Featured image credit: Taehoon Kim / The Narwhal
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EPISODE DESCRIPTION
We sit down with Francesca Fionda, a reporter from The Narwhal, to discuss the recent investigation she led into BC’s mining reclamation funding. Our discussion focuses on the significant shortfall in the funds set aside for reclamation—sometimes referred to as the Reclamation Liability Gap. We also chat about the collaborative nature of the investigation (it was the result of a joint effort by The Narwhal and The Globe and Mail), about the data that were used to tell the story, and about how taxpayers might be forced to foot the bill for mining disasters.
You can read Francesca’s investigation here: https://thenarwhal.ca/bc-mining-liabilities-cleanup-costs-taxpayers/
Follow Francesca on Twitter: https://twitter.com/FrancescaFionda
SPEAKERS
Umair Muhammad
Francesca Fionda
Umair Muhammad 00:06
Welcome to ‘Beneath the Surface’ podcast, brought to you by the BC mining Law Reform Network. My name is Umair Muhammad. My guest today is Francesca Fionda. Francesca is a reporter with The Narwhal, where she covers mining. She’s the lead author of a recent investigation titled “British Columbia’s multimillion dollar mining problem.” The investigation, which is a result of a collaboration between The Narwhal and the Globe and Mail, looked into the cost of cleaning up mine pollution in BC and found a significant funding shortfall in the money that’s supposed to be set aside for reclamation. Among other things, this raises questions about the future financial burdens taxpayers might face. We’ll include a link to the investigation in the show notes. It’s well worth reading through, so be sure to have a look. Thanks for coming on the podcast Francesca.
Francesca Fionda 00:58
Thanks so much for having me.
Umair Muhammad 00:59
You’ve done this investigation into the cost of mining pollution in BC, I thought I’d start by asking you to talk about the collaborative nature of the investigation. So it involved The Narwhal as well as the Globe and Mail working together. And that’s not something I see happen very often. How did this collaboration come to take place?
Francesca Fionda 01:20
At The Narwhal we’ve been covering mining for years. And something that I’ve always wanted to learn a little bit more about, as BC continues to explore for “critical minerals” is what plans are in place to ensure that we’re thinking about the cleanup and the cleanup costs. And what started the investigation is some of the data that’s published in the BC Chief Inspector of Mines Annual Report, and it provides financial data. So I was taking a look at that about a year ago, we started digging into those numbers, because they can kind of start to answer that question.
And we wanted to partner with another newsroom that has a track record of delivering big data-driven investigations and has produced some some great data stories in the past. And so we connected with a team at the Globe and Mail. And we worked with reporters, Jeffrey Jones and Chen Wang to find out if enough is being done to ensure the public is protected if mining companies can’t or won’t pay for the cleanup. And so the result, as you mentioned, is our first collaboration with the Globe and Mail. And it was really great to work with Jeff and Chen, as we all brought different experiences to the table. Jeff is an experienced journalist. And he’s focused on sustainable finance and ESG issues, and Chen is a data journalist at the Globe. And actually, Jeff and Chen have worked on an investigation into inactive oil and gas wells in Western Canada—so a lot of similar themes to our investigation.
And myself working on the mining beat for The Narwhal, I’ve spoken with so many people involved in this massive industry. And, you know, many of them say we need certain minerals if we want a greener future fueled by batteries and solar panels. And while they might disagree on how we get them, or how much we need, or the different ways that we address this idea of “critical minerals”—one shared concern is how do we avoid the mistakes of the past. So together, we teamed up and the resulting collaboration is you can read it on The Narwhal’s website and the Globe and Mail‘s website as well.
Umair Muhammad 03:22
The Chief Inspector of Mines Annual Report—it’s a lot of numbers, and numbers that have to do with bonds. That’s what your story deals with as well. And not the kind of social bonds that we usually think of when we think of bonding. It’s quite, it can get quite technical. And so maybe we could start with that. Could you explain the concept of bonding in the context of mining and, you know, how does it work to ensure that companies are held accountable for cleanup and restoration costs?
Francesca Fionda 04:00
A mine project has to plan for cleaning up their site after production ends, but exactly how much it might cost to do that when they have to pay and in what form that payment has to be—it differs depending on the government’s policies. So that’s what we were looking at. In BC companies have to give a financial security to cover some of the costs of reclaiming a site. So it’s like it’s an IOU essentially. But in BC that IOU, that financial security, can be in various forms.
So it can be in cash, it can be letters of credit, it can be surety bonds. It can also be in other forms, like guaranteed investment certificates. So there’s lots of different ways that a mining company can can tell the government that, you know, here’s an assurance that we are going to put aside enough money to clean up this site. In some cases, mineral reserves can also count towards a financial security, but we can talk about that a little bit later. Essentially, the government holds this security until the mine is restored to what they would describe as a safe and environmentally sound site. So that’s essentially what we were looking at the policies behind making sure that the government is collecting enough money to cover the future cleanup costs of mines.
Umair Muhammad 05:21
Right. And you found that perhaps they aren’t collecting enough money and that there happens to be a fair bit of underfunding in that system.
Francesca Fionda 05:31
Yeah, it’s a tricky question to answer about how underfunded it is. It really depends on who you ask. If you ask mining reform advocates and environmentalists, as well as the many policy researchers that we spoke to, they would say that underfunding is a huge problem across BC as well as in many other jurisdictions. But the root of that underfunding, they would say, is from under-estimating the true costs of cleaning up these sites. And in BC, they’re working on adjusting how that happens. Right now, how it generally works is that the company uses—the standard standard practices shared by the government, there’s actually an online Excel spreadsheet that you can go and see how it might be calculated.
Again, they’re updating that but that’s the information that’s available now. Essentially, a company will come up with an estimate for how much it should cost to clean up the site over the next five years of work that they’re going to be doing on that site. And then they submit that to the government. The government generally adds a 15% contingency on top of that. So the estimate comes from that, but a lot of people that we spoke with, say that those estimates are severely underestimated.
So that’s one of the reasons why the liabilities are underfunded. And there are some pretty dramatic examples of what can happen when those costs are not estimated correctly. So, you know, historically, it’s been a much bigger problem. And when that happens in the past, it can be really hard to play catch up. For example, one of the sites that we looked at in our investigation is the Tulsequah Chief Mine, which is close to the BC-Alaska border. That stopped producing in the 50s, and has been leaking acid mine drainage into the Taku River for decades.
The cleanup now is estimated at about 72 million, but the BC government has less than 1% of that in hand. So that’s where the risk to the public comes in—is that: who’s gonna pay when companies go bankrupt or they can’t afford to pay? And so to your question about, you know, how big is this issue of underfunding mine cleanup, people working in mining and the government will point out that there have been significant improvements in closing the gap between the estimated cleanup costs and what the government has collected in security.
So over the last few years, that gap has closed. In 2016, the Auditor General released a report warning that this was a huge liability. And since then, the government has worked towards closing that gap. And one of the things that we looked at was this new interim policy that is meant to help address this problem. It’s an interim policy. So it hasn’t been made into the official policy or into regulations. Many people are calling for that to happen, but there has been movement towards addressing this problem.
Umair Muhammad 08:27
What you’re really saying is that there’s that gap between the estimated cleanup cost and how much money the companies have given—which I don’t really understand. If there’s a requirement for companies to pony up, why doesn’t the government do something and actually force them to give this money?
Francesca Fionda 08:46
Yeah, good question. Yeah, sorry, you have a “and then”?
Umair Muhammad 08:50
And then there’s the other issue, right? There’s the fact that the real problem may be that the estimated cleanup costs are too low. So even if that gap completely closes, that won’t solve the problem entirely.
Francesca Fionda 09:02
That’s definitely what some people have told us. And that’s why, you know, that question of: how widespread is the underfunding? It’s kind of hard to answer because some people would say, right now, even if the government collected all the money that is estimated to clean up all these sites, that it would still be underfunded, because the actual cost of cleanup is much higher. That’s what some of the folks that we spoke to would say, in terms of of ensuring that companies pay for what the current estimate is.
We did ask the government about that in terms of, you know, have there ever been any financial penalties or what kinds of enforcement actions have you taken to address any companies that are maybe behind on their payments? And they told us that they work with companies to ensure that there is a payment plan in place, they have mines that are currently facing possible penalties for falling behind on their reclamation securities. They wouldn’t tell us which mines and they told us that there hasn’t been a final decision made on that.
But this new interim policy was recently in place. And before that, there wasn’t a huge push to make sure that mines paid these reclamation securities. Now there is a regulation that makes it a lot clearer that mines are expected to pay—new mines and mines with less than five years of estimated reserves are also expected to fully pay the cost of cleanup. So they introduced that and those kinds of policies are meant—they’re just kind of playing catch up to meet what the new interim policy is requiring from from mine sites.
Umair Muhammad 10:50
Right. And mind you, this is hundreds of millions of dollars we’re talking about.
10:54
Currently the estimated total liability, according to the last financial year, which is the most recent data that we have estimates—the total liability of cleaning up major mines in BC is $4.1 billion. So that’s the that’s the estimate for how much it would take if we had to clean up all the major mines in BC right now. And as of last report, the BC government had collected $3.7 billion of that. So it describes that as a short fall of $400 million dollars.
But one of the things that we looked at just to make it a bit clearer how this liability is calculated, and how the security is calculated—there are some sites that have provided a little bit more or overpaid what their estimated liability is. And that might be because a mine might be planning an expansion or you know, these are all estimates, right. So if a company wants to provide greater financial security, they can do that. But that doesn’t mean that extra financial security that they’ve put down could go to another site that might be severely underfunded.
So if we take out those overpayments, the difference was closer to $753 million. So that’s the gap that the government is trying to close right now. And again, as you mentioned, some people told us that even if that $753 million is closed, and there’s still the question of: is that even enough? So those are the kinds of things that people in the industry are wondering about?
Umair Muhammad 12:30
And I’m wondering why if I have, you know—if I’m behind on my taxes by, say, $753, why I get threatening letters, but the mining industry just gets to keep taking stuff out of the ground. It’s okay, they got a payment plan in place, I guess.
Francesca Fionda 12:53
One of the things that I heard that people would like to see more of is more clear incentives for ongoing reclamation, so that it isn’t something that is just done when the project is done. But as the mine develops, as it grows, things are are done on site to think about cleaning up as you go. And even in the earlier stage of design, and thinking about that at the very beginning stages of a mine in terms of designing for things that could control or reduce pollution. So more incentive towards that is something that I heard from folks.
Umair Muhammad 13:35
How does BC compare to other jurisdictions, whether other provinces in Canada or other countries around the world?
13:43
There are some things that BC is improving on, some things that BC does better, and there’s some things that they’re behind on. And the first thing I’ll say is that, you know, we wouldn’t have been able to do this investigation if BC didn’t actually publish this financial data and make it public. So it’s great that we can get this kind of information. Not all jurisdictions provide this info.
And so the info we were able to get was, it’s like a list of all the mine sites for estimated cleanup costs, and how much that site has put aside in terms of their financial security. Ideally, we’d want this data to be updated a lot more frequently than every fiscal year in terms of what’s shared with the public and then sharing it as soon as it’s available rather than just the end of the calendar year, which is the Chief Inspector report.
The mining industry told us that it is a big supporter of the government policy, and they see it as more stringent and that it could encourage more long term stewardship. So meaning that, as I described, there’s more incentives for ongoing reclamation. One company said that the interim policy does a good job of ensuring that a mine is fully bonded during the riskiest parts of his life. So you know, the first five yours and the last five years.
But where the policy is falling short, we heard that there should be more clear incentives for ongoing reclamation and better designs to reduce pollution as well as better estimates upfront for what the actual cost or the true cost of cleanup is.
The other concern was that the provincial government has what they call an “exploration incentive.” It allows mineral reserves in the ground to be counted towards the security in some specific cases. And the concern we heard from economists and policy researchers is that if you’re counting minerals in the ground, it’s not as secure because the value of those minerals changes. In Quebec, for example, they require only what are known as “hard financial securities,” and those are less likely to fluctuate in value.
Umair Muhammad 15:50
I was rereading your story just before talking to you. And I was thinking, you know, we talk a lot about money and reclamation. But of course, part of the issue here is that you can’t really reclaim the environment as it used to be, right? Is there any discussion about the fact that these are ecosystems that are forever altered? There’s no going back. And all we’re doing, like coming up with estimates of the amount of money that that will be necessary for reclamation is sort of papering over that fact?
16:23
One of the stories that I would love to do and keep looking into is reclamation, specifically, like what are the requirements for reclamation? And sometimes you hear the term remediation, which is different than reclamation, reclamation is a lot more intensive, and like you said, kind of returning the area to an environmentally sound and safe space.
And I think that one of the questions that has been asked a lot is like, what, what exactly does it mean to fully reclaim a site? There are—the Britannia mine, as an example, is a historical mine that will require water treatment for what they say is forever. So it is going to cost taxpayers $3 million a year in maintenance costs. And previously there, there were more mines that had this risk of needing cleanup in perpetuity.
So needing to have a water treatment site, water treatment facility on site, possibly forever. And those costs, like, how do you calculate the cost of cleaning up something forever? I don’t know how you do that. And people ask us that question a lot. And so there are folks who are trying to untangle the idea of like, how do you accurately estimate the cost of cleaning up some sites that will require this for decades, for over a 100 years?
Umair Muhammad 17:59
Yeah, forever is a long time. I don’t know if any of these companies are going to be around 500 years from now. We don’t know if the province of BC is going to be around 500 years from now. But, you know, this is what we’re leaving the future generations so.
Francesca Fionda 18:15
And we can see the Tulsequah Chief Mine was an example that we focused on in the story, because it is something that was, you know—still to this day, polluting. And it has been for decades. And so if we don’t plan for the future, it’s it’s possible that future Tulsequah Chief Mines could exist, and we don’t we don’t know yet.
Umair Muhammad 18:41
And one of the things that you mentioned briefly in your report is the absence of an industry-funded pool for mine cleanup in BC? Would you be able to talk a little bit about that? And like, what would an industry funded pool of that sort entail?
Francesca Fionda 18:57
So you’re right. Right now, there’s no industry-funded pool specifically for mines and the mining industry in BC. And I know this is something that BCMLR has pushed for in the past. It’s that, you know, it’s shared that this new policy—still, the new interim policy in BC still doesn’t address things like unexpected, catastrophic events or bankruptcy. And, you know, this was a concern that I heard from folks working in policy research. That today, you know, with increasing climate risks and extreme floods and droughts and wildfires, that this is something that needs to be addressed.
And, you know, in BC, we can look at some historical examples of companies that went bankrupt and left a huge bill to pay. And there was no backup, no fund, no industry-funded pool. So the idea would be that perhaps there could be a levy, or something that the industry pays into, and that pool can be accessed in the event of a catastrophic event. You know, a major failure or bankruptcy of a company.
Essentially, the idea is that this would help protect taxpayers in that event, rather than it falling to the taxpayers to pay for something that the mining company was unable to. It’s something that is planned for ahead of time. And right now, the BC government is reviewing its bonding strategy for a wide range of industry projects. And that could be something that they that they look at in phase two of reviewing their public interest bonding strategy. And that’s something over the next year, the government plans to look at financial assurance mechanisms for unplanned events, like disasters. But we didn’t get any specific assurances from the government that—if they’re looking at it specifically for mining. Just that it’s something that they’re looking at overall.
Umair Muhammad 20:58
I loved your investigation. I loved reading through it. But you know, my favorite thing in it were the visualizations. Because, as I mentioned, I’ve also looked at those reports, the Chief Inspector of Mines reports. And just looking through them—the tables, you know, it’s not a fun exercise. But reading through your investigation, and looking at the way that you visualize that data is actually—if not fun, it’s actually quite engaging and interesting. Could you talk a little bit about the process of figuring out how to organize that data? And, you know, how to present it in a visually appealing way?
Francesca Fionda 21:37
So as you mentioned, most of our data came from the annual Chief Inspector of Mines report. And so that’s published at the end of every year, and we were able to go back to 2014, because that’s as far back as when the reclamation securities and liabilities were both published.
And the other things that we looked at beyond those reports were company records and annual reports to get a better idea of which companies we were looking at. Since some of the companies as you might have noticed in the table, maybe they use a numbered company name, or they might have multiple subsidiaries. And it looks like it’s three different companies when in fact, it’s actually one major company.
So we worked with Chen Wang, who did a lot of the thinking on ways to present some of our main findings. Chen at the Globe and Mail is a data journalist there. And one of the things that we wanted to show was how the situation has changed over time, and as well as which mines had not provided their full security.
So we focused on those questions, and how can we make it, you know, obvious in terms of what are some of the trends that we found when we looked at the data. And so you can see, you know, looking at the estimated liability and security over time for overall, all the mines has definitely continued to grow.
And when you look at—one of the biggest liabilities for the estimated liabilities is Teck’s coal mines in the Elk Valley. We wanted to focus on that because it is the single biggest liability on the list, and just to show that it has continued to grow as well.
And then the other things we wanted to be able to show is, you know, is it possible to get a snapshot of how all the mines are doing when it comes to providing a financial security. And so we were able to spread out the mines that haven’t provided their full security, just to kind of show you which mines are are kind of, you know, below 40% or 20% of the of the level that they might expect it to be at. And so this is a snapshot of the data as of last financial year. So hopefully when we get new data, we’ll be able to kind of compare and see how things have improved.
Umair Muhammad 24:06
And is there any specific piece of data that you were surprised by? Was there anything that you perhaps didn’t expect to see?
Francesca Fionda 24:15
I think one of the surprising things, I think, to me was the the overall context of what we’re looking at. So, you know, when we look at how BC has had record-high mining and exploration investments, and that many of these companies bring in revenues in the millions or billions of dollars. When you look at all the money that’s going into that end of things, what was surprising to me is the discrepancy between record profits, and, you know, delaying or not providing the full security to the province.
When often the amount owed is a fraction of some of the revenues that some companies are bringing in. And obviously that’s not the case for all companies, but in terms of looking at the individual mines and seeing that there doesn’t seem like they’re that far away from maybe fully bonding their site, and having revenues that are maybe, you know, in the millions or billions of dollars,
Umair Muhammad 25:20
Yet somehow it makes accounting sense, right?
25:23
It helps to graph it all out and see that information, because then it helps us compare. And, you know, obviously, there are some companies that are much bigger than other ones. And so it would be interesting to learn more about what’s happening at each of those, each of those sites and learn more individually about, you know, what kind of ongoing reclamation is happening there. So, hopefully, that’s something that we can keep looking at.
Umair Muhammad 25:53
I do have a last question for you about what else you’re interested in following up on in this specific investigation, and then perhaps other related topics?
26:03
Yeah, I mean, we’re always looking to hear from folks that are involved in any of these issues that we were discussing today. So if people are interested in reaching out, we’re always ready to listen. In terms of some of the questions that I’d love to dig into is just a bit more about reclamation. And you brought up this question at the beginning, like what exactly is reclamation? How does it work? When is a mine considered fully reclaimed?
That would be something really interesting to look into more, and I’d love to hear more about solutions to water treatment issues. And because I know that’s a big issue for a lot of the sites that we looked at—a big cost is water treatment. So hearing solutions from folks about what they’re doing on the ground, it would be great to learn more about that.
Umair Muhammad 26:54
So how can people get in touch with you?
Francesca Fionda 26:59
You can email me at Francesca at the narwhal.ca. And we’d love to hear from folks, especially about solutions and things that are being done to address some of the issues that we talked about today.
Umair Muhammad 27:12
People can follow you on Twitter?
Francesca Fionda 27:14
You can. I’m not on there that often.
Umair Muhammad 27:18
Yeah, we’re all trying our best not to be…
Francesca Fionda 27:22
Yeah, I am on there. But it might take a while to respond.
Umair Muhammad 27:29
Well, we can share your handle in the description for the podcast.
Francesca Fionda 27:33
Yeah, that would be great.
Umair Muhammad 27:37
Thanks so much, Francesca. This was great.
Francesca Fionda
Yeah, thank you.
Umair Muhammad
Thank you, Francesca for shedding light on such a critical issue. To our listeners. We hope this episode has provided you with a better understanding of the financial challenges posed by Mining Reclamation in British Columbia. It’s clear that proactive measures and transparent policies are essential for safeguarding our environment, and preventing future taxpayer burdens. Remember to look at the shownotes for link to the full report. And for a link to our website, where you can learn more about BC mining law reform. Join us next time on beneath the surface as we continue to explore the impacts of mining in British Columbia. We’ll see you that