Abandonment levies adding millions to mines’ capital costs

Getting in and out of the mining business is becoming much more costly, thanks to securities demanded for abandonment, a Vancouver lawyer said at a recent environmental law conference here.

Lynne Huestis told the 40 delegates that the Federal Court of Canada ordered Curragh (TSE) to provide securities of almost $1 million or 10% of post-closure costs at its Faro lead-zinc mine in the Yukon.

In its January decision, the court also demanded that Curragh put $560,000 annually into a post-closure trust fund as a condition for obtaining a water licence for its Vangorda project near Faro.

The court supported requests by the federal government under the Environmental Assessment and Review Process (EARP) for an extra $4.4 million in securities, which brought the total up-front costs to more than $5 million, Huestis said, and total reclamation costs during the project’s life to more than $12 million.

Curragh’s appeal of the decision will likely be heard next year, Huestis said. She cited another case involving Cominco (TSE) and the Tulsequah Chief mine in northeastern British Columbia. The mine had closed in 1957 but Cominco bought out all shares and in 1987 resumed exploration.

The British Columbia government has now issued a pollution abatement order, citing acid mine drainage, which Cominco unsuccessfully appealed. Huestis said companies now must make reclamation plans from the outset. Enforcement most often is in the form of securities, she said, a particularly tough requirement for 1-mine companies.

And as with Curragh, companies are increasingly facing financial demands from more than one jurisdiction, she said. And security amounts could change during a mine’s life, she said, noting that the federal Department of Energy, Mines and Resources considers security reviews to be one of its top priorities.

Another environmental law specialist, James Mackenzie, outlined the Canadian Environmental Protection Act of 1988, marking the start of aggressive federal expansion into environmental law that had traditionally been the preserve of the provinces.

Mackenzie said this Act applies to a limited number of industrial aspects of mining and milling, such as storage and disposal of PCB wastes or dumping of mine wastes at sea.

The industry must soon grapple with Bill C-13, the Canadian Environmental Assessment Act, passed in June and expected to be in force next January. Mackenzie said this Act replaces the EARP guidelines, which were once considered relatively toothless and now are being strictly enforced by the courts, as in the Supreme Court of Canada’s decision this year on the Oldman River.

An important document for the mining industry to examine is the Act’s so-called Law List, he said; it lists all federal statutes under which federal approval is needed.

While Mackenzie said some people have called the new Act a retrenchment of federal powers, he understands there will be broad coverage of all projects with a federal link.

There are provisions for joint review panels, he said, for example with the provinces or other bodies.

Lawyer Brian Abraham predicted that compensation cases will increase, as competing land users turn to the court. “Cases are all over the map in this area,” he said.

Abraham also said the industry can expect more litigation dealing with the workplace environment.

The conference was organized by the Yukon Chamber of Mines, the Canadian Bar Association and the Law Society of the Yukon.