Download MODULE Module Title - IUCN Academy of Environmental Law

Exploring the liability of Financial
Institutions in the light of NEMWA
Chapter 4 Part 8: Who will remediate
mining pollution?
Reece C Alberts
Centre for Environmental Management
Internal Box 150
North-West University
Potchefstroom Campus
Private Bag X6001
POTCHEFSTROOM
2520
Tel: +27 (0) 18 299-1448
Fax: +27 (0) 18 299-4266
E-Mail: [email protected]
Web Address: http://cem.puk.ac.za
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NEMWA Ch4 Part 8 & Financial Institutions
Background
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 National Environmental Management:
Waste Act 59 of 2008
 Chapter 4: Part 8 – Contaminated Land
 Places duty on :
Owner of Land
Person who undertakes contaminating activity
 Report Contamination - Sec 36(5)
May not transfer land without disclosing – Sec 40




Conduct Site Assessment –Sec 37(1)(b)
Directed to Remediate – Sec 38 (2)
Directed to Monitor and Manage – Sec 38 (3)
National Contaminated Land Register – Sec
41
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NEMWA Ch4 Part 8 & Financial Institutions
Question?
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 What are the risks to Financial
Institutions lending money to finance
mining operations?
 Specifically worried about NEMWA
Ch4: Part 8
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Mining & Waste
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NEMWA Ch4 Part 8 & Financial Institutions
Mining Waste
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 NEMWA
 Includes Mining Waste in the Definition of
Waste in Sec 1
 Sec 4 however excludes Residue Deposits
and Residue Stockpiles
 Residue Deposits defined as:
 any debris, discard, tailings, shines, screening, slurry,
waste rock, foundry sand, beneficiation plant waste,
ash or any other product derived from or incidental to
a mining operation and which is stockpiled, stored or
accumulated for potential re-use, or which is disposed
of, by the holder of a mining right, mining permit or
production right
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NEMWA Ch4 Part 8 & Financial Institutions
Mining Waste
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 Residue Stockpile defined as:
 any residue stockpile remaining at the termination,
cancellation or expiry of a prospecting right, mining
right, mining permit, exploration right or production
right
 Deposits and Stockpiles alone account for
+/- 80 % of “Waste” Generated in SA
 510 000 000 tons in 2007 (Purnell, 2009:4)
 Result in significant environmental
degradation and pollution
 Hazardous Chemicals/Substances
 pH – AMD
+ and others
 Heavy Metals – Chr
6
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NEMWA Ch4 Part 8 & Financial Institutions
Mining Waste
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 Deposits and Stockpiles also
severely effect water resources
 Ground Water pollution
 Surface water pollution
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Other Legislation
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NEMWA Ch4 Part 8 & Financial Institutions
National Water Act & National
Environmental Management Act
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 National Water Act 36 of 1998 &
National Environmental Management
Act 107 of 1998
 Sec 19 of NWA and 28 of NEMA places
a duty on:
Owner of the land
Person in control of land
Person who occupies or uses the land
 Take all reasonable measures to
prevent the pollution of a water
resource or environment from
occurring, continuing or recurring.
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NEMWA Ch4 Part 8 & Financial Institutions
National Water Act & National
Environmental Management Act
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 May be directed if reasonable
measures are not taken.
 Government may intervene and
recover costs from:
 Person responsible, or who directly or
indirectly contributed
Lending of funds?
 Owner of the land, or successor in title
Repossession?
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NEMWA Ch4 Part 8 & Financial Institutions
National Water Act & National
Environmental Management Act
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 Person in Control of land or who has
right to use the land
Repossession?
 Persons who negligently failed to
prevent
Ask the right questions before lending?
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NEMWA Ch4 Part 8 & Financial Institutions
National Water Act & National
Environmental Management Act
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 Important to note that pollution
resultant from residue deposits and
residue stockpiles is subject to the
above provisions
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What are the Risks?
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NEMWA Ch4 Part 8 & Financial Institutions
NEMWA
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 Financial institutions lending money
to mines may be exposed to the
following risks with regard to the
pollution emanating from those
mines
 NEMWA:
 Scenario 1
 If the borrower defaults for any reason,
and the financial institution forecloses
and in so doing becomes the owner of
the property the following may result:
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NEMWA Ch4 Part 8 & Financial Institutions
NEMWA
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 If the property is recorded as
contaminated in terms of
NEMWA:
The financial institution is
exposed to financial loss
which may manifest itself as
either
(i) Clean up cost
(ii) A reduction in market value of
the property
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NEMWA Ch4 Part 8 & Financial Institutions
NEMWA
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 If the property is subsequently
recorded after the financial
institution becomes the holder in
title the following costs can be
incurred
 Ancillary investigation costs
 (i) above
 (ii) above
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NEMWA Ch4 Part 8 & Financial Institutions
NEMWA
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 Scenario 2 (Most likely)
 If the borrower is ordered to
remediate the following financial
liabilities may accrue to a bank
If the value of the running concern
is less than the rehabilitation/clean
up cost then the borrower may
default
Financial institution forecloses: See
scenario 1 above.
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NEMWA Ch4 Part 8 & Financial Institutions
NEMWA
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 NB to remember that the
contamination caused by Residue
Deposits and Residue Stockpiles
cannot be considered in the light of
NEMWA
 Sec 4 Exclusion
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NEMWA Ch4 Part 8 & Financial Institutions
NWA & NEMA
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 NEMA and NWA
 Scenario 1
 If the borrower defaults and the
financial institution becomes the
owner/ holder in title (???)
The financial institution may be directed to
clean up or to remediate which results in
direct costs being incurred.
The market value of the property may be
compromised and the financial institution
will incur a loss upon selling
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NEMWA Ch4 Part 8 & Financial Institutions
NWA & NEMA
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 Scenario 2
 If the borrower is directed to clean
up, and he fails to comply
Government may intervene and
claim costs from the financial
institution
Directly or indirectly responsible?
Negligently failed to prevent?
The market value of the property
may be compromised and the
financial institution will incur a loss
upon selling
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Concluding Remarks
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NEMWA Ch4 Part 8 & Financial Institutions
Conclusion
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 Risks posed to Financial institutions with
regard to the financing of mining
operations is greater in terms of NEMA
and NWA than NEMWA
 Largely due to exclusion of Residue deposits
and Residue stockpiles
 NEMA and NEMWA provides for a wider
ambit in terms of “who” is liable.
 Not property specific
 Above scenarios also pose reputational
risks to the financial institutions
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NEMWA Ch4 Part 8 & Financial Institutions
Conclusion
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 It must be noted that given the
absence of case law regarding the
liabilities accrued by financial
institutions with regard to the
funding of pollution or damage
causing activities and the extent of
their liability in such instances, the
above scenarios remain untested in a
court of law and no precedent exists.
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NEMWA Ch4 Part 8 & Financial Institutions
Questions?????
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