This article is an extract from GTDT Practice Guide: Mining 2021. Click here to view the full guide.
Two recent major tailings dam failures caused the mining industry, investors, non-governmental organisations (NGOs), and governments to look closely at the potential risks of these facilities and the standards by which they were being managed. The first, the Mount Polley tailings dam failure in British Columbia in 2014, caused substantial environmental harm, releasing about 24 million cubic meters of water and tailings into downstream waterways.2 The second, the Vale failure near Brumadinho, Brazil in 2019 was even worse. This failure caused 270 fatalities and devastated the lives and livelihoods of those who survived, in addition to having significant environmental consequences, with the operator reported to have paid more than US$7 billion in damages arising from the incident.3
The root causes and other contributing factors of these catastrophic incidents have been extensively investigated, resulting in detailed reports evaluating the reasons the failures occurred and providing recommendations for corrective actions and reforms that would decrease the likelihood and the consequences of such events in the future.4 The investigative panels evaluating these incidents considered many technical, engineering, organisational, and human behavioural factors that may have contributed to these events. These reports are well worth reading to better understand the interaction between latent conditions and operational decision-making that can, in some circumstances, lead to tragic consequences.
Unsurprisingly, these two incidents also led many stakeholders, such as investors, governments, NGOs and the mining industry itself, to examine why these events had occurred and to develop measures to prevent them from happening in the future. Most notably, a group of three co-convenors joined together to develop the Global Industry Standard on Tailings Management (GISTM).5 These were the International Council on Mining & Metals (ICMM), a group of international mining companies committed to ‘strengthen[ing] the social and environmental performance of the mining and metals industry’6; the Principles for Responsible Investment (PRI), ‘the world’s leading proponent of responsible investment’;7 and the United Nation’s Environment Programme (UNEP), ‘the leading global environmental authority that sets the global environmental agenda, promotes the coherent implementation of the environmental dimension of sustainable development within the United Nations system, and serves as an authoritative advocate for the global environment’.8 GISTM ‘strives to achieve the ultimate goal of zero harm to people and the environment with zero tolerance for human fatality’,9 and adopts 15 principles and 77 requirements spanning topics including tailings facility design standards, operating practices, independent reviews, emergency response planning, disclosure and corporate governance.
Many of these topics fall outside the expertise of most lawyers, and lawyers advising clients on matters that touch on tailings management would be well served to always bear in mind the complexity of these issues and the numerous disciplines required to evaluate them. That said, the potential risks associated with tailings dam failures will inevitably raise legal questions on which lawyers will need to advise their clients. Possible legal issues include those related to:
- disclosure requirements, both government-mandated or undertaken voluntarily; compliance with existing regulatory requirements;
- evaluating the legal implications of changes in existing tailings management practices (whether undertaken by mine operators, recommended by external constituencies, or required by governments);
- participation in the development of new regulatory or permit requirements;
- advising clients regarding potential liability associated with managing tailings facilities; and
- advising clients regarding corporate governance issues that touch on tailings management.
Moreover, as arguably related topics – such as evolving physical risks related to climate change and environmental, social and governance (ESG) concepts involving sustainability, human rights and environmental performance – become increasingly important to both investors and governments, a mine operator’s policies and procedures regarding tailings management may need to be integrated with, or at least considered in connection with, its larger efforts regarding ESG or sustainability performance reporting.
This brief article explores some of these issues, largely from the perspective of lawyers who advise the mining industry, although we anticipate that this discussion may be useful to attorneys considering these issues from other perspectives. A working understanding of the GISTM, other emerging tailings standards, and the source and focus of other broadening ESG and climate-related standards will allow lawyers to more effectively provide legal counsel on issues that touch on tailings management, giving advice that is sensitive to the overall context in which these legal issues may arise, is better informed by the challenges clients face, including the operational and governance implications of particular recommendations, and anticipates the range of possibilities that may arise in the future from ongoing trends.
Stakeholder responses to Mount Polley and Brumadinho
Investor-led disclosure and reform efforts
Since the Brumadinho disaster, investors have taken action to increase transparency surrounding tailings storage facilities through the Investor Mining & Tailings Safety Initiative (the Initiative). The Initiative is an investor-led effort that aims to improve understanding of the social and financial risks associated with tailings facilities and ensure that best practices and standards in the management of tailings facilities are implemented.10 The Church of England Pensions Board and Swedish Council of Ethics of the AP Funds chair the Initiative, which is backed by 112 international investors that collectively manage over US$14 trillion in assets.11 The Initiative’s first act was to call for development of a global tailings management standard. It supported development of the GISTM12 and has set the expectation that companies conform to the GISTM and disclose a timeline for intended compliance.13
On 5 April 2019, shortly after calling for development of the GISTM, the Initiative sent out a disclosure request (the Request) to 721 companies seeking identification of and information on tailings facilities across the globe.14 The Request covered a range of topics, including location and ownership information, construction methods, consequences of failure, past stability issues, volume of tailings being stored, internal and external engineering support, and whether the tailings facilities has been assessed against the impact of climate change-related severe weather events.15 To ensure that companies disclose all tailings facilities they have an interest in, the Request asked for disclosure of tailings facilities operated by subsidiaries, partnerships, and joint ventures, even if the disclosing company was not the operating partner.16 As of 5 May 2021, 341 companies had responded.17 Of these, 188 declared that they had no tailings facilities, 153 provided full or partial disclosures, and 197 confirmed that they had tailings facilities but provided no further disclosure.18
The information provided in response to the Request was compiled in the Global Tailings Portal (the Portal).19 The Portal allows users to sort tailings dam data by location, company, volume, risk, and a number of other metrics. Phase two of the Portal project will aim to capture information about inactive or legacy tailings facilities that were not disclosed in response to the Request and to include remote monitoring of tailings facilities via Synthetic Aperture Radar satellites.20
On 25 January 2021, the Initiative committed to further mining sector action.21 The cornerstone of this effort is a 2030 Investor Agenda for the Mining Sector (the Investor Agenda).22 Asset owners and fund managers will collaborate to develop the Investor Agenda, which will address ‘systemic issues including tailings waste, climate change, and a just transition related to automation, supply chains, child labour, critical mineral supply, pipeline of future mining leaders, among other issues’. The Investor Agenda will also address how to consolidate disclosure requests and independent site-level monitoring of tailings facilities.
Other actions in the effort include:
- the launch of an independent global institute for mining and tailings safety in coordination with the United Nations Environment Programme;
- the creation of an expert working group to determine feasibility of a global, 24/7 tailings monitoring hub;
- the creation of an investor working group on affected communities that will work with communities affected by tailings facility disasters; and
- a second disclosure request (Second Request) that is anticipated in 2021.23
The Second Request is expected to expand into climate and topography and refine prior requests by following up with questions on:
- types and dates of past stability issues;
- breakdowns of tailings production over time;
- breakdown and differentiation of tailings type (eg, slurry, co-disposal, cycloned, thickened, paste and filtered);
- types of operation (eg, open-cut or underground);
- tailings facilities closure dates;
- inactive tailings facilities;
- presence of liners;
- seepage and seepage treatment; and
- the presence of particular tailings management operations (eg, paste backfill).24
Industry and standards-setting group activity
Industry and standard-setting groups have also created or updated their own mining and tailings management standards since the Brumadinho disaster. In 2019, the World Gold Council, the Mining Association of Canada’s Towards Sustainable Mining programme, and the Initiative for Responsible Mining Assurance all either published or updated their standards.25 Additionally, the Sustainability Accounting Standards Board (SASB) is currently finalising revisions to its Metals & Mining and Coal Operation Standards to address tailings management.26
Even before the GISTM was finalised, the Global Tailings Review noted that equivalency between the GISTM and standards developed by other bodies is key to maximising conformance with the GISTM.27 Equivalency allows operators seeking certification under one standard to be relieved of demonstrating conformance with other standards if the operator demonstrated compliance under an equivalent program.28 The World Gold Council and ICMM have already collaborated to develop an equivalency table demonstrating alignment between the two frameworks.29 While the SASB continues to discuss further revisions to its draft standard, it has expressed its general support for continued alignment with the GISTM.30
Stakeholders and industry participants have noted increased investor scrutiny of the mining industry and are taking action in anticipation of new disclosure requirements. For example, the London Metals Exchange has announced that it will require all metals in its warehouses to include information on sourcing.31 This disclosure is intended to help customers procure sustainably produced metals without the need to review individual company reports or disclosures.
While initial investor-led efforts were focused on disclosure and standards-setting, companies are already facing growing pressure from the Initiative to commit to a timeline for revising existing policies to comply with new and updated industry standards.32 As a practical matter, if companies refuse to comply with these reform efforts, some investors may choose to shift their investments to companies that comply with disclosure requirements and the GISTM standard.
The GISTM: what does it do and what remains controversial?
Finalised in August 2020, the GISTM addresses six separate topic areas:
- affected communities;
- integrated knowledge base;
- design, construction, operation and monitoring of tailings facilities;
- management and governance;
- emergency response and long-term recovery; and
- public disclosure and access to information.
While a full summary of the GISTM’s requirements is beyond the scope of this article, there are a few points of particular interest. Importantly, the GISTM is not limited to technical engineering standards related to tailings management, and it imposes substantive requirements on broader matters related to tailings facilities, including those related to affected communities, internal corporate governance, the financial capacity of mine operators, cultural issues, and independent external reviews. The GISTM imposes requirements that apply throughout the tailings facility lifecycle and incorporates requirements for closure planning at early stages in the lifecycle. It is not, generally speaking, prescriptive on engineering matters, and largely leaves the choice of particular technologies and designs to the judgment of the mine operator, although the GISTM explicitly requires that considerations related to climate change be evaluated in connection with certain GISTM requirements. There appears to be general consensus that the GISTM reflects a significant improvement in practices for tailings management, even on the part of those who believe it should have gone further.33 There are, however, a number of issues that remain controversial, and these issues are the ones that are most likely to be significant from a legal perspective.
As noted above, the GISTM is not generally prescriptive on technical issues, and that fact has resulted in criticism from certain stakeholders, particularly environmental NGOs.34 For example, some have argued that the ‘upstream’ method of tailings dam construction – where additional raises of the tailings dam are supported, in part, by compressed tailings deposited earlier – is inherently less safe than other methods of dam construction (the ‘center line’ and ‘downstream’ methods) and should therefore be banned entirely.35 Other analyses suggest that upstream dams are safe in appropriate settings (principally areas of low seismic activity and rainfall) so long as they are managed properly,36 and the other methods of dam construction may have their own drawbacks (eg, larger footprints or use of more material). Under the GISTM’s process, proscriptions of particular dam methods were outside of the GISTM’s scope37 – a point that some have argued biased the process.38 This issue will likely remain a point of controversy going forward.
The question of upstream dams is not the only design consideration that remains somewhat controversial. Some groups have argued that tailings facilities should be required to use de-watering technology resulting in ‘filtered’ tailings before placement in an impoundment and that the GISTM should have pressed for greater use of these and other technologies to reduce the water content of tailings.39 The GISTM requires reviews of technology and, for new facilities, a goal to ‘minimise the volume of tailings and water placed in external tailings facilities’.40
Similarly, the question of appropriate external loading criteria – principally the magnitude of earthquakes and floods that a particular tailings dam must be designed to survive – remains subject to some debate. The GISTM itself adopted an approach whereby new tailings facilities must either be constructed to meet ‘extreme’ loading criteria – criteria developed based on assumptions regarding the scale of the impact a catastrophic failure might cause – or be demonstrated to have the capacity to be upgraded to meet those criteria if needed.41 Critics of this approach argue the very act of trying to distinguish among the potential consequences of dam failures in setting design criteria tacitly reflects a tolerance of failure, and that all dams should instead be designed to withstand the greatest possible loading (the ‘maximum credible earthquake’ or the ‘probable maximum flood’).42 Even some commentators that have argued for more stringent standards, however, have also recognised that to a certain extent any ‘zero tolerance’ standard is, in some sense, aspirational.43 Acceptance of that reality should not be construed as tacitly endorsing failure. Against that backdrop, the GISTM’s reliance on the ‘as low as reasonably practical’ (ALARP) principle reflects an approach to risk that was acceptable to the co-convenors.44
Chronic versus acute failures
The original impetus for the renewed focus on tailings dam safety arose from the sudden catastrophic failures of the tailing dams at Mount Polley and Brumadinho, which caused deaths and substantial environmental harm as an acute failure consequence. As the GISTM process evolved, however, other failure scenarios came into play, including ‘chronic’ or long-term environmental harms potentially caused by tailings facilities. Some stakeholders have argued that such long-term chronic impacts can become ‘catastrophic’ in their own right and should have been included in the GISTM, a view that from the industry perspective would have represented a substantial increase in the scope of the GISTM beyond the important question of managing acute catastrophic failure risk.45 Ultimately, the GISTM required mitigation for the projected material chronic impacts of new tailings facilities rather than incorporating prescriptive approaches to managing chronic impacts and applying such approaches to existing facilities.46 Importantly, however, chronic issues can be and often are managed through environmental management systems and local environmental regulations. Where the GISTM should end, and where other kinds of environmental regulation and management systems should begin, may well be a contested issue arising during implementation of the GISTM.
Financial assurance and insurance
The question of financial assurance and insurance also remains controversial. Some stakeholders have argued vigorously that no regulatory regime governing mining can be complete without requiring mine operators to provide financial assurance in the form of liquid financial instruments to be held in trust to provide for decommissioning and reclamation of a tailings facility in the event that a mine operator cannot do so themselves, and that the mine operator must also be required to obtain liability insurance to compensate for any downstream impact caused by a tailings facility’s failure.47 Others have argued that sufficient assurance of the ability to decommission and reclaim a tailings facility can be demonstrated, at least for well-capitalised mining operators, by showing that the operator has sufficient financial resources to do so (eg, by demonstrating that capacity through financial statements or other mechanisms). Ultimately the GISTM took that approach, endorsing periodic demonstrations of financial capacity and imposing insurance requirements only to the extent commercially reasonable.
Often lost in the arguments over financial assurance and insurance are the practical realities of the matter – theoretical objections to self-bonding and financial demonstrations often do not seriously engage with the fact that such arrangements have generally been effective in avoiding orphan mine sites (most such sites pre-date the imposition of financial requirements), and have been successfully applied in many regulatory programs.48 Similarly, the use of financial assurance in jurisdictions with relatively mature mining regulations is not directly applicable to what makes sense in less-regulated jurisdictions (eg, jurisdictions where there is no regulatory infrastructure that would allow such requirements to work as a practical matter). And, as for insurance, there are practical limitations on the current market availability of commercial insurance to protect against the large-scale impacts of a catastrophic failure at a large tailings facility.49
Governance and corporate risk management
While there appears to be general consensus that an important part of tailings dam safety is ensuring that an executive sufficiently highly placed in an organisation is accountable for safety and the prevention of catastrophic incidents, there remains some controversy over what form that organisational structure must take. The GISTM requires the adoption of a policy statement at the board level50 and the appointment of an accountable executive ‘directly answerable to the CEO’,51 but critics of the GISTM argue that it should have been more prescriptive in two key aspects:. First, defining reporting lines from facility engineering staff to the accountable executive and from the accountable executive to the CEO. Secondly, explicitly mandating that the board of directors be ultimately accountable for major accident risk at tailings facilities.52 The advocates for such board accountability generally argue that a board is the only level at which major accident risk can really be balanced against cost and production pressures, which critics worry will otherwise overwhelm safety consideration at lower (even very senior) levels of management.53 Opponents of such prescriptive governance requirements view them as inconsistent with the role of corporate boards in certain jurisdictions and believe that such matters are appropriately resolved at the senior management level (eg, by the CEO).
Indigenous peoples, project affected peoples and free, prior and informed consent
The interactions between mining and other large-scale project development companies and indigenous peoples has long been of significant concern to many. The ICMM released a position statement on this issue in 2013,54 and there is an extensive body of literature related to the issue of free, prior and informed consent (FPIC) in the context of large-scale projects such as mining. Given the issue’s significance, GISTM requires that:
[Where] a new tailings facility may impact the rights of indigenous or tribal peoples, including their land and resource rights and their right to self-determination, [operators] work to obtain and maintain free, prior and informed consent (FPIC) by demonstrating conformance to international guidance and recognised best practice frameworks.55
Similarly, the GISTM generally imposes a procedural requirement that an operator undertake ‘meaningful engage[ment]’ with project-affected people,56 including disclosure requirements and grievance mechanisms. Certain environmental NGOs have argued for a much higher level of involvement of indigenous and project-affected people, taking the position that projects should not be allowed to go forward without consent from affected people, and that such people need more than just engagement, but rather need to be involved in making decisions regarding particular projects.57
The path forward – what should lawyers be ready for?
The recent development of the GISTM, coupled with the still-undetermined level of uptake among mining companies, timing of implementation, and the evolving responses of various stakeholders makes the near-term path forward uncertain. That said, lawyers working in this space should be aware of possible future developments and be prepared to advise their clients accordingly.
Continued pressure on certain GISTM issues
Notwithstanding the general recognition of the many virtues of the GISTM, it is apparent that certain stakeholders, most notably but not exclusively environmentally-focused NGOs, believe that the GISTM is not adequate in certain respects and intend to continue advocacy to persuade other stakeholders, such as investors and governments, to require more. As noted above, for example, Earthworks, an environmental NGO with a focus on mining issues, released its own competing standard addressing issues related to mine tailings management. While such organisations can be expected to continue their advocacy on all issues raised in such standards, including highly technical ones, from the perspective of practicing lawyers, the ones that are most likely to be of legal interest include those positions that mandate or forbid certain technologies (eg, bans on upstream dams, use of filtered tailings); positions requiring liquid financial assurance arrangements; and prescriptive rules on internal corporate governance. One forum in which such issues will be raised is in the development of an independent entity to assess compliance with the GISTM and to consider revisions to the GISTM going forward. Such an entity was not provided for in the GISTM itself, but a process to create such an entity has been commenced by two of the three GISTM co-convenors (UNEP and PRI).
Counselling clients regarding disclosure and governance issues
As noted above, much is afoot on the disclosure front. The accuracy of public statements made by mine operators regarding tailings facility management practices, adoption or compliance with the GISTM and other standards can be legally significant from a securities disclosure perspective in some jurisdictions. Further, action on the tailings front comes at a time when regulatory attention to public disclosures regarding ESG issues, such as climate change and human rights, more generally has increased and appears to be of increasing interest to investors in making investment decisions.58 As a result, it is reasonably likely that mining companies will feel the need to make more public statements and release more information on these topics, which might extend to a host of topics related to tailings management, and those statements may well need review and consideration from a legal perspective, not just a technical one.
Participation in development of future regulatory requirements
While a comprehensive survey of regulatory initiatives on mine tailings management is beyond the scope of this article, one of the papers prepared by the expert panel as part of the GISTM process contains a relatively recent analysis of such requirements.59 We anticipate that continued future development in this area is likely, and that the requirements of the GISTM will affect such processes – whether through regulations, proposed permit conditions, or public comments from affected stakeholders in various regulatory processes – and thus be relevant even for those companies that have not formally adopted the GISTM.
An example of this kind of regulatory development process occurred in the United States in connection with the US Environmental Protection Agency’s proposal to impose new financial assurance requirements on the hardrock mining industry using an environmental statute, the Comprehensive Environmental Response, Compensation and Liability Act.60 That proposal would have required substantial new financial assurance to be provided by the operators of hardrock mining facilities in the United States. Over the course of a six-month public comment period, many affected stakeholders prepared detailed comments addressing many aspects of the rule, both for and against. While, generally speaking, the proposal was favoured by environmental groups and opposed by the mining industry, many state governments and other federal agencies also opposed the rule on the grounds that existing state and federal regulatory programs, which already had their own approaches to financial assurance for mines, were sufficient and did not need to be supplemented or overridden. Ultimately, the proposal to add new mining financial assurance requirements at the federal level in the United States was never adopted, with the EPA determining that the mature regulatory programmes in the United States were sufficient to the point that no additional requirements were needed, a decision that an appellate court affirmed in the face of a vigorous legal challenge from environmental groups.61
Liability risk management
While much of the focus of the GISTM and other similar standard setting activities is to ensure that catastrophic events never occur, a mine operator’s approach to the GISTM may well be relevant to potential liability in the event that a worst-case outcome occurs. While compensation to injured people and restoration of the damaged environment is the highest priority in the aftermath of a catastrophic incident, mine operators will likely also be subject to potential punitive consequences, whether that be through private lawsuits seeking punitive damages or civil or criminal proceedings against a company, individual executives, or key contractors. For example, the Brazilian authorities have commenced criminal proceedings against a number of individuals regarding the Brumadinho incident,62 consultants involved with that facility are the subject of litigation in Europe,63 and criminal prosecution has occurred in other analogous cases, such as the Deepwater Horizon well disaster in the United States.
Some thought must be given to managing those risks before any event occurs, and the role of lawyers will of course be central in the aftermath of such an event. The best legal defence against such punitive liabilities is precisely the same as those measures needed to prevent a catastrophic incident in the first instance: a robust safety culture, defensible technical and operational standards, meaningful independent review, and other similar measures. In that regard, mining companies that have not adopted the GISTM will likely be at greater risk in the aftermath of an incident. It appears largely unquestioned that the GISTM represents a significant improvement in the area of tailings facility safety and reducing major accident risk. The GISTM has emerged from organisations and from a process that will not be easily dismissed as stating an appropriate standard of management and care. Thus, for those entities that do not adopt the requirements of the GISTM, significant thought should be given to documenting the basis for that decision and demonstrating how equivalent measures of safety have been deployed. Importantly, the ICMM has developed a detailed good practice guide regarding tailings management64 and a conformance protocol to assist its members in compliance with the GISTM. Even entities that develop a particularised tailings facility management approach, rather than adopt the GISTM as a whole, may still be well served by considering many of the points made in the GISTM.
On a final note, it is important to recognise the many benefits of mining, in order to place the potential risks in context. It has been recognised, for example, that various metals produced through mining are critical to the infrastructure build out necessary to support greater electrification, a step that is in turn necessary to facilitate renewable energy deployment to reduce greenhouse gas emissions and align with the goals of the Paris Agreement. Similarly, there are many historic mining districts with poor environmental conditions and no remaining responsible parties that can restore them, where the most viable path to environmental remediation may be a mine-to-remediate scenario that would have benefits for mining companies, the environment, local stakeholders and regulating governments alike. While this consideration in no way justifies deviations from necessary tailings facility safety and reclamation practices, it is important to ensure that this side of the equation is also placed before stakeholders evaluating mining policy decisions – whether regulating governments or financial institutions making investment decisions – to ensure a balanced consideration of these important issues. In short, metals are still essential to achieving many laudable social welfare goals, and without mining those metals will not be available. Lawyers can play an important role in ensuring this is not overlooked as the industry moves to better practices.