CEPMLP Internet Journal Volume 12 : Abstract 11

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Bonding Requirements for Coal and Hardrock Mines in the US

by James Boyd

This paper will be included in the projected book International and Comparative Mineral Law and Policy: Trends and Prospects, edited by Elizabeth Bastida, Thomas Wälde and Janeth Warden and to be published by Kluwer Law International in 2003.

Executive Summary

Financial assurance rules, also known as financial responsibility or bonding requirements, foster cost internalization by requiring potential polluters to demonstrate the financial resources necessary to compensate for environmental damage that may arise in the future. Accordingly, assurance is an important complement to liability rules, restoration obligations, and other regulatory compliance requirements. This is particularly true in the case of coal and hardrock mining. Experience with site reclamation and other environmental problems demonstrates the necessity of financial mechanisms dedicated to future environmental obligations. The paper assesses the implementation and politics of assurance rules in the United States. From the standpoint of both legal effectiveness and economic efficiency, there are a number of important design issues that must be addressed by any assurance program that aspires to effectiveness. The paper gives a brief overview of these issues. Despite these cautions, on the whole, cost recovery, deterrence, and enforcement are significantly improved by the presence of existing assurance regulations.

Keywords: assurance, financial responsibility, bonding, environmental insurance.

James Boyd
Senior Fellow
Resources for the Future
Washington, DC.
(added 07 October 2002)

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