Georgia has been one of the few countries of the former Soviet Union to actively develop its environmental legislation, mostly due to its increasing role as an oil and gas transit state. It was not accidental that during negotiations of the so-called "Early Oil Pipeline" and "Baku-Tbilisi-Ceyhan" main export pipeline projects, the Georgian government, among other concerns, raised issues of the environmental protection and environmental standards applicable to interstate oil and gas projects.
Georgia has a relatively well-developed body of law on the environmental protection. The most important provisions are found in the laws On Environmental Protection of December 10, 1996 (the "Environmental Protection Law"), On State Ecological Expertise of October 15, 1996 (the "Ecology Law"), On Environmental Permit of October 15, 1996, On Subsoil of May 17, 1996 (the "Subsoil Law"), On Protection of Atmospheric Air of June 22, 1999 (the "Air Protection Law") and On Water of October 16, 1997. These laws apply to any investment project to the extent that they do not contradict with the international agreements of Georgia, which take precedence over local laws.
General Legal Framework
The Environmental Protection Law
The Environmental Protection Law establishes the general principles and standards of environmental protection and the use of natural resources in Georgia. Its main objectives are to ensure the rational use of natural resources by creating an optimal balance of ecological, economic and social interests of the public; to protect the original landscapes, ecosystems, flora and fauna of Georgia, and to create an environmentally safe habitat for the population.
The Law requires Georgian citizens to observe the environmental legislation of Georgia, to protect their natural and cultural habitat and to promptly inform relevant state agencies on existing or potential natural accidents or ecological calamities. State authorities and physical and legal persons are further required to observe the principles and standards of environmental protection stipulated by the Law in the process of planning and implementing their activities. The Law provides the following principles of the environmental protection: risk reduction, "the polluter pays," bio-diversity preservation, wastes minimization, recycling, restitution, environmental impact assessment, the accessibility of information, etc. The Law also provides the following standards of environmental protection: qualitative standards of the environment’s status, admissible limits of environmental pollution by the emission of hazardous substances and microorganisms, admissible limits of chemical substances’ use in the environment, ecological requirements to products, etc.
The Ministry of Environment and Natural Resources Protection (the "MENRP") is authorized to regulate issues of environmental pollution at both national and local levels. It is also authorized to issue environmental licenses on any activity related to the environment or on the use of mineral resources. The MENRP is further responsible for the state supervision of the use of natural resources and for monitoring the environmental situation throughout the country. In addition, the Ministry of Health is required to administer sanitary control in Georgia and monitor the protection of sanitary and hygienic standards, as well as epidemiological rules.
The Environmental Protection Law establishes environmental taxes for the negative effect on the environment and for the use of natural resources. The Law requires entities operating in Georgia to maintain ecological insurance and to conduct ecological audits to determine the conformity of their activities with state environmental protection regulations.
The Law obligates a potential developer to observe environmental and ecological requirements, existing principles and quantitative and qualitative standards related to the environment. A developer must also implement all measures necessary to protect the environment, to maintain ecological safety and to make timely payment for damages to the environment.
The Ecology Law
The Ecology Law provides the basic principles and procedures of the state ecological examination (the "SEE"), as well as the powers and obligations of authorized state agencies and rights and obligations of investors during the SEE.
The Ecology Law states that the SEE is a necessary environmental measure carried out in the course of decision-making on the issuance of an environmental permit to entities engaged in industrial or any other type of business activity, in developing infrastructure projects, construction plans, projects for exploitation and use of water, forest and mineral wealth, land and other natural resources in Georgia, etc. The Law provides that the objective of the SEE is to control the ecological balance in conformity with environmental protection requirements and principles on the efficient use of nature and sustainable development. The SEE summary is a necessary condition to obtain an environmental permit.
The MENRP and its regional and local subdivisions are responsible for conducting the SEE. Interestingly, the Law provides for the commitment of MENRP to establish regulations of the environmental impact assessment (the "EIA"). According to the Ecology Law the EIA should define all possible sources, characteristics and types of the environmental impact assessment and evaluate its ecological, social and economic implications.
The Law on Environmental Permit
The Law on Environmental Permit establishes the procedure for the issuance of an environmental permit and provides a list of documents and information necessary for that purpose. It also provides the principles of the EIA, as well as regulations for the public participation in a decision-making process for granting the environmental permit.
The Law contemplates four categories of activities that require an environmental permit, depending on the scale, importance and degree of the environmental impact. The first category involves activities that, because of their nature, scale or location, are likely to have significantly adverse and irreversible effects on the environment, on natural resources or human health. The second category involves activities that, because of their nature, scale or location, are likely to have adverse effects on human health or on the environment of a region where the proposed activity will be implemented. The next category involves activities that, because of their nature, scale or location, are likely to have significant effects on the environment. The final category involves activities that do not qualify under the above categories and are likely to have significant effects on the environment.
A developer may obtain an environmental permit by filing an application with the MENRP and its regional and local subdivisions. The application should include a request for an environmental permit, a feasibility study of planned activities, an EIA, as well as a complete description of the technological process, notwithstanding if such description may reveal industrial or commercial secrets of a developer. A developer is further required to submit a brief annotation of works if the planned activities qualify under the first, second or third category described in the law. A developer may also submit other relevant information about the planned activities. Severe penalties apply if a developer submits false information to obtain an environmental permit.
The Law also provides that the EIA should study, reveal and describe direct and indirect effects of planned activities on human health, flora and fauna, subsoil, air, water, climate, landscape, ecosystems, historic and cultural monuments, etc. The EIA is a significant factor in the course of granting an environmental permit.
Pollution of Land
The Subsoil Law
The Subsoil Law requires any entity developing subsoil resources in Georgia to ensure the rational use of subsoil and mineral resources and to implement all activities related to subsoil operations by observing environmental safety norms. Companies are further required to observe the established regulations for the protection of the subsoil, air, land, water, forests, protected areas and parks, buildings and structures of historic and/or cultural value, as well as all other buildings, from any negative effects of subsoil use. Subsoil operations that may cause damage to the environment or become the cause of a threat to the life or health of the population are prohibited.
The Subsoil Law provides the principal requirements for the subsoil protection, including the following:
- to ensure the rational use of mineral resources;
- to ensure the complete and comprehensive study of subsoil in order to correctly administer subsoil protection measures;
- to protect mineral deposits from flooding, deluge, pollution, fire or other factors that may affect the quality of mineral resources;
- to prevent the harmful effects of natural gas and other substances’ storage and/or burial in the subsoil;
- to prevent the accumulation of industrial and/or household wastes in the vicinity of water storage structures;
- to ensure the reliable forecasting and assessment of the potential impact of subsoil operations upon the environment and to carry out the necessary measures to protect the environment and population, etc.
The MENRP is authorized to issue licenses to study the subsoil, to mine mineral resources and to process and use industrial waste. The MENRP is also authorized to conduct the state control and monitoring of subsoil use operations in Georgia.
Criminal, civil and administrative sanctions and penalties will apply to a developer liable for the violation of the Subsoil Law.
Pollution of Air
The Air Protection Law
The Air Protection Law provides for atmospheric air protection from adverse human effects and the legal regime of air protection within buildings. Adverse human effects are those that may negatively affect both the environment and human health, including air pollution with toxic substances, radiation, microorganisms or biologically-active microbes, as well as the negative effect of noise, vibration and electromagnetic waves. on the environment.
In order to minimize these negative effects on the environment and human health, the law establishes admissible limits and standards of pollution. Admissible limits of a toxic substances’ density in the environment are established according to Georgia’s Tax Code and Orders of the MENRP regarding Relative Danger Coefficients of Air and Water Pollution From Fixed Sources. From January 1, 2005, the basis for calculating the above limits will become Directive No.96/62/EC of the European Union On the Atmospheric Air Quality Assessment and Management dated September 27, 1996.
The Air Protection Law provides for the division of Georgia into extremely polluted, highly polluted, polluted and non-polluted regions. The Law stipulates that the level of air pollution should be determined pursuant to a pollution index that is calculated by the MENRP on the basis of quantitative indices of dust, sulfur dioxide, nitrogen acids, carbon acids, etc.
The Law also provides the limits of air pollution with toxic substances emitted from fixed, movable and disperse sources. It contemplates the establishment of a monitoring system over the quality of air (which should be regulated by a separate law) and the necessity of air protection planning by local state authorities, pursuant to the requirements of the laws On Environmental Protection, On Health dated December 10, 1997 and On Local Self-government dated October 16, 1997.
The Air Protection Law authorizes the MENRP to carry out state air pollution control. It further authorizes the Ministry of Health and its subdivisions to carry out the air pollution control from fixed sources within their respective competence.
Finally, the Law provides a list of environmental laws and regulations that should be adopted and a timetable of their adoption.
Pollution of Water
The Law on Water
The Law on Water regulates the legal aspects of water conservation, study and use by state authorities, physical and legal persons, as well as the production of water products and their international trade. The Law expressly provides that the laws On Subsoil and On Fauna, dated December 26, 1996, regulate the protection of underground waters and of marine animals, respectively.
The Law declares that water is state-owned. Rights to water use may be transferred when a relevant license is granted. Water in Georgia is divided into surface and underground waters. Water is further classified into categories of distinguished state priority, state priority and local priority groups.
The Law states that measures for the protection of water include the protection of water storage facilities from pollution, littering, etc., that may negatively affect human health, reduce fish population, cause problems to water supply, worsen the physical, chemical and biological attributes of water or cause other negative effects. Such measures also include the protection of water storage areas of scientific, esthetic and recreational value, the protection of water and marine areas, as well as seashores and adjacent zones, etc. The Law lists prohibitions, regulations and recommendations that may apply in order to protect water from pollution and littering.
The Law specifically provides for the protection of Black Sea resources, as well as regulations on the location, design, construction and exploitation of entities and buildings that may affect the quality and characteristics of water. It also provides for the establishment of sanitary protection zones to protect household, healing, recreational water resources, etc. In order to conserve and/or restore unique water resources and ecosystems, flora and fauna, creations of nature and cultural areas, certain water storage areas may be granted status as a protected territory or park.
The Law requires physical and legal persons who use and consume water to participate in the elimination of negative effects on water, such as flooding, deluge, overflow, land erosion, etc. An extraordinary ecological situation may be declared in cases where, due to flooding or other negative effects on water, the ecological balance is in danger and may cause threat to human life and annihilation of flora and fauna, and, therefore, qualify as an ecological calamity.
The MENRP is authorized to carry out the state control and management over water protection and use. Within their respective competence, the Ministries of Health and Agriculture, the State Geology Department, state and local bodies of land management and local self-government authorities are also authorized to regulate the use and protection of water. The Law provides that the MENRP and its local subdivisions must maintain the state water registers, in which information concerning water and water examination results, including, but not limited to, quantitative and qualitative attributes of water, must be registered.
Severe criminal, civil and administrative sanctions and penalties may apply if provisions of the present law are violated.
Regulations Specific to Oil and Gas Industry
Georgian law does not establish specific environmental standards and practices applicable to the oil and gas industry or to transnational oil and gas projects. In the absence of such standards and practices, provisions of existing environmental laws will apply. However, Georgian law allows the application of environmental standards and practices other than those provided by Georgian law if so stipulated by interstate agreements of Georgia, including agreements on transnational oil and gas projects. For instance, the intergovernmental agreements between Azerbaijan, Georgia and Turkey on Baku-Tbilisi-Ceyhan main export pipeline provide for the application of international standards and practices, including environmental that are not less stringent than the standards and practices used by the European Union. Such standards and practices must be implemented notwithstanding any standards and practices stipulated by the environmental legislation of Georgia. Specific environmental standards and practices for transnational oil and gas projects are resolved in the process of negotiations between the Georgian Government and the equity owners, developers or contractors in transnational projects.
With its recently adopted laws, Georgia has a body of law to regulate the environmental aspects of any investment project, including those in the oil and gas industry. The environmental legislation of Georgia will apply to all investment projects, unless they are regulated by inter-governmental agreements that take precedence over local Georgian environmental regulations. Under this setting, the parties to investment projects in Georgia, including oil and gas deals, will likely need to negotiate and be bound by rules separate from the country’s environmental legislation. Notwithstanding this, the environmental protection and safety issues are matters of growing concern to state authorities and the public. As a result, as a part of their public relations programs, foreign investors, especially in the oil and gas sector, are paying more attention to local environmental requirements to ensure social acceptance and continuing governmental support of their projects.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.