The Asia Miner

OCT-DEC 2015

The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region

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October-December 2015 | ASIA Miner | 7 tection requirements. However, the main penalty available under EIA Law is still a one-off penalty. It is possible that the local de- partment may choose to apply the one-off fne instead of the more serious cumulative fnes. It is also possible to apply both the one-off fne and cumulative fnes as the new EPL does not prohibit the simultaneous application of EIA Law. Therefore, the EIA Law shall be amended accordingly to be adapted to new penalties under the new EPL. In light of these discrepancies it is necessary to amend the EIA Law for consistency with the new EPL. Proposals to amend the EIA Law were raised during the session of National People's Congress in March this year. Cost of non-compliance Under the original EPL, enterprises that fail to comply with regu- lations are subject to capped one-off fnes. Such punishment for non-compliance has been viewed as not serious enough and many enterprises kept violating regulations by simply paying fnes as a cost of doing business, which are normally much less than the cost of compliance. With the new EPL, the increased liabilities for non-compliance, if properly implemented, will change this situation. Cost of compliance The new EPL may signifcantly increase operational costs of en- terprises in some manufacturing industries which are traditionally heavy polluters and have been failing to comply with environmental protection regulations, eg steel, petrochemical and pharmaceutical enterprises. Many manufacturers in these industries will have to suspend production to make way for improvement projects for compliance. If they cannot endure the costs involved, some of them may be forced out of business. It is estimated that the entire steel industry would have to spend RMB90-110 billion (US$14-$18 billion) on im- proving facilities to meet requirements under the new EPL, and the improvement projects are also expected to raise operational costs by RMB80 billion (US$13 billion) per year due to maintenance fees and other expenses. Who will beneft from compliance? Enterprises not as severely impacted with costs of complying are likely to reap most rewards because the new EPL requires that the Chinese government introduce fscal, tax, price and government procurement policies and measures to encourage and support en- terprises to further reduce emission of pollutants. It is also expected this policy will translate into more work for the environmental protection industry and environmental consul- tants as a result of the increased need for environmental protec- tion equipment, technologies and services. Increased penalties for non-compliance and preferential treatments for compliance will pro- vide greater incentives for enterprises to purchase and use emis- sions-reduction technologies. Defciencies Although the new EPL has made progress, there are still gaps. The law fails to say in what specifc forms information will be disclosed, whether the information will be viewable on websites, downloadable, or printed so as to be assessed by the public. More- over, the law contains no requirements with respect to specifcs of the kind of environmental data that will be released. So far, disclosure of information has mainly focused on air pollu- tion due to the long acknowledged air quality problems, while infor- mation about water and soil quality does not receive much publicity. The Ministry of Environmental Protection classifed soil pollution data as a State secret and therefore withheld such data from the public. In the absence of detailed rules under the EPL on data subject to public disclosure, more sensitive environmental data may continue to be withheld without justifcation. Public interest lawsuits Individual citizens are still unable to fle environmental lawsuits on behalf of the public. Although NGOs are granted standing to fle such lawsuits, the new EPL imposes stringent criteria for the eligibil- ity of NGOs. An NGO must have a record of non-violation for fve or more years so as to be eligible to fle a public interest lawsuit. The non-violation record is ambiguous as it is not defned under the new EPL, and the law contains no procedures to verify the non-violation record of NGOs, which might be diffcult to prove in practice. This may be used by defendants or even the courts to disqualify NGOs for fling a public interest lawsuit. Enforcement Another concern is that implementation and enforcement of the law may prove diffcult, notwithstanding that the new law introduces harsh punishments and incentives for both enterprises and govern- ment offcials. Since the restructuring of government departments and elevation of the State Environmental Protection Administration to the current Ministry of Environmental Protection in 2008, fnancial and staff re- sources as well as powers provided to the Ministry have only in- creased incrementally. The expected transformation of the environ- mental governance system has yet to materialize. Insuffcient resources and structural challenges will continue to be an obstacle to China's progress toward more effective environmen- tal governance and may therefore become a drag on the Ministry and its local counterparts to enforce the new EPL. Local governments also need to change their mentality to con- sider not only regional economic development but also the need to protect and maintain ecological systems over the long-term. Since local governments still rigidly control personnel and fnances at lo- cal environmental protection bureaus, it is uncertain to what extent local bureaus will be able to avail themselves of their powers under the new EPL, particularly if local governments still favour short-term regional economic development over environmental protection. For further information about the new Environmental Protection Law in China contact Sam Farrands or Rebecca Silli at the Hong Kong offce of Minter Ellison on +852 2841 6888 or email sam.farrands@ minterellison.com

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