17 Aug 2012

WA introduces new environmental bonds system for mine rehabilitation

The WA State Government has introduced legislation (the Mining Rehabilitation Fund Bill 2012) to establish a new fund to replace the previous environmental bonds system for mine rehabilitation in Western Australia.

The new Mining Rehabilitation Fund will require operators to make annual contributions based on a percentage of their total closure liabilities, which will go into a pooled Government-administered fund. Bonds will only be retained for some high risk operations.

The Reforming Environmental Regulation program is expected to deliver greater certainty, confidence and clarity surrounding the environmental regulatory system and strengthen the enforcement capacity of the Department of Mines and Petroleum.

The position until now for environmental bonds in WA

The position until now has been that under section 84A of the Mining Act, an applicant for a mining lease has had to lodge a security for compliance with the conditions to which the mining lease, if granted, would from time to time be subject, and the relevant provisions of the Mining Act and the regulations. A security had to be in accordance with and subject to section 126, and mining lease could not to be granted unless a security had been lodged.

In March 2008, the Department of Mines and Petroleum proposed a revision of the bond policy. This recommended that for higher risk projects, the bond be increased to between 75% and 100% of actual rehabilitation costs.

This was followed by a paper entitled "Policy Options for Mining Securities", released in December 2010. In that paper, three models were discussed:

  • an unconditional performance bond system;
  • a mining security fidelity fund system; and
  • an insurance-based system.

A Ministerial Advisory Panel was then appointed in mid-2012 to advise the Minister on the development of a simple yet robust regulatory approach to the issue.

As a result of the work of that Panel, the mining security fidelity fund system approach has been adopted. As indicated by the Chamber of Minerals and Energy, the benefit for industry is that this model will free up significant capital at the beginning of project development while the Government benefits from having a fund that covers the full closure costs for mine rehabilitation.

The mining security fidelity fund system

A mining security fidelity fund system:

  • will provide the State with adequate funding to carry out rehabilitation in the event of default by a miner in fulfilling its rehabilitation obligations;
  • will offer equity, affordability and "transparency";
  • will allow a release of significant (and unnecessary) funds locked up in unconditional performance bonds; and
  • will provide for the option to require unconditional performance bonds from unsatisfactory or high risk operators or operations.

It was noted in earlier studies that care would be required to ensure that administrative and compliance costs are not excessive, and a flaw in such a system seen by earlier studies is that there is an inherent conflict of interest in the State both administering the fund and being its beneficiary.

The Mining Rehabilitation Fund Bill 2012

The Mining Rehabilitation Fund Bill 2012 seeks to:

1. Establish the Mining Rehabilitation Fund to provide a source of funding for the rehabilitation of abandoned mine sites and other land affected by mining operations. Levies, penalties and investment income are to be credited to the fund.

The fund is to be applied to fund the rehabilitation of abandoned mine sites and affected land, and in the payment of refunds where levies are adjusted following reassessment.

Investment income in the fund may be applied, in addition to rehabilitation, to the funding of programs and the provision of information on abandoned mine sites, the payment of administration costs and enforcement costs. By allowing only investment income to be applied to non-rehabilitation objectives, the Government appears to have met the potential objections relating to the possibility of the fund being eroded by administration costs and the broader Government agenda.

2. Enable the declaration of abandoned mine site and land affected by mining operations. Such sites will be gazetted.

The Chief Executive Officer of the department administering the Act (presumably the Department of Mines and Petroleum) may authorise the rehabilitation of a gazetted mine site. However, if the site is on private land (or a pastoral lease), the power of entry cannot be exercised unless notice is to be given to the owner or occupier (or lessee), or reasonable attempts are made to do so; or the owner or occupier (or lessee) consents.

3. Impose a rehabilitation levy in respect of each current:

(a) mining tenement unless it is granted, or held, pursuant to a Government agreement;

(b) a mining tenement granted, or held, pursuant to a Government agreement, if the mining tenement is prescribed or of a class prescribed; and

(c) mineral lease granted under a Government agreement, if the mineral lease is prescribed or of a class prescribed.

Because the State appears to take the view that mining tenements issued under State Agreements pursuant to the Mining Act 1904 remain a separate species of mining tenement, tenements of that kind (ie. tenements and rights of occupancy referred to in section 5(2) of the Mining Act 1978) that are prescribed or of a class prescribed are specifically included.

The amount of the levy will be the subject of regulations.

Assessments of liability to the levy are to be made by the Chief Executive Officer. Information to enable assessments to be made must be provided by tenement holders. The Chief Executive Officer may act on other information if dissatisfied with the assessment information provided by the tenement holder. Assessments are payable no earlier than 30 days after issue.

Levies may be reassessed due to earlier assessment or reassessment errors, or where it is otherwise appropriate to do so. Objections may be taken to an assessment within 28 days of the date of the assessment on the grounds that:

(a) the person assessed is not liable to pay the levy amount to which the notice relates; or

(b) that there is an error in the assessment or reassessment of the levy amount; or

(c) on a prescribed ground (if any).

Objections must be determined by the Chief Executive Officer within 28 days of lodgement. The Chief Executive Officer's decision is subject to review by the State Administrative Tribunal on application made no later than 42 days after the decision. Levies are payable as assessed despite unresolved an objections.

The Chief Executive Officer is given extensive powers to obtain information. An individual is not excused from giving information, answering a question or producing a record when directed to do so by the Chief Executive Officer on the ground that to do so might tend to incriminate him or her, but there is a limit on the use to which that information can be put in subsequent proceedings.

4. Establish a Mining Rehabilitation Advisory Panel to provide advice to the Chief Executive Officer in relation to any matter relating to the administration of this Act that is prescribed, and any other matter relating to the administration of the Act referred to it by the Chief Executive Officer.

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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.