What mining companies and government regulators can learn from the recent catastrophic tailings pond spill
Earlier this week, the B.C. government announced two reviews into the breach of a tailings pond dam at Imperial Metals’ Mount Polley mine in B.C’s Cariboo region. Werner Antweiler of UBC’s Sauder School of Business looks at the political and business implications.
What are the questions being raised about management of the mine?
It has been alleged that management at Imperial Metals’ Mount Polley mine had decided to increase the mine’s output without fully understanding the limitations of the capacity of the tailings pond. There are reports that warnings from employees were ignored, as were concerns by the engineering firm that was involved in the original construction of the tailings pond. The picture that emerges is that the tailings pond may have exceeded its design capacity in recent months. It also appears that the company did not have an environmental emergency plan prepared in the event of a dam breach. These are matters that an investigation will have to verify, but they reveal the core management issues.
What is government’s role in the tailings pond breach?
Under existing legislation, the provincial government has the authority to monitor and regulate tailings ponds. However, the government may have lacked internal capacity to carry out routine monitoring, or may have failed to require firms to implement a more rigorous monitoring protocol. Belatedly, the government has agreed to inspect all 98 tailings ponds in British Columbia. In a 2011 report, the auditor general had lamented a lack of resources for monitoring mining activities in British Columbia.
What would be your recommendation to mining executives who find themselves in a similar situation?
The most important lesson is that prevention is better and cheaper than disaster recovery. Monitoring of a tailings pond can provide early warning of an imminent breach, providing valuable time to react and take countermeasures. It is also highly advisable to have independent auditors provide environmental assessments from time to time. Such audits can often detect problems that go unnoticed internally, and suggest state-of-the-art solutions. Lastly, firms need to be prepared for a wider set of contingencies and prepare environmental emergency plans. Speedy intervention in case of an accident can often limit and contain the damage.
What is the role of risk management? What is best practice for companies facing a crisis like this?
Risk management is about limiting damage and liability. Many companies react instinctively by disclosing very little–lest it be used against them at a later point, especially in a legal case. On the other hand, emergency responders and affected populations demand timely and full disclosure of all relevant information. For this reason, preparing an environmental emergency plan is crucial. Such plans define response procedures, delegate authority, and typically require training of personnel. Such plans also include a communication strategy with first responders, authorities, and the public. Crisis management starts by being prepared.
Do company shareholders carry any liability in a situation like this?
The responsibility of shareholders is rather indirect. Primary responsibility lies with the directors of a firm, who have statutory obligations to carry out due diligence in preventing environmental harm. Directors may be liable individually in addition to the collective liability of the firm where inaction or wrongful action have caused environmental harm. Shareholders are affected through the stock price, which in the case of Imperial Metals dropped by 40 per cent after the disaster, from about $17 in mid-July to around $10 in mid-August.