Mine Closure, Site Rehabilitation, Historical Contamination and Environmental Risk Allocation in Cross-Border Investments

Large energy and mining projects are usually assessed at the beginning of their life cycle through questions of licensing, financing, construction, production and profitability. Yet some of the most significant legal and financial liabilities may arise after commercial operations have ended.

A mine may cease production while tailings facilities require monitoring for decades. An oil field may become uneconomic while wells, pipelines and production equipment remain in place. A power or industrial facility may be dismantled while contaminated soil and groundwater remain beneath the site. A company acquiring a supposedly inactive project may discover that environmental liabilities created by previous operators have effectively followed the asset.

For this reason, decommissioning is no longer properly viewed as a technical issue to be addressed at the end of a project’s life.

It is a legal, financial and transactional risk that should be assessed from the beginning of the investment.

International energy and mining projects therefore require careful consideration of several interconnected concepts:

decommissioning, meaning the removal, dismantling or permanent closure of facilities;

rehabilitation, meaning the restoration or stabilisation of land disturbed by industrial or mining activities;

remediation, meaning measures taken to eliminate, control or reduce environmental contamination;

post-closure monitoring, meaning environmental and technical supervision after operations have ceased; and

historical environmental liability, meaning responsibility for contamination or environmental damage originating from earlier operations or previous owners.

These issues become particularly complex in cross-border investments because the project may involve international shareholders, foreign lenders, concession agreements, investment treaties, international contractors and foreign-law transaction documents, while the physical environmental obligations remain governed predominantly by the law of the country where the project is located.

This article examines decommissioning and environmental liability in international energy and mining projects, with particular reference to Turkish law, international project structures and European and international environmental standards.

1. Decommissioning Is Part of the Project Life Cycle

The traditional commercial model of an energy or mining project often concentrates on four stages:

exploration, development, production and sale.

Modern environmental regulation adds another essential stage:

closure and post-closure responsibility.

A mining licence, petroleum right or environmental approval generally does not give an operator an unrestricted right to extract resources and subsequently abandon the site.

The operator may remain responsible for restoring the land, stabilising waste facilities, removing installations, controlling pollution and monitoring environmental risks after production ends.

The economic consequences can be substantial.

Closure expenditure may include demolition of processing facilities, plugging wells, removing pipelines, treating contaminated soil, managing hazardous waste, stabilising open pits, rehabilitating waste-rock areas, closing tailings facilities, restoring topsoil, replanting vegetation and monitoring groundwater for many years.

Accordingly, the correct financial question is not simply:

“What does it cost to construct and operate the project?”

It is also:

“What will it cost to leave the project lawfully?”

For investors and lenders, this distinction is critical because an apparently profitable project can carry a substantial unfunded closure liability.

2. Decommissioning, Rehabilitation and Remediation Are Different Legal Concepts

Although these concepts frequently overlap, they should not be treated as interchangeable.

Decommissioning

Decommissioning generally concerns the physical retirement of the industrial installation.

Depending on the project, it may include removal of:

• production equipment;
• buildings and processing plants;
• petroleum wells;
• offshore or onshore installations;
• pipelines;
• storage facilities;
• electrical infrastructure; and
• temporary project structures.

The objective is usually to place the facility into a legally acceptable permanent-closure condition.

Rehabilitation

Rehabilitation primarily concerns the physical condition and future usability of land disturbed by the project.

In mining projects, this may involve reshaping slopes, stabilising excavation areas, replacing topsoil, controlling erosion, restoring drainage systems and revegetating disturbed areas.

The 2025 amendments to the Turkish Mining Law introduced an express statutory definition of rehabilitation encompassing measures such as securing disturbed areas, stabilisation, grading, topsoil application, seeding, planting, afforestation and physical or chemical improvement.

Remediation

Remediation goes further where actual contamination exists.

Removing an industrial building does not necessarily remediate the site.

For example, dismantling an oil-storage tank may satisfy part of the decommissioning obligation. If petroleum hydrocarbons have contaminated the soil beneath the tank, a separate remediation obligation may continue.

Likewise, restoring the visual appearance of a mining site does not necessarily address acid mine drainage, contaminated groundwater or unstable tailings.

A legally compliant closure strategy must therefore distinguish between removing infrastructure, rehabilitating disturbed land and remediating pollution.

3. The Polluter-Pays Principle

The central principle underlying modern environmental liability is straightforward:

the person responsible for pollution should bear the cost of preventing and remedying it.

Turkish environmental law expressly incorporates this principle.

Under Article 3 of Environmental Law No. 2872, expenses incurred for preventing, limiting and eliminating pollution or environmental degradation and improving the environment are, as a general principle, borne by the person causing the pollution or degradation. Where public authorities are required to intervene because the responsible person fails to perform those obligations, the resulting public expenditure may be recovered from the responsible party.

This principle has major consequences for project closure.

Environmental responsibility does not necessarily disappear when:

• production ceases;
• the operating licence expires;
• a facility is sold;
• the operator becomes insolvent;
• equipment is removed; or
• the site is no longer commercially productive.

Where environmental damage remains, the legal consequences may continue after the economic life of the project has ended.

4. Strict Environmental Liability Under Turkish Law

Turkey’s Environmental Law establishes a particularly important liability rule for environmental damage.

Article 28 provides that persons causing pollution or environmental degradation may be liable for resulting damage regardless of fault. The provision also preserves liability arising under the general rules of compensation law.

This considerably changes the risk analysis for industrial operators.

A claimant does not necessarily have to demonstrate that a sophisticated mining or energy company intentionally polluted the environment or negligently failed to follow industry practice before environmental liability becomes relevant.

The distinction between fault-based civil liability and statutory environmental liability therefore matters considerably.

From an investment perspective, compliance with licences and technical standards remains extremely important, but compliance alone should not automatically be assumed to eliminate every possible environmental compensation exposure.

Environmental damage may generate several categories of risk simultaneously:

administrative remediation obligations, civil compensation claims, administrative fines, contractual claims, licence consequences and, depending on the circumstances, additional public-law or criminal consequences.

Environmental risk should therefore be analysed as a multi-layered liability regime, rather than simply as a possible environmental fine.

5. Historical Pollution: Who Pays for Damage Created Years Ago?

Historical contamination is one of the most difficult issues in international acquisitions.

Consider a mining site that has operated since the 1980s.

Operator A conducted mining activities for twenty years.

The project was then transferred to Operator B.

Years later, groundwater contamination is discovered beneath the processing area.

Who is responsible?

The answer cannot safely be determined merely by examining the current registered owner.

The legal analysis may require examination of:

• who caused the contamination;
• when the pollution occurred;
• whether contamination continued after the transfer;
• who currently owns or operates the site;
• what environmental obligations accompanied the transfer;
• whether environmental authorities have issued remediation orders;
• what representations were made in the transaction documents; and
• whether the seller remains solvent and available to satisfy an indemnity.

Turkey’s Regulation on Soil Pollution Control and Point-Source Contaminated Sites is particularly important in this context.

The Regulation provides a framework for identifying contaminated sites, investigating contamination, preparing clean-up plans, implementing remediation and conducting post-remediation monitoring. It also links liability for soil and groundwater contamination to the Environmental Law.

Crucially, the Regulation also addresses changes in ownership. Where ownership of a regulated site or facility changes, the new owner is required to comply with obligations imposed under the Regulation.

This is a major transactional risk.

It means that a purchaser cannot simply assume:

“We did not cause the contamination, therefore the contamination is irrelevant to us.”

The person who historically caused the pollution and the current owner or operator may face different forms of responsibility under the applicable regulatory framework.

6. Environmental Liability in Share Deals and Asset Deals

The transaction structure can significantly affect environmental exposure.

Share Acquisition

In a share acquisition, the legal entity owning the project normally remains the same company.

The shareholder changes, but the project company continues to exist.

Accordingly, historical liabilities sitting within that company do not generally disappear merely because ownership of its shares changes.

If the target company incurred environmental obligations before closing, those liabilities may remain within the target after the buyer acquires it.

This is why environmental due diligence is particularly important in the acquisition of mature mining, oil and gas businesses.

A purchaser may effectively be acquiring not merely reserves, licences and infrastructure, but also decades of accumulated environmental exposure.

Asset Acquisition

An asset acquisition may provide greater flexibility in defining which contractual liabilities are assumed.

However, it does not necessarily allow the purchaser to exclude environmental responsibilities imposed by public law.

This distinction is essential.

A sale agreement may provide:

“The Seller shall remain responsible for all environmental contamination occurring before the Closing Date.”

That provision may be commercially valuable between seller and buyer.

However, it does not necessarily prevent an environmental authority from exercising statutory powers against a person who is legally responsible under mandatory environmental legislation.

The buyer may therefore first be required to deal with the regulator and subsequently pursue the seller under the contractual indemnity.

Contractual allocation of environmental risk and statutory environmental liability are therefore two separate questions.

7. Environmental Due Diligence Must Go Beyond Reviewing Permits

A common mistake in acquisitions is to conduct environmental due diligence by asking only whether the target holds valid licences.

A valid permit is important.

It does not establish that the property is uncontaminated.

A meaningful environmental review should examine the actual historical use of the site.

For older energy and mining projects, the review may require analysis of previous operators, production methods, waste-disposal areas, historic spills, tailings facilities, underground tanks, chemical storage, groundwater data, administrative inspections and historical environmental reports.

Where the risk profile justifies it, documentary review may need to be supplemented by physical investigation, sampling or environmental site assessment.

For an investor, the critical distinction is between:

known liability and unknown liability.

A known EUR 10 million rehabilitation obligation can be modelled into the purchase price.

An unidentified environmental problem capable of developing into EUR 100 million of remediation exposure cannot.

Environmental due diligence therefore serves not merely a compliance function but also a valuation function.

8. Mine Closure Under Turkish Law

Mining creates particularly significant closure obligations because extraction itself alters the physical structure of the land.

Turkey substantially strengthened the legal framework surrounding mining rehabilitation through amendments introduced by Law No. 7554 in 2025 and the subsequent Regulation on Rehabilitation in Mining Areas published on 23 January 2026.

The new framework represents an important development for both existing Turkish mining companies and foreign investors considering Turkish mining assets.

Under the 2026 Regulation, rehabilitation is not treated merely as an activity to begin after the last tonne of ore has been produced.

The regulatory approach is based on the principle that rehabilitation should begin together with mining activities, continue throughout the operational period and be completed following termination of mining activities. The rules also address active licences and areas affected by surrendered or cancelled licences.

This is a significant conceptual shift.

Rehabilitation is increasingly a progressive operating obligation, not simply an end-of-life obligation.

9. Rehabilitation Projects in Turkish Mining Operations

The rehabilitation process is based on a project prepared for the affected mining area.

Under the 2026 regulatory framework, rehabilitation planning may include measures concerning land stability, reshaping, soil restoration, revegetation and future land use.

The rehabilitation project is submitted to MAPEG for the relevant approval process, while additional environmental authority involvement may arise in specially protected areas.

The practical importance for international investors is substantial.

The rehabilitation plan should be reviewed alongside:

• the mining licence;
• operational plans;
• reserve life;
• annual production;
• waste-management arrangements; and
• financial models.

An investor calculating the net present value of a mine without analysing the approved rehabilitation obligations may materially overvalue the project.

The closure plan is therefore a financial document as much as an environmental document.

10. Turkey’s New Rehabilitation Fee

The amendments to the Mining Law also introduced a separate rehabilitation fee regime.

Under the amended framework, rehabilitation funds are associated with operating licences and are intended to provide financial resources for rehabilitation obligations.

MAPEG confirmed that, from 1 January 2026, operating licences in force became subject to an annual rehabilitation fee corresponding to the applicable operating-licence fee.

MAPEG further confirmed in June 2026 that the rehabilitation fee had become a separate payment obligation and that non-payment within the statutory period could result in cancellation of the mining licence.

The statutory structure also protects the rehabilitation fund for its designated purpose. Amounts collected are intended for rehabilitation, and where the licence holder has fully satisfied the relevant rehabilitation obligations, the unused portion may be refundable under the applicable rules.

This mechanism is particularly significant from the perspective of project finance.

Closure liability is no longer merely an accounting estimate that may become relevant twenty years later.

It is increasingly reflected through present-day regulatory financial obligations.

11. What Happens If a Mining Company Fails to Rehabilitate?

The effectiveness of an environmental regime depends largely on what happens when the operator does not perform.

The Turkish rehabilitation framework provides mechanisms allowing rehabilitation to be carried out by the relevant public authority where the licence holder fails to satisfy its obligations.

In such circumstances, the available rehabilitation funds may be used and, where the actual rehabilitation expenditure exceeds the available amount, the additional cost may be sought from the responsible licence holder under the applicable public-receivables regime.

This has two important consequences.

First, abandonment of the project does not necessarily terminate the financial obligation.

Second, a financial security mechanism may reduce—but does not necessarily cap—the operator’s actual environmental exposure.

An investor should therefore never assume that payment of a rehabilitation fee represents the maximum possible cost of closure.

The actual cost of bringing the site into regulatory compliance may exceed the financial security already provided.

12. Tailings, Mining Waste and Long-Term Closure Liability

Mine closure cannot be understood without examining mining waste.

A mine may stop producing ore while its largest environmental risks remain in place.

Tailings facilities, waste-rock dumps and contaminated water systems can require continued management long after extraction ends.

Turkey’s Mining Waste Regulation governs mining waste from generation through final management and contains requirements concerning waste-management planning, operation and closure.

The closure of a mining-waste facility may require a specific closure project. The regulatory framework addresses technical matters including stability, drainage, impermeability and other measures required for environmentally safe closure.

For certain higher-risk mining-waste facilities, financial-security mechanisms are particularly important because the environmental consequences of failure can extend far beyond the licensed mining area.

Tailings liability may include risks arising from:

dam failure, seepage, contaminated drainage, acid mine drainage, groundwater impacts, dust emissions and long-term structural instability.

Unlike demolition of a factory, these risks may remain relevant for decades.

For that reason, sophisticated mining transactions should analyse not merely mine closure costs, but also post-closure stewardship costs.

13. Mining Operations on Forest Land

Mining projects located within forest areas may involve an additional layer of closure obligations arising from forestry legislation and permits.

Where mining-related permissions terminate, infrastructure may be required to be removed and the affected area rehabilitated in accordance with applicable forestry and mining-waste requirements. Turkish forestry legislation contains specific mechanisms concerning restoration of areas affected by mining activities.

This illustrates a wider principle applicable to international projects:

one project may have several different closure regimes simultaneously.

A mining licence may terminate, while environmental, forestry, water, waste-management and land-use obligations continue independently.

Closing the primary operating licence therefore does not necessarily close the regulatory file.

14. Decommissioning of Oil and Gas Projects in Turkey

Oil and gas projects raise a different category of decommissioning obligations.

Under Turkish Petroleum Law No. 6491, petroleum-right holders are subject to obligations concerning environmental protection and restoration.

The statutory framework requires petroleum operators, following the completion of petroleum operations, to restore affected land and contains obligations relating to protection of land, surface and underground waters and the wider environment. It also provides for security in connection with potential damage arising from petroleum operations.

The implementing framework further addresses abandonment of petroleum areas and removal of facilities.

Where petroleum rights terminate or areas are abandoned, the operator may be required to provide inventories and plans concerning underground and above-ground installations and the method and timetable for their removal. The legislation also addresses restoration of land following termination of the relevant use rights.

Accordingly, petroleum decommissioning may include:

well plugging and abandonment, removal of production equipment, pipeline treatment or removal, restoration of access roads, management of contaminated soil, treatment of drilling wastes and restoration of affected land.

An investor acquiring a mature petroleum field should therefore investigate not merely proven reserves and remaining production life, but the abandonment liability associated with every existing well and installation.

15. Mature Oil and Gas Assets Can Contain Hidden Decommissioning Debt

Consider an oil field with 100 producing and non-producing wells.

The field may still generate positive cash flow.

However, every well will eventually require plugging, abandonment or another legally acceptable closure procedure.

The investor’s economic position therefore consists of:

remaining production value minus future abandonment liability.

This is why decommissioning can effectively operate as a form of hidden debt.

The issue becomes particularly important where mature fields are transferred from a major international operator to a smaller independent company.

The purchasing company may have sufficient resources to purchase and operate the field but insufficient financial capacity to decommission it decades later.

Regulators and transaction parties therefore increasingly focus on financial security, parent-company guarantees and decommissioning-security arrangements.

The most important commercial question becomes:

who will have the financial capacity to perform the abandonment obligation when production finally ends?

16. Decommissioning of Energy Infrastructure Beyond Oil and Gas

Closure issues are not limited to extractive industries.

Thermal power stations, refineries, storage terminals, renewable-energy facilities and other industrial energy projects may also require substantial end-of-life work.

Depending on the project, obligations may arise from:

• environmental-impact assessment commitments;
• waste legislation;
• contaminated-soil legislation;
• environmental permits;
• land-use or lease agreements;
• forestry permissions;
• concession arrangements; and
• sector-specific licensing conditions.

Turkey’s Environmental Impact Assessment framework may also become relevant where activities subject to EIA requirements are implemented or terminated in circumstances requiring restoration measures. The current EIA Regulation provides regulatory consequences for projects proceeding without required environmental approval, including restoration-related obligations in the circumstances prescribed by the Regulation.

Therefore, the absence of a single statute entitled “Power Plant Decommissioning Law” should never be interpreted as meaning that decommissioning is legally unregulated.

Closure responsibilities may instead be distributed across several overlapping legal regimes.

17. Contaminated Soil and Groundwater May Survive the Facility

One of the most important principles for investors is that buildings are temporary, but pollution can be persistent.

A refinery may be demolished.

A storage terminal may disappear.

A mine-processing facility may be removed.

Yet hydrocarbons, heavy metals, solvents or other contaminants may remain in soil or groundwater.

Turkish contaminated-land regulation establishes procedures through which potentially contaminated sites may be investigated, classified and subjected to clean-up and monitoring requirements. Where remediation is required, the process may involve preparation of clean-up planning documents, implementation of remediation measures and subsequent monitoring.

Accordingly, legal completion of demolition works should not automatically be considered environmental completion of the project.

The relevant closing question is:

Has the contamination risk been legally resolved, or has only the infrastructure been removed?

18. Environmental Liability Can Outlive the Commercial Contract

Energy and mining projects frequently involve EPC contractors, operators, joint-venture parties and service providers.

These contracts may allocate responsibility for environmental damage.

For example, an operating agreement may state that the operator is responsible for pollution resulting from operational negligence.

An EPC contract may impose responsibility on the contractor for spills during construction.

A sale agreement may allocate pre-closing pollution to the seller and post-closing pollution to the buyer.

Such clauses are commercially essential.

But they must be distinguished from the rights of regulators and third parties.

Public environmental law may identify a legally responsible operator independently of the contract.

Therefore, a contractual indemnity may determine who ultimately bears the economic cost between the parties, without necessarily determining whom the regulator may initially pursue.

This distinction is one of the most important drafting principles in environmental transactions.

19. Environmental Representations and Warranties in M&A Transactions

Environmental representations and warranties should be specifically negotiated rather than hidden within a generic compliance representation.

For a mining or energy acquisition, the seller may be asked to represent that:

all material environmental permits are valid; no undisclosed remediation orders exist; there have been no unreported material releases; waste has been lawfully managed; environmental reports disclosed to the buyer are complete; no material contamination is known outside disclosed areas; tailings and waste facilities comply with applicable requirements; and no material administrative investigation is pending.

The buyer should then consider whether an ordinary warranty claim provides sufficient protection.

Environmental liabilities can emerge years after closing.

Accordingly, environmental warranties often require different survival periods, liability caps or specific indemnities from ordinary commercial warranties.

Where a known contamination issue has already been identified, a specific environmental indemnity may be preferable to relying on a general representation.

20. Environmental Indemnities Must Be Drafted Carefully

An effective environmental indemnity should answer several difficult questions.

What constitutes an environmental loss?

Does the indemnity cover only third-party claims or also voluntary remediation?

Does it cover investigation costs?

Are legal fees included?

Does it include groundwater contamination discovered outside the property?

Is liability triggered by contamination existing before closing or only by a regulatory order?

Who controls remediation?

Can the seller insist on the cheapest technically compliant solution?

What happens if the buyer changes the site’s future use and thereby increases remediation standards?

How long does the indemnity survive?

Is there a financial cap?

Is security available if the seller later becomes insolvent?

The drafting should also address whether environmental costs include:

consultants, sampling, excavation, transportation, waste disposal, groundwater treatment, monitoring, regulatory fees, penalties where legally indemnifiable, third-party claims and loss arising from restrictions on use.

A poorly drafted environmental indemnity can create almost as much litigation as the environmental contamination itself.

21. Financial Security for Decommissioning

Because closure obligations arise in the future, the identity of the responsible company may change many times before closure occurs.

For this reason, regulators, investors and lenders frequently require some form of financial assurance.

Depending on the legal and contractual framework, security can take the form of:

bank guarantees, letters of credit, escrow accounts, reserve funds, trust arrangements, parent-company guarantees, surety instruments or dedicated rehabilitation funds.

The fundamental objective is the same:

money should remain available when the environmental obligation eventually becomes due.

The Turkish mining rehabilitation-fee regime introduced into implementation in 2026 reflects the same broader policy objective by creating dedicated financial resources connected with rehabilitation obligations.

However, regulatory financial assurance should not automatically be assumed to equal actual closure cost.

The two figures may be materially different.

22. Decommissioning Cost Estimates Must Be Updated

A closure estimate prepared when a project begins may be seriously inaccurate fifteen years later.

Costs may change because of:

inflation, new environmental legislation, changed waste-disposal costs, deterioration of infrastructure, expansion of the disturbed area, new contamination, higher labour costs, revised engineering standards or stricter rehabilitation requirements.

For this reason, sophisticated project structures periodically update the decommissioning estimate.

The model should distinguish between:

nominal future cost, present value of that cost and financial security actually available.

This is especially important in acquisitions.

A balance sheet may contain an accounting provision for closure, but that accounting provision should not automatically be assumed to represent the amount required to satisfy the legal obligation.

Independent technical and legal verification may be necessary.

23. International Standards: The EU Environmental Liability Directive

For projects connected with European jurisdictions, the Environmental Liability Directive 2004/35/EC provides an important reference point.

The Directive is based on the polluter-pays principle and establishes a framework under which operators responsible for qualifying environmental damage may be required to prevent and remediate that damage.

The European framework distinguishes between forms of environmental remediation including primary, complementary and compensatory remediation in relevant cases.

The basic concept is not simply financial compensation.

Where possible, the environmental resource itself should be restored towards the relevant baseline condition, with additional mechanisms addressing situations where full restoration at the damaged location cannot immediately be achieved.

For international investors, this illustrates a fundamental feature of modern environmental law:

environmental liability is increasingly restorative rather than merely compensatory.

Paying damages does not necessarily replace the obligation to remediate the environment.

24. EU Mining-Waste Rules and Financial Guarantees

The EU Extractive Waste Directive, Directive 2006/21/EC, is another important international reference point for mining projects.

The framework addresses management of waste from extractive industries and includes requirements concerning operation, closure and after-closure of mining-waste facilities.

It also provides for financial guarantees designed to ensure that relevant closure and rehabilitation obligations can be satisfied, including where implementation must ultimately be undertaken independently of the operator.

The underlying policy is particularly relevant to investors:

the financial resources necessary for rehabilitation should exist before the operator disappears.

This principle increasingly influences regulatory regimes, lender requirements and ESG expectations far beyond the European Union.

25. International Lenders and Good International Industry Practice

Domestic environmental law establishes minimum legal requirements, but internationally financed projects frequently face an additional contractual layer.

International lenders, development-finance institutions and export-credit structures may require compliance with international environmental and social standards beyond the minimum requirements of local legislation.

The IFC Environmental, Health and Safety Guidelines, for example, are presented as technical reference documents reflecting Good International Industry Practice (GIIP) and are used within World Bank Group project frameworks alongside sector-specific guidance.

Consequently, an operator may theoretically satisfy the minimum requirements of domestic environmental law while remaining in breach of financing covenants requiring compliance with international standards.

For project sponsors, the relevant question is therefore not simply:

“Is this lawful under domestic legislation?”

It may also be:

“Does this comply with the environmental standard incorporated into the financing agreement?”

26. Lender Exposure to Closure Risk

Banks financing long-life mining and energy projects should analyse closure obligations as part of credit risk.

A lender may not ordinarily be the primary polluter.

Nevertheless, inadequate decommissioning planning can affect:

• project cash flow;
• reserve accounts;
• debt-service capacity;
• asset valuation;
• enforceability of security;
• refinancing prospects; and
• recovery value following default.

A secured lender contemplating enforcement over a contaminated industrial asset may discover that the collateral has a negative value after environmental costs are included.

For that reason, sophisticated financing documentation may require:

periodic closure-cost estimates, maintenance of environmental permits, dedicated reserve accounts, independent technical reviews, limits on distributions where closure funding is inadequate and lender consent for material changes to rehabilitation plans.

Environmental due diligence is therefore also credit due diligence.

27. Joint Ventures and Decommissioning Liability

Mining and upstream petroleum projects are frequently operated through joint ventures.

A joint operating agreement may allocate operating expenses according to participating interests.

But decommissioning creates a special risk:

what happens if one participant becomes insolvent before closure?

Suppose four companies each own 25% of an oil project.

Twenty years later, one participant becomes insolvent just before substantial abandonment expenditure is required.

Unless contractual and regulatory protections are adequate, the remaining participants may face increased exposure.

Joint-venture documentation should therefore address:

decommissioning contributions, timing of funding, security requirements, defaulting participants, transfer of participating interests, release of former owners and the consequences of insolvency.

A party selling its interest should not automatically assume that the sale terminates every potential abandonment exposure.

Whether the seller is fully released depends on the governing regulatory regime, transaction documents and any required governmental consent.

28. Change of Control Does Not Erase Environmental History

International investors frequently acquire projects through offshore holding structures.

A holding company may be incorporated in London, Amsterdam, Luxembourg, Singapore or another financial centre.

Yet the environmental asset remains physically located in Turkey or another host state.

Changing the offshore shareholder does not physically change:

the contaminated land, the mine tailings, the abandoned wells or the groundwater plume.

This creates a central rule of international environmental transactions:

corporate structuring can allocate economic risk, but it cannot make the physical environmental problem disappear.

Accordingly, legal due diligence must follow the project down through the corporate structure to the actual operating asset.

29. Cross-Border Movement of Decommissioning Waste

Decommissioning can itself generate substantial quantities of waste.

Potential materials include:

contaminated soil, waste oils, chemical residues, asbestos-containing materials, mercury-containing equipment, transformers, hazardous catalysts and contaminated industrial machinery.

If such waste is exported for disposal or recovery in another country, international waste-shipment rules become relevant.

The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal establishes international controls over the transboundary movement of hazardous and certain other wastes and operates through notification, consent and environmentally sound management requirements.

Accordingly, a decommissioning contractor cannot safely assume that a hazardous material may simply be sold or transported abroad because a foreign recycling facility is willing to accept it.

Waste classification and cross-border transfer rules must be analysed before shipment.

30. Transboundary Environmental Damage

Some energy and mining projects can affect more than one country.

Potential examples include:

a tailings failure contaminating an international river basin, offshore petroleum pollution crossing maritime boundaries, groundwater systems extending across borders or air emissions affecting neighbouring states.

International environmental law increasingly recognises the importance of transboundary environmental assessment and consultation.

The Espoo Convention, for example, establishes a framework requiring environmental assessment, notification and consultation for certain projects likely to create significant adverse transboundary environmental effects in jurisdictions where the Convention applies.

Even where a particular treaty does not apply to a specific project or state, major international lenders and investors may require a comparable transboundary-risk analysis as part of project due diligence.

31. Environmental Disputes and International Arbitration

International energy and mining projects often contain arbitration clauses.

Environmental liabilities can therefore develop into international commercial disputes.

Typical disputes may concern:

whether historical contamination existed before closing; whether a seller breached an environmental warranty; whether an indemnity covers government-ordered remediation; whether closure costs should be shared among joint-venture participants; whether a contractor caused contamination; whether an operator complied with rehabilitation obligations; or whether a change in environmental law triggers a contractual adjustment mechanism.

However, arbitration cannot ordinarily replace the regulatory powers of the host state.

An arbitral tribunal may determine contractual responsibility between investor and seller, but the environmental authority may independently exercise statutory powers under domestic law.

Therefore, environmental disputes often operate on two parallel levels:

public-law proceedings with the regulator, and
private-law proceedings allocating the financial consequences between commercial parties.

Transaction documents should anticipate this possibility.

32. Investment Treaties and Environmental Regulation

Foreign investors may also hold rights under applicable bilateral or multilateral investment treaties.

Environmental measures adopted by a host state can sometimes become relevant in investment arbitration, particularly where investors allege expropriation, discriminatory treatment or breach of fair and equitable treatment standards.

However, environmental regulation falls within an area of strong public interest and state regulatory authority.

An investor should therefore be cautious before assuming that a stricter rehabilitation requirement or environmental enforcement measure automatically constitutes a treaty breach.

The legal analysis may require examination of:

the applicable investment treaty, legitimate expectations created by the state, proportionality, discriminatory treatment, existing domestic environmental obligations, the investor’s own compliance record and the state’s right to regulate for environmental protection.

The strongest investment strategy is normally not to rely on treaty arbitration as a substitute for environmental compliance, but to ensure that environmental risks are properly identified and documented from the beginning.

33. Climate Change May Alter Closure Assumptions

Decommissioning models prepared today may also be affected by future climatic conditions.

A tailings facility designed for historical rainfall patterns may face different precipitation intensity decades later.

A coastal energy installation may face changed flooding or sea-level risks.

Water scarcity may affect mine-water treatment and rehabilitation.

Wildfire risk may alter revegetation assumptions.

This means that long-term closure planning increasingly requires consideration of physical climate risk, particularly where environmental infrastructure must remain stable for decades.

The legal significance is straightforward:

a closure plan that was technically sufficient when first prepared may require revision as environmental conditions and regulatory standards evolve.

34. The Most Important Contractual Clauses

The legal structure of an international energy or mining transaction should therefore allocate decommissioning risk expressly.

At a minimum, transaction and project documents should address:

1. Closure responsibility: which party is legally and contractually responsible for decommissioning, rehabilitation and remediation.
2. Historical contamination: how pre-existing environmental damage is identified and allocated.
3. Closure standard: which domestic laws, permits, approved rehabilitation plans and international standards apply.
4. Cost estimates: how closure estimates are calculated, reviewed, audited and indexed.
5. Financial assurance: whether bank guarantees, escrow, rehabilitation funds, parent guarantees or other security must be maintained.
6. Environmental indemnities: scope, caps, survival periods, control of remediation and recovery procedures.
7. Transfer of the project: whether a seller remains liable after transferring its interest and when existing security may be released.
8. Post-closure monitoring: duration, performance standards, reporting and responsibility for unexpected environmental deterioration.
9. Waste management: responsibility for hazardous, mining and demolition waste, including cross-border movements.
10. Dispute resolution: coordination between regulatory proceedings, emergency relief and arbitration.

These issues should be negotiated before closing—not after environmental damage is discovered.

35. A Practical Due Diligence Example

Assume that an international mining group intends to acquire a copper mine in Turkey.

The mine has operated for twenty-five years and has approximately seven years of remaining reserves.

The seller presents an attractive EBITDA figure and a current mining licence.

A superficial transaction review may therefore suggest that the project is highly profitable.

A proper environmental review, however, may reveal:

an ageing tailings facility, historical groundwater contamination, an incomplete rehabilitation programme, a substantial future land-restoration obligation, insufficient closure provisioning and potential costs for long-term water treatment.

If these issues are valued correctly, the economics of the acquisition may change dramatically.

The purchaser may then seek:

a reduction in purchase price, a specific environmental indemnity, escrow security, a parent guarantee, pre-closing remediation, an enhanced rehabilitation reserve or, in an extreme case, withdrawal from the acquisition.

This example demonstrates why environmental liability is not peripheral ESG paperwork.

It is capable of determining the value of the transaction itself.

36. When Is a Project Really “Closed”?

The legal end of a project should not automatically be equated with:

the final day of production, expiry of the operating licence, removal of machinery or departure of employees.

A project is environmentally complete only when the legally required closure and remediation obligations have been satisfied to the applicable standard and any required post-closure monitoring or regulatory sign-off has been addressed.

For certain projects, this may occur years after revenue generation has stopped.

The tail of environmental liability can therefore be much longer than the tail of commercial operations.

This principle is particularly important when negotiating:

final distributions to shareholders, winding-up of project companies, release of guarantees and dissolution of special-purpose vehicles.

A company should not be stripped of assets and dissolved while material environmental obligations remain unresolved.

37. Strategic Lessons for International Investors

Three principles are particularly important for foreign investors entering the Turkish energy and mining sectors.

First, closure obligations must be analysed before acquisition.

Environmental liability should be treated as part of enterprise value and transaction pricing.

Second, contractual protection cannot replace regulatory compliance.

Representations, warranties and indemnities are essential, but the investor should understand whom Turkish public law may require to take action.

Third, financial assurance matters as much as legal responsibility.

An indemnity from a company that has become insolvent fifteen years later may have little practical value.

Where environmental exposure is material, the investor should consider whether the contractual obligation is supported by actual financial security.

Conclusion

Decommissioning and environmental liability represent some of the most underestimated risks in international energy and mining projects.

The end of commercial production does not necessarily mean the end of legal responsibility.

A mining operator may remain responsible for rehabilitation, waste facilities and environmental monitoring after extraction has ceased.

A petroleum operator may face obligations concerning removal of facilities, abandonment of wells and restoration of affected land.

An industrial-site purchaser may encounter contamination created decades before the acquisition.

A contractual seller may promise to retain historical environmental liabilities, while environmental regulators continue to exercise statutory powers against the current owner or operator.

Under Turkish Environmental Law, the polluter-pays principle and strict environmental liability provide an important foundation for environmental responsibility. Turkish contaminated-land legislation further demonstrates why ownership changes must be considered carefully when acquiring historically industrial sites.

For mining projects, the legal landscape has become particularly significant following the 2025 amendments to the Mining Law and the new Regulation on Rehabilitation in Mining Areas of 23 January 2026. The new system emphasises progressive rehabilitation and has made system emphasises progressive rehabilitation and has made rehabilitation funding a more visible and immediteturn713673search1turn833249search1turn833249search2

For international investors, the central lesson is therefore simple:

environmental liability should be priced when the investment begins, not discovered when the project ends.

Before acquiring, financing or developing a mining, petroleum or major energy project, investors should identify the applicable closure obligations, quantify expected decommissioning expenditure, investigate historical contamination, verify the adequacy of financial assurance and contractually allocate environmental risks among sellers, buyers, operators, joint-venture partners and contractors.

In large-scale international projects, the most valuable environmental document may therefore not be the permit authorising the project to begin.

It may ultimately be the documentation demonstrating that the project has been lawfully, financially and environmentally brought to an end.

This article reflects the general legal and regulatory framework as of August 2026 and is intended for informational purposes only. It does not constitute legal advice regarding any specific energy, mining or environmental project.