France’s proposed ban on import U.S. shale
Article by Jason Bennett, Partner and Joyce Banks, Associate at Baker Botts
Banning hydraulic fracturing has become a hot topic in the U.S. oil and gas industry during the last few years of the shale boom. France, which has already banned hydraulic fracturing, is now attempting to extend its ban to the import of “fracked gas.” As our brief summary below highlights, such a ban faces number of obstacles to its legitimate implementation.
World Trade Organization: The first obstacle France faces is compliance with the rules of the World Trade Organization (“WTO”). The WTO deals with global rules of trade between member nations, including the United States and France.
Article III of the General Agreement on Tariffs and Trade (“GATT”) states that a member nation cannot discriminate between like products from different trading partners. In the event that another member country disputes France’s ban, it is not clear whether the WTO would consider conventional gas and fracked gas “like products” when resolving the dispute. However, to be successful in such a dispute, France, at a minimum, would have to show that the conventional gas and fracked gas are sufficiently different to justify the discriminatory practice, which could prove a difficult task.
Article XI of GATT also prohibits member nations from imposing import restrictions on other member nations. Because of the nature of natural gas (further discussed below) and the joint use of pipelines, France’s ban at a minimum complicates and might possibly interfere with another member country’s use of a shared pipeline. Such complications might be considered a violation of Article XI of GATT in the event of a dispute.
France could argue that the ban falls under an exception to the above rules because it is necessary for the protection of human, animal and plant life or health under Article XX(b) of GATT, but this argument is highly attenuated. Even if France argues that the objective is to protect the environment and human health from the dangers of fracking, once the gas is already produced the objective is obsolete and no longer justifies the ban. France has yet to argue that the consumption of fracked gas, as opposed to the production of fracked gas, poses a direct threat to human life or health. Thus, the objective has already been accomplished through France’s hydraulic fracturing ban.
Additionally, France would be arguing that it is protecting the nationals of other countries by stopping fracking outside of France or somehow protecting the health of its own people, possibly through a climate change argument. In any case, these are not traditional exception arguments under Article XX(b) of GATT.
Logistical and Political Challenges: Even if France were able to overcome the legal difficulties, there are serious logistical and political obstacles that decrease France’s likelihood of success; the first of those being, commingling. Conventional natural gas and fracked gas are mixed during transport in pipeline and liquefaction tanks. Separating the two at the point of transfer is virtually impossible. Thus, France would have a difficult time procuring conventional gas that has not been commingled with fracked gas.
Additionally France, like other European countries, is highly dependent on natural gas supply from Russia. Russian companies have expressed an interest in developing an unconventional gas industry. France would no longer be able to accept Russian gas if the gas were commingled with fracked gas. Thus, France’s proposed ban might actually jeopardize its long-term supply of natural gas from a number of potential suppliers. Beyond the above listed challenges, there are also questions regarding whether France, as a member of the European Union, would have to get approval or input from the European Union before implementing such an onerous ban.
Ultimately, France faces an uphill battle in attempting to ban the import of fracked gas. With numerous legal hurdles, inevitable logistical battles, and potential political obstacles, the likelihood of success for France’s proposed ban is minimal. Hopefully, this is no more than political speech in France and will not see its way into binding legislation.
Join the Conversation: Will France extend its ban to the import of “fracked gas”? Leave your comment below.
Jason Bennett, Partner and Joyce Banks, Associate at Baker Botts
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