Friedland gets green light to pursue counterclaim

The U.S. Environmental Protection Agency (EPA), already under fire for having bungled the remediation of the ill-fated Summitville gold mine in Colorado, has been ordered to face a Canadian court for matters related to its 1996 attempt to freeze US$152 million worth of Inco shares owned by mine financier Robert Friedland.

An Ontario judge rejected a move by the U.S. government to seek “sovereign immunity” from a counterclaim filed by Friedland in response to the EPA’s attempts to seize his Inco shares for payment of environmental remediation costs at Summitville. The open-pit, heap-leach mine was placed into production in the late 1980s by a subsidiary of Friedland’s former flagship, Galactic Resources. It quickly became both an economic and environmental failure, and was relinquished in 1992, when Galactic declared bankruptcy.

The EPA took over the site the following year.

In the ex parte application made to Canadian courts in 1996, lawyers for the American government sought to impound the shares (awarded to Friedland when the nickel giant took over Diamond Field Resources) without benefit of any liability determination or judgment. The application was made without Friedland’s knowledge (and without his having legal representation), which meant the onus was on the U.S. to make fair and accurate disclosure of the facts relating to the case.

While the shares were frozen for a time, an Ontario court later found that the injunction had been wrongfully obtained. The shares were returned, and the court ruled that Friedland was entitled to payment of his legal fees, stating that U.S. government lawyers had “misstated and misrepresented information” and withheld important information favorable to Friedland. The omissions were characterized as “flagrant breaches of duties regarding appropriate disclosure.”

Friedland’s US$150-million counterclaim, filed in April 1997, alleges that the representatives of the U.S. Department of Justice (DOJ) and EPA abused their roles and functions and those of the courts. The recent court ruling paves the way for Friedland to pursue his counterclaim against the U.S.

government and personnel within the DOJ and EPA.

Friedland has consistently refuted the notion that he should bear the brunt of responsibility for environmental problems at Summitville, pointing to the 100 years of mining in the region that pre-dated his involvement and to major engineering miscalculations made by contractors. He also cites a post-mortem conducted by Knight Piesold, which concluded that the situation at Summitville “is the manifestation of a myriad of decisions, actions, rules and procedures that were not unilaterally determined by one party.” Friedland points out, too, that the EPA itself was unable to meet the “impractical, if not impossible” water discharge standards imposed by government authorities. Before its bankruptcy, Galactic sought to have the standards reclassified, arguing they were more stringent that standards for drinking water and, therefore, inappropriate for a region that did not have a high level of water purity because of historic mining.

Friedland also notes that the EPA’s remediation work at Summitville has drawn criticism by the Colorado Mining Association (CMA) and the TAG Advisory Committee, a local citizen’s council set up to monitor activities at Summitville.

In 1994, the CMA raised concerns about the lack of mining expertise of EPA’s contractors engaged in the cleanup, and offered technical assistance. CMA also warned the EPA that its proposed wastepile removal program would exacerbate, not reduce, acid mine drainage.

The EPA turned down the offer of assistance and forged ahead with its cleanup. But, by 1995, TAG found that the EPA’s waste-removal program had served only to generate a new “major source of acid mine drainage,” which resulted in contaminant loading into the river basin.

TAG also criticized the EPA’s inability to improve water quality in the Alamosa River, having measured, on one visit, releases of pH 2.5 (strongly acidic) leaving the site. And it also noted that, despite warnings from the U.S. Geological Survey and others, the EPA plugged old mine tunnels and adits, thereby bringing about numerous uncontrolled seeps that increased acid mine drainage.

“Instead of a ‘point source’ of acid mine drainage (which was the case prior to plugging), there are now many non-point sources of toxic water that are often difficult or impossible to identify, collect and treat,” TAG members informed Colorado’s governor in 1995. “In conclusion, TAG feels that downstream water users and communities are victims of the structural flaws in [the EPA’s] Superfund [program], which allow continued contamination of onsite and offsite areas by EPA. EPA is consuming a large sum of taxpayers’ money and minimally protecting the environment and continuing with downstream degradation.”