Last year the Queensland Government commissioned the Queensland Treasury Corporation to review the Financial Assurance (FA) framework for the resource sector (QTC review).
Last week, the Government released the Financial Assurance Framework Reform and Better Mine Rehabilitation for Queensland discussion papers, as part of a series of discussion papers aimed at implementing the recommendations of the QTC Review. Together, the papers give proponents an insight into the Government’s proposed financial assurance and rehabilitation policies and below are the five key changes you need to know.
- FAs will now be divided into a four separate arrangements that resource companies will fall into based on the size of their rehabilitation liability and their “risk profile”.
- Low financial risk companies with a relatively low rehabilitation liability (below approximately $500m) will be able to make annual contributions to the new, interest earning, rehabilitation fund. The contribution will be the rehabilitation cost estimate multiplied by a rate reflecting the resource company’s level of financial risk. A similar approach, allowing companies to make annual contributions directly to the Government, will be allowed for companies who qualify for the ‘Select Partner Arrangement’. Companies that are assessed as a higher financial risk will need to provide third party surety from an approved provider. The discounts previously offered will no longer apply.
- A resource company’s “category” will be closely monitored by the Government, and will change depending on variations to a company’s level of financial risk. Financial risk is determined either by a ratings agency, or the financial information provided to the Government. This potentially results in companies who are experiencing an increased level of financial risk, having to supply full FA at a potentially very inopportune time.
- For smaller operators – whether they need to provide third party surety or participate in the rehabilitation fund will depend on the total amount of FA liability. The current environmentally relevant activity standards for mining will be reviewed by mid-2018 to assist in coming up with appropriate levels of FA for activities.
- For companies needing to provide the third party surety – sureties will be extended to give proponents options beyond the Australian regulated banking sector, provided specific conditions are met. Approval will be given on a case-by-case basis at the discretion of the Government.
- The fees that proponents would otherwise pay to a bank to maintain a guarantee will effectively be redirected to the Government, which will help expand the abandoned mines program. It is also intended to improve companies’ serviceability and balance sheet by making annual contributions, rather than providing a large bank guarantee.
A new “life-of-mine plan”, requiring public consultation is proposed to be incorporated into the environmental authority (EA) application process. This will initially impact all new and existing projects with a site-specific EA.
The proposed life-of-mine plan will form part of:
- an EIS (where an EIS must be undertaken prior to an EA being made);
- a site-specific EA; and
- any application for a major amendment to an EA or life-of-mine plan.
The life-of-mine plan will be released for public comment from any interested party.
- A life-of-mine plan will describe how land will be rehabilitated, rehabilitation milestones, completion criteria and performance indicators. The plan also needs to address potential future land uses, which need to complement existing planning regulations and consider community views. The rehabilitation outcomes and milestones will be directly enforceable rather than via EA conditions.
- This process is planned to be in effect from mid-late 2018 impacting projects in the following order:
- new mines applying for site-specific EAs at the time of application;
- existing mines with site-specific EAs from the first anniversary of the grant of the relevant mining tenure that falls:
- one year after commencement of the process for “higher risk” mines; and
- two years after commencement of the process for remaining mines.
Whether a mine is considered “high risk” will be based on the area of disturbance, significant environmental areas and remaining life of the relevant mine.
- The process for regulating rehabilitation of petroleum activities and resource activities with an EA issued through standard or variation application processes will be reviewed once the above process has been implemented.
- The Government is proposing new statutory obligations to complete progressive rehabilitation programs in accordance with the life-of-mine plan rather than at the end of a mine’s life when land becomes ‘available’.
- EA annual returns will be required to address onsite disturbance and rehabilitation against the milestones under the life-of-mine plan. Reporting to the community directly will also be required.
- It is proposed that independent audits will be conducted every 3 to 5 years to ensure compliance with the EA and life-of-mine plan, and the likely success of planned rehabilitation measures.
There is currently no trigger for the Government to review the EA or tenement if a resource asset is sold through a share sale. The Government is looking to the review of approval processes on the sale of resource assets in future discussion papers.
To address concerns that resource companies are using “care and maintenance” to indefinitely prolong rehabilitation obligations, together with the increased environmental risk of projects in care and maintenance (from deterioration), the Government is considering new regulations including:
- obligations to notify;
- permitted timeframes for care and maintenance; and
- progressive rehabilitation.
The discussion papers are the first of a series of papers to address the QTC Review, with the remaining discussion papers to be released over the next year.
Submissions on the Better Mine Rehabilitation for Queensland and Financial Assurance Framework Reform discussion papers can be made by emailing: email@example.com by 5pm, 15 June 2017.
For more information or to discuss the papers, please contact HopgoodGanim Lawyers’ Resources & Energy team.