Queensland’s Department of Environment and Heritage Protection (DEHP) has recently announced that it will not proceed with the reforms to the financial assurance requirements for environmental authority holders, proposed in the ‘Reform of Queensland’s financial assurance system’ discussion paper (Discussion Paper) that was released for consultation in June.
The Discussion Paper had proposed the introduction of a new alternative ‘pooled fund model’ for environmental authority holders for mining, petroleum and gas activities in Queensland (Operators), whereby Operators would be required to contribute to a ‘pooled fund’ to be used to meet any future outstanding rehabilitation costs.
It had been proposed that under the ‘pooled fund model’, Operators would still estimate their own total rehabilitation liability (as is the case under the current system), but that these estimates would then be multiplied by a contribution rate which included:
- a contribution rate based on the credit rating of the Operator or its parent company
- a fixed contribution rate applicable to all Operators regardless of their or their parent company’s credit rating.
This model had been proposed as an alternative to the existing regime, whereby Operators are required to pay up to 100% of the forecast rehabilitation cost for the project for the year in which those costs are forecast to be the highest (less any applied discount), on the basis that it was considered that there was a low likelihood that all Operators would default on their rehabilitation obligations at the same time, and therefore the Government was requiring that Operators provide a greater level of financial assurance than may be required to meet all outstanding commitments.
Following the receipt of feedback obtained through the consultation process, including criticism of the failure to substantiate the basis for the reforms and the proposed method for the calculation of the contribution rates, as-well as concerns that the State would be exposed to additional risk, the Government has announced that it will not be proceeding with the amendments in the form proposed and is developing a further alternative ‘negotiated risk evaluated’ framework.
While details as to how this further framework will operate have not yet been published, the DEHP has advised that a further consultation process is anticipated to commence in early 2015.
Future updates on this topic will be provided as further information is made available.