US investigation into BHP Billiton concluded

• $25 million civil penalty imposed

• No findings of corrupt intent or bribery

• Remedial efforts to enhance compliance program and full cooperation by the company acknowledged

After a lengthy investigation by the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) relating to potential breaches of anti-corruption laws which began in 2009, global resources company BHP Billiton announced this week that the matter had been resolved.

The investigation by the US regulators primarily related to the company’s minerals exploration and development efforts and its hospitality program in connection with its sponsorship of the 2008 Beijing Olympic Games.  BHP Billiton cooperated fully with the SEC and DOJ since the investigation began and has since developed a world class anti-corruption compliance program.

The SEC imposed a civil penalty of US$25 million (which is relatively low in comparison to the penalties imposed in the top 10 enforcement actions for breaches of US anti-corruption laws ranging from US$185 million to US$800 million).  Interestingly, the SEC made no findings of corrupt intent or bribery by BHP Billiton.  The DOJ completed its criminal investigation without taking any action.

The SEC noted that the settlement ‘reflects BHP Billiton’s remedial efforts and cooperation with the SEC’s investigation’.  The company is required to report to the SEC on the operation of its compliance program for a 12 month period.

The SEC found that BHP Billiton failed to devise and maintain sufficient internal controls over its hospitality program in connection with its sponsorship of the Beijing Olympics, where the company invited 176 government officials and employees of state-owned enterprises to attend the Games.  Sponsored guests mainly from Africa and Asia were provided with hospitality packages that included event tickets, luxury hotel accommodation, and tours.

The SEC stated in its cease-and-desist order released earlier this week that, ‘as a result of its failure to design and maintain sufficient internal controls over the Olympic global hospitality program, BHP Billiton invited a number of government officials who were involved with, or in a position to influence, pending negotiations, efforts by BHP Billiton to obtain access rights, or other pending matters’.
The company stated publically that while it made efforts at the time to address the risks relating to inviting government officials to the Olympics, the controls it relied on were insufficient to satisfy the internal accounting controls requirements of the US anti-corruption laws.

Mining and resources companies, particularly those operating in high risk countries, should ensure that they have adequate procedures in place to manage the corruption risk associated with giving gifts, meals and entertainment to government officials, especially where the official is in position to influence pending negotiations or decisions regarding the grant of mining and petroleum licences. 

If anything of value is given or offered to government officials, it should be appropriate in the circumstances, having regard to whether any other things of value have been given to the government official in the previous six months, whether it is of an appropriate value and nature considering the government official’s position and whether it serves only a legitimate business purpose.

Since the commencement of the US investigation, BHP Billiton has undertaken the following significant remedial action, which was important in demonstrating its strong culture of compliance and its commitment to operating to the highest standards:

• creating an independent compliance function that reports to the head of the legal function and the Risk and Audit Committee of the board
• enhancing its policies and procedures regarding hospitality, gift giving, use of third party agents and business partners and other high-risk areas
• enhancing its financial and auditing controls
• conducting extensive employee training globally on anti-corruption issues, and
• overhauling its processes for conducting internal investigations of potential violations of anti-corruption laws.

Tiffany McLean

Risk based approach to compliance and enforcement - NSW Division of Resources and Energy

The NSW Division of Resources & Energy (DRE) has published its new Compliance and Enforcement Policy which introduces a risk-based approach.  

The DRE will determine its enforcement approach by identifying the likelihood of a particular event occurring and the consequence to the community, industry and DRE should that event occur. 

The DRE’s Compliance & Enforcement branch (established on 31 July 2014) oversees and investigates non-compliances with obligations created by the grant of a right to explore, extract or produce petroleum or minerals in NSW, as well as unlawful mining or petroleum extraction activities.  Its functions include:

• monitoring overall industry compliance
• developing compliance initiatives and programs, and
• determining the level of enforcement to be applied in cases of non-compliance.

The risk-based approach to compliance and enforcement means that businesses who have not complied with relevant polices, regulations, approval or licence conditions are deemed ‘high risk’, while business that do comply are determined to be ‘low-risk’.

The DRE’s stated regulatory objectives are:

• to maximise a titleholder's compliance with legislation and policies governing coal, mineral, petroleum and coal seam gas activities
• to provide for a healthy and safe work environment for mineworkers resulting in zero deaths and a reduction in serious injuries occurring in the workplace
• to promote a culture of environmental protection and best practice environmental management in the exploration, mining and petroleum industries
• to educate and provide guidance to industry and the community
• to demonstrate consistency in the compliance and enforcement actions taken by DRE
• to promote transparency in DRE's decision making processes
• to conduct thorough and timely investigations of potential non-compliances or alleged breaches of legislation, policies or approvals
• to exercise enforcement action in a professional, transparent and effective manner
• to encourage self regulation and timely reporting of non-conformances to Government, and
• to protect the interests of the State and the people of NSW.

The DRE has identified that it will focus its regulatory actions on ‘those who consciously choose not to comply with the law’, and will be undertaken in order to raise industry awareness and to encourage a change in attitude or behaviour.  The 2015-2016 compliance priorities will be:

• titleholders, prospectors or mine operators whose activities potentially have significant safety implications
• titleholders, prospectors or mine operators whose activities actually or potentially have a significant impact upon the environment, community or government revenue
• titleholders, prospectors or mine operators whose activities whose activities attract significant public interest
• titleholders, prospectors or mine operators whose activities who have a history of non-compliance with title conditions, and
• titleholders, prospectors or mine operators who are not undertaking effective exploration.

The DRE’s auditing program will include compliance inspections and assessments, desktop audits, targeted audits and comprehensive audits, which will review information about business operations through onsite investigation and intelligence gathering.

 

Enforcement actions can include financial penalties, permit penalties (imposition of restrictive conditions) and suspension or cancellation of licences, permits and authorities. 

 

Explorers and miners in NSW should be aware of the new Compliance and Enforcement Policy being implemented by DRE and should ensure that they comply with the conditions of any mining or petroleum tenement. Additionally, if your activities attract significant public interest you may get extra attention from DRE notwithstanding a strong environmental record. We can assist you with understanding your obligations under your tenement conditions.

 

Samantha Daly, Patrick Holland, Kate Swain, Felicity Douglas 

Planning Minister announces review of Mining SEPP

The New South Wales Planning Minister Rob Stokes recently announced an upcoming review of the State Environmental Planning Policy (Mining, Petroleum Production and Extractive Industries) 2007 (Mining SEPP) which will occur before September 2015. 

In making this announcement the Minister indicated that:

• there will be an overhaul of the way large mining and coal seam gas projects secure approval
• environmental considerations must be a foundational concern in any decision about resource use
• the community will be given a greater chance to test the planning decisions
• society and the environment will get a more equal weighting with the economy in decision making, and
• there will be a focus on monitoring and compliance so that the consent doesn’t sit on a shelf after it is granted.

Proponent’s that rely on the Mining SEPP to carry out their operations should start giving consideration to how the SEPP can be improved, such as by the following means:

• examples of exempt and complying development that have minimal environmental impact and which should be included in the Mining SEPP
• dealing with issues faced in the implementation of the Gateway process, and
• changes to the application of clause 12AA regarding the significance of the resource.

Further updates on the proposed reforms to the Mining SEPP will be provided in due course.

Samantha Daly, Patrick Holland, Kate Swain

 

Reforms to NSW state significant development assessment

The Minister for Planning, The Hon. Pru Goward, has announced proposed changes to how state significant development (SSD) proposals are processed.  In an effort to reduce the current lengthy delays, the NSW Government has made a commitment to cut the average time that it takes to process SSD applications (including mines) by up to 170 days. 

The reduction in processing time for SSD applications will be achieved through the introduction of:

• clear timeframes for certain assessment processes
• clearer guidance to the Planning Assessment Commission (PAC) on the application of government policies, and
• the appointment of case managers to manage planning applications. 

The Minister also proposes to establish a panel of independent experts to advise the NSW Government and the PAC on technical issues.

The timeframes are not enshrined in law and the proposed changes do not include deemed approval provisions, so it remains to be seen whether the reforms will result in a significant reduction in processing times for SSD applications. 

 

Samantha Daly, Patrick Holland, Kate Swain

New land acquisition and mitigation policy for NSW mining, petroleum and extractive industries

The NSW Government has released a new State Environmental Planning Policy Amendment (Gas Exploration and Mining) 2014 (SEPP Amendment) which came into force on 19 December 2014. 

The SEPP Amendment introduces a new land acquisition and mitigation policy to formalise landholder protection from noise and dust for State Significant Developments (SSD) in the mining, petroleum and extractive industries. 

This means that decision-making bodies are now obliged to take into account the new 'Voluntary Land Acquisition and Mitigation Policy' in determining development applications.  This policy provides guidance on measures to reduce the impact of noise and dust on adjoining properties from proposed new activities.  It applies to all undetermined SSD applications and any future applications to modify existing operations. 

The policy provides that the acquisition price to be paid by a proponent be an amount no less favourable that a 'market value' rate calculated as if the land was unaffected by the development and with reference to section 55 of the Land Acquisition (Just Terms Compensation) Act 1991 (Land Acquisition Act).  This requirement is controversial as the Land Acquisition Act is a statutory scheme introduced for use by NSW government authorities during compulsory acquisition of private land for a public purpose. 

The policy also has the potential to significantly impact proponents of SSD in the mining, petroleum and extractive industries, as it introduces voluntary land acquisition criteria for particulate matter applicable to the majority of workplaces on privately owned land (in addition to residences). Importantly, the consent authority maintains discretion as to whether or not to apply the particulate matter acquisition criteria to workplaces, with a range of factors for the consent authority to consider including the nature of the workplace.

Under the policy, a 'workplace' is defined to include 'a lawfully operating office, industrial premises or intensive agricultural enterprise where employees are grouped together in a defined location, but does not include broad-acre agricultural land, heavy, hazardous or offensive industry or businesses intentionally located close to mining operations.'

Outcome

The requirement that the Land Acquisition Act criteria be applied to acquisition of some types of workplaces affected by dust has the potential to make smaller SSD applications and modifications unviable, as the cost of relocating and compensating a business owner could be substantial. 

Samantha Daly, Patrick Holland, Kate Swain

Draft Industry Action Plan for NSW minerals industry

The Minerals Industry Taskforce (Taskforce) was formed in 2014 with the goal of addressing challenges faced by the NSW minerals industry, and to drive growth, innovation and productivity in the industry.  The Draft Industry Action Plan (Draft IAP) has been developed by the Taskforce and proposes a number of strategies that are aimed at reversing the fall in mining capital expenditure in NSW and increasing the value of mineral production by 30% by 2020.

The Draft IAP is a long-term strategy, and is seeking the NSW Government’s commitment to the following priority areas:

• a transparent process and integration policy that provides certainty for mining companies investing in NSW
• providing fiscal certainty – ensuring no increase to royalties over the next 25 years and a consolidation of fees and charges to reduce these in real terms over time, and
• developing skills and providing supporting infrastructure to foster a vibrant mining sector.

The flaws in the current planning approval process

The Draft IAP indicates that reform to the planning and regulatory decision making regime is the single most important initiative that the NSW Government can implement to address the current flaws in the process, which include:

• delays in the assessment and determination of projects – alarmingly, a development application can take up to 1323 days from the date of submitting an application to when a decision is made as to whether the development can proceed
• lack of accountability and responsibility in the decision making of the Planning Assessment Commission (PAC)
• failure of the PAC to follow government policy and the advice of the Department of Planning and Environment, and
• manipulation and abuse of the PAC referral and hearing process to deliberately delay a decision being made by the PAC and mislead the PAC about often trivial issues.

Recommendations of the Taskforce

The Taskforce has made 12 recommendations to address the above priority areas, including a number of fundamental changes to the planning approvals process and the role of the PAC in the determination of mining related projects. 

 

Transparent process and integrated policy

The following recommendations have been made by the Taskforce to address the significant issues associated with the planning approval process:

• the Taskforce argues for the removal of PAC as the answer to the ‘broken’ process, or at the least the following reforms are considered vital to improving the system:
• projects undergo only one rigorous and thorough review process and are not subject to a merits-based review, and
• if the PAC is to be retained the following further changes are required:
• return of decision-making authority to the elected government
• finalisation of clear policy parameters for project assessment
• tighten the scope for any PAC assessment
• introduction of clear timeframes for the PAC process, and
• reform of the PAC referral and hearings process
• establishment of a lead agency with the authority, sufficient capability and power to drive cross-agency decisions – this body should be the single point of contact for major resource and industry infrastructure projects
• streamlining the decision-making processes and addressing policy gaps with an emphasis on implementing outcomes and risk based regulation.  For example, the Draft IAP advocates for the reintroduction of a broad based modification power for State significant development into the Environmental Planning and Assessment Act 1979
• NSW Government excellence in service delivery and regulation – the Taskforce recommends that an online lodgment and tracking capability be developed
• clear communication of NSW’s robust regulatory regime by providing clear and factual information to the public, and
• continue to provide information to, and engage with communities – encouraging the use of community liaison officers by NSW Trade and Investment.

 

Fiscal certainty

A number of industry-specific taxes are levied on the minerals industry by the NSW Government such as mining royalties, fees and levies.  Stability in taxes and levies will lead to investor confidence and in turn, the growth of the sectors.

 

The Taskforce is seeking a commitment from the NSW Government for:

• no increases in royalties for the next 25 years, and
• consolidation of mining related fees and levies, and a reduction in the real cost to explorers and miners over the long-term.

The above changes will reduce investment risk by increasing certainty, resulting in increased capital investment in NSW mineral projects.

 

Developing skills and providing supporting infrastructure

Finally, the Taskforce proposes a number of changes to ensure that the NSW Government works together with industry and the skills and training sector to ensure direct investment in developing and maintaining a skilled workforce for a competitive and growing minerals industry.

 

Other recommendations include improvements to pre-competitive geosciences information, funding for research in deep cover exploration, mining operations productivity and low emission energy technology and enhancements to ensure the competitiveness and efficiency of the NSW freight network.

 

Submissions on the report can be submitted via email to the Taskforce’s secretariat (minerals.iap@trade.nsw.gov.au) or by post, Minerals Taskforce secretariat, GPO Box 5477, Sydney NSW 2001 until 5pm Friday, 19 December 2014.

 

 

Patrick Holland, Samatha Daly, Michelle Sirasch, Kate Swain

Safety, Rehabilitation and Compensation Legislation Amendment Bill 2014

On 19 March 2014, the Federal Parliament introduced the Safety, Rehabilitation and Compensation Legislation Amendment Bill 2014 (Cth).  If the legislation is passed, it will significantly alter the landscape of workers’ compensation insurance in Australia. 

The aim of the amendments is to remove the requirement for certain organisations to comply with the separate workers’ compensation schemes of each and every State or Territory, by allowing them to apply for a licence to self-insure under the Safety Rehabilitation and Compensation Act 1988 (Cth).

On 15 May 2014, the Senate referred the Bill to the Senate Education and Employment Legislation Committee (Committee) for inquiry and report.  The Committee’s report was completed 8 July 2014.

Safety Rehabilitation and Compensation Act (Cth)

The Safety Rehabilitation and Compensation Act 1988 (Cth) was established to provide statutory insurance cover for Commonwealth and ACT government employees.  Changes were made to the legislation in 1992 and 2006, allowing certain other organisations to self-insure under the Federal legislation. 

In 2007 however, the Rudd government instituted a moratorium preventing any further self-insurance by non-government corporations.  This ban was finally lifted on 2 December 2013.

Proposed changes to the scheme – national employers

If the Bill is passed, ‘national employers’ will be eligible to self-insure under the Federal Comcare scheme and will be covered by the Work Health and Safety Act 2011 (Cth).  A ‘national employer’ is a corporation that has employer obligations in two or more Australian States or Territories.  A national employer has employer obligations if the corporation is, or would be required to meet the obligations of an employer under a workers’ compensation law of the Australian jurisdiction to pay premiums, contributions or similar payments.

This ‘national employer test’ will replace the current definition of ‘eligible corporation’ under the Act and the associated ‘competition’ test.

The decision whether or not to award a licence will be determined by the Safety Rehabilitation and Compensation Commission (Commission) directly and the requirement that a corporation be declared ‘eligible’ by the Minister will be removed, thus providing a more streamlined application process.

Licensed employers may engage a claim management firm or insurer to manage their workers’ compensation claims.  Licencees will also be required to provide a bank or insurer’s guarantee, for an amount that could be called upon by the Commission in the event a self-insurance licence is suspended or revoked, together with a reinsurance policy.

Benefits of the scheme – resources sector

There is a high prevalence of personal injury claims across the resources sector due to the physically demanding nature of the work.  As such, insurance and risk control is particularly important for employers in the resources industry.

Many companies involved in mining and infrastructure development have projects in regional and remote areas throughout Australia and will operate across multiple States.  These companies may therefore meet the requirements of the new legislation and be eligible for self insurance.

Self insurance may be a particularly attractive option for these larger corporations as a way to increase operating profits through the reduction in compliance costs and overheads associated with the maintenance of insurance in each state. The scheme will also provide those licensees with increased freedom and control through self-management.

The introduction of a single licence for self-insurance for a related group of companies, as opposed to the requirement of single licenses for each corporation, will also increase efficiency and reduce costs and avoid the situation where only some entities within a group are eligible to be licensed, while other members of the same group fail to meet the requirements.

There are currently some 30 employers, which are self-insured under the federal scheme.  Yet, there are approximately 2000 companies operating in two or more States or Territories, which could potentially become licensees.  A large number of those employers are operating in the resources sector, and the legislation therefore has particular relevance with its potential to significantly impact the way risk is managed by those employers.

Findings of the Senate Education and Employment Legislation Committee

The Committee received submissions from 18 organisations, including a number of unions, government departments, as well as the Queensland Government.

In its submission, the Queensland Government called for the Commonwealth to consult further with the States and Territories, in an effort to reach agreement about the proposed amendments, raising a number of areas of concern. 

The Committee chaired by Senator Bridget McKenzie has recommended the Senate pass the Bill.  We now await the Second Reading Speech of the Bill in the House of Representatives. 

Companies who operate within two or more jurisdictions and are interested in reviewing their current workers’ compensation arrangements should seek advice from our Insurance and Risk Group about the process and a comparison between schemes.

Kate Denning, Brad Russell