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Brief Counsel

The Government’s mining package – where to from here?

31 March 2010

Media coverage of the discussion document on developing New Zealand’s mineral potential predictably focused on the proposal to open up parts of the conservation estate to mining.  But there is much more to the package than that, and it is important that the issues be debated calmly with a view to finding a balanced solution which reconciles environmental and economic values.

This Brief Counsel comments on the Government’s proposals and raises some questions for consideration in the submission process.

Submissions close on 4 May 2010

Proposals in brief

  • To open up more of the conservation estate to mining by removing specified areas from Schedule 4 of the Crown Minerals Act 1991 (CMA).  Applications for minerals-related activity on this land would then need to be considered on a case by case basis (with land access and resource consent considerations still applying). 

  • To bring new areas of conservation value into Schedule 4.  In all, some 7,000 hectares would be removed and about 12,400 hectares added – a net addition of 5,342 hectares.

  • To undertake further scientific and technical, minimum impact investigations (comprising techniques such as airborne geophysical exploration, mapping and hand-held sampling) in both the North and South Islands over the next nine months to determine whether more areas should be removed from Schedule 4.

  • To require that the approval of both the Minister of Energy and Resources and the Minister of Conservation be required in future to access minerals on Crown land.

  • To introduce a nationwide standard operating procedure for access to land, including standardised application forms, specified fees and indicative timelines for processing different types of applications.  (A review by the Department of Conservation (DOC) will also be continued, with a specific focus on streamlining the decision-making process, increasing transparency and reducing compliance costs).

  • To direct 50% of royalty revenue from mining on DOC land to the establishment of a contestable conservation fund. 

Chapman Tripp comment

In our view, the Government’s decision to consult on the package is both prudent and judicious - prudent, because New Zealand desperately needs to generate more wealth, judicious, because the Government is treading carefully:

  • it has identified only a small amount of land for release from Schedule 4 at this stage (much smaller than originally proposed)

  • further areas will be released only if justified after further, careful geological assessment

  • there will be opportunity in the submissions process and through the select committee to refine the proposals, and

  • existing provisions to control and to mitigate the environmental effects of mining will be retained.

Current protections and controls

A permit under the CMA is needed to prospect, explore or mine for minerals or petroleum in New Zealand, except for privately-held minerals.  Applications are processed by Crown Minerals, the division of the Ministry of Economic Development (MED) that administers the CMA.

The permit does not confer any right of access to the land area involved.  For this, the permit holder needs to negotiate an access agreement with the landowner and/or occupier.  Default arbitration procedures apply in the event that the negotiations fail.

Land listed in Schedule 4 cannot be opened to mining except in very limited circumstances (such as gold fossicking and demonstrations of historic mining methods).  But parts of the conservation estate outside Schedule 4 are already host to minerals and petroleum exploration and mining.  DOC access agreements are commonplace in this industry.

The permitting regime requires compliance with a range of criteria around efficient allocation of resource, fair financial return to the Crown, compliance with good exploration and mining practice, consultation with Māori and agreement with Crown Minerals on an efficient and productive work programme. 

The requirement to consult with affected iwi and hapu means that permit holders tailor their exploration and mining activities to respect the spiritual significance of the land and the continued enjoyment of customary rights.

Most importantly from an environmental perspective, some exploration and any mining activity will require the holder first to have obtained necessary resource consents under the Resource Management Act 1991, involving compliance with the usual RMA processes including any public notification and consultation.

Further, the mine site must be remediated at the end of the life of the project.  This is a significant responsibility for miners and one which, in our experience, is taken seriously by government, local councils and industry alike.  Recent annual financial statements from Solid Energy New Zealand, Newmont Mining Corporation and OceanaGold Corporation, to name just a few examples, all show a substantial balance sheet contingent liability allowance to meet legal site remediation and rehabilitation requirements.  Bonds have to be posted.

There are, therefore, a number of interlocking checks and balances at play, with scope at several points for the competing interests to be evaluated.

The case for change

The case for change can be made very simply: New Zealand needs to lift its economic game and New Zealand is apparently considered very prospective, for both minerals and petroleum, including some of those “rare earth” elements1 so important to newly developing technologies.

There has been a lot of argument and counter-argument about what our mineral estate is worth and how much of the revenue would stay in New Zealand.  According to NZIER, fuller use of our mineral resource could boost GDP by 1.3%, adding $2.3 billion a year to national income or $550 per person2.

Mining provides high-paying work, often in areas of high unemployment or limited employment opportunity – and those jobs are highly productive3 returning an average $360,000 of GDP per full-time employee in the 2000 to 2005 period.

Also, modern mining techniques mean that land can be mined sensitively and with minimal visual impact.  Not all mining is open cut.

Concerns have been raised about the size of the areas identified for removal from Schedule 4 but this is for the explorative phase only.  Any actual mining will most likely be confined to a much smaller space.

Permits are taken out over large tracts of land because the precise location of relevant minerals or hydrocarbons cannot be pinpointed with any accuracy until a lot of exploration work has been done and the results analysed.  Indeed it is a Crown Minerals requirement that seismic studies be conducted over a good portion of the permit area so that the information gained can be added to the Crown’s geological database where it will be available for future explorationists.

Issues for submitters

The debate the Government has opened represents an important chance to better develop our mineral resource and to reduce some of the unnecessary red tape around mining without compromising environmental protections.

Among the issues we consider submitters should have regard to are:

  • whether there are known parts of Schedule 4 land, not currently proposed for removal, that are in fact highly prospective (even if not removed up front, they may be candidates for a second round attempt)

  • some of the land proposed for addition to Schedule 4 includes existing prospecting, exploration or mining rights and it is not clear from the discussion document whether these rights, and the ability to join access to the underlying land, will be reserved to the permit holder.  This is a point of significant potential concern to those permit holders as it undermines statutorily conferred rights which have already provided the basis for significant expenditure.  Compensation could become an issue here. We note that the Government has specifically undertaken to protect existing use rights until expiry in the just announced foreshore and seabed proposals.

  • an issue with the CMA which is not currently included in the Government’s reform agenda is section 25(2).  This enables a permit to be granted on terms that reserve to the Crown, or any agent acting on the Crown’s behalf, the right at any time to participate in the permit or any subsequent permit.  The provision has never to our knowledge been used but creates a risk for industry, particularly in the event of a significant commercial discovery.  We suggest that this uncertainty could be removed or mitigated by clarifying the scope of section 25(2)

  • the insertion of the Minister of Energy and Resources into the approval process is clearly intended to ensure that the economic benefits of an exploration or mining proposal are weighed against any environmental detriment.  This arrangement could be strengthened by specifying what the roles of the two Ministers are and the criteria each must take into account rather than leaving their interaction to the imagination

  • importantly also, we should examine whether it is still appropriate that the default arbitration procedures under the CMA for mining be any different than those applicable to petroleum (which allow the arbitrator to set the terms and conditions of access more freely, and not soley where public interest grounds exist), and

  • the signalled improvements to the system for DOC land access arrangements will be welcomed.  There is little consistency in approach, with mining companies complaining of lack of clarity of criteria and delays.  Specific suggestions for improvement will be useful and may be influential.  Whether the new guidelines should be included in the Conservation Act (as opposed to some form of non-binding code of practice) is one of them.

The submissions process

Submissions are due by 5:00 pm on Tuesday, 4 May 2010.  Using either the online submission form provided4 or a written submission, submitters are required both to email their submission and to mail a hard copy to the Ministry of Economic Development. 

It is likely that all submissions will be made public unless confidentiality is requested.  Confidentiality should be sought only for very specific commercially sensitive information, with a clear reason provided for why it needs to be protected from disclosure.

For more information please contact the lawyers featured.

Footnotes

  1. For example, dysprosium, terbium, erbium and ytterbium, critical to technologies such as hybrid and electric cars, wind turbines and fibre-optic telecommunications cables.  See Discussion Paper, p.1.
  2. NZIER, “Mining debate needs some cold, hard facts” (29 March 2010)
  3. McDouall Stuart Research, “Stepping Up” (June 2009)
  4. See:  http://www.med.govt.nz/templates/StandardSummary____42577.aspx

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