Extractive industry waste management: time for legislative change

The agenda includes finalizing and improving the text of the draft law «On Mining Waste Management»

In Ukraine, mining waste accounts for about 70%. Today, there is no effective system for managing such waste, which has a negative impact on the environment. But there is another side to the coin – «something unnecessary» could be turned into something “necessary” at relatively little cost and even with financial benefit if the state facilitated it.

On June 20, 2022, the Parliament adopted the Law on Waste Management, which became the basis for fundamental changes in approaches to waste generated in all areas of activity. This was one of the steps towards European legislation. The Ministry of Environmental Protection convened a professional working group of experts, extractive businesses and their associations, which managed to draft a draft law «On the Management of Extractive Industry Waste» before the war began, and the text of which is now officially published on the website of the Ministry of Environmental Protection.

Now that this working group has resumed its activities after a pause caused by martial law, the agenda includes finalizing and improving the text of this draft law before it is submitted to the parliament. The task is to ensure that the future law effectively meets the challenges posed by today’s realities, taking into account the martial law, and takes into account the needs of the extractive industry.

Waste from the extractive industry has potential. For example, some waste is essentially a by-product of the main activity. They could be sold to other sectors of the economy and reused (such as crushed stone after ore mining or cement ash after coal mining).

The National Association of Extractive Industries of Ukraine (NAEIU) initiated the amendment to the draft law to classify as a by-product, rather than waste, those substances that are generated in the production of the main product and are not the purpose of this production, but are suitable as raw materials in other production or for use as finished products. After all, mining companies extract minerals, and after processing them according to the technological scheme, waste is generated, for example, such as non-fractional screening of dry magnetic separation at mining and processing plants, which is suitable for use in road construction.

Therefore, instead of accumulating in dumps for many years, the status of a by-product would give the right to transfer such screenings for use in other industries. And most importantly, one of the fundamental principles of waste management laid down in the 2022 parent law, namely the prevention of new waste generation, will be fully implemented.

NAEIU also proposes to revise Article 43 of the draft law. It concerns the financial security that subsoil users will have to provide to guarantee the implementation of post-operational measures for the closure and maintenance of waste facilities after the completion of production. In other words, industrialists must pay the state an amount that will cover the costs of closing the facility, monitoring it, reclamation, etc. This scares off entrepreneurs and potential and current investors. Subsoil users already pay a lot of money for this item in the form of an environmental tax for the disposal of mining waste. It is not earmarked in the budget and goes to the general fund without being used for relevant environmental measures. Therefore, the emergence of another similar financial obligation on the same issue must be properly justified and thought out without harming business.

NAEIU proposes to exclude from the draft law the obligation to insure post-operational costs and deposit a sum of money into an escrow account, which immediately deprives businesses of a significant amount of such necessary funds. Instead, it should be replaced with more flexible mechanisms: contracts of guarantee or pledge of movable and immovable property, property rights, and securities.

In addition, the National Agency proposes to provide in the future law that the detailed procedure and conditions for indexing financial security be determined by the Cabinet of Ministers. After all, it is at the bylaw level that the conditions, procedure, types of indexation, etc. should be determined.

NAEIU also draws attention to the need to revise the amount of fines for violation of the legislation on mining waste, which are prescribed in the draft law. Currently, these amounts reach UAH 160-480 thousand for each fact of violation, which may include, for example, only late submission of a report. For a repeated offense within a year after the first fine is imposed, it is expected to double, i.e., in the amount of UAH 320-960 thousand. Such fines do not seem to be properly justified and reach such amounts that it would be more profitable for an entrepreneur to simply close down rather than fearfully await sanctions from the state.

The above proposals may seem technical, but they mean a lot to the extractive industry. A law that is effective for all will result in a reduction of the environmental burden, coupled with an increase in the efficiency of waste recycling, leading to progress towards sustainable development.