Following criticism of environmental enforcement in the resources sector, the Western Australian state government has proposed substantial changes to remedy shortcomings in the existing legislative framework1. These include changes to the relinquishment process for mine site closure to ensure that clear, objective processes and risk-based standards are applied.
The proposed overhaul of environmental controls on mining projects follows recent changes to mine site closure planning. Since 1 July 2011, a Mine Closure Plan must accompany all new applications for mining tenements and be prepared in accordance with Department of Mines and Petroleum (DMP) guidelines. Effective rehabilitation strategies are an essential component of mine closure, particularly as an operator or tenement holder may retain responsibility for clean-up under the state contaminated sites regime after the tenement has been relinquished.
The state government has also introduced a new Mining Rehabilitation Fund to address the state’s unfunded liability for abandoned mine site rehabilitation. From 1 July 2013, most tenement holders under the Mining Act 1978 (WA) (Mining Act) will be required to contribute an annual levy to the Fund calculated as 1 per cent of the estimated total mine closure cost. Previously, new tenement holders were required to provide financial security (in the form of unconditional performance bonds) to meet mine site closure obligations including the cost of rehabilitation.
Mine closure obligations
The identification and management of environmental issues is a critical component of mine site closure. This must occur early in the mine planning and approval process, together with the development of rehabilitation strategies, mitigation measures and closure designs. Since 1 July 2011, DMP requires that a Mine Closure Plan accompany all new applications for mining tenements under the Mining Act.
Mine Closure Plans
All new applications for mining tenements must contain a Mine Closure Plan prepared in accordance with the Guidelines for Preparing Mine Closure Plans (Guidelines)2. In addition, a Mine Closure Plan must be prepared where mine closure planning is required as part of the EPA’s assessment of the project under Part IV of the Environment Protection Act 1986 (WA). From 1 July 2011, assessment by the EPA of mine closure will only occur in those circumstances which give rise to high environmental risk3. Where the EPA does assess mine closure, a condition will normally be applied requiring a Mine Closure Plan to be prepared in accordance with the Guidelines. Compliance monitoring of these conditions may be delegated by the EPA to DMP.
The Guidelines provide that Mine Closure Plans should be regularly reviewed and updated throughout the life of a mine. Once approved, the Mine Closure Plan must be submitted again for approval by DMP three years after its initial approval or at such other time as required in writing by DMP. The requirement for a Mine Closure Plan and the timing of its review will be imposed as tenement conditions.
Where a Mining Proposal and/or Notice of Intent has been approved under the Mining Act before 1 July 2011, DMP requires that tenement holders undertake a review of existing mine closure plans and rehabilitation plans and submit them to DMP by 30 June 2014. For projects that are not administered under the Mining Act or where mine closure has not been assessed by the EPA, proponents are expected to liaise with DMP environmental officers to ensure that mine closure planning and implementation is consistent with the Guidelines.
The Guidelines sets out the structure and content of a Mine Closure Plan. The Plan should include a legal obligations register which identifies closure obligations and commitments under state and federal legislation, as well as individual tenement conditions. All legally binding documents relevant to the mine must be referred to in the register, including Mining Proposals, Notices of Intent, Letters of Intent, Programmes of Work, and Ministerial Statements. The Plan must also identify post-mine land uses and site-specific closure objectives consistent with those land uses.
Responsibility for remediation
Mine sites that the WA Department of Environment Regulation (DER) classifies as ‘contaminated – remediation required’ must be cleaned up. The Contaminated Sites Act 2003 (WA) (CS Act) sets out a hierarchy of responsibility for contamination. Those potentially responsible for remediation are listed below:
- the polluter
- an owner/occupier who changes the existing land use to a more sensitive use
- the owner of land
- directors of an insolvent body corporate
- a mortgagee in possession, and
- the State.
The WA Contaminated Sites Committee is given broad discretion to determine responsibility for remediation from this hierarchy and can allocate responsibility to more than one party. For contamination caused before 1 December 2006 (the date the CS Act came into force), the ‘polluter’ is responsible but only to the extent that the act causing the contamination was done without lawful authority. The concept of ‘lawful authority’ excludes an act that contravenes a permit, lease, approval or authority granted under a written law in force at the time the act occurred. This means that a person who contaminates a mine site in contravention of a mining lease or other approval granted under the Mining Act will be responsible for cleaning up the site. For contamination caused after 1 December 2006, generally the person who caused the contamination will be responsible for remediation whether or not the act was done with lawful authority.
It follows that an operator or tenement holder may retain liability for contamination of a mine site after the tenement has been relinquished. This is consistent with section 114B of the Mining Act which provides that the surrender of a mining tenement does not affect the liability of the person who was the holder of the tenement for any act done under or in relation to it.
Where an operator or tenement holder proposes to transfer responsibility for remediation of a site to a subsequent owner or land manager, the written approval of the CEO of DER must be obtained under the CS Act. When seeking approval from the CEO, the person responsible for remediation must demonstrate that the person to whom responsibility is to be transferred has sufficient financial capacity to carry out the remediation.
The new Mining Rehabilitation Fund
The Mining Rehabilitation Fund Act 2012 (WA) (MRF Act) imposes a levy on holders of most tenements under the Mining Act to pay an annual, non-refundable levy into a central fund, known as the Mining Rehabilitation Fund (Fund). The purpose of the Fund is to secure long-term funding for the State to rehabilitate abandoned mine sites and other land affected by mining operations where the mine operator does not fulfil its mine rehabilitation and closure obligations.
Relationship of the Fund to performance bonds
Before the Fund came into effect, unconditional performance bonds were required by the WA government of mining tenement holders under the Mining Act 1978. Commencement of mining operations was not permitted unless a satisfactory bond was held and posted on the DMP’s Bond register. Bonds were set at a level to encourage the rehabilitation of the tenement to a satisfactory level.
Existing bonds cover approximately 25 to 30 per cent of the state’s contingent liability to rehabilitate land affected by mining operations. This does not include rehabilitation liability for abandoned mine sites that were not subject to the performance bonds regime. Following a review of the regime in 2010, DMP decided to increase bond amounts to cover 50 per cent of the state’s closure liability by 2014. This review also recognised the need to identify an alternative funding arrangement to eliminate the government’s financial risk.
Levy imposed on a ‘liable holder’
Under the MRF Act, the holder of a ‘mining authorisation’ (known as a ‘liable holder’) is liable to pay an annual rehabilitation levy as assessed by the CEO of DMP. For the purposes of the MRF Act, a ‘mining authorisation’ includes:
- a mining tenement as defined in the Mining Act, and
- a specified kind of mining tenement or right granted under a state agreement which is identified in the Mining Rehabilitation Fund Regulations 2013 (Regulations).
The MRF Act does not override state agreement acts. A state agreement act participant will only be liable to pay an annual levy after consideration by the state of the risks and benefits to the particular mining project.
The Fund is established as a special purpose account under the Financial Management Act 2006 (WA). The Fund’s principal, comprising of levy payments, can only be used to rehabilitate abandoned mines and land affected as a result of operations undertaken by tenement holders who are required to contribute to the Fund. The rehabilitation of historic abandoned mines will be funded out of interest earned on the principal. An ‘abandoned mine’ is one declared by the CEO to be abandoned if the CEO is satisfied that mining operations on, in or under the land have been carried out and have ceased. It is possible that the proceeds of the Fund could be used to clean-up an abandoned mine site that is classified as contaminated under the CS Act.
Levy calculation and appeal process
The levy will be calculated as 1 per cent of the total mine closure cost per annum (as an estimated figure). The Regulations set out the formula for calculating the amount of levy payable based on 1 per cent of the ‘rehabilitation liability estimate’ for the mining authorisation for the year. The ‘rehabilitation liability estimate’ is the amount obtained by working out the total area of land (expressed in hectares and rounded to at least 2 decimal places) for a particular ‘rehabilitation liability category’ and multiplying it by the unit rate that applies to that category. More than one rehabilitation liability category may apply to each mine site. The unit rate for each category is set out in schedule 1 to the Regulations. For most operators, this would represent a lower annual cost than the compliance costs currently associated with the bank guaranteed unconditional performance bonds. If the rehabilitation liability estimate in the year is calculated to be $50,000 or less, then there is no liability to pay the levy.
Failure to pay the levy by the due date will incur, in addition to the levy amount, an additional penalty of 20 per cent per annum on the amount remaining unpaid. An objection can be lodged with the CEO of the DMP if a liable holder is not satisfied with the CEO’s assessment of the levy payable. For example, objections can be made on the ground that the person is not liable to pay the levy or that the levy was incorrectly calculated. An appeal to the WA State Administrative Tribunal is available to a liable holder who is dissatisfied with a decision of the CEO.
The requirement for a performance bond creates the main incentive for meeting closure and rehabilitation obligations. Payment of an annual levy under the new Fund may not create the same incentive. In transitioning to the Fund, comparable incentives and enforceability will need to be provided through DMP’s environmental compliance regime. Failure to do so presents a significant risk to the state. It is currently unclear how DMP will treat performance bonds in the future or how the existing performance bond regime will transition to the Fund. It is anticipated that DMP will be publishing a bonds transition policy to provide guidance to current tenement holders.