COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT
Date: 2014-01-22
Institutions: European Commission
Subjects: environmental research, hydraulic machinery, mining extraction, natural gas, natural hazard, renewable energy













EUR-Lex - 52014SC0022 - EN











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52014SC0022

COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT /* SWD/2014/022 final */









Contents
I............ Context. 2
II........... Need
for action.. 2
1........... What
is the problem being addressed?. 2
2........... What
is this initiative expected to achieve?. 3
3........... What
is the value added of action at the EU level?. 3
III......... Solutions. 3
1........... What
legislative and non-legislative policy options have been considered? Is there a
preferred choice or not? Why?. 3
2........... Who
supports which option?. 4
IV.......... Impacts
of the options. 4
1........... What
are the benefits of the main options?. 4
2........... What
are the costs of the main options?. 5
3........... How
will businesses, SMEs and micro-enterprises be affected?. 5
4........... Will
there be significant impacts on national budgets and administrations?  5
5........... Will
there be other significant impacts?. 5
V........... Comparing
the Options. 6
VI.......... Follow
up.. 7
I.                 
Context
In
the past decade, the United States has seen a very rapid development of
unconventional sources of gas and oil. The term ‘unconventional’ refers
primarily to the characteristics of the geological reservoirs or rock
formations containing the hydrocarbons, which differ from conventional
reservoirs. These unconventional formations often stretch over very large
areas, are characterised by low energy content per rock volume and by low or
very low permeability. The main types of unconventional fossil fuels are: tight
gas, shale gas, coal bed methane, methane hydrates, tight oil, shale oil, oil
shale and oil sands. Shale gas appears to be the unconventional hydrocarbon
with the greatest potential for development in Europe, with exploration
activities already underway in some Member States.
The
growth in US shale gas production has led to a consequential drop in US
domestic gas prices and to positive economic impacts on the US economy. These changes in the US economy have also had implications for international energy
markets. For example, greater liquefied natural gas (LNG) supplies have become
available at the global level, indirectly influencing EU gas prices[1] as
well as resulting in increased exports of coal to the EU.
In
the EU, a number of Member States are in the process of granting or have
granted concessions and/or prospection/exploration licences over the past three
years: Denmark, Germany, Hungary, Netherlands, Poland, Portugal, Romania, Spain, Sweden and the United Kingdom[2].
However, not all license holders have started concrete prospection or
exploration activities. Currently, such activities (at prospection or
exploration stages) have taken place or are ongoing in Denmark, Germany, Poland, Romania, Sweden and the UK. As yet, there is no commercial production of
shale gas in Europe, although a few pilot production tests have already been
conducted, for instance in Poland. Commercial production could start in 2015-17
in certain Member States (e.g. Poland, UK).
II.              
Need for action
1.                
What is the problem being addressed?
A number
of environmental impacts and risks related to shale gas development result from
the techniques used of High Volume Hydraulic Fracturing combined with
directional Drilling through rock formations. So far, there is very limited
experience of these techniques in the EU. Existing legislation in Europe is not fully equipped to tackle the resulting environmental impacts and risks (e.g.
surface and groundwater contamination, air emissions including greenhouse gas
emissions). Legal clarity and predictability of the regulatory environment is
essential to enable investments in this domain and also to reassure the public
that the impacts and risks of such activities are prevented, or if this is not
practicable, at least mitigated or properly managed. Without action to address
them, these problems are expected to endure. The most affected stakeholders
are: businesses wishing to invest in shale gas exploration and extraction;
water-related sectors wishing to ensure that water quality is safeguarded;
responsible authorities in Member States and EU citizens.
Most experts consider that the key
environmental impacts and risks associated with shale gas projects relate
essentially to the use and pollution of water; air emissions (including
volatile organic compounds and methane — a highly potent greenhouse gas); and
community impacts (e.g. land use, biodiversity, noise, traffic).
The main causes of such impacts and
risks have been identified as:
-   Activities
on very large areas
-   Geological
conditions (e.g. deep aquifers, abandoned wells, possible faults that can be
pollution pathways or lead to induced seismicity)
-   Cumulative
effects of multiple wells
-   Use
of typically hazardous chemicals
-   Large
use of water, part of which is not recovered
-   Waste
volumes and characteristics
-   Use
of venting and flaring during well completion
2.                
What is this initiative expected to achieve?
The
general objective is to ensure that unconventional fossil fuel developments, in
particular shale gas, are carried out with proper climate and environmental
safeguards in place and under the maximum legal clarity and predictability for
responsible authorities, citizens and operators, thus enabling the development
of the sector. The first specific objective is to ensure that environmental
impacts and risks arising from the techniques used for exploration and
exploitation activities, both as regards individual projects and cumulative
developments, are adequately identified and managed. The second specific
objective is to clarify the EU legal framework, so that investments in shale
gas developments across the EU can take place within a predictable setting.
3.                
What is the added value of action at the EU
level?
Geological
estimates show that several shale gas plays spread across the borders of Member
States. Moreover, environmental impacts and risks do not respect national
borders: impacts in one country can give rise to, or worsen, pollution problems
in other countries. This is in particular true for surface waters and
groundwater, for air quality and for greenhouse gas emissions. Action at EU
level is therefore justified. In addition, the European Parliament, the
Committee of the Regions, a majority of respondents to the public consultation
and several Member States have asked for action at EU level.
III.          
Solutions
1.                
What legislative and non-legislative policy
options have been considered? Is there a preferred choice or not? Why?
Apart
from the baseline, four options have been analysed in detail. 
Option A consists of a Recommendation to Member States on ways to address
environmental aspects of shale gas exploration and production. It also provides
for guidance on the interpretation of environmental legislation (such as water
and waste). Moreover it encourages voluntary commitments by the sector’s
operators. 
Option B proposes amendments to some existing EU environmental legislation
to clarify the applicable rules for the sector (combined with elements of
option A). 
Option C is a framework directive proposing a set of overarching goals,
including the disclosure of chemicals used and dealing with cumulative impacts,
while amending the existing environmental legislation as in option B; 
Option D is a directive setting specific requirements covering all issues
identified. 
No
single preferred option is put forward as trade-offs exist between the
different impacts: the aim of the impact assessment is to provide evidence for
a political decision.
2.                
Who supports which option?
The
majority of EU citizens are in favour of harmonised and consistent approaches
at EU level, according to Eurobarometer surveys. Views of individual
respondents to the public consultation are split when responses are considered
unweighted. However, when responses are weighted to reflect a country’s
population (five countries made up more than 90 % of the individual
responses), a strong majority is in favour of a comprehensive framework at EU
level. Environmental NGOs favour a regulatory approach to strengthen
environmental safeguards. The oil and gas industry tends to prefer soft
measures although it could envisage amendments to existing EU legislation.
Certain non-oil and gas operators and service companies have expressed interest
in comprehensive and specific EU legislation. Based on informal indications,
one Member State would prefer to rely only on national provisions, while a
number of Member States see a need for EU action, ranging from guidance to amendments
to existing EU legislation up to a stand-alone regulatory approach. The
European Parliament called for ‘harmonised provisions for the
protection of human health and the environment’ and stressed
the need for the ‘highest safety and environmental standards’. The Committee of
the Regions called for a ‘clear and legally binding regulatory
framework of the EU, preferably in the form of a directive’.
IV.           
Impacts of the options
1.                
What are the benefits of the main options?
All
options A-D aim at tackling environmental risks and impacts of shale gas
operations (although to varying degrees), providing enhanced legal certainty
and clarity, and addressing public concerns and this represents the main
benefit of this initiative. Health impacts addressed by this initiative are
direct impacts in terms of air emissions and indirect impacts in terms of
potential water pollution by chemicals, some of which are recognised as
carcinogens. The baseline is not effective in addressing environmental risks
and impacts, nor in providing legal clarity / certainty nor allaying public
concerns. Options B, C and D are increasingly effective in addressing the
identified impacts and risks, while providing a clearer and more predictable
regulatory framework for investors and reassuring the public. Option A, with
its non-binding character, is the least effective of the policy options
analysed. Clarification of the legal requirements for shale gas operations would
provide a more secure environment for investment and therefore enable shale gas
developments. The regulatory options (B, C and D), by enabling EU shale gas
production, could lead to a limited gas price decrease - or an avoided
increase -
thereby benefiting the EU economy in the short to medium term. However, given
the uncertainty on the estimated levels of shale gas resources in Europe and the many variables at stake in gas price setting, effects are uncertain.
Moreover, the competitive advantage of the United States in terms of lower gas
prices would remain. Shale gas development in EU would at best replace
declining conventional gas capacities. It would not alter the EU’s current gas
import dependency but it could potentially improve the EU’s negotiation
position towards external energy suppliers.
2.                
What are the costs of the main options?
For
shale gas operators, annualised compliance costs for policy options B, C and D
amount to 1.4-1.6 % of expected annual revenues, with option D (the most
costly) adding about 8 % to the absolute costs of operations. The costs
for operators of option A will depend on whether they implement voluntary
measures or not.   
3.                
How will businesses, SMEs and micro-enterprises
be affected?
Owing
to the level of investment needed to conduct shale gas exploration and
exploitation, operators are generally large companies. SMEs and
micro-enterprises are only expected to be affected indirectly, through related
increased activities (e.g. equipment, catering, and transport) and if EU shale
gas operations lead to impacts on energy prices. However, given the uncertainty
on the estimated levels of shale gas resources in Europe, and the many
variables at stake in gas price setting, effects are uncertain.
4.                
Will there be significant impacts on national
budgets and administrations?
Options
B, C and D represent different degrees of change to existing environmental
legislation; option A does not change it. National administrations would be
expected to adapt to that. Some elements of the changes - for instance
the provision of an integrated framework or requirements suggested under
options C and D -
could lead to a lower administrative burden compared to today. Otherwise no
significant impacts on public authorities are expected to result from this
initiative.
5.                
Will there be other significant impacts?
There
might be impacts on competitiveness, especially for energy-intensive industries
using gas or possible by-products as a feedstock, should the option chosen lead
to a significant shale gas production in the EU. In this case, this could
influence EU gas prices and potentially partially reduce the gas price gap with
the US. This is, however, uncertain since gas prices depend on a wide set of
variables. Even in a best case scenario, the EU gas price is expected to remain
twice as high as that of the US in 2035.
Economic impacts for Member States and regions will depend on several factors, including the perspective of shale
gas development; their current energy mix and import dependency; the stage of
development of their gas infrastructure; their economy’s level of energy
efficiency; and their administrative situation.
                        
V.              
Comparing the Options
 Options || Effectiveness in ||   Economic costs in EUR (broad estimates) ||     Economic benefits ||     Efficiency (effectiveness / costs) ||     Social impacts   ||     Timeliness of implementation ||     Easiness to enforce   ||   Consistency with relevant EU goals ||     Overall score 
 reducing environmental impacts and risks || providing legal clarity/certainty || addressing public concerns 
 Baseline || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 || 0 
 A || + || + || + || 0 to 595 000 || + || + || 0 || ++++ || n/a || + || + 
 B || +++ || ++/+++ || +++ || 595 000 || ++ || ++ || + || +/++ || ++ || ++ || ++ 
 C || ++++ || ++++ || ++++ || 595 000 to 643 000 || ++ || +++ || + || ++ || +++ || +++ || +++ 
 DD                D || +++++ || +++++ || +++++ || 643 000   || ++ || ++++ || + || +++ || ++++ || ++++ || +++/++++ 
VI.           
Follow-up
Within
an appropriate period after the preferred option is put into effect, the
Commission would report on the initiative’s implementation and effectiveness.
The duration of the appropriate period for reporting will vary depending on the
preferred option: longer in the case of legislative options (to leave time for
transposition) and shorter for non-legislative ones. Data collection for a
number of indicators is suggested to ensure monitoring of the implementation of
the initiative.
[1]               JRC IET report ‘Unconventional Gas: Potential Energy Market
Impacts in the EU’, Sept. 2012.
[2]               Licences
granted by Bulgaria and France were subsequently revoked by laws banning
hydraulic fracturing.