Legal Eye: License to distill

"Member States shall take appropriate steps to encourage greater consumption of electricity produced from renewable energy sources"

article 3 (1) Directive 2001/77/EC

The illegal production of biofuel by some farmers may not be illegal for much longer. That is if the latest draft of a new law regulating the production of biofuel is adopted by the Parliament.

What Polish farmers may not realize, and what some politicians may not want to admit, is that the "illegal" production of biofuel is in fact in line with EU policy to develop alternative energy sources. In this case the farmers are, to a large extent, ahead of the government in implementing the 'spirit' of EU energy policy. The current draft law before the Parliament is an attempt by the government to play catch up.

Biofuel v renewables

EU Directive 2001/77/EC requires each member state to establish specific regulations and action plans in order to expand the use of renewable energy resources to produce electricity. A renewable energy resource is defined as energy derived from non-fossil energy sources, such as wind, solar, hydropower, biomass, landfill gas, tidal and geothermal.

Similarly, biofuel provides an alternative energy source produced from a combination of fossil fuel, bio-ethanol and ether.

Although biofuel is not precisely defined as a renewable energy source, its use will enhance the "security and diversification of energy supply, environmental protection, and promote social and economic cohesion," all goals set forth by EU energy policy.

A crime no more

Under current regulations a farmer, or anyone for that matter, must first obtain a license to produce, store or sell biofuel, regardless of the amount. A violation may result in the imposition of a fine of up to 50 percent of the value of the biofuel produced or sold. Such a penalty also applies even if the biofuel is used solely for home use, with no exceptions.

Under the proposed changes, the production of biofuel for home use would no longer be subject to the licensing requirement, provided that the amount produced is limited to 100 liters per hectare of farmland under cultivation per year. All producers, however, including those falling below the 100-liter threshold, will be required to file quarterly production reports. Failure to comply will also be punishable by imposition of a monetary fine, in this case a flat fee of zł.3,000 per offense.

Licensing requirements

The issuance of a license is regulated by the Energy Law. Licenses are issued by the Energy Regulatory Agency. A license is valid from between 10 to 50 years, depending on the size of the operation and financial strength of the applicant.

An applicant will need to be recorded in the Commercial Registry Court, similar to any other person wishing to engage in a business activity. An applicant need not be a Polish legal entity per se, but will need to be a legal entity recognized in another member state or member of the European Free Trade Area. Additionally, an applicant will need to demonstrate the necessary financial resources and technical capability to produce, store and/or sell biofuel.

2010 goal

The EU Commission has set an overall goal to utilize renewable energy sources to satisfy at least 12 percent of all EU energy requirements by 2010, and up to 22 percent with respect to the production of electricity. Thanks in part to the farmers, the Polish government has now taken the next step toward achieving this goal.

Paul Fogo is a senior attorney with Miller, Canfield, W Babicki & Partners