Commentary: Seabed mining still lacks ground rules

As the natural resources available on land become less and our need for them grows, exploration activities move offshore.

The oil and gas industry is the most advanced, and over the years it has developed more sophisticated technology to extract oil and gas from deepwater wells, and in formations thousands of metres below the ocean floor.

It’s not surprising that the mining industry is investigating orebodies on the ocean floor. Minerals recoverable from seabed mining include coal, copper, lead, zinc, gold, silver, manganese, cobalt, nickel and rare earth elements. These can be available from seabed mining at higher grades than mining on land. The deposits occur in the territorial waters of a number of nations, and are present on the seabed in international waters.

Higher commodity prices, better technology and robotics, and the promise of stable legal frameworks have brought this industry to a place where we can reasonably expect that it will take a prominent role in satisfying the world’s increasing need for metals in the near future. At the moment, the industry’s desire to produce is compromised by the fact that both within territorial and international waters, the legal framework for exploitation and production is lacking. It is difficult to carry on business without certainty about the ground rules.

Seabed mining is the search for three types of mineral deposits: polymetallic nodules, sea-floor massive sulphides (SMS), and crustal deposits that form around mountains, ridges and plateaus in the ocean. These deposits are located on the surface of the seabed floor.

Mining requires a technology that can prepare the sea floor for the deposits to be picked up and brought to the surface. The deposits that are in international waters are more difficult to collect because of the depths and pressures involved. Having said that, it was not too many years ago that the oil and gas industry would not have expected to be drilling in the deep waters where it now carries on business. Need drives technology, and the technology for seabed mining has kept pace with the need.

There are SMS deposits located in the coastal waters of several Pacific Island countries. A number of these countries have granted leases to companies wishing to explore in this region. In August 2012, the Secretariat of the Pacific Community launched a regional protocol to ensure that deep seabed mining in the Pacific Island countries is conducted in a “conserved manner.” This framework is needed because many of these countries have considerable deep-sea mineral potential within their authority, but do not have the legislation or regulatory structure to govern mineral exploitation.

The secretariat sees seabed mineral potential in Papua New Guinea, Fiji, Federated States of Micronesia, Kiribati, Tuvalu, Solomon Islands, Vanuatu, Cook Islands, Samoa and Niue. Most of these countries have already issued licences for prospecting.

The lack of a legislative framework can be highlighted by reference to a resolution of the Congress of the Federated States of Micronesia in 2012. The preamble to this resolution articulately states the problem: “Urging the president to review a mining proposal and authorize a foreign company to engage in a seabed mining survey pending applicable legislation that regulates seabed mining, and to propose new or amendments to existing national legislation that explicitly provides for the procedures, fees and regulatory mechanisms over mining activities in the exclusive economic zone of the Federated States of Micronesia.”

In the vernacular, this can be seen as the “cart before the horse” conundrum.

The Pacific Island countries stand on the verge of benefitting from deep seabed mining, but the lack of a regulatory framework and consensus on the scientific issues stands in the way of reliable and stable development.

In international waters the leasing of seabed deposits is regulated by the International Seabed Authority (ISA), which derives its powers from the United Nations Convention on the Law of the Sea. ISA has granted 17 contracts for exploration in areas of the Indian, Atlantic and Pacific oceans. These licences are held by states parties to the UN Law of the Sea and by companies sponsored by states parties. National government participants include those from South Korea, India, France, Japan, Germany and the Interoceanmetal Joint Organization (a consortium of Bulgaria, Cuba, the Czech Republic, Poland, Russia and Slovakia). Countries that have sponsored companies to explore include France, the U.K., Kiribati and Belgium.

ISA is developing a complete regulatory framework. While it has regulations in place that address issues related to prospecting and exploration, it has not yet developed a “mining code” to regulate the exploitation of the deposits. The most recent indication from ISA is that such a code would not be in place until at least 2016. ISA is also developing financial arrangements between the licencees, as work moves into the exploitation phase. A study concerning these issues is to be presented to ISA’s legal and technical commission in February 2013.

ISA is conversant with the environmental management issues regarding exploration and exploitation of deep seabed deposits. In an ISA technical study emanating from a workshop in December 2011, a working group on legal issues identified a number of international obligations that are required in any statutory framework for offshore mining. This list gives a flavour of the approach that ISA considers necessary to move deep seabed mining forward. These are partly based on the articles of the UN Law of the Sea itself, and include a duty to protect and preserve the marine environment (Article 192), a duty to prevent, reduce and control pollution from seabed activities (Article 208), and ongoing monitoring of environmental impacts (Article 204).

The Pacific Island countries are also taking steps to put ground rules in place that complement ISA’s efforts. At this point, the nascent deep seabed mining industry awaits rules within which participants can confidently invest and operate.

— Wylie Spicer is counsel in Norton Rose’s Calgary office. He is a recognized authority on matters related to the offshore oil and gas industry, particularly in the Arctic. He also writes and presents on issues dealing with the UN Convention on the Law of the Sea and its application to industries working offshore, including seabed mining. For more information, visit www.nortonrose.com.