The on-going tension between insolvency law and Commonwealth environmental law is being played out for one, in the Senate Environment and Communications References Committee, convened in February 2017, which has now had its reporting date extended to early 2019. It has taken extensive evidence around the country.
In the meantime, the states have been proceeding to address their concerns about being left with unfunded environmental remediation liabilities, in particular with Queensland’s new Mineral and Energy Resources (Financial Provisioning) Act 2018.
One question the Committee asked, about how to account for outstanding rehabilitation costs of mining ventures in the financial accounts, does not appear to have been the subject of submissions. The likely experts would be from AASB, or the accounting or insolvency professions, the latter being where the liabilities are invariably finally disclosed.
That question was raised in particular in March this year, before the Committee’s hearing in Perth, with a recommendation made that such liabilities should be disclosed in the accounting records and reported publicly through documents lodged with ASIC. Evidence was given that Australian accounting standards allow effective downplaying of future liabilities, with environmental advocates arguing that negative discount rates should be used as presenting a more accurate picture to the market, serving perhaps to “change corporate behaviour rather quickly.
The accounting standards were also raised by the WA government, including as to the classification of rehabilitation costs as current or non-current liabilities and as the transparency of assumptions made on actual costs, discounting rates and scheduling of planned expenditure.
Queensland’s Mineral and Energy Resources (Financial Provisioning) Act 2018
In Queensland, the Mineral and Energy Resources (Financial Provisioning) Act, passed into law in November 2018, replaces existing financial assurance requirements with the Financial Provisioning Scheme (the Scheme) and also amends the Environmental Protection Act 1994 to require companies to develop Progressive Rehabilitation and Closure Plans.
The Provisioning Act is said to be the first major step of the Queensland government’s broad reforms to improve rehabilitation of mined land on a progressive basis, rather than at the end of a mine’s life; thereby reducing the financial risk to government in the event a holder of a resource authority or small scale mining tenure goes into external administration or otherwise fails to meet its environmental and rehabilitation obligations.
Meanwhile another concern of WA, arising from the liquidation of Kimberley Diamonds, is the liquidator’s right of disclaimer of contaminated land, with COAG being asked to report on the issue.
This is also a significant issue in Canada, where the right of disclaimer in such situations remains the subject of a reserved decision before the Canadian Supreme Court, since February 2018.
More in 2019.