Alice Whittaker writes that Ireland must study developments in the UK and Poland, where a favourable regulatory regime is being adopted to encourage shale gas exploration, and consider the intergenerational implications of our energy decisions
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Author: Alice Whittaker, partner, Philip Lee Solicitors and head of the firm’s Environment, Planning and Climate Group

Despite a significant increase in wind energy production over the last six years, Ireland continues to import over 85% of its energy requirements. Our energy dependence makes us vulnerable to geopolitical developments, cost hikes and interruptions in supply.

Our energy dependence also limits our ability to respond to the threat of climate change. Some 90% of the energy we import is comprised of fossil fuels. The Fifth Intergovernmental Panel on Climate Change (IPCC) Report contains stark warnings about the rate of global warming and the world’s ability to cope with potentially catastrophic climate change. The message is clear: climate change is happening, and action needs to be taken now.

In a statement published in response to the IPCC Report, the Department of the Environment refers to a number of consultations and initiatives, including the Climate Action and Low Carbon Development Bill, which is due to be published very soon. The Department’s statement highlights that Ireland has a long way to go before it will have recovered from the economic and banking crisis, and that it is important to balance economic and environmental objectives as part of the recovery.

One gets the sense that our expectations in terms of the content of the Bill are being managed before its publication. There is certainly no great sense of urgency in the Department’s response to the IPCC Report.

The Department of Energy is due to publish the long-awaited Energy Green Paper around the same time as the Climate Action Bill. The Green Paper will consider various energy options available in Ireland from oil and gas, nuclear, wind energy and other renewables, interconnection, district heating and energy efficiency.

In the course of strategic energy planning, the various options should be identified, described and assessed in an integrated manner against key objectives, to include security of supply, sustainability (including water use), affordability, decarbonisation, competitiveness, environmental protection and human health. In view of the long-term impact of climate change, intergenerational equity as required by the Aarhus Convention should also be a key consideration.

A PLACE FOR FRACKING?

What will the Government Green Paper say about unconventional shale gas extraction, often referred to as ‘fracking’, and its potential place within the overall energy mix? Probably very little, as the Government’s official position on fracking is unlikely to be formed until a major research project to be commissioned by the Environmental Protection Agency (EPA), on behalf of the Department of Environment, Community and Local Government, the Department of Communications, Energy and Natural Resources and the Northern Ireland Environment Agency, is completed.

This project will look at, among other things, the environmental impacts of unconventional gas exploration and extraction, including identification of regulatory gaps and best environmental practices.

Fracking is a process which involves vertical and horizontal drilling, usually at depth, and the injection of large volumes of fracking fluids at high pressure to create fractures in layers of impermeable rock to release the shale gas contained within.

Fracking uses greater volumes of water than conventional gas drilling and extraction methods. The fracking fluid will often include chemicals and biocidal products (usually between 0.5-2% chemical content). Because the gas cannot be extracted from a single ‘field’, it is necessary to have a number of drilling and fracking operations on-going at well pads over a wide area in order for the gas to be extracted commercially.

Depending on the location of the fracking site, plant, equipment, personnel, water, fuel and other materials need to be delivered by road, rail or pipeline to the site. As a result, fracking has a considerable environmental footprint, both at the well pad and in the surrounding area.

Fracking is viewed as a geopolitical game-changer in the US, slashing domestic gas costs and projecting the US to become a net energy exporter within the next few years. EU countries currently dependent on gas from Russia via Ukraine are looking on with interest.

From an Irish perspective, the most significant potential economic benefit of fracking is security of supply. Even if substantial volumes of shale gas are capable of being commercially exploited, gas prices are unlikely to drop significantly due to market conditions. A domestic supply could however slash our import costs and, like any industrial activity, fracking would certainly create jobs and give the economy a boost.

SHALE GAS

While shale gas is another fossil fuel that could add to our greenhouse gas emissions, there could be climate benefits if the following two conditions are met:

  • Firstly, naturally occurring methane must be captured during the process, as methane is a potent greenhouse gas;
  • Secondly, the gas produced must replace imported coal and gas, not lower carbon, renewable options such as onshore and offshore wind and biomass, or domestic gas supplies.

Fracking is not a new concept – it has been used in other jurisdictions and in the gas and petroleum extraction industry for many years, but it is new to the Irish onshore environment. In February 2011, licensing options were granted to three companies to study the shale gas potential of two areas: the North West Carboniferous Basin and the Clare Basin. There would appear to be interest among these companies to do exploratory drilling, which may involve fracking.

The Environmental Protection Agency and the Northern Ireland Environment Agency must therefore consider the conditions, regulatory requirements and best practices under which fracking might be safely undertaken with a low risk to the environment.

At an EU level, unconventional gas exploration and extraction is primarily regulated through a patchwork of EU Directives and Regulations, including the Mining and Waste Directives, the Water Framework Directive, REACH and the Enviroment Impact Assessment (EIA) Directive (to an extent).

To date, however, Member States have been interpreting the legislation differently, resulting in an inconsistent approach across the EU. The EU Parliament, therefore, asked the Commission to prepare a Directive on Unconventional Gas Exploration and Extraction.

EU REGULATORY FRAMEWORK

In the face of strong resistance to the proposed directive from Poland and the UK, and the Commission published instead a ‘Shale Gas Initiative’ at the end of January 2014, consisting of a non-binding Recommendation and Communication on Shale Gas. These documents set out minimum standards and best practice guidelines for regulators and operators.

The Commission has indicated it will keep the situation under review for 18 months and will, if necessary, at that stage introduce legislation for the protection of the environment and human health.

The Commission had also been asked to prepare a directive to amend the EIA Directive, and in particular to include shale gas exploration and extraction activities within the Annex I list of projects for which EIA is mandatory. On 12 March 2014, the final wording of the new directive was agreed. However, all references to shale gas were dropped, along with many other environmental protection provisions from the earlier drafts, including requirements for post-consent monitoring and compensatory measures.

This is a significant roll-back on the environmental protections that had been proposed two years earlier, when various EU reports and studies had identified a number of significant regulatory gaps at an EU level including:

  • Lack of strategic environmental assessment and forward planning;
  • No clearly applicable regime for assessing:
  • Underground risks
  • Well integrity
  • Methane capture;
  • Chemicals usage and disclosure of fracturing fluid composition (if not already registered under REACH);
  • Lack of integrated and consistent requirements for baseline assessment and operational monitoring of sites and receiving environment;
  • No clear enforcement regime.

IRISH REGULATORY FRAMEWORK

There are also issues at an Irish law level. Exploration and extraction are primarily regulated by the Minister for Energy under the Petroleum and Minerals Development Act 1960, as amended. This legislation has been amended to incorporate procedures to comply with the EIA and Habitats Directives, but it was not drafted with fracking in mind.

Licensing options were granted without strategic environmental assessment (SEA), and it is unclear at what stage the Department would intend to undertake SEA. Individual applications for exploratory licences are likely to require EIA, where deep drilling is to be carried out, but it would be preferable if the proposed licensing regime was subject to a higher-level strategic assessment before individual licences are granted.

On the grant of a petroleum lease by the Minister, the Petroleum Development Act allows the lease holder to gain access to such lands as are necessary for the purposes of carrying on the production activity. In the case of fracking, this might involve large areas of land which are currently in private ownership.

Great care will need to be taken to ensure that rights granted to private companies to compulsorily access lands for the purpose of fracking are exercised in a manner which respects Constitutional and human rights to private property, and that fair procedures are adhered to at every stage in the process.

Shale gas extraction activity would require an integrated pollution-control licence from the EPA. However, exploratory drilling activities are not currently within the EPA’s remit. The EPA’s role (if any) in relation to enforcement of exploration activities is also unclear.

Proposed legislation regulating the abstraction of surface and ground waters will be necessary to ensure that the requirements of the Water Framework Directive are met, and that there is appropriate governance over our valuable water resources. Abstraction of water should be regulated and subject to charges to reflect the economic and environmental costs of the water use.

Clarity is also required around the role of the Commissioner for Energy Regulation as safety regulator, and to ensure that all of the bodies with responsibility for regulating the sector have sufficient expertise and are competent to assess each stage of the proposed activity.

THE FUTURE

There are a many regulatory and technical issues to be investigated and resolved before unconventional gas becomes part of Ireland’s energy mix. We should study closely developments in the UK and Poland, where a favourable regulatory regime is being adopted to encourage shale gas exploration.

We should also consider the intergenerational implications of our energy decisions, in the knowledge that climate change and energy security issues are already upon us.

Alice Whittaker is a partner in Philip Lee Solicitors and head of the firm’s Environment, Planning and Climate Group, ranked ‘Top Tier’ by independent law firm ranking guide Legal 500. Email: awhittaker@philiplee.ie. Telephone: +353 1 2373700. Twitter: @WhittakerAlice.

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Author: Alice Whittaker, partner, Philip Lee Solicitors and head of the firm’s Environment, Planning and Climate Group Despite a significant increase in wind energy production over the last six years, Ireland continues to import over 85% of its energy requirements. Our energy dependence makes us vulnerable to geopolitical developments, cost...