Constitutional Insights #1

Congress must provide constitutional regulation for the gas sector

By Luis Fernando Priolli

Brazil is at a crucial turning point in defining the rules for the natural gas sector. The National Agency of Petroleum, Natural Gas, and Biofuels (ANP) is currently debating a resolution to establish technical criteria differentiating transmission pipelines from distribution pipelines. While seemingly technical, this discussion directly impacts sector organization, legal certainty for investments, and the future of the national energy matrix.

Natural gas is a strategic transition fuel. It emits fewer pollutants than coal and oil derivatives and offers the flexibility to meet demand peaks and complement renewable sources like solar and wind. Its role is increasingly vital for the stability of the Brazilian electrical system, especially regarding climate change and international pressure for decarbonization.

ANP’s proposal seeks to harmonize rules and bring regulatory clarity, but it does not resolve the root problem. Although it aims to align regulation with the Gas Law (Law No. 14,134/2021), the discussion highlights a larger void: the lack of regulation for Article 25, §2º of the Federal Constitution.

This constitutional provision, amended in 1995, determines that States are responsible for exploring local piped gas services, either directly or through concessions. The amendment sought to grant States autonomy but failed to define precise competencies, creating persistent ambiguities.

The bottom line is that the 1995 constitutional amendment made the issue more confusing. By including the phrase “in accordance with the law,” the amendment delegated regulation to federal legislation that still does not exist.

For exactly three decades, Congress has failed to create this legislation. In this vacuum, state governments created their own laws and regulatory agencies established their own norms. These are merely palliative measures; without a federal law—the only definitive solution—legal insecurity persists, leading to constant judicial challenges against state laws and agency norms.

The lack of regulation generates insecurity on several fronts:

• Divergent Interpretations: Some argue States have exclusive competence; others believe federal limits are necessary to avoid conflict with the Union.
• Stalled Infrastructure: Multi-billion real projects are exposed to legal risks. Transporters fear investing in pipelines that might be reclassified as state distribution.
• Increased Costs: Legal disputes stall contracts, make projects more expensive, and delay essential works for the expansion of the gas network.

An administrative resolution from the ANP is insufficient to pacify the sector. The true solution lies with the National Congress. Only the regulation of Article 25, §2º can unequivocally define the boundaries between Federal and State jurisdiction. This complementary law is what will provide legal certainty and align Brazil with international best practices.

This is not a merely technical debate; it involves significant economic interests for producers, transporters, distributors, and industrial consumers (steel, chemical, and fertilizer sectors). For natural gas to increase national competitiveness, the regulatory framework must be stable and predictable.

Brazil currently faces a contradiction: it recognizes the strategic importance of gas while maintaining a 30-year regulatory impasse. This gap threatens energy security and drives away investment. The time to fill this constitutional void is now. Regulating the Constitution is an indispensable condition for the sustainable expansion of the natural gas market and the future of Brazilian energy policy.