Safety
Queensland's mining safety legislation requires those operating mines to ensure that risk is at an acceptable level. Risk is to be kept at an acceptable level by developing and implementing a Safety and Health Management System for the mine. The SHMS must include a Principal Hazard Management Plan, which must be developed for any hazard that has the potential to cause multiple fatalities.
Where mines are close to watercourses or in other flood-prone areas, the company should address flooding as a part of its PHMPs. These plans should provide for adequate mechanisms to warn of potential flooding and guidance on the appropriate actions to take depending on the likelihood and severity of such flooding, which may include a system of evacuation or moving people to a place of safety and ensuring the site and equipment is properly prepared to minimise risk.
As the floodwaters subside and companies begin to return to operational mining, they will need to conduct an appropriate Occupational Health and Safety assessment of the changed operational conditions and have appropriate resources and procedures in place to ensure they continue to comply with OHS obligations.
Environmental risks and remediation obligations
Intense rain events, flood and inundation will of course create environmental risk. Flooding may cause sumps, environmental traps, tailings dams and minewater ponds to overflow or fail. Mismanagement of contaminated wastewater or unauthorised release of floodwaters may contravene environmental authorities and could lead to penalties and prosecutions.
The Department of Environment and Resource Management has been notified of 13 coal mines and four coal seam gas operations that have released water outside of their environmental authority conditions over the last two months. Even though there is an extraordinary cause from the flooding, the DERM will investigate the cause of these breaches and prosecutions may result.
Companies should consider whether it is necessary to carry out additional water testing, and may also need to consider the extent to which they are capable of complying with their remediation obligations under the mining/petroleum tenement given the impact of the floodwaters.
Development or review of Targeted Action Response Plan
In addition to ensuring compliance with mining safety and health obligations, Queensland Mines and Energy has specifically advised operators to consider developing and activating a Targeted Action Response Plan on the basis of warnings and observations to assess and communicate the onset of severe weather events to anyone potentially affected and ensure the safety of workers and minesites. Take this opportunity to ensure you have a TARP in place and review that it reflects the most recent weather warnings.
ASX continuous disclosure obligations
Listed entities are required to inform the Australian Securities Exchange of information that a reasonable person would expect to have a material effect on the price or value of the entity's securities. Such an obligation arises once an entity is or becomes aware of any information concerning it.
Companies should consider their disclosure obligations in light of recent flood events and continue to update the market as they assess the impact of the floods on previous financial disclosures and operations, and as they return to operational mining.
Force majeure provisions
Most mining-related contracts will include a force majeure provision which should be carefully considered in light of the recent floods. For example, in relation to commodity sales contracts, miners should consider whether they will be able to meet contracted deliveries to clients following the floods. FM provisions may allow you to miss contracted deliveries for reasons beyond your control. It has been reported that many companies in Queensland have already made FM declarations as a result of the floods.
Companies should ensure compliance with the relevant contract when making such declarations and consider the implications for contracted deliveries and mining operations moving forward as floodwaters subside. Also consider whether your delivery obligations have been simply postponed or whether they may be excused as a result of the FM events under the terms of your agreements.
In addition, early notification may assist in avoiding disputes concerning demurrage or associated transport and logistics expenditure. As the floodwaters subside and miners begin to return to operational mining, they need to ensure they give appropriate and prompt notification of the end of the FM event.
Review material contracts that may not have FM
Major contracts normally will include FM provisions, but where a material contract does not have an FM clause and a party is not able to perform its obligations under the contract, you will need to evaluate the contract to determine who bears the risks associated with such non-performance. In addition, it will be important to consider whether the non-performing party must provide notice to the other parties in relation to the non-performance and the parties' obligations to mitigate loss.
Key services, dry hire, lease, infrastructure, supply or procurement contracts, for example, may have covenants to maintain your plant and equipment in good working condition, but they may not have provisions for FM. Where a contract includes covenants or warranties in relation to maintaining the condition of plant, materials or other assets, you should consider whether you are at risk of breaching such covenants or warranties due to flood conditions. Again, you should evaluate the contract to determine which party assumes the risk in such plant, materials and assets, notice requirements and obligations to mitigate loss or damage.
It may also be the case that the contract may be terminated by frustration. It will be important to carefully consider the allocation of liability for loss resulting from such termination.
Allocation and resourcing of clean-up obligations
Most mining services contracts will include an allocation of responsibility for cleaning up the minesite. Subject to the suspension of obligations under an FM provision, you should consider who is responsible for cleaning up the minesite after the flood event and who will bear the costs of the clean-up, for example, the costs of hiring additional equipment and engaging additional labour as required.
Given the number of mines in Queensland facing similar operational issues due to the floods, it will be important for mine operators to take action promptly to secure the resources (eg personnel, equipment, plant and parts) required for clean-up, recovery and the recommencement of operations. Recovery efforts may be hindered by labour shortages and delays in the delivery and installation of replacement equipment. Mine operators also need to be prepared for labour costs and the price of equipment, plant and parts to rise as demand for these resources increases.
Stand-down of employees
The floods are likely to result in impeded access routes and mine closures and have the potential to leave hundreds of workers unsure about the future of their employment. Operators should be aware of the possibility of employees being forced to stand down and consequential liability should action to reinstate access routes and reopen minesites not be taken in a timely manner.
For example, if an employee cannot be usefully employed because the floods have resulted in a breakdown of machinery or equipment, then employers may be able to stand down the employees without pay. The right to "stand down" employees without pay is subject to any express rights that employees may have in their contracts or enterprise agreements, which might impose additional requirements on the employer.
"Stand down" should not be used indefinitely or for long periods of time. If it appears that employees will be stood down for a long period, employers may need to start looking at their obligations in relation to redundancy and redeployment.
All stakeholders will need to review their potential exposure to loss and liability that might result from floods affecting mines and associated infrastructure. Certain actions may be required under contracts or at law to ensure exclusions or limitations of liability can be fully enjoyed, and to otherwise mitigate potential consequences. The events in Queensland are a timely reminder to all industry participants that emergency response and contingency plans should be proactive and not reactive in nature.
* Robert Milbourne is an energy, resources, infrastructure and mergers and acquisitions lawyer based in Brisbane.
He has over a decade of experience advising private-sector clients on a variety of energy, resources and major infrastructure projects, M&A transactions, joint ventures and large-scale complex commercial transactions, predominantly in the resources sector.
