JPT | 11 August 2016
European Commission Strives Toward Reasonable Shale-Gas Regulation
Following years of deliberation, the European Union (EU) released a recommendation on unconventional hydrocarbons and a related communication in 2014. Although these documents are not legally binding on member states, they are nevertheless of great significance because they indicate, for the first time, the current and likely future stance of EU institutions on the regulation of unconventional hydrocarbons. This paper traces the origins and development of these documents, which provide vital clues for the road ahead in European shale-gas regulation.
The potential threats of groundwater contamination, irresponsible disposal of flowback, the repercussions of significant land use, and increased emission of greenhouse gases have been named in recent scientific studies as main potential threats of shale-gas extraction. The current European law framework on environmental protection, mainly consisting of directives and regulations, entails some gaps and does not cover these issues comprehensively. Thus, the EU took recent action to develop shale-gas-specific regulation in order to close the identified gaps in the existing general framework.
Because the existing secondary law norms were elaborated at a time when shale gas extraction was virtually unknown in Europe, one would suspect that they entail provisions that do not sufficiently cover the specific potential threats of this technique. Indeed, there are a number of issues. Probably the most important one is that environmental impact assessments (EIAs) are not compulsory for shale-gas projects. Although member states have the right to require an EIA for specific, individual shale-gas projects, this discretion does not appropriately match the level of potential environmental hazards of shale-gas extraction.
The paper does not engage in an analysis of the pre-existing EU regulatory framework but focuses on the EU’s efforts to close the gaps in the framework that have been discovered previously. The EU introduced nonbinding, soft-law measures in this regard to create a level playing field among all member states in the form of the 2014 Shale Gas Recommendation and the 2014 Shale Gas Communication.
The paper highlights the main features of the recommendation and the communication and considers whether they are sufficient to close the gaps in the EU secondary law framework. Overall, the author concludes that these measures go a long way in addressing the perceived gaps, although they do not succeed in closing all of them.
Despite that rather favorable assessment, the recommendation and the communication have been criticized because of their legal guise as nonbinding soft-law norms. The fear that individual states could simply ignore the recommended measures if they do not fit in with their respective agendas on shale-gas extraction was expressed by some scholars. This peculiarity, they argued, could lead to a “race to the bottom” of environmental standards, as one member state may try to undercut the others on environmental standards in order to attract investors.
However, this paper concludes that the described race to the bottom would be a rather short one and would not put the environmental standard in the EU into any real danger. The existing environmental directives and regulations of the EU constitute the ultimate bottom line, below which member states are not allowed to operate. Because of the high standard and elaborated nature of this bottom line, there currently is no real danger for environmental standards in Europe to be lowered to any significant extent. Moreover, member states would be ill-advised to take a chance and simply ignore these recommendations. A considerable number of legally binding EU directives started their existence as recommendations in the past. In line with this history, the 2014 Shale Gas Recommendation explicitly threatens member states with the introduction of legally binding norms if the EU is not satisfied with the domestic implementation of the recommendation. Thus, it is not unlikely that the recommendation could turn into an EU directive or regulation.
Although the 2014 Shale Gas Recommendation and the 2014 Shale Gas Communication go to some length in addressing current gaps, they do not cover all of them. Even more importantly, the 2014 measures are not legally binding on member states. However, this paper concludes that the nonbinding legal character could be an advantage because it provides member states with the greatest possible leeway to implement shale-gas regulation that is tailored to their individual needs.
Both documents recommend to member states that wish to engage in shale-gas extraction a set of measures and operating standards in order to create a level playing field among those states. The measures indeed go some way in closing some of the pre-existing gaps. The framework urges member states to carry out a strategic environmental assessment before issuing licenses that may lead to shale-gas extraction. The 2014 Shale Gas Communication entails a pledge of the EU to look into the issue of a specific best-available-technique reference document for shale-gas extraction under the Mining Waste Directive. This action is designed to ensure that waste is appropriately handled and treated and that the risk of water, air, and soil pollution is minimized.
Moreover, the framework reinforces the monitoring requirements under the Water Framework Directive and the Groundwater Directive. Baseline studies of shale-gas sites with regard to water, soil, and air quality, and other issues, should be conducted; their results should be benchmarked against future results of comprehensive monitoring exercises. Furthermore, the framework calls upon member states to apply the provisions on environmental liability to all activities taking place at a shale-gas-extraction site. This request shall be understood explicitly as including strict liability for greenhouse-gas emissions and overbearing use of land, which currently do not fall under the scope of the Environmental Liability Directive.
However, the European Commission failed to close some other gaps. Most notably, it called upon member states to ensure that an EIA is carried out for each shale-gas project but took no action to insert shale-gas projects into Annex I of the EIA Directive. This move would have made EIAs obligatory for all shale-gas projects, already at EU level. By simply passing the ball back to member states, the EU did not adequately address the main gap in EU EIA legislation.
However, the 2014 framework on shale-gas extraction does not actually implement the described measures but merely recommends to member states to take these measures into account. The framework has been molded into a recommendation and a communication, secondary EU law measures with no direct binding force.
The nonbinding nature of these EU regulations on shale-gas extraction became the main point of criticism. It was argued that nonbinding legislation is an ineffective way to create a level playing field for shale-gas extraction for all member states because individual states are allowed to ignore the measures outlined in the recommendation if the measures do not fit in with their respective agendas. This could lead to a race to the bottom of environmental standards, because one member state could try to undercut another on environmental-compliance costs for foreign investors. However, this race to the bottom could not last indefinitely because the existing environmental-law framework of the EU constitutes the bottom line for member states.
A review of the effectiveness of the framework shall be conducted within 18 months of its coming into force. Depending on the outcome of this review, the commission is going to determine if further, more-stringent, regulatory action on shale-gas extraction is required. In fact, this is the way in which a considerable number of directives came into force in the past.
Ultimately, the nonbinding character of the 2014 Shale Gas Recommendation is in some respects an advantage. The principle of subsidiarity, under which member states should take responsibility for matters that can be decided at their level, is honored. Subsidiarity must also be viewed in the context of proportionality. The principle of proportionality requires the use of nonbinding instruments (e.g., recommendations) in EU environmental legislation, wherever possible.