Corporate Europe Observatory

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EU-Canada trade agreement threatens fracking bans

Corporate Europe Observatory, the Council of Canadians and the Transnational Institute

Amsterdam/Brussels/Ottawa, May 6th.- The proposed Comprehensive Economic and Trade Agreement (CETA) between the European Union (EU) and Canada would grant energy companies far-reaching rights to challenge bans and regulations of environmentally damaging shale gas development (fracking), a new briefing by Corporate Europe Observatory, The Council of Canadians and the Transnational Institute shows.

As Canadian negotiators visit Brussels this week to move the CETA negotiations further towards conclusion, “The right to say no” warns the proposed investment protection clauses in the agreement would jeopardise governments’ ability to regulate or ban fracking.

Currently, EU member states are studying the environmental and public health risks of this newly popular technology to extract hard-to-access natural gas or oil. While the majority of countries concerned with shale gas endowments are taking positions against it1, powerful oil and gas corporations are pushing back against regulation.

CETA will empower big oil and gas companies to challenge fracking bans and regulations through the back door. They would just need to have a subsidiary or an office in Canada”2, warned Timothé Feodoroff, from the Transnational Institute.

Under the North American Free Trade Agreement (NAFTA) there already exists a precedent for the legal challenges to fracking bans and regulations that could be the state of things to come in Europe. US energy firm, Lone Pine Resources Inc., is challenging a moratorium on fracking in the Canadian province of Quebec, suing the Canadian government for compensation.

The Lone Pine case shows that governments are highly susceptible to investor-state disputes against precautionary measures related to controversial energy projects”, said Stuart Trew, trade campaigner with the Council of Canadians. “An investor–state dispute system in the proposed CETA would create needless risk to European communities weighing the pros and cons of fracking.”

EU member states already have experience with investor-state disputes undermining green energy and environmental protection policies. Germany is currently being sued by energy company Vattenfall because of the country’s exit from nuclear power. Vattenfall is seeking €3.7 billion in compensation for lost profits.

Members of the European Parliament should put the public interest ahead of investors’ and oppose an investor-state dispute settlement mechanism in CETA. It would pave the way for millions of Euros in compensation paid to big business by European taxpayers – for legislation in the public interest”, explained Pia Eberhardt, from Corporate Europe Observatory.

EU – Canada CETA negotiations were launched at a bilateral summit in May 2009. Several of the proposed chapters in the agreement will constrain the policy space of the EU and member states, putting effective environmental protection measures at risk of trade or investment disputes from Canada. Negotiators hope to conclude a deal before the summer.

Corporate Europe Observatory, the Council of Canadians and Transnational Institute are urging the EU, member states and the Canadian government not to include an investor–state dispute settlement system in CETA.

  • 1. France, Bulgaria and the region of Cantabria in the North of Spain have already banned hydraulic fracturing on environmental concerns, while Romania, Ireland, the Czech Republic, Denmark and North-Rhine Westphalia in Germany have proclaimed moratoria. As in the Netherlands, the UK and Switzerland, projects in the listed countries with moratoria have been suspended until further environmental risk assessments are done. In Norway and Sweden, fracking has been declared economically unviable. Projects in Austria and Sweden have been cancelled for the same reason, though without legislative measures.
  • 2. There are many oil and gas companies, with headquarters or offices in Canada, which have already begun exploring shale gas reserves in Europe, particularly in Poland. Though many of these firms are not strictly Canadian, a subsidiary based in Canada would allow them to challenge fracking bans and regulations through CETA. There is ample evidence that firms will shift their nationalities in order to profit from such a treaty.
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