facing cleanup costs frequently avoid those costs by declaring bankruptcy and transferring their assets to other corporations controlled by the same individuals. One such example is Montana’s Zortman-Landusky gold mine mentioned already in Chapter 1 and developed by Pegasus Gold Inc., a Canadian company. When opened in 1979, it was the first large-scale open-pit cyanide heap-leach gold mine in the U.S., and the largest gold mine in Montana. The mine proceeded to cause a long series of cyanide leaks, spills, and acid drainage, abetted by the fact that neither the federal government nor the Montana state government required the company to test for acid drainage. By 1992, state inspectors had established that the mine was contaminating streams with heavy metals and acid. In 1995 Pegasus Gold agreed to pay $36 million to settle all lawsuits by the federal government, state of Montana, and local Indian tribes. Finally, in 1998, at a time when less than 15% of the mine site had undergone any surface reclamation, Pegasus Gold’s board of directors voted themselves more than $5 million in bonuses, transferred Pegasus’s remaining profitable assets to the new company of Apollo Gold that they created, and thereupon declared Pegasus Gold bankrupt. (Like most mine directors, those of Pegasus Gold did not live in the downstream watershed of the Zortman-Landusky mine, and they thus exemplified elites insulated from the consequences of their actions as discussed in Chapter 14.) The state and federal governments then adopted a plan of surface reclamation to cost $52 million, of which $30 million would come from the $36 million payment by Pegasus while $22 million would be paid by U.S. taxpayers. However, that surface reclamation plan still does not include the expense of water treatment in perpetuity, which will cost taxpayers much more. It turns out that five out of the 13 recent major hardrock mines in Montana, four of them (including the Zortman-Landusky mine) open-pit heap-leach cyanide mines, were owned by the bankrupt Pegasus Gold Inc., and that 10 of the major mines will require water treatment forever, thereby increasing their closure and reclamation costs by up to 100 times previous estimates.
A bankruptcy more expensive to taxpayers was that of another Canadian-owned heap-leach gold mine in the U.S., Galactic Resources’ Summitville Mine in a mountainous area of Colorado receiving over 32 feet of snow annually. In 1992, eight years after the state of Colorado had issued an operating permit to Galactic Resources, the company declared bankruptcy and closed the mine on less than a week’s notice, leaving a large local tax bill unpaid, laying off its employees, stopping essential environmental maintenance, and abandoning the site. A few months later, after the start of the winter snowfalls, the heap-leach system overflowed, sterilizing an 18-mile stretch of the Alamosa River with cyanide. It was then discovered that the state of Colorado had required a financial guarantee of only $4,500,000 from Galactic Resources as a condition for issuing the operating permit, but that the cleanup would cost $180,000,000. After the government had extracted another $28,000,000 as part of the bankruptcy settlement, taxpayers were left to pay $147,500,000 through the Environmental Protection Agency.
As a result of such experiences, American states and the federal government eventually began to require hardrock mining companies to guarantee in advance some form of financial assurance that enough money would be available for cleanup and restoration, in case the mining company itself refused or proved financially unable to pay for the cleanup. Unfortunately, those assurance costs are typically based on a cleanup cost estimate made by the mining company itself, because government regulatory bodies lack the time, knowledge, and detailed mine engineering plans necessary to make such an estimate for themselves. In the many cases where mining companies have not cleaned up and the government has been forced to fall back on that assurance, the actual cleanup costs