Mine rehabilitation and financial assurance – the new regime in QueenslandNov 2017 | Insurance
In the days immediately prior to the announcement of the 2017 state election, the Queensland Government released the much anticipated Mineral and Energy Resources (Financial Provisioning) Bill 2017 (the Bill) after a short public consultation period. The Bill introduces two key changes proposed to Queensland’s mine rehabilitation and financial assurance regime:
- a revised financial assurance regime that seeks to minimise the financial risk to the State if mineral and energy resource tenure holders do not comply with their environmental management and rehabilitation obligations. The new regime proposes the creation of a pooled fund for financial assurance contributions, and a more flexible way to provide sureties; and
- new mine planning obligations that focus on progressive rehabilitation throughout the entire life cycle of a mine.
Our previous newsletters (which can be found here) provide detailed summaries of the policies leading to this Bill.
Revised financial assurance provisions
The Bill establishes the Financial Provisions Fund, otherwise known as the ‘scheme fund’. The scheme fund will receive contributions made by the holders of environmental authorities, also known as ‘authorities’, issued under the Environmental Protection Act 1994 (Qld) (EP Act).
Other contributions will also be made to the scheme fund, including amounts earned as interest on cash surety held.
To manage the scheme fund, a ‘scheme manager’ is to be appointed, and is tasked with:
- allocating environmental authorities to a risk category – being either very low, low, moderate or high;
- reviewing the risk category to which authorities have been allocated;
- managing the scheme; and
- setting investment objectives.
When deciding the risk category allocation for an environmental authority, the scheme manager must consider:
- the scheme manager’s opinion of the probability of the State incurring costs and expenses because the holder of the environmental authority has not prevented or minimised environmental harm, or rehabilitated or restored the environment, in relation to a resource activity carried out under, or to ensure compliance with, the authority;
- submissions made by the holder of the environmental authority (the scheme manager must notify a holder of the initial indicative risk category allocated, and the holder has an opportunity to make submissions); and
- the scheme manager guidelines.
In forming an opinion, the scheme manager must also consider the financial soundness of the holder and any parent corporation of the holder. There is no definition for the term ‘financial soundness’, but it is anticipated that the guideline will provide additional information and direction. The scheme manager may also consider the characteristics of a resource project to which the authority relates and any other matter that they consider relevant to forming an opinion.
If there is more than one holder, the scheme manager may consider the financial soundness of any or all of the holders and the parent companies of any or all of the holders.
The scheme manager must review the risk category initially given to an environmental authority each year, and may review it upon transfer of the relevant resources authority, including by change in control of a holder.
The scheme manager will make guidelines about the operation of the scheme, including a statutory guideline in relation to the making of allocation decisions.
Holders can apply for review of some of the scheme manager’s decisions pursuant to the Judicial Review Act (Qld) 1991, including a review of the risk category allocation.
Financial assurance contribution
If the scheme manager allocates a risk decision of very low, low or moderate and the estimated rehabilitation cost is less than $450 million1, then the holder of the authority must pay a financial contribution into the scheme fund. The amount of the contribution is calculated by multiplying the estimated rehabilitation cost with a ‘prescribed percentage’ for that authority, which is determined by the risk category allocation made by the scheme manager.
The prescribed percentages will be set out in the relevant regulation, which is not yet available.
If the scheme manager makes an allocation decision that the authority is a high risk category, or if the estimated rehabilitation cost is more than $450 million, then the holder of the authority must provide a surety for the entire amount of the estimated rehabilitation cost (or the value above the $450 million threshold).
The scheme manager may also require the holder of any authority to provide a surety in place of payment into the scheme fund if the scheme manager considers that the viability of the fund requires preservation.
Small scale mining tenure holders will also be required to provide surety.
Types of surety are to be expanded to include insurance bonds, bank guarantees and cash. These types of assurance can be used flexibly by proponents over the course of the authority by allowing proponents to use a mixture of different sureties to support their financial assurance obligation.
The estimated rehabilitation cost is initially determined to be the amount of an existing financial assurance for an authority. The calculation of estimated rehabilitation cost will remain under the EP Act, with some amendments. Details regarding specific calculation are not yet known.
An authority with an estimated rehabilitation cost equal to or more than $100,000 will continue to be required to provide surety until such time as the scheme manager makes an initial allocation decision. This process will commence with the giving of a transition notice by the scheme manager to the holder of an authority. The transition notice must be given within three years from commencement, and it is understood that the scheme manager will provide guidance as to the likely timeframe that the affected authorities will be issued with a transition notice.
Progressive rehabilitation and closure plans
By making amendments to the EP Act, Mineral Resources Act 1989 (Qld) (MR Act), and Mineral and Energy Resources (Common Provisions) Act (Qld) 2014, (MERCP Act) the Bill seeks to introduce new obligations on authority holders to require the preparation of a detailed Progressive Rehabilitation and Closure Plan (PRC Plan) for site-specific authorities. It is not clear at this stage whether similar requirements will apply to petroleum projects in the future.
The main purpose of a PRC Plan is to:
- plan for how and where environmentally relevant activities will be carried out on land in a way that maximises the progressive rehabilitation of the land to a stable condition; and
- provide for the condition to which the holder must rehabilitate the land before the authority may be surrendered.
A PRC Plan is required to be part of the environmental authority application for a mining lease.
The Bill also requires a Progressive Rehabilitation and Closure Plan Schedule (PRCP Schedule) to be prepared as a specific part of the PRC Plan. The PRCP Schedule is intended to provide additional detail regarding the rehabilitation objectives described in the PRC Plan, to set rehabilitation milestones and to confirm when each milestone will be met.
A guideline will be developed to support the requirements for PRC Plans and PRCP Schedules and ensures the structure and content are consistent and comprehensive, and will include information relevant to both new and existing mines, and different commodities.
The Bill also confirms that land rehabilitation will be required as soon as reasonably practicable after land is ‘available for rehabilitation’, which is defined to be land that is not being mined or used for related infrastructure, unless it will be mined within 10 years or has permanent infrastructure that will be retained.
Non-compliance and enforcement
It will be an offence not to comply with a PRC Plan milestones or conditions.
The administering authority can issue an environmental protection order to ensure compliance with a condition of a PRCP schedule. However, a transitional environmental program cannot be utilised by the administrating authority (or be requested by a proponent) to address non-compliances with PRCP Schedule activities or milestones.
It is intended that these reforms will commence 1 July 2018.
Within 3 years after commencement, existing site-specific environmental authority holders will be given a notice by the administration authority, stating that the holder must submit a proposed PRC Plan. The notice must specify the date by which the plan must be submitted, it is expected that the timeframe will range between 6 months and 12 months.
For existing mines with rehabilitation obligations or closure plans included in existing authority conditions, the holder will be asked to translate their authority rehabilitation conditions into milestones and milestone criteria. For authorities that do not have existing commitments regarding rehabilitation or post mining land use, the process of developing a proposed PRC Plan will require holders to prepare a PRC Plan including rehabilitation objectives, milestones and post mining land uses based on which stage the mining operation is in.
With the Labor Gonvernment likely to return, it is anticipated that the Bill will be re-introduced. However, it is unlikely that the proposed start date of 1 July 2018 will be achieved. We will continue to keep you informed of all future developments.
Please contact us if you have any questions regarding the potential impacts of the new regime on your project.
1 Or such other amount prescribed by regulation
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