Increased Fees for Extractive Industry

By on March 31, 2017

DR ELIZABETH GIBSON, General Manager of CMPA reports on further cost recovery for ERR.

The CMPA received a letter dated 3 March 2017 from Earth Resources Policy and Programs (DEDJTR) concerning further cost recovery for the Earth Resources Regulation Branch (ERR). The following is an extract from the main body of the letter:

“The Victorian Government has contributed $7.7 million over four years to fully fund improvements to the Earth Resources Regulation function, under the Modernising Earth Resources Management MERM) initiative. The overall purpose of the initiative is to strengthen the Department’s Earth Resources Regulation Branch, particularly its regulatory and compliance capability, stakeholder engagement and leadership. In doing so, the initiative is expected to build and maintain public confidence in the regulation of the sector’s operations.

The balance of the cost is to be recovered from operators in the sector via regulatory fees, in accordance with the established cost recovery guidelines published by the Department of Treasury and Finance. The costs attributable to the sector are $540,000 in 2017-18, $863,000 in 2018-19 and 2019-20., and thereafter $650,000 per year ongoing. The relevant Regulations will be amended accordingly, effective on 1 July 2017.

The distribution of the 2017-18 to 2019-20 costs attributable to sector operators in the sector via the existing fee structure is subject to consultation. The recovery of the ongoing costs beyond 2019-20 will be subject of future consultation as part of the remaking of the Regulations, and related cost recovery review, in 2018/19.

The Department has identified four options to amend the regulatory fees at various rates across six broad fee categories:

  1. Mineral licensing
  2. Extractive industry work authority fees
  3. Annual mineral licence rents
  4. Extractive work authority industry annual fees
  5. Mine stability levy applied to coal mines
  6. Work plan lodgement and work plan variation fees

The Department’s preferred option is to increase all minerals and extractives fees, excluding the mine stability levy, by a uniform percentage, given that the improvements in the regulator’s capability will benefit all minerals and extractive operations. Approximately 95 per cent of the regulatory and compliance activities undertaken by Earth Resources Regulation Branch are attributable to minerals and extractives operations. It is not proposed that the increase be recovered through the mine stability levy applied to coal mines, as the broader issues for coal mines are addressed via other specific initiatives and costs. Adopting this approach would result in fee increases of approximately 11 per cent in 2017/18 and 17.7 per cent in 208/19 and 2019/20.”

CMPA’s comments

The CMPA is extremely disappointed at the requirement for additional cost recovery for improvements (that have not yet materialised for the extractive industry) into a more effective, through reduction in red tape, efficient and practicable regulator. The lack of performance improvement is evidenced by the small number of and length of time taken for Work Authorities approved with no large approvals having occurred in recent times.

For example, reference is made to CMPA’s submission made on 24 April 2014 and the Regulatory Impact Statement (RIS) on the introduction of cost recovery that resulted in new fees and fee increases. In the RIS, Table 3.8, p.13 estimations are made that there will be 51 applications per annum for a new Work Plan including three with an environment effects statement. Additionally, there are estimated to be 96 applications to vary a Work Plan per annum. A note of caution should be given to Earth Resources Regulation that these targets are not being achieved further impacting the budget.

It is noted through the tone of the letter that CMPA has no say in the cost recovery, only in the manner in which it is undertaken. The CMPA is still developing a response and will provide a full submission in the next issue of Sand & Stone.

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