26 October 2017

Queensland’s mining rehabilitation reforms all but assured

This article was written by Matthew Austin, Anna Vella and Julian Ilett.

On 25 October 2017, the Queensland government tabled in parliament the Mineral and Energy Resources (Financial Provisioning) Bill 2017 (the Bill) as part of its ongoing push to introduce reformed financial provisioning requirements for resource activities and new requirements for mining rehabilitation in Queensland.

There are two central components to the reform package, being the introduction of:

  • a new financial provisioning scheme (the Scheme); and
  • enhanced ‘life-of-mine’ plan obligations through the imposition of a progressive rehabilitation and closure plan.

Financial Provisioning Scheme

The purpose of the Scheme is to provide the Queensland government with the necessary funds to manage environmental impacts resulting from the use of land by resource activities. The new regime proposes that, among other things, the risk of an environmental authority holder for a resource activity failing to meet its rehabilitation and environmental management obligations is considered by a Scheme Manager – which is a new State entity created under the Bill.

Functions of the Scheme Manager

The Bill proposes that the Scheme Manager will:

  • allocate particular environment authority holders to a risk category – which will be very low; low; moderate or high;
  • review the risk category allocation on an annual basis; and
  • manage the Scheme and set long term investment objectives for the scheme fund.

The Bill contemplates that the Scheme Manager must decide an initial risk allocation category for each environmental authority for a resource activity, and in doing so:

  • must consider: the financial soundness of the relevant environmental authority holder and any parent corporation of the holder; and the Scheme Manager guidelines; and
  • may consider: the characteristics of a resource project to which the authority relates; and any other matter the Scheme Manager considers relevant.

The Bill itself does not include any detail as to what an assessment of an environmental authority holder’s ‘financial soundness’ or ‘the characteristics of a resource project’ by the Scheme Manager will specifically involve. As outlined in our previous alert, some indication has been provided by government which we expect will be formalised in a supporting guideline.

Provision is made in the Bill for the Scheme Manager to deal with the scenario where there is more than one holder of the environmental authority. In that circumstance, the Scheme Manager may consider the financial soundness of any or all of the holders (without necessarily having to consider the financial soundness of the majority shareholder).

The Bill provides the Scheme Manager with a wide discretion to consider ‘any other matter’ which the Scheme Manager considers to be relevant in making an initial risk category allocation decision. While not apparent from the Bill as to what this may include, we expect that this could involve the Scheme Manager considering the total rehabilitation and environmental management obligations across all resource environmental authorities held by a corporate group.

Risk Category Allocation and Financial Provisioning

The Bill contemplates that a risk allocation is not required where the relevant holder of an environmental authority has an estimated rehabilitation cost of less than $100,000.  For other environmental authorities eligible for a risk allocation, a contribution to the scheme fund may occur in the following circumstances:

Contribution to the Scheme Fund

Contribution to the Scheme Fund

Risk Category Allocation

Very low, Low, Moderate

High

Considerations

Provided the Scheme Manager does not decide that the holder of the authority otherwise must give a surety, then the authority holder will be able to contribute into the scheme fund.

Despite a ‘high’ risk allocation, an environmental authority holder may be required to contribute to the fund if:

  • the allocation occurs as a result of an annual review;
  • in each of the preceding 4 years, the authority holder has been assigned a risk category allocation of very low, low or moderate; and
  • the Scheme Manager is reasonably satisfied that the authority holder is not able to give a surety within 12 months of the annual review decision being made.

An annual contribution to the pooled fund will be calculated as a percentage of assessed rehabilitation obligations (yet to be confirmed, but expected to be around 2.5% to 2.75%) to meet its financial obligations.

However, an allocation to the pooled fund will be subject to the overriding discretion of the Scheme Manager. The framework enables the Scheme Manager to retain the flexibility to consider qualitative factors in applying discretion in the risk category allocation decision.

An environmental authority holder may be obliged to provide a third party surety by way of a bank guarantee, insurance bond (from a prescribed insurer to be stated in a supporting regulation) or cash. The below table illustrates the circumstances in which third party surety may be required by the Scheme Manager:

Third Party Surety

Third Party Surety

Risk Category Allocation

Very low, Low, Moderate

High

Considerations

Despite the Scheme Manager making a risk category allocation decision of ‘very low’, ‘low’ or ‘moderate’, the Scheme Manager may decide the holder of the authority must give a surety, rather than pay a contribution, to preserve the financial viability of the Scheme Fund.

If a risk category allocation of ‘high’ is determined by the Scheme Manager, surety will need to be provided, subject to the considerations outlined in the table above.


If the Estimated Rehabilitation Cost for the holder of an environmental authority (or multiple authorities) exceeds the $450 million fund threshold, the Bill contemplates that the holder of that environmental authority (or authorities) must pay a contribution to the pooled fund and give surety for the amount of the Estimated Rehabilitation Cost over the fund threshold.

Information gaps

The Bill does not contain detail in a number of areas which are required to assess the full impacts of the Scheme – such as the risk assessment range to be applied by the Scheme Manager in its risk category allocation, detail as to the ‘financial soundness’ considerations or ‘the characteristics of a resource project’ and prescribed percentage to be applied in calculating the scheme fund contributions.

From the information released to date, timeframes as to when this further detail and supporting guideline material will be available, has not been provided.  

Reviewing the risk category allocation

Judicial review

A person dissatisfied with their initial risk category allocation can apply for a review of the decision under the Judicial Review Act 1991 (Qld) (JR Act). However, the application of the JR Act to any final legislation is to be limited and any challenge on the basis of jurisdictional error will need to rely on the inherent jurisdiction of the Supreme Court.

Changed holder review triggers

The allocated risk category may be reviewed in circumstances where the holder of the relevant environmental authority is proposed to be changed, whether by transfer or a change in control of the entity which holds the environmental authority. The Scheme Manager has the discretion to review the risk category allocation or, an application may be made by the relevant entity to have the allocation reviewed.

Progressive Rehabilitation and Closure Plan

The second component of the reforms will involve amendment to existing legislation. These amendments will introduce more comprehensive life-of-mine planning obligations for rehabilitation purposes via changes to the:

  • Environmental Protection Act 1994 (Qld) (“EP Act”); and
  • Mineral and Energy Resources (Common Provisions) Act 2014; and
  • Mineral Resources Act 1989 (Qld).

The Bill proposes to amend the EP Act so that, for a site specific application for a mining activity, the application must include a progressive rehabilitation and closure plan (PRC Plan) and a progressive rehabilitation and closure schedule (PRCP Schedule). The Bill prescribes, in some detail, the necessary requirements for both a PRC Plan and PRCP Schedule, with the holder of an approved PRCP Schedule responsible for ensuring its compliance.

Contravention of a condition relating to the compliance with a PRCP Schedule carries a significant penalty (of up to $3,437,500 for corporations). Further guidance on complying with the requirements of the PRC Plan and PRCP Schedule will be provided by the government, however a timeline on when these guidelines can be expected is yet to be determined.

New auditing powers are included in the Bill which will require the holder of a PRCP Schedule to report on compliance with the schedule every 3 years.  Annual returns will also need to report on the effectiveness of the PRCP Schedule, including the effectiveness of the environmental management carried out under the PRCP Schedule, for the year to which the annual report relates.

While the introduction of the PRC Plan is not directly related to the implementation of the Scheme, the undertaking of certified rehabilitation may lower an entity’s risk profiling for financial provisioning purposes. The PRC Plan obligations will apply to mining proponents, subject to transitional provisions.

It remains unclear when petroleum and gas projects may need to comply with PRC Plan obligations. The government is set to undertake further consultation before these reforms are more broadly applied. As it currently stands, no timeframe has been provided to inform industry stakeholders when this may occur.

Transitioning to the new regime

The Queensland Government has expressed the intention that, subject to any unforeseen delays, these reforms will take effect from 1 July 2018.

Transitioning into the Scheme

Existing financial assurances in place prior to the commencement of the Bill will be taken as surety under the new legislation. The Scheme Manager is not required to make an initial allocation decision for an existing authority until it has given the authority holder a “transition notice”. However, the transition notice must be given within 3 years of the commencement of the legislation.

It is expected that, once the Bill commences, transition notices are likely to be rolled out progressively.

PRCP transitional provisions

Where a current plan of operations is in place for a mining activity, that plan will continue to operate for the “life left to run” on that document. Prior to the expiration of the plan of operations, the holder of the environmental authority will be required to have a PRC Plan and PRCP Schedule approved for the mining activity. The plan of operations will then hold over until the relevant PRCP Schedule is approved.

Next Steps

The Bill has been referred to the Agriculture and Environment Committee (Committee) for review. The Committee’s report is due back to parliament on 8 December 2017.

This means that a small window (of potentially 2 to 3 weeks) is expected for industry and stakeholders to be able to make a submission about the new framework.

We will continue to monitor and report the progress of these significant reforms.

Should you have any questions regarding the potential impacts of the new framework, please don’t hesitate to contact us.

Share on LinkedIn Share on Facebook Share on Twitter
    You might also be interested in

    Queensland’s Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (Regulations) has been amended – extending its effect to the months of October, November and...

    28 October 2020

    On 21 October 2020, the Victorian Minister for Planning introduced further temporary changes to provide greater flexibility to the hospitality industry.

    27 October 2020

    On 10 September 2020 the ACT Government announced the extension of the Leases (Commercial and Retail) COVID-19 Declaration 2020 to assist commercial tenants affected by the pandemic and experiencing...

    15 September 2020

    Waratah Coal has made an application in the Queensland Land Court to strike out a number of objections to its Galilee Coal Project.

    15 September 2020

    This site uses cookies to enhance your experience and to help us improve the site. Please see our Privacy Policy for further information. If you continue without changing your settings, we will assume that you are happy to receive these cookies. You can change your cookie settings at any time.

    For more information on which cookies we use then please refer to our Cookie Policy.