Legislation: Debate on Future of Polish Shale Gas Heats Up

As the October 2011 parliamentary election draws nearer, the debate on the future of the exploration and production of shale gas in Poland is heating up.

There is currently no separate legislation regarding Polish shale gas, its taxation or royalties. The ruling party and its coalition partner appear to be delaying making a decision in this respect until more solid data is available on the possibility of producing shale gas. However, according to representatives of the largest opposition party (Law and Justice) separate draft legislation has been prepared in relation to Polish shale gas.

The main points of the draft appear to be as follows:

• The minimum fee for the mining usufruct (ie, the contractual right to produce shale gas) must amount to no less than 40% of the sales value of shale gas designated for production from a given deposit.
• A fund for future generations will be created to which profits from the production of shale gas will be transferred. Parliament will decide on their designation (to be agreed by a two-thirds majority).
• A special purpose vehicle will be established by the State Treasury to engage in all exploration and production activities, similar to that already established in Norway. It will control these activities by exercising its right as a minority shareholder in companies established for the purpose of exploration and production of shale gas.
• Concessions or licences for shale gas production will be granted through tenders; if a company exploring shale gas deposits does not tender for or win a tender, the State Treasury will return any incurred exploration costs to the exploration company.
• Rules of access to geological data (including data for exploration) will be altered; however, there is no specific information on the type of changes envisaged.
• Legislation will be implemented to ensure that 'undesired' investors will not be able to acquire companies engaged in the shale gas sector.

Law and Justice intends to submit this draft legislation for parliamentary discussion immediately after the elections.

R Adam Kozłowski is a real property, construction and environmental lawyer with Norton Rose Piotr Strawa and Partners LP (adam.kozlowski@nortonrose.com).

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