On April 11, 2014, Brazil’s National Agency of Petroleum, Natural Gas and Biofuels (ANP) enacted Resolution No. 21/2014, which regulates hydraulic fracturing in unconventional reservoirs, requiring prior approval from ANP before beginning such activities. The draft version, which was put in public consultation before Brazil Round 12, was significantly modified, incorporating part of the contributions received during the public consultation period.

The Brazil Round 12, promoted by ANP in November 2013, offered areas in onshore basins that have high potential for natural gas originating from unconventional reservoirs. For this reason, the draft version of the Concession Contract was modified to include several specific provisions for the exploration of this type of reservoir, including that the exploration of unconventional resources and the fracturing activities should be performed in compliance with applicable legislation.

Resolution No. 21/2014 aims to meet the demand for specific legislation on this matter. It establishes mandatory adoption of an environmental management system that contains a plan for the control, treatment and disposal of the generated effluents. Additionally, the resolution requires the performance of preliminary studies, which are necessary for the approval of the operations by ANP, such as fracturing simulations and risk analysis. In relation to the performance of the activity itself, the resolution provides standards to be complied with and determines the preparation of an emergency response plan.

Finally, the resolution binds ANP approval to the environmental permitting conducted by the relevant environmental agencies. In other words, to obtain ANP approval, the requesting party must have obtained (and maintain) the appropriate environmental permits, which may need to specifically authorize fracturing activities in unconventional reservoirs.

Resolution No. 21/2014 is available on ANP’s web site.

For more information about this Legal Update, please contact Alexandre R. Chequer, Luiz Gustavo Bezerra, Leonardo P. Costa, Victor Galante or Bruno Belchior.