MINE CLOSURE – THE LAW AND THE ENFORCEMENT MECHANISMS FOR MEETING COSTS

• Closure is an absolute responsibility of the Lease holder; Government should not dilute this principle

1. The Mineral Concession and Development Rules 1988 clearly lay down the procedures and the financial guarantee that the closure plan will be executed.
2. The current legislation on mine closure provides for abysmally low levels of financial assurance ranging from Rs. 15,000/hectare and Rs. 25,000 / hectare.
3. 14 % of leases account for 83% of the lease area comprised of Large leases (>50 hectares and above). More than 70% of non-coal mining leases are held by private sector. Therefore much of the closure tasks are of the major miners.
4. Mine closure is an absolute responsibility of the lease holder and all costs and appropriate activities should be supported as a part of the project costs. This is an important aspect of the legal requirement as well as important obligation in the process of mining.
5. The current situation is causing confusion on the issue and perhaps orchestrated to get public expenditure to take care of the closure. Any percentage of Royalty and deposits at abysmal rates will not solve the problem. Even if we assume 30 percent of the royalty, this works out to a meagre Rs 25 per hectare.

• Closure is a Scientific, Technical and Socio-economic Process with specific tasks and procedures and cannot be just equated with some monetary mechanism

1. Mine closure is not an activity that a universal model will be applicable. Just as the mine plan is site and mineral lode specific, the closure plan will require complex activities.
2. These costs can be fairly well estimated and as a precautionary measure a solatium must be levied. Volume is a better metric than area of lease for computation. However this is to be based on empirical results in each mineral and ecological belt and can only be indicative.
3. Mine closure plan must dovetail with the Environmental Management Plan, the Compensatory Afforestation Plan, and maintenance of green belt, conservation and restoration of water sources and other such measures including human settlement issues.
4. Currently mine closure plans are only a piece of paper to ease-the-business of doing mining without a serious thought about the future of the region and people. The mechanism set up at the apex level, PAMCAF should not relegate it to mere certification and pressure the ministries to initiate mining without a proper closure plan.
5. An institutional mechanism is required to ensure closure and has to become a part of the closure and environmental obligations.

• Closure is necessary task and has no relevance to whether the mine makes profit

1. Closure is a necessity for every mine and irrespective of whether the mines are profitably producing or otherwise the investments on closure is sine-qua-non
2. We already have a number of legacy issues and only a very few of them have been identified as abandoned mines and orphaned mines and this data is over a decade ago.
3. Every mining company by virtue of the structure of the industry will be facing reduced revenues towards the end-of-life of the mine when closure costs peak. Companies have a tendency to apply for bankruptcy and escape the burden of reclamation.
4. Therefore even before we begin mining, a robust mechanism must be created to ensure the proper reclamation, rehabilitation and safety of the mine after its closure for eternity.
5. The level of capability shown by the IBM and the existing corporate responses do not reflect the importance that needs to be attached to mine closure.

• We need to ensure proper mine closure for our future generations

1. We need proper plans and progressive costs which are transparently presented to the community.
2. The costs and the tasks must be identified with concurrent understanding of the impacts and implications.
3. The “financial assurance ” as laid down in the rule also provides for four forms of financial assurance, as given below. However the rule says any one or a combination is sufficient. We need to use all four instruments effectively.

(a) Letter of Credit from any Scheduled Bank;

This is to ensure that the liability does not end with the entity having no resources to complete the mine closure. A letter of credit must be obtained for the estimated amount including the solatium;

(b) Performance or surety bond;

This is required to ensure that all the scientific processes indicated in the plan have been implemented and will be carried out to the fullest satisfaction of the community and the Government;

(c) Trust fund build up through annual contributions from the revenue generated by mine and based on expected amount sum required for abandonment of mine;

A corpus and a cash flow is required for long term maintenance of the institutions and infrastructure created for mine closure.

(d) Any other form of security or any other guarantees acceptable to the authority;

Insurance of the future closure plan could provide a basis for ensuring intergenerational equity and sustainability

These measures are necessary for a fair assurance that the mine will be closed properly.