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By Root 2058 0

have proved to be up to 100 times the mining company estimate. That’s not surprising, because the estimate was provided by the company, which regularly underestimates because it has no financial incentive or government regulatory pressure to estimate the amount fully. The assurance is provided in one of three forms: cash equivalents or a letter of credit, the safest form; a bond that the mining company obtains from an insurance company in return for an annual premium; and a “self-guarantee,” meaning that the mining company pledges in good faith that it will clean up and that its assets stand behind its pledge. However, frequent breaking of such pledges has shown self-guarantees to be meaningless, and they are now no longer accepted for mines on federal land, but they still account for most assurance in Arizona and Nevada, the American states most friendly to the mining industry.

U.S. taxpayers currently face a liability of up to $12 billion to clean up and restore hardrock mines. Why is our liability so large, when governments have supposedly been requiring financial assurance of cleanup costs? Parts of the difficulty are the just-mentioned ones of assurance costs being underestimated by the mining companies, and the two states with the biggest taxpayer liabilities (Arizona and Nevada) accepting company self-guarantees and not requiring insurance bonds. Even when an underfunded but real insurance company bond exists, taxpayers face further costs for reasons that will be familiar to any of us who have tried to collect from our insurance company for a large loss in a home fire. The insurance company regularly reduces the amount of the bond payoff by what are euphemistically termed “negotiations”: i.e., “If you don’t like our reduced offer, you may go to the expense of hiring lawyers and waiting five years for the courts to resolve the case.” (A friend of mine who suffered a house fire has just been going through a year of hell over such negotiations.) Then the insurance company pays out the bonded or negotiated amount only over the years as cleanup and restoration are carried out, but the bond contains no clause for inevitable cost escalations with time. Then, too, not only mining companies but sometimes also insurance companies faced with large liabilities file for bankruptcy. Of the mines posing the 10 biggest taxpayer liabilities in the U.S. (adding up to about half of the total of up to $12 billion), two are owned by a mining company on the verge of bankruptcy (ASARCO, accounting for about $1 billion), six others are owned by companies that have proved especially recalcitrant at meeting their obligations, only two are owned by less recalcitrant companies, and all 10 may be acid-generating and may require water treatment for a long time or forever.

Not surprisingly, as a result of taxpayers’ being left to foot bills, there has been a backlash of anti-mining public sentiment in Montana and some other states. The future of hardrock mining in the U.S. is bleak, except for gold mines in underregulated Nevada and platinum/palladium mines in Montana (a special case about which I shall say more below). Only one-quarter as many American college undergraduates (a mere 578 students in the whole U.S.) are preparing for careers in mining as in 1938, despite the explosive growth of the total college population in the intervening years. Since 1995, public opposition in the U.S. has been increasingly successful in blocking mine proposals, and the mining industry can no longer count on lobbyists and friendly legislators to do its bidding. The hardrock mining industry is the prime example of a business whose short-term favoring of its own interests over those of the public proved in the long term self-defeating and have been driving the industry into extinction.

This sad outcome is initially surprising. Like the oil industry, the hardrock mining industry too stands to benefit from clean environmental policies, through lower labor costs (less turnover and absenteeism) resulting from higher job satisfaction, lower health costs, cheaper