Mining rights policies and regulations under New Normal
—Q&A seminar by relevant departments from MLR
Source: www.mir.gov.cn Citation: www.agkyb.com Date: October 28, 2015
The CHINA MINING Congress and Expo 2015 held the session on special topic of “Interpretation of Mining Right Policies”. The relevant heads of Department of Mineral Development and Management, Department of Mineral Resources Reserves, Strategic Research Center of Oil and Gas Resources and Department of Cultivated Land Protection (all the above department are under Ministry of Land Resources, PRC)focused on the interpretation of new policies and new requirements of mining right management issued by Ministry of Land and Resources,PRC and promoted newly-issued measures of mining right management for the public convenience. The session also conducted interactive activities with mining right people and investors, and the heads of related departments on the spot gave answers to inquiries of the policies problems.
Q: Fluorite mine previously was the mineral with total production control. Are there any latest regulations or development trend on current fluorite mine?
Mr. Yao Huajun, Director-General of Department of Mineral Development and Management under MLR: MRL issued the “Notice on Control Index of Total Production of Highly-alumina Clay Minerals Fluorite Mine” in 2010 and firstly implemented the control management on total production of fluorite mine. The control at that year targeted at a total production of fluorite mine with 11 million tons (ore production), and now there is no longer for the implementation of total production control on fluorite mine. With regard to protective mining policy, it will be taken into consideration with our industry policy for establishment of a dynamic adjustment mechanism on a pilot basis in the future to gradually improve the examination and approval proceedings of protective mining minerals. The State Council also retained the examination and approval of protective mining minerals as an internal item in government during this approval system reform, and it is surely a hot issue. There actually are some relevant regulations on fluorite mine in other industry, but it is not the protective mining mineral any more. With the accelerating social process of post-industrialization, non-metallic minerals play an increasingly important role and Ministry of Land and Resources will also organize experts to have discussions on establishment of a dynamic adjustment involving more mineral types than fluorite mine.
Q: We faced relatively great confusion in running fluorite mine in the past and it was difficult to exactly grasp the establishment of mining right and exploration right and the regulations relevant to production quota. Please give a detail on the establishment of mining right and exploration right, and whether the relevant quota policies are similar to other minerals? Is there any special?
Mr. Bo Zhiping, Deputy Director-General of Department of Mineral Development and Management under MLR: The control management on total production of fluorite mine has been released currently. This control management has its origins at the year of 2009. Then, the economies including EU, the United State and Japan launched the proceedings against 13 raw materials in China under the framework of WTO. We chose two minerals including the fluorite mine in response to this lawsuit and started to manage total production control since 2010. China lost this lawsuit and lifted total production control.
Q: My question pertains to the policy of shale gas. If there is a requirement for drilling only a parameter well of shale gas, does it need to approved by Ministry of Land and Resources? Since there is a clear permission restriction to shale gas exploration and exploitation, what qualifications are required to the unit for application of drilling a parameter well of shale gas?
Mr. Zhao Xianliang, Director of Strategic Research Center of Oil and Gas Resources under MLR: We firstly have to be clear on a concept. Only the corresponding qualifications are required for a unit to obtain the exploration right or mining right. At present, Ministry of Land and Resources is considering setting free to the qualifications for exploration right of shale gas. The first round of bidding for exploration right of shale gas merely faced four corporations including CNPC, SINOPEC, CNOOC and Shaanxi Yanchang Petroleum Corporation. And the qualifications for application were adjusted during the second round of bidding for exploration right of shale gas. All units with qualifications of gas exploration (including coalbed methane and natural gas) are qualified. Thus, the second round of bidding for exploration right of shale gas witnessed a large amount of enterprises with coalbed methane exploration qualifications registering or participating the competitive bidding as operating representatives.
With regard to conventional oil and gas, its initial bidding pilot in Xinjiang has currently been conducted but cannot be totally cancelled since the prospecting license and mining license still require corresponding qualifications.
At present, Ministry of Land and Resources has adjusted relevant policies based on the consideration of laws and regulations and the need of reform. The open bidding for oil and gas exploration regions in Xinjiang did not make requirements on exploration qualifications, but the bid winner ought to select an exploration institution before exploration registration for a temporary qualification in Ministry of Land and Resources.
What qualifications are required for drilling the parameter well of shale gas depends on the specific behavior of drilling the parameter well. If it is merely a geological survey project, there is no need to apply the exploration right but a corresponding filing or application in local government department is required. If drilling the parameter well is purely a personal behavior, it may not be approved without any exploration qualifications.
Mr. Yu Haifeng, Director-General of Department of Mineral Resources Reserves under MLR: If the project of survey work is funded by finance, after being officially approved and replied, it can be drilled with permission of provincial departments of Ministry of Land and Resources. If the enterprise wants to drill the parameter well of shale gas with previously obtained oil and gas exploration right, it can be achieved through altering additional minerals. Except above two cases, it is the key for other enterprises to obtain the approval of provincial departments of Ministry of Land and Resources. Considering the complicated facts and different conditions, it is hard to simply decide whether it can be drilled or not.
Q: According to relevant state regulations, only the proved orefield financed by our country is allowed to charge for the mining right. In the past several years, the mining industry was in better situation and the mining enterprise did not particularly care about the assessment amount of the money paid for the mining right. However, in fact, there are many cases that the current documents or relevant materials are not very standard to fully evidence that the proved orefield is state-financed, which may cause the partial loss of state assets. Particularly, the enterprise who has obtained but not disposed the mining right has to pay for the charge with a large amount of money during alteration of mining mode. And the policies in all provinces (areas and municipalities) are different, what is the opinion of Ministry of Land and Resources on such issue?
Yu Haifeng: I have three points on this issue. First, according to our understanding in charge, the national finance investment on the geological survey project enables a valuable orefield formed or a valuable mine explored, which must reflect the right of national finance as an investor in the way of charge. However, in the practical work, all valuable orefields formed with national finance investment or vacant land without national investment in some provinces (areas and municipalities) are required payment and also called charge as long as they are remised. Therefore, a clear comprehension in the term of charge is required.
Second, we actually experienced such issues many times during the current audit and inspection tour in the field of mineral resources. Many officials in the system of Ministry of Land and Resources are arrested for involving the loss of state assets. With regard to the identification of criminal liability, both the auditing department and discipline inspection department ask for opinions of Ministry of Land and Resources. We insist on that if there is the investment based on national finance (including the central and local governments) and ore field or valuable ores are actually found, corresponding charge is surely required after the charge assessment of mining right. This system has never changed. However, the difficulty of this issue lies on whether the valuable ore field or minerals are found. It depends on the real historical materials at that time to prove whether they are drilled or conducted with heavy engineering and other works. Some surveys might happen in the 1950s and the workers in those previous projects cannot be found, which is hard to check and verify in this case and it merely depended on the current materials and numbered evidences. Charge is required if it is true, and charge is not required in the contrary situation. Of course this issue is hard to handle and it involves various interests from all parties.
Third, concerning charge assessment and its repayment, Ministry of Land and Resources is considering a number of new reform measures to relieve the pressure on enterprises for paying a large amount of charge, including installment payment or staged payment, or adjustment to payment with the varied mines income. The ultimate goal targets at resolving the issue in a way combined the consideration of actual difficulties faced by the enterprises with the protection on the authority of charge revenue. The system is under our study and has not shaped at present.
Q: There are still three questions to inquire. First, how to define the standard of “state-financed”? Second, with regard to the “state-financed”, the burden of proof should lie on the government. If the government fails to evidence the national finance investment amount and the already conducted survey on the involved valuable ore field, is it possible to consider that it is the government rather than the mining right people who cause the potential adverse effect? Third, at present, the installment payment on mining right charge is allowed within our policy. However, if the current charge is too high, a certain proportion of fund possession cost is surely charged in accordance with relevant regulations and the cost equals to the loan interest rate at the corresponding period. This is an extremely high financial cost, being the greatest financial pressure for every mine. Is there a better way to help the enterprises to resolve this problem and relieve the pressure?
Yu Haifeng: I want to talk the last question firstly. We are informed on the issue of financial cost that there is truly heavy burden on some domestic major enterprises of iron mine in this aspect and at least heavier than those in other countries around the world. The recent price of iron ore is lower and taxes and dues account for 37% of the whole income, which leads to great difficulty in continued running of the middle and small mines. Thus, it should be brought to the attention. Our preliminary idea is to work out a reasonable mechanism and adjust it with the market. In addition, a supportive policy for the enterprises is introduced in a special period, instead of blindly strict taxes or charges, to help the enterprise through this tough times.
The second question pertains to the fund possession cost. At the end of this year or so, Ministry of Land and Resources may shape an opinion on this issue and also on the previous mentioned issues—how to define the standard of “state-financed”? who will provide proof? What should do if there is a mass in explanation? —and on other issues.
Q: The latest document from Ministry of Land and Resources has mentioned the support to public entrepreneur and innovation and “land for new energy” are defined and explained in its content, with a special mention of the permission of leasing the photovoltaic land and the necessary formalities of construction land for farmland. Then, does the program of mutual supplement between agriculture and cultivation, fishery and cultivation require to go through the farmland formalities?
Mr. Yan Gang, Deputy Director-General of Department of Cultivated Land Protection under MLR: As regards photovoltaic land, our country has introduced a number of policies including growing rice and keeping fishes under the photovoltaic panel. Two groups are classified at present, the waste land which is directly access to and the cultivated land which is used in accordance with policies. In case of other new situations and new problems, it will be gradually worked out in the future.
Yao Huajun: This issues contribute great help to our work advancement, system improvement, reform deepening, services optimization and efficiency enhancement. At present, the mining industry has entered into a new development with new normal, new challenges and new opportunities, which also demands for higher way to develop and utilize the mineral resources. The transformation in development and utilization inevitably forces the birth of corresponding system and policies, even the adjustment, adaptation, supplement and improvement on higher laws and provisions. (Liu Aiying)
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