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OTTAWA, June 19 (Reuters) - Heavy dust clouds blowing from Cliffs Natural Resources' abandoned Wabush iron ore mine into a small township in the eastern Canadian province of Newfoundland and Labrador is putting a focus on the liability of miners that seek creditor protection and walk away from assets.
Iron ore and coal miner Cliffs Natural Resources Inc announced in February 2014 it was shutting down its Wabush mine. This year it sought creditor protection for its Canadian assets.
The fate of the deserted mine is in limbo until it is either acquired by a rival or Cliffs is able to restructure and exit creditor protection.
Local residents say the abandoned site has many open pits, with drilling equipment, trucks and other equipment stranded on the site.
"Now that the company has gone into closure, it is very hard to maintain a relationship with them. From a corporate level, we have not heard anything from them in almost a year, if not longer," said Colin Vardy, mayor of the town of Wabush. "I'm very disappointed. ... They haven't been paying their town taxes."
Vardy said the company used to spray water on its tailings to control dust, but now that the mine has been closed dust is casting a pall around the town and causing health concerns.
The provincial environment department says air quality monitoring stations show that pollution levels are still at low risk levels, which may mean the dust is more of a nuisance than a health risk. Vardy was skeptical.
"When I walk through the community and I can feel the dust on my teeth and I can feel it in my mouth and I can feel it in my nose," said Vardy, adding the town is urging the provincial government to intervene and release funds from a security bond paid by the company of about C$50 million ($40 million) to cover mitigation costs.
Newfoundland Environment Minister Dan Crummell on Thursday said the government has told Cliffs it is responsible to remediate the land, despite being under bankruptcy protection. He told the provincial legislature that Cliffs recently issued a contract to revegetate the tailings area.
Both Cliffs and U.S. Steel have sought creditor protection for their Canadian arms in a bid to isolate losses and insulate their shareholders.
Critics say the creditor protection filings are thinly veiled attempts by the companies to wash their hands of closure costs and pension liabilities around their assets. U.S. Steel has significant environmental clean-up costs around its Hamilton operations.
Cliffs and U.S. Steel were not available for comment.
A spokesman for a Canadian watchdog group said the situation shows miners need to have long-term plans, regardless of whether they are using wet or dry tailings.
"Obviously you cannot rely on a plan that involves sprinkling water forever on tailings to control the dust," said Hugo Lapointe, program director for MiningWatch Canada.
Miners typically use either wet or dry tailings ponds to store the waste material created during the mining process. Both disposal systems present their own challenges.
$1 = 1.2224 Canadian dollars Reporting by Mike De Souza; Editing by Leslie Adler