B.C. is supposed to have a polluter-pay policy, but that’s not the reality on the ground according to experts

It’s been five years since the Mount Polley tailings dam burst and spilled 24 million cubic metres of mining waste into critical salmon habitat in the Fraser River watershed, but B.C. hasn’t learned its lesson, according to a new report released on Tuesday.

If another mining accident happened today, B.C. taxpayers would still be at risk of paying the clean-up bill according to the report released by the First Nations Energy and Mining Council, which calls on the B.C. government to compel mining companies to provide funds for cleanup.

“The lack of financial assurance for mining disasters is a serious policy gap in British Columbia — one that increases the risk of another Mount Polley,” said report author and economist Jason Dion. “By implementing smart financial assurance requirements, B.C. can better protect the public while still ensuring a thriving mining sector in the province.”

The cost of cleaning up B.C.’s abandoned mine sites was pegged at more than $500 million in 2016.

Financial assurance is a system of ensuring funds are available to pay for a cleanup even if a company goes bankrupt. It screens out companies that can’t afford the risk of their own projects.

British Columbia currently relies on a phased system of financial assurance, in which companies do not have to put up the full estimated clean-up cost up front; companies can rely in part on the value of the untapped commodities in the ground, an approach that is vulnerable to commodity swings, company bankruptcies and technological innovations at competing mines elsewhere in the world, Dion says.

Two tailings dam failures expected each decade under current regulations

The expert panel that reviewed the cause of the Mount Polley mine disaster warned B.C. can expect two dam failures every 10 years unless mining laws are updated. Nearly five years later, no fines and no charges have been laid against the mine’s owner Imperial Metals, which is now on precarious financial ground. One economist has estimated that British Columbians are on the hook for a $40 million clean-up bill for the Mount Polley disaster.

“B.C. has a polluter-pay policy under its Environmental Management Act, but that’s not the reality on the ground,” said Allen Edzerza of the First Nations Energy and Mining Council.

“By accepting our recommendations, the government would not only ensure that polluters pay when there are disasters, it would also reduce the risk of another Mount Polley by giving mining companies a financial incentive to reduce risk in their operations.”

The recommendations would bring the mining sector into line with other heavy industrial sectors — pipelines, offshore oil and gas production, tanker traffic and nuclear power generation — which must provide financial security against the risk of disaster, in many cases up to $1 billion, according to the report.

A June report from the First Nations Energy and Mining Council found that British Columbia does not need to reinvent the wheel in terms of mining rules. It can emulate other jurisdictions such as Quebec and the United States.

A case in point: in 2013 Quebec tabled legislation requiring all new mines to provide a guarantee sufficient to cover the estimated costs of clean up. A mining operation today must provide a financial guarantee in three separate payments in the earliest stages of mine life: 50 percent of the total amount within 90 days of mining plan approval, with two payments of 25 percent each, made on the subsequent anniversaries of approval.

‘The power exists to do it today’

These changes could be made in B.C. with a stroke of the pen, says report author Dion, a researcher at Ottawa’s Ecofiscal Commission.

“The power exists to do it today,” he says of requiring any new B.C. mine to put up a full clean-up cost with cash or other secure financial instruments. “Under this scenario, only the mines that could afford to clean themselves up would go forward, from now on. This is definitely low-hanging fruit.”

This spring, the B.C. Ministry of Energy, Mines and Petroleum Resources confirmed it was engaging industry and First Nations on legislative changes to the Mineral Tenure Act, specifically around changes to placer mining and mineral tenure rules. In late July, a spokesperson for the ministry confirmed that there are also plans to change B.C.’s reclamation security policy this year, although details and more specific timelines were not provided.

The Quebec policy shift, part of a wider body of reforms, is noteworthy because a big multinational mining company operating in Quebec today needs to put up full clean-up costs upfront, regardless of how much money it has in the bank. Meanwhile in B.C., mining giant Teck Resources has unsecured reclamation costs of $700 million for its mines.

Tulsequah Chief mine polluting for decades

Emulating the Quebec approach could eliminate the conditions that created the fiasco at northern B.C.’s Tulsequah Chief mine. In that instance, a large company developed the mine and later sold it off, only to be taken over by a succession of small players without the means to clean it up.

The Tulsequah Chief, which has been polluting a shared Alaska-B.C. transboundary salmon river for decades, has not only strained B.C.’s reputation and relationship with Alaska, but B.C. taxpayers are now on the hook to pay for clean-up.

B.C. also gives its Chief Inspector of Mines, an unelected bureaucrat appointed by the ministry, a large amount of discretion in setting the terms of financial assurance, which appears to occur on an ad hoc, mine-by-mine basis without posted guidelines. The province did not facilitate The Narwhal’s request for an interview with Herman Henning, B.C.’s new Chief Inspector of Mines. Henning’s LinkedIn page as of July 24 showed his current occupation as a “self-employed mining consultant.”

Edzerza of the First Nations Energy and Mining Council cautions that more is necessary than simply insisting on full up-front reclamation costs. Mechanisms are also needed to ensure that estimated reclamation costs reflect the real clean-up cost — including when a mine expands beyond the originally permitted size.

‘No negative effect’ from Quebec’s strengthened reclamation policy

In Quebec, political will was required to make the policy changes. Government faced criticism from a wide range of industry-related groups in the lead-up to the changes, including warnings that tougher bonding rules would make the sector internationally uncompetitive.

But more than five years later, the sky has not fallen in Quebec.

“There has been no negative effect on investment attraction,” wrote Sylvain Carrier, a spokesman for Quebec’s Ministry of Energy and Natural Resources, in an email to The Narwhal. “This policy change had a positive effect on public confidence, fostering social responsibility, and on mining investment.”

Carrier says that in 2014, the year after the changes were made, total mining investment in Quebec was $2.9 billion; last year, it was more than $3.1 billion.

“We can say with reasonable confidence that [the Quebec changes] haven’t led to the kind of major crash in mining sector investment that some might have predicted when the policy was put on the table,” says Dion. “It might mean less mining investment, but given the risks and costs of remediating some of these mines, if they cannot pay their own costs down the line, that might make sense.”

Dion cites the latest Fraser Institute’s annual survey of mining companies, sent to 2,600 global mining professionals, which ranked Quebec fourth out of 83 mining jurisdictions in terms of “investment attractiveness.” British Columbia came in at number 18.

The Quebec Mining Association (Association Minière du Québec), one of the groups that cautioned about the changes in advance, declined comment for this story.

Should B.C. have a Superfund program?

One approach to paying the massive costs of future disasters, recommended in the June report from the First Nations Energy and Mining Council, is for British Columbia to create something akin to the U.S. federal government’s Superfund program.

Superfund is the name given to 1980 federal U.S./ legislation that empowers the Environmental Protection Agency (EPA) to clean up contaminated sites, forcing parties responsible to either perform cleanups or pay for government-led cleanup work.

At its outset, Superfund was funded by excise taxes on the petroleum and chemical industries, which makes it a useful model to consider for raising money to deal with future industrial disasters in B.C. Dion says it might be possible to “pool risk” across industrial sectors that are provincially regulated — for example, requiring mining and natural gas fracking companies to pay into a single disaster clean-up fund.

“We think the Superfund [approach] should be looked at closely as a model to replicate,” Edzerza said. “Because as we found out with Mount Polley, you’ve got to scramble to find funds to initially respond, and then to assess [damages] and do restoration work.”

Such an approach creates an industry-wide incentive — a sort of peer pressure — to ensure that all companies across a sector don’t let operations slip, because each company is indirectly on the hook for costs if a disaster occurs.

While this pooled risk approach is commonplace in many sectors, not a single province or territory in Canada currently uses such an approach to pay the cost of mining disasters.

— With files from Emma Gilchrist

View of the north dam and lower seepage collection dam at the Red Chris mine, owned by Imperial Metals, in northwestern B.C. Photo: Garth Lenz / The Narwhal