Business сalls for аmendments to the draft law on mining waste

06/ 12/ 2024

On 4 December, the Verkhovna Rada Committee on Environmental Policy and Nature Management discussed Draft Law No. 12180 on mining waste. The European Business Association welcomes the initiation of active discussions on this legislative initiative. At the same time, the EBAs experts have highlighted several contentious issues, the neglect of which could significantly and adversely affect both the development of the mining and metallurgical complex (MMC) and the economy as a whole. Specifically, five main problems have been identified. Increased Fiscal Burden on the Same Tax Base If the draft law is adopted in its current form at the beginning of 2025, businesses will, within six years (by 2031), be required to pay both a tax on mining waste disposal for all volumes of mining industry waste and financial provisions for waste facilities. This will inevitably lead to higher production costs and prices, with potential negative economic consequences, such as increased final product costs, production downtime, or closures due to economic unprofitability. It is also important to note that unlike other economic sectors, subsoil users cannot relocate or move their operations. They remain in local communities, contributing to Ukraine’s economy and supporting local and state budgets. Thus, increased mining costs will likely result in higher prices for consumers, particularly for utilities (e.g., natural gas), and potential reductions in budget revenues due to production declines. Notably, the version of the draft law previously released for public consultation included a provision delaying its implementation until amendments were made to the Tax Code to repeal the waste disposal tax. This provision was welcomed by the business community as a positive signal for a balanced policy to support domestic producers. Therefore, we propose returning to the previous version and amending the transitional provisions to ensure that the financial provision norms only take effect after the Tax Code is amended to abolish the environmental tax on mining waste. Increased Bureaucracy Due to Duplicate Reporting The draft law proposes requiring operators to submit notifications on the transfer of mining waste. However, under current legislation, operators already include the volume of waste transferred and the recipient in their waste declaration. It would be reasonable to remove this requirement. Disproportionate Fines for Violations of the Draft Law The proposed fines are calculated based on the monthly minimum wage at the time of the fine, rather than the traditional untaxed minimum income. This approach lacks a reasonable justification, with fines ranging from UAH 160,000 to UAH 480,000 per violation, which could include minor infractions like late report submissions. Additionally, under Paragraph 5 of the same article, repeat violations within a year would result in doubled fines, reaching UAH 320,000–960,000. Inadequate Consideration of Oil and Gas Waste Management Specifics The draft law fails to define or ambiguously interprets terms such as “drilling sludge pits” and “neutralisation.” This could force oil and gas companies to use the sole pitless drilling method, requiring waste transfer to specialised facilities for further management. However, Ukraine lacks a sufficient number of specialised facilities and landfills for managing non-hazardous waste, which could increase the cost of oil and gas extraction and further raise consumer prices. Duplicated Permit and Renewal Stages for Mining Waste Facilities The draft law introduces requirements for cross-border consultations in cases covered by Ukraines international agreements ratified by the Verkhovna Rada. These consultations effectively duplicate the cross-border environmental impact assessments (EIAs) conducted during the EIA process. We propose either removing these provisions or allowing for prior EIA assessments to be considered during the permit process for mining waste facilities. The ЕВА urges the Committee to revise the draft law to address business community proposals.

On 4 December, the Verkhovna Rada Committee on Environmental Policy and Nature Management discussed Draft Law No. 12180 on mining waste.

The European Business Association welcomes the initiation of active discussions on this legislative initiative. At the same time, the EBA’s experts have highlighted several contentious issues, the neglect of which could significantly and adversely affect both the development of the mining and metallurgical complex (MMC) and the economy as a whole. Specifically, five main problems have been identified.

Increased Fiscal Burden on the Same Tax Base

If the draft law is adopted in its current form at the beginning of 2025, businesses will, within six years (by 2031), be required to pay both a tax on mining waste disposal for all volumes of mining industry waste and financial provisions for waste facilities. This will inevitably lead to higher production costs and prices, with potential negative economic consequences, such as increased final product costs, production downtime, or closures due to economic unprofitability.

It is also important to note that unlike other economic sectors, subsoil users cannot relocate or move their operations. They remain in local communities, contributing to Ukraine’s economy and supporting local and state budgets.

Thus, increased mining costs will likely result in higher prices for consumers, particularly for utilities (e.g., natural gas), and potential reductions in budget revenues due to production declines. Notably, the version of the draft law previously released for public consultation included a provision delaying its implementation until amendments were made to the Tax Code to repeal the waste disposal tax. This provision was welcomed by the business community as a positive signal for a balanced policy to support domestic producers. Therefore, we propose returning to the previous version and amending the transitional provisions to ensure that the financial provision norms only take effect after the Tax Code is amended to abolish the environmental tax on mining waste.

Increased Bureaucracy Due to Duplicate Reporting

The draft law proposes requiring operators to submit notifications on the transfer of mining waste. However, under current legislation, operators already include the volume of waste transferred and the recipient in their waste declaration. It would be reasonable to remove this requirement.

Disproportionate Fines for Violations of the Draft Law

The proposed fines are calculated based on the monthly minimum wage at the time of the fine, rather than the traditional untaxed minimum income. This approach lacks a reasonable justification, with fines ranging from UAH 160,000 to UAH 480,000 per violation, which could include minor infractions like late report submissions. Additionally, under Paragraph 5 of the same article, repeat violations within a year would result in doubled fines, reaching UAH 320,000–960,000.

Inadequate Consideration of Oil and Gas Waste Management Specifics

The draft law fails to define or ambiguously interprets terms such as “drilling sludge pits” and “neutralisation.” This could force oil and gas companies to use the sole pitless drilling method, requiring waste transfer to specialised facilities for further management. However, Ukraine lacks a sufficient number of specialised facilities and landfills for managing non-hazardous waste, which could increase the cost of oil and gas extraction and further raise consumer prices.

Duplicated Permit and Renewal Stages for Mining Waste Facilities

The draft law introduces requirements for cross-border consultations in cases covered by Ukraine’s international agreements ratified by the Verkhovna Rada. These consultations effectively duplicate the cross-border environmental impact assessments (EIAs) conducted during the EIA process. We propose either removing these provisions or allowing for prior EIA assessments to be considered during the permit process for mining waste facilities.

The ЕВА urges the Committee to revise the draft law to address business community proposals.