Mining Closure Closeout Plan hearing held on July 24, 2019

[Editor's Note: This author was unable to attend the entire hearing because of other commitments, so this article is written from audio recordings of the event. That is the explanation of the late report, too, but it will be a multi-part series of articles and they will be comprehensive, if often paraphrased.]

By Mary Alice Murphy

Felicia Orth, the hearing officer of the New Mexico Mining and Minerals Division, part of the Energy, Minerals and Natural Resources Department, led the hearing on a closure closeout plan for Chino Mine on July 24, 2019.

She noted that the plan is required to be updated every five years, but it has been 11 years since the last update.

"It may be called a closure closeout plan, but it does not mean the mine is imminently going to close," Orth said. "It is not a plan to close. As far as we are concerned the mine will operate until the operator chooses to close it. This plan describes the reclamation items, the operator will be responsible for, including erosion control, reclamation, surface and groundwater protection, and reclamation of piles. This event is recorded and transcribed by a transcribing reporter. The Mining and Mineral Division regulations require that all testimony be under oath."

She said the first presentation would come from Freeport-McMoRan, followed by a presentation by Gila Resources Information Project (GRIP), which requested the hearing, and then comments from those who signed in to give comments. Written comments would also be accepted at the hearing and by email up to Aug. 7 and would be placed into the record.

Holland Shepherd, program manager of the Mining and Reclamation Program, said the program had existed since the Mining Act had passed in 1992-93. "We welcome you. The Mining Act and its rules were and are created through considerable public process. We want to hear everyone's comments. We will look at all comments before the final creation of the reclamation plan. It will take years here to do reclamation, although some parts have already started. We continue to update the plan and financial assurance plan."

He introduced members of the technical staff, who will look at it from the technical stand.

Dal Moellenberg attended the hearing at the request of Freeport-McMoRan but said he would not be speaking on behalf of the company.

Rita Lloyd-Mills gave Freeport's presentation. She was sworn in and then welcomed those in attendance.

"We're here to talk about the closure closeout plan," Lloyd-Mills said. "Chino Mines has been involved in reclamation since 2011. This plan was put together by a whole team, based on recent engineering and scientific fact."

She also introduced Thomas Shelley, Freeport reclamation manager and professional engineer, who has worked on several reclamation projects. Sherry Burt-Kested, manager of environmental services, was also in attendance.

Lloyd-Mills said the plan at the hearing would talk about Chino Mines, which is visible from New Mexico 152 and U.S. 180. "I will talk about the North Mine and the South Mine, which includes the tailings on NM 152."

"Every operating mine, under the Mining Act, has to update its closure closeout plan every five year. It tells us how we will reclaim the land, while being environmentally sustainable." The plan includes wildlife and industrial aspects in its scope of work.

"We develop the process and once we prepare the plan, we have to follow the process by submitting it to the New Mexico Mining and Minerals Division and the New Mexico Environment Department, once the scope of work is accepted and the application is approved," Lloyd-Mills said. "We submitted the application in February 2018. The plan is in compliance with the Copper Rules, the Groundwater Compliance Act, the Mining Act and the Mining Act Rules. The Mining and Minerals Division receives the comments. We responded to all comments at that time. In August of 2018, we formed a work group, made up of Freeport, the mining oversight agencies and GRIP. We wanted to collaborate. We discussed the closure closeout plan and financial assurance. We came together in December 2018, and the cost estimate was submitted in May 2019. We are working through comments."

Freeport did five years of analyses before work began on the closeout plan to determine what year would be the most expensive year. It was determined and the reclamation plan is based on that, she said.

 

"Once we have the design to work with, we will begin with reclamation," Lloyd-Mills said. "We have grading rules, which are specific in the Copper Rules, as a 3-to-1 slope. So, we have to cut back to that slope and then once it is regraded, we work on storm water control. The Copper Rules state that the reclamation has to be able to sustain a 100-year flood in a 24-hour event. Once it's cut in, we then put on the reclamation material, then cover over the area to be reclaimed."

She said the company places at least three feet of cover and then seeds it with native plant material. "When it is revegetated, we have to monitor it for erosion, vegetation monitoring, quality and quantity monitoring. The cost estimate takes all of that into account. We go out to inspect the reclaimed land after every one-inch rain event. The waiver area, we don't have to maintain. The waiver area is in the pit. We develop on the reclaimed land a self-sustaining eco-system. We have a waiver from the Mining and Minerals Division, but we still have some reclamation in areas outside the pit rim." She said a map of the areas in color was available to view in the open house area, which was in the lobby of the Grant County Administration Center.

"In the pit area, even though we are not doing material moving, we will treat the water in the pit," Lloyd-Mills said. "In the South Mine area, we have done close to 3,000 acres of reclamation. We will reclaim other areas, which are in this plan to regrade and seed."

For water treatment, the mine captures all the water and continues to use it. "When the mine closes out, we will capture it and it will go to a water treatment plant at the South Mine and at the south end of the mine, it will meet a high standard and the water will be released. We have money in the plan, and we already have the permit for treatment."

The plan also talks about the monitoring wells that will be closed when the mine closes. "We will drill new wells for monitoring. We will demolish all the industrial buildings that will not be used. The area will be fenced to protect wild and human life."

She noted the cost estimate was not developed by Chino Mine, but four people decided what methodology to use for the cost estimate and submitted the proposal.

Lloyd-Mills said the proposal allocates $426 million for the water treatment and reclamation. "We have proposed that because of the scope of work. The number, at current net value is $212 million. Once we all agree, then we will propose the financial assurance instrument."

She said photos of the reclaimed areas show deer, javelina, rabbits, and evidence of predators, too.

Next, GRIP's Executive Director Allyson Siwik and James Kuipers, GRIP's technical consultant, were sworn in.

Siwik said GRIP was founded in 1998, with the mission: Recognizing that human and environmental systems are inseparable and interdependent, Gila Resources Information Project pursues two goals: 1. To protect and nurture human communities by safeguarding the natural resources that sustain us all; 2. To safeguard natural resources by facilitating informed public participation in resource use decisions. Gila Resources Information Project (GRIP) was incorporated as a 501(c)(3) organization in 1998.

"Our goal is to facilitate informed public input to ensure a responsible mining operation," Siwik continued. "We are not anti-mining. We recognize the importance of mining to local families, businesses and the state, as well as the importance of copper production to renewable energy development. At the same time, we don't think the mining profits should come at the expense of the environment and the community."

Kuipers noted the plan is more than a decade out of date. "We are pleased to be here closing in on completion of the plan. It will protect water, the air, wildlife and provide for a healthy environment. We have been meeting quarterly to resolve the differences. One big change is water treatment. GRIP appealed the 2003 closeout closure plan under the Water Quality Act. It would take 9,000 acer-feet of water to dilute the wastewater. That's more than three times the amount of water Silver City uses each year. We settled in 2008 when Freeport agreed to wastewater treatment. They spent two years bench testing it. We are pleased it is in the plan now. It will save groundwater. We are pleased progress has been made, but there is more work to be done. I want to address financial assurance. GRIP has had issues with Freeport using the parent company as its third-party guarantee for financial assurance. The New Mexico Mining Act allows the mines to use a third-party as guarantees for a portion of the financial assurance, but Freeport's parent company that provides financial assurances puts the state and public at risk. If Freeport goes out of business, the state will have to put up taxpayer money. The Forest Service and Bureau of Land Management prohibit the use of a parent company as a third-party guarantee. It is our collective responsibility to prioritize a healthy future for Grant County. Freeport should follow the responsible mining best practices and put in place a cash trust or bank letter of credit as the financial assurance. We're here to explain how to get to the point Allyson described. We want to talk about the objectives of this plan. We want to give recommendations."

"I grew up in a mining family and became a process engineer," Kuipers said. "I wanted to take the opportunity to work with interest groups to support them from the technical point of view. I've been at it for 23 years. It is evolving trying to find ways to work together. We worked on tailings and closure reclamation, as well as water management and treatment and financial assurance. We don't have a dispute with the way we're dealing with issues."

He said the purpose of the New Mexico Mining Act is responsible reclamation. "A definition of financial assurance is required for all mining operations in the U.S. and internationally. The concept is a plan in case of closure. We're about being fiscally responsible. We want to see the mining companies doing reclamation. Freeport is doing it right. We want a plan that won't let the tailings dam fail. The cost estimation process we've been working on, we want to make sure we know the site we have incorporated in the plan, as each site is closed. This is a plan for every site. We need a schedule. We are looking for when the higher cost year is taken into account."

He explained the New Mexico Mining Act was passed in 1993. The first closure closeout plan was developed in 1998. It took five years to get it finalized. The year 2008 was the last time the plan was updated. In 2013, there should have been another update. "New Mexico was a model, but we departed from the standard process. We held the technical committee. The result today is that we have reviewed the estimate and are making comments. We wanted to expedite the plan for Chino, because we want to see plans for Cobre Mine and Tyrone Mine. We want to see reasonable constant improvement. We're comfortable with the CCP (closure closeout plan). As we get closer to closure, it will continue improving. It brings New Mexico back to being the model. We came up with a middle-of-the-road plan. Our single recommendation to the company and the agencies is the long-term cost. We made assumptions for 2025, 2050 and 2075. It's the right way to do it as a constant. When the company does reductions, then they can go to the agencies to request reduction of costs."

He cited five things for future CCPs.

"The timing on this one is based on a plan for 2014-2019, which should have been done in 2013,"Kuipers said. "We are dealing with an outmoded plan. It should get updated for Chino and should redo the cost estimate next year. I think there will be only minor changes to get back to the timing to do minor differences every two years.

"Second, water discharge. The mine is now using 1,000 gallons a minute. That water should be used for aquifer recharge, municipal uses, ag uses, and others. The company owns the water. It could discharge treated water."

Third, storm water. "We see 100-year floods happening more often than every 100 years because of climate change. Whether you agree that is the cause or not, Montana is now choosing to use a 200-year event. It's about a 15 percent change. I hope the company decides to make the internal change."

Fourth, declaration of financial assurance for net present value. "We heard that water treatment might last for 100 years. The cost estimate is for 100 years. BLM is using a 500-year treatment plan. It adds small increments beyond the 100 years, so it can go on for perpetuity."

And fifth, net present value. "In trying to predict inflation or interest rates, there is a lot of difficulty in getting the numbers right. Most states are using 3 percent. We're looking at 3.5 or 4 percent."

"My last comment is on our concerns about financial assurance," Kuipers said. "We prefer cash or cash equivalent. Surety bonds are also good. But we don't recommend property or collateral. The corporate guarantee—things can change. We will work to address this. Self-guarantees are not good. We want to encourage a long-term cash trust fund as a portion of the assurance. We will work with the company to tie it into the price of copper to long-term phase out corporate guarantees."

Several members of the audience had questions.

Luis Terrazas asked if the financial assurance was already partly cash.

Kuipers said: "Yes, a significant amount is in cash and is increasing over time. We want to make sure it's adequate."

Terrazas asked if the $212 million figure was based on today's dollars.

"For the $400 million number, we applied interest and inflation rates to earn $400 million over 100 years," Kuipers said. "Then there will be cash for the next 100 years. Collateral is not preferred, and we would like to see it phased out."

Gavin Clarkson noted that GRIP had said it would like to see every ounce of copper extracted.

Sure," Siwik said. "We're not here to close out the mine. That's up to the mine operator. Our purpose is to ensure the environment and the communities are protected. Where we see risk, we're going to speak up."

Clarkson said: "Looking at the long term, what about technology advances? For instance, drones have created reductions in costs."

"We cannot predict when they will occur," Kuipers said, "so we will address it when it occurs. We don't discourage technical innovation."

"But you are wanting to make the corporation park cash where they can't use it for innovation," Clarkson said.

Kuipers said GRIP is not discouraging technical advancement, and this is not tying up significant amounts of money.

Peter Wyman said: "I heard what sounded like opinions on what would be the best practices regarding financial assurance. I'm asking with what Freeport is proposing, if it's in compliance with the law as it stands, not with what you wished had passed back in February or March with the mine bill. Given today's laws, is Freeport in compliance?"

Kuipers replied: "You're talking about laws and regulations. I'm talking about standards of operations. We've made a lot of advancements. When you hear us talk about best practices, it exists in the industry. It's been worked on for years. What we propose is consistent with best practices. It's evolving and we're getting better at it. Disagreement is going away. Everyone is recognizing best practices. We're here saying we're satisfied with this plan. There is one thing we're not agreeing on, but we won't contest it."

Siwik said there has been long-standing disagreement on the finance issue. "We believe using a corporate guarantee is risky and not best practice. Under the Mining Act, it is allowing the third-party guarantee to be a corporate guarantee. We haven't seen the financial instruments yet to see what Freeport is proposing. We are being pro-active in stating our recommendation."

A woman asked about BLM requiring the 500-year flood plan.

"The Phoenix Mine in Nevada has that plan," Kuipers said. "There are only a few major gold mines, but other mines are accepting it. What BLM is doing should be all mines. This is our guidance. It is not policy, but I haven't heard industry complaining."

Diane LeBlanc asked if he was saying that some states are requiring this, and New Mexico should step up.

"We're trying to encourage all companies to follow best practices," Kuipers replied.

Juan Jaurequi asked how anyone could figure out what the interest rate would be in 100 years.

"That's why we want it updated every five years," Kuipers said.

A man asked: "Understanding that the Mimbres Basin is fairly pristine. If there were a 100-year flood event, is there any indication of what heavy metals are getting into the Mimbres?"

Kuipers said he thinks the mine is doing a good job of preventing contamination. "I am not aware of any impact to the Mimbres."

Harry Browne said Kuipers mentioned this plan was for 2014-19. "Is the new mine not part of this plan?"

Kuipers said the Cobre Continental Mine would be a different plan. "It would have a different estimate of about $30 million more in financial assurance."

The next article will begin to address the public comments. About 30 people signed up for public comment, but as the meeting went on, many left the hearing.

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