StrategicFit - French unconventionals regulation

Developments in Unconventional Gas
regulation in France
January 2012

Fracking is currently banned in France due to significant
public and political opposition, removing the opportunity
for 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

There are outstanding issues to be resolved which will
significantly affect the future of shale gas in France


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


There are many institutions involved in license decision making


French Administrative Structure


Exploration Permit allocation is dependent on national and local bodies


Drilling permits must be acquired in addition to
exploration or production licenses


Agreement must be reached with the owner of the surface
for production but the State can intervene


Pipeline approval is split based upon the size of the project
and 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.

Taxes must be paid nationally and locally dependent on
the quantity of gas produced


National Pipelines in France are operated by two companies but
legislation ensures tariffs are uniformly set for all operators


Households can choose to receive gas either at a regulated
or free market rate


In July 2011 legislation was passed explicitly banning hydraulic
fracking and rescinding licenses based on this technology


Example Cases- Montelimar License previously held by Total


Route of Appeal for Total has several levels
In France there is a system of “Civil Law” as opposed to the “Common Law” in
USA and UK.


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)


There were strong reactions from industry to the Government’s
decision to implement a Fracking ban and repeal licenses
Christophe De Margerie, Total CEO: “We are surprised and want to see what the real legal reasons
for stopping this permit [are]. Did we anticipate such a move? No. We did not anticipate it would
be such a big event. Everybody knows the way we work.”

Bruno Courme, MD Total Europe announcing the appeal against the repeal of licenses: “Our position
is 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 in
the ban): “There are concerns about the environmental impact [of Fracking]. Probably it can be
improved and probably it has to be improved.“

Craig McKenzie, President and CEO of Toreador stated Fracking was not needed for evaluation of
exploration licenses but did not comment on production: "It is important to note that our plan to
evaluate our exploration licenses does not call for hydraulic fracturing. We will not conduct
hydraulic fracturing operations within any of our permit areas”

President Sarkosy outlined the thought process behind the ban : “Development of hydrocarbon
resources underground is strategic for our country but not at any price…[development would
come] 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 trying
to find non-polluting technologies to develop this incredible resource.”


We have extensive experience helping clients with
unconventional resource plays.


For further information, please contact:

Adam Mitchell Duncan John
+44 7876 243 480 +44 7771 562 500
amitchell@strategicfit.co.uk djohn@strategicfit.co.uk

www.strategicfit.co.uk
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StrategicFit - French unconventionals regulation

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