Improving rehabilitation and financial assurance outcomes in the resources sector

Progress on reforms

On 14 November 2018, the Queensland Parliament passed the Mineral and Energy Resources (Financial Provisioning) Bill 2018 (the Act). The Act replaces existing financial assurance requirements with the Financial Provisioning Scheme (the Scheme).  The Act also amends the Environmental Protection Act 1994 (EP Act) to require companies to develop Progressive Rehabilitation and Closure Plans.

Passage of the Act completes the first major step of the Government’s broad reforms to improve rehabilitation of mined land on a progressive basis, rather than at the end of a mine’s life. Information on the rehabilitation reforms can be found on the Department of Environment and Science website.

Replacing existing financial assurance requirements with the Scheme will reduce the financial risk to Government in the event a holder of a resource authority or small scale mining tenure (holder) fails to meet their environmental and rehabilitation obligations.  Over time, abandoned mines will be rehabilitated and rehabilitation techniques will be improved through grants provided from the Scheme’s Financial Provisioning Fund.

While this major milestone has been met, further reforms are still occurring.  The final reform discussion paper on Managing residual risks in Queensland has been released for public comment.  Please see the Managing residual risks in Queensland paragraph and submission below for further information and on how to provide a submission.

In addition, issues outlined in previous discussion papers by the Department of Natural Resources, Mines and Energy on associated risks and proposed solutions, and the State’s abandoned mines legacy, continue to be progressed. Further information on these initiatives will be made available once the appropriate policy approvals have been obtained.

More information is available:

Managing residual risks in Queensland

The Managing residual risks in Queensland discussion paper outlines a range of proposals to support implementing the residual risk framework in Queensland.

This discussion paper responds to findings of the Government’s review of Queensland’s financial assurance framework.  Supplementary work (Framework for Queensland’s Residual Risk in the Resource Sector) was undertaken by Queensland Treasury Corporation to support the Government with development of this discussion paper.

The discussion paper provides a number of proposals including:

  • principles to be used in developing a standardised risk assessment methodology
  • two options to assist with the estimation of post-surrender costs:
    • a calculation tool to be used in most circumstances
    • an expert panel to be used where the tool is not appropriate
  • clarification of payment requirements
  • identification of the need to record post-surrender management activities including how these could be communicated to land owners
  • identification of key roles in the post-surrender management of land and funds.

A summary of the discussion paper outlining these proposals is provided for your convenience.

How to make a submission

Submissions can be made to the email address: financial.assurance@treasury.qld.gov.au

Submissions close on: 1 February 2019.

Draft Regulation and Scheme Manager Guidelines

Note: The Draft Regulation and Draft Scheme Manager Guidelines have been prepared in accordance with the Mineral and Energy Resources (Financial Provisioning) Bill 2018 and are released for the purpose of consultation.  A final version of the Regulation and Scheme Manager Guidelines is subject to the passage of the Bill by Parliament.

Draft Mineral and Energy Resources (Financial Provisioning) Regulation 2018 (Draft Regulation)

The Act includes a regulation making power for various subject matters. The Draft Regulation will support the effective operation of the financial provisioning scheme by:

  • setting a prescribed percentage as part of the formula to calculate the contribution to be paid to the scheme fund
  • defining a ‘prescribed insurer’ for issuing of insurance bonds as an approved form of surety
  • setting an assessment fee.

A public consultation process was completed for the draft Regulation (supported by draft Explanatory Notes) during June/July 2018.

With the passage of the MERFP Act 2018, Governor in Council approval to finalise the Regulation is now being sought in preparation for scheme commencement.

Draft Scheme Manager Guidelines

Under the Act, the scheme manager must, for an authority with an estimated rehabilitation cost (ERC) amount equal to or more than $100,000:

  • make an allocation decision, allocating the authority to one of four risk categories – very low, low, moderate or high; and
  • determine whether the authority holder is to pay a contribution to the scheme fund or give a surety to the scheme manager.

A holder of an authority with an ERC less than $100,000 is required to give a surety to the scheme manager in an amount equal to the ERC for the authority.

A holder of a SSMT is required to give a surety to the scheme manager in the amount prescribed under the EP Act.

The MERFP Act 2018 enables the scheme manager to make guidelines about the operation of the scheme. The guidelines will support the effective operation of the financial provisioning scheme.  The following draft guidelines were released for public consultation.

The draft guideline Forming the Scheme Manager’s Opinion is based on the report Design of the Risk Assessment Process for the Financial Assurance Scheme.

The Risk Category Allocation Information Sheet will assist in understanding the risk category allocation framework under Part 3 of the Act and how the draft scheme manager guidelines apply to this framework.

Public consultation on the draft guidelines has been completed. The Scheme Manager guidelines will be provided on a Financial Provisioning Scheme website and via email to holders once the Scheme Manager has approved them.

Achieving improved rehabilitation outcomes for Queensland mines

The Department of Natural Resources, Mines and Energy has released two discussion papers (see discussion papers open for consultation below) on improving outcomes for abandoned mines and other proposals to reduce the financial, safety and environmental risks for the state. Reform ideas include development of:

  • a monitoring and reporting regime for sites in care and maintenance
  • a change of control test to empower the government to assess the technical competency and financial capability of a new acquirer of an existing resource authority
  • a framework that allows the government to temporarily hold ownership of disclaimed resource authorities in order to facilitate a return to production by a new owner

Submissions can be made to financial.assurance@treasury.qld.gov.au and will close on 16 July 2018.

More information

For more information on the reforms, email the Financial Assurance Reform team financial.assurance@treasury.qld.gov.au.

The Queensland Government is working to ensure that reform of the current financial assurance arrangements for the resource sector protects the State’s finances while achieving the best balance between a viable resources sector and the environment.

The reform package proposes to deliver:

  • a higher level of environmental performance
  • rehabilitation investment in the State’s resources industry
  • better protection of the State’s financial interests.

Background

review of Queensland’s financial assurance framework (PDF 1,570 K) in November 2016 found that current resource sector financial assurance arrangements could be improved.

The review recommended a package of reforms to deliver positive environmental outcomes, improve rates of site rehabilitation, and ultimately reduce the amount of rehabilitation required at the end of a resource site’s life cycle.

The package of reforms includes:

  • reforming the current resource sector financial assurance framework
  • improving mine rehabilitation in Queensland
  • expanding the range of surety providers available for the provision of financial assurance
  • improved management of sites in care and maintenance
  • expansion of the abandoned mines program to improve management of legacy issues
  • review of existing approval conditions on the sale of resource assets
  • improved data analysis, information systems and governance framework
  • residual risk policy development.

More information on the review and its findings is available in the Review of Queensland’s financial assurance framework (PDF 1,570 K).

The Queensland Government provided in principle approval to implement the reforms outlined in the review. A project management office was established in Queensland Treasury with representatives from the Department of Environment and Science and the Department of Natural Resources, Mines and Energy to consult with stakeholders and progress implementation.

Risk assessment process

As part of the proposed package of reforms an assessment will be undertaken on individual resource environmental authority holders to determine the financial provisioning they will be required to provide under the proposed tailored solution. Please click here for a summary of the reforms and proposed assessment. Independent consultants KPMG and Australia Ratings were commissioned by the Government to assist with the design of the risk assessment process. Consultation was undertaken with peak industry bodies, individual companies, and environmental bodies. Findings have now been released in the report Design of the Risk Assessment Process for the Financial Assurance Scheme, available for stakeholder feedback. Please provide the feedback to the email address financial.assurance@treasury.qld.gov.au.

Last updated: 19 November 2018