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 has developed more and more sophisticated technology to permit it to extract oil and gas from wells in very deep water and in formations thousands of metres below the ocean floor.

It’s not surprising that the mining industry is now actively investigating the recovery of orebodies from 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 are obtainable through 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 within which to operate have brought this industry to a place where we can reasonably expect that it will start to take a prominent role in satisfying the world’s increasing need for these metals in the near future. At the moment the desire of the industry to begin producing 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: polymetalic nodules, seafloor massive sulphides (SMS), and deposits located in the crusts that form around mountains, ridges, and plateaus in the ocean. These deposits are on the surface of the seabed floor.

Mining requires a technology that can prepare the seafloor 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 very 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 SMSs 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 intended 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 exploitation of the minerals.

The secretariat sees seabed mineral potential in Papua New Guinea (PNG), Fiji, Federated States of Micronesia, Kiribati, Tuvalu, Solomon Islands, Vanuatu, Cook Islands, Samoa, and Niue. Most of these countries have already issued licenses 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 benefiting 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 UN Convention on the Law of the Sea. The ISA has granted 17 contracts for exploration in areas of the Indian, Atlantic and Pacific oceans. These licenses are held by states parties to UN law of the sea and by companies sponsored by states parties. National government participants include those from South Korea, India, France, Japan, Germany, the Inter Ocean in Metal 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.

The ISA is developing a complete regulatory framework. While it has in place regulations 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 the ISA is that such a code will not be in place until at least 2016. The ISA is also developing financial arrangements between it and the licensees as work moves into the exploitation phase. A study concerning these issues is to be presented to the Legal and Technical committee of the ISA in February 2013.

The ISA is conversant with the environmental management issues in connection with both 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 the ISA considers necessary to move deep seabed mining forward. These are partly based on the a articles of 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 the ISA’s effort. 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.