Posts Tagged Fracking
Travel is a wonderful opportunity to catch up on reading back issues of The Economist. Now I have made a valiant effort in recent years to reduce the pile. I am now only a few months behind. (I read the magazine diagonally when it comes out. Properly a little later). In the issue of 28 February of this year, there is a report on the town of Windsor, New York, along with 14 other towns along New York’s border with Pennsylvania, wanting to secede and join Penn. I have not been able to get an update on the state of affairs, and I am not sure whether the idea got much traction.
It is the ultimate answer to regulatory competition: to move an entire slice of territory into what is perceived as a preferable regulatory regime. The cause? New York’s strict (some might say: cautious) policy on fracking /shale gas. Penn State is fracking friendly. New York has banned it.
The Economist also flag that State secession in the US has only ever succeeded in 1777: when a chunk of New York became Vermont. Now, that’s a State where others pack and move to in upwards harmonisation fashion: for Vermont is arguably the top of the regulatory curve when it comes to environment and food regulation.
Ready steady, flare? The ECJ in Marktgemeinde Straßwalchen limits the scope of ‘commercial’ yet insists on strict cumulation test.
In a judgment undoubtedly with consequences for the fracking industry in the EU, the ECJ held yesterday in Marktgemeinde Straßwalchen, Case C-531/13. Rohöl-Aufsuchungs AG had obtained authorisation to undertake exploratory drilling within the territory of the Marktgemeinde Straßwalchen (Austria) up to a depth of 4 150 metres, without environmental impact assessment. The Marktgemeinde Straßwalchen and 59 other persons have challenged that decision before the Verwaltungsgerichtshof (Administrative Court).
The EIA Directive‘s key element is that not all projects are subject to mandatory EAI. Only projects listed in Annex I of the Directive are subject to a mandatory EIA. Annex I lists for example crude-oil refineries, thermal and nuclear power stations which fulfill certain production or output thresholds. Projects listed in Annex II of the Directive, are subject to a screening procedure of the Member States. Screening is commonly referred to as the process by which a decision is taken on whether or not an EIA is required for a particular project. The competent authority in the Member States can make this decision either based on a case-by-case examination or by establishing thresholds or criteria, or both.
‘Extraction of petroleum and natural gas for commercial purposes where the amount extracted exceeds 500 tonnes/day in the case of petroleum and 500 000 cubic metres/day in the case of gas’ is included in Annex I, sub 14. However the Court held that exploratory drilling even if by nature it is ‘commercial’ (lest it be carried out purely for research purposes), does not meet the conditions of Annex I entry 14, for that provision links the obligation to conduct an environmental impact assessment to the quantities of petroleum and natural gas earmarked for extraction. Prior to an exploratory drilling operation, the actual presence of hydrocarbons cannot be determined with certainty. An exploratory drilling operation is carried out in order to establish the presence of hydrocarbons and, where they are found, to determine the quantity and ascertain, through a trial production, whether or not a commercial operation is feasible. Thus, it is only on the basis of an exploratory drilling operation that the quantity of hydrocarbons that can be extracted per day can be determined. Moreover, the quantity of hydrocarbons earmarked for extraction in such a trial, as well as its duration, are restricted to the technical needs arising from the objective of establishing the feasibility of a deposit.
No mandatory EIA therefore on the basis of Annex I. However, Annex II, in entry 2 d), includes ‘Deep drillings, in particular:(i) geothermal drilling;(ii) drilling for the storage of nuclear waste material; (iii) drilling for water supplies; with the exception of drillings for investigating the stability of the soil’. Exploratory drilling falls under that entry. With reference to previous case-law, the ECJ emphasises that notwithstanding the discretion enjoyed by national authorities vis-a-vis projects included in Annex II, the characteristics of a project must be assessed, inter alia, in relation to its cumulative effects with other projects. Failure to take account of the cumulative effect of one project with other projects must not mean in practice that they all escape the obligation to carry out an assessment when, taken together, they are likely to have significant effects on the environment. With this approach the ECJ has countered the salami effect: the artificial splitting up of projects which do not individually meet EIA thresholds but which do so on a cumulative basis.
There are roughly 30 probes for gas extraction within the area of the Marktgemeinde Straßwalchen. The ECJ does not take the final decision as to whether an EIA therefore had to be carried out, for that is for the national court to be decided, however it is quite likely that the cumulative effect of these 30 probes does lead to a requirement for EIA (which will have to look beyond municipal borders) once it started being clear that the area concerned is a hotbed for such exploratory drillings.
Over at the FROG Leonie Reins and myself report on the minimum principles which the European Commission have adopted for shale gas regulation. A recommendation only – not a proposal for Directive or Regulation. However there are plenty of references to what some in the industry see as stifling measures, such as baseline reporting and EIA.
The recommendation does not provide new munition for either proponents or opponents of the activity. It remains to be seen how Member States implement these recommendations in practice (they are to report by end 2014) and whether such minimum principles are enough to regulate an activity which is associated with so many uncertainties and which faces public opposition and political debate in nearly all Member States. A strict interpretation of the precautionary principle would certainly ask for “more”; but “more” might come in the future: the Commission is buying time with these minimum principles, having the European elections in spring 2014 in mind.
Leonie Reins and myself have launched the Frog – a Fracking Blog. A blog on all thing fracking. No more to add than to encourage you to have a peek.
As I tweeted earlier, the French Constitutional Court has rejected the challenge to its moratorium on fracking. The precautionary principle was not quite addressed head on by the Court – it simply noted that in the current state of scientific insight, the ban was not disproportionate. The non-discrimination principle was also addressed: Schuepbach Energy had argued that in allowing geothermal projects and disallowing shale gas exploration, this principle was infringed. The Court disagreed: its review of the preparatory works of the Government Order showed that the government considered the two risks involved to be very different. Note the high degree of deference to the Government’s conclusions from scientific opinion. France is not by chance the state of origin of the ‘Bouche de la Loi’ theory!
Marjolein de Ridder and Sijbren de Jong report here on the geopolitical implications of shale. Legal arguments like the ones discussed in the French litigation have an important impact on that debate – or is it the other way around?
In Lone Pine Resoures v Canada, the company involved has filed a claim under NAFTA’s Chapter 11, which protects investors against ‘regulatory takings’. Quebec has placed a moratorium on fracking (shale gas exploration) by revoking all permits pertaining to oil and gas resources under the St Lawrence river.
I shall be reporting tomorrow on the rejection by the French Constitutional Court of the challenge to the French moratorium. In a related (not to fracking but to regulatory takings) development, the European Commission has posted an interesting defence of Biltateral Investment Treaties here. Reference is made ia to the ongoing Philip Morris and Vatenfall (Nuclear energy) issues, both high profile cases of alleged regulatory taking.
It has been reported that the challenge to the French moratorium on shale gas exploration, by US firm Schuepbach Energy, has been referred to the Constitutional Court. Schuepbach had initially challenged the freezing effect of the 2011 ban on the permits which the firm had been granted erlier in 2011, before the lower administrative court at Cergy Pontoise. This court referred for judicial review to the Conseil d’Etat, which now has passed the file on to the Constitutional Court.
I have difficulty getting hold of the official court documents. Reports suggest that the challenge is based on Articles 16 and 17 of the French Déclaration des droits de l’homme et du citoyen, dealing cq with the separation of powers and the right to property.
The French challenge comes amidst the imminent publication of the report commissioned by the European Commission into the suitability, or not, of the current legal framework in the EU and the Member States for regulating shale gas. A little bird tells me (ok, it’s a PhD student of mine, Leonie Reins, who co-authored the report) that the report will be published just after the summer.
In a related, more technical but not therefore less effective manner, Poland’s roll-out of fracking licences arguably received considerable setback following the ECJ’s end of June ruling in Case C-569/10, Commission v Poland: the court held that Poland should have put the licences out to open tender, in accordance with Directive 94/22 on hydrocarbons exploration. The case does not concern fracking licences alone, and the impact on licences that have already been issued is uncertain (although surely these licences cannot be held to be entirely kosher and free of challenge by competitors or NGOs, following the judgment).
Watch this space. I need not tell you that fracking is very controversial in the EU. See in particular this tour d’horizon /overview of contentious issues by Kathleen Garnett over at EU perspectives.