"The type and the amount of the security required...will be determined by the scheme manager"
Financial Assurance Regime to receive an overhaul
On 25 October 2017, the Mineral and Energy Resources (Financial Provisioning) Bill 2017 (Qld) (the Bill ) was introduced into Queensland Parliament and proposes significant changes to the financial assurance regime for resources projects in Queensland.
The Bill proposes to replace the existing financial assurance regime, which requires all environmental authority holders to provide a financial assurance (typically in the form of a bank guarantee) to the State, with a new regime which establishes a "financial provisioning scheme" (to be administered by a scheme manager) under which:
- a financial provisioning scheme fund will be created; and
- authority holders will be required to provide one (or, in limited cases, both) of the following types of security to the scheme manager:
- an annual contribution into the scheme fund; or
- a surety (in the form of a bank guarantee, insurance bond or cash deposit).
The type and amount of the security required to be provided by an authority holder under the new regime will be determined by the scheme manager applying a risk assessment methodology which takes into account the following five factors:
- the "estimated rehabilitation cost" for the authority;
- the "risk category" to which the authority is allocated by the scheme manager;
- the "prescribed ERC amount" (A$100,000);
- the "total estimated rehabilitation cost" for the authority holder (or, if more than one holder, the nominated "relevant holder") and its parent corporation, subsidiaries and controlled entities; and
- he "fund threshold" (A$450 million).
Corrs is currently compiling a comprehensive report which critically analyses the key elements of the new financial assurance regime. The report will be made available via our website.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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