EPAsProposed Ground Water Protection

Standards40 CFR 192

an Industry Perspective

Peter LuthigerMesteña Uranium LLC

Prologue

EPA Notice of Rulemaking – January 26, 2015

The proposed new Subpart of 40 CFR 192 would establish ground water restoration goals and monitoring requirements at ISR facilities

Requirements to characterize background ground water chemistry

Requirements to meet restoration goals for 13 constituents

Requirements for long-term stability monitoring

Comment period recently extended to May 27, 2015

Reality Mother Nature made the ground water in and around uranium ore bodies not suitable for use as a source of drinking water

EPA attests through the aquifer exemption approval that pre-mining water quality in and around uranium ore bodies is not suitable as a source of drinking water now and in the future

Treatment of ground water for use as a public water supply in and around uranium ore bodies would be required whether mining occurs or not

Pre Mining Water Quality

Mesteña Uranium – Alta Mesa Project

Parameter UnitPre-Mining

ConcentrationEPA

StandardMeet

StandardParameter Unit

Pre-Mining Concentration

EPA Standard

Meet Standard

Calcium mg/l 221 Conductivity µmhos 3,070Magnesium mg/l 57 Alkalinity mg/l 658

Sodium mg/l 498 Ammonia mg/l 1.5Potassium mg/l 42 Arsenic mg/l 0.75 0.01 NOCarbonate mg/l 155 Cadmium mg/l 0.01 0.005 NO

Bicarbonate mg/l 658 Iron mg/l 3.73 0.3 NOSulfate mg/l 1,030 250 NO Lead mg/l 0.06 0.015 NO

Chloride mg/l 514 250 NO Manganese mg/l 1.6 0.05 NOFluoride mg/l 74 4 NO Mercury mg/l 0.001 0.002 YESNitrate-N mg/l 4 10 YES Molybdenum mg/l 3.6

Silica mg/l 46 Selenium mg/l 1.97 0.05 NOpH Std. Units 10.7 6.5 - 8.5 NO Uranium mg/l 2.72 0.03 NOTDS mg/l 2,160 500 NO Radium-226 pCi/l 3,790 5 NO

Magenta = Secondary Standard

Is There A Need For This Rulemaking?

EPA Protect ground water from potential future contaminationNot burden future generations with costs if ground water contamination occurs

Regulated CommunityHas a condition existed in the past that needs fixing? Is there a condition now that needs fixing?Is there a condition that may happen in the future that needs to be prevented?

Scientific / Technical JustificationEPA

Technical discussion is speculative“..may increase concentrations..”“..potentially reduced risk of exposure..”“..may migrate out of production zone..”“..potentially reduced human health impacts..”“baseline price assumed to be $57 per pound..”

No specific example identified by EPA in the proposed rulemaking document or any support documents of ground water contamination of any public water supply attributed to an ISR site

Regulated Community

Existing regulatory framework in Texas has been developed over 30+ years from the cooperative effort between stakeholders to ensure protection of the public and the environment.

TCEQ – “There have been no documented cases of offsite contamination in south Texas in over 30 years of in situ uranium mining at over 30 different sites.”

NRC – “The monitoring data indicated no impacts attributed to the migration of impacted ground water from the existing facility.”

Scientific / Technical Justification (continued)

DataDataMore Data

Scientific / Technical Justification (continued)

Impact on Property OwnersSurface lease

Surface owner’s land tied up in extended lease arrangements preventing surface property owners use of their land

Mineral estate likely not developedLoss of resourceLoss of value of resourcePossible regulatory “takings”

Excessive consumption of water (i.e., waste) Lowering local and regional water tableCosts for new wells, deepen existing wells, reset pumps

Water Use Waste

Water pumped from an exempted aquifer is replenished from surrounding water sources which reduces overall water quantity

Pre mining water quality in and around the ore body was designated by EPA as not being suitable for use as water supply now or in the future

Continued water consumption while chasing an arbitrary statistical result without any incremental future use value = waste

EPA stated goal is to protect water quality and quantity

Restoration is most consumptive phase of ISR process and continues until goals are achieved

Economic Analysis

EPA relying on a “Draft” documentInternal Peer Review??External Peer Review??

EPA chose to omit numerous costs in evaluationTechnical consultants (modeling, data evaluation, etc.)G&A cost (insurance, permit fees, financial assurance updates, lease holding costs) OP/EX cost (facility maintenance, personnel)

Involving industry would have shown EPA that these costs are substantial and must be included in any valid economic analysis on ISR facilities

Cost to Sales Ratio

Significant impact if ratio > 3%Regulatory Flexibility Act/Small Business Regulatory Enforcement Fairness Act guidance (EPA,

2006).

EPA revenue estimate based on all US utility purchasesAnnual compliance costs = $13.5 million (EPA App. D)EPA uses $3 billion in sales (@ $57/lb., this = 52.6 MM lbs.)

EPA math results in cost to sales ratio of 0.4%

Analysis of impact on ISR should use data from ISRAnnual compliance costs = $13.5 million (EPA App. D)Annual US production of 4.6 MM lbs. @ $43/lb. = $198 million

ISR annual production is less than 4.6 MM lbs.ISR cost to sales ratio = 6.8% ( $13.5 M/ $198 M) = SIGNIFICANT IMPACT

Economic Analysis (continued)

Case Study

Mesteña Uranium LLC

EPA Costs: Low = $480k; Average = $613k; High = $761k (EPA, App. D)Sales: 500,000 lbs. @ $57/lb. = $28.5 millionRatios: Low = 1.4%; Average = 1.7%; High = 1.9%EPA Conclusion : Ratio < 3% = Not significant

RealityCosts: Low = $480k; Average = $613k; High = $761k (EPA, App. D)Sales: less than EPA guessPrice: Market price (~ $40/lb.)

Economic Analysis (continued)

Economic Analysis (continued)

Mesteña Uranium is SIGNIFICANTLY impacted

$35 $40 $45 $50 $55 $57 0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Mestena Uranium LLCCost to Sales Ratio for Annual Sales Volume

Low Average High

Sale Price ($/lb.)

Cost

to S

ales

Rati

o

Path ForwardEPA must rescind proposed 40 CFR 192 rulemaking

EPA must then answer this question in a truthful, factual, scientific, defensible and transparent manner:

“Is there an actual problem that requires attention?”

If answer is no –> time for Shiner and Tito’s

If answer is yes –> re-initiate process in a truthful, factual, scientific, defensible and transparent manner

Engage stakeholders in a working group processFederal and state agenciesISR mining companiesEnvironmental organizations

R&D – Rip off & Duplicate the Texas success story

As Texas Goes, So Should the EPATexas has demonstrated 30+ years of ISR restoration success

Restoration to levels consistent with pre-mining range of water quality in vicinity of ISR operationsNaturally occurring geochemical environment controls mobility

EPA needs to adopt Texas UIC Restoration Program30 TAC § 331.10730+ years of proven success at protecting USDW.Ongoing improvements to Texas UIC program involving cooperative effort from all stakeholders ensures continued success into the future

Thank You