Developing aregulatory Framework formineral Exploitation in the Area Submission of Ifremer

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1 Introduction Ifremer The French Research Institute for the Exploitation of the Sea, Ifremer is a public institute of industrial and commercial character (EPIC), created in 1984 and placed under the authority of the Ministry Higher Education and Research, Ministry of Food, Agriculture and Fisheries and the Ministry of Ecology, Sustainable Development and Energy. Ifremer contributes, through its work and expertise, to the knowledge of oceans and their resources, monitoring of the marine and coastal environment and to the sustainable development of maritime activities. In this context, it designs and implements instruments for observation, experimentation and monitoring and manages the French oceanographic fleet as well as oceanographic databases for the entire scientific community. Ifremer is a source of knowledge, innovation, monitoring data and expertise for the ocean community, both in terms of public policy and socio -economic activity. The Physical resources and deep ecosystems Department (REM) is involved in scientific research related to continental margins and the deep ocean, is responsible for the French UNCLOS continental shelf program as well as the French activities related to the Area. Ifremer has a direct interest in the exploration activities in the Area. It is the French contractor of the Authority (since 20 June 2001) for exploration of manganese nodules in the Clarion-Clipperton Area. The work carried out during the contracting period concerns in particular the potential mining of nodules (based on mineral concentrations); the environmental aspects of mining for the seabed and the water column; a contribution to metallurgy and extraction methods with industrial partners. Moreover, Ifremer has a long standing history of marine geological and marine biological research related to hydrothermal systems along mid-ocean ridges, and is currently in the process of signing a new contract with the Authority for exploration for polymetallic sulphides in the Atlantic Ocean. Ifremer s Submission and potential participation in future working groups Aaccording to its mandate Ifremer has to promote and contribute to the sustainable and responsible exploration and exploitation of the resources of the ocean. Ifremer is a stakeholder in any regulatory Page 1

2 framework that could affect the Area, as in fact it will affect the ocean as a whole. Ifremer is particularly sensitive to and experienced in the environmental aspects of the regulatory frame work that the Authority needs to develop. Our response to the survey will therefore focus mostly on Parts B and C, and we will be more succinct on the other aspects. Concerning the environmental impact of the exploitation of deep-sea mineral resources (in particular polymetalic nodules, hydrothermal sulfides and cobalt crusts), a French initiative (initiated by the French Ministry of Research) has been launched under the coordination of the Centre National de Recherche Scientifique (CNRS) and Ifremer in order to establish a state of the art of the potential impact. The results of this study would be available mid 2014 and will be communicated to the Authority as a contribution to the development of the regulatory framework. It is important to note that the lack of data concerning deep biodiversity and the functioning of ecosystems could be problematic for the establishment of a regulatory framework for mineral exploitation. Ecosystems associated with inactive massive sulfide deposits and cobalt crusts are almost unknown while critical gaps remain in the understanding of the distribution of species, the connectivity among populations and the functioning of abyssal communities associated with nodule fields. We suggest that the Authority organizes specific workshops in order to share scientific expertise on this topic, with the aim to better analyse what could be the best recommendations for environmental protection and damage mitigation. Ifremer provides its express consent to make the information contained in this submission publicly available. Ifremer is also interested in continuing the dialogue with the ISA and participating in stakeholder group meetings and discussions, as well as in workshops of experts in the areas mentioned above and elaborated further in our answers below. Contact Information Ifremer Headquarters M P. VINCENT, Deputy Managing Director155, rue Jean-Jacques Rousseau Issy-les-Moulineaux Cedex Tél. : +33 (0) Page 2

3 Ifremer M. L. MENOT Laboratoire Environnement Profond Centre Bretagne - ZI de la Pointe du Diable - CS Plouzané Tél. : +33 (0) PartA: Financialtermsand obligations In responding to this Part A, please consider the questions presented below and in a bullet point form highlight the main issues you believe should be addressed or considered in developing a regulatory framework. Feel free to provide additional information in narrative form. The payment mechanism The Agreement requires that a system of payments is to be implemented which will compensate mankind for the exploitation of the resources in the Area. The Agreement calls for there to be a fair system and that the payment system should neither be complicated nor incur major administration costs for either the ISA or a Contractor. The Agreement states that a royalty or combined royalty and profit-share mechanism is to be considered, although alternative system(s) are also possible. In a land-based environment, it is generally accepted that a progressive system is fairer and that any payments increase in line with project profitability, subject to a minimum revenue flow through a royalty-based mechanism. However, there is an administrative trade-off in that royalties are generally simpler to administer than profit-based mechanisms, which can be technically challenging. Currently, the ISA does not have an accounting infrastructure to support a complex profit-based system. Page 3

4 Other qualities of a financial system include stability, flexibility and responsiveness to changing market conditions. The ISA Secretariat has undertaken a preliminary study into comparable land-based mechanisms. However,to advance this further your comments on the following would be appreciated. In connection with a proposed payment mechanism and system: 1. In delivering a best revenue opportunity for the ISA and an overall fair and equitable system, which payment mechanism would you consider preferable for the ISA and Contractors and why? 2. Ifaroyaltymechanismisadoptedforreasonsofadministrativeconvenience,howcana royaltymechanismcapture, forexample,economicrentsoverthelife ofanexploitation contract? 3. Areyouawareofanyalternativepaymentmechanismsthatwouldmeritconsiderationby theisa? 4. Inyourview,howfrequentlyshouldanypaymentmechanismbereviewedfromaregulatory viewpoint? 5. Thepoint(s) of valuation for anypaymentobligationsundertheregulatoryframeworkneeds tobeidentified.inland-basedregimesandoilandgasregimes,theory determinesthat the valuationpointisascloseaspossibletothepointofextractionoftheresource.inland- basedregimes anapproximation for thisis usually thefirstarm slengthsalein the downstreamprocess.oftena freeonboardexportpriceoranetbacksystemisadopted for royaltycalculation purposes. ForactivitiesintheArea,theremaybeanumberof possiblevaluationpointsforthe minerals and metals to beexploited.pleasewouldyouconsiderand advisewhichvaluation point(s) the ISAshould considerindetermininganarm s-lengthvalue forthe purposes of calculatingthe fairvalueofthe mineraland metalresources.fromanadministrative viewpoint,which valuation pointwould be thesimplesttodetermine? Page 4

5 6. Inconnectionwithanylateoroverduepayments/returnsbyContractors,inyouropinion, whatpenaltyorfinemechanismsshouldbe adopted bytheisa? Otherconsiderationsimpactingfinancialtermsandobligations 7. The current Exploration Regulations state that an applicant must be financially and technically capable ofcarryingoutaplanofwork forexploration.thisisconsideredof relevance tofuture exploitation regulationsaswell. a. Inyour viewwhat keyelementsshouldbeconsidered inrespectof technical capability?;and b. Similarly, in your view what key elements should be considered in respect of financial capability? 8. In your view, how can the regulatory framework be structured to encourage optimum extraction oflowgrademineral resources? 9. Doyouhaveanysuggestionsforincentivemechanismsthatwouldencourageinvestmentin the Areaand/ or support best environmentaloperating practices? 10.Forwhatterm(inyears)shouldanexploitationcontractbegranted?Whatdoyouconsider bestpracticein termsof renewal periodsforthe samecontract? 11.Inyourview,whatcriteriashouldContractors/theISAconsiderinconnectionwiththe optimumsize ofexploitation areaswithin acontractarea? 12.Itwouldseemappropriate,inlinewithexistingextractiveindustryregimes,thatfinancial penaltiesareconsideredaspartofthe regulatoryframework. TheAgreementprovides, subjectto judicialremedies,thatinthecaseofviolationsofnon-fundamentalcontractterms (orinplace ofanysuspensionorterminationofacontract),monetarypenalties maybe imposedoncontractors.contractors mayalsobesubject tootherpenalty regimesbeyond Page 5

6 thatoftheisa(forexample,bysponsoringstatesunderthe termsofdomesticlicencesor permits). a. In your view, what penalty mechanisms should be adopted in the regulatory frameworkandimposed specificallyby theisa?forexamplethiscouldbefixed penaltiesinconnectionwiththebreach ofproceduralobligations,including environmental procedural obligations; b. Inaddition,doyouhaveanyrecommendationsastotheclassification(seriousness oftheviolation,durationetc) ofviolations and arangeofpenaltyamounts? c. Finally,yourrecommendationsontheuseofanypenaltyamountscollectedbythe ISA?Forexample,shouldtheseamountsbe directed towardan inspectionregime only? Financing an inspection regime based mainly on the money recovered from penalties would not give stability and sustainability to the inspection regime which would need a more constant and strong flow of money. Inspection regime means staff and other tools. Therefore it is governance issue for the ISA as a whole body. 13.TheExplorationRegulationsrequireContractorstomaintainappropriateinsurancepolicies that are in accordance with generally accepted maritime practice. Do you have any recommendationsas to any specificinsurance products thatshouldbereflectedin the exploitationregulatoryframework? Specificenvironmentalconsiderations 14.Itiscommonpracticeinland-based regimes to require anenvironmental guaranteeorbond. Insome regimes,a cashamountis paidundera trustarrangementor to aspecialbank account. What are your recommendations for including such a guarantee or cash contributionintheexploitationregulatoryframework?pleaseadviseonthenatureofany guarantee,the quantum ofthe guarantee(itscalculationmethodology),itsuseandrationale (for example, for restorative obligations, agreed penalty amounts) and the suggested duration beforerelease/return. 15.TheSeabedDisputesChamber 4 recommendedthatconsiderationbe giventoestablishinga Page 6

7 trustfundintheeventanenvironmentalliabilitygaparises. WesternAustralia,forexample, hasimplementedaminingrehabilitationfundtocoversituationswhereanoperator failsto rehabilitatethe environment. However,the conceptofatrustfundmayhave widerappeal. Yourcommentswould bewelcomethereforeon thesettingupofa generalenvironmental trust fund under the exploitation regulatoryregime onthe basis of the polluter pays principle.pleasealsoprovideyourcommentsonhow anycontributionto thefundshouldbe calculatedand suggested,specificusesoftrust monies. Part B:Environmentalmanagementtermsand obligations There exist a number of general obligations to protect the marine environment in the Convention.Inaddition theexplorationregulationsidentify specific obligationsincluding applicationofthe precautionaryapproachandbestenvironmentalpractices. Thesefundamental principles will be carriedthroughtotheexploitation regulations. SimilartoPartA,inrespondingtothisPartB,pleaseconsiderthe questionsbelowconnected with environmental assessment and environmental management and in bullet point form highlightthemainpointsforconsiderationinthedevelopmentoftheregulatory frameworkfor exploitation.again,pleaseprovide additional information innarrativeform. 16.PleasedescribeanygeneralrecommendationsthattheISAshouldconsiderindeveloping rules,regulationsandproceduresonthepreventionofdamagetothemarineenvironment fromactivities in the Area; Mitigation Hierarchy to achieve no net loss: The mitigation hierarchy is a set of prioritised steps to alleviate environmental harm and work towards no net loss of biodiversity through: 1. Avoidance, measures taken to avoid creating impacts. 2. Minimisation, measures taken to reduce the duration, intensity and / or extent of impacts. Page 7

8 3. Restoration, measures taken to rehabilitate degraded ecosystems or restore cleared ecosystems following exposure to impacts that cannot be completely avoided and/ or minimized. 4. Offset, measures taken to compensate for any residual significant, adverse impacts that cannot be avoided, minimised and / or rehabilitated or restored, in order to achieve no net loss or a net gain of biodiversity. Ecological Risk Assessment (ERA): an ERA is provided, describing the likelihood of any disturbance, their magnitude and scale, together with the sensibility of threatened habitats, their spatial extent and recovery time scales Environmental Baseline Studies (EBS): Insure that a baseline study is properly designed and performed at relevant temporal and spatial scales for the key functional and taxonomic groups according to habitats potentially threatened by the activities. Environmental Impact Assessment (EIA): Insure that the monitoring of impacts is properly design and implemented at relevant temporal and spatial scales for the key functional and taxonomic groups according to habitats potentially threatened by the activities. 17.TheExplorationRegulationsdonotreflectanyrestorativeorrehabilitativeobligationsinthe marineenvironment.inyourview,underanexploitation framework,whatgeneralrestorative orrehabilitative obligationsshould be incorporated? - Recommendation but no obligation: Restoration and rehabilitation are critical steps of a mitigation strategy but which have never been experimented in the deep sea. The ISA can promote experimental restoration however there is no guarantee that it will be successful and, considering the very low colonisation rates in most deep-sea habitats, it may take decades to demonstrate the benefits of restoration. - Habitat restoration: Habitat removal is likely the most serious threat to the marine environment due to mineral mining. Ecological restoration, if any, should aim at habitat restoration. The LTC could issue recommendations regarding habitat restoration strategies based on expert advices. 18.As part of the approval process for exploitation, Environmental Assessments and Page 8

9 Environmental Management Plans will be required. 5 What procedural steps should be incorporatedintothe regulatory frameworktoevaluateenvironmentalassessmentsand EnvironmentalManagementPlans? Whatindependentverificationproceduresshouldbe adopted by the LTC inreviewingenvironmental Assessments andenvironmental ManagementPlans? - A Panel Expert Review: Environmental Assessments and Environmental Management should be reviewed by a panel of experts nominated by the Authority. The panel of experts should be multidisciplinary with experts on physical oceanography, chemical oceanography and biological oceanography (benthic and pelagic). The International network for scientific investigations of deep-sea ecosystems (INDEEP) is maintaining a database of deep-sea experts ( The Deep Ocean Stewardship Initiative (DOSI, specifically aims at integrating science, technology, policy, law and economics to advise on ecosystem-based management of resource use in the deep ocean and strategies to maintain the integrity of deep-ocean ecosystems. Both initiatives could help the Authority in setting up a Panel Expert Review and provide guidance for environmental management in the framework of regulations for the exploitation of mineral resources in the Area. 19.Astoanydamagetothemarineenvironmentfollowingtheremovalofasubstrate(e.g. polymetallicnodules)whatdoyouconsider the mostappropriate advanceresponse strategiesto conservation,restorationandnaturalremediationofbiologicaldiversityand ecosystemfunctioning?is remediationbestachievedbythedevelopmentofareas of ParticularEnvironmentalInterest 6 andpreservationreferencezones 7 envisagedbythe ExplorationRegulations? - Restoration: more studies are needed to demonstrate the benefits of restoration for each of the habitats threatened by deep-sea mining - A strategic conservation planning, at regional scale through APEIs and local scale through Preservation Reference Zones seems appropriate. Both should form a consistent network of protected areas managed by the Authority. Page 9

10 20.Inconnectionwithquestion19above,whatecosystemfunctionsarecriticaltorestoreand/ orwhatlevelsofbiological diversity shouldbeconservedat regional levels,localscalesand overwhattime periods? - Restoration of ecosystem functions: Habitat provision would be a key target for restoration - Conservation of species and genetic diversity: at regional scale, conservation strategies would aim at preserving species within their distribution ranges while at local scale, conservation strategies would aim at preserving genetic diversity within populations. As a census of species and genetic diversity is out of reach in many deep-sea habitats, habitats or communities could be a proxy target for conservation at both regional and local scales. - Permanency of protected areas: unless restoration projects proved successful over less than a decade, protected areas should be permanent. This measure may also serve as a levee to promote experimental restoration. 21.The Exploration Regulations (and the Convention) envisage an emergency response (knownas emergencyorders )whereanincidenthascaused,iscausingorposesathreat ofseriousharmtothemarineenvironment.pleasedescribeanyrecommendationsyou haveinthelightofbestpracticesonthemeasuresandproceduresthatshouldbeadopted in connection with anemergencyresponse. - Transparency: details regarding the incident, its consequences and any measure or procedure should be communicated to the Authority and, as needed, reviewed by an Expert Panel - Environmental emergency planning should be included in Emergency Management including strategies to monitor the spatial extent and magnitude of any harm to the marine environment. 22.A number of international and domestic legal instruments, including the Exploration Regulations,incorporate termssuchas seriousharm or vulnerablemarineecosystems in connectionwiththeprotectionofthemarineenvironment.how doyouthinkthese terms should bebetterdefinedand interpreted inthe exploitation regulatoryframework? - Definitions of serious harm and vulnerable marine ecosystems will vary according to the resources (nodules, massive sulfides, cobalt) and threatened habitats, definitions and Page 10

11 interpretations would need recommendations from the LTC based on expert advice, considering the ecological attributes of the ecosystems and the magnitude and scales of cumulative impacts of the activities. Better definition should also be based on what is known in the international as well as domestic jurisprudence on these issues. 23.HowcantheISAmostusefullypromoteandencouragetheuseofbestpractice(including technologyadvancesandscientific research) tobetterprotecttheenvironmentduring exploitation operations? - Regular workshops among contractors and with scientists in order to learn from ongoing operations and insure a level of consistency and standardization across practices. 24.ArethereanyotherfeesorleviesthattheISAshouldconsidertopromoteenvironmental compliance? 25.ForthemonitoringofactivitiesintheArea,theExplorationRegulationsprovideforan inspectionregime.additionally,sponsoringstatesmayalsoundertake monitoringof Sponsored Contractoractivities in the Areathrough inspection. a. InyourviewwhatmonitoringobligationsshouldbeplacedonContractorsoperating in the Area andincludedin the exploitation regulatoryframework? b. Pleaselistthe key measuresandcharacteristicsofwhatshouldbeconsideredin establishingasupervisionprogrammetoverifycomplianceofcontractorswiththe rules,regulationsand procedures,particularlycompliancewiththeir monitoring obligationsabove.inyourview,how shouldsuchan ISAregimebe structuredand implemented,includingthe frequencyofinspection,by whomandhow shouldan inspection regime befunded? See elements under 12,c). Inspection regime should not be funded only by the contractors because it is deemed to be part of the whole institutional framework of the Authority 26.Whatspecificproceduralobligationsshouldbeadoptedundertheprecautionaryapproach Page 11

12 bestenvironmentalpracticesandadaptivemanagement?arethereanybestpracticerisk managementapproaches(forexampleinan oilandgasor fisheriescontext)thatcould usefullybe adaptedtodeep seabedmineral exploitation activities? 27.In considering environmental procedures above, what internationally-accepted environmental managementstandards should be reflected in the exploitationregulatory framework? The regulatory framework should build on existing environmental standards that are already applied, such as for example the OSPAR Convention for the protection of the marine environment of the north-east Atlantic. However, adaptation to the specific impacts of deep sea mining will need to be done through workshops and consultations with experts, in order to guarantee the highest possible standards, taking into account the significant uncertainties due to lack of data and scientific knowledge. Part C: Health, safetyand maritimesecurity TheExplorationRegulationsrequireContractorstocomply with generally acceptedinternational rulesand standardsrelatingtosafetyatseaand anyrelatedrules,regulationsand procedures adoptedby the ISA.Equally,the Exploration Regulationssimilarly require Contractors to comply withanyrules,regulationsandproceduresrelatingtoemploymentpracticesincludinghealth and safetymatters. 28.Inconsideringhealth,safety,labourandmaritimesecurity,canyousuggestthegeneraland / or specific duties and obligations that should be placed on Contractors under the exploitationregulations?pleasealsoconsiderany furtherspecificobligationstowardother usersof themarine environment. The maritime operators used in any operation shall make every effort to respect and protect the marine environment (seabed, subsoil and water column) Many internationally recognized conventions, rules and codes exist already and operators shall Page 12

13 therefore: - Be a member of and abide by the rules and codes of the International Maritime Organization (IMO) - Be certified according to the International Safety Management code (ISM) which provides an international standard for the safe management and operation of ships and for pollution prevention - Be certified by the International Ship and Port Security (ISPS) All operators shall meet the following standards: - SOLAS 74, International Convention for the Safety of Life at Sea - MARPOL 73/78, International Convention for the Prevention of Pollution of the Sea by Oil - COLREGs 72, International regulations for preventing collisions at sea The Operator should ideally be an ISO 9001 certified. Following the example of national legislation in several States (Brazil, Suriname, United-States, to cite a few), the education on environmental and safety issues of all employees involved in the mining operations is essential. Any operation should therefore demonstrate to include environmental and safety education activities for workers involved directly and indirectly in the activity of mining operations at sea The goal is to educate, inform and train employees, highlighting the interference with the natural environment of the activity in question, the risks related to the natural environment for the operators, and to promote a positive coexistence between the operations and others who use the environment in the area where the activities takes place. The main idea is to allow all those involved in operations and its supervision to have access to knowledge and skills required to participate in the management of their activities and enable them to decide on the best approach, considering environmental, safety, ethical and social economic issues inherent to each situation, whether it is during routine operations or in case of emergencies. Emergency Action Plan (EAP) Page 13

14 The proposed framework has to aim at covering all the elements relating to an emergency action plan for mining operations in deep water. For this, the Authority needs to develop rules and guidelines for minimum requirements for the protection of the environment and the employees and infrastructures involved in the activity. Health, safety, security, labour and environment Many of the health, safety, security and environment (HSE) practices currently employed by the offshore oil and gas industry can be used and/or adapted to deep sea mining. These include for example: HSE responsibilities in relation to on site Operational Responsibilities o Organization chart links between Authority and Contractor o Communication system o Work permits system in force o Hand over between personnel on shift or rotation, crew change, personnel movement o All relevant operating procedures and policies o Weekly HSE site meetings Risk evaluation and management; o Management of changes o General safety rules in force Respect for the Environment o Waste Management Plan o Chemical Management Plan o Accidental pollution response plan (ref. to Emergency Preparedness) Safeguarding of Health o Medical fitness control o Personal Protective Equipments o Hazardous Substances, products or materials Page 14

15 Competence and Training o Induction and personnel involvement sessions o Certification of personnel Emergency Preparedness: o Plans, trainings and drills Incident Investigation o Analysis of reported incident and diffusion of information Inspection and audits: o plan, and appropriate follow-up HSE Improvement plan o Key performance indicators and action plan reviews Security o General organization o Security plan o Communication o Emergency response Part D:Generalconsiderations stakeholdercommunicationand transparency Inconnectionwithenvironmentaldecision-makingprocedures, the ISA willfacilitatepublic participationinaccordancewiththeconventiononaccessto Information,PublicParticipationin Decision-MakingandAccess tojusticein Environmental Matters,1998,and itsownrules, regulations andprocedures. Page 15

16 Thisstakeholdersurvey willnaturallyidentifyabroadlistofstakeholderswithanequallybroad variety ofinterests.however,properandeffectivestakeholderengagementdemands an investmentintimeand resources. TheISA seeksyoursuggestionsandcommentson thefollowing: 29.HowcantheISAbestdevelopacommunicationsandconsultationstrategywhichboth secures transparency,efficiencyandprovides for theneedsofabroad stakeholder base? It wouldbehelpful toincludespecificexamplesof successful communicationandconsultation approaches. In the interest of transparency, while taking into account confidentiality and proprietary considerations related to mining operations, the ISA should make available on its web-site all Environmental Impact Statements that it produces in relation to proposed plans of work. This practice can be adopted from national examples (e.g. BOEM/BOEM-Regions/Alaska-Region/Environment/Environmental- Analysis/Environmental-Impact-Statements-and--Major-Environmental-Assessments.aspx) 30.Whatformsofengagementbestenableyoutomakecontributionsandreceiveappropriate feedback?pleaseprovidecommentson anyspecificinitiatives,includingdigitalinitiatives, thatwouldbeproductivetogetherwithanyobservationsonthestructureandcontentofthe current ISA website ( Transparencyisnow anintegralpartofextractiveindustries.transparencyspansfromfinancial transparencyintermsofrevenuemanagement(promotedby thecritieriasetby theextractive Industries Transparency Initiative(EITI)) throughto transparency ofotherinformationwhich promotes public awareness, facilitates cross-borderco-operation,sharingofbestpracticesand lessons-learned. 31.WhatinformationonactivitiesintheAreadoyouconsidermostimportanttomakeavailable available publicly? Howshould thisinformation be shared? 32.WhataspectsoftheEITIdoyouthinkshouldbereflectedintheexploitationregulatory framework? Page 16

17 Yourinputon thispartdwillallowtheisa tosuggesta meaningfulengagementplan, communicationprocessandinformationflowandencouragesyourfeedbackontheabove points. Otherconsiderations 33.Arethereanyfurthercommentsyouwishtomakeontheissuesraisedinthissurveythat you have notcommented onelsewhere? 34.Whatotherareasortopicsrelevanttotheexploitationregulatoryframeworkdoyouthink would benefit from futuresurveysand consultation,including processes and procedures? Page 17

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