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Alberta to audit coal mines to ensure there's money for cleanup

Companies must post a deposit, but it may fall short of the actual cost of reclamation

Posted: July 28, 2016
Last Updated: July 29, 2016

The Paintearth mine just south of Forestburg, Alta., will be audited to ensure its owner has enough security to clean up the mine at the end of its life. (Erin Collins/CBC)

As Alberta moves away from coal-fired electricity, the provincial government is trying to ensure it will not be on the hook to clean up old coal mines once they stop operating.

The Alberta Energy Regulator is planning to audit nine coal mines beginning by mid-September to ensure that each operator has the security on hand to reclaim the property.

The AER said it is looking for a contractor to "validate that the approval holder's … security deposit is sufficient for the liability cost of suspension, decommissioning, remediation, monitoring and surface reclamation," according to a request for proposal posted this month.

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In its climate change plan released last November, the provincial government said it will no longer be dependent on coal-fired power by 2030.

That means several plants will be shut down many years before their operators had planned. That has set off a series of disputes about power purchase arrangements and whether electricity costs will rise, and if power generators deserve to be compensated for the early retirement of their assets.

Future of coal bleak

It also means many of Alberta's coal plants have no future.

In particular, thermal coal mines, which produce coal for power generation, do not have many options open to them. Even metallurgical coal, which is often shipped out of Canada for steelmaking, is seeing prices low enough that some mines have suspended operations in Alberta. 

The Sheerness coal plant is near Hanna, Alta., will be forced to close early because of new provincial regulations. There is $13 million on deposit to close and reclaim the mine. (Canadian Press)

The AER said the audits are planned "due to current economic condition and government policy affecting the coal mine industry."

Alberta has had problems with companies walking away from their mines. In 2000, Smoky River Coal's bankruptcy left Albertans with a $6 million bill to clean up its coal mine in northwestern Alberta.

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That case led to the creation of the Mine Financial Security Program, which required mine operators, both coal and oilsands, to post a deposit against the eventual cleanup costs.

$400 million on deposit

Because of the uncertain future of coal mining, the industry elected to post full security to cover cleanup. As an example, Grande Cache Coal has paid a deposit of just under $30 million in a combination of cash and a letter of credit.

In total, there is more than $400 million on deposit from 19 coal mines. There are questions about whether that is enough. However, Alberta's auditor general reported in 2015 that only three of those mines had been subject to a detailed audit of their security.

"Very little audit activity has been undertaken in the coal sector to ensure the amount of financial security provided by the operators is sufficient," read the report. It suggested more audits need to be done.

The AER is looking for an expert on coal mine reclamation to do the audits and to identify any gaps between the cost of reclaiming the mines and the deposits held by the province.

In British Columbia, the liability estimate for its 20 coal mines is more than $1.1 billion. Those liabilities were found to be underfunded by $600 million.

ABOUT THE AUTHOR

Tracy Johnson
Business reporter

Tracy Johnson is the executive producer of CBC's western digital business unit. She's been a business reporter/producer with CBC on radio, television and online for 15 years. @tracyjohnsoncbc