COLUMN-EU safety-first view on shale gas makes sense: Gerard Wynn

Tue Mar 27, 2012 9:57am EDT

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(The author is a Reuters market analyst. The views expressed are his own.)

By Gerard Wynn

LONDON, March 27 (Reuters) - The European Union lags the United States in developing shale gas but leads it on safety - a cautious approach that may pay off in averting the sort of environmental backlash that's scuppered the best laid energy plans in the past.

This approach ultimately could lead to greater production of European shale gas than otherwise, if it stops countries from joining France and Bulgaria in banning exploration.

In the United States, green groups have increasingly criticised the burgeoning shale gas industry for possible groundwater contamination, lack of transparency, wastewater disposal and truck movements.

That has prompted some regulatory response, with the Environmental Protection Agency probing possible violation of pollution laws and groundwater contamination.

U.S. President Barack Obama confirmed in January his administration would draft rules requiring companies to disclose chemicals used on public lands during the fracking process, in which liquids are blasted into rock deep underground to release pockets of gas.

The EU legal framework gives regulators more opportunity to scrutinise projects before they get off the ground. Natural resources are owned by the state rather than by private individuals, forcing developers to request a permit to explore.

In both Europe and the United States, in any event, the wisest approach may be to tap the resource cautiously, taking account of all the risks.

In that way, the industry may head off the kind of protests that have successfully stopped projects in nuclear power (on radiation fears), onshore wind (landscape blight), carbon capture and storage (CO2 leaks) and coal (CO2 emissions and local air and water pollution).

Besides tougher rules, Europe's smaller reserves and differences in property rights laws mean that shale gas development will be less than in the United States.

So far, the EU has only 31 test drills (22 in Poland, three in Britain and six in Germany) compared with tens of thousands of operating wells in the United States.

Estimates of Polish reserves were sharply downgraded last week, knocking the country off the top spot of EU shale gas resources.

PHASED IN

Four existing EU directives apply to shale gas, none specifically written to target the sector. The European Commission says the existing laws are adequate for the present exploration phase and that it has no plans to write regulation tailored for shale gas.

Those laws force projects to obtain a permit after conducting an impact assessment, while other rules require disclosure of fracking chemicals and protection of groundwater and water catchments.

Regarding disclosure, EU regulation of chemicals ("Registration, Evaluation, Authorisation and Restriction of Chemicals" - REACH for short) forces transparency on chemical use and is being phased in over a decade from 2007.

Under REACH, developers have to disclose fracking activity to their chemical suppliers, who in turn tell the European chemicals agency (ECHA).

As of last autumn no fracking activity (using common fracking chemicals) was logged with EU authorities, officials at the environment arm of the European Commission told Reuters.

While that could be because of a breach in the rules, it is more likely because of the small scale of activity and the gradual phase-in of the regulation.

The rules at present apply only to the most hazardous substances or to suppliers individually making or importing more than 1,000 tonnes of a chemical annually.

By 2018 the threshold will fall to just 1 tonne, which should capture all use of fracking fluids, with penalties for non-disclosure. Members of the public will be able to access a registration database.

PERMITS

The Environmental Impact Assessment (EIA) process adds a permitting hurdle that developers don't face in the United States, where they can buy an exploration lease from private owners of land and mineral rights.

In Europe, the state owns the resource. Members of the public have the right to express an opinion on a permit request, and even where this is granted the public or environmental groups can challenge its legality at the national level.

In other rules, the Mining Waste Directive defines fracking fluid as waste, which means companies have to clean up spills and obtain permits for treatment of flowback water (used fracking fluids returned to the surface), while the Water Framework Directive requires member states to monitor surface and groundwater for contamination.

British company Cuadrilla says it has already posted online the chemicals it used at the one well it has fracked so far, confirming that these were below REACH thresholds.

Such early, voluntary compliance makes sense, given that the public in Europe may be even more jumpy about fracking than in the United States. In addition to outright bans in some countries, Britain ordered a suspension following a mini-earthquake in northwest England, attributed to Cuadrilla. (editing by Jane Baird)

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