Mining operations that are subject to the Mining Act 1978 (WA) (Mining Act) are currently subject to an environmental bonding system introduced in the late 1980s. The principle objective of this system is to provide Government with sufficient security from tenement holders to cover the costs of rehabilitating mine sites in the event that the operator fails to do so. Despite previous increases in bond amounts in WA, Government estimated that bonds only cover around 25-30% of the current actual rehabilitation costs. This is largely due to the increasing costs and standards of rehabilitation.

Over a number of years the WA Government has been investigating options for reform of the bonding system. The Mining Rehabilitation Fund Act 2012 (WA) establishes a central fidelity account to be known as the Mining Rehabilitation Fund (MRF). The holders of mining authorisations under the Mining Act will be required to pay an annual, non-refundable levy to the MRF on commencement of the regime. Funds from the MRF can only be used to fund the rehabilitation of abandoned mine sites and other land affected by mining operations carried out on those sites. Operators will remain responsible for funding their own rehabilitation and closure works in accordance with approved mine closure plans and maintain adequate financial provisioning in this regard.

A consultation draft of the MRF Regulations (Draft Regulations) has been published, which details the proposed operation of the MRF. The Draft Regulations propose that an operator’s levy payment will be based on actual rehabilitation liability and calculated on the following basis:

Annual levy payment ($) = Current Rehabilitation Liability Estimate ($) x Rehabilitation Fee(%)

Rehabilitation Liability Estimate will be determined by reference to standardised unit rates for defined categories of land disturbance.  Effectively, this is the middle ground between a flat rate for the levy payment and an individual third party liability review for each mining operation. The Rehabilitation Fee has been set at 1%.

A liability threshold will be set, which at this stage is anticipated to be $50,000. If the Rehabilitation Liability Estimate for a particular tenement is under this threshold, no levy payment will be required to be made.

Compulsory levy payments to the MRF are anticipated to commence on 1 July 2014. This will coincide with the relinquishment of environmental bonds presently held by Government. However, between 1 July 2013 and 1 July 2014, operators can voluntarily opt-in and commence making levy payments early. Operations with a poor history of environmental management or considered ‘high risk’ will not likely be eligible to opt-in.

The Draft Regulations are accessible at the department of Mines and Petroleum website1 and comments are being sought by 5 April 2013.

Other States are watching the MRF initiative with great interest, so similar proposals for the reform of environmental bonding regimes may emerge elsewhere in Australia.