Country
Assessment
Article 7 of the CNH Technical Provisions for the Use of Associated Natural Gas in the Exploration and Production of Hydrocarbons states that flaring of associated gas, a nonrenewable resource, outside of the approved utilization program would cause an economic loss to the nation and that operators must have the necessary financial resources to cover such losses. This compensation is in addition to any penalties that may be imposed under other laws and regulations. Article 34 provides that, based on monitoring and supervision, the CNH may initiate a sanctioning administrative procedure to determine whether there was noncompliance with the technical provisions. Article 35 provides that violations of these provisions will be sanctioned in accordance with Articles 85–87 of the Hydrocarbons Law, 2014 , or specific contracts. According to Article 85 of the Hydrocarbons Law, 2014, the seriousness of the violation will be considered when determining a sanction. SENER sanctions noncompliance with the terms and conditions established in the assignments and contracts, with a fine of 15,000–75,000 times the minimum wage. Operators failing to comply with an exploration plan or production development plan will be penalized with a fine of 150,000–3 million times the minimum wage. In the case of oil and gas development and production activities that do not have a measurement system approved by the CNH, a fine of three–six million times the minimum wage may be levied. The application of sanctions and payments are regulated by the Federal Law of Administrative Procedure, 2018. Article 25 of the ASEA Law, 2014 , also provides for penalties up to 3 million times the minimum wage depending on the severity of the violation of the environmental mandates.
Section 21 of the Emissions Regulations imposes an administrative fine of US$3.50 per mscf if gas is flared, vented, or wasted without Commission authorization. Any licensee, lessee, or producer that fails to submit gas data according to regulations or fails to install metering equipment according to the regulations, or commits another specified violation, is subject to an administrative fine of US$10,000. There have been flaring fees based on previous regulations. NEITI has been tracking the payment records. According to the Oil and Gas Audit Reports published by NEITI , US$308 million was paid in 2019, up from US$15 million in 2018. In 2020, payments fell to US$257 million, in line with the fall in overall production. The Commission (Department of Petroleum Resources [DPR] at the time) began issuing invoices for the new flare payments only in 2019. The huge increase that year illustrates the impact of the substantial increase in the flare payment rates. According to the Midstream and Downstream Gas Infrastructure Fund Regulations, money received from flaring penalties “shall be for the purpose of environmental remediation and relief of the host communities.”
According to Section 10 of the Norwegian Petroleum Act, 1996 , noncompliance with an order issued pursuant to the law may result in a daily fine for each day of the violation. Section 10 subjects a willful or negligent violation to fines or imprisonment. As the Norwegian Petroleum Act, 1996, prohibits flaring in excess of what is needed for safe operations, these fines apply to such excessive flaring. Separately, a carbon tax is imposed on all gas flared or vented, and willful or negligent submission of incorrect or incomplete documentation or any other breach of provisions or decisions contained in or issued by virtue of the CO2 Tax Act, 1990 , is subject to a fine.
Article 16 of Federal Law No. 7-FZ on Environmental Protection, 2001 specifies the procedures for calculating associated gas flaring or venting fees. Sections 1– 7 of Federal Decree No. 1148, 2012 defines the key principles applicable to calculating these fees: The maximum admissible limit value for flaring and venting combined should be no more than 5 percent of the total associated gas volume, calculated by the flaring rate (Z), Z = S/V x 100%, where S is the amount of associated gas flared and vented and V is the volume of associated gas produced. Volumes flared during scheduled shutdowns are excluded from the calculations. Below the maximum admissible limit value, the fee calculation (using emission pollutants and environmental factors) as quoted in Federal Decree No. 913, 2016 applies without any additional multiplier uplift. Above the maximum admissible limit value, a multiplier (k-factor) of 25 applies to the calculated fee, up from the previous k-factor of 12, which was applicable until 2014. An additional k-factor of 120 applies if there is no metering system that meets the Federal Ministry of Energy requirements in place. Efforts to increase associated gas use are captured in a cost coverage indicator, which reduces the overall fee. Production of less than 5 million m3 a year and production with a hydrocarbon saturation of less than 50 percent can be exempt from additional fees. Federal Decree No. 255, 2017 requires these fees to be paid in quarterly advance payments (except for the fourth quarter). Sections 1 and 3 empower the Federal Service for Supervision of Natural Resources to verify the fee calculations and collect the fees, which are not tax-deductible.
Under Article 8 of the Executive Regulation for Air Quality , “failure to comply with the requirements of the design, installation and operation of flare systems” is subject to penalties from SRI 50,000 to SRI 500,000 based on the amount and duration of emissions. Under RCER-2015 Volume III (Penalty System), operators can be fined if, upon inspection by the Royal Commission, they are found to violate venting, flaring, and emissions regulations outlined in Volume I. Section C3 provides the formula used in calculating the penalty. The minimum fine is SRI 5,000.
The OGA is authorized to sanction operators for noncompliance with any of the licenses it issues, including consents for flaring and venting. Chapter 5 of the Energy Act, 2016 , on sanctions, details OGA’s disciplinary powers. Sanction notices can cover enforcement of “petroleum-related requirements,” financial penalties, revocation of licenses, and operator removal. Section 42 of Chapter 5 defines petroleum-related requirements, which include responsibilities imposed under Section 9C and 9A of the Petroleum Act, 1998 , requirements under the Energy Act, 2016 (including flaring and venting consents issued by the OGA), and any term of offshore licenses issued by the OGA. According to Sections 44–46 of Chapter 5, financial penalties are limited to £1 million (about US$1,400,000 as of October 2021), although the secretary of state can increase them up to £5 million (about US$ 6,800,000 as of October 2021). If a financial penalty notice is given to two or more parties, they are jointly and severally liable. The payment is recoverable as a civil debt if it is not paid before the deadline in the notice. Penalties must be paid into a consolidated fund. However, exact penalties must be defined in the guidance to be issued by the OGA. The most recent guidance from the OGA provides principles of best regulatory practices based on other regulators. As of 2021, OGA has not sanctioned any operator for violations of flaring or venting consents. Civil penalties for flaring or venting range from £500 to £50,000 (about US$680–US$68,000 as of October 2021) and can be issued by OPRED under the Offshore Environmental Civil Sanctions Regulations 2018. In addition, OPRED, the Environment Agency, the Scottish Environment Protection Agency, and the Scottish Environment Protection Agency can impose civil penalties for breaches of the UK ETS under the Greenhouse Gas Trading Scheme Order 2020 . This last penalty has become more pertinent, as flaring is no longer eligible for free allowances under the EU ETS Phase IV, which started in 2021. The UK ETS is expected to align with the EU ETS Phase IV.
According to North Dakota Century Code Section 38-08-06.4 , violators of flaring exemptions will pay production taxes and royalties on flared gas. NDIC Order 24665, 2014 , outlines penalties the NDIC may impose on operators for failing to comply with gas capture goals. Penalties start at US$1,000 a month, commencing the month following the month in which the operator fails to attain the gas capture goals, oil production exceeds production restrictions, and the operator fails to file for a hearing with the NDIC. Penalties double every month of noncompliance up to a maximum of US$12,500 a month. The same level of penalty applies if an operator fails to comply with production restrictions for three months despite monthly notices of violations from the NDIC. North Dakota Century Code Section 38-08-16 allows for civil penalties that can be imposed on oil and gas operators that violate any rule, regulation, or order from the NDIC. Civil penalties may be up to US$12,500 for each offense. Each day’s violation is a separate offense.