On June 1, 2017 the Swedish Government decided to instruct an investigatory committee to analyze the potential actions or measures necessary to efficiently ensure that sufficient collateral security is in place in mining operations for remediation and other restorative measures. The investigation adopted the name the “The investigation into financing regarding mining waste” and was submitted to cabinet minister Karolina Skog in June 2018 (SOU 2018:59).

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:

Mining operations should not be given permission to be carried out unless adequate collateral security has been provided. The investigation committee concluded that the current system regarding required collateral security is not sufficiently clear and therefore has proposed the revision of how the required amount of collateral security is calculated. The committee suggest that:

The requirement for separate collateral security under the Minerals Act should be removed for companies that provide collateral security for mining operations. Based on current regulations there are no restrictions regarding the type of collateral security that is considered acceptable. The investigation does not present any examples wherein the form of collateral security has posed a problem in connection with a claim. However the investigation still considers that the uncertainty that exists regarding the form of collateral security considered acceptable poses problems for both operators and the State. For this reason the committee proposes that only two types of collateral security be accepted:

In today's system, the collateral security is tried by the Land and Environmental Court and examined in conjunction with the application for a mining permit in accordance with the Environmental Code. The investigation committee is of the opinion that this implies an excessively fragmented governmental responsibility. The Land and Environmental Court makes decisions regarding both the amount and form of the collateral security, the State is often being represented in these cases by the Swedish Environmental Protection Agency or any of the relevant County Administrative Boards, which lack specialist competence in the field. This, according to the investigation committee, weakens the State’s ability to protect its interests.

The investigation committee therefore propose that:

We at Foyen see a number of major challenges with the proposals made by the investigation into financing regarding mining waste remediation. The first concern being the intention to limit the possibilities concerning the lodging of collateral security, even though the investigation committee has been unable to conclude that alternative forms of collateral security, in addition to those currently proposed, have caused problems. Furthermore, we have serious concerns regarding the proposal that collateral security should include a 75% uncertainty surcharge. This will amount to significantly higher costs for the mining operators. Additionally, the calculation of collateral security is based on the assumption that an external party will perform the remediation, which does not reflect reality in many cases. The proposals made by the investigation committee may even create complications in the judicial examination procedure carried out in the court system.

Overall, the investigation has exaggerated, at the expense of the operator, a remediation situation that, even in the worst-case scenario, is unrealistic.

It remains to be seen where the investigation committee’s proposals will lead after a proposal for new legislation is referred to the Legislative Council for consideration which may ultimately lead to a new government bill. Whatever the outcome we will be following the next steps with interest.

Do you have questions about mines or mining activities, for example questions regarding permits, agreements or land access?

Email: Pia Pehrson, Partner/Advokat, Foyen Advokatfirma [email protected]

Email: Björn Eriksson, Associate, Foyen Advokatfirma [email protected]