According to EU law, member states have sovereignty over hydrocarbon resources that are on their territories. Therefore, they have the right to determine the areas within their territory to be made available for the exercise of the activities of prospecting, exploring for and producing hydrocarbons’ (Directive 94/22/EC of the European Parliament and of the Council of 30 May 1994 on the conditions for granting and using authorisations for the prospecting, exploration and production of hydrocarbons), while having to ensure a non-discriminatory delivery of authorisations.
There is no difference between the regulation of the unconventional and conventional sectors in the French jurisdiction, apart from Law No. 2011-835 codified as articles L.111-13 and L.111-14-1 of the Mining Code, which prohibits any exploration works in as far as they involve hydraulic fracking.
The Mining Code and its implementing decree on mining and storage titles (Decree No. 2006-648, dated 2 June 2006 on mining and storage titles) provide that mining titles are issued by the Minister in charge of Mines after a competitive procedure, and exploration titles after a public survey. However, and in compliance with article L.143-1 of the Mining Code, the mutation (eg, the assignment) of a mining title is issued by the relevant administrative authority (under a ministerial order or a Council of State decree) without any competitive procedure or public survey. The new holder of the mining title should fulfil the conditions required to obtain the mining title (article L.143-2 of the Mining Code).
Any mining title (exploration or exploitation title) may be withdrawn, after formal notice, in the following limited cases:
- lack of payment of the required fees for more than two years;
- non-compliant mutation;
- grave breach of the policy rules; or
- lack of, or prolonged insufficient, operation (article L.173-5 of the Mining Code).
Mining titles (and, from a general point of view, administrative decisions related to mining titles) may be challenged on legal grounds before the relevant administrative court within two months of the official notification of a decision. The requirement of an official information measure includes derogations in the case of an implicit decision (implicit rejection, for instance). A decision may be interrupted and delayed by the existence of an administrative appeal for consideration or a hierarchical administrative appeal, and such delay may be longer for an appellant living in an overseas French state or territory or abroad. In addition, Chapter II of Book V of the Mining Code provides the offences and penalties in mining matters. In view of the mixed character of mining legislation, certain questions fall within the jurisdiction of either the administrative courts or civil courts.
Law No. 2017-1839, which organises the stoppage of research and exploitation of hydrocarbons in France, rules that the mining titles properly issued before the day following its publication (31 December 2017) remain subject to the provisions of the Mining Code, of the Environmental Code and of Law No. 2011-835. The Law rules in particular that no new hydrocarbon exploration licence shall be granted, which will stop the search for new oil or gas deposits. Existing operating concessions will not be renewed beyond 2040. Liquid and gaseous hydrocarbons, except coal mine, fall within the scope of the Law.
According to article L.121-1 of the Mining Code, exploration works may only be undertaken subject to a prior administrative authorisation by:
- the owner of the soil;
- someone authorised by the owner;
- a person authorised by the administration without the consent of the owner; or
- the exploration licence owner.
Under articles L.122-3 and L.142-1 of the Mining Code, the licence (also called ‘the exclusive licence to prospect for oil and gas’) is granted, after competitive procedures and without public survey, by the Minister in charge of Mines for up to five years initially after an assessment of the technical and financial capabilities of the applicant. The exploration title may be extended twice for five years without new competitive procedures. The process is regulated by Decree No. 2006-648, and by a Ministerial Order, dated 28 July 1995, laying down the procedures under which applications for mining titles are established. The application for the mining title is transferred to the relevant regional authorities. When the application is considered complete, the opening of the competitive procedure is published in the Official Journal of the French Republic (JORF) and the Official Journal of the European Union (JOUE). The competition phase lasts for 90 days from the date of its publication in the JOUE. The licence is finally granted by a ministerial order from the Minister in charge of Mines, and published in the JORF. If the Minister is silent for two years, this equals denial of the licence.
Even after the delivery of the exploration licence, articles L.162-41 and L.411-1 of the Mining Code, and Decree No. 2006-649 of 2 June 2006 on mining and storage works and on mining policy, require the licensee to provide for a declaration of the opening of these mining works or, if the impact of the works so requires, to ask for an authorisation that involves a public survey and that is granted by the administrative local authority.
Articles L.121-3 and L.122-1 of the Mining Code provide that the explorer is free to use the products from its exploration works.
To facilitate the return on investment of the exploration phase, French law provides for the principle of ‘inventor privilege’, according to which the licensee has a right to obtain an exploitation title, also called a ‘mining concession’. Under article L.132-7 of the Mining Code, where the inventor is not granted the mining concession, the decree granting the mining concession determines the compensation due to the inventor by the operator.
A holder of two contiguous exploration permits can apply for a merger of his or her permits (article L.141-1 of the Mining Code), which should be authorised by a ministerial order from the Minister in charge of Mines. The order will determine the expiry date of the new mining title, which will be between the expiry dates of the merged permits (article L.141-2 of the Mining Code).
According to Law No. 2017-1839, which created article L.111-10 in the Mining Code, if the protection of the environment, public safety and health or other existing or planned uses of the soil or subsoil so justify, a set of specifications sets out the special requirements imposed on the holder of the mining title. The specifications are drawn up by the administrative authority competent to issue the relevant mining title for exploration or exploitation of hydrocarbons, or to grant its extension or its renewal. It takes into account the result of the administrative instruction of the application for the title, its extension or its renewal and, in case this request requires the implementation of a procedure of public participation, the administrative authority may supplement the specifications in order to take into account the results of this procedure. The specifications are brought to the attention of the applicant.
According to article L.163-11 of the Mining Code as amended by Law No. 2017-1839, the facilities dedicated to exploration or exploitation for liquid or gaseous hydrocarbons, as well as the facilities essential to the mine, within the meaning of articles L.153-3 and L.153-15, may be converted or transferred by an agreement and after local authorities have rendered their opinion, by the explorer or the operator to any public or private persons. This transfer is accompanied by the transfer of the rights and obligations relating to the facilities. It is approved by the administrative authority, subject to the execution by the transferor of the work stoppage procedure for all the facilities that are not necessary for the new intended use and, as the case may be, subject to the prior granting of a mining title for this new use.
With Law No. 2011-835, the state prohibited any exploration works concerning shale gas (and oil) insofar the works involve hydraulic fracking. These provisions are now codified as articles L.111-13 and L.111-14-1 of the Mining Code. According to article L.111-14-1, the applicant for any authorisation regarding coal or other liquid or gaseous hydrocarbons shall provide the competent administrative authority with a report justifying the non-utilisation of hydraulically fracturing drilling.
French Guyana benefits from an exception. An exclusive permit for research of liquid or gaseous hydrocarbon mines, known as ‘Maritime Guyana’, was granted by a Ministerial Order dated 29 May 2001, and extended twice by Ministerial Orders dated 2 July 2007 and 22 December 2011. It has been extended once again by a Ministerial Order dated 14 September 2017, taken under article L.142-2 of the Mining code, until 1 June 2019. Indeed, article L.142-2 provides that, in the event of exceptional circumstances invoked by the holder of the mining title or by the administrative authority, the duration of one of the validity periods of the permit may be extended for a maximum of three years, without reduction of the area. By a Prefectural Order dated 22 October 2018 No. R03-2018-10-22-009, the company Total Exploration et Production Guyane Française was authorised to carry out a five-hole exploration drilling campaign within the Guyana Maritime permit. This authorisation was granted after a favourable opinion from the public inquiry commission, which was challenged in court. In accordance with article L.132-6 of the Mining Code, this exploration permit could lead to the delivery of an exploitation permit if Total E&P Guyane Française SAS discovers deposits.
Under article L.131-1 of the Mining Code, production of gas relies on a concessionary regime. Production without authorisation is subject to sanctions of up to two years’ imprisonment and a €30,000 fine (or more in cases of environmental impact).
The applicant shall provide for technical and financial capacity to ensure the optimisation of the mine, and to be able to uphold its legal and regulatory obligations as laid down by article L.132-1 and L.132-2 of the Mining Code.
The application, to be addressed to the Minister in charge of Mines and instructed by the local authorities, shall contain, in compliance with article 24 of Decree No. 2006-648, several documents, including a technical report, an environmental impact notice and the commitment to comply with the rules of the concession.
The application involves a public survey (article L.132-3 of the Mining Code and article 26 of Decree No. 2006-648), as well as competitive procedures if the applicant is not already the holder of the exclusive licence to prospect for oil and gas within the area of his or her application for the prospecting title.
The concession is granted through a Council of State decree or rejected by a ministerial order from the Minister in charge of Mines, according to article L.132-2 of the Mining Code and article 31 of Decree No. 2006-648. A three-year silence on the application implies the rejection of the application. The concession is granted for a maximum of 50 years, and can be extended several times for 25 years at most by a Council of State decree (articles L.132-11, L.142-7 and L.142-8 of the Mining Code).
Under article L.132-12 of the Mining Code, the issuance of the concession means the cancellation of the exploration licence on the perimeter instituted by the concession and for the concerned substances. The holder of the concession retains the right to explore for the substances concerned by the concession and within the perimeter of the concession. In addition, the holder retains his or her exclusive licence to prospect outside the concession perimeter, and also inside the concession perimeter for substances not concerned by the concession.
According to article L.132-12-1 of the Mining Code, created by Law No. 2017-1839, five years before the end of its concession and under conditions laid down by a decree, the operator shall submit to the administrative authority an application presenting the potential of conversion of its facilities or of their location for the purpose of other uses of the subsoil, in particular geothermal energy, or for other economic activities, in particular the establishment of renewable energies.
The extension of the area of the concession requires an authorisation granted after a public survey and following the same procedures as those applicable to the issuance of the concession (articles L.142-12 et seq of the Mining Code).
The farming out of the mining concession may be authorised without any competitive procedure or public survey or consultation with the Council of State (article L.143-9 of the Mining Code). The lessee should fulfil the conditions required to obtain the mining concession (article L.143-11 of the Mining Code).
The exploitation mining title may be terminated at the end of its term, by administrative withdrawal (sanction) or by waiving. At the end of a concession, the mine returns to the state for free, after realisation of the required works. If the operator has disappeared or is insolvent, all rights and obligations are transferred to the state (article L.132-13 of the Mining Code). Proceedings for stopping the operation aim to make the operator responsible for the prevention and termination of damages that mining activities may cause after their definitive end. The operator is responsible for ensuring the ‘after-mine’ condition through the provision of equipment necessary to monitor and prevent any risk (article L.174-1 of the Mining Code).
The main regulatory authority outside of the government for the determination of regulatory policies governing the production, transmission, distribution, supply and the storage of natural gas is, since its creation in 2000 by Law No. 2000-108 of 10 February 2000, the Electricity Regulatory Commission, which was renamed the Energy Regulatory Commission (CRE) by Law No. 2003-8 on 3 January 2003, and which is an independent administrative authority. Such authority is a state institution, but with no hierarchical authority from any minister, in charge of the regulation of strategic sectors. It is composed of six commissioners, assisted by administrative and technical services. It has some prerogatives (recommendations, decisions and sanctions), acts in the name of the state, and is independent from both public authorities and the regulated sector. Public authorities cannot give orders to independent authorities, and their members are not removable. The CRE proposes appropriate funds for its purposes to the Minister for Energy and the Minister of Economy and Finances, which funds are then included in the general state budget.
The CRE regulates both the electricity and gas markets, in view of their liberalisation. Its missions include:
- ensuring equal access of operators to the public grid (transmission and distribution);
- ensuring equal access to liquid natural gas facilities and underground gas storage facilities;
- monitoring the functioning and development of this grid;
- ensuring the independence of the grid operators;
- promoting the European market;
- monitoring transactions;
- ensuring the functioning of the retail market (the government fixes the regulated tariffs after (non-binding) advice of the CRE);
- ensuring sufficient production (eg, through the implementation of public tenders); and
- informing consumers.
Depending on its mission, the CRE has a power of decision (eg, to provide for technical regulations), approval (eg, of the investment programme of the grid’s operators) or authorisation. Its decisions, as well as supposed breaches of rules by an operator, may be challenged before its Committee for Dispute Settlement and Sanctions (CoRDiS). Further, the CoRDiS may impose sanctions, laid down by article L.134-25 et seq, on an operator that disrespects any laws, regulations or CRE decisions.
Pursuant to article L.134-28 of the Energy Code, in the event of a breach by the operator, or the user of a grid, a work or an installation referred to in article L.134-25 of the Energy Code to its obligation to comply with decisions taken by the CoRDiS, this entity or person may be subject to a sanction by the CoRDiS without any formal notice. The penalties incurred are listed in article L.134-27 and take the form of either a temporary ban, for a period not exceeding one year, from the access to public grids, works and installations, or a ban on any activity on the wholesale market in the event of non-compliance with the provisions of Regulation (EU) No. 1227/2011 on the integrity and transparency of the wholesale energy market (the REMIT Regulation), or if the failure to do so does not constitute a criminal offence, a pecuniary penalty, the amount of which is proportionate to the seriousness of the failure, the situation of the person concerned, the extent of the damage and the benefits resulting therefrom (article L.134-27 of the Energy Code).
For instance, the CoRDiS fined VITOL SA €5 million for engaging in market manipulation on the French Southern virtual Gas Trading Point (PEG Sud) between 1 June 2013 and 31 March 2014. In December 2016, the president of the CRE lodged a sanction request with the CoRDiS pursuant to article L.134-25 of the French Energy Code. This request was based on the findings of the investigation opened in April 2014, which found VITOL SA’s behaviour to be likely to breach rules laid down in the REMIT Regulation. In its decision dated 5 October 2018, the CoRDiS held that VITOL SA had engaged in market manipulations on the PEG Sud, in breach of article 5 of the REMIT Regulation. The CoRDiS found that VITOL SA carried out, over the course of 65 cases spread over 54 trading days, conduct that was likely to give the market misleading signals as to the supply or demand on the PEG Sud; in the absence of any counterevidence from VITOL SA, the CoRDiS concluded that this behaviour did not follow a rational economic logic. This is the first decision imposing a penalty within the framework of the REMIT Regulation in France. In its first sanction dated 11 June 2018, the CoRDiS fined a distribution system operator for infringing a dispute settlement decision.
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