May 24, 2019

NEMA Revised Financial Provisioning Regulations, 2019 released for public comment

On 17 May 2019 the Department of Environmental Affairs released Proposed Regulations Pertaining to Financial Provisioning for the Rehabilitation and Remediation of Environmental Damage Caused by Reconnaissance, Prospecting, Exploration, Mining or Production Operations, in terms of the National Environmental Management Act 107 OF 1998 ("Draft Regulations"), for public comment. Once finalised, they will replace the current Financial Provisioning Regulations, 2015 in their entirety.

The Draft Regulations seek to introduce several new aspects in respect of the financial provision which mining rights applicants and holders are required to make in respect of the cost of environmental remediation and rehabilitation of environmental damage. The purpose of such financial provision is to avoid the State becoming liable for such costs, and is an enactment of the 'polluter pays' principle.

Some of the more fundamental changes from the current position include the proposed introduction of the following:

  • Criminal sanctions for financial institutions who fail to properly notify the various ministries (being environmental affairs, mineral resources and treasury), and the holder of the mining right, of their intention to cancel or withdraw financial guarantees, or who fail to deposit funds within 21 days from the date of demand on such financial guarantees. The proposed sanction introduces strict liability, and a penalty of up to R10 million, or up to 10 years imprisonment, or both such fine and imprisonment.
  • An early warning notice process is introduced, and requires the Minister responsible for mineral resources ("Minister") to notify holders of mining rights and financial institutions prior to making a demand on a financial guarantee. This will allow rights holders (including liquidators or business rescue practitioners) to propose measures to remedy and rehabilitate to the Minister's satisfaction, in an attempt to avoid the Minister needing to call up the financial guarantees.
  • The use of financial guarantees for post-closure obligations to remediate and manage residual and latent impacts is introduced, with the proviso that there is an automatic call up of such guarantees on the issuing of a closure certificate.
  • An iterative and on-going rehabilitation focus is introduced, with allowance made for withdrawal of funds in respect of final rehabilitation, decommissioning and mine closure in limited circumstances. In addition, it is proposed that the cost for annual rehabilitation be provided for in the operation budget of applicants and holders of mining rights, rather than having to be included in the separate financial provision vehicles provided for (being the cash deposits, trusts, financial guarantees and closure rehabilitation companies, the latter having been introduced as proposed new vehicles).
  • Trust funds may once again be used as vehicles for financial provision for the final decommissioning and closure costs of mines. The current position, in terms of the 2015 Regulations, is that trust funds may only be used as financial provision for post-closure liabilities. An obligation to cede any funds in the trust to the Minister on the issuing of a closure certificate is also introduced.
  • A new template for the financial guarantee to be utilised during the life of the mine is introduced. However, no template wording is provided for guarantees relating to post-closure liabilities.
  • New minimum content plans and calculation methodology for the implementation of the various plans are introduced.

The Draft Regulations are available here. Written representations and objections must be submitted within 45 days of publication, and are due on or before 1 July 2019.