Interview: Head of Volyn Regional Council and Director of ME “Volynpryrodresurs” Discuss the Role of Amber and Peat Extraction for the Region
The journalists of VSN spoke with the head of ME “Volynpryrodresurs” Anatolii Kapustiuk and the chairman of the Volyn Regional Council Hryhorii Nedopad about the significance of enterprise activities for our region, factors affecting the indicators of amber and peat extraction, and future prospects.
ME “Volynpryrodresurs” (VPR) is the largest enterprise in Ukraine engaged in legal amber and peat extraction in the Volyn region. According to financial and economic indicators for 2023, the enterprise exceeded its projected planned indicators, increased amber extraction figures fivefold, and achieved first place in amber extraction in Ukraine.
Conversation with the Head of ME “Volynpryrodresurs” Anatolii Kapustiuk
- The results of KP “Volynpryrodresurs” for the past year are impressive: first place in amber extraction in Ukraine. Congratulations! How did you achieve such results? Are you satisfied with the indicators?
- In fact, achieving first place was a pleasant surprise. We learned about it from the report of the head of the State Service of Geology and Mineral Resources of Ukraine (Derzhheonadra), Roman Opimakh, after all enterprises in the extractive industry submitted their reports. The indicators of the volume of minerals extracted by enterprises are submitted to the State Service of Geology and Mineral Resources of Ukraine at the end of each year.
During the report hearing by the head of the State Geological Service, Roman Opimakh, indicators from all enterprises in the amber extraction industry were presented, detailing how much each had extracted. In our case, this amounted to 14 tons and 667 kilograms. The second place was taken by the Rivne-based company “Sun Craft Center” LLC with an indicator of 11,623.04 kg. The third place was also occupied by another Rivne-based company, “Business Elite Group,” with an indicator of 4,383.48 kg.
However, there is always a desire to achieve more. Here a detailed answer is needed: the enterprise has increased this indicator by changing its technological approach to amber extraction. As a result, the ability to extract small fractions has increased. Previously, if the extraction of small fractions constituted 15-20 percent of the total mass extracted, now we are able to extract almost all 100 percent of the deposits. This refers to small amber – fractions of 0-2 grams – which we previously lost along with clay to a greater extent. But now we are able to extract even the tiniest pieces of amber from clay.
Thanks to the implementation of more modern technologies, it has been possible to significantly increase the volume of extraction. With the new approach to work, the extracted small fraction (0-2 grams and 2-5 grams) accounted for 60 percent of the total mass of all amber extracted by our enterprise in 2023 (from 14.5 tonnes).
- How much amber was sold, and were there any difficulties encountered, and what were they?
- In 2023, we sold almost 16 tons of amber, including a leftover from last year – 1 tonne and 923 kilograms, for a total amount of nearly 115 million hryvnias.
For example, there is an approved standard agreement by the Cabinet of Ministers of Ukraine for conducting exploration and extraction works, concluded between us and the landowner represented by the Volyn Administration, which allows us to carry out exploration and extraction activities within the contours of our special permits. However, there is a point that work can only be conducted on territories that have been cleared of forest cover and shrubs. Accordingly, we are directly linked to the logging operations carried out by forestry enterprises. The logging of trees and shrubs by the State Specialized Forest Enterprise “Forests of Ukraine” occurs in pre-planned areas. Thus, certain difficulties have arisen in the work of “VPR,” for example, we say that we need to clear here. We hear in response: logging in this area is not planned for this year; please check for amber presence in other areas where logging has already occurred. We enter, passing through several hundred hectares where they have conducted logging, and on those plots there is even a lack of clay. That is, there is no amber, but significant funds have been spent on conducting field and geological exploration work.
However, in 2023, the Cabinet of Ministers of Ukraine introduced a new type of logging for purposes unrelated to forestry, so we went along the path of concluding a servitude agreement in order to take advantage of such innovations within our licensed areas. According to these changes, a subsoil user within the servitude can appeal to the permanent forest user, having a special permit and a positive environmental impact assessment. Within 10 days, the forest user calculates losses and damages, issues a logging ticket, and begins clearing trees and shrubs from the declared territory.
Such changes will significantly simplify access to areas after conducting reconnaissance and will allow the company to increase its amber extraction performance by at least 5 times. We have enough amber; the main thing is to get to it. Almost all of these areas are covered with forest.
- We also know that after extraction, “VPR” conducts land recultivation. How does this happen?
- As soon as we have worked the area, the first thing we do next is carry out mining and technical reclamation. This means we return the layers of soil in the order of their deposition, compacting them, and restoring them to the state they were in before the extraction activities. Immediately after this, we transfer the worked (with conducted mining and technical reclamation) areas to the forestry for biological reclamation (tree planting). They develop a plan for biological reclamation, a planting plan, which specific species will be used, what spacing will be applied, what root system should be present, etc. Thus, within a month or two after completing extraction activities, the entire area is mechanically planted.
If we compare with adjacent territories that we have not processed, the difference is striking, as there the soil is compacted. In our reclaimed areas, it’s not just suitable for planting forests; one can even sow wheat. The acceptance rate of seedlings is probably a hundred percent; they develop a good root system. Therefore, we pay for the planting material, planting, and a year of care for this forest.
– The ME “Volynpryrodresurs” has four special permits for peat extraction. Last year, work was carried out at the peat bogs “Koza-Berezyna,” “Velyke Bahno,” and also at the deposit “Velyke Boloto.” What were the results?
– Last year, we finished with a production figure of 83 thousand tons of milled peat. We sent 43 thousand tons for processing and manufacturing peat briquettes – we managed to produce 22 thousand peat briquettes, which were successfully sold. There are more than 9 thousand tons remaining at the factory of DP “Volyntorf” in Manevychi. We separately sold 3 thousand tons of milled peat. And on the fields, we have almost 35 thousand tons of milled peat. In total, the enterprise sold peat products worth 74 million 745 thousand 684 hryvnias and 42 kopecks.
- After the privatization of “Volyntorf,” accusations against “Volynpryrodresurs” regarding excessive profits and fraud resonated throughout the country. Subsequently, you held a press conference where you convincingly refuted all allegations against the enterprise. What are the current relations with the new owners of “Volyntorf,” and is there a prospect for further cooperation?
- Due to the privatization of “Volyntorf,” it was difficult to predict any future steps regarding cooperation or lack thereof. Whether this enterprise will independently develop its territories or purchase new licenses was uncertain, which is why the swamp preparation works that was supposed to take place by the end of the year has been halted. Currently, negotiations initiated by the new owners of “Volyntorf” are underway.
They are considering the option of purchasing raw materials, which is the principle of operation we worked under previously. Over time, we switched to a tolling scheme: they processed our peat raw material into peat briquettes, and we then sold them independently. Now, the new owners are initiating discussions regarding the purchase of the milled peat extracted in 2023, taking into account the profitability of our communal enterprise. We are still at the negotiation stage – nothing has been formally documented yet. In a private conversation, they explained that the accusations directed at our communal enterprise during their press conference were a result of emotions since criminal proceedings began immediately after they purchased DP “Volyn Torf,” and they mistakenly thought that we had initiated them. Therefore, if documents for cooperation are signed, we will definitely invite the media to ensure that all aspects of our communal enterprise’s work are publicly highlighted rather than resolved behind closed doors.
- According to the report for 2023, dividends paid by the enterprise to the regional budget increased fourfold compared to 2022. What caused this increase in this indicator?
- To the general fund of the Volyn regional budget, 15% of net profit was paid based on quarterly financial and economic activities for 2023, amounting to 4,361,312.00 UAH, while in 2022 it was 1,297,103.00 UAH. Thus, in monetary terms, this is indeed more than four times higher, and in terms of production volume, we have increased indicators by almost five times.
For each year of operation, the utility company agrees a financial plan with the regional council. We have also exceeded these expectations in terms of revenue by more than four times. It is difficult to compare with other utilities, because VPR is 100% self-supporting. That is, we are not financed from the regional budget at all, but we earn 100% of our own money and transfer dividends to the regional budget from our net profit.
Over the past year, we have often communicated with various regional councils and territorial communities, which consider the experience of our ME to be interesting. In general, the creation of an enterprise on the basis of a territorial community and the extraction of any minerals: sand, chalk, crushed stone, granite and others - is a great option to receive additional revenues from the resources that are literally under their feet to fill the budget. Therefore, when people ask about our experience, we are always happy to share it and give practical advice, but whether it will be implemented in the future is questionable, as the war has a great impact on this. Obtaining any special permit is a rather complicated process nowadays, and it is also quite difficult for the regional council to attract any investment during the period of martial law. Therefore, I believe that when the war is over - with our victory, of course - subsoil production will develop in various areas.
- In your activities, there is an important aspect such as monitoring the ecological state of the environment. “Volynpryrodresurs” conducts this monitoring through collaboration with scientists. Please tell us more about this process.
- Not causing harm to the environment is one of the main requirements for conducting activities such as mineral extraction, or at least striving to minimize this impact. To analyze the potential effects of our activities on the surrounding environment, we have engaged the Department of Ecology and Environmental Protection at Lesya Ukrainka Volyn National University.
A memorandum and contract have been signed with Volyn National University named after Lesya Ukrainka for conducting monitoring within the framework of special permits for subsoil use. According to the recommendations of the Ministry of Environmental Protection and Natural Resources of Ukraine, they carry out ecological monitoring of all objects for which we have special permits.
The scientific group includes ecologists, zoologists, and botanists. They conduct a very large volume of work: researching not only peat bogs and amber extraction sites but also adjacent territories. Such observations are carried out throughout the entire growing season, meaning that there are at least four field trips per year for each object. These are field studies, water analysis, radiation levels, as well as studies of plant and animal life. In other words, they analyze the impact of our activities on the environment. Students from Lesya Ukrainka Volyn National University are also involved in joint trips to monitoring sites, processing materials, and preparing cartography.
Conversation with the Head of the Volyn Regional Council, Hryhorii Nedopad
- What role does ME “Volynpryrodresurs” play in shaping the regional budget compared to other municipal enterprises?
- This is one of the few – perhaps the only – enterprises that generates significant profit both for the regional budget and for the communities where extraction works are carried out. This includes dividend payments, the provision of new jobs, and it truly is the only enterprise operating on such a scale – although we know that similar minerals are found in Rivne and Zhytomyr regions – but this is the only municipal regional enterprise in Ukraine that extracts minerals, shows profits, and operates transparently.
What I would like to emphasize is the need to facilitate access to mineral resources that are covered by forests. Here, cooperation with foresters and local communities should be established so that there are no obstacles, but rather understanding. With licensed areas and capacities of the communal enterprise that can be scaled up, we can cover the budget revenue shortfall; this issue has even been discussed at the Defense Council, where it was noted that the amount projected to be lacking in the regional budget for 2024 could almost be fully covered by our communal enterprise under normal unobstructed operations.
- What was the purpose of establishing this company in the first place?
- The primary goal of creating the enterprise was to combat illegal amber mining that emerged in the Volyn region during 2014-2015. During this period, illegal mining activities led to significant environmental degradation, resulting in landscapes resembling a “lunar surface” due to extensive excavation for amber extraction. In response to this crisis, the Volyn Regional Council made a decision in 2016 to establish the municipal enterprise “Volynpryrodresurs.” This enterprise works in collaboration with law enforcement agencies to serve as a barrier against the spread of illegal amber mining within the region. As a result of these efforts, there have been no reported cases of illegal amber extraction in Volyn recently. Law enforcement regularly updates on the situation, confirming that such activities have been effectively curtailed. That's why it was crucial to stop illegal amber mining and stop causing damage to the environment and ecology in general.
After mining works, ME “Volynpryrodresurs” fully reclaims the mined areas, and does not leave behind “lunar surface” and empty treasury like illegal miners in other regions.
- Were there any difficulties that preceded the establishment of the enterprise?
- At that time, in 2017, the then authorities were very resistant to this. I don’t know why; perhaps they did not need a controlled legal extraction process and it hindered them. So, they probably had their own benefits from illegal extraction. Therefore, they blocked the operation of the enterprise for years. There were repeated searches in the regional council, municipal enterprise, State Geological and Subsoil Survey, Ministry of Ecology, State Commission of Ukraine on Mineral Reserves, GeoInform… with the seizure of all documents, as well as those belonging to our employees. This eventually led to proceedings and lawsuits that reached even the Supreme Court, in which we never lost because all special permits for subsoil use were obtained legally. Fortunately, all this is in the past, and in 2020 the enterprise started operating.
In the fall of 2020, Anatolii Kapustiuk, who had been working as the deputy director of the municipal enterprise since 2017, was appointed as the company's director. It was from this time that the development of the enterprise began, and thus this appointment was the right choice. In 2021, Anatoliy Anatoliyovych won a competition for the position of director. We can see with our own eyes the annual positive results of his work.
- What are the prospects for the development of the enterprise? It is clear that increasing extraction capacities will lead to an increase in regional budget revenues.
- The enterprise is currently conducting research in certain territories. If those territories are processed, it will automatically increase the number of jobs. If there were a large number of those territories with sufficient amber deposits that were researched, the number of employees could easily exceed even one thousand people. Accordingly, salaries would be high; such activities imply this.
The military state has a significant impact, and we must take this into account. There are territories with copper deposits that, unfortunately, we cannot currently develop due to their proximity to the border with Belarus – only 5 km away, with the construction of fortifications and the mining of its territory. Therefore, extraction activities there are on hold, at least during the military state and until the complete demining of the deposit area.
As for the significant contribution to the economic development of the region, this is indeed the case, as based on the results of quarterly financial and economic activities, UAH 4,361,312.00 and UAH 1,297,103.00 was paid in 2023 and 2022 respectively, to the general fund of the Volyn regional budget from the 15% share of the net profit. This means that dividends have quadrupled compared to the previous year. In 2023, the company's revenue amounted to UAH 120,858,797.60, profit was UAH 35,917,285.58, and income tax was paid in the amount of UAH 6,841,874.
In addition, a rent from extraction is paid, 70% of which goes to the state budget, while 30% goes to the community, taking into account personal income tax (PIT) and profit tax, which contribute to local and regional budgets. If we calculate all this together, the communities in the areas where amber extraction takes place receive an average of more than one million hryvnias per month. Furthermore, there are hundreds of employees of the enterprise who bring decent salaries home to their families each month, having earned them honestly by working legally. Therefore, the positive changes occurring in the communities (street lighting, repairs, construction) are their personal contribution to the development of their own communities.
SOURCE: Волинська Служба Новин