Features of Local Mineral Law

Legislation in force in Ukraine, particularly Acticle 23 of The Code of Laws on the Subsoil of Ukraine stipulates that extraction of minerals of local significance and peat with a total depth of exploitation of up to two meters within a land parcel is permitted, as is underground water (except mineral water) for all needs, except for the production of packaged drinking water, provided that the production of groundwater for each of the water abstractions does not exceed 300 cubic meters a day.

However, for agricultural enterprises where the share of agricultural commodity production exceeds 75% in the previous year, the limits on groundwater extraction are not applied provided that such water is used for own use.

The list of local minerals defined by Decree No. 827 of the CMU of 12 December 1994 includes limestone, gypsum, gaju, sapropel, chalk, sand, loam, soup. We also recall that although water and peat are not minerals of local importance — as noted above — their treatment is similar.

At the same time, restrictions on extraction without permission make any “unauthorized” extraction commercially unattractive, even if it is extraction for own use — primarily due to the impossibility of an effective increase in production.

Therefore, the issuing of mining permits is necessary.

Formally, mining requires:

1) special permission to use the subsoil for industrial exploitation of the deposit.

2) an oil and gas mining lease.

3) approved project documents for construction of a quarry.

In practice, however, the issuing of such documents is accompanied by the need for complicated procedures and the receipt of a number of other documents, the presentation of which is provided for by law or is subject to the provisions of other special legislation, particularly environmental.

Procedure for Obtaining Special Permission to Use Subsoil

The procedure for obtaining a special permit for the use of subsoil resources was approved by the Decision of the CMU of 30 May 2011.

Permission to exploit local mineral resources is granted by the State Geo subsoil without the holding of an auction. To obtain permission, the following documents are submitted to the State Geo subsoil through the subsoil user’s electronic office:

•  declaration of prescribed form;
•  explanatory note describing the object, the state of its geological study, the method of exploitation, the justification for the use of subsoil, indicating the capacity of the enterprise;
•  results of chemical and bacteriological analysis of water with a period of not more than six months (for groundwater deposits);
•  copies of protocols certified by the applicant, State Commission for Mineral Resources of Ukraine (Ukrainian Territorial Commission for Mineral Resources, Central Commission for Mineral Reserves, Scientific and Technical Councils) on approval (appraisals) of stocks;
•  catalogue of geographical coordinates of the angular points of the subsoil (less than 1 second of error) indicating its area, and for groundwater extraction, a catalogue of geographical coordinates of water intake structures;
•  view map (at least 1: 200,000)
•  a situation plan with the delineated boundaries of the mining area and the geographical coordinates of its angular points (error less than 1 second) on a scale that verifies the accuracy of the coordinates and for groundwater; A situational plan with waterworks and their geographical coordinates;
•  a plan for the calculation of mineral resources on a topographical basis with delineated boundaries of the category of reserves, boundaries of land and mining (if any), contours of the license area with geographical coordinates of the angular points of the subsoil, and for groundwater with water intake structures and their geographical coordinates (error less than 1 second) and with geological cut lines;
•  a hydrogeological map (for groundwater deposits);
•  characteristic geological sections with boundaries of categories of reserves and symbols;
•  copy of the environmental impact assessment report certified by the applicant in accordance with the Law of Ukraine On Environmental Impact Assessment;
•  for enterprises that start mining — a program of work on commissioning the deposit, specifying the individual stages and dates of their implementation, the sources of financing until the enterprise reaches project capacity.

The decision to issue a permit is made within 30 days from the date of submission of the documents, and includes obtaining approval from the local council on whose territory the deposit will be located.

Among the above-mentioned list, we should first highlight the protocols of the State Commission on Mineral Resources of Ukraine (Ukrainian Territorial Commission for Mineral Reserves, Central Commission for Mineral Reserves, Scientific and Technical Councils/Technical Councils) on the approval (validation) of reserves.

A permit for industrial exploitation of mineral resources is issued only if the deposit in question has been explored and an expertise and assessment of the reserves has been carried out. The only exception to this rule is the extraction of oil and gas, for which both geological exploration and commercial exploitation can be immediately authorized.

For other minerals, these are two distinct stages that will actually need to be completed twice. The situation is complicated by the fact that, unlike minerals of state importance for which geological exploration of the deposit could have been carried out earlier (for example, in Soviet times), there are almost no approved reserves for minerals.

In this way, a new additional step is added for the potential subsoil user:

1) to obtain a special permit for the geological study of the deposit;

2) to explore and assess mineral resources;

3) to approve the results and quantity of reserves with the State Commission of Ukraine for Mineral Reserves.

The procedure for obtaining special authorization for carrying out a geological study is generally similar to that for an exploitation permit. However, taking into account the time required for exploration and assessment of reserves, this procedure adds between one and a few years to the total period needed for obtaining an industrial exploitation permit.

Another critical and significant element in the time spent was the need to obtain an opinion on the environmental impact assessment in accordance with the Law of Ukraine On Environmental Impact Assessment.

The Act stipulates that in the conduct of an environmental impact assessment procedure, a public discussion lasting from 25 to 35 days is mandatory. In practice, this phase may take up to six months or longer.

Industrial extraction of locally important minerals usually requires the construction of a quarry, which itself has a significant impact on the environment and is not well received by the inhabitants of the surrounding cities or towns. The situation is complicated by the fact that often a variety of ‘ecological’ public organizations incite residents to create a conflict situation, then propose a way to the future subsoil user to ‘solve’ the situation.

In some cases, therefore, the question of whether to go through an environmental impact assessment procedure may be one of the most difficult to solve, and the costs incurred by the subsoil user make the mining of local minerals commercially unattractive.

After obtaining a special permit, the subsoil user and the State Geo subsoil sign a subsoil use agreement, which is an annex to the permit and lays down the obligations and restrictions for the subsoil user.

Then you can get an oil and gas mining lease.

The procedure for obtaining it is regulated by the Decree of the Ministry of the Environment and Natural Resources of 27 January 1995.

To obtain an oil and gas mining lease, an application is submitted to the territorial body of State Labor, to which is attached a draft mining recusal form. The decision to issue the document is taken within 21 days.

Once the mine is cleared and the approved project documents are in place, the quarry and mining can finally begin.

In most cases, however, the construction of a quarry is preceded by a land issue.

Land Registration

In the vast majority of cases, the subsoil user is beginning to think about the extraction of local minerals that already own or use land. But what is the purpose of this land?

Mining and the construction of a quarry on the land must have an appropriate purpose. In practice, such a target assignment is only granted under a special permission to use the subsoil and to obtain a patch for the purpose of «industrial exploitation of the deposit», and without a permit this is virtually impossible.

Therefore, in most cases, the land has an agricultural purpose. And before a quarry is built, that purpose must be changed.

Alternatively, if there is no subsoil user for the land, it must be allocated in the prescribed manner. On the positive side, the existence of a special permit for the use of subsoil entitles the holder to the right to land without an auction.

Both of these procedures could become another significant bureaucratic impediment to mining. For example, refusal by the authorities to grant permission for the development of a land allocation project is very common, but it is necessary for both the change of purpose and its withdrawal. Although a person has a right under a special permit, a refusal is granted on the basis of formal or spurious grounds, which leads to a decision on the land being adopted in court.

But the draft objection that has been developed needs to be approved. That is, the decision needs to be approved by the same body that has already refused to approve at the authorization stage.

Another problem that subsoil users sometimes face is that they have not taken care of the land before obtaining a special permit to use the subsoil. In the process of issuing a special permit, particularly during public discussion, information about the construction of the quarry becomes public. This enables third parties to obtain ownership or use of the land where the quarry is to be found. And once the permission is obtained, the subsoil user can discover that the land needed by him already has an owner or user with whom to negotiate.

In this way, the exploitation of local deposits requires an equally cautious and sensitive approach, as does the exploitation of minerals at national level. In fact, the authorization procedure is no less complicated and certain intermediate stages may become a significant obstacle to getting authorization.