Mining rehabilitation security deposits

The Department of Planning and Environment requires mining companies to rehabilitate sites according to conditions set in the mining development approval. The Department holds mining rehabilitation security deposits that are meant to cover the full cost of rehabilitation if a mining company defaults on its rehabilitation obligations.

The total value of security deposits held has increased from $500 million in 2005 to around $2.2 billion in 2016, covering around 450 mine sites in New South Wales.

While there have been substantial increases in total deposits held, mine rehabilitation security deposits are still not likely to be sufficient to cover the full costs of each mine's rehabilitation in the event of a default, according to a report released today by NSW Acting Auditor-General, Ian Goodwin.

This is largely because:

• rates and allowances used to calculate deposits have not changed since 2013. The Department has circulated to industry a proposal to update the rates and allowances.
   
• deposit calculations do not cover, or cover adequately, some activities required for effective rehabilitation. The Department proposes to include additional items to better cover required rehabilitation tasks, although the current proposal would not fully address all the shortcomings of the existing method used to determine the required security deposit.

the Department also does not seek sufficient contingency from mining companies to cover uncertainties associated with unplanned closure.

Further, there is no financial assurance to cover unexpected environmental degradation in the long-term after a mine is deemed to be rehabilitated and the security deposit is returned. The Audit Office has recommended that the Department investigates ways to address this risk.

The Department should be able to access the security deposits it holds if required. To date, the Department has not been required to access a deposit for a state significant development mine.

Security deposits are an option of last resort. The Department uses other legislative and regulatory tools to promote rehabilitation before accessing a security deposit. It can direct the mining company to take action, issue fines, or the Minister can revoke a mining lease.

The Audit Office of NSW assessed whether the Department maintains adequate security deposits to cover liabilities associated with mine closures, including rehabilitation. This audit was undertaken almost entirely when the Department of Industry, Skills and Regional Development was responsible for administering security deposits. This responsibility was transferred to the Department of Planning and Environment on 1 April 2017.

Further information

Barry Underwood, Executive Officer, on 9275 7220 or 0403 073 664 and email barry.underwood@audit.nsw.gov.au.