This article was written by Matthew Austin.
The Queensland Government has published two discussion papers as part of the government’s ongoing mine rehabilitation and financial assurance reforms initiative. The papers propose amendments to Queensland’s existing resources legislation, the Mineral Resources Act 1989 (Qld) (MR Act) and Mineral and Energy Resources (Common Provisions) Act 2014 (Qld) (MERCP Act) (together ‘Resources Acts’), to reduce the risks of rehabilitation obligations transferring to the State and to promote new uses for Queensland’s abandoned mines. The papers build upon the Financial Provisioning Scheme (FP Scheme) and Progressive Rehabilitation and Closure Plan (PRCP) framework set to be introduced in the Mineral and Energy Resources (Financial Provisioning) Bill 2018 (Qld). Our previous alerts have explored the proposed FP Scheme and PRCP framework and the Queensland mine rehabilitation and financial assurance reforms initiative.
Risk Management Paper
The ‘Achieving improved rehabilitation for Queensland: other associated risks and proposed solutions’ (Risk Management Paper) outlines a number of reforms to reduce the risks of rehabilitation obligations transferring to the State.
Care & Maintenance Reforms
Care and maintenance (C&M) occurs when an authority holder is no longer producing resources but is maintaining the site, infrastructure and equipment. C&M is recognised by government as a legitimate management response to minimise losses caused by changes in the market and operating conditions. Operators may also elect to enter C&M to address technical constraints or one-off events impacting resource extraction (i.e. flooding). The government has an expectation that resource operators will ensure sites entering C&M remain compliant with environmental and safety obligations and recommence operations as soon as is commercially feasible.
Currently, the government is not required to be notified when a mine enters C&M. The Risk Management Paper proposes the Resources Acts be amended to require resource holders to provide notice if a site enters C&M. Notification will be accompanied by a Later Development Plan that provides:
- Formal notification of the cessation of production;
- The expected C&M period; and
- Conditions that would justify bringing the site out of C&M.
Operators entering C&M following commencement of the FP Scheme must also notify the scheme manager. Resource operations with depleted orebodies and limited future development opportunities entering C&M are likely receive a higher risk-category allocation under the annual FP Scheme risk-category review. Operators are still required to meet all plan of operations and PRCP milestones and must apply for plan amendment if an extension of the rehabilitation timeline is required. If rehabilitation obligations are not or are not likely to be met, the government will act to ensure site rehabilitation is progressed. Enforcement options include:
- Compliance action to ensure compliance with EA conditions and PRCP milestones;
- Undertaking a PRCP and EA amendment process to cover the C&M period;
- Submission of a further Later Development Plan that provides further explanation for the site entering C&M.
Change in Control Assessment
Unlike a direct resource authority acquisition, DNRME does not have statutory power to assess the financial and technical capabilities of a company acquiring the holder of a resource authority. The Risk Management Paper proposes that “change in control” transactions be assessed under the MERCP Act. The Minister will consider whether the proposed new holder has the financial and technical capacity to comply with the resource authority conditions and, if not satisfied, is entitled to refuse transfer.
All existing and new authorities issued under the MERCP Act will be amended to include a condition to notify the Minister of any proposed “change in control” transaction. The obligation to notify will extend to:
- The resource authority holder;
- The entity divesting itself of the holder; and
- The new controlling entity.
To facilitate assessment processes, existing authority holders will be able to apply to the Minister prior to acquisition for a legally binding indicative assessment of the acquirer’s financial and technical capabilities.
Reforms for Disclaimed Resource Assets
Some recent high profile insolvencies (e.g. Linc Energy Ltd) have prompted reforms for disclaimed assets.
Liquidators managing an insolvent company can “disclaim” a resource authority to legally terminate the company’s rights, interests and liabilities in the authority. Disclaimer generally occurs when a buyer for the authority cannot be identified and there are ongoing expenses being incurred by the insolvent company (i.e. maintenance or rehabilitation requirements). Terminated resource authorities cannot be transferred, requiring a new operator to undergo the full application process.
The Risk Management Paper proposes the Resources Acts be amended to enable disclaimed mines to be transferred to a holding entity (which may be a government owned entity) to “warehouse” a resource authority disclaimed during liquidation until it can be sold or transferred. Transfer will prevent the authority from terminating and reduce delays in acquiring the resource approvals necessary to return a disclaimed site to production. Upon transfer:
- The insolvent company may still be pursued for environmental compliance and enforcement actions;
- The disclaimed resource operation is managed by the State in the same manner as an abandoned mine;
- The State will assess the resource operation’s economic viability to identify opportunities to return the site to production.
Costs incurred by the State for mines disclaimed following FP Scheme commencement will be drawn from the disclaiming company’s contributions to the FP Scheme or any surety provided. Following transfer to the warehousing entity, the government will advertise opportunity for site recommencement. A new operator must demonstrate they have the financial and technical capacity to conduct the resource operation, consistent with an assessable transfer under the MERCP Act, and obtain the necessary environmental, native title and land access authorities.
Abandoned Mines Management
The ‘Achieving improved rehabilitation for Queensland: addressing the state’s abandoned mines legacy’ (Abandoned Mines Management Paper) focuses on abandoned mines that existed prior to the establishment of the FP Scheme set to be introduced in the Mineral and Energy Resources (Financial Provisioning) Bill 2018 (Qld). These mines are classified into three categories:
- Historical Disturbances – Mines featuring small-scale, non-mechanised mining methods that ceased production prior to the Environmental Protection Act 1994 (Qld) amendments in 2000
- Legacy – Contemporary mines with mechanised mining methods that ceased production prior to the Environmental Protection Act 1994(Qld) amendments in 2000.
- Pre-Commencement – Modern mines ceasing production after the Environmental Protection Act 1994 (Qld) amendments in 2000 but prior to FP Scheme commencement.
Repurposing Abandoned Mines
Undertaking resource activities on an abandoned mine currently requires new approvals and agreements to be sought in the absence of an existing mining lease. The Abandoned Mines Management Paper proposes a new “Abandoned Mine” tenure status be introduced. The new tenure status aims to expedite granting of mining tenures over legacy and pre-commencement abandoned mines with residual in-ground resources or suitable for alternative site uses. Alternative site uses may include renewable energy hubs, such as the North Queensland Kidston hub, or mineral extraction from tailing dams.
The Abandoned Mine tenure status is proposed to address complications between granting resource authorities over abandoned mines and current legislation, including:
- Tenure Application – streamlining tenure grants by reducing application requirements and removal of objection rights to reflect that mining activity is occurring on land currently impacted by mining activities;
- Contamination and Rehabilitation Liability – clarification of who is responsible for existing and continuing mining disturbances following tenure grant.
- Land Access – streamlining land access process for repurposing not involving mining activities, which currently requires the proponent to organise licencing and leasing arrangements.
Proponents seeking an abandoned mine tenure declaration will still be required to comply with the necessary legislative requirements for a resources activity, including environmental obligations, third party agreements and native title requirements.
The next stage in the Queensland Government’s resource rehabilitation reforms will be passage of the Mineral and Energy Resources (Financial Provisioning) Bill 2018 (Qld). Prior to predicted passage of the Bill in August, DNRME will continue development of draft statutory guidelines to facilitate introduction of the FP and PRCP schemes in late 2018 through early 2019. DNRME is now accepting public submissions regarding both the Risk Management and Abandoned Mines Management discussion papers until 16 July 2018.
Should you have any questions regarding new provisions and transition processes, please do not hesitate to contact us.