Comment to article 139. Expertise of project documents in the field of subsurface use of hydrocarbons to the Code of the Republic of Kazakhstan “On Subsurface and Subsurface Use”
1. Project documents in the field of subsurface use of hydrocarbons are subject to state environmental expertise conducted in accordance with the environmental legislation of the Republic of Kazakhstan.
2. The exploration project (amendments and additions to it), which does not provide for drilling and (or) testing of wells, is sent to the competent authority in a notification manner.
3. An exploration project (amendments and additions to it) involving drilling and (or) testing of wells, a trial operation project (amendments and additions to it) and a field development project (amendments and additions to it) are subject to state expertise of project documents subject to appropriate environmental permits.
4. A trial operation project is subject to a state expert examination of project documents only after the subsurface user receives a positive conclusion from the state expert examination of the subsurface in relation to the report on the operational calculation of geological reserves.
A field development project is subject to a state expert examination of project documents only after the subsurface user receives a positive conclusion from the state expert examination of the subsurface in relation to the report on the calculation of geological reserves.
5. If the technical design documents provide for the construction of objects of architectural, urban planning and construction activities, such projects are subject to expertise in accordance with the legislation of the Republic of Kazakhstan on architectural, urban planning and construction activities.
6. If, during the examinations provided for in paragraphs 1 and 5 of this Article, disagreements have arisen that the subsurface user cannot resolve without deviating from compliance with good practices in the use of subsurface resources, at the request of such a subsurface user, the competent authority shall, within ten working days from the date of receipt of the application, organize negotiations with the participation of representatives of interested state bodies, the subsurface user and the design institute to develop an appropriate solution.
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(Mukhamedov R.N.)
1. With regard to project documents, the 2010 Law on Subsoil provided for the mandatory conduct of the following examinations:
– for exploration projects and appraisal projects that do not include a pilot production project or a trial operation project - state environmental expertise;
– for evaluation projects, including a pilot production project or a trial operation project - state environmental, industrial safety and sanitary-epidemiological;
– according to the project documents for mining operations - state environmental, industrial safety, sanitary and epidemiological, and in the field of rational and integrated use of mineral resources.
Within the framework of the Subsoil Code, the list of necessary examinations was reduced, as a result of which the maximum number of examinations was reduced to two - the state environmental assessment and the state examination of basic design documents. At the same time, the latter is carried out only with respect to exploration projects involving drilling and (or) testing of wells, trial operation projects and a field development project, as well as with respect to changes and additions to such projects.
2. It should be noted that the state environmental expertise of the project documents would have been carried out without specifying it in the Code on Subsoil Resources – in accordance with art. 87 of the EC RK. In turn, this approach does not apply to industrial safety expertise, since according to clause 7, clause 1, Article 73 of the Law on Civil Protection, project documents are subject to such expertise, in respect of which such a requirement is explicitly provided for by the Subsoil Code (there is no such requirement for project documents on hydrocarbons).
3. The 2010 Law on Subsurface Resources did not provide for provisions on the need to conduct an expert examination of projects in the field of construction of facilities in relation to certain project documents, which raised a number of questions. For example, the field development project contains an indication of the need to build an oil pretreatment center, however, detailed regulations for this project are provided in the relevant technical design document. At the same time, from Chapter 9-1 of the Law of the Republic of Kazakhstan "On Architectural, Urban Planning and Construction activities in the Republic of Kazakhstan" No. 242-II dated July 16, 2001. It was difficult to make an unambiguous conclusion whether both the field development project and the technical project, or only the latter, should be subject to expertise. In this regard, in paragraph 5 of the commented article, it was clarified that only the relevant technical design document should be subject to such an expert examination.
4. As for the sanitary and epidemiological expertise, according to paragraph 3 of Article 62 of the Code of the Republic of Kazakhstan "On Public Health and the Healthcare System", it is carried out in relation to projects (feasibility studies and design estimates) intended for the construction of epidemiologically significant facilities (conducted as part of a comprehensive non-departmental expertise). At the same time, according to the List of Products and Epidemiologically Significant Facilities subject to state sanitary and epidemiological control and Supervision, epidemiologically significant facilities include, among other things, activities involving the extraction of natural gas and oil (paragraph 29, paragraph 1).
Thus, it is difficult to draw an unambiguous conclusion from the legislation on the health of the people and the healthcare system whether all project documents in the field of subsurface use for hydrocarbons are subject to sanitary and epidemiological expertise, or only technical design documents providing for the construction of facilities directly. In this regard, by analogy with paragraph 5 of the commented article, it would be advisable to make an appropriate clarification regarding sanitary and epidemiological expertise.
5. Paragraph 2 of the commented article establishes that the PRR (amendments and additions to it), which does not provide for drilling and (or) testing of wells, is sent to the competent authority in a notification manner, that is, in this case, retaliatory actions (for example, conducting an expert examination) are not required from the competent authority.
At the same time, since, according to paragraph 1 of the commented article, such an environmental assessment is also subject to a state environmental assessment, it must be carried out before it is sent to the competent authority, despite the absence of a direct indication of this.
In addition, if the PRR was not notified to the competent authority, but work was started in accordance with it, then this may be regarded as an administrative offense under Part 4 of Article 356 of the Administrative Code.
6. With regard to the PRR, which provides for drilling and (or) testing of wells, PPE and PRM, paragraph 3, on the contrary, explicitly establishes that they are subject to state expertise of project documents only if there is an appropriate environmental permit.
With regard to this point, there is a question of how justified it is to conduct an environmental assessment before the examination of the basic design documents confirms the validity of the types, methods and technologies of work chosen by the subsurface user.
In general, the wording of paragraph 3 of the commented norm was changed in 2021 in connection with the adoption of the new EC of the Republic of Kazakhstan, and corresponds to the approach set out in paragraph 3 of Article 52 of the Subsoil Code (see comment). The amended version of paragraph 3 of the commented norm creates difficulties for enterprises in meeting its requirements in practice.
7. Regarding the state examination of project documents, it should also be noted that it is carried out only in relation to basic project documents and development analyses (for more details, see in the commentary to Article 140 of the Subsoil Code). At the same time, a necessary condition for conducting such an expert examination in relation to the trial operation project and the field development project, paragraph 4 of the commented article determines the existence of a positive conclusion of the state expertise of the subsurface in relation, respectively, to the report on the operational calculation of reserves or the report on the calculation of reserves (for more information on this examination, see in the commentary to Article 141 of the Subsoil Code).
8. Given the complexity of subsurface use operations and the inevitability of their impact on the environment, in practice there may be cases when, for example, the same technological solution may be optimal with
from the point of view of environmental legislation, however, it is not effective enough from the point of view of rational use of mineral resources. As a result, since all the examinations mentioned in the commented article are conducted by the relevant separate state bodies (organizations), it may be unattainable for the subsurface user to find a solution that will suit all parties.
In this regard, the legislator, in paragraph 6 of the commented article, provides for a conciliation mechanism that allows, with the participation of all parties, to work out the optimal solution to such issues. At the same time, a prerequisite for its application is that the subsurface user cannot eliminate the disagreements that have arisen without deviating from the observance of good practices in the use of subsurface resources.
It should also be noted that a similar mechanism was also included in the 2010 Law on Subsoil, but its effect extended to the economic and legal expertise of the subsoil use contract (paragraph 3 of Article 62 of the 2010 Law on Subsoil), which, with the entry into force of the Subsoil Code, were abolished (except in cases of amendments to contracts concluded before the entry into force of the Subsoil Code).
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Kazakh Association of Organizations of the Oil and Gas and Energy Complex KAZENERGY
Nur Sultan 2022
The Kazenergy Association expresses its sincere gratitude for the support in preparing the commentary to the following companies: North Caspian Operating Company NV, NC KazMunayGas JSC, Mangistaumunaygas JSC, Karachaganak Petroleum Operating BV, White & Case Kazakhstan LLP, Haller Lomax LLP)", "Erlicon CG" LLP, "Signum Law Firm" LLP. © Kazenergy Association, 2022 © team of authors, 2022 © authors, 2022
Dear readers!
We offer you a scientific and practical commentary prepared by a group of Russian specialists with extensive practical experience in legislation on subsoil and subsoil use and who participated in the preparation of the Code on Subsoil and Subsoil Use.
Subsurface use is a very complex and specific area of public relations, the regulation of which has its own historical background and takes into account the technological specifics of the process of subsurface development, as well as environmental, commercial, legal and other features of exploration and development of deposits.
Kazakhstan's legislation on subsoil and subsurface use has passed through several stages in its development, and has always been based on a balance of interests between the state and subsurface users, transparency, striving for the maximum possible degree of protection of the rights and legitimate interests of investors, ensuring sustainable social, economic and environmental development of the country.
The Code "On Subsoil and Subsoil Use", adopted at the end of 2017, was developed taking into account many years of accumulated experience and law enforcement practice, as well as the results of extensive discussions with experts working in the industry.
It reflects specific, important measures on the part of the state to increase the investment attractiveness of exploration and further reduce administrative barriers.
Nevertheless, practice and legislation do not stand still, constantly evolving, taking into account new challenges facing both the subsurface use industry and the economy as a whole.
In this regard, this commentary is intended to serve as an aid for a wide range of interested persons – specialists working in the industry, in
understanding the meaning of the norms, their historical context, the interrelationship and mutual influence of the various provisions of the Code.
We also hope that studying the commentary will serve as an incentive for new generations of young domestic specialists to work scientifically and practically in this important industry, for the benefit of the development of our country, current and future generations of Kazakhstanis.
Sincerely, U. Karabalin, Deputy Chairman of the Kazenergy Association, Hero of Labor of Kazakhstan
