On 2 February 2021, President Kingham made orders reducing a mining company’s estimated rehabilitation cost (ERC) by $46 million, after determining that the Department of Environment and Science (DES) ERC calculator is not binding.
Snapshot
- A mining company successfully lowered their ERC from $230,465,718 to $173,271,205.71 with the benefit of a joint expert report.
- The Land Court of Queensland has confirmed that the ERC calculator is not binding because to do so would remove DES’ discretion as the decision-maker.
- On balance in this appeal as the decision-maker, President Kingham preferred the unanimous expert assessment on the best method on the subject mine over the ERC calculator assumptions.
Background of the appeal
In Century Mining Limited v Department of Environment and Science [2021] QLC 3, DES decided the amount of the ERC for a mining company’s activity was $230,465,718, a decision it confirmed after internal review, and the mining company appealed the review decision to the Land Court contending that the ERC should be $173,271,205.71.
During the pre-hearing steps, a number of issues were resolved and only two key issues remained in respect of rock dump and tailings storage facility design and the process to calculate the ERC. The lowered ERC amount was ultimately agreed between the parties on the basis that the design requirements were met in a joint expert report.
What is the ERC?
On 1 April 2019, amending legislation commenced that gave effect to significant reforms to the financial assurance regime in Queensland, which will require most operators to make ongoing and regular contributions to a pooled fund scheme, to be administered by the Scheme Manager. All existing financial assurance was deemed to be ERC and mining companies have been transitioning into obtaining formal ERC decisions and obtaining risk category allocation decisions from the Scheme Manager that together determine how a mining company will provide financial security for their operations.
How is the ERC calculated?
DES has published an ERC Guideline which provides guidance for calculating ERC under the Environmental Protection Act 1994 (Qld) (EP Act) including the creation of the ERC calculator. The ERC Guideline states, ‘All EA holders must use the most recent version of the department’s ERC calculator to calculate their ERC, unless the method or rate to estimate ERC is prescribed in an ERA standard’.
The ERC calculator does assist operators with calculating their ERC but there can be difficult assumptions in the ERC calculator that lead to significantly different end results, as was the case here in respect of capping design for the waste rock dumps and tailing storage facilities.
How did the Court calculate the ERC?
President Kingham held in making the ERC decision that as the decision-maker, the unanimous expert assessment on the best method to prevent seepage of the material contained in the waste rock dumps and tailing storage facilities was preferred over a default assumption in the ERC calculator about capping design.
President Kingham also held that there is no statement in the ERC Guideline to suggest that DES as the ordinary decision-maker must only use the ERC calculator because to so bind DES would remove any discretion as a decision-maker.
What does this mean for other operators?
Every ERC application and decision requires technical analysis that can be assisted by the ERC calculator, but the end result need not be determined by the ERC calculator alone. Operators should strategically consider the supporting technical information that can be provided to DES to ensure an accurate ERC is calculated, particularly in circumstances where assumptions contained in the ERC calculator do not result in a true ERC calculation for the operation.
We have assisted several operators in this space. If you would like to discuss your company’s ERC decisions and risk category allocation decisions, we would be happy to assist.
By Madeline Simpson, Special Counsel and Michael Bidwell, Solicitor
Disclaimer
The articles published on this website, current at the dates of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.