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Resolving mine subsidence problems in the Hunter

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Resolving mine subsidence
problems in the Hunter

A property industry perspective




Property Council of Australia – June 2006
               Contents




               Executive summary                                                        3

               1. Background                                                            4

               2. Current problems                                                      5
                   2.1   Costs make projects unviable                                   5
                   2.2   Risk adverse stance of MSB                                     5
                   2.3   MSB certification period too short                             6
                   2.4   No link to strategic planning                                  6
                   2.5   No certainty in planning controls                              7
                   2.6   Unreliable information on condition of workings                8




          3. Recommendations                                                            9
                   3.1 Make mine subsidence a priority issue for the Lower
                   Hunter Regional Strategy                                             9
                   3.2   Fund investigation and remediation in priority growth areas    9
                   3.3   Restructure the Mine Subsidence Board                         10
                   3.4 Strengthen the funding base or allow alternative
                   insurance/reinsurance options for the Mine Subsidence Board         11
                   3.5   Ensure coordination of MSB with State and
                   Local Government strategies and instruments                         12
                   3.6 Amend the MSB certification period                              12



               Contact                                                                 13




Resolving mine subsidence problems in the Hunter                                            Page 2
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                Executive Summary



                The Lower Hunter Region must realise and tackle the legacy of its
                mining past if it is to continue to evolve and grow. Many of the region’s
                identified priority growth areas have abandoned mine workings beneath
                them, with current New South Wales legislation inhibiting the potential
                to accommodate new multi-storey development.
                This situation represents a fundamental challenge to the 30 year
                planning strategy for the Lower Hunter now being developed by the
                Government. How will key areas like the Newcastle CBD, Charlestown
                and Glendale continue to evolve and grow if their development potential
                is significantly limited?
                It also represents a challenge for today. The costs of site remediation
                can be up to $2 million, making development on affected sites unviable.
                Together with the cost of investigative work to assess the status of mine
                workings, projects are being burdened with uncertain cost, risk and
                delays preventing development from occurring.
                The Property Council believes fundamental changes are urgently
                required into the way mine subsidence risk is evaluated and legislated.
                To ignore the current range of problems is to seriously jeopardise New
                South Wales Government growth objectives for the region.
                This paper identifies the key problems associated with current practices
                and recommendations to address them.

                     Summary of recommendations:


                     1. Make mine subsidence a priority issue for the Lower
                        Hunter Regional Strategy
                     2. Fund investigation and remediation in priority growth
                        areas
                     3. Restructure the Mine Subsidence Board
                     4. Strengthen the funding base or allow alternative
                        insurance/reinsurance  options for   the   Mine
                        Subsidence Board
                     5. Ensure coordination of MSB with state and local
                        government strategies and instruments
                     6. Amend the MSB certification period




Resolving mine subsidence problems in the Hunter                                     Page 3
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                1. Background



                The Property Council of Australia’s Initiatives for the Lower Hunter
                discussion paper of June 2005 raised serious concerns with the way
                mine subsidence issues are currently being managed.
                Abandoned mine workings are spread throughout the Lower Hunter
                at varying depths and in various states of disrepair.    These
                workings are impacting on development at the surface in the
                following ways:
                     •   the existence of workings under priority growth areas leads
                         to major inconsistencies between strategic planning
                         objectives and local planning instruments, particularly with
                         the added limitations on development imposed by the Mine
                         Subsidence Board,
                     •   a lack of reliable data on the location and stability of mine
                         workings means expensive investigation work is often
                         required before approval of any development can be
                         considered. This adds significant cost, of between
                         $30,000 to $200,000 per site, and an increased risk profile to
                         projects in mine affected areas, and
                     •   remediation work must entirely be paid for by the property
                         owner at a cost of between $250,000 and $2 million per site,
                         leaving many development projects unviable even in priority
                         growth areas.
                The Property Council’s Initiatives for the Lower Hunter called on the
                NSW Government to review the way mine subsidence issues were
                managed.    This submission builds on this to provide specific
                recommendations on how these issues should be addressed.
        If we make the assumption that absorption rates will be similar in
        the future, this would indicate the CBD had capacity of 14 years
        supply of new




Resolving mine subsidence problems in the Hunter                                          Page 4
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                2. Current problems


                The current approach to dealing with mine subsidence issues and
                their impact on development creates a range of problems.


                2.1 Costs make projects unviable
                Where the Mine Subsidence Board requires further investigation of
                mine workings or remediation of these workings, the costs must be
                borne by the land owner.      Investigation works generally cost
                around $30,000 to $200,000 and remediation work costs between
                $250,000 and $2 million.
                The heavy costs of mine remediation make many development
                projects unviable, even in priority growth areas where the NSW
                Government and local councils wish to promote greater densities.
                The following example of a five storey residential building in the
                Newcastle CBD demonstrates the problems of a typical situation;


                         •   council has approved a new residential development with
                             generally five storeys and in places up to six levels,
                             subject to mines subsidence approval,
                         •   conditional approval from MSB granted, subject to
                             geotechnical investigation required to assess risk and
                             possible need to remedial measures,
                         •   MSB assessment of the geotechnical investigation
                             assesses risk and MSB deem risk to be unacceptable,
                         •   Mine Subsidence Board subsequently requires the mine
                             workings below the site to be treated prior to approval –
                             estimated cost is around $1 million, which makes the
                             development unfeasible,
                         •   MSB further advise that a maximum of three storeys
                             would be unconditionally approved on the site – it is not
                             economically viable to replace a five storey building with a
                             three storey building.


                2.2 Increasingly risk adverse stance of the Mine Subsidence
                Board
                The Mine Subsidence Board is liable for any mine subsidence
                related damage.     While the risk of mine subsidence generally
                reduces with time, increasing levels of development in the Lower
                Hunter has resulted in the Board adopting a more risk adverse
                stance to approving development.




Resolving mine subsidence problems in the Hunter                                            Page 5
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                This situation is seeing more onerous requirements being placed on
                development merely because the overall exposure to claims is
                being increased to the Mine Subsidence Board, not because that
                development itself creates more risk today than it would have five
                years ago. That is, the Mine Subsidence Board appears to be
                greatly concerned about managing their potential liability with a
                very limited reserve of funds.
                This points to a structural issue within the Board, not only does it
                control the reserves to offset liability, but it also has a concurrence
                role. This issue alone needs to be addressed.
                It also points to the need for government and in particular the MSB
                to consider what risk is acceptable to society.


                2.3 MSB certification period too short
                The certifications provided by the Mine Subsidence Board are only
                valid for two years, whereas most development consents last
                between three to five years.
                This inconsistency means that a proponent must reapply to the
                Mine Subsidence Board for certification if the project has not
                commenced within two years, notwithstanding that the project is
                unchanged from that assessed previously by the Board.
                This inconsistency serves no public policy purpose, adds
                unnecessary cost, time delay and risk to a project and should be
                resolved.

                2.4 No link to strategic planning
                The impact of mine subsidence must be a priority consideration in
                the Draft Regional Strategy for the Lower Hunter, now being
                finalised by Government.
                The New South Wales Government released the Draft Lower Hunter
                Regional Strategy late in 2005. The Strategy makes scant mention
                of mine subsidence issues, only noting that ‘urban development will
                not be located in areas at high risk from natural hazards and mine
                subsidence.’
                However, the Draft Strategy also identifies areas such as Newcastle
                CBD, Charlestown and Glendale as priority growth areas. These
                areas are known to contain old mine workings and are affected by
                mine subsidence issues. Yet the Draft Strategy promotes greater
                levels of urban consolidation in these priority growth areas without
                strategic consideration of the impact of mine subsidence.




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                By failing to seriously review this issue the NSW Government will
                ensure that conflict will inevitably continue to occur at the
                development application stage of individual projects.
                Under the current legislation and Mine Subsidence Board criteria,
                mine subsidence can have far greater and less obvious ramifications
                than other constraints such as lack of transport infrastructure and
                the impact of threatened species.
                There are only two possible strategic solutions where mine workings
                affect priority growth areas:
                    •    mine workings be assessed, and if necessary, remediated at
                         public expense to allow growth to occur, or
                     •   growth be directed to alternative locations, this is obviously
                         not a viable solution for areas such as Newcastle City,
                         Charlestown and Glendale.
                Identification of an acceptable level of risk is the key to the decision
                of which areas in the Lower Hunter will require remediation.
                While we understand the Mine Subsidence Board has been
                consulted in the development of the Lower Hunter Regional
                Strategy, we do not believe that the importance of this issue has
                been recognised.

                2.5 No certainty in planning controls
                Currently mine subsidence issues are not adequately reflected in
                local planning controls. Local planning instruments set out the
                heights and densities for development in their areas, yet these are
                now proving to be inconsistent with limitations on development
                imposed by the Mines Subsidence Board.
                Applicants are required to get concurrence from the Mine
                Subsidence Board before approval can be given. The development
                consent issued by the local council is generally conditional on any
                further limitations imposed by the Mine Subsidence Board.




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                In key affected areas these limitations have been significantly more
                restrictive than that allowed under the planning controls.
                Inconsistencies between local planning controls and limitations of
                mine subsidence need to be addressed.

                2.6 Unreliable information on mine workings
                While we recognise that circumstances concerning mine workings
                are subject to variation across the region, greater certainty needs
                to be provided to applicants to reduce risk and make development
                feasible.
                Not all mine workings are mapped (sometimes because the original
                mining activity may have been illegal), mapping is not always
                accurate and there is only limited information on the condition and
                therefore subsidence risk of most mine workings.
                The Mine Subsidence Board has only limited available funding to
                undertake the investigative work required to not only properly
                identify the nature of the workings but also permit the framing of
                alternatives and solutions to the issues. This significantly increases
                risk to potential developments and therefore undermines their
                viability.
                There must be a more effective dissemination of information
                particularly through the development assessment process and
                funding support for this activity is required.




Resolving mine subsidence problems in the Hunter                                         Page 8
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                3. Recommendations


                The Property Council proposes the following solutions be adopted to
                address the current problems.


                3.1 Make mine subsidence a priority issue for the Lower
                Hunter Regional Strategy
                The 30 year planning strategy for the region must face the grim
                reality that the priority growth areas in the Lower Hunter are
                affected by mine subsidence issues. The current Draft Strategy is
                silent on the capacity of the urban areas to accommodate growth in
                relation to mine subsidence constraints.
                The community and industry are seeking a thorough investigation
                of the impact of mine subsidence on the stated development targets
                and its effect on key growth areas.

                By virtue of the region’s history, built around mining villages, mine
                subsidence issues impacts on heavily populated urban centres
                including Newcastle CBD, Charlestown, Cardiff, Glendale and
                Morisset.

                Without serious consideration of the implication of mine subsidence,
                the growth forecasts in the Strategy will not be delivered. It is
                imperative that a solution to this critical issue be delivered by the
                Strategy.
                The current Draft Regional Strategy needs to clearly identify which
                areas are affected by mine subsidence issues and what degree or
                risk is evident.
                It must then identify how priority growth areas which are affected
                by mine subsidence issues are to be dealt with. There are only two
                viable options:
                     •   mine workings be assessed and if necessary remediated at
                         public expense to allow growth to occur, or
                     •   growth be directed to alternative locations, this is obviously
                         not a viable solution for areas such as Newcastle City,
                         Charlestown and Glendale.


                3.2   Fund investigation and remediation in priority growth
                areas
                The NSW Government needs to commit appropriate funds for the
                investigation and remediation of mine workings in priority growth
                areas.




Resolving mine subsidence problems in the Hunter                                          Page 9
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                Without public funding of investigation and remediation works,
                Government policies on the management of growth will not be
                achieved. Remediation costs simply make many developments
                unviable. The most efficient way to resolve this issue would be a
                government funded remediation strategy for various key areas such
                as Newcastle CBD, Charlestown, Glendale and Cardiff. This is
                preferable to the haphazard way it is currently being done.

                Government funded investigation and remediation programs
                already exist in countries such as the UK and the USA.      The
                Property Council recommends that a similar program be developed
                in all affected mine subsidence areas in NSW, with particular
                emphasis placed upon all priority growth areas.

                3.3      Restructure the Mine Subsidence Board
                The Mine Subsidence Board’s Charter is established by the Mine
                Subsidence Compensation Act 1961. The Board administers a
                scheme for the payment of compensation where surface
                improvements are damaged by mine subsidence; however, the
                Board also controls building and surface development in all mine
                subsidence districts in NSW.
                The fact that the same body is responsible for insuring against
                subsidence damage and for approving new development provides a
                structural conflict of interest which has resulted in a risk adverse
                approach to assessment.
                Although members of the Board are provided with legislative
                indemnity under section 6(3) of the Mine Subsidence Compensation
                Act 1961, it should be noted that an increasingly risk adverse
                stance towards development has been adopted over the past three
                to four years.
                The Property Council understands that the Mine Subsidence Board
                has reserves of approximately $40 million set aside for the payment
                of compensation. This amount would be wiped out with the
                occurrence of one significant catastrophic event. With this in mind,
                it is little wonder that the Mine Subsidence Board continues to adopt
                a highly risk adverse approach to development.
                The Property Council recommends that the NSW Government
                amend the Mine Subsidence Compensation Act 1961 with a view to
                establishing separate approval and insurance agencies. The primary
                function of the Mine Subsidence Board should be to provide
                comprehensive information and approval services to the community
                and property owners.




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                The Property Council recommends a review of the structure and
                constitution of the Board to provide a better balance of
                representation from the Lower Hunter areas, in particular,
                Newcastle and Lake Macquarie, where issues of development delays
                in priority growth areas due to mine subsidence issues are most
                evident.


                3.4      Strengthen the funding base or allow alternative
                         insurance/reinsurance  options for   the   Mine
                         Subsidence Board
                Two models for the provision of mine subsidence compensation
                funds can be identified. Firstly, the funding base of the Mine
                Subsidence Board could be strengthened through additional funding
                from the budget and should also continue to be funded through
                existing levy on mined coal tonnage.
                Alternatively, the Property Council recommends that consideration
                is alternative insurance and reinsurance options be permitted such
                as those, that are currently utilised for mine subsidence in the USA
                and which are used to provide coverage for natural events such as
                earthquakes and other disasters.
                Public policy objectives of growth for the Lower Hunter will not be
                achieved unless the current Mine Subsidence Board contradictory
                roles of regulator and compensator are separated.
                A fundamental aspect of the Property Council’s recommendation is
                an investigation into the US approach of the final asset owner
                obtaining insurance for mine subsidence.
                Examples of reinsurance schemes in the US can be found at the
                following websites;
                     •   Ohio: http://www.ohiodnr.com/publications/geo/insurance.html
                     •   Indiana:
                         http://www.in.gov/idoi/consumer_services/mine_subsidence.html

                     •   Illinois: http://www.imsif.com/
                     •   Pennsylvania:
                         http://www.pacode.com/secure/data/025/chapter401/chap401toc.html

                     •   Kentucky:http://www.lrc.state.ky.us/KRS/30444/CHAPTER.HTM
                     •   Wyoming:
                         http://legisweb.state.wy.us/statutes/titles/title35/c11a13.htm




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                3.5 Ensure coordination of MSB with state and local
                government
                Better coordination between the Mine Subsidence Board and state
                and local planning authorities should be directed at providing better
                information to the community, property owners and council
                planners to enable integration with local planning development.
                In the short term, the Property Council recommends that a
                planning forum be held involving all key stakeholders to discuss the
                range of current problems and recommended solutions.              In
                particular, a formal system of regular communication between the
                MSB and state and local governments should be provided for.


                3.6      Amend the Mine Subsidence Board certification period
                The certifications provided by the Mine Subsidence Board are only
                valid for two years, whereas development consents last five years.
                The Property Council recommends that the NSW Government
                amend the Mine Subsidence Board certification period to five years.
                The current inconsistency serves no public policy purpose, adds
                unnecessary cost, time delay and risk to a project and should be
                resolved.




                Contact




Resolving mine subsidence problems in the Hunter                                        Page 12
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        Contact



        Please contact the following about any aspect of this submission:
                     Ken Morrison
                     NSW Executive Director
                     Property Council of Australia
                     Level 1, 11 Barrack Street
                     Property Council of Australia House
                     SYDNEY NSW 2000
                     t. 02 9033 1906
                     f. 02 9033 1978
                     m. 0412 233 715
                     e. kmorrison@propertyoz.com.au




Resolving mine subsidence problems in the Hunter                            Page 13

				
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