Article by Bronwyn Parker
The National Environmental Management Act (NEMA) has undergone numerous amendments in the preceding years, with these amendments primarily focused on encompassing mining activities under the regulations of the Act. Many of the amendments consist of a transfer of certain provisions from the Mineral and Petroleum Resources Development Act (“MPRDA”) into NEMA, with the effect being the change of authority held by the Minister of Mineral Resources under the MPRDA now being enforced by the same Minister under NEMA. Section 24P of NEMA, The Financial Provisions for Remediation of Environmental Damage is one such provision. The objective of this provision is to necessitate the implementation and maintenance of a ‘financial provision’ for rehabilitation and remediation of environmental impacts resulting from the lifespan of a mining operation.
Section 24P was conveyed into NEMA under Act 62 of 2008 and become enforceable as part of the NEMA environmental authorisation process involving mining activities, as of the 1 September 2014. Until recently however, there has been no legislated guideline which regulates the reporting and calculation of these financial provisions. On the 20 November 2015, Regulations Pertaining to the Financial Provisions for Prospecting, Exploration, Mining or Production Operations were Gazetted to amongst numerous other obligations, assist with standardisation of the quantification criteria, review timeframes and contents of financial provisions.
The focus of this Article is on Section 24P of NEMA and the recent Regulations.
• Financial provision needs to be made for annual rehabilitation, final rehabilitation, decommissioning and closure, and latent or residual impacts;
• The provision must at ANY given time be equal to the sum of actual costs of implementing the annual rehabilitation, final rehabilitation and remediation costs for a period of 10 years forthwith;
• A trust fund may only be established to secure funds for remediation of latent or residual environmental impacts;
• Financial provisions for annual and final rehabilitation may only be secured by means of a financial guarantee or a deposit into an account held by the Minister;
• Specific formats for financial provisions, annual assessments and plans are set out in the Appendix to the Regulations;
• The Minister must be notified by the financial institution if the holder of the right intends to withdraw the financial guarantee;
• Compulsory for a review and assessment of financial provision to be undertaken by an external specialist;
• Interest earned on financial provision should accumulate and go towards the financial provision;
• Annual assessments must be audited by an independent auditor and include an environmental audit report as contemplated in the Environmental Impact Assessment Regulations 2014;
• The financial statement must include an amount for contingent liability and restricted cash flow associated with the financial provision;
• Timeframe restrictions are placed on annual assessments and non-compliance herewith is an offence;
• Environmental management audit reports contemplated in Section 24N of NEMA, submitted as part of annual assessment must be available to the public;
• The CEO and independent auditor are required to sign off all documentation to the Minister;
• A process with timeframes is now in place for acknowledgment of reports, plans and findings by the Minister;
• Care and Maintenance is now a recognised ‘status’ and holders can apply to the Minister to place the mine in care and maintenance for up to 5 years.
• Provision is made in the Regulations for holders to enter into payment agreements with the Minister should they be unable to meet assessed and increased financial provision obligations.
• Failure to comply with transitional arrangements review timeframes contravenes Section 24P of NEMA and is an offence punishable by fine or imprisonment.
• Banks or financial institutions intending to withdraw a financial guarantee approved prior to the coming into operation of these Regulations must comply with Regulation 8(3) – (6) in terms of notifying the Minister and obtaining approval for withdrawal.
• Non–compliance with the Regulations is an offence punishable by a fine up to R10 Million or imprisonment up to 10 years.
• Financial provisions calculated and implemented under Regulation 53 and 54 of the MPRDA Regulations are regarded as having been undertaken in terms of the provisions of these Regulations only if the actions can continue to be undertaken in terms of the provision of these new Regulations.
• Pending applications under the MPRDA Regulations must continue to be processed under the MPRDA Regulations as if these Regulations were not repealed.
• Existing financial provisions approved under the MPRDA Regulations must be reviewed an aligned with the new Regulations at the next annual assessment as described in Regulation 11(2) or within 15 months after coming into operation of these Regulations (by-February 2017).
Noteworthy Points in Appendixes
• The Deed of Trust is only an appropriate financial provision vehicle for latent and residual environmental liability.
• The Environmental Management Programme is now required to have a component which contains:-
i. an Annual Rehabilitation Plan, which must consist of:
o rehabilitation goals and outcomes;
o establish a plan, schedule and budget for a 12 month period; and
o an evaluation and updated cost for closure costs.
ii. A Final Rehabilitation, Decommissioning and Mine Closure Plan which must consist of:-
o A vision, objectives, targets for final rehabilitation, decommissioning and closure of project;
o Outline the design principles for closure;
o Explain the risk assessment methodology and outcomes;
o Detailed closure actions and mitigation of risks;
o Commitment to a schedule, budget, role and responsibilities for final rehabilitation, decommissioning and closure of each relevant activity;
o Identify knowledge gaps;
o Detail full closure costs for life of project;
o Outline monitoring, auditing and reporting requirements.
iii. An Environmental Risk Report which must:–
o Ensure timeous risk reduction;
o Identify and quantify the potential latent environmental risks related to post closure;
o Detail the approach for managing risk;
o Quantify potential liabilities; and
o Outline monitoring, auditing and reporting requirements.
• The contents of the Annual Rehabilitation Plan, the Final Rehabilitation, Decommissioning and Mine Closure Plan and Environmental Risk Assessment are subject to the same requirements for stakeholder review and auditing as the amendment to an Environmental Management Plan.
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