Mineral resources are not managed sustainably in Latvia which does not contribute to the development of the national economy. There are several reasons for this situation such as a lack of a comprehensive strategy for the use of subsoil, a lack of complete, high-quality, and timely information about national mineral resources, a lack of structured data and risk-based inspections, and incomplete laws and regulations on renaturalisation of mineral resource extraction sites.
“The country does not have a strategy or future vision for the use of subsoil, a system that would provide complete, high-quality, and timely information about the available and extracted mineral resources in the country is being slowly created, but the existing information is not analysed and used for decision-making. Therefore, the monitoring of mineral extraction is insufficient, an unreasonable administrative burden has been imposed on mineral miners and insufficient cooperation of state institutions can be observed at the same time,” states Inga Vilka, Council Member of the State Audit Office of Latvia after the audit of the State Audit Office on the management of Latvia’s mineral resources.
- There is no subsoil use strategy in Latvia, and this does not contribute to the development of the national economy and the balanced and sustainable management of natural resources. The only development planning document was developed for peat resources.
- In Latvia, the amount of use of secondary materials (6% of the total consumption in 2021) is two times behind the European Union average (12%).
- No systematic mining of new minerals and other subsoil resources has taken place for 20 years in Latvia. Only 10% of the geological information system data are currently available digitally instead of the planned 90%.
- The data in the Register of Mineral Resource Deposits is incomplete and erroneous. Complete information about the mineral resources available in the country is necessary for the development of high-quality development planning documents in the field of subsoil use.
- Laws and regulations for the renaturalisation of mining sites is not sufficient because there are no established criteria for recognizing the extraction of mineral resources as completed, the monitoring of renaturalisation process of mining sites is determined in general, there is no requirement to create financial security for their renaturalisation, thus creating the risk of an increase in degraded areas.
Without a state policy, a strategic long-term vision, and complete monitoring of mineral resource extraction, further operation and development of various industries, for example, construction, might be troubled. This is especially crucial now when several large infrastructure construction projects of national significance are being implemented and a significant increase in the demand for raw materials for building materials is expected.
In Latvia, the amount of use of secondary materials (6% of the total consumption in 2021) is two times behind the average indicator of the European Union (12%), as the use of secondary raw materials and the reduction of extraction of primary raw materials, that is, non-renewable minerals, have not been sufficiently facilitated in the country. The main economic tool for promoting the development of the processing market is tax on natural resources; its task is not only to promote producer responsibility, but also to create incentives for reducing cost differences between primary and secondary raw materials by taxing the extraction of mineral resources. In Latvia, tax rates on natural resources have not been able to effectively ensure this until now. At the same time, checks on the correctness of tax calculations on natural resources are not effective enough because the State Environmental Service (SSE) requires mineral resource miners to submit information that is already at the disposal of the State Revenue Service (SRS), and also checks the payment of the tax, although this is the task of the SRS.
Due to insufficiently digitized geological information, systematic search and exploration of new mineral resources and other subsoil resources have not been carried out in Latvia for 20 years. By 2020, one planned to digitize 90% of the information in the geological information system, however only 10% of the geological information is digitally available due to limited funding. It limits further search and exploration of subsoil resources significantly, and new resources are not identified in a planned manner. It can also have a negative impact on the development planning of the area. For example, by not including potential mineral extraction sites in municipal territorial plans, there is a possibility that these sites or their surroundings will be built up before mineral extraction thus not using the available minerals rationally and creating conflict situations in different territories.
Deficiencies in the Register of Mineral Resource Deposits, which contains information on mineral resource deposits, as well as the Inventory Balance. Currently, information is entered into the Register manually, which requires a large and long-term consumption of state institution resources, as well as causes errors in data entry. In their turn, insufficient cooperation between the State Environmental Service and state-owned “Latvijas Vides, ģeoloģijas un meteoroloģijas centrs” Ltd, and control deficiencies have also affected the quality of the Inventory Balance or data collection on mineral resources. The auditors believe that electronically submitted reports on mineral resource extraction would allow errors to be detected more promptly and save resources of the State Environmental Service. In its turn, the fact that the State Environmental Service has not checked compliance with the requirements of certain laws and regulations affects the completeness of the data on stocks in the Register of Mineral Resource Deposits. For example, the Register does not have up-to-date information on the amount of remaining stock at 131 mineral extraction sites.
Due to the deficiencies of the data collection methodology, according to the auditors’ estimates, the Inventory Balance for the year 2021 does not contain data on the available mineral resources for building materials of 65.4 million cubic meters or 16.4%, as well as on peat and sapropel residues of 8.87 million tons or 10.3%.
The Ministry of Environmental Protection and Regional Development and the institutions subordinate to it, State Environmental Service and state-owned “Latvijas Vides, ģeoloģijas un meteoroloģijas centrs” Ltd, are responsible for ensuring full availability of information so that development of data-based qualitative development planning documents for the use of subsoil and purposeful planning of their use in the long term would be possible, and for more efficient performance of state administration, one needs to improve the flow of information among these institutions.
Insufficient regulation for the renaturalisation of mining sites creates the risk of increased degraded areas, including if a mineral resource miner does not fulfil their obligation to recultivate or organize a mining site after the completion of mining. For example, out of 128 mineral resource miners (companies), the audit has identified 39 (~30%) wound-up enterprises that have not recultivated 51 mining sites in total. In addition, the cost of rehabilitating degraded mining sites increases every year. For instance, renaturalisation costs of identified degraded peat mining sites amounted to around 14 million euros in Latvia in 2016, but according to the auditors’ estimates, these costs already amount to 20 million euros in 2022 considering inflation. If the miner has not fulfilled the obligation to recultivate the mining site, then the costs will have to be borne by a land owner. It should be mentioned that the majority of peat mining sites belong to the state or local or regional governments.
Currently, the legal framework does not determine the criteria for recognizing mineral resource extraction as completed, also the monitoring of renaturalisation process is defined in general, but a requirement to establish financial security for renaturalisation is not defined. Paradoxically, only a miner actually knows the moment of renaturalisation of a mining site, but the miner has no obligation to inform the responsible institutions about it. In addition, most mineral miners, including local and regional governments do not plan funds for the renaturalisation of mining sites in time because 87% of the enterprises and no local or regional government have shown savings for renaturalisation in their annual reports out of all the enterprises and local and regional governments included in the audit sample.
According to the legal framework, renaturalisation is supervised by local and regional governments, but they have different understandings of supervision. The audit has identified 254 mineral resource extraction sites where minerals may no longer be mined, but these sites have not been recultivated, including mining may not be carried out for more than 10 years in 140 mining sites.
Recommendations of the State Audit Office of Latvia #PēcRevīzijas
The audit provided 13 recommendations to the Ministry of Environmental Protection and Regional Development, State Environmental Service, and state-owned “Latvijas Vides, ģeoloģijas un meteoroloģijas centrs” Ltd. The timeframe for implementing the recommendations is January 2027.
About the State Audit Office of Latvia
The State Audit Office of the Republic of Latvia is an independent, collegial supreme audit institution. The purpose of its activity is to find out whether the actions with the financial means and property of a public entity are legal, correct, useful and in line with public interests, as well as to provide recommendations for the elimination of discovered irregularities. The State Audit Office conducts audits in accordance with International Standards of Supreme Audit Institutions of the International Organization of Supreme Audit Institutions INTOSAI (ISSAI), whose recognition in Latvia is determined by the Auditor General.
100 years of AUDIT STRENGTH
On 16 August 2023, the State Audit Law will turn 100 years old. With the adoption of this Law, the State Audit Office from a formal de facto institution founded on 2 December 1918 became a de jure independent, collegial supreme audit institution of the Republic of Latvia. The State Audit Office is one of the independent state institutions enshrined in the Satversme (Constitution) of Latvia. The Constitution was signed by Roberts Ivanovs as the secretary of the Constitutional Assembly, who was then confirmed as the Auditor General. He worked as the first Auditor General for 12 years. His signature confirmed the text of our Constitution alongside that of Jānis Čakste.
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