For our freedom and yours: “Going all out for shale” to secure national energy independence

Energy & Transport
Wednesday, January 29, 2014
Adriel Kasonta

According to the White Paper which was released by the European Commission on 22 January 2014, Europe will cut its greenhouse gas emissions by 40 per cent by 2030, compared with 1990 levels, the toughest climate change target of any region in the world, and will produce 27 per cent of its energy from renewable sources by the same date. 

The 28 member governments are now urged to follow the non- binding principles covering a range of protective measures against water contamination and other hazardous environmental impacts. EU nations engaged in fracking will be asked to present “scorecards” within six months, outlining which EU recommendations have been instigated and implementation of these guidelines will be reviewed in July 2015. If not satisfied, the Commission may consider making them legally binding. Nevertheless, the guidelines don’t interfere with a nation's right to ban the practice.

The decision to offer new voluntary guidelines while maintaining current EU oil and gas laws is a victory for industry groups and governments such as the UK and  Poland  that are pioneering shale drilling in Europe and have led the opposition to binding European regulations on fracking, in contrast to France, Germany and Spain.

“Existing EU legislation and national laws already cover shale-gas operations in a comprehensive way.” said Alessandro Torello, a spokesman for the International Association of Oil & Gas Producers in Europe early this year. This fact is also acknowledged by the report dated on 8 November 2011 carried out for the European Commission by Belgian law firm Philippe & Partners.

The Final Report on Unconventional Gas in Europe says that water protection issues, for instance, which have been raised as an issue by shale gas detractors, are already covered by EU legislation under the Water Framework Directive, the Groundwater Directive and the Mining Waste Directive. Meanwhile, the use of chemicals is covered by the REACH regulation. 

Even though the study was carried out only in four countries – Poland, France, Germany and Sweden – the law firm said shale gas activities were too small at the moment to justify specific legislation: "Neither on the European level nor on the national level have we noticed significant gaps in the current legislative framework, when it comes to regulating the current level of shale gas activities.”

In November 2013 Poland’s Environment Minister Maciej Grabowski told the Polish newspaper Dziennik Gazeta Prawna that he was keen to form coalitions with states such as the UK to fight against EU regulation that could hamper the nascent industry: “I know what is happening in Brussels, some concern is warranted. If there is need we will act in an unambiguous way on many front lines and create coalitions to back our position.”

It is very well known that: “on shale gas, they (Cameron and Tusk) welcomed the progress made to head off EU legislative proposals and agreed that there should be further co-operation to promote the benefits of shale gas across Europe”, as said by a Downing Street spokesperson after a telephone conversation between the two Prime Ministers in December 2013. He added that they also wanted “to ensure that the European Commission does not place burdens on the industry that prevent countries from realising the sector’s full potential”, which was recently achieved.

Poland, which aims to shrug off its dependency on Russian gas, is planning to begin commercial shale gas production from 2014, Prime Minister Donald Tusk said last year. Most of the projects are currently at the phase of seismic surveys and some projects already have entered the drilling phase, which is expected to intensify after 2014. Poland imports two thirds of its gas from Russia at $500/1,000 cubic metre, 45 per cent above the spot price, a level deemed "totally unacceptable" by Mr Tusk.

Polish Prime Minister makes no secret that fracking is a bargaining tool to force Gazprom into big price cuts when the supply contracts come up for renewal in 2019: "After years of dependence on our large neighbour, my generation will see the day when we will be independent in natural gas, and we will be setting terms" he said.

It is worth mentioning that Gazprom has made no secret of its war against shale, lobbying furiously in Brussels for EU-wide legislation to curb fracking. The Polish intelligence service (ABW) warned in a declassified report last year that Russian spies are engaged in widespread espionage operations targeting Poland's shale projects.

The natural gas trapped in shale rock in Poland could provide the country with enough fuel to last for 300 years, the US Department of Energy said last year. Therefore, it is a fair bet that Poland has a good potential to be Continental Europe's fracking power by the early 2020s, with enormous geopolitical consequences.

In 4 December 2013 Mr David Cameron wrote a letter to José Manuel Barroso, the president of the EC, saying it was “essential the EU minimise the regulatory burdens and costs on industry and domestic bill payers by not creating uncertainty or introducing new legislation.” The shale gas industry in the UK “has told us that new EU legislation would delay imminent investment” Cameron added.

Ever since videos of flaming taps began appearing on YouTube in 2010, shale gas has been in the spotlight for its potential to contaminate groundwater and cause seismic disturbances.

Fracking, or hydraulic fracturing, is the process of drilling deep underground using high pressure and a mix of chemicals, water and sand to crack rocks and release the gas inside. There has been much opposition against fracking in the UK, with protests regularly making the headlines. Those against the technique believe fracking could cause small earth tremors or contaminate water.

In order to investigate social awareness on this touchy subject, Radio 5 live commissioned a poll as part of its Energy Day programming which asked how much, if anything, would you say you know about fracking?

Of those who responded, 4 per cent said a great deal, 19 per cent said a fair amount, 40 per cent said a little, while an accumulative figure of 77 per cent said they knew a little or nothing at all.

If anything, the real argument to win in the UK is with the public. Many, including the mainstream press, view fracking with some reservation and tend to focus on the potential risks to the environment and to health and safety. The density of the population in the UK and the fact that the crown – and not landowners - as is the case in the US – owns hydrocarbons in the ground, point to the need for more engagements with local communities to secure higher levels of public acceptance for shale gas developments.

We are now seeing the Government exploring ways of offering incentives to local communities affected by shale gas developments with financial incentives, benefits such as lower energy prices or community projects. On the regulatory side, the UK can rely on some of the world’s most stringent environmental laws which in this context will include a requirement to monitor seismic activity at the well before, during and after drilling and the carrying out of an environmental risk assessment.

While clarifying guidelines in some areas might be necessary, the signs are that the UK government sees shale gas playing an important part in the transitioning of our energy needs and wants to streamline the regulatory processes with a view to avoiding unnecessary delays’ said Paul Bowden, a partner and environmental law expert at international law firm Freshfields Bruckhaus Deringer.

The risk of contaminating groundwater aquifers as a result of shale gas exploration in the UK is ‘negligible’, says the Chemical Industries Association (CIA) which has gathered evidence to promote development of the UK’s shale gas resources. The report builds on assessments made by the Royal Society and Royal Academy of Engineering in 2012 and agrees with a report published by Public Health England – a division of the UK government’s Department of Health – on 31 October 2013.

According to the Strategic Environment Assessment report (SEA), unveiled by Energy Minister Michael Fallon, large scale shale gas production by the 2020s could boost the UK’s energy security and plough almost £1 billion back to local communities through benefit schemes.

The SEA uses a ‘high activity scenario’, which assumes that a substantial amount of shale gas is produced during the 2020s, three times more than current gas demand in the UK.

Under this scenario, the assessment says there would be beneficial impacts, with employment in the oil and gas industry increasing by 7 per cent.

Local economies would benefit too from receiving an initial contribution of £100,000 per hydraulically fractured site, and a further 1 per cent of the revenue received for each well over its lifetime.

Britain is offering tax breaks and other incentives to open up its shale industry as North Sea oil and gas reserves decline: "Gas production from the North Sea is going down. We are importing more gas and quite a lot from the other side of the world. If we can have gas safely in this country that will mean jobs, tax revenue and greater energy security - so fracking is not the evil thing that some people try to make it out to be." energy secretary, Ed Davey, has claimed in September 2013.

Early this year, The British Prime Minister said: “A key part of our long-term economic plan to secure Britain's future is to back businesses with better infrastructure. That's why we're going all out for shale. It will mean more jobs and opportunities for people, and economic security for our country (…) I want us to get on board this change that is doing so much good and bringing so much benefit to North America. I want us to benefit from it here as well." 

It is no wonder why Mr Cameron took this direction if in the US, where the shale gas industry has experienced a boom in recent years. Between 2007 and 2011 it contributed to an 18.9 per cent increase in domestic natural gas production and a fall of nearly 50 per cent in gas imports. 

Mr Cameron's announcement on business rates came as French company Total confirmed plans to invest up to $48 million for a stake in shale licenses in Britain seen as one of Europe's strongest prospects for unconventional oil and gas development. 

James Sproule, chief economist at the Institute of Directors, acknowledged this fact: "Investment from Total is a vote of long-term confidence in the UK shale industry, and is a welcome sign that the government is creating the conditions necessary to maximise the potential benefits of a new domestic energy source. The wider benefits are clear; shale gas development could create tens of thousands of jobs, reduce imports, generate significant tax revenue and support a resurgence in British manufacturing. In short, shale gas could be a new North Sea for Britain."

We can’t also forget that in May 2012, the Chairman of the Environment Agency for England and Wales, Lord Smith of Finsbury voiced support for shale gas extraction telling that fracking could be done safely and that the technology could improve Britain's energy security and end the need to import gas from abroad.

Despite the fact that the large-scale commercial production of oil and natural gas from shale itself may be new, there is nothing new about this principle or fracking. Innovation is involved in unlocking the shale potential in Europe, and so it will take time to bring these resources to market in countries that lock themselves out of the free flow of investment, or that do not allow for competition at home.

George Osborne, who has spoken of the "huge potential" of shale gas in his autumn statement last month said: "We are prepared to push the boundaries of scientific endeavour, including in controversial areas, because Britain has always been a pioneer. The country that was the first to extract oil and gas from deep under the sea should not turn its back on new sources of energy like shale gas because it's all too difficult."

There is no doubt that shale gas could play a vital part in what has become a pressing need for energy security at a time when power sources are being decommissioned and major carbon reduction targets approach. 

Recent victory will certainly have an impact on geopolitics, with producers like Russia, Saudi Arabia and Qatar, but a more significant fact is that Britain by working with EU allies has repatriated renewable energy targets from the EU and it is a strong signal on need to restoration of the right of nations to self-determination not only in this particular matter but part of a greater deal of reshaping European Union where Britain could plays a key role of a leader.

Adriel Kasonta is a law graduate and currently works at the British Polish Chamber of Commerce as a UK Project Manager.