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Gap Analysis Participation of Local Actors in Ukraine's Eiti

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Gap Analysis Participation of Local Actors in Ukraine's Eiti GAP ANALYSIS PARTICIPATION OF LOCAL ACTORS IN UKRAINE’S EITI Civil society in Ukraine is the driving force behind implementation of the Extractive Industries Transparency Initiative (EITI) and promotion of reforms in the energy sector. The key role in promoting the EITI Standard is played by civil society institutes of national level. Participation of local stakeholders in this process is so far low. Despite the existence of numerous civil society institutes in regions of high extractive activity, interests of local communities and regions are still underrepresented in the EITI Multi-Stakeholder Group (MSG). INTRODUCTION extractable raw materials covered by the Ukraine EITI Report, such as coal, metal ores, clays and sands EITI implementation and dialogue within the EITI require more thorough discussion of the transparency MSG framework represent a convenient platform of their extraction. for the discussion of challenges faced by Ukraine’s extractive sector and continuing implementation of The issues of ecology, unemployment and the state reforms. With the passage of the Law of Ukraine on of transportation infrastructure are common for the Transparency of Extractive Industries in September overwhelming majority of areas where extraction 2018, the EITI MSG includes five civil society operations take place. Intensive production and representatives, three of which represent extractive the use of heavy machinery badly affect public regions. roads, which quickly crumble and the repair of which becomes an unbearable burden for local In the context of promoting EITI, efforts aimed at budgets. Because of the way budget law is written, developing and enhancing institutional capabilities local councils are unable to allocate as they deem of CSOs in regions, increasing regional coverage of fit a portion of rent payments they receive to solve EITI promotion projects, improving the effectiveness these problems, thus having to request additional of spending proceeds from rent payments at local resources. level, starting from defining financing priorities and ending with effective control over the utilization of This gap analysis is aimed to outline in general financial allocations, are presently important for terms the involvement of local stakeholders in the Ukraine. In the context of updated EITI Standard, the implementation of the EITI Standard in Ukraine. It will today’s agenda addresses environmental issues in focus mainly on the existing forms in which bodies extractive regions, gender equality and transparency of local self-government, extractive companies and of contractual relationships. In addition, other civil society institutes participate in the EITI in order 1 to define instruments of accommodating, in the most of this contact would help expand the competence of efficient way, interests of local communities in whose BLS officials by gaining new knowledge and skills in territory extractive companies operate. budget planning, preparation of investment projects and co-financing. Thanks to the participation of BLSs in the EITI and communication with extractive GOVERNANCE STRUCTURE IN companies, local communities in the areas where UKRAINE’S EITI raw materials are extracted will receive an additional motivation for transparency in the budgeting process The implementation of EITI in Ukraine is overseen and spending proceeds from rent payments, and for by the EITI MSG comprising government agencies, the involvement of local population in the decision extractive companies and CSOs. Before the last making process. changes in the Ukrainian government took place, government agencies having one representative in Local executive authorities play an important role the EITI MSG each included: Ministry of Ecology in the functioning and development of extractive and Natural Resources of Ukraine, State Service of industries in regions. In particular, they are vested Ukraine for Geology and Extractable Resources, State with a number of controlling and authorization Fiscal Service of Ukraine and State Customs Service functions (endorsement of special extraction permits, of Ukraine. The EITI MSG is chaired by the Minister adoption of decisions on planned activity) and the of Energy and Coal Industry of Ukraine (the Ministry powers to redistribute remittances from extractive has been recently reorganized into the Ministry of companies operating in the region. Bodies of local Energy and Environmental Protection). According self-government include elected local (regional, to Ukrainian law, the Ministry is responsible for the city, city district, district, village) councils and their implementation of EITI, preparation of the national executive bodies (first of all, executive committees of EITI Report, and creation and coordination of the local councils). EITI MSG. In addition, the EITI National Secretariat continues to coordinate EITI implementation Thanks to the support provided by the International processes and liaise with the EITI International Renaissance Foundation and the German Secretariat and donors. Until recently, members government via Efficient Management of Public of the EITI MSG representing civil society were Finances project implemented by the German nominated by the Energy Transparency Association, Corporation for International Cooperation (GIZ but it is quite possible that with the adoption of a new GmbH), numerous events were held in extractive EITI MSG membership procedure the procedure of regions with participation of local public authorities. delegating civil society representatives to the MSG For example, over 60 events took place in Ukraine’s will change as well. regions during 2018 with the support from the aforementioned donors, held in the format of round Presently, civil society is represented in the MSG tables, trainings and public discussions focused by two actors based in Kyiv, DiXi Group and upon sustainable development of communities and International Renaissance Foundation, and three popularization of the EITI Report. These events were members from extractive regions: New Energy organized and held by a number of CSOs, such as (Kharkiv), Bureau of Development, Innovations and New Energy, Poltava branch of the Social Service Technologies (Ivano-Frankivsk), and Agency for of Ukraine and Agency for Development and Development and Cooperation (Lviv). Cooperation. Involvement of bodies of local self- Even though after adoption of amendments to the government (BLSs) and local executive Budget Code concerning decentralization of rent authorities in the EITI BLSs received a substantial resource guaranteed by law (5% of the amount of rent payments on every site, Ukraine received the status of EITI candidate disbursed among local budgets), the participation of country back in October 2013, but until presently, local councils and their associations in promoting EITI BLSs have not been directly represented in the EITI in Ukraine is limited to communication with extractive MSG. The involvement of BLSs in the dialogue and companies operating in the areas under jurisdiction public discussions of EITI and the extractive sector in of these councils. general is very important, because the establishment 2 With the adoption of rent decentralization law, and private (Naftogazvydobuvannia PrJSC, Poltava social partnership agreements were expected to Gas and Oil Company JV, UMG Invest LLC, Cub lose their importance for local authorities, giving Energy Inc., DTEK Energo LLC) companies. way to rent payments to councils of various levels. However, certain regional councils (especially when According to 2016 data1, main natural gas producing election campaigns kick off) begin blackmailing regions were the Kharkiv (46.7%), Poltava (41.4%), extractive companies into signing social partnership Lviv (3.1%), Dnipropetrovsk (2.7%), Sumy (2.1%) agreements with predetermined (desirable or of and Ivano-Frankivsk (2%) Oblasts. Major gas priority importance for local authorities) areas of production companies include Ukrgazvydobuvannia spending to show how they care about voters. JSC, Naftogazvydobuvannia PrJSC, Ukrnafta PJSC, Smart Energy, Poltava Gas and Oil Company JV. There is a difference in the attitude of local authorities Ukrgazvydobuvannia JSC is responsible for 73% of toward state-owned and private extractive the nation’s total gas production output. companies. State companies operate within legislative confinements as regards the possible Ukraine’s main oil producing regions include the areas of spending funds under social partnership Sumy (44.3%), Chernihiv (17.2%), Ivano-Frankivsk agreements, and therefore, they often become (17.1%), Poltava (9.8%) and Lviv (8.2%) Oblasts. hostages of unfounded demands from local authorities Among major oil producing companies are Ukrnafta and cannot receive special extraction permits. In PJSC, Ukrgazvydobuvannia JSC, Poltava Gas and some regions, there is a practice of not disclosing Oil Company JV. Ukrnafta PJSC is responsible for details of social partnership agreements (SPAs). As 90% of the nation’s total oil production output. a result, the procedure of spending proceeds from Coal is extracted in the Dnipropetrovsk (42.7%), SPAs by extractive companies, specific areas of Donetsk (33.6%), Luhansk (19.8%), Lviv (3.7%) spending, and projects on which moneys were spent and Volhynian (0.3%) Oblasts. Major coal mining under SPAs remain undisclosed and unknown to the companies include DTEK Pavlohradvuhillia PrJSC, broad public. Therefore, the effectiveness of social Pokrovske Mining Department PJSC and
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