Poland: One Well a Month
After lengthy and turbulent discussions among ministers and the recent stage of public consultations, the draft of new hydrocarbon regulations is almost ready for cabinet approval, promises the main author of the draft, deputy Environment Minister Piotr Woźniak.
Woźniak notes that the government wants the new law to take effect at the beginning of 2014. "I expect the shale gas draft bill to be adopted by the end of June and Parliament should do the same by the end of this year" said Woźniak, as quoted by Polish media.
In spite of these words, supported by Prime Minister Donald Tusk who cautioned ministers "not to demolish the draft," the history of shaping new hydrocarbons laws in Poland may suggest that such declarations should be treated with special care.
Woźniak revealed that the first version of the draft was ready at the beginning of April 2012. Since early summer 2012 six ministers have been engaged in discussing the draft.
He assures new hydrocarbons laws finally reach a proper balance between the interests of the Polish government and companies. The minister says it will streamline and speed up the process of exploration by removing some bureaucratic obstacles and environmental restrictions.
For example, companies will be allowed to start building works before receiving so called environmental decisions, which will still be necessary to launch drilling works. According to the minister this should save an investor approximately 200 days.
In addition, under new regulations, environmental impact assessments will be required only for the vicinity of a borehole and not for the entire concession area or several hundred square kms, as is the process today,
Under the new regime, a license will be also guarantee obtaining mining usufruct rights, which effectively means the right to produce.
Some regulations have been widely criticized by the industry and withdrawals of heavyweight North American companies are widely considered the result of lengthy and uncooperative legislation processes.
Representatives of companies exploring for shale gas in Poland have repeatedly pointed to unclear tax rules, lack of substantial tax incentives and the 40% level of overall government share.
Last week the Finance Minister announced tax regime compromises are possible. Jan Vincent-Rostowski opted for introducing a 'tax holiday' until 2020 and for changing some of the special accounting rules defined by new regulations.
Another bone of contention is with state-owned operator NOKE, the mandatory minority shareholder in all licenses. Woźniak stressed that the final draft keeps the role of NOKE unchanged.
Deputy Environment Minister argued that NOKE would act as a "stamp of the state," sharing profits and risks with the companies. According to the Head Geologist, inclusion of NOKE into partnerships will allow the state to legally subsidize the hydrocarbons sector that would otherwsie not be possible under European Union state aid regulations.
Woźniak announced documents would be sent to the Prime Minister`s Office on June 12.
This would be almost a year after Mr. Woźniak's first attempt to reveal new legal framework was cancelled at the last minute on June 13 last year.
At the same time, the Environment Ministry updated the count of exploration wells for unconventional hydrocarbons. 44 wells have been completed, 5 are under way. The previous number, announced over two months ago was 42.
Exploration have been under way for three years.