The Federal Government published the Regulating Decree of the New Gas Law
On June 4th, 2021, the Federal Government published the Decree nº 10,712/2021 (“Decree”) to regulate the New Gas Law (Federal Law nº 14,134/2021). The Decree fully revoked the former Decrees – nº 7,382/2010 and 9,616/2018.
Following the regulatory reform of the gas sector, the Decree regulates and clarify many subjects of the new regulatory framework, as well as provide the guiding principles for the upcoming National Petroleum Agency – ANP regulation.
We highlighted the main points of the new Decree:
Guiding principles: set out the main principles to be observed in the application of the New Gas Law and in the regulation to be implemented by ANP. In line with the provisions of the New Gas Market, these principles are:
- promoting competition and the liquidity of the natural gas market;
- promotion of free enterprise for the exploration of the competitive activities;
- expansion of the transportation system and other infrastructures on economic basis;
- promotion of efficiency and the non-discriminatory access to the essential infrastructure; and
- harmonization of the federal and state regulations related to the natural gas industry.
Authorization for the transportation activity: since the regime for transportation activities has changed from concession to authorization, the Decree establishes:
- the proceeding for granting of the authorization shall be fast and efficient, assuring transparency to the users of the facilities and to the society (Article 7º of the Decree); and
- the authorizations for transportation activities which the former Gas Law granted for a fixed period of 30 years, from now on will be valid for an indeterminate term (Article 24º of the Decree).
Classification of transportation pipelines: in addition to clarifying certain parameters for the limits of diameter, pressure, and extension of the transportation pipelines under Article 7, VI of the New Gas Law, which limits will be set out by ANP (Article 8º of the Decree), the Decree establishes that:
- the pipelines connecting CNG or LNG facilities to another transportation gas pipeline shall be classified as transportation pipelines, observing the conditions of Article 7º, VI of the New Gas Law (Article 8º, § 2 of the Decree); and
- direct connections between a transportation facility and the natural gas end consumer may be performed, if allowed by the applicable state rule (Article 9º of the Decree).
Transportation systems: creation of certain definitions about transportation systems, to be further regulated by ANP, addressing the integration between the capacity market areas. Rules were also established for Management of the Market Area, which relevant costs shall be borne by the transporters and reflected in the transportation services tariffs (Article 10º of the Decree).
Access to the transportation infrastructure: creation of parameters to be adopted by ANP for regulation of the non-discriminatory access of shippers to the transportation capacity and to the virtual hubs, that shall be guided by efficiency and transparency. Additionally, the Decree provided criteria and mechanisms to be adopted by ANP to relieve contractual congestions (Article 11º of the Decree).
Stocking activity: due to the change of the regime for granting the Stocking activity from concession to authorization, the Decree establishes:
- ANP may articulate with other agencies for the regulation of granting the Stocking activity (Article 12º of the Decree);
- the tariffs to be charged for the stocking services shall be previously approved by ANP (Article 13º, § 1 of the Decree); and
- establishes that third party access to storage facilities will be on a non-discriminatory, objective, and transparent basis, and the period and conditions under which third party access is not mandatory must be respected (Article 13º, § 2 of the Decree).
Third-party access to essential infrastructure (flow, processing and LNG terminals): in addition to the innovation brought by the New Gas Law regarding the mandatory and non-discriminatory third-party access to the essential infrastructure, the Decree establishes mechanisms for accomplishment of the free access that will be the basis of the upcoming ANP Regulation, as follows (Article 16º, § 1 to 3, and Article 17º of the Decree):
- ANP shall establish terms and conditions for negotiation of third-party access to the infrastructure, and the interested parties shall inform to ANP when the negotiation with the facilities owners are initiated and the existence of disputes, if any (Article 16º, § 1 of the Decree);
- ANP’s is permitted to act ex officio if the free access negotiation is not concluded within a certain period (Article 16º, §2 of the Decree); and
- publicity and coordination of new projects which involve essential infrastructure.
Distribution: corporate relationship between agents of the competitive activities (exploration, development, production, importation, shipping, commercialization) and the piped gas distributors is allowed. Additionally, reinforce that restriction brought by the Article 30º of the New Gas Law are related only to the functional unbundling between such agents (Article 18º of the Decree).
Antitrust practices: establishes mechanisms of control and supervision by ANP of the functional unbundling rules applicable to competitive agents in relation to piped gas distributors, which must be observed in the process for provision of authorization to these agents (Article 20º of the Decree).
Commercialization: establishes the following among ANP attributions while regulating commercialization activities:
- ANP shall ensure transparency regarding formation of market prices (Article 21º, I of the Decree); and
- provides that the commercialization activity regulated by ANP encompasses sale of natural gas in gas, liquid, or solid forms, even if transported by forms other than pipelines and directly to end users (Article 21º, §2 of the Decree)
Concentration reduction: reinforces the importance of control mechanisms for market and creates guidelines related to implementation of a natural gas sales program (Article 22º of the Decree).
Harmonization of state regulations: establishes mechanisms that can be adopted by the ANP and MME to ensure the planned harmonization, clarifying that voluntary adhesion by the States may be registered through the National Pact for the Development of the Natural Gas Market.
The Decree Nº 10,712/2021 is available here, in Portuguese.
The Oil, Gas & Offshore team is available in case of doubts.