Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697645854580.pdf (Australia)
SUBMISSION TO SENATE ENVIRONMENT AND COMMUNICATIONS REFERENCE COMMITTEE “INQUIRY INTO THE REHABILITATION OF MINING AND RESOURCES PROJECTS AS IT RELATES TO COMMONWEALTH RESPONSIBILITIES” Thank you for the opportunity to make a submission to the Senate Subcommittee.

ToR.
ToR.

The rehabilitation of mining and resources projects as it relates to Commonwealth responsibilities, for example (under the 1999 EPBC Act), with regard to: 1. the cost of outstanding rehabilitation obligations of currently operating projects; • Within the mining industry it is fairly well known that the real costs of rehabilitation and mine closure are, as in any commercial enterprise, essentially confidential information known only to the owners of projects.
Closure costs can be calculated “in terms of immediate closure”, and in fact some corporations do undertake this regularly as a standard process during the process of building that cost base for corporate reporting.
• Companies that report closure costs, as required under corporation’s laws and defined by International Financial Reporting Standards 2007 (Slight and Lacy 2015), allow closure cost to be subjected to accounting treatments such as the use of Net Present Value (NPV), and other discounting processes that provide a future cost of closure, often many multiples less than the actual cost of closure when that closure occurs.
• As the States have enacted more closure planning legislation and regulation over the last 15 years the • gap in knowledge of closure cost became apparent, and action in response is ongoing.

In response many States produced cost calculators modeled around the Standardized Reclamation Cost Estimator (SRCE) a tool developed in Nevada, USA.
Some companies had some calculation tools before that time, but since 2006 when I was first exposed to and used the Nevada tool for a mining corporation, there has been increased effort to more accurately represent mine closure costs within corporations and achieve cost standardization, to avoid the surprise of unforeseen costs.
• These costing models and tools have helped most States “partially” close the knowledge gap, particularly as these tools report real time costs (sometimes with third party contracting rates), and by requiring companies to apply and report on closure costing to Government.

I did observe limitations in the practice in different States (during 2005-2010), but as I am not actively engaged in this work currently this may be a purely a historical perspective from my earlier career and may have improved.
• The cost of raising capital by mining corporations is being affected by growing market awareness of mine closure liabilities, and although being a below the line balance sheet item, banking processes such as the application of the Equator Principals and risk analysis in relation to mining liabilities has made financial market aware of the issue.

Hence this matter is on the radar of mining corporation boards and financial managers, and particularly institutional shareholders.
2. the adequacy of existing regulatory, policy and institutional arrangements to ensure adequate and timely rehabilitation; • The States provide a diversity of approaches to the management of rehabilitation and ultimate closure of mine sites.
Although diversity is effective through providing the capability for local advancement in forms of regulation, science and innovation, it also renders Australia as a whole vulnerable to the prevailing political whims of that particular State, its form of legislation, and capacity to enforce regulation and capture malfeasance at a particular time in its history.
• The Commonwealth is vulnerable to poor outcomes in mine rehabilitation and mine closure, corporate irresponsibility, and mine closure failures through events, sometimes beyond the control of the mine operator or corporation, that can become an issue beyond the resources, predominantly economic, but sometimes legal, of a State.
Rehabilitation of mining and resources projects as it relates to Commonwealth responsibilitiesSubmission 77 • Poor mine closure is effectively becoming an untaxed, unaccounted for, negative externality within Australia’s economy.

While the financial impact is deferred; the real time environmental costs occur, are ongoing, with a multitude of impacts and effects.
• As mining and minerals industrialization continues a problem of considerable magnitude expands, and States will ultimately turn to the Commonwealth for funds to address failures in mine closure that impacts the wider tax paying community.

Many current closure legacies can be named by communities i.e.

; Captains Flat, Horne Island, Rum Jungle, Radium Hill, Mt Morgans, Brukunga, Wittenoom, Kathleen Valley, Elverdton etc.

etc.

have, or will become, a financial drain on the economy.
In my experience there are times when the States find it hard to provide adequate regulatory, policy and institutional management to enforce timely rehabilitation, and effective mine closure processes.

This occurs for a variety of complex and diverse reasons; however, I believe in time these can be overcome with some supportive process.
• • Assistance in the form of a “legislative framework’ that’s based on federal law to protect States (broad enough to address the many forms of impacts from this industrial land use) if it fails to meet its obligation) may assist the States in the business of regulating and guiding its local minerals producers sufficiently to achieve adequate and timely rehabilitation, and effective closure planning.
3. the adequacy and transparency of financial mechanisms, including assurances, bonds and funds, to ensure that mining and resources projects are rehabilitated without placing a burden on public finances; • The capacity of mining organizations to meet 100% of closure cost through bonding provisions, has at times been criticized by industry.

Primarily in reducing available capital for to the company.
Bonding is generally provided in the form of a bank guarantee, it does reduce the borrowing limit of companies, but is an effective low-cost bank backed security for States and hence the Commonwealth.

• This issue and a variety of others around bonding put by industry, recently drove a change in approach in Western Australia, that the Committee is well aware of (the Minerals Rehabilitation Fund) and does not require further description.
Many jurisdictions and regulators, nationally and globally are watching this approach with interest to see how successful - limited bonding (purely on high risk mines), with annual 1% of the estimated closure cost (in this form as a tax or royalty collected as the MRF) will be able to manage the current abandoned mine inventory (and future mine legacies) of this State.
• There has been quite an interesting range of responses from practitioners that I have interacted with in relation to this quite unique system.

My impression that it will be some time before the MRF is able to be fully evaluated for effectiveness.
Some mine rehabilitation practitioners suggest that it has demotivated company’s, whereas other (with large closure costs) are suggesting that the MRF has motivated upper management, and progressive mine closure is gaining traction as they see the MRF as a tax to reduce.
• Despite the concerns of industry there are States/Territories who sustain 100% performance bonding on the basis of a closure cost estimate, (the NT additionally includes an abandoned mine royalty), and companies have to meet that requirement.

A common problem (perhaps less so today) was the bonds were often found to under represent the full cost of closure by a considerable amount, sometimes only represent 25-35% (or less) of the actual cost of closure.
• Without the legislative capacity to capture past corporate ownership of a mine site i.e.

transfer liabilities via sale and through a chain of future failed companies, trade to the point of premature closure, become bankrupt, etc.

many of the State’s financial mechanisms to ensure a reduction in the risk of unplanned closure, will I believe, tend to be inadequate to the task ahead, and to address those of the past, without massive capital injections from the Commnwealth.

4.
4.

Effectiveness of current Australian rehabilitation practices in safeguarding human health and repairing and avoiding environmental damage; Rehabilitation of mining and resources projects as it relates to Commonwealth responsibilitiesSubmission 77 • Being from the West.

Aust.

Goldfields and being around abandoned mines, and then being involved in mining actively for most of my life, I can say there has been a steady and gradual improvement in the last 40 years in these areas of the ToR of the Enquiry.
I was first employed in the mining industry largely due to individuals within the industry recognizing their impacts, understanding rehabilitation could be improved, having a concern for local community and public opinion, and in response to gradually forward looking legislative and regulatory requirements.
• • However, the number of historic, and more recently abandoned mines inadequately rehabilitated or failing to meet the general overarching “Safe, Stable and Rehabilitated” model is increasing, commiserate with the scale of industry activity.
Industry footprint, when considered as impacts and change to atmospheric influences, air quality, water (surface and ground), light, noise and to ecosystems (not to mention social and economic) of the mining industry is now very substantial, compared to the 1930-1960’s, due to mining lower grade ore, larger mining systems and global demand-based growth for minerals.
• • The scale of mine operations today means that many mining organizations are challenged to stay fully in-control and manage their environmental impacts, while meeting the requirements of the current burden of operational license conditions.

Particularly so when economic conditions are stressing that particular mines’ profitability (often experienced) and they are short staffed.
The managerial and resourcing challenge does result in effort toward rehabilitation and management of closure liabilities being deferred to periods when profitability returns, hence a rehabilitation/closure backlog builds.

• To some extent the requirement to have a “regularly updated” and active mine closure plan (particularly were this is a legislated requirement), and/or to have a conceptual closure plan prior to mine approval, is helping drive improvements across the industry.
These processes, if a legislated requirement, in all States can assist in supporting active rehabilitation and progressive closure.

5. the effectiveness of existing abandoned mines programs, with regard to repairing environmental damage and safeguarding human health; • My impression is most of the State programs are only just holding in check the abandoned mines issue as it emerges and are forming abandoned mine management groups within Resource/ Env.

Department to manage the situation.


The capital and incentives to tackle this issue will most likely require some form of Commonwealth legislation to underpin and support the States, as the funding currently allocated is purely (I believe enough) to keep a lid on the situation i.e.

“sustain a holding position”.


• A simile in effective legislation may be that as enacted through the “Superfund” laws within the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA 1980), or the SMECRA (Coal Mining) legislation of USA.

Similar problems as Australia faces have been brought into management, particularly through funding royalties on current production, and could be considered analogues for review.
• A component of CERCLA is known by some parties as “the last man standing law” Sec.

107 (CERCLA 1080).

This act imposes liability on potentially responsible parties (PRP’s), to recover costs from former owners and operators of a facility, if disposal of hazardous substances occurred while the PRP owned or operated the facility.

• The recent enacted Chain of Responsibility amendment to the EP law in QLD, may be the first of that form in Australia.
• These laws are difficult to administer if poorly formed with more resources spent in court, between the contesting parties, than on the ground in dealing with the impacts from negative mine legacy.

Fortunately, we have these working examples of these international laws to point out the pitfalls, and as potential guides if Australia decided a form of these regulations was appropriate.

• SMECRA understood it would need funds for land reclamation.
In 1977 its legislation established royalties “of 31.5 cents per ton of coal produced by surface coal mining and 13.5 cents per ton of coal produced by underground mining”.

The funds (as described in the legislation) are used on approved abandoned mine reclamation work and restoration of land and water resources that have been degraded by the adverse effects of coal mining practice.
Rehabilitation of mining and resources projects as it relates to Commonwealth responsibilitiesSubmission 77 6. whether any mining or resources companies have engaged in conduct designed to avoid fulfilling their rehabilitation obligations; • Cases pending against the Ellendale (Kimberly Diamonds) Directors, if successful, would indeed show a most recent example of avoidance of responsibilities.
• Mineral resource economics points to an infection point during exploitation, were the value of an in- situ unmined ore resource reaches a point where the liability and cost of production is greater than the value of the remaining resource.

At this point, the liability is often transferred to another mining company, via various arrangements or outright sales, as mentioned by others, is a common business risk management approach.
The larger and most risk averse mining corporations have policies that test the economic and appropriate capacities of potential purchasers to meet the closure obligations post sale however I suspect this has generally been a response to finding themselves subject to the PRP laws (in USA).
However, these same companies, when aware that such a law does not exist in a different jurisdiction are more relaxed and less diligent, and indeed do transfer mine assets often burdened with liability, for low entry cost, as part of the plan to remove a problem from their balance sheet.

• Brand protection, credibility and business sustainability is currently a major issue for mining corporations/companies.
A large public relations effort, significant resourced is expended in this area, and all the more so when a particular corporation is impacted by a Samarco or a Deepwater Horizon level event, whereas globally it the industrial footprint of mining through time that is the real event.

The mining industry finds parts of the world to be un-welcoming.
The legacies of past, and more recent, mining operations have affected generations of local communities, and impacts have been so severe that current operators are refused access, distrusted, reviled and shunned.
In some counties people sacrifice their lives in armed struggles to prevent access by the industry (Mining News 2015, Dondo 2014) • Jurisdictions seem to be unaware that their failure to provide good governance and law within which mining companies can operate is not appreciated and is in fact detrimental to that industry.

This is because the industries reputation is only as good as its weakest operators.
Those more incapable or unscrupulous and unable to run a professional operation within the industry, damage the reputation of all, and destroy industry credibility within the communities in which they currently, or will hope to operator in the event of a mineral discovery.

As tabled “the Minerals Resource Legacy Framework Figure 1. attached) discusses the importance of the relationship between these three primary stakeholders, to make this point (Aus.

Govt 2016).
Govt 2016).

• Unfortunately, I am time poor (and so will skip comment on 7,8,9,10.11).

In summary; some closing points and suggestions; • Many excellent submissions to the Enquiry have covered the issues (in detail).

Some appear to touch on the same points, with a range of perspectives.
• My points are purely to stress that there is a role for the Federal Government, current and future to establish effective guidance, and foundation in legislation (in some form), to underpin the States responsibilities on these issues.

• Other industrialized economies have found ways to navigate these problems, and we have the opportunity, to learn from their failures and build on their successes.
There are also parallels in contaminated site management, and legislation, and again USA decided the only way it could manage its mounting and the worst industrial legacies was via the CERCLA legislation.

A more efficient draft Act (Hard Rock Mining Act) has been in progress for some time there.

One could say USA also still has a road to travel in this area, and are avoiding the broader legacy of mine impacts.
I would suggest it is time for the Federal Government to consider (as others are suggesting) a Commonwealth Environment Commission and the potential formation of a National EPA to have carriage of the larger environmental management issues such Australia faces with its mining industry and the legacies of that industry.

• • Mining is a temporal and transitional industrial land use and requires legislation that is adaptable and realistic for post-industrial land use.
Legislation and processes can be formed that respond to this fact, without damaging the financial viability of the industry.
Rehabilitation of mining and resources projects as it relates to Commonwealth responsibilitiesSubmission 77 • The cyclical and unpredictable economic activity of mineral extraction in Australia does need good foundational law and subsequent regulation that deals with issues of site rehabilitation, that delivers optimal post closure land use, recognizes corporate and company obligation, and manages abandoned and negative mine legacy.
• The industry, itself, I believe would work to develop positive mine closure legacy if provided with effective foundational legal and regulatory frameworks to do so, and under an emerging paradigm of change, and as I have eluded to in documents such as Integrating Closure Planning and Providing Positive Legacy (Lacy 2016).
• • The more forward looking mining corporations are driving toward an integration of closure planning systematically into their mining business – as represented in (Figure 2) Phases of a Mining Project Integrated into a Closure System (Aust.

Govt 2016).

I believe the States need the Commonwealth to establish a common regulatory position that the Commonwealth will back, by providing the mechanisms and financial resources to deal with current and future abandoned mine management matters.
Incentives to assist and guide the States in the areas of the enquiry I believe would be welcomed.

Incentives may be suggested such as a.

• a.

Revision of the 2000 ANZMEC Mine Closure Guidelines (a simplified vision) b.

Funding and royalty’s mechanisms to assist States with Abandoned Mines.

c. Establish Federal Excellence awards for Mine Closure and Restoration, similar to those (AMEEF) provided in the 1990’s, to recognize this work.
d. Establishment of effective law (either Corporate, Company, Environment) that provides States, Territories, and the Commonwealth capacity to join legacy responsibilities to past operators of mining properties.

e. Establishment of a Commonwealth Commission (perhaps under a COAG style arrangement) to ensure effective management in the areas of the Senate Enquiry may be an appropriate mechanism.
• Unless we progress the liability of poor rehabilitation and degraded landscapes from this industrial activity will continue to be deferred to future generations.

• There is no need to miss the great economic opportunity of effective and well managed mine transition to alternative and effective future land use of these industrial sites.

• That process is being demonstrated globally in other economies and the Commonwealth Government can facilitate the same process.
• This could be achieved before escalating conflict, due to further inaction, mar the relationship between the mining companies, the communities and government around the issue of the Resource Legacy.

Thank you for the opportunity to Submit Your Sincerely Harley Lacy Restoration Ecologist, Environmental Manager and Environmental Biologist.

Company Director (GAICD).

Fellow of the Royal Society of Arts.

Member of AusIMM.

Life Member of American Association of Mine Reclamation.
Long Standing Member of the Env.

Consultants Association and Goldfields Environmental Management Group.

6th March 2018 Rehabilitation of mining and resources projects as it relates to Commonwealth responsibilitiesSubmission 77 Figure 1 The minerals resource legacy framework (Lacy and Bennett in Aus.

Govt 2016) Figure 2 Phases of a Mining Project Integrated into a Closure System (Aus.

Govt.
Govt.

2016) Rehabilitation of mining and resources projects as it relates to Commonwealth responsibilitiesSubmission 77 References Australian Government (2016) Department of Industry and Science (DIS) Leading practice sustainable development viewed mine programme http://www.industry.gov.au/resource/Programs/LPSD/ Pages/LPSDhandbooks.aspx.

handbook industry, closure mining 2015, April the for CERCLA (1980).
The Comprehensive Environmental Response, Compensation and Liability Act of 1980, Enforced by Environmental Protection Authority (EPA).

Office of the Law Revision Counsel of the U.S. House of Representatives.

Dondo, S.J.

(2014) Occasional Paper.

‘Financial assurance for Mine Closure: A regulatory Perspective from the Argentine Context.

Centre for Sustainable Management in Mining.

SMI University of Queensland, Aust.


Lacy H. (2016) Seeking a Paradigm Shift: Integrating Closure Planning and Providing Positive Legacy through Mine Closure.

in Gecamin “Planning for Closure.

the first international Congress on Planning for Closure of Mining Operations.

Santiago.

Chile.

Lacy H.W.B and Bennett K.E.


(2015) ‘Updating Australia’s leading practice sustainable development (LPSD) mine closure handbook for 2015: Closing the gaps and understanding the mineral resource legacy’, Proceedings Tenth International Seminar on Mine Closure, 1–3 June 2015, Vancouver, Canada, A. Fourie, M. Tibbett, L. Sawatsky and D. van Zyl (Eds.

), Australian Centre for Geomechanics, Perth, Australia, pp.

1-14.

MRF (2016) Mining Rehabilitation Fund.


http://www.dmp.wa.gov.au/Environment/Mining-Rehabilitation-Fund-MRF- 4906.aspx - 18 September 2016 Mining News (2015) http://www.mining.com/over-21bn-worth-of-mining-projects-delayed-in-peru-due-to-social- conflict/ PricewaterhouseCoopers (PWC).

2007.

Financial reporting in the mining industry – International Financial Reporting Standards (IFRS 2007), June Section 9 Closure and Environmental Liabilities, Energy, Utilities and Mining, pp.

56–59.
56–59.

SMCRA (1977) Surface Mining Control and Reclamation Act, P.L.

95-87, Enacted August 3, 1977 "An Act to provide for https://www.osmre.gov/lrg/docs/SMCRA.pdf https://www.osmre.gov/lrg.shtm.

cooperation Secretary between Interior.

the the the of Slight, M., Lacy, H. (2015) Managing and estimating closure and reclamation liabilities - a practitioner’s view.
In 2015 National Meeting of the American Society of Mining and Reclamation, Lexington, KY Reclamation Opportunities for a Sustainable Future June 6 - 11, 2015.

R.I. Barnhisel (Ed.)

Published by ASMR, 3134 Montavesta Rd., Lexington, KY 40502 SRCE.

Nevada Standardized Reclamation Cost Estimator (SRCE) software.
Nevada Division of Environmental Protection, Bureau of Mining Regulation and Reclamation (NDEP), the U.S. Department of Interior, Bureau of Land Management (BLM) and the Nevada Mining Association (NvMA).

https://nvbond.org/ The Sarbanes-Oxley Act (2002) Regulation of financial practice and corporate governance, Sections 302, 401, 404, 409, and 802 Senator Paul Sarbanes and Representative Michael Oxley US Congress).
http://www.soxlaw.com/ Rehabilitation of mining and resources projects as it relates to Commonwealth responsibilitiesSubmission 77