Madang Guidelines MR0362

8/6/2019 Madang Guidelines MR0362

http://slidepdf.com/reader/full/madang-guidelines-mr0362 1/34

THE MADANG

GUIDELINESPrincIples for the Development of National Offshore Mineral Policies

APPENDIX:

Report of the Offshore Mineral Policy Workshop

Madang, Papua New Guinea

22nd_26th February 1999

(SOPAC Miscellaneous Report 323)

'A"'ANEWGUI-DEPAIrrMENT OF

MINING AND PE:rROLEUM

.1..~ J.." /~ ! ! ~ /J\1 MA~AJ ~:=~:=-



HE ADANG

UIDELINES

i

A study ased n theRecommendationsnd Proceedingsf a Workshop n

OffshoreMineralsPolicy, eldn Madang,PapuaNew Guinean February 999,

hosted; rganisedndsponsoredy heGovernmentf PapuaNew Guinea, he

Metal MiningAssociation f Japan MMAJ), thePacificslands orum

Secretariatnd heSouthPacific pplied GeoscienceommissionSOPAC)

SOPAC Miscellaneouseport 62

December 999



THE MADANG GUIDEliNES

TABLE OF CONTENTS

FOREWORD 4

SUMMARYAND CONCLUSIONS 6

THE MADANG GUIDEliNES 7

MADANG GUIDI~LINESOFFSHORE MINERALDEVEWPMENTPOLICY

Introduction .~ 9

Offshore Mineral Resources """'."'.'.""' "'.."""""" ~.. 10

National Policy for the Offshore Exclusive Economic Zone 11

Offshore Mineral Exploration and Development Policy 13

Fiscal Regime for Offshore Mineral Development and Exploitation 16Environmental Considerations in Offshore Miner~ Development .".""""""""""""""""'" 19

Key Factors in Developing an Environmental Assessment Program 19

Outline for Impact Assessment Efforts """"""'.'.""""'..."'.".'."."'" 21

Environment Related Considerations for Exploitation 23

Associated Issues 25

Associated Issues in Policy Formulation 25

Fishery Considerations in Offshore Mineral Development 29

Industry in Offshore Mineral Development 30

Marine Scientific Research , 32

ACKNOWLEDGEMENTS 34

SOPACMiscellaneouseport62 3





THE MADANG GUIDEUNES

mineral occurrences themselvesmay have unique ecosystems, articularly in the caseof polymetallic massivesulfide occurrences,about which we have ittle or no knowledge and which may themselveshave significant

economic potential.

To date, however, few if any nations, have n place comprehensivepolicy and legislative regimes o

effectively manageoffshore mineral developmentsbeyond those that may occur within their Territorial Seas.

Even in these cases he offshore mineral developmentsare normally governed by existing mineral policy and

legislation that has been formulated and enacted or onshore mineral developments.Such policies and

legislation are generally not applicable for the exploration and development of mineral resourceswithin the

deep-seaportions of the EEZ. Therefore, it is imperative that individual nations begin the process, n consul-

tation with industry and other stakeholders, f developing appropriate regimes and legislation to manage

present and future mineral exploration, developmentand exploitation within their EEZs.

To provide a basis for the future exploration and possible development of offshore mineral resourcesan

expert group was convened under the auspicesof SOPAC in Madang, Papua New Guinea in February 1999

to address he issuesof new policy and legislative egimes o effectively manage ssuesarising from offshore

mineral exploration and potential development. It is believed that the recommendations of this expert group

"The Madang Guidelines" provide a useful basis o assistnations of the international community in their

formulation of effective policy and legislation for offshore mineral development. In particular the Madang

Guidelines provide for the accommodation of the unique attributes and occurrencesof the deposits them-

selves, he "pioneering nature" of exploration and developmentactivities and for a broad range of associated

issues ncluding (a) environmental impacts and impact as.sessment,takeholder nterests, isheries mpacts and

the inter-relations of government, industry and marine scientific research.

As such the "Madang Guidelines" are a pioneering effort to ensure he sustainabledevelopment of

mineral resources n the EEZs of the nations of the world. I commend them to you.

fo "\ ---'

Alf Simpson

Director of .S"OPAC

SOPACMiscellaneouseport62 5~



THE MADANG GUIDELINES

SUMMARY

Recent discoveries of gold-rich polymetallic massivesulfide deposits and cobalt-rich manganesenoduleswithin the EEZs of severalnations has renewed corporate interest, beyond the traditional interest in

nearshore mineral resources, n the exploration and possible development of offshore mineral resources n

deeperportions of EEZs and in the open oceans.The immediate impact of the renewed nterest in offshore

mineral resource development, coupled with the ratification of UNCLOS and the formal establishment of

the International SeabedAuthority, has been that most nations must begin to (a) address he requirement of

UNCLOS in terms of defining the extent of their EEZ and (b) develop appropriate policy and legislation to

govern offshore mineral exploration and development.

Existing mineral policy and legislation developed for on land mineral exploration and development

cannot be effectively applied to offshore mineral exploration and development becauseof the unique at-

tributes of the deposits themselvesand the "pioneering nature" of exploration and development activities.Equally important is the need to addressa range of associatedssues ncluding (a) environmental mpacts and

impact assessment, takeholder nterests, isheries mpacts and the inter-relations of government, industry

and marine scientific research.

To address he above ssuesa set of 19 recommendations, The Madang Guidelines", have been devel-

oped and are proposed as a basis to formulate effective and enabling policy and legislation by governments to

govern offshore mineral exploration and development.

6 ,~OPACMiscellaneoliseport62





1. As appropriate, nations should take relevant measures o ensure he provisions of the 1982 Convention

become fully implemented within their jurisdictions.

2. Nations should move forward rapidly to delineate he baselines rom which the various jurisdictional

zones under the United Nations Convention on the Law of the Sea (UNCLOS) ("1982 Convention")

are measuredand to deposit the appropriate charts and list of co-ordinates with the United Nations.

3. In the caseof potential extensions of the continental shelf beyond 200 nautical miles, these data should

also be gathered as soon as possible and the appropriate claims filed (bearing n mind the 10-year imit

from the date of ratification by the coastal state).

4. Measures should be taken o designatearchipelagicand other sealanes or the purpose of navigation in

accordance with the 1982 Convention and other international conventions.

5. Nations should proceed to select heir preferred dispute resolution mechanismas required under the

1982 Convention

6. In the interests of consistencyand simplicity of administration, the unique nature of offshore mineral

development activities and the diverse nature of stakeholder nterests,coastal statesshould develop a

comprehensive Offshore Mining Act,' where appropriate, as a distinct country-specific regime which is

separate rom their existing onland mining acts.

7. The "risk" components associatedwith the exploration and exploitation of offshore mineral resources

should be assessed nd considered n the development of an appropriate licensing and fiscal regime.

8. Individual nations should develop a fiscal regime specific for offshore mineral development that ac-

counts for the unique economic aspectsof such exploration and development, in particular the high

costs of exploration, development and technology development.

9. Initial offshore mineral developments should be viewed as "pioneering efforts" and as such be granted

appropriate economic incentives to promote investment and development.

10. Recognising he appropriate instruments within the 1982 Convention regarding he conservation and

managementof the living resourceswithin coastalstates' EEZs, measuresshould be taken o minimise

adverse mpacts to the marine environment and to traditional and non-traditional usesof the sea that

may be causedby offshore mining.11. Where appropriate, coastalstatesshould consider making a declaration hat the non-living resources

beyond the 3-mile limit from the Provincial coastlinesare a "Common Heritage of the Nation".

12. Coastal states should adopt a proactive approach n all significant decision making activities related to

environmental concerns associatedwith offshore mineral exploration and exploitat.ion.

13. The collection of baseline environmental data should be a condition of any marine exploration licence.

Collection of baselinedata should begin as early as possible followed by systematicdata collection

throughout the term of the exploration licence.

SOPACMiscellaneoflseport62 7




14. Stakeholdergroups and their interest should be clearlydefined during the formulation of any Offshore

Mineral Development Agreement to ensure that the interests of the stakeholders re adequatelyconsid-

ered and, where appropriate, ncorporated into the agreement.

15. Appropriate programs will need to be developed for the assessment f, and compensation or, impacts

of marine mineral development activities on traditional and commercial fishery activities.

16. To facilitate the development and sustainability of national fisheries government and industry should

consider joint development of industrial support facilities that could service both industries and allow

for additional development (mineral processing, ish canning).

17. Offshore mineral policy and legislation should ensure he confidentiality of corporate researchand

development data within their license area/so

18. To ensure the long term capability of the coastal states o effectively monitor offshore mineral resources

activities, relevant government representatives hould participate in all at-seaphasesof MSR, explorationand evaluation and that provision be made, either through appropriation or the creation of specialuse

funds within the responsible agency(ies), o provide adequatehuman and fiscal resources equired for

needed data collection and collation, monitoring and enforcement activities.

19. Recognising he unique nature of the biota associatedwith active hydrothermal zones,activities that

ensure an adequateunderstanding of the biota communities and the impacts of any associatedmineral

exploration and exploitation should be undertaken by MSR and Industry.

,;:; ;)'

';';; :;ri' ;;- 1

-j:;; ii- \ : 1;:';;:" i:l':

;: ,) C,!: ,'.

,;"":,, -j"!'.)!;"-!,,, i;'T'r::-' :;r! c,;ii.

i if;'; hi".' ,:'i'

~

8 SOPACMiscellaneouseport362




THE MADANG GUIDELINES -OFFSHORE MINERAL POLICY

INTRODUCTION

The mineral potential of the world's oceans,both near shore and deep-sea,s largely unexplored al-

though the potential for new discoveries of commercial, or potentially commercial, mineral deposits s

considered very high. The highest mineral potential is within the 200 nautical mile Exclusive Economic Zone

(EEZ) of individual nations where, to date, he vast majority of exploration and development has been

confined to the Territorial Sea three nautical miles from the shoreline) -only a small fraction of the total

area of the EEZ.

Perhaps ronically, the most extensivelyexplored area of the world's oceans s arguably he deep-sea

Clarion-Clipperton zone (easternPacific Ocean) which has been he site of extensive nternational explora-

tion for manganesenodules by many nations for over four decades. he exploration success n the Clarion-Clipperton Zone led to extensive exploration in the southeastPacific, central Indian Ocean, offshore south

Australia and the South Pacific (Cook Islands). Of these,only the manganese odules of the Cook Island's

EEZ appears o have sufficient size and nodule grade o be considered an alternative site for possible mining.

Most recently the discovery of potentially economic polymetallic sulfide deposits, particularly those with

high gold values within the EEZ's of individual nations, has sparked nterest on the part of both govern-

ments and industry with respect o their possible development. The gold-bearing massivesulfide occurrences,

individually with a resource potential of 50-250 million tonnes (t), occur primarily in the Manus, Lau, Fiji, and

Mariana Basins of the western Pacific (Clark 1999, Rao 1999, Kia and Lasark 1999, Binns and Dekker 1999,

Ponia 1999).

The discovery in the EEZs of many nations of potentially commercial mineral deposits, n particular the

above noted manganesenodules and gold-rich massivesulfides,poses a number of new challenges or both

government and industry. Specifically,governments must develop new policy and legislative egimes to

effectively manage ssuesarising from offshore mineral exploration and potential development. To date,

however, few if any nations, have n place comprehensivepolicy and legislative egimes o manageoffshore

mineral developments beyond those that may occur within their Territorial Seaswhere offshore mineral

developments are normally governed by existing mineral policy and legislation enacted for onshore develop-

ments. Such policies and legislation are generally not applicable for the exploration and development of

mineral resources within the deep-seaportions of the EEZ. Therefore, it is imperative that individual nations

begin the process, n consultation with industry and other stakeholders, f developing appropriate regimes

and legislation to manage present and future mineral exploration, development and exploitation within theirEEZs.

In recognition of the above, an Offshore Mineral Policy Workshop was held between 22-26 February

1999 in Madang, Papua New Guinea. The Workshop was hosted by the PapuaNew Guinea (PNG) Depart-

ment of Mineral Resources, oordinated by the South Pacific Applied GeoscienceCommission (SOPAC) and

sponsored by the Metal Mining Agency of Japan (MMAJ) and the South Pacific Forum Secretariat.This

Workshop combined national, regional and international expert presentationswith w>rking group sessions

and plenary discussion. The primary goals of the Workshop were, based on inputs from the assembled

specialists, o review and revise the draft PNG Green Paper on Offshore Mining Policy (Government of

Papua New Guinea 1999, Wanjik 1999,James 1999) o develop a list of recommendations for individual

nations to consider in the preparation of offshore mineral policy and legislation.





In the following, based on the papers presentedand subsequentdiscussions,a brief overview is pre-

sented on the occurrence and nature of polymetallic massivesulfides and manganesenodules, presently the

focus of interest by industry for commercial development, within the EEZs of severalnations of the west-

ern Pacific. Based on this overview, he key issues nherent in the formulation of an appropriate marineresources development policy and enabling egislation are discussed ollowed by a number of specific recom-

mendations. This is followed by a discussion of environmental, social, cultural and related ssues hat must

also be considered and accommodated n an overall offshore minerals policy. The combined recommenda-

tions that follow each section constitute the "Madang Guidelines for Offshore Mineral Policy".

OFFSHORE MINERAL RESOURCES

Within the EEZs of severalnations, deposits of black sands,chromite, gemstones,gold, diamonds,

metalliferous muds, phosphate, platinum, sand and gravel, salts,silica, sulphur and tin have been recognized

and exploited for centuries. In addition, serious consideration has been given to the mining of metal-rich sea-floor oozes and sediments n the Red Seaand the recovery of cobalt-rich manganese rusts from deep-sea

seamountsand ridges. At present, however, he above mentioned manganese odules and gold-rich

polymetallic sulfide deposits which occur within the EEZs of many nations are the subject of increased

exploration and evaluation for commercial exploitation (Clark 1999, Rao 1999, Kia and Lasark 1999, Binns

and Dekkar 1999,Ponia 1999).

Manganeseodules

Manganesenodules are spherical or egg-shaped lobules of metallic oxides measuring from 2 to 15

centimeters (cm) in diameter, and are spread on flat seabed urfaces at depths of 4000 to 6000 metres (m).

They contain mainly iron and manganese xides, but also contain nickel, copper and cobalt, amongst others.

Manganesenodules were first discovered n the deep seaduring the 1873-1876expedition of the Challenger

but remained ittle more than a scientific curiosity until the 1950swhen large nodule fields were discovered n

the Pacific Ocean. During the 1960sand until the late 1970s,manganese odules were the subjects of intense

scientific researchand exploration by private industry (Kajitani 1999,Tesishima 1999).

Although manganesenodules occur in all of the wotld's oceans, he most famous area s the Clarion-

Clipperton nodule field, an area of roughly 2.25 million squarekilometres (km~ that is estimated o contain

(McKelvey 1986)2.1 billion dry t of potentially recoverablenodules.The mineable areawould be 1.25 million

km2,with a nodule concentration of 11.9 kilograms per squaremetre (kg/m~ of nodules containing 1.3%

nickel, 1 % copper, 25% manganese, .22% cobalt, and 0.05% molybdenum.

In 1995, Clark, et al., estimated that the cobalt rich manganese odule resourcesoccurring within the

EEZ of the Cook Islands was approximately 7.5 billion dry tonnes of nodules containing 32.5 million tonnes

of cobalt, 24.5 million tonnes of nickel and 14 million tonnes of copper (cut-off grade of >5kg/m~ in an

area of 652 223 km2.

According to Ponia (1999), a feasibility study conducted for the Cook Islands Government has examined

exploiting the nodule resourcesoccurring within the EEZ of the Cook Islands.The feasibility study pro-

poses a mining scenario with an output of about 3000 onnes of cobalt per year, he equivalent of around

ten percent of the wotld's cobalt consumption that would be mined from a small area north of Aitutaki. The

proposed mining areawas chosen for its high nodule abundance, he high cobalt content of the nodules and

the presenceof a relatively flat terrain that would facilitate the harvesting of the nodules.The nodules would

be gathered by dredging, using small beam rawlers especiallymodified for the recovery of nodules. Once

10 SOPACMiscel/aneoHSeport362




brought to the surface, he nodules would be loaded onto large transport vessels or shipment to a processing

plant (assumed o be in New Zealand) where the nodules would be subsequentlyoff-loaded, stockpiled and

later reclaimed for smelting and refining at the plant.

PolYmetallicassiveulfides

Polymetallic massivesulfide deposits are concentrations of copper, ead and zinc sulfide minerals, often

with high concentrations of gold, which occur as thick blankets, sulfide-cementedbreccias,disseminations

and as the well-known "black smoker chimneys", the latter considered o be hydrothermal mineral deposits in

formation. Since the discovery of deep-seapolymetallic sulfide deposits (PSD) in 1978, many authors have

noted the similarity of such occurrences o deposits now being mined on the continents. In particular, they

have noted the PSDs to be similar to the deposits of Cyprus (Adamides 1979), apan (Halbach et.al. 1989b)

and the numerous massivesulfide deposits of Canadaand Australia. Extensive iterature now documents the

widespread occurrence of these deposits along the East Pacific Rise, he Galapagos spreading center, and theMid-Atlantic Ridge implying that such deposits are widespread throughout the major oceans of the world.

The western Pacific polymetallic massivesulfide deposits, many high in gold content, were first discov-

ered in the South Lau Basin in 1984 (Stackelberget al. 1985)and subsequently n the northern Lau Basin,

Okinawa Trough and the North Fiji and the Manus Basins.At the present ime, the PSD occurrences of

primary interest to industry for possible commercial development are those discovered n the Manus Basin

of Papua New Guinea (Binns et al. 1997). These occurrenceswere eased o private industry by the Govern-

ment of Papua New Guinea in November 1998.

According to Binns, et al., 1997, the easternManus Basincontains three known active hydrothermal

zones (pASCMUS, DESMOS and Susu Knolls) which are rapidly becoming recognized as regional-scale

modern analoguesof volcanic hosted mineral fields on land. In ,the PACMUS field, Binns, et al. (1997),

reports that "... [c]himneys dominated by chalcopyrite and sphalerite,with barite and some bornite, have

averagecompositions of 11 wt% Cu, 27% Zn, 230ppm Ag, and 18 ppm Au.. .." And, in the Susu ield" analysesof three Suzettechimneys average19% Cu, 22% Zn, 125 ppm Ag and 23 ppm Au " If the

value of the known mineralisation n the easternManus s calculated on a per tonne basis t would be worth

approximately US$500 to US$600/tonne in contained metal (gold, copper, zinc).

The actual economic potential of PSD is unknown at present, as there is insufficient information

available,with respect o the geology, engineeringand technology of possible mining and extraction, to

conduct a feasibility study.As noted above,however, he gross value of selectedspecimens ecovered from

the deposits is sufficient to warrant further exploration.

Before industry can proceed to make the necessarynvestments equired to fully evaluate he economic

potential of nodule and polymetallic sulfide deposits,and before governments can effectively administer and

manage such developments, t is necessaryo have n place comprehensiveand enabling mineral policy and

legislation which is specific to the exploration and development of these offshore mineral resources.

NATIONAL POliCY FORTHE OFFSHOREEXCLUSIVE CONOMICZONE

With the recognition of the economic potential of new occurrencesof marine mineral resourceswithin

the EEZ, there has been a national and international recognition of the need to establish egal jurisdiction

over these resources.The recognition of a national need for exclusive urisdiction of the near shore environ-

ments has also been a major factor (among several) hat led national governments o define a Territorial Sea

SOPAC iscellaneouseport62 11



TH1\ MADANG GUIDEUN}~S

--

(mean high tide to three miles offshore) with a larger contiguous zone (nine miles offshore). Similarly, he

recognition of the resource potential of deep-oceanmanganese odules ed to serious questions concerning

the ownership of all deep-ocean esources. n 1967 AmbassadorArvid Pardo of Malta, in a speech o the

General Assembly of the United Nations, proposed that such resourceswere the "Common Heritage of

Mankind". As a result, the United Nations establishedan Ad Hoc Committee on the PeacefulUses of the

Seabedand the Ocean Floor Beyond the Limits of National Jurisdiction, from which nearly a decadeand a

half later was to evolve into the UnitedNationsConventionn heLaw of theSea (UNCLOS) under which the

International SeabedAuthority (ISA) was formally established n 1994 (International SeabedAuthority, 1998,

Lodge 1999).

A particularly significant result of UNCLOS was the designationof the EEZ as "a zone normally

extending not more than 200 nautical miles from the baselines rom which the breadth of the territorial sea s

measured" (United Nations 1981) within which a coastalstate has sovereign ights over the natural resources

of the seabed,subsoil, and superjacentwaters.This sovereign ight of the nation over the resourcesof the

EEZ requires that individual nations establish both a national policy and appropriate legislation to govern

mineral resource development within their EEZs. In the following, the basic elementsof the required policy

and legislation are presented.

Elements f Marine MineralPolicy ndLegislation

The primary element in defining a rational marine mineral resourcespolicy is to first establish he

territorial boundaries of the EEZ, within the framework set forth by UNCLOS, to which the policy will be

applied. The recently proclaimed EEZs of many, f not most, nations have not been sufficiently surveyed

and/ or defined to ensure that exact erritorial boundaries are known and, more importantly, accepted by

other nations. Once the issue of territorial boundaries has been clarified, a nation can begin to establish tsmarine mineral resource policy: the key elementsof which are sovereignty, elf- sufficiency and self-determi-

nation.

BasicObjectivesf a MarineMineralPolicy

Although the resourcesand the level of resource endowment within the EEZ of individual nations will

vary greatly, here are a number of fundamental objectives that a nation should strive to achieve with its

offshore mineral policy. Among the most important are the following:

.Promote efficient and timely exploration, development,and production

.Encourage diversification in resource development

.Ensure conservation in exploitation of the resources

.Maximize economic return on resource exploitation

.Protect the enviror1tI1ent

.Contribute to overall national development n multiple sectors

In achieving the above objectives, t must be remembered hat marine mineral resourcesare

nonrenewable national assets.As such, a nation's marine mineral resource policy, while promoting the respon-

sible development of the resources,must also ensure he optimization of economic and social development

for present and future generations while simultaneouslypreserving he environment and traditional values of

the nation.

12 SOPACMiscelh/1eollseport62



THJ.: MADANG GUIDELINES

-,- Co.-' .--

Characteristics f a Marine Mineral Policy

In achieving the objectives of a national offshore mineral resource policy it is necessary to address the

characteristics of the marine minerals industry with respect to exploration, development and exploitation ofthe resources. In particular, there are five major attributes of the industry and its activities that are critical to

consider in policy formulation if a nation is to attract foreign investment for the exploration and develop-

ment of the resources' (Clark 1999). These five attributes are:

.Exploration is high risk and cosdy

.Exploration, development and exploitation all require advanced technology

.Development and exploitation is capital intensive

.Project economics are subject to market and price instability

Because of these attributes, it is imperative that a national offshore mineral resources policy recognize,

and be responsive to, these factors if it is to attract foreign investment. At the same time, the nation cannot

modify its overall marine mineral resource policy to such an extent that it does not achieve the major objec-

tives set forth in the above.

Madang Guideline Recommendations

1. As appropriate,nationsshould ake relevantmeasureso ensure heprovisions of the 1982 Convention ecomeullY

implementedwithin their urisdictions.

2. Nations shouldmoveorward rapidlY to delineatehe baselinesrom which the variousurisdictional zonesunder he

United Nations Convention n the Law of the Sea (UNa-OS) ("1982 Convention'; are measured nd to deposit

the appropriate chartsand list of co-ordinates ith the United Nations.

3. In the case f potential extensions f the continental helf beyond 00 nautical miles, hese ata shouldalso be

gatheredas soonaspossibleand theappropriateclaims iled (bearingn mind the 10-:]ear imit from the dateof

ratification by the coastalstate).

4. Measuresshouldbe taken to designate rchipelagic nd othersealanesor theputpose of navigation n accordance ith

the 1982 Conventionand other nternational conventions.

5. Nations should roceed o select heirprefetTeddispute esolutionmechanism s requiredunder he 1982 Convention.

OFFSHORE MINERAL EXPWRATION AND DEVELOPMENT POUCy

The key elements of the policies and legislation under which onshore mineral exploration and develop-

ment take place are well established in most nations. Indeed, in many countries the same policies and legisla-

tion have been applied, with minor modification, to nearshore mineral development (Wanjik 1999). Few if

any nations, however, have developed policies and legislation that are specific for deep-ocean marine mineral

resource exploration and development and which recognize and accommodate the unique aspects of such

activities. The following discussion is directed specifically toward defining some of the specific factors that

should be considered in the formulation of exploration and development policy, legislation and developmentagreements. The following discussion focuses on the exploration phase and development agreements in

particular because these are the major issues presendy facing governments and industry. In the following,

seven basic parameters are briefly discussed with respect to formulating policy and legislation for offshore





mineral development (Clark 1999). The majority of these ssueswould be included in exploration licences/

leasesgiven, and development agreementsentered nto, by an individual nation. These parameters nclude:

commodities sought, exploration area,exploration areashape,duration of exploration licence, revenues,

performance control, and retention and relinquishment.

Commoditiesought

A clear statement s necessarywith respect o the individual commodities sought (and eventually devel-

oped and marketed) within an exploration area.This is becauseores derived from the majority of anticipated

offshore mineral developments) will be mineralogicallycomplex. As a result, a definition of individual

commodities upon which royalties (or other payment) will be made s essential o ensure an oPtImum co-

nomic return to the nation.

ExplorationArea

The exploration area allocated within a nation's territorial sea or EEZ is normally dependent on two

factors: (1) the mode of occurrence and spatial distribution of the resourceand (2) the total exploration area

(normally expressed n km~ that is availablewithin the EEZ. As examples,nodule deposits tend to occur as

thin veneerscovering seamounts or abyssalplateaus equiring exploration areas hat encompassseveral

thousand km2 n orde~ o have sufficient area for discoveryof a viable mine site,whereas,polymetallic

massivesulfide occurrences are more restricted in size,and have higher ore gradesand lower tonnage, equir-

ing considerably smaller exploration areas.However, becauseof the limited knowledge concerning most

offshore mineral occurrences t is probable that initial exploration policy and legislation will grant much

larger areas n the offshore than would be granted onshore.

The total availablearea for exploration within an EEZ is normally a secondaryconsideration in deter-

mining a nation's policy with respect o the size of an individual exploration area.The main policy decision

that must initially be made,assuming that the availablearea s sufficiently large to provide for severalexplora-

tion areas, s whether to grant the entire area as a single icence or to divide the area nto several smaller

exploration areas.Normally it is in the interest of the licensing nation to proceed with several exploration

areas, ather than one large area,as such a policy encouragescompetition among nvestors and will ultimately

provide a broader base of data upon which the nation can make developmentdecisions. n caseswhen the

total exploration area within the EEZ is either quite small or the areasof mineral occurrence are known to be

restricted, a nation may need to grant the entire areaas a single icence in order to attract investor interests.

ExplorationArea Shape

Normal licencing procedures are designed o offer exploration areas hat are essentiallyequidimensional

and contiguous. This practice is appropriate for most offshore mineral resources,however, n the case of

polymetallic massivesulfides that are associatedwith linear zones and may be discontinuous along a zone, the

licence areaswould perhaps better be defined by long narrow tracts either parallel (providing a ,naximum rea

of similar geology) or perpendicular (providing maximum variation in the geologic setting) to the axis of the

linear structure.

A possible alternative to either the equidimensionalor the elongateshape s to issue icences o coverwhatever areas he investor may wish to define (within the leasesize imitations previously set). Such a

procedure has both ,be.n~fits nd drawbacks o the licensing nation and is generallynot recommended without

strict controls and relinquishment regulations.

14 SOPACMiscellaneofiseport 62




Duration of Exploration Licence

The duration of an exploration licence should be determined by a number of factors, however, he

duration should provide sufficient time to explore the area, o the point that specific economic targets fordevelopment can be defined. Licences can be extended based on performance criteria, which would normally

be contained in the legislation of the nation issuing he licence. Such extensionsare usually ied to a sequen-

tial relinquishment of a portion of the total exploration area. n all cases,he time frame should be set and

clearly stated so that both the government and the investor can fulfill their obligations without dispute. As a

general rule, exploration licenceswould be considered short term (5 years)or long term (20 years)but would

not exceed hese imits without exceptional reasons: his may be the casewith respect o certain offshore

mineral resources.

Revenues

Exploration licencesare normally granted with the provision that if an economic deposit s found the

investor has the right to develop and exploit the deposit under the fiscal regime defined by the nation for

offshore mineral resource development. As a result, severalmethods are used to secure he appropriate

revenues economic rents) to the government. Among the most common methods are the following:

Performance ontrol

Regulations are added to exploration licences o ensure hat the investor will proceed with the proposed

work plan in a timely and professional manner. Such egulations are enforced by (a) requiring that the inves-

tor post a performance bond that is forfeited if work is not done or (b) by suspensionof the explorationlicence(s) f work does not proceed. Normally performance criteria are set n terms of money spent, area

explored, work completed, or various combinations of the above. Performance controls are essential o

ensure that a nation's resource endowment s not unduly controlled by investors for long periods of time

without exploration activity taking place.

Retentionand Relinquishment

Exploration licences should provide a set schedule or both the amount of area that can be retained and

the portion that must be relinquished on a yearlybasis. n standardpractice, he relinquishment of an area

proceeds to a specified minimum level at which time the investor s allowed to retain rights if (a) a yearly,and

normally escalating-rent, s paid per unit area; (b) a specified area s transferred to either development or

mining; or (c) exploration continues to meet performance criteria.

Specified retention and relinquishment proceduresare essential rom the government's perspective o

ensure that large areasof the national domain will continuously be available or explor~tion and possible

development. Additionally, it ensures hat exploration by any single company will proceed n a timely and

professional manner.

The above brief discussion of the basic components of offshore mineral policy and legislation, and the

various issues that should be considered n their development, s not intended to be all-inclusive but rather to

provide a basic checklist for governments as they proceed o develop appropriate policy and legislation. Inthe development of offshore policy and legislation one of the most important issues o consider, n addition

to the above, s that of the fiscal regime under which offshore mineral development and exploitation should

take place.

SOPAC Miscellaneouseport 62 15




Madang Guidelines Recommendation

6. In the interests f consistencynd simpliciryof administration, he unique natureof offshoremzneraldevelopment

activitiesand the diverse ature of stakeholder nterests, oastal tates houlddevelop comprehensiveOffshoreMining Act, , whereappropriate,as a distinctcountry-specificegimewhich s separaterom their existing onland

mining acts.

7. The "risk" componentsssociated ith the explorationand exploitationof offshoremineral resourceshouldbe

assessednd consideredn the developmentf an appropriate licencing and fiscal regime.

FISCAL REGIME FOR OFFSHORE MINERAL DEVELOPMENT AND EXPLOITATION

In general, the fiscal regime for offshore mineral development and exploitation will be developed within

the broader framework of the nations overall economic policy and the legislative instruments that have beendeveloped for implementing that policy. Existing economic policy and legislation within most nations pro-

vides for various direct and indirect taxes and specific tax incentives which de facto determine (a) the profit-

ability of any economic enterprise (such as an offshore mineral resource development and (b) the return to

the government from the exploitation of the resource. In the following a brief overview of the major

components of a fiscal regime, which would be applicable offshore mineral resource development, are briefly

reviewed. It should be noted, as pointed out by Fortin (1992) that the fiscal policy and regime of one nation

cannot be easily "borrowed" from another nation since fiscal regimes are the product of the specific circum-

stances that exist in each nation. This caution should be equally applicable to the development of fiscal

regimes developed for offshore mineral resources.

Components f a mineral sectoriscal regime

Mineral taxation methods vary in form and application within individual Governments. The taxation

structure of a nation often determines whether or not a given project is economically viable and the govern-

ment's share from the exploitation and utilization of the nation's resources (resource rent). For the majority

of nations the taxes levied on a mineral development are either direct (taxes paid directly by the company to

the Government) or indirect (fees and costs paid to other government agencies or individuals and govern-

ment mandated activities paid for by the company) taxes. Among the most common direct taxes are the

following:

Direct Taxes

.Income tax. Often called a profit tax, an income tax is normally a percentage of the profits of an

enterprise.

.Rf!Yolry tax. Often called a production tax the royalty tax is normally a percentage levied against the

amount of a commodity produced or the sale price of the commodity produced. There are, however,

many variations used in the calculation of the royalty tax.

.Import dury. A tax levied against the value of imported equipment and materials used in a mining

enterprise. Normally, not all imports are taxed and this tax is often highly discretionary.

.Export tax. A tax normally levied against the value of the commodity exported. If the commodity is

sold domestically it is normally subject to a sales tax in lieu of an export tax.

16 SOPACMiscellaneouseport 62




.Withholding tax. A tax levied on the remittance of profits or dividends abroad. This tax is normally

levied on nonresidents but may also apply within certain corporate structures.

.Local taxes. n many nations the provincial and or local levels of government often have vested rights

to tax mining activities-these taxes are often called use taxesas they nclude taxes for education,

roads and property.

.Additional ProfitsTax. A tax levied on profits in excessof a set amount (or level of IRR) which nor-

mally increases ncrementally with level of profit.

.Other taxes. n addition to the above there are normally a large number of other direct taxes that are

levied againsta mining activity. These include, but are not limited to the following: rental fees, egistra-

tion fees, ransportation, water, environment (compensation ees),and in special circumstances,a value

added tax (VA1).

IndirectTaxes

.Landowner compensation.ormally a fee paid directly to the owner of the land upon which the mining

activity will take place or, in rare instances,paid directly to the national government.

.Local componentules. n many nations there are strict rules with respect o the use of domestic goods

and/ or labor, normally a percentageof the total, which may result in increasedcosts. Additionally,

many nations have a requirement for the company o participate in overall development that is an

additional cost.

.Foreign exchangeulesand regulations.ormally imposed in such a way that the company experience

foreign exchange osses or encounters ncreased ransaction costs when exchanging or transferring

foreign exchange. n specific casesof borrowing within the country, additional taxes may also be

imposed.

.Equi!J participation.Normally takes he form of free equity participation in a project in extreme cases

but usually s a carried equity interest, also known as deferred equity, which allows the government to

put up its equity share from future earnings.

.Transfer of technologyndknow-ho~Most commonly applies to the cost of acquiring and transferring

patents or other proprietary property to the host country as a condition of undertaking the mining

activity. This was a particularly contentious issue n negotiations under UNCLOS.

Tax Incentives

In recognition of the unique aspectsof mineral resource developments,both onshore and offshore,

existing policy and legislation normally provides for the following economic incentives:

.Tax holiday. n initial period of time in which a mining enterprise s not subject, or only partially

subject, to all types of tax liabilities. N?rmally this period is approximately ive years and, in special

cases, en years or more.

.Deductions againstncomeax. Covers a range of issuessuch as depreciation, amortization and depletion

allowanceswhich can be deducted as costs, hereby, educing taxable ncome. Deductions are com-

monly only allowed for certain types of equipment or for specific expenditures.Specialapproaches

have been developed n many countries to either speed up (accelerateddepreciation) or slow down

(defined number of years) ndividual deductions.





.Interest deduction.s mining enterprisesare capital intensive, he common practice to finance the ven-

tures is through loans. Therefore, most nations have provisions for allowing the deduction of all or

part of the interest on borrowed money.

.Loss carry onlJarelLargely becauseof the cyclical nature of the mining industry companies enjoy

profitable years and endure yearsof loss. In the years of loss the amount of the loss can be "carried

forward" as a cost and deducted from taxable ncome in subsequent rofitable years.The terms of

loss carry forward, particularly with respect o the applicable time, is often specified. The converse of

loss carry forward is "loss carry back" which requires an amended ax return.

.Tax credits. deduction from taxable ncome allowed by the government specifically for investment of

profits in the country. The amount of deduction s normally a percentageof the amount invested

domestically.

.Research and developmenteductionsgainstax. Deduction allowed for researchand development activities

in either pioneering endeavours,such as deep-seamineral exploration and development, or for thedevelopment of new technologies of particular interest to government and industry e.g. mproving

environmental or economic efficiency of a project.

Additional considerationsn establishingfiscal egime

In addition to the above fiscal issues here are a number of other issues hat may directly impact the

development of fiscal regimes for the development and exploitation of offshore mineral resourceswithin the

EEZ. Among the most important are the following:

FinancialAnalYsis f projects. s a result of the anticipated ong time-frame for many offshore mineralresource developments (it has been 4 decades ince manganese odules in the Clarion-Clipperton Zone were

evaluated for development) it is extremely difficult, if not impossible, n the initial stagesof exploration and

development to construct an accurate inancial analysisof a proposed project. Indeed, any estimation of an

Internal Rate of Return (IRR) or the Net PresentValue (NPV) based on present economics would be of

little value either to the Government or to industry. Therefore, such analyses hould be viewed primarily as

indicators of future profitability and should not be used by government for the determination of the fiscal

regime.

RingFencing.n many countries, expenses ncurred in the exploration of one area,which exceed he

expenses alled for in a work program, can be credited as expenseson an adjacentproperty owned by the

same company in order to fulfill the work program on the second area. n essence, company can expend allof its effort on one property, while holding a secondproperty, without doing any work on that property.

Alternatively, a company may be able to mine, at a profit, on one property yet deduct the costs accrued on

other properties in order to reduce their taxable ncome. In the caseof offshore mineral exploration and

development, where one company holds two or more licences, heseproblems could become acute.There-

fore, governments should consider "ring-fencing" of expenses,whereby, he profits and costs of exploration

and development on a license or mining areaare confined i.e. "ring-fenced" to only those associatedwith that

licence or mining area.

High Grading.A major problem, which should be considered with many offshore mineral developments,

is that of high grading. If, as it is anticipated, he mining of offshore mineral deposits s both costly and

capital intensive there will be a necessity o mine only the highestgrade portions of the deposits.Economi-

cally, his can be viewed simply as mining to a high cut-off grade which, onshore, s normally justified on the

18 SOPACMiscellaneouseport 62




assertion that the lower grade materials can be mined later, However, because of the particular circumstances

which surround the mining of deep ocean resources this may not be feasible, as it often is on land, to ass~me

that you can go back later and remine the area.

Environmental Costs.A great uncertainty with respect to the development of PMS deposits lies in the

associated environmental costs and the liabilities that a company may have to assume in order to mine a

deposit. Although this is a possibility, studies associated with the proposed development of manganese

nodules indicate that environmental costs are not prohibitively high nor is the amount of associated environ-

mental disruption.

Although the number of direct and indirect taxes is large, it is encouraging to note that the number of

potential tax incentives, which can also dramatically impact the profitability of a mining enterprise, are also

quite numerous and are very important. Overall, the fiscal regime of any nation must have sufficient flexibil-

ity to be able to accommodate the national policy with respect to mineral development while, at the same

time, assure the government of a reasonable "take" from the exploitation of the nation's resources.

Madang Guideline Recommendations

8. Individual nations should develop iscal regime pecificor offshoremineral developmenthat accountsor the unique

economic spects f suchexplorationand development,n parlicular thehigh costs f exploration,developmentnd

technology evelopment.

9. Initial offshoremineral developmentshouldbe viewed s "pioneering fforts" and as suchbegrantedappropriate

economicncentivesopromote investment nd development.

ENVIRONMENTAL CONSIDERATIONS IN OFFSHORE MINERAL DEVELOPMENT

As offshore mineral development increases for new deposit types (nodules and polymetallic massive

sulfides) and to deeper portions of individual nations EEZs the number and diversity of actual and possible

environmental impacts increases dramatically. Of primary concern for commercial development of these

deposits are the assessment and minimization of the potential environmental impacts which may accompany

such development. In the following the key factors related to assessing he impact of anticipated exploration

and development activities, and a strategy for addressing them and other concerns in an effective and

efficient, manner are discussed. The discussion is specific to the exploration and development phases. Al-

though the same general procedures would be applicable to aspects of the exploitation phase the present

uncertainty as to how, when and what deposits might be exploited does not allow for a detailed discussion of

environmental impacts or required programs. Nevertheless, certain aspects of land-based mineral exploita-

tion environmental policy will undoubtedly be applicable, to a greater or lesser degree, for offshore exploita-

tion. Those aspects, should exploitation take place, are briefly discussed at the end of the section.

KEY FACTORS IN DEVELOPING AN ENVIRONMENTAL ASSESSMENTPROGRAM

According to Morgan, (1999) there are three key factors must be addressed in any environmental assess-

ment program; in many ways these dictate the strategy for implementation of such a program. These three

key factors are:





Multipleurisdictions,ew rules

As noted many of the primary exploration targets for offshore minerals are ocated in the territorial

waters or exclusive economic zones (EEZ's) with few or no establishedprocedures for offshore mineraldevelopment. Others, such as the manganese odules of the Calrion-Clipperton Zone are ocated in areas

subject only to international law:Even the prospects ocated in the jurisdictions of countries with well-

developed onland regulatory frameworks present unique problems becauseof their offshore locations and

because heir development would not be covered by existing rules. Each site will present different problems

and call for the interfacing with different authorities and individuals.

Undefinedechnologies ecosystems

The history of environmental controversy s full of critical decisionsbased on inadequate nformation, a

factor of critical importance when the development of offshore mineral resources s considered. Deepseabedmining will consist of unprecedentedcommercial-scalemineral recovery operations in seabedareas

populated by unique biological communities, many of which, in the case of those associatedwith

polymetallic massive~ulfide deposits,were completely unknown to sciencebefore 1979 and which remain

only very poorly characterized o date.

Overall, considerable progress has been made internationally in the attempt to preserve and enhance he

air, water, and and living resources hat are essential o our survival and despite the bureaucratic chaos and

quasi-religious rhetoril:= hat unfortunately abound in the general ield of environmental protection, some

genuinely useful ideas have also evolved. Some of these deaswere assembled n 1979 by the US Council on

Environmental Quality (CEQ) into a set of Guidelines that are particularly relevant o the regulation of new

industries in poorly defined environments i.e. offshore mineral resources.

Two concepts from the Guidelines, "scoping" and "tiering" are particularly to environmental analysisof

new activities in frontier areas.

.Scoping is defined in the Guidelines as "[t)here shall be an earlyand open process for determining the

scope of issues o be addressedand for identifying the significant ssues elated to a proposed action. This

process shall be termed scoping". Scopingbegins when the subject of an environmental analysis, he pro-

posed action, is sufficiently defined to permit its reasonedevaluation by all interested parties. It consists of

public hearings,private interviews, and literature surveys. t culminates n a scoping report that describes he

concerns raised in the process and the means chosen o address hese concerns. Scoping compels the envi-

ronmental assessmento include the following rules:

1. A definition of the proposed action which is detailed enough o permit meaningful environmental

impact analysisand

2. An iterative and open project review procedure that can identify and set priorities for the issues

considered in the analysis.

Tiering is defined as "...the coverageof general matters in broader environmental impact statements

with subsequent icher statements or environmental analyses...incorporating y reference he generaldiscus-

sion and concentrating solely on the issuesspecific to the statementsubsequentlyprepared". Tiering allows

preparers of EIS's to "...focus on the issueswhich require decision and exclude from consideration ssues

alreadydecided or not yet required". Tiering implies the following additional rules for efficient and timelyimpact analysis:





3. Phasing of the resolution of environmental issues o be compatible with the schedule of activities

contemplated in the proposed action.

4. Whenever possible, separateenvironmental issues rom governance ssuesand general ssues romspecific issuesand deal with eachas appropriate.

The responsible implementation of the principles of scoping and tiering effectively addressesboth theobjectives of industrial development and environmental protection. In addition to the above overarching -

concepts Morgan (1999) has defined three additional mechanisms hat are particularly useful in environmen-

tal assessments or marine mineral resources hat are summarized as follows:

Bootstrapping. hen activities cannot be adequately efined, phase heir regulation to cover the front-end,

well-defined portion of the activity. Through monitoring and disclosure requirements,structure eachphase

of regulation to include definition of the next phase.

Consolidatedrocedures.hen the activities are well-defined, organize the permitting procedures as muchas possible into a single process with specified time limits for each step. However, do not attempt to over-

structure activities which are not well-defined.

Representativeommittees. henever possible, channel he identification and resolution of environmental

issues hrough an independent group composed of representativesof all interested parties rather than

through hired staff. This permits identification of the key issues n time for their resolution and also provides

an objective guidance of the assessment rocess.

In summary, government and industry are faced with a variety of potential environmental regimes n

their development efforts, many of which are not yet in place. In particular industry faces particular chal-

lenges related to environmental impact issuesbecauseof: (1) the relativelyundefined nature of the deposits

to be mined and the systems o mine them; (2) the popular mystique of anything related to the oceansand

the political forces which thrive on them; and (3) the genuine ssuesassociatedwith associatedunique ecosys-

tems. Hydrothermal vent communities. The next section outlines the important aspect~of the hydrothermal

vent communities of concern.

OUTLINE FOR IMPACT ASSESSMENTEFFORTS

Based on the considerations provided in the precedingsections, he following approach may be appro-

priate for undertaking an environmental assessmentor offshore mineral resources. Although all of the

following steps would be undertaken for each assessmenthe levels of effort would vary significantly inresponse o the specific needs and priorities of the individual nation and the resources o be developed:

Overall, schedules or the various environmental assessment ctivities would be driven completely by the

exploration and development scheduleswith the overall procedure nitiated concurrently with the permit

acquisition process. Discussion of environmental ssuesshould be included during the initial contacts be-

tween government and industry to demonstrate he unanimous commitment to environmental protection by

both sides.

5 copingand tiering

As discussedabove, his is probably the most important part of an assessment rogram. The key itemsthat must be accomplished n this component are:

SOPAC isceilaneoHSeport62 21



THI~ MADANG GUIDEUNES

1. Identify and analyze he legal and regulatory regimes which will control the exploration, mining, and

other activities, ncluding the lines of authority, participating organizations,and pertinent rules (if any);

2. Identify and examine the chains of authority to elucidate, f possible, any potential conflicts of interestamong agencieswith regulatory responsibilities;

3. Complete a development scenario which describes, n as much detail as practical at the time, the

planned activities of exploration, mining, transportation, processing,and waste management;

4. Establish an advisory board for each assessment rogram, to include representatives f industry and

the organizations with authority, technical experts (e.g.,scientists, ocal fisheries biologists), and repre-

sentatives of potentially interested parties (e.g., rom tourist bureaus, isheries organizations, environ-

mental groups);

5. Hold public hearings and information exchangemeetings within the appropriate jurisdictions to

present the development scenario and to provide an open forum for the expressionand documenta-tion of environmental issues;and,

6. Complete a scoping report which: (a) dentifies the primary issues hat will require assessment nd

those that do not; and CD) rovides a specific plan for the assessment ffort.

Environmental programs include tasks n the following categories.

Complianceasks

These are the assessmentasks that are specifically equired by the appropriate regulatory regime. They

include such things as the acquisition of permits for land-based activities, vessel nspection certificates,and

completion of environmental assessment eports, f required. In a jurisdiction with well-developed environ-

mental regulations, these tasks form the bulk and heart of the assessment ffort. In jurisdictions with few

and unstable regulatory regimes, they will constitute a variable part of the job. It is important to distinguish

such tasks from the primarily technical task of environmental assessment nd from the primarily public

relations task of public education, desc,ribed elow.

Assessmentasks

These tasks nclude the formal assessmentwork that must be done to address he environmental issuesraised by advisory committees and at public hearings.The result s an environmental assessment eport or

statement that covers the following topics:

.A description of the laws, regulations, or formal agreementsunder which mining activities will be

carried out

.A detailed summary or complete presentation of the development scenario

.A description of the potentially affected environment, focusing particularly on those resourceswhich

have been raised as ssuesof concern in the scoping process

.An analysisof environmental effects and necessary lans for mitigation, if necessary

.Documentation of the processby which issueswere dentified for analysis

22 SOPACAfiscelhneot/seport62




Rtsearch nd datagathering ctivities

It may be advisable o sponsor imited researchand/or data gathering activities in the exploration areas

to addresscritical issuesof concern. However, such work should be undertaken only after it is deemednecessary uring the scoping process and after its objectives and methods are clearly defined. When possible,

researchand data gathering activities should be carried out in conjunction with exploration field activities.

Collection of baselinedata and execution of field experiments can often be tied very efficiendy to explora-

tion activities with minimal interference and relatively itde expense.

Publiceducationasks

It may also be advisable o sponsor efforts to distribute researchor assessmentesults in public forums

and using attractive presentation methods. Such asks should also be identified specifically n the scoping

analysisas particularly controversial or subject o widespreadmisunderstanding. n such work it is veryimportant not to replace substancewith format; presentationsshould be clear, well documented and sup-

ported by independent experts. Public workshops can provide visibility and credibility to the program efforts

and can enlist the help of acknowledgedworld experts to assist n the design of the program plan.

ENVIRONMENT RELATED CONSIDERATIONS FOR EXPLOITATION

As noted previously, the high level of uncertainty that is presendyassociatedwith possible offshore

exploitation of deep seamineral resources, n particular polymetallic massivesulfides,make it difficult to

assessn detail the structure of an appropriate environmental regime for their environmentally responsible

exploitation. However, many of the basic components of the environmental regime for onland mineral

exploitation will, to a greater or lesserextent, be applicable o offshore mineral developments. t is important

to note that for most nations there will be a need to either draft new environmental policies and legislation

that are specific to offshore mining or, alternatively, o extensivelymodify existing policy and legislation. The

key components of an offshore mineral exploitation environmental program, based on onland practices,

would include, but not be limited to, the following components.

CriteriaRegulations

Becauseof the number of unique deposit specific project activities that are anticipated to be associated

with offshore mineral exploration, the most obvious being mining at extreme depths on the oce~n loor,

there will be a need to set criteria for categorizing individual activities as a precondition for establishing

environmental guidelines.

Fee, evies ndBondingRtgulations

Similar to onland mineral exploitation activities a comparable set of fees, evies and bonding will have to

be developed for offshore mineral exploitation. Although the basic types of fee regulations will apply they

will undoubtedly vary considerably n terms of magnitude (actual amount of the fee, evy or bond) and

timing (the overall time period for which they will apply). This will presenta unique challenge or botngovernment and industry to develop a fiscal regime that is not punitive, with respect o impacting the eco~

nomic viability of the project, but ensure protection of the environment. Existing uncertainty with regard to




THE MADANG GUIDELINE5

the types and extent of environmental impacts, particularly in terms of the extent and timing of rehabilita-

tion, make the development of a realistic fee regulation systemhighly problematic at the present time.

As with onland mineral exploitation projects, he developmentof a comprehensive Environment Mining

Plan (EMP) will be essential or both government and industry in order to ensure environmentally and

economically responsible exploitation. Initial plans will need to be flexible and provide for regular updating

and modification as experience s gained with the actual exploitation process. n particular, the EMP will be

critical in initially defining the scope and cost of bonding and subsequently n determining any changes

needed n the bonding procedure.

Environmental bonding will representa particular challenge nitially requiring (a) he definition of the

type and impact of the mining method to be utilized, the establishmentof suitable environmental guidelines

for monitoring the exploitation activities and (c) the establishmentof mitigation and rehabilitation costs for a

new type of mining activity. Nevertheless,a system hat includes, at a minimum, a bonding procedure for

rehabilitation and reclamation will be required. Such bonding may also be for non-conventional aspectsof

rehabilitation and reclamation; such as reclamation and rehabilitation to reestablishecosystemdiversity in theexploited area.

Environmental Policy on Offshore Waters

In the majority of nations there is already n place environmental policies and legislation which are

specific to onloand and nearshore water resources:normally under either a specific Water ResourcesAct or

as a major component of Environmental Protection, Environmental Planning and/or Environmental Con-

taminants acts. The Water ResourcesAct will normally deal with licensing of water abstraction and discharge

of wastewater nto any water body; the Environmental Protection Act normally covers general pollution

control and the registration of contaminants and the Environmental Planning Act covers the Environment

Plan (EP) Approval process.This latter activity will be extremelycritical in that it will detail the specific

studies and reporting that will be required to enablegovernments o closely monitor offshore exploitation

activities.

Each of these acts, f they exist, will undoubtedly need to be modified to accommodate he unique

aspectsof offshore mineral exploitation and overall operations within the open oceanmarine environment.

Alternatively, governments may wish to develop new policies and legislation, that are specific for offshore

mineral exploitation, that specifically addresseshe marine environment.

Enforcement olicy

In addition to the unique aspectsof environmental monitoring an equally complex, and closely related,

area of concern during the exploitation of offshore mineral resources s that of enforcement. Becauseof

costs,accessand availabledata with respect o offshore mineral exploitation the enforcement policy will need

to rely heavily on reporting by industry, to a lesserdegree on marine researchers nd, perhaps east, on actual

compliance evaluations by the State.Therefore it is necessaryhat the enforcement policy be closely inked

with activities mandated n the fee regulations (particularly he bonding procedures)and the environmental

policy for offshore waters.

Additionally, enforcement policy should also nclude details of operational procedures and industry

codes of practice that can normally be more easilymonitored for compliance and de facto help to ensurecompliance in associatedactivities ess easilymonitored.

24 SOPAC Miscel/aneol/S eport362



THE MAOANG GUIDELINES-

ASSOCIATED ISSUES

In the preceding discussions emphasis has been placed on the major issues which government and

industry must consider in developing t}te policy, legislation and guidelines which are needed for sociallyresponsible sustainable development of offshore mineral resources. The development of offshore mineral

resources, however, must consider a number of other impacts and issues that will be associated with offshore

mineral development. Among the most important of these are issues related to stakeholder interests, fisheries

and scientific research in the areas of offshore mineral development.

Madang Guidelines Recommendations

10. Recognisinghe appropriate nstrllmentswithin the 1982 Convention egarding he conseroation nd management f

the iving resources ithin coastal tates' EEZs, measures houldbe taken to minimiseadverse"pactsto the marine

environment nd to traditional and non-traditional uses f the sea hat mqy be caused y offshoremining.

11. Where appropriate,coastal tates houldconsidermaking a declaration hat the non-living resourcestyond the 3-mile

limit from the Provincial coastlines re a "CommonHeritage of the Nation".

12. Coastal statesshouldadopt a proactiveapproach n all significantdecisionmaking activities elated o environmental

concerns ssociated ith offshoremineral explorationand exploitation.

13. The collection f baseline nvironmental ata shouldbe a conditionof any marine exploration icence.Collectionof

baseline ata shouldbeginas earlYaspossibleollowed by rystematic ata collectionhroughout he ter", of the explora-

tion licence.

ASSOCIATED ISSUES IN POLICY FORMULATION

In the preceding discussions, emphasis has been placed on the major issues which government and

industry must consider in developing the policy, legislation and guidelines that are needed for socially respon-

sible sustainable development of offshore mineral resources. The development of offshore mineral re-

sources, however, must consider a number of other impacts and issues that will be associated with offshore

mineral development. Among the most important of these are issues related to stakeholder interests, fisheries

and scientific research in the areas of offshore mineral development (Lola 1999, Kolkolo 1999).

Stakeholder nterests

The number and special interests of potential stakeholders which are directly or indirectly impacted by

offshore mineral development are large and varied and beyond the scope of the present discussion to deal

with in detail. Defining the number and interests of the various stakeholders that may be impacted by off-

shore mineral development is further compounded by the fact that since offshore mineral development

creates a new development environment there will undoubtedly be a number of stakeholders and interests

that cannot be anticipated at the present time. Therefore, it is of great importance that the stakeholders and

their interests, in particular, the "new" stakeholders and the issues that are associated with them, are identi-

fied and addressed at the outset of the development of any policy and regulatory regime.

In the following a brief overview is given of some of the different stakeholders and their concerns that

one would expect to encounter with an offshore mineral development program within the EEZ of island

nation in the Pacific. This scenario has been chosen because of the ongoing projects for the development of

SOPACMiscel/aneouseport 62 25




--

manganesenodules in the EEZ of the Cook Islands and the recent ssuanceof exploration licences for

polymetallic massivesulfides in the EEZ of PapuaNew Guinea: two areasof ongoing exploration and

possible development in the near term (5-10 years).

Thestakeholders

According to Lola (1999), he most obvious stakeholders n offshore mineral development are the

government and industry whose interests are relativelywell-defined in government policy and industry's

objectives in offshore mineral development. In general, he following individuals or entities can be identified

as the principle stakeholders n any offshore mineral development:

.National government

.Industry (including stockholders)

.Provincial governments

.Local level governments

.Coastal communities

.Marine scientific researchers nd researchers ndertaking other researchactivities

.Commercial fishing industry participants, including traditional fishermen

.Shipping operators, ncluding other marine navigators and users

.Interest groups, including environmental groups, conservation groups

.International SeabedAuthority

.Landowners

It should be emphasized hat although all of the above stakeholdershave shared nterests they may use

completely different, and at times conflicting, methods to realize their basic objectives.

Stakeholdernterests

Stakeholder nterests are normally defined in terms of the claims by individuals or organizations of

ownership and/or user rights, perceived or otherwise, that they exerciseover the offshore area.Normally, the

State's assertion of ownership rights over mineral resources n the offshore area stems from the ownership

rights vested under a national constitution that almost alwaysgrants total ownership rights to the State over

the natural resources within its territories (including the EEZ). Some activities relating o offshore mining

operations may, however, ake place onshore in which customary andowners may assert heir ownership

rights over their customary and.

Other stakeholdersmay not assertownership rights but they can still assertsome form of user rights in

the offshore areasand, therefore, their interests,or the interests that they represent, will have to be consid-

ered. For example, stakeholders,such as traditional fishermen and local coastal communities may assertuser

rights over certain reefs or traditional fishing grounds.

26 SOPACMiscellaneoHseport362




--

Some stakeholders,such as commercial fishing industry participants, may assert ights that ate inherently

theirs by virtue of the terms of bilateral and multilateral agreements hat are in place, that accord them the

right to fish within the EEZ. The commercial fishing industry participants are an important group of

stakeholdersprimarily becauseof the fact that in most nations they are alreadyoperating in the offshoreareas hat are now being considered for mining activities.

A researchermay assert certain rights, including the right to be in a particular place to conduct Marin~

Science Research MSR) or other forms of research,on the basis of existing agreementsor other forms of

approval that they may have received from the State or its relevantagencies.

In the case of industry, a stakeholder,such a petroleum company may asserta right, to be in the off-

shore, pursuant to the terms of a petroleum agreement hat it has with the State,which permits it to carryon

petroleum activities in the offshore area. Similarly,a mining company may assert hat it has a statutory right

to be present offshore through an exploration licence that it has beengranted under a nation's mining act.

Likewise, a shipping operator may also asserta right because t has been icenced under the relevant shipping

laws to operate a particular route. The particular interests of the mining industry are discussed ater in this

analysis.

Provincial governments and local level governments may assert ights in relation to the sharing of

benefits emanating from the development of a natural resource. n fact, in many nations (Indonesia, Papua

New Guinea, Philippines) the State s obligated under various "decentralization acts" to share such benefits

with these second and third tier governments.

In some nations (Indonesia and Papua New Guinea), State mineral corporations may assert hat, pursu-

ant to enabling legislation which accorded t the right to be an entity, t has a right to participate as the State

nominee in any mining project.

Stakeholderssues

Issues of interest to the above various stakeholdersare varied and very much depend on the rights that

they are asserting n relation to the offshore areas.The common issues of interest to most stakeholders

would be for some form of compensation for the loss of certain rights due to offshore mineral development

.As an example, he commercial fishing industry may ind that mining activities may curtail their activities

and, hence, they ought to be properly compensated or any oss that arisesas a result of their forced curtail-

ment of fishing activities. Similarly, coastal communities and traditional fishermen may also seekcompensa-

tion for the loss of their traditional fishing ground and reefs: access o which may be restricted as a result of

mining activities.

Issues of stakeholder nterest to the State are particularly complex in that there are a number of issues

that are of concern to the State directly as well as a number of issuesof interest to the State ndirectly as the

representativeof other stakeholders local governments n particular). Among the most important issues are

those that pertain to the State's ight to participate directly in the developmentof an offshore mineral project

and the terms and conditions of such participation. Other important issues,of direct interest to the State,

relate to the various taxes and other imposts that the State adopts as part of its fiscal regime for offshore

mineral development projects, nfrastructure developments by industry, job training for nationals to facilitate

their taking more for more skilled jobs within the operations of a mining company.The State s also inter-

ested in seeing that the development of a mining project is carried out in a manner that has minimal environ-

mental impact.

SOPACMiscel/aneoHS Report362 27




Provincial governments and local level governments would want to see that existing provisions of

legislation pertaining to decentralization and resource rent revenue sharing (Clark, 1999) are rigorously

adhered to by the national government so that they can also receive benefits, including royalties, that arise

from development of any offshore mineral development project. Both provincial governments and local levelgovernments will want infrastructure to be developed by developers operating in their areas.

Non-governmental organizations (NGOs) have taken a great interest in issues surrounding the develop-

ment of natural resources in general and in particular with regard to the impact of mining activity and the

distribution of resource rents associated with such developments (Clark 1999). Such organizations will

undoubtedly be interested in a host of issues, in particular, those relating to the environment. and the conser-

vation of the "pristine" environments that are found offshore. Equally of c.oncern will be issues related to

the unique biota that are associated with the areas of high mineral resource potential, in particular those

associated with areas of ongoing formation of polymetallic massive sulfides.

Forum to Address 5 takeho/der ssues

The stakeholder issues in relation to a new offshore mineral development will almost always involve the

State, the landowners, the provincial governments, and local level government. The specific issues of impor-

tance to each of the stakeholders will usually be considered at a forum, or a series of forums, specifically

convened to deal with those issues.

Decisions and agr~ements reached at the forum on issues relating to royalty distributions, equity partici-

pation (basically the sharing of the portion of project equity available to the State), additional grants from the

national government, and commitments from the national government on infrastructure development should

be recorded in specific Memoranda of Agreement that are executed between the State, industry, the provin-

cial governments and the landowners.

Stakeholder issues that involve the State and industry are usually considered in meetings held between

the parties, either in specific meetings to consider specific issues such as financing plans, or through a nego-

tiation process. The State normally establishes an inter-departmental negotiation team with the responsible

natural resource agency, normally a Department of Mineral Resources (DMR), playing the lead role. This

team is the government's representative body that can enter into negotiations with industry on stakeholder

issues of mutual interest to both with the objective of formulating an Offshore Mineral Development

Contract (OMDC). When concluded, the OMDC is the document that stipulates the binding obligations and

commitments of both parties in relation to the development of a project. The developer's approved propos-

als for the development of the project forms part of the MDC.

The State, through its respective agencies, is also required to give separate approvals relating to industries

proposals for development, its financing plan and the environmental plan, among others.


14. Stakeholder roups and their interestshouldbe clearlY efinedduring the ormulatt"onof a'!) OffshoreMineral

Development greement o ensure hat the nterests f the stakeholders re adequatelYonsidered nd; Jllhere ppropri-

ate, ncorporated nto the agreement.

28 .fOP./1CMiscel/aneONSeport62



THI~ MADANG GUIDELINES

FISHERY CONSIDERATIONS IN OFFSHORE MINERAL DEVELOPMENT

According to Kolkolo 1999, the coastline and offshore archipelagosof individual nations presents a

great diversity of coastal ypes and marine environments characterizedby large delta areas,mud flats, man-grove swamps, ringing coral reefs, narrow lagoons, akes, ivers and extensivesystemsof marshes.The

extensive coastaland offshore areasnormally occur within the boundaries of a number of coastal provinces,

many of who have considerable autonomy. Additionally, many of the provinces have considerable autonomy

in regard to fisheries development/managementand share n the revenuesgenerated rom fishery activities

within the extended jurisdictional boundary of the individual provinces seaward nto the territorial seaand

the EEZ.

Potential mpactson isheries

Because he scope, ocation and specific impacts of offshore mineral development activities are largelyunknown at this time, there is little that can be said with respect o specific impacts and or policies vis a vis

such developments and fisheries. A number of concerns can be identified, however, which will need to be

addressedby government and industry should such developments ake place. Among the most significant are

the following:

1. Disruption of the Seafloor: Virtually any foreseeablemining venture will require extensive disruption

of the seafloor with varying impacts on biota;

2. Waste disposal: The mining operations will produce waste materials both at the mine site and, f

different, at the site of processing.The former will normally be in the deep ocean and the latter near

shore thereby impacting a number of habitats;

3. Restrictions on access:The mining activity will necessitate hat the areasof primary operation be (a)

declared off limits for other activities or (b) that other usesbe restricted in scope and area of opera-

tions;

4. Fishery impacts: The mining operation will have multiple impacts (both good and bad and many of

which cannot now be predicted) on fisheries n the areasof activities; and,

5. Economic, social, cultural and environmental mpacts: The mining activity will, in most casesand to

varying degrees,have national, provincial and local impacts on the economy, environment, social

institutions and culture.

The fisheries of most nations are (a) biologically diverse; (b) wide-spread throughout many marine

environments; and (c) are comprised of a wide range of fishing operations ranging from local subsistence

fishing to large-scalepurse seining.

Research nd developmentssues

Given the above potential impacts of offshore mineral resource developmentoudined above the follow-

ing researchand development ssueswill need to be addressed n the formulation of a comprehensive marine

mineral resource development policy which is sensitive o fisheries development.

SOPACMisceJ/aneous Report362 29



THl~ MAOANG GUIDEUNES

1. Diversity of fishery resources: The diversity of fisheries and their associated ecosystems necessitates

that a comprehensive program be initiated to protect biodiversity and to ensure the preservation of

marine fishery habitats both near shore and in the deep ocean;

2. Zoning of the sea areas: Because of the above mentioned need to protect the biodiversity within the

fisheries, the scope of fisheries-related activities throughout the EEZ and the requirements of indi-

vidual treaties and agreements, it will be necessary to consider a zoning of sea areas for specific uses;

and,

3. Impact assessment and compensation: Appropriate programs will need to be developed for the

assessment of, and compensation for, impacts of marine mineral resource development activities on

traditional and commercial fishery activities.

For most countries there is a growing concern over the development and sustainability of their coastal

and inland fisheries. To facilitate such developments it is important that government and industry consider

joint development activities: in particular, the government and industry (fisheries and minerals) shouldconsider the possibility of joint development of industrial support facilities that could service both industries

and allow for additional development (mineral processing, fish canning).

Policy considerations

As a signatory to numerous regional and international agreements, many of which are specific to the

fisheries and/or offshore mineral resource development activities there is a need to ensure that offshore

mineral development activities are in compliance with regional and international agreements. Among the

most significant are the United Nations Conventionon the Law of the Sea (UNCLOS) and theAgreementor the

Implementationof the Provisionsof the United Nations Convention f the Law of the Seaof 10 December1982 Relating othe Conservation nd Management f Straddling Fish Stocksand H,ghfyMigratory Fish Stocksand the WashingtonConven-

tion on International Trade n EndangeredSpecies f Wild Fauna and Flora (CITES) (Kolkolo 1999). Therefore, there

is a need to conduct a policy and legislative review of existing (and proposed) fisheries and minerals related

legislation, agreements (bilateral, multi-lateral) and relevant contracts to ascertain what issues exist that may

require resolution/coordination with regional and international bodies.


15. Appropriate programswill need o be developedor the assessmentj, and compensationof; impactsof marine mineral

developmentctivities on traditional and commercialishery activities.

16. To acilitate the development nd sustainabiliryof national isheriesgovernment nd ndustry should conszaeroint

developn,entf industrial support acilities that couldservice oth industriesand allow or additional development

(n,ineralprocessing,fishcanning).

INDUSTRY IN OFFSHORE MINERAL DEVELOPMENT

According to Malnic, 1999, for successful minerals exploration and development to proceed in the

offshore areas of any nations EEZ, there is a need to consider the specific needs of the potential investor

who will be required to make the necessary investment for the exploration and development of any commer-cial mineral deposits. The basic issues of security of title, tenure, levels of investment, work programs and




THE MADANG GUIDEUNES-

the fiscal regime for development have been previously discussed.However there are a number of other

issues hat must also be considered and may need to be specificallyaccommodated n national policy and

legislation. Among the most significant of these are the following:

Data Reporting nd ConfidentialitYGovernment legislation and UNCLOS stipulates that all data gathered

within a license area,or within the EEZ in the caseof UNCLOS, should be deposited with the host nation.

These requirements, however, mmediately raise wo fundamental questions that each nation will need to

address.

1. Since the data collected from offshore mineral exploration ranges rom physical samplesof tonnes of

sulfides,buckets of mud, water samples, rates of deep sea clams,and hydrothermal fluid samples how

will the data be stored so that it is preservedand accessible?Currendy few countries and! or government

agenciesare capableof effectively handling suchdiverse samples.

2. How can the present systemof publicly accessible Open File' and confidential 'Closed File' material thatis in use by most nations be refined to cope with the status of researchmaterialsgathered within indus-

try's licence areas?Currendy, such researchmaterials are placed in Open File reports that are almost

immediately available o the general public. The scientific conclusions from the researchmay be published

a year or two later.

Guaranteed erths At present the normal protocol for offshore mineral exploration and research s that

representativesof industry, researchorganizations and! or government are offered berth on the various

cruises: a system which has worked well in the past but may be the subject of concern in the future. Indeed

to address his issue n the SOPAC area, he SOPAC organization developed a protocol of cooperation in a

1998 collaboration between icence holders and researchers, pecifically, o address his issue. However,

assuming a more intense future for mineral exploration, industry believes hat the conditions regardingcollaboration, applicable to researchersand industry, should ideally be stated n nationally promulgated law

and implementing regulations and in a way that does not di~courage esearchersor bury them in pilperwork.

TrespassIn onshore mineral exploration licencesaccess o the licence area can be closely controlled and

is not allowed without a formal accessor joint venture agreement.However, control of such accessoffshore

within the EEZ, particularly for researchpurposes and by competitors, will be difficult to monitor and

enforce. Ensuring the integrity of licence areasmay require specific agreementsbetween government and

other users of the EEZ, which specificallypreclude trespass.

Intellectual ropertyBecause many aspectsof offshore mineral exploration and development associated

with new offshore mineral deposits will require the developmentof new technologies,and result in new

knowledge regarding the mineral occurrences, ndividual companies will acquire unique capabilities,expertise

and knowledge, .e., ntellectual property. This intellectual property will have significant economic importance

for the company that develops! acquires t and, consequendy, hey will want keep the knowledge for their

own benefit. Where presendy not accommodatedprovision to accommodate his issue should be incorpo-

rated in the policy and legislation of individual countries.

Disclosuref Affiliation -In caseswhere research ctivities are approved and condu<:=tedithin licence

areas here is a need to ensure that full disclosure s made with respect o the individuals participating in the

researchand the extent, f any, of their interest in other commercialenterprises.This disclosure should state

explicidy that representativesof competing companiesare not on board and that information will not be

given to competing interests without the licence holder's approval.

Overall, the basic concerns of industry with respect o the exploration and development of offshore

mineral resourcesdo not differ gready from those concerns that industry has for exploration and develop-

ment on land. However, the vastnessof the ocean environment and the resulting difficulties of maintaining





the integrity of access to the license area make it imperative that government, industry and research organiza-

tions work closely and cooperatively.


17. Offthore mineralpolicy and legislation hould ensure he confidentiality f corporate esearch nd development ata

within their license real s.

MARINE SCIENTIFIC RESEARCH

The identification of the majority of the mineral resources which are of commercial interest to industry

at the present time were originally discovered and defined on the basis of marine scientific research. Only

after considerable additional marine research did such occurrences begin to have commercial interest and to

be sought after by industry. Therefore, the scientific community has a vested interest in continuing its re-

search on the discoveries they have made, even after licences have been granted, and because of their unique

knowledge and expertise, it is also of interest of both industry and government that they continue their

research activities. As a result the major question that emerges is how can scientific research continue while at

the same time respecting the constraints of private industry? To accomplish this mutually beneficial coopera-

tion a number of specific issues that overlap with the concerns of industry must be addressed (Malnic 1999).

Among the most significant are those related to the following issues:

Onboard ndustry RepresentativesMarine mineral research is a costly endeavor with research vessels

costing as much as US$20,OOO/day (and more) to charter and with an "at sea" research project costing

approximately one half million dollars per year. Additionally, for many nations one of the primary justifica-

tions for the large quantities of government funding dedicated to research, and the access that researchers

seek in foreign waters, is the expected economic benefit of the research. Nevertheless, the issue of having an

industry representative onboard and participating in marine scientific research is both simple and complex. In

the special cases that marine scientific research is taking place within the licence area of industry, it would

seem to be a simple decision to grant the industry a berth to participate in such research. Conversely, in non-

licenced areas the issue is more complex and the presence of an industry representative raises two questions.

First, does the presence of an industry representative give that individual's company a comparative advantage

over other companies? Second, what should be the terms and conditions for granting an industry representa-

tive access to the research data, particularly with respect to the use and release of the data?

Research ccessPriorities -As noted previously the vast majority of the mineral occurrence of presentinterest to industry were initially discovered as a result of marine mineral research activities. Once discovered

and subsequently licenced by industry, however, the question arises with respect to whether the scientist who

discovered the occurrence has priority over other researchers for the study of that occurrence. To resolve this

issue it is suggested that nations (individually regionally or internationally) should develop a Set of guidelines

that would bestow some privilege of priority to the researcher of discovery.

Industry-ResearchCooperation The mutual rewards to be derived from industry-research cooperation are

already considerable and expected to increase in the future as offshore mineral exploration and development

activities increase. Industry-research cooperative efforts are not without problems however, particularly with

respect to the release of data and scientific findings as has been noted earlier. To a large extent industry-

research cooperation can be achieved by establishing a working arrangement by which the research organiza-tion is a "consultant to", rather than "working for", industry. In such a cooperative arrangement, the research

32 SOPACMisce/laneoHseport362




organization can assist industry while simultaneously pursuing its own research agenda in the same area.

Although such an approach may at first appear to be more "definition" than "substance", detailed negotia-

tions can produce the required result.

Government-Research Cooperation -The cooperation between individual governments and research institu-

tions for marine mineral research within the EEZ of the individual governments has been both the norm

and fruitful for both parties for decades. This relationship has been further strengthened and codified under

UNCLOS that mandates that access be granted, except under special circumstances, to a nation's EEZ for

the purposes of marine scientific research. It must be recognized, however, that entry into the EEZ of an

individual nation must be for the purposes of marine scientific research only and may not be for commercial

purposes unless specifically approved by the government.

The above issues are critical to resolve in order to ensure the continuation of marine mineral research

within the EEZs of individual nations and a continuous flow of new scientific discoveries; many of which

will be the economic mineral deposits of the future.


18. To ensure the long term capabilitY of the coastal states to effectivelYmonitor offshore mineral resourcesactivities,

relevant government representatives should participate in all at-seaphases of MSR, exploration and evaluation and

that provision be made, either through appropriation or the creation of special use unds within the responsible

agenry(ies), to provide adequate human and fiscal resources equired for needed data collection and collation, lHonitoring

and enforcement activities.

19. Recognising the unique nature of the biota associatedwith ach"vehydrothermal zones, activities that ensure an adequate

understanding of the biota communities and the impacts of a'!Y associated mineral exploration and exploitation should

be undertaken by MSR and Industry.

SOPACMiscel/aneollseport62 33




ACKNOWLEDGEMENTS

The Offshore Mineral Policy Madang Guidelines becamea reality owing to the invaluable contributions

of severalcommitted organisations and individuals. We wish to acknowledge he Department of Mineral

Resources,PNG for hosting the workshop; the Metal Mining Agency of Japanand the Forum Secretariat or

sponsorship. Our gratitude goes to the authors of the papers who set he tone and developed the eclectic

framework for the discussions.A specialword of mention to Dr. Allen Clark, East West Center, Hawaii for

playing a key role during the conference and helping compile and edit the papers for the Workshop report

(SOPAC Miscellaneouseport 23). SOPAC is proud to have co-ordinated the workshop and to present here

the Madang Guidelines on offshore minerals policy (SOPAC Miscellaneouseport 62).

Documents

Madang Guidelines MR0362