An overhaul of environmental bond regulation for all resource operators in Queensland, and rehabilitation requirements for miners is proposed in a Bill recently introduced by the Queensland Government. All resource operators in Queensland should understand how the reforms may impact their current and proposed operations. Partner Bill McCredie and Senior Associate Gobind Kalsi report.
The current environmental bond (ie financial assurance system) will be replaced with a financial provisioning scheme, including a Financial Provision Fund.
Under the new regime proposed by the Mineral and Energy Resources (Financial Provisioning) Bill 2018, the Department of Environment and Science will determine the 'estimated rehabilitation cost' (ERC), being the estimated cost of rehabilitating the land on which the resource activity is occurring for the relevant period (generally one to five years).
Once this decision is made, the fund manager will determine the 'initial risk category allocation' for the holder of the environmental authority. This decision is reviewed annually by the scheme manager.
- an environmental authority holder assessed by the scheme manager to have a 'very low, low, or moderate risk' will pay a contribution to the scheme fund.
These holders will not be required to provide an environmental bond (eg a bank guarantee) as they do under the current system.
- an environmental authority holder assessed by the scheme manager as 'high risk' will be required to provide a surety.
The surety may be in the form of a bank guarantee, insurance bond or payment of a cash amount.
However, there are a number of factors (and the discretion of the scheme manager) that can change the above outcomes, in particular, where a resource entity is the holder of a number of environmental authorities in Queensland, and/or the 'estimated rehabilitation cost' of the holder's multiple operations in aggregate is above $450 million. For some resource operators, it is possible that they will be required to make both a contribution to the fund, and provide a surety for coverage of all of their operations across the state.
Under the new regime, the current system of discounts will not apply. Critically, the rate that will be applied to determine contributions to the fund (based on whether a holder is determined to have a very low, low, or moderate risk) is yet to be determined.
Operators undertaking mining activities that require site-specific environmental authorities (ie full-scale mining activities) will be required to have a 'progressive rehabilitation and closure plan' (PRC Plan) that will include a 'PRCP Schedule' which will specify binding and enforceable milestones for mine rehabilitation.
A new regulatory regime will be introduced to support the proposed PRC Plan and PRCP Schedule including:
- making it an offence to carry out site-specific mining activities under an environmental authority unless there is also a PRCP Schedule for the activity;
- requirements for stakeholder consultation, public notification and third-party objections rights for PRCP Schedules; and
- a requirement for PRCP Schedules to be audited every three years.
Holders of site-specific environmental authorities for mining activities will no longer be required to hold a Plan of Operations.
An outline of the new regime is shown below. Both regulations and guidelines will be developed to assist in the implementation of the new regime. The content of these regulations and guidelines will be important to the overall operation of the regime and will be of significant interest to industry.
Care and maintenance
Holders of environmental authorities must notify the scheme manager if:
- the holder ceases production and does not expect production to restart within six months after the cessation; or
- production has not been carried out for six months.
Change in holder
The scheme manager may review the risk category and decide to confirm or change its decision if:
- there is proposed to be a change in the holder of the relevant tenure; or
- there is change in control of the holder, or change in control of a parent corporation, within the meaning of the Corporations Act 2001 (Cth).
The purpose of the 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 summary of the role of the PRC Plan and PRCP Schedule are described in the table below.
Non-use management areas
'Non-use management areas' are areas of a site that cannot be rehabilitated to a sustain a post-mining land use. Such areas can only be specified in the PRCP Schedule if particular criteria are satisfied including:
- carrying out rehabilitation of the land would cause a greater risk of environmental harm than not carrying out the rehabilitation; or
- failing to rehabilitate the land to a stable condition is justified, having regard to the costs of rehabilitation and the public interest in the resource activity being carried out.
The Explanatory Notes to the Bill indicate that the Government's policy position is that it is unlikely to accept that there is adequate justification for retaining a non-use management area at closure for greenfield sites, having regard to best practice rehabilitation or site management.
Guidelines prepared to support the preparation of the PRC Plans and PRCP Schedules will be of significant interest to industry.
The proposed reforms to the environmental bond (financial assurance) and mine rehabilitation regime are significant.
The Bill has been referred to the Economics and Governance Parliamentary Committee for reporting by 20 April 2018. We will keep you updated on any further developments.