Shale Gas in Ukraine: Facts
Dec 3, 2013
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Contributed by: Yelyzaveta Aleksyeyeva and Hanna Khomechko

In 2011 and 2012 the Government of Ukraine, pushed by several multinational extracting companies, announced an auction for the two major gas fields to be developed by hydraulic fracturing. In 2012, Royal Dutch Shell won the auction with regard to Yuzivska field in eastern Ukraine (7886 km2) and Chevron – to Oleska in western Ukraine (6324 km2).

The Government and Royal Dutch Shell signed a product sharing agreement (PSA) in January 2013. Prior to its signature, the Government has neither arranged for any sort of public participation, nor released the draft of the PSA into the public domain. Both the Government and the company claim they agreed that the PSA shall be confidential and provided for repercussions in case party leaked the conditions of the deal to the public. Regarding the Yuzivska field, the Government has also failed to perform various assessments (including environmental) required by law prior to the signature of the PSA. Neither party has ever published the text of the PSA. Furthermore, in March 2013, the Government classified it as “for official use only,” meaning no citizen or NGO can gain access to the conditions of the deal.

With regard to the Oleska field, only the regional council has published the draft PSA. In this case too, both the Government and Chevron claim the whole text of the PSA (some three hundred pages) is confidential. In August 2013, an environmental assessment of the PSA regarding Oleska field was performed, though no public participation in its course was allowed. The PSA on Oleska field was signed on November 5th, 2013. Its text has also never been published.

Over the last two years, environmental NGOs and the general public has extensively expressed strong concerns about governmental decision to turn to fracking for securing energy needs of the country instead of exploring more sustainable alternatives. Apart from the information campaigns, there were hundreds of protests and a few dozens of lawsuits.

According to the Minister of the Environmental Protection of Ukraine, the PSAs vest investors with exclusive rights to explore and exploit any hydrocarbons on the given gas fields for the next 50 years. From the drafts of the PSAs leaked to the public, it became clear that PSAs also exclude these activities from any normal regulatory control and establish special taxation, environmental and other provisions for the purpose of the activities covered by the PSAs. According to the experts, these rules are less stringent than domestic environmental legislation; many of them are voluntary and thus unenforceable. It has also come to public attention that in both cases some 10% of the governmental share of the profit will go to newly established private companies linked to the highest officials of the state.

EPL’s litigation campaign

In May 2013, EPL brought an administrative lawsuit against the Cabinet of Ministers of Ukraine asking the court to oblige the Government to officially publish the signed PSA with Royal Dutch Shell. EPL alleged that both the Constitution of Ukraine and the Law of Ukraine “On access to public information” allow public access to such a document. The court disagreed. Ignoring all allegations of the plaintiff, the court merely concluded that since the parties to the PSA agreed that its text is confidential – both parties to the PSA (including the Government) are bound by the confidentiality clause and thus public access to the document shall be denied. The court dismissed EPL’s arguments regarding the public’s right to know the conditions of the deal since all minerals in Ukraine are the property of the People of Ukraine. There is a lack of any legitimate interest from the Government and the investor to protect this information as well as a huge overriding public interest in disclosing it. On October 2013, the Administrative court of appeal upheld the decision of the lower court.

In June 2013, EPL brought another administrative lawsuit against the Cabinet of Ministers of Ukraine asking the court to declare failure of the Government to perform various assessments (including environmental) prior to signing the PSA with Royal Dutch Shell, to oblige the Government to conduct such assessment with regard to PSA with Chevron and refrain from signing the PSA with Chevron before the assessments are done. The court heard the case 3 times longer than is prescribed by law. It had not rendered its decision by the time the second PSA was signed. The declaratory judgment is still pending. In August 2013, EPL brought an administrative lawsuit against State Service of Geology and Minerals of Ukraine. In spring 2013, the Service issued a permit to exploit minerals on Yuzivska field to Royal Dutch Shell. The Service denied EPL’s information request for such a permit, claiming that since the confidential date from the PSA was included in the permit, the latest is classified as well. EPL has lost in the lower court and is currently working on the appeal.

During November 2013, EPL plans to challenge in court the material and procedural legality of environmental impact assessment performed with regard to Oleska field. This assessment does not discuss any alternatives to fracking itself or to various sub-technologies such as using gas instead of water for fracturing or pitless/closed-loop drilling. It also does not discuss any foreseen impact on the ecosystems and natural resources; it merely says that there will be no negative impact on either. Moreover, there has not been any public participation in EIA on Oleska field.

Having failed in domestic courts, EPL plans to bring a communication to the Aarhus Convention Compliance Committee and various other international fora.

For further information on the cases, please contact: Yelyzaveta Aleksyeyeva, Senior lawyer at EPL, e.aleksyeyeva@epl.org.ua

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