1.7. Subsoil regulation in Russia
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Federal Law No. 2395-1 dated 21.02.1992 “regarding subsoil” is the fundamental Russian normative and legislative act in the sphere of subsoil use. Subsoil use in the Russian Federation is subject to fees. The law recognises the importance of subsoil regulation for people and for the economy and its significant influence on the environment.
Utilising the Continental shelf’s mineral resources
Granting utilisation of the Continental shelf’s mineral resources and those of the Russian Federation’s exclusive maritime economic zone are elaborated in Federal Law No. 187 dated 30.11.1995 “regarding the Continental shelf of the Russian Federation”.
The specific character of the Continental shelf’s legal regime provides a foundation for consolidating provisions in a special law that grants preference to native users who utilise the resources of Russian industry as much as possible and restricts participation of foreign users in competitions to explore, survey and exploit mineral resources in the interests of guaranteeing security and development of industry and power engineering in the Russian Federation.
In 2007 the Russian government is working with amendments to the Russian tax law regarding tax regulations in the Mineral extraction tax. It is suggested to give tax exempt to offshore fields in the Russian Arctic. 68
Within the confines of the Continental shelf and the exclusive economic zone of the Russian Federation beyond the external boundary of its territorial waters (the twelve mile zone), licensing is carried out by the Ministry of Natural Resources following a decision taken by the Russian Government. This is according to existing international offshore law standards.
Licence to use subsoil
Legal permission to use subsoil is granted by special State authorisation in the form of a license. Legalisation, State registration and the issuing of licenses relating to the use of certain subsoil areas is managed by the Federal Agency for Subsoil Regualtion or its regional institution. The license portrays a coat of arms of the Russian Federation, and contains supplements in the form of text and graphics which delineate the basic conditions for using the subsoil.
The license gives its owner the right to use subsoil areas within specified boundaries for the purpose stated in the license during a specified period, provided the owner observes conditions agreed upon beforehand.
The license certifies the right to carry out work on all forms of subsoil regulation, including:
• the geological study of the subsoil;
• the development of mineral resource deposits;
• the utilisation of waste materials from mining production and the associated reprocessing activities;
• the utilisation of the subsoil for purposes not connected with the extraction of mineral resources;
• the formation of geological sites which are afforded special protection;
• the harvesting of mineralogical, palaeontological and other geological sample materials.
Comments by a legal expert:
The formation of geological sites which are afforded special protection: this form of subsoil management is realised taking into account the provisions of Federal Law No. 33 dated 14.03.1995 “regarding areas of nature which are afforded special protection”. As applied to the Continental shelf of the Russian Federation, the license granting the right to use the subsoil in such territories directly prohibits the inclusion of sanctuaries, game reserves, prohibited areas and other territories on the Continental shelf afforded special protection, which are important as regards the preservation, reproduction and migration of important animal and plant species.
Combined licenses may also be granted which permit utilising the subsoil in several ways. The license is issued once preliminary agreement is reached on the part of the body responsible for managing land resources, or the landowners, to allocate the corresponding plot of land for the purpose of subsoil regulation.
The license for subsoil regulation consolidates the conditions and form of contractual relations pertaining to subsoil regulation.
Timeframes for utilising sections of the subsoil
The State lays down fixed timeframes for subsoil regulation depending on the type of use. In Russia, sections of the subsoil are granted for use either for a fixed period, or indefinitely. The following types of fixed-term licences are issued:
• geological study - for a period of up to 5 years;
• extraction of mineral resources, estimated starting from the technical and economic basis for developing mineral resource deposits which guarantees efficient use and protection of the subsoil • extraction of subterranean waters - for a period of up to 25 years;
• extraction of mineral resources on a short-term basis by granting a short-term entitlement to utilise sections of subsoil to a temporary operator. This, in the event of the license owner’s right to use these aforementioned sections stopping ahead of schedule, and the inexpediency or impossibility of suspending the extraction of mineral resources - for a period of up to 1 year.
Licenses may be issued for an unlimited period for the following activities:
• construction and exploitation of underground structures not connected with the extraction of mineral resources;
• construction and exploitation of underground structures connected with the burial of waste products;
• construction and exploitation of oil and gas holders;
• formation of geological sites which are afforded special protection;
• other objectives.
For your information:
The ministry of Natural Resources suggests strengthening the possibility to obtain combined licenses for geological studies, exploration and drilling on the shelf. The ministry also proposes to extend the timeframe for geological studies from 5 to 8 years, with the possibility of further prolonging.69
The timeframe for utilising a section of the subsoil may be extended on the initiative of the subsoil user once conditions stipulated in the license are fulfilled, provided there is a need to complete development of the mineral resource deposits or carry out liquidation measures. The timeframes for utilising sections of the subsoil are calculated from the time the license is registered with the State.
Bids and auctions for the right to utilise sections of the subsoil
Until recently on the Arctic shelf, there was a system of bids and auctions for obtaining licenses on the subsoil. The Federal organ for State Governance of the Subsoil (ROSNEDRA) is responsible for regulating this process in Russia. The Russian Government decides utilisation of each section of subsoil, or grouping of subsoil sections in internal sea waters, territorial waters and the Continental shelf of the Russian Federation. The bid and auction committees also include representatives of the executive body of the corresponding site within the Russian Federation, except for cases concerning the granting of rights to utilise subsoil sections in internal or territorial waters and on the Continental shelf.
In January 2007 it was officially announced by president Vladimir Putin that the in the Russian Arctic all licenses will be given to the state companies Gazprom and Rosneft. It was also decided that contracts would be subject to competition and not through auctions. How this will be in practice will become clear when the amendments to the Russian laws “Law on the Continental Shelf” and “Law on the use of the subsoil” 70
Procedures for conducting competitions71
Here’s a thought
Now the work of how to divide the shelf between the companies (Rosneft and Gazprom), and to decide which changes in the law this decision pushes forward. It is important to reflect this in the law. – Rinat Gizatulin, Representative of the Ministry of Natural Resources.72
Information regarding impending competitions must be published in All-Russian and corresponding regional mass media no later than 90 days prior to the date when they are to be carried out. The official basic criteria for determine the successful bidder when holding competitions for the right to use sections of subsoil are as follows:
• the scientific and technical level of geological study and subsoil section utilisation programmes;
• the complete nature of mineral resource extraction;
• the contribution made to the territory’s social and economic development;
• the timeframes for implementing the corresponding programmes;
• the efficiency of measures for protecting the subsoil and the surrounding environment;
• the consideration for national security interests in the Russian Federation.
The results of the competition, or auction, shall be corroborated within 30 days of when they are held and must be published in All-Russian and regional mass media. If the competition advertised does not take place in connection with receipt of the application from just one participant, the license to use the section of subsoil may be issued to this participant under the conditions of the competition advertised.
| LIST OF EXISTING LICENSES | ||||
| Licensed area | License owner | License | Date of registration (re-registration) | Period of validity |
| Shtokman | The Sevmorneftegaz | SHBTS 11322 NE | 28.11.2002 | 15.03.2018 |
| Prirazlomnoe | The Sevmorneftegaz | SHPCH 11323 NE | 28.11.2002 | 15.03.2018 |
| Kolokolmor | The Arcticshelfneftegaz | SHBM 11358 NR | 26.12.2002 | 24.09.2025 |
| Pomor | The Arcticshelfneftegaz | SHBM 11357 NR | 26.12.2002 | 24.09.2025 |
| Medynsko-Varandey | The Arcticshelfneftegaz | SHBM 11356 NR | 26.12.2002 | 24.09.2025 |
| Kola - 3 | The Severneftegaz | SHBM 11649 NP | 08.08.2003 | 28.02.2008 |
| Kola - 2 | The Severneftegaz | SHBM 11648 NP | 08.08.2003 | 28.02.2008 |
| Kola - 1 | The Severneftegaz | SHBM 11647 NP | 08.08.2003 | 28.02.2008 |
| Tsentral’no-Kola | The Sintezneftegaz | SHBM 12527 NP | 05.07.2004 | 16.06.2009 |
| Sryedne-Kola | The Sintezneftegaz | SHBM 12528 NP | 05.07.2004 | 16.06.2009 |
| Zapadno-Kola | The Sintezneftegaz | SHBM 12529 NP | 05.07.2004 | 16.06.2009 |
| Pakhtusov | The Sintezneftegaz | SHBM 12644 NP | 01.09.2004 | 30.08.2009 |
| Admiraltey | The Sintezneftegaz | SHBM 12645 NP | 01.09.2004 | 30.08.2009 |
| Chugoryakhin | The gazprom public company | SHKM 11230 NP | 30.05.2002 | 01.10.2006 |
| Obsk | The gazprom public company | SHKM 11229 NP | 30.05.2002 | 01.10.2006 |
| Kamennom | The gazprom public company | SHKM 10902 NP | 06.07.2000 | 31.12.2008 |
| Dolgin | The gazprom public company | SHPM 13443 NE | 30.12.2005 | 31.12.2025 |
| North Barents Basin, eastern edge GK No. 05/03/70-152 | The MAGE [Marine Arctic Geological Expedition] public company | SHBM 13407 NP | 13.12.2005 | 31.12.2007 |
| South Barents Basin, Kola-Kaninsk GK No. 03/07/332-3 | The MAGE [Marine Arctic Geological Expedition] public company | SHBM 13408 NP | 13.12.2005 | 31.12.2006 |
| Admiraltey swell section GK No. 01/03/331-2 | The MAGE [Marine Arctic Geological Expedition] | SHBM 13409 NP | 13.12.2005 | 31.03.2006 |
| Sections of the Kara and Barents Seas (R-41) GK No. 03/03/12-17 | The“MAGE [Marine Arctic Geological Expedition | SHKM 13410 NP | 13.12.2005 | 31.12.2008 |
| Western part of the Pechora Sea GK No 07/01/70-69 | The Yuzhmorgeologiya State scientific centre | SHPM 13353 NP | 15.11.2005 | 31.12.2007 |
Footnotes:
[68] The Shelf is being divided between state companies/ Gazprom and Rosneft is granted tax exempts. http://www.kommersant.ru/doc.html?path=/daily/2007/095m/14939923.htm (2006 year) Back
[69] Barentsobserver.com/February 15th 2007 Back
[70] The shelf is divided between the state companies. // Gazprom and Rosneft gets tax exempts. http://www.kommersant.ru/doc.html?path=/daily/2007/095m/14939923.htm (2006 year) Back
[71] «Subsoii regulation : theoretical – juridical analyze з», V.N. Kokin. Moskva, 2005 Back
[72] kommersant.ru/doc.html?path=/daily/2007/095m/14939 (2006 year) Back
