By Casper Herler and Niklas Vartiainen, Borenius Attorneys Ltd
Casper Herler and Niklas Vartiainen at Borenius Attorneys highlight the challenges faced by the Nordic mining industry when it comes to establishing exploration projects in novel sites.
Exploration and mining operators often face the challenge of reconciling conflicting interests when commencing projects in novel sites. To overcome these challenges operators usually need not only licences based on law but also social licence, which may only be acquired via trust built on cooperation and interaction with the local community and its various stakeholders. While legal and regulatory licences are typically difficult to lose – thus ensuring security for the holder – a social licence may be lost in the blink of an eye, and very often in conditions that may be difficult to predict.
Despite the common difficulties in predicting what specific conditions may lead to a project crisis, it is fairly easy to identify causes for concern among stakeholders. Much focus has been placed on such conditions in emerging economies and indigenous areas; here, we are looking at project development in industrialised developed economies with a stable political system and a widespread welfare system that regulates income differences, and provides public services (such as health care, quality education and social support to all citizens).
Exploration and mining without a social licence to operate – especially in sensitive areas – raises the risk not only of a slew of administrative appeals that will delay the project, but of its entire future if the local community is not willing to stand behind, or at least live with, the project. Many of the risks encountered in exploration and mining projects are common to all areas, although they may have a quite different context. However, there are a number of region-specific risks as well.
Owing to the nature of Nordic societies, the economic benefits of mining don’t overrule either competing forms of land use or contradictory interests. Even though mining has a long history in Finland and Sweden, going back centuries, the downturn in commodity prices in the 1980s and 1990s forced many mines to close. Old mining communities lost this part of their identity, so that exploration and mining became a novel concept to newer generations. During this period, competing forms of land use increased in significance; recreation and tourism, along with conservation and environmental protection, became much more important in Nordic society.
Operators in Nordic countries may come across areas that are regarded as sensitive and protected by law, zoning or voluntary mechanisms. Derogation permits and annulment decisions regarding conservation sites may be obtained; however, without a social licence to operate, the operator may risk having to going through various stages of administrative appeals before gaining all required permits to operate. The Nordic legal system offers widespread rights for parties to be consulted, as well as appeal rights that are actively used by individuals, communities and NGOs.
In sensitive areas opinion may be divided, and a project that benefits many may still not receive the acceptance of a loud few who are defending a particular interest. Additionally, in Nordic countries legislation provides efficient protection mechanisms for a number of interests; often, with new projects that augur many changes and unknown quantities, the social and personal concerns thus raised are most efficiently explored via the appropriate legal procedures. In other words, social risks tend to be transposed into concerns surrounding conservation or environmental protection, as the legal mechanisms for environmental matters are similar to those dealing with the social impact of a project.
There is a wide range of conservation-related legislation regulating land use and other operations carried out in the Nordics.
Conservation regulation in the Nordics comprises national legislation (such as acts and decrees establishing the division of conservation areas into separate grades and categories) and EU legislation (which is either directly applicable as such, or implemented into national legislation). Zoning decisions at various levels of the land-use system may contain additional conservation constraints for project development.
Nordic conservation protects both habitats and species. When taking into consideration the arctic climate that causes the ground to freeze and melt once a year, and various species to migrate and nest during specific spring and summer periods, the challenges of reconciling exploration or mining activities with varying conservation levels are truly evident.
The most extensive conservation area in the Nordics is Natura 2000, an EU-wide network of protected areas. The network covers around 5 million hectares in Finland and over 6 million hectares in Sweden. As a general rule, it is prohibited to cause an adverse effect on the Natura 2000 network. Due to its vast area, operators commonly find that their area of interest is situated within the network.
It should be noted that exploration and mining in these areas may require either: amendments to acts establishing such areas or specific derogation permits; or amendments of zoning decisions issued by competent authorities.
Reindeer herding is one of the most ancient livelihoods in the northern parts of the Nordics, and it forms an intrinsic part of the indigenous Sami people’s culture. In Finland, however, reindeer herding is also carried out by non-Sami reindeer herders; hence, there are both indigenous issues and competing land-use issues to consider when mitigating the impact on reindeer-herding. Reindeer herding is carried out across the north. The occupation of large areas by exploration and mining projects may interfere with reindeer routes and collection areas in a way that requires planning and mitigation in cooperation with the reindeer herding associations. The permitting procedures consider the reindeer herders’ interests and require mitigation of, and compensation for, any harm caused. In Finland, cooperation between mining projects and the national reindeer herding association has enabled the development of an impact assessment tool, which produces information to form the basis for solutions that reduce the impact of mine projects on herding.
Despite the fact that the ILO Convention on Indigenous People’s Rights has not been ratified by Finland or Sweden, national legislation (e.g. via the Finnish constitution, the Finnish Mining Act and Sami legislation) contains provisions securing several of the rights and procedures required by the ILO Convention. In practice, due to past legal procedures on the duty to consider the Samis’ interests in exploration projects on their homelands, as well as indigenous rights, most of the Finnish mining in-dustry has currently chosen not to carry out exploration on Sami homelands.
Recreational housing culture in the Nordics is widespread and popular. The unspoiled nature and wilderness are considered national assets and are greatly valued. Both Nordic citizens and tourists alike appreciate the largely well-preserved Nordic landscape.
Planned projects, and those currently under way, are commonly situated in rural areas of the Nordics where in many cases tourism (such as ski centres, cabins and safaris) is an important business and a substantial employer. The old image of mining fits poorly into the general public’s view of an area driven by, and driving, tourism – even though this can be seen in practice, for example, via the positive effect of mining projects on airline routes and hotel occupation during the quiet season, as well as employment opportunities for spouses.
A mining project might face surprising challenges in reconciling the project with recreational housing and tourism, when a relatively small local community encounters a group of out-of-towners offering their views on the unique recreational opportunities for the area of interest.
Often areas intended for recreational use will have a land-use plan in force. Land-use plans contain objectives regarding the specific nature of the land, and any deviation therefrom will require amendments to such plans. Municipalities have a monopoly on planning, thus introducing a political aspect to the project, as the politically elected body will need to approve such land-use plans.
A key challenge faced by the Nordic mining industry during the recent mining boom is the increased awareness of communities and stakeholders, and the new legal and media channels through which the legitimacy of projects can be contested. Nordic countries are not as dependent on mining, from a macroeconomic point of view, as some other jurisdictions. Despite foreign direct investment, and the substantial economic impact of mining being allocated to rural areas suffering from declining econom-ic activity, mining is not viewed as essential for the national economy. This is especially the case when one disregards the links to other metal and mining technology industries. As such, there is no longer a permanent and overruling licence for mining; every project must earn its own licence in order to carry out work within the surrounding community.
In order for the project to successfully earn its licence to operate, the operator must take into consideration, for example:
As already stated, social concerns have root causes that fall outside the remit of existing regulation, and stakeholders may easily find that the legal mechanisms do not adequately address such concerns.
To fully understand and assess the local community and its special characteristics, it is highly recommended that a project operator initiates a series of public discussions in order to meet members of the local community, and key stakeholders, and to familiarise them with the project. Trust-building discussions with the municipality and local authorities should also occur in the very early stages of the project, and should continue regularly. The operator should also be able identify and, at the first possible opportunity, contact local landowners.
Through transparency and open discussions, the operator can anticipate, avoid or mitigate any negative effects of the project, and maximise its positive effects on the local community and key stakeholders.
Exploration usually gives rise to somewhat unrealistic expectations among landowners and the community. If these expectations are not managed, they may lead to disappointment or misunderstandings among the public, thus affecting their long-term perceptions of the project. Active management of expectations is important during the exploration phase of the project.
It is also important, in Nordic projects, to manage expectations of time. The exploration phase may take longer than anticipated due to permit procedures and environmental assessments. Also, appeals and protection complications may limit exploration to no more than a few months per year. Project timelines are long, and require the coordination of several permit and consultation procedures – which often comes as a surprise to professionals with experience of operating in other jurisdictions. Attempts to cut corners in licensing are, however, carefully monitored by authorities and NGOs and may lead to severe issues with compliance – as well as the company’s reputation. A successful way of mitigating timelines is to separate sensitive areas from non-sensitive areas in the exploration portfolio of applications, thus differentiating between quick projects and those with more time-consuming elements.
Cooperation and good dialogue between the operator and both the local community and local stakeholders should be at the heart of every project’s planning and execution.
Information received by the community from the authorities only, during the permit-issuing process, may create unnecessary apprehension and annoyance directed towards the project – and can easily lead to downright resistance. To avoid this, the operator should ensure that information about an upcoming project is communicated directly to the community and stakeholders. Without this, such lack of awareness generates misunderstandings and enables the spreading of rumours; it can also give rise to uncertainty and create a response to the project that is based on emotions, rather than facts.
As a general rule, information regarding a project should be communicated to the local community before the permit application is filed. This way, the local community and stakeholders can give direct feedback to the operator, who can then better understand the different views and expectations held locally. Responding directly to this feedback will help to create mutual trust.
Provision of information concerning the local community’s interests, fears, views and expectations is also important for the social impact assessment, should the project advance to a mining stage. Social media has created new possibilities for rapid mobilisation against projects; on the other hand, it can also provide an excellent platform for information-gathering on stakeholder concerns, and can enable project developers to quickly identify, and respond to, issues of concern.