The European Commission's Approach Towards Safe Shale Gas Extraction

Following years of deliberation, the European Union released a Recommendation on unconventional hydrocarbons and a related Communication in 2014. Although these documents are not legally binding on member states, they are nevertheless of great significance as they indicate, for the first time, the current and likely future stance of EU institutions on the regulation of unconventional hydrocarbons. The paper will trace the origins and development of these documents, as they provide vital clues for the road ahead in European shale gas regulation. Given the long-standing absence of specific European regulation on unconventional hydrocarbons, a range of different views on the applicability of the existing regulatory framework evolved. The paper highlights the main pillars of the system, which constitute the foundations of the 2014 Recommendation on unconventional hydrocarbons. The paper will conclude that the European Commission resisted numerous calls for implementation of an unnecessarily intrusive and legally questionable set of new rules. Instead, it adopted a flexible and sufficiently open approach to unconventional hydrocarbons extraction. The 2014 Recommendation may hence be characterized as a successful balancing act, which leaves member states with considerable leeway for implementing their own regulatory strategies, while providing much-needed assurance for investors that Europe will not be “closed for shale business”.

This article, written by Special Publications Editor Adam Wilson, contains highlights of paper SPE 175503, “Toward Reasonable European Shale-Gas Regulation—The European Commission’s 2014 Recommendation and Communication on Shale-Gas Extraction,” by Ruven Fleming, University of Groningen, prepared for the 2015 SPE Offshore Europe Conference and Exhibition, Aberdeen, 8–11 September. The paper has not been peer reviewed. Following years of deliberation, the European Union (EU) released a recommendation on unconventional hydrocarbons and a related communication in 2014. Although these documents are not legally binding on member states, they are nevertheless of great significance because they indicate, for the first time, the current and likely future stance of EU institutions on the regulation of unconventional hydrocarbons. This paper traces the origins and development of these documents, which provide vital clues for the road ahead in European shale-gas regulation. Introduction The potential threats of groundwater contamination, irresponsible disposal of flowback, the repercussions of significant land use, and increased emission of greenhouse gases have been named in recent scientific studies as main potential threats of shale-gas extraction. The current European law framework on environmental protection, mainly consisting of directives and regulations, entails some gaps and does not cover these issues comprehensively. Thus, the EU took recent action to develop shale-gas-specific regulation in order to close the identified gaps in the existing general framework. Because the existing secondary law norms were elaborated at a time when shale gas extraction was virtually unknown in Europe, one would suspect that they entail provisions that do not sufficiently cover the specific potential threats of this technique. Indeed, there are a number of issues. Probably the most important one is that environmental impact assessments (EIAs) are not compulsory for shale-gas projects. Although member states have the right to require an EIA for specific, individual shale-gas projects, this discretion does not appropriately match the level of potential environmental hazards of shale-gas extraction. The paper does not engage in an analysis of the pre-existing EU regulatory framework but focuses on the EU’s efforts to close the gaps in the framework that have been discovered previously. The EU introduced nonbinding, soft-law measures in this regard to create a level playing field among all member states in the form of the 2014 Shale Gas Recommendation and the 2014 Shale Gas Communication. The paper highlights the main features of the recommendation and the communication and considers whether they are sufficient to close the gaps in the EU secondary law framework. Overall, the author concludes that these measures go a long way in addressing the perceived gaps, although they do not succeed in closing all of them.

This chapter investigates the regulation of SWFs' investments in the EU and its Member States. The chapter starts with an overview of the latest multilateral initiatives concerning SWFs and national security-related concerns, namely the Santiago Principles and the OECD Guidelines for Recipient Countries Investment Policies relating to National Security of 2009. The aforementioned multilateral initiatives, also supported by the EU Commission, aim at avoiding national (over)reactions, and a downward spiral into protectionist. Furthermore the chapter emphasizes that the admission and establishment of foreign investments (direct investments of third countries' SWFs included) in the EU is primarily (but not exclusively) governed by the freedom of circulation of capital. This internal market freedom encompasses the fundamental principle of non-discrimination, which is also mentioned in the OECD Guidelines as a sound basis for national investment policies. Nevertheless, the aforementioned freedom is not absolute. Under the Treaty's rules it is subject to reservations and (possibly) Member States' derogations, when genuine public order and security reasons exist. In this respect, the chapter highlights that free circulation of capital and the case-law of the CJEU thereon gives Member States quite limited possibilities to lawfully resort to investment restrictions. That notwithstanding, some Member States (such as Germany and France) have tightened their foreign investment control procedures for public order and security reasons in recent times. The chapter argues that such national schemes are not in line with the principles developed by the CJEU in its case-law on the matter. Moreover, after the entry into force of the Lisbon Treaty the EU has acquired exclusive competence to legislate on the admission of FDI. The conclusion is drawn that a European harmonization is needed in order to address Member States' genuine public security concerns related to direct investments of third-countries' SWFs.

Unconventional hydrocarbon research has developed rapidly in the recent years. In order to review the advances in unconventional hydrocarbon research in the areas of reservoir geology, geophysics, engineering, and economic evaluation, the Unconventional Natural Gas Institute (UNGI) of China University of Petroleum (Beijing) was invited to organize this special issue. Papers in this special issue are mainly about tight oil and gas, shale oil and gas, and coalbed methane, which are the main types of unconventional hydrocarbon. In the area of geology and accumulation mechanisms, Song et al. divided unconventional oil and gas into different types based on relationships between source rock evolution and different unconventional reservoirs and further noted that the fundamental difference between unconventional and conventional hydrocarbons is the driving force. Xiao et al. discussed the controlling factors and enrichment area evaluation of shale gas of the Lower Paleozoic marine strata in south China, and established geological and loss models of shale gas for uplifted/folded and faulted/folded areas. Jiang et al. identified three types of tight sandstone gas reservoirs according to the timing of coupling between the two phases of gas charging and reservoir tightening, and clarified the controlling factors, accumulation mechanisms and modes of different types of tight gas reservoirs. Zou et al. optimized the evaluation parameters and standards of the tight oil ‘‘sweet spots’’ which are significant for the exploration of tight oil in China. In the area of geophysical exploration, Yin et al. proposed a constrained basis pursuit inversion (BPI) method for stably estimating the Young’s modulus and Poisson’s ratio, and effectively predicting the brittleness of unconventional reservoirs. In the area of hydraulic fracturing, Zeng et al. used the finite element method to quantify the stress distribution and investigated the controlling mechanism of the stress distribution of multi-stage hydraulic fracturing and fracture expansion. Ge et al. discussed the interaction between hydraulic fracturing fluids and shale matrix, clarified the mechanism of low flowback efficiency of fracturing fluids, and established its relationship to gas productivity. In the area of development and economic evaluation, Hu et al. discussed the pore structure of typical American and Chinese shales and investigated the effect of pore structure on the decline of shale gas well production. Wang et al. discussed the influence of gas transport mechanisms on the productivity of multi-stage fractured horizontal wells in shale gas reservoirs. Zhang et al. proposed a model of hydraulic fracture in tight oil reservoirs by using a combined finite and discrete element method to direct the hydraulic fracturing of tight reservoirs. Tang et al. quantitatively divided the coalbed methane well-production process into four stages and quantitatively characterized the coal reservoir permeability change in different stages. Zhang et al. simulated the absolute adsorption and excess adsorption capacity of medium rank coal to CO2, CH4, and C2H6 gas using molecular dynamics, and provided a theoretical support for improving coalbed methane recovery using CO2 injection. Luo et al. applied the discounted cash & Yan Song sya@petrochina.com.cn

Regulation of Electricity Markets in Europe in Light of the Clean Energy Package: Prosumers and Demand Response

Summary The European Union is facing huge environmental and climate-related challenges. Greenhouse gas emissions, biodiversity losses, ammonia emissions and continuing excessive nutrient loads in water bodies demand a much more targeted and consistent agri-environment-climate policy than has hitherto been the case. Agri-environment-climate policy measures to date – including within the Common Agricultural Policy (CAP) – have not sufficiently reduced the environmental pollution caused by agriculture. In its 2018 draft regulations, the European Commission proposes a “new delivery model” for the post-2020 CAP. This model shifts responsibility for policy-making towards member states and strives for greater “results orientation”, offering member states the possibility of implementing the CAP to focus much more on the public good. Under these legislative proposals, the EU will in future only specify the objectives and broad types of interventions, leaving member states to quantify targets and design the specific measures. To that end, each member state will produce a national strategic plan for its entire territory in which measures in Pillars 1 and 2 of the CAP are jointly programmed. This plan is to be submitted to the European Commission for approval. Three policy tools are envisaged in the design of the CAP’s “green architecture”: the “conditionality” of direct payments; the new so-called “eco-schemes” in Pillar 1; and environmental and climate-related regulations in Pillar 2 (AECM II). These three policy tools combined offer member states much greater leeway than they have had in the current funding period (2014-2020). In Germany this requires more extensive coordination between the Federal Government and German states. The Advisory Board’s conclusions on the legislative proposals submitted by the European Commission are mixed. Member states are being offered new opportunities to implement targeted agri-environment-climate measures, but the scope they are being given is so broadly defined that it is possible for their agri-environment-climate policies to be relatively unambitious and continuing to focus on income support. The Advisory Board recognises a risk of a race to the bottom in terms of the level of ambition of agri-environment-climate policy if the European Commission, which is the impetus behind it, does not apply more ambitious budgetary provisions or stringent criteria for the approval of national strategic plans. Whether a challenging, targeted and efficient agri-environment-climate policy is developed or member states stick with the status quo of agricultural aid primarily depends on their political will to take action. In the present report, the Advisory Board evaluates the legislative proposals for their potential to produce a targeted agri-environment-climate policy, and offers suggestions for an effective national design of this policy area as part of the CAP’s “new delivery model”. The Advisory Board also gives details of its April 2018 recommendation to gear the post-2020 CAP more towards serving the public good (WBAE 2018). To design an effective agri-environment-climate policy as part of the post-2020 CAP, the Advisory Board makes the following recommendations for the Federal Government and in part for state governments: I) Clearly identify agri-environment-climate policy issues and operationalise objectives. (1) Based on the issues identified, prioritise objectives; (2) state the contribution the CAP should make to achieving national environmental and climate action plans; and (3) support the interpretation of target income according to the case law of the European Court of Justice, thus focusing the CAP on safeguarding agriculture’s social functions. II) Specify and gradually increase the minimum budget shares for agri-environment-climate protection. For national implementation: (1) spend at least 30 % of the sum from direct payments and EAFRD funds on agri-environment-climate action objectives from the start of the new funding period; (2) increase this budget over ten years so that 100 % of Pillar 1 funds are available for ambitious eco-schemes, AECM II or animal welfare measures; (3) communicate this change in premiums in good time; (4) if eco-schemes are oversubscribed, reduce the basic premium (“basic income support for sustainability”); and (5) reallocate more funds from Pillar 1 to Pillar 2 as early as 2020. Furthermore, at EU level, support: (6) the complete removal of the basic premium over ten years; (7) the possibility of the basic premium being co-financed nationally; (8) a distribution of funds between member states in line with the challenges faced and added value to Europe; and (9) the stipulation that all member states spend at least 30 % of the sum from direct payments and EAFRD funds on agri-environment-climate objectives. III) Establish specific budgets at EU level for biodiversity and moor preservation across member states. At EU level, lobby for: (1) the establishment of specific EU budget shares for the Natura 2000 network and moor preservation (as a pilot project); and (2) the implementation across the EU in the medium term of a specified minimum percentage of extensively farmed land at regional level for species and biotope protection. IV) Replace blanket cross-compliance of direct payments with “specific conditionality”. (1) Minimise the conditionality requirements for individual farms in the CAP strategic plan and instead programme targeted, ambitious and well-funded eco-schemes and AECM II; (2) enshrine selected funding regulation standards in regulatory law to maintain land in a good agricultural and environmental condition (GAEC); and (3) from a certain subsidy amount, place beneficiaries under an obligation to receive advice or undergo individual farm sustainability checks. V) Reinforce constitutional and target conditionality. In EU negotiations, support the introduction of: (1) a sliding scale of constitutional conditionality; and (2) the implementation of binding target conditionality across the EU as part of the CAP strategic plans. VI) Overhaul the CAP’s performance framework. In EU negotiations support: (1) a closer alignment of the reported indicators and objectives; and (2) the simplification of reporting. VII) Clearly state the requirements for approval of the CAP strategic plans, thus increasing transparency and planning predictability. In negotiations at EU level, support: (1) the stipulation of minimum requirements in terms of the ambitiousness of eco-schemes; (2) timely public access to member states’ strategic plans; and (3) maximum inclusion of requirements in the basic legal instruments and not in the form of implementing acts or delegated legislative acts. VIII) Design targeted and efficient eco-schemes. (1) In the national strategic plan, programme measures that are of interest nationwide and have been formulated for the relevant objectives; (2) design and reward measures differently by location; (3) differentiate efficiently between eco-schemes and AECM II, and create targeted combination options; (4) exclude eco-scheme payments from capping or degression. IX) Open up eco-schemes to animal welfare measures and develop animal welfare support. At EU level, support: (1) the ability of member states to compensate for some of the costs incurred by increasing regulatory animal welfare standards considerably above the EU average with state payments within the scope of the European Agricultural Guarantee Fund (EAGF) or the European Agricultural Fund for Rural Development (EAFRD); (2) open up eco-schemes to non-investment animal welfare measures that can be linked much more effectively to the number of animals than to the eligible area. For national implementation: (3) considerably increase the use of funds for animal welfare funding; and (4) make use of opportunities to appropriate funds within the Joint Task for the Improvement of Agricultural Structures and Coastal Protection if funding does not come from eco-schemes. X) Increase the focus of Pillar 2 agri-environment-climate measures on objectives by means of innovative incentive mechanisms. (1) Test incentive tools for improved spatial steering of agri-environment-climate activities in practical applications; (2) develop programmes for results-based reward of environmental and climate performance; (3) do not stand in the way of a shift towards a more targeted agri-environment-climate policy by using the argument of higher administration costs. XI) Improve the institutional prerequisites for collectively organised agri-environment-climate protection. (1) Examine the extent to which elements of the Dutch system of collective nature conservation arrangements could also be applicable in Germany; (2) improve the institutional prerequisites for the implementation of collective models of environmental and climate action; (3) in pilot projects in the current finance period, support the grouping of relevant local actors into “biodiversity-generating communities”. XII) Revise the definition of subsidy beneficiaries and eligible land. At EU level, support: (1) the eligibility of all land managers who perform agricultural activities within the scope of Pillar 1; (2) the expansion of the definition of “agricultural activities” to include paludiculture in the draft CAP strategic plan regulation; and (3) the expansion of the definition of “permanent grassland” in the draft CAP strategic plan regulation so that member states can distinguish “permanent grassland” on a particular qualifying date. For national implementation: (4) make as much use as possible of the freedom to encourage high-quality nature conservation-related management and care of non-forest areas through Pillar 1.

Shale gas is now recognized as one of the most important unconventional hydrocarbon resources, primarily stored in micropores, particularly within the pores of clay minerals and organic matter. A clear understanding of unconventional hydrocarbon and CO2 sequestration in shale reservoirs is necessary for reducing the energy deficit. The present article reviews literature on source rock potential and CO2 sequestration in shale for the purpose to evolution of evolving source rock characteristics and the CO2 sequestration possibility in the shales of the Assam Arakan basin. The objective of this article is to discuss potential, unconventional hydrocarbon formations within the basin using rock eval data. The available literature indicates that studies on the evolution of source rock characteristics and CO2 sequestration potential in the shales of northeastern India have been conducted on sporadic and very limited samples. Therefore, an integrated study is required, including organic petrography, organic geochemistry, inorganic geochemical studies, stable isotopes, and CO2, CH4, and N2 adsorption capacity to characterize the shale formations to assess unconventional hydrocarbon and CO2 sequestration potential within the Assam Arakan basin.

Shale gas regulation in the UK and health implications of fracking

To date, social sciences have devoted little attention to the processes of expert knowledge production related to the exploitation of unconventional hydrocarbon resources. In this article, we examine an epistemic experiment led by the European Commission, the European Science and Technology Network on Unconventional Hydrocarbon Extraction, which was aimed at producing authoritative knowledge claims on shale energy development. By developing the idiom of ‘co-production’, the article provides a more fine-grained understanding of the processes through which competing knowledge claims, forms of epistemic authority, and new energy publics co-evolve in a situation of highly-politicized controversy. Drawing on our first-hand observations as participants representing the social sciences in the expert network, this article provides an in-depth ethnographic account of the struggles of the European Union authorities to manage and delimit the controversy. In this way, the analysis develops our understanding of the challenges in improving the deliberation of shale gas as a transnational energy policy issue.

President's column In the last couple of years, we have seen an extraordinary growth of unconventional gas activity that is literally reshaping our industry—notably, tight gas reservoirs and gas shales in North America and CSG/LNG projects in Australia (CSG means coal seam gas, which is another name for coalbed methane). These advances were made feasible by technology, which made possible what was once considered impossible to achieve (production per well, sufficiently low cost per well, etc.), but also by perseverance. We must not forget that it took about 20 years to find the key to unlock the potential of these unconventional gas plays, whose resource had been identified a long while ago. This remark applies also to the development of another unconventional hydrocarbon, the oil sands of Canada; it took 20 years from the concept of steam-assisted gravity drainage (SAGD), and the first patent by Roger Butler, to significant production using this technology As recently as 5 years ago, almost nobody was forecasting what is happening now with gas shales. Our current success has been made possible by a few technological breakthroughs, or step changes, which are by essence difficult to predict. I think that will be the case for all unconventional hydrocarbons, such as oil shales and, perhaps someday, gas hydrates. It is almost impossible to make a reliable guess about when gas hydrates will come onstream with significance, but this will happen at some time. It is also interesting to compare oil shales and gas shales—oil-shale production still faces a lot of technological barriers, and the economics look quite uncertain, which is exactly the situation gas shales were in 20 years ago. Unconventional hydrocarbons are interesting for two reasons: (1) the resources are huge, and may cover our needs for more than a century; and (2) the geographic distribution of those resources, which is mostly in non-OPEC countries. The gas resource is important in North America, central Europe, and Australia. The oil-shales resource, as known today, is mostly in North America and “new” countries such as Jordan, Lithuania, Morocco, and a few others. A very important point is that, in addition to “traditional” technology challenges, the development of all types of unconventional hydrocarbons is facing similar environmental issues: One is land use—in all cases, footprint is important, mostly due to the large number of wells. The other is water issues—production of dirty water (to be treated adequately), or the risk or fear of contamination of aquifers when fracturing the pay zone.

Unconventional hydrocarbons occupy an enormous proportion in the world energy budget nowadays. Both the progress in exploration and development of them as well as resources assessment results are the major factors to determine the future pattern of the world energy market. Although there are problems and difficulties, opportunities always coexist together with challenges. So far, the evaluation method of shale oil and gas has become matured, while the development of coalbed methane is rapidly driven by both demand and technology. The contribution of tight oil and gas reservoirs is increasingly prominent. For the timebeing, unconventional hydrocarbons in North America is dominated by shale gas and tight reservoirs, and the exploration and development of them are growing rapidly. In the Asia-Pacific region, shale gas projects in China and coalbed methane projects in Australia are developed in full swing and can be considered successful examples. The Europe has also started its ice-breaking travel, eventhough the European environmental and social impacts will greatly restrict local development of shale oil and gas in Europe. Meanwhile, other regions and countries such as Brazil and Argentina in South America are also having hot spots. Although the technology in exploration and development has been gradually optimized and put into practice worldwide, technological levels and geological conditions still vary considerabley in different countries. In particular, many problems such as economic evaluation, ecological environment evaluation, social impact evaluation and standardized operations, urgently need more concerns from various countries all over the world. Among issues that should be paid attention to presently are atmospheric pollution, water scarcity and pollution, wastewater treatment and utilization, possible land subsidence, environmental ecology, and social impacts of local communities.

Globally, unconventional hydrocarbons, known for the symbiosis of their hydrocarbon source and reservoir, pose significant seismic exploration challenges due to their confined target regions, extensive burial depth, minimal acoustic impedance variation, marked heterogeneity, and strong anisotropy. Over the past decade, electromagnetic (EM) exploration has evolved markedly, improving resolution and reliability, thus becoming indispensable in unconventional hydrocarbon exploration. Focusing on China's application of the controlled source electromagnetic method (CSEM), this review examines the geological and electrical attributes of these reservoirs, notably the low resistivity, high polarization and strong electrical anisotropy of shale gas reservoirs. Despite the demonstrated positive correlation between induced polarization (IP) parameters and reservoir parameters, current methodologies emphasize the IP effect, inadvertently neglecting electrical anisotropy, which affects data precision. Moreover, single-source CSEM methodologies limit the observational components, acquisition density, and exploration area, impacting the accuracy and efficacy of data interpretation. Recently developed CSEM techniques in China, namely wide-frequency electromagnetic method (WFEM), time–frequency electromagnetic method (TFEM), long offset transient electromagnetic method (LOTEM), and wireless electromagnetic method (WEM), harness high-power pseudo-random binary sequence (PRBS) waveforms, reference observation and processing technology, hybrid inversion, and enhancing operational efficiency and adaptability despite the pressing need for multi-functional software for data acquisition. Case studies detail these methods' applications in shale gas sweet spot detection and continuous hydraulic fracturing monitoring, highlighting the immense potential of EM methods in unconventional hydrocarbon sweet spot detection and total organic content (TOC) predication. However, challenges persist in suppressing EM noise, streamlining 3D inversion processes, and improving the detection and evaluation of sweet spots.

There is an expectation that the exploitation of unconventional hydrocarbons (UH) reservoirs will contribute to satisfy the growing demand of energy, since conventional reservoirs are on a declining stage. However, environmental consequences of the fluids used on unconventional formations are an aspect that has not been analyzed in depth in the region. Approximately 10-40% of the volume injected of fracturing fluids returns to the surface during the hydraulic fracturing process. The flowback not only includes the chemicals added, but may also contain various substances suspended from the formation. This situation demands the development of appropriate technologies for flowback treatment and the need to consider the existing legal context and the ecologic and environmental conditions. The impacts associated with UH activities that need to be analyzed in order to accomplish control and standardization, include those related to consumption of surface water or groundwater, potential contamination of regional water resources, treatment and final disposal of flowback. It is possible to achieve the sustainability of the activity, based on an environmental analysis. The objective of this work is the analysis of the environmental aspects associated to the extraction of UH (shale and tight). A comparative analysis of the activity, in a national and international context, including legal aspects, technologies used and environmental risk is performed. Additionally, possible mitigation measures of environmental risks are evaluated. The study includes the analysis of the existing environmental legislative framework in different regions where the exploitation of UH could be made. It also includes the analysis of the actual effluent management strategy. A description of the environmental conditions, including climatic, geological, hydrological and ecological conditions is performed in areas with completion activities, in order to identify the regions with higher level of environmental risk. Possible technologies for flowback water treatment and reuse are analyzed, depending on physicochemical characteristics and volumes of water. The novelty of this work is the analysis of the factors that determine the environmental risk in the extraction of UH, especially in the hydraulic fracturing process, which includes technologies, environmental conditions at the site and the legal context in the region. This allows identify the areas of higher and lower level of environmental risk in order to proceed to the identification, implementation and development of potential mitigation measures to achieve the sustainability of the activity.

Chapter 1 - The Fuss about Shale

Shale gas and tight gas exploration and extraction processes create potential threats to the environment. In Poland, no comprehensive guidelines for environmental risk assessment have been prepared so far. This paper presents a proposal of environmental risk assessment methodology which can be used for corporate risk management procedures during exploration and extraction of unconventional hydrocarbons in Poland. The most frequent environmental threats that may occur during the exploration and exploitation of unconventional hydrocarbon deposits include degradation of soils through construction of drilling rigs and access roads, landforms change, local soil pollution caused by fuels, cleaning agents and materials used to prepare drilling fluids, rubble, cement, gravel, pollution of surface and underground water as a result of emergency discharges of sewage, infiltration of pollution from waste reservoirs, disturbance of hydrogeological equilibrium through significant water intake, noise and atmospheric pollution resulting from the combustion of fuels. To check the level of these threats’ six exploration sites form Pomeranian and Carpathian region of Poland (3 wells of shale gas and 3 wells of tight gas) have been evaluated in detail, and the risk quantification has been made. Because of a local, short-term and reversible environment impact, the environmental risks for the exploration and extraction processes of unconventional hydrocarbons have been found to be medium or negligibly small. It is recommended that using the same methodology for other regions of Poland where we can find unconventional hydrocarbons and it can be enriched in dedicated application with spatial maps to give the investors a quick feedback on the potential environmental risks. Key words: environmental risk assessment, sustainable development, shale gas, tight gas drilling rig, environment pollution.