This article reviews significant international legal developments made in the areas of international energy, natural resources, and environmental law in 2022.
During 2022, the following environment-related statutes were approved by the President of the Republic: (1) Presidential Order 8/22, which created the National Climate and Environmental Observatory “to coordinate, control and analyze data and information related to environmental, economic and social indicators”; (2) Presidential Decree 83/22, which approved the environmental fees due for issuance and renewal of environmental licenses and registration and environmental consulting firms, among others; and (3) Presidential Decree 165/22, which approved the Regulations for Management of Naturally Occurring Radioactive Material (NORM) and other Radioactive Waste. In addition, following the presidential election last August, the former Ministry of Culture, Tourism, and the Environment split into the Ministry of the Environment and the Ministry of Culture and Tourism.
Regarding the downstream subsector, the Rules and Procedures for the Exportation of Fuels were approved. The new rules are aimed at “monitoring and controlling the exportation of petroleum products” and subject their export to a “prior authorization from the Institute for the Regulation of Petroleum Products.” Also, in line with “the General Strategy for the Award of Petroleum Concessions for the period of 2019–2025 . . . the Licensing Round for Petroleum Concessions for year 2021 was approved together with the respective Terms of Reference.”
The Gabonese Government, by means of Decree 0020/PR/MEFMEPCPAT, approved a “new regime and nomenclature for facilities classified for environmental protection.” The new statute applies to, inter alia, industrial, petroleum, mining, forestry, and agricultural facilities held or exploited by both natural and legal persons. The statute also sets forth the procedure and the documents required to be filed with the Ministry of Environment according to the potential impact caused by such facilities. The new statute also lists the obligations relating to risk assessment and emergency plans and establishes penalties for breaches of its provisions.
In addition, in line with the 2019 Hydrocarbons Code, the Government approved Decree 0021/PR/MPGM, governing the State and the Gabon Oil Company’s rights of first refusal in case of transfers of shares in entities holding participating interests in production sharing contracts. The new statute sets forth the procedure for notification, the relevant timelines, and the mechanism to set the transfer price in case such right is exercised. Also, following “the Country’s readmission to the Extractive Industries Transparency Initiative (EITI) back in October 2021, the by-laws of the EITI were formally adopted by means of Order 0541/PM/MER.” “By implementing the EITI, Gabon commits to the transparent management of its extractive sectors, notably as regards granting of permits, collection and use of revenue, and publication of expenditure-related data.”
Last June, by means of a joint Ministerial Statute, the Ministry of Economy and Finance and the Ministry of Mineral Resources and Energy established several measures to mitigate the impact of the rise in the price of the barrel of crude oil internationally. These measures shall remain in force for a six-month period and include, inter alia, a five-percent reduction of port handling fees for diesel and petrol and a sixty-percent reduction in the costs of logistics infrastructure for fuel intended for petrol stations. Also, by means of Decree 30/2022, the Council of Ministers “amended the Special Regime for VAT [value-added tax] Regularization by Companies Operating within the Mining and Petroleum Sectors.” Under the new rules, beneficiaries may be excluded from paying VAT assessed by their suppliers upon issuance of Regularization Notes thereto. This procedure, though, is subject to certain requirements, including prior authorization from the Tax Authority.
In 2022, two important statutes in the oil and gas sector were approved. (1) Decree-Law 22/2022, on the new Legal Regime for the Provision of Services to the National Petroleum Sector, establishes, inter alia, (A) the terms and conditions pursuant to which service providers must be registered with the National Petroleum Agency (ANP-STP), (B) the tax regime to which service providers are subject and the obligation of the entities that carry out petroleum operations to submit to the ANP-STP quarterly procurement plans. Contracts entered into by Authorized Persons or Associates in breach of the new statute are deemed null and void, and the costs incurred therewith are neither recoverable nor deductible. (2) Decree Law 47/2022 approved amendments to the Production Sharing Contract (PSC) Model, notably in respect of the fees payable by contractors under the PSC, cost recovery, decommissioning, and employment and training of national citizens.
Decree-Law 41/2022 created the National Authority for Environmental Licensing. The new Authority is responsible for, inter alia, assessing projects and classifying and issuing environmental licenses, as well as verifying that entities conducting activities with an environmental impact “comply with the provisions of both national and international legislation related to protection of the environment.”
Moreover, “[i]n compliance with Timor-Leste’s commitments under the Kyoto Protocol, the Government has created the Designated National Authority for the Fight against Climate Change, by means of Decree-Law 42/2022.” “This Designated Authority has the mission to approve the participation of public and private national entities in projects related with clean development and emissions trading and will serve as a liaison between Timor-Leste and the Green Climate Fund.”
Also, Decree-Law 39/2022 amended environmental licensing procedure in Decree-Law 5/2011. The new statute establishes new rules, notably in respect of the submission of documents and payment of fees.
“With a view to developing the mining sector, Decree-Law 43/2022 . . . created the national mining company, called Companhia Mineira de Timor-Leste, S.A. (CMTL, S.A.), and approved its by-laws.” “CMTL, S.A. will be responsible for conducting mining activities . . . including reconnaissance activities, prospecting and exploration, evaluation, development, mining, treatment, transportation, and commercialization of minerals as well as mine closure activities.”
On February 8, 2022, the Italian Chamber of Deputies adopted amendments to Article 9 and Article 41 of the Italian Constitution to introduce environmental protection as a fundamental principle. On the original basis to “promote the development of culture as well as scientific and technical research” and to “safeguard the natural landscape and the historical and artistic heritage,” the amendment added that the Republic “shall protect the environment, biodiversity and ecosystems, also in the interest of future generations.” In addition, Article 41 of the Constitution was modified to include “health and environment” as new limitations to private economic initiatives. It also encourages Italian law to orient economic activities with “environmental purpose,” stating that “[t]he law shall provide for appropriate programmes and controls so that public and private economic activity may be oriented and co-ordinated for social and environmental purposes.”
In response to various economic and social consequences of the Ukraine crisis, Royal Decree-Law 6/2022 went into force in March 2022. The main aspects related to the energy sector include the following: (1) supportive measures to electro-intensive, gas-intensive, and gas-consuming industries; (2) updated parameters of the remuneration regime for the production of electricity from renewable energy, co-generation, and waste sources; (3) simplified authorization procedures and conditional waiver of environmental impact assessments for renewable energy projects; (4) release of ten percent of the reserved capacity in transmission grid knots for self-consumption facilities; (5) reduction of greenhouse gas emissions intensity over the life cycle of fuels and the energy supplied in transportation; and (6) extraordinary and temporary rebate on the final price of certain energy products.
In October 2022, Spain began the process of withdrawing from the Energy Charter Treaty (ECT). Earlier in June 2022, an Agreement in Principle to modernize ECT was reached among signatories to conclude fifteen rounds of negotiations, which introduced flexibility for signatories to exclude investment protections in fossil fuel investments, and was pending for further adoption by the Energy Chapter Conference in November 2022.
To deal with soaring energy prices, the Dutch government reduced excise duty on petrol, diesel, liquefied petroleum gas (LPG), and liquefied natural gas (LNG). Meanwhile, the VAT on natural gas, electricity, and district heating was reduced for all entrepreneurs from twenty-one percent to nine percent. In October 2022, the Dutch government unveiled a temporary price cap on electricity and gas from January 1, 2023. For gas, the price would be capped at 1.45 EUR/m3 within the consumption of 1,200 m3. For electricity, the price would be capped at 0.40 EUR/KWh within the consumption of 2,900 KWh. Excess consumption needs to be paid pursuant to the market price. Also, in October, the Dutch government released the Energy Cost Contribution scheme (TEK) to enable energy-intense SMEs to get allowance for the period from November 2021 to December 2023.
But, in October, the effective day of the Environment and Planning Act (Omgevingswet) was postponed to July 1, 2024. The new Act embodies twenty-six existing acts to test building projects on environment, housing, nature, and water, which is expected to reduce the time to apply for a permit from twenty-six weeks to eight weeks.
To further finance the transition to a sustainable economy, the EU Commission published the Complementary Climate Delegated Act (CCDA) in July 2022, specifying science-based screening criteria for the EU Taxonomy Regulation (Taxonomy). In 2020, the EU set forth six environmental objections and four conditions for companies and investors to identify green economic activities in the Taxonomy and adopted the first delegated act in January 2022. Compared to the first act, CCDA includes specific gas and nuclear activities into the Taxonomy list, meanwhile providing special disclosure requirements for companies to state to what extent their transactions are linked to natural gas and nuclear energy. In light of the current applicable Corporate Sustainability Reporting Directive (CSRD) and Sustainable Finance Disclosure Regulation (SFDR), CCDA, with the Taxonomy, will fit into the EU’s finance framework as policy tools to impose mandatory disclosure requirements on large companies. They also can be voluntarily adopted to achieve positive environmental impacts.
After a Hydrocarbons Investments Promotion Bill proposed by the National Executive on September 15, 2021, failed to receive expedited treatment by the National Congress, the National Executive, urging to secure domestic hydrocarbon production increases to satisfy the domestic demand substituting costly hydrocarbon imports, issued Decree of Necessity and Urgency (DNU) 277/2022 on May 27, 2022.
The Decree created two substantially similar exchange rate incentive regimes aimed at easing the remittance of currencies required to enable new investments in the critical hydrocarbons industry: (1) a foreign exchange access regime for incremental oil production (the Petroleum Regime, or RADPIP, per its official acronym); and (2) a foreign exchange access regime for incremental natural gas production (the Natural Gas Regime, or RADPIGN, per its official acronym).
The beneficiaries of these regimes will be granted access to the Free Exchange Market without the need for prior approval from the Central Bank for (1) the payment of capital and interest on foreign commercial or financial liabilities, including liabilities with non-resident-related companies and/or profits and dividends that correspond to closed and audited financial statements and/or the repatriation of direct investments of non-residents; (2) their respective volumes of benefited incremental oil production (equal to twenty percent of the quarterly incremental production obtained by each beneficiary over its respective production baseline curve); and (3) their respective volumes of benefitted incremental natural gas injection (equal to thirty percent of the incremental injection obtained by each beneficiary over the natural gas injection baseline) valued at external market prices.
The given promoted percentages may increase in light of the beneficiary’s level of coverage of domestic market needs or in case it meets other conditions, such as, among others: (1) having reversed the decline curve of the producing reservoirs in the immediate past year; (2) having obtained, for the petroleum regime, incremental oil production from low productivity wells or previously inactive or closed wells in partnership with small companies, which, in turn, must meet certain requirements; (3) having hired, for the natural gas regime, a minimum ten percent of its fracking services from regional or domestic companies, which, in turn, must meet certain domestic content requirements; or (4) having increased its earnings and profits investments by no less than $5 million in marginal fields or fields located in regions or basins with declining conventional production only within a period of two years from admission to the incentives program.
To access and maintain the benefits of RADPIP and RADPIGN, beneficiaries shall submit and comply with a National and Regional Supplier Development Plan that satisfies certain “Regional and National Integration Requirements,” as well as a system of preferences in favor of said National and Regional Suppliers.
Thereafter, the Decree was further regulated by National Decree 484/2022, issued on August 12, 2022, whereby the beneficiaries were enabled in order to promote the necessary investments to increase the production in their hydrocarbon fields to submit applications jointly with other legal entities, which will be considered as associated third parties, as long as they comply with the applicable requirements, prove a contractual link with the beneficiary of at least twelve months, and have a minimum effective investment of $50 million, with the terms to be further regulated by the Enforcement Authority.
Additional regulations from both the National Secretary of Energy and the Argentine Central Bank are also pending for several aspects of these government incentives to become operational.
In early July 2022, Turkey’s President Tayyip Erdoğan signed and forwarded a bill to the Parliament’s Speaker’s Office that would make Turkey a party to the Svalbard Treaty. In October 2022, the Turkish Parliament’s Foreign Affairs Committee approved the bill, paving the way for a vote by the full Grand National Assembly of Turkey.
Signed in 1920, the Svalbard Treaty governs an archipelago located in the Arctic Ocean approximately halfway between Norway and the North Pole. Under the treaty, Norway is given “full and unrestricted sovereignty over the Svalbard archipelago,” subject to several key provisions. First, all treaty signatories are granted non-visa entry and are not subject to tariffs for the import or export of goods. Second, all parties enjoy “equally the rights of fishing and hunting in the territories . . . and in their territorial waters” and can “carry on there without impediment all maritime, industrial, mining and commercial operations on a footing of absolute equality.” At the time the Treaty was signed, nations had exclusive control of up to around three or four nautical miles of territorial sea. In 1982, the United Nations Convention on the Law of the Sea (UNCLOS) extended these territorial waters to twelve nautical miles (nm) and established an exclusive economic zone of up to 200 nm beyond a nation’s territorial sea. It is unclear how UNCLOS is to be applied in relation to the Svalbard Treaty.
There were originally fourteen party signatories to the Svalbard Treaty. Turkey is poised to become the forty-seventh party to the treaty. Becoming a signatory to the Svalbard Treaty will open the door for Turkey to initiate economic and scientific activities within the Arctic region. It may also renew legal and political discussions about how to interpret old treaties, considering increased global competition for Arctic resources.
