Question 4: Will Minnesota’s taxpayers be protected?
Sulfide mining pollution not only takes a toll on the environment and human health, but also brings long-lasting financial burdens to communities and states. The history of metal mining is filled with companies going bankrupt or lacking the financial resources to respond to pollution from their mines. The result has either been ongoing environmental contamination, with community-wide environmental and economic impacts, or a shift of financial burden from the companies to the public to attempt to clean up mining pollution. The U.S. Environmental Protection Agency estimates that the cost of mine cleanup for sites listed as national priorities is $20 billion. The most significant cost associated with this cleanup effort is long-term water treatment and management.
Here are two examples of the financial failure of mining companies and the associated taxpayer liability:
- Summitville Gold Mine, Colorado. The company filed for bankruptcy in 1992, leaving cleanup costs to the public. Costs are expected to be about $235 million and cleanup efforts to take at least 100 years.
- Gilt Edge Mine, South Dakota. The parent company, Dakota Mining, went bankrupt and abandoned the mine in 1999 with only a $6 million bond in place, an amount insufficient to cover water treatment for a single year. In 2000, South Dakota requested the mine be designated a Superfund site for long-term cleanup, leaving the burden of reclamation costs on taxpayers.
Several possible factors are involved in the failure of mining companies to pay for their own cleanup costs, including that predictions for the amount of disturbance and contamination, especially long-term water pollution, were significantly underestimated. In some cases, mining companies may not have provided adequate levels of “financial assurance.” Financial assurance is similar to a damage deposit one must pay to rent an apartment. It is money provided up front to cover any damages that may occur, and it is money that is returned when the apartment is left in good condition. In the case of mining, financial assurance is intended to cover the cost of pollution issues and the reclamation of the site at the mine’s closure. But history has shown companies and state agencies consistently unable to accurately predict what those costs will be, resulting in inadequate levels of financial assurance.
Many reasons account for this failure. Researchers have found that predictive modeling results are not adjusted to account for past real-life failures at other mines. Prediction models may also use incorrect characterizations of the hydrology and geochemistry of the site, or be built on insufficient data to come to accurate predictions. In addition, the science of water flow and pollutant interactions is complex and not always easy to predict.
In some cases, mining companies have been allowed to use forms of financial assurance that are not secure – such as self-guarantees. If the company goes bankrupt, the money for pollution cleanup and reclamation also disappears.
Minnesota requires sulfide mining companies to provide financial assurances for their operations. These provisions were established roughly 20 years ago, but in the absence of any sulfide mines, they have not been tested. In recent years, concerned experts and advocacy groups have studied financial assurance provisions and experiences in other states, and believe Minnesota would greatly benefit from strengthening its financial assurance requirements. Two decades of study of what works well and what does not could help Minnesota avoid the costly mistakes of other states. To date, efforts to reform Minnesota’s financial assurance provisions have not passed at the state legislature.
Kuipers, J.R. and Carlson, C. 2000. Hardrock Reclamation Bonding Practices in the Western United States: Summary Report. National Wildlife Federation.
Kuipers, J.R. 2003. Putting a Price on Pollution: Financial Assurance for Mine Reclamation and Closure. Mineral Policy Center.
Septoff, A. 2006. Predicting Water Quality Problems at Hardrock Mines: A Failure of Science, Oversight, and Good Practice. Earthworks.