GLOBAL TRENDS IN MINE RECLAMATION AND CLOSURE REGULATION

• Jurisdiction: Derecho Internacional

Mining and Oil and Gas Law, Development, and Investment - Book 1
(Apr 2007)
CHAPTER 9A
GLOBAL TRENDS IN MINE RECLAMATION AND CLOSURE REGULATION
James Otto
Professor and Director of Graduate Studies in Environmental and Natural Resources Law and Policy
University of Denver Sturm College of Law
Denver, Colorado, USA

JAMES OTTO

James Otto, Director (and Professor) of Graduate Studies of the Environmental and Natural Resources Law Program, University of Denver Sturm College of Law, Colorado.

During his professional career, Professor James Otto has been engaged in the practice of mineral economics and natural resources law working in over 40 nations for governments, the private sector, multi-lateral institutions and universities. He has undertaken a wide variety of mining and natural resources assignments related to the development of national mining laws and fiscal systems, sustainable development, environmental impact mitigation, mineral sector driven poverty alleviation, and country risk assessment. He sat as member of the specially convened session of the World Bank Experts Group on Mining Law, the Southern Africa Development Community Advisory Committee on Environmental Mining Regulation, the United Nations Experts Group on Modernization and Rationalization of Mining Law, and the UNCTAD Group of Experts on State Participation and Privatization in the Minerals Sector. He was appointed to the Minerals Committee of the Section of Energy and Resources Law of the International Bar Association, the Advisory Committee of the International Minerals Professional Society, various committees of the Rocky Mountain Mineral Law Foundation, the Implementation Committee of the IIED project on mining and sustainable development, and the North American Committee of MMSD. He was formally the Director (and Professor) of the Institute for Global Resources Policy and Management at the Colorado School of Mines; Deputy and Acting Director (and RTZ Senior Lecturer) of the Centre for Energy, Petroleum and Mineral Law and Policy at the University of Dundee, United Nations Chief Technical Advisor UNDTCD and Project Fellow and Coordinator of the Asia-Pacific Mineral Trade and Investment Project East West Center. He holds degrees in engineering, mineral economics and law.

1. Introduction

Every mine will close. This may be a result of the deposit being depleted or because economic or social factors make it no longer viable to mine. In prior times, neither the company nor the government concentrated much effort on the closure process, and the result has been, in many countries, a substantial legacy of abandoned mine sites that pose health, safety, environmental and blight challenges for present and future generations. The expectations of stakeholders, including mining shareholders, mine management, employees, affected communities, regulators, consumers, and watchdog nongovernmental organizations, regarding mining have evolved over the past several decades, and these expectations have led to a paradigm shift in how the closure process is typically implemented. Governments and the mining industry increasingly recognize the need of mines to obtain and maintain a social licence to operate, and maintaining such licence for the industry, over the longer term, means handling reclamation and closure in a socially and economically acceptable manner. This paper examines global trends in mine reclamation and closure regulation. It begins by identifying the key policy issues that have driven the development of such regulation and then proceeds to examine these issues from regulatory and economic perspectives. Examples are provided of various regulatory approaches and trends are described. Finally, recommendations are offered.

2. Reclamation and Closure Policy Issues

The complexity of reclamation and closure has increased over time. Fifty years ago, at closure a mining company might focus on removal of equipment for salvage or sale, collection of accounts receivable, laying off its workforce, and extinguishment of it legal title. As environmental awareness increased attention was paid to reclamation, initially with regard to pollution containment and safety but increasingly focusing on ecologic system restoration. More recently, social and economic issues are being considered, particularly where mines have substantial economic linkages to the local and/or national economy. These later issues range from employee termination compensation to implementation of community sustainable development programs. Other emerging closure issues include: restoration of the mine site so as to maximize future economic potential rather than to restore a marginal ecosystem; at the local level, transfers of assets to communities, such as infrastructure, fire equipment, ambulances and so forth; at a national level, attention to macro-revenue stabilization and intergenerational trust schemes, and means to repay government infrastructure debt formerly serviced with mine user fees. The particular issues faced by any one mine will be in some ways unique

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to that mine dependent on the nature of its operation and how it fits into the physical, ecological, social and economic landscape. The importance of each issue will vary amongst stakeholders. Table 1 lists sample reclamation and closure issues that may be of particular interest to different stakeholders.

Table 1. Sample Reclamation and Closure Issues
Stakeholder	Reclamation/Closure Issue
Company	Profit maximization (cost minimization)
Termination of liability
Social licence to operate in the future
Employee	Termination benefits
Retraining
Future status of pension
Community	Future economic viability
Economic diversification
Unemployment
Environment
Debt repayments
Recurrent costs previously paid by the mine
Transfer of infrastructure and facilities
National government	Safe site
Ecological recovery
Landform transformation
Revenue stabilization
Intergenerational trusts
Macro-economic linkages
Infrastructure debt repayment (ports, rail, water, roads)

The terms reclamation and closure are not synonymous. Reclamation is the process whereby a mine's landform and ecology are altered to achieve a planned state. Closure includes the physical shutdown of the mine and the host of activities, such as final reclamation, equipment removal, community disengagement, employee severance, debt settlement, and so forth that occur when the company determines that it will no longer mine the property.

3. Timing Reclamation and Closure Activities

Whether required by regulation or not, planning for reclamation and closure commences before a mine is built. Engineering and fiscal feasibility models are used to analyze the economic viability of the mine and to optimize it. Key parameters are looked at such as mine size and life. Except for exceptional deposits, or well-situated quarries, the mine's life, and year of closure, will be determined. The mining method will be carefully studied and a mine design chosen. Often this process is already taking into account reclamation and closure. For example, where should tailings dumps be situated so as to avoid costly future acid drainage problems? Should lime be added to tailings on

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an ongoing basis to reduce future acid generation or will a permanent water treatment plant be needed? Where will stripped top-soil be segregated and stored for future topping applications? For medium and large scale operations mine reclamation and closure is an inherent part of the mine design process.

It is common for a mine's initially planned life to be extended through progressive additions to reserves as a result of additional brown-field's exploration or technology improvements allowing lower grades of ore that are now sub-economic to become economic in the future. Thus, ideal planning for reclamation and closure is evolutionary commencing with feasibility and adapting as circumstances change throughout the life of the mine. Some mines are amenable to on-going reclamation as mining leaves one part of the deposit to mine on another part (for example, strip mining of coal or mineral sands), while others will incur most reclamation costs when mining ceases (for example, an open pit mine). Companies are also aware that even in circumstances where reclamation and closure regulatory requirements are minimal or absent, this may not be the case at the time the mine closes. Retrofitting a mine to comply with new requirements can be more costly than building the mine initially with forethought for reclamation and closure. Today's mining engineers graduate having learned that good mine design includes engineering and cost estimates for reclamation and closure.

Not every mining company is concerned about its social licence to operate and particularly amongst smaller operators, many who operate marginally economic mines, reclamation may be considered by them to be a non-essential part of their business. Even among large companies with highly profitable mines every mine manager strives annually to minimize costs and non-revenue generating activities, such as reclamation and plans for closure, and the manager may delay implementation of reclamation anticipating that that burden can be borne by his successor manager. To insure that mines do not become abandoned without adequate planning processes, design and implementation, almost all countries now impose reclamation and closure regulatory requirements. These requirements commonly take the form of statutory or administrative law but can be imposed through negotiated mining agreements. Additionally, the mining industry, through various associations, has developed its own voluntary guidelines.

4. Regulatory Systems

Given the wide range of issues involved with reclamation and closure it is common to see a number of different laws...