B.Batkhuu, Head of the Policy Implementation Agency of the Ministry of Mining, tells S.Bold-Erdene of the ways in which the issues around the law with the long name are being addressed.It has been a year since the Regulatory Law of the Law with the Long Name (LLN) was submitted to the State Great Khural for approval. Why is it taking so long? Yes, it was submitted in August last year and a working group has been working on it. It is a complicated issue and is taking time because many aspects need thorough and careful study, but we expect that the State Great Khural will pass the law during the Fall session.
One reason for the delay is that the restrictive boundaries and the compensation amount haven’t been fully determined. The Ministry of Environment and Green Development hopes to complete work on the boundaries before long, and once that is done, many other things will be clear.
But new exploration licences will now be granted, keeping the restricted regions in mind, right?The Government made a mistake when it issued Decree No.194 to fix the boundaries of the three types of regions where the long-named law would apply. The Ministry of Environment, as it was called then, was responsible for defining the boundaries of river resource and forest areas, so there were fewer mistakes when compared to the similar boundaries defined by local authorities for water resource protection areas. Some soum authorities even fixed areas up to 10 km from rivers as falling under the LLN. There were also many instances where river courses were drawn incorrectly. This was a clear attempt to overstep or abuse one’s authority to cancel or suspend some special licences. This increased both the extent of affected areas and the number of affected special licences. Once the restrictive boundaries are drawn correctly, the areas coming under the LLN would be much smaller than now.
How does the draft law submitted to the State Great Khural deal with the issues?First of all, I would like to say that no amendments would have been necessary if the Government had the funds to compensate the companies as stated in the Regulatory Law of the LLN. The Law states that if companies holding a special licence are not compensated when their rights are cancelled, they will have to be allowed to continue with their operations. The estimated amount of compensation totalled at least MNT659 billion which was beyond the Government’s capacity to pay. So it was not possible to actually implement that clause of the law and the companies have suffered loss. That is why we suggested an amendment to the Regulatory Law of the LLN.
The draft submitted by the Government suggests leaving exploration licences out of the discussion and talking about mining licences only. Altogether, 427 mining licences and 909 exploration licences falling in areas approved by Decree No. 194 have some overlapping problems. Of these, 346 mining and 789 exploration licences were granted before the LLN was passed on July, 16, 2009. So more than four years have passed since the issue of Decree No.194 and banning grant of new licences.
This period has seen the grant of 81 mining and 120 exploration licences. The former were issued when exploration licence holders completed their exploration work, and estimated reserves were approved. This is something of an automatic process under law.
As for the 120 exploration licences, these were granted in the 11 months between July 16, 2009, when the LLN was passed, and June 17, 2010 when the law banning grant of new exploration licences was passed. No new licence has been issued since then.
As I said earlier, we submitted the proposed amendments to the Regulatory Law of the LLN to the State Great Khural in August, 2013. The main idea of this draft is to bring order to the licences issued before the LLN. Licence holders continued to operate even after passage of the LLN as the prohibitory boundaries had not been demarcated. We wanted to resolve this anomaly, but with a different approach for each of the three types of affected regions. All licensed activities are prohibited within 200 meters of river banks and water resources. Other areas can have contract operations, and mining licences in forested areas are to be regulated under the Law on Forests.
Before the amendments, all licences could have been summarily suspended if they fell within the parameters of the LLN. Now we propose to review each licence individually and decide which will be allowed to operate, and which not. A total of 346 mining licences will be subject to such review.
What companies will be allowed to proceed?Licences to operate beyond 200 meters from the river will be permitted, on condition that the company places 50% of the total cost for environmental protection and rehabilitation in a special fund and gives a proper guarantee for the remaining 50%. This collateral can be a piece of property, not necessarily cash. We shall also determine whether the value of the estimated mineral reserves is enough for rehabilitating the potential ecological damage. No work will be allowed on a deposit if we decide that the result would not be enough to recoup operational costs and pay for rehabilitation.
Were the 346 licences in your list classified according to the type of minerals?Yes, they were. Most, 194 to be exact, are gold deposits, while 72 licences are for construction materials, 42 for coal, 7 for salt, 5 for iron, 5 for tin, 4 for wolfram, 4 for spar, 4 for composite minerals. There are a few others also.
The actual number of licences we shall review is 337 as nine licences for strategic deposits are in any case outside the LLN. A total of 247 entities hold these 337 licences.
What effect will the amendments have on the 81 mining licences that were originally exploration licences?We are currently considering this issue. Changing exploration licences granted before the LLN into mining ones after the law was passed is one thing, but we also have one example of such change allowed to an exploration licence that was granted after the law came into force.
What about the exploration licences?Our prime concern now is the one of how to compensate the 789 exploration licences issued before the LLN was passed. Just the fees they paid for the licences amount to nearly MNT155 billion, and to this is to be added MNT451.8 billion spent on geological and exploration work by both mining and exploration licence holders. This is a rough estimate, as some companies are coming in to say that their licensed area overlaps other licences and they want to explore the unencumbered areas.
Simple and blanket reimbursement is not the only issue. A company might well have spent MNT10 billion and found nothing. We feel they took a risk and suffered a loss. If we pay compensation in such cases, the Government would be responsible for paying MNT10 billion. The State should also not be expected to pay anything when a company wants to surrender its licence and go away. Compensation claims can be entertained only when there is evidence of legitimate expenses on unfinished exploration work.
How do you resolve such intricacies? The 789 exploration licences should continue work until their licence expires. In some cases, this will be as late as 5 years from now. The State will not compensate those who fail to find any mineral deposit, or if what they find is not considered economically viable. If they find a profitable deposit, the principle governing the 346 licenses will be followed. This way, we can avoid paying hundreds of millions of tugrug as compensation.
Is the number of special licences that encroach on prohibited areas getting higher? I mentioned earlier that the boundaries set by Parliament’s Decree No.194 have lots of errors. Some included areas as far as 10 km from the river while some didn’t include river areas. Satellite mapping by the Ministry of Environment and Green Development does show that cases of licences spilling into protected areas are now more numerous, but at the same time, there is a decrease in the number of licensed areas that fall entirely in protected areas. According to the boundaries set by governors of aimags, there are 278 special licences covering parts in water resource areas.
As I see it, you are basically saying that we need to pass the Regulatory Law because the LLN cannot be fully implemented as it stands. But this failure to implement seems to have much to do with the incorrect boundaries set by aimag governors.
The previous Law on the Environment stated that the boundaries of protected regions of river areas would be set by local authorities, and then approved by the Citizens’ Representatives Meeting. But according to the new law, the boundary will be demarcated by the Ministry and if the local authorities do not approve of the cadastral map prepared by the Ministry, they should give reasons. Such disputes arise as we do not have a centralised mapping system of Mongolia.
The law called for a cancellation of licences upon payment of compensation within 5 months of its coming into force. But we had neglected to consider our financial and technical capacity for doing this. This is the principal reason for the delay in implementing the LLN. Secondly, the clause that says a company has the right to continue its operation if compensation is not paid is another hurdle for the LLN. The companies insist on continuing their operation since they have not been compensated. It’s as if the law itself is pushing people to act illegally.
In 2011, the Government issued Decree No.174, mainly targeted at gold miners. How is the implementation going? There are nearly 1,500 licences included in the LLN’s protected region. The matter was placed before the former Government several times and finally a decision was made to suspend gold placer deposits in phases. That was Decree No.174. However, the results have not been good.
The estimated compensation for licence holders of gold placer deposits is nearly MNT222.5 billion, beyond the State’s capacity. The companies have stopped operating and the compensation amount keeps rising, as the companies say they have to hire guards to keep the ‘ninjas’ away, apart from paying salary and social security benefits to other employees.
Only 13 out of the 242 gold licences were actual gold deposits. Altogether 163 out of the 229 gold placer deposits filed claims for compensation. Licences of 66 companies that didn’t submit any claim were cancelled once Decree No.174 was issued. Some think this was a good decision, but I’d say it caused further harm to the environment as some of the companies have now become ninjas themselves.
How exactly?First of all, the number of illegal gold miners has increased and the companies have stopped bearing any responsibility for rehabilitation. Secondly, these companies have stopped paying tax. That’s why I say the companies have turned into ninjas.
All this is the result of not having an appropriate mechanism to implement the LLN. If we keep delaying passage of the Regulatory Law, the present compensation amount of MNT659 billion will keep going up, now more so as the exchange rate is also increasing for the MNT.
Will there be any principal change in the main concept of the LLN?The main concept of the law won’t be touched. Since the amendment to the Minerals Law states that exploration licences will be granted only on areas approved by the State, no licence will be issued on areas covered by the LLN. Our aim is to dismantle the obstacles in implementing the LLN. It’s not the fault of the people who obtained licences, it’s the State’s. We shouldn’t have granted licences on these areas in the first place.