Legal Alerts/8 Sep 2022

Government Proposes Amendments to the 2011 Mining Act – What Will Be Reformed?

The Finnish Government proposes to reform the Finnish Mining Act of 2011. The reform is based on the Government Programme, a document guiding the legislative work of the Government.

Like the public debate preceding the Government’s adoption of the proposal, many of the mining related legislative measures called for in the Government Programme fall within the scope of environmental protection and nature conservation, both which are mainly regulated through separate sector-specific legislative instruments.

The proposal at hand nevertheless seeks to implement the Government Programme’s agreed measures through the reform, as far as possible.

Background of the proposal

During the preparation of the proposal, number of NGOs submitted citizens' initiatives to the Parliament calling for the reform of the Mining Act. Many of the suggested amendments fell within the scope of the Environmental Protection Act or Nature Conservation Act. These citizens' initiatives nevertheless had an impact on this proposal.

In addition to the foregoing, the previous Government commissioned a third party fit assessment on the Mining Act, which resulted in numerous provision-specific recommendations to improve the performance of the Act. Several of the amendments in the proposal aim to implement these recommendations.

What will be amended?

The proposal includes amendments to, among others, the validity of reservation, the prerequisites to extend the validity of an exploration permit as well as changes to the prerequisites to award mineral rights. Furthermore, the proposal introduces a new tax-like charge, a reservation fee.

Under the government proposal, submitted to the Parliament today, on 8 September 2022, the Government expects the proposed amendments to increase both regulatory and financial burden on companies.

The new legislation is intended to enter into force on 1 March 2023, however, entry into force is subject to the Parliament’s work schedule. According to the transition provisions of the proposal, mining permits are to be brought into compliance with the reform no later than five years after the entry into force.

The legislative process concerning the possible introduction of a separate mining tax is currently being prepared by the Ministry of Finance and is a separate legislative procedure from the Mining Act reform.

We will continue to monitor the situation and provide updates as the tax bill progresses through the legislative process. If you have any questions, please feel free to contact any of the Borenius attorneys listed in this alert or those with whom you usually work.

Snapshot of the bill – Check if It Affects Your Business

Under the proposal, operators carrying out exploration work based solely on landowner consent would be obliged to notify the Mining Auhtority (Tukes) of any exploration works prior to the commencement of said works.

The proposed amendment strengthens Tukes’ supervisory role and provides Tukes the possibility to assess whether the notified activities are deemed to be subject to an exploration permit. Commencing exploration works would nevertheless not require any separate consent or decision from Tukes.

2. Amendments to reservation regulations

a. The validity period of a reservation to be cut down by half

The current Mining Act gives operators the possibility to reserve areas for the purpose of preparing exploration permit applications for the said area. A valid reservation gives its holder priority to seek for an exploration permit for the area in question. Under the current reservation regime, reservations may and primarily have been awarded for a maximum of 24 months, a period that is not included in the maximum 15-year validity period of an exploration permit.

Under the proposal, the validity period of a reservation would be cut down from 24 months to 12 months. For special reasons, the reservation decision could be awarded for a maximum of 24 months, if, for example, the gathering of required background material required for drawing up the planned exploration permit application is expected to involve exceptionally large amount of work.

b. Aerial restriction applicable to reservations

Under the proposal, certain areas to which an exploration permit cannot be awarded are to be cropped out from reservation notifications submitted to Tukes.

These areas include, for example, cemeteries, areas reserved for the Finnish Defence Forces, public roads, railways, private houses and yards, construction sites, public buildings, and power lines. Furthermore, reservation areas may not overlap with national parks and nature parks as defined in the Nature Conservation Act, which many exploration companies have already adopted as a standard practice.

c. The adoption of a new reservation fee

The proposal introduces a new one-off reservation fee payable to the State. The reservation fee is set at EUR 1 per hectare and the fee would be levied simultaneously when the reservation is awarded. The introduction of the reservation fee is estimated to generate an estimated EUR 1–2 million annually.

Under the current Mining Act, exploration permits are awarded for a maximum of four years, with the possibility of renewal until a total maximum of 15 years will be reached.

The proposal introduces a substantial amendment to the provisions governing the renewal of exploration permits. Accordingly, extending the validity of an exploration permit would be subject to landowner consent once the maturity of the exploration permit reaches ten years. The proposal would not, however, cut down the total maximum validity time (15 years) of exploration permits.

The threshold would be met if at least half of the properties comprising the total surface area of the exploration area consent to the renewal of the permit.

Under the proposal, the Government could, upon receiving an application from the operator, award the sought renewal in case the threshold cannot be satisfied. In such case, the operator would be required to show that the project is required by the public interest.

4. A municipal-level land use plan as a prerequisite for mining

Under the proposal, all mining operations would be subject to a legally binding municipal-level land use plan, with the exceptions laid down in the transition provision of the bill.

It is provided in the transition provision that within five years after the entry into force of the reform, existing mining areas may be expanded following the provisions preceding the reform. Accordingly, mining is subject to a legally binding municipal-level land use plan, a regional land use plan or a clearance reached in cooperation with the municipality, the local regional council and the local Centre for Economic Development, Transport and the Environment.

As provided in the Mining Act and land use legislation, municipalities already have the freedom not to adopt land use plans, which support mining operations under their jurisdiction, the proposed amendment to some extent clarifies the requirement of a local land use plan in terms of mining operations.

5. Widening the scope of mining collateral

The Government proposes certain amendments to the provisions governing the mining collateral:

  • clarifying the current judicial status by providing an exhaustive list of measures that the mining collateral will cover
  • introducing a new provision stipulating that with regard to monitoring and remedial measures, the collateral is to cover a period of at least 30 years, unless the holder of the mining license proves otherwise sufficient.
  • expanding the scope of the mining collateral to also cover safety measures caused by unforeseeable events. Such an event would mean situations related to the operator's insolvency or bankruptcy and the measures intended to be covered by the mining collateral would mainly consist of measures related to energy supply, for example,
    • lighting the area due to monitoring,
    • operating electric locks and gates,
    • guaranteeing fire safety and
    • organising water management.

The collateral should cover such costs that accumulate during a period of one year.

  • the mining collateral is to cover an amount corresponding to the annual value of the hectare-based excavation fee payable to the landowners (i.e., EUR 50 per hectare not owned by the mining company).

6. Introducing the possibility to commence exploration works despite an appeal

With regard to novel exploration permits, the proposal introduces the possibility to apply for a separate enforcement order enabling the enforcement, i.e., the commencement of exploration works, despite an appeal.

The amendment would provide operators the possibility to speed up the launching of exploration campaigns in situations where negotiations concerning access to land have been stalled. 

7. Permit holder’s obligation to organise annual public events

The proposal introduces a new obligation for permit holders to organise annual open public events.

Under the proposal, the holders of exploration permits must provide a presentation on completed exploration activities, key results and impacts to the environment and local communities including research activities, an obligation which already is a requirement under the Finnish exploration standard.

In addition, mining companies must organise similar annual events, which is already an established practice by the industry. Furthermore, developing local cooperation and community relationships is an integral part of the Finnish mining standard, a standard developed based on the Canadian standard Towards Sustainable Mining (TSM).

8. Force majeure as a basis for extending the validity of an exploration permit

The proposal introduces the possibility to apply for the renewal of an exploration permit if exploration works have been interrupted due to force majeure or other special reasons not attributable to the operator while the permit was in force.

A renewal based on this provision would not affect the maturity of the exploration permit (i.e., the renewal would not affect the remaining validity periods of the exploration permit).

A corresponding provision could be found in the repealed Mining Act of 1965, which for an unknown reason was left out from the current Mining Act. The re-introduction of the provision is warmly welcomed as COVID and the war in Ukraine may have caused interruptions in permitted exploration works.

9. Securing interest of other livelihoods and improving the level of environmental protection

One of the main factors for the reform was to secure the interest of other livelihoods and local businesses, including the rights of the Sámi. Accordingly, the proposal introduces several amendments to the provisions governing permit consideration that will ensure that the operations under the Mining Act do not impose undue harm to other livelihoods and businesses. Furthermore, the proposal includes legislative changes that aim to ensure, through specific permit provisions, that other livelihoods and environmental aspect are taken into consideration appropriately.

For example, exploration permit decisions are to include necessary provisions on measures to ensure, among other things, that the permitted exploration work does not cause substantial harm to other business activities. Similarly with regard to mining permits, the proposal obliges Tukes to lay down necessary permit regulations on measures to prevent a significant deterioration of the locality's settlement or economic conditions. In addition, mining permits are to include necessary permit regulations regarding the preservation, renewal and new planting of trees and other vegetation during mining operations.

Background and preparatory materials produced during the legislative process can be found on the Ministry of Economic Affairs and Employment’s website (mainly in Finnish).

If you have any questions, please feel free to contact any of the Borenius attorneys listed in this alert or those with whom you usually work.

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Additional information

Casper Herler

Partner

Helsinki

Niklas Vartiainen

Counsel

Helsinki