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Reports this week indicated that Germany might be modifying its fracing laws to make it possible for companies to drill for shale gas. Many hoped that the German government might lift its ban on fracing at depths shallower than 3,000 meters (9,800ft). While the government has said that they plan to review the process closely, they will not ban the practice entirely, either.

The German government’s new plan will stop short of an outright ban on fracing, bowing to pressure from the industry, according to the latest draft of a law from the environment ministry, according to Bloomberg. The German industry is concerned that its competitiveness is being hurt by rising energy costs at home, compared to lower prices in the U.S. which has seen a fracing boom.

Deterioration in ties with Russia over the Ukraine crisis has also raised pressure on Europe, especially Germany, to cut its reliance on Russian gas and fueled the fracing debate.

Germany is drawing up new fracing rules, and has promised strict environmental audits and a ban on drilling in areas where water is protected due to possible environmental damage, reports Reuters.

The new bill will allow exploratory commercial drilling, starting in 2019, at depths of less than 3,000 meters with “strict” environmental limits to advance usage of the technology and after case-by-case decisions, according to draft legislation obtained by Bloomberg.

The new rules “don’t generally prevent the development of the fracking technology but tie it to the fulfillment of the necessary requirements to avoid any damages to environment and health,” according to the bill drafted by the Environment Ministry.

Under the German proposal, companies would be able to drill for shale gas if:

  • They successfully completed exploratory drilling under scientific supervision with fluids that don’t harm the environment;
  • An independent commission of experts agrees that commercial fracing at the site wouldn’t harm the environment or cause earthquakes;
  • And once local authorities, who are not bound to the commission’s verdict, permit drilling.

This marks a slight shift from draft guidelines outlined in the summer, where fracing would have been completely banned until 2021 apart from test drilling for scientific purposes.

About 10% of Germany’s gas comes from domestic sources, and fracing has been used in the country to recover tight gas, but there have been a de facto moratorium on new permits in the last few years due to environmental issues.

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.