Ad Hoc Committee on Mining Regulations

Members Present

Senator Sylvia Allen, Co-Chair Representative Russ Jones, Co-Chair

Joe Dixon (for Maria Baier) Representative Barbara McGuire

Chad Fretz Representative Franklin Pratt

Ben Grumbles Yates Hudson

Herb Guenther Tom Lowry

Joe Hart Dr. Madan Singh

Members Absent

Senator Amanda Aguirre

Senator John Nelson Will Humble

Kris Hefton Bill Staudenmaier

Thomas Adkins, Majority Research Analyst, Natural Resources & Rural Affairs Committee (NRRA), stated that he is the new staff person for the NRRA Committee.

Co-Chairman Jones noted that Ralene Whitmer accepted a position at the Arizona Department of Transportation and wished her the best.

Rusty Bowers, Arizona Rock Products Association (ARPA), introduced Steve Trussell,
Executive Director, ARPA, one of the producers of a video about the rock products industry.

Steve Trussell, Executive Director, Arizona Rock Products Association (ARPA), remarked that a video to be shown to the Members highlights some challenges the rock products industry faces, most of which will tie into the Committee’s review of proposed legislation for the omnibus bill.

The Members viewed the video.

Co-Chairman Jones stated that it is important to make sure resources are available in close proximity to where growth will occur in the future.

Mr. Hart opined that the Navajo Code Talker monument would not have happened without the help of ARPA and Mr. Bowers who worked a few nights by flashlight to complete it.
Co-Chairman Jones remarked that it is an impressive monument to honor a group of special people. His father-in-law was a young Marine in the South Pacific in World War II, and he talked about the Code Talkers who made operations much more successful and saved lives.

Representative McGuire indicated that she agreed to sponsor legislation, which she asked
George Tsiolis to explain.

George Tsiolis, ASARCO, stated that there was discussion at the previous meeting about how the slow permitting process harms the mining and milling industries. Since there are three operating copper smelters in the United States, two of which are in Arizona, there is an area of legislation outside traditional mining regulation that is more associated with the Clean Air Act (CAA) that he believes would most benefit the milling industry. It involves a process to normalize how the public participates in finalization of recommendations to the Environmental Protection Agency (EPA) that does not have any bearing or undue restrictions on the Arizona Department of Environmental Quality’s (ADEQ) ability to advise the Governor as to what to recommend to the EPA. This process would avoid what historically has been a politicalization of how those recommendations are formulated. He worked with ADEQ to develop the legislation over the holidays, and he believes it provides the type of public involvement that is necessary to avoid a misinformed recommendation of attainment status.

Mr. Grumbles opined that the legislation will protect the public interest and increase transparency and accountability in the process.

Co-Chairman Jones thanked everyone for working on the legislation over the holidays.

Representative McGuire expressed gratitude to everyone who provided input, indicating that the goal is to have a community with a healthy environment, while at the same time providing jobs and boosting the economy.

Co-Chairman Jones asked staff to incorporate copies of the draft language (Attachments 1, 2 and 3) as part of the addendum to the revised recommendations (Attachment 4).

Mr. Grumbles explained that the governor of each state has an opportunity to make a recommendation to EPA on developing the size of an area of attainment or non-attainment or whether it is unclassifiable. After much discussion and review of materials and monitoring data, the Governor wrote a letter recommending that the EPA find that all portions of the state, excluding Indian country, be designated as attainment/unclassifiable, with the exception of the Hayden area in Gila and Pinal Counties (Attachment 5). The Governor recommended that the EPA use discretion to avoid making any premature designation of the Hayden area in order to allow time to carry out the commitment contained in an attached letter by ASARCO to improve control of lead through its permitting process and to allow ADEQ to obtain more data, in order to avoid the stigma of a non-attainment designation.

Mr. Grumbles said he will follow-up with the EPA to ensure that the importance of the Governor’s recommendation is understood. He advised that there is no specific time frame for a response, but the Governor’s letter requests that the EPA reserve judgment on the designation until October 2011. He added that the letter also highlights the need for accurate monitoring data, noting that there is the possibility of another monitoring station.

Co-Chairman Jones stated that concern was expressed by presenters that agencies such as ADEQ and the Department of Mines and Mineral Resources need to have adequate resources to deal with permits in a timely manner.

Mr. Grumbles referred to a proposal for legislation to provide an exemption from the rule-making process in order to increase fees and make sure those fees reflect a fair and accurate level of services provided (Attachment 6).

Co-Chairman Jones remarked that the Arizona Department of Agriculture (ADAG) has an advisory council that recommends fees and fee structures in conjunction with the director. ADAG has an exemption from the rule-making process, and it has been a fairly successful model with the exception of the propensity for the Legislature to sweep the funds from the fees, leaving the agency without adequate resources to provide services. Any proposed legislation should include language to prevent that from occurring.

Mr. Grumbles noted that it would be beneficial to have more input from stakeholders because it is a priority of ADEQ to have fees that reflect the cost of services. He offered his help on the sweep-free fee front.

In response to questions about the proposal (Attachment 6), Mr. Darwin advised that there is not an across-the-board increase of a certain percentage or doubling of fees; some were decreased and others were increased. He hopes to have an opportunity to share with stakeholders the detailed process used to establish the fees. He pointed out that the proposal includes fee caps so there is a level of certainty to industry that at some point the fees will not increase.

Mr. Grumbles remarked that in the next year ADEQ is committed to issuing general permits as opposed to individual permits which facilitates the permitting process. ADEQ will also add more staff to the permit processing portion of the agency and do a variety of things for the mining sector to help carry out ADEQ’s environmental responsibilities and improve performance.

Mr. Darwin responded to questions about some fees in the proposal (Attachment 6).

Referring to the revised recommendations (Attachment 4), Mr. Bowers conveyed that he hopes to address the bidding process so subcontractors are named and have to be the providers of the service to avoid any “funny business” after a bid is received by the state. He has some draft language but questioned if it is germane to mining since it deals with minerals, but it also relates to other contracting bids that ADEQ or any agency may receive from a contractor.

Co-Chairman Jones replied that he is not sure if the Members could constitutionally carve out something that pertains only to mining, and after a brief discussion, Mr. Bowers stated that it can be worked out separately from the Committee.

Mr. Bowers made the following comments:

General regulations at the state level should not exceed federal mandates or regulations.
It is necessary to plan for aggregates as the industry grows.
The permitting reviews done by ADEQ are appreciated.
In relation to dual regulation, in their case, financial assurances are required for remediation efforts of a mine site, but remediation requirements of other entities at the county and state agencies sometimes overlap on the same site, which he hopes to address.
Any Governor’s Regulatory Review Council (GRRC) improvements are welcome, especially early petition and time frames.
Participation of the State Land Department (SLD) on state land reform that is underway is appreciated.
Mr. Guenther’s new initiative to place butterflies in every well is appreciated.

Referring to a handout, “Uranium Group Input” (Attachment 7), Mr. Singh commented that lawsuits were brought against companies that are mining or want to mine uranium. The state should become an intervener, including lawsuits on federal lands, because the state has an interest.

Co-Chairman Allen stated that after the Rodeo-Chedeski fire, the Forest Service put up some burned timber for salvage and environmental groups sued. She has watched as the timber industry fought lawsuits over the years, and this was the only one the industry won, probably because all of the cities and counties became interveners due to the economic ramifications in the communities of loss of the sawmills and jobs. She opined that it is absolutely critical for the state to become involved. When frivolous lawsuits are brought up over and over again, industries eventually give up, so something needs to be done to stop lawsuits that are geared to harass and cease production.

Mr. Hart commented that the City of Kingman and Mohave County will be glad to intervene if there is an opportunity to mine uranium. The County wants those jobs and needs the income. Those tax dollars will eventually arrive in Phoenix and he would like to help if any legislation is required.

Mr. Singh related that the basis of the complaints is environmental damage. Mines have been operating in that area and there has been no proof of environmental damage, but people scare easily when uranium is mentioned.

Mr. Grumbles stated that ADEQ stands behind permits that were issued and he looks forward to working with the mining industry on location and safeguards, etc. He understands the importance of mining and uranium mining to the state and country.

Lyn White, Director of Government Relations, Freeport McMoRan Copper & Gold, stated that her concerns are covered in the revised recommendations (Attachment 1).

Co-Chairman Jones asked for input as the Members review the revised recommendations (Attachment 1).

II. State Issues/Recommendations

Federal, State and Stakeholder Communication

Mr. Grumbles indicated that he and George Tsiolis already addressed legislation on the transparency of making recommendations on non-attainment.

Active Management Area (AMA) Recommendations

Ms. White explained that in moving forward with remediation activities, it was discovered that there are conflicting statutes for the Arizona Department of Water Resources (ADWR) versus ADEQ as far as well placement, which is the reason for the first two items. Regarding the fourth item about groundwater transportation between groundwater basins, the Bisbee facility sits between two basins, and although the process of mitigation is moving forward, this is recognized as an issue, so it is included for clarification.

Mr. Fretz added that many wells will be put in at the Sahuarita Sulfate Mine that will be tied to mineral extraction rights to pump those wells in the future. If those wells impact other wells, and they will likely have an effect on drawdown, people have the opportunity to comment, but if their approval is not obtained, it will not be possible to put in those wells. The idea is to waive impact analyses as the wells are put in if something is being done with a mitigating purpose. The company will work with constituents who will be affected, but the ability is needed to put those wells in to manage the plume adequately in the future.

Referring to the third item, Mr. Fretz stated that if pumping is still required at the end of mine life, the mines might not have the right to extract groundwater if there is some mitigation ongoing, so the purpose is to clarify that Type 2 Rights can be used for mitigation purposes relating to mining.

Ms. White added that it would also apply to any remediation that will be done in the future because remediation is part of the entire process. It would apply for some of the aggregate companies as well.

Mr. Grumbles stated that he visited the Sahuarita Mine and saw the work that is being done to remediate a sulfate plume. As to well withdrawals or potential impacts on other wells, it is important to make sure the company has the ability to remediate and that the entity providing water to the community is part of the process. Community involvement is necessary and he wants to make sure that would not be decreased by doing this.

Mr. Guenther stated that more information is needed on the first recommendation. ADWR has a management plan requirement and people with certificated assured water supplies should not be impacted. As far as the second item, the first concern is how much water and the type of withdrawal. Also, it is necessary to look at the increased overdraft and assured water supply entitlements that are already committed, so that would be on a case-by-case basis; however, that item and the third item may already fall under A.R.S. 45-513(A).

Ms. White agreed that those are covered in statute, but the intent is to make extra sure that it is clarified.

Mr. Guenther suggested that the fourth item could be taken care of in session law for a specific purpose. Co-Chairman Jones pointed out that Representative Lucy Mason is sponsoring emergency water transfer session law legislation that is passed every year, which could possibly be amended to include this item. Ms. White agreed to work with Representative Mason and
Mr. Guenther.

Co-Chairman Jones stated that he hopes to work out the details for possible legislation in stakeholder meetings.

Time Frames Licensing and Bidding Process

Mr. Singh stated that the first item is meant to address delays by some agencies because he is aware of instances that have gone on for years.

Co-Chairman Jones surmised that the three items are a package and noted that it may not be possible to take politics out of the permitting phase as suggested in the third item, but it is possible to build in some reasonable time frames and disincentives for extensions.

Ms. White indicated that the language relates to consequences for an agency’s failure to comply as well as establishing time frames. It is taken from A.R.S. 41-1077 and 41-1073.

Sydney Hay, Arizona Mining Association, related that she did not recommend nor does she understand the meaning of the third item.

Co-Chairman Jones recalled that there was discussion about some permits taking an extremely long time and that a way needs to be found to bring those to closure because the applicant is in limbo while the cost of maintaining their standing goes on, increasing their overall cost.

Mr. Grumbles commented that taking politics out of the process would be a challenge. If he drafted the language it would be about accountability, transparency and science-based decision making; however, ADEQ is supportive of the previous items. It is important to provide predictability and consistency up front so those in the regulatory process are not in perpetual limbo.

Mr. Guenther said he is not in agreement with the one percent to five percent penalty paid directly to the General Fund, which should probably be discussed further. Whatever the percentage, it should go into the agency account of unexpended funds so it can be tossed to the Legislature when sweeps are made.

Funding of Agencies

Referring to the first item, Mr. Guenther indicated that he has a problem with setting 2010 as a baseline in statute. He pointed out that a state agency cannot delegate responsibility for approval of increasing fees to stakeholders. As far as private consultants or alternative resources to assist the agency in reviewing licenses and permits, that is primarily an accelerated permit review process, so he assumes the applicant would pay the cost of the consultant.

Referring to the last item, Mr. Singh remarked that with all of the budget cuts, there is no money.

Governor’s Regulatory Review Council (GRRC)

Co-Chairman Jones stated that GRRC recommendations were covered in some of the working materials already discussed.

Ms. White submitted that the third and fourth items fall under regulatory reform and are duplicative, so only the third item should be used. She would like to see it apply to ADWR, SLD and other agencies whereas the fourth item only deals with ADEQ.

Mr. Guenther stated that in relation to the first and second items about GRRC comment periods, he believes there is already the authority to submit written comments at any time under
A.R.S. 41-1052.

Ms. White answered that when attempts were made to move forward and go to GRRC, it was deemed as inappropriate, but she can look it up.

Mr. Guenther stated that one concern about the third item to be moved to regulatory reform is that the federal government does not have a Groundwater Code.

Mr. Grumbles responded that is probably the reason it says “unless expressly authorized by the Legislature.” It is important, in the context of environmental protection and maintaining delegated programs at the state level, to know what is on the table with such a provision because sometimes ADEQ takes great pride in customizing programs, maybe not just because of an act of the Legislature, but because of a particular agency.

Co-Chairman Jones speculated that the word used was exceed, i.e., if the state requirements for compliance exceed what the federal government is requesting or requiring,

Mr. Grumbles submitted that leads to whether there is a quantitative exceedance or if it is a broader scope. For environmental permitting and regulatory programs, ADEQ needs to know what this would entail and whether delegated state programs would be put at risk.

Co-Chairman Jones said those items may be merged or reworded.

City/County Planning

Ms. Hays related that she received a request to add to the second item: “NOR SHALL COUNTIES UTILIZE PUBLIC FUNDS OR STAFF TO ACTIVELY OPPOSE SUCH IMPROVEMENTS,” as a result of a situation involving Rosemont Copper and Pima County.

Co-Chairman Jones asked that she bring it up in stakeholder meetings since legal counsel will be present.

State Trust Lands

Joe Dixon, State Land Department (SLD), remarked that it appears the items would be helpful to SLD, especially in relation to uranium closure.

Lawsuits

Mr. Guenther suggested that a constitutional lawyer review the language and
Co-Chairman Jones agreed.

Regulatory Issues/Recommendations

Co-Chairman Jones noted that the first item refers to Mr. Bowers’ comments about the bidding process.

Mr. Singh related that the idea of the second item is to specify a detailed procedure as to how to reach the final objective, and as long as the standards are met, it should be left to the company to determine how best it can be done.

Ms. White, referring to the third item, conveyed that current statute addresses licenses and permits, but does not include leases, so she wants to be sure mineral leases with the SLD are included.

Referring to the first item, Mr. Guenther submitted that state-certified engineers are not all created equal. Many times a peer review is required, even among certified professionals, to make sure individuals are practicing to their potential, which should be kept in mind when looking at state-certified people.

Co-Chairman Jones stated that there was discussion about transparency with respect to qualifications and credentialing because of ambiguity about requirements.

Ms. White related that one of the qualifications of the State Mine Inspector’s Office is at least three years of experience in underground mining, but there are no longer any underground mines in Arizona. She suggested adding language to the omnibus bill to require mining experience instead of underground mining experience, and she believes it is four years.

Mr. Singh acknowledged that there are currently not any underground mines, but advised that a gold mine will probably come into operation this year or next year, so the qualifications should be broader.

The Members agreed to require experience in mining or underground mining, which
Co-Chairman Jones indicated will be added to the revised recommendations (Attachment 4).

Co-Chairman Allen moved that the Committee accept the documentation (revised recommendations) as amended and supported documentation. The motion carried unanimously.

Co-Chairman Jones stated that the bill sponsored by Representative McGuire is moving along and others still need to be discussed in stakeholder meetings. The first stakeholder meeting will be held on the morning of Thursday, January 14, 2009. It may not be possible to go through all of the recommendations, but they will be reviewed in steps.

Mr. Grumbles stated that he will coordinate with the Governor’s Office and get back to
Co-Chairman Jones.

Without objection, the meeting adjourned at 3:22 p.m.

_______________________________

Linda Taylor, Committee Secretary

January 14, 2010

(Original minutes, attachments and audio on file in the Chief Clerk’s Office; video archives available at http://www.azleg.gov)

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AD HOC COMMITTEE ON MINING REGULATIONS

January 5, 2010

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