The EPA Spill: Whose Fault Was It?

There’s been a flurry of commentary following the recent spill of heavy metals-laden water into the Animas River, and rightly so.
An Environmental Protection Agency (EPA) clean-up team accidentally caused a massive spill of water stored at the now-closed Gold King mine near Silverton, Colorado while excavating above an old adit at the mine. Three million gallons of water spilled into Cement Creek, a tributary of the Animas River, eventually turning a large stretch of the river a dull shade of yellow.
As per CNN, three states were heavily hit by the spill, including Colorado, Utah and New Mexico. Farmington, New Mexico, the largest town affected by the spill, is home to 45,000 people.
The EPA has taken full responsibility for the accident, but understandably, both those watching the events unfold and those directly affected by the spill have sensed that there’s more to the story.
EPA coordinator Hayes Griswold has said that his team underestimated how much water pressure was built up behind a plug at the entrance to the mine. However, for a retired geologist living in Farmington, it was all too obvious what would happen.
A number of news outlets, including Breitbart, have noted that a letter to the editor published in the Silverton Standard predicted the spill — seven days before it actually happened.
“I am certain Mr. Hestmark’s hyrdologists have advised him what’s going to happen when the Red & Bonita portals [are] plugged and the ‘grand experiment’ begins with unknown and foreseeable results and possible negative consequences,” wrote David Taylor, adding, “make no mistake, within seven to 120 days all of the 500 gpm flow will return to Cement Creek.”
Martin Hestmark is an assistant regional administrator for the EPA. The Red and Bonita mines are located nearby Gold King.

Why would the EPA knowingly allow such a thing to happen? Taylor believes it’s part of the agency’s plan to justify its “hidden agenda for construction of a treatment plant.” Breitbart explains that the EPA has been trying to designate parts of the area as Superfund sites — or polluted sites requiring extended clean-up responses — in order to secure additional funds for clean up. However, there’s been resistance in local communities, as noted in The Denver Post, as the designation would mean an “economic hit” for the region.
“After all, with a budget of $8.2 billion and 17,000 employees, the EPA needs new, big projects to feed the best and justify their existence,” Taylor points out in his letter.
Tim Oliver, an environmental engineer and occasional contributor to Brent Cook’s Exploration Insights, has another take on the spill: while the EPA is certainly to blame, it’s also Kinross Gold’s (TSX:K,NYSE:KGC) fault, even though the mining company didn’t directly own Gold King.
According to Oliver’s post, It’s fun to blame the EPA, but…, Kinross used to own the Sunnyside mine, the major mine in the area, through its subsidiary Sunnyside Resources. A deal between Sunnyside and the Colorado Water Quality Control Division allowed the company to seal up the mine with bulkheads in exchange for a commitment to working on other water treatment projects, among other things.
That agreement also included a transfer of the company’s water-quality discharge permit to the owner of the Gold King mine. However, Oliver states that the Gold King owner “flaked out,” leaving a treatment plant out of operation for a decade.
Oliver lays the blame on the EPA here, arguing that the agency should have put a Superfund label on the area at that point. “Had they done so, they would have had the legal ability to place financial liability directly on Kinross to pay for the cleanup,” his note reads. “Kinross knows this.”

It’s best to read Oliver’s post for the full overview, but in short, he also suggests that Kinross leaned more towards avoiding liability than being proactive about cleaning up the mine. Of course, avoiding liability is to some extent always a necessity for mining companies (or any company for that matter), but Oliver argues that Kinross’ approach wasn’t quite on point.
“[I]f a company has a major exposure to potential Superfund action, and the company actively seeks to avoid that liability, then the company needs to get out ahead of the problem and be the boss,” he states. “Take over the cleanup. Get it done. This is what major mining corporations do. I know I’ve been there.”
No matter whose fault it is, there’s no doubt that the problem of at-risk mines stretches far beyond Colorado and Gold King. The Associated Press notes that there are 500,000 abandoned mines across the US, and “only a fraction have been dealt with, despite decades of effort.”
For investors, the situation serves as a reminder that stiff environmental regulations and high-cost mitigation measures are there for a reason. Given the current state of the market, it isn’t worth taking one more risk by investing in a company with a poor environmental track record, so it’s important to do one’s due diligence in this area.
Kinross was ranked as the most socially responsible mining company in Canada by Maclean’s this year.
 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.