The law and economics of reclamation bonds

It is becoming a standard practice for governments to require mining operat ions to post reclamation bonds. Yet, there have been few theoretical treatm ents examining the rationale for bonding mechanisms, and even fewer empiric al treatments of the effectiveness of bonding. This paper addresses some of these holes in the literature. It begins by examining the rationale underl ying reclamation bends, and discusses the strengths and weaknesses of bondi ng as a tool for enforcing reclamation requirements. The role of bonding me chanisms is to help enforce standards, not necessarily yield efficient outc omes, and these mechanisms are best viewed as a complement to - not a subst itute for - liability rules. The paper also examines the effectiveness of b onding by drawing on evidence from hardrock mining on public lands in the w estern United States. (C) 2001 Elsevier Science Ltd. All rights reserved.