There is a saying often attributed to Abraham Lincoln that goes: "The best thing about the future is that it comes one day at a time". On 20 June 2023, the Mineral Resources (Sustainable Development) Amendment Bill 2023 (Vic) (Bill) was introduced into the Victorian Parliament, and maps out the key components of what the future of the regulation of exploration, mining and extractive industry in the State will look like. The Bill has been long awaited, and presents a suite of reforms which seek to:

• fundamentally change how mining and extractive industry is regulated in Victoria, without amending the current scope of matters regulated;
• deliver a simpler, more flexible and proportionate regulatory framework;
• modernise and streamline assessment and approval processes; and
• deliver a more consistent and transparent compliance regime and enhance regulatory oversight.

In this article, we take you through the key elements of the Bill. We provide our insights into this significant development, what it means for industry participants moving forward, and what it signals in terms of government and public positioning towards an industry that is crucial in our efforts to deliver the critical minerals and raw materials necessary to create a cleaner and more sustainable future.

The Bill proposes a suite of amendments to the Mineral Resources (Sustainable Development) Act 1990 (Vic) (Act), which is proposed to be renamed the Mineral Resources and Extractive Industries Act 1990 (Vic). Below, we take you through each of the key changes.

A new duty-based regulatory model

The Bill introduces a new duty-based regulatory model into the Act, which establishes a general duty to, as far as reasonably practicable, eliminate or otherwise reduce risks posed to the environment, any member of the public or to land, property or infrastructure by exploration, extractive industry, mining or rehabilitation of land or any related activity carried out by or on behalf of a duty holder (Duty).

The drafting of the Duty and associated provisions take inspiration from the general environmental duty (GED) contained in section 25 of the Environment Protection Act 2017 (Vic) and the general duties contained in the Occupational Health and Safety Act 2004 (Vic). Similar to these duties, the provisions in the Bill creating the Duty also:

• provide some guidance as to what is or is not 'reasonably practicable' at a particular point in time, and the factors which must be regarded in making this assessment (such as the likelihood of the risk eventuating, what the duty holder knew or ought to have known about the relevant risk and the costs of eliminating or minimising the risk); and
• set out specific circumstances in which a duty holder will contravene the Duty (such as failing to use and maintain adequate systems to ensure that if a risk eventuates, its harmful effects are minimised; failing to provide persons engaging in the activity with the information, instruction, supervision and training necessary to enable those persons to eliminate or minimise the risk posed by the activity; and failing to comply with Codes of Compliance, standards and conditions).

Contravention of the Duty will be a criminal offence and carry significant penalties (approximately A$1.85 million for a corporation, along with potential direct exposure for certain officers of the corporation).

The new duties-based approach is intended to result in a more dynamic and less prescriptive approach, which also facilitates increased standardisation across industry.

However, in our view the potential for regulatory overlap and dual regulation (for example with the GED and other statutory duties in the Environment Protection Act 2017 (Vic), and the general duties in the Occupational Health and Safety Act 2004 (Vic)) remains a key area of concern under the new framework and could be seen as a missed opportunity to clearly delineate the jurisdiction and responsibilities of Earth Resources Regulation compared to other regulators. Managing this overlap is not dealt with in the Bill and is left to be addressed at an administrative level between separate governmental authorities and departments, who may have differing requirements, and competing compliance and enforcement priorities or drivers.

Associated material will be developed to further specify compliance requirements or provide guidance on how to comply with the Duty, while also maintaining flexibility for industry on how to meet relevant performance standards. Similar to the GED, it appears that the 'state of knowledge' (that is, all the information reasonably known about risk identification, assessment and management from sources such as the duty holder, regulators, industry and governments) will be a key factor in determining what is required to comply at a particular point in time. In that regard, we expect that work plans and work plan variations will continue to have a meaningful role to play in informing the state of knowledge, particularly in the early stages of the duty-based model.

A risk tiering system for licences and work authorities is introduced

As part of the new Duty, the Bill introduces a risk tiering system for licences and work authorities. Under this new system, licences and work authorities under the Act can be determined as being of lower risk, moderate risk or higher risk.

First, a licensee or applicant will be required to undertake a self-assessment of the relevant risk level category applicable to the licence or work authority.

Second, prior to carrying out any work under the licence or work authority, the licensee or applicant will be required to apply to the Department Head for a risk level determination for the licence or work authority, which will be required within a period that will be specified in regulations. It is intended that the assigned risk level will then dictate the requirements with which a licensee or work authority holder must comply.

Lower risk licences or work authorities will be required to comply with activity-based Codes of Compliance, moderate risk licences or work authorities will be required to comply with Codes of Compliance and prescribed standards, and higher risk licences and work authorities will be required to comply with Codes of Compliance, prescribed standards and custom conditions on licences or work authorities to address specific risks. This approach is intended to increase consistency, improve transparency and support community confidence in the sector. Holders of licences or work authorities that are moderate or high risk will also be required to prepare and comply with a rehabilitation plan (see below).

The categorisation of licences and work authorities into overall risk categories appears to be a way of ensuring the level of regulation is proportionate to the overall level of risk. How this categorisation will be made (i.e. before or after risk treatments and mitigation), and how it will deal with circumstances where high and lower risk activities are conducted on the same licence or work authority, remain to be seen.

Significantly, the introduction of a new tiered duty-based risk framework into the Act appears to remove the current legislative framework authorising and regulating 'low-impact exploration.' Low impact exploration is currently defined in Schedule 4A of the Act which is now proposed to be repealed under the Bill and we understand will be replaced with a Code of Compliance.

As it stands under the Bill, this will mean that licence holders conducting low-impact exploration will first need to self-assess their licence as low-risk and then have this determined as such before the work can be carried out in accordance with regulations or a Code of Compliance, which introduces a new approval step into the process. It remains to be seen whether the final framework will still authorise low impact exploration in the same manner and subject to the same conditions and exemptions as is currently the case (including in relation to the exemption from the requirement for a planning permit to remove a small amount of native vegetation, as is currently contained in clause 52.17-7 of the Victoria Planning Provisions), however it is noted that taking low impact exploration out of the legislative framework will allow greater flexibility for this to be changed by the Department into the future.

The Bill provides a right to a licence or work authority holder to apply to the Department Head for a review of the risk level for the licence if the licence or work authority holder reasonably considers that a change or foreseeable change in circumstances has or will materially affect the risk posed by the work under the licence or work authority. This provides an avenue for a licence or work authority holder to, for example, reduce the risk level for work under a licence or work authority to a lower tier if it can demonstrate a change in circumstances of the work being undertaken warrants the reduction. A licence or work authority holder will have a right to apply to the Victorian Civil and Administrative Tribunal for a review of the Department Head's decision in relation a risk level determination.

The specific factors that will determine whether a licence or work authority is lower, moderate or higher risk (and associated requirements associated with a particular risk level) will be further developed in subsequent regulations and supporting instruments.

New duty and risk-based framework is proposed to replace the existing regime

The new duty and risk-based framework is proposed to replace the existing regime which relies in large part on the preparation, submission and approval of work plans and work plan variations.

A work plan generally outlines the proposed activities to be undertaken pursuant to the licence or work authority, and functions as a repository of information relating to matters such as environmental management, community engagement, health and safety, reporting obligations and more. The replacement of a work plan approach with a new duty-based risk framework is intended to facilitate a less prescriptive regulatory model.

Removal of statutory endorsement process

Significantly, the removal of work plans from the regulatory architecture also removes the statutory endorsement process.

This process applies where a licence or work authority holder requires a planning permit for proposed work, and is not required for exploration work, or where an Environment Effects Statement has been prepared for proposed works, assessed by the Minister for Planning, and that assessment has been provided to the Minister for Energy & Resources. To understand the current statutory endorsement process in more detail (along with some helpful flowcharts demonstrating how this process fits into the bigger picture of work plan-related approvals), read our previous insight piece 'A step-by-step guide to exploration and mining in Victoria'. The flow charts were developed in collaboration with the Minerals Council of Australia and are relevant to mining and exploration work. However, substantially similar processes apply in the context of work plans or work plan variations for extractive industry and they are helpful for the purposes of understanding the changes as outlined below.

The statutory endorsement process was described in the Second Reading Speech as 'opaque' and 'a significant source of unnecessary cost and delay from the approvals process,' which is consistent with the flow charts we have prepared.

It is envisaged that under the new framework, licence and work authority holders will apply and obtain planning permission as the initial step in the approvals process for new work, rather than first obtaining statutory endorsement of a work plan or work plan variation from the Department Head. This is intended to provide the community with a much earlier opportunity to understand and provide input on resources proposals via the planning permission process, and ensure decision-making about appropriate use and development of land under the planning regime takes place prior to the authorisation and commencement of operational works.

In our experience, while the statutory endorsement process was well-intentioned and in fact designed to streamline assessment and approval processes for exploration, mining and quarrying activity, its implementation has at times had quite the opposite effect in practice, leading to a lengthy and somewhat circular process. Therefore, at least at a conceptual level, this is a very welcome proposed reform.

However, it also brings squarely into focus the challenges of the interactions between the planning framework and the separate regime established to authorise and regulate the exploration, mining and extractive industries. This is an issue that we explored in detail in our note Planning: Consideration of matters relevant to the approval of a quarry.

In particular, the proposed new framework will have the effect of calling for a responsible authority to make a decision in relation to a planning permit without the benefit or assurance that comes from the statutory endorsement process (that is, that the mining and extractives regulator is satisfied that the work plan is suitable to support a planning permit application after having gone through a statutory referral process with relevant referral authorities).

Under the new framework, there will be no work plan, no statutory process undertaken by the mining and extractives regulator to engage with referral authorities, and no endorsement of a work plan by the mining and extractives regulator in advance of the planning permit application. This will presumably increase the administrative burden on responsible authorities during the assessment of planning permit applications, and will also require them to make a decision on a planning permit application without the benefit of:

• a work plan or work plan variation document; and
• the prior decision by the specialist mining and extractives regulator to endorse that work plan.

We expect that the burden the new framework places on responsible authorities, coupled with a lack of administrative resources and experience in mining and extractive industries from local councils, may create some challenges in realising the objective of this reform to remove a significant source of unnecessary cost and delay. We understand that this challenge is proposed to be mitigated, in part, by having the Department Head (i.e. the Secretary of the Department of Environment, Energy and Climate Action, the Department which encompasses the Earth Resources Regulation) be a determining referral authority in the planning permit application process. It is intended that this will provide assurance and support to local council planning departments in assessing whether planning permission should be granted for a mining or extractive industry proposal, and to prevent 'scope creep' as between subject matter that is properly within the realm of the mining and extractives framework rather and the planning regime.

We note that the associated reforms proposed to the Victoria Planning Provisions and individual planning schemes to realise the reform package remain to be released. Ensuring consistency across regulatory systems, including the effective operation of referral processes, will need to be the key focus areas of these reforms – getting these right could assist with streamlining assessment and approvals processes, and getting them wrong could result in a lengthy, contested, and challenging new process. We also query whether making the Minister for Planning the responsible authority for mining and extractive industry (similar to how the Minister for Planning is the responsible authority under clause 72.01-1 of planning schemes for energy generation facilities with an installed capacity of 1 megawatt or greater) would be a way to ensure consistency, reduce the administrative burden on local councils created by these proposed reforms, and allow the mining and extractives regulator to work with just one co-regulator under the planning framework.

Notification obligation applicable to licence and work authority holders

The Bill introduces a new notification obligation applicable to licence and work authority holders, which is intended to operate in addition to the requirements in the current regulatory framework for licence and work authority holders to supply technical and financial information concerning their activities to the Minister. The strengthening of these notification requirements has been described as the trade-off for removing the prescription that exists in work plans and work plan variations under the current framework.

A current or former licence or work authority holder will be required to notify the Department Head of any material change, or proposed material change to work under the licence or work authority. Notification will also need to be made of any change, or foreseeable change, in circumstances that are likely to materially increase the risk posed by the work under the licence or work authority.

The Bill also provides that the Department Head may at any time direct the holder or former holder of a licence or work authority to make a notification if the Department Head believes on reasonable grounds that there has been a material change to work under the licence or work authority or a relevant change in circumstances that materially increases risk. This power is only enlivened where the Department Head believes on reasonable grounds that the holder or former holder is unlikely to notify the Department Head of that change.

The Bill specifies that a notification or any information given to the Department Head as part of this new notification obligation is not admissible as evidence against the person in a proceeding for an offence, other than a proceeding that relates to false or misleading information provided by the person in relation to a notification. The purpose of these provisions is to ensure that the regulator is properly appraised of the risks and proposed management of those risks.

Non-compliance with the proposed notification obligation is a criminal offence and carries significant penalties (approximately A$1.85 million for a corporation, along with potential direct exposure for certain officers of the corporation).

Rehabilitation plans

Despite the proposed removal of work plans, if the self-assessed risk level of the licence is moderate or high risk, or if the Department Head finds that the licence is a higher risk licence or moderate risk licence or authority, licensees and work authority holders will still be required to lodge a rehabilitation plan.

The core requirements of a rehabilitation plan include detail as to how the impact to the land covered by the licence or work authority, or affected by work under the licence or work authority, will be rehabilitated, and any matters required by the regulations.

The Bill sets out requirements to review rehabilitation plans in various circumstances, including where the risk level produced by the licence or work authority holder's self-assessment differs from the Department Head's determination, at prescribed intervals or if directed to do so by the Department Head. In these circumstances, a licence or work authority holder will be required to review the rehabilitation plan within a prescribed period and may need to lodge a revised version. Similar to the current framework, it will not be possible to commence work until a rehabilitation plan has been approved.

Where a licence is determined to be a low risk licence, a rehabilitation plan is not required. Rehabilitation will in those cases be regulated under a Code of Compliance (which will be developed at a later stage).

We expect that the decision to preserve a level of prescription around rehabilitation requirements for mining and extractive industry work has been motivated by the desire to ensure that end-of-project liabilities are fully documented, understood and committed through appropriate bonding arrangements. This is no doubt seen as particularly important given, absent the licensee or work authority holder having adequate planning and funding for rehabilitation liabilities, the State is left responsible for the rehabilitation related liabilities in order to achieve a safe and stable landform.

Minor variations to approved work plans (transition period)

Prior to the commencement of the proposed framework which will remove the requirement to lodge and operate in accordance with a work plan or work plan variation as discussed above, the Bill proposes the introduction of a 'minor work plan variation' process. This will provide an alternative pathway to vary a work plan when compared to the existing processes currently available under the Act, and we expect that it will replace and broaden the administrative update process which is currently utilised.

The Bill defines a 'minor variation' in relation to an approved work plan to be a variation to any part of the approved work plan that does not significantly increase the risk that the work set out in the approved work plan poses to the environment; to any member of the public; or to land, property or infrastructure in the vicinity of that work; and is not a specified variation.

If the proposed variation is minor, then with the approval of the Department Head, the licence or authority-holder is able to avoid engaging in the existing work plan variation process under the Act which can often prove lengthy and complex (see our article: A step-by-step guide to exploration and mining in Victoria which sets out the existing state of play under the Act on the work plan/work plan variation process).

The new minor work plan variation process is limited to proposed variations of work to be undertaken on private land, and does not capture variations relating to Crown land.

If a licence or authority-holder gives the Department Head notice of the proposed minor variation, the Department Head will have 28 days to make a determination on the proposed variation. However, the Bill contains a deeming provision which provides that if the Department Head does not make a determination within the statutory timeframe, the variation is deemed not to be a minor variation.

It is envisaged that this new minor work plan variation process will in turn be removed once the requirement to lodge a work plan is removed.

Next steps

The Bill received a second reading in the Legislative Assembly on 21 June 2023, with debate adjourned until a later date.

The default commencement date of the Bill is stated to be 1 July 2027, to allow for the preparation of various subordinate instruments which will assist with implementation of the proposed amendments. The Bill provides that provisions may come into operation by proclamation (which could be earlier than July 2027 and we expect this to be the case for the minor work plan variation process outlined above). However, we anticipate that the substantive reforms such as the duty-based model and removal of work plans will require further time to develop.

The Bill will follow its ordinary course through Parliament and may be subject to changes as a result of this process. Early, ongoing and meaningful engagement on the development of Codes of Compliance, standards, regulations and guidelines has been promised in order to effectively implement the changes envisaged under the Bill. Other supporting materials that will need to be developed include a Transition Strategy, a Regulatory Compliance Strategy, the update to the Victoria Planning Provisions and associated guidance, and an update to the RMSVic online portal.

Finally, the Bill contemplates a range of transitional provisions under which existing licence and authority holders will have their risk tier determined ahead of the amended Act commencing (including former licence or authority holders that have not yet fulfilled their rehabilitation obligations). The Department Head will contact existing licence and authority holders to engage in this transitional process and to commence discussions around which risk tier category an existing licence falls within.

The introduction of the Bill clearly signals a greater recognition of the importance the mining and extractives industries will play as we ramp up efforts towards increasing our renewable energy capacity and improving the delivery of our infrastructure pipeline and build new homes. This is reinforced by comments from the Minister in the Second Reading Speech which stated that "Victoria has critical minerals potential on a global scale. This Bill brings an increased capacity for Victoria to produce the critical minerals needed for the manufacture of renewable technologies that will support the global transition to net zero." This is also reflected in the Federal Government's release in the same week of the Critical Minerals Strategy 2023-2030 (albeit with some disappointment as to a lack of ambition and financial support that was previously anticipated to be contained in this Strategy).

On the whole, these developments appear to evidence a turning point in the public psyche about the importance of facilitating progress and development in an industry that is fundamental to the decarbonised future we are collectively envisioning. In addition, it is hoped the changes will result in the intended streamlining of regulatory processes and assist with increasing Victoria's attractiveness as an investment destination.

To understand how this Bill may impact your organisation, contact us.