State regulation of large scale hardrock metal mining

in the Western United States

Andrew Bellavie

1

TABLE OF CONTENTS

Page

Acknowledgements………………………………………………………………………2

List of figures and tables…………………………………………………………………3

Introduction………………………………………………………………………………4

Chapter 1: Scope and methodology……………………………………………………....6

Chapter 2: Administrative and regulatory efficiency…………………………………….15

Chapter 3: Performance and reclamation standards……………………………………..21

Chapter 4: Bonding requirements……………………………………………………......31

Chapter 5: Bond amount determination……………………………………………….....38

Chapter 6: Bonding program effectiveness………………………………………………42

Chapter 7: A ranking of the Western States……………………………………………...47

Conclusion………………………………………………………………………….........56

References………………………………………………………………………………..57

2

Acknowledgements

I would like to extend special thanks to Dr. William Holden for supervising this project and

providing me guidance and encouragement. Thank-you Dr. Allan Ingelson for being the reader

for my final paper. Thanks to Dr. Tak Fung for assisting me with the cluster analysis. Finally,

thanks to the University of Calgary, the Department of Environmental Science.

3

LIST OF FIGURES AND TABLES

Figure 1.1 Percentage public land in the Western United States pg. 6

Figure 1.2 Acid mine drainage in Rio Tinto, Spain pg. 10

Table 2.1 Administrative Efficiency Clusters pg. 16

Table 3.1 Performance and Reclamation Standards Clusters pg. 22

Figure 4.1 Real copper prices in the United States 1900 to 2009 pg. 31

Table 4.1 Bonding Requirements Clusters pg. 33

Table 5.1 Bond Amount Determination Clusters pg. 39

Table 6.1 Bonding Program Effectiveness Clusters pg. 43

Table 7.1 Ranking of the Western United States and PPI 2014 pg. 47

Figure 7.1 Mineral Information Layer for Oregon pg. 49

4

INTRODUCTION

Mining is an important industry, both historically and economically, in the United States of

America (USA). It is estimated that non-fuel minerals contributed $16,800 billion GDP to the US

Economy in 2013 (Jewell and Kimball 2014). The mineral resources of the country serve as

feed-stocks and raw materials for a plethora of industries. Despite this economic and industrial

importance, mining has enormous potential for environmental destruction, and is an industry that

causes persistent and costly environmental impacts.

At a federal level, mining and prospecting on federal public lands is governed by the General

Mining Act of 1872. In 1976, the Federal Land Policy Management Act (FLPMA) led to many

changes in the original 1872 mining law. Federal regulations dealing with mining were updated

and published in 2001. The Bureau of Land Management (BLM) and the United States Forest

Service (USFS) are the divisions of the department of the interior and the department of

agriculture respectively. They manage the public lands and administer the FLPMA across the

country. While the 1872 Mining Act and the FLPMA are important, mining regulation is often

conducted by the states themselves, each with a variety of state laws and regulations. One

example of this is the National Pollutant Discharge Elimination System (NPDES). The NPDES

is a federal permitting program established in 1972 under the Federal Water Pollution Control

Act (Clean Water Act) to regulate point source discharges of pollution. NPDES is administered

at the state level by the Environmental Protection Agency (EPA) or by state’s EPA approved

programs.

5

The 11 western, or public land states, will be analyzed in terms of their environmental regulation

of hardrock metal mining. Two questions will be answered: How do variations in environmental

regulation affect mining industry perceptions of the state? And, can environmental regulations

provide evidence of regulatory capture of state governments by the mining industry? Ultimately,

each state will be examined qualitatively, compared to the others, and a relative ranking of the

Western States will be generated and compared to the Fraser Institute Annual Survey of Mining

Companies 2014 ranking (Jackson and Green 2014).

6

CHAPTER 1: SCOPE AND METHODOLOGY

Scope of the Study

As stated previously, this study is focusing on 11 public land states, located west of the 100th

Meridian in the United States of America (USA), on the North American Continent. The states in

alphabetical order are: Arizona (AZ), California (CA), Colorado (CO), Idaho (ID), Montana

(MT), Nevada (NV), New Mexico (NM), Oregon (OR), Utah (UT), Washington (WA), and

Wyoming (WY). These states are unique in that the US Federal Government owns anywhere

from 80% (NV) to 26% (WA) of the lands per state; hence the term, “public land states” (Figure

1.1). This is a relatively large amount of land compared to an average of 5% federal land

ownership in the other 39 states. Since Federal lands tend to have lower population density than

private lands, mining companies are more inclined to look for exploitable minerals on them

(SMGB Information Report 2007).

Figure 1.1 Percentage public land in the Western United States.

Figure 6.2: Percentage of State Land Area that is Federal Land

0

10

20

30

40

50

60

70

80

90

Nev

ada

Uta

h

Idah

o

Ore

gon

Wyo

min

g

Alask

a

Cal

iforn

ia

Arizon

a

Col

orad

o

New

Mex

ico

Was

hing

ton

Mon

tana

Avera

ge o

f the

oth

er S

tate

s

Source: National Research Council (1999)

Perc

en

tag

e o

s S

tate

Lan

d A

rea t

hat

is F

ed

era

l L

an

d

7

For each state, regulations that were analyzed specifically applied to hardrock metal mining.

Hardrock mining deals with the excavation of hard minerals or ores containing metals. Often,

metals are located as deposits in igneous or metamorphic formations, hence hardrock. Mineral

resources considered to be metallic in nature include iron, aluminum, manganese, titanium,

magnesium, copper, gold, silver, lead, zinc, tin, tungsten, chromium, platinum, mercury,

molybdenum, and uranium (Skinner 1976). Due to its use in nuclear reactors and its radioactive

nature, uranium is often governed by very specific regulations and administrative bodies that

deal solely with uranium mining. Other non-uranium metal mines are usually regulated under

more general mining policies. For this reason, uranium mining regulation was not considered to

be in the scope of this study. Additionally, some mineral resources are considered non-metallic.

Examples of non-metallic mineral resources include cement, sand, gravel, gypsum, asbestos,

coal, petroleum, oil shale, phosphate, nitrate, sulfur, surface water, and groundwater (Skinner

1976). Non-metallic resources are often mined from sedimentary rock using different techniques

than hardrock mining, and thus lead to different impacts and regulations. With the exception of

water, state regulation of these non-metallic resources was not considered to be in the scope of

this study. Metal mining is a water intensive industry, thus many states have surface and

groundwater policies that deal with all stages of mine life.

Furthermore, many states differentiate between large scale mining operations and hobby or

placer mining. Additionally, underground mining and surface mining are also regulated under

different rules in many cases. For the purposes of this study, only the regulations governing large

scale, surface mining operations were considered due to time restrictions.

8

Environmental Impacts of Metal Mining

Mining practices are an ongoing controversy amongst the public, environmental non-government

organizations (NGO), industry lobbyists, and government policy makers around the globe. In

fact, mineral exploration, extraction, and processing are widely regarded as one of the most

environmentally and socially disruptive practices in the world. Environmental impacts can occur

during exploration, development, operations and even after a mine has closed down (Bebbington

et al. 2008). Permanent changes to landscapes, water systems, economies, and communities are

associated with modern large-scale mines (D’Epsosito 2005). Despite this, mining has been and

continues to be practiced as a source of raw materials and for economic development of many

countries and communities throughout history, including the USA (Coulson 2012).

The most apparent impact of mining is certainly how it alters the physical appearance of the

land. The visual, or aesthetic, impacts of mining are possibly the least serious, but still “mining

landscapes seem a nightmarish expression of technology run amok” (Francaviglia 2004). Recent

studies of mining affected landscapes, showed that whole landscapes are cast in a negative light

when active or non-reclaimed mines are present ( Svobodova et al. 2012).

In addition to altering the physical landscape, mining infrastructure development and operations

may have negative impacts on local flora and fauna. Impacts to biodiversity at mining sites is

almost always observed as a reduction in the number of species (Mining, Minerals and

Sustainable Development 2002). Habitat fragmentation resulting to access road construction into

remote wilderness is another commonly observed impact. Whitmore (2006) estimated that 40

percent of the world’s undeveloped forests are threatened by mine development. Generally,

aquatic species bear the brunt of the negative impacts. Clearing vegetation, soil relocation, water

9

extraction, and mine waste disposal to land or water have enormous potential for habitat

disruption through soil erosion, sediment deposition, and watercourse alteration (Mining,

Minerals, and Sustainable Development 2002).

Undoubtedly, the most serious environmental impact associated with hardrock mining is the

oxidation of sulfide minerals, or acid mine drainage (AMD). A naturally occurring phenomena

sometimes called “acid rock drainage” when not associated with mining activity, AMD is a slow

spontaneous chemical reaction between atmospheric oxygen and iron-sulfide minerals (pyrite,

marcasite, and pyrrhotite for example) and other products. In the presence of chemotrophic

bacteria, Thiobaccillus ferrooxidans, the rate of reaction is substantially increased (Downing

2014). The rate of reaction is also increased when anthropogenic activities such as mining

expose these minerals to the atmosphere. Overall, the reaction generates a highly corrosive

product: sulfuric acid in water (pH 2.75 at 1mmol/L). This reaction is ongoing through geologic

time, and will continue in perpetuity. Water bodies affected by AMD are easily identified by

their red-orange color, indicating rapid oxidation of pyrites (Figure 1.2). The extremely acidic

conditions induced by AMD are highly impactful on aquatic ecosystems; many fish populations

cannot reproduce below pH 5, and others even die out at pH 6 (Ripley et al. 1996). Furthermore,

the highly corrosive nature of the acid leads to dissolution of the parent and surrounding

materials, mobilizing heavy metals into the water as ions. Heavy metals such as arsenic,

cadmium, chromium, copper, lead, mercury, and zinc have been observed to have detrimental

effects on biological life, especially when biomagnification is considered (Clarkson 1985,

Neuberger et al. 1990). To exasperate the problem further, AMD is difficult to predict, difficult

to prevent, and impossible to reverse once started. Since the 1970s, the EPA has required

10

standardized analytical procedures (acid-base accounting, kinetic tests) for predicting acid

generating and neutralizing potential of rock or soil samples (Jennings and Jacobs 2014). These

methods were used in many hardrock mine EIS and since then have been shown to be inaccurate

in their long term predictive capabilities (Kuipers et al. 2006). One reason for this is that there is

often mineral variation between geologic domains (heterogeneity), and sampling may not be

thorough enough to accurately characterize the area (Jennings and Jacobs 2014). Often, by the

time it is realized that the ores are generating acid, it is already too late and the process will

continue in perpetuity.

Figure 1.2 Acid mine drainage in Rio Tinto, Spain. (Rio Tinto River Carol Stoker NASA)

11

In order to mitigate the damages of acid mine drainage, the mining industry has used subaqueous

tailings disposal since the 1980s (Ripley et al. 1996). Fine particles of processed mine waste,

“tailings”, are stored underwater in an anaerobic environment as a slurry. This is done to prevent

contact between sulfide ores and atmospheric oxygen, which causes acid generation. Modern

mines generate millions of tons of tailings by exploiting low grade ore bodies, and thus tailings

storage facilities are massive dams holding the ever growing tailings pond. Tailings storage

facilities themselves pose a risk to the environment. If the dam ever failed, millions (if not

billions) of liters of water and mine tailings could be released, leading to pollution of the

surrounding environment. With such high states, tailings storage facilities must be properly

designed and constructed, as well as monitored and maintained in perpetuity, in order to be an

effective solution to mine waste management (Mining, Minerals, and Sustainable Development

2002). Tragically, this has not been the case. The most common environmental accidents are

“breaks and spills from tailings dams and the discharge of tailings into rivers and waterways” as

reported by the mining industry (Burke 2006).

Cyanide leaching is a recent development in mining technology. It has allowed profitable

exploitation of lower grade ore deposits by mining companies around the globe. In gold and

silver mining, there are two methods of using sodium cyanide to extract metals from low grade

ores; heap leaching and vat leaching. Both methods ultimately achieve the same result when the

sodium cyanide chemically bonds with gold and silver atoms, drawing them out of the crushed

ore and into a solution so that the metal can be concentrated and retrieved. For other metal

mines, cyanide is used during milling and concentration processes. The use of cyanide, however,

is controversial because it is an extremely toxic chemical. To put it in perspective, consider that

for a solution of two percent cyanide ingesting only a single tablespoon will kill an adult human

12

(Moran 1998). Fish, birds, and other mammals are all susceptible to poisoning from cyanide,

with fish being the most vulnerable (Moran 1998). Environmental contamination from

deliberate and accidental cyanide discharged into lakes and streams has resulted in fish kills.

Additionally, there is great uncertainty in the fate of free cyanide chemical derivatives in the

environment (Moran 1998). Some of the cyanide-related compounds generated by mine waste

are often persistent in the environment and toxic to aquatic organisms (Moran 1998).

Hardrock mining is a water intensive industry, and has potential to impact the availability of

water resources (Holden and Jacobson 2012). In addition to storing tailings, mines use water for

dust suppression, milling, processing, metal recovery, and reclamation. Flooding of open pits

and mine shafts below the water table requires constant pumping (dewatering) and creates a cone

of depression in the surrounding aquifer. This effect is compounded if there are many open pits

or underground tunnels in the same area and can significantly lower the regional water table,

reducing stream flows and groundwater availability. Mining’s impact on hydrology is important

to consider because water is a resource required for all eukaryotic organisms on earth to survive.

This includes people from all economic sectors and social classes.

Just as hardrock mining may impact the environment, there is enormous potential for

repercussions to the social environment. Studies of communities near to a mine being

constructed indicate that prostitution, alcoholism, increased domestic violence, organized crime,

cultural disruption, and sexually transmitted diseases may be related to mine development

(Anderson 1998). In addition, mining corporations around the world have used “security forces”

to protect their operations from criminals or armed insurgents, especially in regions plagued by

political turmoil (Holden and Jacobson 2012). There are disturbing reports from many of these

13

regions, detailing how peaceful anti-mining activists have been harassed, and killed by mine

security forces (Moody 2007, Holden and Jacobson 2012). Furthermore, metal mining may be an

avenue for political corruption and white collar crime. As one of the most regulated industries in

the world, the almost constant industry-government interactions during exploration,

development, operation, environmental impact assessments, and closure greatly increase the risk

of regulatory capture, bribery, and fraud (Laffont and Tirole 1991, McEwan 2011).

Analysis Methodology

The following method was used in the determination of the strictness of state mining regulations

and subsequent ranking. For each state the relevant statutes and regulations were surveyed. All of

these documents are readily available online. Any highly significant aspects of mining

regulations were noted. This included, but was not limited to, administrative powers,

performance standards, reclamation standards, bonding and financial surety, and relationships

between state and federal agencies. After compiling the information, it was input into a matrix

spreadsheet via a series of numerical arguments. The matrix was divided into sub matrices, by

grouping arguments together into logical categories. Arguments are essentially a numerical

representation of qualitative data. For example, the category “Bond Amount” contains the five

arguments “surface bonding”, “geochemical”, ”hydrologic”, ”chemical” and “worst-case

scenario”. States that have regulations requiring bonding for hydrologic disturbances received a

“1” under this heading; states that did not require bonding for hydrologic disturbances were

assigned a “0”. The grouping resulted in the creation of five categories (sub matrices). To reveal

similarities and differences between states, each category was subjected to a complete-linkage

cluster analysis using SPSS (version 22) software. Thus, clusters of homogeneous states were

14

formed from the matrix input. For each category, the clusters were given a score ranging from

“one” to “five”, with five being the strictest in terms of that category, and one being the least

strict. In other words, clusters of states that had permissive mining regulations scored a “one”,

and cluster scores increased to “five” as the regulations imposed more requirements on the

mining industry. It must be noted that the numerical value is arbitrary; “one” does not indicate

that the cluster has poor governance of the metal mining industry, just like a “five” does not

indicate superiority of that cluster. The scores were totaled across all five categories for each

state giving a total score. When the states are ranked according to the total score, the state with

the highest total score is the one with the strictest (least permissive) regulation of hardrock metal

mining.

To verify the accuracy of this method, the ranking of states was compared to the Fraser Institute

2014 Annual Survey of Mining Companies “Policy Perception Index”. This survey is an

assessment of the mining industry’s opinions on the attractiveness of mining policies.

15

CHAPTER 2: ADMINISTRATIVE AND REGULATORY EFFICIENCY

Criteria for Cluster Analysis

In order for any policy to be effective in regulating an industry or protecting the environment,

there must be supporting administrative structure. Since policy sets the rules and guidelines for

governing, weaknesses in administration can lead to minor misunderstandings but also to serious

environmental impacts. After all, regulatory programs could be stringent in theory, but without a

system conducive to action, they could be ineffective in achieving environmental policy goals.

For this purpose efficiency was defined as the extent to which time or resources are used to

achieve the desired result.

To assess the efficiency of each state in terms of their hardrock metal mining regulations, five

variables were considered. The number of agencies, if the state employs a State Environmental

Protection Agency, if the state has a Memorandum of Understanding (MOU) with the BLM or

the FS, and the percentage of federal land in the state, were all quantified and five clusters were

created (TABLE 2.1). Scores were assigned to each cluster based on the assessment of the state

regulations.

16

Table 2.1 Clusters And Scores For Administrative Efficiency.

Discussion

Number of Agencies

It was found that western states generally had two or more agencies administering regulatory

programs dealing with hardrock metal mining, with most having three agencies. Notable

exceptions included Montana and California.

Montana regulates mining through a single state entity. The Montana Department of

Environmental Quality (DEQ), Environmental Management Bureau is responsible for

17

administering the Montana Metal Mine Reclamation Act (MMRA) and operating permits. This is

a very effective platform for administration, as the all mine operating and reclamation plans, are

reviewed by the same team of officials under one act. This serves to essentially eliminate

conflicting regulations, and presents a system with clear expectations to both industry and

government.

The exception in this category was the state of California. Mining activities in the Golden State

are governed by a veritable labyrinth of state laws. The regulation of surface mining on any lands

of the state is under the Surface Mining and Reclamation Act (SMARA). Enforcement of the act

is relegated to a lead agency. The lead agency could be one of 115 jurisdictions comprising 61

cities and 54 counties. These lead agencies, as well as the Department of Conservation Office of

Mine Reclamation answer to the State Mining and Geology Board (SMGB). Under SMARA,

each county can write its own ordinances that exceed the state reclamation standards. Further

regulation of surface mining comes from the California Environmental Quality Act (CEQA)

administered by the lead agency, the Porter-Cologne Water Quality Control Act (PCWQCA)

administered by one of six Regional Water Quality Control Boards (RWQCB), the Fish and

Game Code Section 5650, and California Endangered Species Act. For California to effectively

regulate hardrock metal mining, there must be co-ordination between the lead agencies, the

SMGB, the RWQCB, and BLM or USFS. Furthermore, individuals in these agencies must be

aware of state and local regulations, have an understanding of the regulations, and recognize

potential interactions of the various ordinances. A 2012 Lead Agency Survey by the SMGB

found that roughly one quarter of responding cities were not familiar with statutory and

regulatory aspects of SMARA, about half of responding cities had dedicated expertise and

18

resources to implement SMARA, one quarter of cities had not processed any mining permit

applications in the last 5 years, and one third of the counties and one fifth of the cities SMARA

programs were adversely affected by staff turnover and reductions. This survey was concerned

SMARA alone, however, it still reveals potential issues with administrative efficiency created by

the complex regulatory structure in California.

SEPA

Three of the Western States have state regulations that are similar to the National Environmental

Policy Act (NEPA). These State Environmental Policy Acts (SEPA), or little-NEPAs, as they are

sometimes called, are a reflection of the federal procedural law (Marchman 2012). SEPA

requires state actions to be analyzed for impacts to the environment, often in the form of an

Environmental Assessment (EA) and resulting Environmental Impact Statement (EIS).

California, Montana, and Washington are the states that have SEPAs. A very brief discussion of

the SEPAs follows. In California, the policy of the state is to “take all action necessary to

protect…the environmental quality of the state”, to “preserve for future generations

representations of all plant and animal communities”, and further to “require governmental

agencies at all levels to develop standards and procedures necessary to protect environmental

quality” (Cal. Pub. Res. Code §§ 21000 – 21177). The Montana Environmental Policy Act

(MEPA) is a review of state actions to ensure “(a) environmental attributes are fully considered

by the legislature in enacting laws to fulfill constitutional obligations; and (b) the public is

informed of the anticipated impacts in Montana of potential state actions” (MCA §§ 75-1-101 to

-324). In Washington, the State Environmental Policy is to “(1) To declare a state policy which

will encourage productive and enjoyable harmony between humankind and the environment; (2)

19

to promote efforts which will prevent or eliminate damage to the environment and biosphere; (3)

and [to] stimulate the health and welfare of human beings…” (WRCA §§ 43.21C.010 to .914).

EA and EIS are required for proposed large scale hardrock metal mining projects in CA, MT,

and WA.

In terms of administrative efficiency of large scale hardrock metal mining, SEPA is a positive

aspect of these states. It provides the state a tool to assess proposed and current mining projects

in terms of their environmental impacts. While not increasing the speed of administrative

processes per-se, SEPA explicitly sets out a methodology for assessing the environmental

impacts of mining projects, and thus enables efficient governing. With the knowledge gained by

an EIS, state governments in CA, MT, and WA, can make informed decisions about approval or

disapproval of a new mine or magnitude of permitting requirements. This process also enables

input from people outside the sphere of government or industry to review and comment on EIS

and in some cases attend meetings with the relevant agencies and mining companies.

Memorandums of Understanding

A Memorandum of Understanding (MoU) is an agreement between two or more parties, which

indicates the parties will cooperate, coordinate, and share information, such that a shared

objective can be achieved. Given that hardrock metal mining often takes place on Federal lands

in the west, many states have entered into MoUs with the BLM and the USFS. CA, ID, MT, NV,

OR, UT, and WA all have MoU on surface mining on federal lands with the either the BLM or

20

the Forest service. [Disclaimer: MoU documents are often not readily available to the public,

leading to increased potential for missing or incorrect information.]

The co-operation between agencies granted by a MoU is essential to efficient regulation. The

MoU is important because without it, regulation of a mining project could be divided among

separate regulatory agencies. The division of authority can lead to inconsistency, duplication of

effort, and failure to meet bonding objectives.

Percentage of Federal Land Ownership

The final factor of Administrative and regulatory efficiency that was considered was the

percentage of Federal owned land in the state. This was noted to be an important factor for

Nevada; in the Silver State, federal land ownership is about 80 percent. In the entire Western US,

Nevada was the only state where Federal laws form the regulatory model, rather than having

separate state regulatory regimes. This simple and predictable administrative method lends itself

to efficient regulation of hardrock metal mining.

On the other hand, MT and WA are the only western states with less than 30% federal land

ownership. These states also follow a regulatory model where mining is regulated by the state,

with the state setting standards, issuing permits, and collecting fees. This is extremely favorable

in terms of regulatory efficiency, since the federal land ownership is less than lands owned by

the state.

21

CHAPTER 3: PERFORMANCE AND DESIGN STANDARDS

Criteria for Cluster Analysis

The main purpose of regulation is to reduce social harms by improving industrial environmental

performance and increasing workplace safety by modification of individual and organizational

behavior (Coglianese et al. 2003). Historically, mining has proven to be an inherently dangerous

activity with great potential for human death, persistent environmental impacts, and sociological

disruption (Down and Stocks 1977). Modern governments use performance and design standards

to impose their expectations on mining companies, in an attempt to reduce the potential impacts

of mine activities, from exploration to post-closure.

In the case of performance standards, the ability of the miner to adhere to the standards form the

basis for legal commands of the regulatory standards. Essentially, the desired outcome is defined

by the state, with the steps taken to achieve that outcome relegated to the mine operator. Often,

these types of regulations are accompanied industry created performance guidelines, or “best

practices”, to meet the standard. The benefit of this type of regulation is flexibility in the

application of new technology to meet performance standards (Besanko 1987). In the case of

hardrock mining, performance standards are considered to be generally less strict than design

standards, but could vary in terms of precision.

In contrast, design standards specify the compliance goal, and exactly how it is achieved. These

are often highly specific in scope. This type of standard limits the technological flexibility of the

mining outfit. In the case of hardrock metal mining, design standards are considered to be

22

generally stricter than performance standards, but again vary in terms of precision. When

considering large-scale hardrock metal mining, it is important to consider the extractive

techniques that pose the greatest threat to the environment and are commonly used in the

industry. The eleven western United States were grouped into clusters based on their

performance standard regulations pertaining to: cyanide use or chemical mining techniques,

methods of mine tailings disposal, backfilling requirements, specificity of reclamation standards,

and concurrent reclamation. Five clusters were created and scores were assigned to each cluster

based on the assessment of the state regulations (Table 3.1).

Table 3.1 Clusters and Scores for Performance and Reclamation Standards Category

23

Discussion

Regulation of Cyanide Use

As noted previously, cyanide is an extraordinarily toxic compound that is used by hardrock

mining companies to extract gold or other metals from low-grade ore using heap or vat leaching.

With such a high toxicity to living organisms, one would expect strict state regulations on

cyanide leaching practices. This is not the case however, and regulations on cyanide mining

performance standards in the majority of the western states are surprisingly general. For

example, specific detoxification technologies are not prescribed in the regulations, but instead

performance standards requiring detoxification and rinsing of wastes to comply with water

quality standards are the norm. Furthermore, problematic ambiguity arises due to some states

determining these performance standards on a site-specific basis. Important aspects to be

considered are location, heap pad construction, process solution containment, monitoring

requirements, facility maintenance and inspection, and emergency protocols. States that had

explicit performance and design standards dealing with the use, transport, and disposal of

cyanide or design, construction and operation of cyanide facilities that were separate from

general water quality standards included AZ, ID, MT, and OR.

Of the western states, Montana has taken the most proactive approach to preventing

contamination of state waters by cyanide discharge. On November 6, 1998, after a history of

legal battles between the state, mining industry, and a statewide coalition of grassroots NGOs,

the Treasure State enacted a rule (Initiative 137) that bans cyanide heap and vat leaching open pit

gold and silver mining, although mines that were already operating before this can continue to do

24

so under their operating permit (MCA 82-4-390). This exempts the Golden Sunlight mine, now

owned by Barrick Gold, which has operated in the state since 1975, and still employs vat

leaching to extract gold from the rocks.

Oregon may have the toughest performance standards for chemical mining in a state that actually

allows cyanide use in hardrock mining. The Chemical Mining Rules (CMR) as administered by

the Department of Environmental Quality (DEQ), explains that public policy in Beaver State is

“staunchly opposed to actions creating water pollution”, and “chemical process mines pose an

unusual risk of environmental harm” (ORS 4688.015, OAR 340-043). Interestingly, the rules

note the historical environmental atrocities as a result of chemical mining in Oregon and other

states, and that permittees were not held responsible for the damages. The rules hold mine

owners (not shareholders) liable for any environmental damages due to the operation (OAR 340-

043-0025(2 and 5)). Aside from blatantly stressing corporate environmental responsibility, the

state designates a “technical review team” for each proposed project, which, amongst other

duties, must determine the best available, practicable, and necessary technologies for ensuring

compliance with environmental standards. This team can be viewed as an effective

environmental safeguard against potential biased reporting, such as in Arizona, where the mining

company or a 3rd party consulting firm determines the best technology (A.R.S 49-243.B.1). If the

review team cannot identify such a technology, then the Department of Geology and Mineral

Industries will not issue a permit (OAR 632-037-0118). Furthermore, Oregon does not allow

chemical facilities on 100-year floodplains or wetlands, and requires an additional 200ft “buffer

zone” between the facility and surface waters. There is a requirement that wildlife is never to

come into contact with process solution. Other specific regulations for heap leach piles include a

table outlining minimum capacity-sizing criteria, specifications for leach pad liner, criteria for a

25

leak detection system, standards for process pond and emergency ponds, and a specific protocol

for leak response. Mining operators must also determine if spent ore has potential for acid

generation, and submit a plan for acid correction, before the heap is loaded. Oregon’s CMR show

how a combination of performance standards and design standards are used to effectively

regulate cyanide mining.

Tailings Disposal

Mine tailings are waste materials remaining after the ore has been processed. Materials that are

present in the mine tailings are dependent on the composition of the ore and the process used to

extract the metal. Tailings from open pit hardrock metal mines are a significant environmental

challenge to the mining industry and the western states. Many of the public land states set

performance standards addressing tailings treatment, detoxification and pond/impoundment

construction. This shows that the state and mining industry are still employing “end-of-pipe”

solutions, and are lagging behind other industries in establishing proactive solutions to pollution

prevention;for example to reuse or recycle. The most common regulation was a “minimum

design criteria” for tailings facilities. For example, Nevada establishes a minimal design criteria

for the impoundment structure at “equivalent to 12 inches of soil liner with coefficient of

permeability 1x10-6cm/sec” (NAC 445A.434). Other examples of this minimum criteria exist for

many states.

26

Backfilling Requirements

With the advancement of modern mining technology, open pit mining is now the conventional

technique employed by the industry. Metal ores are excavated from the surface and subsurface

through engineered explosions and mechanical excavation and hauling equipment. Open pit

mining is the most economical, and simplest method to turn a deposit of low grade metallic ore

into profitable operation. The tradeoff, is adverse effects, such as grandiose topographic

alteration, hydrologic disruption of ground and surface water, groundwater pollution, endless

piles of waste rock and tailings, and sociocultural impacts to nearby communities.

Backfilling describes the process of returning all or some of the material removed from a hole, to

said hole. For a large scale hardrock mine, this material could include the waste rock,

overburden, and spent tailings. Backfilling an open pit can have positive impacts including

reducing the volume of mine waste stored outside of the pit, reducing potential for acid mine

drainage, and returning the natural topography. In contrast, the negative impacts of backfilling

include potential for groundwater pollution, land subsidence, and increased monetary costs. The

inclusion of backfilling can significantly increase the cost of reclamation. For instance, the

Golden Sunlight Mine, MT, and the Zortman-Landusky Mine, MT, had backfilling costs of

$525,000 and $5,750,000 respectively; in contrast to the $60,000 for regrading and recontouring

at the Beartrack Mine, ID (Kuipers 2000). While it is inconclusive if backfilling is an optimal

method of open pit reclamation, it can be said that regulations requiring backfilling of open pits

are stricter than partial backfilling or recontouring.

27

In general, the western states did not require backfilling of open pits; however, many included

provisions for backfilling as an option to meet reclamation objectives. Only California’s

SMARA specifically requires backfilling of all metallic open pit surface mines (14 CCR Section

3704.1). The backfilling standard was adopted in 2003, following an investigation by the SMGB

of closed and abandoned metallic mines. This study revealed the open pits were not being

reclaimed to the performance standard prescribed by SMARA in 1993. The backfilling

requirement was justified by the SMGB as essential to meeting the requirements of SMARA

which seek to reclaim lands affected by mining to a “useable condition readily adaptable for

alternate land uses and create no danger to public health or safety” (PRC Section 2733). The

board noted that the final state of large scale surface mines, huge open pits in the surface

surrounded by millions of cubic yards of waste rock, were not meeting the standard of the site

being returned to a useful condition. Interestingly, this is an example of mining regulations

California increasing in precision as a response to the inability of the industry to conform to

performance standards.

Conditional backfilling regulations exist in Idaho under the Idaho Surface Mining Act 1971

(ISMA). The Gem State requires any waste piles or surface depressions in mined areas less than

two acres must be returned to the approximate previous contour (IDAPA Section 20.03.02.140).

This standard does not address the environmental impacts presented by large scale open pit

surface mines and the huge volumes of waste rock and tailings. For example, the Thompson

Creek Molybdenum Mine, ID, has an open pit approximately 640 acres and a waste rock pile of

500 acres (Blanchard et al. 2002).

28

In contrast, Nevada’s Mined Land Reclamation Act explicitly states that backfilling is not

required for open pits (NAC 519A.345). This is a highly unique regulation, since other states

mention backfilling as an option for reclamation.

Reclamation and Closure Standards

The purpose of reclamation is to return any lands disrupted by resource extraction to a more

natural condition. Western states tended to designate a “post-mining land use” that gives the

mining company a reclamation objective to aim for, requirements that can be used to estimate

bonding costs, and a basis for evaluating the success of reclamation. Regulations governing

reclamation of hardrock metal mines in the west are highly variable in scope and content

between states. All eleven states require reclamation to some degree, but differences exist in

regulation specificity. Reclamation standards were found to be brief descriptions, and detailed

listings of standards. Generally, reclamation standards for surface mines were determined on a

site-specific basis, and the majority of states had generalized requirements. For most states,

mining companies are to produce reclamation plans in their permit proposals. Plan requirements

generally included landscape recontouring or ground stabilization, topsoil salvage and

replacement, erosion prevention, revegetation, capping of tailings ponds, disposal or removal of

equipment, roads, hydrologic balance, water treatment, monitoring, wildlife, public safety, and

post closure maintenance.

States that had detailed, specific closure and reclamation standards were California and New

Mexico. In California, mining operations are required to comply with detailed performance

29

standards for topsoil (SMARA §3711), recontouring (SMARA §3704), Revegetation (SMARA

§3705), water quality (SMARA §3710), and wildlife habitat (SMARA §3703). The New Mexico

Mining Act (NMAC 19.10.6) includes detailed reclamation standards dealing with specific

impacts of mining. The Act contains provisions for wildlife protection hydrologic balance,

stream diversion, surface stability, erosion control and revegetation (NMAC 19.10.6.603).

Notably, the Land of Enchantment requires new mining operations to eliminate perpetual

treatment of water resources as a practice to meet water quality standards (NMAC

19.10.6.603H). In 2013, after extensive industry lobbying, New Mexico’s Water Quality Control

Board adopted amendments to the Copper Rule (NMAC 20.6.7 and 20.6.8). The new rule allows

the pumping of water from an open pit determined to be a “flow-through” pit in order to

maintain water quality standards, contradicting the previous performance standard (NMAC

20.6.7.33D). There are additional provisions that change the “double liner” standard for process

water impoundments to a “liner optional” standard, instead promoting the interceptor well

technique (NMAC 20.6.7.22A4c). Pumping is the current practice at Freeport-McMoRan

Tyrone Mine open pit to achieve hydrologic containment and mitigation of groundwater

contamination.

Concurrent Reclamation

Rather than conducting all reclamation initiatives after the mine has been closed, some of the

Western states require that reclamation must be conducted simultaneously with mine operations.

Concurrent reclamation is required under the reclamation acts in California, Colorado, Idaho,

and Oregon. This requirement is viewed as increasing the overall strictness of the state’s mining

policy. There is significant monetary costs imposed on the mining companies to relocate soil and

30

overburden. Costs are generally lowered since any equipment needed for earth moving is on the

site already. Despite this economic cost, concurrent soil reclamation positively impacts the

mining site by reducing the amount of land disturbed at the time, and may enhance the final soil

quality (Arbogast et al. 2000).

31

CHAPTER 4: STATE BONDING REQUIREMENTS

Criteria for Cluster Analysis

Performance bonding is the practice of requiring financial surety from a company, insurance

company, or bank to guarantee that a project will be completed in a satisfactory manner.

Reclamation and performance bonding has been applied to hardrock metal mining with varying

degrees of success in the Western United States. Mine bonds serve as collateral for covering the

cost of reclamation in the event that the mining company is bankrupt, such as in the infamous

case of Pegasus Gold Ltd and the Zortman-Landusky Mine in Montana. Historically, the prices

of metals fluctuate with high variance, and bankruptcy is a very real fate for many mining outfits

(Figure 4.1). For mining companies that have substantial monetary strength, the choice between

conducting reclamation and defaulting on the bond becomes even more complex (Gerard 2000).

Figure 4.1 Real copper prices in the United States, 1900 to 2009.

32

Furthermore, it is important for state bonding policies to be comprehensive since metal mining

can result in many long term and costly environmental harms (Chapter 1). In a comprehensive,

first of its kind study, Kuipers et al. (2006) compared the impacts to water quality predicted in

hardrock mining EIS to the actual hydrologic impacts at the mines. In many cases, where there

was predicted “no impact” to water quality or the potential risk for acid mine drainage was

predicted to be “minimal”, the study identified leaching of heavy metals from tailings

impoundments, high concentrations of cyanide compounds in nearby water bodies, and

acidification of groundwater from acid mine drainage (Kuipers et al 2006). This was especially

common in mines that had been abandoned or that had failed to conduct appropriate mitigation

measures. As previously noted in Chapter 1, prediction of these impacts is not accurate with the

methods currently employed by the industry. This represents but one of many high risk situations

associated with mining and is justification for appropriate reclamation bonding.

The cluster analysis resulted in the eleven Western states grouped into homogeneous clusters.

Five clusters were created (Table 4.1), and scores were assigned to each cluster based on the

assessment of the state regulations.

33

Table 4.1 Clusters And Scores For State Bonding Requirements Category.

Discussion

Surface Disturbance

All of the western states require reclamation bonding for surface disturbances. This forms the

baseline for reclamation bonding and is the least strict bond requirement for hardrock mining. It

was interesting to note that Nevada and the BLM only have authority to bond for surface

disturbances. No other impacts are considered in the bond requirement or calculation. This

greatly simplifies the estimation of bond amounts for Hardrock mines under Nevada state and

Nevada BLM jurisdiction. The value of the bond for surface disturbances is generally calculated

34

in two ways (Gerard 2000). The first calculation is to multiply a cost-per-acre by the total area to

be disturbed by the mine. The second method is to estimate the expected reclamation costs,

including administrative fees and 3rd party reclamation costs, and set the bond amount at this

value. Since August 1, 2013, Nevada has employed an online system to assist operators

preparing reclamation plans and bonding costs; the Nevada Standardized Reclamation Cost

Estimator (NSRCE).

Geochemical

Bonding for geochemical impacts to water quality was required by over half of the states. This is

commonly refers to the costs associated with remediation of acid mine drainage. The Porter-

cologne water quality Act implies geochemical bonding may be required to comply with water

quality standards in California. In Colorado, the Mined Land Reclamation Act (MLRA) may be

used by the Division of Minerals and Geology to bond for geochemical impacts from hardrock

mining. Authority to require bonding for geochemical impacts is also implied in Montana’s

MMRA and Water Quality Act, Oregon’s MLRA and Water Quality Act, and Washington’s

Mining and Milling Act. Arizona’s Department of Environmental Quality and Utah’s

Department of Natural Resources may also be able to require bonding for geochemical impacts

under the Aquifer Protection Permit Program (APP) and Minerals Regulatory Program

respectively.

35

Hydrologic

Bonding for hydrologic impacts is also inferred by regulations in more than half of the western

states. Arizona could require hydrologic bonding under the APP Program. California, Colorado,

and Utah, have authority to bond for various hydrologic impacts implied by their statutes.

Authority to require bonding for hydrologic impacts is implied in Montana’s MMRA and Water

Quality Act, Oregon’s MLRA and Water Quality Act, and Washington’s Mining and Milling

Act.

New Mexico has the authority to require bonding for hydrologic impacts as well, but the new

amendments to Copper Rule (NMAC 20.6.7, and 20.6.8) adopted in 2013 are contrary to this

endeavor. Financial assurance is required for those portions of a copper mine facility to be

reclaimed in accordance with a closure plan prepared by the operator in the permit application

(NMAC 20.6.7.11(U)). The facilities that are listed in NMAC 20.6.7 were open pits,

impoundments, pipelines tanks and sumps, and “crushing, milling, concentrating, or smelting

areas”. Tailings ponds, a source of potential ground and surface water contamination are not

considered “impoundments” under this rule, and are excluded from bonding. In the case of open

pits, like the Freeport-McMoRan Chino open pit, standards of NMAC 20.6.2.3103 do not apply

if the pit is determined to be a “hydrologic evaporative sink” (NMAC 20.6.7.33.D). This

essentially exempts an open pit from ground water quality standards (including maximum

cyanide concentrations), and financial assurance. Furthermore, if the open pit is determined to be

a “flow-through” pit, the rules allow pumping of water from the open pit in order to maintain

water quality standards; an expensive option if the pumping is required in perpetuity (NMAC

20.6.7.33.D).

36

Chemical

It was found that CA, ID, OR, and WA all could require additional financial surety to cover

reclamation of spilled or leaked process chemicals. Under the Mined Land Reclamation Act and

Chemical Process Mining Statutes, Oregon has authority to bond for environmental protection

costs (with no limit on the amount) associated with remedial cleanup measures, detoxification

and disposal of ores and process solutions, cost of restoration for contaminated soil, surface and

groundwater, living resources, and can require additional security for mines using toxic

chemicals (OAR 632-037-0135(6) and OAR 340-043-0025(h)). With the authority granted by

the Metal Mining and Milling Act, the Washington Department of Ecology can bond for impacts

associated with construction, operation and closure of metals mining, including problems

revealed during or after closure (RCW 78.56.110(2)(a and c)). Idaho, on the other hand, does not

have such broad discretion, but rather, the Chemical Processing by Cyanidation permit can be

bonded for $25,000 up to $100,000 (IDAPA §16.01.13.650). Considering that remediation costs

for cyanide pollution can range anywhere from $200,000 to $12 million (for treatment in

perpetuity), setting an upper bond limit at $100,000 essentially ensures financial assurance will

be insufficient (US EPA 1997). This limitation is incredibly short sighted and weakens the

Chemical Processing Permit as an effective chemical impact bonding policy relative to other

states.

Worst-Case Scenario

Of the eleven western states, California proved to have the most comprehensive bonding

requirements. The use of this administrative oversight by the California Water Quality Control

37

Board is best illustrated by an example. The Briggs, CA gold mine was required to include costs

for a “reasonable worst case release from the processing facilities” in their reclamation cost

estimate (Kuipers 2000). The company developed a model for an influx of chemical process

solution due to a failure in the piping system, resulting in a catastrophic overflow of the heap

leach pad. Costs for corrective action and mitigation of this theoretical accident were then

included in the total bond amount. The inclusion of ‘worst case’ bonding by the Golden State to

its already extensive bonding requirements shows that it is the most stringent.

38

CHAPTER 5: BOND AMOUNT DETERMINATION

Criteria for Cluster Analysis

As previously discussed, reclamation and performance bonds are a financial guarantee from the

mine operator or company that the project will be operated as legally required by the state

regulations, and that reclamation is completed as set outlined in the mine closure plan. Ensuring

the bond amount is sufficient to cover the costs of operation and reclamation constitutes an

extremely important stage in the planning of the mine. The project proponent is looking to

develop the mine as a profitable enterprise; a bond amount that is too high, is a risk to the

miner’s financial assets. State governments on the other hand, face 3rd party reclamation costs,

management costs, and costs associated with post reclamation and closure activities. Thus, state

agencies often estimate higher bond amounts. Comparison of surface reclamation costs for the

areas to be reclaimed shows tremendous variability. In fact, total cost of surface reclamation can

vary from less than $800 per acre to more than $20,000 per acre between states and mine sites

(Kuipers 2000).

The cluster analysis yielded 3 homogeneous clusters under this category. In general, the public

land states rely on the mining company to determine the performance and reclamation bond

amounts, with a state agency who reviews and decides if the estimate is sufficient. There are, of

course, notable exceptions to this practice, including the mining company exclusively

determining the bond amount, and a state agency exclusively determining the bond amount.

39

Table 5.1 Clusters and Scores for Bond Amount Determination

Discussion

Both Mining Company and State Agency Determine Bond Amount

The most common practice for mine bond amount calculation in the western United States is a

joint effort between mining companies and state agencies. Colorado, Idaho, Montana, New

Mexico, Utah, Washington, and Wyoming were states grouped in this cluster. Generally, case

studies of these states in Kuipers (2000) revealed that the state governments are relying on the

mining company to estimate the cost of reclamation. The state agency would then review the

bond estimate from the company before calculating the final bond amount. Estimates from the

companies varied in terms of the labor rates, administrative costs, and contingency costs, despite

40

similar reclamation activities. Cost of reclamation per acre of land disturbed also varied state to

state. The main drawback with this method is that the costs of reclamation incurred by the

mining company are typically lower than state incurred reclamation costs.

Mining Company Determines Bond Amount

The second most common method of determining the bond amount was having the mining

company complete the calculation based on the operation plan. The south eastern most states,

Arizona, California, and Nevada all rely on the mining company to calculate the bond amount.

The intricacies of the regulations vary between these states despite this similarity. In Nevada,

estimates of reclamation bonding are greatly simplified by the NSRCE program. The amount

must be based on the mine’s reclamation plan being completed by a third party contractor.

Despite the NSRCE having incredible potential for accurate bond amount estimates, there are

some significant problems. As previously discussed, Nevada’s regulations only require

reclamation and bonding for surface disturbances; the bare minimum in terms of potential

mining related impacts. The state department does have discretion to require “specific types” of

reclamation if appropriate. For mines in Nevada, appropriate reclamation must be economically

and technically practicable, and not anything beyond what is required by a federal agency (NAC

519A.140 and 519A.255). Due to inadequate bonding requirements, neglecting overhead and

indirect costs, there is a high risk of underestimating the cost of reclamation. Consider the

monetary costs and externalities if an open pit mine were to generate huge volumes of acid mine

drainage. A federal agency like the EPA may name it a superfund site, requiring water treatment

and remediation in perpetuity. What was initially a small cost to the mining company could

evolve into an enormous cost for the public down the road.

41

State Agency Determines Bond Amount

Oregon is the only state in the west that determines the performance and reclamation bond

amount through a state agency. Under the Mined Land Reclamation Act, the Department of

Geology and Mineral Industries is to calculate the value of the financial security. The amount is

calculated on the basis of estimated actual costs of reclamation and closure, as well as

considering a credible accident analysis for additional environmental protection costs (OAR 632-

037-0135). The actual cost of reclamation is estimated if the department contracted services to

perform the mine reclamation as planned. Use of this method in Oregon has several advantages.

By assigning the task of cost estimates to the department, there is a dedicated group of

individuals who may be repeatedly calculating bond values using their experiences and

knowledge, leading to increased accuracy. Furthermore, the department should have a thorough

understanding of the state requirements, and can address this through the bond value.

Additionally, the department members may be more familiar with local rates and contractors

than a mining company. Rather than depending on the speculation of a mining company, who

may have financial motivation to underestimate the reclamation cost, the state department can

formulate a more realistic value for the reclamation bond in order to achieve environmental

protection.

42

CHAPTER 6: BONDING PROGRAM EFFECTIVENESS

Criteria for Cluster Analysis

Due to the high variability associated with mineral economy, such as the price of metals and

mine development, a performance and reclamation bond should be more than just an insurance

policy. The bond must be effective in guaranteeing compliance, such that the environmental

protection sought by the state can be upheld. To this end, a strict bonding program would be

comprehensive in the mining activities that are to be bonded. Additionally, as the performance

and reclamation bond can take many forms, a strict bonding program would not allow “self-

bonding” or corporate guarantees. The legal intricacies of the many bonding forms will not be

discussed here, but it should be noted that corporate guarantee or self-bonding are the least

effective forms, especially since they essentially become worthless if a company goes bankrupt.

Bond amounts would be dynamic, with a review period of no greater than one year, allowing

bond adjustment to reflect the changing costs of operation, reclamation, and mine expansions.

Furthermore, if reclamation is conducted simultaneously with mining, the bond would not be

released incrementally; it would be kept in full until the completion of the mine reclamation.

State regulations were evaluated in terms of the number of activities covered by bonding, if the

state allows self-bonding or corporate guarantee as a form of surety, if the bond amount is

subjected to annual review, and if the state allows incremental bond review. The cluster analysis

resulted in five clusters of homogeneous states based on these categories (Table 6.1). Scores

were assigned to each cluster based on the assessment of the state regulations.

43

Table 6.1 Clusters and Scores for Bonding Program Effectiveness

Discussion

Number of Activities Covered By Bonding

Of the western United States, it was the Golden State that had the most comprehensive bonding

program. Under SMARA and the Porter-Cologne Water Quality Act, California can theoretically

require financial surety for surface disturbances, geochemical impacts, hydrological impacts,

chemical impacts, and worst case scenarios. While unable to bond for worst-case scenarios,

Washington’s Mining and Milling Act (MMA) and Surface Mining Act contain statutes that

44

require bonding for the other four disturbances, resulting in a nearly comprehensive program. In

stark contrast, Nevada Department of Environmental Protection only requires bonding for

surface disturbances under the Mined Land Reclamation Act.

Self-bonding or Corporate Guarantees Permitted

It was found that variation exists in the type of bonds allowed under state bonding programs. The

western states allowed surety bonds, irrevocable letters of credit, trust funds, property deeds,

cash, savings, certificates of deposit, government bonds, corporate guarantee, corporate self-

bonding, and even equipment salvage, to varying degrees. Surety and irrevocable letters of credit

are accepted as financial assurance across all eleven public land states. Many states also allowed

trust funds, property deeds, cash, and savings. The other forms were less common. Corporate

guarantees and self-bonding were allowed in Nevada, Arizona, and Wyoming as an acceptable

bonding form.

Annual Bonding Review

CA, ID, MT, and OR are required to review the bond on an annual basis. Illustrating Idaho as an

example; bonds are reviewed annually, and if there is any increase in acreage of affected lands

over the next 12 months, the bond value is increased (IDAPA §20.03.02.120.04). Despite being

limited to land area disturbances, this is still a very proactive approach to bonding. This

effectively ensures that there is enough money in the bond to reclaim any new mining impacts at

all times. Since these states can increase the bond amount to account for new developments or

mine expansions each year, annual bonding review is considered to be a more stringent

45

regulation of mining. Bonds in other states are reviewed less frequently. Examples of this

included Nevada, where the surety amount is to be reviewed at least every 3 years by the

operator, and Utah, where the surety amount is to be reviewed and adjusted at 5 year intervals

(NAC 519A.380 and UAC R647-4-113). This is a less effective method of ensuring the

reclamation bond is of a sufficient amount during the mine life. Considering that operators in

Nevada can modify mine reclamation plans for any reason (as long as the division receives a

modified plan draft to review), and that there is a blurry distinction between “major” and

“minor” plan modifications (the latter being exempt from hearings and public comment), this

presents a potential situation where there will be inadequate financial surety for up to 3 years.

With the price of metals experiencing significant fluctuations in the past, the long period

between bond reviews serves to increase the risk of insufficient surety for temporarily closed or

abandoned mines.

Incremental Bond Release

It was found that Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, and Utah allow the

mine bond to be released incrementally. Provisions for phased bond release, act as an incentive

for mining companies to practice concurrent reclamation (Warhurst and Ligia Ioronha 2000).

Considering Colorado’s Mined Land Reclamation Act as an example, the operator can apply to

the division to have a portion of the financial assurance released once that part of the reclamation

plan is completed (2 CCR 407-1-4.17). In Nevada, the surety is released periodically; 25% of the

bond when revegetation is completed, and 60% of the bond when revegetation and earthwork is

completed (NAC 519A.385). For this study, allowing incremental bond release, decreases the

46

relative strictness and subsequently, the effectiveness, of the state’s metal mining bonding

program.

47

CHAPTER 7: A RANKING OF THE WESTERN STATES

One objective of this study was to obtain a ranking of the Public Land States in terms of their

regulatory strictness. This has been a largely successful endeavor, since there existed substantial

variation in the stringency of hardrock metal mining regulations across the west. The ranking as

determined by this study is presented below (Table 7.1).

Table 7.1 Ranking of the Western United States by strictness score obtained in this study, and by

policy perception index (PPI) score from the Fraser Institute Survey of Mining Companies 2014.

Comparison to the 2014 Survey of Mining Companies

Policy Perception Index

Since 2010, the independent non-partisan research organization, the Fraser Institute, has

investigated the opinions of the mining industry through the annual Survey of Mining

Companies. The survey has been designed to determine how exploration investment is

State Score State PPI 2014

NV 8 WY 87.89

AZ 10 UT 80

WY 11 NV 79.89

CO 12 AZ 71.68

NM 12 CO 71.19

UT 14 ID 67.35

ID 15 NM 63.15

MT 17 MT 59.47

CA 18 CA 56.31

WA 18 WA 44.37

OR 20 OR NA

48

influenced by geologic and public policy factors. To accomplish this, an electronic survey was

circulated to 4,200 individuals representing exploration, development, and mining-related

companies around the globe. In 2014, the survey responses allowed analysis of 122 jurisdictions,

including sub-national jurisdictions in the United States. Jurisdictions were only included in the

final report if 10 completed responses were submitted (Jackson and Green 2014).

Of interest to this study, is the Policy Perception Index (PPI), previously called the Policy

Potential Index, included in the Survey. According the Fraser Institute, the PPI is “a ‘report card’

to governments on the attractiveness of their mining policies” (Jackson and Green 2014). The

index is a relative comparison of jurisdictions based on the mining industry responses to survey

questions regarding policy factors (Jackson and Green 2014). 17 factors are compared, with the

final index being normalized to 100 (Jackson and Green 2014).

The PPI can be qualitatively compared to the ranking of states based on the relative regulatory

strictness as determined in this study (Table 7.1). The most obvious issue is that this study found

Oregon to have the most stringent Hardrock Metal Mining Policy, but the Survey does not

provide a PPI score for the Beaver State. This is also true for all previous editions of the Survey.

There is no data available for Oregon. At first it was suspected that this is because there was little

to no locatable mineral potential in the state, however, as the Mineral Information Layer for

Oregon (MILO-2) shows, this is not the case (Figure 7.1). Note the abundance of metals in the

North Western and South Eastern corners of the state. While much less reliable, an internet

search uncovered that there are no active metal mining operations in Oregon at this time, based

49

on data from the US Geological Survey. This may explain why Oregon was not included in

Survey responses.

Figure 7.1. Mineral Information Layer for Oregon.

Another major difference between the two rankings is the relative position of the states with the

most permissive mining regulations (at the top of the table). This essentially equates the least

stringent hardrock metal mining policy to the most attractive for mining investment. Specifically,

Nevada and Wyoming switch positions in the ranking between first and third most permissive.

Considering the nature of this study, analyzing hard rock metal mining regulations, and the

Survey analyzing regulations governing all types of mining; this is not surprising. For Wyoming,

coal mining is one of the most important industries. Coal mining generated 16% of the Cowboy

State’s annual revenues in 2014, while all other minerals only accounted for 0.057% of the

50

annual revenue (Department of Revenue 2014). The favoritism paid to Wyoming by the mining

industry in the Survey PPI 2014 could be attributed to coal mining regulations. When considering

metal surface mining regulations alone, it is no surprise that Nevada is in the top 3. The Fraser

Institute found that the Silver State, had low “uncertainty concerning administration,

interpretation, and enforcement of existing regulations”, and furthermore had low “uncertainty in

environmental regulations”, in the eyes of the mining industry (Green and Jackson 2014). With

the lowest total score of all of the west, Nevada, was characterized by a relatively efficient

administration, highly generalized performance and reclamation standards, and a generally weak

bonding program. All of these factors, result in a state with a hardrock metal mining policy that

is correlated with being extremely attractive for mining investment.

Despite the apparent differences in the state rankings, there are substantial similarities as well. In

particular are the positions of California, Montana, and Washington in both rankings (Table 7.1).

In the Fraser Institute Survey, these states are ranked in the bottom 20 jurisdictions worldwide in

terms of “uncertainty concerning administration, interpretation, and enforcement of existing

regulations”, and are ranked in the lower 10 jurisdictions worldwide in terms of “uncertainty in

environmental regulations” (Jackson and Green 2014). This means that the mining industry is

discouraged from investment by the environmental regulations and administration of said

regulations in these states. Mining industry comments included in current and previous editions

of the Survey referred to California as a “regulatory horror story”, with an “oppressive regulatory

regime”, and criticized the backfilling requirement (Wilson et al. 2013, Jackson and Green

2014). Montana’s cyanide ban, open pit gold mining was called “extremely dissuasive” (Jackson

and Green 2014). Finally, Washington’s mining laws “essentially shut down open pit gold

51

mining” (Jackson and Green 2014). In this study, California, Montana, and Washington, were

all found to have relatively specific performance and reclamation standards, proactive pollution

prevention legislation and comprehensive bonding requirements. It is evident from comparison

with the other western states that these factors correlate with industry perceptions of an

unattractive hardrock metal mining policy.

Regulatory Capture in the Western United States

The second objective of this study was to examine the hardrock metal mining regulations for

evidence of regulatory capture. To do so, there must be a clear definition of regulatory capture.

Though many political scientists and economists have developed complex models of the

phenomenon, regulatory capture is generally defined as the change in the role of an

administrative body from acting in public interests of increasing social welfare, to instead acting

in the interests of the industry it is charged with regulating (Dal Bo 2006). For the state

departments, regulating hardrock mining in the western United States, many of them are charged

with the basic intention of protecting the environment and human health. Consider that in

Montana, the state constitution gives all persons “the right to a clean and healthful environment”

(Article II 3). Others are charged with supporting the economy through mineral exploration and

development. When mining is considered, there is potential for a massive conflict of interest

(Blumm 1994).

While many arguments could be made for the existence of capture in the Western United States,

recent regulatory revisions in New Mexico provide a compelling example. As was previously

52

mentioned, the Water Quality Control Commission (WQCC) adopted new regulations for copper

mining, called the Copper Rule, in 2013 (NMAC 20.6.7 and 20.6.8). This is a statutory

requirement of the WQCC; to regulate specific industries, including the copper industry (NMSA

74-6-4K). It is apparent that this requirement exists because the metal mining industry is the

largest source of pollution in the state (EPA National Analysis Dataset 2013). Furthermore, the

WQCC is charged with adopting regulations to prevent or abate water pollution in the state;

considering factors such as impacts to health, welfare, environment and property, public interest,

the economic value of the source of contamination, technical and economic reasonableness of

reducing or eliminating water contaminants, successive uses of the water, property rights and

accustomed uses, and federal water quality requirements (NMSA 74-6-4E). A part of the

Environmental Improvement Act, the WQCC’s purpose is to ensure the environment of New

Mexico will confer optimum health, safety, comfort, and economic and social well-being on its

inhabitants, and furthermore, to protect current and future generations from health threats posed

by the environment, and maximize the economic and cultural benefits of a healthy people

(NMSA 74-1-2). New Mexico is a region with an arid or semi-arid climate, where average

annual precipitation can be as low as 10 inches (25.4cm), and even less in the South West where

most copper mining occurs (Western Regional Climate Center). Considering that over 90 percent

of the state’s population relies on groundwater for drinking, protection of water resources

becomes even more critical for the health of the people and the environment (National Water

Information System 2010).

The fact is, the new Copper Rule does not achieve this purpose. The rules directly violate the

statutory requirement to “prevent or abate water pollution”, by instead allowing pollution from

new and current mining operations to be captured and contained. For example, if a mine

53

proposes to use an interceptor system in lieu of a liner system for storage and disposal of waste

rock, then testing and characterization of the material for acid mine drainage is not required,

even if the material has already been shown to be acid generating (NMAC 20.6.7.21A(1)). The

interceptor system is apparently considered an equivalent technology to a liner system for both

waste rock pile and for tailings impoundments in capturing and containing groundwater, so long

as groundwater does not exceed applicable standards at specified monitoring well locations

(NMAC 20.6.7.21B (e) and NMAC 20.6.7.22A(e)). By adopting these rules, the WQCC are

essentially allowing continued operation and future construction of unlined impoundments for

cyanide contaminated tailings and acid generating waste materials. Rather than attempting to

limit the fresh water that comes into contact with these toxic chemicals (by requiring a liner

system), the Copper Rules have allowed a potential situation where the volume of process water

will increase in perpetuity as contaminated groundwater is pumped through the interceptor

system.

To further illustrate the lack of attention and thought paid to human health and environmental

protection by the Copper Rules (adopted by the WQCC), consider the abundance of grandfather

clauses that exist in the new regulations. In the Copper Rules, grandfathered regulations are

present for waste rock stockpiles (NMAC 20.6.7.21C(2)), tailings impoundments (NMAC

20.6.7.22B(2)), pipelines and tanks (NMAC 20.6.7.23B(2) and 20.6.7.23C(6) and

20.6.7.23C(7)), monitoring wells (NMAC 20.6.7.28B(1)), and ground water sampling

procedures (NMAC 20.6.7.28G ). Generally, these regulations all allow existing facilities, the

benefit of exemption from the requirements of the Copper Rules, continued operation under their

previous discharge permit, and even “renewal” of the previous discharge permit. The fact that

these grandfather clauses are included in the new regulations again violates the statutory

54

requirement to prevent and abate water pollution. For proof of this statement, consider the track

record of water quality impacts at the Freeport-McMoRan owned Tyrone and Chino mines in

Southwestern New Mexico from 1986 to 2012. The Chino Mine has reported 10 accidental

releases of process water and tailings to Hanover and Whitewater Creek, has reported failures in

water collection and treatment, and contaminated groundwater requiring treatment in perpetuity

(Gestring and Chambers 2012). The Tyrone Mine has reported 7 accidental releases to Mangas

Creek, has reported failures in water collection and treatment, tailings dam breaches, and

contaminated groundwater requiring treatment in perpetuity (Gestring and Chambers 2012). A

joint investigation of the environmental impacts from these two mines by the US Department of

Justice and State of New Mexico in 2011 revealed widespread contamination of groundwater by

hazardous substances in excess of water quality standards (Gestring and Chambers 2012). This

provides evidence that the current mining practices of the Chino and Tyrone Mines are

ineffective at preventing the degradation of groundwater resources in the state of New Mexico,

and thus begs the question; why are the mines still permitted to operate under the new rules?

It has already been shown that the WQCC has gone against its statutory requirements to prevent

and abate water pollution to ensure human and environmental health in its adoption of the

Copper Rules, but was this administrative body really captured by the mining industry? To

answer this question it is best to consider the political and social climate in the state. Before the

regulations were adopted, there was a period of public comment as part of the rule development

process and submission of written statements during the final hearing. Freeport McMoRan also

submitted comments that asked for removal of liner requirements and removal of the lengthy

process for groundwater quality variances, both of which are not found in the final rule. There

55

was significant public and NGO opposition to the proposed Copper Rules, citing concerns about

long term groundwater quality, human health concerns, questions about the economic benefits of

copper mining, and holding the mines financially accountable (WQCC Matter 12-01(R)). It is

evident that the rules were written considering the interests of the copper industry, and not the

nature of copper mining, and thus revealing regulatory capture in New Mexico.

56

CONCLUSION

This study of the Western United States has been successful in achieving the objectives. While

the basic intention of mining and reclamation statutes are generally similar, there exists

variations in the way regulatory models are designed. Using a novel method, a relative ranking

of the Public Land States based on variation in regulatory strictness was developed and

compared to the Fraser Institute Survey of Mining Companies 2014. The comparison revealed

that states with lower environmental regulatory strictness are favored for investment by the metal

mining industry. On the other hand, states with higher regulatory strictness are highly criticized

by the metal mining industry. New Mexico was provided as an example of regulatory capture by

the metal mining industry, using evidence from the state’s regulations.

57

REFERENCES

Anderson, K. 1998. Social Risk. Mining Journal 6.

Arbogast B.F., D.H. Knepper, and V.H. Langer. 2000. The Human Factor in Mining

Reclamation. US Geological Survey 1191: pg.15.

Arizona Administrative Code AAC11 Mined Land Reclamation.

Arizona Revised Statutes ARS 27 Minerals, Oil and Gas.

Bebbington, A., I. Hinojosa, D.H. Bebbington, M.L Burneo, and X. Warnaars. 2008. Contention

and ambiguity: Mining and the possibilities of development. Development and Change 39, 6:

887-914.

Besanko, D. 1987. Performance versus design standards in the regulation of pollution. Journal of

Public Economics 34: 1944.

Blanchard, T., C. Baun, L. Stone, D. Gudgell, and J. Hayes. 2002. Hardrock and phosphate

mining in Idaho. Boise ID: Idaho Conservation League and Ketchum ID: Boulder-White Clouds

Council.

Blumm M.C. 1994. Public choice theory and the public lands: Why multiple land use failed.

Harvard Environmental Law Review 18.

Burke, G. 2006. Opportunities for environmental management in the mining sector in Asia.

Journal of Environment and Development 15: 224-235

California Code of Regulations CCR14-2-8-1 Surface Mining and Reclamation Act (SMARA)

California Public Resources Code PRC 2 Geology, Mines, and Mining.

California Water Code CWC 7. Porter-Cologne Water Quality Control Act.

Clarkson, T.W. 1985. Reproductive and developmental toxicity of metals. Scandinavian Journal

of Work, Environment, and Health 11: 145-154.

Constitution of the State of Montana. Article II Section 3. Inalienable Rights.

Coglianese, C., J. Nash, T. Olmstead. 2003. Performance-based regulation: prospects and

limitations in health, safety, and environmental regulation. Administrative Law Review 55: 70

Colorado Code of Regulations 2CCR407-1 Hardrock and Metal Mining.

Colorado Revised Statutes CRS34-32 Mined Land Reclamation Act.

Coulson, M. 2012. The history of mining: The events, technology and people involved in the

industry that forged the modern world. Petersfield, Hampshire: Harriman House Ltd.

Dal Bo, Ernesto. 2006. Regulatory capture: A Review. Oxford Review of Economic Policy 22:

203-225

Down, C.G. and J. Stocks. 1997. Environmental Impacts of Mining. New York: John Wiley and

Sons.

58

Downing, B.W. 2014. Natural acid rock generation, drainage, and metal leaching: Impact on

exploration, mining, and reclamation. In: J. A. Jacobs, J.H. Lehr, and S.M. Testa 2014. Acid

Mine Drainage, Rock Drainage, and Acid Sulfate Salts: Causes, Assessment, Prediction,

Prevention, and Reclamation. First Edition. John Wiley and Sons.

D’Epsosito, S. 2005. Public perspectives on mining: There must be a way to do it right. In: L.G.

Price, D. Bland, V.T. Mclemore, and J.M. Barker. Mining in New Mexico: the Environment,

Water, Economics, and Sustainable Development. Socorro, New Mexico: New Mexico Bureau

of Geology and Mineral Rescources.

Gestring B., and D. Chambers. 2012. US Copper Porphyry Mines: The track record of water

quality impacts resulting from pipline spills, tailings failures and water collection and treatment

failures. Earthworks.

(http://www.earthworksaction.org/files/publications/Porphyry_Copper_Mines_Track_Record_-

_8-2012.pdf )

Francaviglia, R.V. 2004. Hardrock mining’s effects on the visual environment of the west.

Journal of the West 43:40.

Gerard, D. 2000. The law and economics of reclamation bonds. Resources Policy 26: 189-197.

Jackson, T. and K.P. Green. 2014. Fraser Institute annual survey of mining companies.

Vancouver BC: The Fraser Institute.

Holden W.N. and R.D. Jacobson. 2012. Mining and natural hazard vulnerability in the

Philippines: Digging to development or digging to disaster? New York NY: Anthem Press.

Idaho Code IC47-15 Idaho Surface Mining Act

Idaho Administrative Rules IDAPA 16.01.13 Rules for Ore Processing by Cyanidation.

Jennings, S.R. and Jacobs, J.A. 2014. Overview of acid drainage prediction and prevention. In:

J.A. Jacobs, J.H. Lehr, and S.M. Testa 2014. Acid Mine Drainage, Rock Drainage, and Acid

Sulfate Salts: Causes, Assessment, Prediction, Prevention, and Reclamation. First Edition. John

Wiley and Sons.

Jewell, S. and S.M. Kimball. 2014. Mineral Commodity Summaries 2014. Reston VI: US

Geological Survey.

Kuipers, J.A. 2000. Hardrock reclamation bonding practices in the Western United States.

Boulder CO: National Wildlife Federation.

Kuipers, J.A., A.S. Maest, K.A. MacHardy, and G. Lawson. 2006. Comparison of Predicted and

Actual Water Quality at Hardrock Mines: The reliability of predictions in Environmental Impact

Statements. Butte MT: Kuipers & Associates and Buka Environmental.

Laffont, J., and J. Tirole. 1991. The politics of government decision making: A theory of

regulatory capture. The Quarterly Journal of Economics.

Marchman, P. 2012. “Little NEPAs”: State equivalents to the National Environmental Policy Act

in Indiana, Minnesota, and Wisconson. Arlington VA: Federal Emergency Management Agency.

59

McEwan, P.D. 2011. Fraud and corruption in the mining and metals industry. Vancouver BC:

Continuing Legal Education Society of British Columbia. October 2011.

(http://www.cle.bc.ca/PracticePoints/NAT/11-FraudandCorruption.pdf)

Mining, Minerals and Sustainable Development. 2002. Breaking New Ground. London:

Earthscan Publications.

Montana Code Annotated MCA 82.4.3 Metal Mine Reclamation.

Montana Code Annotated MCA 75-1-101 Montana Environmental Policy Act.

Moody, R. 2007. Rocks and Hard places: The globalization of mining. London: Zed Books.

Moran, R. 1998. Cyanide uncertainties: Observations on the chemistry, toxicity, and analysis of

cyanide in mining related waters. Washington DC: Mineral Policy Center.

National Water Information System 2010 (http://waterdata.usgs.gov/nwis/water_use/)

Neuberger, J.S. et al. 1990. Health Problems in Galena, Kansas: A heavy metal mining superfund

site. The Science of Total Environment 94: 261-272.

Nevada Annotated Code NAC 445A.350 Mining Facilities

Nevada Revised Statues NRS 519A. Reclamation of Land Disturbed by Mining Operations or

Exploration Projects.

New Mexico Administrative Code NMAC 20.6.1 Water Quality.

New Mexico Administrative Code NMAC 20.6.7 Copper Rules.

New Mexico Administrative Code NMAC 19.10 Non-coal Mining.

New Mexico Statutes Annotated NMSA 74.6 Water Quality

Oregon Administrative Rules OAR 632-033 Mined Land Reclamation Act.

Oregon Administrative Rules OAR 632-037 Consolidated Permitting of Mining Operations.

Ripley, E.A., R.E. Redmann, and A.A. Crowder. 1996. Environmental impact of mining in

Canada. Kingston ON: Center for Resource Studies.

State Mining and Geology Board. 2007. A comparison of the regulatory surface mining

programs in the Western United States. Sacramento CA: California Department of Conservation

Resources Agency.

State Mining and Geology Board. 2007. Report on backfilling of open-pit metallic mines in

California. Sacramento CA: California Department of Conservation Resources Agency.

State Mining and Geology Board. 2012. Report on the survey of lead agencies affected by the

Surface Mining and Reclamation Act. Sacramento CA: California Department of Conservation

Resources Agency.

Skinner, B.J. 1976. Earth Resources, 2nd ed. Englewood Cliffs, NJ: Pretence Hall.

60

Svobodova K, P. Sklenicka, K. Molnarova, and M. Salek. 2012. Visual preferences for physical

attributes of mining and post-mining landscapes with respect to the sociodemographic

characteristics of respondents. Ecological Engineering 43:34–44.

EPA Toxic Release Inventory: National Analysis Dataset 2013 (http://www2.epa.gov/toxics-

release-inventory-tri-program/2013-toxics-release-inventory-national-analysis)

United States Environmental Protection Agency, Office of Solid Wastes, 1997, Costs of

Remediation at Mine Sites. Washington DC, Table 4-1.

Utah Administrative Code UAC R647 Mined Land Reclamation Act.

Utah Environmental Quality Code 19.5 Water Quality Act.

Warhurst A., and Ligia Ioronha M. 2000. Environmental Policy in Mining: Corporate Strategy

and Planning. Boca Raton FL: CRC Press (Lewis Publishers). pg. 188.

Washington Annotated Code WAC 332-18 Surface Mine Reclamation.

Washington Annotated Code WAC 173-200 and 201A Water Quality Standards.

Washington Annotated Code WAC 197-11 SEPA Rules.

Washington Revised Code RCW 78 Mines, minerals, and Petroleum.

Water Quality Control Commission, New Mexico Environment Department, Matter 12-01(R)

(http://www.nmenv.state.nm.us/wqcc/Matters/12-01R/index.html)

Western Regional Climate Center (http://www.wrcc.dri.edu/narratives/NEWMEXICO.htm)

Whitmore, A. 2006. The emperor’s new clothes: Sustainable mining? Journal of Cleaner

Production 14: 309-314.

Wilson, A., M.A. Cervantes, and K.P. Green. 2013. Fraser Institute annual survey of mining

companies. Vancouver BC: The Fraser Institute.

Wyoming Department of Revenue. 2014. Annual Report.. Cheyenne WY: Wyoming Department

of Revenue. (https://sites.google.com/a/wyo.gov/wy-dor/dor-annual-reports)

Wyoming Statutes Annotated WSA 35.11 Environmental Quality Act.

Wyoming, Code of Rules CWR 2-1 Non-coal mine permit application.

Wyoming, Code of Rules CWR 3 Environmental Protection Performance Standards

61