Because of their location, nature and often their scale, resource projects can have significant local economic, environmental and social effects. Governments must account for these in any plan to initiate exploration or to develop the resource. The decisions to explore or develop should be informed by an understanding of the possible local economic, environmental and social consequences, usually through a strategic or project impact assessment. These consequences need to be weighed in the decision of whether or not to extract. Public participation should be integral to the process. In some cases it may be appropriate to defer investment until technology improves, or until the impacts can be better assessed on the basis of new data. Impact assessments should be public documents. If the decision is made to invest, then environmental and social monitoring should be maintained throughout the project’s life consistent with a plan to minimize or mitigate possible adverse consequences.
The social, economic and environmental spillovers will be felt most by communities located in the region being explored or developed. The decision to explore or develop may present these communities with direct economic and social opportunities linked to the establishment of industries and services based on natural resources. These may be associated with employment opportunities or the increased availability of goods and services. New transport infrastructure, as well as improvements in training and education, health services etc. may also enhance the development of local communities or regions. This in turn calls for a proactive spatial and land use planning approach by local, regional and national governments, in order to direct developments according to approved structural plans and policies.
The social, economic and environmental costs of extraction are often borne disproportionately by those in the vicinity of the extraction process. Where these costs are incurred, citizens have a claim to be compensated through services, infrastructure or dividends. Indeed, without a clear commitment to provide reasonable compensation for these costs as well as equitable participation in the national benefits, local communities are liable to sabotage the extraction process.
Local communities and the wider public should be consulted prior to development. The UN Declaration on the Rights of Indigenous Peoples calls for the free, prior and informed consent of indigenous peoples. The World Bank requires 'free, prior and informed consent' for lending to extraction projects. The voluntary Equator Principles call for free, prior and informed 'consultation'. The ICMM also stresses consultation, but notes growing pressure to make consent the standard. A prerequisite of prior informed consent will be sufficient capacity of citizens and civil society to participate in meaningful dialogue and debate. The ownership rights of local communities need to be clearly defined in law. Overall, affected communities should be left better off as a result of extraction.
The government is responsible for setting, and enforcing, environmental standards and determining the claims of local communities for compensation. These standards may be set by reference to international standards such as the Equator Principles, now accepted by commercial capital providers to extraction projects and by IFIs. While governments must set standards and monitor their enforcement, the costs of mitigation, avoidance, and compensation are part of the economic cost of the project and must be accounted for. The impact on women should be separately and explicitly identified and factored into the decision-making process.
The security arrangements of projects can give rise to negative human rights impacts when private or state security forces use excessive force. Legal operating of projects has to include strong safeguards and mechanisms for recourse in case of human rights abuse.
The investor is in the best position to control or mitigate environmental damage during operations and is likely to be the most efficient party to conduct reclamation at the time of project closure. A requirement to conduct ongoing reclamation during operations is likely to be efficient and avoid larger liabilities at project closure. Where private companies take on the responsibility for mitigation of environmental damage and project closure, it is important to ensure that national and local government and civil society have the capacity to monitor and enforce company obligations and conduct. Escrow accounts can be an effective tool to ensure that reclamation costs are covered.
When deciding on if, and when, to proceed with project development, government should take into account economic benefits, both locally and nationally, in addition to social or environmental impacts. In some cases, and in some locations, it may be appropriate to restrict or prohibit project development. Candidates for such restrictions include areas of significant national or international environmental or cultural importance, or areas of particular value for agriculture, fisheries, water, or for indigenous peoples.
The presence of artisanal mining can create challenges for governments and investors, but if carefully managed they can foster local development benefits. Governments should seek to formalize and regulate such activities with the objective of encouraging positive development impacts while mitigating negative effects.
