VAGO Rehabilitating Mines

By on July 28, 2021

Following is a series of comments from RON KERR, CMPA Honorary CEO. in response to the Victorian Auditor General’s Office (VAGO) report Rehabilitating Mines (1).

I, like many of those in our industry who hold or manage Work Authorities, am proud of the quarrying industry and undertake these responsibilities with great care. I feel that this report leaves our industry exposed to inferred benefit or high risk of contingent liability due to our regulator’s perceived poor performance. I do not accept this to be the case.

This report should also consider the 1999 report where the Auditor-General (2) made the same findings and used the same example of mine rehabilitation, and it is good to see that there has been no claim from the quarrying sector in that period. This can only be attributed to the close management of the risk by the department, an awareness within the industry of their obligations, and commercial opportunities presented to
quarries nearing the end of their life.

If we stay silent and accept reports provided by departmental officers without questioning and challenging, incorrect assumptions can be drawn by those signing off reports may lose their vigour to internally cross check and double check reports before being released.

Reviewing the VAGO report, I am concerned:

  1. Reporting has not been supported by a robust IT platform. The
    information stored in RRAMs is limited at best and cannot be
    relied upon. Tens of millions of dollars have been outlaid on this
    program over the last decade and by now information should
    have been accurately collated.
  2. About the damage occurring to the quarrying sector because
    of the report.
  3. That to ensure a better understanding of the issues, quarries
    and mines must be reported on separately.

Key Areas of Concern

The Audit Report contains deficiencies, inaccuracies, misleading
extrapolations, misstatements, and evident bias against the extractive industry. Some of the key concerns are that VAGO:

• Reported the so-called “bond moratorium” was not communicated to stakeholders when clearly it was.
• Failed to acknowledge that quarrying rehabilitation bonds increased by 40% between 2009 and 2019 (i.e. bonds held for the extractive sector on 30 June 2009 was $64.9 million and in 30 June 2019 was $91.9 million).
• Failed to acknowledge that the rehabilitation bond calculator increased the number of items and contingencies considerably between 2007 and the current iteration.
• Suggested ERR did not conduct any ongoing progressive rehabilitation compliance monitoring when clearly compliance auditing has occurred.
• Proposed that the State has a liability under the MR(SD)A for sites which do not yet hold approved Work Authorities where clearly no such liability exists • Failed to consider the Extractive Industries Development Act anywhere in its analysis, which would likely change its analysis of rehabilitation plan compliance for Work Authorities.
• Proposed that rehabilitation bonds which are less than $4,000/ha of total Work Authority area are inadequate when this amount applies to quarries with limited or no internal buffers (i.e. extraction limits).

Audit Snapshot

The observation is made that “the cost to restore the land MAY fall on the State”(3). It is critical to acknowledge the word “MAY” which has not been compensated for, recognised in or worked through anywhere within the report and should form the basis of any contingent liability assessment.

The auditor’s conclusion is that “DJPR is not effectively regulating operator’s compliance with their rehabilitation responsibilities”(4). The report identifies from the MRSDA that the “present risks to Victorians and the environment” however what the report has failed to do is to detail exactly what are the limits of risk to Victorians and the impact upon the environment for quarry sites which would be acceptable.

The reported systemic regulatory failures were summarised into five points:

  1. Using outdated costing estimates
    The current costing estimates are not aligned to the Victorian quarrying industry but built from other jurisdiction’s mining rehabilitation formulas, with Victoria’s current template now the most expansive in the land(5). It is noteworthy that there are some states without a quarrying rehabilitation bond requirement and Victoria has only had one failure in the quarrying sector which occurred 30 years ago.
    As always, the focus is on the much higher and different risk profile of mines. The first quarries, which opened in the 1830s and 1840s, were in the Fitzroy Gardens, Carlton and Clifton Hill. Obviously, these quarries have been rehabilitated. The formula is silent when recognising future opportunities presented from a debunked quarry site and does not clearly define if State access to private land would be guaranteed. Furthermore, it is impossible to tie down an estimate while variations and adjustments continue to be expanded within regulations and CoPs.
  2. Bonds are not being regularly reviewed
    If there is no systemic failure by way of claims upon the State, then the review process and management thereof need to be set appropriately considering likelihood. For the greatest benefit for the State and community, DJPR’s limited man-hours should be directed to known failures or non-compliances under their responsibility.
  3. Failure to assure that site rehabilitation had actually occurred . In quarrying, landowners must agree to the use of the land prior to a WA being granted. This is a commercial agreement, and therefore the primary and secondary responsibilities to ensure the site is safe, stable and sustainable should remain between these two parties as commercial compensation and benefits or opportunities has been set according to the agreed undertakings. The State’s responsibility and therefore exposure is limited. We are unaware of any claim ever upon DJPR for rehabilitation works to be undertaken following the cancellation of a quarrying Work Authority (WA). This is probably partly due to the s.82(2)(6) which requires consultation with both the landowner and LGA prior to release of a bond. However, we are aware that Field Reports and/or letters have been used to document landowner’s acceptance and satisfaction of the final rehabilitation during transfer of responsibility or WA closure. This would only be identified through careful inspection of the department’s physical records.
  4. Approving inadequately specified plans. Again, if there is no systemic failure by way of claims upon the State under s.83 (1) or enforcement proceedings under s.110 (1)(c)(7), then how is it an absolute fact that those approved have been inadequate? Furthermore, how was such an assessment possible when the Extractive Industries Development Act, which regulated quarries from 1966 until 2007(8) wasn’t considered in the analysis of information requirements for rehabilitation plans(9)? What is required is a specific rehabilitation plan that is practical and does not eliminate future access to resource due to cost of compliance or eliminate strategic future end use which may be of greater community benefit (i.e., public hospitals on former quarry sites). For example – mandating a final batter to be set at 1:3 creating a financially impractical liability, requiring the importation of significant amounts of fill or alternatively leaving significant resources behind. Given many natural features are less than 1:2, this is excessive.
  5. Lack of enforcement. More site visits and enforcement are absolutely agreed to as long it is untaken by qualified and industry-experienced inspectors.

Rehabilitation Liabilities – Rehabilitation bonds held by the State

ERR carried out this self-assessment. It was not the Auditor General’s findings, but our own department’s information that set the inferred liability of $831 million for the whole industry. Indeed, it is unclear how this self-assessment occurred – Were figures drawn from data within RRAMs under “Recommended Bond”? If so, this figure does not always match the “New Balance” as assessed. What it does highlight is that for every site, 32% is allocated to management and contingency costs (from about 10% in 2007). Since its release, the VAGO report has been used to discredit our
industry on numerous occasions including at planning panels and hearings, and local government business briefings.

My observation here, and it is the most critical point to take from this commentary, is that we do not have the reporting tools available clearly identifying if and what the current or future State liability is assessed specific to quarrying Work Authorities. To make a fair judgement, data needs to be set out in a format which underpins the sets out and links to the contingent liability. Quarrying Work Authorities need to be grouped and assessed against:

• WA status
○ i.e., Work Plan statutorily endorsed, WA approved but not commenced, WA never operational, no activity is occurring onsite (irregular or campaign use(10)), or Operational site.
• Land status
○ i.e., Crown land, privately owned land with limited depth, or privately owned land with unlimited title
• Controlling party
○ i.e. LGAs (collectively holding almost 100 WAs), other government agency (DWELP holding 20 WAs), publicly listed company, registered company or private entity.
○ This analysis could produce a subset of grouping controlling party as this significantly reduces the number of participants in the marketplace with the majority controlling more than one quarry.
• Processing method
○ i.e., Approved for drilling and blasting; Wet or dry processing; Method for winning material
• Linking annual returns to WAs
○ i.e., Are annual returns made (Yes/No), what those collective volumes are for each site
• Recognised bond be nominated.

Lack of Rehabilitation Bonds
The perception of the assumptions being drawn here are denigrating the quarrying industry. This may infer to an outside party that the sector is not being managed appropriately and is benefitting from that; and as such the public should not have trust in our regulator.
This has been self-inflicted by the officers reporting on behalf of DJPR.

There needs to be detailed analysis of the 38 quarries or mines which apparently are breaching the Act. That said, considering the data currently available on GeoVic there are only two currently active quarries without a bond nominated – one of which happens to be covered by its own Act.

Of the remaining 540 quarries or mines which do not have bonds, the requirement to provide documentation to prove a site is not operating (i.e., not granted a Work Authority) does not make any sense. We are concerned that this number includes quarrying Work Authority numbers representing applications, proposals or preproposals – this is in the order of 180 quarrying sites considering the data currently available on GeoVic.

Quarry applications can only apply for a Work Authority once they hold a Planning Permit, agree to meet all planning permit conditions, vary draft Work Plan, receive an approved Work Plan, negotiate initial bond and finally apply for a Work Authority(11). The author of the report should have ensured this was documented more clearly in Figure 1H: ERR’s roles of the report.

The State’s Contingent Liability

Our reading of this suggests quarrying is being tarred due to the activities of the mining sector. The volatility of $1.7 million to $29.8 million specifically attributed to the “state’s mining rehabilitation CL”(12). Is the final figure of $50 million inclusive of quarrying? Given Section 60(6)(d) does NOT apply to quarries, we query how any WA holder was assessed on their “likelihood of an operator defaulting on their rehabilitation obligations (financial standing and resource depletion)”.

When reviewing the State’s liability, one must accept the “present risk to Victorians and the environment” is the test. This is built from the “progressive restoration” and “reclamation” in 1966(13), to “safe and stable landform” in 1995(14), and more recently “sustainable” when incorporated within the MR(SD)A. I would strongly argue that during the working life of all quarries there is a sequential movement of risks whilst operating that are non-negotiable and with a quality inspectorate will be possible at all times.

  1. Safe: That our sites must always be safe to the public otherwise they should be being shut down by the regulator.
  2. Stable: The potential impact or risk to adjoining land, sensitive receptors, assets offsite (public and private) – and again a quarry should not be operating if this cannot be achieved.
  3. Sustainable: Highly hypothetical when trying to establish an end use which in an urban or growth area will have a totally different use to a rural setting.

Liability will continue to expand as the regulatory complexity expands. Many of the liabilities are either the landowner’s responsibility under other regulations or may be required to be retained by the landowner. For example: land management post closure of feral animals, weeds and pests; removal of access roads, hardstands and services; through to 1:3 batters.

The contingent liability for the quarrying sector should consider:
• The standards to which the site must comply to;
• The commercial arrangement between the landowner and quarry operator;
• How many sites controlled by a common entity and the leverage this gives to ensure compliance;
• Location of resource to its markets;
• Future land use opportunities; and
• ERR’s regulatory powers, from ongoing inspections through to enforcement tools such as s.110 (both current and former WA holders) or s.83.

Where to from here

DJPR should consider biennially carrying out a VAGO-style audit internally to ensure officers are well prepared for the 10-yearly VAGO audit.

A biennially Progressive Rehabilitation Report or similar audit tool may need to be developed by the CMPA for members using the Department’s existing audit as a template to provide a report being completed by the operator and supported with aerial evidence.
Within that report some of the questions may reflect on if a regulator had visited the site over the last 2 years, reviewed the work with respect to rehabilitation including expenditure outlaid and that projected to be outlaid to show progressive rehabilitation.

1 References to the report in the footnotes used this pdf version: https://www.audit.vic. gov.au/report/rehabilitating-mines

2 Restoration of Mining Sites, May 1999, available here: https://www.parliament.vic.gov. au/papers/govpub/VPARL1998-99No56.pdf (electronic pages 263 to 272)

3 Electronic page 6, Rehabilitating Mines, Victorian Auditor-General’s Report

4 ibid

5 Comment: Interestingly although the bond calculator in 2007 had 9 items against pits compared to 26 possibilities today, those that were there were substantially higher. For instance, in 2007 to “Batter top bench by blasting xxx meters; 5 meter face @ $10 p/m” where as in the current calculator “Drill and blast a vertical face to achieve a minimum batter angle of 33 degrees, where blasts < 3000 t, face height is typically < 10m” costs $4.72/m.

6 Electronic pages 218, Mineral Resources (Sustainable Development) Act 1990. References to the MR(SD)A in the footnotes used this pdf version: https:// content.legislation.vic.gov.au/sites/default/files/567a5e12-2087-387b-9ba1- b230fb8fe63e_90-92aa097%20authorised.pdf

7 Electronic pages 219 and 304, Mineral Resources (Sustainable Development) Act 1990

8 Extractive Industries Development Act 1995; here: https://www.legislation.vic.gov.au/ repealed-revoked/acts/extractive-industries-development-act-1995/034

9 Electronic page 55, Figure 3A, Rehabilitating Mines, Victorian Auditor-General’s Report

10 Comment – Although noted by DELWP on page 12 that such sites were unrehabilitated, previous land managers regularly directed that the contract crushing operator left the site so it could be readily re-opened should further works be undertaken usually for the benefit of their own land. The 1966 Act allowed for an Extractive Industries Land Reclamation Fund which facilitated such works (in 1983 there was $200k in this Fund – https://www. vgls.vic.gov.au/client/en_AU/search/asset/1145659/0 )

11 Section 77I(3)(b) a rehabilitation bond is entered into prior to the grant of a Work Authority after the approval of the Work Plan.

12 Electronic page 8, Rehabilitating Mines, Victorian Auditor-General’s Report

13 Extractive Industries Act 1966. Here: http://www.austlii.edu.au/au/legis/vic/hist_ act/eia1966266.pdf

14 Extractive Industries Development Act 1995. Here: https://content.legislation.vic.gov. au/sites/default/files/6e553537-60ca-32ce-b813-e1550661a1d4_95-67a001.pdf

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