March 21, 2008

 

To: Ms. Beverley Everson, Geologist

Coronado Forest

300 W. Congress St.

Tucson, AZ 85701

 

From: Cheryl Rennie

HC1 Box 1055

Sonoita, AZ 85637

 

 

 

Dear Ms. Everson:

I am submitting the following concerns as part of the public comment for the EIS analysis for the Rosemont Copper Project:

Inadequate Bonding Requirements For Reclamation

History teaches us not only that things can go bad with rock mining companies, but when they do, the damage cannot be mitigated and the costs can be enormous. The under bonding of current operations is a serious problem, because modern mines (post 1976) regularly go bankrupt. In the past twenty years, at least 15 “state of the art” mines have gone bankrupt leaving taxpayers with

massive environmental destruction and potential cleanup liability exceeding $12 Billion according to a 2003 report. A list of these modern mines and 5 of the case studies are attached as an addendum to this letter.

Remedy:  Expand the bonding requirement along with penalties if reclamation is not done concurrently. Specify how or how much a mine should be cleaned up. In addition, insert an inflation adjustment clause in the bond letter of credit. Get regulatory authority to issue administrative penalties for violations of their regulatory requirements, subject to due process, and clear procedures for referring activities to other federal and state agencies for enforcement.

 

Regulatory Gaps

There have been numerous environmental regulations put on the hard-rock mining industry since the Mining Act of 1872, one of them being the Clean Water Act. But according to testimony of John Leahy, distinguished professor of law at University of California before the Senate Committee on Energy and Natural Resources last September, the Clean Water Act does not protect ground water. It is generally designed to “protect, sort of, industrial waste coming out of pipes. Mines don’t pose those kind of problems. They need, in some respects, some clean water act permits, but the quantity impacts of hard-rock mining are not addressed under the existing environmental laws.” He goes on to say that the Mining Law itself is utterly silent on environmental regulations and that the newer laws do not comprehensively address the myriad of environmental threats posed by hard rock mining such as the depletion of ground water, pollution, and disruption of wildlife habitat. In light of the proposed Rosemont Copper Project, this is particularly disturbing since according to Supervisor Ray Carroll in his letter to Congress, the federal land that Rosemont wants to “develop” is at the headwaters of Tucson’s water supply. For example, Heavy rains and flooding such as we received as recently as 1993 in the Rosemont Project area would have washed out the tailings impoundment and polluted the whole area  with toxic chemicals.

Remedy: Do not allow these mining activities to take place on NFS land that threaten major water supplies. Consider impacts of major flooding  events.

 

Exploitation Of Public Property Without A Fair Return To The Taxpayer

According  testimony before the Senate Committee on Energy and Natural Resources Sept. 27,2007, “there is no payment, no royalty, no rental, no kind of direct financial return to the Treasury from hard rock mining on public lands. It is a glaring exception, because we are all charged to camp on public lands, cattle ranchers pay grazing fees, energy companies, timber companies, just about everybody pays something to use and exploit public lands. Usually something like fair market value. The hard rock mining industry is one very big exception. The Federal lands of the United States are practically the only place on earth that this industry operates without making a direct payment to the owners of the minerals. If they operate on State lands they pay a royalty, Federal lands they do not. The question of whether a royalty should be imposed on the hard rock mining industry has been settled since at least 1995,when the mining industry supported legislation contained in the Budget Reconciliation Act which would have imposed a 5% net proceeds royalty on new claims. The debate now focuses almost entirely on the structure of the royalty.

The statement of Rosemont Mine executives that the mine will produce a total of $1.8 billion of income taxes during the project’s 20 year life is speculative and obscures the real issue. The public is receiving no direct compensation for the taking of valuable resources for private gain. This is a ridiculous argument. All profitable companies pay federal income taxes. If one were to consistently apply  the Rosemont Mine Executive’s example, they should also be getting all of their raw material for free! How absurd.

Remedy: Apply a fair market value payment for the leasing of Forest Service Land based on the value of minerals($500 Million last April) extracted regardless if  the actual pit is located on private or NFS land, it is all part of the same project. The project-related activities located on NFS land are a necessary and integral part of the overall Rosemont Copper Project.

 United States v. Locke, 471 U.S. 84,104-5 (1985):opinion makes clear that the government retains the right to require a payment (whether labeled a tax, royalty, fee, or something else) from a holder of a mining claim on federal lands, even one with discovery and a property right as part of its continuing redistribution of the benefits and burdens of economic life. In general, the Supreme Court has never given credence to arguments that federal taxes and fees constitute

takings of private property. See, Cole v. La Grange, 113 U.S. 1.8 (1885)”the taking of property by taxation requires no other compensation than the taxpayer receives in being protected by the government to the support of which he contributes.”

                     

Financial  Feasability

The market for metals began to rebound in 2002 and 2003, based almost exclusively on the demand from China. Copper consumption in China has more than tripled since 1998 and it is now the biggest consumer of copper in the world. Most agree that any prolonged downturn in the Chinese economy would dramatically impact metal prices and halt growth in the industry. The extreme volatility in the metals market in general,  combined with inflation and  the concentration of one large user makes the economic feasability of The Rosemont Copper Project extremely speculative. Even though the project used conservative estimates of the long term price of copper in doing its projections, one only has to look at a very recent example of a copper mining project that appeared economical two years ago that  may no longer be viable. Case in point: Novagold’s(NG/TSX) Galore Creek project in British Columbia. Because of inflation, costs estimated at $2.5 billion a year or so ago escalated to more than $4 billion. The cost overruns have put the project on hold despite high copper and gold prices. Novagold is a huge corporation compared to Augusta Resources that owns Rosemont Mine and has years of successful experience and expertise in mining. If Novagold underestimated costs of water diversion, tailing banks, labor and inflation on its project, it is certainly reasonable to question the reality of Rosemont’s assumptions.

In addition, Asarco Mines currently has a lawsuit pending against Augusta Resources for not paying fair market value for the Rosemont Property. Augusta states in its financial report that the lawsuit is without merit, but that will be determined by the court. In any event, this lawsuit presents yet another financial uncertainty for the Rosemont Project in terms of unknown legal costs that could undermine the company’s profitability.

Remedy: Double check Rosemont’s financial assumptions with special consideration given to inflation and the exchange rates of the US$ and C$ which could adversely impact their financial statements as Augusta Resources is a Canadian company and financial reports are in Canadian $.Get an unbiased and fair assessment of Rosemont’s standing and potential legal liability as Defendant in the Asarco lawsuit. Incorporate those estimates in the financial feasability study.

 

Economic Impact

Rosemont Executives claim that the copper from this project represents 5-10% of the United States copper supply and to mine the copper will make us less reliant on foreign sources. That is a misleading statement unless they have forward sales contracts to U.S. companies or plan to hold 5-10% in reserve. No such commitments have been made available to the public.

Secondly, Arizona alone has 100000 abandoned mines with the legacy of safety hazards, pollution and disrupted landscapes that will cost billions of dollars to repair. Pima County Manager, Huckelberry testified that more than 35000 acres, or twice the size of Tucson Mountain Park have already been, or are being mined in Pima County and he knows of no plans by any mine to restore the sites to the natural landscape. Furthermore, Augusta Resources has no proven track record in  mine reclamation.  It is not in the interests of the citizens of Arizona and Pima County to be financially burdened with additional negative economic impact from hard rock mining.

Finally, The USDA Forest Service Strategic Plan: FY 2007-2012 states“Open space provides many environmental, social, and economic benefits to rural and urban communities..... These green spaces elevate home values and generate jobs and economic vitality. Current population growth trends show a steady loss of these vital open spaces to developed uses.” Considering  Pima County’s  population growth and the fact that we already have significant acreage in the county leased for mining, I respectfully request that the U.S. Forest Service in keeping with the goals of your strategic plan deny the leasing of Federal Land for the Rosemont  Copper Project.