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Practice Guide to Auditing Mining Revenues and Financial Assurances for Site Remediation

Financial Assurances for Site Remediation

The development and operation of a mining site can span several decades. Over this time, exploration and extraction activities can significantly change local ecosystems. Vegetation cover will often be removed, local drainage patterns can change, species diversity may be reduced, and soils and waters may be contaminated. For example, lands that were disturbed by coal or metal mining activities can release acidic water that contaminates soils and groundwater for very long periods, known as acid mine drainage.

Nowadays, at the end of mining projects, proponents are usually required by regulations to return operation sites to their natural state or to a state that meets established standards. However, years ago, before such regulations existed, many mining sites were abandoned once operations ceased and they were not rehabilitated. In many cases, governments inherited the responsibility for cleaning up these sites and for the costs of doing so. In addition, governments can also remain responsible for the ongoing maintenance, monitoring, and management of certain sites over long periods. A common example is the monitoring of acid drainage that is produced by the piles of tailings left at mining sites by previous owners.

The costs of remediating and maintaining abandoned sites can be very important. The case of the Giant Mine in Canada’s Northwest Territories is an illustrative example. This gold mine operated between 1948 and 2004 and the federal government assumed responsibility for the cost of remediating and maintaining the site, which includes 237,000 tonnes of arsenic trioxide stored in underground chambers. Total project costs are estimated at $903.5 million from 2015 to 2025, with significant additional maintenance costs over many decades.

In countries or regions where there is a large number of mines, the total cost for the eventual remediation of all mining sites can be very high. In British Columbia, for example, the cost of remediating all mining sites in the province as of 2015 was estimated to be $2.25 billion (including $1.27 billion in liabilities not backed by financial assurances).

Remediation cost estimates vary over time for different reasons. In addition to costs changing due to new technologies, environmental liabilities may increase over time due to more stringent environmental standards. In such an instance, lands that had previously been remediated to existing standards may require additional remediation work if they do not meet new standards. The question of who is responsible for these new liabilities may be difficult to resolve; ultimately, governments may have to assume partial or full responsibility for these costs.