Draft amendments to the subsoil legislation revising the criteria of attribution of subsoil areas to areas of federal significance
A draft Federal law “On Amendments to Article 2.1 of the Law of the Russian Federation “On Subsoil” prepared by the Ministry of Natural Resources and Ecology of the Russian Federation (hereinafter - “the Amendments”), proposes revisions to the criteria of attribution of subsoil areas to areas of federal significance and lifts restrictions from certain categories of plots.
1. Under the current Law “On Subsoil” (part 3, art. 2.1), the following areas, inter alia, are considered of federal significance:
- those containing deposits and occurrences of diamonds and platinum-group metals; and
- those located in the territory of one or several constituent entities of the Russian Federation and containing vein gold reserves of 50 tonnes and up.
In order to encourage subsoil users to carry out geological surveys of subsoil areas containing gold, diamonds and platinum-group metals, the Amendments propose:
- to increase the threshold value for vein gold reserves to 250 tonnes, and
- to determine as subsoil areas of federal significance those areas which contain reserves of platinum-group metals and vein diamond reserves, and to exclude from such areas those containing exclusively occurrences of such minerals.
2. In addition, the draft Amendments propose to lift restrictions imposed by a number of provisions of the Law “On Subsoil” on subsoil areas of federal significance containing gold, diamonds and platinum-group metals. These provisions are as follows:
- a possible refusal to grant the right of using the subsoil area for exploration and extraction of minerals, or, in the event of geological survey under a combined licence, a possible termination of the right of using the subsoil in the given subsoil area of federal significance;
- an obligation of a subsoil user which is going to carry out exploration and extraction of minerals in a subsoil area of federal significance to obtain a permit from the Government of the Russian Federation for such exploration and extraction of minerals in that area;
- an obligation of a subsoil user to finalise completely the geological survey of the subsoil area of federal significance prior to obtaining the Government permit referred to above; and
- a prohibition against assignment of the right to use a subsoil area of federal significance to a Russian legal entity with a foreign investor participant or a group of persons which includes a foreign investor, in certain instances.
Pursuant to the Amendments, the above provisions would not apply: (А) to such mineral deposits discovered after the effective date of the Amendments, and (B) to subsoil areas which have been granted for use for the purpose of geological survey, exploration and extraction of minerals under a combined licence, and on which the subsoil user had completed the geological survey of the subsoil and proceeded to the exploration and extraction of minerals before the effective date of the Amendments.
At present the Amendments are under negotiation in the federal executive authorities.
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Amendments into the subsoil legislation - possibility for the mineral licence holders to modify the boundaries of licence areas
The adoption of the Decree of the Government of the Russian Federation No. 429 dated May 3, 2012 “On Approval of the Regulations regarding Establishment and Modification of the Boundaries of Subsoil Plots Granted for Use” (hereinafter the “Regulations”) finally has clarified the issue in which cases and how one can modify the boundaries of the subsoil plots.
According to the Regulations, which came into force in May 2012, it is possible to reduce or increase the boundaries of subsoil plots granted for geological exploration and (or) detailed prospecting and production of minerals in any spatial direction, both in terms of area as well as in terms of depth.
Note that it is only possible to increase the licence area once throughout the term of the mineral licence (irrespective of the number of cases of transfer of the right for subsoil use and its reissue).
Special features of expanding the licence area
It is possible to expand the subsoil plot at the expense of the adjacent territory, if it has been neither granted for use to the other user nor offered for public sale.
The amount of add-on reserves may not exceed 20 per cent of the minerals of the initial deposit earlier explored and entered into the state balance.
The above limitations do not cover addition of the underlying subsoil plot granted to the same user.
The extension is only possible in relation to the same mineral as provided for in the existing licence for subsoil use.
Special features of reducing the licence area
According to the Regulations it is possible to reduce the subsoil plot only after completion of the geological exploration and/or detailed prospecting of minerals and submission of the geological report to the geological information fund. At the same time it is not permitted to reduce the boundaries of the subsoil plot if the part to be reduced contains mineral reserves, which are described in the licence and in respect of which state evaluation has been performed.
In order to modify the boundaries of the subsoil plot the subsoil user must file an application to the body in charge of establishment of the boundaries of this subsoil plot. The Regulation also lists the documents necessary for modification of the boundaries and regulates the procedure for their review.
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Changes to regulation of liability for breach of subsoil use legislation
On 14 June 2012 the Federal Law No. 74-FZ “On Amendments to the Law of the Russian Federation “On subsoil“ was adopted (“Amendments”), which will come into force on 1 January 2013.
Instead of a specific list of violations of the subsoil use legislation, the Amendments introduce a broader concept whereby any breach of the subsoil use legislation could lead to administrative and/or criminal liability.
In addition to the above liability, the offending person must also rectify the breach and compensate for any damage caused.
The Amendments envisage that the Government will establish a legal procedure for calculation of the amount of damages caused to subsoil. It is proposed that the Federal Service of Supervision in the Sphere of Natural Resources Management of the Russian Federation (Rosprirodnadzor) will be the responsible state authority for recovering such damages.
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