Polish unconventional resources: Implementation of European Energy Policy

Lawyer and doctoral candidate at Faculty of Law, Adam Mickiewicz University (UAM) in Poznań, Poland.

Published: June 30, 2015

European Energy Policy envisages the concerted action of the member states, aimed at providing them with secure, environmentally-friendly and competitive energy supplies. Since the establishment of the European Coal and Steel Community (1952) and Euratom (1957), the situation in the energy market has also changed as a result of geopolitical changes, technological progress as well as general civilization changes.

The cooperation of the member states in developing the energy landscape becomes more intensified due to growing global competition for access to natural resources, increase in energy prices and their diversification in relation to main competitors. Therefore, the European Union strives to become independent to the greatest extent possible on the issue of energy acquisition from unconventional sources from third countries. Still, the direction of the EU energy policy is determined by the following assumptions: combating climate change, reducing the EU's vulnerability to external factors resulting from the dependence on imported hydrocarbons, and promoting employment and economic growth. Poland plays a key role in this endeavour.

Recently, the hopes for achievement of the objectives set are associated not so much with the performance of shale gas any longer but of tight gas, another form of unconventional gas. Potential unconventional deposits and technological feasibility of extraction of this gas evoke discussion on replacing external supplies with domestic gas.

However, a method used for its extraction causes public concern about environmental pollution, in particular air and groundwater pollution. It should be emphasised that general EU legal regulations related to environmental protection were developed when hydraulic fracturing was not yet used in Europe and the use of this method was not fully justified, especially in terms of strategic planning, underground risk assessment, well integrity, baseline and operational monitoring, capturing methane emissions and disclosure of information on chemicals used on a well by well basis.

Moreover, the applicable law was not uniformly interpreted by individual member states with reference to the gas extraction from unconventional sources. That's why, after months of legal analysis, on 22 January 2014 the European Commission issued a recommendation on minimum principles for the exploration and production of hydrocarbons using high-volume hydraulic fracturing, thus defining basic rules that allow safe use of hydraulic fracturing for the EU member states. The most important principles include:

obligation to prepare a strategic environmental assessment (based on the requirements of Directive 2001/42/EC) before granting licenses for exploration or production of hydrocarbons with hydraulicfracturing
obligation to provide clear rules on possible restrictions of prospecting and production operations in protected, flood-prone or seismic-prone areas;
obligation to define minimum distances between the prospecting or production operations carried out and residential and water-protection areas;
obligation to establish minimum depth limitations between the area to be fractured and groundwater;
obligation to make a relevant assessment of geological formations as for their suitability for gas extraction with the use of fracturing;
obligation to make a risk assessment;
obligation to determine the environmental status of the site subject to drilling so it is possible to monitor potential changes in the future;
obligation to inform the public about chemicals used for fracturing of individual wells.

Pursuant to the recommendation, it should be implemented within six months of its publication. The commission will review the recommendation's effectiveness 18 months after its publication. The deadline is on 22 May 2015. Poland has not yet implemented these obligations in its legal system, nor has it drafted .However, legislative work is currently conducted on that matter.

Explorationand production of gas from unconventional sources in Poland is governed by the Act of 9 June 2011 – Geological and Mining Law. The most recent amendments of this act have become effective beginning of 2015.

The exploration and production sector as well as individual entrepreneurs hoped that the new regulations would, first of all, simplify procedures and shorten the waiting time for obtaining decisions from administrations. After critizism from the industry on the recent amendments, the following issues were taken into account:

the establishment of the National Energy Minerals Operator (NOKE) and its participation in the licenses granted were abandoned;
the scope of the proposed license for hydrocarbon exploration and production was extended to include hydrocarbon exploration;
the possibility of carrying out geophysical surveys in order to investigate geological structures based on application, initiating hydrocarbon production and continuing at the same time the prospecting and exploration operations in the remaining area covered by the license was retained;
a demand for documenting obligations arising from the license in an annual and not quarterly (as originally planned) schedule was accepted;
marginal reservoirs were defined in respect of which no service charge is planned; the establishment of a new authority (GIOŚiNG - Chief Inspectorate for Environmental Protection and Geological Supervision) was abandoned.

In addition, comments aimed at ensuring greater clarity of some provisions of the Act were taken into account and transitional provisions were made more specific.

Still, the Recommendation of the European Commission has not yet been implemented to this day. In an official document submitted to the Commission on 31.12.2014, the so-called analysis of the Polish legal status in relation to the Recommendation of the European Commission of 22 January 2014 on minimum principles for the exploration and production of hydrocarbons (such as shale gas) using high-volume hydraulic fracturing (2014/70/EU) the Polish government pointed at four issues with still unclear legal status.

Firstly, the current legislation lacks legal basis allowing the carrying out of strategic environmental assessment for shale gas prospecting, exploration and production since it is conducted for planning documents only.
Secondly, the legislator has not introduced any minimum vertical separation distance between the zone to be fractured and groundwater.
Thirdly, seismic-prone areas have not been referred to in the national regulations.
Fourthly, the monitoring of hydrocarbon prospecting and production stages have not been legally regulated.

The Ministry of Environment explains that these issues will be regulated following the completion of a task requested by the Minister of Environment. This task aims to identify risks within the scope of impact of shale gas exploration operations on the environment in Polish conditions and defining optimum (from the perspective of legal provisions, geological conditions and technology) procedures for the management of such risks. It should be noted that both the amendment to the Geological and Mining Law and currently drafted special hydrocarbon act still do not address the aforementioned issues.

The Special Hydrocarbon Act

Additionally, it should be mentioned that currently legislative works are in progress on a bill on rules for preparing and executing investment projects within the scope of prospecting, exploration, production and transport of hydrocarbons (the so-called special hydrocarbon act). The main purpose of introducing new legislation is to simplify administrative and legal procedures and to increase their clarity. The bill is a nod to investors by bringing together in a single legal act provisions concerning the preparation and execution of hydrocarbon production, thus encouraging them to implement investment projects.

The special hydrocarbon act envisages speeding up the preparation and implementation of investments by shortening the waiting time for decisions on environmental conditions for the project implementation, decisions on reclassification of land as non-agricultural land, decisions on temporary reclassification of land as non-agricultural or non-forest land. Also, permits required under the Water Law Act shall be issued faster in the future. The regulation also aims to eliminate lengthy procedures relating toobtaining a legal title to real property for conducting the authorised operations. Still, the bill does not fully meet the expectations of the industry.

At the consultation stage the demands included, inter alia, the requests for including land for housing development to the activity related to prospecting, exploration and production of hydrocarbons and for allowing access to information data as well as geodetic and cartographic data related to the real property. In addition, the industry hoped that consideration would be given to comments regarding the limitation of the scope of application for the issuance of a decision on location and the removal of regulations related to environmental protection and fire regulations from the decision on location.