The 53rd Annual Rocky Mountain Mineral Law Institute gathered in Vancouver, July 19 to 21, 2007 to discuss the laws that affect mines, mining, and the oil & gas industry. Here is a brief report.


Climate Change

David Victor, a professor of law at Stanford University Law School and the director of the program on energy and sustainable development spoke on the implications of global warming on the laws that govern (or should govern) the energy sector. His thesis is that global warming will result in “a radical transformation in the energy industry and that with that transformation there will be radical changes in the practice of energy law.” He said that because it is easier and politically more palatable to reduce carbon emissions from coal-powered power plants, they will bear the brunt of new laws. Because no government has a clear idea or plan to deal with emissions control or the sequestration of carbon dioxide, new laws will have to be formulated, litigated, and tested. Regarding carbon sequestration alone, these new laws will cover everything from the issue of who regulates sequestration, through who owns the pore spaces in geologic units suitable for sequestration, to who is responsible in the long term for the maintenance and care of sequestered carbon dioxide. And those are the easy questions. You will have to read his paper for the hard questions.


Political Risk

All the seats were full when Patrick J. Garver, Executive Vice President and General Council, Barrick Gold Corporation, Toronto talked about dealing with political risk in the minerals industry. He noted that the three big political risks are still with us: expropriation; currency restrictions; and terrorism that the state cannot control. But there are other, new political risks that threaten to eclipse the traditional three. These include:

1) Devolution of power from central governments to local authorities. The four provinces of Argentina that have effectively banned gold mining are an example. This devolution of power is associated with weaker central governments, and easier access to the open world of information. As we see in Scotland and Wales, this trend is not confined to places where there are mines and resources to be mined.

2) The rise of parallel economies. Criminal interests making money from drugs, guns, prostitution, and human trafficking, are like the mafia of old, seeking to put their money into more “legitimate” enterprises. These criminals can and do subvert politicians, judges, and local authorities and destabilize the entire structure of governments. He noted that you know this is happening whenever you read of the revocation of operating licenses, alleged environmental transgressions leading to a shut down, taking on local partners, and new rules for bids favoring the only local bidder.

3) State sponsored companies. From Russia, China, and Venezuela we see state sponsored companies branching out into other countries offering financial terms and other benefits no private company can match.

4) The increasing influence of NGO. He noted that with the loss trust of politicians which seems to be endemic to most societies, NGO are coming to represent a voice of reason and credibility. He noted that many NGOs are sophisticated and well financed and many locals turn to them as independent voices of reason.

5) The declining influence of international financing institutions. He noted that the World Bank, for example is tarnished, and is not longer the only source of finance.


Environmental Law

Ann Klee and Chet Thompson of Crowell & Moring LLP discussed the thorny question of whether U.S. environmental laws should apply extra-territorially. The case history that emphasizes the relevance of this question to mining companies is the Teck Cominco case. For many years, Teck Cominco had disposed of sludge into the Canadian headwaters of the Columbia River–in full accord with Canadian law. Prompted by two Indian tribes and the State of Washington who believe they are detrimentally affected by the sludge which has washed down the river into the United States for over 150 river miles, the U.S. EPA sought to force Teck Cominco to clean up the mess in terms of CERCLA. The story is long and involved, but suffice it to say that right now, in terms of a contractual agreement (not derived from CERCLA), the mining company has embarked on a $20 million RI/FS that could well lead to a $2 billion cleanup.

The presenters did not say as much, but I conclude on the basis of what they did say, that they do not believe U.S. environmental law does or should apply outside the U.S. They appear to believe that when civilized nations like Canada and the U.S. deal with each other over pollution issues, it is probably better to invoke negotiations and existing international agreements like NAFTA. The point is ultimately that if the U.S. succeeds in imposing its environmental laws on other countries, those countries may try to impose their laws on us; not a nice thought. Which must lead one to conclude that Canadian mining companies should obey the environmental laws of foreign countries where they operate, but should not be held accountable for a failure to follow Canadian legal requirements in spirit or fact.


Confidentiality Agreements

Fred Pletcher, an attorney with Borden Ladner Gervais LLP, and Anthony Zoobkoff, Senior Council for Teck Cominco, made the best presentation I have ever seen at a conference. The topic could be dry and dull: confidentiality agreements in the mining industry. But they got the audience up and interested with horror stories of confidentiality agreements gone wrong and a risqué joke about Paris Hilton and the prison priest. The joke is confidential so I cannot repeat it. But the substance of the law is well set out in their paper and the story they told worth repeating on this blog.

It is a true story, documented in the court case Aquiline V. IMA Exploration. In brief, IMA's geologist was looking over the information about a deposit in Argentina as part of a review to decide if IMA should get involved with the then owners of a property. IMA had signed a Confidentiality Agreement before looking at the data. The inquisitive geologist looked around the office and saw and got information about resources in the area surrounding the deposit, and as he and IMA contend outside the area covered in the Confidentiality Agreement. To be precise, the geologist noticed on a map hanging on the back of a door a bunch of silver anomalies about 40 kilometer away from the deposit in question and the subject, so they thought, of the Confidentiality Agreement.

The ownership of the deposit that was unquestionably the subject of the Confidentiality Agreement changed hands. IMA, on the basis of the geologist's observations, staked claims to the silver deposit causing the anomalies and opened a mine. Aquiline Resources Inc, now the owners of the data that the geologist had observed, filed suite against IMA in British Columbia. The court issued a declaration that IMA hold the Navidad Project (the new silver mine) in trust for Minera--thereby effectively stripping IMA of ownership and awarding the mine to Minera. On the day of the decision, IMAs shares dropped, loosing about $130 million in market capitalization. Minera's shares went up in value by $135 million. (The five million dollar difference being legal fees?)

IMA appealed and lost. IMA has announced its intention of appealing to the Supreme Court of Canada, so the story continues. The lesson to be learnt, at least this is what I heard from the presentation, it to get the terms of your Confidentiality Agreements right before you look at somebody else's mining data, or before you let anybody look at your mining data. You could loose your mine, or better still get somebody else’s mine.


Water

Arlene Kwasniak of the University of Calgary surveyed water rights law in the west of the United States and Canada; she reviewed the impending shortages of water in these regions; and she noted that there are innovative technical and engineering ways to squeeze more water out of limited supplies. The problem she told us is that, at least in Alberta, where there is probably the greatest need for more water for mining than is available, the law is not up to the task. She proposed a whole-scale revision of Alberta water rights law, much like was done recently in Queensland to begin to address the impending water shortages that will impede profitable mining.

Joan Drake of Mondrall et al. in Albuquerque, NM gave an engaging presentation on when a mine needs a 404 permit. At its simplest that is when you get involved with navigable waters of the United States. But does a mine that dumps ash in a remote arroyo in the far desert of New Mexico, hundreds of miles from the Rio Grande have to worry about the fact that no boat could float in the arroyo or the Rio Grande? As always in law, it is not that simple, and she presented with good humor a plethora of conflicting case law, inane Supreme Court decisions, agency formulations aimed at keeping power over polluters, and timid permit writers fearful of misinterpreting vague rules and worst court judgments. Seems there is a 180 day comment period in progress to say what you think of the Corp of Engineer's most recent attempt to bring clarity to this fascinating mess. Take a look and comment pleases--seems it will be to the benefit of the mining industry to bring some sanity and clarity to this mess.


Land Use

Mark Squillace is Professor of Law at the University of Colorado School of Law, Boulder, Colorado. In a masterful summary of recent developments in the law as it affects mining and public lands that he made this morning at the Rocky Mountain Mineral Law Institute meeting in Vancouver, he gave somber warnings of the implications of a case not involving mining to the mining industry.

The case is Navajo Nation v. U.S. Forest Service. Four tribes sued the Forest Service contending that the Forest Service’s decision to allow a ski resort to use reclaimed sewage water for snow making “burdened their exercise of religion by contaminating water and soils.” On the basis of the Religious Freedom Restoration Act of 1993, the court agreed. And it found the project’s EIS in violation of NEPA because it did not contain a “reasonably thorough discussion” of the negative health effects of ingesting snow made of treated wastewater.

As Professor Squillace puts it: “While this case only marginally concerns mining and public land law, its implications for those dealing with natural resources issues in Indian country could be profound.”

He notes the story of the Glamis mine in California. In 2000, the Interior Department denied a permit to mine, finding that the proposed mine would cause undue degradation to public land and substantial irreparable harm to the tribal lands of the Quechan Tribe. Following the 2000 election, the Interior Department reversed its decision and reopened the permit application process. A law suit over that decision resulted in a remand to the Department of the Interior. We do not know the outcome as yet, but as Professor Squillace notes, if the tribe invokes the Religious Freedom Restoration Act they would have a pretty powerful tool to stop the mine in light of the finding in the Navajo case.