Return of environmental bonds – the Mining Rehabilitation Fund

Pursuant to the Mining Act 1978 (WA) (Mining Act), tenement holders were historically required to post bonds (usually through their bank) to cover potential site rehabilitation costs (to cover their environmental obligations – see section 84 of the Mining Act).

As a result of perceived inadequacies and deficiencies in the current system, the Western Australian Government proposed a new system whereby tenement holders would pool their funds (levies) into a Fund.  The result is the Mining Rehabilitation Fund, established under the Mining Rehabilitation Fund Act 2012 (WA) (Act).

The stated purpose of the new Mining Rehabilitation Fund is to address the issue of having insufficient bonds to cover the State’s liability and to enhance the State’s ongoing capacity to manage and rehabilitate abandoned mines, leading to better environmental and community safety outcomes.¹

The new Mining Rehabilitation Fund system commenced on 1 July 2013. 

For the period 1 July 2013 – 30 June 2014, the Mining Rehabilitation Fund will operate on a voluntary opt-in basis. 

During the voluntary opt-in period, the tenement holder has the opportunity to notify the Department of any existing bonds it holds and that it wants those bonds returned on payment of the first levy notice of assessment. 

Yesterday, the Department on Mines and Petroleum released the attached fact sheet that clarified who would be eligible to participate in the voluntary opt in period and have their bonds returned.

That fact sheet states:

if the tenement holder or controlling business entity is currently under administration, listed in liquidation, has a notice of winding up application or order, is under deed of company arrangement or agreement, scheme of arrangement or deregistration they will be ineligible to have bonds retired during the voluntary opt in phase (emphasis added).

Effect on insolvency practitioners

The release of the fact sheet means that insolvency practitioners who are appointed as voluntary administrators, deed administrators, or liquidators will not be eligible to take steps to have the bonds paid by the company returned during the opt in period until at least 1 July 2014.

We understand that from 1 July 2014, participation in the Mining Rehabilitation Fund will be compulsory.

While the fact sheet does not clarify whether a company in receivership will be eligible to participate during the voluntary opt in period, it is our view that it is likely to be an oversight on behalf of the department and that the same rules will apply to receivers and managers (ie they will not be eligible).

Lavan Legal will continue to monitor developments with respect to the Act and the soon to be released Mining Rehabilitation Fund Regulations 2013 (WA).