B.C. Taxpayers On The Hook for Underfunded Mine Disaster and Reclamation Costs

Taxpayers are being put at serious financial risk by gaping holes in B.C.’s mining regulations that allow companies to underfund mine remediation or disaster costs, says a new report by economist Robyn Allan.

The report, funded by the Union of B.C. Indian Chiefs, describes financial assurance policies for mine site reclamation as “woefully inadequate” and estimates there is more than $1.5-billion in unfunded liability — meaning taxpayers are on the hook both for mine site reclamation, when a company leaves a contaminated site, and for catastrophic events when a company is unable to pay.

“A regime to ensure mine owners have sufficient financial resources to pay for environmental damage and third-party losses from unintended mine accidents is non-existent,” wrote Allan, former CEO of ICBC and former senior economist for B.C. Central Credit Union.

The UBCIC report comes on the heels of a scathing assessment of B.C.’s mining practices by B.C. Auditor General Carol Bellringer and renewed pressure from U.S. politicians to have transboundary mines along the Canadian/U.S. border come under the scrutiny of an International Joint Commission.

Bellringer estimated a shortfall in financial security deposits of $1-billion, but Allan said the Ministry of Energy and Mines had $1.3 billion in site reclamation costs not funded by mine operators by March 2014 and the province has assumed responsibility for reclaiming abandoned mines which will cost another $275-million.

The costs could be higher today, but exact figures are not known as the province no longer makes the figures available, Allan said.

In theory, B.C.’s rules are based on polluter-pay principles, but, as there is no effective system of financial assurances to hold parties liable, B.C. residents and First Nations are picking up a burgeoning bill for mining-related environmental harm, Allan said in the report.

“The province’s failure to ensure that whenever polluters pollute, polluters pay, represents an obvious cost to taxpayers because taxpayers end up bearing the burden instead. If the cost does not fall to taxpayers, then it falls to society along with much of the clean-up, compensation, remediation and/or reclamation going unattended,” she said.

To make matters worse, provincial policies increase the risk of disasters as, with no clear liability, some companies cut corners and flout safeguards, according to Allan.

“In contrast, when a mining operator is unequivocally held financially responsible for its environmental impacts, positive outcomes result,” she said.

Under B.C.’s rules there are few inducements for companies to invest in techniques such as dry-stacking tailings that lower reclamation costs and reduce the risk of spills because the operator may never be held accountable if disaster strikes, Allan said, adding she wants to see companies post full security bonds for reclamation costs.

Other recommendations in the report include requiring companies to hold sufficient financial assurances to meet the full costs of environmental damage and third-party losses from mine accidents — with companies annually providing proof of those financial assurances — and creation of an industry-funded pool to cover catastrophic events if a polluter is unable to pay.

A claims process, independent from the mining company, should be set up for those who suffer environmental damage or losses and companies should publicly report every year on their reclamation plans, risk assessment and amount of security posted, Allan recommended.

Currently the province relies on reclamation estimates by mine operators and, despite the risk presented by the increasing number and growing size of tailings storage facilities, there is no requirement for mining companies to undertake an environmental risk assessment, says the report.

“Neither is there a requirement that companies provide proof to regulators that access to sufficient financial resources, including insurance, exists to meet obligations if an environmental harm event occurs.”

Grand Chief Stewart Phillip, Union of B.C. Indian Chiefs president, said B.C. is enabling a dangerous disregard for environmental monitoring and protection by letting mining companies off the hook.

“Other industrial sectors treat accident insurance and security deposits as a routine and fundamental cost of doing business and, if a warehouse catches fire, a pipeline bursts or a factory has to be shuttered, companies have money set aside to respond effectively and immediately,” Phillip said.

Instead of following the lead of jurisdictions such as Quebec and Alaska that insist on full funding for reclamation — something that creates a powerful incentive for companies to focus on safety and best practices — B.C has placed taxpayers at huge financial risk, Phillip said.

“Factor in the poor performance, lack of enforcement capacity and muddled political direction of the ministries of energy and mines and environment and the failure to ensure all mines are safe and held accountable and British Columbians have a great number of reasons to mistrust the mining sector,” he said.

UBCIC is calling on the B.C. government to adopt Allan’s and Bellringer’s recommendations.

After Bellringer’s report was made public, Mines Minister Bill Bennett said he accepted most of the recommendations, except for creation of an independent mining compliance office, and he agreed that the province’s compliance and enforcement regime needed improvement.

Bennett has also committed to acting on many recommendations that followed the collapse of the Mount Polley tailings dam in August 2014 — a disaster that spilled millions of litres of sludge and mine waste into Quesnel lake and surrounding waterways in central B.C.

The ministry did not respond to questions from DeSmog Canada on the Allan report in time for publication.

The report is underlining concerns of Southeast Alaskans who have watched a proliferation of mines along the B.C./Alaska border and, as an example of the lack of enforcement in B.C., they point to continued pollution, stretching over decades, from the Tulsequah Chief mine where rusty, acidic water is draining into a tributary of the Taku, one of Alaska’s major salmon producing rivers.

The report underscores existing grave concerns about the lack of financial assurances, said Heather Hardcastle of Salmon Beyond Borders, who wants to see an adequate bonding system in place.

“We are demanding that the state, the province and both federal governments come up with a mechanism to make sure we will be protected downstream,” she said.

“This is why we need an international solution to an international problem. The money has to be set aside to adequately cover a catastrophe that most likely will happen.”

The Allan and Bellringer reports are timely as the issue is gaining increasing traction with both federal governments, Hardcastle said.

Chris Zimmer of Rivers Without Borders said the reports are significant because mines in the Taku, Stikine and Unik watersheds will have long-term acid mine drainage and water treatment needs that are not currently funded.

“It’s now more important than ever that Secretary (John) Kerry work with the Canadian federal government to ensure Alaska’s water and salmon are not harmed by mining in B.C.,” he said.

Image: Tulsequah Chief mine on the banks of the Tulsequah River, a tributary of the Taku/Rivers Without Borders.