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Adjusting To BC’s Increased Reclamation Bonding Requirements – Mining

The BC government is increasing its reclamation bonding
requirements from mining operations. On April 8th, 2022,
BC published a new interim Major Mines Reclamation Security Policy (the “interim
“). Among other things, the interim policy
seeks to reduce the difference between the mining sector’s
reclamation liabilities and the reclamation security held by the

Background to the Policy: Recommendations and Examinations in
BC’s security Reclamation Practice

The interim policy was developed in response to recommendations
following a 2016 audit of compliance and enforcement in the BC
mining sector. The audit report found that the Ministry of Energy and
Mines was not holding enough security ($0.9 billion at the time) to
cover the estimated environmental liabilities at major mines ($2.1
billion at the time). The Auditor General recommended that the
“…government safeguard taxpayers by ensuring the reclamation
liability estimate is accurate and that the security held by
government is sufficient to cover potential

This recommendation – and subsequent examinations into
BC’s reclamation security practices by independent engineering
and accounting consultants – led to the development of the
interim policy. In November 2020, the Minister of Energy, Mines and
Low Carbon Innovation and the Minister of Environment and Climate
Change Strategy were given a mandate to “ensure owners of
large industrial projects are bonded moving forward so that they
– not BC taxpayers – pay the full costs of
environmental cleanup if their projects are

Key Provisions of the Interim Policy:

(1) any new mines must post reclamation security equal to 100%
of the reclamation liability for the projected disturbance and any
environmental liabilities created in the first five years of the
mine’s life;

(2) any mines that have fewer than five years of mineral
reserves remaining must post reclamation security equal to 100% of
the reclamation liability for the mine;

(3) cost estimates for mines’ liabilities include
“conventional reclamation,” like landforming and
revegetation, and post closure environmental stewardship costs,
like water treatment and its associated costs (e.g., labour,
reagents, shipping, parts, sampling/analysis); and

(4) companies can post their required reclamation security

a. cash,

b. cash equivalents (certified
cheques, money orders, bank drafts),

c. surety bonds,

d. qualified environmental trusts,

e. irrevocable standby letters of

Overall, the interim policy creates a more detailed and
formulaic framework for determining the amount and form of
reclamation security.

Industry Response:

The Mining Association of British Columbia
(“MABC“) has
to the Province’s interim policy, noting it is
one of the most stringent reclamation policies in the world. While
generally supportive of the interim policy, the MABC notes that the
reclamation security held by the Province has increased by more
than $1 billion (up to $2.3 billion, currently) since 2016.

Mine operators are learning to cope with the financial burden of
increased reclamation bonding requirements, with a degree of
apprehension as to the ongoing implementation of the interim policy
and the final legislative regime that is expected to follow in the
coming years.

Strategies for Mining Companies

(1) Engage with Ministry – Mine operators
should understand the importance of collaborating with the
Ministry, as there may be room to explore aspects of the
Ministry’s valuation approach.

(2) Consult with Indigenous Communities – Mine
operators need to be proactive in consulting, and developing strong
relationships with, local indigenous communities who might be
affected by mining operations. Affected indigenous communities have
important voices in determining whether mining operations go ahead
and how much security the government requires.

(3) Use Cash Alternatives – As outlined above,
the Ministry accepts a number of cash alternatives as reclamation
security, such as letters of credit (which are typically
cash-backed) and surety bonds (which may be issued based on
non-cash security or even just a strong corporate balance sheet).
Note that letter of credit and surety bonds are vulnerable to being
unwound by the relevant issuer should market conditions, or the
mine operator’s financial circumstances, change.

(4) Back-to-back Structures – The Province has
specific form requirements for letters of credit and surety bonds.
In some cases, a surety company may not accept the Province’s
form or the proposed surety may be unacceptable to the Province. In
such cases, consider employing a back-to-back structure: posting a
letter of credit in the Province’s required form that is backed
by a surety bond on commercial terms favourable to the mine
operator (e.g., with no cash collateral requirement).


1. See interim policy at p. 1.

2. Ibid.

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The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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