Special permits for subsoil use. Complications again?
In connection with the adoption of the Ordinance of the Cabinet of Ministers ¹ 277 dated 6 April 2016 the procedure of granting of special permits for subsoil use and the procedure of auctions for such permits were amended. Some of the changes came into effect on 12 April 2016, and some will enter into force on 1 April 2017.
In particular, since 12 April 2016 geological exploration of minerals, including research and commercial development of minerals of national importance or mining of minerals by applicant, who is the owner or lessee (concessionaire) of the integral property complex, which is built (reconstructed) for the extraction and processing of minerals from subsoil, for the use of which special permit is granted, has been excluded from the list of grounds for getting a permission without an auction. At the same time changes have not changed the grounds for extension of the term of permits, in particular, those that were received before 12 April 2016.
Before the latest amendments this ground of getting permit was a widespread method of avoiding the procedure of auctions by subsoil users. To get the permit the subsoil user needs to pay the fee in the amount of the initial sale price of this permit on the auction; in such way the subsoil user avoids competition, which entails the price increase. The exclusion of this provision may be related to the absence in current legislation of clear definition of what may fall under the meaning of integral property complex and how far from mineral resources should it be located, which creates conditions for abuses.
Now such ground of getting permit for subsoil use without auction (extraction of minerals (geological exploration of oil and gas subsoil, including research and commercial development of minerals, followed by extraction of oil and gas (mining industry))), if applicant has realized approbation in the State Commission of Ukraine on Mineral Resources (SCR) on his own cost, with the subsequent approval of calculation of mineral reserves in SCR during 3 years, but within continental shelf and exclusive (maritime) economic zone of Ukraine – during 10 years from the moment of granting of permit, is still valid.
In practice getting of permit on this ground is as follows: potential subsoil user purchases geological information (which may be state, as well as private property, but anyway sale of this information should be approved by State Service of Geology and Mineral Resources of Ukraine) on the area, which is not used anymore and the area of which is not licensed, with the following execution of geological and economic assessment (calculation of resources) and their approbation in SCR. In that case all the risks for subsoil user don’t disappear, but at the same time permit is still shall be get in non-auction procedure. State budget receives fee for granting of permit and getting the geological information (if it’s the state property).
At the same time, it should be noted, that the procedure of getting of permit on this basis is not clearly envisaged in the legislation and therefore requires legal support to prevent considering of the permit to be obtained illegally.