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Articles

A Comparison between Shale Gas in China and Unconventional Fuel Development in the United States

‘A Comparison between Shale Gas in China and Unconventional Fuel Development in the United States: Water, Environmental Protection, and Sustainable Development’, Brooklyn Journal of International Law 41(2): Paolo Farah and Riccardo Tremolada

Paolo Farah of West Virginia University and Riccardo Tremolada of Shanghai JiaoTong University assess the role that shale gas might play in China’s move away from conventional fossil-based energy sources, noting their potential benefits as well as the dangers that come from a lack of strong environmental laws and regulations governing their extraction.

The article begins by observing the current state of China’s shale gas reserves, potentially the biggest in the world, and the potential risks that extraction harbours- from the direct threat of contamination to freshwater aquifiers to the indirect threat posed to R&D into renewable energy technologies. The threat to water supplies is observed by the authors to be particularly objectionable in China’s context, given the nation’s already problematic clean water supply levels. In light of the risks, it is identified that regulations pertaining to environmental risk, relevant physical infrastructure and pricing mechanisms for the shale gas market should be introduced.

No laws currently regulate the environmental risks posed by shale gas specifically. Current environmental laws which do apply to the protection of water supplies are regarded by the authors as arguably nontechnical, vague policy commitments rather than enforceable legal statements.

Enforcement of existing regulations is identified as a pertinent issue. It is noted that many government agencies at a central and decentralised level may have authority over a particular issue and that these overlapping competencies may create friction between the agencies and ultimately render them slow to act. Furthermore, it is noted that regional governmental bodies are subject to lack of funding and incentivised to engage in corruption.

Regarding reform, drawing from experiences in the USA, it is argued that China should move towards a free market pricing system for shale gas and that financial obligations imposed on foreign investors in the sector should be made less onerous. Furthermore, it is proposed that China’s obligations under the WTO compel it to increase competition between the major state-owned oil companies, observing that none exists between the top three, all of which are centrally controlled by the same body. Furthermore, it is suggested that the ownership rights attaching to underground minerals, which by default all belong to the state, should be reformed in favour of private ownership. It is also suggested that new pipelines will need to be built to meet projected shale gas production rates.

The political benefits of undergoing said reforms, including reduced reliance amongst nations on oil reserves in the Middle East, is noted.