EUROPEAN COMMISSION
Janez Potočnik
European Commissioner for Environment
"Shale gas in Europe – being consistent with a low
carbon economy, managing health and environmental
risks"
European Economic Congress in Katowice/Poland
14 May 2013
SPEECH/13/402
Mr Chair,
Distinguished guests,
Since the first industrial revolution, our economies have grown and expanded on the
basis of abundant and cheap energy.
With a fairly low hourly wage in Belgium, we can today buy enough gasoline to run a car
for 100 km. Had we not the engine and the petrol, we would need days to transport
ourselves on that distance. Energy has substituted labour and boosted human
productivity. So when energy prices rise, we get worried.
In times of economic crisis, it is therefore not surprising that we hear some voices
blaming the high price of energy for slow growth. In such a situation, people search for
solutions. Some people believe that if we had access to cheap energy, we would soon be
out of trouble: the economy would grow, we would create jobs.
Yet there are some worrying signals out there, which indicate that there is more to this
storyline. We are running out of steam
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We need to dig more or deeper to get the same amount of energy. This costs us
more than before.
In the European Union, domestic gas production has been steadily declining over
the past decade.1
The world demand for energy is set to continue growing rapidly. The largely
populated emerging economies need an increasing volume of energy to satisfy the
needs of their growing and wealthier population.
As resources become less easily accessible and more costly to extract, there is a
need to use often more complex and intensive techniques.
And the competition to access energy becomes fiercer. We, Europeans, are at a
disadvantage as we heavily depend on external sources2.
There are also the unintended and undesired side effects of our energy use – emissions
that we breathe and those that warm our planet.
Climate change is an inconvenient reality. We need to cut our greenhouse gas emissions
if we are to remain within the 2°C limits. There is no simple solution to this global
challenge. This implies a radical energy transition worldwide: we need to progressively
get rid of fuels such as coal or oil, and move to cleaner, renewable ones such as hydro,
wind or solar energy. We also need to cut our energy consumption, to promote energy
efficiency and resource efficiency. Investments in these fields can actually help the EU
cut energy costs and be more competitive.
Against this background, it is critical how we approach to energy investments being
made now, as they will have implications for the next 40 years or even more. The
current generation of policy-makers and investors has a strong responsibility in making
the energy transition possible. Most of you will, I am sure, share this diagnosis.
In this context, new sources of gas, such as from shale, seem attractive: a possible
substitute for more polluting fossil fuels, such as coal and lignite, a better security of
supply with less dependence on dominant energy suppliers from abroad, as well as a
source of public revenues.
1
The primary production of natural gas in the EU-27 declined from 203 257 (thousand tonnes of
oil equivalent) in 2004 to 140 173 (thousand tonnes of oil equivalent) in 2011. (Source: Eurostat)
2
The EU- 27 energy dependence rate -defined as net imports divided by gross consumptionamounted to 54% in 2011 (Source: Eurostat, Feb. 2013)
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The experience in the US has undoubtedly been a game changer. Prices have come
down very significantly until last year3 (although the latter start rising again this year).
According to the US Energy Information administration, the US could become a net
exporter of gas by 20204.
This has already had significant impacts on the rest of the world. It has led to greater
supplies of Liquefied Natural Gas (LNG) becoming available at global level, indirectly
influencing EU gas prices as well as stimulating cheaper exports of coal to the EU. And
we just heard from the American President days ago that we can expect more LNG
exports in the future.
In this light, I think we need answers to two key questions:
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Are these developments there to stay? In other words, for how long abundant and
cheap gas will be available?
Can it be replicated in other parts of the world, and in particular in Europe?
As regards the first point, some recent analysis by the US Energy Information
administration5 indicates that natural gas prices are actually projected to rise with an
expected increase in production costs after 2015, due to the progressive depletion of
resources in inexpensive areas.
On the second issue, the jury is still out, as there are large uncertainties about
recoverable volumes in the EU. But most analysts recognise that, even in the most
optimistic case, European shale gas development can only compensate for the decline in
conventional gas production. This would basically help maintaining the current level of
EU import dependency to 60 %. This would certainly help to bring some downward
pressure on prices of gas, but it would not make Europe self-sufficient in gas6.
The conditions in Europe are rather different from those in the US. Unconventional gas
production cost is expected by the International Energy Agency 7 to be about twice as
high in the EU compared to the US. The population density and the technical
environment are different. There has been some important downscaling of early
estimates of reserves in certain Member States 8. Some countries would also need to
invest heavily to upgrade their gas infrastructure9. And private operators are seeking
reassurance that the legal and regulatory environment is predictable and coherent,
providing a level playing field in the European Union.
Special care would need to be taken to secure the climate integrity, tackling issues such
as preventing fugitive methane emissions from extraction. This is quite possible as
techniques or best practices exist, but they would need to be widely adopted and
rigorously implemented.
3
Annual average Henry Hub spot natural gas prices reached 2.62 dollars per million Btu in 2012
compared to 10.07 dollars per million Btu in 2005. Source: US EIA, Market Trends Natural Gas,
April 2013
4
US EIA, April 2013
5
US EIA, April 2013: http://www.eia.gov/forecasts/aeo/MT_naturalgas.cfm#natgas_prices
6
JRC IET “ Unconventional gas in Europe” sept 2012
7
IEA " Golden Rules" report, 2012, p. 72
8
E.g The US EIA initial estimates for recoverable resources in Poland were revised downwards
by the official Polish Geological survey. Estimates are expected to be regularly revised in the light
of data collected from exploration.
9
eg in Poland about half of the households would need to be connected to the gas network,
according to a report by the German Institute for International and Security Affairs, Dec. 2012
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To secure the longer term climate integrity, efforts to explore and exploit shale gas also
need to be matched by efforts to promote energy savings, reduce coal and accelerate
the uptake of renewables.
So shale gas may bring about important benefits but only as part of a package to secure
the long term benefits of a transition to a more sustainable energy model in the future.
And for this to happen, the issue of the public acceptance of shale gas extraction needs
to be tackled. This is largely a question of making sure that environmental risks can be
managed so as to assure the general public that exploitation is safe. We have to
recognize that the public opinion does perceive environmental risks from the "fracking"
technology. Our American friends have told us this very clearly. People do not believe
claims that there are no risks at all. The International Energy Agency in its “Golden
Rules” report recognises that unconventional gas generally imposes a larger
environmental footprint than conventional gas development. And the US have recently
tightened rules that govern shale gas extraction, notably with regard to air emissions,
while Canada has also modernised its regulation.
The main challenges that have been pointed to concern notably water use 10, water
pollution, air emissions11, and the management of waste water. To reassure the public,
all of these risks should be prevented, managed and reduced. As I already said,
techniques and good practices exist; important parts of the necessary regulatory
framework are in place. But our duty is to ensure that these techniques and practices
are effectively used and that the regulatory framework provides adequate and effective
safeguards of the environment and human health.
Prospection or exploration licenses have been granted or are in process of being granted
in a number of Member States from Poland to the UK, Spain or Hungary. Romania has
lifted recently its temporary moratorium. Production is expected as of 2015 in some
Member States. At the same time, a number have reviewed or start revisiting their
applicable framework, so as to facilitate shale gas production and ensure that specific
risks are duly covered.
This is the case for instance of the UK which has introduced specific rules as regard the
monitoring of induced seismicity. Several countries 12 have decided or envisage to impose
a mandatory Environmental Impact Assessment for both exploration and exploitation
activities. Other Member States introduced temporary moratoria or enacted legal bans
on the use of hydraulic fracturing.
These various national initiatives that flourish may ultimately lead to a mosaic of
different legal frameworks/interpretations. All of this can affect what companies and
investors need most, i.e. a level playing field and a clear and predictable framework.
Indeed, the oil and gas industry naturally wishes to continue exploring for shale gas and
to start exploiting it. But it faces significant public acceptability issues in a number of
countries, issues which have been taken up at EU level by the European Parliament.
Public and private actors are therefore looking into ways to increase public trust.
Ensuring public participation and transparency in the process will be essential to that
end.
(shale gas necessitates high volumes of water which are not fully recovered and may lead, in
water stresssed countries to arbitrate between different uses of water)
11
(e.g VOCs and methane, 20 times more global warming potent than CO2)
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12
(e.g mandatory EIA in DK, AT, BG; and proposed in ES)
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It is not for the Commission to decide whether shale gas should be exploited or not. The
Treaty is quite clear: Member States are responsible for deciding on their energy mix 13.
But they have to ensure that this is done in line with the environmental rules that apply,
so as to ensure protection of the environment and human health.
The Commission's role is to ensure that the rules of the game are clear and predictable
for operators and authorities across Europe, while providing reassurance to the general
public that appropriate climate and environmental safeguards are in place.
These are the reasons why the Commission undertakes this year an EU level assessment
of the environmental, climate and energy aspects of shale gas with a view to enable its
safe and secure extraction. I am working closely with Gunther Oettinger and Connie
Hedegaard on the details. This assessment is on-going and, if all goes well, is due to be
released by the end of this year.
All options are being carefully examined as part of this exercise, in an open consultation
with all stakeholders. Where good practices need to be encouraged, the Commission will
foster those. Where interpretations need to be clarified, specific guidance will be issued.
Should legal gaps be identified, the Commission will take its responsibility, building on
the existing framework at both EU and national level.
To summarise: our energy strategy must have a long term horizon. Decoupling our
demand for energy from our economic growth and building a competitive, highly
resource and energy efficient low carbon economy should be the ultimate goal. Shale
gas may contribute to these goals, provided its potential in Europe is confirmed and that
risks associated with its exploration and exploitation are managed. Addressing health
and environmental risks will be of paramount importance for the shale gas industry to
gain public acceptance. The Commission is working towards delivering a framework that
should provide reassurance to the general public and enable the industry to operate
under clear and predictable rules.
I am not for or against shale gas. I am for using the potential of shale gas, if confirmed,
in an environmentally responsible way while keeping in mind our long term objectives
and supporting the policies which are leading us towards those objectives.
I also hope for your support in achieving that.
Thank you for your attention.
Art. 194 TFEU: a Member State has the "right to determine the conditions for exploiting its energy resources, its
choice between different energy sources and the general structure of its energy supply, without prejudice to Article
192(2)(c)." (according to which the "Council acting unanimously in accordance with a special legislative procedure
[can] adopt measures measures significantly affecting a Member State's choice between different energy sources and
the general structure of its energy supply".)
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