Requirement to Post Security

Overview of BC Law

Securities have been required of most of the mines currently operating in BC. However, under provincial mining legislation, there is no mandatory legal requirement to post security. Instead, the Chief Inspector has the discretion to require security as a condition of the mine permit.⁵² Stronger legal requirements mandating the posting of mine securities are provided in other jurisdictions.

Issue

Reliance on unfettered discretion over clear legal requirements leaves the security and bonding process vulnerable to miscalculation and omissions.

Recommended Solutions

Require posting of security for all mines

[Tags: Security; Bonds; Assurance; Surety; Permit Application]

In other jurisdictions, legal provisions mandate that miners must always post security. Several Canadian jurisdictions have enacted laws that require mandatory posting of mine securities, including Saskatchewan⁵³ and Yukon.⁵⁴ Several American jurisdictions have also adopted this approach. At the federal level, the US Bureau of Land Management has decided not to exempt any mining operations from the requirement to post security for closure obligations on any federally managed lands.⁵⁵ In Colorado, all mine permit applications, regardless of size, have a legislated requirement to post security in the amount determined pursuant to the Act.⁵⁶ Similar requirements are in place in California,⁵⁷ Washington,⁵⁸ and New Mexico.⁵⁹ Several jurisdictions outside North America also require mandatory posting of securities, including Papua New Guinea⁶⁰ and Sweden.⁶¹  Similarly, South African legislation clearly mandates the posting of security as part of the miner’s environmental management plan.⁶²

At minimum, if the regulatory authority is to retain the discretion on whether or not to require security, that discretion must be limited and well-defined. For example, in New Brunswick the regulatory authority must consider the following factors in deciding whether or not to require that security be posted:⁶³

• type and amount of planned work;
• nature and severity of potential damage to the environment;
• nature and current use being made of the affected property; and
• nature of a program, and the anticipated cost that would protect, reclaim and rehabilitate the environment.

In the Yukon, both the Quartz Mining Act and the Kaska Mining Regulations mandate that an applicant’s past environmental performance be considered in determining whether or not security must be posted.⁶⁴ An operator’s past performance can be assessed on the basis of various factors, including:⁶⁵

• management of other operating and closed sites;
• frequency of spills and unforeseen events;
• record of compliance with mining regulations;
• existence of an environmental management system;
• environmental certifications;
• public disclosure of environmental performance records; and
• regular environmental audits by independent experts.

In Queensland (Australia), where financial assurance is required for mining activities under the Environmental Protection Act 1994 (Qld), the relevant Government authority administering the act must take into consideration “the degree of risk that environmental harm will be caused; the likelihood that action will be required to rehabilitate or restore or protect the environment; and the environmental record of the holder” of the mining lease.⁶⁶

Although these types of factors help ensure that security is collected when required, it is still preferable to require security at all mines.

Require mandatory posting of security for mineral exploration activities

[Tags: Security; Bonds; Assurance; Surety; Mineral Exploration; Mine Permit Requirements]

A mine permit may not always be required for mineral exploration activities in BC.⁶⁷  Where a mine permit is not required, security will generally not be required either (as this is usually attached as a condition to the mine permit). Although exploration activities are generally less intrusive than activities at an operating mine, they can still impact the environment, and require costly remediation.

Unlike BC, security is required for mineral exploration activities in other jurisdictions.  For example, in Brunei (a wealthy nation), the government will not issue a prospecting licence until the miner has deposited security of at least $100,000 BND ($80k CDN).⁶⁸

Legislate mandatory timelines for posting security and impose consequences for failing to meet these timelines

[Tags: Security; Timeline; Permit]

Under BC law, no work can commence in, on or about a mine until a miner holds a mine permit (unless the Chief Inspector grants an exemption to the permit requirement).⁶⁹ Where a miner fails to comply with the conditions of the permit, including posting security as a condition of the mine permit, the Chief Inspector may order that the mine stop operation, apply the security to reclamation work,close the mine, or cancel the permit.⁷⁰ However, BC legislation has no explicit, legally enforceable timelines by which the miner must post security nor any mandatory consequences associated with a failure to post security in a timely manner.  As such, a mine in BC could be completely unsecured even if it is in advanced stage of operation.

In contrast, Montana legislation specifically provides that where a miner fails to post the required security within specified deadlines, the permit is suspended and the miner must immediately cease mining activities until the required security is both posted and approved by the regulatory authority.⁷¹ This provides greater assurance of prompt posting of securities.