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ORLEN Group 2016 Integrated Report

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Regulatory environment


The ORLEN Group operates in regulated markets, so regulatory compliance is a key aspect of its business.

Under its regulatory risk management policy, PKN ORLEN and the other ORLEN Group companies engage in a fully transparent and open dialogue based on applicable laws, which involves reviewing drafts of legislative solutions at a national and EU legislation level.


1. Biofuels

Directive 2009/28/EC of the European Parliament and of the Council of April 23rd 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC requires the Member States to ensure a 10% share of renewable energy in the overall energy consumption of the transport sector by 2020. The Directive was implemented into Polish law by the Act on Biocomponents and Liquid Biofuels of August 25th 2006 (subsequently amended). The Act imposes the requirement for domestic refineries and fuel importers to achieve the National Indicative Target, i.e. ensure the required minimum share of renewable fuels (biocomponents) in the total volume of liquid fuels.

In 2016, PKN ORLEN took part in consultations of the draft biofuel regulations. The Company proposed:

1) reduction of the NIT

2) introduction of a mandatory requirement to blend biocomponents into liquid fuels

3) adoption of measures preventing fraud related to the NIT requirement in Poland.

Based on the Act Amending the Energy Law and Certain Other Acts of November 30th 2016, the NIT was reduced relative to the levels defined in the 2013 Regulation of the Polish Council of Ministers from 7.8% to 7.1% in 2017 and from 8.5% to 7.5% in 2018. The fact that the NIT reduction factor in 2017 will be 0.82 if the share of biocomponents sourced from domestic producction is 70% means that the actual NIT for PKN ORLEN in 2017 (5.822%) will be the lowest since 2012. In addition, the Act Amending the Energy Law and Certain Other Acts of July 22nd 2016 introduced a requirement that as of 2017 at least 50% of the NIT was to be achieved by blending bio-components into liquid petroleum fuels (mandatory blending). At the same time, the Act expanded the definition of an entity obligated to achieve the NIT so that it covers all entities importing liquid fuels to Poland, regardless of whether they operate on the basis of a relevant licence or not.

2. Retail sales tax

The Act on Retail Sales Tax of July 6th 2016, which came into force on September 1st 2016, introduced a tax on retail sales to consumers. The tax base is the amount of net revenue from retail sales in excess of the tax-exempt amount (PLN 17m per month). The tax rates are: 0.8% of the tax base up to PLN 170m and 1.4% of the excess over PLN 170m. The costs for PKN ORLEN were estimated at PLN 18.5m per month, or approximately PLN 222m annually (the estimate did not account for the exclusion of retail sales to businesses due to an inability to extract such data).

In connection with the European Commission’s decision of September 19th 2016, which includes the requirement to suspend any illegal state aid until the Commission decides on the compatibility of the aid with the internal market, on October 18th 2016 the Minister of Finance and Development issued a Regulation on refraining from the collection of the retail sales tax. The Regulation entered into force on October 19th 2016; the retail sales tax will not be collected on revenue earned from September 1st 2016 to December 31st 2016. Then, the Act Amending the Act on Retail Sales Tax of November 15th 2016 introduced a provision whereby the Act on Retail Sales Tax would apply to revenue from retail sales generated as of January 1st 2018.

3. Combating the grey market

In 2016, PKN ORLEN took part in public consultations of draft amendments to tax and administrative regulations aimed at combating the grey market in liquid fuels, in particular VAT fraud and avoidance of administrative obligations related to the supply of liquid fuels on the market.

The Act Amending the Value Added Tax Act and Certain Other Acts (the fuel package) of July 7th 2016 and the Act Amending the Energy Law and Certain Other Acts (the energy package) of July 22nd 2016 introduced a number of fundamental changes to the regulation of the liquid fuel market in Poland, including new rules for accounting for VAT on imports of liquid fuels to Poland and a close link between tax requirements and licence requirements in Poland. Its provisions, which will be fully implemented in 2017, should lead to a determination of the actual number of entities operating in the market, thereby creating an inventory of liquid fuels infrastructure, and sustainably minimising the illegal supply of liquid fuels on the market.

4. Gas market liberalisation

Throughout 2016, PKN ORLEN continued public dialogue as part of the process of gas market liberalisation in Poland, concerning waiver of the requirement to obtain President of the Energy Regulatory Office’s approval of tariffs for gas sold to business customers and households. The Act Amending the Energy Law and Certain Other Acts of November 30th 2016 provides for a timetable for the deregulation of gas prices in Poland, according to which the liberalisation of gas prices for industrial consumers is to take effect on October 1st 2017, and for households − on January 1st 2024.

5. Energy efficiency

To effectively fulfil its strategic objectives, PKN ORLEN strives to improve energy efficiency, which is essential for an energy-efficient economic model. With this approach, the Company actively participated in the legislative work for a new law on energy efficiency, which entered into force on October 1st 2016. The energy audit mechanism put in place at PKN ORLEN will improve the Company’s financial performance by optimising energy consumption while contributing to a reduction in the environmental impact of its activities. The Company is optimistic about the possibility of reducing the costs of its electricity and natural gas purchases based on completed efficiency improvement projects on assets covered by the CO2 emissions trading system, and of having heat and natural gas classified as a form of final energy, with savings of this energy achieved through efficiency improvement projects to be applied towards the fulfilment of an efficiency-related obligation. This would enable the Company to fulfil the obligation to achieve annual savings of final energy equal to 1.5% of the annual energy sales to end users, and to reduce the cost of purchasing natural gas.

6. Energy certificates

After a three-year investigation process, the European Commission issued a decision approving the certificate-based support system for high-efficiency cogeneration. The European Commission found the national support system to be in line with EU regulations on state aid, declaring that it complies with the goals of the EU climate and energy policy and contributes to more efficient energy production. The scheme is planned to be implemented until 2018. The decision confirms that the support obtained by PKN ORLEN in previous years in connection with electricity generation by its CHP plant in Płock was compatible with EU state aid rules and provides grounds for obtaining further support for cogeneration installations.

7. Energy-intensive companies

In 2016, the European Commission decided that no objections would be raised against the measure reducing RES-related burdens for energy-intensive undertakings, recognising its compatibility with the internal market under Article 107 paragraph 3, letter c) of the Treaty on the Functioning of the European Union. The reduction of the costs of the support system for renewable energy sources and excise duty on electricity will contribute to the higher competitiveness of the Company’s products.


The key bodies in Unipetrol´s regulatory environment in the Czech Republic are:

Key legislation having influence on Unipetrol´s business on the Czech market:


Regulatory environment of Germany’s ORLEN Deutschland:

ORLEN Deutschland is subject to the following laws and regulations:

There are various main important local authorities and institutions, e.g. municipal administration (including building authorities, water management authorities, waste management authorities, etc.), state authorities (including the data protection and security authority, etc.), and federal authorities (including Federal Cartel Office, etc.).


Lithuania’s ORLEN Lietuva’s regulatory environment:



Canadian companies operating in the oil and natural gas industry are subject to extensive regulation and control of operations (including land tenure, exploration, development, production, refining and upgrading, transportation, and marketing) as a result of legislation enacted by various levels of government with respect to the pricing and taxation of oil and natural gas through agreements among the governments of Canada, Alberta, British Columbia, Saskatchewan, and New Brunswick all of which should be carefully considered by investors in the oil and gas industry. All current legislation is a matter of public record and the Corporation is unable to predict what additional legislation or amendments may be enacted. Outlined below are some of the principal aspects of legislation, regulations and agreements governing the oil and gas industry both federally and in the Provinces the Corporation operates in.

Provincial Acts, Regulations, and Regulators

Alberta Acts and Regulations

Mines and Minerals Act — governs the management and disposition of rights in Crown owned mines and minerals, including the levying and collecting of bonuses, rent and royalties.

Important regulations include:

Responsible Energy Development Act — establishes the Alberta Energy Regulator (AER), and sets out its mandate, structure, powers, duties and functions.

Coal Conservation Act and Coal Conservation Rules — govern the appraisal, development, and conservation of Alberta's coal assets.

Gas Resources Preservation Act — governs the removal of gas or propane from Alberta.

Oil and Gas Conservation Act — governs the conservation and development of oil and gas resources in Alberta, including legislating safe and efficient practices for locating and developing resources and controlling pollution. Important rules and regulations include:

Oil Sands Conservation Act — governs the conservation and development of oil sands resources in Alberta to ensure the orderly, efficient, and economical development of the resource in the public interest. Important rules and regulations include:

Pipeline Act — governs the development and operation of pipelines within Alberta. Important rules and regulations include:

Environmental Protection and Enhancement Act — governs the protection, enhancement and wise use of the environment by designating proposed activities for which an approval or registration is required. Important rules and regulations include:

Water Act — supports and promotes the conservation and management of water, including the wise allocation of water, while recognizing, among other things, the need for Alberta's economic growth and prosperity. Important rules and regulations include:

Public Lands Act — governs the use of public land in conjunction with the Responsible Energy Development Act. Important rules and regulations include:

Alberta Regulators

Alberta Energy (Ministry) — manages the development of Alberta's non-renewable resources, grants industry the right to explore and develop, and seeks to assure sustained prosperity through the stewardship of energy and mineral resource systems, responsible development, and wise use of energy.

Alberta Energy Regulator — is responsible for regulating the life cycle of oil, oil sands, natural gas, and coal projects in Alberta from application and construction to production, abandonment, and reclamation. Also conducts environmental assessments.

Natural Resources Conservation Board — is responsible for reviews of proposed major natural resource projects, and for the regulation of confined feeding operations in Alberta. As a decision maker, it strives to exemplify integrity and foresight in the best interests of Alberta.

Surface Rights Board — is a quasi-judicial tribunal that grants right of entry and assists landowners/occupants and operators resolve disputes about compensation when operators require access to private land or occupied crown land to develop subsurface resources such as oil, gas, and coal or to build and operate pipelines and power transmission lines.

New Brunswick Acts and Regulations

Oil and Natural Gas Act — governs oil and natural gas leases, exploration, and development New Brunswick. Important regulations include:

Petroleum Act — not yet in force: will replace the Oil and Natural Gas Act.

Clean Environment Act — governs Environmental Impact Assessments conducted in New Brunswick which assess environmental impacts from proposed projects. Important regulations include:

New Brunswick Regulators

Department of Energy and Mines — has regulatory oversight over oil and natural gas land tenure, exploration, drilling and production, and well abandonment.

Department of Environment and Local Government — implements a review and approval process to regulate and manage the environmental and social aspects of the construction, operation, and decommissioning of oil and natural gas projects and facilities.

British Columbia Acts and Regulations

Petroleum and Natural Gas Act governs the management and disposition of rights in Crown owned mines and minerals, including the levying and collecting of bonuses, rental and royalties. Important regulations include:

Oil and Gas Activities Act — governs the conduct of oil and gas operations including exploration, development, and consultation. Important regulations include:

Environmental Management Act — uses modern environmental management tools to protect human health and the quality of water, land and air in British Columbia. 

British Columbia Regulators

Ministry of Natural Gas Development — is responsible for managing the land tenure system and oil and gas leases in British Columbia.

Oil and Gas Commission — is an independent, single-window regulatory agency with responsibilities for overseeing oil and gas operations in British Columbia, including exploration, development, pipeline transportation and reclamation.

Surface Rights Boardassists in resolving disputes between landowners and companies that require access to private land to explore for, develop, or produce Crown-owned subsurface resources such as oil, gas, coal, minerals and geothermal.

Saskatchewan Acts and Regulations

The Oil and Gas Conservation Act—governs the orderly exploration for, and development of, oil and gas in Saskatchewan and optimizes the recovery of these resources. Important regulations include:

The Crown Minerals Act—governs the leasing of Crown mineral rights and provides authority for the Crown to collect royalties. Important regulations include:

The Environmental Assessment Act — establishes a system to ensure that development proceeds with adequate environmental safeguards through the integrated assessment of environmental impacts.

The Environmental Management and Protection Act, 2010 — regulates and controls potentially harmful activities and substances.

Saskatchewan Regulators

Ministry of Economy — governs the exploration, development, management, and conservation of non-renewable resources. This includes granting leases and operations permits.

Ministry of Environment — provides science-based solutions, compliance and mitigation measures aimed at protecting the environment, safeguarding communities, and helping to ensure balanced economic growth. It accomplishes this through environmental assessments, management of industrial sites, and compliance activities.

Federal Acts, Regulations, and Regulators

Acts and Regulations

Canada Oil and Gas Operations Act — governs the exploration, production, processing, and transportation of oil and gas in marine areas controlled by the federal government. The Acts regulations address drilling and production, geophysical operations, installations, financial requirements, operations, and spills and debris liability.

The Canada Petroleum Resources Act — governs the lease of federally owned oil and gas rights on "frontier lands" to oil and gas companies that wish to find and produce the oil and gas. The Acts regulations cover royalties, registrations, and research funding.

Canadian Environmental Assessment Act — governs the environmental assessment of proposed projects where the federal government is the proponent or where the project involves federal funding, permits, or licensing.


National Energy Board — oversees the international and inter-provincial aspects of the oil, gas, and electric utility industries. It regulates the construction and operation of oil and natural gas pipelines that cross international or provincial borders.

Natural Resources Canada — is the federal ministry of natural resources. It develops policies and programs that enhance the contribution of the natural resource sector to the economy. It seeks to enhance the responsible development and use of Canada's natural resources and the competitiveness of Canada's natural resources products.

Canadian Environmental Assessment Agency — is responsible for conducting environmental assessments under the Canadian Environmental Assessment Act

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