COMMENTARY TO ARTICLE 19. A SUBSURFACE AREA AS AN OBJECT OF SUBSURFACE USE RIGHT TO THE CODE OF THE REPUBLIC OF KAZAKHSTAN "ON SUBSURFACE AND SUBSURFACE USE"

1. A section of the subsoil is a geometrized part of the subsoil with certain spatial boundaries, provided for use in accordance with this Code.

The spatial boundaries of a subsurface area are formed by conventional planes radiating from straight lines between points with geographical coordinates (the territory of the subsurface area) and the depth forming the upper and lower spatial boundaries.

The upper spatial boundary of the subsurface area is located below the soil layer, and in its absence – below the earth's surface and (or) the bottom of reservoirs, watercourses. The lower spatial boundary of the subsurface area is located at depths accessible for geological exploration and development.

In the cases provided for by this Code, the upper and (or) lower spatial boundaries of a subsurface area may be located at a different depth.

2. In order to identify the territory of a subsurface area for conducting mineral exploration operations (exploration area) and geological exploration operations (geological survey area)

The territory of the Republic of Kazakhstan is conventionally divided into blocks, each side of which is equal to one minute in the geographical coordinate system. Twenty-five blocks form a sub-section of blocks, each side of which is equal to five minutes in the geographical coordinate system. One hundred blocks form a section of blocks, each side of which is equal to ten minutes in the geographical coordinate system.

Each block, sub-section and section of blocks have their identifying coordinates and individual codes assigned by the authorized body for the study of the subsurface. The territory of an exploration site (exploration area) or a geological survey site (geological survey area) may consist of one or more blocks. If the specified territory consists of two or more blocks, each block of this territory must have a common side with at least one other block of it.

In the cases provided for by this Code, the exploration territory may include a part of a block or blocks, each of which must have a common side with another block of such territory or its part.

3. The territory of a subsurface area for mining operations (mining area), for prospecting (mining area) and for the use of subsurface space (subsurface use area) must be a rectangle. If the natural features or boundaries of another subsurface area do not allow determining the territory of the corresponding mining, prospecting, or use of subsurface space in the form of a rectangle, the territory of such a subsurface area may have the shape of a quadrilateral, the two opposite sides of which must be parallel to each other.

In the cases provided for by this Code, the territory of a mining site may have the shape of a polygon with right angles, determined by the external contours of the deposit.

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(Odilov T.A.)

1. The name and content of the commented article "A subsoil plot as an object of the right of subsurface use" indicate that as the only object of a legal relationship that develops and arises regarding the use of subsurface resources on the basis of licenses, contracts and permits for

use, an exclusively subsurface area is established. Accordingly, in the absence of such a legal relationship, the subsurface area does not exist.

This statement is true even when the phrase "subsurface area" is used in the Subsurface Code in the context of a terminated subsurface use right. For example, in paragraphs 1) paragraph 2 of Article 126 or in paragraphs 4) paragraph 2 of Article 203. In such cases, the use of the phrase "subsurface area" represents the cost of legal technology, assuming a closed space within the boundaries of the defunct subsurface area, where work is being carried out or should be carried out to eliminate the consequences of subsurface use.

When drafting the Subsoil Code, the legislator aimed to establish a unified approach to the emergence of the right of subsurface use, taking into account the experience of law enforcement of the 2010 Law on Subsurface Resources, according to which technogenic mineral formations were recognized as objects of the right of subsurface use along with the subsoil plot. This led to controversial situations, including when the right of subsurface use arose as a result of the conclusion of a contract for extraction from TMO, located, among other things, on the contractual territory of another subsurface user.

2. In Part 1, paragraph 1 of the commented article, the phrase "... provided for use ..." follows from the content of the concept of "subsurface use" provided for in Part 1 of Article 17 and does not include ownership rights, as previously provided for in the 2010 Law, due to the impossibility of actual possession of the geometrized part of the subsoil by known methods, and also the provisions of art . 24, when the same part (space) of the subsurface is actually in use by different persons, for example, for conducting hydrocarbon exploration and exploration operations, while dividing the same territory of the earth's surface.

The phrase "... a part of the subsurface with certain spatial boundaries, provided for use ..." means that the subsurface area as an object of the right of subsurface use is allocated within the boundaries of conventional planes and exists in three-dimensional space. Thus, the subsurface area is a geometrized (three–dimensional) figure in three-dimensional space, the side faces of which are conditional planes, and the upper and lower bases are, respectively, the upper and lower boundaries.

According to Part 2, paragraph 1 of the commented article, the lateral faces of this figure (the spatial boundaries of the subsurface area) are set on the earth's surface by straight lines that connect points with geographical coordinates – "The spatial boundaries of the subsurface area are formed conditionally

planes coming from straight lines between points with geographical coordinates...".

The closed polyline that is formed in this case is called the territory of the subsurface area. The lateral spatial boundaries of a subsurface area as an object in three–dimensional space are actually projected by the territory of the subsurface area and vice versa - that is, the territory of the subsurface area is a projection (transfer) of a subsurface area, an object of three-dimensional space, on the Earth's surface (bottom of a reservoir, watercourse).

Thus, the subsurface area and the territory of the subsurface area are objects in three-dimensional and two-dimensional spaces, respectively. When defining the boundaries of a subsurface area and its territory on a cartogram and topographic map, this pattern is used.

At a briefing in the Central Communications Service, the Chairman of the Committee of Geodesy and Cartography of the ICRIAP of the Republic of Kazakhstan noted that "Kazakhstan still uses the 1942 coordinate system (SK-42), which has become obsolete with the advent of digitalization. In addition, SK-42 has a restrictive rating, that is, access to geodata is closed to non-governmental structures, legal entities and individuals, including foreign investors. In addition, different departments, spheres and regions use different coordinate systems SK-42, SK-63, WGS-84, and local coordinate systems. As a result, this leads to the fragmentation of the graphical foundations of government databases, cadastres and geoportals.".

The Code provides for the use of an internationally applicable coordinate system. Currently, the Geodetic Service of the Republic of Kazakhstan, within the framework of "digitalization", is working on the implementation of the national coordinate system KazTRS (Kazakhstan terrestrial reference system) using the world geodetic coordinate system - 1984 (WGS-84).

The territory of a subsurface area may be continuous, having only the outer perimeter boundaries formed by the above-mentioned polyline, or it may not be so, having, in addition to the outer boundaries, also internal (internal) closed boundaries. This is indicated by the word "external" in paragraph 3 of the commented article. If there are internal boundaries of the territory of a subsurface area, the formation of spatial boundaries (lateral faces) is set in a projection in three-dimensional space accordingly.

Cases when the territory of a subsurface area may have internal boundaries are disclosed in a Special part, for example, in paragraphs 1) and 2) of paragraphs 3. art. 186 and paragraph 2 of art. 209.

In its meaning, the territory of a subsurface area is not the same as a “land plot". The territory of a subsurface area is only a conditional area with borders,

designed to determine the location of a subsurface area relative to the Earth's surface. This category was introduced by the legislator, firstly, to more clearly define the pattern of formation of the boundaries of a subsurface area, secondly, in connection with the differentiation of the concepts of a subsurface area from a land area, subsurface use from land use, and, thirdly, the primacy of granting the right to subsurface use (subsurface area). The territory of a subsurface area may coincide with the boundaries of the land plot, but not necessarily. Such a coincidence, as well as the need for the subsoil user to register a land plot for the purposes of subsurface use, is typical only for operations involving mining, construction and use of subsurface space, since it is during these operations that a large-scale violation and use of the basic properties of the land plot is assumed. However, registration of a land plot is not required (but is not prohibited) (this is practically unimaginable) for exploration and geological exploration operations due to the vastness of the area (up to several thousand square kilometers). Otherwise, these operations would have taken hundreds of thousands of agricultural and other land categories out of circulation and targeted use.

Figuratively, the territory of the subsurface area is shown in the following figure.

The upper boundary of the subsurface area (the upper base of the figure in three-dimensional space) coincides with the territory of the subsurface area or, in other words, the territory of the earth's surface /bottom of a reservoir (watercourse) in the absence of a soil layer, based on the definition of the subsurface given in paragraph 1 of art. 10. However, in the presence of a soil layer, the upper boundary of the subsurface area (the upper base), therefore, will run along the boundary of the soil layer and the subsurface. The soil layer is understood as the soil-vegetation layer, which, from the point of view of soil science and geology, represents the upper horizon with the index A in its various modifications. Depending on the terrain, the thickness (depth) of this horizon ranges from 10 cm to a meter. These conclusions are based on the understanding that soil horizons B and C, following the horizon A, as a rule, consist of or predominantly contain common minerals: clay, gravel, sand-gravel mixtures, etc. Also in foreign literature, the horizon with the A-index

the concept of topsoil corresponds, while the next horizons with indexes B and C are the concept of subsoil (translated from English as "subsoil").

In almost all cases, the upper limit is set at the legislative level according to the rules described, and not arbitrarily: a site for prospecting, geological exploration, exploration of solid minerals, extraction of solid minerals, extraction of common minerals and a site for the use of subsurface space under the appropriate types of licenses for subsurface use.

However, there are exceptions to this rule in part 4, paragraph 1 of the commented article. These exceptions are established for hydrocarbon exploration and production sites based on the principle of rational management of the state subsoil fund and due to the geological features of the formation and development of hydrocarbon deposits. The exceptions are described in more detail in the Special Part in paragraph 5 of Article 110. This provision provides for the possibility of providing a subsurface area at a depth below another subsurface area used by another person. In this case, the upper spatial boundary of the provided subsurface area within the territory of the subsurface area of such a subsurface user is determined by the lower spatial boundary of the provided subsurface area. Thus, for hydrocarbon exploration and production sites, a kind of "number of floors" is possible, when the upper section of the subsoil is in use by one person, and the lower one by another. In such a situation, the territories of each of the subsurface areas in the projection onto the earth's surface may coincide in whole or in part (combined).

The lower boundary of the subsurface area for almost all subsurface areas at the legislative level has no depth limit and is set by the possibilities of geological exploration and development of the subsurface user himself – "located at depths accessible for geological exploration and development."

However, as in the case of the upper boundary of a subsurface area, an exception is provided for in a special part of this rule according to Part 4, paragraph 1 of the commented article.

Exceptions are given: 1) for a subsurface area for the exploration or production of hydrocarbons by virtue of clause 5 of Article 110, according to which the lower limit can be set at a certain depth, thereby allowing the subsurface area to be provided to another subsurface user on the "floor" below; 2) for a site for the extraction of common minerals by virtue of clause 2 of Article 234, according to which the lower limit it is installed at a depth of at least thirty meters from the lowest point of the earth's surface; 3) for the mining area by virtue of paragraph

the fifth part of the first Article 270, according to which the lower boundary of the mining site during drilling and other earthworks is set at a depth of at least three meters from the lowest point of the earth's surface.

The lower boundary at a depth of three meters is also provided for the mining area. This follows from the content of the prospecting license provided for in paragraph 5 of Article 270.

The provided rules for defining the boundaries of a subsurface area represent a geometrized approach to defining a subsurface area, as indicated by the phrase "geometrized part of the subsurface". The detail of the rules is important in practice, which makes it possible to completely exclude possible disputes about the boundaries of adjacent subsurface areas between different subsurface users.

It is important to note that in the vast majority of cases, subsurface areas (defined by mining and geological allotments) under subsurface use contracts concluded before the introduction of the Subsurface Code provided for a lower boundary at a certain depth. With the entry into force of the Code, this rule was abolished for newly provided subsurface areas, since it did not allow subsurface users to freely explore the geological potential of subsurface in the lower strata, while having the right to subsurface use in areas up to a certain depth. The subsurface user had to apply to the competent authority and the authorized body for the study of subsurface resources to increase the depth of exploration and development below the permitted depth of the issued mining or geological allotments and further amend the contract for subsurface use with new mining or geological allotments as new applications. This situation implied unjustifiably lengthy bureaucratic and administrative procedures, as well as the risks of registering subsurface plots in the lower depths to third parties for speculative purposes, while using the same land surface (territory) with the existing subsurface user. In the best international practice, legislation on subsurface resources, as a rule, does not provide for restrictions on the depth of subsurface plots provided for use, fully guaranteeing the exclusivity of rights to subsurface resources within territorial borders at any depth with the possibility of maximum exploration and development.

Figuratively, the subsurface area and its defining elements are shown in the following figure.

Despite the strictly geometric approach to forming the boundaries of a subsurface area, which, by definition, is used through subsurface use operations, subsurface use (subsurface use operations), according to paragraph 2 of Article 10, may still "go beyond" a subsurface area in a situation of mining located, for example, in the thickness of the soil layer or on the earth's surface. In this sense, subsurface use operations are not limited only to the boundaries of the subsurface area. This conclusion is relevant only in the case of granted subsoil use rights.

3. The norms of the commented article in paragraphs 2 and 3 establish the pattern of determining the territory of a subsurface area depending on the type of subsurface use operations.

Paragraph 2 establishes general rules for the formation of a territory, which, according to paragraph 1 of the commented article, defines the parameters of the spatial boundaries (lateral faces) of a subsurface area for exploration or geological exploration operations.

In Part 1, paragraph 2, the words in parentheses "exploration site" are given as a concept, the definition of which is contained in the same sentence – "a subsurface area for conducting mineral exploration operations." This concept is applicable both for hydrocarbon exploration operations and for solid minerals. Similarly to the concept of "exploration site", the concept of "geological exploration site" is given in parentheses with a similar definition, given in the text – a subsurface area for conducting geological exploration operations (in this case, we are not talking about the state geological exploration of subsurface, but about operations for the geological exploration of subsurface conducted on the basis of a license for geological exploration – see the commentary to V. 84).

Territories (a closed polyline defining the external boundaries) that define the spatial boundaries (lateral faces) of the exploration site and the geological study site in Part 2 of paragraph 2 are also given in parentheses as concepts, definitions for which also follow from the sentence itself: exploration territory – the territory of the exploration site, the territory of geological study – the territory of the subsurface area geological study.

The formation of an exploration territory or a geological study territory is subject to a strictly defined pattern, which is based on the block system (block grid) formed in the international mapping of topographic maps. The block system provides that "... the territory of the Republic of Kazakhstan is conditionally divided into blocks ...". "Conditionally divided" means the superimposition of an international mapping map on the territory of the Republic of Kazakhstan of 1:1,000,000 and 1:100,000 scale topographic map sheets. The use of international mapping is provided for at the subordinate level according to the Order of the Minister of Investment and Development of the Republic of Kazakhstan dated May 30, 2018 No. 403 "On approval of the block identification map with the appropriate coordinates and individual codes". However, the law does not restrict the authorized body for the study of subsurface resources from using its own mapping system based on the national coordinate system, although based on the international one, as it is used in Australia, the United States and other countries.

The basic unit of a block system is one block. Accordingly, the territory of exploration or geological exploration can be defined by at least one block. The sides of each block run along the lines of latitude and longitude of the geographical coordinate system. The length of each side of the block is equal to one full minute of longitude and one minute of latitude in the geographical coordinate system. When determining geographical coordinates, the "sphericity" of the Earth is taken into account, so the sides of the block are not perfectly connected.

straight lines. This, in detail, in relation to the formation of the territory by blocks, contradicts the pattern of formation of the territory of a subsurface area from straight lines provided for in paragraph 1 of the commented article. However, in a practical sense, the curvature of the lines does not matter, therefore it is not taken into account by the legislator in paragraph 1. In this case, there is a legal fiction that considers the lines of the sides of the block to be straight.

In the latitudes of the Republic of Kazakhstan, the average area of the block is 2.3 square kilometers.

As mentioned above, the block system is based on the international nomenclature of 1:1,000,000 and 1:100,000 scale topographic maps. Accordingly, each block in this nomenclature has an individual designation (code). The points between the sides of the block, respectively, also have established geographical coordinates (the intersection of minutes of north latitude and west/east longitude), and do not require a separate definition.

In order to simplify the formation of large areas of exploration and geological exploration of the subsurface, it is possible to combine 25 blocks into subsections, and 4 subsections into sections. As for blocks, individual designations (codes) are provided for sections and subsections according to the international nomenclature. Examples of codes are provided in the Order of the Minister of Investment and Development of the Republic of Kazakhstan dated May 30, 2018 No. 403 "On approval of the block identification map with the appropriate coordinates and individual codes". Thus, the assignment of codes by the authorized body for the study of subsurface for blocks, subsections and sections is carried out by a simple reference to the international nomenclature of topographic maps instead of the one actually established.

The presence of subsections and sections of blocks with established codes, including strictly defined blocks, provides for the possibility of specifying them in exploration or geological exploration licenses, exploration and production contracts, as well as in the State Budget without the need to detail blocks when it comes to large-scale territories. In a practical sense, the use of section and subsection codes reduces the risks of errors or typos of block codes (if there are many of them), which can lead to additional error correction procedures or, in the worst case, disputes.

The nomenclature of topographic maps with side codes and their corresponding coordinates, written into the terms of the license or contract, is part of the Institute for the stability of the terms of licenses and contracts, since even with the subsequent change of the nomenclature and coordinate system used, the terms of licenses and contracts containing an indication of the boundaries

the provided subsurface area (exploration), formed, as indicated above, by the exploration territory (block codes, subsections and sections), remain valid in accordance with paragraph 7 of art. 31 and paragraph 7 of art. 36.

4. The block system for forming an exploration territory or a geological study territory with established codes and predefined geographical coordinates of points between the sides of the blocks is directly borrowed from foreign legislation, in particular Australia and Canada. The block system in intelligence also exists in the USA, Great Britain, Norway and other countries. Previously, in the early 90s, in the Republic of Kazakhstan, subsurface areas for the exploration and production of hydrocarbons were also provided using a block system. However, there were no strictly defined rules and patterns of the ratio of blocks for the formation of a subsurface area.

The quintessence of the current block system for forming an exploration territory or a geological study territory (defining an exploration or geological study site) is provided for in Parts 2 and 3 of paragraph 2 and consists of the following rules and patterns: 1) a territory may consist of one block, complete or incomplete (part of a block is the same as an incomplete block) – accordingly, this territory cannot be formed not according to a block or not according to blocks (as it was previously before the introduction of the Subsoil Code); 2) a territory may consist of two or more blocks, complete or incomplete, but each of the blocks forming the territory of exploration or geological study must have at least one side in common with another block, complete or incomplete, which is included in the number of blocks (complete or incomplete) forming this exploration territory; or geological study.

These rules are common to contracts for the exploration and production of hydrocarbons, as well as licenses for geological exploration and licenses for exploration of solid minerals.

The rule on at least one common side between 1) two complete blocks, 2) between two incomplete blocks, or 3) between a complete and incomplete block, which are considered to form an exploration territory, does not specify what "common side" means.

In an objective sense, all blocks forming a block system always have a common side with the adjacent block along the minute lines of north latitude and west/east longitude. This is the essence of the international nomenclature of 1:1,000,000 and 1:100,000 scale topographic maps.

Therefore, it is obvious that in the context of the formation of a specific exploration territory, the "common side" refers to the side of two adjacent territories.

a friend of blocks, complete or incomplete, included in an exploration area that is continuous and not interrupted by the boundaries of another subsurface area provided for operations on the same groups of minerals (hydrocarbons or solid minerals) or for the use of subsurface space.

This conclusion is implemented in paragraph 2) of paragraph 3 of Article 186 of the Special Part by the phrase "such a common party is not located in the specified territories" when forming a territory for exploration of solid minerals. With regard to the formation of the hydrocarbon exploration territory, the mechanism for implementing the block system in a Special part is not provided in principle, which is undoubtedly the subject of further improvement of the Subsoil Code.

Nevertheless, the pattern of a common integral and continuous side between the blocks forming the exploration territory is fundamental to the functioning of the block system. For example, if the territory of an exploration site or a geological study site consists of three blocks: A, B, C, then each of the blocks must have a common side with at least one of the other two. Otherwise, separate territories may arise, each of which will determine separately the corresponding subsurface area, the right to use which is also granted separately on the basis of a license or contract.

In the opinion of the author of this commentary, failure to comply with or further exclude from the Code the rule on the common side of two adjacent blocks included to determine the exploration territory will lead to the emergence of parts of blocks adjacent to each other not according to a strictly defined pattern, but arbitrarily, which will lead to the leveling of the very essence of the block system. The introduction of a block system for the formation of an exploration territory in this sense would not make sense, assuming the return of the institute and procedures for issuing and designing geological allotments.

Figuratively, in the context of the formation of solid mineral exploration territories, the rule about the common side between adjacent blocks is shown in the following figure.

The mechanism and cases of the admissibility of determining the exploration territory (for hydrocarbons or solid minerals) or geological exploration using an incomplete (part of) block or incomplete blocks should be provided for in a Special Part – this is indicated by the content of Part 3, paragraph 2 of the commented article.

At the time of the introduction of the Subsoil Code, such cases and the mechanism were not provided for in a Special part. This made it difficult to fully involve the entire territory available for subsurface use in exploration operations for potential development in accordance with the principle of rational management of the state subsoil fund. The occurrence of situations suggesting the presence of incomplete blocks is inevitable, since, for example, the formation of territories for mining and using subsurface space is not subject to the block system, and also since, before the introduction of the block system, the territorial boundaries of subsurface areas (contract territories for mining and geological allotments) were formed arbitrarily according to the shapes of completely "irregular" shapes that repeat the contours of deposits or promising manifestations of minerals.

To fill the legal gap, the Law of the Republic of Kazakhstan dated December 26, 2019 No. 284-VI amended Article 186 with a new paragraph 3 regulating the cases and mechanism for including incomplete blocks in the potential exploration area of solid minerals, while making editorial changes to paragraph 2 of the same article, excluding references to a partial block. Because the mechanism

The formation of a territory for hydrocarbon exploration and geological exploration of subsurface from incomplete or complete blocks is still not provided for in the Subsurface Code as of the date of writing this commentary.

The commented article also does not provide a direct definition of an "incomplete block". Its value is determined and follows from the mechanism of formation of the territory of exploration of solid minerals in a Special part, taking into account the rule "on the common side". With regard to the hydrocarbon exploration area and the geological survey area, the meaning of the "incomplete block" remains uncertain at the moment.

For the purposes of forming a territory for exploration of solid minerals, based on the provisions and rules "on the common side" provided for in paragraph 3 of art. 186, incomplete or partial is (I) a block in which at least one side is interrupted or will be located, for example: 1) on the territory of another subsurface area in which another subsurface user carries out subsurface use operations in relation to solid minerals or for the extraction of hydrocarbons; 2) on the territory within which the provision of a subsurface area for subsurface use operations is prohibited; 3) on the territory of a subsurface use area or a subsurface area for the construction and (or) operation of an underground structure not related to exploration and (or) extraction of minerals; 4) on the territory of a foreign state; or (II) a block in which the territory (area) is not continuous, that is, inside the block the territories listed above (in this paragraph) are located, although their territorial borders do not cross the lines of the sides of the block).

The key rule of the block system is also the rule about the inadmissibility of including different parts of the same incomplete block in different territories of exploration for solid minerals during their formation. This rule follows from a set of interrelated norms in paragraphs 4) of paragraph 2, parts 2 and 3 of paragraph 3 of Article 186, in order to exclude the potential combination (overlap) of the territories of exploration for solid minerals in this block and potential disputes. In other words, the same block, complete or incomplete, cannot be included in two or more exploration territories for solid minerals or hydrocarbons, that is, in the same group of minerals. At the same time, this rule does not prohibit the inclusion of the same block both in the territory of the UVS intelligence and in the territory of the TPI intelligence (see commentary to art. 24).

Below are figuratively presented options and examples of the territory of exploration for solid minerals with complete and incomplete blocks, taking into account the requirements for one common side between them and the rules of art. 186 in the General part.

5. Paragraph 3 of the commented article establishes general requirements for the formation of the territory of a mining site, prospecting, and the use of subsurface space along their outer boundaries – the perimeter.

In Part 1, paragraph 3, the words in parentheses "mining site" are given as a concept, the definition of which is contained in the same sentence – "a subsurface area for mining operations." At the same time, the types of minerals extracted in the subsurface area are not specified. It follows from this that the requirement provided for in this paragraph 3 applies to all types of minerals, as well as extraction from TMO, which constitute subsurface resources, since in accordance with Part 2, paragraph 5 of art. 13 "For the purposes of this Code, the legal regime of solid minerals is applied to man-made mineral formations included in the subsurface."

Similarly to the concept of "mining area" given in parentheses, the concepts of "mining area" are given with a similar definition in the text – a subsurface area for mining, and a "subsurface space use area" –

also with a similar definition is a subsurface area for operations to use subsurface space.

Unlike the territory of the exploration site, the formation of the territory of the mining site, prospecting and the use of subsurface space is not subject to a block system. However, the outer boundaries (a closed polyline defining the outer boundaries) of such a territory, which define the spatial boundaries (lateral faces) of a subsurface area, still obey the rules of shape formation. These rules are directly borrowed from foreign legislation, in particular Australia, Chile and Canada, as they allow us to eliminate the lack of regularity and randomness (in a figurative sense) of the territories of mining sites (mining allotments) that arose before the introduction of the Subsoil Code. This situation led to disputes regarding the boundaries of the contract territories and land plots due to the multitude of corner points and uneven lines. In addition, to the detriment of the institute for the elimination of all the consequences of subsurface use, including from the auxiliary infrastructure, the contract area for the mining allotment repeated only the contours of the deposit and rarely the prospects for landfills.

With the adoption of the Code, these risks have significantly decreased, since, in accordance with Part 1, paragraph 3, the formation of the outer boundaries of the territory of mining, prospecting and use of subsurface space is subject to the following rules:

1) in the absence of obstacles in the form of natural features or another subsurface area located nearby for conducting subsurface use operations for the same group of minerals (UVS or TPI), due to the exclusivity of rights or operations for the use of subsurface space, the outer boundaries of the territory of the mining site being formed, the prospecting site and the subsurface use area should be in the form of a rectangle (a quadrilateral with all corners straight) or a square, since a square is a special case of a rectangle (quadrilateral, in which not only all angles are straight, but also all sides are equal);

2) if there are specified obstacles that do not allow forming a territory in the form of a rectangle within reasonable limits, its external borders can be formed in the form of a quadrilateral with at least two opposite sides parallel to each other. Such a figure can be a parallelogram (its opposite sides are parallel to each other in pairs), a rhombus, or varieties of a trapezoid.

In this case, natural features include the terrain, natural surface and underground water bodies, forests, including specially protected natural areas, etc.

It is also important to emphasize that the location of the formed shape on the map can be at any angle relative to the lines of longitude and latitude, which is also a distinguishing feature from the block system.

The specified rules on a rectangle or quadrilateral with one pair of parallel and opposite sides are not exhaustive – part 2, paragraph 3 of the commented article provides for the possibility of establishing a different form of the outer boundaries of mining sites, prospecting and use of subsurface space, however, only in cases that should be provided for in a Special part. Such a case is currently paragraph 1 of art. 209, Part 1 of which provides for the possibility of forming the boundaries of a solid mineral extraction site (as well as a mineral extraction site due to the applicability of the same provisions to relations on mining operations in accordance with Part 1, paragraph 2, Article 231) in the form of a polygon (consisting of straight lines) with the least possible number of angles, however, only if the (obvious) impossibility of determining the external boundaries of the mining site in accordance with the above rules of Part 1, paragraph 3 of the commented article. At the same time, there are no requirements for parallel sides and degrees of angles. A triangle, for example, is also a special case of a polygon.

Thus, the logic of forming the external boundaries of the territory of a solid mining site, taking into account the requirements for the location of objects inside it, provided for in Part 2, paragraph 1, Article 209, should first of all be based on the first sentence of Part 1, paragraph 3, then on the second, and only if it is impossible to determine the boundaries, refer to part 1, paragraph 1. V. 209.

Unfortunately, at present, the Special Part does not provide for a similar approach regarding the production sites of the UVS (Article 110 provides only documents-sources and objects that determine the boundaries of the production site), prospecting and use of subsurface space, which in practice can cause insurmountable difficulties, including the inability to comply with the requirements of Part 1, paragraph 3 of the commented articles in exceptional cases. This issue should undoubtedly become the subject of further improvement of the Subsoil Code.

Figuratively, the rules of the block system defining the territory of solid mining are shown in the following figure.

6. The rules/requirements for the formation of territories of subsurface areas provided for in clauses 2 and 3 of the commented article apply not only when providing a subsurface area (concluding a contract/making changes to it when fixing periods of subsurface use or issuing a license), but also when converting or rejecting (returning) a part of a subsurface area (making changes in the contract, renewal of licenses). In other words, no matter how the territorial boundaries of subsurface areas change in cases permitted by the Subsurface Code, they must always comply with the rules of the paragraph being commented on.

These requirements must also be taken into account by the state examination of basic design documents, government agencies when considering applications for licenses, applications for the conversion of subsurface areas, the rejection (return) of part of the site, as well as preparations for auctions, which are scheduled to provide subsurface areas, including the formation and re-approval of the Federal Tax Service. For example: 1)

the auction territory, designated in the IGFN, within which, following the results of the auction, it is expected to provide a site for exploration or extraction of solid minerals (issuance of licenses for exploration or extraction), must take into account the permissible combination of blocks or all possible configurations of the shape of the outer boundaries of the mining site, which at the end of the auction will be provided to the winner (during exploration) or declared the winner (during mining) for approval with the relevant government agency; 2) an application for an exploration license must contain a combination of blocks (if there are more than two) that comply with the rules of the block system in accordance with the comments above on Parts 2 and 3 of paragraph 2 of art. 19.

Failure to comply with these requirements leads to inefficiency of geological exploration and use of the territory and subsurface, contrary to the principle of rational management of the state subsurface fund. For example, the block system assumes the preservation of a single (integral) exploration territory at any time, even taking into account the decrease in the original territory as a result of the refusal (return) of the subsurface user from a part of the blocks. Abandonment of blocks without following the rules of the block system may, in fact, be the result of selective (relative to the area) geological exploration rather than a continuous one throughout the entire territory of the originally provided site. Thus, the block system of forming an exploration territory inclines the subsurface user, firstly, to a more meaningful choice of the number of blocks and, secondly, to a more efficient (in the interests of the state) exploration work without the intervention and individual regulation of government agencies. In this sense, the blockchain system is one of the mechanisms of the so-called "smart regulation".

In a specific case, violation of the rules for the formation of the territory of a subsurface area means the conclusion of a contract / amendment to the contract, the issuance or reissue of licenses, the content of which (conditions on the boundaries of the subsurface area) does not meet the requirements established by the Code regarding the key institution of legislation in the field of subsurface use – the subsurface area – the object of the right of subsurface use. This violation is the basis for invalidating the license. With respect to subsurface use contracts, this conclusion is not obvious, since the grounds for invalidating the contract, including invalidating the auction, which resulted in the provision of a subsurface area formed not in accordance with the Code on Subsoil, do not cover cases of incorrect formation of the territory of a subsurface area for the exploration or production of hydrocarbons or uranium. Undoubtedly, the absence of such grounds may violate the rights of others, including subsurface users.

Therefore, this issue should be the subject of further improvement of the Subsoil Code.

The range of people who may be interested (whose rights and legitimate interests have been violated or may be violated as a result of incorrect formation of the subsurface area) is very wide. For example, if the territory of exploration or extraction of solid minerals is defined by a block or territory, the inclusion of which is unacceptable for the formation of an exploration site or, accordingly, production, but at the same time there is an application for a license from another person for this block or territory (production), then this person, in the opinion of the author of this comment, should be considered interested. The tax authorities may also be interested in the case of non-compliance with the territorial rules for the formation of a subsurface area, which led to a smaller area of the TPI/prospecting area or a smaller number of blocks of the TPI exploration area compared to the one that should have been formed in compliance with the rules (the area of the TPI/prospecting area and the number of blocks of the TPI exploration area depend on the amount of annual lease payments).

7. In accordance with paragraph 4, paragraph 3, Article 277, the commented article applies to relations on permits, licenses and contracts for subsurface use issued and concluded before the entry into force of the Subsoil Code, only in part 1. This implies the identity of the meaning of contractual territories, licensed areas to the concept of a subsoil area without prejudice to the content of the powers regarding the site. the subsoil and its borders. This conclusion is based on the preservation of the actions of concluded contracts and issued licenses and permits provided for in paragraph 1 of art. 278, an integral part of which are, among other things, applications with mining and (or) geological allotments.

Paragraphs 2-3 of the commented article do not apply to the specified contracts, licenses and permits due to the difference in approaches to the formation of territorial boundaries of subsurface areas, mining and geological allotments.

At the same time, the legislator provides for the possibility of a kind of transformation of subsurface areas provided under contracts and licenses concluded and issued before the entry into force of the Subsurface Code, in accordance with the rules of paragraphs 2 and 3 of the commented article. However, this option is provided only for subsurface areas that are in use under contracts for subsurface use in relation to TPI and contracts for the extraction of OPI during the transition to a licensed regime.

subsurface use (re-registration of the right of subsurface use) in accordance with the provisions of paragraph 25 of Article 278.

When switching to a licensed subsurface use regime (issuing a license for exploration of TPI, a license for extraction of TPI or a license for extraction of OPI), the boundaries of subsurface areas previously defined by mining allotments are subject to alignment with the rules for determining TPI/OPI production sites according to clauses 1 and 3 of art. 19 and art. 209, and the boundaries of subsurface areas, previously defined by geological allotments – in accordance with the rules for determining exploration sites for mining and field exploration in accordance with clauses 1 and 2 of art . 19 and clauses 2 and 3 of art. 186.

8. Taking into account the above, the subject of further improvement of the Subsurface Code should be the provisions in the Special Part on a more detailed mechanism and methods for forming the territory of hydrocarbon exploration and geological exploration in a block system, taking into account complete and incomplete blocks, as well as provisions on the possible, in exceptional cases, polygonal shape of the boundaries of hydrocarbon production sites, prospecting and use of subsurface space. subject to the rule in paragraph 3 of the commented article. The absence of these provisions may cause insurmountable legal difficulties and risks in practice.

Undoubtedly, the consequences of non-compliance with the requirements and rules for the formation of subsurface territories also need to be clearly reflected in the Subsoil Code, especially in cases where such non-compliance violated the rights and interests of third parties, including subsurface users.

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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