Adapting to Climate Change
Mining companies are starting to learn that climate change will undermine their own operations. Many are working now to save themselves from enormous future costs.
COMPANIES WORLDWIDE ARE HAVING to change the way they do business in order to mitigate the effects of climate change on their operations. The mining industry in this country is a prime example. In Canada’s far north, says Dennis Mahony, a partner at Torys LLP in Toronto, mines are already having to adapt to the effects of climate change on their infrastructure.
“Look at what’s happening with what we once called ‘permafrost,’” says Mahony, co-chair of the firm’s interdisciplinary climate change and emissions trading practice. “There is an awful lot of waste rock contained in frozen tailings dams in the far north. Melting ground threatens the stability of those storage structures, and it increases the likelihood that acid and heavy metals from the waste will leak into the surrounding soil and water, causing major ecological damage.”
The same is true of other aspects of mining in the far north that assume predictably long, cold winters, adds Mahony. Winter roads over frozen lakes and rivers, for example, have been used for generations to bring in heavy equipment, workers and supplies to mines. Those passageways are now freezing later, thawing earlier and less stable even at the height of winter because of material average temperature increases. “As a result, mining companies are forced to seek often expensive alternatives to bring in their equipment and people,” he says, “including flying them in.”
Changing modes of transportation also have a direct effect on a mine’s carbon footprint, says Adam Chamberlain, a partner with Gowling WLG in Toronto. As a result, mines are having to not only consider and manage increasing costs, they are also having to deal with design issues related to subsiding permafrost that were not a reality even 10 or 20 years ago. “The environment is changing; and those living and doing business in the changing landscape are being required to adapt in order to survive.”
At the permitting stage, mining and climate change has taken on increased prominence, says Keith Bergner, a partner with Lawson Lundell LLP in Vancouver. One central issue is that, while there are working assumptions as to the future impacts of climate change, “we can’t look back at history and say, well, ‘that’s what happened in the past, will it happen in the future?’”
In the face of uncertainty, Bergner says regulators will tend to be conservative, to look at a variety of scenarios and to say, “Will the proposed mining project continue to be safe, continue to be able to operate under these various scenarios?”
In the case of mines where First Nations are involved, one way to decrease uncertainty is through the use of preliminary memoranda of understanding (MOUs) and, later, impact and benefit agreements (IBA), says Kate Kempton, a partner at Olthuis, Kleer, Townshend LLP in Toronto. These agreements require that, at the end of the day, the mine cannot be built without the consent of the First Nations and provides a variety of protections.
“Language varies and, from our perspective, the standards keep going up in terms of what’s in an IBA as time goes on and Canadian and international law and understanding develops,” she says. In addition, many modern agreements speak to the role of First Nations, providing for them to not only review and comment and give advice, but in certain circumstances, to actually play a role in decision-making.
Most often, mining companies will enter preliminary agreements because the reality is the market — for example, raising money from investors through shares or from banks through loans — typically requires certainty, says Kempton.
For mining companies, the threat of climate change manifests in two ways: the potential adverse impact on legacy mine sites and future operations, and the costs of increasingly onerous government measures to reduce carbon emissions, says Mahony. Consequently, in addition to adaptation to the changing weather, Mahony notes that the mining sector is also facing an increasingly burdensome myriad of climate-related laws that federal and provincial governments have been putting in place across the country.
“At the top of the mining sector’s wish-list is that the legislative framework be relatively simple, and provide certainty and consistency across the country. A complicated patchwork of laws that don’t work well together is expensive for companies to track and manage and can make business planning much less certain.”
For First Nations, says Kempton, “their laws often require them to look seven generations ahead. They are embedded in the land, so environmental protection, which does encompass climate change, is a huge issue.”
As to potential risks in mining operations stemming from the effects of climate change, Kempton, whose law firm works exclusively for Indigenous peoples, persons and organizations, says, in her experience, Indigenous people tend not to fragment items off into separate silos or boxes on each issue.
“First Nations feel they have the right to consent or withhold consent to developments such as mines within their traditional lands or that otherwise affect their rights. So any mine is looked at from a holistic and global perspective, taking into account all of its potential impacts — environmental, social, cultural and economic — as a whole.”
Indeed, a mining project encompasses multiple and broad considerations that need to be taken in totality throughout its lifetime, says Bergner. For example, he asks, what can be done to adapt or mitigate the effects of climate change on the mine during not only its operations stage — but also when it has ceased functioning?
He says mines don’t move around, but birds, caribou or moose herds do. “The mining project will still be there, even if it’s in the closure and reclamation stage. What today might be a very minor impact on the habitat of a healthy animal or bird population might become a much more significant impact on a population diminished or dislocated by climate change.” So, in the case of mining, these are very project-specific issues.
ECONOMICS AND GREEN ENERGY
There’s a growing convergence of thought between mining economics and the environment, says Quentin Markin, partner and co-head of the global mining group at Stikeman Elliott LLP. The Vancouver-based lawyer says, “It’s turning out in many situations that it makes economic sense to be developing mining infrastructure that is greener; that it really is actually advantageous for a lot of mining companies to start going down this path.”
As an example, mines in locations off the power grid and without nearby infrastructure access have historically taken one of two approaches: they either build a large power line from the nearest grid infrastructure to the mine site or truck in that power, typically diesel for a diesel electric-generating plant at the mine site. “But what you’re seeing now more and more is a lot of these companies, often in remote locations, are starting to set up either wind power, in some cases, but more often solar facilities. This is not designed to totally replace diesel or other fossil fuels, but to augment that power source.”
One of Markin’s clients, Sandfire Resources, based in Perth, Australia, invested in a solar facility at their DeGrussa copper-gold mine in Western Australia. Located in the middle of the Australian outback, the mine site obviously benefits from a sunny, dry climate. In Africa, IAMGOLD announced a partnership to develop 15 megawatts of solar energy for the operation of its Essakane gold mine in Burkina Faso.
Still, Markin says, going forward, the increased use of renewable energy in mining operations, as in other settings, will be driven by technological advances in electricity storage and its ability for the mine to use this power 24 hours a day.
During meetings with mining executives who operate in Canada’s north, Chamberlain says that he’s hearing more frequent discussions on the role of renewable energy as one way to deal with the effects on mines from climate change.
Mining companies aren’t in the business of building wind turbines — it’s clearly not their core expertise — but Chamberlain says, “If you build wind turbines at a mine site, and if it saves you money and it also helps the environment, it’s a win-win in all aspects.”
As an example, he points to the Diavik Diamond Mine in the Northwest Territories, which offsets diesel fuel requirements by building large-scale wind farms. The benefits of reduced fuel requirements, and associated costs, are clear from a business point of view. Regulatory requirements and contractual relations with turbine manufacturers add some complexity, but not enough to outweigh the benefits.
Being creative about local economic opportunities that also serve the environment can be achieved by building mine power sources with multi-tasking in mind, says Kempton. “One of the approaches that is being developed is having the residual heat and power from gas turbines used to provide heat and power for greenhouses, thereby circulating the climate-changing greenhouse gases to grow green vegetables,” she says.
Looking back, Markin says a mine, a decade ago, that decided to use green energy for some portion of its power needs would generally have been viewed as a kind of outlier. “In contrast, these days, not only is it making economic sense in many cases, but from a public-relations and social licence point of view, it’s all dovetailing; so almost every mine feasibility study explores whether to incorporate some form of green energy.”