Financial Provisioning Bill for financial assurance and rehabilitation in Queensland reintroduced, open for submissions

21 Feb 2018

Submissions are being sought on the Mineral and Energy Resources (Financial Provisioning) Bill 2018, reintroduced to Parliament on 15 February 2018, which seeks to establish a new financial assurance system for resources projects in Queensland. 

The Mineral and Energy Resources (Financial Provisioning) Bill 2017 lapsed on the calling of last year's Queensland election, however, it was reintroduced, with some modifications, to Parliament on 15 February 2018 (we summarised its key changes to Queensland's existing financial assurance framework for resources projects and rehabilitation requirements for mining projects here).

Brief overview of the Bill

The explanatory notes to the Bill identify the following key policy objectives:

  • manage the financial risk to the State if mineral and energy resource tenure holders do not comply with their environmental management and rehabilitation obligations; and
  • ensure that land disturbed by mining activities is rehabilitated to a safe and stable landform that does not cause environmental harm, and can sustain an approved post-mining land use.

The Bill proposes to establish a new financial provisioning scheme for resources projects, including a pooled financial provision fund (scheme fund) with a scheme manager to manage the scheme. It also proposes to reform the current rehabilitation framework for mining projects, including requirements for upfront commitments to progressive rehabilitation and mine closure through a progressive rehabilitation and closure plan (PRC Plan).  This will replace the plan of operations for mining activities.

Key differences between the 2017 and 2018 Bills

Purpose of the Bill

Two key purposes of the Bill relating to the provision of funds to the State have been broadened by:

  • clarifying that the Bill is to provide a source of funds to the State for costs and expenses "relating to preventing or minimising environmental harm, or rehabilitating or restoring the environment, or securing compliance with an authority or small scale mining tenure" (not just for costs and expenses incurred where an environmental authority holder or small scale mining tenure holder does not comply with its obligations as set out in the 2017 Bill) and
  • expanding the scope of research (contributing to rehabilitation of land) for which the State may receive funding, by removing the qualifying reference to 'scientific'.

Estimated rehabilitation cost (ERC)

The ERC is a key component by which the amount of contribution to the scheme fund, or surety required, will be calculated.

The 2018 Bill inserts additional factors for calculating the ERC.  Previously, it was based only on the estimated cost of rehabilitating the land on which the resource activity is carried out, but now, in line with the broader purpose, extends also to the estimated cost of preventing or minimising environmental harm, or rehabilitating or restoring the environment, in relation to the resource activity.  Consequential changes to provisions relating to ERC decisions have also been made.

Risk allocation

Contributions to the scheme fund will vary depending on the risk category allocated to each authority by the scheme manager.

In forming an opinion of the risk category allocation of an authority, the 2017 Bill required the scheme manager to consider the financial soundness of the holder and any parent corporation of the holder.  Under the 2018 Bill, consideration of the parent corporation's financial soundness will be at the scheme manager's discretion.

Release of surety

The Bill sets out the circumstances in which the scheme manager must release the surety. 

The 2017 Bill required the release of the surety where an authority or small scale mining tenure for which a surety has been given has been surrendered.  

Under the 2018 Bill, the surrender of an authority or small scale mining tenure is insufficient to trigger release of the surety.  Rather, the scheme manager may release a surety in these circumstances if the scheme manager is satisfied it will not be asked to make a claim on or release the surety or part of it.  The scheme manager may be satisfied of this if it receives appropriate notice from the administering authority.

Transitioning financial assurance

Where financial assurance has been paid under the pre-amended Act, and the ERC for the authority is equal to or more than the prescribed ERC amount, the scheme manager does not need to make an initial allocation decision until it issues the holder of the authority with a transition notice.  The transition notice must be given within 3 years of commencement (of these provisions). 

The 2018 Bill includes a requirement that once the transition notice has been issued, and until the scheme manager makes an initial allocation decision, the holder of the authority must give surety in the amount of the estimated rehabilitation cost for the authority within 30 business days

Minor amendment of a PRCP threshold

The Bill includes amendments to section 223 of the Environmental Protection Act, and specifically, to the definitions of minor amendment and major amendment, to include references to PRCP (that is, progressive rehabilitation and closure plan) schedules.  Whether or not an amendment is minor or major will determine whether assessment is required.   The new definition for "minor amendment (PRCP threshold)" for a PRCP schedule includes where the amendment does not change a rehabilitation milestone or management milestone by more than 5 years or where it does not extend the day by which rehabilitation of land to a stable condition will be achieved.

The 2018 Bill inserts a new provision to allow the administering authority to decide that a proposed amendment changing the order of at least 2 of the days when rehabilitation of the land will be achieved will be a minor amendment if it is satisfied adequate community consultation has been undertaken and the proposed amendment would be unlikely to attract an objection if the notification stage were to apply to the amendment application.

Environmental authorities - amalgamation or de-amalgamation

The provisions relating to the ERC decisions have been extended to require environmental authority holders to re-apply for an ERC decision where the administering authority has approved an application to amalgamate an environmental authority for a resource activity with another environmental authority or to de-amalgamate an environmental authority.   

What's next?

We still don't know how much the new financial assurance system will cost.  Risk allocation decisions have not yet been made, and the proposed regulation with risk category contributions is still not available. 

The detail required for the progressive rehabilitation requirements will only be known when the guideline prepared by the scheme manager is released.  It will be important for resource entities to be involved in the consultation process for the draft guideline when it becomes available.

The Mineral and Energy Resources (Financial Provisioning) Bill 2018 has been referred to the Economics and Governance Committee.  Submissions on the Bill must be made to the Committee by 12pm on 9 March 2018, with the Committee to report to the House on 20 April 2018.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.