MINING security bonds were introduced in WA in the late 1980s as insurance against companies not adequately rehabilitating mine sites. As the bonds covered only a fraction of mine rehabilitation costs, successive WA Governments were forced to contribute the majority of funds; an unsustainable model, as mining interests in the state continue to soar.
Under new State Government legislation announced by WA Mines minister Norman Moore on August 15, the innovative Mining Rehabilitation Fund (MRF) will be established in place of the bonds system.
Under the MRF, mining companies will pay a predetermined amount each year into a pooled fund instead of the entire bond amount up front.
Mr Moore said the State Government recognised the current bond system needed revamping to ensure that ample funding was available for mine site rehabilitation where operators failed to meet
environmental obligations. Subject to parliamentary processes, it is anticipated that the MRF levy will start on July 1, 2013.
The WA Government has estimated that the levy contribution will collect between $33 million and $45 million during 2013 and 2014. By 2015, the fund is expected to increase to between $102 million and $161 million.
“DMP [Department of Mines and Petroleum] records show that we have called in bonds on 60 tenements and the amount totals just over $2.5 million since it was established in the 1980s,” Mr Moore said.
“It is anticipated the fund will raise approximately $30 million a year with the aim to establish a fund of about $300 to $500 million.
“The proposed fund will provide a more flexible and cost-effective system for industry while meeting public expectations for higher standards of rehabilitation and mine closure.”
The MRF model was chosen after consultation between industry, the Government, and conservation and community stakeholders. It is expected to enhance the state’s ongoing capacity to manage and rehabilitate abandoned mine sites, facilitating superior environmental management and community safety.
Mr Moore said it was part of a larger framework of environmental regulation reforms in WA.
“We are moving towards a risk-based system for environmental management rather than the prescriptive regulatory system we currently have,” he said.
“This means the resources at the department for environmental compliance will be able to target higher risk projects rather than every site getting the same treatment.
“There is no point having those services attending a site where there are minimal or no environmental issues.”
Under MRF legislation, a Mining Rehabilitation Advisory Panel (MRAP) will be established to provide advice to the Director General of the DMP on MRF issues.
The levy will be calculated using figures submitted to the department relating to the number of hectares of disturbed land in each mining tenement.
This will then be assessed against criteria, currently being developed, that will estimate the cost per hectare of rehabilitating the disturbed land, thereby providing a fair base for levy calculations.
The levy will be charged annually as a percentage, with contributions to be made on a per-tenement basis.
“At present we are looking for companies to contribute 1 per cent of estimated rehabilitation costsannually, which goes into the fund to build it up,” Mr Moore said.
“The MRF money will go into a trust account and can only be used for rehabilitation.
“The [2006 Financial Management] Act provides for the advisory committee [MRAP] to advise the DMP on how the money should be spent, which was a request from industry.
“The objective is to accumulate enough money in the fund to deal with environmental issues that come up and, once that sum is reached, we can consider reducing the rate or not require them to pay more,” Mr Moore said. “If it becomes that they don’t pay more and there is a drain on the fund, a levy can be re-introduced to raise the fund up again.”
Mr Moore said the principal amount could only be spent on rehabilitating abandoned mines and affected land for which payments had been made into the MRF.
However, interest earned on the MRF can be spent on: rehabilitating land affected as a result of mining operations on mine sites abandoned before establishment of the MRF; administration of the MRF, including enforcing the new legislation; and funding programs or information relating to mine site rehabilitation.
The MRF can also be spent on rehabilitation work outside mine land as the effect of an abandoned facility, such as a tailings dam, on the environment may extend beyond the boundaries of the mine.
“The interest that is to be generated on the fund will then be able to be used to address legacy sites around the state, which is a significant part of the fund,” Mr Moore said.
“It will be a few years before that can start to happen but there is going to be a future where that starts to happen, which is a good environmental outcome.”
Mr Moore said he believed that the MRF would boast increased benefits for the WA mining industry compared to the current bonds system, while substantially reducing costs for mining companies and taxpayers alike.
“The current bond system also ties up company cash but it more importantly ties up borrowing capacity, so for some companies it makes it difficult,” he said.
“Under the present system individual companies are responsible for rehabilitation through their bonds. Under this system, industry will collectively look after rehabilitation where that is required.”
Mr Moore said that the MRF was designed to ensure mining companies would be unable to avoid environmental obligations by requiring them to undertake ongoing rehabilitation and provide a mine closure plan. This would minimise the need to dip into the fund.
The DMP has also been devising appropriate compliance measures and penalties to deter unlawful behaviour by mining companies, including abandoning mine sites without meeting rehabilitation and closure obligations.
While unconditional performance bonds could still be applied at any time, Mr Moore said they would only be retained for some high-risk operations.
“We are not getting rid of the bonds system: we will continue to use it if needed for some companies that have seriously difficult environmental issues which may require them to have a bond in place because of the particular circumstances of the operation,” he said.
The Association of Mining andExploration Companies (AMEC) welcomed the introduction of the MRF, and called it a “win-win” for all stakeholders involved in the rehabilitation of land following
mining and exploration activities.
The WA Chamber of Minerals and Energy (CME) also lauded the new legislation, and said the advantage to industry was that the model freed up significant capital at the beginning of project development while the government benefitted from having a fund that covered full closure and mine rehabilitation costs.
“So this fund will collect a significant amount of revenue over time, which will provide that security for government but it will also generate interest like any fund, and that interest from the fund
will be able to be directed towards rehabilitating some of those legacy sites that exist from a bygone era that still present some sort of risk factor to the environment,” CME manager – Environment Kane Moyle told ABC Goldfields.
“In the past there have been some closures that haven’t met the standards that are required today,” he said.
“Industry, with government, is keen to work on making sure those sites are rehabilitated and put back to a standard that is acceptable both to the community and also industry.”