Community Development Requirements in Mining Laws Global Dataset

Created by Kendra Dupuy

PhD Candidate, University of Washington Department of Political Science, Seattle, USA &

Natural Resource Management Advisor, U4 Anticorruption Center, Chr. Michelsen Institute, Bergen, Norway1

27 April 2014

Introduction Since the mid-1980’s, 32 countries have adopted new, or amended existing, mining laws, while nine countries are in the midst of changing or updating their mining laws. These laws mandate mining firms and/or national or sub-national governments to carry out socio-economic development projects in the communities that reside in proximity to mining operations. These development projects include infrastructure and social service provision as well as the establishment of funding mechanisms for these purposes. I refer to these laws throughout this document as community development in mining laws.

In this document, I introduce data I have collected on the adoption of community development in mining laws and discuss my data collection methods. I collected this data because I am writing my PhD dissertation on the adoption, design, and implementation of these laws. Specifically, I seek to explain why some countries adopt these laws while others do not, the variation in the design of the laws, and the outcomes of implementing them. Studying community development in mining laws is important because these laws represent an important advance for mining-affected local communities, who are often hardest hit by the negative externalities of mining, including livelihood destruction when land and water sources are used for mining, through the production of pollution, and through the influx of migrant laborers. Community development in mining laws mandate the targeted creation of positive social and economic gains for those who bear the greatest costs of mining; they require that mining-affected local communities should be better off than they were prior to mining operations – not as good off, nor worse off. I argue that these laws represent a move towards higher regulatory standards, in that they increase the responsibility of mining firms and/or states to provide public goods and services to mining-affected local communities.

Proper citation When using this data, please cite it in the following way: Dupuy, Kendra E. (2014). “Community Development in Mining Laws, 1993-2012”. Forthcoming in The Extractive Industries and Society.

                                                                                                               1 Kendra Dupuy can be reached via email at kendup@gmail.com or via telephone at +47-41044511. A copy of this data, and articles published and in progress using the data, can also be found on Kendra Dupuy’s website: http://kendradupuy.weebly.com.

  2  

Overview of the data, and definitions During 2013-2014, I collected data on the adoption of community development in mining laws across all countries with active or emerging mining sectors (124 countries in total). Data on the presence of mining sectors within countries around the world comes from the World Bank’s World Development Indicators dataset (measured as mineral rents as a percentage of GDP), the International Council on Mining and Metals, and the Extractives Industry Transparency Initiative. I examined the legal framework at national and sub-national levels, both for countries with active mining sectors as well as those with mining sectors that are in the process of becoming active (such as Afghanistan). I retain records of the mining laws and policies adopted by all 124 countries.

To collect the data on community development in mining laws, I read through the laws and policies that govern the mining sector of each of the 124 countries. I also read through relevant secondary literature on the mining legal framework for each country, including academic literature as well as reports from think tanks, non-governmental organizations, international and intergovernmental organizations, and governments. In order for a given law or policy to be considered as a community development in mining law, the law or policy must specifically target communities living in proximity to mining operations, and it must mandate either mining companies and/or national or local governments to carry out socio-economic development projects in those communities.2 By local community, I mean a “population that is significantly affected by a nearby mining operation” (Veiga, Scoble, and McAllister 2001, 192)3, or that is in the “immediate impact zone” (Kemp 2009, 2002).4

Community development in mining laws are different than other legal provisions that address mining-affected local communities but that rather merely seek to mitigate or offset the effects of mining. Mitigation measures include compensation for land use, social and environmental impact assessments, and environmental laws that stipulate mine closure and clean-up procedures and responsibilities. Community development in mining laws are also different than sub-national mining revenue redistribution schemes that do not specifically target the local communities living near to mining operations, although a redistribution mechanism (such as a trust fund for a portion of mining revenues such as royalties) may be established to fund legally required community

                                                                                                               2 Besides general public goods spending and redistribution of mineral revenues, there are several other ways in which the state plays a role in the direct distribution of benefits to mining-affected communities. The first is through the legal recognition of indigenous land rights, which in practice empowers indigenous communities to directly negotiate the provision of socio-economic benefits with mining companies. However, this has occurred in only a handful of states, such as Norway, Canada, Australia, and Finland. The second way is through recognition and enforcement of strong communal land tenure rights, which can in some cases force mining companies to directly negotiate rights to land and mineral rights with local communities. Finally, when governments (re)negotiate the terms of mining leases and contracts with mining companies, they can require that mining companies implement community development projects in these agreements. This occurred in Liberia when the government renegotiated Arcelor Mittal’s mineral development agreement, and also in Ghana when AngloGold Ashanti’s agreement was renegotiated; both companies are required to establish and contribute to social development trust funds. I do not include recognition of land rights or types of land rights systems in my analysis, as these laws do not directly call for community development in mining-affected areas; rather, community development programs are their (sometimes unintended) outcome. I also do not include contract renegotiation, or the adoption of voluntary community development agreements by mining firms and local communities, since the unit of analysis in my data is the adoption of a new state-level law or policy that requires community development in mining areas. 3 Kemp, Deanna. (2009). “Mining and Community Development: Problems and Possibilities of Local-Level Practice”. Community Development Journal, 45(2): 198-218. 4 Veiga, Marcello M., Malcolm Scoble, and Mary Louise McAllister. (2001). “Mining with Communities”. Natural Resources Forum, 25: 191-202.  

  3  

development projects in mining-affected local communities. Finally, community development in mining laws entail more than mere consultation with, and the consent and participation of, the communities living nearby to mining operations, although agreements regarding the nature and delivery of community development social benefits may be the outcome of consultations and consent processes.

In total, 32 countries have adopted community development in mining laws since the mid-1980’s, while an additional nine countries are in the process of adopting new laws, or enhancing their existing mining laws, to include community development provisions. A list of the countries that have adopted, and that plan to adopt, these laws is listed in Table 1 below, organized by years of adoption. TABLE 1 Countries that have adopted community development provisions into their national or sub-national mining laws and policies: China (1986) Ghana (1986) Papua New Guinea (1992) Colombia (1994) Philippines (1995) Nicaragua (2001) Canada (2002) Democratic Republic of Congo (2002) Mozambique (2002) South Africa (2002) Peru (2004) Equatorial Guinea (2006) Fiji (2006) Mongolia (2006) Niger (2006) Nigeria (2007)

Laos (2008) Central African Republic (2009) Ecuador (2009) Indonesia (2009) Sierra Leone (2001, 2009) Ethiopia (2010) Afghanistan (2010) Kazakhstan (2010) Vietnam (2010) Yemen (2010) Zimbabwe (2010) Guinea (2011) India (2011) Mali (2012) Kyrgyzstan (2012) South Sudan (2012)

Adoption of new, or enhancement of existing, community development in mining laws is pending in the following countries: Ghana Guatemala Burkina Faso Myanmar Kenya South Africa Mongolia Togo Mozambique

  4  

Countries That Have Adopted Community Development in Mining Laws, 1986-2012

  5  

Countries Where Community Development in Mining Laws Are Pending Adoption

  6  

1985 1990 1995 2000 2005 2010

05

1015

2025

30Cumulative Adoption of Community Development in Mining Laws,

1985-2012

Year

Run

ning

Tot

al o

f Law

s P

asse

d P

er Y

ear

  7  

1985 1990 1995 2000 2005 2010

01

23

45

6Adoption of Community Development in Mining Laws,

1985-2012

Year

Tota

l Law

s P

asse

d P

er Y

ear

  8  

Adopted Laws (as of April 2014) Country Law/Policy (year) Details China Mineral Resources Law

(1986, amended in 1997) Article 10 states that “In mining mineral resources in national autonomous areas, the State should give consideration to the interests of those areas and make arrangements favourable to the areas' economic development and to the production and well-being of the local minority nationalities. Self-government organs in national autonomous areas shall, in accordance with legal provisions and unified national plans, have the priority to develop and utilize in a rational manner the mineral resources that may be developed by the local authorities.”

Ghana Mineral Royalties Regulations (1986)

Stipulates that 10% of mineral royalties are to be paid back to the communities on whose land mining takes place; money is to be used for development projects. New bill currently under consideration to update this policy. Also, the government put CSR guidelines into place in 2010 for mining companies.

Papua New Guinea

Mining Act (1992) Requires consultation with affected parties, and compensation for use of land – firms sign compensation agreements with local communities. The Development Forum requirement has lead to the signing of Memoranda of Agreement between landowners and governments regarding provision of infrastructure, breakdown of royalty payments, funding commitments, etc. Mining Development Contracts are signed between firms and government and outline provisions for infrastructure development, facilities and roads essential to operations and the community, as well as local business, employment, and procurement obligations, environmental and closure conditions. Development Levy is shared among public and private landowners.

Colombia Law 141 (1994) Establishes a National Royalty Fund for the distribution and use of royalties received from mining concessions; it receives the revenues from royalties not assigned to specific regions and uses the money to promote mining activities, preserve the environment, and finance regional investment projects. Furthermore, businesses are required to develop activities without harming the cultural, social, and economic values of the communities and ethnic groups occupying the area of concessions, such as indigenous peoples.

Philippines 1995 Mining Act and Chapter 3 requires that indigenous communities must

  9  

1996 Revised Implementing Rules and Regulations of RA 7942 (1995 Act)

be consulted before mining operations start, and royalties must be paid out into a trust fund for these communities for their socio-economic development. Chapter 10 requires contractors to assist in the development of its mining community, the promotion of the general welfare of its inhabitants, and the development of science and mining technology. Outlines activities that can be carried out. 1996 Rules state that royalty payments for small-scale mining shall be put into a Trust Fund for the socio-economic development of the local community, that 1% of gross output should be paid to indigenous communities, and that the contractor/permit holder shall assist in the development of the host and neighboring communities to promote their general welfare and allot 1% of mining costs to this. Section 135 of 1996 Rules outline acceptable activities for enhancing development of mining and neighboring communities (establishment and maintenance of community schools, hospitals, churches, and recreational facilities open to the public, construction and maintenance of community access roads, bridges, piers and wharves, communication, waterworks, sewerage and electrical power systems, housing, training facilities and livelihood industries, and creating self-sustaining income generating activities).

Nicaragua 2001 Mining Law: Special Law for the Exploration and Exploitation of Mines (Law 387) and its bylaws in Decree No. 119-2001

Part of the royalties from mining (3%) must be directed towards a Mining Development Fund.

Canada Yukon Oil and Gas Act (YOGA, 2002); Canada Oil and Gas Operations Act (COGOA, 1985); NW Territories legislation (1985); also, land title recognition for First Nations peoples also empowers them to negotiate community development benefits and impact/benefit agreements with firms

YOGA calls for signing of benefit agreements: must outline how Yukon residents will obtain employment and training and how to supply goods and services for the licensee. Section 5.2 of the Canada Oil and Gas Operations Act repeats the prohibition on carrying out work before the approval of a benefits plan. The section defines "benefits plan" to mean “... a plan for the employment of Canadians and for providing Canadian manufacturers, consultants, contractors and service companies with a full and fair opportunity to participate on a competitive basis in the supply of goods and services used in any proposed work or activity referred to in the benefits plan.” The section

  10  

also addresses the matter of preferential treatment of certain categories of Canadians as follows: “The Minister may require that any benefits plan submitted ... include provisions to ensure that disadvantaged individuals or groups have access to training and employment opportunities and to enable such individuals or groups or corporations owned or cooperatives operated by them to participate in the supply of goods and services used in any proposed work or activity referred to in the benefits plan.”

Democratic Republic of Congo

2002 Mining Law (Law 007/2002)

Requires exploitation permit applications to include a report on how the project will contribute to the local community’s development. Mining royalties paid to local government are to be used for the construction of basic infrastructure in the community’s interest.

Mozambique Mining Law 14 of 2002 Article 28 states that “Production tax is based on the value of mining products resulting from mining activity undertaken in the national territory, of which a percentage shall be destined to local services where the undertaking is carried out in accordance with the terms to be defined through regulations, with the aim of influencing local development.”

South Africa Mineral and Petroleum Resources Development Act (2002; Act No. 28)

Section 23 states that firms must provide social and labour plans that outline plans for the social development of mining-affected communities (local socio-economic development plan). 2013 amendment states that the government can direct the holder of a mining right to address the socio-economic challenges or needs of a particular area or community (amendment of section 23). Also, local communities have preferent rights over land, giving them the ability to negotiate with firms for benefits. Mining-affected communities are paid mining royalties because they were landowners. Mines closure plan must outline how the mining company will carry out socio-economic activities to provide an alternative livelihood to local communities beyond the mine life.

Peru 1992 General Mining Law (Supreme Decree No. 014-92-EM), updated in 2011; Supreme Decree law No. 015-2004-PGM passed in 2004 (the legal framework for decentralization); Supreme Decree-law No.

Article 57 of 1992 law requires distribution of mining taxes to local governments for investment and development in their areas. Supreme Decree law No. 015-2004-PGM passed in 2004 (the legal framework for decentralization) was established to use revenues from mineral production to maximize the well-being of local communities through economic growth, environmental protection, and social development in a sustainable way. 2006 Decree established to administer the CSR program in the mining sector.

  11  

066-2005-EM of May 2006 (legal framework for creation of the Direccion de Gestion Social)

Equatorial Guinea

Mining Law 9 of 2006 Article 54 requires that the Contractor perform social works in the township district, neighborhood community, or municipality in the jurisdiction where the Contractor conducts its operations.

Fiji Mining Act (1978; revised in 1985 and 1997, and amended in 2010); Mineral Exploration and Exploitation Bill (2006)

Communities adversely affected by mining laws should be compensated, and firms should contribute to a Mine Closure and Rehabilitation Fund. 2006 Bill outlines specific reasons for compensation, and says that royalties should be paid into a Trust Fund for compensation. Under category 2 for compensation (“cultural disruption”) holder of mining lease must establish a community development plan that includes provisions for enhancement of the economic climate of the communities, provision of opportunities to obtain employment etc., mitigation of adverse social and cultural impacts, establishing a community development committee, etc.

Mongolia 2006 Minerals Law States that an Investment Agreement can be undertaken with firms that invest not less than $50 million during the first five years of a mining project; this agreement would outline plans to develop the region and create more employment.

Niger 1993 Mining Code; updated in 1999 and 2006

2006 amendment to the 1993 Mining Code (law 2006-26 of 9 August 2006, amending ordinance 93-16 of 1993) says that the state will redistribute 15% of mining revenue back to mining-affected areas.

Nigeria 2007 Minerals and Mining Act

Section 116 requires the holder of a mining lease, small-scale mining lease or quarry lease to conclude with host community of any activity within lease area a Community Development Agreement, prior to starting any activity. This agreement will ensure the transfer of social and economic benefits to the community; these contributions will contribute to the sustainability of the affected community. Must address all or some of the following issues for the host community: educational scholarships, training, and employment opportunities; financial or other forms of contributory support for infrastructural development and maintenance, including education, health, community services, roads, water, power; assistance with the creation and development of small scale and micro enterprises; agricultural product

  12  

marketing; methods and procedures for environment and socio-economic management and local governance enhancement. CDA is subject to review every 5 years, and has binding effect; it shall specify appropriate consultative and monitoring frameworks and for how the community will participate in the planning, training, etc. of activities carried out under the Agreement.

Central African Republic

Law No. 09-005 (Mining Code of 2009)

Article 33 requires that permit for industrial exploitation of large or small mine is be accompanied by a plan for a community development program.

Ecuador 2009 Mining Law Article 40 states that in cases where mining firms and government enter into a service contract, that government will use the economic resources from 3% of the sales of exploited minerals for sustainable local development projects through municipal governments and parish boards and indigenous community governance structures. Community must be consulted about operations and the firm’s social and environmental management. It is mandatory for indigenous communities to be consulted. Article 93 states that of the 5% royalty to be collected by the government, 60% shall be used for sustainable local development projects through the sectoral governments and parish boards, and 50% of that goes to indigenous community governments. Priority must be given to addressing the needs of communities directly affected by mining activities.

Indonesia Mining Law No. 4 (Mineral and Coal Mining Law) (2009, implemented by Government Regulations 78 and 22 of 2010)

Article 108 requires companies to have development and empowerment programs in place to benefit surrounding community and that are developed in consultation with Government and local communities. Firms are responsible for executing these plans.

Laos Mining (or Minerals) Law (Act) (2008) and implementing decree

Investors must contribute to Community Development Funds.

Ethiopia Mining Proclamation 678/2010

Article 60 states that mining firms are required to participate in the community development plan of the peoples in their license area, and allocate money for such expenses. Also, the Ministry of Mines has an Environment and Community Development Directorate, as established in 2007 by Article 14 of Environmental Protection Organs Establishment Proclamation 295/2002. This entity reviews Environmental Impact Assessment reports, and coordinates, approves, monitors, and evaluates

  13  

community development projects. Sierra Leone Diamond Area

Community Development Fund policy (2001); Mines and Minerals Act (2009)

DACDF redistributes a percentage of diamond tax revenue back to diamondiferous communities for development purposes. 2009 law requires holder of small-scale or large-scale mining license to assist in the development of mining communities affected by operations to promote sustainable development; must have a Community Development Agreement with primary host community if mining firm only if has output of more than 1 million cubic meters per year from alluvial deposits, or for underground mining operations where combined run-of-mine ore and waste production is more than 100,000 tonnes per year + other requirements. Company must spend no less than 1% of 1% of gross revenue amount earned by mining operations in previous year. Terms of the CDA must be negotiated with the community, and should address: social and economic contributions that the projects will make to the sustainability of the community; assistance in creating self-sustaining, income-generating activities such as production of goods and services needed by the mine and community; consultation with the community re mine closure. CDA must outline how it will be monitored, and how community will participate in planning and monitoring etc. of the agreement. Other issues that should be addressed include educational, financial support, support to small business, agriculture, and environmental and socio-economic management and local governance enhancement. CDAs cannot provide cars, additional rents/fees, or provision of payments to individual families.

Afghanistan 2010 Minerals Law and Mining Regulations

Environmental Management Plan must show how the firm will ensure benefits to local communities. To get an exploration license or quarry exploitation authorization, a development plan must be submitted that shows proposed investments and any socio-economic contributions for the communities. Government can establish additional obligations relating to the socio-economic development of affected communities. Government may require development plan to be included in the exploitation bid. Regulations stipulate that the license holder will contribute to the development of the host and neighboring communities of the mining area.

  14  

Regulations define Development plan as: “A Development Plan which shall establish appropriate sustainable development and social protection programs and structures, taking into account international best practice. A Development Plan should propose approaches for ensuring adequate housing, sanitation, roads, medical facilities, power and water supply, educational facilities, religious facilities and recreational opportunities. A Development Plan should also address economic development, employment and job creation in local communities, taking into account employment requirements established under the Minerals Law. Finally, a Development Plan must establish funding and implementation commitments.”

India Mines and Minerals (Development and Regulation) Act (2011)

Section 26.3 requires that “Without prejudice to the generality of the provisions of the mining plan, there shall be attached to the mining plan in respect of all major minerals, a corporate social responsibility document, comprising of a scheme for annual expenditure by the lessee on socioeconomic activities in and around the mine area for the benefit of the host population in the panchayats adjoining the lease area and for enabling and facilitating self employment opportunities, for such population, and the lease holder shall, at the end of each financial year, publish in his annual report and display on the website, the activities undertaken during the year and the expenditure incurred thereon”.

Kazakhstan Law on subsoil use (2010)

Bids are required to have information on the costs for social and economic development of a mining region and the development of its infrastructure; contracts must also contain this information, plus info on training. Contracts must contain a commitment to the size and terms of spending on social and economic development of the region and develop its infrastructure for the local content, size of expenditure allocated to education and training of workers; must have local content in goods and services.

Vietnam 2010 Mineral Law State will appropriate revenue from mining in localities in which mined to assist with socio-economic development. Firms are required for building welfare works for local inhabitants and compensating for damage.

Yemen Law of Mines and Quarries (2002 – Law

Mining license holders for large-scale projects must have a community development agreement in place.

  15  

No. 24; revised in 2007) – updated in 2010 as the Law 22 Concerning Mines and Quarries

Zimbabwe 2007 Indigenization and Economic Empowerment Act and Statutory Instrument 114 of 2011 to implement it; Community Share Ownership Trusts were established in terms of Section 14B of the Economic Empowerment (General) Regulations of 2010

President Robert Mugabe set up community share trust funds in 2012 as a result of the 2010 regulation and 2011 instrument. Communities whose natural resources are being exploited by any ‘‘qualifying business’’ must be guaranteed shareholding in such business. Mugabe launched the trust funds as mechanisms for benefiting.

Guinea Law 2011/006 of 2011 (Mining Code)

Chapter 3, Articles 130-131 of the Mining Code specifically addresses the relationships between mining companies and local communities. Holders of mining titles must conclude a Convention of Development with the local community residing near a mining concession. The state will be involved in the development of these agreements; these agreements are designed to create conditions conducive to the management of effective and transparent development contributions paid by the firm, taking into account the capacity of local communities in terms of planning and implementing a community development program. The agreement must contain provisions to train local populations, protect the environment and health of populations, and development of social projects. Local Development Funds must be established. Mining title holders must contribute 0.5% to 1% of the company’s turnover to the local community (% depends on the mineral).

Mali Law 2012-015 of 2012 (Mining Code); Decree No. 2012-311/P-RM

Mining firms must file a Community Development Plan together with exploitation permit application, which is developed in consultation with the interested local communities as well as local authorities. Community Development Plan must be updated every two years, and the government Mines authority is tasked with setting up a Technical Committee on Local and Community Development to approve and implement the Community Development Plan.

Kyrgyzstan Subsoil Law (redrafted in 2012) (“Regulation on the Procedure for

Calls for program of social investments into local communities through the production phase. Section 105 states that “subsoil users who have received the

  16  

Licensing and Subsoil Use Rights”)

subsoil license, except for non-metallic mineral deposits and water, are required to submit to the authorized state body for the implementation of the state policy on subsoil use social package - an investment program to create the conditions for the local community development (training, employment of local people and infrastructure construction), approved by authorized representative body of local self-government, with regard to solution of contentious problems of the local community in whose territory the subject is located.”

South Sudan Mining Bill (2012) Requires signing of Community Development Agreements to secure mining licenses, and also requires CSR (guided by ISO 26000).

LAWS PENDING ADOPTION Country Law/policy being

amended or adopted Details

Ghana New: Minerals Policy Act, and Mineral Development Fund Bill

The draft Minerals Policy Act would encourage mining firms to carry out community development. The Mineral Development Fund Bill would give a stronger legal framework to an already existing fund from which royalty payments and development funds of mining companies are put; this money will be used by local development committees for infrastructure projects in mining communities and for enhancing the mining industry. It also says mining firms should participate in community development initiatives.

Burkina Faso Revision of Mining Code (Law No. 031-2003/AN (2003))

Mining code is currently being revised, and will include community development provisions, though exact nature of these provisions has not yet been announced.

Kenya New: Geology, Minerals and Mining Bill 2012

Under this new law, local communities will receive 5% of total revenue from mining activities. For large scale mining operations, companies shall “where applicable and necessary facilitate and carry out social responsibility to the local communities”. (Law also establishes a sovereign wealth fund for mining revenues to the state.)

  17  

Mongolia Updating of 2006 Minerals Law

Section 86.2 of proposed law forces mining companies to get local community permission to operate, and also requires signing of Local Development Agreement with local self-governing authorities/governments that requires mining/processing license holder to improve local public infrastructure, local social services, provide jobs, support local businesses, and improve the environment.

Mozambique New: Mining law In new draft law, the government is supposed to spend a percentage of the revenue that the state earns from mining on developing local communities, with the percentage to be specified each year in the state budget.

Guatemala Reform of Mining Law (Decree 48-97 of 1997)

Proposed new law would establish a mining fund to distribute royalties including 35% to the community where the mine is located.

Myanmar New: Mining Law New mining law will compel government to put a proportion of profits from mining sector into a reserve development fund so local communities can benefit from mining projects. These funds would go toward CSR projects and mine closure programs. Government also wants to amend constitution to introduce provisions on sharing of natural resources with region and state government so those living near mining projects enjoy a share of the profits.

South Africa Draft Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill is under consideration

Changes to the social and labour plan requirement: see above under 2002 law.

Togo Reform of Law 96-005/PR (Mining Code)

Amendments include requirement to promote local and regional development, and requirement for mining companies to contribute financially to this development and to achieve socio-economic and community work in the prefecture concerned from operations. The financial contribution shall be paid annually at the end of each operating year.