The department holds security deposits for mining rehabilitation consistent with the amounts it has requested from mining companies, and it should be able to claim on a deposit if a mining company defaults on its rehabilitation obligations.
The total value of deposits has increased from $500 million in 2005 to around $2.2 billion in 2016, covering about 450 mine sites.
The department’s management of the security deposit process has improved in recent years, and it has well advanced plans for further improvement, including a revised cost calculation tool.
“The department’s policy is that each mine’s security deposit should cover the full costs of rehabilitation for that mine,” according to the Auditor-General’s report.
“The security deposits the department holds are not likely to be sufficient to cover the full costs of each mine’s rehabilitation in the event of a default.
“The rates and allowances in the current cost calculation tool have not been updated since 2013 and some activities required for effective rehabilitation are not covered, or not covered adequately.”
As part of the Mining Rehabilitation Security Deposits Report, which started last August, four recommendations were made regarding improvements to security deposit scheme processes, mine rehabilitation and closure plans, government oversight and the review of funding for potential future residual risk issues.
While the department only took responsibility for mine rehabilitation from department of Industry on April 1, some work addressing the recommendations is underway.
Environmental sustainability director David Blackmore said a number of measures had already been employed by the department to address the recommendations in the Auditor-General report.
“The report acknowledges that the department’s security deposit scheme processes have improved in recent years and that there are well-advanced plans for further improvement,” he said.
“For instance, in June we will be introducing an updated cost calculation tool that will assist in calculating the amount of security needed depending on the mine.
“In the last two years, the department in its systematic review of rehabilitation securities have raised this by almost $1 billion to $2.3 billion to ensure no liability is transferred at the end of mine life.
“Determining the exact security needed for a mine is not a simple equation but the new calculator will help.”
An Australia-first rehabilitation Geographic Information System will also be introduced by next March to help mining companies and department environment officers accurately record and track areas of disturbance and effectiveness of rehabilitation progress at each mining site in NSW.
“The rehabilitation GIS will be a very handy tool for government and industry alike,” Blackmore said.
“We are developing the best technology to ensure we can track rehab progress more thoroughly and quickly.
“To ensure the people of NSW are fully aware of the progressive rehabilitation underway, it will also be linked to an online portal accessible by the public.”
The NSW Minerals Council also welcomed the completion of the NSW Auditor General’s report into the mine rehabilitation bond framework.
The NSW mining industry participated in and contributed to the Auditor General’s inquiry. Now the report has been completed we will take time to examine the Auditor General’s findings and recommendations.
“We note the Auditor-General’s observation that ‘... the security deposits held by the department generally align with the approved rehabilitation cost estimate’,” the council said.
“This in contrast to the bond framework in Victoria and Queensland, where, the report identifies, ‘deposit amounts held fell below the calculated costs’.
“We also note the Auditor-General’s recommendation on the need to update the method of calculating mine rehabilitation costs. We are already working with the Department of Planning and Environment on their proposed new Rehabilitation Cost Estimate calculator that will soon be introduced to update the existing calculation method.”
Additionally, the NSW Minerals Council welcomes the Auditor-General’s observation that the entire mine rehabilitation framework was developed by the NSW Government with the goal of keeping the bond as a last line of defence.
Mine operators are required to meet and report on a host of regulatory obligations, including publishing regular updates of ongoing rehabilitation works. If these requirements are not met the operator can be prosecuted.
NSW Minerals Council CEO Stephen Galilee said since the introduction of the system 12 years ago there had not been a single incident of a major mine becoming insolvent in NSW, while over the same period the amount held in rehabilitation bonds has grown to well over $2 billion.
“We are committed to working within the best possible rehabilitation framework that delivers community confidence and world’s best practice rehabilitation outcomes,” he said.