Establishment and Management of Rehabilitation Bonds

By on April 12, 2008

DPI Response to the CMPA’s Concerns

In late 2007 the CMPA was asked to review and provide comment upon the draft guidelines ‘Establishment and Management of Rehabilitation Bonds for the Mining and Extractive Industries’ and Bond Calculator.

The following information covers the comments put forward by the CMPA and the associated responses from the Department of Primary Industries (in italic).

Rehabilitation Liability

Will the extractive industry be drawn into annual reporting on rehabilitation as mining is, and will we be forced to appoint an auditor?

Minerals & Petroleum Regulation Branch is not aware of any intention to have the extractive industries report annually on rehabilitation liability.

The CMPA has noted this point.

Management, Contingency & Monitoring Costs

The CMPA questions the need for all sites to include an additional 25% of estimations for management, contingency and monitoring costs, which at the current bond levels may be as high as $13 million.

The application of all the contingency fields in the bond calculator tool is not mandatory and has to be addressed on an as needs and case by case basis.

Neither the guideline nor the tables make this point clear. This requires some consideration.

Controlling Pest Animals and Plants

The requirement for rehabilitated sites to control pest animals and plants prior to the bond being released appears to an extension of the obligations of the Catchment and Land Protection Act, and the CMPA questions the right of the DPI to hold a financial security to ensure this obligation is met. That is, the return of the bond must be contained to the obligations set under the EIDA.

As you are aware, rehabilitation bonds are calculated in accordance with the requirements of the rehabilitation plan and conditions as specified under s.31 and s.33 of the EIDA. Similarly, any bond return is assessed against these rehabilitation requirements. The control of weeds and vermin should be read in the context of adequately achieving the rehabilitation with respect to the end use. For example, if the end use for a site is specified as pasture the Department would retain a portion of the bond until such time as pasture could be established. If no on-going effort is made to establish pasture or the area becomes weed infested it would be unreasonable for the Department to return the bond.

The CMPA accepts this point, however would like to see wording to this extent included within the guideline itself. In particular, the CMPA would like to see the text, “and pest plants and animals are controlled to an appropriate level”, removed.

Securities Held

The CMPA questions the DPI holding such substantial bonds in the extractive industry (presently $52 million for the extractive industry) when there is no guarantee the Minister will rehabilitate the land or the land owner will give the DPI access, especially with no evidence of risk (as per section 36 of the EIDA).

The guidelines and bond calculator tool have been developed to aid industry in the self assessment of rehabilitation bonds and do not specifically address the issue of the value of bonds that the Department currently holds or the application of s.36 of the Extractive Industries Development Act 1995 (EIDA). The Department is aware that the CMPA has concerns over its bond policy, however, it is outside the scope of this publication to fully explore those concerns.

The CMPA was simply raising the point and would appreciate this issue being give due consideration in the review of the EID Act.

Consultation with Private Land Owners

Private land owners need to be consulted when setting or reviewing the rehabilitation bond as they may require certain items left. This is not presently within the guideline or is it that the Crown is treated differently?

The consultation matrix outlines the Department’s statutory obligations to consult when setting, reviewing or returning bonds. The Department accepts that some private land owners may wish to be consulted regarding the setting and reviewing of bonds, however, there is no statutory requirement to do so at present. If the departmental officer undertaking the assessment is notified that the land owner wishes to be consulted, then this can occur.

The CMPA accepts this point, however would like to see wording to this extent included within the guideline itself.

Progressively Raising Rehabilitation Bonds

The guideline should more formally articulate that sites can progressively raise a rehabilitation bond as the liability changes, rather than being required to raise the total amount up-front.). Bond reviews nominating the future perceived liability disadvantage sites whose activity changes over a 10 year period.

The Department’s policy objective is that the bond is sufficient to cover any liability for rehabilitation at the site. In setting long review periods for some sites it is our intention to avoid unnecessary administrative burden for operators or wasted effort by the Department in carrying out assessments. If a long review period resulted inadvertently in disadvantage to the operator, this would not be a desirable outcome. An operator could address this problem by negotiating a shorter review period with the Department’s area manager or could request an unscheduled review providing an explanation as to why it was necessary. The implementation of a staged start up bond is also available where a new operation meets certain criteria and DPI considers it will not be exposed to significant liability. Progressive bond increase at the time of review (although not the Department’s preferred option) is used in exceptional circumstances where there is a genuine inability to pay.

The CMPA accepts this point, however would like to see wording to this extent included within the guideline itself.

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