4.3 Deep-Sea Mining

Box 4.3 Deep-Sea Mining

Technological advances are yielding access to mineral deposits in the deep waters of the oceans. This frontier for mining exploration involves licensing in waters subject to national jurisdiction (exclusive economic zones or EEZs) and in international waters. The environmental and social impacts of such activities are not yet fully understood and a cautious approach is encouraged for such development.

In international waters, applications for rights are granted by the International Sea-bed Authority (ISA) under the UN Law of the Sea Convention, which establishes and governs the “area” beyond jurisdiction of coastal states for “the common heritage of mankind.” The ISA has established a mining code and issued several sets of regulations on minerals. The code requires information on the proposed plan of work in a license application, to include a preliminary assessment of the possible impact of the proposed activities on the marine environment; a description of the proposed measures for prevention, reduction, and control of pollution and other hazards, as well as possible impacts on the marine environment; and a description of environmental baseline studies and rules relating to possible environmental impact. Companies must enter into a contract with the ISA before receiving an exclusive right to explore for or exploit the mineral resources of the deep seabed.

Developing states have preferential access to the area if they identify banked sites with known prospectivity. Exploration licenses from the reserved banked sites have been granted to commercial companies sponsored by Nauru (2011), Tonga (2011), and Kiribati (2012). State sponsorship entails responsibility to monitor and control the operations. Apart from the economic rent, the expected advantage is knowledge transfer. Already more than two dozen licenses have been granted to countries such as Brazil, China, India, Japan, and the Russian Federation.

A number of countries are also seeking to derive benefits from deep-sea mining in their EEZ as well as in international waters. Papua New Guinea became the first state to award a seabed mining license in its national waters. Fiji is among the growing number of Pacific Islands countries engaged in licensing, adopting a law to promote investment in this area: International Seabed Minerals Management Decree 2013. The United Kingdom passed its Deep-Sea Mining Act in 2014. For the ISA National Legislation Database, see http://www .isa.org.jm/en/mcode/NatLeg.

The marine mining industry has produced a voluntary code to address environmental protection issues— the International Marine Minerals Society’s Code for Environmental Management of Marine Mining, http:// www.immsoc.org/IMMS_code.htm.

managerial skills transfer that comes with foreign participation. Norway, for example, had a very public debate on whether or not to open its petroleum sector to foreign investors and eventually decided to permit foreign involvement for many of the reasons just given (Gylfason 2004, 26–27).

Exploration. Although the exploration phase generates valuable information for the host government and investors, it remains a financially high-risk undertaking. Thus, the question about whether or not the government should assume this risk is an important policy issue. Faced with the risks, governments have four basic options: they can (1) develop the resources themselves, (2) contract private petroleum and mining companies to develop the resources for fees, (3) auction the right to develop the resources to a private company, or (4) adopt a combination of any of the aforementioned alternatives. More often than not, governments enter into agreements with private companies to explore and develop the resources at their own costs and risks. This option is particularly attractive where a government or its NRC does not possess the essential technical know-how and skills to develop the resources themselves (Tordo 2007, 5–6).

Local benefit. Policy statements increasingly outline expectations with respect to local benefit as governments seek to maximize impacts from resource development in the wider economy. Local benefit requirements seek links between core sector investments and operations, on the one hand, and local employment and economic activities, on the other. Policy makers are likely to experience strong pressures from local business or communities to promote such content. However, such pressures can present issues for both host governments and foreign investors, as the necessary skills for some petroleum and mining operations may

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