The future of shale gas in the UK is attracting the attention of the government, both at a national and European level. However, Hogan Lovells believes that Europe could learn some useful lessons from the US.
Hogan Lovells’ London energy partner Richard Tyler and environment partner Christopher Norton welcomed George Osborne’s commitment to the future of shale gas in the 2013 Budget. The European Commission is also consulting on the regulation of unconventional fossil fuel exploration and development in Europe.
The Commission is seeking stakeholder views on the need for additional regulation ‘to enable safe and secure unconventional fossil fuels… extraction in Europe’.
However, Tyler and Norton pointed out that the implementation of proposed regulation could take some time based on experience in the US.
Tyler said: ‘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 US around extraction of unconventional fossil fuel could provide some useful lessons for Europe. Presently in the US, 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 US complicates oil and gas investment and corporate transactions, and can also give rise to resource-intensive litigation in multiple forums. The US experience will undoubtedly prove relevant to the evolving situation in Europe.’
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 US. 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 instils confidence in both organisations involved in shale gas exploration and the general public alike.’