There is no doubt that “shale fever” has gripped Europe. Not a week goes by without articles being published, describing the U.S. shale bonanza and listing the benefits from the extraction of unconventional sources of energy as well as the implications for the global energy market.

There is also a plethora of successive reports and expert evaluations published by independent agencies, research divisions and governments of European Union (EU) member states, which list the estimated unconventional deposits and evaluate both the economic and the business benefits. The willingness to replicate this “American Dream” of sorts has become a key political priority in some countries, such as Poland. European public opinion is, however, evidently split on this issue.

In addition to supporters, critical voices in this debate are getting louder. Protests are coming from local communities and ecologists, who are contributing to the growing information chaos as they draw attention to the increasing controversy around hydraulic-fracturing technologies.

Reliance on fuel imports

Among the characteristic aspects of the European energy sector is its considerable reliance on fuel imports, as well as their high prices. Russia is the biggest supplier of gas and oil to EU member states. Over the past few years, fuel imports have grown steadily. In 2000, Russia supplied 13.3% of total fuel demand in the EU. In 2005, the ratio grew to 18.1%.

In 2008 alone, 38% of the total volume of natural gas supplied from outside the EU came from Russia. The second- largest fuel supplier is Norway, followed by countries in North Africa and Saudi Arabia. Currently, more than 60% of Europe’s gas resources come from imports. By 2030, the International Energy Agency (IEA) estimates that the level of dependence may increase to 80%.

As a result, one of the key challenges for the EU is to diversify its supply sources to ensure energy security for the European community as well as to reduce energy prices. EU gas prices are, on average, more than three times higher than in the U.S. This has a direct impact on end-user energy prices and, for the industry, which is not only in recession but also suffers additional burdens. As a result, production costs grow, and the EU economy is becoming less competitive. Furthermore, stringent environmental standards and climate policies are contributing to “carbon leakage,” which describes the increasing trend of industries moving their operations outside of EU borders, such as to the east.

Energy prices are lately high on the agenda in Brussels. The last EU summit in May (meeting of the head of states and governments) was devoted to energy policy and the competitiveness of the European industry. European leaders agreed on the conclusions that EU must ensure "competitive energy prices," diversification of energy supply and development of its "indigenous energy resources," a clear reference to shale gas.

Deposits and potential

The geological potential of shale formations in Europe appears promising. The deposits are mostly concentrated in Poland, France, Great Britain, Romania, Ukraine and the German state of North Rhine-Westphalia. According to a U.S. Energy Information Administration (EIA) report from April 2011, the largest deposits are located in Poland and stand at 5.3 trillion cubic meters, an amount equivalent to 300 years of cumulative gas consumption in the Polish market.

This estimate decreased by 20%, according to an EIA report released in June that stated Poland has some of Europe's most favorable infrastructure and public support for shale-gas development.

However, in March 2012, the Polish Geological Institute released a report stating that this potential was overstated and the amounts are estimated at between 346 and 768 million cubic meters, which, with the application of today’s technologies, would meet the equivalent of Poland’s requirement for 65 years.

For Poland, shale gas is a strategic challenge described by some as the “state project.” If successful, Poland, could become, to a large (yet certainly not full) extent, independent of supplies from Russia, reduce the volume of coal in its overall energy mix (Polish energy sector is 90% dependent on coal) and reduce its CO2 emissions.

Beyond Poland

Great Britain has taken a precautionary approach, seeing shale gas as an opportunity to diversify its energy sources. According to the British Geological Survey, the value of deposits is calculated at £1.5 billion (US $2.3 billion).

For British authorities, shale-gas exploration represents an opportunity to reduce the country’s steadily growing dependence on fuel imports. Despite a temporary moratorium on hydraulic-fracturing technologies, which are suspected of causing mini seismic activity, Edward Davey, Secretary of State for Energy and Climate Change and Member of Parliament, announced in December 2012 that shale-gas-prospecting efforts with this method had been restarted.

After fracing in northwest England, IGas, one of the companies granted a license by U.K. authorities, announced that shale-gas resources seem to be 10 times bigger than the first estimates. For the area, that could mean that the U.K. would not have to import gas for a period of 10 to 15 years.

An updated assessment by the British Geological Survey in July, estimates that around 1,300 trillion cubic feet (40 trillion cubic meters) of shale gas—double previous estimates—may be present in the U.K.’s Bowland basin, which spans 11 counties in the north of England.

Similarly in December 2012, Romania renounced its moratorium, instituted earlier by the center-left government. Shale-gas prospecting is among the political priorities for the country’s government because, according to the EIA, the country’s deposits would yield the equivalent of 40 years of cumulative consumption.

Countries opposed to development

The other side of the barricade includes countries led by France, Bulgaria, the Czech Republic and some German states. Although France boasts the second-largest shale-gas reserves (second only to Poland’s), the country’s opposition to developing this sector in Europe is among the strongest. Despite an appeal from the heads of Total SA and GDF Suez SA, who listed specific economic benefits that France could gain thanks to extracting gas from its domestic deposits, French President François Hollande openly declared that the ban on exploring shale gas would be upheld for five years—until the end of his term in office. Similarly, in Bulgaria, the decision to ban shale-gas prospecting is seen by representatives of the opposition as a political one.

Before any extraction occurred in Europe, a wave of protests started in France and spread throughout the EU.

According to the poll conducted by Eurostat earlier this year, less than 10% of Europeans are of the opinion that extracting unconventional fossil fuels should be among EU’s energy priorities. Poland and Hungary are among the biggest enthusiasts, with only 16% of respondents strongly opposed to shale-gas extraction occurring in their communities. The biggest social resistance is from people in France, Austria, Germany and Bulgaria, with more than 50% of respondents opposing extraction.

Despite the fact that the U.S. can showcase shale gas as a success story, why are the positions of citizens in individual EU countries so radically different?

Differences matter

There are many contributing factors. For one, property rights are different in Europe. In the U.S., many surface property owners enjoy direct benefits from the deposits extracted on their property, but in Europe the deposits belong to the state treasury. The inhabitants are not the direct beneficiaries of investments, and they can only enjoy indirect benefits, as long as part of the profit can be retained in the relevant region or municipality. Resistance and social distrust results from the fact that no prior fuel-extraction activity had been conducted in those areas. The new and the known are typically met with reserve and skepticism.

Brussels has watched the developments in individual member states carefully and is increasingly active in those developments. The European Commission (EC) has ordered four different reports related to shale gas, its consequences for energy markets, the climate and the environment. New studies, together with the impact assessment, are already in the pipeline and are expected to be published after the summer. A key question for EU decision makers is whether the EU’s legal framework is sufficient for extracting gas from unconventional sources.

In November 2012, the European Parliament (EP) adopted two reports related to shale gas and its environmental and energy aspects. At that time, it sent a clear message. EP members rejected an amendment calling for a pan-European moratorium. The vote followed months of contentious debate. A compromise was eventually reached, and shale gas development was greenlighted in Europe.

Stakeholders agree that the EU should draw lessons from the American experience: create a catalog of available best practices and technology, introduce permanent monitoring requirements for operators’ activities as well as full transparency of undertaken activities—both in terms of granting concessions as well as publishing information about the chemicals used in the public domain. The EP report also emphasizes the importance of the information and education campaign in order to explain all controversies and gain public acceptance for the actions.

It is already confirmed that by the end of 2013, energy, environment and climate commissioners will have to jointly decide and reach a conclusion whether there is a need to create a separate legislative proposal for or if specific modifications to existing legislation would be sufficient, including the areas of extraction, environment, air quality, water and registration, evaluation and authorization of chemicals.

It should be noted that in line with the provisions of the EU treaty, EU policy cannot infringe on the rights of a member state “to determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply.”

The EC proposal regarding energy until 2050 (Energy Roadmap 2050) states that gas will have a fundamental, key role in transforming the energy system by contributing to a reduction in emissions. The main demarcation line in the EU exists between those who see shale gas as a so-called transition fuel, which could replace coal and contribute to low-emission goals, and those who favor the development of renewable-energy sources instead of fossil fuels.

While renewable energy sources may become a real alternative in 20 or 30 years, Europe needs a bridge between current energy sources and the technologies of obtaining energy from wind or sun. Shale gas is such an alternative, because it is a safe, cheap and is an environmentally friendly fuel, which should be exploited in Europe.

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