EPA demands restitution for Summitville — Courts move to freeze Friedland’s Inco stock

More than six years after resigning as chairman and chief executive officer of now-defunct Galactic Resources and moving on to the unmitigated success of his Diamond Fields Resources, Robert Friedland remains haunted by the spectre of Galactic’s ill-fated Summitville gold project.

In May, a federal district court judge in Colorado signed a court order requiring Friedland to pay restitution of US$152 million for the Environmental Protection Agency’s (EPA’s) cleanup of the Summitville mine site in southwestern Colorado. Department of Justice officials then went to the Supreme Court of British Columbia, pleading their case that Friedland was likely to avoid paying restitution by pulling his assets out of North America completely unless his Inco stock (his share of the Inco buyout of Diamond Fields Resources, of which he was co-chairman) were frozen. The court complied.

All of the court proceedings took place ex parte, that is, without Friedland’s knowledge or participation.

While the freezing of the shares would represent only one step on the path to reimbursement of the EPA’s costs, the U.S. government intends to wait and see what Friedland does before pursuing the matter any further, says U.S. Justice Department spokesman Joseph Krovisky.

“The ball is now in Friedland’s court,” he says.

Ray Torresan, speaking on Friedland’s behalf, said Friedland has instructed his counsel to apply to the courts to have the seizure of his assets overturned as unlawful. He is considering whether to make a companion claim for damages, as is permitted by the court order. In a release, Friedland stated, “If the EPA thinks I am going to tolerate this high-handed effort to run roughshod over our civil rights, they have been misadvised.

“There was no opportunity to ensure that the court heard fair and balanced argument,” he added. “This is an attempt to impound my property before any of the EPA’s claims have been proved at a trial. The agency has never proved that I am legally responsible for any portion of their costs.

“It is disturbing that they would resort to legal stealth and use an entirely false premise to try to accomplish what they obviously feared they could not achieve in an open proceeding, with all parties properly represented.” In defense of the ex parte actions, Krovisky said, “Our concern was that after this deal [between Diamond Fields and Inco] was completed, he might flee to either Singapore or Australia, and the United States’ efforts to collect that money would be seriously jeopardized.”

Krovisky said the U.S. government considers Friedland solely responsible for the environmental cleanup bill at Summitville by reason of his close involvement with Summitville Consolidated Mining through its parent company, Galactic Resources.

“We say he was the owner and operator of that mine site; that’s what we’ve told the court. We asserted that Friedland directly controlled and influenced the operations at Summitville that led to the release of hazardous substances and that he failed to prevent environmental contamination at the site.” Environmental problems, notably the discharge of acidic, copper- and silver-rich drainage into the local river system, developed at Summitville soon after the mine opened in 1984. The mine closed in 1992, a financial liability to Galactic until the very end.

According to EPA spokeswoman Carol Russell, 70% of the treatment and cleanup work at the Summitville mine site has been completed. The leach pile has been cleansed of cyanide, and no cyanide remains anywhere at the site. Waste from mining operations has been placed back into the open pit, and the pit has been capped.

She said the amount of copper being released at the site has decreased by about 80% since the EPA took over the site in December 1992. Since that time, the EPA has increased water treatment capacity to 1,500 from 200 gallons per minute.

Although most of the costly work is finished, two additional studies have yet to be completed: one dealing with area livestock and waterfowl; and the other dealing with irrigated agricultural land downstream from Summitville. Another study, dealing with “use attainability assessement,” was recently completed.

Work also has to be carried out on the possible moving, capping or revegetation of the leach pile (the EPA’s choice of action has not yet been made).

The Summitville mine was designated a Superfund site, meaning it was listed on the EPA’s national priority list for cleanup. Ironically, Superfund is paid for by taxes levied on the petroleum and chemical industry but not the hard-rock mining industry, even though the majority of Superfund projects in the EPA district that includes Summitville involve mines.

The US$152 million requested by the EPA covers all the cleanup work at Summitville, plus the “probable need” to treat water from the site in perpetuity, Russell explained.

“Our view is that Friedland did participate personally in the decisions regarding environmental actions at the site,” which, in the end, necessitated the EPA cleanup, she said.

In contrast, neither the post-mortem report prepared by the Colorado Department of Natural Resources nor a similar report prepared by a coalition of mining companies called the Summitville Study Group made significant reference to Friedland’s responsibility for the environmental problems at Summitville.

Friedland also points out that although the EPA has said he is solely responsible for the environmental consequences of the Summitville operation, others have already been found legally responsible.

A grand jury has indicted Summitville Consolidated Mining and Thomas Chisholm, its former environmental manager, for violating the Clean Water Act by knowingly discharging pollutants without Clean Water Act permits, knowingly and willfully submitting false statements to the EPA by not reporting the quantity and quality of discharges at or about the mine, and knowingly and willfully violating Colorado Department of Health permits.

“The implication of the freeze order is that one person, without being heard, can be held hostage indefinitely in an effort to cover what independent experts have described as excessive and wasteful spending by the EPA — and that is not justice,” Mr. Friedland said. “Any person in Canada or the United States could wake up one morning and find their assets impounded by this sort of abuse.”

Russell defends the EPA’s early work at Summitville as “an emergency response” to the situation at the site following Summitville Consolidated Mining’s bankruptcy and abandonment of the site in December 1992.

“Sometimes [emergency responses] aren’t the most efficient way to deal with a problem. Time will tell whether that remediation action was harmful or not.

Thus far it has not been.”

Although a group of “good samaritan” companies offered to help clean up the site, liability concerns prevented them from doing so, leaving the job up to the EPA.

“Their offer of assistance was greatly appreciated,” Russell said. “We wanted to accept, but there just wasn’t anything we could do to release them from that liability.”

Asked whether government regulators who fast-tracked

approval of the Summitville project were partly to blame for the subsequent environmental problems at the mine site, Russell said, “There’s enough blame to go all the way around.”