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Mining Lawyer: SB 108, A first step in solving the interim management plan problem (Part 3)

by

Kerry Shapiro

This three-part blog series on California SB 108, a bill which changes provisions in the Surface Mining and Reclamation Act of 1975 (SMARA) pertaining to “idle” mines, is based on a paper I first presented at the CalCIMA Conference in October 2011. If you have not yet read part one which gives background on the Interim Management Plan problem, or part two which discusses what SB 108 does and who it affects, you will want read those first.

SB 108: Unresolved Problems and Ideas to Address Them

  1. Application to Active Mines. It is arguably inappropriate to designate as “idle” an operation that is generating returns that seem adequate to support continuing operation and defray ultimate reclamation costs. One solution might be to establish a minimum annual quantity of production as a so-called “safe harbor” to qualify a mine as “active” without regard to changes in historical production level. After all, why should a mine be classified as “idle” simply because it now produces less than it used to? Future legislation could establish a minimum quantity of annual production as a “safe harbor” from classifications of “idle” or “abandoned.”

  1. Lack of Definition of Production. Ambiguity in the definition of “mineral production” raises a number of issues, including:
  • Does the processing of ore from a stockpile constitute production?
  • Does the processing of ore from an off-site source constitute production?
  • Does stripped overburden constitute production?
  • Does excavation and processing for future sale constitute production in the absence of current sales?
  • Is production measured by the amount of material excavated or product sold, e.g., if 50,000 tons or rock are excavated, and 25,000 tons of sized material are sold from it, how much “production” was there?

By addressing these existing ambiguities, a clear definition in future legislation or regulation may provide greater clarity, practicality, and fairness to the determination of “idle.”

  1. Idle Notwithstanding Substantial Expenditure for Operations. “Idleness” seems inappropriate where the operator continues to invest substantial money for capital expenditures or operating costs because such investment is the best gauge of whether the operation is likely to continue. Future legislation that factors minimum expenditures into the equation of “idle” or “active” could vastly improve the current, rigid, mathematical formula for mineral “production.”
  2. Rigid Mathematical Approach. It seems that exclusive reliance on any one mathematical formula is too inflexible. There are many reasons why matters that are really beyond the control of the operator may produce an involuntary curtailment of production that sheds little or no light on the future of the mine or the timing of ultimate reclamation, including, for example, depressed economic conditions; business or title disputes; lack of, or litigation over, entitlements; labor disputes; and Acts of God. Future legislation could address this through additional provisions that permit the operator to demonstrate on a case-by-case basis to the lead agency that curtailment is the result of conditions beyond the operator’s control that are not appropriate for a determination of “idle” or “abandoned.”
  3. Increases in Production Could Cause “idleness.” Short-term spikes or increases in production should not be the cause of “idleness” or “abandonment.” In fact, spikes in production demonstrate that a mine is still viable and not in need of special treatment in the reclamation process. One way to smooth out the inequity of using short-term increases would be to adopt rolling production averages (as opposed to peaks) of 5 or 10 year periods as the basis for any determinations of idleness based on curtailment of production.
  4. Due Process Problems. B 108 does not address a key problem under the current law, namely, that classification of operations as “idle,” and then, absent filing of a timely IMP, as “abandoned,” continues to be self-executing in that it occurs without any notice to the operator, and does not allow the operator a remedy for being unaware that the operation became “idle” and for having failed to file an IMP in a timely manner. Future legislation or regulation should require such notice and provide operators with an opportunity to cure, particularly where classifications of “idle” or “abandoned” threaten an injustice.

[Note: putting aside potential future legislative changes, better application of current law could minimize potential due process problems. For example, SMARA Section 2770(c) requires OMR to notify operators of deficiencies in a SMARA annual report within 90 days of receipt. If OMR provided such notice to operators incorrectly filing an annual report as active and requested the report be corrected to identify the operation as idle, many future abandonment problems could be avoided.]

kerryshapirocropped.jpgKerry Shapiro has a comprehensive government, land use, environmental, and natural resources practice, with extensive experience working with NEPA, CEQA, the Endangered Species Acts, the Mining Law of 1872, FLPMA, the Mineral Materials Act, SMARA, and the Clean Water Act, in relation to various entitlements and public land matters and related litigation, at federal, state, and local levels. Kerry has also specialized in representing the construction and building materials industry on mineral extraction and land development projects for over 20 years, and has secured entitlements for the largest federally-approved sand and gravel project in the United States, obtained the first-ever vested rights confirmation from the State of California for the largest construction aggregate deposit in California, and successfully represented clients before the Ninth Circuit Court of Appeals on federal endangered species and mining law matters. Contact Kerry at KShapiro@jmbm.com or 415.398.8080.