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31 January 2011

New land use regime encourages energy facilities development

Author: Vadym Samoilenko, Kateryna Rekiianova
Source: International Law Office. - 31 January 2011. - http://www.internationallawoffice.com/?i=1265944&l=7EYGF7Y

On August 17 2010 the Law on Land for Energy Facilities and the Legal Regime for Special Zones of Energy Objects was officially published and came into effect.

Broad definition of 'land for energy facilities'

The law defines the legal basis for the allocation and use of land for energy facilities. It also defines the legal regime applicable to land that is used for special energy facilities zones. Compared to the Land Code, the law contains a broader definition of the term 'land for energy facilities', including land for the installation, construction and operation of:

• facilities that produce and transmit electric power and heat;

• alternative energy facilities; and

• technological infrastructure facilities, including administrative and industrial buildings used by companies engaged in such energy industry operations.

Easier use of state and municipal land

The code provides that state-owned and municipal land can be transferred to new owners or users only by tender, except in cases specified by law. However, the new law provides that state-owned and municipal land can be granted to new owners or tenants for energy-related uses on the basis of a resolution issued by an executive body or local authority. Thus, local authorities can rely on the new law to simplify the procedure of obtaining land for energy-sector use.

The law also provides that land can be used for the deployment of electricity transmission installations on land easement terms. Unlike the previous law, it specifies the procedure for granting such easements. In addition, it allows power transmission facilities, which were previously restricted to land zoned for the deployment of energy facilities, to be built on land zoned for other purposes.

Special zones for energy facilities

The law resolves certain previously unregulated issues relating to land allocation and use for energy facilities. It sets out the legal regime for special zones for the deployment of energy facilities. In particular, the law defines five categories of special zone, differentiated according to the type of energy facility. The law states that land within the boundaries of the special zones may not be expropriated or purchased from owners and users, which may continue to use their land subject to certain restrictions. Special zones for energy objects can be designated on land under virtually all zoning categories. The maximum dimensions of certain zones are specified in the law; these dimensions will be determined by the Cabinet of Ministers in the case of the remaining zones.

The law also provides for reimbursement for landowners and land users in respect of losses resulting from land use restrictions imposed by special energy zone rules. It regulates the general terms of such reimbursement and mandates the Cabinet of Ministers to establish a reimbursement procedure.

Reduced land tax rate for alternative energy facilities

The law introduces a significant incentive for the development of alternative energy: land tax on land used for facilities that generate power from alternative sources will be 30% of the standard rate for energy facilities.

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