The Greenland regulatory regime for natural gas activities, including in particular the Mineral Resources Act, covers the land areas, the territorial sea area and the continental shelf areas of Greenland. The Mineral Resources Act does not distinguish between unconventional and conventional sector regulation.
Natural gas exploration and exploitation activities may be conducted both onshore and offshore. Currently there are only gas exploration activities offshore.
Onshore exploration and exploitation of natural gas will naturally be more difficult in those large parts of Greenland that are covered by the Greenland ice sheet, which covers 1.8 million km2 of the total land area of 2.2 million km2.
Some minor areas in Greenland are off-limits for natural gas activities owing to environmental or military considerations.
The main statutory rules regarding prospecting, exploration and exploitation of natural gas are laid down in the Mineral Resources Act. Part 4 (section 15) contains general rules on prospecting and Part 5 (sections 16 to 21) contains general rules on exploration and exploitation (production). Part 6 (sections 22 to 28) contains special rules on exploration and exploitation of hydrocarbons.
In 2012, Parliament passed an act on building and construction works relating to large-scale projects (the Large-scale Act). The Large-scale Act applies, inter alia, to projects concerning licences granted pursuant to the Mineral Resources Act with a cost of construction above 5 billion Danish kroner. The Act stipulates a requirement for an environmental impact assessment and lays down minimum requirements with respect to foreign labour in large-scale projects.
Other main parts of the regulation concerning prospecting, exploration and exploitation of natural gas are set out in the government’s licence terms:
- standard terms for prospecting licences - hydrocarbons (March 2009);
- Model Licence for exploration and exploitation of hydrocarbons - open-door areas onshore Jameson Land 2014 and Offshore South West Greenland 2014 (September 2014);
- Model Licence for exploration and exploitation of hydrocarbons in onshore areas in Disko Island and Nuussuaq Peninsula 2016 (September 2014, licensing round was held in 2016);
- Model Licence for exploration and exploitation of hydrocarbons - open-door area onshore in Disko Island and Nuussuaq Peninsula 2017 (May 2017); and
- Model Licence for exploration and exploitation of hydrocarbons in offshore areas in Baffin Bay (2017) and Davis Strait (2018), respectively (September 2014).
Companies that are co-licensees - members of a licence group - must make and use a joint operating agreement, which is subject to the approval of the MLSA. The government has issued a model joint operation agreement in connection with each area, which generally must be used with only minor amendments.
The standard terms for prospecting licences, the model exploration and exploitation licences and the model joint operating agreement are all available on the MLSA website at www.govmin.gl.
Prospecting, exploration and exploitation of hydrocarbons in Greenland may only be carried out under licences granted by the government.
Any Greenland or foreign person or company may perform natural gas prospecting or exploration activities under a prospecting licence or an exploration licence, respectively, if the requirements for licensees and operators under such licences are met.
Under section 16(3) of the Mineral Resources Act, an exploitation licence may only be granted to a public limited company that only carries out activities under licences granted pursuant to the Act. The company must, as a general rule, be domiciled in Greenland. The company must have the necessary technical capability and experience and financial capability.
Prospecting, exploration and exploitation licences are generally granted as hydrocarbon licences that cover both oil and natural gas. Prospecting licences are non-exclusive. Exploration and exploitation licences are exclusive.
The general selection criteria for granting exploration and exploitation licences are the company’s technical capability and experience, financial capability and intended exploration and exploitation activities, including its environmental protection practices and procedures.
Prospecting licences are granted for up to five years at a time.
Licence periods for exploration licences are generally 10 years, but may be up to 16 years if justified by special circumstances. An exploration licence period may be extended by periods of up to three years at a time with the purpose of further exploration.
An exploration licence will be extended as an exploitation licence with the purpose of exploitation if the licensee has complied with the terms of the exploration licence, including the requirement to demonstrate a commercially exploitable deposit that the licensee intends to exploit. The licence periods for exploitation licences are generally 30 years, but may be extended to up to 50 years if justified by special circumstances. Rights according to a licence cannot be transferred directly or indirectly without approval of the government. This follows from section 88 of the Mineral Resources Act.
Pursuant to the Mineral Resources Act and the various licence terms, licensees must pay certain fees. As mentioned in question 4, licensees under exploitation licences must also pay certain royalties to the government. In addition, Nunaoil is a mandatory participant in any hydrocarbon exploration and exploitation licence, with a participating interest of 6.25 per cent currently and a carried interest during the exploration period.
The government is generally responsible for all legal and administrative matters concerning prospecting, exploration and exploitation of gas, subsoil storage of gas and establishment, and the operation of gas pipelines for transportation of gas in connection with said other activities governed by the Mineral Resources Act. All these activities are governed by the Mineral Resources Act.
Prospecting, exploration and exploitation licences may only be granted, amended and revoked by the government, which also must approve any direct or indirect transfer of a licence or a share of (participating interest in) a licence.
Administration of the Mineral Resources Act and all activities under it are generally carried out by the MLSA under the government.
The MLSA approves activities under prospecting, exploration and exploitation licences (to the extent approval is required), licensees’ provision of security for the performance of their obligations, and plans for exploitation and decommissioning. In cooperation with the Greenland Minister of Mineral Resources and Labour, the MLSA also approves appointments of operators. Further, the MLSA supervises and inspects activities under licences and other activities covered by the Mineral Resources Act.
The Mineral Resources Act was changed on 1 January 2013 with immediate effect. The administration of environmental protection in hydrocarbon projects was separated from the MLSA, and placed with the EAMRA.
The MLSA is a one-stop shop, however, and obtains the necessary approvals of, for instance, environmental impact assessment reports from the Environment Agency for Mineral Resources.
Administrative and regulatory decisions of the MLSA or the EAMRA may be appealed to the government of Greenland.
Administrative and regulatory decisions of the Minister of Mineral Resources and Labour cannot be appealed to any other public authority.
Decisions of the MLSA, the EAMRA and the Minister may be brought before the Greenland courts, which may revoke or amend these decisions.
The Ministry of Mineral Resources and Labour, vested in MSLA, supervises activities covered by the licences and the Mineral Resources Act. As part of the supervision, the authority may without a court order gain access to and search companies performing activities under the Act. The government may issue an order to ensure compliance with the Act and terms in the licences. The supervising authority may also request relevant information and documentation from the companies. The government may lay down provisions that require the companies to provide information and documents concerning tax matters and to make tax payments in accordance with the regulation. If this request is not met, the government may lay down provisions that order the licensee to cease its activities under the licence until these documents are provided. The provisions may be laid down in, inter alia, orders, licence terms and approvals. The authority may also impose a fine if certain provisions in the Act are not met, including performing activities without a required licence or non-compliance with terms laid out in a licence. Liability under criminal law may be imposed on the companies. Furthermore, the government may confiscate mineral resources that have been collected, extracted or exploited without a licence or contrary to the terms of the licence.
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