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Ministry of Climate has drafted updates to the regulation on the detailed register of liquid fuels whose production, storage and trade require a license. The goal of the changes is to adapt the nomenclature to the regulation issued by the European Commission from October 2019. A number of smaller entities from this sector might face problems if they are not aware of the upcoming changes. Is it possible to avoid this? – asks Bartłomiej Sawicki, editor at BiznesAlert.pl.
What are the updates to the regulation about?
To the currently binding resolution of the Minister of State Assets from 27 November 2019 on the detailed register of liquid fuels whose production, storage or reloading, transmission or distribution, trading, including abroad, requires a license and whose import requires an entry to the register of entities that import commodities, applies the combined nomenclature that was binding in 2019. However, as of the 1st of January 2020 the Commission Implementing Regulation (EU) 2019/1776 of 9 October 2019 on the tariff and statistical nomenclature and on the Common Customs Tariff is binding. A new version of the attachment to this Directive provides for, among others, adapting the CN codes to a new threshold content of sulphur quantity in marine fuels, in line with the European Parliament and EU Council Directive 20106/802 due to, among others, the changes in the subheading 2710. In result of these changes, some of the CN codes in the regulation on the detailed register of liquid fuels were replaced with new ones. Because of this the Ministry of Climate announced it was necessary to update the regulation in question. According to the Energy Law, if the register of liquid fuels is amended by a minister in charge of energy with regard to nomenclature, companies that hold licenses to produce, store, reload, transmit, distribute or trade fuel have 30 days to acquire a license or update the scope of the already owned license from the day the amendment enters into force. This means that the requirement to adapt to the new nomenclature will force entities to apply for a new license or for updating their existing license within a month from the date the updated regulations enter into force. If the obliged entity does not submit the application within the deadline, it will mean it is pursuing its activties without the required lincese with regard to the license scope affected by the changes in regulations. In Poland there are about 6 thousand businesses in the fuel market. However, the draft regulation was sent only to the seven biggest petrochemical, oil and gas companies in Poland and to five trade organizations. Still, not all companies belong to the trade organizations, or have a large enough legal department that is able to monitor draft legislation on a daily basis. They may find it difficult to acquire a new license or update their current one, considering the fact that time is running out and they need to run their company on a daily basis and fulfil their contracts. Therefore, it seems there is a problem with lack of information. Large companies, which participate in consulations on a daily basis are do not have any issues with the new regulation.
The big ones are happy
PKN Orlen, Poland’s biggest oil company has positively assessed the draft regulation on adapting the licensed liquid fuels in the segment of heating oil to their current definition on the basis of combined nomenclature, i.e. CN codes. “It will make it possible to impose licenses on heating fuels for which as of 1 of January 2020 CN codes have changed, and which have not been included in the regulation that is currently binding,” says the PKN Orlen statement sent to BiznesAlert.pl. Orlen will be in favor of adopting licensing obligations for liquid fuels. However, the company is planning to give some suggestions.
According to Orlen, the update is necessary to introduce order and the time needed to submit an application to change the lincese is sufficient to preprare the whole process. On the basis of the application, until the President of the Energy Regulatory Office processes the request, the applicant, as any company on the liquid fuel market this change pertains to, may continue to pursue its licensed activties on the basis of the old rules. “This means updating the regulation will not have a negative impact on the supply of heating oil to the market,” PKN Orlen stressed.
Grupa Lotos shares this view and does not see a problem with the updated regulation. Grupa Lotos has voiced no objections as to the draft regulation.
Shell Polska explained that the reason behind these changes is mostly the necessity to adapt the CN code nomenclature of products that require an energy license to the amended EU Directive. “Therefore, they will not have any material impact on the scope of the licenses we have. The 30-day deadline has been in force for the past few years and we have adapted our processes so that in case we needed to update something, we would be able to do it within the deadline,” the company wrote in an official response to BiznesAlert.pl. At the same time the company has stressed that the regulation is consluted with the Polish Organization of Petroleum Industry and Trade.
The small ones have issues with access to information
We asked an expert and a lawyer who handles fuel licenses on a daily basis. Accoring to Karolina Wcisłow from the Brysiewicz i Wspólnicy law office, large companies that employ teams of lawyers will not face issues with meeting the deadlines. “However, in Poland there are about six thousand license holders who have a liquid fuel businesses and about 500 entities that import commodities from the detailed register. Those are mostly small or medium -sized enterprises that do not have any legal background. The requirement will not apply to everyone as the regulation encompasses only diesel and heating oil. Still, a large group of businesses may not be aware about the necessity to apply to amend their license with the new nomenclature within the required 30-day deadline,” the lawyer said.
“An administrative procedure arising from prusing a business activity on the basis of an outdated license or an outdated entry to the register of importing entities is initiated by the President of the Energy Regulatory Office. After conducting the procedure, the President of the Regulatory Office may impose a financial penalty. The company is allowed to appeal against the President’s decision, but the court proceedings usually take even between 2 and 3 years. Companies do not know whether they operate in line with the law. What creates an even bigger barrier is the number of regulations that are being introduced and lack of access to information,” Wcisło concluded. The situation described by Wcisło already took place in 2016 and 2017 when the regulation was updated and the impacted entities had to apply for updating their licenses. Back then many businesses continued to operate without knowing about the requirements. Recently a similar scenario played out when a regulation by the Minister of State Assets from 27 November 2019 was introduced. Each time the fuel companies had to apply for updating their license on their own.
An alternative?
Karolina Wcisło stressed that it was important to ask whether the Energy Regulatory Authority should update the licenses on its own if the changes are caused by formal requirements. However, the proposed amendments do not include such a solution. “This means the situation from 2016 and 2017 may repeat itself. Back then the introduction of a new regulation ended with a number of administrative proceedings, financial penalties on companies and terminations of licenses. Criminal proceedings due to running a business without a license were also initiated,” the lawyer said.
PKN Orlen also gave its own proposal, despite the fact that as the biggest company in the country it does not have to fear any changes in regulations. The company suggested that solutions pertaining to tax law should be used to introduce transition mechanisms into Energy Law. This would allow businesses to continue their licensed activities without the necessity to change the regulation on the registry of licensed fuels and without updating the licenses themselves.
Public consultations will end this week. Will the Ministry of Climate and the Energy Regulatory Office introduce amendments that will allow the majority of smaller, local license holders to avoid problems?
