Review of Environmental Performance Bonds in Western Australia

Abstract

The Western Australian government has initiated a review of the environmental performance bond system to consider the adequacy of current regulatory policies and processes. Environmental performance bonds or mining securities serve to protect a State from financial liability should a mineral tenement owner fail to comply with mine site rehabilitation requirements. The review will determine whether alternate financial instruments such as insurance could optimise flexibility for the minerals industry whilst maintaining acceptable levels of financial risk for the State and the Minister. This paper provides information about the existing financial assurance system used in Western Australia. It describes the review objectives and considers current regulatory policy. As of June 2006, Australian government agencies collectively administer around A$2.0 billion in mining securities. The Western Australian Department of Industry and Resources (DoIR) administer A$480 million in performance bonds and securities and regulate around 500 active mine sites. The amount of mining security held is estimated to be 25% of the total cost of rehabilitation. By contrast, the Queensland government administer around $785 million for approximately 100 mine sites. The Queensland government hold securities for around 50% of the total cost of rehabilitation. Other Australian jurisdictions hold securities representing 40-50% of the total cost of rehabilitation (Table 3). Western Australia regulate the majority of Australian mine sites yet the value of securities held for mine site rehabilitation is significantly less than those required in other States. The Western Australian government appears to be accepting a higher level of financial risk exposure than other States and Territories. The review will consider whether the current regulatory policy provides the State with adequate financial protection. A working group of industry, government and community representatives has been formed to provide recommendations to the Minister. The review is scheduled for completion in 2007.