Member Article

On 3 October 2013, DG Environment of the European Commission published its final report following the public consultation on ‘Unconventional fossil fuels’ (e.g. shale gas).   Since this is an important stage in the legislative process, the purpose of this note is to provide you with a brief outline of its findings and follow up. Importantly, the European Commission has announced that in December 2013 the impact assessment will follow. At that point, we also expect the legislative or non-legislative proposal on how the Commission thinks the development of shale gas in the EU should be best regulated. In light of the contents of the consultation report, we already provide you with some insights as to what can be expected in December 2013 as well as the regulatory process that will ensue.

Can we expect regulation at EU level?

In November 2012 the Commission published the roadmap on shale gas extraction, stating that EU action could be justified because impacts would not only be local or regional, but could have trans-boundary environmental implications on surface and ground waters, as well as air quality across national borders. In that roadmap, a stakeholder consultation is an important stage in drawing up an impact assessment which precedes EU regulatory action.  The impact assessment itself, expected in December 2013, will then outline the policy options which can be followed. In making the choice between diverse options, for the European Commission, the consultation constitutes an important tool to legitimate the proposal it will make.  For that reason the findings from the consultation already provides us with some insight as to the nature and content of forthcoming EU regulatory action. 

Between 20 December 2012 and 23 march 2013 the European Commission launched its stakeholder consultation, which generated 22.875 responses from individuals, representative organizations and public authorities. While disagreement exists on whether or not shale gas ought to be developed, the Commission reports that a ‘robust’ number of citizens agree that “doing nothing” for the EU is not an option. The Commission further notes that citizens argue that the current framework is not well adapted to future developments.  Similarly, the report points out that most industry associations and national governments find that no action at EU level ‘appears to be the least favoured option for institutions and organisations’. In sum, we can almost certainly expect some form of EU regulatory action to be proposed in December 2013.

What kind of regulation at EU level?

The November 2012 roadmap which announced the ongoing regulatory process on shale gas marked it as both “non-legislative and legislative”, meaning that the form of regulatory action that may be proposed is as of yet unclear. Thus, these are the three options on the table:

 - A standalone instrument such as a new Directive.

 - Amendments to existing legislation.

 - Soft guidance to industry such as recommendations setting out voluntary principles.

As regards these three options, we may look at the upcoming European Parliament vote on the adoption of the revised the Directive on Environmental Impact Assessments. Negotiations on the adoption through first reading are ongoing at the time of writing, with a partial vote having taken place on 9 October 2013. The final vote is expected to take place during the third week of October, and it has been reported that it is still not certain that notably testing for methane leaks in shale gas drill zones would be included. Whichever the outcome, the inclusion or non-inclusion could subsequently be reflected in the proposals of the Commission in December and also provide a heads-up as to whether the first or second route mentioned above will be preferred by that institution.

In any case, we do note that in 2011 the European Commission already concluded that existing EU environmental legislation applies to practices relating to the whole of the shale gas production cycle. Additionally, we now see that the final report of the consultation finds that there is ‘a large consensus among respondents’ that ‘transparency and information are necessary at all stages’. Concretely, this means, according to the Commission, that there is a lack of: information on planned developments, operators, their licenses and permits; information on water and air quality prior and during operation; information in incidents, risks of exploration and extraction, as well as potential benefits of shale gas production. Whereas the consultation seems to find significant lacunae in existing legislation; shale-specific regulatory action becomes more likely.

What happens next: defending your interests.

The publication of the impact assessment in December 2013 will be a crucial moment, as it will become clear whether soft guidance, amendments to existing regulation, or a full-fledged new Directive will be the option pursued.  The absence or presence of certain options can be in your advantage or disadvantage, and ALTIUS’ EU Regulatory Team can make an in-depth risk assessment for your business objectives. The Impact Assessment may be accompanied by a legislative or non-legislative proposal.  As the case may be ALTIUS’ team will monitor and inform you, and outline a strategy to safeguard your interests:  in case the Commission proposes to draw up non-binding recommendations, we will focus our efforts on that Institution.  In case we see a formal legislative proposal under the ordinary legislative proposal, our strategy will also incorporate the Council (Member States) and the European Parliament.  In sum, the energy industry writ large is likely to be affected by the upcoming impact assessment. What we propose is the following:

 - A targeted regulatory strategy tailored to your business interests.

 - Proactive monitoring to ensure constant monitoring and early warning of any developments. 

 - Interpretation of the impact assessment together with informed predictions to help you in making the right decisions on shaping future regulatory developments.

 - The representation of your interests through written submissions and/or closed personal meetings with EU officials.

 - Follow-up through the lifespan of the regulation that will be adopted, including notably its implementation at national level in a way that matches your interests.