Russian Environmental Protection Law

1. Russian Environmental Protection Law An Approach to Estimating Environmental Impact Costs

2. If I may, please… Don’t shoot the messenger! Instead, contact the author: Paul Kalashnikoff, Sr. Biologist, AMEC Edmonton (paul.kalashnikoff@amec.com)

3. impacts to marine resources for an offshore oil & gas development Project Overview: • Russian oil & gas development to illustrate how marine impact and compensation costs were applied. • Damages are calculated as part of the environmental assessment process. • Overview of Russian environmental regulatory requirements: • Compensation required for resource exploitation, pollution • Overview of ‘damage’ calculation process • Example: application to project impacts on fisheries

4. The “Environmental Protection” Law of the Russian Federation (Article 20) requires: • Environmental protection - Efforts towards the renewal and conservation of natural resources; • Collection of payment for: • Use of natural resources – including land, mineral resources, water, vegetation and wildlife within and above the established limits; and • Pollution of the environment – for emissions, discharges, waste disposal, and other types of pollution by the natural resource user within and above established limits. As environment protection expenses are calculated and approved, amounts are collected from the natural resource user.

5. Payments for use of Natural Resources PAYMENTS… • Are considered a form a taxation of an enterprise for the right to use natural resources. • Can be characterized as a share of the profit received from exploitation of natural resources. This includes payments for the use of land, water, mineral resources, forests and other natural resources. • Are calculated based on cost to compensate the region for losses as a result of exploitation of natural resources, accounting for: • Quantity of those resources, • Location of those resources, • Use, temporary/permanent loss and/or changes to regional infrastructure associated with the planned resource use.

6. Payments for Pollution and Waste Disposal PAYMENTS… • also provide compensation for damage inflicted on the environment by emissions and discharges of pollutants, waste disposal and other kinds of pollution. • payment for pollution of the environment is calculated according to the “Procedure for Determining the Payment” established by Resolution of the Government of the Russian Federation dated 28 August 1992 (No. 632)”. • Involves multiplying approved standard base values by indexing coefficients that consider changes in resource pricing and environmental/social sensitivities in the region.

7. Reimbursement of Damage to Natural Resources • Damage to bioresources is determined by applying aggregate indices (eg. productivity/unit area) against the quantity of the resource to be impacted (eg. tonnes/m2), by species. • Damage values (eg. tonnes/year of resource loss) are used as the basis for calculating financial compensation to be paid. • To achieve this, formulas are applied that include approved base values, and consider valuation of regional environmental, economic and social sensitivities.

8. Damages are calculated as: • Damages to LAND resourcesas a result of: • Withdrawal of land from actual or intended use under a land allocation plan; • Degradation of land capability and productivity as a result of construction in areas of temporary land allocation and accidental pollution; and, • Alteration of ecological functions of the land base during operations. In many cases, damage also implies lost profits by owners, users, proprietors and holders of affected lands. Such indirect damages receive detailed review during the project approval process.

9. Damages are calculated as: 2. Damages to MARINE bioresources as a result of: • Destruction of bottom biota due to excavation of ocean bed and underwater quarries; • Death of benthic organisms from increased content of suspended matter and precipitation of suspended matter at places where dredging and dredged material dumping is planned; • Destruction of fish larvae, juveniles and ichthyoplankton near the bottom due to dredging and dumping of bottom sediments.

10. EXAMPLE - Estimating Damage to Fisheries Resources Estimated damage of construction and normal operation is calculated in accordance with “Temporary methods of estimating fishery damage resulting from construction, refurbishment and expansion of enterprises, buildings and other facilities, and from various activities at fishery water bodies” (Moscow, 1990). The estimated project-related damage to fisheries resources considers: • Direct effects within a fixed period of time, including the period of direct impact. This effect is limited by fish life span. • Indirect effects that account for change (decrease) in food supply for fish and diminishing biotic community productivity. • The estimates are conservative (“worst case” scenarios) due to degree of uncertainty in the impact assessment and effects on aquatic ecosystems.

11. EXAMPLE - Damage Assessment for Export Pipeline (i.e., linear development) Assessment of direct damage to fisheries included the following considerations: • Determination of the spatial and temporal boundaries of the impact zone and possible toxic agent concentrations therein; • Aquatic biota characteristics in the impact zone; • Aquatic biota mortality due to project activities (eg. excavation, dumping soil); and • Estimation of the proportion of commercial species loss in the future catch.

12. Damage Assessment for Export Pipeline – Indirect Losses Assessment of indirect damage to fisheries included the following considerations: • Mortality of forage plankton due to lethal concentrations of suspended solids. • Mortality of forage fish following reduction of their benthic feed stock in impact zones. Restoration of benthic biota was considered to take 4 years. • Density of all benthic organisms was considered, assuming that all benthic forms are equally available as food for fish.

13. Final Compensation Estimate - Fisheries The compensation cost for the aquatic resources component of the project is summarized below: Estimate of Compensation for Project Facilities

14. IN SUMMARY • Environmental costs for an oil & gas development in Russia were estimated as part of the EIA process • The example of estimated costs of impacts to fisheries illustrates how marine impact and compensation costs were applied. • Impacts, both direct and indirect, were evaluated and a financial cost was determined and added to the overall project environmental damage assessment cost.