State Audit Office: Mineral resources in Latvia are not managed sustainably

There are several reasons for this situation, including the lack of a comprehensive strategy for the use of subsoil, the lack of complete, high-quality and timely information on the country’s minerals, the lack of structured data and risk-based inspections, the regulatory acts on the recultivation of mineral extraction sites are incomplete.

VK council member Inga Vilka states that “there is no strategy or future vision in the country for the use of underground resources, a system is slowly being created that would provide complete, high-quality and timely information about the available and extracted minerals in the country, but the existing information is not analyzed and used for decision-making Therefore, the monitoring of mineral extraction is insufficient, at the same time, an unreasonable administrative burden has been placed on mineral miners, insufficient cooperation of state institutions can be observed”.

VK has concluded that without state policy, a strategic long-term vision and with incomplete monitoring of mineral extraction, the further operation and development of various industries, such as construction, can be so difficult. This is especially important at the moment, when several large infrastructure construction projects of national importance 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%), because the use of secondary raw materials and the reduction of extraction of primary raw materials – non-renewable minerals – have not been sufficiently promoted in the country. The main economic tool for promoting the development of the processing market is the tax on natural resources – its task is not only to promote the producer’s responsibility, but also to create incentives for reducing the cost differences between primary and secondary raw materials by taxing the extraction of minerals.

In Latvia, natural resource tax rates have not been able to effectively ensure this until now. At the same time, checks on the correctness of natural resources tax calculations are not effective enough, because the State Environmental Service (SSE) requires mineral 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.

According to VK, due to insufficiently digitalized geological information, systematic search and research of new minerals and other underground resources has not been carried out in Latvia for 20 years. It was planned to digitize 90% of the data available in the geological information system by 2020, but in reality, due to limited funding, only 10% is currently available digitally. This significantly limits the further search and exploration of underground resources, 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.

There are gaps in the Register of Mineral Deposits, which contains information on mineral 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 institutions’ resources, as well as causes errors in data entry. On the other hand, insufficient cooperation between the VVD and the state SIA “Latvijas Vides, Geologija und Meteorologija Centrs” (LVĜMC) and also control deficiencies have affected the quality of the Inventory balance, or data collection on minerals.

The auditors believe that electronically submitted reports on mineral extraction would allow errors to be detected more promptly and save VVD resources. On the other hand, the fact that VVD has not checked compliance with the requirements of certain regulatory acts affects the completeness of the data on stocks in the Register of Mineral Deposits. For example, the register does not have up-to-date information on the amount of remaining stocks in 131 mineral extraction sites.

Due to the shortcomings of the data collection methodology, according to the auditors’ estimates, the stock balance for 2021 does not contain data on the available minerals of building material raw materials in the amount of 65.40 million cubic meters or 16.4%, as well as on the remains of peat and sapropel in the amount of 8.87 million tons or 10.3 in the amount of %.

It is the responsibility of the Ministry of Environmental Protection and Regional Development (VARAM) and the institutions under its department – VVD and LVĜMC – to ensure full availability of information in order to be able to develop data-based qualitative development planning documents for the use of subsoil and purposefully plan their use in the long term, and for the more efficient state administration the activity needs to improve the circulation of information between these institutions, concludes VK.

Insufficient regulation for the recultivation of mining sites creates the risk of increasing degraded areas, including if the miner does not fulfill his obligation to recultivate or clean up the mining site after the completion of mining. For example, out of 128 mineral miners, the audit identified 39 or approximately 30% liquidated companies that have not recultivated a total of 51 mining sites. In addition, the cost of rehabilitating degraded mining sites increases every year. For example, in 2016, the recultivation costs of identified degraded peat mining sites in Latvia amounted to around 14 million euros, but, taking into account inflation, in 2022, according to auditors’ estimates, these costs are already 20 million euros. If the miner has not fulfilled the obligation to recultivate the mining site, then the costs will have to be borne by the land owner.

At the same time, VK states that the majority of peat mining sites belong to the state or municipalities.

Currently, the regulatory framework does not determine the criteria for recognizing mineral extraction as completed, also the monitoring of the recultivation process is defined in general, but the requirement to create financial security for recultivation is not defined. Paradoxically, only the miner actually knows the moment of recultivation of the mining site, but the miner has no obligation to inform the responsible institutions about it. In addition, the majority of mineral miners, including municipalities, do not plan funds for the reclamation of the mining site in time – from the companies and municipalities included in the sample, 87% of companies and no municipality have shown savings for reclamation in their annual reports.

According to the regulatory framework, recultivation is supervised by local governments, but they have different understandings of supervision. The audit identified 254 no-go mining sites that have not been reclaimed, including 140 sites that have been off-limits for more than 10 years.

VK has given 13 recommendations to VARAM, VVD and LVĜMC after the audit. The deadline for implementing the recommendations is January 2027.