Mining's prosperity must come with taxpayer protection
It's a time to reflect on both the risks and benefits of the sector
The economic benefits of mining are very real for B.C., but so too are the environmental risks and the risks to taxpayers — who can get stuck with the costs of cleanup. The province has a legacy of toxic orphaned and abandoned mine sites that it is dealing with to this day. And the 2014 Mount Polley tailings spill provided a visceral reminder of the risks that ongoing operations can present.
May is mining month in B.C., and as we reflect on the benefits that mining can bring to the province, so too should we reflect on the risks. When mining companies go bankrupt, B.C. taxpayers can end up saddled with the costs of cleaning up their environmental liabilities. While the abandonment of mines by bankrupt owners is not the problem it once was, it continues to occur in B.C. For example, in 2015 the Yellow Giant Mine in Northern B.C. was shut down for unauthorized effluent discharges and several permit violations. Its owner filed for bankruptcy in 2016, leaving behind an unremediated mine site. The costs of cleaning up the site will likely fall to taxpayers.
A 2016 report by B.C.'s auditor general recommended that the government reform its approach to collecting financial security from mining operations (bonds or other financial resources that the government has companies post against the costs of mine remediation), to ensure that the “polluter pays.” These changes are still needed. As of last year, the financial security held by the province against the costs of mine remediation was $1.1 billion short of the sector's total estimated cleanup liability, leaving taxpayers at risk.
Recently, the province has announced a new policy that helps to close these kinds of gaps. Some welcome changes include a standardized approach to financial assurance requirements (rather than the current, more ad-hoc one), improved incentives for companies to minimize
When mining companies go bankrupt, B.C. taxpayers can end up saddled with the costs.
on-site environmental damage and complete cleanup as they go, and the addition of a 15-per-cent contingency on requirements in recognition of the fact that actual cleanup costs can often end up exceeding estimates.
While there are areas for improvement in the policy, it presents an important step forward that will help the sector tap its significant growth opportunities in ways that are environmentally responsible.
But more work remains to be done. While protections exist to help avoid taxpayers getting stuck with the cost of cleaning up mine sites at the end of their lives (protections that are even stronger now), there is no such coverage for mining disasters like the Mount Polley spill. The 2014 breach spilled 24 million cubic metres of waste and tailings into Quesnel Lake and nearby creeks and rivers, making it the largest tailings dam failure in Canadian history. Communities impacted by the Mount Polley disaster are still waging a frustrating legal battle for compensation from the mine's owner, Imperial Metals. But imagine what might have happened had the company been bankrupted by the spill.
If a Mount Polley-like disaster were to occur again in B.C. and the responsible company was bankrupted, a large share of the cleanup costs would likely fall to taxpayers.
The Mount Polley Independent Expert Engineering Investigation and Review Panel found that based on past experience in B.C., there is a one in 600 chance of a tailings pond failure in any given year — a not insignificant risk. The panel firmly rejected a “business as usual” regulatory approach.
On this front, the government has recently launched a discussion paper and public consultation process on a “public interest bonding strategy” for industrial projects. The public is invited to participate in the online discussions and to submit ideas until May 28.
Smart policy will be needed here. It is critical that the province takes an approach that balances the need for a thriving, world-class mining sector in B.C. with the need to protect taxpayers and the environment.
Jason Dion is an economist and research director, with Climate Choices Canada; Nancy Olewiler received her PhD in economics from the University of B.C. and is currently the director of and professor in the School of Public Policy at Simon Fraser University.