Contract analysis

I. Executive Summary This memorandum analyzes the force majeure and excusable delay provisions in the proposed consent decree in United States of America and State of Montana v. Torchlight Mining Corp., et al., Civil Action No. 9:24-cv-00087-DWM (D. Mont.). Specifically, this memorandum addresses the force majeure provisions as set forth in the Department of Justice's ("DOJ") first draft consent decree, circulated on

1. Expand the definition of qualifying force majeure events to include severe weather events, epidemics and pandemics, regulatory and permitting delays by state and federal agencies (including delays by EPA itself in reviewing required submissions), third-party contractor and supplier failures on the critical path, and utility and infrastructure failures.

2. Negotiate a cure period or penalty-tolling mechanism so that stipulated penalties do not accrue — or are held in escrow — during any period in which a good-faith force majeure claim is pending.

3. Clarify the burden of proof standard by proposing a "commercially reasonable efforts" standard as an alternative to the government's "due diligence" formulation, or alternatively, by defining "due diligence" with reference to an objective industry standard.

4. Modify the notice requirements by implementing a two-tier notice mechanism — a 15-day preliminary notice followed by a 30-day supplemental notice — rather than requiring a comprehensive notice within 15 calendar days.

5. Add provisions for cascading delays so that if a force majeure event causes excusable delay in one milestone, all dependent downstream milestones at the same site (and, where demonstrable, at other sites) are automatically extended.

6. Address state co-plaintiff coordination by clarifying notice obligations and the role of state environmental agencies in force majeure determinations. Each of these recommendations is discussed in detail in the sections that follow.

II. Background and Context A. The Consent Decree Framework This action was filed on January 18, 2024, by the United States of America, acting through the Department of Justice, Environment and Natural Resources Division ("ENRD"), and the U.S. Environmental Protection Agency ("EPA"), together with the States of Montana, Nevada, and West Virginia as co-plaintiffs, against Torchlight Mining Corp. and certain affiliated

1. Ridgecrest Copper-Molybdenum Mine (Drummond, Montana). The Ridgecrest Mine is an inactive open-pit copper-molybdenum mine located approximately 12 miles northeast of Drummond, Montana, in Granite County, at an elevation of approximately 5,800 feet. The site encompasses approximately 3,200 acres, including the open pit, tailings impoundment, waste rock dumps, and associated haul roads and infrastructure. The primar

2. Gallatin Chemical Works (Belgrade, Montana). The Gallatin Chemical Works is an active chemical manufacturing facility located in Belgrade, Montana, approximately 8 miles west of Bozeman, in Gallatin County. The facility has been in operation since 1962 and currently produces carbon disulfide (CS₂) and related chemical products. Environmental contamination at the site includes CS₂ groundwater contamination at conce

3. Bonanza Creek Gold Mine (Lander County, Nevada). The Bonanza Creek Gold Mine is an active open-pit gold mine located in Lander County, Nevada, approximately 45 miles south of Battle Mountain. The mine utilizes heap-leach processing with cyanide solution. Environmental concerns include three documented heap-leach releases: a release of approximately 15,000 gallons of cyanide-bearing solution in March 2022; a releas

4. Kanawha Bend Chemical Plant (Institute, West Virginia). The Kanawha Bend Chemical Plant is an inactive chemical manufacturing facility located in Institute, West Virginia, in the Kanawha Valley industrial corridor (commonly known as "Chemical Valley"). The facility operated from 1948 to 2019, producing sulfuric acid, oleum, and specialty chemical products. Environmental contamination includes sulfuric acid residua

III. Analysis of the Government's Proposed Force Majeure Provision A. Text of the Government's Proposed Provision (DOJ First Draft, November 8, 2024) The DOJ's first draft consent decree, circulated November 8, 2024, contains a force majeure provision at Section XII (Paragraphs 87–95) that closely tracks the standard EPA model force majeure clause. While we do not reproduce the entire provision verbatim in this memor

IV. Analysis and Recommendations A. Definition of Qualifying Force Majeure Events The definition of qualifying force majeure events is the most consequential element of the force majeure provision. An overly narrow definition — limited to traditional "acts of God" — would leave TMC exposed to stipulated penalties for a wide range of circumstances genuinely beyond its control. Conversely, the government will resist an

1. Natural Events and Severe Weather The government's draft limits force majeure to traditional "acts of God" categories — floods, earthquakes, and fires. While these are appropriate, the list is incomplete in that it does not address severe weather events that, while not rising to the level of natural disasters, can materially impair TMC's ability to perform outdoor remediation activities. This omission is particula

2. Epidemics and Pandemics The COVID-19 pandemic demonstrated conclusively that public health emergencies can cause widespread disruption to construction and remediation activities, including workforce quarantines, supply chain disruptions, government-ordered shutdowns, and limitations on interstate travel. While the acute phase of the COVID-19 pandemic has passed, the risk of future pandemics or localized epidemics

3. Regulatory and Permitting Delays This is perhaps the most critical category of force majeure events for TMC, and the one most likely to provoke significant government resistance. Several key remediation milestones under the consent decree are directly dependent upon the issuance of permits, approvals, or authorizations by state and federal regulatory agencies. TMC cannot control the pace of regulatory review, and

4. Third-Party Contractor and Supplier Failures TMC has engaged Pinnacle Creek Environmental, LLC ("Pinnacle Creek"), led by Dr. Astrid Bergmann, P.E. (Bozeman, Montana), to serve as the primary remediation design and oversight contractor for all four sites. In addition, TMC will need to procure specialized remediation equipment and materials, including geosynthetic liners for the Bonanza Creek Mine heap-leach pad re

5. Utility and Infrastructure Failures The Kanawha Bend Chemical Plant and Gallatin Chemical Works are active or recently active industrial facilities that depend on reliable utility services, including electrical power, natural gas, water supply, and telecommunications. Remediation activities at these sites may require continuous power for treatment systems, communications for monitoring and control, and water suppl

6. Legal and Judicial Delays The proposed consent decree has not yet been entered by the court. The current target date for entry of the consent decree is May 15, 2025, with an anticipated Effective Date of June 14, 2025. All remediation milestones under the consent decree are measured from the Effective Date. If entry of the consent decree is delayed — whether due to extensions of the public comment period, challeng

1. The 15-Day Notice Period The government's draft requires TMC to provide written notice to EPA and DOJ within 15 calendar days of the date TMC first knew or should have known of a force majeure event. TMC's December 16 redline proposed extending this period to 30 calendar days. Both positions have merit and drawbacks. From TMC's perspective, 15 calendar days may be insufficient to identify the full scope and impact

2. Content of Notice The government's draft requires the force majeure notice to identify: (a) the specific force majeure event or events; (b) the affected consent decree obligation or obligations; (c) the anticipated duration of the delay; (d) the actions taken by TMC to prevent or minimize the delay; and (e) a proposed schedule for carrying out the affected obligations after the force majeure event has ended. This

3. Notice Recipients The government's draft requires TMC to provide force majeure notice to EPA (specifically, Margaret Coulson, OECA, and the applicable EPA Regional Project Coordinator — Dr. Samuel Tesfaye for the Ridgecrest Mine and Jennifer Whitfield for the Bonanza Creek Mine) and to DOJ (Philip Orenstein, ENRD). The draft does not specify notice to state co-plaintiffs. We recommend clarifying that TMC shall als

1. Government's Position: "Due Diligence" Standard The government's draft places the burden on TMC to demonstrate three elements: (i) the delay was caused by circumstances "entirely beyond TMC's control"; (ii) TMC exercised "due diligence" to avoid the delay; and (iii) TMC took "all reasonable steps" to minimize the delay once it occurred. The "due diligence" standard is a high bar. In the environmental enforcement c

2. TMC's Proposed "Reasonable Efforts" Standard TMC's December 16 redline proposed substituting "reasonable efforts" for "due diligence" throughout the force majeure provision. "Reasonable efforts" is a lower standard that generally requires commercially reasonable steps short of extraordinary measures. Under a "reasonable efforts" standard, TMC would need to demonstrate that it took steps that a reasonable company i

3. Recommendation. We recommend proposing "commercially reasonable efforts" as a middle ground between "due diligence" and "reasonable efforts." This formulation is well-established in commercial contracts, is frequently used in consent decrees and other enforcement instruments, and has a substantial body of case law interpreting its meaning. The "commercially reasonable" qualifier provides an objective standard — it

1. Government's Position Under the government's draft, stipulated penalties continue to accrue during any period in which TMC has asserted a force majeure claim but EPA has not yet rendered a determination. If EPA subsequently approves the force majeure claim, the accrued penalties attributable to the excused delay are abated. If EPA denies the claim, the accrued penalties remain due and payable. This approach create

2. TMC's Position TMC's December 16 redline proposed that stipulated penalties not accrue at all during any period in which a force majeure claim is pending, regardless of the ultimate disposition of the claim. This proposal is understandable from TMC's perspective but is likely to be rejected by the government, as it creates an incentive for TMC to file force majeure claims — even weak or marginal ones — to pause pe

3. Recommendation. We recommend a compromise approach that balances TMC's need for financial protection with the government's interest in maintaining penalty deterrence. Specifically, we propose the following framework: Option A (Preferred): Tolling During Good-Faith Claims. Stipulated penalties shall be tolled (i.e., paused and not accruing) during any period in which a force majeure claim is pending, provided that:

1. Importance of Cascading Delay Provisions The consent decree establishes multiple milestones at each of the four sites, with many milestones dependent on the completion of earlier milestones. For example, at the Ridgecrest Mine, the construction commencement milestone (June 14, 2027) depends on EPA's prior approval of the Remedial Action Work Plan (due December 14, 2025). If a force majeure event delays the submiss

2. Recommendation. We recommend proposing a cascading delay provision with two components: Intra-Site Cascading Delays. If a force majeure event causes excusable delay in one milestone at a given site, all subsequent milestones at that site that are dependent on completion of the delayed milestone shall be automatically extended by a period equal to the period of excusable delay, without the need for separate force m

1. Government's Proposed Process Under the government's draft, EPA has sole discretion to determine whether a force majeure event has occurred and whether the claimed delay qualifies for relief under the consent decree. The draft does not specify any timeframe within which EPA must render its determination. If TMC disagrees with EPA's determination, TMC may invoke the consent decree's dispute resolution mechanism, wh

2. Recommendations. We have four recommendations regarding the EPA review and determination process: First, we recommend proposing a deadline for EPA's force majeure determination. The absence of any specified timeframe for EPA's determination creates uncertainty and delays that compound the financial exposure discussed in Section IV.D above. We recommend proposing that EPA shall render a written determination on any

1. Government's Position The government's draft limits the period of excusable delay to the duration of the force majeure event itself. Once the force majeure event ends — e.g., once a flood recedes or a wildfire is extinguished — the excusable delay period terminates, and TMC is immediately obligated to resume performance and meet the original milestone deadlines (as adjusted only for the duration of the force majeu

2. TMC's Position and Recommendation TMC's December 16 redline proposed that the excusable delay period extend for the duration of the force majeure event plus a "reasonable recovery period." This is a critical provision. The cessation of a force majeure event does not mean that remediation activities can resume immediately. After a flood at the Ridgecrest Mine, for example, TMC would need to conduct damage assessmen