Our analysis reveal that, as the law currently stands, we cannot really say that there exists a specific legal regulating shale gas activities specifically –
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As a rule, laws applicable to hydrocarbon activities in general (“general law”) are applicable “as such” to shale gas activities
Various laws/rules apply depending on: – –
Where the activity takes place What risk the activity entails
Legal & regulatory framework: an overview •
Where does the activity take place? Surface level Ground ownership (private)
Zoning and planning law Soil protection Wildlife protection Natura 2000 sites Other (depending on the activity)
Underground Underground deposits (state ownership)
Hydrocarbon law (or “Mining Law”) Other (depending on the activity)
Legal & regulatory framework: an overview •
What does the activity entail? Environmental concerns Environment impact assessment Use of clean water
Disposal of waste water
Water contamination prevention
Extraction and disposal of mineral resources
Noise
Gas emissions Other safety issues
Transport and use of chemicals
Use of pressurised equipments
Workers protection
Health protection
Other issues (transport, etc.) Private law Property law
Civil/environmental liability
Outline •
Purpose and scope
•
Specificities of shale gas activities
•
State of play in the four Member States of scrutiny
•
Legal & regulatory framework: an overview
•
Legal & regulatory framework: some results
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Conclusions
Legal and regulatory framework: some results
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Outline: a. b. c. d. e. f. g. h. i.
Competent authorities Main types of procedures under the Mining Law Eligible area Public participation Legal certainty Transition from exploration to production Environmental impact assessment requirement Other environmental requirements Chemicals
Legal and regulatory framework: some results a. Competent authorities •
Varies depending on State organisation –
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Varies depending on law structure – – – –
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In Germany, the licensing system properly speaking is organised on a Land level
In France, the main licensing authority is centralised Permits must be obtained locally, i.e. from the territorially competent Prefect(s) The candidate must also liaise with numerous authorities (Police des eaux, Police de l’air, Police des installations classées, etc.) To sum up: there is a ”mosaic” of authorities with whom companies have to deal
At least one case of “one-stop-shop” authority –
In Sweden, the main competent authority deals with the application once submitted by the applicant, including distributing it to all other competent authorities
Legal and regulatory framework: some results b. Main types of procedures under the Mining Law •
All scrutinised MS require two separate procedures for (i) exploration/prospection, and (ii) production
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2 main types of procedures on the basis of the Mining Law: –
“One-step” procedures (PL & SE) • One main authorisation from one single authority • No additional “core” permit is needed
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“Two-steps” procedures (FR & DE) • The main authorisation gives a “title” • A separate permit must be obtained for starting actual works
Legal and regulatory framework: some results c. Eligible area •
In one MS, the surface for which the initial authorisation is granted is reduced upon renewal of the exploration licence – – –
By two at the first renewal By an additional 25% at the second renewal Potentially not appropriate for the same reason…
Legal and regulatory framework: some results d. Public participation •
Public participation in the main authorisation and/or permitting procedure is rather limited in all scrutinised MS – –
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The Mining Law does not contain any legal basis for public participation in most MS The Mining Law in France does provide for such a legal basis but public inquiry is performed in accordance with the Environmental Code and only for obtaining the concession
As a rule, public participation occurs – –
On the basis of environmental legislation In the context of the environment impact assessment (limited/see below)
Legal and regulatory framework: some results d. Legal certainty •
On case of threat the legal certainty: the Prohibition Act in France – – –
Adopted in July Announcement of abrogation on 3 October • I.e. quite extraordinary consequences Application of the precaution principle into question when we compare the Prohibition Act with the “Moratorium” in North Rheine Westphalia North Rheine Westphalia
Prohibition Act
Suspension
Prohibition
Until results of environmental study are known
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Without waiting for the results of the environmental study
As lawyers, we are allowed to question the French Prohibition Act… – –
Threat to legal certainty: the authorisations had been granted lawfully at the first place! Sends the wrong signals to potential investors in France
Legal and regulatory framework: some results f. Transition from exploration to production •
No significant experience to report so far in the EU…
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All scrutinised Member States foresee some kind of mechanisms giving priority rights to owners of an exploration authorisation for obtaining a production authorisation
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This does not mean that production authorisations are granted to holders of exploration authorisations automatically – –
A full assessment of the application for production authorisation is performed all over again Refusals are possible
Legal and regulatory framework: some results g. Environment impact assessment requirement •
An environment impact assessments (“EIA”) is not required in all cases: Exploration
Production
Sweden
In principle no But municipalities may request it
Always
Poland
Screening procedure
“Annex I projects” only
No
“Annex I projects” only
For obtaining the exploration permit
For obtaining the concession and the production permit
Germany
France
Legal and regulatory framework: some results g. Environmental impact assessment requirement •
Assessment –
Good practices • Use of screening procedure • Right for municipalities to request an E.I.A.
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Point for improvement? • As most of the public involvement takes place in the context of the performance of the EIA, there are many situations where the public will not be consulted extensively and/or directly at all… – E.g. Lack of public participation is the main legal ground put forward for the recourses filed against some exploration authorisations granted in France (despite the fact no public participation was require by application of the law)
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Are the thresholds appropriate taking into account the fact that small scale projects may end up large scale ones? Other (use of screening procedures)?
Legal and regulatory framework: some results h. Other environmental requirements •
We find that all aspects of shale gas activities entailing some risks for the environment are covered by national legislations transposing EU Directives: – – – – – – – – –
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Clean water use Waste water disposal Water contamination prevention Mining waste extraction and disposal Gas emissions Soil protection Biodiversity protection Noise limitations Etc.
Procedures vary depending on the MS: • E.g. Sweden, where any “environmentally hazardous activity” must obtain a separate environmental authorisation, encompassing all the above mentioned issues on a holistic basis
Legal and regulatory framework: some results i. Chemicals •
Transport of chemicals/dangerous substances is regulated
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Under the Seveso II-Directive, major accident-hazards involving dangerous substances must be controlled
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Operators using chemical substances for hydraulic fracturing are considered as downstream users of chemical substances, as such falling in the scope of application of REACH – If operators prefer to keep their use confidential for business reasons, they may conduct their own chemical assessment and report this use to the European Chemicals Agency (“ECHA”) – ECHA then may review such a registration dossier submitted by the industry for chemicals used in hydraulic fracturing and verify the suggested risk management recommendations
Outline •
Purpose and scope
•
Specificities of shale gas activities
•
State of play in the four Member States of scrutiny
•
Legal & regulatory framework: an overview
•
Legal & regulatory framework: some results
•
Conclusions
Conclusions So, without prejudice to what a more in-depth analysis could reveal with respect to environmental legislation, is the legal and regulatory framework applicable to shale gas activities, as it currently stands, adequate and/or practicable?
Answer è generally, it is adequate and practicable, however, there is room for further improvements
Conclusions
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Generally, the framework as it currently stands is adequate for early exploration (seismic/drilling) within all scrutinised MS: (i)
Shale gas activities do not differ that much from other conventional/unconventional activities
(ii)
Companies and authorities are familiar with it
(iii)
Like for other activities, most aspects of shale gas activities are covered by pieces of legislation, especially in the field of environment
(iv)
We have not noticed any significant gap • •
(Almost) all scrutinised EU Directives are translated into national law We find many similarities in ways the relevant EU Directives are transposed
Conclusions
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However, there is some room for further improvements (i)
Important caveat: our assessment refers to the existing (i.e. limited) level of experience • As the US example indicates, commercial scale shale gas exploitation would involve operations on a much larger scale
(ii)
Projects would benefit from further public participation • Ad hoc provisions for organising proactive communication with the public (i.e. not only “notifying” the public but also receiving the feed-back from it and addressing it)
(iii)
Revision of the EIA requirement? • Advantage of involving the public more • Initial small scale projects might turn out to become large scale
(iv)
(v)
(vi)
Another way for easing concerns regarding environment could be to publish guidelines (why not at the EU level?) to the attention of those MS where there is less experience with hydrocarbon activities and/or share of best practices Regarding the concerned area • Geographical limitations are probably not appropriate We find some concern of legal uncertainty in some MS (Prohibition Law…)
Conclusions •
Going further? Some EU action for shale gas activities? •
Guidelines favouring – – –
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Exchange of best practices between authorities Public participation General recommendations
Revision of the EIA requirement – Revision of scope of application – Use of screening
Other issues will probably be of relevance in the future but they are out of scope of this study… – – –
Access rights Competition enforcement Etc.
Thanks for your attention!
Your speaker of today:
Cécile Musialski Lawyer at the Bar of Brussels Lawyer at the Bar of Paris Senior Associate Philippe & Partners Avenue Louise 240 B – 1050 Brussels Phone: Fax: Email: Website:
+32 2 600 52 23 +32 2 600 52 01
[email protected] www.philippe-law.eu
