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The near end of the exploitation of hydrocarbons in France: the HULOT Law

With the adoption of the n° 2017-1839 law of December 30th 2017, France has become the first country in the world banning research and exploitation of hydrocarbons on its territory. It enables France to comply with the commitments set in the 2015 Paris Agreement in the fight against climate change to go forward with the reduction of hydrocarbon consumption in order to achieve carbon neutrality by 2050.

This article will focus on how this text prohibits new fossil fuel exploration and extraction in any form whatsoever of unconventional hydrocarbons, while establishing a plurality of derogations and how it will impact the reconversion of former mining site as well as the 33 research permits and 63 operating concessions holders existing in France as of July 1st 2017.

The principle: a ban on the research and exploitation of hydrocarbons

The phasing out of research and exploitation now codified in the Mining Code applies to the entire French territory and to all types of liquid or gaseous hydrocarbons and coal, while reinforcing the ban on shale gas.

A step forward toward the end of fossil fuel

The HULOT law is the first concrete step of the Climate Plan, presented by the Minister for the Ecological and Solidary Transition. It is a strong signal when, to comply with the Paris Agreement and keep global warming below 2 ° C, more than 80% of the known fossil resources in the subsoil must be left behind.

It was adopted after the One Planet Summit Conference, taking place in France two years after the Paris Agreement, on December 12th 2017 and aiming to bring together the actors in public and private finance. It was intended to reflect upon ways to innovate, support and accelerate the common efforts against climate change and resulted in the adoption of 12 international resolutions.

To that end, the French Government wishes to abandon fossil fuels, in particular hydrocarbons and coal, to focus on green financing, which supports green energy transitions, and to move toward a decarbonized economy and industry. Therefore, this commitment was translated in the adoption of a ban on research and exploitation of such fuels. In doing so, France also complies with its European obligations since this law transposes Directive (EU) 2015/1513 on the promotion of biofuels and Directive 2016/2284 /EU on the reduction of national emissions of certain atmospheric pollutants.

The public information right is also implemented, since the main characteristics as well as a map of the perimeter on the national territory of applications under investigation for exploration and exploitation of liquid and gaseous hydrocarbons will be made available to the public.

The extent of the ban

The law regulates the phasing out of coal and all liquid or gaseous hydrocarbons exploitation, whatever the technique employed, with the exception of mine gas, in order to achieve a definitive cessation of these activities under the conditions and in the manner laid down in articles L. 111- 4 and following of the French Mining Code.

This ban applies to research and exploitation in the subsoil and at the surface of the land territory and public maritime domain, in the seabed and in the subsoil of the sea, the exclusive economic zone and the continental shelf under the sovereignty or jurisdiction of the French Republic.

The ban does not concern mine gas, which is defined under article L. 111-5 of the Mining Code as gas located in previously exploited coal veins whose recovery is carried out without interventions other than those made necessary to maintain vacuum holes containing this gas in order to disperse it. Any action of stimulation, cavitation or fracturing of the deposit remains nonetheless prohibited.

The provisions of the law apply to any application filed within the competent authority after December 31st 2017 for an initial grant or an extension of an exclusive research permit (PER). It also applies to prior exploration authorization or to initial grant or extension of a concession for one or more substances mentioned in article L. 111-6 of the Mining Code, as well as ongoing applications on the same date, subject to judicial decisions having the force of res judicata enjoining the administration to proceed to grant or to authorize the extension of one of these titles.

Now, in principle, the competent authority can no longer grant (i) an exclusive permit for research or authorization of prior explorations for research, including for experimental purposes, relating to coal and to all liquid or gaseous hydrocarbons, according to article L. 111-6 of the Mining Code, (ii) a concession for the exploitation of these same substances, except in the case provided for in article L. 132-6 and (iii) an extension of a concession for these same substances for a period whose expiry date exceeds 1st January 2040.

The ban on shale gas is also expanded. The law n°2011-835 of 13 July 2011 already prohibited the exploration and exploitation of liquid or gaseous hydrocarbon mines by hydraulic fracturing. This ban is now extended to any other method intended to permeate the bedrock.

An ambitious but dubious law

If the main aim of this law is to prohibit research and exploitation of hydrocarbons, the analysis of its provisions shows that the exceptions laid down denature somewhat the overall goal.

Under certain conditions, permits of exploitation of hydrocarbons can still be granted

The first set of derogations provided concerns the extension of the deadline set to January 1st 2040 pursuant to article L. 111-12 of the Mining Code and the second the grant of permits despite the ban.

Indeed, and by exception to the general principle that the concessions granted and the renewal of existing concessions cannot exceed the deadline of January 1st 2040, when the licensee demonstrates to the administrative authority that the deadline does not allow to cover its research and exploitation costs, in order to achieve the economic equilibrium, the permit may exceed this deadline. The Government still has to lay down by decree the procedures to take into account these costs of research and exploitation.

Furthermore, pursuant to article L. 111-7 of the Mining Code, the holder of a title for the exploitation of coal or hydrocarbons, with the exception of mine gas, is also entitled, if the request is made at least four years prior to the term of its title, to the conversion of said title in the exploitation of a new substance or another use of the subsoil. The holder must demonstrate the connection between the new substance or new use and the hydrocarbons contained in the field and the economical profitability of its continued exploitation.

In such cases, the administrative authority will still be able to set technical specifications for the title holder when the environment, public safety and health or other existing or planned uses of the soil or subsoil justify it.

Also, liquid or gaseous hydrocarbons associated with a mining license for another substance, may not be exploited and must be left in the subsoil. Nonetheless, the holder can be authorized to integrate these hydrocarbons in an industrial process when demonstrating that their extraction is the prerequisite for the valorization of the substances covered by the exploitation title. The potential recovery of hydrocarbons is strictly limited to local use, without injection into a transport or liquefaction network.

The reconversion of former mining sites and the challenge of importation of fossil fuels

This end to research and exploitation of hydrocarbons is not without consequences on the concerned territories and importers of fossil fuels.

Regarding the reconversion of former mining sites, the Government will submit a report on the support of businesses and employees impacted by the progressive end of exploration and exploitation activities as well as on the potential for reconversion of the concerned territories by December 30th 2018.

Territories with former mining sites could support the development of renewable energies, in accordance with the objectives for an energy transition set by the August 17th 2015 law. The report will have to detail the mechanisms put in place and their environmental, economic and fiscal aspects.

In addition, before December 31st 2018, the Government will have to prepare a report assessing the environmental impact of crude and refined oils and natural gas consumed in France. More specifically, regarding their import, the Government will submit a report detailing their origins and differentiating them according to their environmental impact, in particular their mode of extraction.

Companies importing hydrocarbons on French territory will also have to make public, every year starting on January 1st 2019, the intensity of unit greenhouse gas emissions over the whole life cycle per unit of energy. To that end, the Government will set annually by decree the method for calculating this intensity.

To conclude, if the law is part of a political will to reduce greenhouse gas emissions and limit climate impact, only time will tell if it will achieve its main goal to end all research and exploitation of hydrocarbons while promoting a transition to renewable energies or if the possible extensions of permits and derogations will succeed in emptying this law of its substance.