The Yukon government will take priority over anyone else owed money by the bankrupt Yukon Zinc Corporation once it spends the rest of the mining company’s security deposit cleaning up the Wolverine mine site, Yukon Supreme Court Justice Suzanne Duncan ruled. (Crystal Schick/Yukon News file)

Yukon government has valid claim in Wolverine mine bankruptcy, judge rules

“This application arises because of an irresponsible mining venture in the Yukon”

The Yukon government will take priority over anyone else owed money by the bankrupt Yukon Zinc Corporation once it spends the rest of the mining company’s security deposit cleaning up the Wolverine mine site, a judge has ruled.

Yukon Supreme Court Justice Suzanne Duncan issued a scathing decision on issue May 26, clearing the way for the territorial government to continue remediation efforts at the site without having to tap into public funds — yet.

“This application arises because of an irresponsible mining venture in the Yukon,” Duncan wrote, referencing a request from the government’s Department of Energy, Mines and Resources for an order declaring it had a claim of $35,548,650 against the company.

“It raises the tensions inherent in society’s and the legislatures’ quest to strike an appropriate balance between ensuring effective environmental regulation and encouraging profitable, responsible resource development. It also demonstrates the limits in the applicable legislation and the need for the regulators to be vigilant in order to protect against potential burdens on taxpayers.”

Yukon Zinc and the Wolverine mine, located about 280 kilometres northeast of Whitehorse between Ross River and Watson Lake, are the latest in a string of companies and mineral projects in the Yukon that have been abandoned and left for the government to clean up.

The company was put into receivership, on the application of the Yukon government, in September 2019 after years of failing to maintain environmental standards at Wolverine and an increasingly perilous financial situation.

The mine had been in care-and-maintenance since 2015 after unfavourable metal prices led to the cessation of actual mining activity. The government stepped in October 2018 to address flooding and water contamination issues, and has been on-site doing remediation work ever since.

The government has been funding the work with the $10,588,966 in security Yukon Zinc did provide, out of the total $35,548,650 that it owed.

Duncan ultimately found that the Yukon government did not have a valid $35,548,650 claim against Yukon Zinc as it could not provide certainty that remediation and clean-up efforts would cost that exact amount.

She ruled that the government would, however, get first dibs on any assets remaining after spending the security it did have on clean-up work.

Lawyers for the Yukon government had stated that it expects it will have used up the $10,588,966 by the end of 2020.

Duncan noted provisions in other jurisdictions like Alberta and the Northwest Territories, where governments have more power to do inspections and enforce the payment of securities on abandoned oil wells and mines.

“This case then, serves to point out the limits of the current Yukon legislation, as well as the need for the regulator to be vigilant in ensuring environmental remediation costs do not escalate and become a burden on others, including taxpayers,” she wrote.

“There is a balance,” she wrote in another part of the decision, “to be struck in encouraging responsible economic development in the Yukon in the context of the competitive mining world, and ensuring that mining activities are completed to closure in a way that protects the environment, not at taxpayers’ expense.”

Contact Jackie Hong at jackie.hong@yukon-news.com

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