Key takeaways
Rehabilitation and closure obligations are a crucial part of any mining or exploration project, and must be considered well in advance of the end of operations.
Project approvals often include rehabilitation and closure conditions.
All Australian jurisdictions have requirements for financial security to be provided, to protect the state if a tenement holder fails to fulfil their rehabilitation obligations.
In Part 8 of HopgoodGanim’s Mining Project Lifecycle Series, we look at the closure and environmental rehabilitation obligations for exploration and mining projects.
Rehabilitation and closure obligations are a crucial part of any mining or exploration project, and must be considered well in advance of the end of operations. Increasingly, project approvals impose detailed environmental rehabilitation conditions, including obligations for progressive rehabilitation. State and Territory Governments will also require project proponents to provide some form of financial security or environmental bonds, in order to guarantee these rehabilitation obligations.
Financial security and rehabilitation bonds
All jurisdictions across Australia have some requirements for financial security to be provided, to be used by the Government where a tenement holder fails to fulfil their environmental obligations. These requirements are designed to ensure that taxpayers are not left with the costs of environmental rehabilitation, should a mining project no longer be profitable and the company enter into administration or liquidation. These measures are often criticised by industry as needing to pay twice for rehabilitation, given proponents will need to provide the financial security to the State, but will also need to spend that amount to rehabilitate the site, before this security can be released.
There are different approaches across Australia, as set out in the table below:
Jurisdiction | Financial security requirements |
Queensland | Security is required to be provided to the Department of Natural Resources and Mines, Manufacturing, and Regional and Rural Development for the grant of any exploration or mining tenement, to ensure the holder complies with the conditions of the tenement and the Mineral Resources Act 1989, rectifies damage caused by activities, and pays amounts payable to the State. An environmental authority (EA) is required for resource activities. The holder of an EA must apply for an estimated rehabilitation costs (ERC) decision for the EA. Where the ERC is less than $10 million and no election notice has been given, the holder must provide surety in the amount of the ERC. Where the ERC is more than $10 million, or an election notice applies to the EA, the EA is subject to an annual risk allocation assessment. Depending on the risk category allocation, the scheme manager will determine whether the holder needs to provide surety for the amount of the ERC, or is eligible to make an annual contribution to the Financial Provisioning Scheme (based on a percentage of the ERC). There are statutory processes allowing funds from the scheme fund to be used for remediation and rehabilitation activities at land on which an abandoned mine exists, and research that may contribute to the rehabilitation of land on which resources activities have been carried out. |
Western Australia | Security is required to be submitted to the Department of Energy, Mines, Industry Regulation and Safety (DEMIRS) to protect against the holder not complying with the tenement conditions and requirements of the Mining Act 1978 and Mining Regulations 1981. WA has a pooled Mining Rehabilitation Fund (MRF). Tenement holders pay an annual levy into the MRF, which provides a source for funding for the rehabilitation of abandoned mine sites. The levy is calculated based on the area of disturbed land, the nature of the disturbance and the relevant environmental impact. The MRF requires disturbance data (describing the number of hectares disturbed and the type of disturbance) to be collated and submitted online to DEMIRS annually. The data is used to calculate a levy which the tenement holder must pay. Tenements with a liability estimate below $50,000 must report disturbance data but will not be required to pay a levy to the MRF. In addition to the mandatory security and the MRF, the Minister has power to require lodgement of an additional mining security for compliance with the environmental conditions imposed in relation to a tenement, in the form of an Unconditional Performance Bond. |
Northern Territory | An environmental (mining) licence is required under the Environment Protection Act 2019. It is a condition of an environmental (mining) licence that the holder both provide a security and pay an annual levy to the Mining Remediation Fund (MRF). The mining security is to secure the holder’s obligation to comply with the Environmental Protection Act, licence and any applicable environmental approval; cover the reasonable costs of the State in addressing environmental harm from any phase of the activity, or for remediation, rehabilitation or closure of the mining site; and cover reasonable costs of post-closure monitoring, management and reporting. It is calculated based on the disturbance to the environment likely to occur as a result of the mining activities. The levy is a non-refundable annual payment, equal to 1% of the mining security provided by the operator. The NT Government manages the MRF and uses it to address the impacts of legacy mines. |
New South Wales | For authorisations granted under the Mining Act 1992, the Minister may impose a security deposit condition to secure the obligations of the holder. The amount of the security deposit is either the minimum prescribed deposit ($10,000 for most authorisations) or the assessed amount, which is calculated having regard to the estimated cost of fulfilling any obligations under the authorisation or authorisations concerned, including obligations under the authorisation that may arise in the future. NSW imposes an annual administrative levy on tenements. The amount of the annual administrative levy is 1% of the security deposit amount. This amount is paid into the Minerals and Petroleum Administrative Fund. Amounts in this fund may be used for the purpose of funding minerals and petroleum administrative costs, which includes costs associated with rehabilitation of land. Amounts from the fund may also be paid into the Derelict Mine Sites Fund, along with interest on security deposits. Money can be paid out of the Derelict Mine Sites Fund in accordance with the Mining Act for costs associated with the rehabilitation of derelict mine sites. |
Victoria | The holder of an exploration licence, mining licence or retention licence must enter into a rehabilitation bond for an amount determined by the Minister. The condition of the rehabilitation bond is that the licence holder rehabilitates the land as required by section 78 of the Mineral Resources (Sustainable Development) Act to the satisfaction of the Minister. The rehabilitation bond reflects 100 per cent of the estimated rehabilitation cost and is in place to ensure that rehabilitation can be undertaken by the regulator should the operator be unable to meet their rehabilitation obligation. Standard bonds are available for exploration work and small mines. |
South Australia | The Minister can require a mineral tenement holder to enter into a bond and provide security to ensure that any civil or statutory liability likely to be incurred by the holder in the course of carrying out authorised operations, and the holder’s present and future obligations in relation to the rehabilitation of land disturbed by authorised operations will be satisfied. The Mining Act 1971 also establishes the Mining Rehabilitation Fund (MFR), which can be used to fund monitoring and maintenance, and rehabilitation programs. Fines and penalties paid under the Mining Act are paid into the MRF. Earlier this year, the South Australian Government undertook consultation on proposed updates to the Mining Act, including seeking feedback on a policy option to allow ‘low financial risk’ tenement holders the option to pay an annual levy into the MRF instead of, or as a partial substitute for a rehabilitation bond. |
Tasmania | A security deposit must be lodged before any mineral tenement can be granted, in order to provide funds to mitigate any damage to the environment during mining operations or exploration. Tasmania has established the Rehabilitation Trust Fund, from which funds can be used to rehabilitate abandoned mining land or former exploration activities. Any forfeited security deposits are paid into the fund, and any other money received for this purpose or directed by the Treasurer to be paid into the Fund (including a portion of royalty payments). |
Most jurisdictions have established calculators that provide the approved methodology to calculate the costs of environmental rehabilitation, using defined rates for activities. Some jurisdictions maintain a publicly available register with details of the financial securities held by the Government.
The replacement of any such financial securities is a matter that needs to be considered and addressed in the sale of any mining tenements.
Rehabilitation conditions
Detailed rehabilitation conditions are often imposed as part of a project approval and approval holders may not be able to surrender their authority following the completion of a resource activity until all rehabilitation requirements have been met. For large mining projects, a progressive rehabilitation and closure plan may be required detailing the rehabilitation activities, milestones, monitoring, and maintenance requirements to restore the land to a stable condition. A rehabilitation strategy may also need to be addressed in an environmental impact statement for a project.
Regulators usually have statutory powers to issue directions to mining tenement holders requiring holders to undertake rehabilitation in addition to statutory powers to enforce any non-compliance with conditions of approval. Further, regulators regularly audit operations to ensure compliance with rehabilitation practices and outcomes.
Requirements with respect to rehabilitation are in addition to general environmental duties and duties to restore the environment contained in environmental protection legislation.
The environmental liabilities and rehabilitation conditions associated with a mining project will form an important part of any project due diligence.
We are also seeing increased consideration of post mining land uses, including through the work of the Australian Government’s Cooperative Research Centre Program and the Transformation in Mining Economies CRC (CRC Time).