CHAPTER 16 MINING PERMITTING AND COMPLIANCE
| Jurisdiction | United States |
(Apr 2010)
MINING PERMITTING AND COMPLIANCE
Parsons Behle & Latimer
Reno, Nevada
JIM BUTLER is a shareholder in the Environmental, Energy and Natural Resources department and practices in the natural resources and environmental areas with Parsons Behle & Latimer in Reno. Before joining Parsons Behle & Latimer, he worked for the Utah State Energy Office, the Utah State Planning Coordinator's Office and from 1981 to 1985, served as a senior policy assistant to Utah Governor Scott M. Matheson for natural resources. Jim also served as a clerk to Judge Stephen H. Anderson of the United States Court of Appeals for the 10th Circuit from September, 1987 to October, 1988. In law school, Jim received an Edward Clyde Fellowship, a Marriner S. Eccles Fellowship and was elected to Order of the Coif. He also served as editor-in-chief for the Utah Law Review.
Introduction
Due diligence in mineral transactions includes an analysis of permitting and compliance for two reasons. First, minerals in the ground are only valuable if they can be removed and refined at a profit. Assessing value in a mineral transaction includes an analysis of whether the acquired property will meet the buyer's expectations regarding present and future uses. Use of mineral property (including exploration or mineral production) is subject to a long list of local, state and federal regulatory requirements which are typically set forth in environmental permits. A potential buyer needs to be satisfied that all permits and approvals necessary to realize a property's potential value are either in place or may be timely obtained. Second, a buyer needs to be fully apprised of the scope of potential liabilities that may be inherited if the transaction proceeds. Noncompliance with permit terms can be a source of significant liability through compliance costs or changes in operations.
This brief paper correlates with a mine permitting and compliance checklist prepared for this conference. The checklist identifies those major categories of diligence and the key questions that should be addressed by a potential buyer's environmental counsel when assisting in due diligence. The checklist targets only those issues associated with permitting and compliance. For example, potential liabilities associated with historic contamination of acquired property or that might arise from contracts or agreements are the subject of different checklists and papers. In addition, an assessment of potential closure costs for acquired properties--and whether the seller has adequately accounted for those costs--is outside the scope of this checklist and paper.
1.0 Buyer objectives and materiality
The starting point for this aspect of due diligence is an analysis of the buyer's objectives for each property in the potential acquisition. In the simplest transaction, a
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buyer may seek to acquire a single property and continue to operate it for current uses and at current levels, or a lender may be financing continued operations of a particular property. But more complex transactions may include a collection of properties and the buyer's interest, plan and perceived value may be different for each of those properties. For example, the key value to the transaction (from the buyer's perspective) may be expanded mineral production from a single property, and the other properties may be less important--in fact, some may be targeted for closure or sale. Thus, the starting point for any diligence related to permitting is to determine the buyer's objective for each property. Adequacy of current permitting (or issues associated with future permitting) then can be measured against that yardstick. Naturally, where the buyer's intentions require changes in permitting to allow new or expanded operations, the focus of the diligence exercise shifts from current compliance to the time and cost associated with permitting those new uses.
2.0 Permit requirements for target properties
For those properties where the buyer expects to continue current operations, the first step in diligence is to compile a list (and file) of applicable permits. For exploration properties, the list may be short--a plan of operations and reclamation plan for exploration on federal lands or a reclamation plan for exploration regulated under state law. For operating properties, permits will typically include state and federal permits governing potential discharges to air and water, construction and operating permits for processing facilities, storage permits for chemicals, fuels, explosives and other regulated materials, and a plan of operations and reclamation plan which describe construction, operation, reclamation and closure of mine facilities (pits, waste rock facilities, leach pads, etc.). Depending upon the constraints imposed by the specific agreement (or lack of agreement) between buyer and seller, the most efficient sources for specific permitting information are the operator's environmental department and the permitting agency's files.
The buyer's counsel should obtain and review permits and compare those permits to applicable regulatory requirements in order to confirm that the property is properly permitted. For operating properties, plans of operations (approved by the Bureau of Land Management or Forest Service for operations on federal lands) and reclamation plans (approved by federal or state agencies) should be included as "permits" and evaluated together with financial assurance. Plans of operation may include monitoring and reporting requirements in addition to those required by environmental permits. The diligence review should include acquisition and review of those reports.
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Where target properties are currently in the permitting process for operation or expansion, the diligence effort should be expanded to include pending permit applications and supporting documents and the diligence report should include a schedule and analysis of pending permit applications and the time frame for expected decisions on the permits. Where pending permit applications are subject to a "public process" that includes public notice and comment and/or the opportunity for third parties to challenge or appeal permitting decisions, the diligence evaluation and report should include an analysis of that process, including time frames and potential impacts on operations as well as any information available that might suggest public concern or opposition.
3.0 Permit compliance
Once permits are identified, compliance...
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