France May Face Legal Action Following Shale Gas, Oil Ban

France risks legal action by energy companies over a planned ban on a method of extracting oil and natural gas from shale rock, according to Environment Minister Nathalie Kosciusko-Morizet.

“We could have a court case, yes, probably there will be one,” she said on LCI television today, adding that a law approved last night by deputies in the National Assembly was designed to “minimize legal and financial risks” although it could “open the way” to compensation claims.

“We have less of a risk of losing,” she said of the bill, that still needs approval by the Senate. “The goal is to ban exploration and production from shale gas. It’s dangerous for the environment.”

The bill would allow the cancellation of exploration permits if companies plan to use hydraulic fracturing, which government ministers and industry representatives say is the only method available to get hydrocarbons from the rock. The Senate is scheduled to vote on the ban June 30 and if approved it would become law, possibly next month.

Fracking, widely used in North America, uses a mixture of water, sand and chemicals injected under high pressure to break dense rock to release oil and gas trapped within. Green groups and politicians led protests across France, saying the method could cause environmental damage.


Under the bill, companies with exploration permits will have two months to declare whether they intend to use hydraulic fracturing. If they do, their permits will be revoked.

France has already granted permits to companies including Total SA, Vermilion Energy Inc., Toreador Resources Corp. and Schuepbach Energy LLC for shale oil and gas exploration. Shares of Toreador, which has the most permits to explore for shale oil around Paris, have dropped about 76 percent since the start of the year.

“No one on these benches wants to have to pay significant compensation to oil companies,” Kosciusko-Morizet told parliamentarians yesterday.

Total spokeswoman Phenelope Semavoine declined to comment on whether the company would seek compensation following a ban. The French oil company holds the Montelimar permit in southern France on which no fresh exploration work has been carried out to determine potential reserves, Jean-Jacques Mosconi, its head of strategy, said last week.

Debate in France on shale energy was too fast, not clear and contained false claims, Martin Schuepbach, founder of Dallas-based Schuepbach Energy, was quoted as saying in an interview published in Le Monde yesterday. The company will protect its rights, the newspaper reported him as saying.

Toreador Chief Executive Officer Craig McKenzie said the company would “consider all our options” when asked last month on a conference call about possible compensation for the loss of permits.

Hydraulic fracturing requires large quantities of water and risks water and ground pollution, Kosciusko-Morizet said, adding that exploration leads to more truck traffic, which could disturb local residents.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE