Shale Gas Interest Representation in the EU

Public Affairs / Lobbying in the European Union


Master's Thesis, 2012
30 Pages, Grade: A

Excerpt

Table of Contents

1 Introduction
1.1 Research Method and Data: Case Study

2 Shale Gas: Resources, Arguments, and Regulations
2.1 Opposition: Environmental and Health Concerns
2.2 National Resources and Political Positions
2.3 EULegislativeFramework

3 Analytical Framework - Political strategies of EU interest representation
3.1 Economic and organisational determinants of lobbying
3.2 Institutional determinants of lobbying

4 Analysis

5 Conclusion

6 References

List of Tables and Illustrative Materials

Figure 1: World's totally recoverable shale gas resources

Table 1: List of political and non-political stakeholders in the EU shale gas debate

1 Introduction

In the Energy Roadmap 2050 the European Union (EU) committed itself to a sustained shift to renewable energy in order to help halt climate change and alleviate concerns over "peak oil". This commitment has been rationalised by claims that reliance on fossil fuels is finite, thus unsustainable, and that renewable energy sources provide the only environmentally friendly and economic alternative. (European Commission, 2011a) These claims are now being challenged by the ability to make previously undeveloped, so-called "unconventional" gas resources, viable. One such unconventional gas is shale gas, which has gone from a marginal to a very significant player in the energy mix of the United States (US) over the course of only a few years; this has resulted in lowered gas prices and greater flexibility to ease the cutting of emissions. As a result, many believe that shale gas has the potential to become a major power source worldwide. But despite shale gas's importance and viability in North America, China, and Australia, the potential for the development and recovery of shale gas in Europe is limited due to stricter regulation, legislation, and higher population density. Moreover, the shale gas industry is facing strong objections from environmental pressure groups. The technique that is used to extract shale gas from rocks - hydraulic fracturing, or "fracking", as it is known in the industry - provokes concerns about health and safety risks, not least triggered by recent incidents such as earth tremors in Blackpool in the United Kingdom (UK)1. There are efforts under way across the EU to regulate or even ban the process. Although there is strong support for shale gas by the Polish and British governments, it remains to be seen if there is enough political will to prompt a u-turn on the EU's commitment to renewables and tap into Europe's unconventional natural gas resources. There is going to be significant legal and regulatory developments relating to unconventional gas all expected in the coming years, including a possible challenge being raised against hydraulic fracturing. Should the backlash against shale gas persist uncontained, at least some of the billions of Euros already spent on exploration could prove to have been fruitless investments.

The European oil & gas industry is concerned about the growing uproar and opposition against shale gas. During my time2 with College Public Policy (CPP), a leading government relations agency based in London, we were approached by several drilling companies to develop a multi-pronged strategy to address: 1) how the industry could confront the immediate issues and pressures it faces in the UK; 2) how it could inform and reassure policy makers around possible health and environmental concerns; and 3) how the industry can mitigate against potentially destructive legislation. CPP has a strong energy sector experience having worked for clients in the wind energy, biomass, and solar industry at local, regional and national government levels in the UK. As part of the team, I conducted comprehensive research and reporting on energy policy and acquired a solid understanding of the different forces at play in policy-making in this sector. This paper will expand on the strategic considerations around shale gas at the EU level and examine opportunities and challenges for the shale gas industry's ability to influence EU policy-decisions. Particular attention will be devoted to relevant facets of interest representation in the EU legal and regulatory environment. Approaching shale gas developments from a neutral perspective, this paper will seek to highlight possible courses of action for the shale gas industry to foster a more positive reputation among relevant stakeholders. Pursuit of these strategic opportunities would permit continuation of seismic research and exploration activities.

For this purpose, a descriptive case study approach has been chosen to investigate the shale gas policy issue in the EU and lobbying activities undertaken by the shale gas industry. First, the paper investigates how the nature of the shale gas issue shapes and limits the ways in which shale gas interest groups can operate in Europe. It becomes apparent that previous attempts to lobby national and EU institutions have been both sporadic and uncoordinated within the industry, but that there is great potential and willingness to streamline and channel their expertise and information, which are critical resources for acquiring access to the EU policy process. In the third chapter, the paper looks at the theoretical framework of strategies of EU interest representation, more specifically at the way corporate and organisational factors influence the political strategies of shale gas interest groups, and how firms' lobbying strategies need to be adapted to the complexity of the EU policy process. Resulting from this analysis, it is argued that the shale gas industry needs to form ad-hoc coalitions, which would allow to operate with the flexibility required in the dynamic, multi-level and technical EU energy sector. In the fourth chapter, the hypotheses will be tested against the actual lobbying activities by shale gas supporters and opponents in Brussels.

Although the jury is still out on the shale gas case, this paper will be able to answer a first series of questions that are crucial for the shale gas industry when trying to realize influence on European decision-making.

- Who initiates the debate and who sets the agenda? Who drives the debate when an issue is contested?
- How can shale gas interest groups become involved in the debate and shape the agenda?
- What is the most effective form of collective action to gain access to EU institutions?

Based on these questions, this paper's conclusion refers to a general application of the findings to lobbying in the EU energy and environmental policy realms.

1.1 Research Method and Data: Case Study

A case study approach has been chosen for this study because it is very useful in investigating a single issue through contextual analysis of a number of events or conditions and their relationships. (Campbell, 1975 and Yin, 1994) The challenge is to define when a case begins and when it is complete enough to evaluate the results. The shale gas debate is in its initial stage, considering the typical five-year periodbetween the commencement of policy drafting in the Commission and the implementation in the Member States. Moreover, we are yet to see if the debate is going to result in a policy-making process at all - although current events indicate forthcoming EU-wide efforts to regulate the standards for shale gas development and hydraulic fracturing. However, in building on proven theoretical models and arguments this study will be able to illustrate a valuable case. As part of this case study, multiple sources will be drawn upon to build independent analysis on the concrete options for the shale gas industry. Official reports, governmental and industry statements, journals and newspaper articles were used to develop initial understanding of the issue and inform this paper's hypotheses. The findings will be backed up by expert interviews with consultants of CPP's office in Brussels, Policy Action, with one part been conducted during the development and planning phase of the campaign, and a second one four months later when the campaign has been launched. That way it is possible to explore not only the strategies used but also the reasons for strategy use. The final chapter will synthesise the finding of the shale gas case study and propose more general indications for energy and environmental interest representation in the EU.

Shale Gas: Resources, Arguments, and Regulations

About a quarter of global recoverable natural gas reserves are in shale formations3 (see Figure 1). The International Energy Agency (IEA) expects persistent global growth of shale gas production from the currently less than one percent to 11 percent by 2035. By that time it is anticipated that two thirds of the gas consumed in the US and around 80 percent in China will come from shale formations. (IEA, 2011) The surge of shale gas supply is expected to have far-reaching geopolitical implications in the years to come. The European Centre for Energy and Resource Security (EUCERS) persists that the shale gas resources in the US will limit the need for imported liquefied natural gas (LNG) from the Middle East. More LNG will be available for the European market, which is currently dominated by a few suppliers from Russia and the Middle East. And if Europe taps into it's own shale gas resources the balance of gas supply will have to be readjusted around the world. (EUCERS, 2011)

2.1 Opposition: Environmental and Health Concerns

The technological breakthrough sparking the shale gas boom is the combination of horizontal drilling and hydraulic fracturing. First used in the Barnet Shale of North Central Texas in 2003, the technique has spread across the US and is now the norm in most natural gas producing areas of the world. Hydraulic fracturing uses high-pressure fluid to crack open shale rock formations thousands of feet below the surface. The resulting fractures allow gas to flow more freely and be recovered. The hydraulic fracturing fluids are, on average, about 98 percent water and sand. The other additives consist of chemicals in differing combinations used to prevent bacteria growth, reduce friction, and keeping the sand suspended in the solution. (FracFocus, 2011) Despite the positive outlook on shale gas globally, the industry continues to suffer from a less-than-positive public image due to past environmentally damaging drilling incidents, which attracted much attention and numerous concerns about the safety of fracking. A recently published paper by the Tyndall Centre for Climate Change Research (2011) warns that further research on the environmental impacts of the drilling procedure is needed before approval should be given to any new projects.

There are two camps that wish to put a stop to this energy revolution. First there are competitors, i.e. oil, coal, and nuclear energy producers as well as existing gas suppliers that fear lower cost gas entering into their markets. Frank Umbach4, Associate Director of EUCERS, argues that the strong ties between Gazprom and most national governments, especially Germany, make them hesitant to pursue this new supply source. (Beckman, 2011)5 The second group of opponents are environmentalists. In 2010, US filmmaker Josh Fox released a documentary entitled "Gasland" showing methane-entrained water from a kitchen faucet flaming in the sink. Although a point-by-point rebuttal of these and other allegations has been made by the American Natural Gas Alliance concerns about contaminated drinking water remained at the forefront of public consciousness. Another group of opponents, the renewables industry, borrows argumentation from both aforementioned camps. The development of shale gas resources could potentially create over-capacity in a key rival fuel for renewable power generation, challenging the economic viability of renewables. One of the biggest communication challenges faced by the shale gas industry, however, is that shale is moving into local areas completely unfamiliar with oil and gas exploration. These constituencies tend to be vulnerable to fear.

2.2 National Resources and Political Positions

Companies own shale gas acreage across more than a dozen countries in Europe, but most activity is currently focused on Poland, this involves approximately 20 companies including a number of North American and European small independent players, as well as major oil & gas companies such as ExxonMobil, Chevron, and Total. The outlook and possibility that, even if only half of the projections were accurate, Poland could be a gas exporter within five to ten years, certainly has created excitement at the highest levels in Warsaw. In November 2011, Poland's Treasury published its departmental plan, which assumes a maximisation of the number of shale gas drillings targeting production of 200-300 million cubic meters in 2014. (Warsaw Voice, 2011) Since the UK Energy and Climate Change Committee (ECC) published its report on shale gas in May 2011, the subject has attracted significant attention, in the spotlight of potential reserves now appearing to be much larger than initially thought (ECC, 2011). Despite revelations that two domestic earthquakes were linked to hydraulic fracturing operations conducted by Cuadrilla Resources, which stopped all fracking immediately following the first earthquake, Charles Hendry MP, Minister of State for the Department of Energy and Climate Change reaffirmed the Government's commitment to shale gas. He affirmed his expectations of a "multi-billion- pound benefit to the UK economy from optimising its resources." (House of Commons, 2011)

However, environmental groups are united in opposition around Europe. After large-scale controversy and intense lobbying by anti-shale gas groups in France, Paris reversed its initially supportive position and restricted shale gas exploration in July 2011. Many in the industry fear that there is a real danger of France and Germany building a strong opposition. Germany's government is keen to be perceived as endorsing environmentally friendly policies. A report by Ernst & Young predicts "Germany's relatively modest estimated shale gas resources are unlikely to have a significant impact on the country's heavy dependence on imports from Russia and Norway." (Nijoka et al., 2011, p.15) Moreover, environmental opposition from the public and the government is hampering Germany's prospects for shale gas development. Germany's Federal Environment Agency (FEA) issued draft proposals for new mining laws in December 2011, including obligatory environmental impact assessments for each well and a ban on hydraulic fracturing in areas where potable water is collected. (Umweltbundesamt, 2011) It is likely that the FEA's proposal will be used as the basis for the country's new mining regulations. If they are, it will make shale gas production unprofitable in Germany. (Ward, 2011)

The expanding controversy over fracking in Europe is beginning to look a lot like the campaign against fracking in the US. Hydraulic fracturing is now highly regulated or prohibited in some states. New York, for example, imposed new rules on drilling in the form of mandatory off-limits zones around waterways and other protected areas. The European shale gas industry fears that those cases could be used as model by European policy-makers for EU-wide regulation on shale gas. Yet, in comparison with industry practices in the US, the European oil & gas industry faces even stronger hurdles, including a higher population density and more stringent legislation. Ben van Beurden, Executive Vice President of Shell Chemical, said at a press event in Amsterdam that the chances of Europe embracing shale gas were slim owing to fundamental differences in US and EU mineral rights. "In places like North America, the land owners love to see a drilling rig because it means money in the pocket. But in places like North Western Europe, mineral rights are being held by the state so the only thing as a landowner you have is inconvenience." Although, Van Beurden added, "it may happen in places that are more at the economic periphery, like Poland." (Cited inTurley, 2011)

2.3 EU Legislative Framework

According to Article 194(2) of the Treaty on the Functioning of the European Union (TFEU), Member States have the right to determine the conditions for exploiting their domestic energy resources. Commitment to environmental preservation notwithstanding (Article 194(1) TFEU), each Member State has the responsibility to decide whether it will allow prospection, exploration and/or production of unconventional gas resources within its jurisdiction. Member States also have to establish appropriate licensing and permission regimes for all hydrocarbon projects that ensure adequate environmental protection and prevention of water pollution. Yet, according to a report by the European Commission's Directorate General for Internal Policies, there are hundreds of EU regulatory instruments potentially affecting the shale gas industry, covering a broad range of topics from safety at work, extracting activities, waste management, to protection of wildlife. (DG IPOL, 2011) Seven Directives are especially critical to the industry: Groundwater Directive, REACH, Natura2000, Environmental Impact Assessment Directive, Waste Framework Directive, and Noise Directive. The Water Framework Directive as well as the Groundwater Directive is currently under deliberation. Similarly, there is debate in the European Commission (EC) about how REACH, which regulates chemicals of all kind in Europe, should be operated with regards to fracking fluids, which could contaminate groundwater. In October 2011, the Commission adopted a proposal for higher greenhouse gas (GHG) emissions values for different sources of fossil fuel, in particular for oil from tar sands, shale oil, and liquefied coal, as part of the Fuel Quality Directive6. This could potentially affect shale gas development, particularly recent academic papers suggesting that the process of hydraulic fracturing gives rise to potential methane leakages. (Howarth, 2011) Shale gas is not yet included in the Directive, but the principle that fuels must meet minimum environmental standards makes it more likely that it could be included in future legislation.

The controversy and polarisation within and across the EU is largely due to the absence of reliable data about shale gas extraction in Europe. There is hardly any balanced discussion, nor energy policy that included unconventional gas at the moment. Reaching a balanced discussion and energy policy that includes shale gas will take a long-term strategic effort by the shale gas industry. Therefore, in the following section, the strategic options for shale gas interest representation in the EU will be examined.

3 Analytical Framework - Political strategies of EU interest representation

The starting point of the discussion of representation of business interest in EU politics are questions of power and influence. There is a substantial body of literature written from a broadly pluralist tradition that suggests that businesses enjoy a "privileged position" (Lindblom, 1977) in a modern polity, due to their structural power. In other words, because their investment decisions have an impact on an economy through employment, tax revenues, and general economic prosperity (Coen and Grant, 2006), businesses have the ability to move those investments to polities in which they are treated best. However, this argument does not apply to shale gas, since drilling companies are tied to the area and national government policies wherever deposits are found. In order to make up for their lack of structural power, shale gas businesses have to engage in the formulation of the policies directly influencing their practices. The ways in which organisations seek to influence public policy vary considerably and so do the terms used to refer to those strategies, tactics, and activities. Peter Koeppl refers to it as "lobbying", which he defines as "the attempted or successful influence of legislative­administrative decisions by public authorities through interested representatives." (Koeppl, 2001, p.71). The term "lobbying", however, has acquired some negative connotations, as a result of unethical and corrupt cases in the past. Alternatively, the term "interest representation" is the most common term in the academic lexicon. According to Warleigh and Fairbrass (2002), interest representation "ranges across lobbying, the exchange of information, alliance building, formal and informal contact, planned and unplanned relationships: in other words, all forms of interaction that are designed to advocate particular ideas, persuade the decision-takers to adopt different positions or perspectives, and ultimately to influence policy." (Warleigh and Fairbrass, 2002, p.2) If we compare the definition of interest representation and lobbying, we see that they are very similar. Therefore, in this paper both terms are used synonymously, with the first stripped of its negative connotations. Lobbying, and interest representation for that matter, is defined as any activities directed at political decision-makers in an attempt to influence their view on a particular policy issue and decisions in the policy field.

[...]


1 The earth tremors were traced back to drilling activities in the area. A report, commissioned by energy firm Cuadrilla Resources, said the quakes were due to an "unusual combination of geology at the well site". The report is available from [www]: www.cuad rillaresources.com/cms/wp-content/uploads/2011/11/Final_Report_Bowland_Seismicity_02-11-11.pdf [Accessed 3 December 2011].

2 Internship from May to August 2011.

3 Shale gas exists in deposits consisting of very soft, fine-grained rock, which is easily breakable into thin layers. Shale gas is only one of many sources of so-called "unconventional" natural gas. Unconventional natural gas is gas that is more difficult or less economical to extract, usually because the technology to reach it has not been developed fully, or is too expensive. There are six main categories of unconventional natural gas: deep gas, tight gas, gas-containing shales, coal-bed methane, geo-pressurised zones, and Arctic and sub-sea hydrates. Source: Naturalgas.org, an educational website covering a variety of topics related to the natural gas industry, maintained by the Natural Gas Supplier Association. [www] Available from: www.naturalgas.org/overview/unconvent_ng_resource.asp [Accessed 20th July 2011].

4 Frank Umbach is Associate Director for the European Centre for Energy and Resource Security (EUCERS) and one of the authors of a report published in spring 2010, entitled Strategic Perspectives of Unconventional Gas. Excerpts of his speech at The European Unconventional Gas Summit in Krakow, Poland, can be found online. Source: Natural Gas Europe (18th October 2011) "If Shale Gas Were Dangerous", [www] Available from: http://www.naturalgaseurope.com/if-shale-gas-were-dangerous-3082 [Accessed on 18th October 2011].

5 Frank Umbach in an interview with Karel Beckman for European Energy Review, 27 May 2011. (Beckman, 2011)

6 Approved in 1998, the Fuel Quality Directive, 98/70/EC sets EU-wide specifications for road transport fuels in an environmental- driven context. The revised directive requires fuel suppliers to reduce the carbon footprint of fuel by 6% six over the next ten years, and another 4% non-binding reductions to be achieved notably with Carbon Capture and Storage (CCS) and CDM credits. Source: European Commisson, Fuel Quality Monitoring. [www] Available from: http://ec.europa.eu/environment/air/transport/fuel.htm [Accessed 3 December 2011].

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Details

Title
Shale Gas Interest Representation in the EU
Subtitle
Public Affairs / Lobbying in the European Union
College
Brunel University
Course
Public Affairs & Lobbying
Grade
A
Author
Year
2012
Pages
30
Catalog Number
V188067
ISBN (eBook)
9783656181767
ISBN (Book)
9783656183778
File size
568 KB
Language
English
Tags
shale, interest, representation, public, affairs, lobbying, european, union
Quote paper
Katrin Schwede (Author), 2012, Shale Gas Interest Representation in the EU, Munich, GRIN Verlag, https://www.grin.com/document/188067

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