* Commission recommends rules, not firm law for shale gas
* EU shale gas impact likely to be limited
* At best, EU shale gas will only cap level of imports
By Barbara Lewis
BRUSSELS, Jan 10 (Reuters) - Shale gas should only be developed in the European Union if a set of conditions is met, such as making public the chemicals used to extract it and taking stringent measures to prevent water contamination, a European Commission document said.
The measures are not binding, following heavy lobbying against formal law for shale gas, including a letter to the Commission, the EU executive, from Britain's Prime Minister David Cameron.
Other steps the Commission invites member states to carry out include an assessment of the environmental impact and keeping to a strict minimum any flaring, or controlled burning of surplus gas, and venting, or the release of gases, such as methane, into the atmosphere.
They are expected to be made public later this month as part of a package of 2030 climate and energy policy steps to follow on from existing 2020 rules meant to increase EU security of supply and lower its carbon emissions.
The draft shale gas document, seen by Reuters, says shale can play a part in helping to avoid the use of coal, which emits around twice as much carbon as gas, and to curb reliance on imports from suppliers such as Russia.
Some eastern EU nations are almost 100 percent dependent on Russian gas and are locked into expensive contracts linked to oil prices.
The United States, in contrast, has benefited from a shale gas revolution, which has drastically reduced its gas and electricity prices.
Although lower than Asian prices, EU natural gas prices are between three and four times higher than in the United States, putting pressure on energy intensive industries, such as aluminium and the chemical sector, the Commission document says.
At the same time, it underlines previous comment from the executive that shale gas would have a much more limited impact in Europe, where public opposition is strong and geology is very different.
Prospects in Poland, which like Britain has high hopes of developing shale reserves, have so far disappointed energy majors such as ExxonMobil, which withdrew from Polish shale gas exploration in 2012.
"In a best case scenario, it (shale gas) could maintain the EU's gas import dependency (currently approaching 70 percent) at a stable level," the draft document said.
The Commission does not comment on unpublished documents.