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The NEMLA Act sets the scene for major changes to financial provisioning laws

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The NEMLA Act sets the scene for major changes to financial provisioning laws

Webber Wentzel

30th June 2022

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The recently published NEMLA Act sets out the general principles, as well as mining-specific principles, on making financial provision for rehabilitation and closure of operations – which will soon come into force.

 

Significant changes will be introduced to the financial provisioning (FP) empowering provisions in NEMA when the recently published National Environmental Management Amendment Act IV (NEMLA IV) becomes law.  All that is left is for a date fixed by the President to be proclaimed in the Gazette.

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FP will be regulated in terms of two separate FP sections. Section 24P will set out the general principles on FP (General Principles), while section 24PA will set out mining-specific FP principles (Mining Specific Principles).

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General Principles

  • The ground-breaking change will be that the need to make FP for progressive rehabilitation, decommissioning, closure and post-closure activities (including water pumping and treatment) (Rehab and Closure), will be extended to "instances" when the Environment Minister (or MEC with buy-in from the Environment Minister) prescribes this to be the case.  Read this as follows: We may see further FP regulations published in future that apply to other high environmental impact industries, such as the energy, industrial, some manufacturing, waste management and, possibly, the agricultural sectors.
  • If prescribed, these industries will need to determine how much FP will be required and provide for this financially to be granted an environmental authorisation (EA) in future.  Although this may seem innocuous for existing operations, remember that expansion and decommissioning EAs may need to be obtained. 
  • The vehicles that can be used for FP will be expanded to officially include insurance products (a welcome change). The door will be open for the Minister to Gazette other vehicles that may apply in certain industries, including a closure rehabilitation company, a parent company guarantee, and an affiliate company guarantee.
  • The law continues to be beefed up to ensure that FP can only be issued for Rehab and Closure.  It will be a criminal offence to use these funds for any other purpose.
  • The rest of section 24P will remain fairly standard, although it will all be novel for industries that have never before had to determine and provide for FP.

Mining-specific Principles

  • These will apply in addition to the General Principles.
  • Obligations will be imposed on the mining industry to maintain and retain FP until a closure certificate is granted to a right holder, to review and adjust FP, as well as publish the review decision in certain newspapers (at intervals to be prescribed) and to audit the FP and submit the audit to the Minerals Minister (at intervals to be prescribed).
  • Provision will be made for annual drawdowns to be approved from the financial provision in the prescribed manner to support final decommissioning and closure for a period not exceeding 10 years before the final decommissioning and closure.
  • Provision will be made for the Minerals Minister to access any remaining FP when a closure certificate is granted, to fund possible latent environmental impacts, as may be prescribed. All of this sets the scene for the finalisation of the Third Draft Replacement FP Regulations, which are intended to completely replace the existing set of NEMA FP Regulations, 2015 (which currently have limited application).  It is expected that the Third Draft Replacement FP Regulations will now be finalised well ahead of the current date for the bulk of the mining industry to transition to the NEMA regime, which is 18 September 2023.  The Third Draft Replacement FP Regulations will prescribe all the timelines and procedures that will specifically apply to the mining industry.

Written by Garyn Rapson, Partner, Tendai Bonga, Senior Associate & Carma Rossouw, Candidate Attorney from Webber Wentzel

 

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