News and developments
Proposal regarding mining waste could prove a costly business for mining operators
The Environmental Code contains general provisions regarding collateral security and guarantees concerning, for example, environmentally hazardous activities. The provisions also include remediation after mining operations wherein collateral security is provided to the State. To avoid that the State and, ultimately, taxpayers are forced to bear the cost of remediation in cases where a mining company, for example, goes bankrupt and the collateral security provided is insufficient to cover costs, the investigation has looked into alternative ways of providing collateral security that is more in line with the actual remediation (post-treatment) costs incurred by mining operations. In light of this, the investigation proposes that changes be made to the Environmental Code and the Minerals Act, and that a new law and associated regulations regarding financial collateral security for mining operations is introduced. The investigation has identified what it considered to be four key areas for reducing the State’s risk regarding remediation in mining operations.
The proposals made by the investigation committee can be summarized as follows:
Clarification of the purpose and objective of collateral security
According to the investigation committee the purpose of collateral security for remediation needs to be clarified. This recommendation has been made as, in the present preliminary work, it is stated that the purpose of collateral security is to minimize the risk of taxpayers bearing the cost of any potential remediation. The investigation also considers that the objective of providing collateral security is not sufficiently clear.
The committee therefore suggest that:
- The amount of security shall be calculated to adequately cover any expected costs of remediation with a comfortable margin,
- The requirements for remediation must be documented in a special post-treatment plan, wherein it is clearly stated what the post-treatment plan will achieve,
- The post-treatment plan must be tried in conjunction with the process for a mining permit according to the Environmental Code and revised at least every five years,
- The amount of collateral security should cover the cost of remediation in a situation wherein the operator is unable (for example due to bankruptcy) or unwilling to pay for post-treatment costs at a time until the next permit revision date. As it stands today, collateral security is usually set for the expected life time of the entire mining operation,
- The amount of collateral security should be revised every five years, there after a new amount of collateral security should be determined for the next five-year period,
- The operator must show that moraine of sufficient quality is available in the immediate area, if this is not the case the costs for soil improvement measures including transport must be considered and taken into account. According to the investigation this is due to the fact that it is assumed that high quality moraine is available in the immediate area when calculating the amount of collateral security needed,
- The calculation should include an “uncertainty surcharge” - the amount of collateral security should, with 75 per cent probability, cover the cost of remediation. It is proposed that any costs surplus to this will be passed on to the State,
- The calculation should take explicit account of future price and wage developments,
- Bank guarantees with standardized conditions as determined by the State,
- Collateral security in the form of a cash deposit
- Limitations on the amount and form of collateral security
- The Land and Environmental Court is relieved of the task of deciding on the amount of the collateral security and that this task is transferred to the Swedish National Debt Office who will act as the supervisory authority regarding collateral security concerning mining waste remediation,
- The review of post-treatment plans should be carried out by the Land and Environmental Court regarding renewing or amending permits for mining operations according to the Environmental Code and by the County Administrative Board regarding revisions.