GREENLAND - MINING REGULATIONS
Greenland sits to the north-east of Canada and is, geographically speaking, part of the North American continent. The country is the world’s largest island, bordered by the Arctic Ocean to the north, the Greenland Sea to the east, the North Atlantic Ocean to the south and Baffin Bay to the west. Greenland is a part of the Kingdom of Denmark but an extensive type of self-rule applies in the country. In 2009, following the results of a guiding referendum, the Act on Greenland Self Governance was passed, replacing the system of home rule governance which had operated in the region since 1979. The purpose of the Self-Governance Act was to transfer additional authority to Greenland’s government, increasing the fields of responsibility which the country will administer directly. Greenland was formerly a part of the EU, joining the organisation as a member via Denmark in 1973. However, following the introduction of home rule, the country voted to leave the Union - mainly in an effort to keep control of its fishing industry. Following extensive negotiations Greenland officially left the EU in 1985.
Greenland has a small economy dominated by the fishing industry, which sits at the heart of it. Around 90% of Greenland’s exports are products from fishing, with shrimp and halibut being exported in the largest volumes. Fishing is also the second largest sector for employment in the country, with the public sector being the largest. Whaling and seal hunting were previously important, though the controversy that surrounds such activities, alongside the EU ban on seal products, has reduced their significance from an economic perspective. Greenland’s economy is further supported by annual grants from Denmark. Each year such grants amount to in excess of $500 million (USD) which is around 25% of Greenland’s GDP.
Greenland is believed to have considerable mineral resource potential and the government is aiming to use its natural resource wealth to diversify and grow the country’s economy. To date the mining industry has not been a major source of revenue for the country, at the time of writing (Aug. 2017) there are few operating and active mines in the country but interest is strong and the results of several large-scale exploration projects have been positive. In addition, climate change has caused some of the ice that covers the island to melt, thereby opening up new areas for exploration. Minerals in Greenland include (amongst others): rare-earth minerals; gold; zinc; lead; iron ore; platinum; uranium; diamonds; and rubies. Further exploration is needed to establish the commercial viability of the country’s mineral deposits and infrastructure issues remain a key hurdle for companies looking to operate in Greenland.
In 2016, Greenland was rated 64th out of 104 jurisdictions covered in the Fraser Institute’s Policy Perceptions Index.
PRINCIPAL LEGISLATION AND REGULATOR
Under the 2009 Act on Self Governance, the Greenland Self-Government was granted authority to exercise legislative and executive power in the area of mineral resources. In December 2009 the Mineral Resources Act (MRA) was passed by the Greenland parliament and is now the main piece of legislation applicable to the mining industry. The MRA has been amended several times – in 2012, 2014, 2015, and most recently in 2016. Other relevant legislation includes the Large-Scale Projects Act 2012; the government has also issued a number of guidelines for the sector including the EIA and SIA Guidelines and the Application Procedures and Standard Terms for Mineral Exploration and Prospecting Licences in Greenland (Application Guidelines / Standard Terms).
Various government organisations and departments play a role in the administration and management of the mining industry. The Ministry of Mineral Resources (Ministry), which is headed by a Minister of the same title, is responsible for strategy-making, policy-making, legal issues and the marketing of mineral resources in Greenland. The Mineral Licence and Safety Authority (MLSA) (formerly the Bureau of Minerals and Petroleum) is responsible for issuing mineral licences in the country, as well as supervising and inspecting projects. The Environmental Agency for Mineral Resources (Agency) deals with environmental matters relating to resources activities, including the management of the environmental impact assessment process. Collectively the MLSA and the Agency form the Mineral Resources Authority (Authority). Also relevant is the Ministry of Industry, Labour, Trade and Energy (MILTE), which handles socio-economic matters relevant to the industry, including social impact assessments; MILTE is also responsible for co-ordinating with the Danish government on certain matters in the field of natural resources.
GRANTS AND FORMS OF MINERAL TITLE
The MRA provides for the following types of mineral licence:
- Prospecting Licence: grants the holder the right to prospect for mineral resources, conduct mineral resource activities, or use the subsoil for storage or purposes relating to mineral resource activities or related activities (s. 15(1), MRA). Licences are non-exclusive and are granted for periods of up to five years at a time, with the specific term indicated in the licence itself (s. 15(2)-(3), MRA; see also §3, Standard Terms for Prospecting Licences (STPL). Applicants must provide sufficient information for the MLSA to assess the technical and financial capabilities of the applicant (see s. B(1.2), Application Guidelines). An application fee of 3,000 DKK (around $500 USD) must be paid within 14 days of an application. The application fee will be deducted from the licence fee (15,000 DKK ($2500 USD)) in the event the application is granted. Decisions in relation to prospecting licences are made by the MLSA unless the decisions are likely to have significant social or environmental effects in which case they shall be made by the government (s. 3c, MRA). Prospecting licences cover all mineral resources (except hydrocarbons, radioactive elements and hydro-power) unless otherwise stated in the licence (§ 1(101), STPL). If an Exploration Licence is granted over the area covered by a Prospecting Licence the Prospecting Licence shall no longer apply in the area covered by the Exploration Licence (§2(203), STPL). Licence holders may carry out the activities specified under §7(701), STPL, but must obtain permission from the MLSA if they wish to carry out other activities (see. § 7(702), STPL). Annual reports must be submitted to the MLSA (§ 10(1002), STPL).
- Exploration Licence: grants the holder the excusive right to explore for one or more mineral resources (s. 16(1), MRA). The application for the licence must contain: details of the applicant; indication of the delineation of the area in accordance with s. 206-207 of the Standard Terms for Exploration Licences (STEL); sufficient information for the MLSA to assess the technical and financial capabilities of the applicant; and any other information required by the MLSA (s. A(1.5), Application Guidelines). An application fee of 5,000 DKK (around $800 USD) must be paid within 14 days of an application. The application fee will be deducted from the licence fee (25,000 DKK ($4000 USD)) in the event the application is granted. Applications shall be sorted into two batches – A and B, depending on which half of the month the application is submitted. A non-competing application is one which does not overlap with an area specified in another application in the same batch. Where competing applications are not amended the authorities will pay particular attention to an applicant’s previous exploration experience and / or field work, offers of the applicant in relation to training and employment of citizens and the registered date of the applications in making a decision between applications (s. A(4.5), Application Guidelines). Decisions on Exploration Licences shall ultimately be made by the Minister and the government. Exploration Licences shall cover all resources expect hydrocarbons and radioactive minerals, unless otherwise specified in the licence (s. C(1.1), Application Guidelines). The licence period shall be specified in the licence itself. According to the MRA, EL shall be granted for a period of up to 10 years or if special circumstances exist up to 16 years (s. 29(1), MRA). However under the STEL, Exploration Licences shall be granted for a first period of five years, with the option for renewal for another period of five years (s. C(3), Application Guidelines; see also §3, STEL). At expiration of the renewal period the licensee may be granted new 3 year licences up to a total period of 22 years (inclusive of the two 5-year terms) though grant is discretionary. Minimum expenditure obligations apply and land reductions may be specified in the licence (§ 6, STEL; see also s. C(4), Application Guidelines). Applications can be made for enlargement of the exploration area. Licence holders may carry out the activities specified under §7(701), STEL, but must obtain permission from the MLSA if they wish to carry out other activities (see. § 7(702), STEL). Annual reports must be submitted to the MLSA (§ 10(1002), STEL).
- Exploitation Licence: if the holder of an Exploration Licence has found and delineated commercially viable deposits which the licensee intends to exploit and the terms of the Exploration Licence have been complied with, the licensee is entitled to be granted an Exploitation Licence (s. C(7.1), Application Guidelines). The area for exploitation must be delineated in accordance with § 14(1406), STEL. The application for the Exploitation Licence must contain: a declaration that the deposit(s) are commercially viable and the licence holder intends to exploit them; a bankable feasibility study of the deposit(s) including a geological evaluation of the deposit(s) and a specification of the assumptions as regards exploitation technology, economics, and environmental matters; and details of the delineation of the area (§ 14(1402), STEL). Exploitation Licences may only be granted to limited liability companies which are not jointly taxed with other companies (unless such taxation is mandatory). Generally, companies are required to have a registered office in Greenland and trade at arm’s length prices and on arm’s length terms. The company cannot be more thinly capitalised than the group of which the company forms part, but the company’s loan capital may exceed the shareholder’s equity up to a ratio of 2:1. Licensees are also required to have the expertise and financial background to carry out the exploitation (see s. 16(3), MRA). The licensee must also work with the MLSA to produce a joint timetable of development activities in order to co-ordinate the preparation and submission of an exploitation plan, a closure plan and an EIA. Such documentation must be submitted in accordance with the timelines stipulated by the MLSA (see §14, STEL) and must be approved before the commencement of exploitation activities. The licence fee is 100,000 DKK ($16,000 USD). The licence shall cover the same mineral resources as covered by the Exploration Licence (§ 14(1404), STEL). Exploitation Licences are granted for a period of 30 years, unless a shorter period has been specified as a condition for granting the licence (s. 29(2), MRA). The exploitation period may be extended up to a maximum period of 50 years (ss. 29(3) & 16(5), MRA).
Decisions to grant, significantly change, transfer, withdraw and approve the relinquishment of a mineral resource exploration or exploitation licence are made by the government (s. 3c, MRA). The MRA also states that direct or indirect transfers of licences to third parties are subject to government approval (s. 88, MRA).
The MRA also provides for special exploration licences for areas in North and East Greenland, which cover larger areas and have slightly varied terms from standard licences (s. C(8), Application Guidelines); personal prospecting licences (s. D(7), Application Guidelines); small-scale exploration and exploitation licences (Part 8, MRA); and exploration and exploitation licences for hydrocarbons (Part 6, MRA).
Holders of Exploration and Prospecting Licences must endeavour to employ manpower from Greenland or Denmark but may employ foreign workers if manpower with similar qualifications does not exist or is not available (§13(1301), STPL & STEL). Holders of Exploration and Prospecting Licences must also endeavour to assign contracts, subcontracts, purchase of supplies and services to Greenland enterprises unless such enterprises are not commercially competitive (§ 13(1302), STPL & STEL). The extent to which licence holders must use labour or businesses from Greenland can be laid down within the terms of the licence (s. 18, MRA). The government may also stipulate the extent to which the licensee must keep exploited minerals in Greenland and sell them to persons who are permanently residing and fully liable to pay tax in Greenland; the licensee must sell the minerals at arm’s length prices and on arm’s length terms (s. 18(4), MRA).
The government must approve an Exploitation Plan, including details on production organisation and related facilities, prior to the commencement of activities (s. 19, MRA). When approving the Plan the government may, on specified terms, allow the licensee to establish and operate power facilities and grant such right as part of the Exploitation Licence (s. 20, MRA); annual fees may apply. A pipeline licence may also be approved as part of the Exploitation Plan (s. 21, MRA). A Closure Plan must also be approved prior to the commencement of activities; as part of the approval the government may stipulate terms on protection of the environment and health and safety measures (s. 43, MRA).
Applicants for Exploitation Licences will need to conduct an EIA and SIA. The EIA and SIA may extend to exploration activities if they can be assumed to have a potentially significant impact on the environment, culture or climate change, though such decision is at the discretion of the government. Regardless, during the exploration phase the procedures and requirements for the EIA process should be integrated into the explorationist’s plans. Requirements for the EIA and SIA are clearly given. Decisions on EIA are made collectively by the MLSA and Agency; decisions on SIA are made by the MILTE. As part of the SIA process, proponents will need to negotiate an Impact Benefits Agreement (IBA) with the government. The IBA must be signed before approval for the Exploitation and Closures Plans can be approved and the Exploitation Licence granted (see also ‘Environmental Overview Commentary’ below).
The government may grant subsoil licences for use of the subsoil for storage purposes or for purposes relating to prospecting, exploration or exploitation of minerals (s. 39, MRA). Such licences may be granted for a period of up to 50 years and annual fees may apply (s. 40, MRA). There is no system of privately owned land in Greenland, instead land is owned collectively by the people of the country. As such, the MRA does not provide for surface rights in relation to private land. The MRA does contain provisions relating to compensation for environmental damage which may be claimed for certain types of damage including damage to property (s. 68, MRA). The government may also allow steps to be taken for the compulsory acquisition of real property in accordance with existing laws (s. 93, MRA).
The government may insert terms and conditions on royalty rates and fees into a licence, with reference to the area covered and the value of the mineral resources extracted. It also permits terms on government participation into a licence, though in the case of an Exploitation Licence this will only be permitted if the terms were originally contained in the Exploration Licence or if certain tax breaks apply (ss. 17 & 30, MRA). Current royalty rates according to the STEL are: rare earth minerals and uranium – 5%; gemstones – 5.5%; minerals other than rare earth mineral, uranium and gemstones – 2.5%.
All decisions of the MLSA or the Environmental Agency may be appealed to the government by parties to the case, those deemed to have a material individual interest in the outcome of the case and associations and organisations which have a statutory objective to safeguard important recreational, environmental, nature or social issues (s. 3b, MRA). The time limit for an appeal is six weeks. Decisions may also be appealed to the courts (s. 3d, MRA).
See Greenland- Environmental Overview Commentary.