Social licence: easy to grant, hard to revoke

What happens to community social licence when resource projects get shelved?

Abandoned gold, copper mine: social licence agreements don’t count for much when the company behind a mine or other resource project runs into financial trouble | Steve Lovegrove/shutterstock

When a new pipeline or mine is proposed, promises are often made to communities and First Nations to win community approval.

The social-licence agreements often go above and beyond what regulators require and can include increased environmental protection measures and deals to provide First Nations with job training and employment.

They can also include community amenities, such as the pledge by Kinder Morgan Inc. (NYSE:KMI) to fund a $500,000 upgrade to a community recreation park in Hope as part of its Trans Mountain pipeline expansion program.

But as Yukon taxpayers and mine workers are learning, it’s hard to force companies to live up to their promises and obligations when they go bankrupt.

Two mine operations in the Yukon shut down recently because the B.C. companies that own them are facing bankruptcy, leaving Yukon taxpayers on the hook for cleanup costs and workers chasing the wages owed to them.

Vancouver-headquartered Yukon Zinc Corp. – owned by China’s Jinduicheng Molybdenum Group Co. Ltd. – shut down its Wolverine mine near Watson Lake in the Yukon earlier this year, and, more recently, Vancouver’s Veris Gold Corp. (OTC:YNGFF) has been deemed by the Yukon government to have abandoned its Ketza gold mine project.

Both companies are under creditor protection. Yukon Zinc has been fined by the Yukon government for failing to make close to $3 million in security deposits to cover the mine’s eventual reclamation. The mine has been flooding since it was idled.

Meanwhile, the Yukon Conservation Society says Yukon taxpayers are on the hook for dealing with runoff from the Ketza mine, which Veris Gold had been working to reactivate.

The ore there contains arsenic, so dealing with runoff from surface disturbances is a serious problem, said Yukon Conservation Society mining analyst Lewis Rifkind.

As part of the permit to operate, the company was required to treat water from the site, he said.

“Now they’ve run out of money and walked away, someone has to keep doing the water treatment and that, of course, is the taxpayer.”

The problem in the Yukon, he said, is that companies need to put up only a fraction of the remediation costs that will be incurred when a mine shuts down, either at the end of its life or prematurely.

In B.C., companies are required to post a security that reflects the long-term liability of mine reclamation and is paid back only when the mine site, once shut down, is fully reclaimed.

In Yukon Zinc’s case, the company not only has defaulted in paying its security deposits, but is also defaulting on its obligations to employees. Workers who had been temporarily laid off in February received notices last week that, as of May 22, they will be permanently laid off.

They have been notified that, because a recent BC Supreme Court order has frozen the company’s assets, the workers might not receive their severance pay.

For Glenn Lafrance, that amounts to $1,726. His benefits will also cease on May 22. Lafrance had worked at the mine for only 14 months, so he says his severance pay is not that significant.

“Some of the younger employees that have been there for a while, they’re talking probably $5,000, $6,000,” Lafrance said.

It’s unclear whether the company has also defaulted on any benefits agreements it might have with local First Nations. These agreements are typically confidential.

However, in Veris Gold’s case, documents filed with EY, the company’s monitor, show four First Nations among its creditors. They’re owed a total of $46,232.

Social-licence agreements may be legally binding, but they’re not necessarily required as part of regulatory permitting. 

Whether a new mine or pipeline gets an environmental assessment certificate or permit to operate does not necessarily hinge on these agreements, said Sean Jones, aboriginal, environmental and regulatory law for Borden Ladner Gervais.

“Those are still legally binding commitments, but they wouldn’t necessarily directly affect the way that the project would be approved or operate in terms of the government’s authority.”

However, Jones added that regulators will sometimes “take comfort in knowing that these agreements are in place.”

“I have seen the B.C. Environmental Assessment Office (EAO] approve projects knowing that the proponent has made good-faith effort to negotiate [the agreements]. And in some rare instances, the EAO has made compliance with those agreements a condition of the project being approved. But that’s certainly not the norm.”

Paul Cassidy, an environmental lawyer with McCarthy Tétrault, dislikes the notion of social licence because it gives a false sense of security. When a company defaults on the promises that are made as part of social- licence agreements, there’s not much a community can do about it.

“Social licence operates outside the law. This is the troubling thing about social licence. It assumes that, in fact, there’s some legal ability or sanction or approval, and that’s just not the case.” 

nbennett@biv.com