Dino requests review and suspends judgment in the STF on the distribution of oil royalties

Minister Flávio Dino, of the Federal Supreme Court (STF), requested a review and suspended the trial that discusses the distribution of oil royalties.

He anticipated that “there probably are some differences” in relation to the vote of the rapporteur, Cármen Lúcia, who voted to maintain the concentration of royalties in producing states and municipalities – which mainly benefits Rio de Janeiro (responsible for more than 80% of national production), São Paulo and Espírito Santo. She is the rapporteur of the case and was the first to vote.

The minister considered, however, that he needs more time to analyze the case due to the regulatory changes that have occurred in the last two decades. “In the jurisdiction, ultimately, where prudence must be reinforced, I don’t feel comfortable voting in the shadows,” he stated.

Cármen Lúcia’s vote is to declare the unconstitutionality of Law 12,734/12, which expanded the transfer of royalties to non-producing entities. The rule never came into force, because it was suspended in 2013 following an injunction from the minister. The issue went through failed attempts at conciliation and had been awaiting a definitive decision from the plenary for 13 years.

“The percentages owed to the Union, producing States and municipalities have always been significantly higher than those of non-producing entities, precisely due to the compensatory nature, in the sense provided for in the Constitution”, said the minister.

Cármen stated that the article of the Constitution that provides for the reduction of regional inequalities should not be interpreted in a way that requires an exact distribution of royalties. This is because, according to the minister, it is the producing states and municipalities that “suffer environmental, administrative and financial burdens on the populations when exploiting these resources”.

The minister also highlighted that, if the change had occurred through a constitutional amendment, and not by ordinary law, it would be valid. “To Congress, what belongs to Congress. It is itself the one legitimized to promote constitutional reforms”, he pointed out.

In the rapporteur’s view, even if the law came into force, its effects could not be retroactive to contracts prior to its validity, under penalty of causing legal uncertainty.

“If there were immediate application to contracts previously in force, we would have a more delicate situation of breach of commitments”, he stated. Cármen recalled that this was the same reason that led then-president Dilma Rousseff to veto sections of the law in 2012. The vetoes were overturned by Congress.

The Rio government estimates a loss of R$9.9 billion in 2026 if Law 12,734/12 is fully applied, and R$2.3 billion if it is applied only to contracts after its validity.

The other States and municipalities defend the law and argue that the current model generates a historical distortion, with a breakdown of equality between entities.

If the 2012 law comes into force, the percentage of royalties distributed to producing states and municipalities would fall from 61% to 26%. The special fund, intended for all other non-producing states and municipalities, would rise from 8.75% to 54%. The percentage passed on to the Union, which is currently 30% of total royalties, would fall to 20%.