More Liberal voices. A Response to the EC Public Consultation on Unconventional Fossil Fuels in Europe

Lithuanian Free Market Institute in partnership  in partnership with F. A. Hayek SY0-301 Foundation (Slovakia), Civil Development Forum (FOR) (Poland), Institute of Economic and Social Studies (INESS) (Slovakia), Institute for Market Economics (IME) (Bulgaria), Centre for 200-120 Economic and Market Analyses (CETA),  (Czech Republic)and the Friedrich Naumann Foundation for Freedom (Germany) contributed to the public consultation of European Commission on unconventional fossil fuels (e.g. shale gas) in Europe, which took place from 20.12.2012  to 23.03.2013.

fuel

Unconventional fossil fuels in Europe

 

Objective of the consultation

Exploration and production of natural gas and oil within Europe has in the past been mainly focused on conventional resources. Whilst opportunities for this type of domestic extraction are becoming increasingly limited, technological progress is opening up new possibilities to extract unconventional fossil fuels such as shale gas, tight gas, coal bed methane, tight oil or shale oil, from geological formations which were previously too complex or too expensive to extract.

The European Commission aims to ensure that developments of unconventional fossil fuels are carried out with proper health, climate and environmental safeguards in place and under maximum legal clarity and predictability for both citizens and operators, as well as to ensure that the potential economic and energy security benefits of such developments can be reaped. Building on analytical work it has conducted since the end of 2011, the Commission has included in its Work Programme for 2013 the development of an “Environmental, Climate and Energy Assessment Framework to Enable Safe and Secure Unconventional Hydrocarbon Extraction” (http://ec.europa.eu/atwork/pdf/cwp2013_annex_en.pdf).

This internet-based consultation is part of the European Commission’s efforts to consult with relevant stakeholders and with the public on this topic.

 

Response in brief

Shale gas should be treated as any other source of energy and the guiding attitude of regulators should be neutral. Risks to the environment should be evaluated in fair manner, without positive of negative discrimination.


Shale gas should be treated as any other source of energy and the guiding attitude of regulators should be neutral. Risks to the environment should be evaluated in fair manner, without positive of negative discrimination. Similarly all the other issues e.g. noise, aesthetic aspects, increased traffic etc. should not be given any special attention just because these issues arise in connection with extraction of shale gas.

The fact that some countries give monopoly rights for extraction of hydrocarbons for government-owned companies is not an example worth following. Extracting of shale gas or other unconventional fuels should be run by private enterprises.

Special attention should be given to barriers to extraction arising from zoning laws. Developer should be able to join (or split) their land holdings, change the designation of land easily and speedily. EU guidance might be needed here: national governments hesitate, but broad changes in this legislation would help all economic activities, not just shale gas.

It would be wise to direct a larger portion of tax revenues from the extraction of resource goes to the local governments. Such schemes increase the support for resource extraction in local communities. Moreover such schemes are fair and just; it is usually the local communities, not central governments, who experience inconveniences in connection with resource extraction. Such schemes would be advisable not only for shale gas, but for other industries as well.

The method of extraction of a natural resource should not play a major (if any) role in assessing its benefit. We should be concerned with the final product, its price and availability, not how it was extracted. If EU has not banned the extraction or use of natural gas, there is no sound reason to not allow extraction of shale gas. The guiding attitude of regulators should be neutral.  Positive externalities e.g. so called “energy independence” or new jobs should not be a decisive factor.

Challenges will be reinforced by defects of the legal system. 1. Lack of objective quantitative methods to measure harm of shale gas extraction esp. in comparison with other economic activities. 2. Tax revenues from hydrocarbon extraction usually go the central governments, not local authorities or citizens, thus local communities lack incentives to allow extraction. 3. Complex planning, zoning and land-use rules create possibilities to continually block extraction via the legal system.

Impact assessment should concentrate on final and quantifiable harm (if such harm is foreseen), not the technological process or the technological detail (e.g. composition of chemicals used or methods of extraction and etc.) Criteria on what constitutes harm must be clear, quantifiable and not discriminate the industry of shale gas when compared to other industries. In other words, no special or unique restrictions should be developed specifically for the industry of shale gas.

EU should advise the governments to implement schemes that allow easier and less complex planning or zoning laws for all industries (extraction, manufacturing etc.) EU should develop recommendations on guidelines of sharing tax from hydrocarbons between central and local governments. EU should clearly defend freedom of establishment and criticize national governments if the latter choose to award rights of extraction, openly or tacitly, only to state-owned companies, but not to private one.