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Client Update: Environmental bond and mine rehabilitation reform in Queensland

15 May 2017

In brief: Major reforms to environmental bonds and rehabilitation requirements are proposed in two discussion papers released by the Queensland Government. All mining sector operators should understand how the reforms will impact their current and proposed operations. Partner Bill McCredie (view CV) and Senior Associate Gobind Kalsi report.

What does it mean for you?

The proposed reforms in the Queensland Government's discussion papers will have the following consequences for operators in the mining sector:

1. The current environmental bond (ie financial assurance system) will be replaced with what is intended to be a 'risk based' system.

The outcome of the new system will be that the majority of mine operators in Queensland will make contributions into a pooled rehabilitation fund, rather than being required to hold bank guarantees for the estimated cost to rehabilitate disturbed land.

The amount of contribution will be calculated by the rehabilitation cost multiplied by the rate of relative financial risk.

The funding of rehabilitation liability is a significant ongoing cost for all mining operators. Accordingly, all operators should understand the benefits and risks of the proposed changes.

2. Operators undertaking mining activities that require site specific environmental authorities (ie full-scale mining activities) will be required to have a 'life of mine plan' that will include binding and enforceable milestones for mine rehabilitation.

A new regulatory regime will be introduced to support the proposed 'life of mine plan' including:

  • a new definition of when mined land will be considered to be rehabilitated;
  • a definition of when mined land is considered available for rehabilitation;
  • the opportunity for public comment on the life of mine plan and any significant changes to the life of mine plan; and
  • the life of mine plan will identify the post-mining land use for the land.
3. New requirements for mines placed into 'care and maintenance'.

Although not a primary focus of the discussion papers, the papers do flag new requirements for operations that are placed into care and maintenance.

Submissions on the discussions papers are open until 15 June 2017. The discussion papers are available here and here.

A summary of the current system, proposed changes in the discussion papers and issues that may warrant consideration by the mining sector are identified in the table below.

Current position Proposed change Some issues for consideration

Environmental bonds (financial assurance)

  • Financial assurances are calculated on a site-by-site basis for all land that has been or will be significantly disturbed identified in a Plan of Operations.
  • The amount of financial assurance is calculated using the Queensland Government’s financial assurance calculator (or other specific calculator approved by the Department of Environment and Heritage Protection).
  • Discounts to the amount of financial assurance can apply if specific requirements are satisfied.
  • The preferred form of financial surety is a bank guarantee.

The current approach to calculating environmental bonds will be replaced with what is intended to be a 'risk based' approach such that:

  • 'Representative resource entities' that are an acceptable risk for a pooled rehabilitation fund will make contributions to a rehabilitation fund rather than be required to hold their existing financial assurance.
    'Representative resource entities' are those that represent less than 5 per cent of the total rehabilitation liability in Queensland and have an B- or above financial credit rating. Queensland Treasury Corporation estimates 134 operators fall into this category.
    The amount of contribution will be calculated by the rehabilitation cost multiplied by rate of relative financial risk.
  • 'Significant resource entities' – companies that represent 5 per cent or more of the total rehabilitation liability in Queensland and have a financial credit rating of A- or above will make direct contributions to the Queensland Government under 'Selected Partner Arrangements'. Queensland Treasury Corporation estimates less than five operators currently fall into this category.
    The amount of contribution will be calculated by the rehabilitation cost multiplied by the rate of relative financial risk.
  • All other resource entities (other than small operators) that pose a higher risk of default will still be required to provide a third-party surety. Queensland Treasury Corporation estimates less than 15 operators currently fall into this category. The options for third-party sureties will expand beyond bank guarantees.
  • The current system of discounts is proposed to cease.
  • Whether the proposed definition of 'Representative resource entities' is appropriate;
  • how the amount of contribution will be calculated;
  • whether there remains an appropriate basis to retain discounts; and
  • the types of sureties the Government should accept as alternatives to a bank guarantee.

 

Rehabilitation requirements for mining activities requiring site-specific environmental authorities

  • The Plan of Operations must include a rehabilitation program for land disturbed or proposed to be disturbed under each relevant lease, and state the amount of financial assurance for the plan period;
  • Environmental authorities include a suite of conditions regulating rehabilitation activities. For example, Rehabilitation Management Plans and final landform criteria.

In addition to the current rehabilitation requirements site specific environmental authorities* (ie full-scale mining activities) will be required to have a life of mine plan that will include binding and enforceable milestones for mine rehabilitation.
A new regulatory regime will be introduced to support the proposed life of mine plan including:

  • a new definition of when mined land will be considered to be rehabilitated;
  • a definition of when mined land is considered available for rehabilitation;
  • the opportunity for public comment on the life of mine plan and any significant changes to the life of mine plan;
  • the life of mine plan will identify the post-mining land use for the land; and
  • only limited circumstances when the State will accept it may not be possible or preferable to rehabilitate some areas of a mine site.

*The relevant discussion paper suggests there may be some streamlining opportunities available. For example, whether the life of mine plan may replace all or part of the Plan of Operations.

  • How life of mine plans can include appropriate binding and enforceable milestones taking into account the complexity of different mining operation types.
  • Whether the definitions of 'rehabilitation' and when mined land is considered available for rehabilitation are appropriate. If so, how this may impact a mine's future operational plans.
  • How the role of the public consultation and instruments under the Sustainable Planning Act 2009 (Qld) should be considered in determining the appropriate post-mining land use.
  • Appropriate recognition of elements of mining activities that are not appropriate to fully rehabilitate (eg voids), but can still be safe and sustainable.

 

Care and maintenance requirements

Obligations relating to placing operations into care and maintenance include:
  • amending the Plan of Operations;
  • amending the Initial Development Plan or Later Development Plan.
  • Notify the Department of Mines and Petroleum before mining operations are suspended;
  • Submit a Care and Maintenance Plan within three months of notification;
  • Ensuring fulfilment of rehabilitation obligations are not delayed when a mine is in care and maintenance mode for an extended period.
  • Ensuring the complexity of factors in determining whether an operation is placed into care and maintenance, and the types of activities that continue during that period are appropriately recognised in any new regulatory regime.

The way forward

The proposed reforms to the environmental bond (financial assurance) and mine rehabilitation are significant. All mine operators, financiers, joint venture partners and relevant financial institutions in Queensland should understand the proposed changes and consider whether to make submissions to ensure the regime reflects the complexity of business arrangements that underpin the mining sector.

For further information, please contact:

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