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Should our exploration efforts bear fruit, PetroKamchatka has the potential to play a vital role in supporting the local economy in Kamchatka. The area is economically deprived and our investment to date and the direct and indirect employment that we account for has been highly welcomed by the local, regional and federal administrations. The Company has also supported, to the extent possible, social investments in the local communities that are near its areas of operations in Koryakia.
The oil and natural gas industry is subject to extensive and varying environmental regulations. Environmental regulations establish standards respecting health, safety and environmental matters and place restrictions and prohibitions on emissions of various substances produced concurrently with oil and natural gas. These further establish that well and facility sites be abandoned and reclaimed to the satisfaction of the regulatory authorities.
Such laws and regulations not only expose PetroKamchatka to liability for PetroKamchatka's own negligence, but may also expose PetroKamchatka to liability for the conduct of others or for PetroKamchatka's actions that were in compliance with all applicable laws at the time those actions were taken. PetroKamchatka may incur significant costs as a result of environmental accidents, such as oil spills, natural gas leaks, ruptures, or discharges of hazardous materials into the environment, including clean-up costs and fines or penalties. Additionally, PetroKamchatka may incur significant costs in order to comply with environmental laws and regulations and may be forced to pay fines or penalties if PetroKamchatka does not comply.
Russian environmental legislation establishes a "pay-to-pollute" regime. The authority responsible for administering the "pay-to-pollute" regime is Russian Federal Service on Ecological, Technological and Nuclear Supervision ("FSETNS"). Fees are assessed for both pollution within the limits agreed on emissions and effluents and for pollution in excess of these limits. There are fines established for certain other breaches of environmental regulations. Russian environmental protection legislation contains an obligation to make compensation payments to the budget for all environmental damage caused by pollution. In the event of a dispute concerning damage caused by breaches of environmental laws and regulations, the prosecutor's office or other authorised governmental bodies may submit a claim to the courts. Courts may impose remediation obligations in lieu of, or in addition to, imposing fines. FSETNS is also responsible for regulation of activities associated with hazardous industrial objects, hydro technical devices, emissions into environment and atmospheric air, management of wastes etc.
The general control and supervision functions in the natural resources area are currently exercised by the Federal Service for Supervision in the Sphere of Use of Natural Resources ("FSNUR") created under the auspices of the Ministry of Natural Resources. Subsoil licences are granted on the condition that the licence holder undertakes to comply fully with Russian environmental standards and norms (air, water and soil pollution limits, waste management requirements, animal protection, human health, etc.). Once a subsoil licence is issued, the licence holder's compliance with licensing requirements is supervised by FASU and FSNUR, while supervision over performance of certain subsoil work and use of hazardous industrial objects and technical devices is exercised by FSETNS. Subsoil use licences generally include certain environmental commitments. There are land reclamation, clean-up requirements and penalties for failing to comply with them. State authorities are entitled to claim in court for the suspension or termination of activities performed in breach of environmental regulations.