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The Bill - proposed changes to financial provisioning

Note: Reference to a holder of a right granted in terms of the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA) refers, among other things, to a range of mining, prospecting, exploration and production activities. For the sake of brevity, we refer only to mining activities in this alert, which includes primary processing activities.

The changes to NEMA which are proposed by the Bill include:

1. an amendment to the definition of "financial provision" to include reference to a holder of a right or permit in terms of the MPRDA (holder). This proposed amendment is important to clarify that NEMA applies to both new applicants and holders of environmental authorisations for mining activities since the OES came into force, as well as historical holders who have now transitioned to the NEMA system under the OES;

2. that financial provisioning to be set aside by applicants for environmental authorisations must be sufficient enough to cater for the costs associated with the "progressive" rehabilitation, "mitigation", "remediation", mine closure and the management of "post closure" environmental impacts of the mine;

3. new provisions will also provide that once environmental authorisations have been granted for mining activities, the holder (which includes MPRDA holders as per paragraph 1) must, on an annual basis:

  • comply with the financial provision that has been prescribed for that year;
  • undertake the rehabilitation measures that "are possible" to be undertaken in that year; and
  • assess the environmental liability and adjust (rather than increase, a welcome proposal) the financial provision accordingly.

In our view, the proposed amendments highlighted in paragraphs 2 and 3 seek to align NEMA with the Financial Provisioning Regulations, 2015 which require annual rehabilitation plans to be submitted to map out the holder's plans for progressive concurrent rehabilitation looking forward for each year of the operation.  These plans will be assessed annually to confirm compliance;

4. the requirement for a holder to submit an audit report to the Minister of Mineral Resources (MR Minister) on an annual basis will be relaxed to every three years. This is a welcome proposal that will need to flow through to the Financial Provisioning Regulations, 2015 which still refer to annual audits;

5. the requirement to maintain and retain financial provision will be amended to remain in force until a closure certificate is issued to the mining operation. This is also a welcome proposal given that NEMA currently provides that this obligation will remain despite the issuance of a closure certificate. Despite this change, further proposals provide that the MR Minister must retain the remaining balance of financial provision which is left for latent, residual or any other environmental impacts associated with the closed mine, in perpetuity (rather than for a prescribed period, as currently provided for in NEMA). This amount of financial provisioning will be required to be ceded to the MR Minister upon the issuing of a closure certificate.  These amendments will require amendments to both the Income Tax Act and the MPRDA.  Bills to amend these Acts have been referred to Parliament for consideration. We understand that these proposed amendments to NEMA will not be brought into effect until these Acts have been amended; and

6. once promulgated, only the Minister (and no longer an MEC in concurrence with the Minister) will be empowered to make the financial provision sections of the NEMA applicable to any other application in terms of NEMA. This provision is interesting because previously, only mining operations were expected to provide financial provision for rehabilitation. The Minister would, however, be well within her powers to promulgate additional financial provisioning regulations for the assessment and determination of environmental liability which pertain to industries other than mining.