Coal port owners ask not to toughen penalties for environmental violations

The Association of Commercial Sea Ports (ASOP) sharply criticized the bill of the Ministry of Transport, which allows the state to terminate the lease agreement with stevedores (berths at the terminals, hydraulic structures and other port infrastructure are state-owned) due to environmental violations during transshipment, crushing and sorting of coal.

At the end of July 2022, ASOP sent the corresponding letters to the working group on the implementation of the “regulatory guillotine” mechanism, the Ministry of Transport, the Ministry of Energy, the RSPP, the consumer council on the activities of FSUE Rosmorport (Vedomosti got acquainted with the appeals).

The bill provides for the possibility of terminating federal property lease agreements if tenants fail to comply with the instructions of control and supervisory authorities and court decisions on violations of sanitary-epidemiological and environmental legislation. Its adoption, according to ASOP members, “will create a situation of excessive regulation of the stevedoring business and discrimination by type of activity” and could lead to “critical consequences” for the industry.

The letters say that if the lease agreement is terminated, stevedoring companies will not be able to continue transshipment in the same volumes, which will lead to bankruptcies of enterprises and job cuts. The new lessee of the port hydraulic structure will not actually be able to transship due to the fact that part of the port facilities (for example, the actual cargo terminals) is owned by the person with whom the lease agreement was terminated.

“Loading and unloading activities at the specified facility will be stopped, which will lead to a significant decrease in port cargo turnover <...> and inefficient use of state property,” the ASOP believes.

The Ministry of Transport prepared this bill in September 2020, and in November 2021, a representative of Deputy Prime Minister Victoria Abramchenko, who oversees the industry, told Vedomosti that the document had been sent for revision. A source close to ASOP says there is now “a movement again” on the bill.

ASOP members have said in the past that the proposed changes discriminate against coal terminal owners compared to other stevedores. According to the interlocutor of Vedomosti in a large stevedoring company, the legislation does not provide for specific environmental requirements in relation to coal products specifically.

The bill prepared by the Ministry of Transport is logically linked to another draft federal law from the Ministry of Natural Resources, which tightens the environmental responsibility of coal stevedores (in June 2022, this draft has already passed the first reading in the State Duma). According to the document, the stevedore will have to pay 100,000–200,000 rubles for failure to comply with the instructions of the supervisory authorities for the first time, and in case of repeated violation, the fine will increase to 300,000–600,000 rubles. In addition, in this case, the activities of the violator may be suspended for up to 90 days.

In July, ASOP also sent letters to First Deputy Prime Minister Andrey Belousov, Chairman of the State Duma Vyacheslav Volodin, the Ministry of Energy and the Russian Union of Industrialists and Entrepreneurs with a request to prepare amendments to the draft law of the Ministry of Natural Resources. In particular. stevedores proposed to exclude liability for a repeated offense during the year and to postpone the entry into force of the law for two years, until September 1, 2025.

The volume of coal transshipment in Russian ports, according to ASOP, in the first half of 2022 decreased by 4% compared to the same period in 2021 to 97.3 million tons.

Vedomosti sent inquiries to the Ministry of Transport, the Ministry of Energy, the Russian Union of Industrialists and Entrepreneurs and members of the consumer council at Rosmorport.

According to Sergey Grishunin, managing director of the NRA rating service, the bill of the Ministry of Transport would be relevant if coal exports, as in previous years, were growing rapidly, and its shipment was carried out from sites “not fully prepared for this type of activity.” This, according to the expert, led to excessive dusting and the ingress of coal dust on residential buildings.

“In recent years, large ports have significantly increased the environmental safety of port facilities, dust screens have been built, and water curtains have been installed. There are still cases of dirty unloading of coal, but it usually happens in small, formerly fishing ports,” he said. Now, according to Grishunin, it is dangerous to give the right to break lease agreements for all ports without exception, since the law does not clearly spell out for which violations such punishment may follow.

Mikhail Burmistrov, General Director of Infoline-analytics, believes that the current version of the document carries very high risks of negative impact on the investment climate and the stability of the stevedoring business. “In the context of the transformation of logistics and the reorientation of export flows, when a number of terminals (especially in the east and south of Russia) are operating at capacity limits, the adoption of regulations that could negatively affect investments in the development of terminal infrastructure looks not only inappropriate, but also dangerous in terms of economic sustainability,” the expert explained.

Artem Kopylov, senior lawyer at Pen & Paper, points out that extending the bill only to coal terminals is a clear violation of legal technique and “a sign of discrimination by type of activity.”

In 2020, the Ministry of Transport issued an order in which it clarified the essence of the term “closed coal transshipment”, which is considered to be transshipment using the best available technologies (BAT) included in the guide. But this document fixed only the BAT requirements, which stevedores are already obliged to follow (the presence of protective screens up to 25 m high, dust water suppression systems, etc.).

“According to the practice of litigation, such ambiguity can be used to the detriment of conscientious stevedores, which in the current economic situation can cause irreparable damage to both the port and coal industries,” Grishunin believes.

This, in his opinion, may lead to the failure of long-term contracts for the supply of coal. The loss of stevedores, according to his estimates, could be up to 10% of the annual turnover, or about $500-600 million.

Kopylov adds that the text of the bill requires “improvement of its legal technique”, as well as the elimination of duplicative, redundant provisions. Nevertheless, according to the lawyer, even if the proposed wording is retained, the law is unlikely to cause “enormous negative consequences.” He points out that the text actually contains a “double judicial filter” mechanism for terminating a lease agreement with a stevedore: “At the first stage, the fact of violation of environmental legislation should be recorded. At the second stage, the court will consider the landlord’s demand to terminate the lease agreement, taking into account all the circumstances of the case.

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