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Fri March 7, 2014
Seeking Energy Independence, Europe Faces Heated Fracking Debate
Originally published on Fri March 7, 2014 10:39 am
While watching the turmoil in Ukraine unfold, you may feel as though it has little to do with the United States, but the conflict is stirring a contentious debate in Europe over a topic familiar to many Americans: fracking.
Much of the continent depends on Russian natural gas that flows through pipelines in Ukraine. European countries are asking themselves whether to follow the U.S. example and drill for shale gas.
In Lancashire in northern England, local anti-fracking groups had been campaigning against shale gas long before the discord in Ukraine made headlines, distributing leaflets and holding public meetings. With several shale gas wells planned for this and other counties, Britain has become a flashpoint for fracking, or hydraulic fracturing — the controversial method of pumping water and chemicals deep into shale deposits to release natural gas. Local resident Anne Fielding is determined to stop them.
"People don't know what's going to happen," Fielding says. "They don't know about the level of pollution and a lot of our information that's come from America has been really frightening."
Many Europeans regard the U.S. boom in shale gas with trepidation. While France and Bulgaria have even banned fracking, others look at the U.S. with envy, says Julian Lee of the Centre for Global Energy Studies in London.
U.S. natural gas prices have fallen to as little as a quarter of those in Europe as a result of shale gas. That raises big concerns over the competitiveness of European companies, Lee says.
"If you are competing with manufacturers in North America, whose energy costs are a fraction of yours, you're looking at a very difficult situation," Lee says.
A more pressing worry, however, is energy security. On the whole, Europe imports at least a quarter of its natural gas from Russia. That leaves Europe in a vulnerable position, says Pavel Molchanov, an analyst at Raymond James.
"The historical backdrop here is that Russia has used natural gas supply as a weapon," Molchanov says. In 2006 and 2009, Russia cut off supply to Ukraine, which affected the rest of Europe as well.
The current conflict in Ukraine is just another reason for European countries to develop their own shale gas industries, Molchanov says. Those efforts have been sluggish so far; there is no commercial shale gas production anywhere in Europe today. For example, Poland, the country that's been most active in shale gas, has only managed to drill about 50 exploration wells to date, he says.
"It's a laughably small number compared to various counties in North Dakota or Texas or Oklahoma where there can be thousands of wells drilled per year," Molchanov says.
One reason for that slow pace: property rights. In the U.S., landowners own the rights to the minerals under their property, says Paul Stevens, an energy expert at Britain's Royal Institute of International Affairs. If Stevens owned a piece of American land and a company wants to drill, he says he'd be all ears.
"If you discover any shale gas, it's mine," Stevens says. "I get a slab of the action. In Europe, the subsoil minerals are the property of the state, not the landowner. So all the benefits and profits go to the governments."
This reduces the incentives for shale gas drilling, he says. But the U.S. government is trying to help Europeans clear those types of hurdles.
David Goldwyn of the Brookings Institution in Washington, D.C., used to lead the U.S. State Department's ongoing efforts to promote shale gas overseas. Among its projects, he says, is helping countries figure out just how much shale gas reserves they have.
"The State Department's motive, particularly in Poland and Ukraine, was diplomatic because we saw that their political survival, their economic survival, depended on diversifying their sources of energy because they're so dependent on Russia for gas," Goldwyn says.
Ukraine imports roughly two-thirds of its natural gas from Russia and it has just started to explore for shale gas. That topic could come up when President Obama travels to Brussels later this month for a U.S.-European Union Summit. And shale gas development could be part of the proposed free-trade agreement between the U.S. and the EU.
Goldwyn says shale gas has been on the agenda for past U.S.-EU summits and he says the goal this time should be to use American expertise to finally develop the region's nascent shale gas industry.
"The White House and the State Department need to really prioritize this as one of the most important tools that Europe has to create better energy security," Goldwyn says. "It's time to get this done."