Panel Transcript: Brownfields Redevelopment

Panel:

Brownfields Redevelopment

 

Moderator: Cassie Boggs

Panelists: Carolyn McIntosh[1] and Allen Reilly[2]

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Mr. Rielly PowerPoint Handout

Ms. McIntosh PowerPoint Handout

Cassie: I am the general counsel of Resource Capital Funds. We are a private equity that just invests in the mining sector. As such, we are interested in all the kinds of topics that we are talking about today. We have two really good speakers who I think will give us a real insight of the concept of brownfields development. I want to introduce our first speaker who is Carolyn McIntosh, a partner at the firm of Squire Patton and Boggs and is one of the preeminent environmental lawyers in the country and counsels clients on complex environmental compliance issues and has considerable expertise in counseling clients in respect to exposure, remediation and issues related to contaminated sites. She is a graduate at the University of Colorado and I want to give a shout out to her associate, Matt Rojas, who helped with the presentation. Matt helps in the area of a wide variety of environmental land particularly related to water and the environment.

 

 

Carolyn L. McIntosh – “Key Factors for Successful Mining Redevelopment”

Carolyn:  Matt Rojas and I took the combination of our experiences representing mining companies and looked at just under a dozen examples where a mining company had discontinued mining at a particular location and then another entity had acquired the mine site, prices had gone up, or some other events had occurred resulting in resurgence or re-starting of mining operations.  We then evaluated whether the re-start was successful in redeveloping that mine for mining purposes. Of the dozen cases that we have looked at, we decided to focus on three case studies.  I am going to present each one of those cases studies and how we evaluated each case to develop the several factors that we thought were predictive of whether the mining property in each case study could be redeveloped.

We identified the following six factors as predictive of the likelihood of mining redevelopment success:

The first factor is the presence of a “valuable resource;” it’s a necessary pre-requisite.  A mining property cannot be redeveloped if it doesn’t have a valuable resource. The textbook definition of “valuable resource” is generally guided by the prudent man standard—if someone would devote their time and effort to develop the resource then that is a first strong indication that a valuable resource is present. For the case studies, we only selected mining sites where a valuable resource had been identified.

The next factor is mining company strength.  We broke this second factor down into a number of sub-factors, including leadership, vision, skilled community engagement, fiscal capability, continuity, and commitment.  We identified fiscal capability as a sub-factor, as opposed to simply financial strength or size, because fiscal capability can mean something beyond how much money is listed on the company’s balance sheet.  The “continuity” sub-factor can mean either continuity of management, continuity of ownership, or continuity of some component of the company, even if there were bankruptcy or restructuring actions along the way. I wanted to add another word about the sub-factor of “skilled community engagement.”  We saw that sub-factor as one of the real differentiators.  Mining redevelopment projects are not simple, they have a lot of moving parts.  If the company doesn’t factor in the need for community engagement then just getting the permit is not going to get the project over all of the hurdles to become a going concern.

The regulatory environment, land use constraints, environmental issues, and community attitude were the other factors. The “regulatory environment” factor includes environmental issues, federal land management issues, triggering lengthy review and public comment processes.  Those kinds of issues are what we used to identify the regulatory environment.  In our case studies, land use constraints ranged from bans on development to development that has grown around the mining property constraining mining use economic viability.  Within the factor “environmental issues,” we included Superfund site listing—which is never helpful—or being next to an area that has endangered species; those are the kinds of factors that we look for environmental issues. Finally, under the factor “community attitude” we asked the question “is the community pro mining or against mining or are they neutral” and what can the mining company do to influence the community attitude.

The first case study is the CR Kendall gold mine.  It is no longer operational, the last gold production was in 1997.  The mine initially started operations in the 1880s and operated through 1942.  The first redevelopment started in 1981, but the focus for our case study is the late 1980s.  As a part of the redevelopment, the property changed hands on a number of different times and the first redevelopment owners went bankrupt.  Canyon Resources Corporation took the property in the late 1980s and continued its ownership and operations through the late 1980s to the time of the mine’s ultimate closure. The current resource, the gold, was produced by cyanide heap-leach processing. This particular property, the CR Kendall Mine, is thought to be the first mine in the United States where open pit, heap-leach cyanide was the processing method. It was somewhat controversial but obviously was authorized by Montana at the time redevelopment was initiated.  A decade later, Robert Redford made the movie “A River Runs through It” set in Montana, on the Black Foot River.  The movie generated a lot of antagonism toward mining and the potential for adverse impact on river environments.  Approximately the same time the movie came out, a totally unrelated mining company was trying to get a mine permitted on the Black Foot River in Montana and was going to use cyanide heap leaching. To prevent the use of cyanide in proximity to the Black Foot River, a group of Montana citizens’ put initiative 137 on the ballot, to  ban the use of cyanide. The ballot measure didn’t directly affect the CR Kendal mine, because it was grandfathered, but it precluded the development of an additional gold deposit within the footprint of that mine because the initiative banned cyanide heap leaching for any new facility permitted after 1998.

With the State’s adoption of the cyanide ban, the CR Kendall Mine was not facing a land use constraint but an environmental issue, as well as a negative regulatory environment. The mine was working through closure and reclamation—performing closure and reclamation work as the mining progressed.  CR Kendall had a plan with the Montana Department of Environmental Protection to implement closure on a staged basis but the regulatory agency wasn’t acting on it in a timely manner. The State has its own state process, similar to the National Environmental Policy Act or NEPA.  The closure plan was subject to State NEPA review, for which the State took more than 2 years without making any progress.  Finally the company said this just isn’t working and withdrew that plan.  CR Kendall proceeded on a voluntary basis to perform reclamation and ultimately came back in 2010 to submit a new closure plan.  That plan was not approved until 2016.  In summary, the very slow pace of review and approval the Montana, CR Kendall created a negative regulatory environment.  As a result, the company decided practically that they were not going to be able to get over the cyanide ban; they were not going to be able to work effectively with the regulatory agency. Accordingly, CR Kendall decided to simply reclaim existing operations and close permanently, leaving a known gold deposit within the very footprint of the mine, never to be developed. CR Kendall performed much of its reclamation work voluntarily because the regulatory agency was so slow in approving their plan. This slide shows one of the process pads that is fully reclaimed and here another process pad, in the foreground that is also fully reclaimed.

In terms of handicapping or doing the factor analysis on the CR Kendall property:  the mine has a valuable resource and the mining company was strong. CR Kendall faced a few bumps in the road in terms of the bankruptcy and ownership changes, but I evaluated that the company demonstrated leadership, management was compliant with then applicable regulatory programs, and they tried to get ahead of their closure and reclamations requirements.  The company also did engage in the community and part of the effort they undertook was not only working with regulators but working with their neighbors.  However, the company had some problems with some of their neighbors as a result of what the regulators required the company to do. The regulators required that CR Kendall keep water from the process pads even though it was treated to the appropriate water standards.  Further, the State regulators required CR Kendall to prevent any water discharges from leaving the mine property. Downstream ranchers contended that the mine was using their senior water rights by not releasing historic levels of water, that created some problems with the neighbors and CR Kendall never was able to resolve that conflict. Obviously with the cyanide ban the regulatory environment was negative. CR Kendall did not face any additional land use constraints, but the cyanide ban prevented economic operations.  Moreover, the community attitude over time became negative. We tallied our factor analysis at three positives and three negatives.  Practically speaking at least as an individual company, they could not overcome the cyanide ban legislation.  That legislation might have been defeated if the industry worked together as a whole, however the legislation also included a ban on lobbying on the issue. There were cyanide ban efforts elsewhere in the country, including Colorado, but the effort in Colorado did not pass. Montana is the only place that the legislation banning cyanide was implemented.

In conclusion, we identified three positive factors and three negative factors in our CR Kendall evaluation.  Three-to-three, meaning the three positive factors and three negative factors does not necessarily mean a redevelopment project will by unsuccessful.  You’ll see with one of the next case studies that the numbers don’t always tell the full story.

The next case study is the Robinson Nevada Mining Company Copper Mine in Ruth, Nevada. This mine has a long and storied history.  The copper deposit there was first discovered in 1857, it was pretty early on brought within the Guggenheim interests. Nevada Consolidated Copper Company was established as a subdivision or division of the Kennecott Copper Corporation to operate that particular mine.  The mine was continuously operated from 1905 until 1978 and actually put the mine into temporary closure. It was subsequently purchased in 1991 by Magma Copper, acquired then by BHP Billiton in 1996 and BHP operated it to 2003 and put into temporary closure and again it was bought. The current owner has operated the mine from 2004 to the present.  The Robinson mine is most well-known for its copper deposit but the mine has also produced gold and is currently producing a small amount of molybdenum.

The redevelopment that we focused on for our case study was the Magma BHP redevelopment that occurred between 1994 and 1996.  Here are a few landscape pictures of the resource.  The property has four or five open pits and some very impressive waste rock dumps or piles.  Given the 73 years of original operation you can imagine they generated a lot of material. 1996 when BHP acquired the mine they put in a new crusher and quite a bit of new equipment.  BHP evaluated the resource, among the issues that they identified were environmental concerns, including specifically that portions of nearly every one of the waste rock dumps had acid generating material and as a consequence there were a least a couple of the pit lakes  that were significantly acidified.  In prior operations, a prior owner had used cyanide heap leaching.  During an inspection by the Nevada Division of Environmental Protection (“NDEP”) shortly after BHP’s acquisition of the mine, two of the heap leach pads were leaking under the leach pad liners. It was pretty clear when BHP came onto the property they were faced with a number of environmental issues. One of the things that I thought was unique was BHP’s approach to these potential environmental violations.  They negotiated a notice of violation to give the company an opportunity to develop and structure a consent decree by which BHP was able to work through every one of those issues but still open the mine. They proceeded to do that, I was part of the negotiating team for the consent decree.  The consent decree required the company to address the pit lakes, address the waste rock dumps.  Part of BHP’s response was to identify where more alkaline material was in the pits and they segregated that alkaline material, brought it to areas of the waste rock dumps that were acidifying, and mixed it in as a part of the early stage reclamation processes. BHP tried other innovative reclamation steps; they brought out a technique that only Newmont had tried.  They rented a small herd of cattle and placed the cattle on the area they were reclaiming and moved the hay so that the cattle would have to walk back and forth on the reclaimed face.  That kept the moisture in, it gave fertilizer and it worked the seeds into the soil and made soil at the same time.  BHP had different test plots to evaluate the success of different aspects of that reclamation process. But the bottom line was that they had negotiated an arrangement with the regulators where they could solve these legacy problems that were not theirs by re-mining and that is how they effectuated the redevelopment.

This is how we scored the Robinson Mine re-mining by BHP.  Yes, there was a valuable resource. Yes, obviously.  Regarding the mining company strength we identified that they demonstrated leadership, they had vision about what the mine could achieve in redevelopment and they invested the resources to get it there.  For example, with the new crusher, BHP was able to reprocess some of the old tailings and derive more than just the copper from reprocessing, that’s how the current owner is producing the gold and molybdenum now. Community engagement wasn’t really necessary.  There was a long-term company town called the Town of Ruth, right at the base of one of the waste rock dumps.  Ruth is the subject of Desperation, one of Stephen King’s novels.  The novel also features the deep Ruth shaft, still marked by the head frame until 2000 or 2001. BHP didn’t have to develop a significant community engagement program because the town of Ruth wasn’t very large and many of its residents looked forward to the opportunity to be re-employed in the mining industry.  BHP didn’t get a lot of community pushback.  The company strength sub-factors of capability, continuity of operation, and commitment of development were also all strong.   Moving to the third factor, the regulatory environment in Nevada at that time was very positive.  If Nevada was a country unto itself, it would be the 6th largest producer of gold in the world as a country.  It is a big mineral producer, it has a very sophisticated mining legal structure with very well trained regulators, and the state derives a lot of its income from mining activity.  In general, I would say Nevada is pro-mining and the regulatory environment was positive.  Turning to the fourth factor,  land use constraints, we determined were slightly negative and we allocated one-half of a negative point for that.  As part of BHP’s redevelopment of the Robinson mine, including using a crusher and implementing the related changes in their process, the tailings impoundment had to be expanded.  In order to do that, BHP needed to use federal land managed by the United States Bureau of Land Management (“BLM”).  The application for BLM approval for the necessary tailings impoundment expansion triggered an alternatives analysis process under NEPA.  The NEPA process in those days took about two and one-half years.  Today it might take four years if you’re lucky.  In any case, BHP did invest the time needed to go through the NEPA process.  Next, turning to the fifth factor, the environmental issues were really the biggest negative with the historic releases that I have described.  We allocated one full negative point against redevelopment due to the legacy environmental violations.  Lastly, the community attitude was positive so the sixth factor was positive.  Summing up our factor analysis for the Robinson Nevada Mining Company Copper Mine, 4.5 points are positive and 1.5 points are negative, and obviously BHP had a successful redevelopment of that mine.

The next case study is my favorite due the history of the mining area.  This case study also ties back to Jim Garrison’s conversation about the 106 consultation process under the National Historic Preservation Act (“NHPA”).  This next case study is on the Comstock mine. The first discovery of gold in the area of what is now Silver City, Nevada was in 1850, but that discovery was not what ultimately drove the history of the Comstock.  In 1859 the first Comstock Lode was discovered.  Months later, other area miners discovered the Ophir Lode, the deposit was about 60% silver and 40% gold.  Initially the prospectors didn’t know what the silver was so they only processed the gold until the material was assayed and discovered it had very high value of silver in it. Over the course of about twenty-three years, from 1859 to 1882, miners produced 320 million dollars’ worth of gold and silver with 56% of it being silver and 44% gold from the area known as the Comstock. The miners discovered close to a dozen bonanzas in just that little area between Virginia City, Gold Hill, Silver City, and Dayton. Comstock has been written about quite a bit, in large part due to the value of the gold and silver discoveries, but also as a result of the mining innovations that occurred there.  This figure (showing a power point slide) is the Northern section of the Comstock and shows all of the lode bonanza deposits.  The vertical lines are shafts, imagine in 1859-82 era they sunk shafts down to 2,000 feet.  And one of the innovations that came out of that process was woven wire rope that was used for the hoists instead of hemp.  Ultimately, the woven wire was used in operation of the San Francisco cable cars, but it was first developed on the Comstock because of the depth of the shafts. The next slide shows the South side of the Comstock, where there are additional large deposits. For example, at the Ophir mine were very rich deposits of silver and gold.  The host material was soft and it was a big deposit.  So, in order to avoid the walls caving in, a German engineer developed the square -set timbering to allow for a larger open space underground so that the miners could mine out as much as the deposit as possible.

The redevelopment we evaluated as our case study was done by the company called Comstock Mining Incorporated (“CMI”).  For a period of years from 2003 to 2007 CMI started buying and accumulating data on the Comstock area.  The company identified some of the historic lodes and discoveries and acquired leases and mine claims that were still available in these areas, ultimately consolidating data and land holdings in order to re-develop several mines in the area. CMI had the vision of doing a combination of re-working some historic pits as well as going underground, back into some areas where lodes had been discovered.  CMI hoped that with today’s modern technology it could also rework some tailings for recoveries. CMI succeeded in doing all of that, but not without facing a number of hurdles. First of all I have mentioned that there are three historic district designations on the Comstock: (1) a National historic district; (2) a state district; and (3) a district for Virginia City.  None of these three districts has the exact same boundary.  None of them have the same regulatory objectives. The state historic district is a building preservation district, while the other two require the 106 consultation process, discussed in the last presentation.  Any activity that may interact with federal lands must be evaluated to determine whether it’s an undertaking, are there historic features, are there stakeholders interested in preservation of those historic features etc. That process is triggered by the historic district designations.  CMI also faced a community, many of whom love the idea of the Comstock area being a historic mining area but don’t love the idea of it being a current mining area. A group of residents organized to resist every single approval CMI sought.  This group of residents objected to, sued to prevent, challenged and tried to obstruct CMI every step of the way.  This group suggested to the National Park Service that “vistas” had to be preserved and encouraged the notion that all Comstock area vistas have to remain absolutely unchanged or, if mining is permitted, that the National Park Service can only allow mining using historic technologies or historic equipment and historic size vehicles. Ultimately, after the consultation process, the National Park Service determined that from almost every view shed within the Comstock one can see mining features, such that mining redevelopment would preserve the character of the area, even if some mining activity was allowed to go forward. One of the things that CMI did was engage with the community.  They created a foundation for historic preservation, preserved an historic head frame in the area, and re-timbered the entry way to one of the historic mines.  CMI created a timeline and a whole series of story boards at a tourist overlook.

To summarize our factor analysis of the Comstock case study, nearly every factor was negative. But with the vision and determination of the company, CMI has managed to successfully recommence mining, anyway.  From our evaluation, the other differentiating factor was CMI’s community engagement and outreach.  Almost everything else was a hurdle for the redevelopment.  CMI was faced with a bad community attitude, the regulators were mixed, BLM was antagonistic and every step of the way it seemed like there was a problem that the company had to address.  CMI had a clear understanding, up front, that the company was going to have to engage with the community and they did it transparently, with integrity, and did what they said they were going to do.  These efforts really made a difference for CMI and really enabled them to get through.  CMI has been mining for about four years.

Allen Reilly – “Application of Michigan’s Brownfield Laws to Facilitate Redevelopment/Reuse of an Old Mining Facility:  A Case Study”

 

Allen: What can a guy from Michigan tell people from the American southwest about mining?  Not much it turns out.  The history, scale, and complexity of mining out here is much greater than anything that occurs in Michigan.  What Michigan does have in abundance though (given its location in the rust belt) are contaminated sites and a boom/bust economic cycle that seems to continually generate more new sites.  This has required us to become creative in managing impaired property in a way that simultaneously addresses historical contamination and unlocks reuse potential.  The hard lessons learned in Michigan could have applicability and value to determining efficient approaches to the reclamation of abandoned mine lands in the southwest.   I intend to explain the potential value of the lessons learned in Michigan through a case study, but first will need to present a short primer on Michigan’s statutory framework.

In 1995, Michigan recognized that its existing environmental response statute (Part 201) was not only ineffective at addressing the backlog of contaminated property, but that it was also actually serving as an impediment to reuse/redevelopment of this property.   Prior to 1995, Michigan’s environmental response statute was based on the same liability scheme (joint, strict, and several) as employed in the federal CERCLA program and most other state superfund analog laws.   This liability scheme created clear disincentives to the reuse of impaired property causing old contaminated sites to be abandoned or warehoused by their owners and new industrial development to move out to green field sites. Clearly, this was not a societal good because it did nothing to promote cleanup and resulted in urban sprawl.

In response, Michigan passed sweeping legislation in 1995 that shifted its environmental response law from a joint, strict, and several liability scheme to a causation-based scheme.   The law (Part 201) still holds polluters responsible for new releases, but provides innocent landowners with liability protection for reusing/redeveloping property with historical contamination.  It is predicated on two important concepts.  First, it utilizes the concept of a Baseline Environmental Assessment or BEA.  A BEA is conducted at the time of title transfer to identify pre-existing contamination and provide a mechanism (either through site characterization data and/or engineering controls) to distinguish new from old releases.  Second, it requires all parties who operate on contaminated property (regardless of liability status) to exercise due care in their use/management of the site.  The concept of due care, which has recently found its way into the CERCLA program (referred to as “continuing obligations” under the All Appropriate Inquiry requirements) essentially require a party to manage a site with known contamination in a manner that is protective of public health and the environment (i.e., control unacceptable exposures, prevent exacerbation, etc.).  Due care does not mean remediate. Rather it requires that a party demonstrate that the property can be used safely for the intended purpose, given the presence of environmental contamination.

My intention today is to present a case study of the Humboldt Mill project site that illustrates how the Michigan program works within the mining context.  The Humboldt Mill site was developed by Rio Tinto to process ore from a new Cu/Ni mine (the Eagle Mine) in the Upper Peninsula of Michigan located about 30 miles north of the mill site.   The Eagle mine and the mill are currently owned and operated by Lundin Mining.

The mill site started out as an underground iron mine in the late 1800’s and later transitioned to open pit iron mining in the 1950s which continued until the mine closed in 1980. Subsequent to the iron mining activities, the mill facility was used for processing of gold ore from the nearby Ropes Mine.  The processing produced sulfide containing waste that was disposed in the former iron open mine pit which had filled with water.

When RT acquired the mill property in 2008, the site had been sitting idle for several years and was heavily impacted by prior uses.  Environmental conditions included the presence of beneficiation materials (including pyrite, cyanide containing materials, iron concentrate, etc.) in stockpiles, pits and trenches outside the mill building.  Open containers and accumulated debris from former processing activities in the mill building.  Soil and groundwater were also documented to have been impacted by the releases of PCBs from a fuel oil underground storage tank.  And, most prominently, 1.82 million tons of sulfide tailings from the processing of gold ore were present in the bottom of the former iron mine pit (referred to as the Humboldt Tailings Disposal Facility of HTDF).

What did RT see in this property you might ask?  The proximity to the Eagle Mine ore deposit made it attractive.  It was much cheaper (and presented a much smaller carbon footprint) to process the ore to a concentrate near the ore deposit and ship the concentrate to Canada for smelting than to send raw ore to Canada.   Power and transportation infrastructure (rail and roads) were already present and adequate to their purposes with minimal upgrade.  This represented a clear benefit over a green field site.  Having a population predisposed to mining operations and desperately in need of jobs was another benefit.  Lastly, the presence of the HTDF itself provided a ready source of water for the ore processing and infrastructure for subaqueous disposal of sulfide containing waste from the processing of the Cu/Ni ore. (The pit was 300 feet deep and the tails from the gold processing raised the bottom of the pit about 150 feet, leaving about 200 feet of free board capacity.)

The question was: how could RT acquire and operate on this site without incurring liability for pre-existing conditions?  This was the challenge.  Could we use the liability protection mechanisms developed primarily for industrial sites (generally smaller scale, less complex sites) to provide robust liability protections in the mining context.  One of the challenges of redeveloping old mining sites for new mining operations (beyond the sheer scale of the operations) is that there is typically a high degree of overlap in hazardous substance use making it difficult to develop a mechanism that can be confidently used to distinguish new releases from old contamination.     The liability protections afforded under Part 201 are only as strong as a party’s ability to document that it has managed its affairs on the property well (i.e., no new releases, no exacerbation).

The project was executed in phases.  The first step was to conduct an AAI Phase I ESA on all three parcels being considered for acquisition.  These included the mill property proper, the HTDF, and some additional surrounding property for rail infrastructure and greenbelt buffer.

The second step involved preparation of a BEA so that RT could take title to the mill building to start cleanout and refurbishment.  The BEA provided the most rapid means of securing liability protection so that work could begin on mill rehabilitation.  This was a fairly straightforward process that relied solely on existing site characterization data with minimal supplementation to document conditions.

The next step was to develop a Covenant Not to Sue (CNTS) to include the mill property as well as the HTDF which presented the most significant challenges in terms of liability due to the sheer quantity of waste present (i.e., tails from gold ore processing).  A CNTS is essentially a site specific contract with the State that provides more flexibility and opportunity for customization than a BEA and does not carry with it a time restriction (in terms of having it completed within 45 days of closing).   The CNTS also provides contribution protection under CERCLA whereas the BEA process does not.

The requirements are the same for the both.  A party must be able to demonstrate clear economic and environmental benefits associated with the project.   In this instance, it was easy to show economic benefits since the project would bring significant investment ($275 MM), jobs (400 over life of project with 75% local hire commitment), and tax revenue ($240 MM in state/local taxes and royalties) to a depressed local economy.

From an environmental perspective, it is necessary to demonstrate benefits in three primary areas.  First, a proposed redevelopment project must free up new proceeds to address environmental conditions at the site.  It is not necessary to remediate the conditions–only to improve them to the degree necessary to support contemplated future use.  Second, it must provide a mechanism for distinguishing new from old releases.  This can be accomplished through site characterization data, engineering controls, or a combination of the two.  Third, the petitioner must show how it will meet its due care obligations under the contemplated use.  The State will not provide liability protection to parties who cannot properly manage the risks posed by the pre-existing contamination.

Coincident with the start of the Eagle project, the State of Michigan passed new mining legislation (Part 632) that required that a comprehensive mining permit be secured prior to commencing non-ferrous mining in the state.  This law required that a party demonstrate that mining could be conducted in a safe manner, by among other things, performance of an Environmental Impact Assessment (EIA), documentation of all of the environmental permits that would be required to extract the mineral, and providing a detailed mine closure and reclamation plan and appropriate financial assurance.

This new mining law actually facilitated development of the CNTS in several important respects.  First, the EIA involved the collection of abundant environmental data (soil, ground water, etc.) much of which was useful in the definition of baseline environmental conditions for the CNTS.  Second, the engineering controls and other release containment and monitoring measures required by the mining permit (and other relevant environmental permits) on a prospective basis could be used to document how due care compliance would be met during operations at the site to mitigate due care risk.   For example, new containment/pavement placed in areas subject to active material handling in future operations also served to minimize the potential for commingling of new releases with old contamination.  Similarly, upgrades to storm water/erosion controls could be relied on not only to mitigate risks of release under new operations but also to reduce the potential for exacerbation of pre-existing contamination.   In this instance, it was possible to build a fairly robust baseline environmental assessment and due care plan simply by mapping over 632 permit requirements.

The desire to use the HTDF for sub aqueous disposal of tailings presented its own challenges and opportunities.  The challenges included the fact that there were already 1.82 million tons of someone else’s mineral tailings in the bottom and that, although there was competent rock on three sides, there was an alluvial deposit on the north end of the pit that was in hydrologic communication with an adjacent wetland. Discharge from the north end of the pit was not acceptable from either a due care or permitting standpoint.  As a result, a cut off wall was designed and installed a 2,200 LF to eliminate leakage from the pit.  This investment substantially improved environmental conditions at the site for the existing tails disposed in the HTDF while simultaneously addressing permitting needs for the use of the HTDF as a waste management unit for the new tails.

The HTDF also presented opportunities. The presence of an existing water source and tailings disposal infrastructure would have been technically challenging (and expensive) to duplicate at a green field site.   There were regulatory benefits as well. Due to the status of the site as an existing (though inactive) facility, it was exempt from New Source Performance Standards under the Clean Water Act.  NSPS for copper is zero discharge.  For nickel, the standard is reserved but expected to be similarly low.

Eagle Mine and Humboldt Mill started production in September 2014.  It is estimated that 360 million pounds of nickel and 295 million pounds of copper will be generated over the mine’s 8 year operating life.  The project has dramatically improved environmental conditions at a site with significant impairment that had been sitting vacant and abandoned for some time.   The environmental permits and due care plan ensure that the mill be responsibly managed and monitored during its active life.  The closure/reclamation requirements associated with the Part 632 permit will assure that all remaining environmental issues are addressed at the time of closure.

Lessons Learned

I’ll close with a few of the lessons learned and pinch points encountered on the project.

  • Closure/Reclamation Standards: Part 632 specifies that a closure/reclamation plan be put forward describing how a mining site will be returned to “a sustainable ecosystem as close as possible to its original condition” at the end of its operating life.   There was much discussion about the relevance/achievability of this standard at a brownfield site since the Humboldt Mill site was an impaired property at the time the Eagle project was begun.  What is “original condition” in the context of a brownfield site? What is a reasonable standard for closure and reclamation in this context?    Should a party willing to take on the risk of redeveloping a brownfield site be accorded with some flexibility with respect to closure/reclamation requirements to incentivize the use of these properties?
  • State/Federal Coordination: Michigan’s move to a causation-based liability scheme in 1995 was, of course, not matched at the federal level.  The liability scheme under CERCLA remains joint, strict, and several.  Although there are numerous aspects of CERCLA that seek to facilitate redevelopment (AAI, prospective purchaser agreements, etc.), there is not good coordination at the state and federal level on brownfield redevelopment and none of the liability protections afforded under Part 201 limit CERCLA liability.  Although the MDEQ and US EPA Region 5 executed a Memorandum of Understanding (MOU) in the mid-1990s to try to provide for some better coordination in Michigan, it has proven to be some pretty “weak tea”.  All it says is that it is not the EPA’s “general practice” to over file or intervene at a site where there is a lead state agency working on a response action or redevelopment project.   The limitations of the MOU were exposed on the Eagle project when a local indian tribe petitioned to have the EPA conduct a PA/VSI at the project site to determine whether the hazards present qualified it for inclusion on the Superfund National Priority List.  This petition, which was denied at the regional level but approved in Washington DC, complicated execution of the redevelopment project but did not ultimately compromise the liability protections afforded under state law.

 

 

[1] Carolyn L. McIntosh, Squire Patton Boggs (US) LLP, counsels clients on complex environmental compliance matters and natural resource development. Carolyn has several decades of experience in the extractives industry sector, including copper, gold, silver, iron, potash and lithium mining operations and asset purchase, lease and sales transactions – both in the US and internationally; operational requirements; permitting and compliance; and bonding, reclamation and closure. Her work includes due diligence, environmental protection review, compliance evaluation, leasing, permitting, operational compliance, remediation requirements, financial assurance bonding, endangered species impact evaluation and closure. Carolyn’s experience includes a range of public lands matters, NEPA and Endangered Species Act issues.  Carolyn is a partner in the Denver office of Squire Patton Boggs (US) LLP, a vice-chair of the American Bar Association Section on Environment, Energy and Resources Superfund newsletter.  She will be joining the Board of Trustees of the American Exploration & Mining Association in December 2016.

[2] Allen Reilly is a Senior Environmental Scientist with Barr Engineering, an engineering and environmental consulting firm with offices in Calgary, Michigan, Minnesota, Missouri, North Dakota, and Utah.  He was a member of the Michigan Governor’s Environmental Advisory Council and has participated on numerous technical committees involved in expanding brownfield initiatives in the State of Michigan.   Mr. Reilly has a Masters in Environmental Science (M.E.S.) from Yale University and a B.A. in Biology from Carleton College.

Footnotes

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