· alleviating barriers to quarry task 4.2 – alleviating financial rehabilitation in lebanon –...

ALLEVIATING BARRIERS TO QUARRY TASK 4.2 – ALLEVIATING FINANCIAL REHABILITATION IN LEBANON – ABQUAR BARRIERS TO QUARRY REHABILITATION

1 INTRODUCTION

1.1 THE ABQUAR PROJECT

Co-financed by the European Commission – Life Third Countries Program and the Lebanese Ministry of Environment (MoE), the Alleviating Barriers to Quarries Rehabilitation in Lebanon (ABQUAR) project is managed and executed by the latter (decree # 14685, dated 20/6/2005) with the external assistance of Earth Link and Advanced Resources Development (ELARD s.a.r.l.). The overall objectives of the project are to minimize or eliminate the environmental and socio-economic impacts caused by non-rehabilitated quarries in Lebanon. Specifically, the project aims at alleviating the legal, institutional, technical and financial barriers that hinder the process of quarries rehabilitation in Lebanon by first identifying the existing barriers and then developing measures to overcome them be they of legal and institutional, technical or financial nature.

Extending from March 2005 to September 2007, the ABQUAR project shall yield the following outcomes:

(i) Evaluation and updating of current institutional and legal frameworks;

(ii) Development of a GIS-based Decision Support System (DSS) as a tool for prioritization of quarries rehabilitation, proposals evaluation, and project monitoring;

(iii) Development of a national plan for quarries rehabilitation;

(iv) Development of financial mechanisms and economic incentives for quarry rehabilitation;

(v) Strengthening of institutional and human capacities through comprehensive training programs tailored to local needs;

(vi) Increase of public awareness and participation;

(vii) Communication and dissemination of the project outcomes and results;

1.2 OBJECTIVE OF THE REPORT

The objective of this report is to present a detailed study of the financial barriers to quarry rehabilitation in Lebanon as well as the means to overcome them as the fulfillment of Task 4.2 (Alleviating Financial Barriers) of the ABQUAR project. In compliance with Contract 13/1 dated 31/12/2005 between the Ministry of Environment (MoE) and Earth Link and Advanced Resources Development s.a.r.l. (ELARD) and its associated Terms of Reference (TOR), this report documents the following as completed by ELARD:

• Estimation of the general rehabilitation costs according to quarry type

• Review of financing mechanisms for quarries rehabilitation in 5 similar countries with similar geographical, social, economical and environmental conditions (e.g., Mediterranean, European and/or otherwise)

3 LIFE04 TCY/RL/000040


• Review of local mechanisms

• Recommendation of appropriate and pragmatic financial instruments for quarries rehabilitation in Lebanon

• Dissemination and update of the proposed alternative in view of stakeholders’ inputs

• Identification of necessary measures (i.e., administrative, legal and financial) to initiate the financing mechanisms

1.3 OBJECTIVES AND STRUCTURE OF THE REPORT

The objective of this report is to present the findings of the financial study as described above with particular emphasis on the rehabilitation of Lebanon’s abandoned quarries and means to ensure successful rehabilitation of its future quarries. The report is intended to present decision-makers with potential alternatives as well as recommendations specific to the case of Lebanon based on an in-depth review of the mechanisms adopted on the international scale. Accordingly, the findings of this study are to be incorporated into the legal framework being prepared under Task 4.1 of the ABQUAR Project.

1.4 STRUCTURE OF THE REPORT

The structure of the report is fairly systematic and is as follows:

• Section 1 introduces the context, objectives and structure of the report

• Section 2 outlines the methodology used in the report

• Section 3 presents an overview of the situation in Lebanon, addressing both abandoned quarries and present excavation activities

• Section 4 aims at estimating the costs of quarry rehabilitation in Lebanon, and attempts to compare the costs of rehabilitation to the expected benefits.

• Section 5 gives a comprehensive overview of the international financing mechanisms used towards abandoned quarry rehabilitation, including mechanisms to prevent such abandonment in the future in nations that have or have had legacies in abandoned mines and quarries (e.g. Canada, U.S.A, U.K, France, and Japan among others).

• Section 6 gives an overview of the national economic situation of Lebanon, and its’ national (and local) system (and vigor) of revenues and expenditure. It moves on to explain the financial mechanisms found in Decree 8803 (updated by Decree 16456).

• Section 7 proposes financing mechanisms to deal with abandoned quarries that are (under Decree 8803 and its update) or could be adopted for Lebanon, and mechanisms to prevent such abandonment in the future.

• Section 8 provides the conclusions and recommendations of the report.



2 METHODOLOGY The report also presents an overview of alternative financial schemes to fund the rehabilitation of abandoned quarries as well as those used to prevent future quarry abandonment in Lebanon. In order to achieve the objectives of this report, a systematic methodology was adopted.

Firstly, the cost of environmental degradation caused by abandoned quarries in Lebanon was estimated via two alternative studies. Given the severe limitation of Lebanon’s resources and its current macro-economic situation, any government expenditure needs to be thoroughly justified and of prioritized. The cost of environmental degradation due to abandoned quarries not only illustrates the magnitude of the damage, but it generates a valid economic justification for intervention.

Secondly, the study proceeded to estimate the costs of rehabilitation. It should be noted that abandoned quarries are of different type, size, shape and age of abandonment, and thereby possibly subject to different rehabilitation techniques – and thus varying rehabilitation costs. However estimating rehabilitation costs (for those quarries selected for rehabilitation) is necessary to undertake for two primary reasons. The first and foremost reason is that the necessary budget to be allocated for rehabilitation needs to be clearly known (i.e. how much money is required from the national or local authority budget – for example- for the rehabilitation of the selected quarries?). The second reason is that the rehabilitation costs should not exceed the environmental damage costs (costs of environmental degradation of respective abandoned quarries), or else there would be no economic (and arguably environmental) justification for rehabilitation to take place. An approximation of the rehabilitation costs of abandoned quarries in Lebanon would be undertaken mainly through interviews with local experts on the issue and other relevant stakeholders.

The study compares the expenditure resulting from the rehabilitation of abandoned quarries to the estimated costs of environmental degradation caused by allowing the quarries to remain abandoned. It must be noted that the calculation of the cost of environmental degradation as well as that of rehabilitating abandoned quarries are subject to much uncertainty and limitations. However both estimations are imperative to describe the problem to policy-makers in economic terms and as well as to predict the resources needed.

The third undertaken would be a thorough literature review of possible financing sources for quarry rehabilitation as carried out in countries around the world faced with a similar task. Five countries would be looked into (Canada, U.K, U.S, and France among others). The approaches they undertook or undertake for such an endeavor would be reviewed and placed for discussion within the Lebanese context, assessing the viability of each and its local applicability with relevant stakeholder like the Ministry of Finance, Ministry of Environment and municipalities (among others).

Finally, the outcome of these discussions would bring forth the best alternative source or several alternatives (sources) for financing quarry rehabilitation in Lebanon. This or these alternative(s) would be adopted into a legal framework that would pave the way for actual rehabilitation of abandoned quarries and the prevention of such abandonment in the future.



3 OVERVIEW OF THE EXISTING SITUATION Extensive quarrying in Lebanon dates back to the Neolithic times, as revealed by archaeological evidence of structures incorporating locally quarried materials found across the country and in the monumental and renowned (historical) limestone ruins of Baalbeck, Tyre, Byblos and elsewhere (Dar Al-Handasah 1996). Nevertheless, these quarries were considered small-scale and primitive, having minor impacts on the environment.

The real damage began in the economic boom years of post-war Lebanon (specifically from 1990 to 2000). Gross National Product (GNP) annual growth rate for Lebanon between the years 1990-1998 was about 7.2% (UNDP 2000), prompting and prompted by immense and rapid urbanization (and rural-urban migration).

Excavation in a chaotic manner answered this quick demand for roads, airport runways, bridges, buildings, ports and other infrastructural provisions (specifically in the years 1995-1996) with quick supply.

However the intensive demand for quarrying material does not necessitate chaotic quarrying which is not based on any technical standards. In other words, the demand for quarry is not the reason for chaotic quarrying, as such demand exists in most other countries around the world that did not resort to such unsustainable quarrying processes. The real reason could be found in local political networks, unprofessional contractors and the absence of corrective institutions in post-war Lebanon, the discussion of which is beyond the scope of this report.

In the year 2002 however, the Ministry of Environment managed to put forth Decree 8803, which outlined the technical and regulatory framework for organising the quarry sector.

The recognized Study by Dar Al Handasah (1996) concluded that there are at least 710 abandoned quarries scattered in various locations in Lebanon, as indicated in Table 1 (Dar Al Handasah – DAH - 1996). Of these 700 or so quarries, 14% are over 1,000 m2 in area, and more than half are located in Mount Lebanon (Plan Blue 1999).

Furthermore, Table 1 presents a legal aspect to quarrying in Lebanon, indicating the number of licensed versus unlicensed quarrying (with unlicensed quarrying dominating in all provinces except the South) prior to Decree 8803/2002 (to be discussed shortly). Of these quarries, 464 sites are for the extraction of rock and 246 for the extraction of sand (DAH 1996).



Table 1. Total Number of Quarries in Lebanon (DAH 1996)

Province (Mohafaza)

District (Caza)

# of Quarries

Density of Quarries (/1,000 Hectares) Total Percentage

of Total

Bekaa

Baalbeck 36 0.32

123

17% Rashaya 15

Western Bekaa

29

Hermel 0

Zahleh 58

Sub-total 138

Mount Lebanon

Aaley 81

1.87

367

52% Baabda 20

Chouf 38

Jbail 87

Kesrouane 82

Maten 59

Sub-total 367

North Lebanon

Akkar 28

0.95

154

22% Batroun 59

Bcharre 19

Koura 14

Tripoli 21

Zgharta 13

Sub-total 154

South Lebanon

Bent Jbail 6

0.27

66

9%

Hasbaya 2

Jezzine 11

Marjaayoun 1

Nabateyi 10

Rashaya 15

Saida 3

Sour 18

Sub-total 66

Total 710 100%




However, more recent estimates (LEDO Land-cover/Land-use map) of the number of abandoned and operational quarries in Lebanon indicate that there are around 1200 such quarries.1

1 Confirmation of the number of quarries existing in Lebanon would be finalised after the ELARD survey is completed.



4 COSTS OF QUARRY REHABILITATION IN LEBANON

4.1 THE COST OF ENVIRONMENTAL DEGRADATION IN LEBANON

In the World Bank Study entitled “The Cost of Environmental Degradation – The Case of Lebanon and Tunisia”, the cost of environmental degradation in Lebanon was estimated with respect to the various categories involved using various environmental economic techniques. Table 2 below summarizes the results estimated, indicating that air pollution (particularly urban pollution) followed by water pollution (specifically lack of safe potable water, sanitation, and hygiene) are the most serious environmental problems in Lebanon (World Bank 2004).

Table 2. Environmental Degradation Costs in Lebanon by Category

Cost of Environmental Degradation (US $ millions per year)

Cost of Environmental Degradation (Percent of GDP)

Air 170 1.02%

Water 175 1.07%

Land & Wildlife 100 0.60%

Coastal Zones & Cultural Heritage

110 0.68%

Waste 10 0.05%

Sub-total 565 3.4%

Global Environment 90 0.5%

Total 655 3.9%

Within the context of quarries, the World Bank study did not undertake a thorough assessment as to the damage cost of all existing quarries in Lebanon. However five such quarries were assessed in Mount Lebanon, where “the loss in land and apartment values (associated with a reduction in aesthetic value) was taken into account.” The loss of land and adjacent apartment values around these five quarries is estimated in Table 3.

Table 3. Loss of Property Value of Real Estate Adjacent to Quarries

Quarry Name Decrease in land prices

(USD million)

Decrease in apartment value

(USD million)

Sub-total (USD million)

Nahr Ibrahim quarry 14.00 - 14.00

Shnanaayer quarry 75.00 8.10 83.10

Abou-Mizen quarry 1.31 - 1.31

Antelias quarry 5.00 0.75 5.75

Nahr El Mawt quarry (Industrial zone, no impact on land prices) -

Total 95 8.85 103.85


10 LIFE04 TCY/RL/000040

However these surveyed quarries are considered among the most important in the country in terms of deterioration of landscape as some border high-density urban coastal zones and popular inland locations. Therefore extrapolating these values nationwide to cover the more than 700 quarries is not an option (World Bank 2004).

As a conservative estimate, the World Bank study indicated that the cost of environmental degradation corresponding to more than 700 quarries in Lebanon is about USD 48 million. This however is overly conservative, as it is solely calculated as the value of the land that those quarries occupy. Added with the five above mentioned quarries in Lebanon, the annual damage costs would amount to a conservative USD 14 – 16 million, or 0.1% of GDP (World Bank 2004).

To place things in perspective however is to indicate that calculating the cost of environmental degradation of quarries is also subject to much uncertainty and variation depending on the technique used for calculation and the assumptions taken.

In one study (Harajli 2005), the contingent valuation method (CVM)2 was utilized to calculate the cost of environmental degradation from one important quarry located in the vicinity of the historic Moussielha Castle in Northern Lebanon, in order to assess the mean and total willingness-to-pay for rehabilitation.

A survey composed of two-hundred questionnaires was carried out in regions both neighboring the castle and considered some distance from it, asking people (through random sampling) face-to-face their willingness-to-pay to rehabilitate the quarry of Moussielha based on a hypothetical scenario and assumptions given below, and based on a simulated picture of the Moussielha quarry rehabilitated:

“Rehabilitation of the quarry site around Moussielha Castle will undoubtedly cost money. Despite who was responsible for the quarry in the first place, and if an Environmental Trust Fund (under the Ministry of Environment) were developed, completely free of corruption and/or mismanagement, where money is collected to pay for rehabilitating the abandoned quarry around Moussielha Castle, which of the amounts listed below best describes your maximum willingness to pay, as a one off donation to the Environmental Fund for this effort? Please answer considering your budget constraint” (Harajli 2005).

Questions in the survey also included (along with WTP) the respondents’ familiarity with the castle quarry, their attitudes towards it and several of their socioeconomic characteristics. Furthermore, a side-component of the study was to ask people’s WTP for rehabilitating all abandoned quarries in Lebanon, known to amount to more than seven-hundred such quarries.

The results obtained indicated that the median WTP for rehabilitating the Moussielha Castle quarry was found to be US$23, which led to a total WTP (or total value towards

2 CVM and its survey techniques are used to estimate the economic value of commodities and/or services that are not traded in the market place and therefore lack any pricing. CVM involves asking a randomly chosen sample of people what they are willing-to-pay for a clearly defined change in the provision of a good or service (or to prevent a change) or to illicit what people are willing-to-accept to forgo or tolerate a change (World Bank 2005).


11 LIFE04 TCY/RL/000040

rehabilitating the quarry) of US$11.3 million (given some assumptions listed in Annex 1), while that of rehabilitating all quarries in Lebanon amounted to a median of US$43 per year, which totalled to US$21.2 million per year, or a range between US$212 – US$318 million over 10 to 15 years or the time it would take for rehabilitating all quarries (Harajli 2005).

The study itself indicated the uncertainties, limitations and necessary assumptions involved, and proceeded throughout as conservatively as possible. With all this, the annual value for the rehabilitation of all quarries in Lebanon was calculated to be over USD 21 million.3

4.2 THE SELECTION OF QUARRIES FOR REHABILITATION

The cost of rehabilitation of quarries in Lebanon is not a simple matter to calculate in general. As aforementioned, there are (according to the latest estimate) almost 1000 abandoned quarries in Lebanon which vary in age, shape, type and size.

A thorough survey would be needed to cover those quarries to indicate their characteristics and the characteristics of their vicinity. However, the first actuality that inevitably would be realized is that not all of these quarries need actual intervention to rehabilitate. This is the case potentially due to some factors, most importantly natural processes that have already acted to reabsorb the quarry sites back into their environment by weathering, erosion processes, natural re-vegetation or other such mechanisms in such a way that would make the outcome look almost as if there were no quarries in the first place and that the landscape feature present had always been such. In other words, if natural rehabilitation has taken, is taking or will take place effectively is subject to the time frame involved as well the surroundings affected by the quarry. In most respects, these quarries would be considered small in size and in areas relatively remote.

The second actuality to consider in the cost of rehabilitating quarries is that there are cases where cost of rehabilitation could be covered by and possibility even financial gain is achieved through the sale of aggregates. Aggregate quarries are often situated in urban districts in order to lower transportation costs. As a result, many of them have been found trapped within urban borders, especially where rapid urban expansion did not follow a long-term planning as is the case in Lebanon. The rehabilitation cost in this case could be well compensated by the production of added value resulting from the new land uses. This is often called ‘progressive rehabilitation’ where rehabilitation occurs sequentially, in a reasonable period of time, while the aggregates are being excavated. With good planning, the extraction of aggregates proceeds in a logical sequence so that depleted areas can be rehabilitated while extraction continues in other areas of the pit or quarry in order to improve the landscape feature relative to how the quarry was abandoned. “Planned stripping and replacement of topsoil, subsoil and overburden materials allows the licensee to establish vegetation in as much area as possible, and a start can be made towards developing the site for a particular after use” (Ministry of Natural Resource, Ontario). In this case thereby, not only would quarrying be re-allowed on an abandoned site for landscaping reasons (subject to an environmental impact assessment and strict monitoring), yet the sale of these aggregates is a 3 However herein it is important to note that not all quarries would need rehabilitation depending on the size, shape, location, and type of quarry and the effectiveness and time frame of natural factors like weathering and re-vegetation.


12 LIFE04 TCY/RL/000040

possibility, as are the benefits of reclaiming the land for alternative purposes which achieve economic returns.

The third group of abandoned quarries are those that indisputably need intervention to rehabilitate and thus would require funding. Each site is subject to its own site-specific basis in order to achieve high quality rehabilitation to meet objectives such as (Ministry of Natural Resource, Ontario);

- The restoration to former use or condition

- Compatibility with surrounding land uses, including aesthetics;

- Agricultural productivity/soil capability; and

- Encouraging biodiversity.

These (the third mentioned category of quarries) are the quarries that would require public (or private) financing sources to rehabilitate, and it is their cost of rehabilitation that should be compared to the cost of environmental damage that they cause. Subject to the severe financial constraints (see Section ___) that would undoubtedly be faced, the prioritization of rehabilitating those quarries should be also undertaken.

In principle, the abandoned quarries that are a hazard to human health and safety, threaten archeological or historical architecture or sites or decrease those site’s appeal, and/or endanger fragile or endangered ecosystems or species (respectively) should be rehabilitated first.

The economic valuation of the damage costs associated with quarries could be used thereafter in order to prioritize quarry rehabilitation efforts following those hazardous quarries mentioned above. Those quarries that would yield the most return from rehabilitation, returns in the form of improved adjacent land and apartment prices (for example), and/or in the form of improved aesthetics and landscape features should be tackled in such order.

4.3 COST ESTIMATIONS

As aforementioned, determining the cost of rehabilitation depends on many criteria and at the specific quarry of interest. However, it is vital to attain an order of magnitude of the maximum costs involved in rehabilitating quarries in Lebanon in order to assess the amount of funding which would be required. It would be assumed, first and foremost, that all quarries (1200 quarries) would need rehabilitation.

Since no quarries in Lebanon have been identified that have been rehabilitated after operation (which would give an ideal indication of the costs involved), an alternative means would be undertaken.

The first alternative is to adopt such a cost from outside experiences. The reported average cost to rehabilitate land disturbed by aggregate production in Ontario is $12,500 per hectare4, with each rehabilitating site averaging 1.5 hectares in size. The sites in Ontario to date are

4 The Dollar sign herein must be assumed to mean Canadian Dollar ($) as it was adopted from Ontario, Canada. The rate of $1 Canadian = 0.86 USD is consequently used.


known to of been rehabilitated to viable agricultural land, natural areas and recreational space (Castrilli 2003).

Adopting these figures to Lebanon to get an order of magnitude only, it would entail (as a maximum) the rehabilitation of 1200 quarries or 1800 hectares of land, equaling $22.5 million (at $12,500 per hectare). Converted to USD, the hectare cost of rehabilitation equals about 11,000 USD, while the total cost of rehabilitation would equal to about USD 19.6 million.

Alternatively, in the DAH report (1996), 710 quarries operational and abandoned were identified (which have been updated recently to 1200), 464 of which were for the extraction of rock and 246 for the extraction of sand. Furthermore, about 62% were considered small in size (volume: m3 ≤ 15,000), around 18% were considered medium in size (volume: 15,000 ≤ m3 ≤ 40,000), and around 20% were considered large (volume: m3 > 40,000).

In the State of the Environment Report (2001), it is indicated that “Dar Al Handasah estimated the cost of implementing (1) noise reduction, (2) dust suppression and (3) site rehabilitation of an active medium-sized quarry producing 40,000 tons/year… It was estimated that the additional costs to quarry operators for implementing policy measures that will suppress dust, reduce noise and vibrations, in addition to rehabilitating the quarry site is equal to US$0.71/m3… (State of the Environment Report, 2001).

The total size of all abandoned quarries in Lebanon (approximately 1200) is calculated taking the following assumptions;

- 62% are small and therefore would be assumed to be 15,000 m3 in size

- 18% are considered medium sized and therefore assumed to be 25,000 m3 in size

- 20% are considered large and therefore assumed to be 40,000 m3 in size.

Therefore and taking the same percentages of small, medium and large quarries and extrapolating them to the present 1200 quarries, it would be assumed that there are 744 quarries sized 15,000 m3, 216 quarries sized 25,000 m3, and 240 quarries sized 40,000 m3. This indicates the total of 26,160,000 m3 area (of quarries) needing rehabilitation. At the cost of US$0.71/m3, this entail the total cost of rehabilitation equal to about USD 18.6 million.

This cost estimate is not far less than that calculated by using the transfer methodology from Ontario’s costs of rehabilitation (USD19.6 million to USD18.6 million respectively).

4.4 COST TO BENEFIT RATIO The total cost of rehabilitating abandoned quarries in Lebanon amounts to about USD 20 million. The conservative estimate of the cost of environmental degradation (and thus the potential due benefits to be received if rehabilitation takes place) according to the World Bank was about USD48 million. Therefore, there a total benefit of USD28 million could be accrued if rehabilitation of all quarries take place in Lebanon, a cost-benefit ration of 1 to 2.4.

13 LIFE04 TCY/RL/000040


14 LIFE04 TCY/RL/000040

If the estimate of the value of rehabilitating of USD265 million (adopted from Harajli 2005 study) is taken, the value of benefits would be very much larger.

Both ways, there is pure economic reason (among other reasons) to undergo rehabilitation.


5 INTERNATIONAL FINANCING MECHANISMS FOR QUARRY REHABILITATION The following sections review how funding rehabilitation of abandoned mines or quarries are carried out in nations that have had a long history with dealing with mines and mining legacies, specifically Canada, USA, UK, Japan and Australia and have thus developed regulatory frameworks for the sector. Review of financial mechanisms includes those for abandoned mines and others for current or future mines (or quarries).

For the purpose of our report, financial mechanisms or sources to rehabilitate abandoned mines would be adopted to the rehabilitation of stone and sand quarries, meaning that the potential financial mechanisms needed for the rehabilitation of mines or quarries are similar.

Beginning with a definition, an abandoned mine (or quarry for that matter) is a site “for which responsible parties cannot be found because they have gone bankrupt, left the jurisdiction, or are unwilling to accept responsibility and, therefore, the government may have to assume the cleanup costs” (Castrilli 2003).

For permitting of future quarries or mines, restoration guarantees are used in many countries as they offer several advantages. Quarrying activities may proceed over a long period and may even cease temporarily only to reactivate at a later date. As extraction may cease either in the short or longer term, it is difficult to establish whether the activity may restart or if the quarry has been abandoned. As a result, restoration guarantees are used in many countries to protect against restoration failure. It acts as a safeguard for regulatory authorities and the public to ensure that restoration will take place to an acceptable standard and to protect against a number of factors including:

- Liquidation or bankruptcy of the operator;

- Inadequate monitoring and enforcement;

- Operator “walking away” from obligations;

- Inadequate or inappropriate conditions on consents;

- Shortage of fill materials.

A financial guarantee is typically used to ensure sufficient resources are set aside to cover the expenditure of restoration. Commonly, guarantees are required for and in order to;

- Ensure that restoration occurs;

- Ensure landscaping schemes are carried out;

- Ensure the removal of plant and machinery on the completion of extraction.

Moreover, these guarantees can come in several forms including:

- Bonds (see annex 4),

- Deposits, or

- Mutual Funding Schemes operated through trade or similar umbrella associations.

15 LIFE04 TCY/RL/000040


In devising mechanisms to act as a guarantee, it is important that excessive costs are not placed on operators in the short-term, which could reduce investment in other environmental mitigation measures or investment in modern plant and equipment.

Two types of guarantee can be identified:

- A guarantee is determined on an ad hoc basis according to the type of mineral extracted and extent of the consent;

- A nationally organized funding scheme organized for example through a trade association, as in the UK, which is targeted at restoration failure arising from liquidation or bankruptcy.

Guarantees or financial sureties are a form of risk management and risk is normally defined in engineering terms as "Hazard" times "Probability of Occurrence". In this case, the hazard is an abandoned quarry site requiring action. The probability of this occurring is determined by many factors. These include:

• Poor Physical Planning for Closure - It is obvious that, if a quarry is not designed with its eventual closure being taken into account, there are likely to be problems.

• Insufficient money - An excellent plan is not useful if there are no funds to implement it. This problem can arise for a number of reasons, including:

Cash flow problems, caused for instance by low prices of aggregates.

Premature closure, which can arise for many reasons,

Company failure, which is a concern because quarries are often run as single operation companies and cannot rely on their parents, which may, in any case, not have any other income.

Sureties mitigate risk but do not eliminate it. Examples of remaining risks include:

Financial failure of the provider of the surety; and

Legal risks: it is only when a surety needs to be realized that its effectiveness is really tested.

The most secure approach to guaranteeing closure funds would be to require a full up-front deposit of cash. However, in deciding on amounts and methods of providing securities, “regulatory agencies have recognized the need to balance the cost of reducing risk against the benefits this may achieve, and do not normally insist on such a deposit. This is because they recognize that it would impose unnecessarily high costs, when the risk of closure in the first few years of operation is normally very low” (Office of the Deputy Prime Minister – Seminar on Financial Guarantees and Securities in the Extractive Industry).

There are several benefits to financial guarantees. First and foremost they provide a level of certainty for communities and regulators that financial failure will not lead to long standing environmental costs or public sector costs. Secondly, they assure the Polluter Pays Principle. Third they assure industry against reputational risks and provide incentives for progressive restoration. Lastly, they provide an incentive for the dissemination of good management

16 LIFE04 TCY/RL/000040


practice (Office of the Deputy Prime Minister – Seminar on Financial Guarantees and Securities in the Extractive Industry).

The costs of guarantees on the other hand take the form mainly of opportunity costs, where there would be displacement of investment capital, especially in the case of "up-front" or cash deposit schemes.

In some countries, guarantees are underpinned by legislation, while in others they are common practice, required through conditions or agreements (Table 4):

Table 4. Use of Restoration Guarantees by Countries

Country / State Bond Required by Legislation Bond not Required by Legislation but

Frequently Used

Austria

Belgium

Denmark

Finland

France

Germany

Greece

Ireland

Italy

Malta

Netherlands

Portugal

Spain

UK

Québec (Canada)

5.1 CANADA - ABANDONED AND FUTURE QUARRIES OR MINES In Canada, several funding approaches towards rehabilitation are undertaken, following certain criteria and principles to regard when deciding who shall pay and how.

These principles and criteria are used in Canada to assess funding approaches to abandoned mine (or quarry) rehabilitation. These principles and criteria are described in Annex 2 (adopted from Castrilli 2003) and briefly tabled below.

17 LIFE04 TCY/RL/000040


Table 5. Principles and Criteria to Assess Funding Approaches

Principles and Criteria Description

1 Polluter pays The one in responsibility for the quarry should finance rehabilitation costs

2 Beneficiary pays The ones who benefited from the quarry (e.g. public) should finance rehabilitation costs

3 Fairness Fairness refers to notions of certainty of process, effectiveness, efficiency, clarity, consistency, and timeliness in achieving environmental objectives. It is related to Polluter and beneficiary pays principles.

4 Sustainable development (SD) goals

SD should provide the overall framework in which a quarry rehabilitation program should be developed.

5 Openness, accessibility, participation

Public input and access to information about the quarry rehabilitation needs to be always taken into account.

6 Revenue generating capacity The funding mechanism needs to generate sufficient funds for the task at hand.

7 Administrative ease The generation of revenue, its collection and application needs to be through a relatively simply process.

8 Economic impacts The economic impacts of the funding approach undertaken needs to be assessed in order to safeguard the competitiveness of the industry among other things.

10 Discourage future site abandonment

The funding approach should also discourage future abandonment of quarries without rehabilitation.

11 Public perception The perception of the public towards the funding approach is important, as it also impact political initiatives towards rehabilitation.

Five funding approaches are undertaken in Canada (Castrilli 2003):

- Government funded programs from general revenues;

- National-municipal government funded cost-sharing arrangements from general revenues;

- Levies on industrial production;

- Government- industry partnerships; and

- Non-profit organization trust funds.

First, the Canadian government or governmental bodies (whether national, provincial, municipal or a combination of national-provincial- municipal) could pay for the rehabilitation of abandoned quarries out of general revenue. The government either did not require, or did not enforce, adequate rehabilitation during the operating life of the quarries and there is now no one available (or some other reason) upon whom to impose these financial obligations. This approach makes all taxpayers responsible for financial resolution of the problem (Castrilli 2003).

18 LIFE04 TCY/RL/000040


19 LIFE04 TCY/RL/000040

Second, the present Canadian quarrying industry could contribute to a fund that can pay for rehabilitation of orphaned/abandoned quarries. The theory behind this funding approach is a generalized notion of polluter pays or internalization of external costs imposed on the industry as a whole as a cost of doing business in the jurisdiction in the future. This approach makes the quarrying industry, and consumers of the products made by the industry, responsible for the financial resolution of the problem (Castrilli 2003).

An important example to illustrate here is that of Ontario and its ‘Aggregate Resource Act’ (ARA). Administered by the Ontario Ministry of Natural Resources, the purposes of the ARA is to rehabilitate land from which aggregates have been acquired. To assist in this initiative, the ARA recommended the establishment of the ‘Aggregates Resources Trust’ that provides for the ‘rehabilitation of abandoned pits and quarries, including surveys and studies respecting their location and condition and research on aggregate resource management, including rehabilitation’ (Castrilli 2003). ‘Rehabilitation’ herein is defined as restoring the land to its former use or condition or changing it into something compatible with the use of adjacent land. Regulations within the ARA impose an annual six-cent per ton licensing fee for each ton of aggregates removed from the site during the previous year. One-twelfth (or 0.5 cents) of the six cents per ton fee must be provided to the Trust for purposes of abandoned pits and quarries rehabilitation and research (the other 5.5 cents go to the municipal, county or county governments in which the site is located). Within the Trust, a separate Management of Abandoned Aggregate Properties Program (MAAP) specifically targets the quarries abandoned prior to the start of 1990. Over 200 hectares have been rehabilitated from 1990-2001, costing $2.5 million dollars (TOARC & APA Management of Abandoned Aggregate Properties Program ‘MAAP).

Third, the Canadian government could provide incentives for existing quarrying companies to rehabilitate orphaned/abandoned quarries (government-industry partnership). These incentives could come in the form of tax deductions, exemptions from liability, issuance of a quarrying license on an adjacent site, financial contribution by government in partnership with a quarrying company, or other similar arrangements. This approach makes both taxpayers and consumers responsible for financial resolution of the problem (Castrilli 2003). In Ontario, the Ministry of Northern Development and Mines (ONDM) and the Ontario Mining Association (OMA) recently signed a memorandum of understanding that would allow mining companies to make voluntary contributions to rehabilitate abandoned mine sites in return for a tax deduction and indemnification from liability. The ONDM would administer funds received from industry, government, or other parties.

Fourth, the Canadian government could, without imposing new taxes or fees on the quarrying industry, (1) re-direct a portion of existing quarrying tax revenue, and (2) reduce existing incentives5 to the industry and earmark both streams to orphaned/abandoned quarry rehabilitation generally, or through a fund specifically designed for this purpose. This approach makes both taxpayers and consumers of mineral products responsible for financial resolution of the problem (Castrilli 2003).

5 In Canada, it is often claimed that the mining industry has received preferential tax treatment, incentives, and subsidies.


20 LIFE04 TCY/RL/000040

Fifth, the Canadian government could use a combination of the above or related funding approaches, including contributions from non-governmental organizations (e.g. large companies) or other such means. The latter (Trust fund) approach blends indeterminate levels of industry, public (and individual) financial contributions to attempt to solve the orphaned/abandoned quarry problem on a programmatic basis. Companies, governments, individuals contribute money without having any particular site in mind when they make their contribution. In that regard, the approach works like an industry levy contributed to a fund with the difference that the industry and private contributions are voluntary, and come with tax deductions (Castrilli 2003).

These funding approaches each have their advantages and disadvantages with respect to the aforementioned principles and criteria that should be taken into account when considering abandoned quarry rehabilitation. A negative sign indicates a shortcoming of the financing approach with respect to the indicated principle (or criteria), a positive sign indicates a favorable combination, and where no such selection could be attained, the reasons are indicated in Table 6.

For future permitting of mines in Canada, Québec for example (in the case of a pit) demands a guarantee of 5,000 $ where the stripping is less than or equal to 1 hectare and 4,000 $ per hectare or fraction thereof where the stripping is greater than 1 hectare, that guarantee being in one of the following forms:

Cash or a certified check made out to the Minister of Finance;

Bearer bonds, cashable at all times, issued or guaranteed by the Government of Québec, the Government of Canada or a municipality and whose market value is at least equal to the amount of the guarantee required;

A joint and several deed in the form of security or of an insurance policy, with a waiver of the benefits of discussion and division, issued by a banking institution, a savings and credit union or an insurer;

An irrevocable letter of credit issued by a banking institution or a savings and credit union.

The Minister may use the guarantee where the operator neglects or refuses to carry out his restoration plan or where the operator becomes bankrupt or, if the operator is a corporation, if it winds up its affairs. Before using the guarantee, the Minister must give the operator 60 days advance notice. Upon expiry of that time limit, the Minister may use the guarantee for restoration of the pit unless the operator has, in the meantime, undertaken the implementation of the restoration plan. Where the operator does not complete the restoration plan, the Minister may give another 60 days advance notice and use the guarantee.


Table 6. The Advantages and Disadvantages of Canadian Funding Approaches

Funding

Approach

Principle

Government funded programs from general

revenues

Provincial-municipal government funded cost-

sharing arrangements from general revenues

Levies on industrial production

Government- industry partnerships

Non-profit organization trust

funds

Polluter pays - - +

Depends on particularities of arrangement

Depends on the ratio of industry to public

money

Beneficiary pays - - +

Fairness - - Depends on situation

Sustainable development (SD) goals

-

-

+

Openness, accessibility, participation Depends on case Depends on case

+

Revenue generating capacity

Depends on magnitude of needed revenues

Depends on magnitude of needed revenues

Depends on production levels and levy rate

applied

+

Depends on

arrangements

Administrative ease + + - - +

Economic impacts -

(with respect to Lebanon)

- (with respect to Lebanon)

- (on quarry industry) Depends on particularities of arrangement

Depends on arrangements

Discourage future site abandonment

-

-

+

+

Depends on the ratio of industry to public

money

Public perception - - + + +

21

LIFE04 TCY/RL/000040


22 LIFE04 TCY/RL/000040

Where the operator chooses a restoration method consisting in leveling and re-vegetation of the site or in a landfill made up of earth, sand or stone, followed by surface re-vegetation, 75 % of the guarantee shall be remitted to him after the Minister has ascertained that he has complied with the rehabilitation scheme. The balance of the guarantee is remitted after two years, when the re-vegetation of the land is completed, unless the environmental milieu will not support perennial vegetation.

Where the operator chooses other restoration options, the guarantee shall be remitted to him in its entirety after the Minister has ascertained that the operator has complied with the rehabilitation scheme, insofar as these apply to the restoration plan which has been carried out.

The guarantee shall not be remitted to the operator if it has been used by the Minister. However, if the amount of the guarantee is greater than the cost of the restoration work carried out on the Minister's orders, the balance shall be remitted to the operator.

5.2 UNITED STATES OF AMERICA - ABANDONED MINES

In the US, other possible funding mechanisms (some of which are similar to those in Canada) to rehabilitate abandoned quarries are used. Different states within the U.S.A may follow different procedures for the funding of quarry rehabilitation.

The Pennsylvania Department of Environmental Protection (PDEP), Office of Mineral Resources Management, considered four reclamation and remining programs and authorized them by the ‘Surface Mine Conservation and Reclamation Act’ (SMCRA). They are as follows:

Government Financed Reclamation Contracts (at little to no cost to the public)

Remining Operator’s Assistance Program

Financial Guarantees to ensure reclamation

Reclamation Bond Credits Program

Beginning with the government financed reclamation contract, this program allowed the removal of incidental coal or coal refuse during the reclamation of an abandoned mine land site (PDEP 2000). For it is the case herein that it is necessary to remove coal in order to effectively reclaim an abandoned mine site. This would also greatly reduce the cost to the government by allowing coal or coal refuse to be removed to offset the cost of the reclamation project (PDEP 2000).6

6 With respect to the Lebanese stone and sand quarries that are abandoned, many of these quarries have steep and dangerous high-walls that would potentially need reshaping or proper landscaping. Many quarry operations in Lebanon did not follow any standards of quarrying in the past (e.g. did not follow steps quarrying) that would allow effective and simple reclamation, and this is an unfortunate legacy that cannot be ignored. Therefore, the possibility to allow further quarrying in abandoned sites to correct the landscapes’ deformity while also


23 LIFE04 TCY/RL/000040

The second financing approach is the Remining Operators Assistance Program (ROAP). The ROAP program “provides an incentive to an operator to remine and reclaim an abandoned mine land area that the operator would not otherwise reclaim. This incentive is in the form of Department financial assistance towards the cost of permitting the remining area (PDEP 2000).

Again this approach is related to the first in that it is a ‘remining’ operation where a permit (for example) is given to remine an abandoned area, however this time the mining operator does not find it profitable. In other words, the remining (or re-quarrying) would not generate enough revenue (from remining output) that would more than cover the cost of reclamation. Thereby, financial assistance would be required.

The third approach is the ‘Financial Guarantees’ program were the Department provides low-cost bonds to guarantee reclamation of the remining area. For each approved permit of an eligible operator for a remining area, the Department will reserve a portion of the financing guarantee as collateral for reclamation obligations on the remining area. In other words, remining is given a permit to go ahead taking in mind that the purpose for remining is rehabilitation, yet also a financial guarantee is put up front to ensure that this rehabilitation would take place.

‘Reclamation bond credits’ (or bond credits) is the final possible approach by the PDEP, undertaken to finance the rehabilitation of abandoned quarries. The bond credits provide an incentive to an operator to reclaim an abandoned mine (quarry) area that the industry would not ordinarily reclaim. An operator may earn a bond credit by reclaiming an abandoned mine area. The value of the bond credit is equal to the lesser of either the PDEP’s cost or the operators cost to reclaim the specified area (PDEP 2000). Each bond credit may be used twice by the operator. Bond rollovers are allowed and do not count as a second use. The bond credit may also be transferred to another operator (PDEP 2000).

5.3 UNITED KINGDOM - REHABILITATION OF ABANDONED AND FUTURE MINES

The English experience is particularly interesting. Companies involved in quarrying activities decided to create mutual restoration funds. If it appears to the Mineral Planning Authority (MAP) that a bond or guarantee is required but an operator can demonstrate that it is covered by an industry guarantee scheme, the Government considers that a bond should not be necessary.

First, the Sand and Gravel Association, known as SAGA, inaugurated a sand and gravel restoration guarantee fund in late 1974. The fund was underwritten by SAGA's members as a mutual fund, which would give minerals planning authorities the confidence that any site in the ownership of one of the members would be restored to an acceptable standard in the event of that member's insolvency.

generating revenue (the receipts of which would be partly if not wholly used for the reclamation action itself) should remain an option based on technical issues (as well as financial).


In 1997, SAGA and the then British Aggregate Construction Materials Industry (BACMI) - the other trade association at that time dealing generally with those members producing crushed rock, lime and asphalt, together with about 60% of concrete and sand and gravel production - merged to form the Quarry Products Association (QPA).

Meanwhile, the Chancellor announced that he was considering if there was justification for introducing specific environmental taxation of surface minerals extraction (including quarry products). In July 1999, the QPA submitted to the Deputy Prime Minister a detailed package of voluntary and regulatory initiatives to form a realistic alternative to the proposed aggregates tax. The QPA's 'New Deal' package included a proposal for the setting up, management and operation of a Quarrying Industry Sustainability Foundation.

While it was recognized at the start of QPA that the fund was only applicable to sand and gravel, it was agreed that crushed rock would need to be included as soon as possible, in order to be able to claim coverage for all the aggregate sites in members' ownership.

Key elements of the QPA's package included:

Creation of a National Foundation for Environmental Improvement and Sustainable Development. The Foundation, wholly funded by the industry and estimated to cost £25 million per annum, would have directed key initiatives including:

o Rehabilitation of orphan quarries

o National research programs on the sustainable development of quarrying

o Funding and development support of the Aggregate Advisory Service

o Extended Quarry Restoration Guarantee Scheme

o Biodiversity Plan

Introduction of a compulsory Transport Code of Practice developed through partnership with local authorities and other interested parties.

Industry wide implementation of ISO 14001 (Environmental Management Systems).

Environmental Assessments for all new mineral extractive developments, regardless of size.

Revision of the Planning Fee Structure, with higher fees to local authorities to enable a greater emphasis on consistent monitoring and enforcement of the terms of consents. It is proposed that these fees would be discounted for companies which have implemented ISO 14001 in order to encourage the extension of best practice in environmental management across the whole of the industry.

Today, the QPA is the major trade body representing UK companies involved in aggregates, silica sand, lime, asphalt, ready-mixed concrete and mortar production. In terms of volume, these companies are responsible for about 90% of UK output. The QPA fund covers some 800 sites. QPA has some money in the bank, attracting as high an interest rate as can be achieved, which is available at very short notice for any claim. Members have also committed

24 LIFE04 TCY/RL/000040


themselves to support claims up to a total of £1 million and any one claim of £500,000. Their obligations are pro-rata on their production volumes.

In parallel, in late 1999, the British Aggregates Association (BAA) was founded representing mostly smaller operators, the 10 % left. The new association had been initiating its own scheme, based on similar lines to the old SAGA scheme.

The SAGA and QPA funds have never, in their combined life of some 32 years, been called upon. Progressive restoration is now very much good practice, either because it is demanded by the MAPs as part of the planning consent, or because the operator sees it as more efficient, effective and less risky than leaving it until the very end of the quarry's operational life. This, in turn reduces the likelihood of a member's financial difficulties causing catastrophic restoration default.

However, some research showed that the low cost of the primary aggregates in the UK had led the industry to decrease the efficiency with which aggregates were used. A research suggested that materials wastage on building sites in the UK was equivalent to building 13,000 extra homes every year.

In 2002, the British Chancellor of the Exchequer finally introduced a new tax, the Aggregates Levy in order principally to secure the system, and to provide an incentive to increase the recycling of aggregate materials, the re-use of components and materials and the utilization of secondary aggregates where appropriate. The tax aims over time to reduce land take by quarrying and the environmental impacts associated with it. It is placed at a rate of 1.6 U.K pounds per ton of sand, gravel or rock.

The new tax supplies an Aggregates Levy Sustainability Fund that can operate an integrated package of policy measures aimed at developing a sustainable aggregate supply industry including planning measures, regulations, product standards, research programs, promoting the uptake of environmental management systems and targeted information programs. However, the QPA's fund has become a valuable complement to the tax, especially concerning the issue of orphaned quarries.

The UK Department for the Environment, Food and Rural Affairs (DEFRA) proposed that the ALSF should have three objectives: (1) to minimise the demand for primary aggregates; (2) to promote environmentally friendly extraction and transport; and (3) to reduce the local effects of aggregate extraction” (DEFRA 2003). Environmental and economic research was undertaken to provide an estimate of the average value of environmental externalities of quarry production.

5.4 FRANCE - REHABILITATION OF ABANDONED AND FUTURE MINES

In France, any person who operates an installation without the necessary authorization is liable to a term of imprisonment of two months to one year and a fine of 300 € to 75,000 €, or to one of these two penalties.

25 LIFE04 TCY/RL/000040


In case of repetition of the offence, the operator would be liable to a term of imprisonment of two months to two years and a fine of 3.000 € to 150.000 €, or to one of these two penalties.

In case of conviction, the court can prohibit use of the installation. In the period during which use of the installation is prohibited, the operator is under obligation to pay his staff all the salaries, benefits and remunerations of whatever nature to which they were previously entitled. The prohibition ceases to have effect if an authorization is subsequently issued under the conditions laid down in the Law.

Moreover in France, the proof of the applicant’s technical and financial capacities to rehabilitate the site after closure consists in a provision of financial guarantees. They are provided by a written commitment from a credit institution, or an insurance company. Its amount depends on the category of installation and its dimension.

This demand is required for all Classified Installations but it binds the grant of authorization only for a few categories of installations, two of whom are waste storage installations and quarries. And it is required after the original authorization as well as after authorization for a change of operator. Activity at such facilities cannot start unless financial guarantees have been provided.

The authorizing Order sets the amount of the financial guarantees required and the conditions in which this amount has to be updated. The Prefect can implement the financial guarantees either if the operator fails to carry out the rehabilitation of the site, or if the operator ceases to exist legally.

5.5 OTHER NATIONS: JAPAN, MALTA AND TUNISIA

In Tunisia, the permit application fee amounts to 50 Dinars (37 $ US) for a craft quarry and goes up to 100 Dinars (75 $ US) for an industrial quarry. Any operator quarrying without a permit is liable to a term of imprisonment of two months to five years and a fine of 50 Dinars (36 $ US) to 10,000 Dinars (7,500 $ US), or to one of these two penalties. However, there is no guarantee mechanism in Tunisia.

In Malta, it is now standard practice for new applications for minerals and mineral-related development to require bonds to be submitted to ensure that restoration and certain works are carried out. For the removal of plant and machinery, the bond may begin as a low figure and increase for every year of the quarry’s life. If the plant and machinery were not removed 5 years after the exhaustion of the quarry, the bond would be called upon.

In Japan, a national survey found 5,500 abandoned mines. Where the original owner exists, the Japanese authority made them liable to pollution prevention and rehabilitation, and where the original owners cannot be found, or in the case of bankruptcy, the local and national governments tackle the issue jointly (UNEP 2000).

26 LIFE04 TCY/RL/000040


5.6 FINANCIAL GUARANTEES AND COUNTRIES IN TRANSITION

A government is ultimately responsible for dealing with the social and environmental costs created by the abandonment of a mine or quarry site. As a result, it is becoming common practice for some form of financial surety or rehabilitation bond to be established prior to project approval. This provision is designed to guarantee performance and to cover both the technical and financial failure of a quarry operator to meet the full obligations at the time of closure or in the event of an unplanned closure (International institute for Environment and Development 2002). Governments establish financial sureties in order to protect the environment and avoid the costs of cleaning up orphaned sites.

Smaller or thinly capitalized companies often have difficulty with surety requirements, necessitating the government to have a good understanding of the issues involved in the design and application of a financial surety policy (International Institute for Environment and Development 2002).

The amount of financial surety is established during project negotiations based on information in the environmental impact statement and is an estimate of the closure and rehabilitation costs. If the mine operator defaults, the money remains in the hands of the regulatory authority. Thus, the “funds from the guarantee should be separate and not reachable by creditors in the case of bankruptcy or business failure” (International Institute for Environment and Development 2002). Once all stages of rehabilitation have been completed, the remaining funds may be returned to the quarry operator.

Whichever method is used to establish a financial surety, it is essential that it is regularly assessed, as part of the environmental management of the project, and increased or decreased as necessary (International Institute for Environment and Development 2002).

‘Good mining industry practices’ as found in Australia, Canada and the USA for example, are normally guided by industry stewardship as a result of good governance; “following company policies and reflecting shareholder, employee, and NGO pressure; relatively recent regulatory frameworks; and sophisticated financial and insurance markets to integrate and address mine closure activities and their financing” (Nazari - UNEP 2000). Mining companies in these nations are required to secure the necessary funding by providing guarantees for mine closure finds prior to commencing construction and operation. These guarantees, as aforementioned, may include “bonding, corporate surety and guarantees, letters of credit, deposits of cash or gold, insurance and other methods” (Nazari - UNEP 2000).

These good mining practices unfortunately are lacking in many economies in transition, where the development of corporate governance, regulatory framework or financial and insurance markets to address the finding of mine closure is yet to take place. The issue is further complicated due to several issues like the involvement of ‘junior investors’ that have limited resources to back-up the mining company’s obligations (and often exhibit little concern for reputational risks), lack of enforcement of local environmental regulations, lack of awareness and influence on the part of the potentially affected public, and lack of transparency as many contractual agreements addressing mine closure activities and related costs are generally treated as confidential (Nazari - UNEP 2000).

27 LIFE04 TCY/RL/000040


28 LIFE04 TCY/RL/000040

6 THE SITUATION OF LEBANON

6.1 EXISTING FINANCIAL SYSTEM

Lebanon is a small, service-based, country with a per capita income of USD 4000 (2004 estimate).

After the termination of the fifteen year civil war in 1990, all economic programmes have focused on the dual task of achieving stability and supporting the economic revival via reconstruction. While economic growth was strong from 1991-1995, the increase in GDP slowed markedly since the mid 1990’s, increasing the debt burden and being slowed by it. Inflation remained restrained in the past years (2004: around 3%) thanks to the exchange rate pegged against the US$ among other things.

The International Community and several EU Member States gave Lebanon some relief from its very high debt (about 180% of GDP in 2002 and about 200% of GDP in 2005) and economic problems during the Paris II donor’s conference in November 2002. Eighteen governments attended the Conference, as well as the heads of the EIB and World Bank, and IMF. Lebanon was urged to go further with its economic reforms, and to engage with the IMF, which is also a condition for EU macro-financial assistance. At this Conference, Lebanon announced a set of measures to reduce the debt burden and to bring about macro-economic restructuring, but reform implementation has been lagging.

The main challenge of the current government is to bring about promised reform. In a Ministerial declaration of July 2005 the government unveiled its priorities: the economic policy would target “the liberalisation of the economy and stimulation of growth”, “the implementation of Paris II commitments to contain the public debt” and “the fight against corruption and ineffectiveness in the public management”7

6.1.1 Lebanese Macroeconomic Situation

Searching for financing mechanisms for any policy, plan or project is subject to the macro-economic situation in the country, and in specific the revenues and expenditures of the government. Annex 3 outlines the Lebanese government’s revenues and expenses in the Budget Law of 2003, 2004. In summary, the Lebanese government’s revenues for the year 2003 and 2004 amounted to about USD 4.3 billion and USD 4.26 billion respectively, three-quarters of which were tax revenues (VAT, excises, income tax, property tax…). Expenditures on the other hand amounted to about 5.7 and 6.2 billion USD respectively for 2003 and 2004, half of which went into servicing the ever-increasing national debt (national debt amounts to about 200% of GDP – 2005 estimate), and over 85% of the rest go into public wages, transfers and subsidies. In 2005, revenues amounted to about 4.7 USD billion (2005 Budget Law) while expenditures amounted to 6.6 USD billion, entailing an almost 2 billion USD deficit for 2005.

7 (http://europa.eu.int/comm/external_relations/lebanon/intro/index.htm).

http://europa.eu.int/comm/external_relations/lebanon/intro/index.htm


29 LIFE04 TCY/RL/000040

6.1.2 Municipal Finances

Considerable variation can be found among Lebanon’s 905 municipalities in terms of membership in unions or federations of municipalities, population numbers as well as budget size. Moreover, some villages in the rural areas of the country have no registered public municipalities.

The main law that addresses municipalities could be considered the Law of Municipalities no. 118/77 that “was passed to increase municipal financial autonomy. It stipulates that any work having a public character or utility within the area of the municipality falls under the jurisdiction of the municipal council.” Initially the National Budget Law decides the revenues and expenditures of municipalities. The executive president (after consultation with municipal members) of the municipality should submit, before the end of July of every year, the upcoming years’ financial plan - along with a review of the past years’ financial statement and accounts. The latter should show the revenues collected and expenditures spent and the savings, if any.

The law specifies that municipalities can sustain their budgets from seven main sources8:

• Direct charges collected by municipalities;

• Funds collected by the state, private organizations or public institutions and re-distributed to each municipality;

• Funds collected by the state for all municipalities (IMF);

• Grants and loans;

• Revenues from municipal property rentals;

• Fines or penalties; and

• Donations

In specifics, the municipality gets its revenues from an annual fee on value of rent (5% of rent value on residential apartments and 7% on other uses), a fee on building permits, sewerage and pavement charges, charges on permits for (and annual charges on) assembly places and gambling points (e.g. hotels, furnished apartments, motels, pubs, nightclubs, restaurants, cinemas…), charges on advertisements (e.g. billboards), charges on oil and gasoline stations, on certified institutions, on public auctions, on touristic, archaeological or historic sites and charges on certificates, announcements and technical studies.

On the other hand, the expenditures of municipalities are divided into six main parts:

• Management expenditures like wages or salaries, rents, telephone bills…

• Expenditures on equipment, maintenance and public cleanliness (e.g. waste containers), renovation and repair of municipal buildings and equipments, transfer of municipal solid wastes, pesticide usage, street lighting maintenance, road maintenance, electricity maintenance, and water and sewage network maintenance;

8 Article 86 of Law of Municipalities no. 118/77, dated 30/6/1977.


30 LIFE04 TCY/RL/000040

• Expenditures on development projects such as various buildings, public street lighting, water and sewage network creation, street pavements, roads, public parks and entertainment facilities, payments of land and building repossession;

• Expenditures on services and grants such as health services were needed, encouragement of social, educational, sportive and cultural events, scholarships, and the encouragement of socially driven NGOs;

• Expenditures on festivities and receptions, on judicial proceedings and lawyers, grants to municipal unions, debt repayment;

• Expenditures on reserves: percentage of collected revenues should always remain as reserves

Expenditures pertained to public works and services are undertaken with an agreement between the municipality and others or by the municipality itself. However, no public work agreements could be undertaken before completing all the judiciary proceedings to ensure that the land upon which the works would be undertaken are under the municipalities jurisdiction. The main agreement types may occur in the following ways;

• General draw (usually for best price);

• Restricted draw (e.g. those only technically and financially capable for project at hand);

• Swift opening and prioritizing of submitted proposal (only when project cost is within a certain amount);

• Consent Agreements (e.g. given for reasons of secrecy or public safety, or when project required certain qualification that only one entity has).

Municipal expenditures are either governed by the Law of Public Accounting or Decree 5595/829. In fact, Decree 2838/5910 stipulates the conformance of fifty of Lebanon’s largest municipalities to the Law of Public Accounting and its stringent audit requirements. On the other hand, Decree 5595/82 governs the expenditures of the remaining municipalities and itemizes the above mentioned as valid municipal expenditures to be included in the municipal budget.

However, despite the expenditures assigned in the law, “in effect, the services provided by Lebanese municipalities are confined to marginal activities such as street cleaning, road asphalting, street lighting, setting up road signs, rehabilitating and extending the sewage and water drainage systems, etc,… There is, thus, a wide gap between what the municipalities are allowed to do by law, and what they are actually able to do, given their resources, ” (UNDP, 2003).

Furthermore, approximately 50% of Lebanon’s municipalities have annual revenues and expenditures that range from US$6,000 to US$60,000 (Shehadi K., 1997). A brief survey of

9 Decree 5595/82 on the Mechanisms of Budgeting for Municipalities and Unions of Municipalities Not Subject to the Law of Public Accounting, dated (22/09/1982) – Article 11 10 Decree 2838/59 dated 14/12/1959 on the Adherence of Select Municipalities to the Provisions of the Law of Public Accounting.


31 LIFE04 TCY/RL/000040

municipal finances in the Caza of Jbeil, based on 2001 – 2003, indicates that municipalities in that area have an average collection rate of 44.47%, average revenues amounting to $US 372,420, and average expenditures amounting to $US 311,000.

Financing quarry rehabilitation from municipal sources is seemingly an improbable option, as most municipalities have very limited resources and yet many pending projects to undergo. However, this should not be viewed entirely as an unfeasible alternative as the municipality has a right to impose an annual fee on quarrying activity in its jurisdiction (see section 6.2.2).

6.2 EXISTING FINANCIAL MECHANISMS OF THE QUARRY SECTOR IN LEBANON

Decree Number 8803/2002 (amended by Decree 16456/200611) is the latest attempt to organize the quarrying sector and impose a financial surety12. Decree 8803/2002 begins by defining the places (landscapes) that are valid for extracting sands, gravel, rocks, minerals… which are located on the surface of the land or within it (Decree 8803, Article 1). However, licenses required by investors in quarrying would only be given if the areas pursued are within areas specified under Map 1 (to license quarrying outside these zones specified in Map 1 would need a resolution by the Council of Ministers). Forbidden quarrying areas include those like protected natural areas, scenic areas and river basins.

Map 1 (updated in Decree 16456) could be considered the national study or Blueprint for organized quarrying in Lebanon. It was produced after consultation with all the stakeholders and interested parties concerned with quarrying in Lebanon. The process included the mapping out of feasible and environmentally sound places for quarrying, selected by the use of overlay in Geographic Information Systems (GIS). In GIS, a land cover and land-use map, and maps depicting boundaries of natural protected areas and urbanized places (20% buffer zone), including a geological map were overlain to come out with suitable quarrying sites.

In specific, revision of existing studies concerning quarrying in Lebanon was undergone, followed by the use of GIS – ArcMap 8.3 and MAPinfo Professional 7.5 to show optimal areas for quarrying that are a distance away from urbanized areas, water sources, areas of forestry and protected natural areas and are appropriate hydro-geologically. Those areas selected by GIS were visited by specialists to analyse transport accessibility, distance of these areas from possible housing or other establishment (that were built after the maps used in GIS), and to ensure the adequacy of the hydro-geological characteristics of the area for quarrying suitability. Furthermore, the vegetation cover characteristics of selected areas were confirmed.

Furthermore, quarries undergone for particular projects are accepted only for a limited time frame and within project geographical limits, under strict environmental considerations and with the approval of the Ministry of Environment.

Decree 8803 creates the “National Council for Quarries (NCQ)”, under the dominion of the Ministry of Environment and comprising of representatives of the following Ministries;

11 Decree 16456 /2006, dated 9/3/2006, Issue 13 of the Official Gazette 12 Financial sureties are up-front guarantees or payments equivalent in this case to the potential rehabilitation costs involved.


Public Works and Transportation (including the Urban Planning Department), Interior and Municipalities, Water and Power, Public Health, National Defense, Finance, Agriculture, and Culture.

The NCQ is responsible to set forth the general terms and conditions for constructing and investing (in) quarries subject to technical developments and concepts in environmental sustainability. It has the ability to refuse or approve license applications or impose specific terms and conditions on the license. Furthermore, it is entitled to suspend quarries found in breach of the terms and conditions of the license, including the responsibility for verifying that the operations of the rehabilitation is according to terms and conditions of the license.

On the other hand, the investor needing a license must produce an application containing a map showing the location and ownership of the land to be quarried, manifest the nature and amount of the materials to be excavated, and complete information as to the operator of the explosives, their license, origin of explosives, quantity, methods and ways for use (Decree 16456). Herein, the quarry operator must appoint a geologist, civil engineer, geo-mechanic or hydrologist who in turn would take complete liability for monitoring the work of the quarry to ensure that it is abiding by the technical and environmental criteria and rules set upon permitting. Every 3 months the hired specialist is to give the Ministry of Environment a technical report as to the operations and whether or not its following what was signed upon permitting, including clear photographic pictures of the site. Furthermore, the quantities of extracted materials must be indicated within the quarterly report, and if the indicated amount is found incorrect, it would permit the responsible authorities to immediately halt quarry operation. These quarterly reports are also passed to the municipalities concerned in the region to comment on the report.

Thereafter, the application given in by the investor to the Ministry of Environment would be forwarded by the latter also to the municipality whereon the quarrying would take place. The municipality must inform all residents that reside within 3 kilometres from the intended quarry (via notes affixed to doors) and collect thereafter any objections these residents may have. The municipality thereby would make a ruling giving the go ahead to the quarry, or a refusal that would be legally binding (Decree 8803, Article 8).

Additionally, a log must be kept at each quarry whereby all activities of the quarry, the investment process, production quantities, public safety and environmental preservation procedures are recorded. Truck drivers must also have papers including the name of the investor, the origin of aggregates and its weight (Decree 8803, Article 11 & updated in Decree 16456).

Furthermore, an investment license for a quarry operator shall not be issued to an applicant who was prosecuted before the courts of law for noncompliance with the present Decree (until found not guilty). The applicant could only be given a new license after five years have elapsed or after the lapse of term of the sentence if it exceeds two years if found guilty. Additionally, no license would be given to a quarry operator who has not rehabilitated his/her past quarrying operations according to the required standards (Decree 16456).

32 LIFE04 TCY/RL/000040


33 LIFE04 TCY/RL/000040

With respect to rehabilitation, Decree 8803 stipulates that the investor must reform and rearrange the places affected by quarrying in accordance to the mitigation measures given in the EIA and within a two year period. The reformation process includes the “levelling of sand, cleaning the land, and any other useful procedure, including the correction of the quarry and forestation… or other reforming activities agreed upon in the license” (Decree 8803, Article 14).

Decree 8803 stresses that no license would be given without the cost of rehabilitation (that is required to be estimated in the EIA undergone by a hired specialist and with his/her joint liability) to be placed as collateral. If the investor of the quarry does not execute the duties and conditions stipulated in the license the NCQ would take that responsibility using the collateral placed, or if insufficient, request that the investor pay the difference. (Decree 8803, Article 22).

Decree 16456 adds a paragraph to Article 23 of Decree 8803, involving rehabilitation of quarries or specifically a ‘land rehabilitation permit’. In particular it states that any operation aimed at tidying the land which attains aggregate material (rocks or soils) is subject to levies upon the issuance of the permit for the municipality of concern or into the national government’s revenue. Additionally, a bank guarantee amounting to a sum (to be confirmed by the Ministry of Environment subject to the type, size and quantity of extracted materials) that ensures the rehabilitation would take place is needed.

Finally Decree 8803 sets the expected judicial rulings in terms of financial penalties or imprisonment for the various violations in which an investor may undergo with respect to the terms and conditions of the license agreement.

6.2.1 Current Charges and Financial Guarantees

The Lebanese government already imposes significant charges on quarry operators, albeit it is a well known fact that much of the listed charges by law are not paid in actuality. Furthermore, as most of the quarries that have operated in the past (and currently operating under administrative authorization) have done so without acquiring the appropriate permit, no financial guarantees were placed up front.

Nevertheless, the Ministry of Finance (under its 2003 Budget Law) is the first that charges quarry operators through or upon issuance of a required permit, costing a lump sum of LL 2.5 million13, and an additional fee of 1,000 LBP for every m3 excavated (US 0.66 cents/ m3) paid on a monthly basis.

Municipalities also have a right to charge an annual fee on licensed quarries operating within their jurisdiction amounting to (upon license and in Lebanese Pounds);

(1) Stone quarry: 15,000 LBP per m-squared area

(2) Mosaic Quarry: 20,000 LBP per m-squared area

(3) Decorative stone/construction block quarry: 20,000 LBP per m-squared area

13 1500 Lebanese Lira (LL) = 1 USD


(4) Cement Quarry: 30,000 LBP per m-squared area

(5) Sand Quarry: 20,000 LBP per m-squared area

With respect to financial guarantees on the other hand, Decree 8803 did not specify a method to calculate the financial guarantees, nor how that guarantee would be used. It is left for the National Council for Quarries to determine amount, and the most recent estimates include;

(1) Stone quarry: 4,500 LBP per m3

(2) Mosaic Quarry: 6,000 LBP per m3

(3) Decorative stone/construction block quarry: LBP 9,000 per m3

(4) Cement Quarry: 9,000 LBP per m3

(5) Sand Quarry: 6,000 LBP per m3

With these financial guarantee levels, a small quarry (sized 15,000 m3) would require a financial guarantee of anywhere between 45,000 USD – 90,000 USD (depending on type of quarry), a medium sized quarry (sized 25,000 m3) would require an upfront surety of 75,000 – 150,000 USD and a large quarry (sized 40,000 m3) would require a surety of 120,000 – 240,000 USD depending on quarry type.

34 LIFE04 TCY/RL/000040


35 LIFE04 TCY/RL/000040

7 PROPOSED FINANCING MECHANISMS FOR QUARRY REHABILITATION IN LEBANON

7.1 ABANDONED QUARRIES

7.1.1 Quarries abandoned prior to Decree 8803/2002

As mentioned in Section 5, by definition an abandoned quarry is a site “for which responsible parties cannot be found because they have gone bankrupt, left the jurisdiction, or are unwilling to accept responsibility and, therefore, the government may have to assume the cleanup costs” (Castrilli 2003). The review of international financing mechanisms for funding rehabilitation abandoned quarries (Section 4) revealed several methodologies, both classical and innovative.

The first and most apparent methodology to finance abandoned quarry rehabilitation in Lebanon is through ‘government funded programs from general revenues’ or a cost-sharing between national and municipal revenues. However, immediately this conventional methodology would clash with the reality that the Lebanese governments’ macroeconomic situation, as outlined in Section 6.1, is in dire condition as most of the expenditures of the Lebanese government are drawn into servicing debt and into salaries, subsidies and transfers (which in the short-medium term is inflexible). This reality trickles down to the municipal level, as many if not most Lebanese municipalities complain of limited funds and financial problems. To add to this constraint is the fact that, as mentioned in Section 4.1, air and water pollution are considered the main environmental priorities to remedy, as revealed by the World Bank report in the cost of environmental degradation in Lebanon.

Nevertheless, the option of funding rehabilitation programs through national revenues or a cost-sharing arrangement between the national and the regional or local levels must remain an option, specifically in emergencies where abandoned quarries are identified to pose risk to human life or irreversible ecological damage. This must be kept in mind as the Dar Al-Handasah report (1996) indicated that about 71 percent of quarries in Lebanon (since no rehabilitation attempts occurs, this percentage could not of changed much) did not respect the most basic standards and performance criteria (e.g., very steep quarry slopes often exceeding 70º). An estimated 70 percent of the quarries were structurally unstable and 60 percent were downright dangerous (CDR/Dar Al-Handasah, 1996).

The second potential approach to fund rehabilitation of abandoned quarries is through levies placed on industrial production, or in specific all industries that deal directly with quarry produce (e.g. rock and sand quarry operators). Herein, the Lebanese government could impose a fee or tax (per ton tax) deposited into a dedicated fund earmarked solely for the rehabilitation of abandoned mines (prior to Decree 8803)14. In essence, this methodology would fit with most of the principles and criteria outlined in Section 5 (polluter/beneficiary pays principles, sustainable development goals, openness, discouragement of future site abandonment and public perception). It would have a negative economic impact however on

14 This approach is similar to the aggregates levy in the UK which supplies the ‘Aggregates Levy Sustainability Fund’. The proceeds of the levy herein would not only go into rehabilitating abandoned mines yet would be used as a tool to encourage the reduction of aggregates usage and their recycling.


36 LIFE04 TCY/RL/000040

the Lebanese quarry industry and may be unfair to a few quarry operators (those operators who did not take part in the past legacy of the Lebanese quarrying industry which left over a thousand abandoned and un-rehabilitated quarries). However, these negative economic impacts may be more than alleviated by bettering the image of the Lebanese quarrying industry by having them take (full or partial) responsibility for past actions. As indicated in Section 3.3, there is about 28.16 million m3 of aggregates taken from Lebanon that created abandoned areas in need, it was estimated, of about USD 20 million to rectify. With a conversion rate of 1.78 tons per cubic meter15, that area amounted to about 46.5 million tons of exploited quarry material. Each ton therefore of exploited quarry material, in retrospect and on average, contributed to the present cost of rehabilitation of about 0.43 USD (which all together amount to 20 million USD). A tax levy therefore to correct this past legacy could be an average of 0.45 USD/ton levy on aggregate materials imposed on current or future operators of quarries. This is not related to the cost of rehabilitating the current or future quarry under operation, which should be covered by a financial surety.16 As indicated in Section 5.2.2 however, the Ministry of Finance already places a fee of 0.66 USD/m3 or 0.35 USD/ton of excavated material. A recommendation therefore would be to increase this levy to about 0.5 USD/ton, or about 0.9 USD per m3 (or 1350 Lebanese Lira) to remedy past mine legacies (until they are rehabilitated). The major difference herein is that this levy should not go to replenish the centre governmental revenues as it did, yet be earmarked to the rehabilitation of abandoned quarries.

The third potential approach to rehabilitate abandoned quarries in Lebanon is through a government-industry partnership. Herein, the government of Lebanon could commit from its general (or municipal) revenues a part of the rehabilitation costs (calculated to be around USD 20 million) while the quarry industry commits to fund the remaining part. The government-industry approach however would work better as a site-specific endeavor (thereby a short-term and partial solution), unless it is linked to a sustainable and institutional arrangement or program over time.

What is of importance to note here, is that many abandoned sites would have to be reopened for quarrying for rehabilitation (landscaping) purposes, and thereby potential to sell the proceeds from such an operation could cover part, if not whole, of the rehabilitation procedure. In this case, the quarrying industry would initiate rehabilitation completely if the re-sale of the aggregates would more than cover costs of operation (rehabilitation), while an agreement for partial governmental support could be asked for if the resale of aggregates would fall short of the costs of rehabilitating the site. To further insure that rehabilitation would take place on part of the quarry operator, a financial guarantee could be asked to be placed upfront also to ensure rehabilitation is undergone according to the agreement (and the purpose that quarry operations was re-allowed on the site in the first place).17

15 Mines Branch, Director of Mines, Manitoba, Canada. 16 This levy could be adjusted (lowered) after a complete survey is undergone to assess how many of the 1200 quarries actually need rehabilitation. 17 This approach is also similar to the Pennsylvania Department of Environmental Protection (PDEP), Office of Mineral Resources Management approach of ‘Government Financed Reclamation Contracts (at little to no cost to the public) and the ‘Remining Operator’s Assistance Program’ indicated in Section 5.2.


The fourth approach could be to create a ‘non-profit organization trust fund’ that receives contributions from private individuals and companies (or from the central government or a donor agency) for its programs. It is much like a government-industry partnership yet arranged by a non-governmental entity. Companies, governmental entities, individuals (among others) contribute (voluntarily) money with or without having one particular site in mind when they make their contribution. However the applicability of this approach in Lebanon would depend on the ingenuity of the non-governmental organization leading the rehabilitation programs, and its ability or capability of reaching out to attain the necessary funds for rehabilitation.

Finally, a combination of the aforementioned approaches could be undertaken in Lebanon.

7.2 FUTURE QUARRIES

For the future operation of quarries, the Lebanese government already set the ground through Decree 8803 (updated partially by Decree 16456). Within Decree 8803, a financial guarantee is required to any would-be quarry operator, the amount of which is set by the NCQ (including the Ministry of Environment). As discussed in Section 3.3, a financial surety amounting to about 12,000 USD per hectare (or fraction thereof) of licensed quarry area should be implemented, as a rough estimate, to be either increased or decreased pending the Environmental Impact Statement of the quarry type and rehabilitation standards required.

This guarantee may come in the form of a cash deposit or may take the form of a letter of credit (issued by a bank or insurance company that essentially acts as an irrevocable guarantee of payment to a beneficiary), placed in a ‘trust fund’ that could be created by the National Council of Quarries, or cash bonds that would be returned once the site has been satisfactorily rehabilitated. If rehabilitation is not completed, part or all of the bond amount (or guarantee) may be used to complete the work. The bond amount accordingly reflects the expected cost of such work and should be reviewed periodically to ensure this. See annex 4 for an example of what a bond is and how to calculate the amount required with respect to quarry rehabilitation.

Furthermore, Decree 16456 that updates Decree 8803 stipulates that no permit for quarrying would be given to a quarry operator if he/she have failed to rehabilitate to agreed upon standards past quarrying (presumably post Decree 8803).

37 LIFE04 TCY/RL/000040


8 CONCLUSIONS AND RECOMMENDATIONS In conclusion, remedying the past and evident legacy of Lebanese abandoned quarries and ensuring its prevention in the future is not a complex task to undertake and yet is of substantial importance. Through the selection and prioritization of the abandoned quarries which need rehabilitation, those quarries that pose risk on human life due to their unstable nature, and than followed by those that guarantee the most socioeconomic and environmental returns if/when rehabilitated (e.g. increased property prices and enhanced landscape features) could be rehabilitated first. This would be necessary to begin the momentum (preferably under a comprehensive and time-framed program) to rehabilitate most, if not all, of the abandoned quarries.

With respect to alleviating financial barriers towards such rehabilitation, there are several methodologies that were proposed for the Lebanese context and adopted from international experiences. Some of these proposed methodologies (section 4) are already within Decree 8803 (updated by Decree 16456), while others could potentially augment the Decree in order to ensure a more robust and efficient financial mechanism to ensure that the problem of abandoned quarries would be solved and would be prevented in the future.

The following Table reviews these aforementioned mechanisms for the funding of abandoned quarries and comments briefly on each one’s applicability in Lebanon.

Table _: Financing Mechanisms that may be utilized in Lebanon

Financing Mechanism Applicability in Lebanon (1-5, where 1 is not applicable at all and 5 is very applicable)

Comments

Government funded from general revenues

2 The Lebanese government’s macroeconomic situation, as outlined in Section 5, is under intense stress and funding quarry rehabilitation from general revenues is highly unlikely given that stress and other priorities needing funding. However, in case of emergency safety risks from abandoned quarries, this option should not be totally put aside in Lebanon.

Government funded from municipal revenues

3 Municipal revenues are also very much limited and under intense pressure from competing needs, however since the municipalities do charge an annual fee on quarries operations (Section 5.2.2), which could be considered a nuisance & in my back yard charge, refunding the receipts in quarry rehabilitation is a viable & logical option.

Levy on current 4 A highly recommended option which is being partially applied by the Ministry of Finance. However it is recommended that it would

38 LIFE04 TCY/RL/000040


quarrying activity be increased to 0.9USD/m3 from its current level of 0.66USD/ m3 and that the receipts from this tax to be earmarked to quarry rehabilitation.

Industry-Government Partnership

4 The estimated amount of money needed (and yet needs to be certified by a demonstrative or pilot project) to rehabilitate abandoned quarries in Lebanon was about 20 USD million. As many of these quarries would require however re-mining for landscape reasons and rehabilitation ends, the resale of aggregate material excavated could contribute to the cost of rehabilitation completely, under strict monitoring from the government, and if the receipt are short of costs, the rest would be remunerated by the government. This is mostly done on a case by case basis.

Industry Voluntarily 3 In England, the quarrying industry got together (see section 4) and formed the Quarry Products Association to better the image of the industry and deal with orphaned quarries themselves. It was estimated that 20 USD million is needed to remedy orphaned quarries in Lebanon (to be necessarily certified by a pilot project undergoing rehabilitation), quarry owners in Lebanon should be given the chance to see whether or not they would remedy their past legacies by themselves before being subject to levies (for example).

As Table _ above illustrates, industry-government partnership is vital in the context of rehabilitating quarries in Lebanon, as many quarries would need a ‘rehabilitation permit’ that would require landscaping to occur and offer the removed aggregates (for rehabilitating purposes) for sale. Monitoring however in this case is crucial, to ensure that the agreed upon rehabilitation would take place, and that if a cost-sharing arrangement is in place, that the calculated amount of aggregates to be removed is accurate and is serving the purpose of rehabilitation.

On the other hand, a levy of 0.5 USD/ton of aggregate material, on average, was recommended furthermore to help replenish a rehabilitation fund (to be set up by the National Council for Quarries) until all abandoned quarries (or those selected for rehabilitation) are rehabilitated. This rate could be kept thereafter (adjusted to include levels of current demand and supply) in order to create incentive for the conservation in the usage of aggregates and to encouragement of recycling and reuse. The levy could be an increase of the levy already in place by the Ministry of Finance (Section 5.2.2) and may supplement the annual fees paid by quarry operators to the municipality they are located in (see section 5.2.2), however a key point to make is that the government must ensure that most, if not all, of the revenues generated from this charge is earmarked to quarry rehabilitation initiatives.

39 LIFE04 TCY/RL/000040


40 LIFE04 TCY/RL/000040

For current and future quarries, it was recommended that a financial surety (in a form of a bond18 or a cash deposit) of about 12,000 USD per hectare be placed upfront before any quarrying is allowed the go ahead. This surety should be refunded in two stages, as the international review of mechanisms revealed, the first stage upon rehabilitation (75% of total amount) and the second (remaining 25%) two years after rehabilitation attempt is concluded to ensure that that attempt was successful and sustainable.

In essence, it is important to remember always that a financial surety should reflect the real and complete costs of rehabilitation required after the termination of all quarrying activity on a site. From section 5.2.2 however, it is realized that the quarrying industry is subject to significant taxation and a large financial surety requirement. For a medium stone quarry for example, sized about 25,000 m3, a financial surety of about 75,000 USD is required (3 USD per m3) along an initial payment for a permit of about 1,666 USD. On the other hand, the stone quarry operator must pay an annual charge amounting to 10 USD per square-meter (assuming average size of medium quarry is 1 hectare), or around 100,000 USD per annum to the municipality, in addition to 0.67 US/ m3 to the Ministry of Finance, that would amount to 16,750 USD after the completion of works. These figures, specifically the financial surety estimates, diverge (considerably higher) from the calculated rehabilitation costs (as adopted from outside studies), and therefore are potentially a slight obstacle to investment in the quarrying sector in Lebanon. It is essential therefore to attain a better idea or a more accurate one of the costs involved in quarry rehabilitation, and the only methodology to this end is for the Ministry of Environment or the NCQ to take on pilot projects (one for each of the various types of quarries) in order to set the guidelines and benchmarks required for quarry rehabilitation (e.g. landscaping, hydro-seeding, and vegetation among other things) in accordance with each type, and more so in order to get an accurate number as to the costs of rehabilitation involved. The latter is vital for any future setting of the financial sureties or bonding that the Ministry of Environment, or other governmental institutions (e.g. Central Bank), insuring companies or financial banks must place or be asked to place respectively. Undergoing such a task is vital to ensure that from the start, the amount requested to be placed upfront (as a general figure and pending further concurring on a case by case basis with an Environmental Impact Assessment) to ensure rehabilitation is the correct amount, that would neither be too large (which would create a disincentive for investment) nor too little (which would fail therefore to successfully rehabilitate an abandoned site). Furthermore, it is common knowledge that many, if not most, of the quarry operators have eluded the payment of a financial surety and eluded taxation of any sort. Thereby, placing an accurate financial surety to reflect the true rehabilitation cost would most likely lower the financial surety required (than that currently in place), increase therefore compliance to this surety (assuming implementation of the law remains as it is) and ensure sustainability of the sector. From this point of view, another important deduction is made being that better implementation of the law, specifically forcing quarry operators to abide by the requirements of a financial surety and strict monitoring or auditing of excavated quantities for taxing purposes is required.

Furthermore, it is recommended that the NCQ set up a quarry rehabilitation office that would monitor quarry rehabilitation attempts, and to ensure that these attempts have been successful 18 See Annex 4.


or sustainable with the passing of time, and that the levies placed on quarry operations be done, as it is internationally, on a per ton basis to create harmonization of units.

41 LIFE04 TCY/RL/000040


42 LIFE04 TCY/RL/000040

9 BIBLIOGRAPHY • Castrilli, Joseph F. & C.N Watson and Associates Ltd. (2003), Potential Funding

Approaches For Orphaned/Abandoned Mines in Canada, Final Report, October 2003 • Dar Al-Handasah, Shair and Partners - Consultancy, (1996) A Nation-wide Study of

Quarries Beirut, Lebanon, Volume 1 – Main Report. • Department for the Environment, Food and Rural Affairs - Defra - (2003), Mid Term

Evaluation of the Aggregates Levy Sustainability Fund, Environment Protection Economics Division, UK.

• Department of Natural Resources and Environment (Australia), Guidelines for the

Establishment of Rehabilitation Bonds for Mining and Extractive Industry, 1997 • Harajli H. 2005. Moussielha Castle Quarry: Valuing the Benefits Rehabilitation through

the Contingent Valuation Method, A report submitted in partial fulfilment of the requirements for the MSc and/or the DIC, Imperial College, London.

• HM Customs and Excise, Notice AGL1 Aggregates Levy, http://www.hmce.gov.uk,

August 2004. • International institute for Environment and Development (2002), Mining, Minerals and

Sustainable Development (MMSD) – Breaking New Ground, Earthscan Publications Ltd., London.

• James R. Kahn, Dina Franceschi, Adilson Curi & Eduardo Vale, Economic and Financial

Aspects of Mine Closure, in National Resources Forum (JNRF), volume 25-26. • Minerals Resources Forum; http://www.mineralresourcesforum.org • Nazari, M. Financial Provisioning for Mine Closure: Developing a Policy and Regulatory

Framework in the Transition Economies, located in UNEP 2000 (see below). • (Office of the Deputy Prime Minister – Seminar on Financial Guarantees and Securities

in the Extractive Industry), located on http://www.odpm.gov.uk/index.asp?id=1143482. • Ontario, Ministry of Natural Resources, located

at; http://www.mnr.gov.on.ca/MNR/aggregates/rehab.html • Plan Blue and UNEP (1999). Mediterranean Country Profiles, Lebanon, Environment

and Sustainable Development Issues and policies, Sophia Antipolis. • Toarc (The Ontario Aggregate Resource Corporation & APA (Aggregate Producers

Association), Management of Abandoned Aggregate Properties Program ‘MAAP) – Ontario.

http://www.hmce.gov.uk/

http://www.mineralresourcesforum.org/

http://www.odpm.gov.uk/index.asp?id=1143482

http://www.mnr.gov.on.ca/MNR/aggregates/rehab.html


43 LIFE04 TCY/RL/000040

• United Nations Environment Program (UNEP), (2000) Industry and Environment: Mining and Sustainable Development II, Challenges and Perspectives. Industry and Environment, Volume 23 (Special Issue 2000)

• World Bank Institute. [Sarraf, F. Larsen, B. Owaygen M.] (2004). The Cost of

Environmental Degradation – The Case of Lebanon and Tunisia, Environmental Economics Series Paper NO.97, U.S.A.

• World Bank [Bolt, K., Ruta, G., Sarraf, M.] (2005), Estimating the Cost of Environmental

Degradation, Environment Department Papers.


ANNEX 1. ASSUMPTIONS USED IN CALCULATED ECONOMIC VALUE PEOPLE PLACE IN REHABILITATING MOUSSIELHA CASTLE QUARRY AND ALL QUARRIES IN LEBANON. • 45.6% of all Lebanese are aged between 25 – 64 years (2002), a range also considered to

be the productive income-generating range. • Total Population of Lebanon is around 3.6 million (2002). • 1,641,600 million inhabitants therefore are considered in the working age range. • Unemployment rate is around 17% (1997 estimate). • Therefore, only 1,362,528 Lebanese are considered employed. • US$23 is considered the median WTP for Rehabilitating M. Quarry and would be used as

a conservative WTP (Protest Bids included). • Though most university students interviewed were willing-to-pay and revealed a high

WTP amount for rehabilitation, since they are not income-generating they would not be excluded from total willingness-to-pay

• Since WTP and income are correlated, only those who have average income greater than US$935/Month would be included or 38% of total working force equal to 517,760 individuals. This is the case also because the mean income of our survey amounted to US$932 per month (See Table 7.3).

• 5% of total respondents said they have more important things to donate their money to other than rehabilitating quarries, found the area around M. castle acceptable the way it is, or did not believe quarry rehabilitation would ever take place. Therefore this percentage, that showed little concern towards quarrying, would be deducted from total WTP as people who have value for rehabilitation = zero.

• This leaves 491,872 individuals

44 LIFE04 TCY/RL/000040


ANNEX 2. PRINCIPLES AND CRITERIA FOR FUNDING APPROACHES Principles and criteria to be taken into account when considering funding approaches to mine (quarry) rehabilitation. (Adopted from Castrilli 2003)

Polluter Pays Polluter pays refers to the principle that the polluter should bear, or internalize, the cost of pollution. However the strict definition of 'polluter pays' cannot be applied to abandoned sites since by definition the responsible party most possibly cannot be found or is unwilling (or incapable) of assuming responsibility. Therefore a more general concept of 'polluter pays' must be substituted if the principle is to be adhered to. This broader concept “can be applied to an orphan (abandoned) funding option by attempting to link the payment of funds to a group or groups with a higher likelihood of being responsible. This may involve aggregations based on an industry sector or a variety of other risk related factors" (Castrilli 2003). However for future quarrying, polluter pays (cost internalization) should be a key principle to guide evaluation of possible future funding approaches for cleanup of orphaned/abandoned mines.

Beneficiary Pays

Beneficiary pays is related to the ‘polluter pays’ principle. It refers to the principle that those that benefit from an activity that caused the problem and those that benefit from the cleanup should not be unfairly enriched. Beneficiary in this context therefore includes a (1) past beneficiary of polluting activities, and (2) current beneficiary of site remediation. The beneficiary however may be either the state in terms of jobs, taxes, and wealth created. On this basis, the public should expect to bear a major part of the costs of cleanup. However, more often then not the mining industry in general had been the main beneficiary of past mining activity, not the public, and therefore should be the ones that bear remediation costs.

Fairness Fairness refers to notions of certainty of process, effectiveness, efficiency, clarity, consistency, and timeliness in achieving environmental objectives. Fairness also relates to the polluter pays and beneficiary pays principles. Fairness may seem applicable but is a subjective, if not fuzzy, concept. The final choice of policy or policies for rehabilitation funding have to be fair if the funding approach was to survive a change in government and therefore fairness should be a benchmark of evaluation.

Sustainable Development Goals Sustainable development goals should provide the overall framework in which an orphan/abandoned site cleanup program is rehabilitated.

45 LIFE04 TCY/RL/000040


In general, sustainable development goals should act as a guide in evaluation of potential funding approaches.

Openness, Accessibility, Participation Openness, accessibility, and participation refer to notions of accessibility of information and opportunity for public input. The development and administration of orphan site funding requires transparency and opportunity for public input and scrutiny.

Revenue Generating Capacity Revenue generating capacity, refers to the ability of a funding approach to raise adequate funding commensurate with the scale of the orphaned/abandoned mine problem in the jurisdiction being examined.

Administrative Ease Administrative ease refers to the ease of generation of revenue, its collection, and application of funding raised to orphaned/abandoned mine cleanup.

Economic Impacts Economic impacts refers to demands, for example, on a mining company contributing to a fund for orphaned/abandoned mine cleanup and also remaining directly responsible for its own active mining sites. Economic impacts also may refer to financial demands on the public treasury. Assessing the economic impacts is an appropriate criterion that is necessary to ensure that if industry were contributing in funding rehabilitation, it did not occur in such a way as to impair its competitiveness.

Discourage Future Site Abandonment The selected funding mechanism or approach needs to have the criteria or ability to discourage future site contamination.

Public Perception Public perception refers to public reaction to funding decisions and approaches. Taking into account public perception for evaluating potential funding approaches for orphaned/abandoned mines is important to consider.

46 LIFE04 TCY/RL/000040


47 LIFE04 TCY/RL/000040

ANNEX 3. LEBANON, MACROECONOMIC INDICATORS19

2003 Budget Law and 2004 Budget Law

2003 Budget Law

($US billion) 2004 Budget Law

($US billion)

Budget Revenues 4.316 4.266

Tax revenues 3.150 3.096

Non-tax revenues 1.166 1.169

Budget Expenditures 5.733 6.266

Current expenditure 5.468 5.828

Debt service bill 2.666 2.866

Other current expenditure 2.802 2.962

Capital expenditure 0.264 0.438

Budget balance -1.416 -2

Primary Budget balance 1.250 0.866

Budget Revenues in the 2003 Year-end Outcome & 2004 Budget Law

2003 Year-End Outcome ($US billion)

2004 Budget Law ($US billion)

Tax on income, profits and capital gains 0.522 0.697

Tax on property 0.214 0.233

Domestic taxes on goods and services, of which 1.803 1.666

Excises 0.779 0.751

VAT 0.907 0.800

Taxes on international trade and transactions 0.317 0.367

Other tax revenues 0.145 0.134

Tax Revenues 3.001 3.097

Income from public enterprises 0.834 0.864

Administrative fees and charges 0.255 0.251

Fines and confiscations 0.004 0.004

Other non-tax revenue 0.050 0.051

Non-Tax revenues 1.145 1.170

Budget Revenues (tax + non-tax revenues) 4.146 4.267

19 Source: Ministry of Finance Budget Law 2004 – A Brief Note


2003 Budget Law & 2004 Budget Law: Economic Classification of expenditures

2003 Budget Law (US$ billion)

2004 Budget Law (US$ billion)

Materials & supplies 0.0827 0.1087

External services 0.0700 0.0747

Salaries and wages 1.4520 1.4413

Subsidies and transfers 0.9807 1.0553

Other expenses 0.1593 0.1767

Interest payments and financial charges 2.6667 2.8667

Unallocated general reserves 0.0573 0.1053

Total current expenditure (including debt service) 5.4687 5.8287

Total current expenditure (excluding debt service) 2.8020 2.9620

Acquisition of land 0.0001 0.0001

Acquisition of Buildings 0.0003 0.0027

Acquisitions for the construction of roads, ports and airports 0.0014 0.0022

Acquisitions for the construction of water networks 0.0033 0.0025

Equipment 0.0272 0.0370

Construction in progress 0.1739 0.3275

Maintenance 0.0345 0.0427

Other expenditures related to fixed capital assets 0.0236 0.0231

Total capital expenditures 0.2647 0.4373

Grand Total 5.7333 6.2667

48 LIFE04 TCY/RL/000040


49 LIFE04 TCY/RL/000040

ANNEX 4. PERFORMANCE BONDING One of the legacies currently receiving the most attention is the problem of environmental impact from abandoned and orphaned mines. Due to the time lag between the economic commencement of quarrying and the abatement phase, the profits from mineral extraction are harvested before the closure activities are initiated. Even if the quarrying firm had been profitable, an incentive exists for the company to announce bankruptcy, transfer ownership to other parties, or engage in similar obfuscation to escape their liability for environmental clean-up. In general, firms must face a guaranteed economic loss if they do not comply with the environmental standards that are defined with mine or quarry closure. Performance bonds, surety bonds and escrow accounts20 are essentially the same thing, but with slightly different characteristics and legal definitions. In each case a participant in the activity surrenders a sum of money before the mining activity starts. If the activity is completed according to the environmental standard, the money is returned; if not, the money is forfeited. Performance bonds can be effective in achieving compliance, as the finds are already in the hands of the government, which can seize it in case of non-compliance. For this to be effective, the economic value of the bond must be at least equivalent to the cost of compliance measures.

Figure A4. Steps in the implementation of a performance bond.

20 Money, property, a deed, or a bond put into the custody of a third party for delivery to a grantee only after the fulfillment of the conditions specified


There are several problems with performance bonds. First, performance bonds only focus on the restoration of damages, rather than the prevention of such damages. Second, they tend to focus on ensuring a minimum level of environmental quality, rather than an optional environmental condition. Third, performance bonds tend to be a discrete instrument, constructed as an ‘all or nothing’ type of control whereby the entire bond is forfeited if the target or restrictions are only slightly violated. TO remedy this, a performance bonding system could be developed with multiple characteristics upon which to base the return of the performance bond. A separate system could be created for each ecological aspect, where the characteristics of each could be weighted if one is deemed more important than another. Setting amount required by a bond In setting bonds it is necessary to determine the works required, begotten from the rehabilitation plan. It is preferable to estimate the worst case scenario for establishment of the bond (or where rehabilitation costs are greatest). Rehabilitation principles for common site features are tabled below.

Table _: Example of Hard Rock Pit Rehabilitation Costs Breakdown (Australia and in Australian $).

Site Feature/Rehabilitation

Costing Information/Comments

Transport costs

Top face battered by backfilling with overburden (only practical if bench width is ≥ face height) Trees planted on batter

Determine source of material. Calculate volume. Use transport costs and tree planting costs.

• To push loose material (bulldozer): app. $0.85 per m3.

• Ripping (by bulldozer): - Soft ground: $200 per hectare - Moderate ground: $300 per

hectare - Hard ground: $500 per

hectare. • Transport of material by scraper

(assuming distance <500m): $1.20 per m3.

• Transport of material by truck/loader (transport distance <1000m round trip): $1.50 per m3. For every additional kilometre in the round trip add $0.50 per m3.

• Excavators: $1.50 per m3. • Rubber tyred loaders: $0.75 per m3.

Top face battered by blasting. Toe of batter covered with 1.0m of overburden, topsoiled and planted with trees.

Determine face and length. Cost blasting from graph _ below. Tree planting costs (see below).

Top face scaled. Bund constructed behind face (large boulders/rocks could be used).

Scaling and bund construction - Scaling hard rock faces (Assumes face height < 15m) $3.00 per m - Constructing 2.0m high bund with dozer $5.00 per m (or battering

edge of shallow excavation)

Selected benches backfilled with overburden to 1 metre depth, topsoils and planted with trees and understorey.

Transport costs for fill as written above. Assume truck transport and dozer to spread. Re-vegetation costs (see below).

50 LIFE04 TCY/RL/000040


Cost to Batter hard rock by blasting

0

50

100

150

200

250

2.5 5 7.5 10 12.5 15 17.5 20Height of face (m)

$ pe

r lin

ear m

eter

Cost to backfill vertical faces

0100200300400500600

2.5 5 7.5 10 12.5 15 17.5 20Height of face (m)

$ pe

r lin

ear m

eter

Re-vegetation costs Trees Most rehabilitation plans will involve some tree planting. This may involve establishment of trees over large areas or planting specific areas such as windbreaks or visual barriers. Where large areas are to be planted the preferred method is direct sowing of tree seed. Sowing will take place in autumn or spring depending on the region and seasonal conditions. On disturbed ground such as rehabilitated mine sites there is generally no need for initial weed control. Native species are generally well adapted to low nutrient conditions but application of an NPK fertilizer at sowing is recommended in some cases. For establishment of clumps or plantations, or supplementary planting in troublesome areas tube stock should be used. Tube stock generally transplants more readily and outstrips larger potted trees in a couple of years. In many cases rabbit guards will be necessary however, to minimize predation. Small numbers of tubed trees are unlikely to be successful at sites where browsing by kangaroos, wombats and the like is a problem. Understorey Plants

51 LIFE04 TCY/RL/000040


52 LIFE04 TCY/RL/000040

Understorey species are generally used in revegetation of bushland areas. They are usually direct sown in conjunction with tree seed. Understorey species should be included in the revegetation specifications if they were present prior to mining. Pasture Where land is to be reinstated to pasture it will be necessary to sow grass species suitable to the area and fertilizer will often be required. Advice on pasture species, fertilizer, rates of application and methods of sowing can usually be obtained from the local office of the NRE Catchment & Agriculture Services. The landowner should also be consulted. It should be noted that rates of application for fertilizer and seed may be higher for rehabilitation of reclaimed land than they would be in normal farming practice Soil Testing It is often necessary to carry out some soil testing to define the best seed and fertilizer prescription at a reclaimed site. Soil analysis and agronomical advice is available at some offices of DNRE. Seed Testing The viability of native seed can vary considerably and may be effected by factors such as collection time, handling, storage, age and pre-treatment. Where germination does not occur at a satisfactory rate the cost can be considerable, both in terms of the cost of replacement seed and the lost time in rehabilitation. Where native seed is used for revegetation it is prudent to have all batches tested for viabilty prior to use. Approximate re-vegetation Costs Trees and understorey - Direct seeding (assumes rate of 2kg/ha) $500 per ha - Fertilizer $100 per ha - Tube Stock (per tree)

Tree $1.00 Guard $1.00 Planting $1.00

Pasture

- Sowing $150 per ha - Fertilizing $100 per ha - Top Dressing $100 per ha

NB For areas greater than 5ha cost pasture establishment at 75% of above figures.

· alleviating barriers to quarry task 4.2 – alleviating financial rehabilitation in lebanon –...

Documents