Exploitation of oil and gas on its Continental Shelf. and preliminary views on implementation of Article 82

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Lorena McKenzie
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1 Exploitation of oil and gas on its Continental Shelf and preliminary views on implementation of Article 82 Toru FURUGORI Principal Deputy Director of Ocean Division, International Legal Affairs Bureau, Ministry of Foreign Affairs, Japan 1 Outline of the system concerning energy and mineral resources development of Japan (1) Overview of the system concerning energy and mineral resources development In Japan the development of energy and mineral resources such as oil, gas and metals is required to be based on the procedure prescribed in the Mining Act. The Mining Act had never been amended since its establishment in 1950, however the large-scale amendment was carried out in July, 2011 (enforced in January, 2012). The main points of the amendment are the following: 1 Introduction of requirements for the applicant such as the technical ability 2 Review of the so called first-to file system 3 The establishment of the permission system for the exploratory activities of resources. (2) Outline of the Mining Act The purpose of the Mining Act is to provide for the basic system of mining with a view to contribute to the improvement of public welfare through developing mineral resources in a reasonable manner.

2 The mineral resources, for the reason of their finitude, are important for national economy, and reasonable development of minerals is not expected by the development depended on a landowner. For that reason, in the Mining Act, the State has the power to grant the right to mine and acquire minerals (mining right). The term of mineral used in the Act covers 41 minerals such as gold ore, silver ore, copper ore, oil, combustible natural gas etc. The term specified minerals as used in the Act means those which are oils and combustible natural gases, and those specified by Cabinet Order such as polymetallic sulphides, manganese ore, tungsten ore and others. The term mining right as used in the Mining Act covers two distinct rights, which are the prospecting right and the digging right. Mining right is deemed as real right, which is monopolistic and exclusive. The prospecting right is the right to investigate mineral presence, quality and profitability. The duration of a prospecting right is two years (in the case of prospecting right for oil or combustible natural gas, four years). The period may be extended twice, for two years each time. The digging right is the right of full-fledged mining of minerals, when it is established to be viable taking into consideration the amount and quality of the minerals and other elements. The duration of the digging right is indefinite. (3) Permission system for the mineral exploration in the sea area (a)the application for permission before exploration Three exploration methods are specified by the Mining Act and relevant ministerial ordinance; the seismic method, the magnetic method and the concentrated sampling method.

3 (b)permission Those who intend to carry out exploration of minerals, which means the investigations into the geological structure, etc. that are necessary for developing mineral resources without mining the minerals by one of the aforementioned methods shall file applications with and obtain permission from the Minister of Economy, Trade and Industry. Any person who carries out the exploration of minerals without obtaining permission shall be punished by either imprisonment with work for not more than five years or a fine of not more than 2 million yen, i.e. 25,000 USD. (4) Procedure of creation of Mining Right in the sea area (a) Outline of Mining Right in the sea area (i) Creation of Mining Right in the sea area (designation of a specified area) With regard to an area where an ore deposit of a specified mineral occur or is likely to occur in the sea area, the Minister of Economy, Trade and Industry designates such area as a specified area and selects a person most capable of developing the specified mineral appropriately in the area by methods such as open invitation. (ii) Specified Minerals The term specified minerals means minerals which are oil, combustible natural gas, the polymetallic sulphides and those which form sedimentary deposit in sea-bed and other areas such as copper ore, manganese ore, tungsten ore, molybdenum ore, nickel ore, cobalt ore and asphalt,. (iii) Content of Mining Right The Mining Act prescribes that Mining Right shall be held only by the people of Japan or juridical person of Japan. The duration of the prospecting right is two years (in case of prospecting right for oil or combustible natural gas, four years). The period may be extended twice, for two years each time. The duration of the digging right is indefinite. The object of Mining Right shall be the specified minerals

4 in specified area. In mining area the minerals which are separated from land shall be owned by those who have the mining rights or mining lease rights thereof. Mining Right is deemed as real rights, and laws and regulations related to real properties shall be applied mutatis mutandis. (b) Procedure of creation of Mining Right in the sea area The Mining Act prescribes that when the Minister of Economy, Trade and Industry designates the specified area where a specified mineral occur s or is likely to occur, he/she shall establish an implementation guideline for inviting applicants (by open invitation). Those who intend to file the application shall submit an application to the Minister of Economy, Trade and Industry. The Minister of Economy, Trade and Industry shall consult with the governor of the prefecture concerned when a mining application is filed. The applicant shall satisfy the requirements such as a financial basis, technical capability, social credibility, no overlap with other person s mining area, no impairment of other industries and no adverse effect on public welfare. (c) Start business after creation of Mining Right Holders of general prospecting right shall formulate their operational plans before starting their businesses, and submit them to the Minister of Economy, Trade and Industry. Holders of general digging right shall formulate their operational plans before starting their businesses, and receive authorization from the Minister of Economy, Trade and Industry. Holders of mining right shall start their business within six months from the day of registration of creation or transfer of mining right. 2 Preliminary Views on implementation of Article 82 I know that article 82 of the United Nations Convention on the Law of the Sea intends to reduce the economic disproportion between a country having outer continental shelf beyond the 200 nautical miles and the country not having. Although UNCLOS entrusted the Authority with establishing regulation and procedure about payment

5 and contribution in kind in respect of the exploitation of the non-living resources of the outer continental shelf. However, the outer continental shelf regime is different from the regime of the Area, and a new rule is necessary. Article 82 is a severe rule for developer, because there is no established method for development of the marine mineral resource and it is cost expensive. The discussion over Article 82 has just begun and there are many points that we must examine. For example, (1) how should we consider equitable sharing criteria,the scope of State Parties for distribution and the partition ratio, (2)how should be calculated the amount of payment or contribution through the Authority, (3) how should be its management, procedure and budget. I think it is important for us to hold realistic discussions in consideration of the actual conditions of development. 3 Conclusion The discussion concerning Article 82 has just started. I believe that we should continue our discussion carefully. This is the end of my remarks. Thank you all for your attention and patience.

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