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Spain Alters Environment Law to Speed Up Energy Projects

Spain changed environmental rules to speed approvals on industrial projects from pig farms to oil rigs and for the first time will regulate shale drilling.

Authorities will have six months to rule on projects based on the potential harm to nature, according to a law published Dec. 5 by parliament that will take effect after appearing in the government’s Official Bulletin. Spanish legislation previously set no clear timeline.

“This is a step in the right direction,” Lars Hubert, exploration manager for shale at San Leon Energy Plc (SLE), said by telephone from Poland. “It should make permitting easier.” The Dublin-based company has four Spanish licenses to prospect for shale rock and six more awaiting approval.

Prime Minister Mariano Rajoy’s People’s Party has used its congressional majority and a fast-track process to produce the biggest revamp of environmental-impact laws since 2008. The changes are designed to keep future projects from getting stuck for years in review and clarify developers’ legal liability.

Explorers including BNK Petroleum Inc. (BKX) of Canada and San Leon have set up Spanish offices to explore for shale resources, which have revolutionized natural-gas production in the U.S. while generating lawsuits over possible water contamination.

“Industrial companies in any sector need security to plan their investments,” Margarita Hernando, general manager of the Aciep trade group for oil and gas exploration, said in an e-mailed response to questions about the new law. “Without this security, investments don’t come, or they go away.”

U.S. Shale

In the U.S., Congress passed legislation in recent years that helped open the way for the shale boom, which requires large volumes of water for the thousands of wells drilled annually.

While Spain’s new law regulates industries from steel to agriculture, its most notable impact may be on oil and gas exploration in one of Europe’s most energy-deficient countries.

Spain imports about 99 percent of its oil and gas, paying 43 billion euros ($59 billion) this year through September. A groundswell of project interest emerged as the government embraced Repsol SA (REP)’s request to explore off Spain’s Canary Islands and backs the development of untapped shale areas.

About 70 permits are in effect for prospecting in Spain, 80 percent higher than five years ago, according to trade groups. Cairn Energy Plc has said waters off Spain have “enormous potential” for conventional drillers, or those not searching for shale.

Water Trading

Spain’s new law requires environmental clearance for hydraulic fracturing, or fracking. At the same time it recognizes the water-intensive technique, giving drillers some measure of legal security in one of Europe’s most arid countries that’s also a leading fruit and vegetable producer.

The change was called for in a law published Oct. 30.

The law widens authorization for water trading as well and creates “conservation credits.” Those can be used by developers to use additional public water or degrade the environment in one region, provided they restore it in another, using a trading mechanism.

The bill was introduced in Parliament in September. The government’s Environmental Quality General Manager Guillermina Yanguas said then that it would “reinforce protection for the environment, simplify steps and ease procedures” for projects.

Climate Change

For the first time a project’s effects on climate change, particularly its carbon footprint, must be taken into account. That was added to the existing list of environmental attributes at risk from development, from rivers and forests to biodiversity and health.

Conservationists have criticized parts of the law, such as the time limit on environmental reviews and possible expansion of transfers of water from central Spain to the more arid Mediterranean areas of Murcia and Alicante.

It’s not sensible to review environmental impacts and carry out public hearings in six months, for example, for a project as large and unprecedented as Repsol’s plan to drill off the Canary Islands, said Abel la Calle, an attorney specializing in environmental law in Almeria.

“Generic measures like these can’t be considered a more effective or efficient way to evaluate the environmental impacts,” La Calle said. Effort is better spent “establishing criteria for the documents developers need to submit or give administrations more resources to handle the job.”

To contact the reporter on this story: Todd White in Madrid at twhite2@bloomberg.net

To contact the editor responsible for this story: Timothy Coulter at tcoulter@bloomberg.net

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