RUSSIA DETAILS TIMETABLE, PROCEDURES TO IMPLEMENT RESOURCES CODE

The Russian Supreme Soviet last month issued a decree that outlined a timetable and procedure for enacting the country's new underground resources code. The decree also establishes parameters of that code and details division of revenues from underground resources exploration and development. Whether the overall goals of the decree will be met is unclear, but certain deadlines already have passed.

March 16, 1992

3 min read

The Russian Supreme Soviet last month issued a decree that outlined a timetable and procedure for enacting the country's new underground resources code.

The decree also establishes parameters of that code and details division of revenues from underground resources exploration and development.

Whether the overall goals of the decree will be met is unclear, but certain deadlines already have passed.

TIMETABLE

The decree, issued under the signature of Supreme Soviet Chairman R.I. Khasbulatov, instructs the Committee on Legislation by Apr. 1, 1992, to propose to the Supreme Soviet revisions to existing law so it conforms with the draft of an underground resources law proposed early in February.

The decree requires the Russian government to set minimum rates of payment for rights to use underground mineral resources in each developed field. Payments are to be assessed from "active extractive enterprises" beginning in March.

By Mar. 1, the Committee for Geology and Useful Resources was to have drafted and submitted to the Supreme Soviet regulations governing licensing of underground resources. Before July 1, the committee is to assure resource developers receive appropriate licenses.

Officials of Arthur Andersen & Co. said the process could be complicated by calls from members of Russian President Boris Yelstin's government to amend portions of the underground resources draft.

PROPOSED LAW

As proposed in February, Russia's underground resources law would:

Ensure the social, economic, ecological, and development rights and obligations of underground resource developers with regard to the interests of the Russian people and jurisdictional agencies.
Empower republics, areas, regions, and autonomous entities to regulate uses of underground resources, determine amounts and forms of taxes and other payments to be collected, and conclude contracts with foreign entities for underground resource use.
Allow 5 years for exploration of underground resources and 20 years for extraction, with options to extend available to the developer.
Require licenses to specify the purpose of underground resource development, boundaries of development sites, license periods, payment conditions, approved levels of production, and manner of distribution. Either the state or licensee could terminate licenses.
Impose fees for rights to prospect and explore for underground resources based on location and size of the development area, type of resource, length of agreement, and extent of prospectively and for rights to extract underground resources based on the type, volume, and quality of resource as well as estimated risks and geographical, technical, and economic conditions.
Allow cities to impose limits on development of underground resources within their jurisdictions to mitigate potential threat to life, health, property, or the environment.

DIVISION OF REVENUE

The proposed underground resources law would allow a city to receive all payments for rights to explore on its territory.

Payments for production of onshore hydrocarbons and precious metals would be distributed 60% to the federation, 30% to republics, territories, regions and autonomous units, and 10% to cities. Seventy percent of payments for production of resources from territorial waters would go to the federation and 30% to republics, territories, regions, and autonomous units.

All revenue, including lease payments, for use of underground resources developed on Russia's Outer Continental Shelf would go to the federation.

Producers of underground resources also would pay an excise tax to the federation.

Part of the revenue from production of resources underlying settlements of native peoples or ethnic groups would be used for their social and economic development.