Frackforward in Germany: Government adopts new legislation

Today, the German government past ist “Entwurf eines Gesetzes zur Änderung wasser- und naturschutzrechtlicher Vorschriften zur Untersagung und zur Risikominimierung bei den Verfahren der Fracking-Technologie“, commented earlier on here and here.

Today, environmental minister Hendricks, despite considerable concern and opposition in her own coalition, presented the new fracking legislation. The final act got considerably watered down in the course of the legislation procedure. The Coalition agreement included a section on fracking which promoted a very careful and observant attitude towards the technology, whereas the draft as it stands includes a section allowing the commercial extraction of shale gas resources as of 2019. This is however only the exceptional case and provided that an independent expert committee considers the development as unproblematic.  This committee is composed of a representative of the Federal Institute for Geosciences and Natural Resources (BGR), a representative of the Federal Environment Agency (UBA), a representative of a State Office of Geology (Landesamtes für Geologie), who is not responsible for the approval of the exploratory drillings, a representative of the Helmholtz Centre Potsdam GFZ German (Helmholtz -Gesellschaft), a representative of the Helmholtz Centre for Environmental Research Leipzig and lastly an appointed representative of a competent national authority for water management, which is not responsible for the approval of exploratory drillings.

The provisions are applicable to drillings reaching from just below the earth’s surface until a depth of 3000 meters and thus closes a legal loophole. Exploratory drillings, including fracking activities for test purposes are generally possible, provided that authorities and Federal States do not use their veto right. Fracking in water protection areas stays prohibited, as stated in previous drafts.

All in all, the draft, even if watered down from its original version, includes the “requirements” outlined in the Commission minimum-principles and in some cases goes beyond the recommendations. It is not a ticket to ride for industry; the hurdles, especially regarding public opposition at the local level are still quite high. The legislation can enter ito force in 2016 and will be subject to review in 2021.

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All well? The US Fundamental Standards on Well Integrity, Water Protection, Disclosure of Chemicals

The US Department of the Interior Bureau of Land Management released today its today issued its new rules on shale gas fracturing applicable to on-shore Federal lands, and thus covering roughly 23 percent of total US shale gas production. Key provisions of the rules, which come into effect in 90 days relate to:

 

  • Ensuring the protection of groundwater supplies by requiring a validation of well integrity and strong cement barriers between the wellbore and water zones through which the wellbore passes;
  • Increased transparency by requiring companies to publicly disclose chemicals used in hydraulic fracturing to the Bureau of Land Management through the website FracFocus, within 30 days of completing fracturing operations;
  • Higher standards for interim storage of recovered waste fluids from hydraulic fracturing to mitigate risks to air, water and wildlife;
  • Measures to lower the risk of cross-well contamination with chemicals and fluids used in the fracturing operation, by requiring companies to submit more detailed information on the geology, depth, and location of preexisting wells to afford the BLM an opportunity to better evaluate and manage unique site characteristics.

 

The drafting of the rules took more than five years from the first draft to the final version; several regional forums, stakeholder meetings and a public consultation with the result of 1.5million comments were carried out. Even if only applicable to public federal land, these rules will have a big impact on on-ground management and set a new standard for US shale gas regulation, maybe emanating to other forms of land.

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Commission publishes preliminary results of the transposition of the Recommendation on shale gas in the Member States

Last week, the Commission published the results of the questionnaire on the implementation of the non-binding minimum principles on shale gas in the individual Member States. All Member States followed the Commission’s invitation to report on the implementation of the Recommendation in the national systems. Of the 11 Member States which have already granted or plan to grant authorisations for the exploration or production of hydrocarbons involving hydraulic fracturing, 10, with the exception of Germany (for the back and forth in the German debate on shale gas see also here; the fact that Germany refused to fully reply to the Commission’s questions will certainly raise further debate) agreed to reply to all questions contained in the questionnaire. It seems like the critical and crucial aspects which have been subject to concern and debate within the institutions and also on the Member State level, especially regarding the carrying out of an EIA (see also here), regarding public participation and the permitting procedure and risk assessment are addressed at the Member State level, at least “partially”. This very notion of “partially” as possibility of answering is indeed interesting, as not all Member States, even if most of them, describe what they mean by this; the proof of the pudding will be in the eating. Based on these findings, the Commission, in a next step, will now assess if the legal framework governing the shale gas exploration and extraction process as outlined in the Recommendation and transposed into the Member States’ legal regimes is enough to guarantee a save and sound activity, or whether more binding measures are needed. These however will not be done before autumn 2015. The findings of the Commission will be considered in the drafting of a special BAT reference document of shale gas. A more detailed analysis will follow shortly.

 

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Policy turn-around on shale gas in Germany – again

Afer considerable back and forth on the German overall policy approach on shale gas (reported on here, here and here) the German environmental Minister Hendricks finally announced that the commercial extraction of shale gas in Germany is not generally ruled out and is possible under “the strictest conditions and with the highest regard for the environment and drinking water.” The amended draft legislatory proposal is however considerably weaker in terms of environmental protection concerns than previous ones, experts criticise: whereas in the initial draft, fracking was generally banned until 2021, it is now possible as of 2019, also lower than 3000 meters, even if fracking in water and nature protection zones is still generally prohibited. It remains to be seen if the final word is spoken; especially taking into account that the reporting date of the Member States regarding the transposition of the European minimum principles has passed and the Commission is now evaluating if stricter measures on a European Level are needed.

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Reblogged from GAVC LAW

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.

Geert.

Ready steady, flare? The ECJ in Marktgemeinde Straßwalchen limits the scope of ‘commercial’ yet insists on strict cumulation test.

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A Research Agenda for Shale Gas: Challenges to a Coherent Regulation in the European Union

To date, most legal research on shale gas in the EU has focussed on the micro- level of regulation, namely on how shale gas is or should be regulated in different Member States, such as the United Kingdom, Germany or others. A European research agenda for shale gas needs to move beyond the analysis of the existing legal framework – however incorporating also the lessons learned from the United States shale gas experience – and broaden it to the implications at the macro-level. More precisely, four additional aspects are crucial in order to get a coherent idea on shale gas in the EU regulatory landscape: 1. the division of competences in the environmental and energy area between the Member States, 2. possible impacts of the technology on a Common European Energy Policy, 3. Other cross cutting energy and environmental issues, as well as 4. a discussion of the precaution and prevention principle in light of new technologies and scientific uncertainties.

For the full article please refer to Leonie Reins, European Union: A Research Agenda for Shale Gas: Challenges to a Coherent Regulation in the European Union, Renewable Energy Law and Policy Review 2/2014: pp. 167-171.

 

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News from the Canadian Underground

The Alberta Energy Regulator in Canada finally released its long awaited guide to play-based regulations introducing a risk-based approach to shale gas regulation. The pilot initiates a frist step to establish an alternative framework for shale regulation, putting the emphasis on operator performance and integrated management of cumulative effects. Being subject to only one application and decision-making process for the individual development project, the AER plans to introduce a radical shift in not only the shale gas licencing procedure but also regarding the management of public concerns and possible environmental impacts. Information on the project, stakeholder engagement, risk management, reporting and accountability are included from the beginning onwards in the application. The AER through its new approach moves away from a purely activity-based approach to a management –based regulatory approach instead. It remains to be seen if this new approach withstands especial the great public opposition surrounding shale gas extraction. The pilot phase ends on June 30th, 2015, applications from operators are received until the end of March 2015. For more information and an academical discussion on the issue see also: A.R. Lucas, T. Watson and E. Kimmel, “Regulating Multistage Hydraulic Fracturing: Challenges in a Mature Oil and Gas Jurisdiction”, in: D.N Zillman, A. McHarg et. al., The Law of Energy Underground, 127- 146, 2014, OUP.

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Conference Announcement: St.Gallen International Energy Forum IEF

After a one year intermission, the St.Gallen International Energy Forum IEF will return on November 27th and 28th 2014 with a roster of distinguished speakers and up-to-date topics. The 7th iteration will prove, once more, to be of high quality and relevance – both in regard to the invited speakers as well as to the topics covered. Topics will include inter alia: the EU internal energy market, shale gas as well as energy dispute resolution. We will welcome more than 15 speakers – from practice, academia and the EU institutions – from both sides of the Atlantic to present and discuss the hot potatoes of the field.

Date: 27th (evening) and 28th (full day) of November 2014
Location: St.Gallen, Switzerland
Programme: http://www.sg-ief.ch/programme/
Flyer: http://www.sg-ief.ch/flyer
Registration: Registration is possible on our website: http://www.sg-ief.ch/conference-registration/
Chairs: Prof. Dr. Dr. h.c. Carl Baudenbacher & Dr. Dirk Buschle

Please refer to our flyer at http://www.sg-ief.ch/flyer<http://www.sg-ief.ch/flyer> for a full list of our speakers and the topics covered.

If you have any questions, do not hesitate to contact us at contact@sg-ief.ch<mailto:contact@sg-ief.ch>.

German Federal Environment Agency releases 2nd study on shale gas fracturing

Last week the German Federal Environment Agency (Umweltbundesamt (UBA) released it 2nd study on fracking in Germany (full text not available as yet). The findings do not reveal any new information but once more confirm the state of the art of uncertainties and concerns especially regarding treatment of flowback water, water protection, Environmental Impact Assessment and the disclose of chemicals which are used during the fracturing process.

The UBA asks for a legal regulation of the activity and supports the key points for a regulation which were suggested earlier by the environmental and energy minister (commented on here). The findings of the UBA read in conjunction with the key points for regulation suggest that Germany at least in the near future will not be one of the key players on shale gas. However, one might argue that a moratorium of the activity might be enough for now. There is no immediate need to prohibit the activity through changes in existing legislation (e.g. the Federal Water Act) and to take away opportunities for the future as the uncertainties might become more foreseeable at some point.

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Pre-emption in the US: yes, no, maybe?

Earlier this month, the New York State Court of Appeal held in two cases (Matter of Norse Energy Corp. v. Town of Dryden and Cooperstein Holstein Corp. v. Town of Middlefield) that local zoning laws can ban hydraulic fracturing. New York has had a state-wide moratorium on fracking for several years (since 2008), but numerous localities have adopted zoning ordinances banning the practice, just in case the state’s position might change. The central thrust of the court’s decisions is that the state’s environmental laws (more concretely §23-0303(2) of New York’s Environmental Conservation Law) do not supersede local zoning authority with respect to hydraulic fracturing. The supersession clause in the Act states that state law shall “supersede all local laws or ordinances relating to the regulation of the oil, gas and solution mining industries.” However, the court held that this clause did not affect local laws that zoned where mining may or may not be conducted.

 

One would have hoped that this New York State Court of Appeal judgement put an end to the pre-emption discussion in the United States and served as an example also for other States and courts. However, last week, the District Court in Boulder County, State of Colorado held that “Article XVI of the Longmont Municipal Charter, which bans hydraulic fracturing and the storage and disposal of hydraulic fracturing waste in the City of Longmont, is invalid as preempted by the Colorado Oil and Gas Conservation Act” (see here for the full judgement). The current ban is however still in place, as the order is pending an appeal.

 

Thus, the pre-emption discussion continues, in case the District Courts’ discussion will be uphold, it will start from the beginning. Legal clarity for investors, operators but also the local public involved looks different.

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