Modernizing Arizona’s Mining Reclamation Trust Model

A Practical Fix for Inflation, Fairness, and Long-Term Stewardship

I was recently approached by Walt Blackman with a very specific request: help draft a statutory amendment to Arizona law that addresses a long-standing structural problem in how mining reclamation funds are handled.

The issue itself is not ideological. It is mechanical, financial, and overdue for correction.

The Existing Problem

Under current Arizona statute, mining operators are required to post financial assurance for reclamation, often in the form of cash deposited with the state. While those funds sit idle, they earn interest. However, that interest does not belong to the mining company. It is retained by the state.

At the same time, operators are required to revisit and update reclamation cost estimates every five years. Because those costs are driven by inflation, materials, labor, and regulatory changes, companies are routinely required to add more money to their financial assurance even when they have already posted full cash coverage.

In plain terms:

• The state keeps the interest.
• Inflation increases reclamation costs.
• Operators are required to make up the difference out of pocket.

That is not a risk-management issue. It is a structural inefficiency.

The Legislative Solution

The amendment currently pending before the Arizona Legislature modernizes this framework by allowing mining operators to place cash-in-lieu reclamation funds into third-party escrow accounts or trusts rather than holding them directly with the state.

Under the proposed changes:

• Cash deposited into a qualified third-party escrow or trust remains fully dedicated to reclamation.
• Interest and earnings belong to the operator.
• Those earnings may be applied directly toward future reclamation costs.
• Upon partial release or substitution of funds, the proportional share of interest is released as well.

The statutory language is explicit and unambiguous on this point.

Why This Matters

This is not about loosening reclamation standards. Reclamation obligations remain intact. Financial assurance requirements remain enforceable. Regulatory oversight remains unchanged.

What does change is efficiency and fairness.

By allowing interest to remain with the party funding the reclamation, operators now have a mechanism to offset inflation rather than constantly chasing it. Over long mine lives, even conservative yield strategies can materially reduce future cash calls without increasing environmental risk.

Responsible Use of Funds

Importantly, this framework does not encourage speculation. The intent is conservative, capital-preserving management. Appropriate investment vehicles might include:

• U.S. Treasury notes
• Government-backed bonds
• Other low-risk instruments consistent with fiduciary trust management

These are not growth portfolios. They are inflation-defense tools designed to preserve purchasing power over time.

A Model That Aligns Incentives

This amendment creates alignment where none previously existed:

• The state retains regulatory authority.
• Reclamation remains fully funded.
• Operators are incentivized to manage funds prudently.
• Inflation is addressed proactively rather than reactively.

From a policy perspective, this is what a modernized regulatory framework should look like: protective without being punitive, structured without being stagnant.

Status

As of now, the amendment is pending filing. If adopted, it would represent a meaningful improvement in Arizona’s mining regulatory framework and could serve as a model for other jurisdictions facing the same structural problem.

This was not about politics. It was about fixing a system that no longer reflected economic reality. And in that sense, it is exactly the kind of statutory cleanup work that benefits regulators, industry, and the public alike.