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    Romania – Some Legal Facts on Gas from Shale



Romania lacks a comprehensive and pragmatic energy strategy and while exploration and production of unconventional resources is legal, there is no guarantee of observance of law.

by: Partner Pachiu & Associates

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Natural Gas & LNG News, News By Country, Romania, Shale Gas

Romania – Some Legal Facts on Gas from Shale

A decade ago, few people in Romania had heard about gas from shale, despite the pioneering and promising prospects in the US at that time. However, the fierce opposition that we are witnessing today against such energy resource reminds us of the antinuclear demonstrations in Western Germany back in the eighties, a phenomenon which was never known in our country. Strangely enough, no other type of resource (even the most polluting ones like coal, or the ones with potentially large and long term scale risks on the environment, like nuclear energy) has generated such intensive debates in Romania, as the issue of gas from shale. 

Apart from the particular focus on the environmental impact of gas from shale operations, some voices (even on the Government side) claim lack of regulation and, consequently, the necessity of regulation either at national level or at EU level. So far, at the member states’ level, only two countries, Bulgaria and France, managed to promote legislation on gas from shale, that is, to prohibit any E&P operations, (the so called “moratorium”).

At EU level it may be stated that some clear positions (although not conclusive) have been structured so far. First, it is the Philippe and Partners report delivered to the European Commission in 2011, which stated that the activities relating to the exploration of shale gas are already subject to EU and national laws and regulations and that there is no further need for legislation. The resolutions of the Committee on Industry, Research and Energy (ITRE) and of the Committee on Environment, Public Health and Food Safety (ENVI), adopted on November 21, 2012, are intended to express the Parliament’s political position towards the production of unconventional resources. It is important to remember that the Parliament’s reports, published by the ITRE and the ENVI in the spring of last year (March 2012), approach the shale gas issue with caution. However, neither of the two studies explicitly recommends the enactment of new regulations at this stage of work, mentioning that the regulation of shale gas exploration and production is closely related to the competences of each national authority.

In Romania, despite the above mentioned conclusions at EU level, and notwithstanding the existing legal, binding and enforceable concession agreements that allowed IOC’s to explore and develop any type of gas (i.e. gas from shale as well), during election year 2012, the Government unilaterally declared (no statute or law being adopted for such purposes) a “moratorium” on any shale gas operations. Some of its members further stated that no decision shall be made until there is a clear pathway adopted at EU level. Such so-called moratorium expired at the end of last year.

Still, the legality of gas from shale E&P is questioned here and there, some towns and villages across the country even promoting local referendums aiming to ban any such operations. 

What is in fact the situation? 

The main piece of legislation governing oil and gas operations is the Petroleum Law of 2004. When referring to hydrocarbons, the law does not make any specific reference, nor distinction, as regards oil or gas from shale or any other type of hydrocarbon, nor does it impose or exclude a certain technology for E&P. There is no legal prohibition for exploration and development of shale gas or of using hydraulic fracturing. In other words, gas from shale, as part of the hydrocarbons family, benefits of clear cut and extensive regulation. Basically, each step of the E&P process is strictly and specifically supervised and requires approval by relevant regulatory authorities, most important ones being the National Agency of Mineral Resources (NAMR) and the Environmental Protection authorities. 

What are the main legal arguments against E&P operations of gas from shale? 

Firstly, it would be the alleged lack of consultation of the civil society/public in the conclusion of relevant concession agreements and the fact that such concession agreements are considered as classified information. There is no legal requirement to pursue public consultation upon conclusion/approval by Government of concession agreements. The Government has the right to classify any information it deems fit or which must be considered as classified according to law. The classified nature of information pertaining to hydrocarbon reserves is specifically imposed by law. Public consultation must be followed, under certain conditions, only in the E&P environmental permitting stage. It seems also that the opposition is making a confusion between Government Resolutions of legislative nature (which indeed require prior public consultation) and Government Resolutions having a so called, individual” nature (i.e. aimed at regulating some particular issues which refer to rights of specific persons, like the case of the concession agreements for petroleum operations).

The opponents to gas from shale claim that any type of operation (including exploration activities) should be prohibited due to reasons of environmental risks. Again, according to law, an evaluation on environmental impact of petroleum operations may be performed only after seismic and geological surveys are being made, i.e. only after the exploration phase.

As regards the arguments of opponents related to the breach of the constitutional right to life and to a healthy environment by promotion of shale gas operations, the case-law of the European Court of Human Rights (which also has jurisdiction on matters raised by Romanian nationals) provides for clear cut conclusions to the contrary. Important to mention is some case law of said Court (Tauira vs. France-1995, Asselbourg vs. Luxemburg-1999), where the court considered that the simple claim of industrial pollution risks is not sufficient for a claimant to be considered to require protection under the Convention for the Protection of Human Rights. Possible accidents in hydrocarbon development do not constitute a legal argument for cancellation of licenses for petroleum operations or banning of same; if this would apply, then Romania would also have to ban its nuclear facilities and other conventional energy production activities. 

And what evidence is available to support such opposition? So far, there is one documentary film, some opinions/doubts of some geologists and the examples of Bulgaria and France who, following street pressure (and not conclusive scientific evidence), decided to suspend shale gas operations.

What is happening on the Government side?

At central level, we face certain inconsistencies among the Government members. Some are supportive of identifying shale gas resources, others call for the EU to provide a conclusive approach aimed at inspiring domestic regulation, while a third category is clearly against it.

Local authorities (such as county or city councils) have been more action oriented. In the towns and villages where it was rumored that shale gas operations might be pursued, local authorities have refused to grant permissions and have initiated referendums, calling the local population to vote in favor or against such operations (due to lack of quorum, such voting was not passed).

It is generally accepted in Romanian case law and legal doctrine that the powers of local public administration may not replace the powers of the Parliament, the only body authorized under Constitution to promote laws. Local public administration does indeed have some normative powers, BUT only limited to the implementation, at local level, of laws issued by the Parliament. It may thus be concluded that whenever a local authority has the initiative to organize a referendum on a specific matter and to decide whether such matter is of “particular interest” for the local community, such must be made in accordance with the law and, in particular, in accordance with the competencies and powers that are vested by law to such local authority. One may not identify under the Romanian laws any authority of a local council/community to decide on matters which are related to exploration and production of natural resources. According to the Romanian Constitution and the Law on public property (in line with the European Charter on Local Self Government), the “riches of the subsoil” are the exclusive property of the Romanian state (and not of local authorities). Consequently, anything that is related to “riches of subsoil” (i.e. including hydrocarbons), may not be decided upon by local authorities, but only by the State, represented by the Government, acting through its regulatory authority, which is the National Agency for Mineral Resources.

Arguing that the population of a specific village can decide on the fate of riches of its subsoil, would mean arguing basic principles of constitutional representative democracy in Romania. Despite serious reasons of considering such referendums as unlawful, they were nevertheless promoted and voting bulletins were printed and stamped.

What will follow next? 

Romania is lacking a comprehensive and pragmatic energy strategy. Relevant stakeholders are currently supportive of defining such strategy (several drafts are being circulated). The respite offered by a non-election year, a Government coalition with (still) high rankings in the polls, can be considered as an opportunity in defining a strategy assumed by all stakeholders and providing for a decisive approach on the fate of unconventional hydrocarbons in Romania.

Meanwhile, E&P of unconventional resources is perfectly legal. Unfortunately there is no guarantee of observance of law and, up to this point, it has been proven that political statements can, strangely enough, have the force of law and even replace the law! Additionally, unprofessional debates, even if deployed under the shadow of Christianity (opposition demonstrations were led by local priests) cannot bring any contribution to a highly specialized issue such like energy, in a time that may be called, indeed, as the “energy century”.

Apart from a “yes” or “no” decision, a continuous ball play with the issue (such as expecting guidance at EU level), without shooting at the gate can make the best defense worthless. And, by “defense”, I mean the energy security of Romania.

Laurentiu Pachiu is the Managing Partner and founder of Pachiu & Associates, having over 18 years of experience in the legal business environment. The energy practice initiated by Mr. Laurentiu Pachiu was among the first legal practices of such kind established in the country. The firm developed at the same fast pace at which the Romanian energy market evolved.

He is a graduate of the Diplomatic Academy of the German Federal Ministry of Foreign Affairs. Prior to being a lawyer, Mr. Pachiu was a diplomat of the Ministry of Foreign Affairs of Romania. 

Pachiu & Associates is a leading Romanian business law firm, offering prompt, effective and personalised solutions to all legal matters, with a special focus on the energy field. The Energy Practice Group provides legal support in relation to the planning, implementation and operation of projects in the field of alternative and conventional energy and natural resources in both upstream and downstream sectors. Pachiu & Associates is the only Romanian firm member of Associated European Energy Consultants. More details on: www.pachiu.com