By Robert Milbourne, Partner, Registered Foreign Lawyer, K&L Gates
THE desire to bring about ‘sustainable’ development of our natural resources is increasingly being championed by governments, industry and civil society. There is, of course, nothing sustainable about extracting a finite resource. Sustainability, then, is arguably about the process of extraction to minimize any negative impact on people and the environment, and maximize the productive aspects of the endeavor for the collective good.
This is generally achieved by offering firms title to resource extraction in exchange for social and environmental commitments (in addition to royalties and tax revenue).
But what commitments are appropriate? Standards vary across states, provinces, countries and continents. Arbitrage results, with some countries seeking to ‘attract’ investment when the ‘free hand of the market’ would otherwise result in mineral development elsewhere. Resource firms may benefit temporarily, but they too may lose out when managing complex regulatory requirements across multiple jurisdictions, which then require excessive ‘compliance’ departments operating across multiple jurisdiction.
In the midst of the globalization of the mining and resources sector, in which many mining firms already operate in multiple countries around the world, a whole new domain of resource extraction is emerging – in the form of deep sea mining, and more recently, ‘near-earth’ or asteroid mining. Indeed on July 10, 2014 the US House of Representatives introduced the ASTEROIDS Act (American Space Technology for Exploring Resource Opportunities In Deep Space), which aims to clarify the legal rights associated with acquiring resources in space.
No longer then can a state, provincial or national government claim to be regulating a purely local and domestic industry. The mining and resources sector is now quite literally global. If a developer of property had to deal with fundamentally different zoning rules in city, it would eventually move on to a place where consistency prevailed – to enhance profit margins, ease of doing business, and ultimately the efficiency of scale that allows more developments to be undertaken. Yet the mining and resources sector is facing these exact inefficiencies throughout the world. Lessons learned from one project should be shared with others around the world in a coordinated, rather than haphazard way. Standards of reporting, approvals, and regulating exploration, project development, operations, and mine closure and rehabilitation can be broadly made consistent.
It seems quite extraordinary that each province, and each state, across the United States, Canada and Australia, all regulate the mining and resources sector under separate codes, standards and expectations. If developed economies such as these struggle with consistency, how can the major emerging resource countries such as Mongolia, Myanmar and Papua New Guinea, achieve best practice? Achieving global consensus on politically sensitive issues like levels of royalties, state equity rights, local content requirements, open infrastructure access and the like may be beyond the scope of consensus at this stage, but surely there are common standards that must be easily replicated to achieve simplification of compliance, and maximization of effective regulatory outcomes. Recently 300 miners were killed in the underground Soma mine disaster in Turkey. Environmental harm, and harm to the workers in this industry, must be mitigated, and the global community can and must learn how to minimize these disasters, while maximizing investments in compliance to have the greatest possible impact.
Encouraging the sharing of best practice on administrative aspects can also speed investment and enhance outcomes. For example, implementing systems that achieve robust review of environmental mitigation standards but in the most rapid way possible can bring about dramatic improvements in the economic and social benefits resource projects provide. Common themes, for example, such as title issuance, relinquishment, conditions to mineral exploration and development, environmental mitigation and rehabilitation standards, and occupational health and safety precautions, could be seen as more in the realm of the technocratic and capable of increased harmonization at minimal cost but likely to achieve significant return. The International Bar Association has proposed a model agreement for a private treaty with a host country to develop a mine, but there is nothing close to a model law for mineral development. The closest effort has been the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development which has proposed a mining policy framework. In the last few years countries throughout the world, from Kenya to Zambia, Mongolia to Myanmar have been reforming their mining codes, yet little alignment in reform has occurred.
At the moment the International Seabed Authority, based in Jamaica, and the Extractive Industry Transparency Initiative, based in Oslo, may be the only truly global bodies regulating the sector. In an age of deep sea and near-earth mining, in which mines have potential to transform host country economies for the better, now is the time for a movement toward harmonizing resource regulation, reducing red tape and bureaucratic compliance, and enhancing effective regulation of the sector to provide greater security to workers and the environment, and greater assurances to resource developers that laws are stable, consistent and effective.
Robert Milbourne is a corporate partner of global law firm K&L Gates, based in Brisbane. Robert’s experience spans across the resources project life cycle from exploration to project development, offtake agreements and operational matters, financings, mergers and acquisitions, corporate governance and commercial advice. Robert has extensive international experience, including years working in-house with Vale in Brazil and Australia, and experience representing clients in PNG, Brazil, Indonesia, Myanmar and countries across Asia and Africa. Robert speaks Portuguese and has capability in Mandarin and Bahasa. He is an adjunct professor of law at the University of Queensland and a Fellow of the Sustainable Minerals Institute.