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Montana Tunnels' permit suspended; next steps unclear

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In this photo taken from an airplane flying over Montana Tunnels' pit last July, the fractures outside of the pit are visible in the lower part of the photo. DEQ has pulled Montana Tunnels' permit to operate and is re-evaluating the mine's bond.

A once-profitable gold, silver, lead, and zinc mine in Jefferson County has dug itself deeper into a pit of trouble.

Montana Tunnels stopped shoveling ore 25 miles south of Helena in 2008, but its permit to operate was suspended last week.

The Montana Department of Environmental Quality has not yet said if the next step is forfeiture of the permit, but the mine is in uncharted territory, say various officials.

The former Pegasus Gold Corp. mine gained attention last summer when environmentalists raised alarm bells because of unaddressed serious environmental degradation. DEQ began taking action and, after nearly a year of back and forth with the owner, suspended the permit Monday. Montana Tunnels can still monitor and maintain the site and do reclamation, said DEQ spokesperson Kristi Ponozzo by email.

However, the mine has not engaged in reclamation work since around 2010, said the mine's owner, Denver-based Patrick Imeson.

The book is not yet closed on the mine’s reclamation bond. Now that DEQ has pulled the operating permit, the agency is in the process of recalculating the $34.9 million bond it just increased last year.

DEQ is expected to increase the bond because the state did not include the most dire of the environmental issues in last year's bond increase — Clancy Creek, which is in danger of disappearing into the mine’s pit.

But now that the mine has lost its operating permit, DEQ is working on a new reckoning for the bond that will include repairing Clancy Creek as well as taking care of a shop building that is unstable in addition to accounting for the presence of fleet vehicles, miscellaneous barrels, and operations-related equipment that are on the site.

That new bond recalculation could take several months, Ponozzo said in email.

What’s going on?

The owner, Patrick Imeson, believes he can resolve the issues and return to mining in Jefferson County.

But this isn’t the first time he’s said that.

Imeson, managing director of Denver-based Black Diamond Holdings, applied Tuesday for a second extension on his permit to operate. But DEQ said Wednesday morning it denied the request.

DEQ gave Imeson one 30-day extension last month to keep the mine's operating permit. This past Monday was the deadline on that extension.

Imeson says he can get Montana Tunnels up and running again, adding that he is “still moving forward with our financing plan.” He could not provide a timeline of how soon he expects to come up with the funds to update the bond and resume mining. But Imeson told The Montana Standard last July that he then anticipated securing new financing by October or November of last year.

Imeson has also faced troubles with the Securities Exchange Commission in the past and been sued by his lawyer for disputed legal claims.

The bond Montana Tunnels put up years ago is around $19 million, but only about $16 million of that is in cash. The additional $3 million DEQ holds for the bond is a piece of land.

The bond is the state’s insurance to enable DEQ to begin reclaiming the mine if the company goes bankrupt.

Since the company is not in bankruptcy but the mine’s permit is suspended and the current bond is insufficient, the mine is in an unusual situation, say various officials.

In addition to these problems, Montana Tunnels owes Jefferson County back taxes in the neighborhood of $5.5 million. The mine was trying to resolve at least $50,000 on its tax liability last year by giving a building in Jefferson City in lieu of payment to the county. But that deal fell through because the building had liens against it, said Leonard Wortman, Jefferson County commissioner.

Wortman said the permit suspension doesn't change anything for the county, but the county may seek outside legal advice and "see where we go from here."

Beyond the new bond recalculation, the agencies are also working internally to identify site hazards and restrict access, said Dave Williams, Bureau of Land Management geologist. BLM is involved because some of the pit is located on BLM land. Williams said BLM will now notify Montana Tunnels that since it is no longer in compliance with state law, the mining company is also out of compliance with federal regulations.

Another of the environmentalists' concerns last summer was that it is relatively easy to trespass on the property north of the pit, and since no one knows when the pit wall might cave in, the situation poses a danger.

Can the situation be saved?

Various agency and mining officials estimated last year that to get shovels moving again at Montana Tunnels, the price tag would come in somewhere between $100 million to $150 million.

But Mark Thompson, president of the Montana Mining Association, said the mine still has mineral potential. Thompson said last year that the mine is “very desirable” because it can produce four different metals. Montana Resources, at one time, considered trying to purchase it.

It appears that there is still hope another mining company could buy the mine. Ponozzo said if another company wanted to purchase the mine, a new company would have to request for transfer of the permit and the new owner would have to post the appropriate bond amount -- $34.9 million, currently -- to cover the current issues.

The most immediate concerns

DEQ began taking action on Montana Tunnels last year after two environmental groups, Missoula-based Trout Unlimited and Earthworks, sounded the alarm about the site. The biggest problem at Montana Tunnels is the north wall of the pit subsiding into the pool of water collecting in the bottom. Large fissures in the ground north of the pit indicate the instability of the wall and the danger of Clancy Creek going with it.

The complete loss of Clancy Creek would, in turn, harm westslope cutthroat trout habitat downstream. Westslope cutthroat trout are considered fish at risk because of limited population numbers.

Williams said the agencies' priority is Clancy Creek.

Various officials told The Montana Standard last year it wasn’t a question of “if” the north wall would cave and take the creek with it but “when.”

Clancy Creek is currently running through a 16-inch pipe above ground for 1,300 feet near the edge of the north pit wall. DEQ wants Montana Tunnels to build a new channel for the creek that will put it out of harm's way.

Imeson said the “permanent fix” for Clancy Creek will be the expansion of Montana Tunnels, which he predicts will happen. Beyond imposing a new bond recalculation on the mine, DEQ hasn't said yet what the next step will be for the agencies if the mine fails to fix the creek.

DEQ is also notifying Imeson of a building on mine property that is foundationally unstable due to the subsidence going on in the pit. That building will also be factored into the new bond recalculation.

Imeson said the building has already been removed. But Williams said the company took down a building adjacent to the one the agencies are currently concerned with. The torn-down building was about to fall into the pit, Williams said. The adjacent building is in danger of deteriorating to the point of becoming “sheet metal blowing in the wind.”

The agencies' next step will be to assess if the mine is abandoned or closed. Imeson said between five and seven maintenance workers still clock in at Montana Tunnels. An unidentified employee answered when the Standard called the Montana Tunnels’ main office number in Jefferson City.

David Brooks, executive director of Trout Unlimited, called the situation “unfortunate but not surprising.”

The bigger picture

Brooks is also concerned about the water collecting in the bottom of the pit. The agencies have not been able to sample the water since around 2010 because of the subsidence. But Williams said that based on the last time it was checked, around 2010, it was "surprisingly good" water. He said frogs have lived in the water in Montana Tunnels' tailings impoundment.

There is no acid rock drainage in the pit, and there is no discharge. The water is an intense blue due to ground-up rock and will never interact with any groundwater in the vicinity, Williams said.

But Brooks said Montana Tunnels is likely going to turn into another example of the state having to pick up the cleanup costs to the tune of $15 million and perhaps more, depending on DEQ’s new estimation for repairing Clancy Creek. Other former Pegasus Gold mines around the state have become money pits for both federal and state agencies. Pegasus Gold Corp. declared bankruptcy in 1998.

“This is why so many of us are supporting I-186,” Brooks said by phone.

Initiative 186, a measure now collecting signatures around the state, is sponsored by a collective of environmental groups called Yes for Responsible Mining. They have about two more weeks to collect the signatures they need to get the measure on the ballot.

If the measure gets the signatures, I-186 will be asking voters to decide if new mines should have to provide “clear and convincing evidence” that a permit to mine will not include perpetual water treatment.

Montana Tunnels does not require water treatment, neither in the short term nor in perpetuity, according to Williams. But despite that, Brooks said the mine is still representative of what I-186 is about because it's a "classic example" of insufficient bonding by DEQ.

"It's certainly an example of promises made during the permitting that don't turn out to be what happens," said Brooks.

Industry officials oppose I-186. They say they don’t oppose the notion but the language, which they say is too vague. Industry officials say if the measure becomes law, it could shut down new mining in Montana and potentially impact current mining because the language in the initiative will be open to interpretation and challengeable. Backers of the initiative say the laws need to be more rigorous and taxpayers are too often being left holding the bag.

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Nat'l Resources / General Reporter

Environmental and natural resources reporter for the Montana Standard.

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