Media Briefing Note: Lessons from the U.S. Should be Heeded when Shaping the Future of Shale Gas in the EU and UK, say Hogan Lovells

LONDON, 26 March 2013 - The future of shale gas in the UK is attracting the attention of Government this week, both at a national and European level, but Europe could learn some useful lessons from the U.S., say Hogan Lovells. George Osborne commented on the importance of shale gas in his Budget speech last week, just days before the European Commission's Consultation on the regulation of unconventional fossil fuel exploration and development in Europe closed on 23 March 2013.

Hogan Lovells London energy partner Richard Tyler and Environment partner Christopher Norton welcome this commitment to the future of shale gas, though point out that the implementation of proposed regulation could take some time, based on experience in the U.S. The Commission is seeking stakeholder views on the need for additional regulation “to enable safe and secure unconventional fossil fuels…extraction in Europe".

Richard Tyler commented:

"The Commission Consultation is the first step in what will most likely be a lengthy regulatory exercise and the emergence of regulatory regimes in the United States around extraction of unconventional fossil fuel could provide some useful lessons for Europe. Presently in the U.S., tension exists between the exercise of regulatory authority by states and local governments specifically impacted by oil and gas development, versus the emergence of federal regulation around hydraulic fracturing, including the regulation of activities on public lands. In an industry where regulatory certainty and consistency is of paramount importance, this fragmented regulatory environment in the U.S. complicates oil and gas investment and corporate transactions, and can also give rise to resource-intensive litigation in multiple forums. The U.S. experience will undoubtedly prove relevant to the evolving situation in Europe".

Christopher Norton  added:

"The European Commission and UK Government should also be closely examining the efforts of public interest groups to influence public sentiment and government action in relation to shale  gas production in the U.S. Hydraulic fracturing has  been linked to groundwater contamination, air pollution, seismic activity, and other adverse environmental impacts, often without substantiation, and it is imperative that the EU is able to address  these concerns  and provide a regulatory regime that instills confidence in both organisations involved in shale gas exploration and the general public alike".

As part of the UK Budget last week, George Osborne announced that the Government would:

  • introduce a new field allowance for shale gas and extend the Ring Fence Expenditure Supplement for shale gas projects from 6 to 10 years;
  • produce technical planning guidance on shale gas exploration by July 2013 to provide clarity  for the industry;
  • ensure an effective planning system is in place as the shale gas industry develops, and by the end of the year, produce guidance for the industry to ensure that the planning system is properly aligned with the licensing  and regulatory regimes;
  • develop proposals by summer 2013 to ensure that local communities will benefit from shale gas projects in their area.

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