The Romanian construction law no. 50/1991 (“Construction Law”) has recently been amended by the Governmental Emergency Ordinance no. 22 dated 14 May 2014 (“GEO 22/2014”) published in the Official Gazette no.353 dated 14 May, with the aim of simplifying the acquisition of land rights and the authorization procedure for conducting works of geological prospection, exploration and/or exploitation of oil and natural gas.
GEO 22/2014 proposes to reflect the specificity of the oil and gas sector, given the rather general nature of the Construction Law provisions.
1. IDENTIFICATION OF THE LAND
A significant and practical industry hindrance is that the land to be used for this type of work does not usually have cadastral measurements and is not registered with the Land Registry or in other special registries held by authorities. This is particularly problematic as under the Construction Law, the permitting procedure could not have been initiated in the absence of the land being measured and registered.
The two operations are both time consuming and costly and sometimes cannot be performed without a significant delay of the oil and gas licensed activities.
The bureaucratic permitting process, alongside the lack of proper updated land registries and other practical land access issues, creates an unfavourable investment regime for the license holders which are bound to perform license commitments.
The positive impact of the amendments introduced by GEO 22/2014 is that cadastral measurements and registration for the un-registered/un-identified lands overlapping with a licensed oil and gas perimeter are no longer required by law for initiating the permitting process.
The identification of such land can now be made based only on existing criteria (i.e. plot and parcel number) and not based on cadastral and Land Registry numbers.
The legislator has aimed to mitigate the in situ situation characterised by lack of performed land registration formalities However despite legal and practical controversy about the means of evidencing title over land, the GEO fails to detail such identification methods and maintains the controversy by generally referencing “any other means prescribed by law”.
2. TITLE OVER THE PLOTS OF LAND
Whereas generally an in rem right must be acquired and registered in the Land Registry in view of requiring and obtaining the building permit and installing the necessary equipment on the land, GEO 22/2014 provides that lease agreements concluded by observing the conditions set out by the sector specific legislation, stand as valid title for the purpose of the Construction Law.
However, such lease agreement must contain the landowner’s express consent regarding the execution of construction works for geological prospection, exploration or exploitation of oil and natural gas.
Potential interpretations may arise in respect to the meaning of “provisory constructions”, as the Construction Law previously recognised lease agreements as valid titles, if the respective leases were pertaining to provisory constructions and the land owner’s express consent was obtained in view of the construction execution. Mutatis mutandis, GEO 22/2014 recognises lease agreements as valid titles, should they be (i) executed by observing the conditions set put by the sector specific legislation, and (ii) contain the landowner’s express consent regarding the execution of construction works for geological prospection, exploration or exploitation of oil and natural gas, other than “provisory constructions”.
The “prescribed” content of the lease agreement contemplated by GEO 22/2014 may potentially generate practical consequences, as the Petroleum Law no.238/2004 does not expressly provide land owners’ consent as a condition of the agreements executed between the latter and the title holders. Accordingly, the supplementary requirement envisaging the amendment of the content of the lease agreements (i.e, land owners’ consent expressed within the agreements), may constitute an additional factor of the already existing challenges often creating hurdles for the companies.
The circumstance where the land is not registered has not been contemplated by this piece of legislation such that this aspect has potential to create a high risk for the operating companies due to the fact that they are unable to register their own leases and respective rights. Accordingly, lack of opposability of such agreements towards third parties may generate situation where, similar agreements are executed by multiple operators having interests within the same licensed area, causing operational conflicts.
It should be also noted that GEO 22/2014 has not addressed the industry’s concerns pertaining to the definition of “construction” and related “drilling and excavation works required for performance of geotechnical studies and geological prospecting activities”, in order to clarify that geophysical works do not fall within the ambit prescribed by the Construction Law.
Under Romanian legal enacting framework, government emergency ordinances must, at a later stage, be approved by a law.
Traditionally, upon issuance of such approval law, further amendments are enacted. However, for now, it is fair to say that the GEO 22/2014 produced a long awaited modification of a rigid legal framework that was not fit for the practical requirements of the industry. Nevertheless, the industry’s standpoint should also be reviewed whenlege ferenda proposals are further drafted, as the industry’s practical take-aways should be considered.