COMMENTARY TO ARTICLE 17. THE CONCEPT AND CONTENT OF THE RIGHT OF SUBSURFACE USE TO THE CODE OF THE REPUBLIC OF KAZAKHSTAN "ON SUBSURFACE AND SUBSURFACE USE"
1. The right of subsurface use is an opportunity provided by this Code to use subsurface resources within the allocated area on a paid basis for entrepreneurial purposes for a certain period of time.
2. The right to use mineral resources is a proprietary indivisible right. Subject to the provisions of this Code, the rules on ownership are applied to the right of subsurface use, since this does not contradict the nature of property law.
3. The use of subsurface resources is carried out in accordance with the procedure, conditions and within the limits established by this Code.
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(Yelyubaev J.S.)
1. The commented norm is a novelty of the legislation on subsoil and subsurface use, since previous legal acts of the USSR, the Kazakh SSR and the Republic of Kazakhstan did not contain a norm giving a legislative interpretation to the concept and content of the right of subsurface use, although previous regulatory legal acts interpreted the term "right of subsurface use" without the details contained in the commented norm. These issues have been studied only in the scientific works of scientists and representatives of natural resource law. Therefore, the inclusion of this norm in the Subsoil Code is the realization of scientific views on the concept and content of the right of subsoil use. This issue continues to be the subject of scientific research at the present time.
2. The right of subsurface use is a special regulation procedure, the essence of which is expressed in the nature and scope of the rights and obligations of subsurface users, the specifics of the subjects of the right of ownership and use of subsurface resources, public administration and responsibility for offenses committed during the implementation of subsurface use operations.
3. The current legislation on subsurface resources interprets the right of subsurface use as an opportunity provided by legislation to use subsurface resources on a paid basis within a designated subsurface area for business purposes and for a certain period of time.
Meanwhile, this legislative provision has drawbacks, in particular, the commented norm does not indicate the sign of "possession" in the right of subsurface use, since without this mandatory element in the right of subsurface use, according to the rules of civil legislation, there cannot be an element of "use". This provision also stipulates that an "entrepreneurial goal" is a prerequisite for the implementation of the right of subsurface use. However, it should be noted that such a type of subsurface use operation as "geological exploration of the subsoil" does not pursue "entrepreneurial
the goal." This type of subsurface use operation is only costly and does not bring material benefits. It should also be borne in mind that, according to current legislation, "entrepreneurial activity" involves "obtaining net income" from the use of property, including in the case of subsurface use.
4. Paragraph 1 of the commented norm provides that the implementation of the right of subsurface use is carried out "within a certain period of time." This means that any subsurface use regime presupposes the establishment of a specific period for conducting subsurface use operations, for example:
1) under a license for the geological study of the subsurface, its holder has the right to use the subsurface for three years for the purpose of geological survey and (or) geophysical work.;
2) the maximum duration of the exploration period at the conclusion of an exploration and production contract is no more than six consecutive years, and in a subsurface area at sea or for complex hydrocarbon exploration projects - no more than nine years.;
3) the maximum duration of uranium mining at the conclusion of a uranium mining contract is not more than twenty-five years, including the period of pilot production;
4) a license for exploration of solid minerals is issued for six consecutive years;
5) the term of the license for the extraction of solid minerals may not exceed twenty consecutive years;
6) the license period for the extraction of common minerals is not more than ten consecutive years.;
7) the term of the license for the use of subsurface spaces may not exceed twenty-five consecutive years;
8) a prospecting license is issued for a period of three years.
5. At the same time, the right of ownership is interpreted by civil legislation as a legally secured opportunity to exercise actual possession of property, and under the right of use – as a legally secured opportunity to extract its useful natural properties from property, as well as to benefit. In principle, these two legislative interpretations of the concepts of "ownership" and "use" of property, including mineral resources, do not contradict each other, but complement each other, since they are mandatory elements of the institution of property law. At the same time, the third element of the institution of property rights, "disposal rights" is inherent only to the owner of the subsoil, that is, the state. The subsurface user does not have the right
to dispose of the subsoil, which is a legally secured opportunity to determine the fate of property.
6. The right of subsurface use is granted for conducting specific types of subsurface use operations in accordance with the procedure and on the terms defined by the legislation, license and contract. Characterizing the essence of the right of subsurface use, it is necessary to identify the following important aspects that must necessarily be taken into account when granting a subsurface user the right to conduct subsurface use operations:
1) no one may be deprived of the right to subsurface use except on the grounds established by law;
2) the subjects of the right of subsurface use may be citizens of the Republic of Kazakhstan, stateless persons, foreign citizens, national and foreign legal entities;
3) the "possession" and "use" of individual subsurface areas may be restricted or prohibited in order to ensure national security and environmental protection;
4) the use of mineral resources in the territories of settlements, suburban areas, industrial, transport and communication facilities may be partially or completely prohibited if such use is capable of endangering human life and health or causing damage to economic facilities or the natural environment.;
5) the use of subsurface resources within specially protected territories is additionally regulated by the legislation on specially protected territories.
The right of subsurface use arises by: granting the right of subsurface use on the basis of a license or contract; transfer of the right of subsurface use (a share in the right of subsurface use) on the basis of a civil transaction; transfer of the right of subsurface use by way of succession during the reorganization of a legal entity, in other cases provided for by law.
7. The subsoil is part of the natural resources. In accordance with the Environmental Code of the Republic of Kazakhstan dated January 9, 2007, natural resources are natural objects of consumer value: land, subsoil, water, flora and fauna. As an object of the right of subsurface use, the subsoil acts as property, and the right of subsurface use itself acts as a property right. In this regard, it is necessary to distinguish between the subsoil, as part of the environment, and the subsoil, as a type of property.
8. As an object of rights, the subsoil is subject to a special legal regime due to its inherent legal and natural features. From a scientific point of view, the subsoil, as a type of property, refers to immovable property, although in Article 117 of the Civil Code of the Republic of Kazakhstan, when listing the types of things related to real estate, the subsoil is not named. Nevertheless, based on the general concept of "real estate", according to which it includes property that is firmly connected to the land (that is, objects that cannot be moved without disproportionate damage to their purpose), the subsoil, of course, refers to real estate.
9. Mineral resources are property limited in turnover, since they are the exclusive property of the state within the borders of the territory of the Republic of Kazakhstan and cannot be the subject of purchase, donation, inheritance, pledge or alienated in any other form. The subsoil may be transferred for use to other entities only on the basis of the right of subsurface use.
10. The concept of property rights is inextricably linked with such concepts as a thing, property, object of a legal relationship, property relations and others. Property rights are a type of property rights, the object of property law is a thing as a type of property, the concept of an object of a legal relationship is based on things and property benefits.
11. Summarizing what has been said about the subsoil as an object of property rights, in particular, the right of subsurface use, we can identify the following characteristic features:
1) the subsoil is property (property benefit);
2) by the nature of their origin, they are covered by the category of "natural resources";
3) the subsoil is the exclusive property of the state, but may be transferred to another person as an object of such a type of property right as the right of subsurface use.;
4) depending on the turnover, the subsoil refers to things that are of limited turnover;
5) like any object of property law, the subsoil is individualized in a certain way;
6) as a type of property, the subsoil belongs to the category of real estate.
12. Objects of property rights, in particular the subsoil, must be characterized by individually defined characteristics. With regard to the subsoil, individualization begins with the fact that: the subsoil is located within the borders of the territory of the Republic of Kazakhstan, separating them from the territories of other states; the subsoil, in turn, is divided into subsurface areas, blocks, etc. throughout the territory of the republic.
13. Property rights are absolute rights, which unites them with intellectual property rights and distinguishes them from binding rights. The holder of property rights is opposed by the obligation of everyone not to interfere with the exercise of these rights. The establishment of property rights by law can be considered a sign of property rights. In contrast to binding rights, which may arise in cases not provided for by law.
14. Thus, the right of subsurface use is a real indivisible right. The norms of the legislation on the right of ownership apply to relations related to the subsoil and with the right of subsurface use, since this does not contradict the nature of property law.
15. The right of subsurface use was first constructed as a property right in the same way as other property rights, such as ownership and land use, in Decree No. 2828 of the President of the Republic of Kazakhstan, which has the force of law, "On Subsoil and Subsurface Use" dated January 22, 1996. The right of subsurface use existed before, but it has never been considered as a civil law or as a property right. Legal relations in the field of subsoil use were of an administrative and legal nature. Thus, in the previously existing Code of the Kazakh SSR "On Subsoil" dated August 4, 1976, the right to use mineral resources was considered within the framework of mining law only according to the model of administrative relations, without the possibility of transferring the right of subsurface use on a contractual, i.e. civil basis.
16. The use of mineral resources in the Republic of Kazakhstan is carried out in accordance with the procedure, on the terms and within the limits established by law. The ownership of mineral resources by the state determines a special and strict procedure for the use of mineral resources. In accordance with natural, organizational, economic, technological and legal features, the process of using mineral resources can be represented in a single system, which includes three important independent subsystems.:
1) provision of subsurface plots for use (on the basis of a license, direct negotiations, contract);
2) the use of subsurface resources in accordance with the established conditions of work, depending on the type of subsurface use operation;
3) control and supervision of compliance with the established requirements and restrictions on the use of mineral resources.
17. Legislation regulates the relations of subsurface use with varying degrees of detail both within the framework of the entire system and within the framework of
separate subsystems. Compliance with the requirements of the legislation is mandatory for all participants in legal relations in the field of subsoil use.
1) The first subsystem, the provision of subsurface resources for use, is designed to regulate the relations that have arisen between the owner of the subsurface (the state) and a potential subsurface user. Within the framework of this subsystem, the relevant state bodies: determine the program for the development of subsurface resources; their specific zones (subsurface areas, blocks) that are provided for use; determine the subsurface user; grant the right to subsurface use by legally formalizing the agreements reached on certain conditions.
2) The second subsystem regulates the relations arising in the process of using subsurface resources, that is, the implementation by the subsurface user of a certain type of activity within the framework of the acquired right, in particular the right to geological exploration of the subsurface, exploration of minerals, mining, use of subsurface spaces, prospecting.
3) The third subsystem, functioning in parallel with the first and second, is designed to regulate relations arising in the process of control and supervision by competent and authorized government agencies.
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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
