Queensland’s financial assurance reforms up in the air

As part of the Queensland Government’s crackdown on financial assurance (FA) and rehabilitation in the resources sector, the Mineral and Energy Resources (Financial Provisioning) Bill 2017 (Qld) (FP Bill)¹ was introduced on 25 October 2017 to propose significant reforms. However, following the recent calling of the State election, Parliament was dissolved on 29 October 2017 and the FP Bill lapsed automatically as a result

Background to the reforms

In 2016, an independent review² of Queensland’s FA framework revealed that an increasingly small proportion of land disturbed by mining in Queensland is rehabilitated, causing over-reliance on FA to remediate the environmental impacts of mining.

In May 2017, the Better Mine Rehabilitation for Queensland Discussion Paper³ and the Financial Assurance Framework Reform Discussion Paper⁴ were released to propose significant upgrades to Queensland’s resource sector FA and rehabilitation frameworks. Consultation reports on these discussion papers were released in September 2017,⁵ along with the Financial Assurance Review – Providing Surety Discussion Paper,⁶ before the FP Bill was released in October 2017.

Overview of the FP Bill

Two key categories of reform were proposed for the mineral and energy resources sector under the FP Bill:

1. reforms to the existing FA arrangements; and
2. reforms to the existing mining rehabilitation framework.

FA reforms

The FP Bill proposed to create a new financial provisioning scheme, which would include a scheme fund, surety arrangements and the appointment of a scheme manager to manage the scheme. The role of the scheme manager would be to manage the scheme fund, allocate risk categories to environmental authorities (EAs) and conduct annual reviews of risk category allocations.

Contributions of eligible entities to the scheme fund would be determined based on both the estimated rehabilitation cost (ERC) and the risk category allocated to an EA by the scheme manager. The risk categories include ‘very low’, ‘low’, ‘moderate’ and ‘high’, however risk allocations would only be required where the ERC for a particular EA holder was at least $100,000. Contributions to the scheme fund would be annual, and it was anticipated (but not confirmed) that these contributions would equate to approximately 0.5% to 2.75% of the EA holder’s assessed rehabilitation obligations. However, the FP Bill imposed a $450 million fund threshold, meaning that where an EA (or EAs) had a total ERC exceeding this threshold, contributions to the scheme fund would be required up to the threshold amount, and then a surety would be required for the excess amount. Importantly, entities assigned to the scheme fund would have to participate and could not choose to ‘opt out’.

Notably, merits review was not proposed to be available for the scheme manager’s risk category allocation decisions, although limited judicial review under the Judicial Review Act 1991 (Qld) was proposed, and the opportunity for review existed in cases where the EA holder was proposed to be changed.

Unlike the current FA arrangements where FA can only be applied to the specific EA it was provided for, the new scheme fund would operate as a ‘pool’ of FA. These funds could be used for all existing resources projects, but would also be available for legacy abandoned mines, abandoned operating sites and research into rehabilitation techniques. Finally, FA discounts would be removed and industry FA calculators would no longer be an option.

Rehabilitation reforms

The FP Bill proposed to require progressive rehabilitation and closure plans (PRC Plans) and progressive rehabilitation closure schedules (PRCP Schedules) to be developed for all mines as part of the initial site-specific EA application process. The content requirements for these documents were provided for in the FP Bill, and offence provisions containing significant penalties were created for failing to comply with the conditions of a PRCP Schedule.

Ultimately, over a three year period, existing mines would need to transition from their current EA rehabilitation conditions to a PRC Plan and PRCP Schedule. Plans of operations for mines would no longer be required under the FP Bill, however they would remain in place for petroleum leases.

Lapsing of the FP Bill: what happens next?

Originally, the reforms under the FP Bill were set to take effect from 1 July 2018, however that date was set prior to the FP Bill lapsing. If the current Government is re-elected, it is likely that the FP Bill will be re-introduced in its current form when Parliament is re-established, although whether the July 2018 commencement date would still be achievable is uncertain. On the other hand, if the current Government is not re-elected, the future of the FP Bill remains unknown.

Whilst any government would likely recognise the importance of ensuring that the cost of non-rehabilitated mines does not burden the State, it is difficult to know how high these reforms will be on the priority list of the newly elected government, and whether they will be re-drafted or left in their current form. One thing is for certain – the reforms to FA in Queensland are no longer so assured, and only time will tell the future of Queensland’s FA and rehabilitation frameworks.

Endnotes

1. See https://www.legislation.qld.gov.au/view/pdf/bill.first/bill-2017-046
2. See https://s3.treasury.qld.gov.au/files/review-of-queenslands-financial-assurance-framework.pdf
3. See https://s3.treasury.qld.gov.au/files/better-mine-rehabilitation-in-qld-discussion-paper.pdf
4. See https://s3.treasury.qld.gov.au/files/financial-assurance-framework-reform-discussion-paper.pdf
5. See https://s3.treasury.qld.gov.au/files/17-107_DNRM-Financial-Assurance-Review-Discussion-Paper_Draft-6.pdf and https://s3.treasury.qld.gov.au/files/17-103_DNRM-Better-Mine-Rehabilitation-Discussion-Paper-DRAFT-6.pdf
6. See https://s3.treasury.qld.gov.au/files/17-106_DNRM-Providing-Surety-Discussion-Paper-GREEN-DRAFT-6.pdf