Acidic Mine Drainage

The Iron Mountain Mine National Priorities List Site is a 4400-acre inactive mine located approximately nine miles northwest of Redding, California. From the late nineteenth century through 1963, the Mountain Copper Company, Ltd. (“Mountain Copper”) mined the Site for various minerals, including iron, gold, silver, copper, zinc, and finally pyrite.

Over the course of the decades of shaft and surface mining, the mountain became honeycombed with mine workings and is now highly fractured. This fracturing has exposed to the elements mineral deposits that, in the presence of oxygen, water, and certain bacteria, form intensely acidic mine drainage (“AMD”).

Mine-contaminated water flows off the Site and into several federally owned and operated reservoirs located about four miles downstream, including the afterbay of Shasta Lake, a key component of the Central Valley Project operated by the U.S. Bureau of Reclamation (“USBR”). Prior to early efforts at control by USBR, AMD was believed to be the cause of a number of major fish kills in the Sacramento River below the mine.

Enforcement Action

The Environmental Enforcement Section (EES) filed suit in 1986 against Iron Mountain Mine’s current owner to abate his interference with early cleanup activities of the Environmental Protection Agency (EPA). In 1991, EES filed suit against Rhône-Poulenc, Inc., Mountain Copper’s successor, to recover the mounting clean-up costs EPA was beginning to incur (approximately $10 million at that time).

Outcome: Between the mid-1980s and December 2000, when — after protracted and intensive litigation — the government settled its case against Rhône-Poulenc, EPA conducted extensive remedial actions and issued a number of administrative orders to Rhône-Poulenc to perform. Those actions resulted in:

• the partial capping of Iron Mountain;

• rehabilitation of the major mine adits;

• diversion of AMD-contaminated water for more efficient collection and treatment; and

• most significantly the construction of a massive AMD-treatment plant and storage facility for the sludge by-product of treatment.

At the time of settlement, EPA had spent approximately $65 million on cleanup activities, and Rhône-Poulenc had spent an additional $150 million under administrative orders.

The December 2000 settlement with Rhône-Poulenc provided a mechanism to maintain existing cleanup activities at the Site, most importantly the operation of the treatment plant, which runs continuously, and at high volume during the winter rainy season, to eliminate the threat of AMD contamination of downstream waters. The settlement funds future cleanup activities over the long term through a finite risk insurance policy that pays for performance of scheduled remedial activities, providing coverage of:

• approximately $202 million over the performance period,

• together with an additional $100 million of coverage for certain unanticipated costs,

• $35 million of liability insurance covering both the government parties and site contractors; and

• a $514 million terminal payment to be made to the government in 2030, which will fund site activities going forward from that date.

Rhône-Poulenc paid approximately $154 million to buy the insurance policy, and other $22 million directly to EPA, the State of California, and the federal and State Natural Resource Trustees to fund additional activities.