CHAPTER 6 WATER RIGHTS ISSUES IN THE IN SITU LEACH MINING OF URANIUM IN NEW MEXICO

• Jurisdiction: United States

Uranium Exploration and Development
(Apr 2006)
CHAPTER 6
WATER RIGHTS ISSUES IN THE IN SITU LEACH MINING OF URANIUM IN NEW MEXICO
Tim de Young
Modrall, Sperling, Roehl, Harris and Sisk, P.A.
Albuquerque, New Mexico
Jay F. Stein
Stein & Brockman
Santa Fe, New Mexico

TIM DE YOUNG

Tim De Young is a shareholder and director with Modrall, Sperling, Roehl, Harris and Sisk, P.A. in Albuquerque, New Mexico. Mr. De Young earned a J.D. from the University of New Mexico and a Ph.D. in Government from the Claremont Graduate School. His practice areas include water rights permitting, real estate due diligence, water dispute resolution through mediation and arbitration, and complex litigation. Tim serve as the New Mexico Reporter for the Rocky Mountain Mineral Law Institute's Water Law Newsletter and has published several articles and papers, primarily in the area of water law and policy.

JAY STEIN

Jay Stein is a shareholder with Stein & Brockmann, P.A. in Santa Fe, New Mexico. He earned a J.D. from the University of New Mexico. Mr. Stein practices exclusively in the field of water law, and is a Board certified specialist in water law in New Mexico. He is a past chair of the ABA Water Resource Committee and serves on the Council for the Section of Environment, Energy and Resources of the American Bar Association.

Although several studies of the technical and regulatory aspects of ISL can be found, relatively little attention has been paid to the unique challenges and legal issues pertaining to the use and protection of water resources both during and after ISL mining. To address this problem, this paper presents a case study of the development of an ISL project in New Mexico with particular attention paid to water rights permitting. In addition to the issues raised about water rights requirements for ISL, the case study demonstrates the relatively unusual jurisdictional issues that can arise when siting an ISL project in close proximity to the Navajo Indian Reservation.

I. INTRODUCTION

In comparison to conventional uranium mining techniques, in situ leach extraction ("ISL") has the potential to be the safest and most environmentally friendly method of uranium production. Despite the economic and environmental advantages of ISL, obtaining all necessary permits is a relatively long and arduous process, typically taking years, even where permit and license applications are uncontested by the agencies and no significant public opposition arises.¹ Water issues can be especially difficult.

ISL projects require acquisition of an adequate supply of water rights as well as necessary permits and approvals from state water quantity agencies. ISL consumes little water during the production phase; most water consumption is during restoration. Consequently, the amount of water rights needed for a project can be difficult to determine especially where water rights agencies are unaccustomed to the ISL process. In addition, necessary permits are required to ensure water quality protection. Obtaining water-related permits can be especially difficult in arid and semi-arid regions where competition for relative finite supplies of groundwater is fierce and water often assumes a symbolic importance that engenders stiff opposition. The potential for groundwater pollution and the perception that the aquifer cannot be restored to prior conditions also can create opposition to ISL projects by both water quality regulators and those members of the environmental community most concerned about safe drinking water. Because recent and projected ISL projects are sited

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primarily in the semi-arid regions of New Mexico, Wyoming, Texas, Nebraska, Colorado, and Utah, water issues often become the most significant challenge faced by the industry.

II. THE BACKGROUND FOR THE DEVELOPMENT OF IN SITU LEACH PROCESS MINING IN NEW MEXICO

Like ISL projects in other regions, New Mexico's ISL projects are being developed in an area where uranium reserves were identified long ago, and where substantial conventional mining has occurred: the Grants Uranium Belt in western New Mexico. The Grants Uranium Belt produced about 348 million pounds of uranium concentrates from 1958 until the early 1990's. This was approximately 48% of domestic production. Estimates of remaining resources in New Mexico alone exceed 500 million pounds.²

The history of prior uranium mining can become a two-edged sword. On the one hand, developing ISL projects can benefit from prior exploratory studies and available monitoring data, thereby shortening the permitting process. Also, necessary properties often have already been acquired or leased which can obviate or reduce the time required for property acquisition.

On the other hand, environmental, health, and safety problems arising from prior mining may create a public relations hangover that is hard to remedy. That is, opponents of prior mining will tend to oppose ISL projects out of principle based on their distrust of the industry, rather than on problems associated with the ISL process. Less obviously, opposition can arise from water rights owners who fear that available supplies will decrease in both quantity and quality. An additional set of problems exists in New Mexico because a portion of the Grants Uranium Belt underlies property in what is contended to be "Indian Country," that is, lands not technically within the boundaries of the Navajo Indian Reservation but adjacent to the Reservation and largely inhabited by Indian allottees.

A substantial amount of water rights were developed in connection with the prior conventional mining of uranium which primarily occurred in the 1950s to 1970s. Consequently, ISL projects can be, and are, developed using existing water rights, rather than upon new appropriations of water. In this particular case study, the United Nuclear Corporation ("UNC") had mined and processed uranium at an underground mine called the Old Church Rock Mine near Gallup, New Mexico. Water rights developed by UNC in connection with this mine were to be used by another company, Hydro Resources Incorporated ("HRI"), in an ISL project that would require the diversion of water from 750 adjacent wells, re-injection of the water after uranium removal, then repetition of the process (hereinafter referred to as "the HRI Project".) To fully understand the water rights issues involved, the following section provides a summary of applicable New Mexico water law.³

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III. A PRIMER ON NEW MEXICO WATER LAW

Under New Mexico law, new water rights are initiated, or existing water rights are changed in point of diversion, or in purpose or place of use, under the administrative authority of the Office of the State Engineer ("State Engineer"). An important exception is recognized for groundwater rights initiated prior to the creation of an underground water basin by the State Engineer. In such cases, an appropriator who lawfully began developing an underground water right and completed it with reasonable diligence under the circumstances acquires a water right with a priority date relating back to the date of initiation.⁴ Pre-basin groundwater rights Declarations may be recorded with the State Engineer.⁵ The basis for State Engineer jurisdiction over groundwater is through declaration of a basin "having reasonably ascertainable boundaries ...."⁶

As part of the permitting process for an ISL project using existing declared or permitted water rights, a State Engineer water rights transfer permit is required.⁷ The applicable statute provides that "[t]he owner of a water right may change the location of his well or change the use of the water, but only upon application to the state engineer and upon showing that the change will not impair existing rights and will not be contrary to the conservation of water within the state and will not be detrimental to the public welfare of the state." Public notice and opportunity for protest is required: "[the] application may be granted only after such advertisement and hearing as are prescribed in the case of original applications."⁸ With respect to standing to protest, objections or protests must be filed within a prescribed time period by existing water rights owners and/or by parties who allege that granting the permit will be contrary to the conservation of water within the state or detrimental to the public welfare of the state "showing that the objector will be substantially and specifically affected by the granting of the application...."⁹

Assuming that settlement of protests is not accomplished, protested applications are set for hearing before the New Mexico State Engineer or his designated Hearing Examiner.¹⁰ The applicable statutory law requires that the Hearing Examiner make reports and recommendations to the State Engineer who "shall base his decision rendered in any matter heard by an examiner upon the record made by or under the supervision of the examiner in connection with such proceeding and the report and recommendation of the examiner...."¹¹

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Parties dissatisfied with the decision of the State Engineer are granted the right of appeal.¹² Appeal is taken to the District Court "of the county in which the work or point of desired appropriation is situated." Proceedings upon appeal to the District Court "shall be de novo as cases originally docketed in the District Court."¹³ The statute provides that "[e]vidence taken in a hearing before the State Engineer may be considered as original evidence subject to legal objection, the same as if the evidence was originally offered in the District Court."¹⁴ Further appeal is taken as a matter of right to the New Mexico Court of Appeals.

IV. OBTAINING WATER RIGHTS PERMITS FOR THE HRI PROJECT

A. The First Attempt

In early 1990, UNC filed a Declaration claiming that prior to the creation of the Gallup Underground Water Basin, it had appropriated and beneficially used 650 acre-feet...