Poland’s shale gas business is facing a serious challenge after the EU’s highest court ruled that Warsaw violated European law by allowing licences to be issued for the exploration and extraction of hydrocarbons, without fully open tenders.
The European Court of Justice ruling, issued on 27 June, affects around 100 shale gas exploration licences issued by Warsaw to firms which were accompanied by production permits that had not been put out to tender, in breach of the EU’s Hydrocarbon Directive.
The ruling could have grave consequences for Poland, Polish news media reported, with the country's current policy aimed at protecting exploration licence holders' interests by issuing subsequent production licences without tenders.
Friends of the Earth hailed the ruling as “a massive setback” for Poland’s shale gas industry, which would delay the roll-out of new drills and allow more time for the European Commission to draw up environmental legislation.
“The European Court of Justice has sent a clear message to Poland that it cannot do whatever it wants to develop its shale gas industry,” Antoine Simon, a spokesman for Friends of the Earth, told EURACTIV. “The Polish government must respect international rules.”
But officials in Brussels and Warsaw have stayed tight-lipped on the issue, which is acutely sensitive, partly due to Poland’s hard-line stance against EU climate policies.
“Poland had not met obligations under the directive to ensure a non-discriminatory granting of such rights to economic operators,” said Marlene Holzner, a spokeswoman for EU Energy Commissioner Günther Oettinger.
The law demands that ‘objective, non-discriminatory criteria’ be applied to all interested parties in tenders for hydrocarbon concessions.
Warsaw says that it has already adjusted its legislation to take account of the EU’s concerns, and expects the Commission to acknowledge this by late August.
“We are very sad that we have this verdict [from the EU court],” Piotr Wo?niak, Poland’s deputy environment minister, told EURACTIV. “It was very painful for us, but now we have changed the law and the concessions are granted by bidding only.”
“No licences will be affected,” he said, adding that the country would pass another draft mining law this month, containing more far-reaching guarantees of competitive access to permitting.
In Brussels, Holzner said the Commission was “currently assessing whether the new Polish legislation is compatible with the directive”.
She also confirmed that the ECJ case related to the Polish legal system’s compatibility with EU law, rather than the legality of already-issued licences.
But some firms that were not awarded licences could yet file compensation claims against Warsaw, as a result of the ruling, according to Przemys?aw Ruchlicki, a legal and economic affairs expert at the Polish Chambers of Commerce.
“If they sue [the] Polish government they have [a] chance to get compensation,” he wrote in an email to EURACTIV.
Polish newspapers have reported that the country could face extensive bills for damages, although Grzegorz Ku?, a senior consultant at the accounting firm PwC, has said that the claims process could be a difficult one.
Plaintiffs would need to prove a connection between a decision not to grant a licence and material damages – and equally, that a licence would have been granted to the company, if the EU’s directive had been correctly observed.
“No one knows [but] in my opinion there will be no fiscal effect,” Ruchlicki said. In the meantime, shale gas licences that have already been granted to firms will remain valid.
“They were granted in good will by both sides and we will not jeopardise them in any way,” Wo?niak insisted.
Warsaw has put shale gas at the centre of an energy strategy aimed at breaking a dependence on Russian gas imports.
Shale gas is an 'unconventional' fossil fuel that is found within natural fissures and fractures underground. Until recently, no method of safely transporting it to the surface existed.
It is mined via hydraulic fracturing, or ‘fracking’, the process of breaking apart layers of shale by pumping liquids and a number of chemical additives under high pressure thereby releasing trapped gas reserves.
To proponents, shale gas represents an untapped and welcome alternative energy source to traditional fossil fuels. At the moment the continent depends on gas imported from Russia, and disputes between that country and Ukraine have disrupted winter supplies in recent years.
In the US, shale gas already accounts for 16% of the world's largest economy natural gas production and some analysts predict that could rise to 50% within 20 years.
- 2013: European Commission to unveil results of public consultation on unconventional fossil fuels, including shale gas, and decide on regulatory steps.
EU official documents
- European Council conclusions (22 May 2013)
- European Court of Justice: Commission v Poland, 27 June 2013
- European Commission: Impacts of shale gas and shale oil extraction on the environment and human health
- European Commission: Philippe & Partners report on unconventional gas in Europe
- European Parliament: Impacts of Shale Gas and Shale Oil Extraction on the Environment and on Human Health
- Post Carbon Institute: Drill, Baby Drill
- Energy Policy Forum: Shale and Wall Street - Was the decline in natural gas prices orchestrated?
- Polish Radio: EU court rules Polish shale licences illegal