Is the US Forest Service Trying to Help a Cash-Strapped Canadian Mining Company?

Agency has been attempting speed up decision-making on proposed Rosemont copper mine in Arizona's Coronado National Forest, say activists

The US Forest Service seems to have been unusually eager to help a Canadian mining company with a dubious track record and financial troubles set up an open pit copper mine in Arizona’s Coronado National Forest. The agency’s efforts, however, might be in vain.

Santa Rita MountainsPhoto by Nate MerillThe proposed mine site in the Santa Rita Mountains is part of an important wildlife corridor that connects southern Arizona’s sky island mountain ranges — isolated mountains that rise up from surrounding lowlands — that are home to unique plant and animal species.

A Vancouver-based mining company, August Resource Corporation and its Arizona subsidiary, Rosemont Copper Company, plan to blast a one mile-wide and half-mile deep mine on 4,000 acres of the Santa Rita Mountains, 50 miles southeast of Tucson. The proposal is being fiercely opposed by environmentalists, local citizens, and Indigenous groups who say the mine would damage the environment, deplete the arid region’s water supply, and hurt the tourism industry that relies on the mountains’ unique “sky island” ecosystem. (Read my April 2013 report about the proposed mine and how it underscores the need to reform federal mining laws.)

Despite serious environmental concerns about the project that need careful study, the US Forest Service released an incomplete draft of its final environmental impact statement (FEIS) for the proposed mine on July 1 and asked the more than two dozen local, state, and federal cooperating agencies to send in their comments within 30 days.

The “Preliminary Administrative Final Environmental Impact Statement,” which is missing key studies and assessments, came with this interesting disclaimer (you still have to click on the disclaimer to get to the statement on the web).

“This document is written from the perspective of a Final EIS. Therefore, it addresses components of the process as if they have been completed, even though some are still being finalized.” (emphasis added)

Coronado National Forest supervisor Jim Upchurch told local media that the purpose of putting up an incomplete FEIS for review was to speed up the process in order to meet the “needs of the proponent [Augusta].” He said the Forest Service would like to issue a “Record of Decision” on the project before September 27, when new federal regulations requiring more public input for projects on forestland would kick in and the permitting process would be delayed by several months. (The Forest Service’s close interaction with Rosemont Copper isn’t new. In 2011, a federal judge found that Rosemont and Forest Service officials had been meeting secretly to discuss the draft environmental impact statement. He noted that the meetings presented at the least an “appearance of impropriety.”)

Following protests about the short timeline from several cooperating agencies, the Forest Service extended the comment period to August 15, but it didn’t update the document to include the missing studies and reviews. The draft FEIS, incidentally, is pretty much a reiteration of the Forest Service’s initial draft environmental impact statement (with a few edits and changes) that the US Environmental Protection Agency had criticized last year as containing “significant inadequacies.”

Thirteen cooperating agencies did file review comments on the draft FEIS by the August 15 deadline; many of the comments are extremely critical of the information gaps and continuing inaccuracies in the document. The Forest Service now says it’s not sure if it will be able to issue a final decision by September 27.

Anti-mine activists say the agency’s rush appears intended solely to benefit the financially struggling Augusta Resource Corporation, which needs to placate its investors by showing that it can get the mine approved.

“We don’t know why they want to help Augusta, but it’s a question everyone should be asking,” says Gayle Hartmann, president of Save the Scenic Santa Ritas, a Tucson-based nonprofit fighting the Rosemont mine. “The Forest Service’s job is to protect public lands, not the profits of mining companies.”

Hartmann says Augusta has been pushing the Forest Service to approve the mine by September 30 because the company is quickly running out of cash.

Back in May, Augusta had warned investors in its Management Discussion & Analysis report that any permitting delays past September 30 could be bad news, as it could “result in the Company consuming its remaining working capital.” Looks like that’s where Augusta’s headed right now.

According to the company’s most recent financial statement, released on August 15, Augusta had only $6.4 million in cash as of June 30 (compared to $29 million in December 2012). If the decision is delayed and additional funding cannot be obtained, “this would indicate an existence of a material uncertainty that raises substantial doubt about the Company’s ability to continue as a going concern,” the company notes.

Augusta is so cash-strapped right now that it has borrowed $10 million from one of its corporate officers and an unnamed shareholder to bolster its cash reserves, according to the company’s financial filings. That’s on top of an $83-million loan it took from a private financing company over the past two years that is due in July 2014. The company has a way out of this financial morass — two other investors have pledged to dole out $335 million — but that’s entirely dependent on Augusta receiving its permits for the Rosemont mine.

However, as Pete Dronkers of the mining watchdog group Earthworks points out, even if the Forest Service decides in favor on the project by the end of this month, the efforts to help the mining company might come to naught: Augusta will still need a Clean Water Act permit from Army Corps of Engineers before it can begin digging the mine. And the Army Corps will most likely wait until after the Forest Service makes its decision and turns in the final version of its environmental impact statement, says Hartmann. “Their review, at best, will take another two to three years,” she says. By then, unless it comes up with additional funds, it’s likely that Augusta will be completely out of cash.

Given that the mining in the area could impact wetlands that have been designated “Outstanding Arizona Waters” that offers special protection under the US Clean Water Act, environmentalists are hopeful that the Army Crops will deny the mining permit.

“I don’t see how [Augusta] will get that [permit] because the mining runoff will contaminate precious streams and wetlands,” says Hartman. “We are encouraged because the company is running out of options and steam.” But, she says the company’s public relations machinery was so good that “a lot of people in the community think the mine is a done deal.”

Augusta’s Rosemont Copper officials in Arizona and the Forest Service hadn’t responded to calls for comment by the time this story went live.

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