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Legal Update

Brazil: Unenforceability of Registration by Non-operator Concessionaires before IBAMA’s Federal Technical Registry and payment of the Environmental Control and Inspection Fee (TCFA)

24 July 2018
Tauil & Chequer Legal Update
The Brazilian Institute of Environment and Renewable Natural Resources (“IBAMA”) Normative Ruling No. 6/2013, recently amended by the IBAMA Normative Rulings Nos. 11 and 12/2018, establishes that individuals and legal entities that are engaged in the performance of potentially polluting activities as well as users of environmental resources, including drilling wells and oil and natural gas production, in accordance with Annex I – Chart of Potentially Polluting Activities and Natural Resource Users, are obligated to register with the Federal Technical Registry (“CTF”). In addition, the individual or legal entity involved in the potentially polluting activity, according to Article 17-C of Federal Law No. 6,938/1981, amended by the Federal Law No. 10.165/2000, is subject to payment of the Environmental Control and Inspection Fee (“TCFA”).

With regard to the activity of oil and natural gas exploration and production, it is necessary to evaluate the status of “operator” and “non-operator” for the purpose of enforcing registration with the CTF and consequent payment of the TCFA. The drafting of the concession agreements signed with the National Agency of Oil, Natural Gas and Biofuels (“ANP”) determines that the operator is responsible for the conducting and execution of all operations and activities provided for in the concession agreement. It is indeed true that the environmental license for the exploration and production of oil and natural gas is always owned by the concession operator.

Therefore, for all intents and purposes, the operator concessionaire is the one who effectively carries out the potentially polluting activity, which is why the registration before the CTF and the consequent quarterly payment of the TCFA is required. However, and according to what is identified by market practice, the non-operator company also decides to carry out the registration before the CTF, which entails the issuance and collection of the TCFA. However, the non-operator companies do not effectively engage in the potentially polluting activity, but only enters into the Joint Operating Agreement (“JOA”) for the division of the high costs involved in the exploratory activity and the resulting legal responsibilities.

For this reason, the required registration before the CTF and the consequent payment of the TCFA by the non-operator concessionaires would not be applicable, given that the potentially polluting activity allegedly practiced by both operator and non-operator, subject to monitoring by IBAMA, constitutes one activity, and is therefore only one activity to be monitored. Seeking to require the TCFA from each of the members of the JOA, as if they were carrying out distinct activities, reveals a distortion of the purpose for which the TCFA is intended, that is, to fund proportionately the activity of inspection, which would otherwise be collected in duplicity.

In this regard, a precedent already exists in which IBAMA has responded to allegations of duplicitous enforcement of regulations in the context of an application by a non-operating concessionaire. Such concessionaire was registered in the activity "drilling of wells and oil and natural gas production" before the CTF, after which IBAMA understood that the company, in spite of being a concessionaire, only engaged in accounting and financial activity and therefore concluded that the request for removal of the activity from the CTF was appropriate, since the potentially polluting activity subject to supervision was performed by third parties (operator of the concession), resulting in the reimbursement of the TCFA that was paid unduly.

Authors

  • Paulo de Bessa Antunes
    T +55 21 2127 4226
  • Bárbara Colaço
    T +55 21 2127 1643
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