Poland Sets out to Accelerate Shale Gas Exploration and Extraction

By Katarzyna Branny, April 9, 2013

Companies interested in exploration and extraction of shale gas in Poland should know that the Environmental Ministry is working on a proposal for an amendment to the Geological and Mining Act (the Proposal) that aims to facilitate permit procedures as well as create less demanding environmental standards for exploration and extraction of hydrocarbons (oil and gas).

Background Information
In the past five years, a significant number of companies have expressed interest in exploration and extraction of oil and gas in Poland. By the end of 2012 over 250 permits had been issued for exploration and extraction of both conventional and unconventional deposits. By way of comparison, a mere 14 permits were issued from 2000– 2006. The sudden rise in the number of permits issued is the direct result of increased shale gas exploration in Poland.

As of December 2012 there were 39 exploratory drilling wells in Poland. Hydraulic fracturing, so-called “fracking”, has been performed in 11 of the wells. Despite the environmental concerns related to fracking, the Polish Geological Institute issued a report in March 2012 on the environmental aspects of hydraulic fracturing based on the findings in the Łebień LE-2H well. According to the report, all elements of the environment are safe if fracking is performed in conformance with the law. As of February 2013, Poland has not adopted any standard addressing the safety of hydraulic fracturing.

The European Union has not taken a final stand on the environmental impact of fracking. Thus far, the European Commission has published only a few studies analyzing the environmental aspects of fracking. In November 2012 the European Parliament issued two non-binding resolutions stressing the importance of complying with applicable EU laws and calling on the European Commission to develop an EU-wide risk management framework for unconventional fossil fuels exploration and extraction. In December 2012, the European Commission opened public consultations and is seeking comments that will be taken in consideration when developing the framework.

Changes Proposed to Polish Mining Law

Permits
The outstanding Proposal aims to modernize the existing permitting system in order to accelerate the permitting process. It would replace three permits that are currently required for exploration and extraction into one single permit. This permit would give companies the exclusive right to extraction after finalization of exploration phase.

In conjunction with the old system, permits for shale gas exploration and extraction would still be issued primarily through tenders. However, as a new feature, multiple companies would be able to submit a joint proposal [wspólna oferta]. In the joint proposal the applicants would need to prescribe how they will share profits and losses. If the joint proposal won the tender and an exploration and extraction permit was awarded, the companies would then need to appoint a single operator who would be responsible to carry out all obligations determined by the permit and to represent the companies before authorities.

Additionally, the winner of a tender would have to sign a cooperation agreement [umowa o współpracy] with the National Operator of Mineral Energy