Aerial view of Open-pit iron mine

Using Environmental Benefits Analysis to Inform Mine Closures and the Transition to a New Energy Future

April 16, 2024

By: Richard Wenning, Mark Rockel, Randy Mandel & Joe Nicolette

Incorporating environmental cost/benefit analysis into mine closure planning helps to ensure that the costly history of planning and mine closure activities is not repeated. Mine closure plans are monitored closely by regulators, investors, and other stakeholders. Successful companies are fully informed of the ecological consequences of closure options and commit to actions that optimize environmental and socio-economic benefits at the lowest practical costs. As such, using environmental cost/benefit analysis to optimize the ecosystem service and natural capital benefits of closure expenditures is becoming increasingly more important..

The mining industry experienced rapid growth during the 2000s until the commodity price downturn with the onset of the 2008 global financial crisis. Recovery has been slow. By 2015, the downward trend in commodity prices led to increased pressure on mining companies to reduce operations costs and expansion plans. Mining companies learned several tough lessons about their value drivers and the need for financial discipline to control spending and improve their balance sheets 1. For those companies able to navigate the difficult fiscal recovery, financial markets have rewarded their performance with improved share prices on world financial markets.

Fiscal Discipline During Mine Closure is Paramount

Financial discipline in the 2020s and beyond won’t, however, relieve mining companies of their obligations to environmental stewardship practices during mine development, production, and closure. Closure activities, in particular, need to be planned well ahead of a mine’s end of productive life. The future uses of mine lands should be included in a mine’s life cycle plan and periodically reviewed to assess future socio-economic trends, regulatory requirements, and environmental risks and opportunities. Enhancing or protecting biodiversity, taking carbon reduction actions, and improving water and waste management are key elements of a sustainable after-life for post-mining restoration. Environmental organizations, investors, and regulatory agencies are monitoring these and related sustainability commitments more closely than ever.

Financial discipline also extends to forecasting mine closure costs at the end of productive life. Climate change has added additional challenges by introducing new uncertainties and possible failure risks that potentially threaten to disrupt the mining sector 2. Researchers at the University of Waterloo have warned that plans to reclaim land after mining could cost the industry billions of dollars in additional cleanup costs if mine closure plans fail to account for the ecological effects of climate change 3. Imprecise engineering details, inadequate environmental baseline data, and inaccurate rehabilitation assumptions and ecological models are often cited as the source of weak closure cost projections and post-closure management of the mine site 4. .

Mine Closure Now and Tomorrow

Demonstrating fiscal discipline requires highly accurate cost estimation and verification capable of forecasting the obvious short-term fundamental rehabilitation costs and longer-term investments in recovering ecosystem services and natural capital. Mining companies preparing to launch their mine site rehabilitation commitments must be vigilant for continuously changing environmental and social attitudes. It is not uncommon for environmental legislation, surrounding land uses, community expectations, and corporate notions of what constitutes an acceptable level of rehabilitation to evolve over time.

Indeed, site stabilization and managing waste materials are challenging elements of mine closure. Water treatment and management remain very costly and complicated in mine rehabilitation work, requiring infrastructure that can be compromised by technical problems or overwhelmed by extreme weather conditions 5. When poorly controlled, the environmental damage caused by pollutants in poorly or untreated water to surrounding areas can be costly to contain and remediate. Treatment and long-term stable containment of mine tailings is another vexing challenge.

Using Environmental Benefits Analysis to Optimize Mine Closure Work

Environmental liability at mine sites is more than being safe, stable, and nonpolluting. Recontouring mine slopes and revegetating the landscape is no longer sufficient. Environmental organizations, investors, and regulatory agencies increasingly expect companies to restore ecosystems to their pre-mined, or natural, state. The International Principles and Standards for the Ecological Restoration and Recovery of Mine Sites (Mine Site Restoration Standards, MSRS) is the first international framework for delivering socially and environmentally responsible ecological restoration after mining, regardless of whether restoration is legally mandated 6.

Environmental cost/benefit analysis incorporates improvements to the environment that positively affect the well-being of people and communities and seeks to maximize the net social benefit accruing to these vested parties. As such, it takes account of economically relevant environmental conditions and impacts, whether valued by the market or not. Environmental benefits analysis is a quantitative economic tool that provides a clear vision of the environmental trade-offs of various mine site rehabilitation options and a basis for optimizing environmental improvements within a mine closure budget.

Mining companies can help prevent closure costs from spiraling upward by developing cost estimates using probabilistic approaches that capture cost and environmental uncertainties. Proactive market research is key. Companies that provide only cursory attention to the closure planning process are usually those whose cost burden ends up being the heaviest.

Rehabilitating mine land is a costly process. Companies must consider several influencing factors when determining the utility and value proposition of future land uses, such as aesthetic, agronomic, ecological, economic, physical, recreational, and social characteristics. Mines in various geographies also possess inherently distinct environmental and social characteristics that affect closure plans and rehabilitation work. Rehabilitation choices made early-on will impact the viability of various future land uses such as carbon sequestration, biodiversity uplift, education, sustainable energy production, tourism, and water storage. It may take several decades to achieve the desired future ecological condition, no matter the size of the mine. Hence, periodic reviews and cost assessments that focus on optimizing the environmental and social benefits of restored mine sites are essential to maintain proper alignment with the strategic plan for the mine site.

How Montrose Can Partner with Municipalities

Economists and environmental scientists at Montrose collaborate with mining companies to address the challenges posed by the rehabilitation of mining sites. Our team includes experts in monitoring and testing soils and surface waters, baseline ecological surveys/risk assessment, and planning for the revegetation of mine sites. Our economists are experts in environmental cost/benefit analysis and assist clients with cost optimization strategies for socially and environmentally responsible ecological restoration supporting mining and resource development projects.

By fostering collaboration, implementing innovative solutions, and prioritizing proactive measures, Montrose and its clients can take meaningful steps toward mitigating the impacts of mining and enhancing, protecting, and restoring the natural capital at mine sites that are integral to the vitality of their communities.

Richard Wenning is a Senior Principal, Mark Rockel is a Senior Economist, Randy Mandel is a Principal Restoration Specialist, and Joe Nicolette is the Vice President of Ecosystem Service Economics at Montrose Environmental Inc. They can be contacted here.

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