The head of the State Service of Geology and Mineral Resources spoke about changes in the field of mineral extraction, simplification of bureaucratic procedures, and drew attention to electronic documentation and updated classification of reserves according to international standards. A court decision is mandatory for the termination of a special permit. A subsoil user can defend its interests in court. Read an exclusive interview with the Head of the State Service of Geology and Subsoil of Ukraine Oleg Gotsynets for the Amber Galbin group of companies.
Legislative changes, judicial protection and new initiatives
- How have the amendments to the Subsoil Code of Ukraine adopted in 2022 affected mining?
Amendments adopted in 2022 increased the efficiency of subsoil use and enabled users of amber, oil and gas, and other subsoil to protect themselves from bureaucratic procedures.
Firstly, the possibility of alienation of special permits. A subsoil user who holds a special permit can transfer it to another owner under a simplified procedure with a minimum package of documents. This makes it possible to attract investors and restore areas where no production was previously carried out.
The second is a change in the procedure for suspending a special permit, when suspension is possible in most cases on the basis of a court decision. Previously, a special permit could only be suspended by an order of the State Service of Geology and Mineral Resources. Now the subsoil user has the opportunity to defend its position in court. A court decision to suspend a special use permit is binding.”
- Can the courts make different decisions in similar cases - or even those that contradict the law? (Article: Case law on subsoil use rights.)
“It's hard to estimate, because the judicial system is not homogeneous. There may be such cases. Courts are different, of different instances, and a subsoil user can justify its position in the first instance, in the cassation court, and in the Supreme Court. We need to look at the decisions for each specific case. It is difficult to comment on judges” decisions, because it is not my competence."
- What changes in mining are proposed by the State Service of Geology and Subsoil?
“We are currently discussing a model of amendments to the Subsoil Code of Ukraine with many associations. In particular, the Verkhovna Rada Committee headed by Oleg Bondarenko is initiating these changes. We have already held discussions at the level of the Ministry and the State Service of Geology and Subsoil on extension of the special permit validity period after the termination or lifting of martial law. It is proposed that after the end of hostilities, subsoil users should be granted two more years to complete the work program, after which the subsoil user either extends the validity of its special permit (if necessary) or obtains a new special permit.
Also, to amend the procedure for holding auctions - to allow the competition is held in the presence of one participant, if there are no other applicants. After all, now because of мIf a collusive agreement is detected, court cases are initiated, which may result in the invalidation of the special permit. The innovations will allow one participant to initiate and obtain a permit under the procedure, even if the other participant does not appear.
But these decisions must be made by the Verkhovna Rada.”
Electronic documents and inventory valuation updates
- Is it possible to simplify bureaucracy? What do you think about updating the extraction mechanism?
“Ukraine, in particular the State Service of Geology and Subsoil, has already made significant progress in simplifying procedures and moving away from the Soviet system to international standards. One example is the update of the classification of inventories according to international standards, which will allow attracting foreign investors at auctions and tenders for production sharing agreements (PSAs).
Starting in 2023, we have also introduced the possibility of applying for the granting, extension and amendment of in electronic form. Now there are no paper applications - neither to extend a special permit nor to obtain a new one. Also, the special permit is issued electronically, with minimal human intervention.
In terms of inventory valuation, everything depends on the type of field.
For oil and gas, you definitely need to make an assessment, because you produce and after three years you realize that those reserves are probably gone.
For amber deposits, it may be necessary to find a different approach to reserve estimation. But it is necessary to understand the extraction process, because some subsoil users produce, while others do not during the term of the permit.
Now, according to the regulations, before starting pilot development, it is mandatory to do the following preliminary assessment of reserves and account for the reserves in the State Balance of Mineral Reserves, which was not the case before. After that, at the stage of industrial development, the reserves must be approved.
I understand that The amber industry has its own problems - They need to be raised and resolved at the legislative level.
I am open for discussion.”
Simplification of mining, new technologies
- Is it possible to simplify bureaucracy? What do you think about updating the extraction mechanism?
“Over the past five years, we have not been able to conduct inspections of the State Geological Survey - First, COVID, then three years of war. Therefore, we do not know the situation fully. We receive information mainly from subsoil users. To confirm or deny it, audit of subsoil areas is required - This has already been stated by the President and the Cabinet of Ministers. We are working in such a way as not to burden businesses with unnecessary inspections during the war, but problems need to be identified and solved together.
I think simplification is necessary, but we need to dive deeper - not just into amber, but into all minerals. One of the rules adopted in 2024: the subsoil user is obliged to conduct assessment of reserves before pilot development. But at the scientific conference, they said that reserves should be assessed without doubling. On the one hand, yes, on the other hand, no. We need to look into it in detail. Maybe, It is worth separating the approaches: one mechanism for some areas and another for other types of minerals.
We need a dialog between subsoil users and the authorities.”
- How do you feel about alternative methods of amber extraction, in particular, hydromechanical extraction, which is used in Poland?
“This should be a joint effort. The more subsoil users and the state talk openly about the problems, the faster we will reach compromises and build an evidence base for attracting investment. I agree: We need to change approaches and engage new technologies - Poland does use others. But you need to understand who holds the special permits, what level of investment they have, where they get their money from, what their working capital is; whether they have opportunities during the war or will have them later. It all depends on the enterprise model - the owner of a subsoil plot, which can use certain technologies to extract amber.”
Powers of the State Service of Geology and Mineral Resources and enterprises of various forms of ownership
- How do you assess the role of the State Service of Geology and Subsoil in the process of approving sites before putting them up for auction?
“The State Service of Geology and Mineral Resources is a body that does not formulate policy, but implements it. We are functionally limited. The procedure is quite simple: the applicant submits documents for a special permit, we analyze them, check for overlap with other areas, and pass them on to the Ministry, where A working group has been set up. It is she who decides on the approval of the site, The State Service of Geology and Mineral Resources does not participate in this group.
This raises issues related to forests, nature reserves, environmental impact assessments, access to rivers, and protected areas. These issues are considered by the commission, which makes a decision on whether the project is approved or not. We get only the result. We have no other mechanisms of influence.
I understand that there are complaints from subsoil users, because we are often talking about forestry lands, which have their own restrictions. But this is a question for other central authorities and ministries - they are responsible for this area.”
- What form of ownership is more effective for developing enterprises: private or municipal?
“Once upon a time, everything in the state was state-owned, and utilities were financed from the budget. Now there is no such funding, especially in the last five years. Utilities are on the verge of survival because they have limited resources and receive almost no support from the state.
Very It is difficult to attract investment in a utility company - It must be fully transparent and comply with international standards: in legislation, in the valuation of reserves, and in labor protection.
Therefore, we need a draft law that will transfer all state-owned enterprises to new forms - joint-stock companies, limited liability companies or non-profit enterprises. But non-profit enterprises mean a return to budget funding. In a time of war, public funds are primarily needed for the country's defense, so This model is unlikely now.
If we compare the models, then it is easier for private enterprises to operate. They can purchase equipment in two or three days, hire employees in a few days, while municipalities are required to go through the Prozorro procurement system, which can take months.
But there are also successful utilities. It depends on the manager, its vision and ability to organize processes. However, in general, the private sector has an advantage, as it can raise its own capital to develop, upgrade and expand production.”