Sao Paulo gas decree may go to Supreme Court: Update

Brazilian oil and gas regulator ANP will ask the Brazilian Supreme Court to decide whether Sao Paulo state's decree giving it more authority over natural gas infrastructure is legal.

ANP will also bring other similar cases where it considers state laws to be challenging its authority before the court, in order to create consistency across the state gas laws being pursued by local governments.

"This decision is meant to show ANP's firm posture towards the matter and issue a warning for states that are making their laws that there will be no tolerance," said Anabal Santos Jr, executive secretary at the oil and gas independent producers association ABPIP. "The decision is important to avoid state laws from creating conflicts and uncertainty".

Under the Brazilian constitution, states regulate gas distribution pipelines to final users but federal authorities regulate overall transportation. Lawyers for ANP argue that Sao Paulo state Decree No 65.889 defining which pipelines are considered main transportation routes and which are for area distribution in the state is unconstitutional and should be struck down. They argue that under Brazil's new national gas law such definitions fall under national regulator ANP's jurisdiction.

The state decree, approved by governor Joao Doria in July 2021, created controversy in the gas industry when it was launched. Some market participants worry that if the definition of distribution pipelines is interpreted broadly enough to allow larger structures and systems to fall under state rule, it could unfairly benefit local gas distribution companies and even hinder competition for gas suppliers.

One project that could be authorized by Sao Paulo authorities under its decree is the Subida da Serra pipeline connecting the Santos port to the distribution grid. This would allow the local distribution company to purchase LNG and supply its regulated market.

By Flávia Pierry