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Financial assurance and mine closure: Stakeholder expectations and effects on operating decisions

Listed author(s):
  • Peck, Philip
  • Sinding, Knud
Registered author(s):

    Financial assurance is increasingly seen as a means to ensure orderly, clean and lasting closure of mines. Broadly interpreted, "closure" requires leaving viable ecosystems on mining lands that are compatible with a healthy environment and with human activities, that have low hazard, and that encompass measures to prevent ongoing pollution from the site in the long-term. Financial assurance encompasses environmental surety instruments that protect the government and public in the event a mining company cannot meet its reclamation or rehabilitation obligations. As such, financial assurance is in essence the money available for closure of the mine in the case when the mine owner is not available to perform the work. A general trend towards greater environmental concern among social stakeholders in mining further serves to focus attention on policies and practices that can actually "assure" financial assurance. Financial assurance is also perceived as a means to address closure-related challenges that are increasing in number as well as diversity. Notably, current trends involve a shift towards a greater focus to the societal aspects of mine closure rather than just the ecological. The use of financial assurance, however, also raises some fundamental questions about how assurance mechanisms influence mining operations and the relationship between mining operations and their surroundings. This paper examines both the internal effect of a variety of financial assurance approaches on mining operations--in particular the manner in which environmental and social concerns are addressed by mining firms, and the almost inevitable tension between some form of financial provision for closure on the one hand, and governmental expectations of tax revenue on the other. As a major argument for supporting the conduct of mining is that state revenues from the extractive industries supply monies for the building of human and infrastructural capital, this second area of tension also has strong social and developmental overtones.

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    Article provided by Elsevier in its journal Resources Policy.

    Volume (Year): 34 (2009)
    Issue (Month): 4 (December)
    Pages: 227-233

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    Handle: RePEc:eee:jrpoli:v:34:y:2009:i:4:p:227-233
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    1. Boyd, James, 2001. "Financial Responsibility for Environmental Obligations: Are Bonding and Assurance Rules Fulfilling Their Promise?," Discussion Papers dp-01-42, Resources For the Future.
    2. Bryan W. Husted & José de Jesus Salazar, 2006. "Taking Friedman Seriously: Maximizing Profits and Social Performance," Journal of Management Studies, Wiley Blackwell, vol. 43(1), pages 75-91, 01.
    3. Shogren, Jason F. & Herriges, Joseph A. & Govindasamy, Ramu, 1993. "Limits to environmental bonds," Ecological Economics, Elsevier, vol. 8(2), pages 109-133, October.
    4. James Otto & Craig Andrews & Fred Cawood & Michael Doggett & Pietro Guj & Frank Stermole & John Stermole & John Tilton, 2006. "Mining Royalties : A Global Study of Their Impact on Investors, Government, and Civil Society," World Bank Publications, The World Bank, number 7105, April.
    5. Andrés Liebenthal & Roland Michelitsch & Ethel Tarazona, 2005. "Extractive Industries and Sustainable Development : An Evaluation of World Bank Group Experience," World Bank Publications, The World Bank, number 7368, April.
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