The Mazhilis of the Republic of Kazakhstan has approved the draft Code on Subsoil and Subsoil Use

According to the correspondent of Interfax-Kazakhstan Agency, the draft Code “On Subsoil and Subsoil Use” has been approved by the Mazhilis of the Parliament of Kazakhstan during its second final reading in the plenary session.

As earlier reported, the project of the Code involves the introduction of the international system of mineral reserves reporting standards and a simplified method of making contracts in subsoil use. The new Code is aimed at the systemic approach to all existing regulations in the field of subsoil use, which, in turn, will make the industry more attractive to investments.

In the course of the second reading of the draft, deputies of the Mazhilis made a number of amendments, including: establishing accountability for a violation of obligations prescribed by the respective subsoil use licenses and contracts; clarifying justifications for asserting the non-validity of subsoil use licenses, and other relevant matters.

As already communicated, the new Code envisages a priority right of the government to the production of uranium through the national company “Kazatomprom”, providing that the share of the national company in any joint venture shall be not less than 51 %.

Earlier, the Vice-Minister of Energy, Makhambet Dosmukhambetov, said: "Uranium, as a raw product, has a strategic importance for Kazakhstan. In this regard, we should continue to take adequate measures of the governmental control over its production and overall mining of the uranium deposits and in doing so adhere to a very rational approach. This is the main reason why uranium has been singled out of the list of hard rock minerals and received a separate section in the Code”.

Other additions to the Code include: the introduction of the Australian model of granting the right to subsoil use which is based on the “first come, first served” principle, changeover to the international system of the mineral reserves calculation, disclosure of the geological information, development of the state reserves management program, regulations on the production of uranium and coalbed methane, promotion of the artisanal mining of subsoil assets.

Granting the right to subsoil use in the field of hard rock minerals will be also simplified through the mechanism of licensing, priority will be given to the environmental and occupational safety in all operational activities of subsoil use, certain steps will be taken to bring more investments to the sector of processing of solid minerals, and also a number of regulatory issues related to the underground water production will be referred to the water legislation.

Furthermore, this draft law is aimed at providing stability of the terms of subsoil use through establishing certain provisions in the reference documents which regulate the contents of the respective licenses and contracts. The Code also defines those objects related to the right of subsoil use and a number of circumstances which eliminate the requirement for the approval from the competent authority to transfer the right to subsoil use and objects related thereto.

The Code introduces a notion of “widespread mineral resources” to replace the term “basic construction materials”. It also gives a precise list of those mineral resources which are deemed to be widespread.

Besides, it sets the responsibility for a violation of the obligations prescribed by the subsoil use licenses and contracts, clarifies some norms related to the licensing and permitting procedures for filing a license application to exploration and production of solid minerals, and handles a number of other matters.

Several amendments, which offer the introduction of the national operator which would liquidate consequences of subsoil use, provide for the stability of the terms of subsoil use, evaluate justifications for the revocation of licenses on the exploration of solid minerals, regulate mining activities concerning the widespread mineral resources, have been submitted to the review of the Government.

Legal norms of the draft Code have been harmonized with the provisions of another draft Code “On Taxes and Obligatory Payments into the Budget” (the Tax Code).

The affiliated draft law “On the Introduction of Amendments and Supplements to Some Legislative Acts of the Republic of Kazakhstan on Subsoil Use Issues” has also been adopted by the Mazhilis during its second reading.