The Future of Shale Gas in Romania

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Published in “Legal Business”, February 2014 issue

Shale gas, the ‘hot’ topic of the oil and gas industry nowadays, has managed not to pass by Romania, a country well known for its abundance of natural resources. With a long history of mining, oil and gas exploration and exploitation, large electricity projects and after recently aligning to the renewable energy trend, Romania made room recently also for shale gas activities. In the context of conventional energy resources reduction, a move forward towards shale gas was not a surprise, given that Romania was ranked third in the list of European countries with highest estimated potential of shale gas prepared by US Energy Information Agency. Thus, it appears there is an estimated potential of 1,444 billion cubic meters of shale two countries above Romania are of 3,879 billion cubic meters in France and of 4,190 billion cubic meters in Poland.

The interest in Romania’s shale gas potential comes both from investors seeking favorable opportunities and from the authorities which tend to regard shale gas as one of the sources which could sustain Romania’s future energy independence. However, the status of shale gas activities in Romania is far from clear. Thus, in addition to the local framework of poor regulation and authorities’ indecision, shale gas also met here its longstanding opponent, public opinion. Against this background, so far, only the US company Chevron has made actual steps towards carrying out shale gas activities in it concessioned areas in Romania.

Shale gas exploration/exploitation activities are not prohibited in Romania. However, they are not distinctly regulated either and as such are deemed to be covered by the same legislation governing oil and gas activities in general. The European Commission considered at a certain point drawing up specific binding regulations for shale gas activities at European level, but it appears to have dropped the idea after the UK’s Prime Minister questioned the need for such a measure considering the discouraging effect for potential investors. For now, the Commission is said to be content with making recommendations and monitoring their implementation. The European parliament has also set out a proposal at the end of 2013 for amending the Environmental Impact Assessment Directive in view of making it mandatory for the full Environmental Impact Assessment (EIA) procedure to be performed for all shale gas exploration/exploitation activities. Recently, however, these plans were put on hold for the near future.

Back at a national level, it may be noted that in Romania as of now, the environmental authorities allowed/completed EIA procedures for shale gas exploration, but no such procedures have been completed so far for shale gas exploitation since it was not the case yet. The Minister of Environment suggested that while exploitation is being allowed, the full EIA assessment that shall be carried out for exploitation activities will be subject to more scrutiny and the exploitation activities will be allowed from an environmental perspective only if all environment-related concerns are addressed.

The public approach towards shale gas in Romania has been divided between opposition and indecision. Thus, the Romanian parliament discussed at least three legislative proposals aimed at banning shale gas activities and hydraulic fracturing as exploration/exploitation method, but two of the proposals faced fi nal rejection, while a third one has been stranded in the legislative process since 2012.

The NGOs and public opinion have been very vocal in protesting against the company involved in shale gas activities in particular.Thus, the public movement against shale gas activities in Romania started rather timidly in 2012, but reached mass proportions in mid-2013, when Chevron started its exploration activities.

Although Chevron appears to have obtained the full set of necessary permits to start shale gas exploration activities, it had diffi culties in starting the works, due to signifi cant protests taking place in the area of the exploration perimeters. In addition to protests, NGOs have the possibility to challenge in courts the environmental permits obtained by shale gas companies. The risk is that if such challenges manage to even merely temporarily suspend the permits for the duration of litigation, this would result in significant delays for shale gas exploitation projects (NGOs are currently using this tactic to block mining projects using cyanide in their technological process). However, the public’s opposition did not lead to clear solutions and no reaction has been obtained so far from the deciding bodies.

As for the government, after setting a moratorium on shale gas activities in its initial 2012 Governing Program, reverted on its position and did not make any reference to shale gas activities in the Governing Program for 2013-16. Further on, both the Prime Minister and the Ministry of Environment expressed public opinions of support for shale gas activities, at the same time trying to maintain a certain ambiguity as to their final view on the matter and thus allowing room for manoeuvre in the future. Other politicians have been very evasive in taking sides, mostly on the account that the subject is very technical.

In this context, the future of shale gas in Romania is not easy to predict. The uncertainty is significantly fuelled by the authorities’ refusal to actually make a decision for or against it. The EU may still adopt legislation in the future, however, it would certainly not result in a blanket ban. Among member states a common approach cannot be identified either, with countries like France and Bulgaria banning shale gas activities, while Great Britain or Poland supporting them.Nevertheless, a move by Romania towards the prohibition of shale gas extraction seems unlikely at the moment, despite opposition from the public.

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