Shale gas exploitation in Europe: Liability and insurance under uncertainty

Shale gas extraction has become a divisive issue among the EU Member States, highlighting the tension between the EU's energy and environmental policies. The identification of shale gas reserves in various EU Member States has created the expectation that shale gas could provide a substitute for more carbon-intensive fuels such as coal. Furthermore, it is expected that shale gas exploitation would ensure energy security. However, there are several environmental risks associated with shale gas exploitation and in particular with the technique used. Public concern has been high, with significant local opposition in several EU Member States to exploratory drilling. After heated debates and months of speculation, the European Commission has issued a Communication and accompanying Recommendation on shale gas regulation. The Recommendation, which is addressed to the Member States, sets out minimum principles for the exploration and production of unconventional hydrocarbons using high volume hydraulic fracturing in the European Union. The goal of this article is to examine the environmental risks of shale gas extraction and hydraulic fracturing and to assess whether the existing EU regulatory framework is equipped to deal with possible environmental damage. In particular, it will be examined whether the EU's environmental liability and financial guarantee provisions will ensure restoration of potential environmental damage caused by shale gas exploitation.