A nuclear reactor meltdown and a major tailings dam failure are both environmental disasters that fall into the category of high-cost, low-probability. In Canada, nuclear operators are required to pay into an insurance pool that provides up to $1 billion in liability coverage. But mining companies in British Columbia are not required to carry insurance, even though the expert panel on the Mount Polley disaster said British Columbia can expect as many as two tailings dam spills per decade.
Economist Jason Dion says that ought to change.
In a report — “Reducing the Risk of Mining Disasters in BC: How financial assurance can help” — prepared for the BC First Nations Energy and Mining Council, Dion urges British Columbia to borrow from industries with similar risk profiles and impose a tiered financial assurance scheme that would make mine owners responsible for the costs of an environmental disaster up to a certain threshold. Beyond that level, a pooled fund maintained by the industry, and perhaps including other sectors, would kick in.
Indigenous communities are likely to bear the heaviest burden of an environmental disaster. Mines are often built on Indigenous lands, and Indigenous peoples rely on healthy ecosystems for sustenance and for cultural practices.
An environmental disaster can bankrupt a company. That hasn’t been the case with Imperial Metals, owners of Mount Polley. It has remained solvent despite bearing the cost, at least so far, of remediation orders. But the Lac Mégantic rail disaster bankrupted the Montreal, Maine and Atlantic Railway company, leaving Quebec taxpayers with most of the bill for its environmental costs.
The prospect of bankruptcy after an environmental disaster can actually increase the likelihood of a disaster happening, Dion argues. If a company knows it may not face the full consequences of the damage it causes, it has a lower incentive to proceed cautiously.
British Columbia does require some financial assurance, Dion notes, but only to ensure that a mine is remediated at the end of its working life. Remediation following a disaster is not part of the plan and, in that respect, British Columbia is not unusual. It is common practice across Canada.
Requiring financial assurance will mean that some mines will not be built. Financial assurance screens out high-risk ventures, but Dion characterizes that as an “economically-efficient outcome” because the return does not justify the risk.