This legislation establishes the national energy policy and governs activities related to the oil monopoly. It also establishes the National Energy Policy Council and the National Agency of Petroleum, Natural Gas and Biofuels (ANP). It determines as objectives of the National Energy Policy: to protect the environment and promote energy conservation; to mitigate emissions of greenhouse gases and other pollutants in the energy and transport sectors, including the use of biofuels (Amendment made by the Law nº 12.490 of 2011); among others. It decrees that all national hydrocarbon deposits belong to the Federative Republic of Brazil. It provides the ANP with the powers and duties associated with the administration of the petroleum industry, including: the establishment of rates and royalties provisions; capability of defining contracts; regulating safety issues; the responsibility to enforce good practices related to the conservation and rational use of oil, natural gas, its derivatives and biofuels as well as to environmental preservation (Amendment made by the Law nº 11.097 of 2005). It also provides the basis for rules that assess royalty payments on flared methane:
Article 47. Royalties shall be paid monthly, in national currency, from the beginning of the commercial production of each field, in an amount corresponding to ten percent of the production of oil or natural gas.
Paragraph 3 - Gas flaring, to the detriment of its commercialization, and product loss under the concessionaire's responsibility will be included in the total production volume to be computed to calculate the royalties due.