Russian Natural Resources and Environment Minister Alexander Kozlov: We need to make it so no one wants to violate environmental laws
Photo: Press-office of the Ministry of Natural Resources and the Environment of the Russian Federation
The global trend of increasing environmental responsibility presents new challenges for society and the government. Environmental protection legislation is changing along with the world view and standards are increasing for industrial companies. Natural Resources and Environment Minister Alexander Kozlov, who marked his first 100 days in office this week, spoke with Interfax about how Russia is pursuing its environmental path, the carbon tax and new trends in resource use.
Q.: The Natural Resources Ministry is one of the ministries where staff continues to be renewed due to a change in leadership. At the same time, it has to carry out the prime minister's orders to optimize the civil service. Has the final new staff structure at the ministry been approved?
A.: The Natural Resources and Environment Ministry is very sectoral, it's important here to retain professionals in their fields. There aren't that many of these people, we're trying to keep them on our team within the context of the prime minister's instructions to optimize staff. The results of overall work and my personal results will depend on them. I see my appointment to the position of head of the Natural Resources Ministry as a promotion, a vote of confidence. At the same time, this is an appraisal of the team with which I worked before. I would like to achieve results at the Natural Resources Ministry with the same kind of effective team. The formation of the ministry's staff numbers and appointments to key positions are still continuing. We'll finish this work by the end of March.
Q.: Have you already formed an opinion as to where the Natural Resources Ministry has organized its work well and what areas still need some work?
A.: I propose to proceed from the name of the ministry. Natural resources, this concerns the revenues of the state. Our ministry helps generate money for the budget and these flows must be maintained. That is, to absolutely clearly understand the state of affairs in prospecting and exploration, subsurface resource use, not lose our country's competencies here, both offshore and onshore, support this work with government contracts, concurrently advance in terms of import substitution. Literally quite recently the government designated water as another strategic resource of the country. We see the problems of Sochi, Crimea, and Kalmykia, where the lack of water resources forces expensive solutions. And there are very many such population centers across the country. I see these challenges as a priority in the area of natural resources.
The next item of work is the forestry complex. It is divided into two parts: the forestry sector, meaning industry, which is fairly developed, and forest management - forests and their regeneration, where we and [federal forestry agency] Rosleskhoz have to first sort out oversight powers. Rosleskhoz must become a service that will strive for order in its field, but is not an irritant. Unaccounted for timber, unauthorized occupation of forests, government agencies' nonfulfillment of plans to put out forest fires, exports... A great many things are not regulated, countless problems remain unresolved for years. In addition to a dedicated law, it is necessary to adopt many regulations, more than forty in two years.
Then there is [federal natural resource use oversight service] Rosprirodnadzor, our key oversight body. We need to make it so that no one would want to violate environmental laws, so that preservation of the environment is more important than the ability to just brush it off and pay a fine. We are now working on regulations to, on one hand, strengthen the position of Rosprirodnadzor but, on the other, so that its employees don't rush to abuse. Heavy fines for companies and heavy accountability for inspectors.
As for issues related to specially protected natural areas (OOPT), first off I want to stress that protected areas cannot be some squatter's holding. And the country's citizens should see nature protected by the state, enjoy its beauty, holiday in conservation areas, admire the lotus in the Far East, animals in the Caucasus. Environmental tourism, competently and intelligently organized, can generate money for the budget. I have met with colleagues in OOPT, these are people who think nationally, having given 20-30 years to their profession. We decided to take OOPT to a new level. I expect a roadmap from our colleagues for reforming the system of national park management.
Policy in the area of hunting is a kind of environmental diplomacy. There are various attitudes toward hunting, from full support to zealous repudiation. But there has always been hunting in Russia, Russians lived by hunting. And it's wrong to not regulate this type of activity, to not set the tone here. International experience shows that this could be a whole industry, capable of creating jobs, and this is important for rural areas and remote population centers where hunting businesses are set up.
Q.: There has been discussion in the past of splitting the Natural Resources and Environment Ministry into two ministries, for environment and resources. Perhaps now, with the environment becoming a national priority, the time has come for such a split?
A.: I don't see the point. Subsurface resource use is handled by [federal subsurface resources agency] Rosnedra, which is overseen by the Natural Resources Ministry. At Rosnedra, everything is worked out in terms of legislation, as well as in terms of work with companies, it is broadly represented by regional divisions. Final responsibility for subsurface resources lies with the Natural Resources Ministry, and we're ready for this, integrated into the process.
Yes, the range of environmental problems is significantly expanding before us, but there is no need to create a separate environment ministry. The objectives are clear: we need to determine environmental indicators and standards, define responsibilities for representatives of industry, establish incentives, in the form of tax deductions for example, attain a progressive attitude toward recycling waste and so on. We will develop in these areas.
Q.: What do you think about carbon regulation in general and the carbon tax specifically?
A.: The environmental agenda is now a part of our lives. For the whole world, concern about the environment and humans' impact on it is top of mind. This is a fact, it's no longer subject to discussion. The creation of new standards is being discussed, and a carbon tax, carbon regulation fits into this logic.
Right now we see a state of affairs where the carbon tax proposes payment of funds for noncompliance with standards and requirements. And money will be taken from Russian companies for the benefit of other countries, which intend to support their producers in terms of the environment with these funds.
Such a placement of emphasis raises questions. Among other things, there's the question of why not take into account the impact that Russian nature has on the whole globe? And what about the positive effect of Russian forests, referred to as the "lungs of the planet," and the impact of our glaciers and the water factor? We must first proceed from the environmental base that Russia forms on a global scale.
But, of course, the time has come to set environmental guidelines for domestic industry. A method for calculating harm to the atmosphere has already been adopted, a forest strategy has been determined, the introduction of best available technologies is progressing steadily. Russia is now working out a common line for its environmental agenda, all relevant agencies are involved, the Economic Development Ministry is actively participating in this, and the concerned public is voicing its ideas.
Q.: How engrossed is the Natural Resources Ministry in the subject of energy transition, which gained considerable momentum in the world in 2020?
A.: The pandemic has heightened arguments about the need for a speedy energy transition - the replacement of fossil fuels with renewable energy sources. The drop in demand for oil and gas in 2020 gave rise to many forecasts about when the hydrocarbon era will end. Yes, we are seeing in real time the shift of all plans to "green" the economy, as is fashionable to say. But will it destroy hydrocarbons, will green energy be able to defeat oil and gas? There are big economic aspects here, we're just studying the matter at this point.
Q.: Getting back to Russian problems, the fire season is approaching. How will control be tightened over the situation with forest fires?
A.: There is the regular, daily, painstaking work of our colleagues in the regions to prevent fires near population centers - the cases where fires are caused by humans. And there is a need for prompt identification of fires caused by natural, weather and climatic reasons.
We need to proceed from the huge scale of our country, from accumulated experience. For example, last year 70% of the area swept by fires in Russia was in Yakutia. But in order to have an understanding, it's 2,400 kilometers from the west to the east of the republic, which is a 13.5-hour flight on an An-2 airplane. From north to south it's about 1,970 kilometers, which is an 11-hour flight on an An-2 plane. In other words, the area is large, while the population is small, and there are not enough firefighters. This needs to be understood. Or Buryatia and Transbaikal, about equal in area, where cultures differ among employees as regards fighting forest fires, which we see in the results of their work. This is a professional field where there must be strict discipline and commitment.
As for tightening control, one of the most important events for firefighting work will be the creation of the North interregional forest fire center, which will help regions where fires are most frequent - Yakutia and Krasnoyarsk Territory. The federal budget will allocate 5 billion rubles for this. We will buy more than 21 pieces of forest fire equipment under the Environment national project. Regions will receive almost 5 billion rubles to improve material and technical resources. The goal is to increase availability of equipment at institutions that protect forests from fires to 87% in the country as a whole by the end of the year.
[Federal weather service] Rosgidromet is giving us a preliminary climate forecast according to which fire risk will already increase in April. This is the southern regions of the Southern Federal District, the North Caucasus, the south of Altai Territory, a large part of Tyva, the south of Buryatia, Transbaikal Territory, the Jewish Autonomous Region, Primorye. There is concern about the trend in Kalmykia, where the frequency of high and extreme classes of fires in April is growing from year to year.
Q.: When do you plan to submit a mechanism to the government that sets criteria for subsidies to regions for the purchase of containers for sorted waste collection?
A.: At first the logic was such, to buy containers with federal funds. But after discussing the problem with the Russian Ecological Operator, we decided that the financial models of many regional operators make it possible to acquire containers in various ways. And the main thing for us is to directly involve regional operators in all this. Discussions are still underway on what mechanisms there could be, besides simple purchase. Within days, colleagues are supposed to submit all their proposals, from which we will select the most effective ones.
Q.: The major disaster on the Taimyr Peninsula drew particular attention to industrial safety. To what extent should environmental standards be tightened for major companies?
A.: A business should work for the sake of what it was created for. Our objective is not to collect fines, but make sure that a business's policy has a clear agenda related to environmental risks. There, where shareholders, the CEO understand this, all mandatory payments are taken into account in the investment program, all risks are factored into production costs. There, where there is no such understanding, the environmental risks are not in costs, but in dividends.
A change in industrial companies' attitude toward the environment is inevitable for one simple reason - consequences lead to responsibility. Starting with reputation and ending with the clean-up of the consequences of a disaster and punitive penalties. Let each one determine the balance of figures: how much a business earns, how much it spends on the environment, how much it pays in dividends. This math is simple, it is also easily monitored by the public.
Q.: Usually after such a severe disaster, the one at fault is subject to a comprehensive investigation. Is a major investigation of Nornickel in the works?
A.: I'm not aware of one.
Q.: Will environmental standards be tightened in the Arctic in connection with the intensification of its development?
A.: The package of laws on preferences in the Arctic is proving popular among businesses - 41 residents have already been registered with total announced investments of 180 billion rubles. The subject of the environment is critically important for the Arctic. But environmental requirements here should not be redundant, like in the case with the need to conduct state environmental assessments of exploration wells in the Arctic, which our attentive businesses pointed out. In practice, it turned out that state environmental assessments are being duplicated here and are complicating the work of resource developers. Practice is the best criterion of truth. Now we've sorted out the regulatory documents, we can correct this simply and quickly.
However, we asked oil and gas companies a counter question - what's the situation with the environmental impact of mothballed and abandoned wells? We hope to find answers together. The environmental aspect in the Arctic needs to be strengthened, but this needs to be done thoughtfully, consistently, identifying problems and finding ways to solve them through joint efforts.
Q.: You have announced that the Natural Resources Ministry plans to initiate a new general clean-up in the Arctic. How much bigger will it be than previous measures?
A.: All waste has an owner. Either a company, or a region or a government agency. I see the essence of the new program of cleaning up the Arctic in having everyone involved in the process: the Natural Resources Ministry, and the five Arctic members of the federation, and all their municipalities. And, of course, companies working in the Arctic zone. An important element here will be assessing the amount of Arctic waste, including geographically, as well as understanding how the state and regions can invest financially, what amount can fall to businesses.
Eleven measures to clean up cumulative environmental damage are underway in the Arctic under the Clean Country federal project. They include eight unauthorized dumps in the cities of Murmansk, Arkhangelsk, Mezen, Belomorsk, and Anadyr, and three more hazardous sites of cumulative environmental damage. One site of cumulative environmental damage has already been cleaned up - oil pollution in the water conservation zone of Kuznetsov Creek in the Mezen district of Arkhangelsk Region. This year, they'll start work on the recultivation of the manure pit of the former Snezhnaya poultry farm in the village of Molochny in Murmansk Region and cleaning up the tailings dump of the Kularskaya gold recovery plant in the Ust-Yansky district in the republic of Yakutia.
Q.: The Natural Resources Ministry, together with the Far East Development Ministry, prepared a program last year for geological exploration in the Arctic zone. Why hasn't it been approved yet?
A.: The draft "Program for geological surveys of resource areas in the Arctic zone of the Russian Federation in order to form a future cargo base for the Northern Sea Route in the period to 2035," which we submitted to the government in January, is wrapping up the approval process and is being prepared for signing. The program proposes, among other things, that more than 95% of geological exploration work in the region will be done at the expense of resource users.
Regional surveys, identification of attractive regions is up to the state in this case, while more detailed additional exploration is up to businesses. Large companies can assume geological exploration risks in new regions, but for medium companies it's more difficult. This factor has also been taken into account in the program, to give medium companies the opportunity to work where the most specific prospects have been identified.
The program specifies 12 varieties of mineral resources, primarily solid mineral resources, that the government will be betting on when doing exploration in the Arctic. The issue of what should be given the main priority in exploration, solid mineral resources or hydrocarbon resources, needs additional work taking into account the specific economic problems of the Arctic region. I think that we'll resolve it in the next month or two.
An argument arose due to the fact that previously Rosnedra lived within a certain system of coordinates - Russia's budget is replenished with oil and gas and hydrocarbon reserves need to be replaced first of all. Yes, this is the current objective, it needs to be carried out. But now there is another challenge - the development of new areas of the Arctic, support for depressed regions and single industry towns.
Take Vorkuta. As regards the future of this city, the country's authorities and the resource developer [Vorkutaugol, a part of the resources division of Severstal] must come together and decide, either we find new reserves there, new prospects for the development of the enterprise, which will be able to diversify, provide work and care for the people who live in Vorkuta, or the city finally falls to ruin and people's lives there lose all meaning. Every day counts here. The absence of a decision now is the exacerbation of problems in future, because development also takes time. We're prepared to act as the initiators of such negotiations.
Q.: Last year, the Natural Resources Ministry did not support changes to the law on gas exports that called for a universal, not selective approach to liberalizing liquefied natural gas (LNG) exports. Several more proposals in this regard are being discussed now. What proposals to liberalize LNG exports is the ministry prepared to support now?
A.: I believe that the country should have a separate position, separate legislation, separate strategy in regard to LNG. In the conditions of the modern world and technology, it's impossible to send all the country's gas into the pipeline. LNG is another means of monetizing gas, capable of not only moving hydrocarbon from one place to another, but also developing certain sectors of the economy, creating new jobs, increasing competition.
Take Chukotka. The issue of electricity is an acute concern here. And Yamal LNG will be sailing by Chukotka along the Northern Sea Route. Is this a chance for generation in Chukotka? Yes! And this option is being considered. However, it turns out that nuclear power might also become a source of generation in this region, as in the case of the Baimskoye deposit. An excellent example of competition - whosever project is more lucrative, is the direction in which the decision on energy supplies in northern Chukotka will lean. And there are many such sites where LNG can be used.
Q.: What are the preliminary figures for replacement of oil and gas reserves for 2020?
A.: In 2020, the increase for commercial categories (AB1C1) of recoverable reserves, based on the results of exploration work, was 1,002 million tonnes for oil, with a production level of a little over 500 million tonnes. For non-associated gas, the increase was 747 billion cubic meters, which is also higher than the level of production, so complete replacement was assured. In 2021, we also expect full replacement of reserves.
Q.: What large hydrocarbon blocks from the unallocated reserve fund do you plan to auction in 2021?
A.: The list of hydrocarbon resource blocks for which we plan to hold auctions in 2021 includes 88 blocks. The largest by forecast resources are gas blocks in the Yamalo-Nenets Autonomous District. For oil, in Khanty Mansi - Yugra and the Yamalo-Nenets Autonomous District, the Yuzhno-Teteisky, Logasyegansky, and Kharayegansky blocks.
Q.: Is there interest among mineral fertilizer producers in expanding the resource base with new blocks? There haven't been auctions in this sector for several years already, but it's known that, for example, EuroChem's resource base in Murmansk Region is gradually depleting. Are there prospective phosphate or potash blocks in this sector that might be offered to investors in the next few years?
A.: Kovdorsky GOK mines apatite in association with mining of iron ore. The total phosphate reserves transferred to the company and embedded in native ores as of January 1, 2020 was 99.473 million tonnes of P2O5 (93.834 million tonnes in apatite-magnetite ore and 5.639 million tonnes in apatite-staffelite ore). In 2019, the company mined 793,000 tonnes of P2O5. If this level of mining is maintained, the reserves transferred to the company are enough to support it for more than 100 years. Based on this, there is no need for JSC Kovdorsky GOK to increase its resource base of apatite-bearing ore.
Of course, there are plenty of such blocks, but given that current resource developing investors are furnished with reserves of this type of resource for the long-term future and considering the already effective distribution of fertilizer market segments among existing resource developers, the entry of new investors into the market will be problematic.
Q.: In 2020 there was a controversy around the sale of the Poniisky gold and copper block in Khabarovsk Territory. There were disagreements about whether to grant the rights to it according to the claim-staking principle or to hold an auction. In the end, the auction generated a substantial sum for the budget. Are there plans to reconsider the approach to the claim-staking principle altogether?
A.: The Natural Resources Ministry prepared changes to revise the claim-staking principle as regards imposing restrictions on licensing for one year of subsurface resource blocks at which geological surveys have been completed with government funds. These changes have already gone into effect.
The temporary ban on licensing according to the claim-staking principle for blocks where geological surveys were completed with budget funds is being imposed in order to encourage competition among market participants. There should be a contest, competition for access to exploration and development of resource blocks at which initial surveys were done by the government.
Q.: When will a new board of directors be appointed at Rosgeo? Have you already assessed the condition and prospects of this state company?
A.: My colleagues from Rosgeo and I have only just started to get to know one another. The replacement of Rosgeo's board of directors was long overdue. The new board will include representatives of the government, the Industry Ministry, Energy Ministry and Natural Resources Ministry. The necessary procedures are now being finalized. And yes, I plan to head the board.
Preliminary data for 2020 show that Rosgeo's strategy is being implemented successfully - amid the crisis the company managed to increase revenue, eliminated losses, and is buying new equipment. And despite changes in the procedure for distributing government contracts, as far as I know the company is winning about 90% of the tenders in which it bids.
Q.: Rosgeo has requested recapitalization to finance the modernization of equipment. But if the company is becoming increasingly independent, aren't there plans to take it public?
A.: The situation is complicated. There are options for state support, and the option of incorporation is also being considered. Rosgeo was undercapitalized. The valuation of enterprises that became part of the holding did not take into account that the depreciation of plant and equipment was as high as 80%. The Natural Resources Ministry supported recapitalization and voiced this position repeatedly. The incorporation of Rosgeo is one possible scenario, if the government is unable to find the necessary resources for the company's retooling.
Q.: A pile of questions have accumulated regarding the activities of companies in subsurface resource use, about the results of exploration work at large projects, about booking reserves, licensing...
A.: I won't rush to talk in detail about each company and specific projects at this point. At this stage, I see several matters as a priority and through some of them I would like to form a policy for relations with resource developers.
The first is dormant licenses. The government, when granting a company a licensing agreement, expects an economic effect. But if the resource block is not developed, it's time to sort out what the problem is. Perhaps there's a possibility to repackage and grant an exploration license to juniors, for example. A dialog lies ahead here.
Second is what I talked about before, that the program for geological exploration in the Arctic should take into account the possibility of developing specifically new areas, give support to depressed areas. The third priority I've also already mentioned - the search for water resources for regions that need them.
There's one more thing I'd like to mention. We're moving away from the practice of choosing a tender or an auction for resource blocks. The Natural Resources Ministry has defended a bill in the government that proposes a single option for bidding for resources, an electronic auction. This means we will have only public auctions and this, foremost, is the preservation of national interests. And we have found resource developers' understanding on this issue, which is gratifying.