Andrii Derkach
Member of
Ukrainian Parliament
Publications List


  • 14.04.2016
  • newspaper "Неделя"

The revenue accumulated by the Sumy Region’s mining industry is a steady source of income for the state and local budgets.

There are 21 oilfields in the region’s territory, which account for 34 million tons of oil  – almost a quarter of all oil on Ukrainian soil; 18 gas fields (the gas reserves there surpass 72 billion cbm); 17 condensate fields, which account for 35% of Ukraine’s overall output; 111 turf fields with almost 55 million tons of peat reserves.

The active development of these natural resources in recent years has dramatically exacerbated economic and ecological problems related to the premature resource and soil depletion, the soil erosion, and the contamination of land by sewage.

Most of these issues have arisen due to the large-scale activity of the Oil and Gas Production Department (OGPD) “Akhtyrkaneftegaz”, which extracts 50% of oil and 6% of gas in the country. The effects and costs of peat extraction and sandstone mining in the careers are becoming all the more evident. The residents of local rural districts have a firsthand knowledge of these effects.

Considering such state of affairs, our current legislation does not provide the criteria for coordination with regional councils as to the matter of approving the utilization of natural resources. On December 16, 2015, the Cabinet of Ministers issued a Resolution #1173, wherein they legalized the procedure, according to which the issuance of permit for utilizing natural resources is conducted by the State Geology Service with no approval of the regional council required. Whereas the district and village councils are virtually deprived of any real authority with regard to initiating the process of disqualification of mining companies from the utilization of natural resources as a penance for the damage inflicted upon economy and ecology.

Taking into account all the aforementioned circumstances, as well as multiple appeals from both the residents and the authorities of the region and its districts alike, this week, Member of Parliament of Ukraine Andrii Derkach has forwarded the appropriate MP inquiries to the Government.

The documents underscore that such state of affairs is in direct conflict with the Constitution and the laws of Ukraine, considering that, in accordance with Article 13 of the Constitution and Article 4 of the Natural Resource Code of Ukraine, natural resources constitute the exclusive property of Ukrainian people, who exercise their right to property through the Verkhovna Rada of Ukraine and the local councils.

The inquiries pay special attention to the analysis of another important aspect of natural resource utilization.

Article 29 of the Budget Code of Ukraine provides that rental fee for utilizing natural resources in the process of extracting oil, gas, and gas condensate shall be fully transferred to the state budget income. The royalties from the aforementioned rent in Sumy Region to the state budget constituted over 3,55 billion Hryvna in 2014. Yet in 2015 the sum has suddenly dropped more than by half – down to 1,77 billion Hryvna. This calls for a reasonable question: where has such significant budget revenue disappeared?

On the other hand, in accordance with the provisions of Article 140 of the Constitution of Ukraine, it is the local government agencies that represent the actual interests of the communities. And it is they, first and foremost, that should receive monetary aid from the utilization of natural resources in their territories.

What actually happens is that Sumy Region keeps increasing the production of natural resources and simultaneously losing much of its financial support, while local councils have to face ecological and infrastructural issues, which arise in the utilization of natural resources, on their own.

Therefore, the MP inquiries contain a proposal to incorporate 25% of the rental fee for natural resource utilization into the regional budget income in order to increase its funding for the purpose of dealing with negative effects of mining activity. Andrii Derkach is positive that such mechanism may and will become one of the main sources of funding for the Sumy Region’s road fund and will facilitate the renovation of other infrastructure objects in the region.

Based on the legal and economic analysis of the problem, MP insists on some other practical solutions, which should be employed by the Government in order to resolve it. Particularly, he proposes to introduce a legal mechanism of regional councils’ authority to make decisions on denying the issuance of license for natural resource utilization and oblige the mining companies to conclude the social agreements with local councils, overseeing the territories where such activity is being carried out.

Local councils, in their turn, should be granted the authority to partake in the procedure of disqualification of the mining companies from the right to utilize natural resources, when there are instances of environmental pollution, natural resource depletion, and violation of the social agreement provisions.

Furthermore, Andrii Derkach calls upon the Prime Minister to instruct the authorized persons to conduct a thorough investigation of the reasons behind the 50% decrease in the royalties from the rental fees for natural resource utilization in Sumy Region to the state budget.

“No matter how hard the state leadership tries to promote its course to the “decentralization of authority and strengthening of responsibility of local communities”, the latest decisions of the anti-national assembly of “foreign tourists”, which the government has turned into, is openly trampling the constitutional principles.

The disgusting hybrid of “old school” thievery and “new school” looting under the alluring slogans of European integration is destroying the country as a whole and the region, in particular. And the current procedure of natural resource utilization is the best proof thereof. Such procedure is absolutely unacceptable and requires specific and decisive action.

Today, making mining companies socially accountable and providing local budgets with real funds in order to cover the expenses for road repairs and other infrastructural projects is the most pressing task”, Andrii Derkach has commented on his MP inquiries.