1、A Study Of Petroleum-Natural Gas Legislation,WANG MingYuan, XIAO Jing & ZHANG ZhiJunCenter for Environmental, Natural Resources & Energy Law, Tsinghua Law School,Basic Considerations,Law on petroleum and natural gas is a kind of special law on special objects. We have to take their specific characte
2、ristics into consideration, as well as the distinction and connection with mining law.Its necessary to analyze the multiple objectives of petroleum and natural gas law and to discuss how to achieve them with specific institutional arrangements. （The multiplicity of objectives decides the diversity a
3、nd complexity of legal means. ）,Relations between Petroleum Law and Natural Gas Law,Traditional Concepts & Modus Operandi: The two used to be integrated. Its generally held that the term of “petroleum” in Petroleum Law includes both petroleum and natural gas. Reason: There are many similarities betw
4、een petroleum and natural gas. And they come from the same source (oil-gas field). The only difference lies in the state: One is liquid, the other is gaseous. As a result, they also share many similarities in legislation.,Relations between Petroleum Law and Natural Gas Law,However, the tendency is t
5、o prescribe natural gas independent of petroleum and to make up separate Natural Gas Law. Reason: 1. The production of natural gas has greatly increased. As an energy resource, natural gas has become more and more important. It is not a supplementary to petroleum any more. 2. The difference between
6、the natural gas and petroleum industry has been more and more apparent. 3. Foreign experience in legislation has also demonstrated that it is necessary to have independent natural gas law. the US: Natural Gas Act, made in 1938the UK: Petroleum and Natural Gas Law, made in 1982Natural Gas Act, made i
7、n 1986,Relations between Petroleum Law and Natural Gas Law,Main Contents: First, introduction to petroleum law, which includes objectives and systems that petroleum law and natural gas law have in common Second, analysis of some special problems of natural gas law based on the specific characteristi
8、cs of natural gas Third, a concise analysis of existing petroleum and natural gas legal system framework, current problems and several important problems to be stressed in legislation,Petroleum Law the Energy Cycle of Petroleum,Energy Cycle： Exploration - Exploitation - Refinery -Transport - Consump
9、tion（mining） （deep-processing）（service industry）（marketing）At every link of petroleum industry, both the inherent characteristics of petroleum resource and distinguishing features of different processes have deep impact on relevant legal system.,Petroleum Law the Energy Cycle of Petroleum: Productio
10、n Process,The production process of petroleum is divided into three periods: exploration, drilling and exploitation. Exploration is just a “guess” at the possible existence of certain energy resource. Only drilling can prove whether there exists an oil field.,Petroleum Law the Energy Cycle of Petrol
11、eum: Production Process,Impact of the limited survey techniques on law Geologists can only infer whether there is an oil field by terrain analysis. All these inferences are testified by drilling. However, drilling is rather expensive. Sure enough, developers want to control investing direction and o
12、ccasion and to disperse the risks, all of which need legal support.,Petroleum Law the Energy Cycle of Petroleum: Production Process,Special embedding form of petroleum: Neither “reservoir” nor “pool” is an exact word. Petroleum usually exists in the holes of special ores and cannot exist independent
13、ly. Natural gas either exists in gaseous state or dissolved in petroleum. Whats more , there is salt water in it. As a result, it lies in the bottom because of its specific gravity. Petroleum and natural gas are so closely connected that it is difficult to distinguish oil field and gas field. And it
14、s also difficult to prescribe them in the production process.,Petroleum Law the Energy Cycle of Petroleum: Production Process,The understanding of physical features of petroleum has affected relevant legal system. In the history of common law, judges judged petroleum on the analogy of wildlife at fi
15、rst. This led to two legal results: 1. Ownership system (Petroleum is separated from solid mineral resources. The rule of “from the sky to the earths core” was nullified. ) 2. Application of the rule of “capture” in the exploitation of petroleum,Petroleum Law the Energy Cycle of Petroleum: Productio
16、n Process,With the improvement upon knowledge, people come to know that petroleum resource has neither the “fixity” that solid mineral resources have nor the “free mobility” that wildlife has. It is affected by mechanism of oilfield. Mechanism of oilfield: Oil well can “dry out” oilfield. What one o
17、bligee does on the oilfield has a great impact on other obligees interests and the development efficiency of the whole oilfield. Accordingly, legislation on exploitation must correspond to this geological rule. US: the practice of oil well certificate and oil well demarcation,Petroleum Law the Energ
18、y Cycle of Petroleum: Production Process,The limitedness of petroleum resource also has an impact on exploitation legislation. requirement of energy conservationMany states in the US have made out detailed laws on energy conservation. Different from “energy conservation” in the general sense, the US
19、 legislation has classified the waste of energy into two types:,Two types of energy waste in the US,Waste of energy,Physical waste,Economic waste,Underground waste (incomplete exploitation),Overground waste (leak, combustion and so on),Over low price (producing excessive oil and unwise use),Over hig
20、h cost of investment,Petroleum Law the Energy Cycle of Petroleum: Transport,The greatest difference between the industry of petroleum and natural gas is Transport. Natural Gas: Pipeline is the only mode of transport. Petroleum: It can be transported by pipeline. Besides, it can also be transported o
21、n land by truck and railway and over sea by tanker. In all the laws on petroleum, oil pipeline companies have always been treated as common carriers. But its not the case in natural gas. The position of natural gas pipeline company has changed greatly with the development of industry.,Petroleum Law
22、the Energy Cycle of Petroleum: Consumption,The end use of petroleum and natural gas is different. Petroleum products are mainly used as fuel used in automobile, ships and aircraft. (traffic fuel) According to American statistics, petroleum occupies 97% of traffic energy in 1994 and 94% in 2015. Natu
23、ral gas is mainly used for heating, power generation and industrial fuel. The end users of natural gas are more dispersed. As a result “gas distribution” is one special link in the industry of natural gas.,Necessity for Petroleum Legislation,Specific characteristics of petroleum resource From the ab
24、ove analysis on energy cycle of petroleum, we can see there are so many specific characteristics in different links throughout the petroleum industry that its necessary to make special laws. Strategic position of petroleum resource limited irreplaceable,Necessity for Petroleum Legislation,Range of a
25、djustment of petroleum law and the connection and distinction with mining law: 1. Mining law is aimed only at exploration and exploitation of mineral resources. The industry of petroleum includes exploration, exploitation, processing, refining, storage and transportation, supply and trade. Its ident
26、ical in space, continuous in time and inseparable in content. Thus arise the necessity and feasibility of a special law . There is certain “overlap” between the two of them in exploration and exploitation.,Necessity for Petroleum Legislation,2. Even in exploration and exploitation, petroleum has som
27、e characteristics different from other mineral resources: Integrated large scale risky high technology high investment,Basic Contents of Petroleum Law,It must covers the overall process from exploration to consumption. It usually includes 5 parts: Law on petroleum exploitation and production Law on
28、petroleum refinery, supply imports and exports Law on petroleum policy Law on petroleum pipelines Law on petroleum companiesPetroleum law has changed from a simple petroleum mining law to a legal system based on petroleum mining that combines multiple separate regulations together.,Multiple Objectiv
29、es of Petroleum Law,Efficiency Stability Safety,Systems Promoting Efficient Utilization of Petroleum（1/3）,The system of property right Ownership of petroleum resource (usually owned by the state) Mining right of petroleum (bidding, competitive leasing and contracting) Refining right of petroleum (th
30、e right to refine crude oil) Storing and transporting right of petroleum (the right to operate petroleum pipeline) Supplying right of petroleum (the right to trade petroleum at domestic market) Importing and exporting right of petroleum (the right to import and export crude oil and other oil product
31、s),Systems Promoting Efficient Utilization of Petroleum （2/3）,Licensing system of petroleum industry All the mining right, refining right, storing and transporting right, supplying right, importing and exporting right of petroleum must be based on license. (the basis for allocation of property right
32、) The system consists of the subject, licensed program, licensed principles, licensed termination and cancellation, legal responsibilities and relief. The key is to solve the problems of administering by law and in reason.,Systems Promoting Efficient Utilization of Petroleum （3/3）,The system of tech
33、nological innovation The purpose is to inspire, protect and boost technological advancement, thus to promote the efficient utilization of petroleum. Backward technology technical supervision and elimination Common technology prescribed technical standards Advanced technology protection of intellectu
34、al property or incentive policies (such as tax preference),Systems Promoting Stable Utilization of Petroleum（1/4）,The system of planned supply Under this system, government regulates the demand and supply, production, imports and exports, refinery and other important issues through planning. To ensu
35、re the safe, stable and reasonable supply of petroleum Applied to overall regulation and control under normal conditions,Systems Promoting Stable Utilization of Petroleum (2/4),The system of petroleum supply adjustment Government gives direct instruction to the subjects of title in petroleum industr
36、y according to law and adjusts petroleum supply and demand to stabilize the safe petroleum supply order. Applicable conditions Great changes happening to the relations between supply and demand of petroleum Disorders happening to the circulation order of petroleum Applied to individual adjustment wh
37、en petroleum industry fluctuates.,Systems Promoting Stable Utilization of Petroleum(3/4),The system of compulsory petroleum supplyGovernment adjusts the relations between supply and demand of petroleum compulsorily according to law. Aimed at taking compulsory measures in case of emergencies such as
38、war, disaster or international petroleum deterioration. This system is taken when the system of petroleum demand and supply adjustment is invalid. Applied to serious emergencies,Systems Promoting Stable Utilization of Petroleum (4/4),The system of strategic petroleum reserves Under this system, gove
39、rnment reserves a certain amount of petroleum resource and product oil. Without authorization, the reserve cannot be used. Aimed at the safe supply of petroleum in dealing with emergencies The variety and quantity of strategic petroleum reserves must be able to sustain the countrys economic developm
40、ent and satisfy the basic demands of peoples daily life in a certain period.,Systems Promoting the Safe Utilization of Petroleum,The system of safe operation of petroleum Inflammable and explosive nature To guard personal safetyThe system of environmental protection of petroleum High polluting indus
41、try To protect environmental safety,Others Funding System in Petroleum Industry,Under this system, government establishes special fund according to law, which is used specifically to promote the development of petroleum industry under government authorization. Aimed at stabilizing the supply and dem
42、and relations and price of petroleum This system can achieve the three objectives of efficiency, stability and safety of petroleum utilization at the same time.,Others Funding System in Petroleum Industry,It mainly includes: Special fund for exploration and exploitation (efficiency) Petroleum reserv
43、e fund (stability) Fund for damage subsidy (safety) Fund for storing and transporting facilities construction (efficiency) Fund for technological innovation (efficiency),Others Funding System in Petroleum Industry,Special fund for exploration and exploitation can promote effective utilization of pet
44、roleum. Necessity for the fund:Petroleum and natural gas industry is not so attractive to enterprise investment because of its own characteristics: deep embedding, complicate conditions in forming a mine and risky exploration Petroleum production declines with the release of stratum pressure, which
45、makes it hard to discover and increase backup reserve and makes it hard to make the most of petroleum resource.,Others Funding System in Petroleum Industry,The system of special fund for exploration and exploitation includes:(1) The system of state fund for exploration and exploitation (2) The syste
46、m of maintaining extracted oil fields (3) The system of oil-gas field exploitation subsidy,Special Problems With Natural Gas,Natural gas is a special commodity. Its market demand development must be based on networks. This kind of network-dependent industry is of three important distinctive features
47、: 1. The market demand development and rate of industrial development depend on the development of network (infrastructure). 2. The network construction needs continuous, enormous investment, which is low in return, long in payoff and risky in investment. 3. The network is an economy of scale and sc
48、ope because of enormous investment. It belongs to natural monopoly.,Special Problems With Natural Gas,In this field, there is a contradiction between the economy of scale and scope and the competitive mechanism of market. To achieve the efficiency of the economy of scale and scope, monopoly of marke
49、t is sure to affect operating efficiency; To raise efficiency through market competition, its sure to lose the efficiency brought with the economy of scale and scope. In the initial stage, the difficulty lies in how to guarantee enough investment to construct large-scale infrastructure; When the ind
50、ustry takes shape, the difficulty lies in how to maintain the vitality of market competition and achieve the efficiency of the economy of scale and scope.,A Survey On US Natural Gas Legislation,Natural Gas Act of 1938This act founded US Federal Power Commission (FPC, the predecessor of Federal Energ
51、y Regulatory Commission) to regulate the interstate pipeline transportation of natural gas. The Congress granted FPC to set fair and reasonable price. But pit head price and intrastate natural gas transportation and distribution were out of FPCs supervision. Problem: Slow pipeline construction caused rapid price fluctuation and supply shortage.,
