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Why are taxpayers on the hook to clean up mines?

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The former Giant Mine has been a giant headache for nearby residents in the Northwest Territories, and Canadian taxpayers, long after former owner Royal Oak Mines went into receivership in 1999. According to documents obtained by Canadian Press, the federal government expects the mine cleanup cost to approach $1-billion, more than twice initial estimates. Meanwhile, a recent Pembina Institute report notes that even after the Giant mess, primarily 237,000 tonnes of arsenic trioxide dust stored underground, is contained by a controversial block freezing process, Ottawa will need to pay $1.9-million annually in perpetuity to control the mine's toxicity.

Mine cleanup costs should not be borne by taxpayers but by miners themselves, which means they must set aside adequate funds through the course of the mine's operating life. Governments in Canada seem to have recognized this, but the associated laws they passed, mostly in the 1990s, didn't do nearly enough to protect taxpayers: As things stand now, expensive publicly-funded cleanups like the Giant mess could happen again and again.

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The provinces and territories do have laws that require miners to come up with closure plans and set aside securities or assurances to pay for the eventual costs. But "the extent to which these are sufficient is not quite clear," says Ramsey Hart, Canada program co-ordinator with MiningWatch Canada , an environmental and social advocacy group focused on improving mining practices. In most cases, the amounts and form of securities set aside are not disclosed publicly, and funds aren't always put into arm's-length securities that can be accessed regardless of what happens to the mining company. There's little to no public scrutiny or third-party confirmation of whether the amounts set aside are sufficient to pay for cleanup.

In Ontario, the ministry responsible for promoting northern development oversees the development of closure plans, putting the department in an inherent conflict. In B.C., a government chief inspector has wide discretion to decide what amounts are sufficient to set aside and what constitutes an acceptable financial instrument. This has led to what the province's auditor-general has called "questionable practices," such as accepting unsuitable assets as security. Meanwhile, a 2011 study by the Environmental Law Centre Clinic found that nine operating coal mines in B.C. had posted securities averaging just $13-million per mine as of their most recent permits, a "remarkably small" amount given vastly larger sums that have been spent to clean up other properties in B.C. The study that notes laws in several U.S. states are stricter than those of the provinces.

The federal government fares little better where it is in charge; the Auditor-General of Canada, Michael Ferguson, recently found that Aboriginal Affairs and Northern Development – the agency tasked with the Giant cleanup – fell far short of doing a proper job to ensure mines under its domain had set aside enough securities to pay for reclamation costs.

And these are just the problems associated with closing mines. Many mines, including Giant, require continuous monitoring, oversight and intervention over decades, even centuries as well, to prevent further contamination. Who pays for that? Taxpayers, of course. That isn't right either.

Sean Silcoff is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow Sean on Twitter at @seansilcoff .

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About the Author

Sean Silcoff joined The Globe and Mail in January, 2012, following an 18-year-career in journalism and communications. He previously worked as a columnist and Montreal correspondent for the National Post and as a staff writer at Canadian Business Magazine, where he was project co-ordinator of the magazine's inaugural Rich 100 list. More

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