“One Environmental System” state of readiness; Mine Closure Financial Provisioning Regulations

Environment, Forestry and Fisheries

14 February 2017
Chairperson: Mr P Mapulane (ANC)
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Meeting Summary

The Financial Provisioning Regulations which were published for implementation in November 2015, are to ensure that the state is not going to be liable for the rehabilitation of mines and to ensure that mining companies do a rehabilitation assessment every year. The Regulations make provision for the costs associated with the undertaking of the management, rehabilitation and remediation of environmental impacts from prospecting, exploration, mining or production during the operation of mines; decommissioning; and latent impacts manifesting post closure. The intention is to allow the financial provision sum related to latent defects to be ceded to the Department of Mineral Resources (DMR) to allow for closure of mines and wrapping up of boards and suchlike. The Mineral and Petroleum Resources Development Act (MPRDA) is to be amended to ensure alignment between the National Environmental Management Act (NEMA) and the MPRDA in terms of environmental liability. NEMA has unlimited liability but the MPRD Amendment Bill, currently in Parliament, will restrict liability to 20 years.

The Department of Environmental Affairs (DEA) spoke about its interaction with stakeholders and industry about their concerns subsequent to the Regulations coming into effect. To align the regulations to various Acts, interdepartmental meetings/workshops were held with DMR, the Department of Water and Sanitation, National Treasury and the South African Revenue Service.

The concerns of industry included management of residue deposits and stockpiles; financial provision vehicles; the content of the appendices; lack of clarity on transitional arrangements for timeframes. A meeting was held with industry and it was agreed that the concern about existing right holders to comply with the February 2017 timeframe must be addressed to allow government and the industry adequate time to deal with the complex and technical concerns. In October 2016 an amendment to the Financial Provisioning Regulations gave existing right holders another 24 months to comply with the Financial Provisioning Regulations. Other amendments are still a work in progress by government and industry. DEA aims to consult the public in March 2017 on the draft amendments and publish the final regulations by April 2017.

On the implementation of the “One Environmental System”, DEA explained it came into existence after the Ministers of Mineral Resources, Environmental Affairs and Water and Sanitation agreed it was not desirable to have different environmental management systems for mining and other activities.

The Ministers adopted an integrated mine environmental management system and sought to align the MPRDA, NEMA, National Environmental Management: Waste Act (NEMWA), National Environmental Management: Air Quality Act (NEMAQA) and the National Water Act (NWA). The agreement implied that environmental issues resulting from mining, prospecting, production and related activities would be regulated by NEMA, whilst the Minister of Mineral Resources would become a competent authority in terms of NEMA.

The Ministers established an Inter-Departmental Project Implementation Committee (IPIC) consisting of officials from the three departments. The initial task of the IPIC was to ensure all legislative amendments in the various pieces of legislation are undertaken and to ensure that the administrative processes are reviewed and aligned so that the Minister of Mineral Resources is provided with the necessary legal mandate to perform this function.

The Minister of Environmental Affairs is the appeal authority for all mining environmental impact assessments (EIAs). 32 appeals have been received for mine EIAs since the beginning of the financial year. Of the 18 appeals finalised so far, 9 were finalised outside of the prescribed timeframes. The remaining appeals are still at various stages of the administration process. Delays in receiving project files and comments on grounds for appeal from regions have meant that 50% of mine environmental appeals could not be finalised within the 90 day time period.

A challenge has been that the MPRD Amendment Bill of 2014 was, on 16 January 2015, referred back to Parliament by the President. The Bill is intended to give effect to the time periods (300 days) agreed upon and the triggers for the issuing of environmental authorisations and other rights, permits and licences, after the acceptance of the mining right. On 19 October 2016 the National Assembly approved and referred the MPRDA Bill to the National Council of Provinces and it is currently awaiting NCOP approval.

Members asked what the contentious issues are in finalising the MPRD Amendment Bill; why environmental authorisation licences are issued by the Mineral Resources Minister but appeals are done by the Environmental Affairs Minister; what the role of provincial governments is on mining matters; if the DMR has adequate capacity to deal with mining regulatory matters; what is being done about abandoned and ownerless mines. The comment was made that the Committee needs to have an engagement with the DMR because it was unfair for the DEA to respond about ownerless and abandoned mines.

Meeting report

One Environment System presentation
Mr Ishaam Abader, Deputy Director-General: Legal Services: DEA, informed the Committee that the Ministers of Mineral Resources and Environmental Affairs had concluded an agreement on the “One Environmental System for the country with respect to mining in approximately 2008. The Minister of Water and Sanitation was joined into the agreement in 2012. The Ministers adopted an integrated mine environmental management system and sought to align the MPRDA, NEMA, National Environmental Management: Waste Act (NEMWA), National Environmental Management: Air Quality Act (NEMAQA) and National Water Act (NWA). The agreement implied that environmental issues resulting from mining, prospecting, production and related activities would be regulated in terms of NEMA, whilst Minister of Mineral Resources would become a competent authority in terms of NEMA.

Key terms of the “One Environmental System are:
• Mining activities are subjected to an environmental authorisation process in terms of NEMA
• Minister of Environmental Affairs prescribes environmental legislative framework and is the appeal authority in mining-related environmental authorisations
• Minister of Mineral Resources is the competent authority for environmental authorisation and waste management licences under NEMA and NEMWA
• Minister of Mineral Resources appoints Environmental Mineral Resource Inspectors with all the powers of an environmental management inspector to enforce environmental laws as far as they relate to mining
• Minister of Water and Sanitation issues water use licences related to mining areas.

The Ministers established an Inter-Departmental Project Implementation Committee (IPIC) consisting of officials from the three departments. The initial task of the IPIC was to ensure all legislative amendments in the various pieces of legislation are undertaken and the administrative processes are reviewed and aligned to ensure that the Minister of Mineral Resources is provided with the necessary legal mandate to perform such a function. After 8 December 2014, the task of the IPIC was to monitor the effective and efficient implementation of the one environmental system. Where challenges are uncovered, the IPIC must resolve them. If not, they are escalated to the Directors General or Ministers Forum.

The IPIC is accountable to the three Ministers and has the following task teams comprising officials from the three departments:
• Appeals and Legislative Amendments – streamline Acts, regulations and appeals processes
• Enforcement – enforceability of legislation to ensure greater compliance
• Co-ordinated Timeframes – coordinate time frames and processes between the respective laws
• Capacity – ensure capacitation to ensure effective implementation
• Communication – tasked to develop a comprehensive communication strategy for the project.

The amendments to the Mineral and Petroleum Resources Development Act were passed in 2008 and it and the regulations necessary for the One Environmental System came into effect in 2014. The other legislation that gave effect to the One Environmental System were:
• National Environmental Management Amendment Act, 2008 (Act No. 62 of 2008) entered into force on 1 September 2014 and gives effect to the one environmental system
• National Environmental Laws Amendment Act, 2014 (Act No. 25 of 2014) commenced on 2 September 2014, and provides for further alignment to the one environmental system
• Environmental Impact Assessment Regulations and Listing Notices, 2014, published on 4 December 2014 and in effect from 8 December 2014.
• National Appeal Regulations, 2014, published and in effect from 8 December 2014.
• National Exemption Regulations, 2014, published and in effect from 8 December 2014.

The Minister of Environmental Affairs is the appeal authority in respect of all mining EIAs: 32 appeals have been received for mine EIAs since the beginning of the financial year. Of the 18 appeals finalised so far, 9 were finalised outside of the prescribed timeframes. The remaining appeals are still at various stages of the administration process. Delays in receiving project files and comments on grounds for appeal from regions have meant that 50% of mine environmental appeals could not be finalised within the 90 day time period.

A challenge has been that the MPRD Amendment Bill of 2014 was, on 16 January 2015, referred back to Parliament by the President. The Bill is intended to give effect to the time periods (300 days) agreed upon and the triggers for the issuing of environmental authorisations and other rights, permits and licences, after the acceptance of the mining right. On 19 October 2016 the National Assembly approved and referred the MPRDA Bill to the National Council of Provinces and it is currently awaiting NCOP approval.

The current Mineral and Petroleum Resources Development Regulations of 2004, published under the MPRDA are not yet amended. The amendments should remove all environmental provisions (Parts III and IV in Chapter 2), amend the appeal provisions (Chapter 3), and provide for alignment with the agreed timeframes of 300 days with respect to the consideration and issuing of a mining licence. The amendments to these regulations are not yet promulgated.

The Department of Water Affairs and Sanitation is also finalising the water use licence regulations to provide for the agreed timeframes of 300 days with respect to the consideration and issuing of a water use licence. The draft regulations were published for public comment on 12 February 2015 for a period of 60 days. The final regulations are not yet published for implementation.

The Financial Provisioning Regulations were published and have been in operation since 2015. Subsequently, industry raised several concerns. For the management of residue deposits and residue stockpiles, industry suggested that the management of residue deposits and stockpiles must be based on a risk-based approach rather than the requirements of the norms and standards. Secondly, the future regulation of the management of residue deposits and stockpiles must be under NEMA and not NEMWA. The Regulations are currently in the process of being amended to provide for a risk-based approach for the management of residue deposits and stockpiles.

Other concerns were the use of various vehicles for financial provision, the content of the appendices attached to the Regulations, and the lack of clarity on transitional arrangements for timeframes for the coming into force of the Financial Provisioning Regulations for holders already complying with the MPRDA provisions. A meeting was held with industry and it was agreed that the urgent concern about existing right holders to comply with the February 2017 timeframe must be addressed in order to allow government and the industry adequate time to deal with the complex and technical concerns.

On 26 October 2016 the Minister published an amendment to the Financial Provisioning Regulations which has the effect that existing right holders have another 24 months before they need to comply with the Financial Provisioning Regulations. The technical and complex amendments are a work in progress by government and industry. The Department’s intention is to consult the public during March 2017 on the draft amendments and to publish the final regulations for implementation by April 2017 in order to provide certainty to the industry.

Mr Abader concluded by summing up the process: the “One Environmental System” came into effect on 8 December 2014, and all environmental regulations required in terms of NEMA were published and are in operation. Processes are already underway to address the challenges in the Financial Provisioning Regulations and the regulations for the planning, management and control of mine residue stockpiles and deposits in mining areas. The Mineral and Petroleum Resources Development Amendment Bill and the amendments to the Mineral and Petroleum Resources Development Regulations of 2004 are not yet promulgated. The final water use licence regulations are not yet published for implementation.

Financial Provisioning Regulations presentation
Mr Alf Wills, Deputy Director-General: Environmental Advisory Services, DEA, took Members through the Financial Provisioning Regulations of 2015, citing their purpose, the concerns identified by and interactions with stakeholders about amendments to the Regulations.

The purpose of the Financial Provisioning Regulations is to ensure that the State would not be liable for the rehabilitation of mines. The Regulations make provision for:
- the costs associated with the undertaking of management, rehabilitation and remediation of environmental impacts from prospecting, exploration, mining or production during the operation of mine
- decommissioning
- latent impacts manifesting post closure.
The Regulations were published for implementation on 20 November 2015.

Mr Wills pointed out that subsequent to the Regulations coming into effect, the mining industry, through the Chamber of Mines engaged with DEA and Treasury about certain provisions which were not aligned to the Tax Act and concerns about the tax implications.

Other concerns raised, amongst others, related to:
- The intention of some provisions were not clear
- Double accounting due to the inclusion of the annual rehabilitation requirement in the financial provision to be set aside
- The cost of retaining funds for 10 years
- The “ultra vires” nature of the provision related to care and maintenance and closure/partial closure
- The restriction of the trust fund mechanism for financial provision
- The inclusion of the financial liability on the financial statement of the holder
- CEO responsibility
- Public access to the Environmental Management Programme (EMPR).

On the concerns to be considered after amendments to relevant Acts, he said the intention is to allow the financial provision sum related to latent defects to be ceded to the DMR to allow for closure of mines and wrapping up of boards, etc. NEMA and the Tax Act currently do not make provision for this and must be amended. The Mineral and Petroleum Resources Development Act (MPRDA) is to be amended to ensure alignment between NEMA and the MPRDA in terms of environmental liability. NEMA has unlimited liability. The MPRD Amendment Bill of 2014 restricts liability to 20 years.

Interaction with stakeholders and industry led to a series of engagements with the mining sector through Business Unity South Africa (BUSA) and the Chamber of Mines. To address their concerns and align the regulations to various Acts, interdepartmental meetings/workshops were held with DMR, Department of Water and Sanitation (DWS), National Treasury and the South African Revenue Service (SARS). An extension of two years for implementation for existing holders was published and came into effect on 26 October 2016. The clarification of certain issues, alignment, and discussion on additional amendments has been ongoing during the extended industry consultation. A final stakeholder meeting was held on 10 February 2017 after which an amended version of the regulations will be gazetted for public comment.

In his conclusion, he said a final industry meeting would be held on a date to be announced to discuss the following remaining items:
- Calculation of the sum for financial provision
- Potential misalignment of future risks with financial auditing standards
- Proportionality of escalation for premature closure
- VAT to be included or not in the Financial Provision
- Approval of plans – versus approval of the financial provision and by implication the approval of plans
- Clarity on the content of EMPR versus the financial provision plans.

Discussion
Mr T Hadebe (DA) wanted to know what the contentious issues are in finalising the MPRD Amendment Bill. He asked if the 10 February stakeholder meeting has been finalised.

Ms Nosipho Ngcaba, DEA Director-General, replied there were several challenges with the MPRD Amendment Bill. She said they first thought it was going to be easy to separate the issues. Some of the issues were dealt with but others could not be separated. They believe that once the NCOP finalises its work on the Bill, the Bill would be passed.

Mr Wills replied about the 10 February stakeholder meeting, saying that companies realised that they had to comply and started bringing up these concerns. The industry did not raise the issues as contentious. There are technical issues that the government does not agree with the industry on, especially on mine closing matters. The liability for rehabilitation must not be transferred to the state for latent defects without financial provision.

Mr R Purdon (DA) asked why environmental authorisation licences are issued by the Mineral Resources Minister but the appeals are done by the Environmental Affairs Minister. He asked who monitors the Mineral Resources Inspectors, and what the role of provincial governments is on mining matters.

On environmental authorisations, the Director-General pointed out that the process started long ago around 1995. The mandate was not in the rightful department. It was agreed later that the DMR Minister should do the authorisations and that the appeals should be done by the DEA Minister. This is something that was discussed at length then and agreed upon. With regard to the inspectors, she said the capacitation is done by the DMR in terms of EIA regulations. Sometimes joint inspections are done by both departments. The DMR Minister is responsible for the inspections and there is a process in the Act that deals with inspection matters.

On the role of provincial governments, Mr Wills explained that mining and exploration are national competence. But other activities like infrastructure development are provincial competences. The provinces and local municipalities participate in the EIA matters because they are commenting authorities.

Ms H Kekana (ANC) asked if the DMR has adequate capacity to deal with regulatory matters in mining.

The Director General replied that inadequate capacity is being upgraded by the DMR in both the inspectorate and EIAs. The most important focus is to ensure the protection of the environment.

Mr S Makhubele (ANC) asked what is being done about abandoned and ownerless mines. He asked if the IPIC Task Teams are achieving what they have been set up to do.

On ownerless mines, the Director-General explained that the law does not apply retrospectively. Generally, she said the issues that needed clarification are a new area. The Department is responding to ensure there are no derelict and ownerless mines. In the process, there must be negotiations and there have been court cases along the way. Concerns will continue to arise and the Department will continue to engage with stakeholders.

Mr Abader added that an audit has been done by the Council for GeoScience on ownerless and derelict mines but the DMR would be better placed to provide an answer. On the matters that needed clarification, they have consulted with the industry, SARS and Treasury, especially when you start implementing the legislation. The Department has applied its mind to the conceptualisation of these issues. With regard to the IPIC Task Teams, the three DDGs responsible meet regularly because they are in the process of implementation. The IPIC Task Teams would not be dissolved now until it has finalised its work. The purpose of the legislation is to ensure the mines do the rehabilitation assessment every year.

The Chairperson remarked that the Committee needs to have an engagement with DMR and it was unfair for the DEA to respond about ownerless and abandoned mines. The DMR is responsible for the rehabilitation of these mines as it has rehabilitation funds which have now been transferred from Standard Bank to another bank. The DMR further has to account to the Committee on how it deals with the matter of protecting the sustainability of the environment. He proposed that the Committee engages with DMR on mining and environment sustainability. He agrees that mining grows the economy, but the mining companies have the responsibility to do things the right way.

The meeting was adjourned.

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