Tag Archives: Marquette County

Mozambique, Michigan, and the SEC Complaint Against Rio Tinto

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Chinde_Rusting_boats

Rusting boats at the port of Chinde, where Rio Tinto proposed to barge Riversdale coal via the Zambezi River.

Yesterday, the Securities and Exchange Commission brought a complaint in New York City against Rio Tinto, charging Tom Albanese, the former CEO of Rio Tinto, and Guy Elliott, his Chief Financial Officer, with fraud. According to the complaint, Albanese and Elliott actively misled the Rio Tinto board, audit committee, auditors, and the investing public about their acquisition of the Riversdale coal business in Mozambique in 2011.

The fraud that Albanese and Elliott are accused of perpetrating looks awfully familiar to those who have followed the development of Eagle Mine and the controversy over County Road 595. Having noticed the parallel between Mozambique and Michigan back in 2013, when Tom Albanese was forced to step down, I now have to wonder whether prosecutors will take the company’s representations around the Eagle Mine into account when building their case.

In Mozambique, they told investors, coal would be transported by barge to the Indian Ocean port of Chinde. Although their technical advisors “highlighted the ‘showstopping’ risks” associated with the barging proposals before the acquisition, Albanese and Elliott blundered recklessly ahead. Then eight months later, the Mozambique government denied Rio Tinto a permit to transport the coal by barge down the Zambezi River. Suddenly, the coal business they had acquired for $3.7 billion appeared to be worth a negative $680 million. According to the SEC’s complaint, Albanese and Elliott “concealed and glossed over” the fact that they had no viable haul route for the 30 million tons per year they projected in their business plans, and misled investors as they raised $5.5 billion in US debt offerings.

In that very same period, Rio Tinto was also promoting Eagle Mine to investors and promising economic renewal in the Upper Peninsula, though they had not yet secured a transportation route — a haul route — for Eagle’s sulfide ore. In Michigan, it appears, the company took the same cavalier attitude toward planning and risk that the SEC complaint says got them into trouble in Mozambique.

Way back in 2005, John Cherry, who was then a Kennecott Minerals project manager and is now President and CEO of the Polymet project in Minnesota, characterized Eagle as a “direct ship” operation, “meaning that the rock would not be processed on site, thereby avoiding the storage of highly toxic debris left over, called tailings.” Presumably this is what Michigan DEQ’s Robert McCann had in mind in 2007, when he told The Blade that Kennecott’s permit “would require them to keep the ores underground, put them in covered rail cars, and ship them to Ontario for processing”; the Marquette Monthly told roughly the same story that year, only now there were trucks in the picture: “ore would be transported by truck and rail to a processing site in Ontario.” This seems to have been nothing more than a cover story.

Everything changed in 2008, when Rio Tinto bought the Humboldt Mill. Those permit requirements the DEQ’s McCann touted back in 2005? They were quickly abandoned. Covered rail cars come into the picture only after the ore is crushed, ground into a slurry, floated and rendered into concentrate at Humboldt Mill. A glossy 2010 company publication promoting Eagle Mine includes not a single word about how Rio Tinto and Kennecott plan to travel the 30 kilometers from mine to mill: “Happily, processing of the nickel and copper can take place in Humboldt, around 30 kilometres [sic] away, at a previously abandoned iron ore plant.” By 2011, the company had “considered more than a half dozen transportation routes” from mine to mill, according to a Marquette Mining Journal article by John Pepin published in February of that year, but they still had no viable haul route.

A good prosecutor with a rigorous and thorough discovery process would probably be able to determine whether the evasions and misrepresentations perpetuated on the public over the Eagle Mine haul route also amounted to fraud, or were part of a larger pattern of deliberately misleading statements. It’s clear Rio Tinto never came clean — and perhaps never really had a firm plan — on mine to mill transport at Eagle before it sold the works to Lundin Mining in June of 2013 and decamped. As long as regulators in Michigan continued to be more accommodating than those in Mozambique, the company seems to have been content to let the people of Marquette County fight out the haul route issue among themselves.

The Political Project of MCRC v. EPA, Revisited

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Judge Robert Holmes Bell dismissed the Marquette County Road Commission’s case against the EPA back in May, and last week the Road Commission’s attorneys at Clark Hill PLC filed a motion to alter and amend that judgment. They complain that the Court’s dismissal for failure to state a claim is not only mistaken on points of law but, more dramatically, it allows the “EPA and the Corps to wage a war of attrition on local governments seeking to protect the health and welfare of their people.”

I was struck by this inflammatory piece of political rhetoric about federal overreach for a couple of reasons. First, because it’s just the sort of hyperbolical language Michigan State Senator Tom Casperson and StandUP, the 501c4 dark-money organization funding the Road Commission lawsuit, have used to frame the case for County Road 595 and advance what, in a series of posts (1, 2, 3, 4) last summer, I called the political project of MCRC v. EPA. Second, because the motion here tacitly admits that mining activity on the Yellow Dog Plains has put “the health and welfare” of people in Marquette County at risk. Rio Tinto and then Lundin Mining proceeded with their plans to mine copper and nickel at Eagle Mine and truck it to Humboldt Mill without a clear haul route. They not only went ahead; they were permitted by the state to do so. The risk was transferred to the public.

This is a familiar pattern, but the story it tells is not about federal overreach or intrusive oversight. Quite the opposite: it’s a story about mining companies rushing projects into production without due consideration for the communities in which they are operating, regulatory capture or lax oversight and enforcement, and elected officials who all-too-easily and all-too-conveniently forget where their real duties lie.

The June 13th motion doesn’t often have recourse to this kind of language. For the most part, the motion deals with fine points of administrative law, citing a few cases that it claims the court misread or misapplied. Probably the most important of these is the Supreme Court’s discussion of the Administrative Procedure Act in a May 2016 opinion, United States Army Corps of Engineers v. Hawkes Co.. (Miriam Seifter explains Hawkes over at ScotusBlog. Even with her very clear analysis in hand I can only hope to make a layman’s hash of things.)

In Hawkes, a company that mines peat for golf-putting greens — a process that pollutes and destroys wetlands — sought an appeal of “jurisdictional determinations” by the Army Corps of Engineers that wetlands on their property were subject to the Clean Water Act.

The “‘troubling questions’ the Clean Water Act raises about the government’s authority to limit private property rights” came up for some brief discussion in Hawkes, notes Seifter, but that was not the main focus of the Supreme Court opinion. The case instead revolved around the question whether jurisdictional determinations are “final,” which in this context means they constitute an action “by which rights or obligations have been determined, or from which legal consequences will flow.”

The Army Corps in Hawkes maintained that appeals of the Corps’ jurisdictional determinations should not be allowed, because the determinations of the Corps are still subject to review and are not “final” or binding. The court found unanimously in favor of the peat-miners, saying that determinations by the Corps were final — they would put legal constraints on the peat-miners, who would have to stop polluting or face penalties — and therefore could be reviewed in court.

In MCRC v. EPA, the Road Commission now seeks a decision along similar lines. “The Court erred,” the motion complains, “by holding that EPA’s veto was not ‘final’ because Plaintiff could submit a new application to the Corps.”

In other words, the court held that the EPA’s objections to County Road 595 weren’t the last word: they didn’t constitute “final agency action” and did not entail legal consequences or impose obligations the Road Commission didn’t already have. The Road Commission can even now take EPA’s opposition to the road under advisement, go back to the Corps and seek a new permit. They can continue to work with the EPA, whose objections to the road are “tentative and interlocutory”: there is still room for conversation.

The attorneys for the Road Commission don’t deny that the Road Commission could have gone back to the Army Corps of Engineers; but they say that it would have been time consuming, burdensome and ultimately futile, as the Corps had joined the EPA in its objections to the road, and the EPA’s objections had the effect of a veto.

This brings us back to the arguments advanced in the original complaint. The EPA didn’t just object to the Road Commission’s proposal; they unfairly vetoed the new road, in a “biased and predetermined ‘Final Decision’.” The Final Decision, according to the motion, took the form of a December 4, 2012 objection letter from the EPA to the Marquette County Road Commission, to which the Road Commission replied on December 27th. They did not receive a reply, and the EPA’s failure to reply was tantamount to a “refusal.”

The EPA’s refusal (or failure) to reply to the Road Commission’s December 27th letter indicated that their objections had “crystalize[d] into a veto,” according to the motion. “Unequivocal and definitive,” a veto is a final agency action, “akin” to jurisdictional determinations made by the Corps. What legal consequences flowed from the veto? For starters, the EPA’s Final Decision divested the state, specifically the Michigan Department of Environmental Quality, of any further authority in the matter.

While this is not a new position for the Road Commission, the way the motion lays it out is nonetheless clarifying. The discussion of Hawkes, especially, brings into focus the question before the court — a question of administrative law concerning the “finality” of the EPA’s objections to CR 595. Of course that question entails others: whether the EPA’s failure to reply to the Road Commission’s letter of December 27th amounts to a refusal of the Road Commission, whether that refusal, in turn, crystalized their objections into a veto, and whether EPA vetoes are really “akin” to jurisdictional determinations by the Corps.

Stronger accusations are only being held at bay here. For example, it would be difficult to read the EPA’s failure to reply to the Road Commission’s December 27th letter as a deliberate refusal to reply without accepting the original complaint’s charges of bias and allegations of conspiracy at the EPA, or indulging its witch hunt for “anti-mining” attitudes and its demonizing of “activists.” But even if we are not willing to follow the plaintiff down that dark road, it would also be difficult, now, to overlook the serious dysfunction and administrative incompetence exposed by the Flint Water Crisis, which cost the head of EPA Region 5 her job, and which showed the world just how broken the system of environmental governance is in Michigan.

The Political Project of MCRC v. EPA, 2

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Second In A Series
Activists Afoot!

In this Greg Peterson photo from the Cedar Tree Institute site, Northern Great Lakes Synod Lutheran Bishop Thomas A. Skrenes blesses one of the trees faith congregations planted on Earth Day, 2009.

In this Greg Peterson photo from the Cedar Tree Institute site, Northern Great Lakes Synod Lutheran Bishop Thomas A. Skrenes blesses one of the trees faith congregations planted on Earth Day, 2009.

As I suggested in my first post in this series on MCRC v. EPA, the complaint filed by the Marquette County Road Commission would have us believe that “anti-mining” forces worked secretly with and even infiltrated the EPA, and the agency’s objections to CR 595 followed a “predetermined plan.” The EPA, it claims, had decided to oppose the haul road even before the MCRC application was reviewed.

This sounds like legitimate cause for concern: permit applications should be reviewed on their merits, not pre-judged and not according to some other anti- or pro- agenda. We certainly wouldn’t want someone in the Environmental Protection Agency to be “pro-mining”; there are enough well-paid mining lobbyists already haunting the hallways in Lansing and Washington, DC. But in this case, the anti-mining label is being used as a term of opprobrium, and to distort and deliberately misrepresent what the Environmental Protection Agency is chartered and required by law to do: in short, to enforce the Clean Water Act and protect the environment.

When it comes to proving the insinuations it makes, the MCRC complaint offers slim evidence.

For example, the complaint makes a big fuss over a November 28, 2012 letter from Laura Farwell, who lives in the Marquette area and is described here as “a prominent environmental activist.”  The letter is addressed to Lynn Abramson, then a Senior Legislative Assistant for Senator Barbara Boxer, and Thomas Fox, Senior Counsel of the Senate Environmental and Public Works Committee, asking them to “weigh-in” with the EPA on CR 595. (Exhibit 1).

EPA must determine whether to uphold its original objections to proposed County Road 595 under Section 404 of the Clean Water Act (“CWA”), pursuant to its supervisory authority over Michigan’s delegated wetlands permitting program. Tom may remember that during the August 30, 2011 meeting at EPA Denise Keehner of EPA’s office of Wetlands, Oceans and Watersheds definitively reiterated EPA’s position and stated that the haul road would not happen.
Thus, this letter is to request, respectfully, that you weigh-in as soon as possible with the EPA on its decision.

The MCRC complains about Farwell’s use of the word “definitively” here and casts the 2011 meeting in a sinister light:

on August 30, 2011, a very different type of meeting regarding CR 595 took place at USEPA Headquarters in Washington, DC. MCRC was neither invited to nor informed of the meeting. In attendance (as far as is known at the present time) were top USEPA officials, Congressional staff, KBIC representatives, and a prominent environmental activist opposed to the construction of CR 595. It further appears that USEPA made no formal record of the meeting.

Without a formal record, it’s impossible to know what transpired at this meeting, and if the complaint is going to rely on Farwell’s memory of the conversation, then it should also take into account her intentions in paraphrasing and recounting it, one year after it took place. The language here — “a very different type of meeting,” “neither invited nor informed,” “as far as is known at the present time,” “no formal record” — doesn’t help in that regard, and it’s meant to suggest that conjurations were already afoot.

It’s clear the MCRC was not included in some discussions at EPA. There’s nothing extraordinary or illicit about that. All concerned parties had been meeting with and petitioning the EPA for several years at this point. The complaint is still a long way from proving that the EPA “surreptitiously met with a number of environmental activists vocally opposed to the road,” and an even longer way from proving that there was anything like an anti-mining coalition assembled in secret at the offices of the EPA.

In an ironic twist, these allegations of secrecy and whispering behind closed doors may come back to haunt the MCRC: at a Marquette County Board of Commissioners meeting this month, the Marquette County Road Commission itself faced accusations that it had violated the Open Meetings Act in planning to bring its suit against the EPA. Public officials who intentionally violate that act are ordinarily fined and incur other liabilities; in this case, there would be some eating of words as well.

By November 28, 2012, the EPA had, in fact, “decided against the proposed haul road,” as Farwell puts it in the email she sent along with the letter to Abramson and Fox. The EPA had entered objections to the Woodland Road Application (in March, 2010) and announced their objections to CR 595 (in March, 2012).  Even so, a Fall 2012 public meeting held by the EPA “in Marquette…for more input” had Farwell worried. She was not at all confident the EPA would uphold its original objections to the haul road.  The matter was still far from being “definitively” settled.

Whatever reassurances Farwell was given at that 2011 meeting — or thought she had been given, or recalled having been given, one year later — were clearly at risk of getting lost in the bureaucratic shuffle. The purpose of her letter is to prevent that.

There is nothing surprising in all this. Those watching new mining developments in the Upper Peninsula are constantly having to chase after the EPA and demand that the regulator step in and do its job.

Jeffery Loman, a member of the Keweenaw Bay Indian Community and a former federal regulator, has repeatedly put the EPA on notice and complained of the agency’s failure to enforce the Clean Water Act.

In May of this year, the grassroots environmental group Save the Wild UP filed a petition with the EPA’s Environmental Appeals Board, arguing that Eagle Mine was issued the wrong regulatory permit. The appeal requested that the EPA require Eagle Mine to obtain a Clean Water Act permit in order to protect the Salmon Trout River and other surface waters from the discharge of mining effluent. The Appeals Board did not contest the facts put forward in the petition, but dismissed it for lack of jurisdiction. They hardly proved themselves to be staunch allies.

So watchdogs and environmental groups, too, have reason to gripe about the EPA and often feel powerless in the face of bureaucratic inertia and ineptitude. Laura Farwell herself seems to have felt that way, and that’s why we find her asking Abramson and Fox for help. The MCRC complaint exaggerates her influence at the EPA when it describes her as “a prominent environmental activist.” The epithet is used here to create the misleading impression that within the offices of EPA Region 5 and the confines of Marquette County there are political opponents with resources to match the power of multi-billion dollar, multinational mining companies.

Laura Farwell and her husband Frank moved to the area in 2006 from Madison, Wisconsin. They are members of the St. Paul Episcopal Church and participate, along with their son Cody, in the church’s Earth Day tree plantings. The couple donated some money to the UP Land Conservancy. Farwell has also organized events for the Cedar Tree Institute, which works to bridge “faith communities and environmental groups.” (She is described on the Institute’s site  as “a concerned mother and local citizen.”) She is thanked for “working quietly behind the scenes” in a 2011 Earth Keeper TV video on the environmental risks posed by the Eagle Mine; and she’s copied along with many other local citizens in a Google Group post dated April 9, 2012, urging people to comment on CR 595 before the public comment period is closed.

Farwell’s commitments to land conservation are pretty clear, and while the complaint asks us to recoil in horror at the phrase “prominent environmental activist,” cooler heads are just as likely to be impressed by Farwell’s dedication to the people around her and the place where she lives. Maybe that dedication is all it takes to be a prominent environmental activist in the view of the Marquette County Road Commission.

Some locals, on the other hand, are legitimately concerned that nationally and internationally prominent environmentalists — like Bill McKibben, George Monbiot, Naomi Klein and their ilk — ignore the current situation around Lake Superior, or fail to give it the serious attention it deserves. National media have barely taken notice. Farwell herself admits that to the great and powerful in Washington DC “the proposed haul road may seem like some little back trail in the middle of nowhere,” but she urges that it will cut through “critical wetlands resources” and “enable the industrializing of this rural Great Lakes watershed by international mining interests.”

Farwell’s letter tries to create some urgency around the CR 595 issue by putting the road in context and specifying whose interests would be served by the industrializing of the region. A serious assessment of CR 595 would significantly widen the lens, taking into account the cumulative effects of all the new mining activities around Lake Superior: all leasing, exploration, development and active mining throughout northern Michigan, Wisconsin, Minnesota and Ontario. Otherwise, we miss the big picture, and without that perspective, it’s just too easy to parcel out the land, the water, and the future of the region to the highest bidders.

The MCRC complaint, too, places CR 595 in the context of “mining and economic development in the Great Lakes region” in a few places, but only to make the specious argument that those who oppose or question the road are opposed to mining and therefore opposed to the region’s prosperity. These are the ideological leaps the complaint makes. Those who don’t make these leaps are called activists or anti-mining obstructionists. That is a political, not a legal argument.

It’s never too late to have a serious discussion of what sustainable economic development and true prosperity for the Great Lakes region might look like. How might we best organize our lives together in this place? is a fundamental political question. But at this juncture, it appears, the MCRC can’t afford to let that conversation happen. This lawsuit is an attempt to shut it down and stifle dissent. Where business leads, society must obediently follow. To question this order of things, as Laura Farwell seems to have repeatedly done, quietly, behind the scenes, is to commit some kind of nefarious act.

This is where the attitude on display in this complaint gets worrisome. With this lawsuit, the MCRC pretends to have the political authority to direct economic development in the region (not just to build and repair roads). But that is only pretense, and things in Marquette County are not as they appear. The public still does not know who is funding the Road Commission lawsuit, what they stand for and what they expect in return for their support. The real powers lurk behind the scenes.

A Letter to Karen Maidlow, Michigan DNR

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Karen Maidlow, Property Analyst, Minerals Management
Michigan Department of Natural Resources (DNR)
P.O. Box 30452
Lansing, MI 48909

Dear Karen Maidlow,

This letter is with regard to land owned by the State of Michigan on the Yellow Dog Plains and next to the Yellow Dog River in Michigamme Township, Marquette County (40 acres, NE1/4 SE1/4, Sec.13, T50N, R29W).

As you know, in a 2003 review, this 40-acre parcel was designated “non-development” by former Fisheries Chief Kelley Smith. Fisheries biologist George Madison, who works out of the Baraga office of the DNR, reversed Smith only this year. It is unclear why, and I urge you to look thoroughly into the matter as part of your review and clarify for the public whether and on what grounds the DNR thinks Fisheries’ reversal of its position on this parcel should stand.

Madison himself says that he was unable to tell why Smith had placed the non-development restriction on the parcel in the first place.

For some reason Kelley Smith (former Fisheries Chief) had placed a non-development restriction recommendation on this parcel during an 8-21-2003 review. Indeed while there is no water or aquatic resources on this parcel, with care and respect for the 2003 review I carried Mr.Smith’s recommendations forward in case there was an element of uniqueness to this parcel that we are not aware of.

For this 8-12-2014 review, I have changed Fisheries Division’s recommendation to “development” with no restrictions.

What reason did Kelley Smith have for restricting development on the parcel? Madison cannot say, and in May of this year Forestry Supervisor Jeff Stampfly admitted he, too, was “at a loss” when it came to accounting for Smith’s review. But then they both recommend its reversal.  Both Stampfly and Madison seem to suggest that Smith was simply mistaken, or at least they see his 2003 review as problematic. What exactly did Smith say? Isn’t it possible that Smith discerned some “element of uniqueness” here that Madison and Stampfly are unable to appreciate? The prudent thing would be to find out.

To that end, the DNR should publish Smith’s August 2003 review — undertaken before the mining boom had really gotten underway — and take what Smith says there under advisement. To help clarify things, Smith himself (now in retirement) should be interviewed about the parcel and what, if anything, makes it unique or deserving of non-development status, and his statement entered into the public record. If Smith and Madison still disagree on the status of this parcel, then that disagreement should be aired publicly and accounted for in whatever report you file. The public deserves this measure of transparency.

For his part, Madison could state more clearly why he reversed Smith in this 2014 review and did not do so previously. Why proceed with “care and respect” for Smith’s review, then suddenly change course after Lundin Mining shows interest in the parcel? Madison seems to be arguing in his comment that Fisheries should place no restrictions on the parcel because he can identify “no water or aquatic resources” directly on the parcel; this seems to be Stampfly’s position as well. But the Yellow Dog River is only a few hundred feet away from the boundary of the proposed site. Maybe, for Smith, that proximity was enough.

As Smith may have known, there are a number of ways in which industrial development on this parcel might seriously compromise the Yellow Dog River. Groundwater flow in the glacial aquifer underlying the Yellow Dog Plains would make it difficult to limit water contamination from drilling to the parcel itself. Even a well-run drilling operation will see lapses: Yellow Dog Watershed Preserve has “photo documentation of ripped sump pit liners, drill bit wash basins that are overflowing, and broken fences” from the exploratory drilling done for the Eagle Mine. Exploratory drilling is also bound to require some roadwork and other infrastructure build-up on the Yellow Dog Plains, and it will increase traffic to and from the parcel. That, too, puts the Yellow Dog River at risk.

YellowDogRupture

Roadside mitigation efforts in October of this year. The Eagle Mine haul route has already put the Yellow Dog watershed at risk and contaminated the Salmon Trout River.

As you are no doubt aware, just this past summer, a road crew working on the Eagle Mine haul route ruptured a perched groundwater seep, dumping sediment and releasing turbid water into the Salmon Trout River, in violation of the Natural Resources and Environmental Protection Act. Mining’s risks never end at the mine’s gate.

In closing, I urge you to take your time looking into the confusion over Smith’s 2003 review and all other questions and comments you receive regarding this parcel. One newspaper account I read has you saying that you intend to finish your analysis by January, having received written comments from the public only a month before that. Wouldn’t it be better to allow time for follow-up interviews or requests for further information? I trust that you and the DNR do not want to give the impression that this request for public comment is merely pro forma, and want to do the right thing by the public you serve.

Sincerely,

Louis V. Galdieri