RESTRICTED UK Representation The Pacuanert Represents to the EU Brussels ee 1040 Brussels Bigham 25 Nov 2013 ‘Tol. +32 (2) 287.8271 Fax: + 32 (2) 267 8396 ‘e-mall: ps, parmrep@eo.gov.uk Dear Tom, ‘SHALE GAS | thought it would be helpful to write setting out the latest developments in retation to shale gas, and possible next steps We expect the Commission to adopt a Climate and Energy Package on 22™ January 2014 which will contain proposals for targets for 2030, a proposal for ETS reform, some kind of framework document dealing with shale gas activity, and a detailed ‘analysis of the composition and drivers of eneray prices for each Member State. This package will inform discussions at the February European Council on industrial competitiveness and energy prices; and the March European Council on the Climate and Energy Framework for 2030. At present within the Commission, the discussions on the final shape of the package are intense, On shale gas, there Isa lively debate about whether to include a legislative proposal for a new framework directive for shale gas, alongside a Communication and guidanee clarifying how the existing environmental directives apply to shale, There have been some positive developments. We understand that Barroso hias recently challenged Potocnik to justify his proposed legislative approach. He has found Potocnick’s arguments thus far unconvincing, and concluded that there is insufficient evidence at this stage to justify new legislation. He has therefore asked the Commission services to strengthen the draft guidance on the application of existing EU environmental legislation to shale and has blocked (for now) the inter-service consultation on the legislative proposal. However the President's position is relatively fragile, and has been taken despite the strongly held views of the Environment Commissioner. Theré has also been strong pressure for legislation from the EP's Environment Committee and some Member Slates, such as Bulgaria, who consider a new EU framework might help them manage their domestic opposition to shale. gas. Our main allies on shale are Poland, Hungary, Slovakia and the Czech Republic, which means that we are currently short of a blocking minority on the Issue should legislation emerge. We are trying to RESTRICTED cherie epteitaedontfdowTegaray lant PbsCere OlbstOGOFPEST 18122 Sha coeRESTRICTED broaden the like-minded group to the Netherlands and Ireland, however they remain undecided about their position on new legislation. We will therefore need to work hard to support Barroso and to guard against backsliding when his position is attacked by opposing interests. They may well draw on the Commission's own impact assessment as evidence — apparently this supports the case for legislation — anid so we will need to take care to avoid our better regulation narrative being used against us in this respect. A rélated issue is the proposal by the European Parliament to amend the scope of the Environmental Impact Assessment (EIA) Directive. The current situation is that an EIA is only needed where a company decides to commercially exploit shale gas, The EP's amendments Would also require an EIA before companies could use tracking techniques for shale gas exploration. Given that the EIA negotiations are at an advanced stage we need an agreed position on the EP amendments and Possible compromises as soon as possible. Failure to progress on EIA will be used by some quarters as a justiication for further legislation on shale. Our short term strategy has to be to ensure that when the Climate and Energy Package issues for inter-seivice consultation (which could be as late as early January) it includes robust guidance, shaped by the UK, but no legislative proposal on shale. To help secure this our advice would be: - Aletter from the Prime Minister to the President next week to confirm and ‘support his position, followed by a letter to the like-minded Member States on shale; ~ Continued lobbying at official and ministerial level, using the recently agreed __ ore script including followup to the recent contacts between Owen Paterson and Potocnik and between Ed Davey and Hedegaard (the recent visits by Katrina Williams and Duatte Figueira from DECC were also very helpful); ~ A ddeepening of the technical level co-operation between DEFRA, DECC and DG Environmentnd DG Energy to énsure that the guidance is fit for purpose and takes account of all possible areas that require interpretation. Defra's technical expertise will be needed to reassure DG Environment (but also other parts of the Commission) that robust guidance is possible; . ~ we will keep a close ear to the ground and will advise if we sense that pro- legislation interests seem to be regaining the upper hand. Even if we are successful in seeing off a legislative proposal on shale in January, we will need a longer-term strategy to manage the risks next year, This should include: ~ + The discussion on industrial competitiveness and energy prices at the February European Council where the potential positive contribution of shale RESTRICTED ‘easnethsnnyponiaoeonsdeneTepery hl Fleer OUGUPARESY THz rdRESTRICTED will be hotly contested. A strong script on energy prices and competitiveness agreed across Whitehall will help to manage this risk; ~The discussion on climate and energy at the March European Council where shale might be used asa lever to infiuence Polanc’s difficult position on GHG targets; - An influencing strategy for the new European Parliament and Commission, where the pressure to concede something on shale may be significant, particularly during the hearings for the new Commissioners. To conclude, the decision to include shale within the broader Climate and Energy Package presents both opportunities and risks. It should help us make the arguments around shale’s positive contribution to the diversification of eneray sources, benefits to energy security and competitiveness alongside the need for a robust environmental framework. We have made some headway on this recently but the risks of the losing ground to those in favour of legislation remain strong. Given that energy will feature heavily at the European Councils in February and March we need to consider our influencing strategy within the context of the wider package. | will be writing on this shortly. am copying this letter to Ed Llewellyn, John Casson, Daniel Korski, Paul Rankin, Angus Lapsiey, Katherine Dixon, Olaf Henricson-Bell, Simon Fraser, Barbara Woodward, Vijay Rangarajan, vill Morris, Jessica Ayres, Katrina Williams, lan McKenzie, Tom Wechsler, Ruth Stanier, Peter Schofield, Mike Barrett, Sonia Phippard, Peter Unwin, Hannah Wiskin, Bemadette Kelly, Susannah Simon, Shan Morgan. Yours, thle Go IVAN ROGERS RESTRICTED ‘cwhtathasoihess.etstaasTonpoay Ware Gat OMsKSOKGOPNEST 1112 Staten