Progress on Rehabilitation Bond Model

DR ELIZABETH GIBSON, General Manager of the CMPA provides an update on the Rehabilitation Bond Model.

A sub group of the Earth resources reform Steering Committee DSDBI/industry representatives), the rehabilitation Bond Working Group – Extractive and Minerals Industry has been formed. CMPA would have preferred that the Group separated out mines from extractives due to the mines higher risk profile. CMPA industry representatives are Dr Elizabeth Gibson and Mark Wagner (Conundrum Holdings). the Working Group resolved to engage a consultant to develop and model a practical application based on a “two-track bond model” (predefined liability proportion bond model). the project objective is the preparation and delivery of an independent report to:

a. Develop a rehabilitation bond model based on the KPMG (2011) guiding principles that provides efficiency and clarity to industry whilst also meeting Government’s statutory requirements and policy commitments;

b. Undertake a further analysis of the “predefined liability proportion model” (two-track bond model) and its applicability and workability under the current regulatory regime and identify if/what modifications are required.

c. Detail specific aspects of the bond model including (but not limited to):

• Eligibility criteria with consideration to the differing industry sectors;
• Transitional arrangements (from other bond mechanisms such as initial or start up bond discounts);
• Administrative requirements and potential for cost recovery;
• Options for a bond instrument;
• Where companies have more than one operation, the potential for company-wide bonds; and
• Compatibility and consistency with the Government’s commitment to the EDIC recommendations.

d. recommend any further reform options not limited by the existing legislative requirements such as:

• Relevance of Local Council referral under section80 and 82 of Mineral resources (Sustainable Development) Act 1990;
• Improved return of bond mechanisms.

The successful consultancy was Accent Environmental (AE). AE have been meeting with operators to gain an understanding of the industry and how the current rehabilitation bond system works.

A consultation workshop was held in June 2014 where the draft “two-track bond model” was outlined. In essence where a Work Authority holder meets certain performance criteria, e.g. progressive rehabilitation, they will be eligible for a reduced bond: 50% in the first 5 years and then 25% up to the last two years prior to closure/rehabilitation. Whilst this may seem beneficial to members, there are a number of fundamental flaws that need to be resolved:

1. The current bond formula is flawed and needs to be revised before any model is implemented.
2. The legislative risk to the Minister should be removed where there is a commercial contract between the operator and a private landowner such as in Western Australia.
3. The complexity of having to arrange bank guarantees with the requirement that two are initially held: one for 100% of the bond and one for the reduced bond before the 100% bond is returned.
4. Consideration should be given for a larger discount (than 25%) in order to make it more attractive to the operator.
5. Due to the much lower risk profile of quarries, mines and quarries should be separated.
6. The requirements as currently written for the “two track model” are so onerous and costly, very few quarries would meet the eligibility criteria.

Currently, AE is running trials for the two-track bond model with actual sites. However, it will be some time before the model is ready to be implemented. CMPA will continue to work with Government to ensure the developed model adequately reflects the risk profile of the extractive industry.

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