Commentary to article 29. The concept of a license for subsurface use to the Code of the Republic of Kazakhstan “On Subsurface and Subsurface Use”  

1. A license for subsurface use is a document issued by a state body and granting its holder the right to use a subsurface area for the purpose of conducting subsurface use operations within the specified subsurface area.

The license for subsurface use does not apply to permits regulated in accordance with the legislation of the Republic of Kazakhstan on permits and notifications.

2. A subsurface use license is issued for the use of only one subsurface area.

3. An unlimited number of subsurface use licenses may be issued to one person, except for the cases established by this Code.

4. The license is issued at the request of the interested party. The license application form is approved by the competent authority.

5. The issued license is subject to publication on the Internet resource of the state body that issued the license on the day of issue.

6. The state body that issues licenses for subsurface use maintains a register of issued licenses.

In addition to the information contained in the license, the specified registry contains the following information::

1) about the place of residence of an individual who is a subsurface user;

2) on the registered encumbrances in relation to the right of subsurface use;

3) other information that is necessary for accounting purposes.

The procedure for maintaining the register of issued licenses is established by the competent authority.

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(Yereshev D.E.)

1. The licensing regime in subsurface use was first introduced in accordance with Government Decree No. 377 dated April 13, 1994 "On the procedure for providing Subsurface resources for Geological exploration, mining and other purposes", which in turn was adopted pursuant to the Decree of the President of the Republic of Kazakhstan, which has the force of Law, dated April 4, 1994 No. 1637 "On additional measures to streamline subsurface use for geological exploration and mining".

As a follow-up to this resolution, the Regulation on the Procedure for Licensing Subsurface Use in the Republic of Kazakhstan was adopted, approved by Government Decree No. 886 dated August 8, 1994. According to the Regulation, the license certified the right of its owner to use the subsurface area, as well as waste from mining and related processing

production facilities within certain boundaries in accordance with the specified purpose within a specified period of time, subject to pre-agreed requirements and conditions. The license for subsurface use had three key properties: action in relation to a specific area of the subsoil, target character, and urgency.

Based on the intended purpose, three types of licenses were provided:

for geological exploration of the subsurface;

for the extraction of minerals and the use of subsurface resources for other purposes, including for the construction and operation of underground structures, waste disposal, and others.;

for geological exploration and mining (complex), located within the same territory.

The license was issued by the Government of the Republic of Kazakhstan, with the exception of OPI licenses, which were issued by the heads of local executive bodies of the region. It is important to note that the license only certified the right to use the subsurface area. For the final registration of the right of subsurface use, the licensee (license holder) had to conclude a subsurface use contract corresponding to the terms of the license. The terms of the contract were set out in the license.

These acts were adopted during the period of validity of the Law of the Republic of Kazakhstan "On the temporary delegation of additional powers to the President of the Republic of Kazakhstan and Heads of local administrations."

The mixed license-contractual regime of subsurface use remained in place, and the Decree on Petroleum of 1995 and the Decree on Subsurface of 1996 introduced the concept of a "license", according to which it recognized a permit issued by a licensing authority for the right to conduct subsurface use operations for a fixed period within the contractual territory.

The license stipulated the basic conditions of subsurface use, such as the term, the area of the subsoil, the type of mineral, the type of subsurface use operations, and other conditions. In accordance with the terms of the license, a contract was subsequently concluded that formed the final terms of subsurface use. If the terms of the license changed, it was necessary to make appropriate changes to the contract. At the same time, the terms of the license were of priority importance, the terms of the contract could not contradict the terms of the license. Initially, the licensing authority was the Government and local executive bodies of the region for the OPI, while contracts were concluded by the competent authority and local executive bodies (contracts for the OPI). The combined licensing and contract system operated until 1999, when the Decree on Oil of 1995 and the Decree on

Amendments were introduced on the subsoil in 1996, which abolished the licensing regime.

The 2010 Law on Subsurface Resources also did not provide for a licensing procedure for granting subsurface use rights.

The Subsoil Code provides for both a licensing procedure for granting the right to subsurface use and the granting of the right to subsurface use through the conclusion of a contract. However, unlike the previously existing licensing regimes, the Subsoil Code considers the license as an independent basis for the right of subsurface use. At the same time, the licensing regime is provided for most types of subsurface use operations, except for exploration and production of hydrocarbons and uranium mining.

2. Although the subsurface use license itself is an administrative document, civil relations arise from it, which distinguishes it from licenses for activities issued under licensing procedures.

The license for subsurface use is a special title document, which requires the definition of its key characteristics.

3. Paragraph 1 of the commented article defines a license as a title document issued by a government agency, the key characteristics of which are that the license grants its holder the right to use the subsoil in respect of the relevant subsurface area for a certain type of subsurface use operations. At the same time, this definition does not specify another key characteristic of the license – urgency, which, in our opinion, is an omission, although not critical, since the definition of the concept of "subsoil use rights" (see the commentary to art. 17 of the Subsoil Code) contains this criterion.

Part 2, paragraph 1 indicates that the license for subsurface use is a title document, not a permit document. The provisions of the legislation on permits do not apply to the license for subsurface use.

Paragraph 2 of the commented article indicates that the Code on the Subsoil lays down the principle of "one license – one piece of the subsoil." Several subsurface plots cannot be issued under one license. This was done in order to ensure the most efficient use of the subsoil and simplify the administration of compliance with the terms of licenses.

Paragraph 3 of the commented article allows for the possibility of issuing an unlimited number of licenses for subsurface use. The exception is the prospecting license, which is issued only to individuals.

Paragraph 4 of the commented article indicates that licenses are issued at the request of the person concerned. This means that, as a general rule, granting the right to subsurface use under a license does not involve competitive procedures, i.e. the so-called principle of the first application is implemented. Exceptions to this rule are provided for in transitional provisions and are temporary (see art. 278 of the Subsoil Code). The application must be submitted in a form approved by the competent authority.

Paragraph 5 of the commented article implements the principle of accessibility of information in the field of subsurface use (see the commentary to Article 7 of the Code on Subsurface Resources). The issued license is subject to publication on the Internet resource of the state body that issued the license on the day of issue.

Paragraph 6 of the commented article provides for the maintenance of a register of issued licenses by the state body that issued the license, which is necessary to record information about the license holder and the imposed encumbrances. The data is entered in the registry for accounting purposes of issued licenses.

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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