The Government has implemented amendments to the legislation governing subsoil use

Today, on July 26, the Government of Ukraine approved a draft resolution titled “On Amendments to Certain Resolutions of the Cabinet of Ministers of Ukraine on Subsoil Use”.

The team at the Geological Investment Group has meticulously analyzed these changes and is prepared to share with you the key innovations that have been implemented.

Specifically, these amendments pertain to the following significant regulatory acts:

• The procedure for granting special permits for subsoil use (Resolution of the Cabinet of Ministers of Ukraine dated 30.05.2011 №615).

To enhance transparency in the subsoil use sector in Ukraine, requirements have been introduced for providing information about the ultimate beneficial owner.

The recent amendments eliminate the possibility of granting permits for geological exploration and extraction of minerals of local significance without conducting an auction.

The scope is also expanded where documents sent to the State Geological and Subsoil Survey can be signed with a qualified electronic signature.

According to the new changes, Ukraine has established maximum timeframes for executing work programs for different groups of minerals. The rights of subsoil users to extend these maximum timeframes for work completion will be limited. It is important to note that following these changes, it will be impossible to make amendments to the work program, except for those specified in the resolution. This will restrict the subsoil user’s right to change or extend the maximum execution timeframes of the work program.

The amendments also address certain issues regarding the extension of special permits’ validity during the period of martial law.

• The procedure for conducting auctions for the sale of special permits for subsoil use (Resolution of the Cabinet of Ministers of Ukraine dated 23.09.2020 №993).

According to the amendments, a separate procedure is established for auctioning off subsoil areas that are of strategic importance for the sustainable development of the economy and the defense capability of the state. This was approved by the decision of the National Security and Defense Council of Ukraine on July 16, 2021, and implemented by the Decree of the President of Ukraine on July 23, 2021, №306/2021.

Alongside this, several deadlines related to the announcement of the first and subsequent auctions are being shortened.

The amount of the guarantee deposit is set at 20 percent of the initial lot price, but not less than 5,000,000 (five million) hryvnias for minerals of strategic importance for the sustainable development of the economy and the state’s defense capability, 10,000,000 (ten million) hryvnias for hydrocarbons, and 500,000 (five hundred thousand) hryvnias for other minerals (except for the lot selling a special permit for geological exploration, including pilot-industrial development, extraction of underground waters, including mineral waters, for all needs). The participant with the next highest bid after the highest cannot refuse to wait until the complete end of the auction

The majority of documents will be able to be signed with a qualified electronic signature.

• Methods for determining the initial sale price at auction of the special permit for the right to use subsoil (Resolution of the Cabinet of Ministers of Ukraine dated 15.10.2004 №1374).

According to the changes, the initial price of a subsoil plot, where mineral reserves have not been approved in the established order or are not accounted for in the state mineral balance, will depend on its area and the category of minerals.

The Government has also partially revised the procedure for determining the initial price of subsoil plots where mineral resources are approved in the established order or accounted for in the state mineral balance.

In cases where a permit is granted for the first time for deposits or subsoil areas where reserves (resources) of minerals are approved (tested) in the established order or accounted for in the state mineral balance, the initial price for a permit for geological exploration, including pilot-industrial development of deposits of minerals of national importance, will be 100 percent of the initial price of the permit for mineral extraction.

A separate approach has been introduced for calculating the initial cost regarding hydrocarbon production. This involves setting the unit price of the commodity product equal to the actual sale price of natural gas, oil, and condensate, published on the official website of the Ministry of Economy, instead of the average customs value of imported natural gas and the actual sale price for oil and condensate indicated on the official website of the Ministry of Economy (as is currently the case).

During the period of martial law, the State Service of Geology and Mineral Resources of Ukraine is allowed to apply the unit price of the commodity product that was published on the official website of the SSGSU in the quarter preceding the introduction of martial law. However, the official resource of the SSGSU still indicates the prices of commodity units as of the 3rd quarter of 2022.

• Methods for determining the value of geological information obtained at the expense of the state budget (Resolution of the Cabinet of Ministers of Ukraine dated 10.12.2008 №1075).

According to the amendments, there is now a fixed fee for secondary geological information set at 6% of the price of the special permit for subsoil use determined at auction (electronic trading), or the fee amount when granting a special permit for subsoil use without conducting electronic trading. Additionally, certain issues regarding access to primary (unprocessed) geological information have been regulated.