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Addressing the Crisis in Reclamation Bonding For Mining Companies

Donald W. Vagstad, Laurence S. Kirsch, Proceedings of 48th Annual Rocky Mountain Mineral Law Institute (2002)

The mining industry is facing a growing crisis in obtaining reclamation surety bonds and in maintaining the bonds currently in effect. Without reclamation bonds, mining companies cannot operate. In the past, obtaining bonds was viewed as a ministerial task, but no longer. Increasingly, the unavailability of bonding is blocking deals and shutting down mines. Bonding companies often require full collateralization, creating significant cash demands that mines cannot meet. Bonding companies themselves are filing for bankruptcy, causing mines to scramble to locate alternative bonding. In some cases, mining companies cannot find alternate bonding and end up in bankruptcy themselves. This chapter addresses the predicament facing mining companies in the new bonding environment, describes means by which mining companies can protect themselves in bond cancellation and work-out contexts, and describes the probable shape of the future bonding paradigm for new projects.

§ 17.02 Background

Mining laws require financial assurance as a condition of mining permits to ensure the availability of funding for reclamation obligations. One of the principal means of financial assurance is the surety bond. Lacking financial assurance, the state and federal governments run the risk that the mining company might not have sufficient resources to conduct reclamation at the end of mining o