The State Geology and Subsurface Service of Ukraine ("Geonadra") amended the existing subsurface monitoring procedure on 6 June 2012, when it adopted Order No. 255 "On Amendment of Orders of the State Geology and Subsurface Service of Ukraine No. 155 of 16 November 2011 and No. 44 of 15 February 2012" (the "Order"), which came into operation immediately upon adoption.

The amended procedure affects all subsurface users, performing activities under special permits for subsurface use, which activities are subject to monitoring and scientific support by accredited state companies. Under such procedure each subsurface use facility will need a special monitoring and scientific support program drawn up for it. The monitoring will be carried out under a works agreement by specially accredited organizations, which will have to submit monthly reports on their work to Geonadra.

As indicated in its name, the Order introduced amendments and supplements into: (i) Geonadra Order No. 155 "On Approval of the Regulation on the Performance of Monitoring and Scientific Support of Subsurface Use" of 16 November 2011, and (ii) Geonadra Order No. 44 "On Approval of Methodological Recommendations on the Performance of Monitoring and Scientific Support of Subsurface Use" of 15 February 2012.

Under the changes introduced by the Order, monitoring and scientific support are to be performed under monitoring programs drawn up for each subsurface use facility in accordance with (and as a part of) relevant programs of works of a subsurface user set forth by an agreement on terms of subsurface use. Monitoring and scientific support is to be conducted under an agreement for performance of works (previously called a services agreement), the form of which was also amended by the new Order.

As follows from the introduced changes, in order to conclude an agreement on monitoring and scientific support works subsurface users shall apply to Geonadra and such application shall be considered by the Section of the Scientific and Technical Council of Geonadra on Monitoring and Scientific Assessment of Subsurface Use.

The Order had also simplified the procedure for assigning specialized state companies and organizations performing monitoring and scientific support. These companies are selected by the Section of the Scientific and Technical Council of Geonadra on Monitoring and Scientific Assessment of Subsurface Use depending on their statutory targets, specialization, the scope of works to be performed, type of minerals, location of subsurface plot, type of subsurface use, terms for performance of the program of works of the subsurface user, the possession of primary geological information by a specialized state company etc.

Under the new rules specialized state companies are obliged to submit monthly reports on the performance of concluded agreements on monitoring and scientific support to the Section of the Scientific and Technical Council of Geonadra on Monitoring and Scientific Support of Subsurface Use. The form of the monthly report was also set by the new Order.

Additionally, the Order introduced a list of specialized state companies and organizations accredited to perform monitoring and scientific support, including State Company "Pivdenniy Ecologo-Geologichniy Centr", Public Joint Stock Company "National Joint Stock Company "Nadra Ukrainy", State Commission of Ukraine on Mineral Reserves, State Geophysical Enterprise "Ukrgeophizyka" and the Ukrainian State Institute for Geologic Surveys.

Please note that under the changes introduced the monitoring and scientific support of subsurface use shall be paid for in accordance with the terms of the agreement on the conditions of subsurface use. The cost of such works, in particular for subsurface use for geologic exploration, shall be calculated on the basis of the program of works (not the exploration project as previously).

Additional notes
This LEGAL ALERT is issued to inform Baker & McKenzie clients and other interested parties of legal developments that may affect or otherwise be of interest to them. The comments above do not constitute legal or other advice and should not be regarded as a substitute for specific advice in individual cases.