StrategicFit - French unconventionals regulation

Developments in Unconventional Gasregulation in FranceJanuary 2012

Fracking is currently banned in France due to significantpublic and political opposition, removing the opportunityfor shale gas production• The award of exploration and production licenses is carried out by the Ministry of Ecology, Energy and Sustainable Development with advice from many other local and central bodies.• In addition a drilling permit is required from local authorities and land access agreements must be made with surface owners.• 2011 has seen a complete ban on hydraulic Fracking and rescinding of 3 licenses with Fracking production plans.• An appeal was launched in January 2012 against the removal of one of the licenses by Total.• There is no outright ban on the exploitation of Shale Gas and the importance of it as a resource is recognised however there are not alternative extraction technologies currently available. Copyright © 2012 by Strategic Fit. All rights reserved. 2

Content• Overview of Regulatory Process• French Administrative Structure• Process for License Award• Taxes and Charges• Pipeline access• Fracking Guidelines• Example Case - Montelimar License• Legal Structure Copyright © 2012 by Strategic Fit. All rights reserved. 4

Pipeline approval is split based upon the size of the projectand the state can force through pipelines in the public interest Routes to Access Land for Construction, Infrastructure and transportation of Gas • Construction of a pipeline requires authorisation. For the largest pipelines this involves Ministerial approval, for smaller pipelines then approval can be granted by Prefects. • Approval is subject to meeting conditions relating to: o technical and financial capacities o safety (all aspects including workers) o protection of the environment o compatibility of projects by following principles and missions of public service • Owners of land which is crossed by gas transportation or distribution pipelines can be required to allow construction of pipelines as a public utility. Further they must not hinder the usage and maintenance of the pipeline. • Currently GRTgaz and TIGF are the managers of the distribution network. Copyright © 2012 by Strategic Fit. All rights reserved. 10

An appeal against administrative decisions by the central government would likely be decided by the Council of State• Any appeal would likely need to be made to the Conseil D’Etat (Council of State).• The Conseil D’Etat will determine if the government decisions comply with higher sources of law: o The constitution o Higher administrative decisions o the general principles of law o Statutory law o International treaties and conventions• The Conseil D’Etat does not have jurisdiction over acts relating to French Foreign Policy and acts relating to the relationship between the Government and the Legislative branch.• An appeal is initiated by a statement of claim detailing the factual background and the appellant outlining their case.• A formal investigation is then begun with the Government branch giving a statement of defence.• Judgement is made by a sous-section (under department) in small cases however for larger important cases this may be passed up to a section or in very large cases (10 per year) the Assemblée du contentieux (administrative claims assembly) Copyright © 2012 by Strategic Fit. All rights reserved. 17

There were strong reactions from industry to the Government’sdecision to implement a Fracking ban and repeal licensesChristophe De Margerie, Total CEO: “We are surprised and want to see what the real legal reasonsfor stopping this permit [are]. Did we anticipate such a move? No. We did not anticipate it wouldbe such a big event. Everybody knows the way we work.”Bruno Courme, MD Total Europe announcing the appeal against the repeal of licenses: “Our positionis that the law does not justify the withdrawal of our permits.”Gerard Mestrallet, CEO of GDF after the ban was implemented (Note: GDF did not lose any licenses inthe ban): “There are concerns about the environmental impact [of Fracking]. Probably it can beimproved and probably it has to be improved.“Craig McKenzie, President and CEO of Toreador stated Fracking was not needed for evaluation ofexploration licenses but did not comment on production: "It is important to note that our plan toevaluate our exploration licenses does not call for hydraulic fracturing. We will not conducthydraulic fracturing operations within any of our permit areas”President Sarkosy outlined the thought process behind the ban : “Development of hydrocarbonresources underground is strategic for our country but not at any price…[development wouldcome] at the price of fragmenting the soil that would massacre the almost spiritual scenery”Budget Minister Valerie Pecresse seemed to offer a conflicting message after revoking Total’s license:“We had to cancel the permits but research must continue. All big developed countries are tryingto find non-polluting technologies to develop this incredible resource.” Copyright © 2012 by Strategic Fit. All rights reserved. 18

For further information, please contact:Adam Mitchell Duncan John+44 7876 243 480 +44 7771 562 500amitchell@strategicfit.co.uk djohn@strategicfit.co.uk www.strategicfit.co.uk Simply Insightful

StrategicFit - French unconventionals regulation

by StrategicFit on Dec 21, 2011

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