Poland considers changes to its hydrocarbon licensing scheme (Part 2 of 2)

Under both the current law and the proposed Act, the Ministry of the Environment has authority to grant and limit licenses. Under the Act, however, the Minister of the Environment has a stronger and more authoritative regulatory role. For instance, the Minister is obliged to commence proceedings to withdraw licenses under certain conditions. Conditions include but are not limited to (1) failing to start conducting activities as provided for in the license, (2) permanent halting of license activities, (3) conducting activities outside of the licensed time schedule, and (4) failing to maintain adequate documentation.

The Hydrocarbon Act contains several inter-temporary provisions that deal with existing hydrocarbon license holders and other related parties.

All exploration and extraction licenses issued before the Hydrocarbon Act becomes governing law will remain in full force. Extraction licenses will become licenses under the meaning of the Act. Generally, holders of exploration licenses will be authorized to apply to the Ministry of Environment to convert their licenses into licenses under the Act.

According to data provided by the Ministry of Environment, as of May 2014, Poland has granted 101 licenses targeting shale gas. The first drilling to explore for shale in Poland began in June 2010. As of 2014, 63 exploratory drillings have been completed. Poland has not granted a single shale extraction license— to date, all existing shale licenses are exploration licenses.

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This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713.651.3662) from Norton Rose Fulbright's Energy Practice Group.

Poland considers changes to its hydrocarbon licensing scheme (Part 1 of 2)

Poland’s parliament is considering amendments to its Geological and Mining Law that will change its hydrocarbon licensing regime. Submitted for consideration by the Polish Government in April 2014, the Hydrocarbons Act (the “Act”) and Hydrocarbons Tax Act will change the regulatory landscape governing both conventional and nonconventional hydrocarbon production.

The Act introduces changes in the licensing system for prospecting, exploration, and extraction. Under the current system, companies must acquire separate exploration and extraction licenses, each of which could be granted for a period of 3 to 50 years. Under the Act, however, there will be a unified licensing system. Single licenses will be granted for prospecting, exploration, and extraction, and they will be issued for a defined period of time (10 to 30 years).

Prospecting and exploration activities will have a maximum time limit of 5 years. This period may be extended a single time for a period not longer than 1 year. Production may commence with approval of the Ministry of the Environment. Before granting approval, the Ministry must assess a play’s geological, environmental, and investment data. Among other things, the Ministry will determine the approved production methods, the borders of the mining area and the time schedule for commencing the production. Production activities may be extended as necessary to complete production, but for no longer than 5 years.

The Polish Government wants the Hydrocarbons Act to be approved and functional by the beginning of 2015, and expects hydrocarbon taxes to be due and payable starting in 2020. Whether these estimates are accurate remains to be unclear.

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This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713.651.3662) from Norton Rose Fulbright's Energy Practice Group.