Consensus or majority?
- Written by Alex Serban, Senior Fellow, Atlantic Council - Brent Scowcroft Center for International Security
2014 should have brought, among others, a new legal framework in the field of royalties for exploiting mineral resources (oil and gas), as well as a new energy strategy for the next 20 years. The exclusive attention on the electoral campaign and, as consequence, the high volatility of the political environment despite a comfortable parliamentary majority for the government, both of them have postponed the two issues for next year.
The main explanation government representatives have offered is connected to the need of properly debating the two issues by the political environment and by the rest of interested institutions, among them the triad made up by the European Union, the World Bank and the International Monetary Fund. According to the executive, the energy strategy and the level of royalties should be agreed upon by consensus, following public debates, in order to signal to the investors the ongoing stability and the predictability of the legal framework. Knowing the way the two issues were approached during the last year, it deserves wondering if the proposed approach is the right one or if other approaches are on hand? As we have drawn the attention in due time, consensus on such issues is commendable, as it would reduce the chances for amendments to a legal framework that needs to be stable – in case of a new parliamentary majority and of a new government. An industry that requires investments, such as the one for exploiting mineral resources, and an interval for cost recoup rather long, as the energy one, needs safety in regard to the laws and to the taxes it pays to the state, safety that these ones are not to be changed on each government shifting.
From this point of view, it’s absolutely normal that debates on the new legal framework for royalties or the new energy strategy of Romania are not carried out in haste and, particularly, that the result is not the wish of a single power pole or of a sole approach. There are however several elements that raise questions regarding the opportunity of focussing on consensus.
First of all we need to consider that the argument of the necessity of debates cannot overcome the one of the necessity to agree as soon as possible on a new legal framework, although no one is denying the opportunity for a larger debate. As an example of active implication for debates comes the fact that associations in line, such as ROPEPCA, carried out a continuous activity during the last years to bring arguments and to signal the need for finalising the debates by the state institutions.
Right now Romania needs a new framework, suited to the new energy market realities, which is passing through reconfiguration following the changing realities of international relations. More than that, reaching the objectives agreed upon by the entire political class, i.e. directing Romania towards becoming a regional energy hub, is impossible without a new framework. At the same time, we have to underline that the government is currently supported by a strong parliamentary majority, rather diverse from the doctrinaire/ideological point of view. We don’t want to suggest that this reality would justify the adoption of a new energy strategy and of the new system for royalties in disregard of the opposition, the civil society or the industry’s opinions. However we believe we’ve reached a moment when the government should count more on its majority in parliament than on getting consensus for the energy strategy envisaging 2015-2035 and for the new level of royalties. Thus we believe that, at this moment in time, the interest of quickly adopting a favourable new framework allowing the development of a performing industry in the field of oil and gas should prevail. By this the objective would be reached despite the lack of consensus, but based on a majority favouring the result.
Last but not least, an essential issue is the predictability and the security of agreements as a prerequisite to convince the investors Romania is a reliable partner and a country worth investing in. Thus, we believe a deadline needs to be set by mid 2015 to conclude the talks about the new royalties system, so that the market would have enough time to get prepared for the legal framework in force by 2016. In order to provide fair awareness and implementation of the new legal framework the government should carry on an informing campaign regarding the changes to be in force in 2016 and their effects. Such a campaign is the more necessary as a new round for allotting perimeters for exploration/exploitation has been announced for spring 2015. Interested companies should get guarantees about the royalties system, while the public must be correctly informed on the issue in order to avoid conflicts generated by lack of knowledge. As renewable energy (wind/hydro) is still a remote perspective related to investments already implemented, however uncertain, as the shale gas adventure may become a resounding disappointment (due to the drillings’ inconclusive results and due to poor communication that had scared the entire country and had burdened prospection and explorations) and as the long term is needed for investments in nuclear energy (and the certitude regarding investors), Romania should manage carefully the industry that, for 100 years, has been the foundation of its development: oil and natural gas.