Coal Extraction In Northwestern B.C.

Risks, Liabilities and Options For Environmental Management

Jordan Hanna. 7667607. ENVR 3160. November 28th 2012

Avyion Mining is a newly established Canadian company focused on coal extraction. Coal is the remnants of prehistoric vegetation that is the product of time, heat and pressure. This ore is used primarily for electrical generation, steel production and as a fuel where over six billion tons per year are used annually.1 Northwestern British Columbia was by Avyion Mining because of the topographical and reserve size advantages for the region. The abundance of coal in B.C. makes mining operations more profitable for the firm. Mining operations consist of area mining that utilizes water to keep dust down and to direct waste from the mining site. Because coal is profitable on a large scale, large-scale landscape clearing is a requisite to pursue operations. The issue of environmental regulatory liabilities becomes a great concern for Avyion Mining because of this large-scale operation. Issues of water and aquifer contamination are a product of mining processes, as are greenhouse gas emissions, which affect air quality. Additionally, clearing such a large area requires wildlife and landscape displacement that will be under the scrutiny of environmental policy. Accordingly, issue analysis is needed to avoid environmental liability in addition to protecting the firms reputation for the public as well as the firms stakeholders.

Issue Description & Analysis

Water Quality & Discharge Mining operations require inputs to produce outputs. For Avyion Mining in B.C. one of these inputs are large amounts of water. The main purpose of incorporating water into operations is to allow for dust settlement during drilling and act as a lubricant to make operations more fluid.2 When water comes in contact with coal deposits the water quality is degraded, contaminated with heavy metals and depending on the pH of the surrounding earth, can acidify the water. Water from the mining operation must be discharged appropriately, which can contaminate adjacent land systems but most importantly water streams that are abundant in northwestern B.C. Primary receptors of stream contamination are wild life, aquatic life and humans who rely on these streams for drinking water. Damage to receptors will create liabilities for Avyion Mining, and can present regulatory implications if proper management is not followed. For mining firms the B.C. government requires that there is to be minimization of environmental impact, as mining operations will compromise the usefulness of water and its ability to support life.3 Under the Mines Act regulations state that if this requisite is not met, a fine of over $100,000 and imprisonment are possible under S.37 ss.(3.1)(a).4 Therefore the liability posed by water contamination is a high-risk issue, based on its enforcement cost and the possible extent of damage that can be done. In addition to mining regulations, water regulations become an issue as well. Licenses are required to pursue diversion of water, and regulations provided under B.C.s Water Act illustrate required steps to be taken by the firm. They illustrate that water sources such as streams and aquifers cannot be altered in quality. The B.C. Water act has two sets of offenses general and high offenses Water Act regulation breach fines can range from $200,000 to $1,000,000 and may also be subject to sentencing from six to twelve months in prison.5 Avyion Mining must be cognizant of water contamination and how water is being used in addition to considering the financial and judicial costs associated with its operation. For these reasons water quality and discharge pose great liability risks for the firm and must be considered prior to commencing operations. 2

Land Transformation & Wildlife To proceed with mining operations the surrounding land must be transformed in order to allow for proper drilling and drainage procedures. Landscape transformation is achieved by clearing large amounts of land through massive excavation. Excavation requires step-like stripping of land and moving earth away from the mining site. West Virginias expansion into the coal industry has seen a great deal of land transformation, particularly removing forests and displacing wildlife.6 For the mining firm in B.C. the location poses a particular problem for forestry and wildlife. To be efficacious at coal mining measures to clear land need to be taken. However, there are several moderate-sized provincial parks that are adjacent to Avyion Mining, which create liabilities for damages to park property as well as wildlife. Under S. 32 ss.(1)(f) of the Parks Act, deposition of waste into parks is strictly prohibited.7 The Parks Act creates a liability for Avyion Mining because such close proximity allows for sediment and toxic chemical runoff to be considered as imposed waste into the parks boundaries. This includes wildlife that is also affected by mining both directly and indirectly. Directly wildlife is affect due to exposure to toxic substances, which affects health and longevity. Indirectly their habitat is affected by clear cutting a large section of land and changing soil and vegetation availability. This has a long-term effect because if the mining operations were to start up at new location, remediation is required of the abandoned location. Companies are legally obligated to remediate lands they affect, and can costs thousands in damages.8 It is critical that mining operations be considerate of nearby parks. If regulations by the British Columbian government are not followed, Avyion Mining can come under regulatory fire for infractions where financial consequences and seizure of professional accreditation may follow as a result. CO2 & Methane Emissions While water quality and wildlife liabilities are of large concern to Avyion Mining, the third liability of greenhouse gas (GHG) emissions are also of concern. Over the last two decades GHG emissions and reduction have come into the environmental-political sphere much greater than ever before. With area mining the GHG CO2 is emitted through gaspowered engines but also through removing the trees that act as carbon sinks, reducing the atmospheric impact of CO2. However, methane is of greater concern for coal mining. When a coal seam is found, it contains not only carbon-laden coal but also a large mixture of methane in it. Methane is problematic because on a per molecule basis it is twenty five times as potent as CO2 for global warming potential (GWP).9 GHG emissions are subject to the Clean Air and Climate Change Act that was amended to include GHG and how to regulate production of them. It is important to note that this act divides Canada into zones, particularly provinces. If standards for air quality are not met in B.C. for example, auditing and regulations will be set on a per-facility basis.10 Because this act provides for carbon budgets based on GHG emissions, methane becomes problematic for how strong it is compared to CO2. However, despite it being so potent as a GHG, the abundance of methane is not as large as CO2 but should not be taken lightly. Consequences for not complying with the Clean Air and Climate Change Act can result in payments to the Environmental Damage Fund under S. 277, or imprisonment under S. 272 3

ss. (2.1)(a) and (b).11 Water, wildlife and air quality compromise can result in large regulatory fines and penalties if appropriate measures are not conducted. These liabilities need to be considered and incorporated into operations prior to engaging in drilling. Reputation Reputation is important to a firms operation, funding and image. Involvement in coal mining creates regulatory liabilities such as water quality and emission standards, which result in effecting their reputation. Union Carbide, a branch of Dow Chemicals is a great example of this. Union Carbide was a pesticide plant in Bhopal, India. In 1984 their processing plant released over 30 metric tons of a toxic cyanide-based pesticide. This caused several thousand short-term deaths, but mostly long-term injuries and diseases that continue to harm Bhopal today.12 They only received public acknowledgement when the Yes Men, a duo poised to expose poor performance of corporations that cost Dow Chemicals twenty years later 4.2% of their stock, or roughly $2 billion of market value.13 This is clearly an extremely large example of how important image and reputation is to the firm. Because of Dows negligence, they lost a substantial amount of stock and also their corporate performance and emergency plans exposed to millions of people who saw the broadcast on BBC. Reputation stems from corporate performance and transparency, which is why a proper framework to manage liabilities is important to address such liabilities before they become an issue.

Options and recommendation

Reasons To Manage The coal mining industry like most other industries has risks associated with the development of its operations. It is crucial for a corporation to manage risk in a manner that spares them of large liabilities, both regulatory and socially through public support. The purpose of risk management for Avyion Mining is simple. First it is to demonstrate that the firm can achieve corporate-social responsibility showing that they are willing to play ball. The goal is to do things in a pragmatic manner and to not disregard the environment solely for profit maximizing. There are large misconceptions that view managing liabilities in a manner that alters operations can affect profits greatly. This, particularly for Avyion Mining, is not the case. For Avyion Mining liability management creates an opportunity to reduce the risk of environmental disaster through negligence and have to pay for damages inflicted in addition to losing confidence of the stakeholders. Options are necessary and available to reduce the certainty of risk, because it promises less environmental damage in the long term, which can really have a positive affect on profit. For these reasons, risk aversion is not an option, but risk management is a viable way to address the liabilities that Avyion Mining may face in upcoming stages of operation. Options For Management Options to minimize environmental risk are available to provide a solid framework as a tool to avoid environmental degradation. Risk management starts with proper practice of due diligence in addition to proper employee training. Due diligence for a firm is the practice of reasonable care by the firm employees and by extension their board of directors. Due diligence as a defense against liability risk requires that there were proper maintenance reports conducted, staff was properly trained and all efforts were put forth to prevent an accident from happening. As an example, British Petroleum (BP) had a major spill in the 4

Gulf of Mexico in 2010, which was a result of negligence on the part of the supervisors and operators. Their oil well continuously spilled into the Gulf without proper efforts being put forth, and under court decision did not practice due diligence and in fact even destroyed evidence of maintenance reports.14 For Avyion Mining, avoiding this issue is about implementing checks in every possible situation. This tool can be applied for when mining is taking place and water is used to assist in drilling but also its disposal, which has to be negotiated with treatment plants. If this liability is managed in such a way, the risk of discharge into the water is minimized, and the contaminate encroachment on nearby provincial parks is reduced considerably because reasonable action was taken in order to ensure waste was dealt with properly. Contracts with the provincial and federal government are another tool in order to minimize risk. Examples of contracts would include disclosing crucial environmental information such as remediation records or the ownership of responsibility in the form of insurance. What contracts essentially do is transfer ownership of risk from one body to another. The transfer of risk would be waste management. Companies on a regular basis would collect and dispose of used drilling water that has been contaminated. This ensures waste is looked after, but also transfers the ownership of such risk from Avyion Mining to the contracted company, indemnifying Avyion of such liabilities. Risk of park contamination, wildlife harm, and river discharge greatly reduce, providing a long-term financial benefit. Contracts incentivize the need to become responsible, because it allows for proof of due diligence and appears responsible in the eyes of government and the public. Lastly for regulatory liability negation are audits. Audits are meant to allow for thirdparty analysis of steps taken to follow environmental legislation. Their benefits include lowering legal liability, providing communication between board of directors and employees in addition to the protection of the environment. Ultimately audits act as a means for continually improving communications between staff and improving performance. Testing water quality of surrounding rivers of the Avyion Mining site can be the difference between risk aversion and corporate responsibility. This difference is the difference between heavy fines, compliance orders and remediation versus continued operations. Audits as a tool for environmental management can prove useful when mining capacity is approached. Audits will demonstrate due diligence, and in addition to contracts will complement Avyion Minings environmental management system. Additionally, covering all the bases for environmental liability will guarantee strengthening of the companys reputation. Stakeholders will be willing to back the firm because such practice will positively affect their bottom line in addition to providing environmental protection.

Conclusion

Avyion Mining prior to operation has several liabilities, which require attention in order to avoid regulatory penalties. After addressing the liabilities of water discharge, park and wildlife encroachment, GHG emissions and reputation, there are tools available for the firm at their disposal to achieve a proper corporate responsibility. Due diligence is the base of Avyion Minings management system, which incorporates proper training and contracts with agencies to address waste in an effective manner. Audits create a third-party version of due diligence which allows for increased performance, resulting in increased profits. If such steps are taken, Avyion Mining will see success in business, in public relations and with maintaining proper responsibility of their operations. 5

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Coal Mining, World Coal Association, http://www.worldcoal.org/ Tiwary R. K., Environmental Impact of Coal Mining on Water Regime and Its Management, 132, 1 (2001): 185-199. 3 BC government, Mines Act (Victoria: Queens Printer, 1996). 4 Ibid. 5 BC government, Water Act (Victoria: Queens Printer, 1996). 6 Shirley Burns, Bringing Down the Mountains: The Impact of Mountaintop Removal Surface Coal Mining, (Morgantown: West Virginia University, 2005): 2. 7 BC government, Park Act: Park, Conservancy and Recreation Area Regulation (Victoria: Queens Printer, 2010). 8 British Columbia Ministry of Energy. Seizing Global Demand (Victoria: British Columbia Ministry of Energy and Mines, 2012), 17. 9 Bharat Singh & Onkar Singh, Study of Impacts of Global Warming on Climate Change, 112. 10 House of Commons of Canada. Bill C-30 (Ottawa: Parliament of Canada, 2007). 11 Ibid. 12 The Yes Men, prod. Yes Men Films LLC, dir. Dan Ollman. 87 min., 2009. DVD. 13 Ibid. 14 Margaret Fisk, BP Appears In Court to Enter Criminal Plea Over Spill, Bloomberg, http://www.bloomberg.com/news/2012-11-27/bp-appears-in-court-to-enter-criminal-pleaover-spill.html (accessed Nov 27, 2012).