Articles

T&T’s Mining Sector: A Brighter Future

By Sherwin Long, Head TTEITI Secretariat and Garik Joseph, Project Officer, TTEITI Secretariat.

The Minerals (General) Regulations 2015 document laid in Parliament in June 2015 has not garnered much column space or airtime, having slipped under the radar at a time when the Tenth Parliament was winding down and the country was anticipating the announcement of the date for the recently concluded general elections. However, the nation stands to benefit greatly from the enforcement of these regulations, especially given the well-publicized shortcomings which have affected the mining sector over the past decade.  These problems include illegal quarrying, royalty payment shortfalls, environmental impact on watercourses/watershed zones and forest and land degradation and an outdated policy and regulatory framework. On paper, the regulations aim to correct these shortcomings while also improving revenue collection, state oversight and administrative and regulatory efficiency in order to maximize the benefits citizens gain from mining operations.

The regulations focus on the procedures and conditions for obtaining quarry licences, the duties and expectations of licensees after licences have been granted and financial obligations.  The duties relate, inter alia, to the conduct of mining operations, disposal of waste water, reporting requirements, training of employees and even site maintenance. While the Regulations 2015 will increase the royalty rates quarry operators will have to pay, in weighing the advantages of the new regulations over the old, the old rates and the new rates must be compared and an analysis done of what payments would have been due to Government in the past and what payments will be due Government in the future, all things being equal.  

The use of publicly available data from the Ministry of Energy and Energy Affairs’ Green Paper on Minerals Policy 2014 produced some interesting results for this analysis. For example, for the period 2005-2013, Government collected a total of $13.3 million in royalties from the minerals sector while, based on production figures and the old royalty rates for the seven minerals considered, royalty payments alone should have amounted to $132.3 million (see Table 1). It is important to note that production data was only available from 2005 to 2013. However, the Green Paper on Minerals Policy 2014 also alludes to a potential gross under-reporting of production and royalty payments between 2001 and 2013 and notes that only 10 percent of royalties were collected in this period. The paper stated, “This represents a loss of revenue to the State of approximately TT$120 million in royalty payments, and does not include loss of revenue from royalties for production not accounted for and from illegal mining (quarrying) as well as revenues from other sources such as: taxes, Business Levy, and Green Fund levy, over the period 2001 to 2013”. 

To illustrate the mismatch, the following graph shows that there was no correlation between royalties paid and volume of minerals produced for the period in question, although royalties are charged per cubic yard of production and the two should therefore correlate directly. This highlights the importance of the changes being introduced by the Regulations 2015 and, more importantly, the need for their strict enforcement.

Source: Ministry Of Energy and Energy Affairs Green Paper on Minerals Policy 2014

Perhaps one of the most significant benefits that can be expected from the new rates under the Regulations 2015 is the change in the value of the Rehabilitation Bonds posted. A Rehabilitation Bond is deposited before a Mining Licence is issued or renewed and is returned to the licensee only if the land for which the licence was granted had been rehabilitated in accordance with the Minerals Act (2001), the Minerals (General) Regulations 2015 or the terms and conditions of the licence. Should the licensee fail to carry out the requisite rehabilitation, the State may do so, with the costs paid out of the forfeited Rehabilitation Bond. The Rehabilitation Bond under the Minerals Act (2001) was $3,000 per acre. Under Regulations 2015, Mining Licence applicants will be required to post a Rehabilitation Bond of $60,000 per hectare (or $24,281.18 per acre) of Licensed Area. That will result in an eightfold increase in funds available for the State to undertake rehabilitation work, if licensees fail to do this themselves. With proper enforcement of the Regulations 2015, one can expect that most if not all abandoned state quarry lands will be properly rehabilitated.

There was also a marginal increase in the Annual Mining Licence Fee from $100 per acre ($247 per hectare) to $250 per hectare of Licensed Area. Based on the current list of licensed quarry operators provided by the Ministry of Energy and Energy Affairs, mining license fees for the first year of operating the Regulations 2015 would be $260,369 compared to $257,355 under the old rates.

The introduction of the Regulations 2015 is an important first step toward improving the regulation of the mining sector, reducing its negative environmental impacts and increasing the revenue collected from it, but this is not enough. The Minerals Division is also taking steps to collect unpaid royalties through closer monitoring of licensed and unlicensed operators and partnering with the Ministry of National Security to reduce illegal mining. The Trinidad and Tobago Extractive Industries Transparency Initiative (TTEITI) is also playing a role in this drive to reform the sector.

The TTEITI Steering Committee Secretariat has begun holding capacity building workshops with mining sector companies with the intention of including the sector in Trinidad and Tobago’s future EITI Reports. This will ensure greater transparency in the reporting of payments made to Government by mining license holders. The TTEITI Steering Committee recognizes the introduction of Minerals (General) Regulations 2015 as a step in the right direction and believes that enforcement of the regulations coupled with mining companies reporting of their payments through the EITI process will bring to the mining sector greater resource revenue transparency, give citizens greater assurance that the sector is being managed sustainably and satisfy them that they are getting value for money from the extraction of their natural resources.

 

Table 1: Estimated Royalties at New and Old Rates for the period 2005-2013

 

Note: Please note that historical production from the 2005 to 2013 period was to tabulate the “new rates” and these rates may not necessarily be in line with 2015 production but are just a rough estimate of royalties payable using past production as a guide. It is also important to be aware that the production data available from 2005 to 2013 includes production from companies which own the mineral rights to their acreage. Companies which own their mineral rights do not pay royalties and only pay licence fees and provide rehabilitation and performance bonds.