How the Public Prosecutor Punished the Foreign Investor

Fyodor Popov
Uralsk, Kazakhstan
OKO: The Republic-wide Public Political Newspaper of Kazakhstan
April 17, 2009

The Uralsk Environmental Protection Prosecutor fined the company “Karachaganak Petroleum Operating” (KPO) 8.6 billion tenge for inflicting harm to the environment.

The Republic of Kazakhstan’s Environmental Code requires that investors who are exploiting mineral resources observe 15 common environmental requirements, including preventing underground pollution, especially for the underground storage of oil, gas or other substances and materials, and the burial of toxic substances and wastes; the observance of established procedures for suspending and stopping resource exploitation operations, for the temporary closing and liquidating of field development objects; and preventing the depletion and pollution of underground water, including using nontoxic reagents when preparing rinsing fluids.

But the implementation of these requirements can be formulated by paraphrasing an old anecdote—You can demand what you want, but who is going to carry out those demands?

It is enough to recall that a couple of years ago ecologists fined the company “Tengizchevroil” 74.4 billion tenge for causing significant damage to the environment through the systematic violation of the technological regulations for the process of safely extracting sulfur, consisting of the storage of 2.8 million tons of granulated sulfur without proper permission in 2003-2006. And what became of the Kashagan scandal, when again our ecologists charged a consortium of extraction companies with violating environmental legislation, but all of the “steam” from their indignation, as they say, “was blown out the whistle”. Not to mention the situation with the mass deaths of Caspian Seals, for which no one has taken responsibility. I recall how at first ecologists maintained that the oil companies were guilty in the deaths of these unique marine animals, and then suddenly it was explained that the seals had…the plague. Also remaining unpunished is the mass death of fish in the Pavlodar Lakes, when guilt was declared… it was duckweed grasses obscuring the smooth surface of the water, and not the multiple chemical enterprises that poisoned the waters of the Irtysh and the lakes for many years.

But in this case, the number that was named was not cleared. An “OKO” newspaper correspondent obtained this information from a reliable source. The entire fine of 8.6 billion tenge, levied as a result of measures undertaken by the Uralsk Environmental Protection Prosecutor, the Western Kazakhstan Oblast Branch of the Zaiyk-Caspian Department of Ecology was recovered from KPO as government income. The funds were entered into the budget.

The total, to be certain, is impressive. Yet since the moment the Production Sharing Agreement was signed in 1997 between the Government of the Republic of Kazakhstan and the consortium of international investors at Karachaganak, comparable accounts for violations to environmental protection legislation have never been presented on a yearly basis. We asked the Assistant to the Uralsk Environmental Protection Prosecutor, Oksana Krylova, to comment on this interesting fact:

“Overall, nothing unusual has occurred. Foreign investors simply step on the same rake from one year to another, violating the environmental protection legislation of our country, and causing harm to the environment. For this, they must answer, pay for damages, and pay major fines. Thus, last year, in the course of assessing observance with legislation established to ensure the environmental safety of the atmosphere, we discovered that the natural resource users were flaring associated natural gas without permission.”

In accordance with the legislation of the Republic of Kazakhstan, the application for flaring associated and natural gas is subject to the agreement of the Territorial Environmental Protection Agency. KPO did not submit the necessary documents. It was only after our interference that the company received permission on October 22, 2008 to flare 28.6 million cubic meters of gas. Clearly, from January 1 to October 21, 2008, the flaring of gas occurred without permission from the authorized office. During this period, 17 million cubic meters of gas were burned. We submitted a letter to the Head of the Regional Inspection of Geology and Mineral Resource Use “Zap.Kaz.Nedra”, posing the question of penalties totaling more than 527 million tenge for environmental damages and bringing companies to account under Article 275 of the Republic of Kazakhstan’s Code “On Administrative Procedures” in the form of 189.7 thousand tenge.

Moreover, in 2008 KPO exceeded the allowable emissions limits established by the project and corresponding limits for storing waste and emissions of polluted substances into the atmosphere. The damages amounted to nearly 4 billion tenge. The company was brought to administrative account under Article 240 of the Republic of Kazakhstan’s Code “On Administrative Procedures” in the form of a fine, which exceeded four billion tenge.

Translated by Crude Accountability