October 2016

Mine closure – are we using the right drivers?

  • By Darren Murphy, Technical Director Asset Closure, Jacobs, and Joanne Heyes MAusIMM

Moving beyond environmental liability to achieve sustainable social and economic outcomes

Mining and resource projects are a temporary land use developed and operated under regulated tenure or licencing that must be relinquished once resource exploitation is complete. Generally relinquishment is regulated for safety, environmental protection and remediation of operational impacts. But under contemporary corporate social responsibility frameworks, many mining companies are now also seeking to understand how their contribution to local and regional communities can be sustained beyond the closure and relinquishment of their operations. This includes understanding their ability to close and relinquish operations, ensuring return on investment to shareholders and facilitating development of new projects.

While many mining companies aspire to reduce liability and reinforce their social licence to operate, very few mine sites have been relinquished in either Australia or other key mining regions around the globe (Butler and Bentel, 2011). Nevertheless, successful and sustainable mine closure can be achieved through commercial approaches to mine closure that take advantage of ongoing human and economic occupation (Harvey, 2016). Such successful transition to alternative land use is supported by case studies presented in the hallmark publication 101 Things to do with a Hole in the Ground (Pearman, 2009) as well as more recent examples such as Genex’s Kidston power generation projects in Queensland, which look to successfully transition the closed Kidston mine into hydro and solar power generation facilities.

Interestingly, few case studies of successful mine closure and relinquishment pertain to mine sites that have been closed by the operator (Butler and Bentel, 2011). Many of those mines for which a post-closure benefit has been extracted are abandoned mines, or mines that have gone into receivership, that are in proximity to urban and rural areas where there is a high demand for land (eg Gerner, Southward and Buckley, 2011; Larance, 2012). Such drivers are less evident for remote mining operations located within remote wilderness or rangeland areas.

While regulatory guidance (eg Western Australian Government, Department of Mines and Petroleum, 2015; Queensland Government, Department of Environment and Heritage Protection, 2014) and numerous literature contributions espouse the need to plan for and establish beneficial final land use, they tend to focus on site-specific technical and systematic assessment of existing or pre-mining land use. Furthermore, where such guidance calls for engagement of stakeholders, this is generally limited to those either impacted by closure or those who can influence closure from a regulatory perspective. Accordingly the focus on minimisation of liability and impact, rather than creation of economic opportunity, is perpetuated.

It is therefore apparent that if we are to successfully relinquish mine sites in Australia we need to take a different perspective on mine closure.

Regional development planning holds the key

In response to the challenges of population growth and associated economic sustainability, global governments are moving toward more structured and coordinated approaches to regional development. This includes drawing on the ability of communities to grow using their own human capital and innovative capacity (Tomaney, 2010), and to seek economic diversity through attraction of investment while facilitating the management of conflicting values and priorities such as land access and environmental protection.

The Australian Government’s ‘Regional Development Australia’ initiative is an example of such an approach, bringing together all levels of government to enhance regional development. Under this initiative, regional development strategies now exist for all regions where mining and mineral processing occur. In their review of these emerging regional development strategies across Australia, the Australian Bureau of Statistics (2013) found that these strategies generally respond to common issues such as:

  • diversification of industry base and associated skills to support diversification
  • population growth and demographic change
  • supply of infrastructure for key services such as transport, water, power and communication
  • conservation and environmental impact management.

Whilst many of the strategies seek to encourage future mineral resource development, or address potential land access conflicts between mining and other land uses, few identify potential future beneficial use of mine sites following the cessation of mining. However, we are seeing some progress, such as in the Hunter Valley where there has been some focus on return of post-mining land to grazing with a number of mining companies, such as Glencore, Rio Tinto and BHP Billiton, partnering in trials with the NSW Government (Huxtable, 2003). Furthermore, a community workshop held during the 2015 Upper Hunter Mining Dialogue community day in Muswellbrook identified an extensive range of possible post-mining land uses that could be considered, including hydroelectric energy, flood proofing and bushfire water storage and aquaculture. In Victoria, the government’s response to the Hazelwood Mine Fire Inquiry (Victorian Government, Department of Premier and Cabinet, 2016) may be one of the first regional mine rehabilitation strategies to consider long-term land use at the regional scale.

Legislation reform is required to facilitate land uses transition

While regional development strategies provide a framework under which mine closure might be guided, they do not provide the pathway by which we can transition from mining to a sequential land use.

In the Pilbara region of Western Australia, increased water demand from growth in resource development, particularly dust control at port operations and urban population growth, has challenged water allocation and supply within the region. Furthermore, opportunities for development of irrigated agriculture projects within the Pilbara and the adjacent Kimberley region are specifically being sought by the Western Australia Government’s ‘Water for Food’ program with potential funding through ‘Royalties for Regions’.

Paradoxically, these development aspirations are paralleled by water surplus from dewatering operations at mining operations within both regions. While irrigated agriculture projects using surplus mine water are being trialled by Rio Tinto and the state government, they are tied to operational licences for the mine granted under the Mining Act 1975 (WA) and Environmental Protection Act 1986 (WA). As such, they cannot continue beyond the life of the mine. Ironically, the Western Australia Government’s plans to encourage irrigated agriculture projects on pastoral leases has been similarly constrained by the state’s ability to repurpose land use created by the Land Administration Act 1997 (WA). To repurpose land, a proponent would effectively have to navigate both native title and environmental protection approvals as for a new project.

In response to the constraint on repurposing of pastoral land, the Western Australian Government has proposed the Land Administration Amendment Bill 2016, which will create a new lease type to allow for:

  • multiple uses – eg grazing livestock, horticulture, agriculture, tourism
  • Aboriginal economic development and land management
  • environmental offsets, rehabilitation obligations or activities that are substantially inconsistent with pastoral uses
  • conservation purposes
  • rangelands use in conjunction with off-lease activities
  • taking advantage of future opportunities that do not currently exist.

If successfully passed, the bill will provide, in addition to repurposing of pastoral land, a regulatory pathway to align mine and asset closure strategies with the regional development strategies. Specific opportunities may include:

  • use of rail infrastructure to support transport of agricultural goods and tourism
  • repurposing of water infrastructure, including pit lakes
  • reforming of disturbed land to support horticultural and irrigated agricultural land use
  • use of pit lakes to develop aquaculture.

Following the release of the federal government’s ‘Multiple Land Use Framework’ (Sinclair Knight Merz, 2012), a number of states are believed to be exploring the repurposing of land post-mining; but details of such considerations have yet to emerge.

We need to change our thinking on completion criteria

Even with legislative reform to facilitate the repurposing of land, there is still a requirement to demonstrate that the land is capable of supporting and sustaining the proposed post-mining land use.

Relinquishment is achieved through demonstration of achievement on closure completion criteria agreed with the primary regulator. Such completion criteria are generally established against key environmental and safety risks and address the potential liability to be ‘accepted’ by the relevant government authority. The inability to agree on appropriate completion criteria is often cited as one of, if not the main reason that few closure sites have achieved relinquishment (eg Butler and Bentel, 2011). Understandably, regulators are reluctant to accept such liability where the nature or extent of the liability is little understood or potential for latent impact may exist (eg acid and metalliferous drainage).

In a review of mine closure performance and monitoring requirement in North America, Smyth and Dearden (1998) suggest that completion criteria should and could be established against land productivity and land capability, in addition to ecosystem function. Examples of mine closure planning where completion criteria address non-environmental (ie ecosystem function) values are rare.

However, specific land use criteria do exist. Ironically, such criteria have been developed to identify and protect specific land uses where a conflict exists with the mining or extractive industry. Within Queensland, criteria for the classification of strategic cropping land (SCL) have been developed for land evaluation (Queensland Government, Department of Infrastructure, Local Government and Planning, 2013; Queensland Government, Department of Infrastructure, Local Government and Planning, 2015). In Western Australia, key land condition criteria for dryland and irrigated agriculture have been developed using the Western Australia Department of Agriculture ‘Land Evaluation Standards for Land Resource Mapping’ (Van Gool et al, 2005). More broadly, guidelines for making informed decisions on land use based on land survey and land resources are also provided by McKenzie et al (2008).

While the majority of land capability criteria and guidance material has been developed for the assessment of natural or degraded land, it should be possible to utilise such information to establish potential productivity and capability criteria for mined land. For example, within the Bowen Basin the creation of SCL from post-mining landforms could be included within a prioritised list of potential land use that aligns with strategic planning for the region. While potentially challenging, such aspiration could not be more difficult or challenging than rehabilitating mining disturbed to pre-existing conditions.

Innovative and novel commercial arrangements must be explored

Mining fundamentally alters the characteristics of the landscape, including geological structure, hydrology and ecological function. Even if an appropriate and achievable post-mining land can be identified and agreed with stakeholders, the expectation remains that no residual impact will exist and that the landscape will be returned to a safe and natural state. However, it is well understood by the mining industry that return of mined landscapes to a natural state, long-term residual impacts, and even the manifestation of latent impacts (ie acid and metalliferous drainage) are challenges common to many sites. It is likely that some form of active management of residual or latent impacts beyond monitoring is likely to be required within the short (ie less than 50 years) and long term (more than 50 years) for most mine closures.

Nevertheless, it may be possible for a mining company to make definitive arrangements for the ongoing management of the mine site in the long term (if not perpetually) and that such arrangements can be incorporated into standard land management practices supporting future land use. Such site management will invariably carry costs; therefore the management arrangements and financing must be sustainable and independent of the mining company. McKenzie (2016) presents examples of mine sites in Papua New Guinea (Ok Tedi) and Indonesia (Kelian and Minahasa Raya) where self-perpetuating funds have been established to buffer the exposure of the custodial authority and to align with future land uses by the local community.

An alternative potential pathway for a mining company to exit responsibly from a closed mine has also been proposed in Canada by Bocking and Fitzgerald (2012). This approach provides complete indemnity to the mining company and a financial assurance to the regulator. The ‘Environmental Liability Transfer Program’ involves the establishment and payment of funds to a special purpose company, which then uses the funds to assume the management responsibility for all aspects of the mine closure/post-closure obligations. The objective of the program is to achieve complete closure and to implement a post-closure plan that is funded either until relinquishment or in perpetuity.

While there are no case studies for successful transfer of environmental liability to date, the concept could be easily applied in partnership with capital market investment and aligned to longer-term regional development strategies to deliver economically and environmentally sustainable mine closure outcomes. Post-closure business ventures and land uses, such as irrigated agriculture, may well establish effective long-term solutions to residual environmental issues, such as poor water quality in pit lakes. Such partnerships and ventures could easily be underpinned by commercial instruments such as those presented by McKenzie (2016) and Bocking and Fitzgerald (2012).

We need to be prepared to wait for the best outcome

Within Australia, less than 25 per cent of mine closures occur under planned conditions (Laurence, 2006), with average operational mine life for a coal mine in the Bowen Basin (Wood Mackenzie, 2015) and the Hunter Valley (Booz and Company, 2009) being approximately 30 years. This timeframe is notably more than the implementation period for most regional development strategies, and is not much less than the 40 years used to measure intergenerational change (Australian Government, Treasury, 2015)

Within Australia, an ageing population with greater (and longer) participation in the workforce and greater productivity with continued economic growth is expected over the next 40 years (Australian Government, Treasury, 2015). While such change would appear supportive of the objectives and goals within regional development strategies, it is difficult to know how community sentiment and expectation will change over this period. Similarly, the life of those organisations with which mining companies may partner under commercial arrangements, many being government organisations, may be less than the expected mine life. The timing of a commitment to post-closure land use must therefore be carefully considered and not be made too early within the mine’s life. Nevertheless, the management and mitigation of key post-closure risks must still be considered within mine design and development activities.

We mustn’t throw the baby out with the bathwater

In addition to the uncertainty of achieving relinquishment obligations, the risk of sterilising future resource development is a potential constraint on mine closure and potential transition to a sequential land use (Sinclair Knight Merz, 2012). It is in fact common for many mines to cease production and be placed on care and maintenance, or decommissioned and rehabilitated, without intent for relinquishment. Such activity is generally driven by the knowledge that exploitation of the residual mineral resource is constrained by either technology or market conditions. Such assets are often held for extended periods of time in a closed or rehabilitated state or are sold to another company with better technology or who believes that they are able to exploit the resource more cost-effectively.

A fundamental assumption associated with resources sterilisation is that a specific area cannot be returned to a mining land use in the future. As with mining, the majority of land uses are temporary, and if facilitated by regional development strategies, there should be no reason why a temporary post-closure land use could not be adopted on the understanding that a return to mining would be facilitated when either technology or market conditions allowed. Such arrangement may even be supported by the continued use of infrastructure, utilities (ie water and power) and management of residual environmental impacts.

Furthermore, for those operations where no alternative productive land use can be identified or supported by relevant regional development strategies, and which a residual resource remains, it may be prudent to undertake minimal rehabilitation of the site to facilitate future development of the resource. Such rehabilitation must address environmental protection and community safety objectives, but may not necessarily require extensive final landform construction or revegetation. While this approach would challenge current regulatory expectations, such as progressive rehabilitation, it recognises the inherent mineral value of the resource and longer-term benefit to the community in maintaining access.

This raises a key terminology issue within the mining industry regarding the definition applied to the various states of mine activity. While closure is often used interchangeably with rehabilitation and relinquishment, these terms have potential different meanings and connotations, as does care and maintenance and abandonment. These terms may also interplay differently with the objectives of regional development strategies such that access to residual resources for future generations is maintained.

So how do we unleash the value in mine closure?There are a number of changes that mining companies could be making to their closure planning activities that could help to open up the value in what historically has been considered ‘closed’ sites.

Firstly, we need to broaden stakeholder engagement associated with mine closure planning to include potential partnering organisations. Inclusion of key regional planning organisations and key venture capital investment organisations within the stakeholder engagement process will draw out potential innovative ideas for the closure of mining assets and establish a foundation for future partnerships. Such engagement of these stakeholders could be undertaken on a regional basis and may not initially need to focus on a specific site or asset. It may be possible to establish regional ‘think tanks’ to draw out potential ideas that could be further explored through targeted discussions with investment organisations. Industry lobby groups such as the Minerals Council of Australia and state mineral councils, as well as regional groups (eg Queensland Rehabilitation Council) could play a key role in the establishment of such groups.

Secondly, we need to align completion and land use criteria to strategic regional development aspirations. This should not replace the establishment of existing criteria for environmental function, but include the establishment and alignment of productive and capability criteria for land uses aspired to within regional development plans. This similarly does not necessarily have to be a site-specific discussion, but can be a more general discussion between relevant parties within a region on what criteria must be met for specific land uses. Such criteria will also enable greater certainty in the engagement of commercial partners and allow mining companies to become far more confident in their closure planning activities.

Finally, we need to investigate and establish workable commercial liability transfer models. In all jurisdictions, successful relinquishment will be reliant on the establishment of commercial and liability transfer mechanisms that are self-funding and economically sustainable. Greater understanding of these models and how they work with regions is needed to enable potential partnering arrangements. It would be expected that such understanding would naturally flow from the preceding action of engaging a broader stakeholder group and understanding the potential productivity and value tied up in post-mining assets.  

References

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