THE FORTCOMING LAND LAW AMENDMENT: A GIANT STEP FORWARD TO RES INVESTMENTS OR NEW CHALLENGES FOR INVESTORS?
Editors: Tatiana Fiodorov, Real Estate & Renewable Energy Lawyer, the managing partner of Fiodorov & Partners
A. Context
In the context EU plans one-year renewable energy permits for faster green shift, the Romanian Parliament passed a law which tries to spare investors from some prerequisites on permitting process. This article has a dual objective. Firstly, it aims to present an overview of the main amendments on the forthcoming entrance into force of the law amending the Land Law No. 18/1991 (“Land Law”) and Governmental Emergency Ordinance No. 34/2013 on the organization, administration, and operation of permanent grasslands and for amending and supplementing the Land Law No. 18/1991 (“GEO No. 34/2013”), the “Amended Law”. Secondly, it aims to provide a responsive brief analyse of its prospective impact on permit-granting process.
Please note that the Amended Law has not been yet published with the Official Gazette of Romania and the date of its entry into force is not yet clear. However, we note that as a temporary law, the Amended Law shall apply until 31 December 2026.
B. Main amendments
Legal provisions which apply until the date of entry into force of the Amended Law, provide the general rule according to which the construction works can be performed solely on lands having the use category “construction yards” and, subject to certain exceptions, only on the lands located intra muros[1].
Those exceptions did not include RES projects. Consequently, for the scope of developing RES projects, investors had to prepare the zonal plan for including the selected land plots within the intra muros area of the municipality, city, commune.
As a result of the coming into force of the Amended Law the following main two changes shall apply:
- RES projects’ development on the extra muros agricultural land plots up to 50 ha having 3rd to 5th soil quality shall be allowed. By means of agricultural land plots, the Amended Law envisages the following:
- arable lands,
- pastures and permanent grasslands,
- vineyards and orchards,
- land plots with land improvement infrastructure.
- the co-use is now regulated for (i) pastures and permanent grasslands, (ii) vineyards and orchards and (iii) land plots with land improvement infrastructure, thus, exempting the payment of the conversion fee partially for the area used in agricultural or grazing scope. For the avoidance of any doubt, the co-use is not allowed in case of arable lands, meaning that such has to be totally removed from the agricultural use.
Mentioned should be made that with regard to the case of permanent grasslands, the GEO No. 34/2013 has not been amended in the sense of repealing the investors’ obligation to recover from the unproductive lands an area equal to such approved to be definitively removed from the agricultural use.
Thus, considering that from practical point of view, most of the RES projects are developed in the extra muros area on the land plots having either arable use category or pastures/ permanent grassland use category, the following main concerns remain unresolved:
- with regard to the permanent grassland, the investors still have the obligation to reinstate the grassland area removed from agricultural use;
- with regard to the arable land plots, the conversion fee is still required in full amount– the co-use not being allowed in this case, (e.g. in 2022, a RES project to be developed on arable land plots of 50 ha, of 3rd soil quality category shall require a conversion fee of approx. EUR 312,000.
C. Zonal Plan: will the new law mean that zoning plans will no longer be compulsory?
In Romania, the implementation of the approved urban planning documentation is ensured by issuing the urban planning certificate. In this regard, the Urban Planning Law provides that the urban planning documents are (i) the General Urban Planning Regulations, approved based on Governmental Decision No. 525/1996, and (ii) local urban planning regulations, i.e. general, zonal and detailed urban plans.
As a rule, there are no specific urban planning documentations approved for the extra muros areas and usually the sole urban regulation in force is represented by the General Urban Planning Regulations. As per the provisions of the General Urban Planning Regulations, it is applicable to the design of all projects on all categories of land, located both in the intra and extra muros area.
Notwithstanding this, the Urban Planning Law states that in the case of a derogation from the existing planning documentation, the competent authority is entitled to make authorisation of the investment conditional upon the preparation and approval of a zoning plan. Moreover, at local or county level, the public authorities may impose specific requirements for certain projects. For example, with regard to RES investments, back in 2008, Constanta County Council issued a decision approving the “Urban planning regulations for the development of wind farms in Constanta County”, which imposed inter alia as mandatory the elaboration and approval of zonal plans.[2]
Consequently, in the context of the Amended Law, our answer is that even if the zonal urban plan is no more required for included the envisaged area of up to 50 ha in the intra muros, it may be reasonable assessed that the applicable legislation does not exclude situations in which zonal plan could be requested even for RES investments up to 50 ha located extra muros.
D. Co-use: Who determines the RES investment area?
At present, the Amended Law does not provide that rules for its implementation are to be laid down. Notwithstanding this, the Amended Law does raise questions on the way if calculating the areas used for RES and agricultural or grazing scope. Further clarifications on this issue have to be provided by competent bodies, namely will investors only have to remove from the agricultural use (i) the land area affected by the support poles of the photovoltaic panels, or will (ii) the ground footprint of the photovoltaic panels be considered?
E. Will it be possible in the future to collect royalties from APIA if the land is used in a dual system?
The applicable legislation provides that areas of land occupied by PV parks are not eligible for subsidies payment by Agency for Payments and Intervention in Agriculture. This provision made sense in a situation where co-use has not been regulated. However, in the current context, there is no reason why the subsidy should not be granted for the pasture area located within the project. Further clarifications on this issue have to be provided by competent bodies.
F. Does the law provide for Transitional Solutions?
In principle, the Amended Law was to include legislative solutions for transitional situations, where the new provisions affect legal situations which arose under the old regulation, but which had not fully produced their effects by the date of entry into force of the new regulation. At the date, transitional situations are not regulated, meaning that general principles shall apply.
In short, the urban planning certificates already issued will follow the legal provisions applicable at the date of their issuance. Consequently, the permitting process will be different depending on whether it is started before or after the entrance into force of the Amended Law (main difference being, the costly and long zonal plan approval). We deem that except for the case the investor will consider resuming and re-submit the request for the urban planning certificate and to automatically fall under the legal provisions of Amended Law, projects on the agricultural lands located extra muros shall have to envisage the approval a zonal plan.
***
[1] Under Romanian Law, the extra muros area represents the territory between the boundary of the urban area and the administrative-territorial boundary of the basic unit (municipality, city, commune), within which the authorization to perform construction works is, in principle, restricted, while the intra muros area represents the territory constituting a locality and is determined by the General Urban Plan, comprising the land plots of any kind, with/without buildings, within which the construction of buildings is allowed. Intra muros areas may be developed by extending into extra muros areas only on the basis of legally approved zoning plans, which are subsequently integrated into the General Urban Plan.
[2] As per the decision No. 5631/13.02.2013, Brasov District court stated that according to the legal provisions of the Urban Planning Law, the public authority competent to issue the urban planning certificate has only the right, and not the obligation, to request the ellaboration of a zoning plan. This right shall be exercised only in the case of a derogation from the existing planning documentation. In the case of Cogealac Wind Parc, the sole urban planning documentation approved at the time of issue of the urban planning certificate has been the General Urban Planning Regulations. In that case, the court assessed that there was no question of requesting a derogation from this planning document.