Poland Shale Legislation: “Lukasiewicz” to Rake in the Money

The main opposition party in Poland, Law and Justice (PiS) has submitted its draft legislation on shale gas licensing and taxation.

According to unofficial sources, the ruling Civic Platform (PO) party of Prime Minister Donald Tusk is in relative agreement on key provisions of the proposed legislation.

According to the draft bill, a production license will be granted through a tendering process. Currently, a company which explores and proves gas reserve, has the priority over other applicants. The new proposal will pave the way to open tenders. The state will return 200% of incurred costs to the exploration company which does not win a tender.

The PiS proposes that the overall, ultimate level of the taxation should amount to no less than 40% of gas sales value. At the same time the draft allows amendments to mining usufruct agreements, contracts  that are necessary to extract oil and gas owned by the Polish State Treasury.

The bill envisages also a flexibility in determining payment schedules, with special incentives to help develop fields in the first years of production.

The draft sets up a sovereign wealth fund, funded by taxes paid by the companies and named the “Lukasiewicz Fund”, after Ignacy Lukasiewicz, an oil industry pioneer who built in the first oil refinery in the world in Southern Poland.

 Another 19th century Polish national hero, geologist and supporter of industrial development of Poland, Stanislaw Staszic, lends his name to a second fund.

The special state-owned company, “Staszic Fund” would take equity stakes in all leases. The main objective of “Staszic” will be to control activities as a minority shaleholder.

Related Reading: New Compromise on Poland Shale Gas Tax