Legislation protecting mine environment standards

Diversified law firm for commerce, environment and finance in mining Bell Dewar & Hall environment senior associate Justine Sweet says that two pieces of legislation could boost local environment respons-ibility in mining operations, with particular reference to mine water treatment.

Sweet says that as a result of the South African Constitution’s guaran- tee of the right to an environment that is not harmful to health or wellbeing, and the right to have the environment protected, mining legislation has been adapted to take this into account through possible retrospective liability and director liability, which strengthens a mine’s environmental responsibility for treating mine water.

Although the court in the Chief Bareki case found that section 28 of the National Environmental Management Act (Nema) was not retrospective, retrospective liability could still apply to Section 19 of the National Water Act (NWA). This, Sweet says, would reflect a legislative understanding of the true nature of pollution, which may go undiscovered for many years and which cannot be remedied on a basis which “essentially draws a line in the sand”. It would be impractical, and sometimes impossible, to remediate pollution only up to a certain point – for instance, up to the point where the pollution existed as at the start of the NWA, she says.

Retrospectivity means that parties who caused environmental degradation before the NWA’s implement-ation could still be held responsible for this degradation and be liable for the existing pollution, even in the case of polluting events that took place before the Act was promulgated.

This is why several mines, during the sale of businesses, try to hand over as much of the environment liability costs to buyers as possible, says Sweet. She further comments that generally in environmental law, there are few precedents, and owing to the legislation’s quite recent promulgation, many environmental acts are still open to interpretation.

In terms of the NWA, parties who have caused water pollution have, “The obligation to cease, modify or control any act of pollution, comply with any prescribed waste standards of national practice, contain or correct the amendment of pollution, treat and eliminate any source of pollution effect, and remedy the effect of any disturbance to the bed or bank of any water source”.

On the other hand, director liability legislation can hold individual directors of mining companies personally accountable for environ- mental damage at their mining operations. For example, the Mineral and Petroleum Resources Development Act (MPRDA) prescribes that, “Notwithstanding the Companies Act or the Close Corporations Act, the directors of a company or the members of a close corporation are jointly and severally liable for any unacceptable impact on the environ- ment, including damage, degra- dation or pollution advertently or inadvertently caused by the com- pany, or close corporation, which they represent or represented”.

Sweet explains that the MPRDA imposes personal liability on a director of a company for “any unacceptable impact on the environ- ment”. At this stage, section 38 of the MPRDA has not yet been subject to the court’s scrutiny, although Sweet believes that the section is likely to be tested in the courts soon. The Stillfontein case of 2006 is an important example, where courts have upheld environmental principles, and have held individuals accountable for treating waste water.

In the Stillfontein case, owing to the liquidation of one mine, two other mines connected to the first mine by underground shafts and tunnels, were ordered to undertake the costs of continuing to pump under- ground mine water out of the liquidated mine, which, if it remained unpumped, would cause significant environmental damage to underground water.

As a result of this case, a court order was issued, which imposed the obligation on surrounding mines to undertake the necessary measures to treat the mine water not only on their own premises but also in the mines of the company that was liquidated.

Director liability is a significant aspect which no longer protects individuals in a company. The formation of a separate identity of a company protected individuals in that company from being held personally liable for any damages caused by the company. Thus, imposing director liability intrudes on the principle which protects individuals under the umbrella of a company. “The more focus there is on director liability, the more important proper environmental due diligence is in any transaction and, more significantly, the harder it could be to convince buyers to take on environmental liability,” Sweet comments.

Sweet says that owing to the high costs of treating environment pollution, it is difficult to obtain a mine closure certificate and most mine sales, joint ventures or merger and acquisition transactions will contractually specify which party, whether buyer or seller, will undertake responsibility for environment liabillity.

Mines are also required to provide financial guarantees, reevaluated every year until the mine closes, before starting operations. In the event of a mine’s sudden closure, these financial guarantees will be used to rectify any damage to the environment before a closure certificate is issued. Mine water treatment should be included in this amount and is commonly the most expensive item, as this must be an ongoing activity.

In South Africa, the three main Acts that deal with environment pollution are Nema, the NWA and the MRPDA.

Nema, which gives effect to section 24 of the Constitution, contains principles that prescribe how all environment laws must be inter- preted. Nema principles deal with methods of preventing pollution, degradation and environmental damage of contaminated land, rather than water.

The NWA focuses particularly on water and water resources, and, together with Nema, jointly specify the terms and obligations for preventing pollution. The NWA regulates the use of water in mining and related activities, and the Act prescribes methods of conducting mining operations by methods that prevent pollution.

The MPRDA also generally regulates mines, and requires that principles of Nema are adopted in the implementation of the MPRDA, although no specific reference to the NWA is made. The MRPDA makes provisions for managing the environ- ment as well as the necessary requirements for water use licences.

Sweet says that although corporate social responsibility is playing a significant role in motivating people to comply with environmental law, the environment requires further corporate attention. Bell Dewar & Hall associate Matthew Burnell says that the King report requires that a company’s general reporting standards include reporting of environment liability, as well as amounts that have been set aside for remediating the environment. “What the report does not mention is that this amount is sometimes inadequate, paying lip service to responsibility for the environment,” he comments.

“Legislation is drafted in a way which promotes self-monitoring of compliance, and in an ideal world this system could function very well.

Unfortunately, generally, South Africa is not in a position where we can rely exclusively on self- monitoring,” says Sweet.

She further comments that despite the need for more active government departments which enforce environment legislation, as well as the need for increased capacity, South Africa is doing well, particularly through the guidance of the Department of Water Affairs and Forestry and the Green Scorpions