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The Northern Myth

Sep 14, 2017

Mining in the NT – the Gunner government made a good start but …

There are a number of legacy mine sites which pose a risk to the environment and/or public safety. Most of these sites ceased operations before 2005 and predated the requirement for operators to lodge a rehabilitation security bond and have either inadequate or non existent securities. The estimated level of historical mining liabilities in the NT is $1 billion.

Yesterday I looked at the very welcome and largely unexpected announcement by Michael Gunner’s NT Labor government that it would release the security bond figures for the nine currently operating mines in the NT.

Late yesterday I posted those figures, noting—among other issues—that while the regulator’s view is that the outstanding mine security figures would be released upon demand from the public or media, that really was a job best done in due course by the department that is the custodian of the information.

By way of new developments, the Supreme Court appeal of the decision by the NT Civil and Administrative Tribunal to release the dollar value of the security bond for the mammoth McArthur River mine in the NT Gulf country, operated by Glencore, was—not unexpectedly—withdrawn.

And, while the Gunner government’s commitment to openness and transparency is welcome, there is much more to be done in the administration of the mining industry. It is trite to observe that mining is an essentially cyclical industry that can readily fall victim—or enjoy welcome and relatively unpredictable success—for reasons far beyond the control of a small jurisdiction like the NT.

These factors create tensions that require that governments have the will, and capacity, to regulate an industry that can talk a big game when times are good but fall very silent when commodity prices or exchange rates—to name just two external factors—fall through the floor. Regulating these boom and bust cycles presents substantial challenges for small administrations like the NT that require an efficient and transparent administration flexible enough to encourage and manage investment in the good times but also able to hold operators to account when mines go into care and maintenance or just go bust.

Recent history in the NT shows that NT mine regulators often struggle to get the balance between industry development and environmental management and social benefits quite right and this is perhaps most evident in the sorry story of legacy mines in the NT. These abandoned mines—often at one time or another strong contributors to the NT and local economies—are scattered around the NT and some are left with minimal care and maintenance and with wholly inadequate—or zero—financing or accountability for rehabilitation of their often highly toxic and dangerous sites.

The NT Department of Primary Industry and Resources has taken specific—if drastically underfunded—action in regard to a small number of the many legacy mine-sites in the NT and notes that there are:

… a number of legacy mine sites which pose a risk to the environment and/or public safety. Most of these sites ceased operations before 2005 and predated the requirement for operators to lodge a rehabilitation security bond and have either inadequate or non existent securities. The estimated level of historical mining liabilities in the NT is $1 billion.

Monitoring is underway at four sites across the NT and, while the department commenced work on an inventory of NT legacy mine-sites in 2014 that it has said would take 18 months to complete, that inventory does not yet appear to be publicly available.

Another issue of concern is the use of so-called “phoenix” companies to avoid—or minimise—liability for rehabilitation. Industry sources indicate that there have been several examples of companies acquiring selected rights to and around particular mine-sites, whether abandoned or in care and maintenance,  that appear unrelated to bringing the mine back into production or addressing rehabilitation issues.

Industry sources also point to the need for a review of the NT’s Mining Management Act, including the provisions that relate to security bonds.

The NT Environmental Defenders Office is critical of the strength of the overall regulatory regime for environmental protection in the Act, not least because it says that mining laws in the Northern Territory do not include principles of ecologically sustainable development, public participation in decision-making is very limited and it has concerns about the “fragmented” nature of environmental protections in the regulatory regime.

A related, and as yet not perhaps fully explored issue, is that of regulatory capture, where the problematic symbiotic web of relationships between the regulating department (and politicians and their staff) and mining and resource operators where the regulators are charged with both the promotion and regulation of an industry with power and influence perhaps disproportionate to their contribution to the economy.

Much has also been made of the failure by some mining companies—not least and most recently Glencore’s McArthur River mine operations—to contribute mining royalties to the NT economy. The NT is the only jurisdiction to operate a profits-based—as opposed to ad valorem—mining royalty regime.

Earlier this week NT treasurer Nicole Manison raised the issue again, telling the ABC that while:

… mining had made a significant contribution to the NT economy … that it was time to look at the benefits of the Territory’s profits-based royalty system. “I think it’s time we explore those options in discussion and in consultation with the mining sector,” she said. “It’s important that we do have a discussion to make sure we have the right taxation regimes in place to ensure that we encourage investment in the Northern Territory and economic growth and create further jobs in the Northern Territory.

Treasurer Manison is right, mining is a significant economic player in the NT, with treasury figures indicating that mining contributed $3.046 billion (gross value-added) or 12.9% to NT GVA in 2015-16. But treasury notes—and this is important in the context of a torpid economic outlook for the NT —that notwithstanding mining being the second largest contributor to NT Gross State Product (GSP) “it employed around 4.6% of the resident employment in the year to February 2017 as it is capital-intensive and a portion of its FIFO workers are residents of other jurisdictions.”

There may well be other mining-related issues warranting the attention of a Gunner government keen on lifting it’s game and preparing for the next mining boom with a more responsible and effective mining regime than currently applies. If you have any thoughts please post your comments—or send your tips—below.

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Photo: The abandoned Orlando copper and gold mine near Tennant Creek. Source: ABC NT

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