The hype around the shale gas boom and the forecasts published in the previous years, according to which Poland has great chances of becoming a “hydrocarbon Eldorado” resulted in a situation when the amendment of the Geological and Mining Law (GML) of 11 July 2014 was associated in the media mainly with the so-called “shales”.
In fact, the major changes concerned the rules for awarding and executing the concession for prospecting for, exploration and exploitation of hydrocarbons, not only those from unconventional deposits, however, it is also worth considering the changes which concern the remaining minerals.
Upon having a closer look, it turns out that there are many changes in this respect. Although sometimes the changes came dawn to adding one or two sections to an Article (e.g. in Article 32 or 81 GML), the changes often have great impact on the performance of activities.
One of the most important changes was the introduction of a new procedure for awarding the concession for prospecting or exploration. Articles 28i – 28l of GML set forth the “open door” procedure (comparison of applications).
Changes in this area were driven by the occurrence of strong competition to the potential concession areas. Although the mere growth of competition needs to be assessed positively, lack of regulation saying how to adjudicate and what to expect from authorities in this respect, definitely cannot receive a positive assessment.
As a consequence of the above gap, in a situation when at least two applications concerning the same (or partly overlapping) area were submitted, two separate procedures had to be launched with each of the competing entities being a party to the respective procedure. Obviously, each of the entities was trying to prove that their application was superior to the one submitted by the competitor(s). Despite the fact that the authority conducted administrative consultations in order to find a compromise, the actual compromise was hardly ever achieved. As a result, the proceedings lasted for a long time and the decisions were finally referred to administrative courts which would also issue irreconcilable judgements in this respect. The situation was not improved by the fact that the grounds for refusal to award the concession, specified in Article 29 of GML, were drawn up as general clauses. There was also lack of clarity regarding the rules for awarding concessions in accordance with GML in the case of tender for mining usufruct mentioned in Article 14 of GML and the rules for awarding concessions as a result of a tender procedure, as specified in the Act of 2 July 2004 on the freedom of business activities.
All the above problems motivated the legislator to settle the existing situation. In short, under the new procedure applications concerning the same area and type of activity will be compared and the best one will be selected.
Just like it has been done so far, the procedure is initiated with an application submitted by a business operator. The difference is that the Minister of the Environment informs about the submitting of application in a notice (published in the Public Information Bulletin and on its website), indicating the boundaries of the area concerned by the application and the deadline for the submission of applications by other parties.
It is worth adding that the requirements related to the application itself also have changed (Article 24 and 25 of GML). The obligation to inform about monuments and about purpose of real property foreseen in the local zoning documents has been withdrawn and the designation of real property owners should currently be made based on the land and building register (without the necessity to add extracts from land and mortgage registers). In addition, the obligation to submit a list of areas covered by specific forms of protection, was limited to projects which do not require environmental decisions. Currently, the application for prospecting or exploration has to indicate the minimum deposit exploration category.
The deadline for submitting additional applications cannot be longer than 90 days, which means that the Minister of the Environment will assess the time needed for other parties to prepare and submit their applications on a case by case basis.
When no other application is submitted within the deadline, the procedure is conducted according to the same rules which have applied so far – it is necessary to obtain opinions or consents of relevant authorities specified in Article 8 or 23 of GML.
When other applications are submitted, they will be evaluated in terms of their formal requirements and content, the only difference being that they will also be compared based on the criteria mentioned in Article 28k of GML, i.e. the proposed scope of geological works, including geological operations, time period for which the concession is to be granted, starting date for the intended activity, financial potential of the applicant and proposed technology.
Please note at this point that the application and the plan of geological operations need to be carefully considered, as no subsequent amendments will be allowed in the course of the procedure to the extent that such amendments might affect the evaluation of the above criteria.
Also in this case opinions or recommendations will need to be obtained. The practice will show whether they will be obtained for the selected best application, or, independently of content-based evaluation, for each of the submitted applications.
After completing the procedure, the entity which submitted the best application will be granted the concession, while other parties will receive refusal decisions. Obviously, one should not forget other potential reasons for refusal to award a concession which are mentioned in Article 29 of GML, including, among other things, detriment to the public interest, specifically when this it related national security, protection of natural environment or rational management of mineral deposits.
OUR OPINION
The new procedure is an attempt to solve practical problems which have been increasingly arising in the course of the proceedings. Thereby, the situation when a competing application is unexpectedly submitted at the end of a proceeding, after obtaining all required opinions, which causes significant delays in the proceedings and uncertainty as to the outcome, will be avoided.
We believe that the "open door” has eliminated doubts as to the interpretation of circumstances, namely the question whether a tender for the mining usufruct right should be applied in the case of competing applications. In practice, using tender procedures should be limited to situations when the authority wants to introduce the procedure ex officio.
A possible drawback is that the procedure could be prolonged even for up to 3 months in cases when no other entities submit their applications, although it is never possible to foresee whether or not such application would be submitted, in which case the procedure should still result in accelerated application processing.
Additionally, entrepreneurs seeking to obtain concessions will now be required to check the authority’s website every day either for notices or in hope that their area still remains undeveloped.
A complete “open door” procedure has not been conducted yet, as no competing entity joined the concession proceedings conducted according to the new rules. Only the application of the rules in practice will make it possible to recognize potential issues or gaps. If such issues occur, we will try to keep you informed.
When an entrepreneur obtains a concession, after winning their "battle” with the authority and most likely also with administrative courts, they will be able to move on to implementing their concession, after achieving positive results – to documenting the deposit and, finally, to exploitation. There are also several changes awaiting entrepreneurs at this stage, which have been introduced in the act, but they will be the subject of our next posts.