OCEAN | Impact Assessment Program for Mineral Activities on the Norwegian Continental Shelf

On 10 September 2021, the Ministry of Petroleum and Energy (MPE) finalised the program for an impact assessment on the exploration for and extraction of mineral deposits on the Norwegian continental shelf. The program constitutes the first step in the exploration and extraction process.

Mining of seabed minerals – the next chapter in Norway’s marine history

Throughout Norwegian history, the ocean resources have been essential for building wealth, industry and welfare. Norway is now about to start what can be the next chapter in its marine history: Mining of seabed minerals. Analysis of samples collected by the Norwegian Petroleum Directorate have revealed that sulphides and manganese crusts from the Norwegian shelf contain high content of inter alia copper, zinc and cobalt¹. These metals may be used for the production of wind turbines, solar panels and batteries, which are important for reducing greenhouse gas emissions. In addition, such metals are used in high-tech products such as mobile phones and computers. The demand for these metals is increasing, and forecasts show that the demand only partially can be met with existing and new land-based mines. Extraction of seabed minerals can help ensure the required supply of metals, and thus be an important industry for Norway in the future.

The exploration and extraction process

Overview

The exploration and extraction process consist of three main phases: (i) Opening of areas for surveys and extraction, (ii) Granting of survey and extraction licenses and (iii) Cessation of activity. The three phases are described in the Norwegian Act relating to mineral activities on the Continental Shelf (the Seabed Minerals Act or the Act), which became effective on 1 July 2019. The Seabed Minerals Act shall facilitate for exploration and extraction of mineral deposits on the Norwegian continental shelf, and is mainly based on principles and regulations from the petroleum legislation.

Opening the Norwegian continental shelf for mineral activities

The process of opening the Norwegian continental shelf for mineral activities is set out in chapter 2 of the Seabed Minerals Act. The Act states that the mineral deposits on the Norwegian continental shelf are owned by the state, and that a license is required to conduct mineral activities.

Before a license to conduct mineral activities in a specific area can be granted to a commercial player, the Act stipulates that the area must – as main rule – be subject to an opening decision by the government, which shall be based on an impact assessment. A similar process is well-known from the petroleum industry. The impact assessment shall highlight which effects a potential opening could have for the environment, as well as the expected impact on business, economic and social factors.

The first step in the process of the impact assessment is to establish an impact assessment program, such as the program established by MPE on 10 September 2021. The program sets out guidelines for how the impact assessment shall be carried out. The program consists of the proposed impact assessment program which was sent for consultation on 12 January 2021 and MPE’s assessment of the 53 consultation inputs received. Pursuant to the program, the following main topics shall be subject of the assessment:

Surveys; Status, development trends and opportunities
Extraction; Status, development trends and opportunities
Overview of information sources describing the natural conditions in the areas being considered for opening
Environmental effects of exploration and extraction and possible mitigating measures
Implications on other industries and possible mitigation measures
Societal effects

The impact assessment will now be carried out in accordance with the program. The impact assessment is expected to be finalized in Q4 2022 following the receipt of consultation inputs. The impact assessment will form the basis upon which a decision to open the area for mineral activities will be taken, including on what terms. The decision on the opening is expected to be taken during Q2 2023.

Granting survey and extraction licenses

Following the formal opening, private players may apply for a survey license and an extraction license. The regulations governing the survey and extraction licence process and requirements are set out in Chapters 3 and 4 of the Act. The license regime is based on the same main features that are found in the Norwegian legislation. The main features encompass a non-exclusive survey license and an exclusive extraction license with an associated work obligation.

A non-exclusive survey license is granted for a specific area and with a duration of up to five years, and applies to exploration for and mapping of mineral deposits for commercial purposes. The license may be granted to both Norwegian and non-Norwegian entities. In the preparatory works to the Act, MPE proposes that the licensee acquires a time-limited exclusivity to the data collected. The licensee may thus sell the data or use it in a subsequent competition for the award of an extraction license. However, the survey license does not give the licensee priority in the award of a subsequent extraction license.

An extraction license gives the licensee the exclusive right to conduct survey for and extract all mineral deposits for commercial purposes in the area covered by the license. This is inspired by the petroleum production license, where the exclusive extraction right also provides the licensee with incentives to invest in exploration (although subject to the approval of a separate plan for extraction). An extraction license can be granted for an initial period of up to ten years, with the possibility of applying for a further extension. The exclusivity and term of the license shall facilitate for long-term investments in exploration and extraction of seabed minerals.

If an extraction licence is shared among multiple licensees, the MPE appoints one of them as operator. The MPE may – as is the case for petroleum extraction licenses – make the license conditional upon the licences entering into an agreement for with a specific content that regulate the cooperation.

The allocation of the extraction license will, as a general rule, be made on the basis of applications following a public invitation by the government to apply for licensees on certain criteria. Unlike the survey license, the extraction license may only be granted to Norwegian entities.

If a licensee in an extraction licence decides to extract a mineral deposit, the licensee shall submit a plan for extraction of the mineral deposit to the MPE for approval.

Cessation of activity

Chapter 5 of the Act contains regulations on cessation of activity. The chapter is largely based on the corresponding chapter in the Norwegian Petroleum Act. The Act stipulates inter alia that the licensee is obliged to ensure prudent clean-up after the activities have ended, and that the licensee shall present a decommissioning plan to the MPE no later than two years before a licence expires or is surrendered.

BAHR’s View

We expect to see an increased focus on the potential in mining of seabed minerals the coming years – in parallel with technological developments and the impact assessment being carried out.

Activities in relation to mining of seabed minerals are expected to be highly relevant for several players currently being engaged in other ocean activities, including companies being involved in petroleum activities and related industries, such as shipping, offshore and service industries – as well as new companies positioning themselves for this new adventure. We also expect to see various forms of collaborations between companies within this field – as we see i.a. in both the petroleum and offshore wind industries. The seabed mining business will be asset heavy, and both the assets and the exploration and extraction activities will require financing.

BAHR is following the process of opening the Norwegian continental shelf for mineral activities closely, including the regulatory framework governing these activities. As the exploration and extraction process is moving forward, we expect an increased need for legal assistance in this area. We have extensive experience from advising also on the corresponding framework regulating petroleum activities. We further have extensive experience providing advice to petroleum related industries such as shipping, offshore and the service industry, which are expected to play a key role in the development of the seabed mining business, as well as related financing.

BAHR is top-ranked in international ratings such as Chambers and Legal500 within relevant areas, such as Oil&Gas, Shipping and Financing.

¹https://www.npd.no/en/facts/news/general-news/2019/analysis-reveals-extensive-seabed-minerals/