Disaster Sureties, Risk Management and the Social License: a Critical Assessment

2019

Anne Johnson, Queen's University ; Paul Semkowich, Queen's University; Laeeque Daneshamend, Robert M. Buchan Department of Mining , Queen's University

In the wake of recent environmental disasters in the mining sector, stakeholders including industry organizations, civil society, and Indigenous advocates, have offered a variety of opinions on actions regulators should take to reduce the likelihood, and/or mitigate the impact, of future incidents.  It has long been postulated that pricing the risk of mining disasters through surety instruments (individual or pooled) – a sort of polluter pre-pay principle – would have the effect of incentivising better risk management, thereby reducing the incidence of catastrophic failures and preventing the problem of the public being left to foot the bill for disaster clean up and long term remediation. In theory, such sureties would inspire public confidence and smooth the path for approval and development of new mines. Currently, mining companies often cannot afford, or cannot secure, insurance to cover the true costs of catastrophic incidents, such as tailings dam failures. Potential insurers, whether public or private sector, are faced with a daunting set of challenges in setting the scope, scale, and price of coverage. There is a limited understanding of significant, potentially catastrophic, mining risks. Whether it is root causes, failure modes, mitigation strategies, probabilities of occurrence, or magnitudes of consequences, the available information and data is sparse and/or of questionable fidelity. Hence the ability to estimate insurance costs for mining disasters is problematic. This paper evaluates the viability of a surety system approach to disaster risk management via a comparative review of the adequacy and effectiveness of closure/restoration sureties currently required by permitting legislation.  It also examines the cumulative costs of environmental impact events that occur more frequently but which have lesser consequences, which would not be covered by disaster surety, but nonetheless play a substantive role in public trust and social license.
Keywords: Risk management, mining disasters, sureties, polluter-pay principle, social licence
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