A controversial trade deal known as the Transatlantic Free Trade Agreement (TAFTA) or the Transatlantic Trade and Investment Partnership (TTIP) could limit governments’ abilities to regulate fracking, thereby expanding the process in both the United States and Europe, according to a new report by Friends of the Earth Europe, Sierra Club, and others. US and EU banks and powerful corporations have been pushing for the trade deal for more than a decade.

Much like the Trans-Pacific Partnership (TPP), TAFTA/TTIP would not primarily target trade but rather health, environmental, and financial policies and protections. The trade deal threatens to weaken or roll back safeguards for citizens and the environment in favor of corporate investments. According to the new report, TAFTA/TTIP would allow “companies to seek compensation when government decisions affect their profits,” which could benefit companies that exploit natural resources by preventing governments from enforcing regulations or bans.

The analysis, No Fracking Way: How The EU-US Trade Agreement Risks Expanding Fracking, argues that:

The TTIP could dangerously thwart government efforts to address climate change and to protect citizens; could expand fracking by removing the ability of governments to control natural gas exports; and could mean that states would be forced to pay millions in compensation to corporations for profits lost to regulation.

The report notes that TAFTA/TTIP contains an “investor-state dispute settlement” clause, which would give more rights to corporations by enabling them to claim damages in “arbitration panels” if they allege that their profits are adversely affected by regulations or policy. The ability of companies to seek compensation for bans, regulations, or policy changes could threaten policies that protect communities and the environment.

The investor-state dispute settlement is referred to as “big energy’s backdoor plan to break the fracking resistance.” TAFTA/TTIP is expected to include “far-reaching” rights for foreign investors that could impact government regulations or bans on fracking. The investor-state dispute settlement is already being used by industry companies to challenge environmental and public health policies that pose a risk to their profits.

One example of this type of scheme is the Lone Pine case. Last year, oil and gas company Lone Pine Resources filed a $250 million North American Free Trade Agreement (NAFTA) lawsuit against Canada for passing a moratorium on fracking underneath the St. Lawrence River in Quebec. Another is the Swedish company Vattenfall, which is seeking more than $6 billion from Germany in “compensation” after the country voted to phase out nuclear energy.

Companies which claim their investments (including expectations of future profits) are affected by a change in government policies could have the right to seek compensation through private international tribunals. US companies (or any company with a subsidiary in the US) investing in Europe could use these far-reaching investor rights to seek compensation for future bans or other regulation on fracking.

Fracking is already poorly-regulated at both the state and federal level. In the United States, the process is widespread and increasingly unpopular. Of 24 states where fracking is currently taking place, 21 have some movement of resistance to the practice, according to the report. In Europe, public opposition to fracking is also growing as people become aware of the risks. In several places, governments have responded to public concern with bans, moratoria, or increased regulations.

US oil giants like Chevron and ConocoPhillips, which are involved in projects to extract unconventional fossil fuels in Europe, are lobbying for “a world-class investment chapter” in TAFTA/TTIP.

If Chevron gets its way, companies exploiting unconventional fossil fuels would have their investment risks reduced to near zero. If affected communities speak out against fracking, or if the government puts in place new regulations, taxpayers could end up picking up the tab. Evidence shows that the mere threat of an investor-sale dispute can have a chilling effect on governments’ willingness to regulate, with corporations using the threat of legal action to kill off legislation.

Officials on both sides of the agreement have suggested that TAFTA/TTIP include investor privileges. The deal would ensure that new laws and regulations benefit corporations at the expense of human health and the environment.

Images via: Friends of the Earth Europe

Alisha is a writer and researcher with Ring of Fire. You can follow her on Twitter @childoftheearth.