Pending legal issues hamper effective utilization of mineral resources
THE BONE OF CONTENTION
Pending legal issues hamper effective utilization of mineral resources
Over the entire recent decade, artificial deposits and artificial (man-made or secondary) raw materials have been the issues of public notice in Ukraine. Various people wrote and said a lot about their utilization.
Today, both the executive authorities and entrepreneurs continue to consider waste as the source of resources. However, not too much waste is recycled and salvaged so far. Why is that? No doubt, one of the reasons for that lies in the general economic crisis and insufficient financing of geological prospecting in particular. The other, to our mind, is connected with uncertain legal status of artificial deposits. Besides, the effective Ukrainian legal acts that regulate mining operations and environmental issues are not too consistent, and some legal norms are incomplete. Therefore, they create a legal conflict when identifying the status of industrial waste and refuse as artificial deposits.
This unclear situation has resulted recently in a number of disagreements when determining the right of waste ownership and considering some disputes in court. Notably, this refers to waste of Dneprospetsstal mill and to landfill waste storage Balka Serednya placed in Zaporizhzhya. The situation became very complicated when the Cabinet of Ministers of Ukraine issued an unprecedented order on 21.08.2000. The order says, “Zaporizhzhya Regional State Administration together with law-enforcement authorities shall undertake urgent measures to ensure that industrial waste, which has been accumulated at the premises of Balka Serednya artificial deposit, is retained in the State ownership, as well as to back mining activities, and protect the rights of a lawful user of this deposit, which was defined as a result of the tender titled Geological Prospecting, Including Exploratory and Commercialization of Artificial Deposit Balka Serednya (held on September 20, 1999)". Further, the order establishes that it is necessary to improve the laws and by-laws, which regulate the order and conditions for recognition of industrial wastes as artificial deposits.
Today, laws and by-laws that regulate exploitation of artificial deposits comprise the Decree of Ukraine’s President on Geological Prospecting and Order of Exploitation of Artificial Mineral Deposits (dated 30 December 1993), Ukraine’s Code on Subterranean Resources (of 27 July 1994), and the Law on Waste (of 5 March 1998).
The presidential decree and other legal acts define the term of “artificial deposits” as “places where wastes of mining, concentration, and treatment of mineral raw materials have been accumulated, provided that these stocks were examined, appraised, and acknowledged suitable for commercial use” (Code of Ukraine on Subterranean Resources) or as “wastes of mining, concentration, and treatment of mineral raw materials that have been geologically prospected in due order, appraised, and acknowledged suitable for commercial use”. As one can see, the difference between these two is the wording only.
The decree also rules that artificial deposits of mineral resources shall be included in the State Fund of Deposits, and that “the fact that wastes have been attributed to…. artificial deposits of mineral resources does not imply any changes in the established legal order of payments for placement of these wastes in the environment.” The latter should be regarded as the first element of the arising legal conflict.
Thus, the essence of definition of “artificial deposits” can be understood by the following three requirements to waste accumulating units:
they should relate only to the sphere of mining, concentration, and treatment of mineral inventories;
special studies and value appraisal should take place;
their suitability for commercial use must be established.
Such an aspect as “suitability for commercial industrial use” is directly related to the natural deposits of mineral inventories as well. The latter are defined as “accumulations of minerals… suitable for commercial use by virtue of their quality, volume, and bedding conditions” (article 5 of the Code). Therefore, both natural deposits (in depth) and waste storage places obtain a status of deposits only provided that their suitability for commercial use (in terms of quality, quantity, and accessibility) has been determined. Only in case resources have been defined as commercial, the respective deposits, including artificial ones, are included in the State Fund of Mineral Deposits. The preliminary appraised objects are only regarded as provisions of this fund.
The Code, in particular, mentions that enterprises are to “ensure placing, registration, and storage of industrial waste, which contain valuable elements and are not temporary utilized”. The same responsibility is envisaged when making designs of mining and processing facilities.
Inclusion of artificial deposits in the State Fund of Mineral Deposits, which is provided for both in the President’s Decree and in Ukraine’s Code on Subterranean Resources (article 5), makes these deposits a property of the State. This means that general principles of the mining laws are applicable to these deposits. Therefore, they are subject to all the corresponding by-laws, e.g., those regarding licensing, conveyance of information, statutory accounting, granting of dumps, transition to industrial development, etc.
The Law of Ukraine on Wastes passed in 1998 provides for full responsibility of waste-generating enterprises for placement of waste, deactivation, recycling, and environment-safe disposal. Wastes can be owned by Ukrainian citizens, foreigners, stateless persons, enterprises, establishments, and organizations of any legal ownership, regional associations, the Autonomous Republic of Crimea, and the State. Thus, enterprises that produce wastes are defined as their owners, which is a legal base for their responsibility as to safe operations with wastes.
The State owns the wastes of state-owned enterprises. In case such enterprises, where particular quantities of waste have been accumulated, are privatized, ownership over waste is passed to the new owners. Wastes that do not have owner, or their owner is unknown, are considered abeyant, thus becoming property of the State. At the same time, enterprises are responsible for determining content of wastes and ways of their possible salvation, storing valuable wastes, ensuring that they are not deteriorated, and searching for recycling and salvation technologies.
Therefore, a variety of waste ownership patterns and some other norms set by the Law on Wastes essentially contradicts the status of artificial deposits as the exclusively state-owned deposits (in compliance with Ukraine’s Code on Subterranean Resources). This situation may possibly result in alienation of valuable wastes from enterprises, and the latter may be incapacitated from use of these wastes. It is well understood that legal conflicts arise right at the moment when wastes are defined as suitable for commercial (industrial) use: on the one hand, this definition should be made by an enterprise; on the other hand, it leads to enterprise’s losing its titles for valuable wastes.
Legislative contradiction of the situation may cause a number of negative consequences as follows:
enterprise may back off financing and assessment of commercial value of wastes since this is connected with the risk to lose ownership over these assets;
other business entities may resist execution of these works;
alienation of valuable industrial wastes from an enterprise by giving them a status of artificial deposits may be initiated (in particular, to satisfy commercial interests of the other interested parties);
an enterprise may still remain responsible for waste (including fees and charges for dumping) even after it has lost the ownership right.
The aforementioned aftereffects are not just theoretical presumptions. Some of these schemes have already been revealed and tested in practice, leading to disputes and litigations. It is clear that lack of a thoroughly drafted legal act facilitates ad hoc interpretations of legal norms regarding treatment of waste dumps as artificial deposits and also leads to breaches of the established order of transferring explored mineral deposits to commercial use (Regulation No.114 of the Cabinet of Ministers of Ukraine dated 14 February 1995).
It is possible and desirable to avoid these clashes without amending the relevant legal acts, taking into consideration the time-consuming character of this procedure, as well as the fact that concept on the State ownership of artificial deposits should be beyond objections.
I would like to stress that, the corresponding effective by-laws make rather formal mentions of artificial deposits and do not consider their specific features as of the sources of raw materials. However, artificial de[posits will become more prominent in the future as they will form a more extensive alternative to natural resources.
Therefore, it is advisable to assemble all additional requirements in one single Regulation on Artificial Mineral Deposits (or Regulation on the Order of Defining Industrial Wastes as Artificial Deposits).
I would like to add that, within the framework of measures mentioned by the National Program for Disposal of Manufacturing and Consumption Wastes till 2005, there has already been launched elaboration of the Methods of Geological Prospecting and Appraisal of Wastes as Artificial Deposits, and methodological aspects of geo-economic assessment of wastes.
Besides, one cannot ignore steps that have already been undertaken to create a preferential (stimulating) regime of exploiting artificial deposits (mining industrial wastes). For instance, Regulation No.1014 of the Cabinet of Ministers of Ukraine (dated 12 September 1997) on Adoption of Basic Norms of Payments for Use of Subterranean Resources for Mining and on Order of Charging Fees for Use of Subterranean Resources for Mining establishes the following points:
while developing artificial deposits, basic payments fees charged for specific types of mineral inventories are to be halved;
in case an artificial deposit has been formed as a result of enterprise’s manufacturing operations, the enterprise shall not be charged for the deposit’s development;
payments for use of subterranean resources are not due if one applies mineral processing wastes, which have been formed during treatment of mineral resources (e.g., slime, slag, and dust), and utilizes waste and overburden rocks that have not been duly registered and taken into account.
The same relates to payments for geological prospecting. Pursuant to the Regulation No.115 of the Cabinet of Ministers of Ukraine (dated 29 January 1999) on Adoption of the Procedure for Establishing Norms of Charging for Geological Prospecting…, in case artificial deposits are developed, fees for the executed geological prospecting are reduced by half the same way as those carried out in respect of similar natural deposits.
The main issues of legal regulations must, to our point of view, be based on preferential rights of waste-generating enterprises when addressing to give these wastes an artificial deposit status. Along with that, it is necessary to foresee all the possible situations, considering that waste dumps may be individual (owned by one enterprise), or collectively owned. The latter, in turn, are divided into following groups: those that are run by two or more enterprises on cooperative basis, and those that belong to business entities or utility service companies (and form communal property). There is also another separate group, namely, waste dumps with unknown, undefined, or non-legally-registered owners (e.g. when enterprises are liquidated or restructured without proper registration of assignment, etc).
The most important items of an artificial deposit status, which should be incorporated in the corresponding by-laws, are as follows:
procedure (order) of geological appraisal of wastes, assessment of their commercial value (based on their quantity, quality, and mining conditions), and granting of the artificial deposit status to waste dumps (along with introduction of a category of preliminary appraised artificial deposits, and artificial deposits, which are covered by the established procedure for examination and approval of stocks, and the like);
preferential right of waste-generating enterprises to obtain licenses for exploitation of these wastes, in case the dumps are recognized as artificial deposits. In other words, such enterprises should be issued licenses on preferential basis, and no bids should be held irregardless availability of other bidders (the transfer procedure without issuance of licenses is also an alternative);
special terms for registration of rights for exploitation of artificial deposits, in case there are two or more owners of waste dumps;
prerogatives of local authorities regarding waste dumps that related to communal property;
preferential rights for waste dumps to be given to waste disposal businesses, in case these dumps are acknowledged suitable for commercial applications;
procedure of issuing special permits (licenses) for use of artificial deposits;
when issuing licenses, special conditions of artificial deposits’ use must be set in place for the sake of rational and effective development;
procedure of granting mining terraces and requirements for terrace design;
procedure of transfer of prospected artificial deposits for industrial utilization;
application of the schedule of state geological control and state geological supervision to artificial deposits;
procedure of arranging with waste-producing enterprises, in case a tender is announced with regard to respective artificial deposits to sign contracts on use of subterranean resources (in compliance with regulation No.841 adopted by the Cabinet of Ministers of Ukraine on 8 June 1998).
COMMENT
V. SUKHAREV, UkrAPchermet, deputy executive director
The author of this article broaches several unsettled legal issues as regards exploitation of secondary materials.
As a matter of fact, domestic and industrial wastes contain much more valuable elements than natural raw materials do. If one stores different wastes separately and does not mingle these materials, the waste can be used without additional geological prospecting. Otherwise, prospecting is definitely required to determine justification of mining, thus consuming money and making secondary materials more expensive.
As regards the mining and metal industries of Ukraine, local metallurgical mills usually stock blast-furnace slag and steelmaking dross separately. Hence, it is economically justified to use slag, and that’s why lots of companies aspire to process and treat these materials.
On the other hand, manganese ore is mined together with claydite. The latter is blended with gob and becomes useless. One can fund examples to negligent storage of waste in the coal mining, energy, and other industries.
Tons of laws, regulations, and decrees have been issued to deal with these problems. Yet, the author has noticed that these laws and by-laws frequently contradict one another and fail to resolve the main task, i.e. effective use of domestic and industrial waste.
I believe that in this case we will have to revert to the old ways, when the highest executive authorities had a special body responsible for secondary materials use. This body supervised compilation of statistical reports on accumulation and utilization of these materials. There were put together the balances of accumulation and use of secondary materials instead of natural resources. Besides, this body drafted the most important bills and by-laws.
The today’s Ukraine has no such central executive bodies. Depending on the state of affairs, different governmental bodies contribute their time and efforts to settle various issues.
I think it would be sensible to give the necessary power to the Ministry for Ecological Safety of Ukraine in order to cope with the mentioned problems.
COMMENT
Alexander ALYOSHIN, director of secondary raw materials department with Ukrainian Association of Ferrous Metallurgical Enterprises, member of the Artificial Resources Coordination Board under the State Committee for Industrial Policy
It is easy to determine how civilized a State is by viewing the way it deals with the problem of rational and safe transactions with domestic and manufacturing waste, and protects the environment and the people from exposure to waste. Unfortunately, settlement of this problem in Ukraine remains an objective yet to be achieved. Both the State and the society must aim at completing this task. The principles of the Rio de Janeiro UN Declaration on environment and development declare that peace and environmental protection are interdependent and cannot be separated. The Declaration also states the necessity of adoption of effective national laws with regard to the environment.
Over the past three years, certain measures were undertaken in Ukraine as to elaboration of by-laws and methods of waste treatment. More than 10 by-laws have been worked out and approved. Therefore, it is understood that when the situation evolves so fast it is quite difficult to think everything over in detail. To a certain extent, this can serve as an excuse for a particular imperfection of legal acts in force now. To avoid such inconsistencies, it would be advisable to start training of legal experts in the field, who could participate in drafting of the related by-laws later on. Besides, when such by-laws are being drafted, experts from various ministries, departments, and enterprises should take part in debates on the drafts. For example, scientific conferences or inter-industrial meetings could be held. The authorities must coordinate these activities. As regards the latter, some favorable results have already been achieved in Ukraine. All important problems in the sphere of waste treatment are considered under the guidance of the Artificial Resources Coordination Board with the State Committee for Industrial Policy of Ukraine, and the secondary raw materials department that was founded within the Ukrainian Association of Ferrous Metallurgical Enterprises.
We are not going to provide here all the details on inconsistencies and discrepancies of certain laws and by-laws. However, it is necessary to determine whether all the valuable wastes that can be used as raw materials should be defined as artificial deposits, or a differential approach must be applied to consider business, economic, and ecological advisability factors. It seems that the latter is more preferable. Along with that, one must remember that, when considering such situations, it is necessary to always keep the balance between interests of waste-producing enterprises and of the State, which should stand for its national priorities in the sphere of efficient use of raw materials. No doubt, it is right to settle the existing legal conflicts with the help of standard legal procedures. This means that, if section VII of the Law on Wastes ordains the Cabinet of Ministers of Ukraine to submit proposals on changes of regulations that do not comply with this Law, this has to be done. Nonetheless, since such questions are not resolved completely so far at the legislative level, one can be guided by article 9 of the mentioned section of the Law on Wastes when establishing a right for ownership. The fact that mainly waste-producing enterprises are charged for dumping proves this.
Transfer (voluntary or forced) of valuable waste into the category of artificial deposits will lead to emergence of additional organizational procedures with regard to rational waste treatment and efficient salvation. In that case additional approvals of and charges for the right (license) for operations with waste, which are often produced by the enterprise itself, will become necessary. Additional “procedural” documentation will be accumulated, and the number of officials working with these documents will increase correspondingly.
In this regard, the following question arises. Is it advisable to give a status of artificial deposits to such units as huge slag dumps, commercial suitability of which has been well known for a long time, just to get insignificant incentives (i.e. an 0.5 coefficient) in payments for geological prospecting? Especially taking into consideration that, after these works are completed, the enterprise may lose its right of ownership over valuable waste. To our mind, there is no sense in all this.
If wastes are produced by two or more enterprises, any disputes between them related to the right of waste ownership shall be settled in compliance with article 21 of the Law on Wastes at the level of local executive authorities, which are responsible for territory of waste placing (storage). There is a civilized way that allows avoiding many conflicts in case business entities show interest in development of valuable waste deposits. Special tenders can be held with participation of experts, including those of environmental protection organizations. This has already been arranged at public joint-stock company Donetsk Metallurgical Works (Donetskiy metallurgiyny zavod).
In order to avoid many inconsistencies and discrepancies in general, it is necessary to clearly determine what is meant by waste, and what is meant by concomitant secondary raw materials produced during manufacturing processes or as a result of other activities of an enterprise. For instance, in compliance with the State Industry Standard (GOST) 17.0.0.05-95 “Unified system of Standards in the field of environmental protection and rational use of resources. Classification of waste”, wastes are defined as all non-purpose man-made products, which are not subject to further processing or utilization in a single technological cycle of the producing enterprise. Another authoritative international edition determines waste as substance or energy, which is valueless for the organization that has produced it. At a scientific conference for industrial waste disposal held in Mariupol in 1999, the author of this comment proposed to define waste as material formations not suitable for industrial application in regular technological processes and negatively affecting the environment.
Taking into consideration all the aforementioned, to prevent further interchange of definitions that lead to various discrepancies and legal conflicts, it is necessary to work out a Regulation on Secondary Raw Materials. Then, it is required to compile a list of these secondary raw materials and establish their worth, so that to apply the carrot and stick policy, including that from the State’s side. Then, many problems would be settled automatically. In the present-day conditions, it would be enough for an enterprise to have the corresponding technical conditions duly developed and approved in order to use these secondary materials. The existing laws and by-laws give an opportunity to do this. The State will win, since it will receive additional incomes to the state and regional budgets from operations in this sector of economy. To expedite the process and to obtain positive results in the sphere sooner, the State together with its executive authorities has to create the required preconditions and undertake corresponding measures to effectively draw secondary raw materials into the production process. One of the steps in the list can become a regulation of the Cabinet of Ministers of Ukraine ruling that:
Construction and road maintenance organizations shall be granted preferential right to use metallurgical slag and products made of them to execute the corresponding tasks. Simultaneously, development of natural stone deposits located close to metallurgical mills shall be limited;
Preferential railway and other transportation tariffs shall be introduced for transportation of products made of metallurgical slag or other secondary raw materials;
When transported across the border, slag coming from ironmaking and steelmaking and some other products made of secondary raw materials shall be excluded from the list of commodities that are subject to additional ecological control and charges;
To introduce ironmaking and steelmaking slag into the list of waste materials that enjoy tax incentives;
The Ministry of Economy shall work out a mechanism for target (preferential) replenishment of current assets of enterprises that are the potential users of secondary raw materials and that utilize these materials in their production processes.
the Metal