LATEST DEVELOPMENTS IN THE ENVIRONMENTAL REGULATION OF PROSPECTING, EXPLORATION,

MINING AND PRODUCTION

JUSTIN TRUTERSANDTON, NOVEMBER 2014

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PRESENTATION OUTLINE:

Media

Mine waste management and contaminated land - a brief overview

Environmental compliance… the noose is tightening!

Environmental law reform and the implications of the NEM Laws Amendment Act, 2014 for the Mining sector

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MEDIA

DA declare war on ‘flawed, poisonous’ MPRDA, MiningMX, 16 August 2013

Miners cry foul over proposed amendments to industry regulation, Business Day, 6 August 2013

DMR concedes constraints impeded MPRDA, MiningMX, 2 August 2013

Mining law changes to send investors scuttling, MiningMX, 11 June 2013

MPRDA detrimental to SA’s mining industry, Mining Weekly, 8 March 2013

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MEDIA (CONT)

Ministerial discretion will not be arbitrary, Business Day, 11 February 2013

Mineral bill will sink SA’s mining sector, Business Day, 10 February 2013

Kenners krap kop oor vreemde taal in wette, Sake24, 9 February 2013

New mining rules ‘threat to investors’, says Carroll, Business Day, 6 February 2013

Confusion over mining sector continues with draft resources bill, Business Day, 6 February 2013

Minister promises faster times, Financial Mail, 5 February 2013

Environment bill “causing confusion” over mining development, Business Day, 29 January 2013

Mineral Bill to fix glaring flaws in SA’s mining rules, Business Day, 7 December 2012

State must do more to manage mining’s environmental effects, Business Day, 17 January 2012

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ENVIRONMENTAL LAW REFORM AND THE IMPLICATIONS FOR THE MINING SECTOR

The evolution of a turf battle: 2007 – 2014: Environmental and mining law reform

The 2014 NEM Laws Amendment Act (“NEMLAA”): 2 September 2014

“To provide for co-operative environmental governance by establishing principles for decision-making on matters affecting the environment…procedures for co-ordinating environmental functions exercised by organs of state; to provide for certain aspects of the administration and enforcement of other environmental management laws; and to provide for matters connected therewith.

main purpose of these amendments is to further align the provisions of the environmental, water and mining legislation in order to give effect to the agreements reached between the Minister of Water and Environmental Affairs and the Minister of Mineral Resources

The NEMLAA read together with the Mineral and Petroleum Resources Development Act, 2013 gives effect to the agreement between the Ministers.

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LAW REFORM (CONT)

The Agreement entails:

• that all environment related aspects would be regulated through one system which is National Environmental Management Act, 1998 and that all environmental provisions would be repealed from the Mineral and Petroleum Resources Development Act, 2002 (MPRDA)

• that the Minister sets the regulatory framework and norms and standards, and that the Minister responsible for Mineral Resources will implement the provisions of NEMA and the subordinate legislation as far as it relates to prospecting, exploration, mining or operations;

• that the Minister responsible for Mineral Resources will issue environmental authorisations in terms of NEMA for prospecting, exploration, mining or operations, and that the Minister will be the appeal authority for these authorisations;

• that the Minister, the Minister responsible for Mineral Resources and the Minster responsible for Water Affairs agree on fixed time-frames for the consideration and issuing of the authorisations, rights, permits or licences in terms of the legislation administered by them and also agreed to synchronise the time frames.

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5. LAW REFORM (CONT)

The provisions as far as they relate to mining will, in terms of section 14 of the Act, only enter into force 18 months after the Mineral and Petroleum Resources Development Amendment Act, 2008 entered into force (7 June 2013)

The two Acts were intended to be fully effective on 7 December 2014, however the NEMLAA repealed the enabling provisions. Effect? DEA adopt the view that mining specific listed activities under NEMA listing notice will come into force and effect on 7 December 2014.

Provides for regulations regulating inter alia, the management and control of residue deposits and residue stockpiles – now defined in NEMA, mine closure, financial provision and apportionment of liability to ensure the sustainable closure of mines.

(Although residue deposits and stockpiles are to be managed in accordance with NEMWA for now – section 24S of NEMLAA)

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IMPLICATIONS OF LAW REFORM FOR THE MINING SECTOR

Mining Rights/Permits, Environmental Authorisations and Water Use licences will follow the same timeframes which have been identified in amendments currently being made to the Environmental Impact Assessment Regulations;

Current draft NEMA EIA Regulations make provision for a 107 day period within which the authority must decide an application for environmental authorisation.

Requirements for notice to other organs of state by registered mail and 30 day commenting period provided. Problematic. Deeming provision?

All the Acts now provide for an internal appeal procedure and the appeal time-frames between the acts are aligned and run in parallel;

The appeal time-frames apply strict time frames to appellants submitting appeals and the authority considering appeals and limits condonation applications;

The appeal process must be finalised prior to the mining right being made effective and construction commencing

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IMPLICATIONS (CONT)

A synchronised system for environmental authorization between the National Water Act, the MPRDA, NEMA, National Environmental Management: Air Quality Act, 2004, National Water Act, 1998 and NEMWA;

This arrangement intended to provide a case study to investigate the coordination of other Acts to provide certainty to developers;

NEMLAA now provides minimum information requirements, which will provide proactive guidance to applicants on information requirements and will ensure consistency of information requests between competent authorities;

The new regulations will make provision of the automatic closure of projects where the applicant does not meet time frames.

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IMPLICATIONS (CONT)

The Minister of Mineral Resources has been given the authority to appoint Mineral Resource Inspectors, with the same powers as the Environmental Management Inspectors (EMIs), to be able to enforce the provisions of the National Environmental Management Act, 1998.

The Director-General of the department responsible for Mineral resources has been given powers to issue directives and to generally implement section 28 in relation to environmental matters in so far as it relates to prospecting, exploration, mining and production activities.

The Minister responsible for mineral resources has been given the authority as the competent authority to issue waste management licences in so far as it relates to prospecting, exploration, mining or production activities.

The ability of the applicant to make the prescribed financial provision has been added as one of the criteria for the consideration of an environmental authorisation.

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IMPLICATIONS (CONT)

The NEMLAA now contains a general definition for “financial provision” and one that specifically applies to section 24P. The financial provision in general has been strengthened.

Section 24P “An applicant for an environmental authorisation relating to prospecting, exploration, mining or production must, before the Minister responsible for mineral resources issues the environmental authorisation, comply with the prescribed financial provision for the rehabilitation, closure and ongoing post decommissioning management of negative environmental impacts.”

24P(5): “The requirement to maintain and retain the financial provision contemplated in this section remains in force notwithstanding the issuing of a closure certificate by the Minister responsible for mineral resources in terms of the Mineral and Petroleum Resources Development Act, 2002 to the holder or owner concerned and the Minister responsible for mineral resources may retain such portion of the financial provision as may be required to rehabilitate the closed mining or prospecting operation in respect of latent, residual or any other environmental impacts, including the pumping of polluted or extraneous water, for a prescribed period.”

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IMPLICATIONS (CONT)

“financial provision” means the insurance, bank guarantee, trust fund or cash that applicants for an environmental authorisation must provide in terms of this Act guaranteeing the availability of sufficient funds to undertake the-

a) rehabilitation of the adverse environmental impacts of the listed or specified activities;

b) rehabilitation of the impacts of the prospecting, exploration, mining or production activities, including the pumping and treatment of polluted or extraneous water;

c) decommissioning and closure of the operations;

d) remediation of latent or residual environmental impacts which become known in the future;

e) removal of building structures and other objects; or

f) remediation of any other negative environmental impacts;

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IMPLICATIONS (CONT)

An appeal lodged against the decision by the Minister responsible for Mineral Resources suspends the decision.

Section 47C of the principal Act now makes provision for the extension of time frames, while condonation will only be allowed in section 47CC in relation to appeals and strict criteria will apply.

The National Environmental Management: Waste Act has been aligned with the National Environmental Management Second Amendment Act, 2013 to include the provision relating to “Prohibited or restricted activities in specified geographic areas.

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MINE WASTE MANAGEMENT AND CONTAMINATED LAND

The mining industry produces significant quantities of waste – between 70

and 80 % of all waste generated in SA.

Many mining activities also generate air emissions that could potentially

have a negative impact on local air quality.

The regulatory authorities have recognised that, if not managed effectively,

mine waste and air emissions pose potential risks to human health and the

environment – evolution of the legislative regime to manage environmental

impacts including water and waste impacts and air emissions.

There is a sound business case for ensuring effective management of these

issues: reducing waste and air emissions at source is usually more efficient,

reduces potential clean-up costs and limits the risk of liability.

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MINE WASTE MANAGEMENT (CONT)

Historically mine waste has been managed and regulated in accordance with an approved EMP/R and Mine Closure and Rehabilitation Plans.

Radioactive waste regulated in terms of the NNRA.

Concerns about lack of monitoring and enforcement and regulation of waste that migrates off the mine property – argued that this is not covered by MPRDA or NNRA.

NEMWA WML.

Transitional provisions – lawful waste management activities pre 1 July 2009 – ECA and NEMA 2006 listed activities?

NEMA duty of care and retrospectivity.

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WASTE MANAGEMENT (CONT)

NEMWA prescribes measures aimed, inter alia, at:

• minimising the consumption of natural resources;

• avoiding and minimising the generation of waste;

• reducing, re-using, recycling and recovering waste;

• preventing pollution and ecological degradation and

• remediating land where contamination presents, or may present, a significant risk of harm to health or the environment.

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WASTE MANAGEMENT (CONT)

'industry' is defined in NEMWA to include:

• commercial activities, commercial agricultural activities, mining activities and the operation of power stations;

'waste' is defined to mean:

• any substance, whether or not that substance can be reduced, re-used, recycled and recovered-

• that is surplus, unwanted, rejected, discarded, abandoned or disposed of;

• which the generator has no further use of for the purposes of production;

• that must be treated or disposed of; or

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WASTE MANAGEMENT (CONT)

• that is identified as a waste by the Minister by notice in the Gazette,

• and includes waste generated by the mining, medical or other sector, but-

• a by-product is not considered waste; and

• any portion of waste, once re-used, recycled and recovered, ceases to be waste;

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WASTE MANAGEMENT (CONT)

Regulations under NEMWA include;

• List of waste management activities that have, or are likely to have a detrimental effect on the environment

• National Norms and Standards for the Storage of Waste

• Norms and standards for the remediation of contaminated land and soil quality in South Africa

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WASTE MANAGEMENT (CONT)

National norms and standards for the storage of waste

• Location of waste storage facilities; Construction and design; Access control and notices; Operation Requirements for waste storage containers; Minimum requirements for above and underground storage facilities; Training; Emergency preparedness plan; Monitoring and inspection; Auditing; Reporting; Records; Decommissioning

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WASTE MANAGEMENT (CONT)

Norms and standards for the remediation of contaminated land and soil quality in South Africa

• Section 7(2)(d) of NEMWA requires the Minister to set National Norms and Standards for the remediation of contaminated land and soil quality

• Soil screening values for metals and organics (Table 1) and anions (Table 2)

• Access control and notices

• General requirements for management of remediation activities

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WASTE MANAGEMENT (CONT)

• Training

• Emergency preparedness plan

• Monitoring and inspection - “it is the duty of the landowner to ensure that an ongoing management and monitoring of remediation activities is carried out until the site is fully rehabilitated and declared free of any contamination or harmful substances”

• Auditing – internal and external

• Reporting

• Records

• Transitional provisions

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National regulations for site assessments and reports

• Definition of “contaminated” – “the presence in or under any land, site, buildings or structures of a substance or micro-organism above the concentration that is normally present in or under that land, which substance or micro-organism directly or indirectly affects or may affect the quality of the soil or the environment adversely.”

• Content of a site assessment report; requirement for detailed site remediation plan to accompany SAR if site considered to be contaminated;

WASTE MANAGEMENT (CONT)

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• Person who may conduct a SAR; independent EAP

• Public participation;

• Submission;

• Consideration; - within 90 days - Remediation Order, or monitor and manage or declare site not to be contaminated;

• Appeal provision;

• Offences and penalties;

• Transitional provisions;

WASTE MANAGEMENT (CONT)

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ENVIRONMENTAL COMPLIANCE… THE NOOSE IS TIGHTENING!

Recent developments in the enforcement of our country’s environmental laws are likely to see company directors place far greater emphasis on their company’s environmental management systems and result in improved environmental monitoring and compliance.

National Prosecution Authority (NPA) placing far greater emphasis on the prosecution of environmental offences.

Significant and forceful judgments being handed down by our courts.

• In 2012, the Ermelo Regional Court was the first court to invoke the criminal provisions of the NEMA, the National Water Act and the environmental provisions of the Mineral and Petroleum Resources Development Act, No 28 of 2002 (MPRDA), against the managing director of a mining company and to hold the MD guilty of the contravention of the provisions of these Acts.

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ENVIRONMENTAL COMPLIANCE… (CONT)

• More recently Blue Platinum Ventures has reflected the direction that environmental enforcement in South Africa will take.

• The matter arose out of Blue Platinum Venture’s clay mining activities conducted outside the village of Bathlabine in Limpopo since 2007,

• Resulted in environmental degradation. Numerous complaints were lodged by the affected community to the DMR without any decisive action being taken.

• The community laid criminal charges against the mining company and its MD in terms of NEMA. The MD was sentenced to five years’ imprisonment for damage caused to the environment.

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• The sentence was suspended for five years, on condition that the affected areas were rehabilitated within three months, with costs estimated at R6.8 million.

• The MD was not given the option of a fine.

• The case is the first in South Africa where an executive of an offending company was held criminally liable and sentenced without the option of a fine under NEMA for environmental offences relating to mining activities undertaken.

ENVIRONMENTAL COMPLIANCE… (CONT)

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Ramifications of the Blue Platinum sentence?

• Company executives paying considerably more attention to the conduct of their employees and the risk of damage to the environment caused by their activities.

• It is also likely to see company executives placing far greater emphasis on having environmental management systems in place and ensuring that these systems are strictly monitored and enforced.

• Implications for the insurance industry with executives likely to ensure that their directors’ and officers’ (D&O) liability cover or environmental degradation, which many business owners have chosen to neglect in the past, is updated or increased.

• Shareholder derivative action claims seeking redress for wrongful acts of the company directors and officers.

ENVIRONMENTAL COMPLIANCE… (CONT)

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Courts are prepared to pierce the corporate veil where a director knew or reasonably should have known of the environmental degradation or noncompliance associated with the company’s activities and failed to take the necessary measures.

Section 24N of NEMA now provides “Notwithstanding the Companies Act, 2008 (Act No. 71 of 2008), or the Close Corporations Act, 1984 (Act No. 69 of 1984), the directors of a company or members of a close corporation are jointly and severally liable for any negative impact on the environment, whether advertently or inadvertently caused by the company or close corporation which they represent, including damage, degradation or pollution.”

See also section 34 of NEMA re. personal director liability.

ENVIRONMENTAL COMPLIANCE… (CONT)

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The role of the Environmental Management Inspectorate

• The mandate and powers granted to environmental management inspectors (EMIs) under NEMA are far-reaching and forceful. These powers range from arrest and detention to attachment of goods and the forced closure of a facility that does not comply with environmental laws or is causing significant environmental degradation.

• The DEA has embarked on various training and capacity-building initiatives over the last ten years, aimed at ensuring all environmental enforcement actions are legally defensible and to ensure that EMIs are trained to properly investigate environmental offences.

• Training and capacity building also focuses on non- EMIs in the investigation and prosecution of environmental offences. This training is extended to magistrates and prosecutors through field training, specialised training and short courses. The DEA has also collaborated with the NPA and has certain cooperation agreements and standard operating procedures in place to ensure the improvement of investigation and prosecution of environmental offences.

ENVIRONMENTAL COMPLIANCE… (CONT)

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Sectors that have already been subject to EMI assessment include ferro-alloy, steel and iron; refineries; cement; paper and pulp; health care risk waste; hazardous landfill sites; and power generation.

EMIs have also had “blitzes” focused on sand mining; taxidermy and tanneries (Operation Skhumba); and illegal trade in reptiles (Operation Cold Blood).

Equator principles and lender liability?

ENVIRONMENTAL COMPLIANCE… (CONT)

THANK YOU

5 November 2014

Legal notice: Nothing in this presentation should be construed as formal legal advice from any lawyer or this firm. Readers are advised to consult professional legal advisors for guidance on legislation which may affect their businesses.

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