Legislation creating a regime for the exploration and production of coalbed methane has been adopted by Parliament and awaits the President's signature.

The law, which will come into force once officially published, introduces principles for safe production of coalbed methane as well as licensing and permit requirements and mandatory insurance of property against the risks of environmental damage.

The law will have a particular impact on Joint Implementation projects under the Kyoto Protocol involving the capture and use of coalbed methane.

One of the key measures in the new law is the requirement to obtain a special permit for companies carrying out coalbed methane exploration and production at existing coal mines, mines being prepared for exploitation and unexploited or abandoned coal fields. The only exemption is for those already holding a special permit for coal production with the right to produce coalbed methane as an accompanying mineral resource.

Special permits:

  • for vacant coal fields will be granted by auction, although any company which has conducted geological survey of deposits at its own expense is entitled to a special permit without having to undergo the auction procedure
  • for existing mines may be issued to the holder of the special permit for coal production or, with their written consent, to another company (which must then enter into an agreement for methane exploration and production with the coal production permit holder)
  • for unexploited or abandoned coal fields may not be granted for a period exceeding 20 years

The tariff for transporting coalbed methane through Ukraine's Unified Gas Transportation System will be set by Ukraine's National Energy Regulation Commission

There will be various tax incentives and state guarantees to encourage coalbed methane exploration and production. In particular, income obtained from coalbed methane exploration and production will be exempt from taxation until 1 January 2020.

In addition, a licence will be required for activities such as coalbed methane supply and storage, as well as the construction, reconstruction and maintenance of exploration installations.

Law: the Law of Ukraine "On Coal Mine Gas (Methane)" dated 21 May 2009

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

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The original publication date for this article was 12/06/2009.