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Australia – Mining Rehabilitation Fund Regulations Released For Comment.

18 March, 2013

 

Legal News & Analysis – Asia Pacific – Australia – Energy & Project Finance

 

WHAT YOU NEED TO KNOW

 

  • On 25 February 2013 the Department of Mines and Petroleum ("DMP") released a consultation draft of the Mining Rehabilitation Fund Regulations 2013 ("Regulations") for public comment. The closing date for submission is 5 April 2013.
  • The Mining Rehabilitation Fund Act 2012 (WA) ("MRF Act") was passed by Parliament late last year to fund the rehabilitation of abandoned mine sites. The Regulations provide important details about the calculation of the proposed annual "rehabilitation levy" payable by tenement holders. The DMP is working towards a start date of 1 July 2013.

 

WHAT YOU NEED TO DO

 

  • Tenement holders should review the draft Regulations and consider what data they will need to collect to calculate the annual levy payable by them. Tenement holders will need to factor the potential rehabilitation liability into plans for new developments, expansions or sales of mining operations.
  • The draft Regulations are open for public comment until 5 April 2013.

 

Introduction of the mining rehabilitation levy

 

The Mining Rehabilitation Fund Act 2012 (WA) ("MRF Act") secures long-term funding by the State for the rehabilitation of mine sites that have been declared abandoned under the MRF Act. The MRF Act achieves this by passing on the rehabilitation cost to be shared by existing mining proponents, through the introduction of a "rehabilitation levy" payable by tenement holders in Western Australia. A mine can be declared abandoned under the MRF Act if mining operations on the land have ceased, but there is no further clarification on the criteria for declaration in the draft Regulations.

 

The DMP estimates the State's current liability for rehabilitating existing abandoned mines exceeds $100 million. In addition, DMP anticipates there are likely to be more abandoned mine sites over the next decade, as there are around 300 mines sites currently on care and maintenance. The State introduced the MRF scheme to deal with this liability instead of implementing other measures, like increasing bonds to cover the full cost of rehabilitation).

 

On 25 February 2013, the DMP released the draft Regulations for public comment. The draft Regulations set out:

 

a) how the annual levy will be calculated;

b) what information tenement holders must provide to DMP for the purposes of calculating the levy payable by them;

c) matters to be specified in DMP issued assessment notices; and

d) details of penalties for non-payment of the levy or other contraventions of the MRF Act or Regulations.

 

Who is liable to pay the levy?

 

The levy will be payable annually by the holders of "mining authorisations", which includes all mining tenements granted under the Mining Act 1978 (WA) ("Mining Act") and other prescribed tenure.

 

The draft Regulations do not prescribe any State Agreement or Mining Act 1904 (WA) tenure for the purposes of the "mining authorisation" definition. This means that if the Regulations are introduced in their current form, only holders of mining tenements granted under the current Mining Act will be liable to pay the levy when it comes into effect. Other types of mining tenure (such as State Agreement mineral leases) may be included in the scheme in the future.

 

The person liable to pay the levy in a particular year is the holder of the mining authorisation on a date that is yet to be specified in the draft Regulations.

 

How much is the levy and how is it calculated?

 

Under the draft Regulations, the levy is to be assessed by the CEO of the DMP annually as 1% of a tenement holder's Rehabilitation Liability Estimate ("RLE") in respect of each, or percentage interest in each, "mining authorisation" they hold.

 

For each mining authorisation, the RLE will be calculated by identifying the hectares of land used by the tenement holder for each prescribed category of land use and multiplying that figure by the corresponding unit rate for that category.

 

Where more than one category of land use occurs within a single mining authorisation, the RLE figure will be calculated by adding together the rehabilitation liability estimate for each category of land use. This calculation could be complex for some mining authorisations, which are used for various categories of land use.

 

If the RLE for a mining authorisation is less than $50,000, no levy is payable for that mining authorisation.

 

The liability categories

 

The prescribed categories of land use and corresponding unit rates are set out in the Regulations. The liability for land that has been used for facilities such as a residue storage facility or a waste dump will be calculated at a higher unit rate than a land use that is less onerous to rehabilitate, such as a mining workshop or access road.

 

Land uses and activities are not defined, which might give rise to some uncertainty . For example, there is no detail clarifying the difference between a "haulage road" and an "access road", which each fall into different categories. Tailings or residue storage facilities and waste dumps or stockpiles are at least classified into further categories taking into account the nature of the waste involved, but those categories are also not defined in great detail.

 

There is a separate category for "rehabilitated land", which will only apply where the rehabilitation has been completed in accordance with the relevant programme of work or mining proposal. There is no mechanism for dealing with progressive rehabilitation, where land has been partially rehabilitated only. T

 

he Regulations do not contemplate any overlapping categories of land use, and there is no mechanism for dealing with a possible overlap.

 

What information must tenement holders provide to the DMP?

 

To calculate the levy payable by a tenement holder, DMP will require a tenement holder to:

 

  • a) assess the various categories of activities and land use on each of their tenements;
  • b) measure and record the area within each tenement which is used for each of the specified categories of land use, on a day nominated by the tenement holder; and
  • c) compile this information and submit it to DMP for assessment before the due date (which is yet to be determined under the draft Regulations).

 

Once the assessment information has been submitted, DMP will issue a Notice of Assessment outlining the levy amount payable and the date for payment. This will usually be 30 days from the date of the Notice of Assessment. Failure to submit the required information to the DMP could result in a $20,000 fine for a corporation.

 

The requirements to submit assessment information may create an onerous administrative burden on tenement holders, at least in the first year of the operation of the scheme and following substantial changes to activities or new operations.

 

DMP has suggested that, in practice, tenement holders who are also required to submit an Annual Environmental Report may submit their levy assessment information together with that Report, provided the information is submitted by the due date specified in the Regulations.

 

What discretion does the CEO have in assessing the levy?

 

If a tenement holder fails to submit the required assessment information, or the CEO is not satisfied with the adequacy or reliability of the information, the CEO has power to make an assessment of the levy based on the CEO's estimate of the levy amount. The CEO also has discretion to reassess a levy amount any time within two years after the original assessment was made, if the CEO considers there has been an error or it is otherwise appropriate to do so.

 

As the exercise of that power by the CEO would give rise to considerable uncertainty (and could result in a higher levy than anticipated by the tenement holder), tenement holders will need to ensure systems are in place to manage collection and submission of accurate and reliable assessment information.

 

Can a tenement holder object to an assessment?

 

A tenement holder may object to a Notice of Assessment or a reassessment notice on the ground that they are not liable to pay the levy amount, or if they consider that there has been an error in the assessment or reassessment of the levy amount. The draft Regulations do not prescribe any additional grounds. For example, the Draft Regulations do not cover the situation where a the tenement holder considers the classification of the land uses by the CEO is not appropriate (which might arise where there are overlapping uses).

 

Objections are made to the CEO, with a further appeal right to the State Administrative Tribunal for a review of the decision.

 

What happens to existing environmental bonds?

 

The State Government's current mining security system requires all mining lease applicants to lodge a bond (commonly known as an unconditional environmental performance bond). The draft Regulations do not clarify how the bond system will operate in conjunction with the MRF scheme.

 

There are no provisions for the return of existing bonds following the transition of mining tenements to the MRF scheme and there have been no amendments to the security regime under the Mining Act. Consequently, the State will still have power to require environmental performance bonds or other security under the Mining Act for new developments and impose additional bonds on existing projects.

 

It is anticipated that once the MRF scheme is introduced, bonds will only be imposed in addition to the MRF levy for "high risk" operations. However, there is no legislative guidance on the interaction between the levy and bond requirements.

 

The bond rates were scheduled to be increased from January 2013, but the Minister for Mines and Petroleum has placed a moratorium on the increase in light of the State Government's commitment to establish the MRF.

 

Practical considerations for tenement holders

 

Mining companies in Western Australia will need to systematically review their operations to determine their potential levy liability and ensure they are complying with the MRF Act and Regulations. In particular, mining companies should:

 

  • a) ensure they have systems in place to manage the collection and submission of accurate and reliable assessment information;
  • b) keep accurate records of assessment information, which may be required to support an objection to any assessment or reassessment of a levy amount;
  • c) be aware that they will be required to pay the MRF levy in addition to providing any unconditional environmental performance bonds required under the existing mining security bond regime; and
  • d) be aware that the development of new mining operations or expansion of existing operations will likely increase the MRF levy payable by them.

 

Mining companies considering purchasing or selling an interest in a mining tenement should:

 

  • a) inspect or disclose (as applicable) information in relation to the levy liability and the tenement holder's compliance with the MRF Act requirements;
  • b) assess and take into account the tenement holder's potential liability for the levy payable in the year of the transaction;
  • c) take into account the due date for assessment information to be submitted to DMP and the likely due date for payment of the levy; and
  • d) negotiate and agree on an apportionment of liability for the levy payable in the year of the transaction and agree on who will be liable for any reassessment amounts.

 

  

For further information, please contact:

 

Katie Winterbourne, Partner, Ashurst

katie.winterbourne@ashurst.com

 

Claire Woodland, Ashurst

claire.woodland@ashurst.com

 

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