British Columbia Mine Reclamation Symposium

Mine-specific B.C. reclamation funds Anderson, Duane


Section 12 of the Mines Act (S.B.C. 1989 c.56) provides for the establishment of mine-specific reclamation funds (Funds) as security for mine reclamation obligations. Section 6 of the Mineral Tax Act (1989) effectively allows Fund payments to be deductible from otherwise taxable income as calculated under that Act. The Ministry of Energy, Mines and Petroleum Resources (EMPR) is developing the Funds as part of its revised mine reclamation security requirements. The intent of these security requirements will be to ensure that mine developments post security sufficient to ensure acceptable site reclamation. This policy is in response to the Province having to fund required reclamation at certain abandoned mines (such as Mt. Washington), a greater awareness of the technical complexities and environmental impacts of some conditions (such as; Acid Mine Drainage (AMD)), and increased environmental consciousness by the general public. EMPR is concerned that failure to satisfactorily address those issues could result in considerable cost to the province and/or significant restrictions on the industry (as has happened in other jurisdictions). Currently, the Income Tax Act of Canada (the Act) is not conducive to reclamation by single-mine companies with long-lived, post-closure mitigation problems (e.g. AMD). The reason for this is that the Act does not allow such companies to deduct all of the associated expenditures from otherwise taxable income. Deductibility can only be achieved by the company posting the security and "walking away" from the reclamation obligation. This is not desirable as the Province must then perform the mine reclamation. The Funds are intended as optional, tax-deductible, security for those mines that would otherwise have difficulty satisfying the province's requirements. The structure of the Funds, with their potential surpluses, will provide reasonable assurance to the Province that its reclamation needs will be addressed and allow the mine to benefit from the use of cost-effective reclamation techniques and/or successful research and development. AMD mitigation is not necessarily a problem for mines owned by diversified companies that have other income sources with which to fund those post-closure reclamation costs and against which to deduct the expenditures. Such mines will be able to post other acceptable forms of security. The Funds will be subject to certain provincial controls to ensure that the Province's reclamation concerns are addressed, facilitate tax deductibility, and maintain public confidence. The Funds' Investment Policies will determine how the Funds can be invested by the Funds managers and can affect the Province's risk exposure and the mine's Fund payments. The Investment Policies will endeavor to provide the maximum possible return to the Fund that is consistent with an appropriate level of risk to the Province. Concerns have been expressed regarding the tax deductibility of the Funds. It is thought that tax deductibility can be achieved in two ways. The first is by amendment of the Act with explicit provision by the Federal Minister of Finance. The second is though a successful legal challenge by a company in response to an unfavourable Revenue Canada ruling.

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