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South Dakota’s first in-situ leach uranium mining project

Posted on: November 13th, 2015
by David Ganje

South Dakota’s first in-situ leach uranium mining project application is pending before the authority of several federal and state agencies. Many regulatory issues have not yet been decided.  I address an issue given little notice:  What is a mining permit applicant’s obligation and capacity to offer financial assurance for the operation, safety and closure of the mine if it is approved?

My concern with any large natural resource project is the risk of socializing the expense of any possible environmental cleanup as a cost paid by the taxpayer. “Superfund” is a federal environmental law under which the government supervises cleanup of contaminated mining and industrial sites. The polluter is financially responsible for the cleanup.  However about 30% of Superfund sites are orphaned sites where no responsible party is available to pay for cleanup. Without adequate financial assurance terms in place by a mine operator to pay for a possible cleanup, the taxpayer may have to step in to pay.

A mine operator’s financial capacity comes into play in the matter of abandoned mines, orphaned mines, spills, costs of water reclamation, decontamination and closure or decommissioning of a mine.  Many mine operators address financial assurance requirement by using surety bonds.  A surety bond is an insurance company’s guarantee of an applicant’s performance under a permit.  An applicant must prove adequate financial resources for reclamation, spills and final closure. Nevertheless several mining operations in the US have been closed with unresolved environmental and groundwater issues exceeding the costs of the financial assurances posted for the operation.

The approval of financial requirements is done by an intermarriage (I call it a challenging marriage) of federal and state agencies. In the case of uranium mining it will be the NRC/EPA and the SD DENR. The relevant agency establishes the financial assurance requirement based on the applicant’s disclosed information and then the agency’s own analysis of the adequacy of any proposals.

It is important that agencies have competence in determining the financial assurance of a permit holder in view of the long term risks involved in mining operations. It is up to state and federal regulators to impose financial assurance standards with effectiveness.

Do specialized environmental agencies have the staff resources to conduct adequate review of financial assurance issues? In a 2001 report on the NRC’s oversight of nuclear power plants, the federal watchdog agency General Accountability Office (GAO) concluded that the NRC (Nuclear Regulatory Commission) did not always adequately verify the owners’ financial qualifications to safely operate power plants. In 2006 the GAO criticized the EPA for not holding mining operators financially accountable for cleanup issues. In 2011 the GAO criticized the BLM in a letter to Congress for not properly considering hard rock mining operators’ financial assurances needed to cover reclamation costs. In a 2012 report on the NRC’s supervision of nuclear power plants the GOA asserted that the “NRC’s formula may not reliably estimate adequate decommissioning costs.” In this report the GOA also stated, “NRC officials told us that their staff resources are limited and that they lack the financial expertise to evaluate compliance with investment restrictions. . . However, weaknesses remain in NRC’s oversight of decommissioning funds that could leave the public and environment vulnerable.”  And in a 2012 GOA report on uranium mining the GAO expressed concern over the BLM and NRC’s ability to determine the costs of reclamation.

The jurisdictional boundaries between the NRC as the lead agency and the state of South Dakota  over specific regulatory issues in the pending Dewey-Burdock in-situ uranium mining applications has not yet been formalized.  Both have authority over various financial assurance issues.  Because these issues are significant but not easily resolved between agencies we have the ‘challenging marriage’ to which I earlier referred.  South Dakota for example has legal authority to require a performance or damage bond, and can require as a condition of a permit financial assurances guaranteeing performance of cleanups. The NRC and BLM also both have financial assurance requirements for mines.

What is a remedy?  I suggest the following:  The agency with designated authority over an applicant’s financial assurance requirements shall evaluate in writing all financial assurance documentation using an agency-designated non-party (Consultant) with recognized experience in the areas of financial assurance. This designation shall be a condition of any permit or license. The costs incurred by the agency in contracting with the Consultant shall be paid by the applicant.

David Ganje of Ganje Law Offices in Rapid City practices in the area of natural resources, environmental and commercial law.