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23/03/16

WA Resources Update | March 2016

Welcome to the latest edition of the WA Resources Update, your regular newsletter about key developments for the Western Australian mining sector.


Roe 8 delay - the decision of Save Beeliar Wetlands v Jacob

Introduction

The Supreme Court’s decision of Save Beeliar Wetlands (Inc) v Jacob(Beeliar Wetlands) confirms that it is important for government to have regard to government policy when decisions are to be made, even where relevant legislation does not expressly require policy to be taken into account.

For private proponents, this means that any published government policy should be taken into account where proposals of any kind are designed and put to government. A failure to take government policy into account may result in delays to the approval of a proposal and further costs incurred in amending and resubmitting proposals that are contrary to published policy.

The Beeliar Wetlands case concerned a proposal by the Commissioner of Main Roads Western Australia (Main Roads) to extend Roe Highway (the Proposal). Third party applicants sought judicial review in the Supreme Court of Western Australia of the following two decisions:

(a) the decision of the Environmental Protection Authority (EPA) to provide a report to the Minister for the Environment (Minister) recommending that the Proposal be implemented subject to certain conditions; and

(b)   the decision of the Minister to allow the Proposal to be implemented subject to certain conditions.
 

On 16 December 2015, Chief Justice Martin found that the EPA’s decision was invalid as the EPA had failed to take into account its own published policies in making its decision.  Accordingly the Minister’s decision, which was made in reliance of the EPA’s decision, was also found to be invalid. These decisions were quashed and must be remade if the Roe 8 extension is to go ahead as envisaged in the Proposal.2

Background

EPA's policy statements

The Environmental Protection Act 1986 (WA) (the Act) provides for the EPA to prepare and publish environmental policies. Chief Justice Martin considered three policy statements3 which enunciated a policy relevant to the EPA’s and the Minister’s decisions (the Policy Statements). The Policy Statements set out the EPA's policy that there would be a presumption against recommending approval of a proposal where the environmental assets that would be affected are categorised as ‘critical’, and the residual adverse environmental impacts would be ‘significant’.4 

The Assessment Report

Following the referral of the Proposal by Main Roads,  the EPA conducted a detailed level of assessment before producing a report on its assessment to the Minister on 13 September 2015 (Assessment Report).

There was no reference made anywhere in the Assessment Report to the policy or the Policy Statements.5 Despite recognising that the residual impacts of implementing the Proposal would be significant (though failing to acknowledge that it would impact ‘critical’ assets), the EPA recommended that the Proposal be approved subject to certain conditions, including the provision of environmental offsets.6
 
On 2 July 2015, the Minister published his determination to allow the Proposal to be implemented subject to certain conditions.7

The decision

The applicants relied on three grounds of review in relation to the EPA’s decision and a further ground of review in relation to the Minister’s decision. The ground of review in relation to the Minister’s decision depended entirely on the proposition that the Minister’s decision was invalid as he relied on the invalid Assessment Report.8

Chief Justice Martin upheld the ground that the EPA failed to take into account a relevant consideration which it was obliged to take into account.

In considering this ground, his Honour found that the Act did not expressly require the EPA to consider its published policy statements. However, his Honour applied the accepted legal principle in Peko Wallsend9 that an obligation to take a policy into account can be derived by implication from the subject matter, scope and purpose of the Act.10

His Honour found that there was an implication that the EPA was obliged to take into account the Policy Statements. This implication derived from the general structure of the Act under which the EPA is responsible for developing administrative procedures, criteria and policies, and from the characteristics of the environmental impact assessment.11  Further, it derived from the fact that the consequences which would flow if the EPA was free to ignore its own published policies would seriously undermine the legislatives objectives of the Act.

Accordingly, as it was clear the EPA had not taken the policy into account, the EPA’s decision was found to be invalid, as was the Minister’s decision, which had been made in reliance on the Assessment Report. The other grounds of review were dismissed.

Consequences of the decision

This decision reaffirms that any proponent or person making submissions in relation to a proposal should, like the EPA, have regard to any EPA policies that may have bearing on the proposal. It also has broader implications; the obligation to take policy into account may be implied by other acts involving administrative decisions, such as the Mining Act 1978 (WA). The Mining Act does not have the same extensive provisions for the creation of policy as the Act, but the Department of Mines and Petroleum (DMP) has published guidance notes on its website that address the manner in which Departmental officers will exercise various delegated powers. Although the Minister for Mines and Petroleum has broad discretion in his or her decision making under the Mining Act, there may still be an implied obligation to take the published guidance notes into account when making any decision pursuant to powers conferred by the Mining Act. As such, when preparing any documents in relation to an administrative decision, it is prudent to consider any government policy, such as DMP guidance notes, that may be applicable.

 

Footnotes

1 [2015] WASC 482 (Beeliar Wetlands).
2 The Minister has appealed the judgment and the appeal will be heard and determined before any further assessment  of the Proposal by the EPA will take place, if necessary.
3 Environmental Offsets - Position Statement 9, published in January 2006; Guidance for the Assessment of Environmental Factors – Environmental Offsets – Biodiversity No 19’ published in September 2008; and Environmental Protection Bulletin No 1 – Environmental Offsets – Biodiversity’ published in September 2008.
4 Beeliar Wetlands [53] – [58].
5 Beeliar Wetlands [89].
6 Ibid [88], [91].
7 Ibid [104].
8 Beeliar Wetlands [105].
9 Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24, 39 – 40.
10 Beeliar Wetlands [151].
11 Ibid [184].

Rehabilitation liabilities - a big diamond mess!

By Claire Boyd and Emma McLeod

When the Mining Rehabilitation Fund was established in 2013, it was lauded as being a great thing for the mining industry.  Transition to the fund came at a time when capital markets were beginning to tighten and it presented an opportunity for much needed cash to be refunded to those who want to spend that money on the ground.  By early 2015, more than $1 billion in unconditional performance bonds had been returned to the mining industry and more than $33 million had been collected in levies for the Mining Rehabilitation Fund.

More recently, we have seen the first mine site in Western Australia being declared as an abandoned site for the purposes of the Mining Rehabilitation Fund and now, in light of the events regarding the Ellendale Diamond Mine (Ellendale), the consequences of that change in regulation are coming into question.

Background

By way of background, Ellendale is located on Mining Lease 4/372 and is accessed via an access road over Miscellaneous Licences 4/26 and 4/48.  These mining tenements were granted under theMining Act 1978 (WA) (Mining Act) to Kimberley Diamond Company NL (KDC), a subsidiary of Kimberley Diamonds Limited.

Recent events

Administration and appointment of liquidators

In July 2015, KDC appointed administrators and all mining activities at Ellendale ceased.  In August 2015, KDC’s creditors placed KDC into liquidation.  KDC’s assets were to be auctioned off by the appointed liquidator in September 2015, but no appropriate offers were received.1
  
Liquidator’s Notice of Disclaimer of Onerous Property

On 19 October 2015, KDC’s liquidators issued a ‘Notice of Disclaimer of Onerous Property’ under section 568A(1)(b) of the Corporations Act 2001 (Cth) and disclaimed any rights, interests and property held by KDC in the mining tenements.

This is the first time this provision has been used by a liquidator with respect to a WA mining project.  With respect to other mining projects in WA placed into liquidation, these have remained with the company in liquidation until a buyer had been found.2

Rehabilitation liability

It has been estimated that a rehabilitation liability of between $28 million and $40 million exists with respect to the Ellendale site.  It appears that KDC did not set aside funds for rehabilitation after it cashed out approximately $12 million in unconditional performance bonds in 2013 when it elected to contribute towards the Mining Rehabilitation Fund established under the Mining Rehabilitation Fund Act 2012 (WA) (MRF Act).  By comparison, and consistent with the requirements of the MRF Act, $818,826.40 was contributed to the Mining Rehabilitation Fund with respect to the Ellendale site.

On 4 December 2015, the CEO of the WA Department of Mines and Petroleum (DMP) declared the Ellendale site to be an abandoned site for the purposes of clause 9(1) of the MRF Act.3  Accordingly, the DMP is able to provide the funding to complete the on-ground works required to keep the site safe, stable and non-polluting.  The DMP has advised however that the site will not be fully rehabilitated and closed through the Mining Rehabilitation Fund as it remains a viable resource project.4

Phosphate Australia Limited’s (Phosphate) forfeiture application

On 21 October 2015, Phosphate (who controls the neighbouring Blina project) filed a forfeiture application over Mining Lease 4/372 for non-payment of fees and royalties.  This application fell between the date of the liquidator’s Notice of Disclaimer of Onerous Property and the expiry of the 14 day period for DMP to challenge the notice.  

If Phosphate is successful in its application, it will have a right in priority to apply for a mining tenement over the area of Mining Lease 4/372 free from the rehabilitation liabilities incurred by KDC.  This will prevent the DMP from finding a buyer for the site together with its rehabilitation liabilities.  

However, a file notation area is noted against the area of Mining Lease 4/372 providing that any application for a mining tenement made with respect to the area of Mining Lease 4/372 would be subject to the Minister’s powers under section 111A of the Mining Act and may be refused in the public interest.

What now?

A decision is still pending with respect to Phosphate’s forfeiture application.  

The DMP has also requested that the Mining Warden make a ruling as to whether the Ellendale mining tenements still exist – in other words, whether the disclaimer operates to extinguish the tenements themselves or just KDC’s interest in them.  A decision on this is yet to be made but will be vital in determining the DMP’s ability to prevent similar situations.5    

Given these provisions of the Corporations Act have not been used before in this context, it is unlikely that specific consideration was given to this scenario when the Mining Rehabilitation Fund was established.  In most cases it is likely that the value of the project will outweigh the obligations such that a liquidator will be able to find other options besides disclaiming the assets.  However, while these rights remain as currently provided for in the Corporations Act, the risk of this occurring again in the future continues. 

In the meantime, it is possible that the State will consider bringing back performance bonds in order to secure rehabilitation obligations for amounts which may be as high as 100% of the estimated rehabilitation cost with respect to the relevant tenement, given the Minister has retained the right to require such bonds under the Mining Act.  The DMP may even look to the model adopted in the Northern Territory where both securities equivalent to 100% of the cost of rehabilitation and an annual levy equivalent to 1% of the value of the environmental rehabilitation security must be provided. 

Another option for the State is to consider implementing new legislation like the Queensland Government is in the process of doing (i.e. imposing a chain of responsibility to ensure environmental obligations are complied with) in order to address concerns from recent events such as the difficulties at the Queensland Nickel Refinery.  

This will be an interesting space to watch and we will be keeping you informed as matters progress.

Footnotes

1 Nick Evans, ‘Bit-by-bit sale for Ellendale’, The West Australian, 3 September 2015.
2 Nick Evans, ‘Liquidators try to dump mine’, The West Australian, 21 October 2015.
3 Western Australia, Western Australian Government Gazette, No 181, 4 December 2015, page 4854.
4 Ellendale Information Sheet 1, Department of Mines and Petroleum Western Australia, December 2015.
5 Nick Evans, ‘Twist for Ellendale tenements’, The West Australian, 1 February 2016.

Where are they now? The passage of amendments to the Mining Act 1978 (WA)

By Claire Boyd and George Salter

The Mining Act 1978 (WA) (Mining Act) is enjoying a recent spate of publicity thanks to the passage of two amendment Bills.  Whilst both Bills seek to amend the Mining Act, their reception by various stakeholders in the mining industry has been vastly different.

The Mining Legislation Amendment Bill 2015, which proposes to  amend to the Mining Act, Mining Legislation Amendment Act 2014(WA), Environmental Protection Act 1986 (WA) and the Mining Rehabilitation Fund Act 2012 (WA) has been commented on extensively and has fallen foul of further red tape with its referral to the Standing Committee on Legislation in late February 2016.  Whilst the Bill, the product of four years of consultation with various stakeholders, has received widespread support from various industry groups including the Association of Mining and Exploration Companies, it has failed to win over small prospectors and leaseholders.  The findings of the Standing Committee on Legislation are due to be reported to Parliament by 10 May 2016.

Somewhat less controversially, the Licensing Provisions Amendment Bill 2015 is currently navigating its way through the Legislative Assembly.  This Bill contains various amendments which seek to remove out-dated and obsolete requirements in various Acts, including the Mining Act, in order to ease regulatory burden for business.  Amongst the proposed amendments to the Mining Act are the creation of a single point of contact for mining tenements as well as removal of the burdensome requirement to seek authorisation for the mining of iron ore.

The amendment to section 111 of the Mining Act provides that any prospecting licence, exploration licence, retention licence or mining lease granted on and after the commencement of the Licensing Provisions Amendment Act 2015 (WA) will not require the endorsement of the Minister prior to being permitted to prospect, explore or mine (as applicable) for iron ore.  This is a welcome removal of unnecessary regulatory red tape and, when viewed in parallel with the Mining Legislation Amendment Bill 2015 (WA), indicates a welcome intention on the part of the legislature to simplify and modernise the Mining Act.

Gilbert + Tobin will continue to track with interest the progression of these two Bills.  Keep an eye out for our further updates!

The implications for miners of unlocking the rangelands in Western Australia

By Claire Boyd and Samer Aljanabi  

Introducing Rangeland Leases and other reforms

On 22 January 2016, the Minister for Lands, the Honourable Terry Redman MLA announced the drafting of the Land Administration Amendment Bill 2016 (Bill).  The Bill will amend the Land Administration Act 1997 (WA) (LAA) and create a new form of land tenure known as the rangelands lease (Rangelands Lease). The draft Bill is expected to be released for comment in April 2016.

Rangelands Leases are designed to provide an alternative to the significant limitations on land use imposed on pastoral leases and therefore maximise the potential of WA’s vast rangelands by enabling multiple and varied land uses. This is intended to create new economic and social opportunities and enable the development of more sustainable business models for those rangelands.

Currently, pastoral lessees are restricted to using their pastoral leases for limited defined pastoral purposes, and certain additional purposes permitted by way of a diversification permit.  Under the LAA, “pastoral purposes” is limited to commercial grazing of livestock and agricultural, horticultural and other supplementary uses of land essential to, or normally carried out in conjunction with grazing of livestock.  

The Department of Lands has identified possible permitted uses for Rangelands Leases as including:

  • multiple uses such as grazing livestock, horticulture, agriculture and tourism;
  • Aboriginal economic development and land management;
  • activities of mining companies for environmental offsets, rehabilitation obligations or where their activities are substantially inconsistent with pastoral uses;
  • conservation purposes; and
  • rangelands use in conjunction with off-lease activities.

It has also been confirmed that Rangelands Leases will not confer exclusive possession and will be subject to a reservation in favour of Aboriginal persons allowing entry to seek sustenance in their accustomed manner, in terms similar to section 104 of the LAA which applies to pastoral leases.

Rangelands Leases are not intended to replace pastoral leases but will be available in addition to them, along with other existing forms of land tenure available under the LAA. Existing pastoral lessees will have a right (but not the obligation) to convert their lease to a Rangelands Lease.  As this is expected to trigger a future act process under the Native Title Act 1993 (Cth), it is uncertain whether many existing leaseholders will consider that path.

Other important changes to be included in this Bill are:

  • an increase in the term of pastoral leases to 50 years (subject to native title processes); and
  • an increase in the maximum area of lease holdings from 500,000 hectares to 1,500,000 hectares before the Minister for Lands must be satisfied that it is in the public interest. This will apply to pastoral leases and Rangeland Leases.

While we await the significant detail that will be set out in the Bill, there are some obvious implications for the mining industry that will arise from an increase in competing land uses.

Implications for miners

Increased and varied use of the rangelands in WA will necessarily mean more competition between the various land users and greater potential for conflict with mining activities.

It is intended that Rangelands Leases will be treated under the Mining Act 1978 (WA) (Mining Act) in the same way as pastoral leases.  This means rights of access to fossick, explore or mine on a mining tenement that overlaps a Rangelands Lease will be prevented in certain areas without the consent of the lessee.  These areas include areas under, or within 100 metres of areas under, crop and areas that are within 100m of any land in actual occupation or on which a house or other substantial building is erected.

Given the stated intention of this land tenure reform is to encourage investment opportunities and broader use of these lands, it can be expected that it will result in an increase in the areas impacted by these restrictions.

One other matter of particular concern for the mining industry has been the reference to Rangeland Leases being available for conservation purposes and whether that will create additional access problems for future exploration and mining. In response, the Government has said that this reform does not propose to change the Minister for Mines’ ability to grant tenements over land held under Rangeland Leases and that a lease applicant will need to acknowledge that mining activities on the land are possible.  That does not of course preclude a conservation party from objecting to the grant of the mining tenement, just as we see such objections from pastoralists currently.  

It seems clear that there will be an increased need for parties to consult and negotiate access to land as the occupation and diversity of use of these lands increases.

The Department of Lands has also flagged that one other consequential change will be the inclusion in the Mining Act of compensation to the lessee of a Rangelands Lease or a pastoral lease for mining activities which result in a requirement to surrender carbon credits under the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth).

There is a positive for the mining industry in these reforms. A significant proportion of pastoral leases are currently held by mining companies. Like all such lessees they are obliged to utilise those lands for the authorised “pastoral purposes”, which may not be their most suitable use.  With the alternative of the Rangelands Lease, companies may find a more appropriate form of land tenure for their purpose, one that would enable utilising areas that are not planned for mining for other more broader purposes, including conservation.

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