On 23 June 2010, the Cabinet of Ministers of Ukraine (CMU) adopted a new yearly "Procedure for the Issuance of Special Permits for Subsoil Use in 2010" (the "Procedure"). The regime introduced by CMU is much more lenient (in comparison to the respective procedure effective in 2009).
As a general rule, the Ministry of Environmental Protection is responsible for holding auctions to award these special permits to the wining bidders. However, the Procedure also permits other numerous grounds which would allow the special permits to be issued without the auction procedure. These include the following grounds:
- for the production of natural resources in 2 cases. First, where the applicant had previously: (1) conducted a geological survey at a licensed area at its own expense, (2) performed an estimation of the reserves and (3) obtained approval from the State Commission on Reserves of the Mineral Resources. Second, if the respective estimation of the deposits is submitted to and approved by the Commission within 3 years following the issuance of the special permit for production;
- for an extension of up to 50 per cent of a subsoil for the purposes of carrying out a geological survey or the construction of the underground storage, or for the production of the natural resources on the extended plot. The extension of the permit, however, must not exceed 50 per cent of the reserves of the original permit, provided that any adjacent plot has not been designated for use yet;
- for the geological survey and production of the natural resources, if the applicant owns an integral property complex, which was built (or reconstructed) for the purpose of producing and processing of the natural resources located at the subsoil plot;
- for the performance of production sharing agreements;
- for the production of the natural resources and peat from the deposits, the reserves of which the State Commission on Reserves of the Mineral Resources has deemed insignificant; or
- in such other cases as determined by a decision of the CMU.
In addition, the Procedure provides that the special permits for (i) the use of the oil and gas deposits; and (ii) natural resources of strategic importance may be granted to the winners of tenders, by-passing the auction procedure. The subsoil users, who previously conducted geological surveys of the licensed areas, estimated the reserves and received the respective approvals, shall obtain permits for production also without going through the auction procedure.
Other changes also include:
- Time limits for reviewing applications (for extension of the special permits or for obtaining the special permits outside the auction procedure) by the Ministry of the Environmental Protection (the "Ministry") were extended from 35 to 55 days.
- The carrying out of a geological survey of the oil and gas deposits under a geological survey and commercial production special permit cannot continue for more 10 years.
- Special permits for the commercial production of oil and gas can be issued without the approval of the Ministry of Fuel and Energy (as it was required before).
- The Ministry may introduce amendments to the subsoil use agreement (it did not have this authority before).
The Procedure extended the grounds that allow a special permit
to be reissued. The Special Permits shall be re-issued inter
alia if:
(i) the essential terms and conditions
of the special permit are changed;
(ii) the area of the subsoil plot was reduced
(either at the subsoil user's request or at the initiative
of the supervising bodies);
(iii) new natural resources were found
at the subsoil plot, or new quality characteristics or new deposits
of the extracted natural resources were revealed.
The Procedure removes some gaps in the Ukrainian subsoil legislation and expressly confirms that:
- foreign legal entities may obtain special permits;
- special permits for the geological survey may be extended for up to 5 years after the expiration of the initial term, but no more than twice and only where the extension is necessary for the completion of the geological survey, estimation of the reserves, development of the natural resources or for conducting the abandonment works.
Law: Resolution of the Cabinet of Ministers No. 596 "On Procedure for Issuance of the Special Permits for Subsoil Use in 2010" dated 23 June 2010
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
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The original publication date for this article was 30/07/2010.
