THE NSW Audit Office will put mine rehabilitation bonds and the NSW Department of Industry’s control of bonds and mine rehabilitation under the microscope.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
The Audit Office has released terms of reference for an audit in response to mounting concerns about the adequacy of bonds, and whether taxpayers risk being left with the cost of mine rehabilitation.
“This audit will assess whether the department maintains adequate security deposits to cover the liabilities associated with mining rehabilitation, including the decommissioning of infrastructure and any long term post-closure management requirements,” the Audit Office said.
Security deposits, or bonds, are designed to cover the “full estimated costs of rehabilitation” in the event of mining companies defaulting on their rehabilitation obligations.
The Audit Office noted mining companies are required to estimate total rehabilitation costs and the Department of Industry is “responsible for verifying the adequacy of these rehabilitation cost estimates”.
The audit will examine whether the department has “a clear understanding of rehabilitation outcomes for each mine site, undertakes on-going reviews of the extent of disturbance and rehabilitation at each major mine site, maintains reasonable estimates of rehabilitation costs and can access adequate security deposits to cover the costs of rehabilitation when needed”.
Thirty of the state’s 36 remaining open-cut coal mines are in the Hunter, Upper Hunter and Gloucester coal fields. The largest open cut coal mines by production volume are located in the Hunter.
In December leading energy analyst Tim Buckley said the NSW Government needed to urgently increase mining industry funds held by the state for mine rehabilitation or risk taxpayers being left with a future bill of possibly billions of dollars.
“A guarantee from a bankrupt company is worthless,” said Institute for Energy Economics and Financial Analysis analyst Tim Buckley, after Victoria’s mining regulator stunned an inquiry in 2015 by predicting a 50 per cent chance major energy companies would become insolvent, leaving a clean-up bill for taxpayers.
The NSW Government system of financial assurances from banks for a fraction of the cost of mine rehabilitation, including serious water issues relating to large final voids, was untested and left taxpayers exposed to significant risk, Mr Buckley said.
“It’s an unprecedented scenario we’re facing,” he said about the coal outlook following the Paris climate change agreement, historically low coal prices, and the decimation of share value in mining companies.
Mr Buckley will be a speaker on a heritage coal train trip from Maitland to Gulgong on Sunday following the Hunter coal chain up the valley.
The Audit Office will also examine the Planning Assessment Commission system and whether commission decisions on major development applications are made “in a consistent and transparent manner”.
The audit will consider whether the PAC has “sound processes in place to help it make decisions on major development applications that are informed and made in a consistent manner”.
It will also assess whether the PAC ensures that its decisions are “free from bias and transparent to stakeholders and the public”.
The audit follows controversial PAC decisions in the Hunter, including approval of the Mount Thorley Warkworth mine and rejection of the Drayton South mine.