MINING AND UPSTREAM PETROLEUM PRODUCTION. CONTAMINATED SITES ASSESSMENT AND REMEDIATION THE REGULATORY REGIMES AND THE POTENTIAL FOR LIABILITY

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1 MINING AND UPSTREAM PETROLEUM PRODUCTION. CONTAMINATED SITES ASSESSMENT AND REMEDIATION THE REGULATORY REGIMES AND THE POTENTIAL FOR LIABILITY Ecoforum Conference, Sydney. May, 2009 Abstract Increasing awareness of the need to effectively address the assessment and remediation of contaminated sites inherited from historical industrial land uses is reflected in the range of specific contaminated sites legislation adopted by all of the Australian states and the ACT. The drivers of the process of identifying, assessing and remediating contaminated sites in urban areas differ from those applicable to industrial activities that have taken place in more remote geographical locations. However, the issue in such areas remains significant. Historically and culturally, the contaminated sites issue for miners and petroleum producers has been addressed through regulatory regimes based principally on petroleum and mining legislation. However, there is generally no legal constraint on the application of specific contaminated sites legislation to land and water resources contaminated by minerals processing and petroleum production activities. It would be prudent to factor into mine and petroleum production planning, particularly for decommissioning stages, the potential application of specific contaminated sites legislation. The Rise and Rise of the Contaminated Sites Issue The social and environmental issue of the identification, assessment and remediation of historically contaminated sites 1 (hereinafter referred to as IAR ) has assumed considerable prominence in the last two decades or so in Australia. This prominence is due as much to economics as environmental concerns. Former industrial land, waste disposal facilities and sites contaminated by past activities have gained in potential value as urban areas have expanded and inner city land, where most industries in Australia were initially located, has increased in value. Where the cost of remediation can be absorbed into re-development projects and their commercial viability maintained there is incentive for the remediation and development of contaminated sites. 1 The term historical contamination refers to soil and groundwater contamination that has occurred as a consequence of industrial and agricultural land uses that have been undertaken over time and resulted in the accumulation of chemical and other contaminants at levels deemed unacceptable. However, land and water contamination can occur as a result of single or isolated incidents with long-term impacts. 1

2 The mining sector and the upstream petroleum industry potentially face the challenge of dealing with contaminated sites, but the drivers behind the remediation of such sites may differ considerably from those in the urban context. Additionally, the regulatory regimes applying to operators in those sectors may differ and in some respects be more complex. Nevertheless, assumptions that miners and petroleum producers are somehow insulated from relatively recent contaminated sites laws in Australian jurisdictions are mistaken. In some circumstances, failure of mining and petroleum regulatory regimes to address effectively contaminated sites issues, particularly where impacts on groundwater are involved, may attract the attention of the regulatory authority administering dedicated contaminated sites legislation in the particular jurisdiction. The Issues Some of the more significant issues confronting miners and upstream petroleum producers may be identified as follows: i. Effective forward planning and costing with respect to the decommissioning of facilities and the assessment and remediation of associated contaminated sites (whether within or outside a tenement area). ii. iii. iv. Identification of the factors in any particular circumstance that may determine likely regulatory responses for example, operations that may have impacted on a significant water resource. Realistic identification of the regulatory regimes likely to be applied to contaminated mining and upstream petroleum sites. Identification of potentially liable parties under relevant legislation, particularly where joint ventures are involved. The Regulatory Regimes In broad terms, the application of IAR to historically contaminated land in urban areas will be addressed, where necessary, by pollution management legislation, much of it specific contaminated sites legislation such as the contaminated sites provisions of the Queensland Environmental Protection Act 1994, the more recent West Australian Contaminated Sites Act 2003 and the contaminated sites provisions of the South Australian Environment Protection Act 1993 that are due to come into effect on July 1 st As will be seen later, such legislation can apply to mining and petroleum operations. It is generally assumed, however, that within existing tenement areas the relevant mining or petroleum legislation and associated administrative regimes will be the principal framework for addressing the issue of sites contaminated by such activities over time. For historical 2

3 and cultural reasons, there can be a tendency to assume that legal obligations will follow largely from these regimes rather than from dedicated contaminated sites legislation. However, as mentioned above and illustrated below, it does not follow that the specific contaminated sites legislation in each jurisdiction is necessarily excluded from application to contaminated land located within a mining or petroleum tenement area. The historical role of mining and petroleum regulators has been significantly diminished in some jurisdictions in relation to environmental management where environment and pollution control agencies have assumed greater prominence through pollution licensing and more recently the administration of contaminated sites legislation. When contemplating the decommissioning of a facility or the relinquishment of a tenement area where contamination of land may have arisen through operations, it would be prudent to factor into planning processes the potential application of a range of environmental legislation, particularly the prospective application of dedicated contaminated sites legislation. Off-site minerals or hydrocarbon processing (that is, outside a tenement area) presents less regulatory complexities. Where the ore or other unprocessed product is transported to non-tenement sites, the issue of site contamination and its resolution will fall more directly under the dedicated contaminated sites regime, if any, applicable within that jurisdiction. The application of IAR to orphan 2 mining or petroleum sites raises special problems, the resolution of which argues for meaningful government intervention Influencing Factors IAR of Contaminated Mining and Petroleum Production Sites The relative geographical remoteness of most, although by no means all, mining and petroleum operations from large urban settlement does tend to shield those industries from the dynamic of urban growth that is encouraging the remediation of contaminated sites within Australian cities, particularly in what are now inner-urban areas. There are, however, other factors that are likely to influence mining and petroleum operators to address the issue within their tenements. These include: 1) Actual or threatened contamination of surface or groundwater in a socio-political climate focusing increasingly on the issue or water resources. 2) Agricultural use of surface and groundwater. 3) Residential expansion in regional centres where contamination of land and groundwater may limit subdivision potential and discourage expansion in areas where there are legitimate fears of groundwater contamination. 2 Orphan sites are those sites for which the original polluter cannot be found and held responsible for remediating the site or where, for whatever reason, it is not practicable or reasonable to hold the person with current title to the land or otherwise in occupation of it responsible for the cleanup. 3

4 4) The concerns of indigenous Australians about their lands and the continuation of traditional land uses. Remediation of Contaminated Mine and Petroleum Sites Nature and Origins Broadly speaking the following regulatory and financial sources exist to address remediation of sites contaminated by mining or petroleum activities. They can be inter-related: i. Specific statutory rehabilitation/restoration requirements imposed on tenement holders; ii. iii. iv. Conditions of tenements requiring rehabilitation or restoration prior to decommissioning; Statutory bonds or securities; Statutory rehabilitation funds; v. Government (publicly funded) mine rehabilitation programs; vi. vii. Conditions imposed on operators holding relevant pollution control authorisations under general pollution control legislation such as Environment Protection Acts; Specific contaminated sites legislation. Specific Statutory Requirements Some legislation contains specific provisions requiring rehabilitation of land within a tenement area prior to surrender or relinquishment of the tenement. For example, the Queensland Petroleum Act 1923 specifies that in no case shall such surrender be effective until the lessee has made full provision for conservation and protection of the property. 3 Whilst it may be inferred from such a provision that remediation of contaminated sites, including evaporation ponds, is contemplated, it would appear that in all practicality surrender or relinquishment would depend upon a determination by the Minister or relevant authority as to whether such remediation was necessary. No equivalent provision is incorporated into the more recent Petroleum and Gas (Production and Safety) Act This reflects the relatively recent transfer of responsibility for environmental management of petroleum and mining activities to the EPA under the Environmental Protection Act The Victorian Petroleum Act imposes on the holder of an authority an obligation to rehabilitate any land that is used in carrying out any operation under the authority and [to], as far as is practicable, complete the rehabilitation of the land before the authority... ceases to apply to the land. 3 Petroleum Act 1923, section 52(1). 4 Transitional provisions of this Act maintain the currency of the Petroleum Act where necessary. 5 Petroleum Act 1998, section

5 Tenement Conditions and Operational Approvals It has commonly been the practice to include in mining and petroleum production tenements in some jurisdictions specific environmental conditions. These conditions are frequently broad, although they arguably encompass the issue of remediation of contaminated sites. For example, production licences issued under the former West Australian Petroleum Act 1967 contained the following standard clause: In carrying out its operation in the licence area the licensee shall take adequate measures for the protection of the environment and shall comply with all reasonable requests of the Minister for Mines in relation thereto. 6 More likely, however, such remediation requirements will be included as conditions of the various operational approvals required from the relevant mining or petroleum agency before specific production operations may commence. In South Australia, the Petroleum Act 2000 requires the preparation of a Statement of Environmental Objectives (SOE) that will require approval by the Minister before operations may commence. This SOE will normally refer to the issue of rehabilitation. For example, the Stuart Petroleum SOE for petroleum production at Acrasia Field 7 contains the following environmental objective: Develop a long term closure and remediation plan in advance of any closure (Objective 21). This is elaborated upon in Appendix 1 of the SEO stipulating that detail of closure and remediation should be developed before closure commences, but attempting detailed planning at the start of production is not an effective course. A further commitment is given to "develop a rehabilitation SEO prior to first well abandonment. It is clear that such conditions and commitments do not normally specify the nature of the restoration or rehabilitation. In relation to contaminated sites, that will lie with the nature of rehabilitation plans developed over time and any subsequent regulatory approvals required. Statutory Bonds and Securities The requirement for the holder of a mining or petroleum tenement to enter into a bond and to provide related security to address on-going and future liabilities, including site rehabilitation, is one means of ensuring that a legacy of unremediated contaminated sites is 6 Now the Petroleum Production and Geothermal Energy Act Stuart Petroleum Pty Ltd. November Statement of Environmental Objectives. Petroleum Production at Acrasia Basin, Cooper Basin SA. 5

6 not bequeathed to future generations and the environment at large. 8 However, whether the financial assurance will adequately address the costly process of assessing and remediating contaminated land will depend on the extent of the security required. The application of a bond to such remediation works may also be determined by the specificity or otherwise of the matters to which it must or can be applied. For example, will it be applied to rehabilitation broadly to the satisfaction of the Minister, or will it be specifically tied to addressing conditions of the relevant mining or petroleum tenement as is the case under the Western Australian Mining Act 1978? 9 It follows that if the conditions can be interpreted narrowly to exclude remediation of contaminated areas of a mine site, the application of the security may not extend to that issue. In Western Australia the requirement for securities under section 126 of the Mining Act 1978 increased from $10,000 per hectare to $20,000 per hectare in 2008 with the Department of Industry and Resources utilising a risk-based approach to calculating performance bonds. 10 In the case of mines of relatively small areas (compared with, say, mineral sands mining) where processing is occurring on site, a risk-based approach would appear much more appropriate than an approach to determining the quantum of security required based on aerial calculation. The Queensland Department of Natural Resources, Mines and Energy reports that the introduction of the Mineral Resources Act 1989 has caused a massive increase in the amount of security required. 11 The Department s report states that since then the amount of security held by the Department increased from about $5 million in 1991 to $45 million in 1993, $62 million in 1994 and more than $370 million in The Victorian Petroleum Act 1998 specifies that the holder of a petroleum authority cannot undertake a petroleum operation unless it has obtained a rehabilitation bond that is acceptable to the Minister. 13 Not all States have adopted the machinery of performance bonds in relation to petroleum activities. The South Australian Petroleum Act 2000 specifies that: It is a mandatory condition of every licence that the licensee must have adequate technical and financial resources to ensure compliance with the licensee s environmental obligations (including the rehabilitation of land adversely affected by regulated activities carried out under the licence) See, for example, section 62 of the South Australian Mining Act See Mining Act 1978, section 84A(1). 10 Audeyev, S., Whinnen, C. and Gishubi, B. Does it Ever End? "Legal Aspects of Mine Closure in Western Australia", in Environment Matters. Blake Dawson. 5 June Department of Mines and Energy Queensland. ww.dme.qld.gov.au/mines/regulation.cfm. 12 Ibid. 13 Petroleum Act 1998, section Petroleum Act 2000, section 75. 6

7 Additionally, the Minister has the power to direct the rehabilitation of land and to undertake necessary work and to recover the cost of so doing from the licensee or former licensee. 15 Presumably, these powers can be applied to a situation where there is substantial hydrocarbon contamination of a site. However, this approach tends to assume that the licensee will be in a position financially to comply with any relevant direction or to recompense the State for the cost of so doing. Statutory Rehabilitation Funds and Government Restoration Programs Some mining and petroleum legislation establishes rehabilitation funds based on a levy imposed on the miner or petroleum producer. The South Australian Mining Act 1971 retains the Extractive Areas Rehabilitation Fund (to address rehabilitation of areas disturbed by extractive industries) which presumably can be applied to contaminated land, although the potential for process-induced contamination from the milling of quarry materials would appear limited. In Queensland, the State Government conducts a state-wide, publicly funded abandoned mine land program directed to the rehabilitation of mine sites abandoned before the more stringent security requirements came into place and where the company that caused the problem no longer exists or does not have the financial resources to meet the rehabilitation costs. Work under this program has reached approximately $12 million (to the end of 2007) and clearly encompasses contaminated sites assessment and remediation. Environmental Assessment and Pollution Licensing In the last fifteen years or so in Australia, most jurisdictions have moved to transfer responsibility for regulating pollution (both short and long-term) associated with mining and petroleum activities from the relevant mining or petroleum agency to the State s Environment Protection Agency or equivalent. Effective a priori assessment of the potential of pollution (including land and water contamination) will occur through the environmental impact assessment (EIA) and associated licensing processes. Two examples of approaches taken by different jurisdictions are outlined below. In Queensland there has been a conscious and concerted effort to integrate environmental regulation of mining and petroleum activities into the Environmental Protection Act Consequently, proposed mining production activities in Queensland may be subject to a requirement for environmental impact assessment, the preparation of an environmental management plan (EMP) and the issuing of an environmental authority based on that plan. To this extent there is ample opportunity under the Environmental Protection Act to manage activities that may have the potential to cause long-term contamination of land and water associated with mining activities. 15 See Petroleum Act 2000, section

8 Petroleum production activities are subject to a similar EIA regime and an environmental authority is required for such activities under the Environmental Protection Act. An applicant for a "Level 1" environmental authority (petroleum activities) is required to submit a plan that is used as a basis for the application of appropriate conditions in the environmental authority. Again, in the context of the petroleum industry, effective regulation of activities that might lead to contamination of land or water is contemplated. In South Australia the processes of EIA and pollution management are not integrated into a single piece of legislation. In the case of the petroleum activities, EIA is managed through the Petroleum Act 2000 and the Development Act 1993 with proposed petroleum production activities (and pipelines) that may have major social, environmental or economic impacts falling under the Development Act. The Environment Protection Act requires that an authorisation be acquired for petroleum producing activities above a certain production or storage threshold. If the proposed production activity has been subject to formal EIA processes under the major project provisions of the Development Act, the EPA will have been consulted under that process and would have had the opportunity to stipulate the appropriate pollution control conditions to be included in any subsequent project approval. These will be reflected in the authorisation that the EPA is then obliged to issue under the Environment Protection Act. 16 Presumably, satisfactory remediation of any contaminated site would be a condition. Mineral processing activities are subject to environmental assessment regimes under the Mining Act 1971 and Development Act respectively, with an authorisation under the Environment Protection Act required for mineral processing activities. Broadly speaking, the processes in relation to major project EIA for mine proposals are the same as those described for petroleum production proposals of similar significance. Again, this facilitates the regulation of activities in both sectors that have the potential to contaminate land or water and to require appropriate assessment and remediation prior to relinquishment or expiry of any authorisation issued under the Environment Protection Act. Specific Contaminated Sites Legislation It is apparent from the above that within the mining and petroleum production regulatory regimes there is substantial scope to implement preventative mechanisms in relation to activities with the potential to contaminate soil and groundwater. There also exist in some jurisdictions requirements for securities and performance bonds that appear adequate to cover residual contamination that must be addressed prior to relinquishment of tenements and decommissioning of production and processing facilities. Furthermore, in some jurisdictions programs have been established to rehabilitate abandoned mine sites. Presumably, such programs extend to assessment and remediation of contaminated land. 16 Environment Protection Act 1993, section 47(2). 8

9 Despite this, situations will inevitably arise where contaminated sites, for whatever reason, remain after the cessation of petroleum or mining activities and pressures to address the problem may occur. For example, whilst the upstream petroleum industry is relatively young, production activities have been occurring in the Cooper Basin for nearly 30 years. There will almost inevitably exist evaporation ponds and hydrocarbon waste pits established in the 1980s that, whilst remote, may not be acceptable in the longer term in an unremediated state. Decommissioned mines and associated minerals processing facilities in peri-urban areas may attract attention sooner than expected under normal mine rehabilitation regimes, whether privately or publicly resourced. The growing demand for residential and ruralresidential land may accelerate the need for effective remediation. If the mining and petroleum regulatory regimes are inadequate in these circumstances, what is the role of the relatively new dedicated land contamination legislation? In short, contaminated sites legislation can apply. Essentially, Australian contaminated sites legislation adopts the following framework: 1) Definition of parties liable for assessment and remediation essentially, the polluter first and the owner second where the polluter cannot be found or is unable to pay for the processes. 2) In some jurisdictions, the creation of registers of potentially and actually contaminated sites. 3) Creation of powers in the relevant authority (for example, the relevant state EPA) to issue assessment and remediation orders to the polluter or, in specified circumstances, the owner. 4) The recognition of environmental auditors who exercise a form of delegated authority under the relevant legislation to ensure that assessment and remediation adheres to statutory criteria and adopted guidelines; 5) Specification of the obligation on contaminated sites professionals (consultants and auditors) to adhere to the range of guidelines created or adopted by the relevant authority; 6) Some connection of the contaminated sites regime, formally or informally, with the relevant local land-use planning and development application process in order that assessment and remediation of contaminated land is integrated into development proposed on such land. Land contaminated by mining or upstream petroleum processes is generally not excluded from the application of specific contaminated sites assessment and remediation legislation. 9

10 As amendments to the Environment Protection Act 1993, the South Australian legislation will apply within tenement areas despite exclusions created by section 7 whereby the Act does not apply to wastes produced in the course of an activity (being one requiring an authorisation under the Act) undertaken within the boundaries of a mining or petroleum tenement provided the waste is produced and disposed of within the tenement boundary. Most mineral processing and petroleum production and processing activities (which are those most likely to produce land and water contaminants) do require a licence under the Act. It follows that any person responsible for contaminating land as a consequence of their activities within a petroleum or mining tenement in South Australia (or in some cases, if applicable, the subsequent owner of the contaminated land) could be issued with site contamination assessment orders and site remediation orders. The site contamination provisions of the Queensland Environmental Protection Act 1994 similarly have the potential to apply to mine sites and petroleum production sites. As indicated above, the decommissioning of mining and petroleum operations will fall substantially to the Department of Natural Resources, Mines and Water although the EPA would also have a role through the conditions of any environmental authorities issued to the operator under the Environmental Protection Act. 17 In the event of a petroleum or mining site being contaminated but not addressed through either of those mechanisms, the Environmental Protection Agency could apply the contaminated sites provisions. The WA Contaminated Sites Act 2003 similarly has no provision excluding its application from mining or petroleum sites. Liable Parties The general position under contaminated sites legislation in Australia is that the polluter is the party principally exposed to the issuing of contaminated sites assessment and remediation orders. Where the polluter cannot be found, no longer exists, or is not in a financial position to respond to such orders, the owner of the land may be subject to such orders. In South Australia, for example, the appropriate person to be issued with a site contamination assessment order (SCAO) or a site remediation order (SRO) will be the person who caused the site contamination at the site or, if it is not practicable to issue the order to that person, the owner in specified circumstances It should be noted that the Queensland Environmental Protection Act requires that the owner or occupier of land who becomes aware of a notifiable activity being carried out on land or that land is being contaminated must notify the EPA within 22 days of becoming so aware (sections 371(1) & 371(2)). 18 Environment Protection Act 1993, section 103C. 10

11 Potential liability for the assessment and remediation of contaminated sites under the West Australian Contaminated Sites Act follows the polluter pays principle, but for contamination caused before the Act came into effect (2006) the contamination must have been caused by an unlawful Act. 19 Otherwise, it is the owner of the site who is liable for assessment and remediation under the Act. In Queensland the person who released the contaminant (the polluter), the relevant local government in certain circumstances, or the owner of the relevant land may be liable for site assessment and/or remediation. 20 In cases of site contamination caused by mining or petroleum operations, identifying the party (or parties) liable for assessment or remediation can be complicated by the now relatively common concept of the joint venture (JV). Legally, these relationships are difficult to define and have the potential to give rise to issues of agency and vicarious liability as between operators and members of the joint venture. Complex issues of law and fact may be involved in determining the extent to which, if at all, a joint venture member may be liable for the assessment and remediation of a site contaminated as a consequence of operations conducted on behalf of the JV. Whilst it is not practicable to address this issue in detail here, it is one that might well attract the attention of members of mining and petroleum joint ventures, particularly if a project or programme is nearing completion. Conclusions Historically, remediation of contaminated land within mining and petroleum production tenements has fallen to a range of regulatory frameworks and government programs located within or associated with the relevant State or Territory mining and petroleum agencies. This situation has changed in the last fifteen years or so in Australia with the application of specific pollution management legislation to a range of mining and petroleum production activities. Nevertheless, parallel regulatory regimes remain with the potential to address the issue of the assessment and remediation of sites contaminated by petroleum production and mining activities. Assessment and remediation of contaminated sites, particularly if water resources are affected, can be an extremely costly exercise to be integrated into the total cost of decommissioning. Arguably flexible approaches to remediation of contaminated sites hitherto available to companies under mining and petroleum regulatory regimes may be constrained by the relatively recent introduction and application of dedicated contaminated sites legislation. 19 Contaminated Sites Act 2003, section Environmental Protection Act, sections 376 and

12 It would be prudent for operators to factor in to the decommissioning and rehabilitation phase of a mine or upstream petroleum operation the potential application of contaminated sites legislation within the relevant jurisdiction. David Cole Special Counsel (Environmental Law) DLA Phillips Fox and Project Leader, Program 4 CRC for Contamination Assessment and Remediation of the Environment 15 April