Environmental liability and risk related to mine closure in Canada

With a growing number of mines reaching closure and seeing closure costs materialize, regulators, lenders and banks are observing projects that fail economically by miscalculating these costs. Mine closure costs are often categorized as a type of liability, which is defined as the money owed by the company to offset effects from the project and the money available to pay for those debts, such as bonds. Often, decisions made before the first day of mining — such as co-disposal, dry stack tailings, waste segregation — can significantly change the bond calculation. Once the bond is calculated and funded, operators are encouraged to conduct closure research and use applied science for progressive bond release prior to final closure. However, the author has observed few instances of financially significant progressive bond release, as there are typically no robust procedures for bond return, either before or during closure activities. As a result, many companies decide that entering a state of care and maintenance (C&M) is less risky than attempting to fund closure activities with an unknown bond return mechanism. Although perhaps less risky in the short term, the primary long-term risk with entering C&M is that it increases the chances of the bond not covering the cost of closure and the chances of the government/regulatory agency inheriting the mine closure. Bonds are typically reevaluated on a regular cycle, such as five years, so every mining company goes through this financing challenge eventually. Challenge As a result of the situation described above, the number of mines that have been fully closed in Canada is relatively small. Most of the inactive, unclosed mines are operating under C&M conditions or classified as orphaned or abandoned. The goal of the closure bond is to ensure the responsible government agency can seize the bond and use it to implement closure in the event of abandonment. There are examples in Canada where the federal government applied the closure bond to reclaim abandoned mines to varying degrees of success. The cost of state-run mine closure activities after abandonment often exceeds the bond amount. This overrun is often due to several factors, including but not limited to: Lack of robust scientific methods, execution details and overall integration in the interim closure plan leading to an underestimation of the bond. Wording in the mine license that states a closure plan only needs to be submitted one year before reaching closure. Bond amount reduced over time from spending during C&M or emergency repairs, which comes from the same source of funding as the bond. The bond estimate does not account for the depreciation expenses of structures and equipment. Changes in legislation, standard practice or stakeholder requirements from the time of bond establishment, which may require new environmental and engineering studies that were not considered in the original estimate. The predicted long-term growth of the bond is not met, therefore insufficient funding is available to match inflation. Realistically, the most effective way to close mines is to have the operators close their own sites. The operators are the ones who have the institutional knowledge and the practical understanding that comes from physically working at the mine. Mining companies should be encouraged to advance their inactive properties from C&M to active closure wherever practicable; however, the current lack of transparency around bond return does not inspire that intended behavior. As previously introduced, part of the predicament for the mining companies is there are no reliable mechanisms to release the bond, which could impair and burden companies with further closure spending. The province of British Columbia, one of the largest mining jurisdictions in Canada, held bonds for both active and inactive mines to an estimated total of C$4.13 billion in 2025 (Fig. 1). This pool of credit should provide a strong incentive for mining companies to close their properties to get their bonds back. However, this incentive is rarely realized as the bond release mechanism is not straightforward, and in some cases, the entire bond is held until all the post-closure conditions are met. The length of the observation period required to ensure closure stability often means the bonds will be held indefinitely (Figs. 2 and 3). Without measurable, quantitative criteria, the monitoring period could stretch to perpetuity, and without clear bond release mechanisms, the mining companies are reluctant to spend additional capital to execute closure. Solution The bond-return limitations described suggest that mining companies, regulators and stakeholders need to agree to a transparent, measurable mechanism to progressively release the bond at the completion of individual closure components. This process should allow better financial planning for mining companies to carry out mine closure in a timely manner according to the approved plan.Most importantly, initiating the bond return conversation allows a starting point for the collective understanding of liability, risk and cost. Often, the first attempt at the conversation results from a perceived “failure” but that does not make the conversation itself less valuable. If the conversation is advanced with the right framework, bond holders do not have to wait decades to see if closure works. The operator can use applied science and complete pilot studies during operations to prove closure concepts, progressively return parts of the bond, and most importantly, fail early and often to iterate rapidly before actual closure. Mine closure “failures” This article uses two mine closure “failures” as examples of the bond-return challenges/solutions previously described, where discussion and cooperation between operators, consultants, communities and regulators have resulted in strategic decisions and in some cases, progressive return of the bond. Permafrost encapsulation One widely practiced closure “failure” observed was the reliance on permafrost to encapsulate waste rock and tailings in northern Canada. Closure plans developed in the 1980s and 1990s did not have our current understanding of climate change, and those plans assumed that permafrost depths would remain relatively constant into the foreseeable future. When monitoring data in the late 1990s and early 2000s began to suggest that thaw depths would penetrate the cover and waste, making the permafrost encapsulation closure concept obsolete, some mining companies took that “failure” as an opportunity to improve their closure plans. Partially saturated (store-and-release) covers were not new to mining, but they were relatively new to the Canadian north at the time, and their subsequent adoption as a pivot away from permafrost encapsulation gave mining companies a closure concept that was more physically and chemically stable in the face of climate change. However, the regulators needed some convincing, which is understandable considering they had just been convinced by the same experts that permafrost was the solution to pollution. Supporting investigations and studies were designed and executed after in-depth communication with the regulators to close knowledge gaps and ensure the regulator’s consultants were satisfied with the long-term performance of the closure design. The primary objective of the various studies was to confirm that the tailings cover would remain physically stable while providing chemical stability (blocking oxygen ingress) to groundwater contained in the cover and tailings. Ultimately, the regulators were convinced the tailings cover plan, with the presented known risks, was sufficient, which allowed the bond return discussion to begin. The objective of that discussion was to identify the sign-off requirements to signify cover completion and release of the associated bond. Once the operators/proponent consultants gained the trust of the regulators/opponent consultants, the bond could be released annually based on the submission of sign-off documents and confirmation inspections by the regulators. The released bond allowed the operators to finance the next phase of closure activities with the prospect of more release based on annual milestones. If the operators had not “failed” with their initial closure concept, the progressive release of bond (and ultimate closure of the site) would not have been possible because the conversations that led to the bond return mechanism would not have started. Mine planning versus closure planning Another common “failure” occurs at the beginning of the project during the drafting of the mine plan. It has been observed that when companies have separate mine planning and closure planning teams, those teams tend to have different objectives and strategies. The mine planners are always put in the spotlight first, because they are the ones responsible for turning a mineral resource estimate report into cashflow. They have a tremendous responsibility to create something from nothing. Prior to the development of the mine plan, there is very little definitive basis for strategy-making, only discussion. Mine planners, like most people, do the best with what they have, which, admittedly, is often very little. They have their discipline-specific liabilities, risks and costs, but they are often not provided with a support team to understand true risk, which falls in between the disciplines. When the planners communicate their design to the other disciplines, a typical response is they are either ignored or criticized, because the various disciplines did not make themselves available to be brought along on the journey. While working on an effluent discharge permit for a mining client the author was made aware of an end-of-life mine plan prepared by another consultant that had been on the client’s desk for many months. The author was quickly aware of a flat and empty pit floor with no in-pit waste rock storage. The author looked for the waste rock, and found it in piles around the exterior of the pit in the flattest spots available, occasionally in the headwaters of a creek. With the piles being so close to surface water and more importantly, so close to areas of potential groundwater/surface water interaction, the author was drawn to the thought that environmental effects from waste rock-impacted water may be expensive to mitigate. The mine/waste plan may seem hard to understand from an environmental liability perspective, but the mine planners did exactly what they were supposed to do. And we (hydrologists, hydrogeologists, geochemists, geologists, water quality experts, geotechnical engineers, ecologists, climate change specialists and so on) must recognize that fact when preparing a response. The “failure” of the first attempt is a window of opportunity the team needs to align the mine plan with the closure plan. It is the moment someone can demonstrate to the group that although the mine planners do not have a complete understanding of liability, risk and cost, neither does any other individual discipline. True risk lies in the spaces between disciplines, which is why your team is only as strong as the weakest shared understanding between two or more disciplines. The recognition of that limitation in this example is why an integrated team of experts was assembled to discuss the consequences of each action from each discipline’s perspective to advance the collective understanding. If the mine planners had not “failed” with their initial mine/waste plan, the team would not have been able to understand the risk associated with the plan or create a closure plan that took advantage of in-pit disposal to minimize environmental liability. Conclusions and recommendations While many Canadian mines have complied with closure legislation, billions of bond dollars are still held by regulators. The existing legislation, policies, framework and guidelines, and monies should warrant a high success rate of mine closure, but they have not. It is this author’s opinion that our fear of making mistakes, as operators, consultants and regulators, is limiting our opportunity to make mining and mine closure truly sustainable. Great teams form because they “failed” together and then brushed ourselves off to come up with a better strategy. Mistakes and hardship are what forges true trust through transparent communication. Hiding our mistakes so others will make the same ones is not a good strategy in any industry. In mine closure, when we are playing with geologic timescales, it only takes one mistake to create liability, risk and cost indefinitely. The scale of potential consequences is why we must advance our understanding collectively beyond the understanding of any one individual discipline. The two examples above would be useful to other mining companies, but these lessons are not commonly shared, which is a waste of knowledge. If your mine is able to be operated sustainably and closed, or you make a critical mistake, recognize this as a ‘teachable moment’ and offer that lesson, as much as possible, to your community. If your community’s mine is operated sustainably and closed, or if it makes a critical mistake, learn as much as you can from them.Teaching and learning should never be constrained to the things that worked; it should focus equally (or maybe a little more) on the things that did not work. References Government of Canada, 2022. Mine Closure, reclamation and monitoring, information about the legislation and regulations related to mine closure. (https://www.rcaanc-cirnac.gc.ca/eng/1646321588912/1646321643743#cp14), June 2022.Indigenous and Northern Affairs Canada, 2017. MVLWB/INAC/GNWT Guidelines for Closure and Reclamation Cost Estimate for Mines, November 2019.International Council on Mining & Metals, 2019. Integrated Mine Closure, Good Practice Guide, 2nd Edition.Mining Association on Canada, 2008. Towards Sustainable Mining, Mine Closure Framework, November 2008.National Orphaned/Abandoned Mines Initiative, 2010. The Policy Framework in Canada for Mine Closure and Management of Long-term Liabilities: A Guidance Document, November 2010.

Environmental liability and risk related to mine closure in Canada

Authored by: Jim Mckinley

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