EN Official Journal of the European Union C 424/34

Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the exploration and production of hydrocarbons (such as shale gas) using high volume hydraulic fracturing in the EU’

COM(2014) 23 final

2014/C 424/05

Rapporteur: Mr ZBOŘIL Co-rapporteur: Mr IONIŢĂ

On 22 January 2014, the European Commission decided to consult the European Economic and Social Committee, under Article 304 of the Treaty on the Functioning of the European Union, on the:

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the exploration and production of hydrocarbons (such as shale gas) using high volume hydraulic fracturing in the EU

COM(2014) 23 final.

The Section for Agriculture, Rural Development and the Environment, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 22 May 2014.

At its 499th plenary session, held on 4 and 5 June 2014 (meeting of 4 June), the European Economic and Social Committee adopted the following opinion by 163 votes to 18 with 10 abstentions.

1. Conclusions and recommendations

1.1 The EU is undergoing massive transformations in the field of energy; the European economy and vulnerable consumers face an increasing risk of unreliable supply and high energy prices.

1.2 High volume hydraulic fracturing — ‘fracking’ — raises concerns about its public health and environmental effects; there is a need to provide the best information for the communities concerned facilitating their protection, as well as a need for more local involvement when decisions are taken on individual projects in compliance with the respective legal requirements.

1.3 The Commission's policy guidelines for unconventional hydrocarbon extraction consist of a set of principles to be implemented by the Member States within six months and a system of monitoring thereafter. Transparency regarding exploration and extraction activities is regarded as crucial in order to minimise risks and secure public acceptance for such projects.

1.4 The EESC believes that the Commission's documents (Communication and Recommendations) are based on a realistic view of the subject and that further discussions must be based on facts and findings, but it is also necessary to consider important subjective factors such as the public's perception of risk. The EESC takes a balanced view of the potential role of unconventional hydrocarbons in the EU energy mix.

1.5 The EESC appreciates the fast track process, with the Recommendations facilitating the start of transparent approval processes for exploratory activities in countries which consider the use of unconventional hydrocarbons indispensable to their energy requirements.

1.6 The EESC thinks that this framework, if correctly implemented, is sufficient for use at local community level and that there is no need to adopt a specific ‘shale gas directive,’ at least for the time being. The EU ‘acquis’ provides adequate means of finding solutions to the cross-boundary effects of fracking, should they occur. In the future, if such activities increase substantially in volume, the matter should be reconsidered.

1.7 The EESC would like to stress that such unconventional hydrocarbon resources, developed under the right institutional framework, can be a factor for growth in Europe. Relatively clean, reliable and flexible generation based on fossil fuels is necessary in order to prevent an imbalance in electricity systems. Furthermore, the frequent political crises in the EU's eastern neighbourhood show how important it is to have such a timely diversification of supply sources.

1.8 The EESC recommends that a number of additional points about fracking technology be emphasised in further Commission documents. The water consumption is not as high as sometimes assumed, though working in water stress areas requires special attention; the chemicals used are subject to regulation (under REACH), and no dangerous substances should be used; gas leaks must be properly managed as well as flaring of the waste gas. The ‘polluter pays’ principle applies.

1.9 The EESC emphasises as crucial for social fairness and public acceptability of unconventional hydrocarbons that the proceeds from royalties and excise taxes should be shared with the local budgets of the communities concerned in a transparent and predictable manner, in order to compensate them for any negative externalities that might occur.

2. Introduction

2.1 The EU is undergoing massive transformations in the field of energy, determined by overlapping factors such as important technological breakthroughs (concerning both renewables and fossil fuels), major geopolitical shifts and ambitious policy targets which sometimes lead to complex actions, the effects of which are difficult to sort out. But while the sources of energy have certainly multiplied and diversified, the European economy and vulnerable consumers face an increasing risk of unreliable supply and high prices.

2.2 One of the new techniques that has appeared in recent decades is high volume hydraulic fracturing — ‘fracking’ — which in the US has matured rapidly and brought undeniable benefits by increasing the stock of natural gas available for economic exploitation and substantially reducing prices. At the same time, fracking raises concerns about its public health and environmental effects, while the public complains about an insufficient level of transparency and consultation about shale gas activities. There is a need for the communities concerned to be better informed, as well as for more local involvement in decision-making on individual projects, including the impact assessment process as required by the applicable legal obligations.

2.3 The EESC would like to strengthen the Commission's message — i.e. that unconventional hydrocarbon resources, developed under the right institutional framework, can be a factor for growth in Europe. The lessons learnt from the deployment of renewables demonstrate that there will still be a need in the foreseeable future for relatively clean, reliable and flexible generation based on fossil fuels, in order to avoid an imbalance in electricity systems. What is more, the frequent political crises in the EU's eastern neighbourhood show, once more, how important it is to have a diversification of supply sources.

3. Commission document

3.1 European economies and citizens require energy which is sustainable, affordable and whose supply is secure and reliable. A high level of reliance on imports and low diversification of energy resources, among other factors, have contributed to increasing prices in the EU, particularly when compared with the situation of some of our main competitors.

3.2 Technological progress has enabled access to unconventional fossil fuels that were previously too difficult or costly to extract. In the US, unconventional gas sources currently account for 60 % of domestic gas production with shale gas showing the highest growth rate, making cheaper US coal supplies available for export, notably to the EU.

3.3 Potential reserves of natural gas from shale formations have triggered high expectations in parts of the EU: shale gas can be a possible substitute for more carbon-intensive fossil fuels, it can reduce dependency on non-EU energy suppliers, and may create additional jobs, economic growth and public revenues. Accordingly, some Member States are actively pursuing shale gas exploration.

3.4 However, the risks associated with the high volume hydraulic fracturing technique, commonly labelled ‘fracking’, raise concerns about its public health and environmental effects. A major part of the population also feels there is an insufficient level of precaution, transparency and public consultation in relation to shale gas activities. Some Member States have decided to ban hydraulic fracturing or impose moratorium.

3.5 In response to public concerns, the Commission has agreed to develop a framework for safe and secure unconventional hydrocarbon extraction in the EU, aiming to: — ensure that opportunities to diversify energy supplies and improve competitiveness can be safely and effectively taken up in those Member States that choose to do so; — provide clarity and predictability for both market operators and citizens, including for exploration projects; and — fully consider greenhouse gas emissions and the management of climate and environmental risks, including those to health, in line with public expectations.

3.6 This Communication accompanies a Recommendation, complementary to the current EU ‘acquis’, providing minimum principles for the exploration and production of hydrocarbons by means of high volume hydraulic fracturing. The objective of this Recommendation is to enable the safe and secure development of these resources, and to foster a level playing field for this industry in all EU Member States that choose to develop them.

3.7 Based on currently available information, natural gas production from shale formations seems to have the highest potential in Europe compared to other unconventional fossil fuels: technically recoverable shale gas resources have been estimated to be approximately 16 trillion cubic metres (tcm), which is much higher than for tight gas (3 tcm) or coal bed methane (2 tcm). As exploration projects develop, further knowledge on the economically recoverable resources from shale formations and other unconventional sources of gas and oil will be gained.

3.8 The new technique could offer Member States with a high import dependency the possibility to diversify their energy sources and enhance their security of supply. Even a moderate decrease or an avoided increase in gas prices — for instance through an increased or maintained negotiating position towards non-EU gas suppliers — would be beneficial for Member States. Shale gas activities also have the potential to bring direct or indirect economic benefits, for instance through regional investments in infrastructure, direct and indirect employment opportunities, and public income via taxes, fees and royalties.

3.9 The experts agree that shale gas extraction generally leads to a larger environmental footprint compared to conventional gas development: it requires a more intensive well stimulation technique, it mainly takes place on-shore and it covers wider areas. In addition, as productivity of shale gas wells is generally lower than conventional wells, more such wells need to be drilled. Some of these risks and effects could have cross-border implications, for example in the event of water and air pollution.

3.10 The environmental risks, also entailing health risks, have led to varying degrees of public concern, including outright opposition to shale gas projects. In particular, the asymmetry of information between the operators and competent authorities or the general public is seen as a problem, especially with respect to the composition of fracturing fluids and the geological conditions in which fracking is to take place.

3.11 The Recommendation mentioned invites Member States, when applying or adapting their legislation applicable to hydrocarbons involving high volume hydraulic fracturing, to make sure that: — a strategic environmental assessment is carried out prior to granting licenses for hydrocarbon exploration and/or production which are expected to lead to operations involving high-volume hydraulic fracturing; — a site-specific risk characterisation and assessment is carried out, related to both the underground and the surface; — baseline reporting (e.g. of water, air, seismicity) takes place, in order to provide a reference for subsequent monitoring or in case of an incident; — the public is informed of the composition of the fluid used for hydraulic fracturing on a well-by-well basis as well as on waste water composition, baseline data and monitoring results; — the well is properly insulated from the surrounding geological formations, in particular to avoid contamination of groundwater; — venting (release of gases into the atmosphere) is limited to the most exceptional operational safety cases, flaring (controlled burning of gases) is minimised, and gas is captured for its subsequent use (e.g. on-site or through pipelines).

3.12 It is also recommended that Member States ensure that companies apply the best available techniques (BAT), where applicable, and good industry practices to prevent, manage and reduce the impacts and risks associated with exploration and production projects. In addition, the Commission is reviewing the existing reference document (BREF) on extractive waste under the Mining Waste Directive. The Committee believes it would be published soon.

3.13 To facilitate the public's involvement, the Commission will establish a European Science and Technology Network on Unconventional Hydrocarbon Extraction, bringing together practitioners from industry, research, academia as well as actors of civil society. Further research in the field on understanding, preventing and mitigating the environmental impact and risks of shale gas exploration and exploitation is also announced in the 2014-2015 work programme of Horizon 2020.

3.14 EU Member States are invited to apply the principles of the Recommendation within six months and, starting in 2015, inform the Commission yearly about the measures adopted. The Commission will monitor implementation with a public scoreboard comparing the situation in the different Member States and will review the effectiveness of this policy in 18 months.

4. The Committee's comments

4.1 The EESC appreciates the balanced approach of the EC towards the unconventional hydrocarbons issue. Such a discussion must be open and based on facts and findings. Nonetheless, subjective aspects, such as the public's perception of risk, also need to be taken into consideration. The Communication is comprehensive, informative well-structured, and stresses the most important issues that need to be addressed in terms of environmental and health protection and general public acceptance. It offers a balanced view of the potential role of unconventional hydrocarbons in the EU energy mix.

4.2 Since not all the EU countries are endowed with this primary energy source, the subsidiarity principle must be followed. The EU ‘acquis’ provides adequate means of finding solutions to the cross-boundary effects of fracking, should they occur. The EESC believes that the current EU regulations are adequate, covering most aspects involved in fracking; there is no need to adopt a specific ‘shale gas directive’ for the time being. Thorough implementation of existing legal obligations is a safe way of developing this new extractive technology.

4.3 There is a relative scarcity of raw material sources within the EU; all available resources ought to be used in the most efficient way, factoring in the health and environmental risks. On the other hand, no human activity is totally risk-free and rational risk management must be an integral part of any human endeavour, including unconventional hydrocarbon exploration and extraction.

4.4 A high level of transparency in every exploration or exploitation project is of paramount importance for securing public acceptance of the new technology. Transparency should be enforced from the early stages of its development, because in order to be able to assess realistically the stocks of resources and the economic benefits from their exploitation, exploratory drilling is needed in areas indicating a potential of shale gas occurrence. A thorough impact assessment concerning the exploration must be provided. Security and sustainability of supply are fundamental pillars of EU energy policy. However, since the imbalance created in the system by wind and solar sources cannot yet be offset without compromising other objectives, such as decarbonisation or increased efficiency, the unconventional gas option appears to be a feasible one for smoothing out the energy transition.

4.5 Geopolitical considerations must be taken into account too, notably in the light of the latest developments in Ukraine, which occurred after the Communication and Recommendations were published. These are related to the security of energy supplies in the eventuality of lingering tensions in the EU's near neighbours, or a trade war with Russia. But they have also to do with developments in other parts of the world and the gradual decline of the EU among the major trading blocs.

4.6 The EESC recognises that unconventional hydrocarbon extraction technology has made progress in recent years. The key environmental and safety concerns have been successfully addressed in a credible manner and the risks in crucial environmental areas reduced. Nevertheless, the danger of water contamination in particular needs to be closely monitored; special attention must be paid to water stress areas. The EESC advises that the Commission's documents be revised at the earliest opportunity so as to incorporate the following suggestions.

4.7 When assessing extraction projects, the benefits accruing to local communities (infrastructure, jobs, taxes and royalties, etc.) should be set out in full. It is very important — and good practice — that the proceeds from royalties and excise taxes be shared with local budgets in a transparent and predictable manner, preferably using a formula available for public scrutiny, in order to compensate communities for any negative consequences caused by extraction and reduce their opposition to such projects. The EESC advises that this point be incorporated into the Commission's Recommendations.

4.8 The climate protection benefits should be set out in full: the emissions from combustion processes would be roughly half those arising from coal. When considering this issue, we should realise the gas leakage impact from a well to a burner, which in some parts of the world are quite high but which are hardly ever disclosed. Unofficially, the experts admit that the gas leaks in badly managed gas fields reach up to 12-13 % while good operational standards keep such leaks under 3 %!

4.9 Geological and seismic risks must be carefully assessed in specific basins but the Communication should mention that the fracturing process takes place in much deeper wells than conventional extraction, well below the aquifers in the case of shale gas. Knowledge should continue to be developed, nevertheless, regarding the medium and long-term risks arising from the sheer scale of the operations involved in the new technology.

4.10 The Commission may also want to mention that the water consumption per well is fairly low, and a good portion of this water returns to the surface to be either reused or properly processed. The chemicals used are subject to the REACH Regulation in the EU and gas leaks must be properly managed, as should flaring of the waste gas. In addition, land use in proportion to the power density of other gas fields is much less than that of PV/wind and biomass installations; currently, this phenomenon is seriously underestimated by proponents of all kinds of renewables, although it often plays a role when decisions are taken on the feasibility of primary energy sources.