How mining companies give taxpayers the shaft

Sad story in my Globe and Mail today about the Faro mine in Yukon. Justin Giovannetti tells us all about the fallout after the world's biggest open pit mine was abandoned. It's a good story as far as it goes. As a taxpayer and a citizen it's certainly important to be informed of a major environmental threat and what the government is doing about it.

What the government has been doing about it is cooking up a remediation plan. The plan has been in the planning process for 18 years now, and get this; work should start in 2023! In the meanwhile, planning takes a lot of money - at least 250 millions thus far! And that's just the planning! The actual remediation is expected to cost at least a billion!

That's a lot of cash and a fascinating story, but what would have been interesting is some discussion about how this ended up being a taxpayer liability. All Giovannetti tells us is that "...the owner went bankrupt, dumping one of Canada's largest environmental liabilities into the lap of the federal government."

Yup, just like that!

Now the story, to my way of thinking, would be far more informative if we knew a little more about those owners who went bankrupt. Obviously, a lot of people must have made a lot of money during the lifespan of what was once the world's biggest open pit mine. Why aren't they cleaning up after themselves?

The lead-zinc motherlode at Faro was discovered by a guy named Al Kulan. He teamed up with an established American mining multi-national, Cyprus Mines, and Cyprus Anvil was born. The CEO of Cyprus Mines at the time was a guy named Henry Mudd. Check out his wikipedia page and you'll see he's mostly famous for his philanthropy; giving money away. He obviously had plenty of it coming in.

Cyprus Mines changed hands and was controlled by Amoco, the US oil giant, at the time Faro closed in the early '80s. They have plenty of money too. Most Cyprus properties eventually ended up with Freeport McMoRan, a company with revenues of almost 16 billion US dollars in 2015.

Amoco, via its subsidiary Dome Petroleum, sold the mine to a rising star in the mining industry, Clifford Frame. Frame has twice been honoured by The Northern Miner as its "Miner of the Year." Frame went on to a measure of infamy thanks to the Westray mine disaster in Nova Scotia in which 26 of his employees died. Here's a fascinating article about Mr. Frame's business practices from Paul McKay at the Ottawa Citizen. Mr. Frame is now 83 years old and fabulously wealthy. No word on whether he's kicking in a few bucks towards the cleanup costs.

Mr. Frame fobbed the Faro mine off on another Toronto mining promoter, and this is the guy who went bankrupt in Giovannetti's story. But he personally didn't go bankrupt - just the company that owned the mine! He too is fabulously wealthy and remains active in the mining community.

So this is what would make a fabulous story, or at least flesh out Giovannetti's version. Lots of folks made lots of money in the relatively short life span of the Faro mine. How do they get to keep their millions but the taxpayer gets stuck with the billion dollar plus tab to clean up their mess!

Sadly, this is far from an isolated incident. Remember Royal Oak Mines? Peggy Witte was the darling of the business pages in The Globe and Mail for a few years, a tough woman making it in the macho world of mining. She too has a "Miner of the Year" trophy on her mantle. She too left a billion dollar mess for the taxpayer to tidy up.

And then there's those 150,000 orphan oil and gas wells awaiting taxpayer remediation in Alberta alone.

That's how we roll in Canada! Some entrepreneurial genius comes up with a scheme. They get laudatory press coverage galore and oodles of government subsidies. Then, when the mine or the well is worked out and our entrepreneurial whiz kids are long gone, leaving the taxpayer holding the bag, that same press can't even remember their names.

Federal officials working overtime to cover their butts on train disaster

Edward Burkhardt isn't the only one doing the 'tain't-my-fault boogie in the wake of the Lac Megantic disaster.

Have a look at the regulators who gave the thumbs up every time Burkhardt found another corner to cut.

Oh golly, now they are concerned about his insurance coverage?

And oh my goodness, you don't mean that there is a remote ever-so-tiny possibility that the TAXPAYER could end up on the hook?

While the sentiments expressed are cleverly engineered to arouse contempt for the railway and sympathy for the regulators, the fact is, this is how it usually works in Canada.

The highly efficient private sector rapes the land/forests/waters what have you, and when the plundering is done and the efficient private sector is long gone, the tax-payer moves in to clean up the mess.

Who remembers Peggy Witte and the Royal Oak Mines saga?

There was a time when you couldn't open a business paper in Canada without reading some obsequious testimonial to the woman who had fought her way to the top in the macho world 'o mining.

She was the "woman of the year" here and the "miner of the year" there and by God you couldn't turn around without bumping into a half dozen stories about what a genius Peggy Witte was.

Peggy is long long gone but the Canadian taxpayer is still cleaning up her mess.

It's actually worse than that; if you read the story through you realize that for a billion dollars of taxpayer money, we're not actually cleaning up the mess, but merely deferring the cleanup.

So don't be taken in by the self-serving cries of alarm coming from the regulators.

The taxpayer always foots the bill after the efficient private sector geniuses have skipped town.