Find out the new trends in managing mining liability
Michael Cramer is director of Accent Environmental, a Melbourne-based consultancy that provides environmental and social impact assessment and management services and strategic advice to the resources, industrial, water and waste sectors. He has more than 25 years’ professional experience working with private clients and government agencies in the resource sector, and specialises in closure planning of sites.
Cramer is currently advising on reforms to Queensland’s financial assurance system for resource development projects. His presentation will outline some of the new approaches across Australia towards the management of liability for resource projects in the remediation phase.
What is your key message for the industry?
There are several new approaches towards the management of liability for mining projects that are either being adopted or considered by regulatory authorities. There are likely to be flow-on effects to the quarrying industry – some good, some not so good – that need to be anticipated and managed. These approaches include consideration of post-relinquishment liabilities, changes to liability cost calculation methods (including incorporation of risk components), further movement towards pooled rehabilitation funds, and more prescriptive requirements to drive progressive rehabilitation.
What advice does Accent Environmental offer about site closures and repurposing?
Effective closure and repurposing can achieve a positive outcome for an operator, community and industry. There are opportunities that did not exist a decade ago – eg the use of sites as part of integrated renewable energy projects, or with the potential to support pumped hydro. My advice would be to consult widely, particularly at the early planning stage.
Where are mines and quarries expected to contribute to pooled rehabilitation funds?
Queensland is leading the way on reforms to the management of mine rehabilitation and financial assurance. Regulators in jurisdictions such as Victoria, New South Wales and the Northern Territory are watching them. The Queensland reform program includes the introduction of a pooled fund for lower risk operations to cover rehabilitation liability. Interestingly, the program will also require payment as part of final site surrender to cover any ongoing liability for the state, including exposure to residual risks. Accent is developing a cost calculation tool for the Queensland Department of Environment and Science to estimate site surrender costs. The reforms cover the mining and petroleum and gas sectors, but not the extractive industry.
What are the pros and cons of pooled funds? Do they work as effectively as envisaged?
I am strongly in favour of pooled rehabilitation funds for mining, but less in favour for quarrying. If set up correctly, they provide the state with funds to cover rehabilitation default without having to trouble the taxpayer – whereas if the funds are tied to a specific tenement, the taxpayer has to step in if the financial assurance is inadequate. I think they suit mining better because the risk profile of mining projects is generally greater than quarrying projects – ie the potential for a risk event to occur that drains the estimated surety for a site is much greater.
The implementation of the mining rehabilitation fund in Western Australia has not gone as smoothly as hoped. It will be interesting to see how the Queensland scheme – which had the advantage of learning from the WA scheme – progresses.
For quarry operators, a pooled fund may put them under greater financial pressure, depending on the level of the fund levy compared with the fee for maintaining a bank guarantee and the associated cost of capital.
What makes the risk profiles of quarrying operations different from mining operations?
Rehabilitation risks associated with quarrying operations are generally well understood and amenable to standard risk mitigation practices. For example, geotechnical, hydrological and hydrogeological risks can be quantified and managed. In contrast, many mining operations have rehabilitation risks that are more difficult to manage, with large, even order-of-magnitude implications. This is true in the area of water quality, where issues like acid and metalliferous drainage can be intractable at many mining operations. In addition, mines typically have much higher capital and operating costs than quarries, and are often remote from settlement, making them less able to survive poor market conditions. Rehabilitation reforms aimed at addressing mining risks may inadvertently overcook quarry risks, if applied without adequate thought.
What are reasonable rehabilitation goals in a mine closure plan?
The basic requirements to achieve a safe, stable and non-polluting site are non-negotiable and progressive rehabilitation goals need to zero in on this outcome. The area that is questionable is the nature of post-closure land use – to what extent can the rehabilitated site support ongoing productive and sustainable land use, and is that land use acceptable to the community and other stakeholders? It is in the interests of the quarry operator to maximise the commercial value of the land for on-selling but this may conflict with local community aspirations. The earlier in the life of a quarry that end land use can be agreed the better for rehabilitation planning, although it is often only as closure approaches that agreement can be reached.
Should regulators expect proponents to outline mine closure plans at an early stage?
It is not unreasonable to have a well developed concept to form a basis for rehabilitation planning and to enable a realistic estimation of financial assurance. It is important though for regulators to realise the plan at the start of a long-lived operation will almost certainly be different from the plan at the end of the operation, as quarries need to adapt to many different factors such as improved resource definition, changing market conditions, changes in surrounding land use, new regulatory requirements and evolving community expectations.
Are rehabilitation liability calculation tools available for quarries to use?
Rehabilitation liability calculation tools are typically developed for mining, not quarrying. The Victorian rehabilitation bond calculator is used for mining and quarrying as the same legislation covers both sectors, but it is arguably better suited to mining. Calculation tools incorporating risk-based cost factors are being considered but introduce a higher level of complexity – both for the user of the calculator and for the regulator reviewing the output. Current calculation tools generally handle uncertainty through a percentage contingency that is applied to the total cost estimation. Given the lower risk nature of most quarrying operations, risk-based calculation is probably overkill, but it has its place for high risk mining operations.
What sort of residual liabilities can remain for an operation once a site is remediated?
The work that Accent is undertaking for the Queensland Government has identified two broad categories of residual liability at mine sites, even after successful rehabilitation and closure. These are a “residual risk cost” associated with the potential for unplanned events to occur (ie slumping of an embankment) and a “maintenance and monitoring cost” (ie where a drainage structure needs annual maintenance). At many sites, residual liabilities may be minimal or effectively zero. As quarries are generally lower risk than mines, residual liabilities would typically be lower.
Originally published by Quarry.
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