preliminary-case-assessment-memo.docx

1039-00003 · Torchlight Mining Corp · Case Assessment & Strategy

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MEMORANDUM

TO: Miriam Soo-Hwan Park, General Counsel, Torchlight Mining Corp. Douglas K. Prennell, Chief Executive Officer, Torchlight Mining Corp.

FROM: Harrison Wexford, Partner, Calderwood & Harkness LLP Beatrice Holloway, Partner, Calderwood & Harkness LLP Elliot Nguyen, Associate, Calderwood & Harkness LLP Grace Nakamura, Associate, Calderwood & Harkness LLP

DATE: November 4, 2024

RE: Preliminary Case Assessment — Multi-Site EPA Enforcement and Consent-Decree Negotiation (Matter No. 1039-00003)

CC: Gareth Linford, VP, Environmental Health & Safety, TMC Carolyn Bracebridge, CFO, TMC

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I. Executive Summary

The purpose of this memorandum is to provide Torchlight Mining Corp. ("TMC" or the "Company") leadership with a comprehensive assessment of the Company's legal and financial exposure arising from the pending multi-site environmental enforcement action brought by the United States of America (acting through the United States Environmental Protection Agency ("EPA") and the United States Department of Justice ("DOJ")) and the States of Montana, Nevada, and West Virginia. This memorandum sets forth our preliminary findings and recommendations after an intensive initial review of all materials available to us since our engagement on October 21, 2024, and is intended to inform the Company's settlement strategy as consent-decree negotiations enter their critical drafting phase.

The case is captioned United States of America and State of Montana v. Torchlight Mining Corp. et al., Civil Action No. 9:24-cv-00087-DWM, pending in the United States District Court for the District of Montana, Missoula Division, before the Honorable Donald W. Molloy, Senior Judge. The complaint, filed by DOJ on January 18, 2024, names five TMC-affiliated entities as defendants and alleges violations at four Torchlight-operated or formerly operated facilities spanning three states.

The four sites at issue are: (1) the Ridgecrest Copper-Molybdenum Mine in Granite County, Montana ("Ridgecrest Site"); (2) the Gallatin Chemical Works in Gallatin County, Montana ("Gallatin Site"); (3) the Bonanza Creek Gold Mine in Lander County, Nevada ("Bonanza Creek Site"); and (4) the Kanawha Bend Chemical Plant in Kanawha County, West Virginia ("Kanawha Bend Site").

The statutes at issue include the Clean Water Act ("CWA"), 33 U.S.C. §§ 1251 et seq.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. §§ 6901 et seq.; the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601 et seq.; and, with respect to the Bonanza Creek Site only, the Migratory Bird Treaty Act ("MBTA"), 16 U.S.C. §§ 703 et seq.

The named defendants are Torchlight Mining Corp., Torchlight Mining (U.S.) Inc. ("TM(US)"), Torchlight Specialty Chemicals, Inc. ("TSC"), Ridgecrest Mine Holdings, LLC ("RMH"), and Bonanza Creek Mining, LLC ("BCM"). The States of Montana, Nevada, and West Virginia have joined as co-plaintiffs with respect to the sites located within their respective jurisdictions.

Based on our preliminary analysis, we estimate TMC's aggregate financial exposure at approximately $409.9 million on a nominal basis, comprising $343.5 million in total remediation costs across all four sites, $31.5 million in civil penalties, $18.1 million in EPA past-costs reimbursement under CERCLA § 107, $12.0 million in supplemental environmental projects ("SEPs"), and $4.8 million in independent environmental monitor costs. On a net present value ("NPV") basis, applying a 3% discount rate, the aggregate exposure is approximately $311.5 million.

TMC's current environmental reserve on its books as of the third quarter of 2024 stands at C$340.0 million, which translates to approximately US$251.4 million at the prevailing CAD/USD exchange rate of 0.7394. The shortfall between the nominal obligation and the current reserve is therefore approximately US$158.5 million, a gap that will require prompt attention in the Company's financial planning and public disclosure.

Calderwood & Harkness LLP ("C&H") was engaged on October 21, 2024, replacing the Company's prior counsel, Whitfield, Palmer & Goss LLP, which had represented TMC from the inception of the enforcement action through the mediation proceedings and the July 30, 2024 agreement in principle on a consent-decree framework. This memorandum reflects our initial review of all available materials, including the complaint and answer, discovery correspondence, the tolling agreement, mediation materials, the agreement in principle, technical reports and data from both TMC's consultant (Pinnacle Creek Environmental, LLC) and the government's technical expert (Cascade Geosciences, Inc.), insurance policies, corporate records, financial statements, and the Company's existing environmental reserve analyses.

Our preliminary recommendation is as follows: Settlement via negotiated consent decree is strongly advisable. TMC's liability on the merits is substantial across all four sites and all applicable statutes. Available defenses are limited, fact-intensive, and unlikely to succeed at trial. Proceeding to trial would expose the Company to significantly higher penalties (statutory maximums far exceed the negotiated range currently under discussion), adverse publicity, and a non-trivial risk of criminal referral, particularly with respect to the MBTA violations at the Bonanza Creek Site. The consent-decree framework agreed upon on July 30, 2024 provides a workable foundation for settlement. Early, cooperative engagement with EPA and DOJ in the consent-decree drafting process will maximize TMC's leverage on penalty mitigation, remediation schedule flexibility, financial assurance structuring, and other critical terms.

The balance of this memorandum sets forth in detail the factual and legal bases for our assessment, the site-by-site exposure analysis, and our specific recommendations for the path forward.

II. Background

A. Torchlight Mining Corp. — Corporate Overview

Torchlight Mining Corp. is a corporation organized under the Canada Business Corporations Act ("CBCA") and is dual-listed on the Toronto Stock Exchange (TSX: TRC) and the New York Stock Exchange (NYSE: TRC). The Company's principal corporate offices are located at 1800 Bayfield Tower, 401 Bay Street, Toronto, Ontario M5H 2Y4, Canada. TMC maintains a U.S. operational headquarters at 750 Copper Ridge Boulevard, Suite 200, Helena, Montana 59601.

TMC is a diversified mining and specialty chemicals company engaged principally in the extraction and processing of copper, molybdenum, and gold, as well as the manufacture of specialty chemicals used in mineral processing, including flotation reagents and leaching agents. The Company operates fourteen mines and six chemical processing facilities across North America, South America, and Australia. It is one of the largest mid-tier diversified mining companies listed on the TSX.

For the fiscal year ended December 31, 2023, TMC reported consolidated revenue of C$4.82 billion (approximately US$3.56 billion), earnings before interest, taxes, depreciation, and amortization ("EBITDA") of C$1.14 billion (approximately US$843 million), and net income of C$412 million. The Company's market capitalization as of October 2024 was approximately C$7.6 billion. TMC employs approximately 11,400 individuals worldwide, of whom approximately 4,200 are based in the United States.

Key officers relevant to this matter include: Douglas K. Prennell, Chief Executive Officer; Miriam Soo-Hwan Park, General Counsel; Gareth Linford, Vice President, Environmental Health & Safety; and Carolyn Bracebridge, Chief Financial Officer.

B. U.S. Operating Subsidiaries — Named Defendants

The complaint names four TMC subsidiaries in addition to the parent corporation itself. The corporate structure through which TMC conducts its U.S. mining and chemical operations is as follows:

Torchlight Mining (U.S.) Inc. ("TM(US)") is a corporation organized under the laws of the State of Delaware, bearing Employer Identification Number 83-2047156. TM(US) serves as the direct operator of TMC's U.S. mining operations and is wholly owned by TMC. Its registered agent is Ashgrove Services Inc., located at 1209 Orange Street, Wilmington, Delaware 19801. TM(US) is the entity through which TMC exercises day-to-day operational control over the Ridgecrest and Bonanza Creek mining sites and serves as the immediate parent of the Company's other U.S. subsidiaries.

Torchlight Specialty Chemicals, Inc. ("TSC") is a corporation organized under the laws of the State of Delaware, bearing Employer Identification Number 47-3819204. TSC is the operator of both the Gallatin Chemical Works and the Kanawha Bend Chemical Plant. TSC is a wholly owned subsidiary of TM(US) and thus an indirect, wholly owned subsidiary of TMC.

Ridgecrest Mine Holdings, LLC ("RMH") is a limited liability company organized under the laws of the State of Montana, bearing Montana Secretary of State Identification Number E1042738. RMH holds the real property and mineral rights associated with the Ridgecrest Copper-Molybdenum Mine. RMH is wholly owned by TM(US).

Bonanza Creek Mining, LLC ("BCM") is a limited liability company organized under the laws of the State of Nevada, bearing Nevada Secretary of State Entity Number E0518294731. BCM holds the real property, mineral rights, and water rights associated with the Bonanza Creek Gold Mine. BCM is wholly owned by TM(US).

An organizational chart depicting the full U.S. subsidiary structure is attached as Appendix B.

C. Procedural History

The procedural history of this matter is summarized below. A more detailed chronological timeline, including pre-litigation events dating back to the commencement of operations at the Ridgecrest Site in 1978, is set forth in Appendix A.

On September 12, 2023, EPA issued a consolidated Notice of Violation ("NOV") covering all four sites. The NOV identified alleged violations of the CWA, RCRA, and CERCLA at the four facilities and set forth EPA's enforcement intentions. TMC, through its then-counsel Whitfield, Palmer & Goss LLP, responded to the NOV on October 27, 2023, disputing certain factual and legal allegations but expressing willingness to engage in settlement discussions.

On January 18, 2024, the DOJ, acting on behalf of the United States and at the request of EPA, filed the complaint initiating this action, United States of America and State of Montana v. Torchlight Mining Corp. et al., Civil Action No. 9:24-cv-00087-DWM, in the United States District Court for the District of Montana, Missoula Division. The complaint was assigned to the Honorable Donald W. Molloy, Senior Judge.

On March 5, 2024, TMC and all named defendant entities filed an answer to the complaint, denying the material allegations of the complaint and asserting various affirmative defenses.

On April 22, 2024, the parties entered into a Tolling Agreement, pursuant to which all applicable statutes of limitations and repose are tolled through December 31, 2025, in order to facilitate settlement negotiations without the pressure of impending limitations deadlines.

On May 15, 2024, the Court entered an order referring the matter to court-ordered mediation before United States Magistrate Judge Clara Finnegan. Mediation sessions were conducted on June 12, June 26, and July 18, 2024.

On July 30, 2024, the parties reached an agreement in principle on a consent-decree framework, setting forth the general parameters for settlement, including the scope of remediation obligations, the anticipated range of civil penalties, the financial assurance structure, and the mechanism for appointment of an independent environmental monitor. The agreement in principle, while not binding, established the framework within which detailed consent-decree language is now being drafted.

On October 21, 2024, TMC engaged Calderwood & Harkness LLP to serve as lead outside counsel, replacing Whitfield, Palmer & Goss LLP, for the purpose of finalizing the consent decree and all ancillary instruments, as well as advising on related insurance, financial, and corporate matters.

On November 8, 2024 (anticipated), DOJ is expected to circulate the first draft of the consent decree for TMC's review and comment.

D. Government Parties and Their Counsel

The enforcement action involves multiple government agencies and legal representatives, which we identify below for completeness and reference.

EPA is the lead federal enforcement agency. Given the multi-state nature of the enforcement action, three EPA regional offices are involved. EPA Region 8 (Denver, Colorado) has jurisdiction over the two Montana sites — Ridgecrest and Gallatin — and serves as the lead EPA region for the consolidated action. The lead regional coordinators are Dr. Samuel Tesfaye and a second coordinator whose identity has not yet been formally confirmed in our correspondence. EPA Region 9 (San Francisco, California) has jurisdiction over the Bonanza Creek Site in Nevada; the regional coordinator is Jennifer Whitfield. EPA Region 3 (Philadelphia, Pennsylvania) has jurisdiction over the Kanawha Bend Site in West Virginia. The lead case attorney at EPA headquarters is Margaret Coulson of the Office of Enforcement and Compliance Assurance ("OECA") in Washington, D.C.

DOJ, Environment and Natural Resources Division ("ENRD") is responsible for the litigation. The lead trial attorney is Philip Orenstein; the supervising attorney is Katherine Rowe-Halpern, Senior Counsel, Environmental Enforcement Section.

The State of Montana, Department of Environmental Quality ("MT DEQ") has intervened as co-plaintiff with respect to the Ridgecrest and Gallatin Sites. Montana is represented by Annika Hedstrom, Assistant Attorney General, Montana Attorney General's Office, Environmental Bureau.

The State of Nevada, Division of Environmental Protection ("NV DEP") has intervened as co-plaintiff with respect to the Bonanza Creek Site. Nevada is represented by Ricardo Fuentes, Deputy Attorney General, Nevada Attorney General's Office.

The State of West Virginia, Department of Environmental Protection ("WV DEP") has intervened as co-plaintiff with respect to the Kanawha Bend Site. West Virginia is represented by Loretta May Hatcher, Assistant Attorney General, West Virginia Attorney General's Office.

The government's retained technical expert is Cascade Geosciences, Inc., of Seattle, Washington. Dr. Patricia Voss, Ph.D. in Hydrogeology, serves as the independent technical reviewer for remedy selection and cost estimation, particularly at the Ridgecrest and Bonanza Creek Sites. Dr. Voss's cost estimates for these sites have exceeded those prepared by TMC's consultant, Pinnacle Creek Environmental, creating a gap that will be a central issue in consent-decree negotiations.

E. TMC Advisors and Counsel

TMC's advisory team for this matter is as follows:

Lead outside counsel: Calderwood & Harkness LLP. The engagement is led by Harrison Wexford (Partner, Environmental Litigation) and Beatrice Holloway (Partner, Environmental Regulatory), with associate support from Elliot Nguyen and Grace Nakamura. The matter is designated as Matter No. 1039-00003.

Montana local counsel: Holcroft, Dane & Weiss LLP ("HDW"), of Helena, Montana. The lead attorney is Russell Dane, a partner specializing in natural resources and environmental law in Montana state courts and administrative proceedings. HDW provides counsel on Montana-specific regulatory and procedural issues related to the Ridgecrest and Gallatin Sites.

Nevada local counsel: sagebrush Law Group, PLLC, of Reno, Nevada. The lead attorney is Denise Quartaro, who advises on Nevada mining law, water rights, and state environmental regulatory matters related to the Bonanza Creek Site.

West Virginia local counsel: Baxter, Tully & Crane PLLC ("BTC"), of Charleston, West Virginia. The lead attorney is Nathan Tully, who advises on West Virginia environmental regulatory and enforcement matters related to the Kanawha Bend Site.

Environmental remediation consultant: Pinnacle Creek Environmental, LLC, of Bozeman, Montana. The engagement is led by Dr. Astrid Bergmann, P.E., Senior Principal. Pinnacle Creek provides remedial investigation/feasibility study ("RI/FS") support, remediation design, cost estimation, and long-term monitoring program design for all four sites. Pinnacle Creek's cost estimates form the basis for TMC's remediation cost projections set forth in this memorandum.

Financial advisor: Northspire Capital Markets, Inc. The engagement is led by Vivian Okafor, Managing Director, Liability & Risk Advisory. Northspire advises on financial assurance structuring, reserve adequacy, insurance recovery strategy, and credit facility impact analysis.

External auditor: Ridgeline Accounting Partners LLP, of Calgary, Alberta. The lead engagement partner is Frances Whitmore, CPA, CA. Ridgeline serves as TMC's external auditor for purposes of financial statement preparation and will be consulted regarding the appropriate accounting treatment of the consent-decree obligations under ASC 450 and IAS 37.

III. Site-by-Site Factual Summary and Regulatory History

This section sets forth the factual background for each of the four sites at issue, including site descriptions, environmental conditions, regulatory history, the specific violations alleged by the government, and our preliminary assessment of remediation costs. Site location maps and detailed contaminant data are included in Appendices C and D, respectively.

A. Ridgecrest Copper-Molybdenum Mine (Ridgecrest Site)

1. Site Description and Operations

The Ridgecrest Copper-Molybdenum Mine is located at 14200 Ridgecrest Mine Road, Drummond, Granite County, Montana 59832. The mine footprint encompasses approximately 3,200 acres, with the total controlled property — including buffer lands, access corridors, and ancillary infrastructure — extending to approximately 8,700 acres. The site is situated in a mountainous area at an elevation of approximately 5,400 feet, within the Flint Creek watershed of the upper Clark Fork River basin.

The Ridgecrest Site is an open-pit copper-molybdenum mine that has been in operation since 1978. Active mining operations ceased on December 31, 2019, and the site is currently in the closure and reclamation phase. During its operational period, the mine produced copper and molybdenum concentrates through a conventional milling and flotation circuit, supplemented by a solvent-extraction/electrowinning ("SX/EW") circuit that was installed in 1996 to recover copper from low-grade oxide ores and leach solutions.

The mine is operated by Torchlight Mining (U.S.) Inc. The real property and mineral rights are held by Ridgecrest Mine Holdings, LLC. Both entities are wholly owned subsidiaries of TMC.

Key infrastructure at the site includes: (i) the open pit (approximately 1,800 feet in diameter and 950 feet deep); (ii) a 425-acre tailings storage facility ("TSF"); (iii) the SX/EW circuit and associated leach pads; (iv) a concentrator and mill complex; (v) waste rock storage areas comprising approximately 180 million tons of material; and (vi) ancillary infrastructure including roads, power lines, a water treatment facility, and administrative buildings.

2. Environmental Conditions

The principal environmental concern at the Ridgecrest Site is acid mine drainage ("AMD"), which is generated by the oxidation of sulfide minerals — primarily pyrite and chalcopyrite — in exposed waste rock, pit walls, and the tailings impoundment. AMD from the site is characterized by extremely low pH (as low as 2.3 in certain seeps) and elevated concentrations of dissolved metals.

The following contaminant concentrations have been documented in AMD discharge and associated surface water and groundwater:

• Dissolved copper: Average concentration of 47 mg/L, which exceeds the Montana chronic aquatic-life surface-water standard of 0.0087 mg/L by a factor of approximately 5,400. This represents the single most significant exceedance across all four sites and has resulted in documented impairment of aquatic life in Flint Creek for a distance of approximately 14 miles downstream of the site.

• Molybdenum: Average concentration of 1.2 mg/L in AMD discharge, significantly exceeding applicable standards for livestock watering and irrigation use.

• Selenium: Average concentration of 0.082 mg/L, exceeding the EPA chronic aquatic-life criterion of 0.0031 mg/L.

• Sulfate: Average concentration of 3,400 mg/L, contributing to total dissolved solids loading in receiving waters.

The 425-acre tailings impoundment has been identified as a primary source of contamination. Documented seepage from the tailings impoundment to Flint Creek has been confirmed through a series of monitoring wells installed between 2018 and 2021. Seepage rates have been estimated at approximately 50–75 gallons per minute, carrying dissolved metals directly into the surface water system. Additionally, the SX/EW circuit generated waste streams that are characteristic hazardous wastes under RCRA, based on toxicity characteristics for copper and selenium (D007 and D010, respectively), and these waste streams were not managed in accordance with applicable RCRA requirements.

3. Regulatory History

The Ridgecrest Site has a significant regulatory history. The site was proposed for listing on the National Priorities List ("NPL") under CERCLA, though formal listing has not been finalized. In lieu of NPL listing, the site is currently addressed under an Administrative Order on Consent ("AOC"), Docket No. CERCLA-08-2022-0039, executed on September 15, 2022, between EPA Region 8 and TMC's U.S. subsidiaries. The AOC required TMC to conduct a remedial investigation and feasibility study and to implement certain interim measures to control AMD discharge.

Prior to the AOC, EPA commenced a removal action at the site on January 15, 2021, pursuant to CERCLA § 104. The removal action addressed the most immediate threats, including the installation of temporary Bramwell Group and treatment systems and the stabilization of actively eroding waste rock areas. The removal action was completed on May 30, 2023, at a total EPA cost of $14.3 million. This amount is the subject of the CERCLA § 107 cost-recovery claim in the pending enforcement action.

The Montana Department of Environmental Quality has been actively involved in regulatory oversight at the site since at least 2015 and has joined the federal enforcement action as co-plaintiff/intervenor.

4. Alleged Violations

The government alleges the following violations at the Ridgecrest Site:

• CWA § 301, 33 U.S.C. § 1311: Unpermitted discharges of AMD — containing dissolved copper, molybdenum, selenium, and other pollutants — from point sources at the mine site (including tailings impoundment seepage collection points and waste rock drainage channels) to Flint Creek, a navigable water of the United States. The discharges occurred without a National Pollutant Discharge Elimination System ("NPDES") permit or, in Montana, a Montana Pollutant Discharge Elimination System ("MPDES") permit. The government alleges that these unpermitted discharges have been ongoing for an extended period, with documented evidence of discharges dating back to at least 2017, and have caused significant impairment of Flint Creek's designated beneficial uses, including cold-water aquatic life and recreational fishing.

• RCRA § 3004, 42 U.S.C. § 6924: Mismanagement of hazardous waste generated by the SX/EW circuit. The government alleges that waste streams from the circuit — including spent electrolyte solutions, raffinate, and associated sludges — exhibit the toxicity characteristic for copper (D007) and selenium (D010) and were not managed, stored, treated, or disposed of in compliance with applicable RCRA hazardous waste management standards. Specifically, the government alleges that these wastes were disposed of on the heap-leach pad and in unlined containment areas without RCRA permits and without meeting applicable treatment standards.

• CERCLA § 107, 42 U.S.C. § 9607: Cost recovery for $14.3 million in EPA removal-action costs incurred between January 15, 2021 and May 30, 2023. The government asserts that TMC, TM(US), and RMH are liable as current owners and operators of the facility from which there has been a release or threatened release of hazardous substances (including copper, selenium, and molybdenum), which caused the United States to incur response costs that were not inconsistent with the National Contingency Plan ("NCP").

5. Remediation Cost Estimates

The Ridgecrest Site represents by far the largest single-site exposure in this enforcement action and drives the overall economics of the settlement. Remediation will be required over a period of approximately 30 years and will encompass construction of a permanent Bramwell Group and treatment system, stabilization and capping of the tailings impoundment, Flint Creek water quality restoration (including habitat improvements), and long-term monitoring.

TMC's consultant, Pinnacle Creek Environmental (Dr. Astrid Bergmann), has prepared a remediation cost estimate of $187.5 million over 30 years, which translates to an NPV at a 3% discount rate of approximately $127.4 million. The government's technical expert, Cascade Geosciences (Dr. Patricia Voss), has produced a significantly higher estimate of $224.0 million over the same timeframe. The primary differences between the two estimates relate to the scope of the AMD treatment system (specifically, whether a passive or active treatment approach is appropriate for the post-closure period), the extent of tailings impoundment stabilization required, and the duration and intensity of long-term monitoring.

The midpoint between the two estimates is $205.75 million. Based on our assessment of the relative merits of each party's technical position and the dynamics of the negotiation to date, we anticipate that the negotiated remediation cost figure for the Ridgecrest Site will settle at approximately $198.6 million. This figure is used in our aggregate financial exposure calculations throughout this memorandum.

B. Gallatin Chemical Works (Gallatin Site)

1. Site Description and Operations

The Gallatin Chemical Works is located at 8800 Industrial Park Lane, Belgrade, Gallatin County, Montana 59714. The facility occupies approximately 145 acres within the Belgrade industrial park area, situated in the Gallatin Valley at an elevation of approximately 4,460 feet. The facility is bounded to the north by agricultural land, to the east by other industrial operations, to the south by a state highway corridor, and to the west by residential development that has encroached on the area over the past two decades.

The Gallatin Site is a specialty chemical manufacturing facility that has been in continuous operation since 1993. The facility manufactures flotation reagents — including sodium xanthate and dithiophosphate collectors — that are used in mineral processing operations at TMC's mines and sold to third-party mining companies. The facility also produces various other specialty chemicals used in the mining industry.

The Gallatin Site is operated by Torchlight Specialty Chemicals, Inc. The facility is an active, ongoing operation, and TMC has no plans to cease operations at the site. This distinguishes the Gallatin Site from the Ridgecrest Site, where active mining has ceased, and introduces additional considerations regarding the coordination of remediation activities with ongoing manufacturing operations.

2. Environmental Conditions

The principal environmental contaminant of concern at the Gallatin Site is carbon disulfide ("CS₂"), a volatile organic compound used as a feedstock in the manufacture of xanthate reagents. Groundwater monitoring data from the site's network of monitoring wells has revealed CS₂ concentrations as high as 890 µg/L, which exceeds the EPA Maximum Contaminant Level ("MCL") of 10 µg/L by a factor of approximately 89. The CS₂ plume extends approximately 2,200 feet downgradient from the primary source area and is migrating toward a municipal water supply well field, though it has not yet reached the well field at current monitoring levels.

In addition to CS₂, xanthate decomposition products — including carbon disulfide breakdown compounds and various organic sulfur species — have been detected in subsurface soils and shallow groundwater. Volatile organic compounds, including toluene and xylene, have been identified in subsurface soils at concentrations exceeding Montana Tier 1 action levels, likely attributable to solvent use and storage practices at the facility.

Three solid waste management units ("SWMUs") have been identified at the facility: (i) a former chemical waste storage area adjacent to the main production building; (ii) a concrete-lined process sump that has experienced structural degradation and is no longer watertight; and (iii) a former drum staging area where soil contamination has been documented. Each of these SWMUs is subject to RCRA corrective action requirements.

3. Regulatory History

The Gallatin Site is a RCRA-permitted facility operating under RCRA Permit No. MTD098712456, issued by EPA Region 8 with MT DEQ concurrence. The permit includes corrective action requirements for the three identified SWMUs. TMC has been found to be in non-compliance with certain corrective action milestones specified in the permit, contributing to the enforcement action.

The Montana Department of Environmental Quality has been actively engaged in regulatory oversight at the Gallatin Site and has joined the federal enforcement action as co-plaintiff/intervenor with respect to this facility.

4. Alleged Violations

The government alleges the following violations at the Gallatin Site:

• RCRA §§ 3004 and 3005, 42 U.S.C. §§ 6924, 6925: The complaint alleges that TMC (through TSC) has operated an unpermitted hazardous-waste storage unit at the facility — specifically, the former chemical waste storage area adjacent to the main production building, which the government contends has been used for storage of reactive and ignitable hazardous wastes without a RCRA permit for storage. The complaint further alleges that TSC has failed to perform required corrective action at the three identified SWMUs in accordance with the corrective action schedule set forth in RCRA Permit No. MTD098712456. The government contends that TSC missed the deadlines for submission of the Corrective Measures Study ("CMS") and has failed to implement interim measures to prevent further migration of CS₂ in groundwater.

• CWA § 301, 33 U.S.C. § 1311: The complaint alleges 14 documented exceedances of MPDES permit effluent limits for CS₂ and total suspended solids ("TSS") between January 2021 and June 2024. These exceedances are established by TSC's own Discharge Monitoring Reports ("DMRs"), which are submitted to MT DEQ on a monthly basis pursuant to the facility's MPDES permit. The DMR data, which constitutes self-reported compliance data, provides an essentially irrefutable evidentiary basis for the alleged permit exceedances.

5. Remediation Cost Estimate

Pinnacle Creek Environmental has prepared a remediation cost estimate for the Gallatin Site of $42.8 million over a 15-year period. On an NPV basis at a 3% discount rate, this equates to approximately $34.1 million. The remediation program will encompass a corrective measures study for the three SWMUs, implementation of corrective measures, CS₂ groundwater remediation (likely including a combination of soil vapor extraction, air sparging, and monitored natural attenuation), and VOC soil treatment at the former drum staging area and other contaminated locations.

The government's technical expert, Cascade Geosciences, has not prepared a separate cost estimate for the Gallatin Site, and the parties appear to be in general agreement regarding the scope and cost of remediation at this facility. We therefore use Pinnacle Creek's estimate of $42.8 million as the basis for our financial projections.

C. Bonanza Creek Gold Mine (Bonanza Creek Site)

1. Site Description and Operations

The Bonanza Creek Gold Mine is located on County Road 447 at Mile Marker 12, Lander County, Nevada 89820, approximately 28 miles south of the town of Battle Mountain. The mine footprint encompasses approximately 5,600 acres, with the total controlled property — including buffer lands, water rights areas, and ancillary infrastructure — extending to approximately 12,400 acres. The site is situated in the Basin and Range physiographic province at an elevation of approximately 5,100 feet, in a semi-arid environment characterized by sparse vegetation and limited precipitation (approximately 8 inches annually).

The Bonanza Creek Site is an open-pit heap-leach gold mine that has been in operation since 2001 and is currently an active mining operation. Gold is recovered through a conventional cyanide heap-leach process, in which crushed ore is placed on lined leach pads and irrigated with a dilute sodium cyanide solution. The gold-bearing pregnant solution is collected, processed through a carbon-in-column ("CIC") circuit, and the gold is recovered by electrowinning and refining. Barren solution is recycled to the leach pads.

The mine is operated by Torchlight Mining (U.S.) Inc. The real property, mineral rights, and water rights are held by Bonanza Creek Mining, LLC. Both entities are wholly owned subsidiaries of TMC.

2. Environmental Conditions

The principal environmental concerns at the Bonanza Creek Site relate to process-solution releases from the heap-leach pad and contamination of solution ponds.

Cyanide contamination: Weak acid dissociable ("WAD") cyanide concentrations in the heap-leach pad underdrain have been measured at 0.62 mg/L, compared to the applicable discharge limit of 0.022 mg/L — an exceedance factor of approximately 28. WAD cyanide has been detected in surface water and shallow groundwater downgradient of the heap-leach pad, attributed to documented liner failures.

Mercury contamination: Mercury concentrations in process solutions and affected surface water average 12.4 µg/L, compared to the applicable water-quality criterion of 0.77 µg/L — an exceedance factor of approximately 16. Mercury is naturally present in the ore body at elevated concentrations and is mobilized during the leaching process.

Selenium contamination: Elevated selenium concentrations have been documented in the developing pit lake, creating a long-term concern for eventual pit-lake discharge or overflow.

Liner failure: The heap-leach pad has experienced a documented tear in its high-density polyethylene ("HDPE") liner system, which has been identified as the source of three documented process-solution releases to an ephemeral tributary of the Reese River. These releases occurred on March 17, 2022; August 9, 2022; and January 22, 2023. Each release was reported to NV DEP and EPA pursuant to applicable spill notification requirements, but the government contends that the underlying conditions constituting an unpermitted discharge from a point source to a water of the United States are continuing violations independent of the individual release events.

Avian mortalities: Seventeen avian mortalities have been documented in the mine's solution ponds between 2021 and 2023. The affected species include migratory birds protected under the MBTA. TMC has implemented certain wildlife deterrence measures, including partial netting coverage of the solution ponds and periodic hazing, but the government contends that these measures have been inadequate, as evidenced by the continued occurrence of bird deaths.

3. Regulatory History

The Bonanza Creek Site is subject to RCRA corrective action requirements and CWA enforcement. The site holds a Nevada Water Pollution Control Permit governing process-solution management, and the three documented releases have been identified as violations of that permit as well as unpermitted discharges under the CWA.

The Nevada Division of Environmental Protection has been actively involved in regulatory oversight of the site and has joined the federal enforcement action as co-plaintiff/intervenor.

The three documented releases are specifically identified in the complaint:

• March 17, 2022: Approximately 15,000 gallons of cyanide-bearing process solution released through the torn liner area, migrating approximately 800 feet to an ephemeral tributary channel.

• August 9, 2022: Approximately 8,500 gallons of process solution released through the same liner failure zone, with surface expression observed in the ephemeral channel.

• January 22, 2023: Approximately 22,000 gallons of process solution released, representing the largest single release event. This release coincided with an unusually wet precipitation event and resulted in visible process-solution flow in the ephemeral tributary for a distance of approximately 1.5 miles.

Additionally, the 17 documented avian mortalities in solution ponds between 2021 and 2023 form the basis for the MBTA claim. The first documented mortality occurred on March 8, 2021, and involved two American avocets found dead in the pregnant solution pond.

4. Alleged Violations

The government alleges the following violations at the Bonanza Creek Site:

• CWA § 301, 33 U.S.C. § 1311: Unpermitted discharge of process solution — containing WAD cyanide, mercury, and other pollutants — from the heap-leach pad (a point source) to an ephemeral tributary of the Reese River (a water of the United States) on three documented occasions. The government contends that the ephemeral tributary constitutes a "water of the United States" under the CWA as interpreted by the Supreme Court in Sackett v. EPA, 598 U.S. 651 (2023), based on evidence of a relatively permanent surface-water connection to the Reese River during seasonal flow events. This jurisdictional issue is discussed further in Section IV.A.2 below.

• RCRA § 3004, 42 U.S.C. § 6924: The government alleges that spent heap-leach ore — that is, ore that has been leached and from which gold recovery is no longer economically viable — constitutes a RCRA hazardous waste based on its characteristic reactivity due to residual cyanide content (D003 classification). The government contends that TMC has managed this spent ore without complying with applicable RCRA hazardous waste management standards, including requirements for characterization, manifesting, and disposal.

• MBTA, 16 U.S.C. § 703: The 17 documented avian mortalities in solution ponds between 2021 and 2023 are alleged to constitute violations of the MBTA's prohibition on the "take" (including killing) of migratory birds. This claim is addressed separately in Section IV.D below and will be the subject of a more detailed standalone memorandum.

5. Remediation Cost Estimate

Pinnacle Creek Environmental has prepared a remediation cost estimate for the Bonanza Creek Site of $63.2 million over a 20-year period. On an NPV basis at a 3% discount rate, this equates to approximately $47.1 million. The remediation program will encompass heap-leach pad liner repair and enhanced containment (including installation of a secondary containment system), cyanide and mercury remediation in affected surface water and groundwater, solution-pond wildlife protection measures (including comprehensive netting systems and enhanced hazing protocols), and long-term monitoring.

The government's technical expert, Cascade Geosciences, has indicated informally that its cost estimates for the Bonanza Creek Site may exceed Pinnacle Creek's figure, though a formal written estimate has not been provided. We have used Pinnacle Creek's estimate of $63.2 million for purposes of this memorandum but note that the final negotiated figure could be higher.

D. Kanawha Bend Chemical Plant (Kanawha Bend Site)

1. Site Description and Operations

The Kanawha Bend Chemical Plant is located at 2200 Chemical Valley Road, Institute, Kanawha County, West Virginia 25112. The facility occupies approximately 78 acres within the Kanawha Valley industrial corridor, commonly known as "Chemical Valley," an area with a long history of chemical manufacturing. The facility is situated approximately one mile from the Kanawha River and is bordered by a residential community to the east, other industrial facilities to the north and south, and a tributary of the Kanawha River to the west.

The Kanawha Bend Site is a chemical manufacturing facility that has been in continuous operation since 1985. The facility produces leaching agents and other chemicals used in mining operations, and also operates a sulfuric acid regeneration unit that processes spent sulfuric acid from TMC's mining operations and from third-party customers.

The facility is operated by Torchlight Specialty Chemicals, Inc. Like the Gallatin Site, Kanawha Bend is an active, ongoing operation, and TMC has no current plans to cease operations at the facility.

2. Environmental Conditions

The Kanawha Bend Site presents a complex suite of environmental contamination issues reflecting its nearly four decades of chemical manufacturing activity.

Soil contamination: Sulfuric acid residuals have been identified in soils surrounding the sulfuric acid regeneration unit, with pH values as low as 1.8 — representing extremely acidic conditions that have rendered the affected soils essentially sterile and incapable of supporting vegetation. Heavy metal contamination has been documented in subsurface soils near a former waste lagoon, with lead concentrations as high as 4,200 mg/kg and arsenic concentrations as high as 890 mg/kg. These concentrations significantly exceed applicable residential and industrial soil screening levels.

Groundwater contamination: A dense non-aqueous phase liquid ("DNAPL") plume — consisting of chlorinated solvents, principally trichloroethylene ("TCE") and perchloroethylene ("PCE") — has been identified in the fractured bedrock aquifer beneath the facility. DNAPL remediation in fractured bedrock presents formidable technical challenges, as the DNAPL migrates through fracture networks in ways that are difficult to characterize and treat. The DNAPL plume is the most technically challenging remediation issue at the Kanawha Bend Site and is expected to require a multi-phase approach including detailed fracture-network characterization, targeted DNAPL recovery, in-situ chemical oxidation, and long-term monitoring.

Former waste lagoon: A former surface impoundment that was used for disposal of process wastewater and chemical residuals has not been properly closed in accordance with RCRA requirements. The lagoon is a continuing source of contamination to soil and groundwater.

3. Regulatory History

The Kanawha Bend Site is a RCRA-permitted facility operating under RCRA Permit No. WVD048823915, issued by EPA Region 3 with WV DEP concurrence. The permit includes corrective action requirements for identified SWMUs and areas of concern.

The West Virginia Department of Environmental Protection has been actively involved in regulatory oversight of the site and has joined the federal enforcement action as co-plaintiff/intervenor.

A significant event in the site's regulatory history occurred on June 14, 2020, when a release of sulfuric acid from the regeneration unit reached a tributary of the Kanawha River. The release resulted in a fish kill and necessitated an EPA emergency response under CERCLA § 104. The EPA emergency response — which included neutralization of the acid release, containment of contaminated surface water, and initial soil remediation — was conducted at a total cost of $3.8 million. This amount is the subject of the CERCLA § 107 cost-recovery claim in the pending enforcement action.

4. Alleged Violations

The government alleges the following violations at the Kanawha Bend Site:

• RCRA §§ 3004 and 3005, 42 U.S.C. §§ 6924, 6925: The complaint alleges that TMC (through TSC) has failed to properly close the former surface impoundment in accordance with RCRA closure requirements, including the requirements for removal or decontamination of waste residues, installation of a final cover system, and post-closure care. The complaint further alleges that TSC has engaged in unpermitted treatment of listed hazardous wastes, specifically K062 (spent pickle liquor from steel finishing operations — by analogy, spent sulfuric acid from the regeneration process) and D002 (corrosive waste), without a RCRA permit for treatment. These allegations relate to TSC's practice of blending and neutralizing various acidic waste streams at the facility without having obtained a RCRA permit specifically authorizing treatment of these waste types.

• CERCLA § 107, 42 U.S.C. § 9607: Cost recovery for $3.8 million in EPA emergency response costs incurred in connection with the June 14, 2020 sulfuric acid release. The government asserts that TMC, TM(US), and TSC are liable as current owners and operators of the facility.

5. Remediation Cost Estimate

Pinnacle Creek Environmental has prepared a remediation cost estimate for the Kanawha Bend Site of $38.9 million over a 20-year period. On an NPV basis at a 3% discount rate, this equates to approximately $29.0 million. The remediation program will encompass interim stabilization of sulfuric acid-contaminated soils and heavy metal-contaminated soils, DNAPL investigation and remediation in the fractured bedrock aquifer, closure of the former surface impoundment in accordance with RCRA requirements, and long-term monitoring.

The DNAPL remediation component is the most significant cost driver and source of uncertainty in the Kanawha Bend estimate. Remediation of DNAPL in fractured bedrock is notoriously difficult and costly, and actual costs could exceed current projections if the DNAPL plume is found to be more extensive or more deeply penetrated into the fracture network than currently understood.

IV. Statutory Liability Analysis

This section presents our assessment of TMC's liability under each of the statutes at issue, applied to the specific facts of each site. Our overall conclusion is that the government has a strong case on the merits across all sites and all applicable statutes, and that TMC's available defenses are limited and unlikely to prevail at trial.

A. Clean Water Act (CWA) — Section 301

1. Applicable Legal Standards

Section 301(a) of the CWA, 33 U.S.C. § 1311(a), broadly prohibits "the discharge of any pollutant by any person" except in compliance with enumerated provisions of the Act, including the NPDES permit program under § 402. The term "discharge of a pollutant" is defined as "any addition of any pollutant to navigable waters from any point source." 33 U.S.C. § 1362(12).

The CWA imposes strict liability — that is, there is no requirement that the government prove intent, knowledge, or negligence on the part of the discharger. The government must establish five elements: (i) a discharge, (ii) of a pollutant, (iii) from a point source, (iv) to navigable waters (i.e., "waters of the United States"), and (v) without a permit or in violation of permit terms. See, e.g., Sierra Club v. ICG Hazard, LLC, 781 F.3d 281 (6th Cir. 2015); Piney Run Preservation Ass'n v. County Comm'rs of Carroll County, 268 F.3d 255, 265 (4th Cir. 2001).

Civil penalties for CWA violations are authorized under § 309(d), 33 U.S.C. § 1319(d), at amounts currently up to $64,618 per day per violation (as adjusted for inflation pursuant to the Federal Civil Penalties Inflation Adjustment Act).

2. Site-Specific Application

Ridgecrest: The CWA liability at the Ridgecrest Site is among the strongest claims in the government's complaint. The discharge of AMD — containing dissolved copper at concentrations approximately 5,400 times the Montana chronic aquatic-life standard — from the tailings impoundment and waste rock drainage channels to Flint Creek constitutes a textbook violation of CWA § 301. Flint Creek is indisputably a navigable water (it is a perennial tributary of the Clark Fork River, a Section 10 navigable water). The tailings impoundment seepage collection points and waste rock drainage channels are point sources as that term has been broadly construed by the courts. The discharges occurred without an NPDES/MPDES permit. TMC's liability for this violation is, in our assessment, clear and essentially indisputable. No viable defense to the discharge itself has been identified.

Gallatin: The CWA violations at the Gallatin Site are established by TMC's own Discharge Monitoring Reports, which document 14 separate exceedances of MPDES permit effluent limits for CS₂ and total suspended solids between January 2021 and June 2024. Self-reported DMR data is routinely used by EPA and DOJ as the primary evidentiary basis for permit-exceedance enforcement actions, and courts consistently accept DMR data as sufficient to establish CWA violations. TMC's defense options are extremely limited for these violations, as the Company itself reported the exceedances to the regulatory agency. The only potential defense — the upset/bypass defense discussed below — has limited applicability and evidentiary support.

Bonanza Creek: The CWA case at the Bonanza Creek Site is strong but presents one jurisdictional issue. The government must establish that the ephemeral tributary of the Reese River, into which the three documented process-solution releases flowed, constitutes a "water of the United States" under the CWA. Following the Supreme Court's decision in Sackett v. EPA, 598 U.S. 651 (2023), which narrowed the definition of "waters of the United States" for purposes of CWA jurisdiction, the government must demonstrate that the ephemeral tributary has a "relatively permanent" surface connection to a traditionally navigable water. Based on our review of the hydrological data, the ephemeral tributary does convey surface flow to the Reese River during seasonal precipitation and snowmelt events, and the Reese River itself is a relatively permanent body of water with a continuous surface connection to the Humboldt River. The government is likely to establish the jurisdictional nexus under the Sackett framework, though this is the one element of the CWA case that could be contested. The substantive violations — discharge of WAD cyanide and mercury at concentrations well above applicable limits — are clear.

3. Assessment of Defenses

Permit shield defense: This defense, which protects a permittee from enforcement for discharges of pollutants that are disclosed in the permit application and not specifically limited in the permit, is inapplicable to the Ridgecrest and Bonanza Creek violations. At Ridgecrest, the AMD discharges are unpermitted — there is no NPDES/MPDES permit in place, so there is no "shield" to invoke. At Bonanza Creek, the three process-solution releases were unauthorized discharges from a torn liner, not permitted discharges. At Gallatin, the violations consist of exceedances of permit limits, not discharges of pollutants not addressed in the permit; the permit shield defense does not protect against violations of explicit permit limits.

upset/bypass defense: The CWA regulations, 40 C.F.R. §§ 122.41(n)–(o), provide affirmative defenses for permit exceedances caused by upsets (unintentional, temporary noncompliance caused by factors beyond the permittee's reasonable control) or bypasses (intentional diversion of waste streams from treatment facilities under certain limited circumstances). This defense may have limited applicability to some of the Gallatin exceedances — specifically, those that occurred during equipment malfunctions at the wastewater treatment system — but the evidentiary support is thin. TMC's operational records do not consistently document that the conditions required for the upset defense (including that the upset was beyond reasonable control and that the permittee exercised operational diligence) were met during the relevant exceedance events.

Overall CWA liability assessment: The government has a very strong case at all three CWA sites. The likelihood of prevailing on a CWA liability defense at trial is, in our assessment, less than 15%.

B. Resource Conservation and Recovery Act (RCRA) — Sections 3004, 3005

1. Applicable Legal Standards

RCRA § 3004, 42 U.S.C. § 6924, establishes standards applicable to generators and owners/operators of treatment, storage, and disposal facilities ("TSDFs") for hazardous waste. These standards encompass requirements for waste characterization, labeling, manifesting, storage, treatment, disposal, and recordkeeping. RCRA § 3005, 42 U.S.C. § 6925, requires a permit for the treatment, storage, or disposal of hazardous waste.

RCRA § 3004(u), added by the 1984 Hazardous and Solid Waste Amendments, requires corrective action for releases of hazardous waste or hazardous constituents from solid waste management units at RCRA-permitted facilities. Corrective action obligations attach to the facility's RCRA permit and require the permittee to investigate and remediate releases from all SWMUs, regardless of when the releases occurred.

Like the CWA, RCRA imposes strict liability for civil enforcement — no knowledge or intent element is required. Civil penalties under RCRA § 3008(a), 42 U.S.C. § 6928(a), are currently set at up to $70,117 per day of noncompliance (as adjusted for inflation).

2. Site-Specific Application

Ridgecrest: The government alleges mismanagement of hazardous waste from the SX/EW circuit. The central issue is whether the waste streams from the circuit — principally spent electrolyte solutions, raffinate, and associated sludges — exhibit the toxicity characteristic for copper (D007, TCLP threshold 25 mg/L) and/or selenium (D010, TCLP threshold 1.0 mg/L). Based on available analytical data, TCLP testing of SX/EW circuit wastes has yielded copper concentrations ranging from 32 to 118 mg/L and selenium concentrations ranging from 0.8 to 3.4 mg/L, indicating that many of the tested samples exceed the D007 threshold and some exceed the D010 threshold. The government's RCRA hazardous waste determination is therefore likely supportable, though TMC may contest individual sample results and argue that certain waste streams are not representative of the overall waste generated by the circuit.

Gallatin: The RCRA violations at the Gallatin Site are relatively straightforward. The three identified SWMUs are documented in the facility's RCRA permit, and corrective action obligations are established by the permit terms. TMC's failure to meet corrective action milestones is documented in the administrative record. The allegation that TSC has operated an unpermitted hazardous-waste storage unit is supported by EPA inspection reports documenting the storage of reactive and ignitable wastes at the former chemical waste storage area without a permit for storage. TMC's liability for these RCRA violations appears strong.

Bonanza Creek: The RCRA case at the Bonanza Creek Site presents the most contestable issue in the entire enforcement action. The government's position is that spent heap-leach ore constitutes a RCRA hazardous waste based on the reactivity characteristic (D003) due to residual cyanide content. The D003 characteristic applies to wastes that are capable of generating toxic gases when mixed with water or mild acid; residual cyanide in spent ore could, under certain conditions, generate hydrogen cyanide gas. This classification is contestable — the mining industry has long maintained that spent heap-leach ore, once the cyanide degradation process is sufficiently advanced, does not exhibit the reactivity characteristic. TMC's position, supported by Pinnacle Creek's data, is that the residual cyanide in the spent ore has degraded to levels that do not trigger the D003 characteristic under standard testing protocols. However, the government has its own analytical data suggesting that certain portions of the spent ore retain sufficient cyanide to exhibit reactivity, and the regulatory analysis is complicated by the fact that different portions of the heap may contain ore at varying stages of cyanide degradation. This issue creates significant litigation risk for TMC, as the outcome depends on complex factual and technical determinations that a court would likely resolve based on competing expert testimony.

Kanawha Bend: The RCRA allegations at the Kanawha Bend Site relate to the failure to close the former surface impoundment and the unpermitted treatment of K062 and D002 wastes. The former impoundment has been identified as a source of ongoing contamination, and the failure to close it in accordance with RCRA closure requirements is well-documented. The government's allegation regarding unpermitted treatment of K062 and D002 wastes relates to TSC's practice of blending and neutralizing acidic waste streams, which the government characterizes as "treatment" of hazardous waste requiring a RCRA permit. TMC's liability for these violations appears strong, particularly given the documented contamination emanating from the unclosed impoundment and the administrative record supporting the government's characterization of the blending/neutralization activities as treatment.

3. Assessment of Defenses

Mining waste exclusion (Bevill Amendment): RCRA § 3001(b)(3)(A), 42 U.S.C. § 6921(b)(3)(A), commonly known as the Bevill Amendment, temporarily exempts certain mining wastes from regulation as hazardous waste under RCRA Subtitle C, pending completion of an EPA study and rulemaking. The Bevill exclusion applies to "solid waste from the extraction, beneficiation, and processing of ores and minerals." This exclusion is potentially applicable to some wastes at the Ridgecrest and Bonanza Creek Sites — specifically, overburden, waste rock, and tailings from the extraction and beneficiation process.

However, the Bevill exclusion has significant limitations. First, wastes from the SX/EW circuit at Ridgecrest may not qualify as "extraction" or "beneficiation" wastes; EPA has taken the position that SX/EW is a "mineral processing" activity whose wastes are not Bevill-exempt. Second, spent heap-leach ore at Bonanza Creek presents a similarly complex question — while heap leaching is generally considered a beneficiation activity, the government may argue that the spent ore, once removed from the active leach circuit, is no longer within the scope of the Bevill exemption. The applicability of the Bevill Amendment to the specific waste streams at issue is a complex factual and regulatory question that would require extensive technical and legal analysis to resolve. In our preliminary assessment, the Bevill Amendment provides a partial but uncertain defense at best.

Mixture/derived-from rule arguments: Under the RCRA mixture rule, 40 C.F.R. § 261.3(a)(2), a mixture of a listed hazardous waste and a solid waste is itself a hazardous waste. Under the derived-from rule, 40 C.F.R. § 261.3(c)(2), any waste derived from the treatment, storage, or disposal of a listed hazardous waste is itself a hazardous waste. TMC may be able to argue that certain waste streams at the Kanawha Bend Site — particularly those characterized as K062 — are not properly classified as K062 because the specific industrial process giving rise to the waste does not precisely match the K062 listing description. However, this argument is technicall

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT This memorandum is a confidential attorney-client communication and constitutes attorney work product prepared in anticipation of litigation. It is not intended for disclosure to any third party and should not be disclosed without the prior written consent of Calderwood & Harkness LLP and Torchlight Mining Corp. Disclosure to any third party may result in waiver of applicable privileges.
MEMORANDUM
TO: Miriam Soo-Hwan Park, General Counsel, Torchlight Mining Corp. Douglas K. Prennell, Chief Executive Officer, Torchlight Mining Corp.
FROM: Harrison Wexford, Partner, Calderwood & Harkness LLP Beatrice Holloway, Partner, Calderwood & Harkness LLP Elliot Nguyen, Associate, Calderwood & Harkness LLP Grace Nakamura, Associate, Calderwood & Harkness LLP
DATE: November 4, 2024
RE: Preliminary Case Assessment — Multi-Site EPA Enforcement and Consent-Decree Negotiation (Matter No. 1039-00003)
CC: Gareth Linford, VP, Environmental Health & Safety, TMC Carolyn Bracebridge, CFO, TMC
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I. Executive Summary
The purpose of this memorandum is to provide Torchlight Mining Corp. ("TMC" or the "Company") leadership with a comprehensive assessment of the Company's legal and financial exposure arising from the pending multi-site environmental enforcement action brought by the United States of America (acting through the United States Environmental Protection Agency ("EPA") and the United States Department of Justice ("DOJ")) and the States of Montana, Nevada, and West Virginia. This memorandum sets forth our preliminary findings and recommendations after an intensive initial review of all materials available to us since our engagement on October 21, 2024, and is intended to inform the Company's settlement strategy as consent-decree negotiations enter their critical drafting phase.
The case is captioned United States of America and State of Montana v. Torchlight Mining Corp. et al., Civil Action No. 9:24-cv-00087-DWM, pending in the United States District Court for the District of Montana, Missoula Division, before the Honorable Donald W. Molloy, Senior Judge. The complaint, filed by DOJ on January 18, 2024, names five TMC-affiliated entities as defendants and alleges violations at four Torchlight-operated or formerly operated facilities spanning three states.
The four sites at issue are: (1) the Ridgecrest Copper-Molybdenum Mine in Granite County, Montana ("Ridgecrest Site"); (2) the Gallatin Chemical Works in Gallatin County, Montana ("Gallatin Site"); (3) the Bonanza Creek Gold Mine in Lander County, Nevada ("Bonanza Creek Site"); and (4) the Kanawha Bend Chemical Plant in Kanawha County, West Virginia ("Kanawha Bend Site").
The statutes at issue include the Clean Water Act ("CWA"), 33 U.S.C. §§ 1251 et seq.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. §§ 6901 et seq.; the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601 et seq.; and, with respect to the Bonanza Creek Site only, the Migratory Bird Treaty Act ("MBTA"), 16 U.S.C. §§ 703 et seq.
The named defendants are Torchlight Mining Corp., Torchlight Mining (U.S.) Inc. ("TM(US)"), Torchlight Specialty Chemicals, Inc. ("TSC"), Ridgecrest Mine Holdings, LLC ("RMH"), and Bonanza Creek Mining, LLC ("BCM"). The States of Montana, Nevada, and West Virginia have joined as co-plaintiffs with respect to the sites located within their respective jurisdictions.
Based on our preliminary analysis, we estimate TMC's aggregate financial exposure at approximately $409.9 million on a nominal basis, comprising $343.5 million in total remediation costs across all four sites, $31.5 million in civil penalties, $18.1 million in EPA past-costs reimbursement under CERCLA § 107, $12.0 million in supplemental environmental projects ("SEPs"), and $4.8 million in independent environmental monitor costs. On a net present value ("NPV") basis, applying a 3% discount rate, the aggregate exposure is approximately $311.5 million.
TMC's current environmental reserve on its books as of the third quarter of 2024 stands at C$340.0 million, which translates to approximately US$251.4 million at the prevailing CAD/USD exchange rate of 0.7394. The shortfall between the nominal obligation and the current reserve is therefore approximately US$158.5 million, a gap that will require prompt attention in the Company's financial planning and public disclosure.
Calderwood & Harkness LLP ("C&H") was engaged on October 21, 2024, replacing the Company's prior counsel, Whitfield, Palmer & Goss LLP, which had represented TMC from the inception of the enforcement action through the mediation proceedings and the July 30, 2024 agreement in principle on a consent-decree framework. This memorandum reflects our initial review of all available materials, including the complaint and answer, discovery correspondence, the tolling agreement, mediation materials, the agreement in principle, technical reports and data from both TMC's consultant (Pinnacle Creek Environmental, LLC) and the government's technical expert (Cascade Geosciences, Inc.), insurance policies, corporate records, financial statements, and the Company's existing environmental reserve analyses.
Our preliminary recommendation is as follows: Settlement via negotiated consent decree is strongly advisable. TMC's liability on the merits is substantial across all four sites and all applicable statutes. Available defenses are limited, fact-intensive, and unlikely to succeed at trial. Proceeding to trial would expose the Company to significantly higher penalties (statutory maximums far exceed the negotiated range currently under discussion), adverse publicity, and a non-trivial risk of criminal referral, particularly with respect to the MBTA violations at the Bonanza Creek Site. The consent-decree framework agreed upon on July 30, 2024 provides a workable foundation for settlement. Early, cooperative engagement with EPA and DOJ in the consent-decree drafting process will maximize TMC's leverage on penalty mitigation, remediation schedule flexibility, financial assurance structuring, and other critical terms.
The balance of this memorandum sets forth in detail the factual and legal bases for our assessment, the site-by-site exposure analysis, and our specific recommendations for the path forward.
II. Background
A. Torchlight Mining Corp. — Corporate Overview
Torchlight Mining Corp. is a corporation organized under the Canada Business Corporations Act ("CBCA") and is dual-listed on the Toronto Stock Exchange (TSX: TRC) and the New York Stock Exchange (NYSE: TRC). The Company's principal corporate offices are located at 1800 Bayfield Tower, 401 Bay Street, Toronto, Ontario M5H 2Y4, Canada. TMC maintains a U.S. operational headquarters at 750 Copper Ridge Boulevard, Suite 200, Helena, Montana 59601.
TMC is a diversified mining and specialty chemicals company engaged principally in the extraction and processing of copper, molybdenum, and gold, as well as the manufacture of specialty chemicals used in mineral processing, including flotation reagents and leaching agents. The Company operates fourteen mines and six chemical processing facilities across North America, South America, and Australia. It is one of the largest mid-tier diversified mining companies listed on the TSX.
For the fiscal year ended December 31, 2023, TMC reported consolidated revenue of C$4.82 billion (approximately US$3.56 billion), earnings before interest, taxes, depreciation, and amortization ("EBITDA") of C$1.14 billion (approximately US$843 million), and net income of C$412 million. The Company's market capitalization as of October 2024 was approximately C$7.6 billion. TMC employs approximately 11,400 individuals worldwide, of whom approximately 4,200 are based in the United States.
Key officers relevant to this matter include: Douglas K. Prennell, Chief Executive Officer; Miriam Soo-Hwan Park, General Counsel; Gareth Linford, Vice President, Environmental Health & Safety; and Carolyn Bracebridge, Chief Financial Officer.
B. U.S. Operating Subsidiaries — Named Defendants
The complaint names four TMC subsidiaries in addition to the parent corporation itself. The corporate structure through which TMC conducts its U.S. mining and chemical operations is as follows:
Torchlight Mining (U.S.) Inc. ("TM(US)") is a corporation organized under the laws of the State of Delaware, bearing Employer Identification Number 83-2047156. TM(US) serves as the direct operator of TMC's U.S. mining operations and is wholly owned by TMC. Its registered agent is Ashgrove Services Inc., located at 1209 Orange Street, Wilmington, Delaware 19801. TM(US) is the entity through which TMC exercises day-to-day operational control over the Ridgecrest and Bonanza Creek mining sites and serves as the immediate parent of the Company's other U.S. subsidiaries.
Torchlight Specialty Chemicals, Inc. ("TSC") is a corporation organized under the laws of the State of Delaware, bearing Employer Identification Number 47-3819204. TSC is the operator of both the Gallatin Chemical Works and the Kanawha Bend Chemical Plant. TSC is a wholly owned subsidiary of TM(US) and thus an indirect, wholly owned subsidiary of TMC.
Ridgecrest Mine Holdings, LLC ("RMH") is a limited liability company organized under the laws of the State of Montana, bearing Montana Secretary of State Identification Number E1042738. RMH holds the real property and mineral rights associated with the Ridgecrest Copper-Molybdenum Mine. RMH is wholly owned by TM(US).
Bonanza Creek Mining, LLC ("BCM") is a limited liability company organized under the laws of the State of Nevada, bearing Nevada Secretary of State Entity Number E0518294731. BCM holds the real property, mineral rights, and water rights associated with the Bonanza Creek Gold Mine. BCM is wholly owned by TM(US).
An organizational chart depicting the full U.S. subsidiary structure is attached as Appendix B.
C. Procedural History
The procedural history of this matter is summarized below. A more detailed chronological timeline, including pre-litigation events dating back to the commencement of operations at the Ridgecrest Site in 1978, is set forth in Appendix A.
On September 12, 2023, EPA issued a consolidated Notice of Violation ("NOV") covering all four sites. The NOV identified alleged violations of the CWA, RCRA, and CERCLA at the four facilities and set forth EPA's enforcement intentions. TMC, through its then-counsel Whitfield, Palmer & Goss LLP, responded to the NOV on October 27, 2023, disputing certain factual and legal allegations but expressing willingness to engage in settlement discussions.
On January 18, 2024, the DOJ, acting on behalf of the United States and at the request of EPA, filed the complaint initiating this action, United States of America and State of Montana v. Torchlight Mining Corp. et al., Civil Action No. 9:24-cv-00087-DWM, in the United States District Court for the District of Montana, Missoula Division. The complaint was assigned to the Honorable Donald W. Molloy, Senior Judge.
On March 5, 2024, TMC and all named defendant entities filed an answer to the complaint, denying the material allegations of the complaint and asserting various affirmative defenses.
On April 22, 2024, the parties entered into a Tolling Agreement, pursuant to which all applicable statutes of limitations and repose are tolled through December 31, 2025, in order to facilitate settlement negotiations without the pressure of impending limitations deadlines.
On May 15, 2024, the Court entered an order referring the matter to court-ordered mediation before United States Magistrate Judge Clara Finnegan. Mediation sessions were conducted on June 12, June 26, and July 18, 2024.
On July 30, 2024, the parties reached an agreement in principle on a consent-decree framework, setting forth the general parameters for settlement, including the scope of remediation obligations, the anticipated range of civil penalties, the financial assurance structure, and the mechanism for appointment of an independent environmental monitor. The agreement in principle, while not binding, established the framework within which detailed consent-decree language is now being drafted.
On October 21, 2024, TMC engaged Calderwood & Harkness LLP to serve as lead outside counsel, replacing Whitfield, Palmer & Goss LLP, for the purpose of finalizing the consent decree and all ancillary instruments, as well as advising on related insurance, financial, and corporate matters.
On November 8, 2024 (anticipated), DOJ is expected to circulate the first draft of the consent decree for TMC's review and comment.
D. Government Parties and Their Counsel
The enforcement action involves multiple government agencies and legal representatives, which we identify below for completeness and reference.
EPA is the lead federal enforcement agency. Given the multi-state nature of the enforcement action, three EPA regional offices are involved. EPA Region 8 (Denver, Colorado) has jurisdiction over the two Montana sites — Ridgecrest and Gallatin — and serves as the lead EPA region for the consolidated action. The lead regional coordinators are Dr. Samuel Tesfaye and a second coordinator whose identity has not yet been formally confirmed in our correspondence. EPA Region 9 (San Francisco, California) has jurisdiction over the Bonanza Creek Site in Nevada; the regional coordinator is Jennifer Whitfield. EPA Region 3 (Philadelphia, Pennsylvania) has jurisdiction over the Kanawha Bend Site in West Virginia. The lead case attorney at EPA headquarters is Margaret Coulson of the Office of Enforcement and Compliance Assurance ("OECA") in Washington, D.C.
DOJ, Environment and Natural Resources Division ("ENRD") is responsible for the litigation. The lead trial attorney is Philip Orenstein; the supervising attorney is Katherine Rowe-Halpern, Senior Counsel, Environmental Enforcement Section.
The State of Montana, Department of Environmental Quality ("MT DEQ") has intervened as co-plaintiff with respect to the Ridgecrest and Gallatin Sites. Montana is represented by Annika Hedstrom, Assistant Attorney General, Montana Attorney General's Office, Environmental Bureau.
The State of Nevada, Division of Environmental Protection ("NV DEP") has intervened as co-plaintiff with respect to the Bonanza Creek Site. Nevada is represented by Ricardo Fuentes, Deputy Attorney General, Nevada Attorney General's Office.
The State of West Virginia, Department of Environmental Protection ("WV DEP") has intervened as co-plaintiff with respect to the Kanawha Bend Site. West Virginia is represented by Loretta May Hatcher, Assistant Attorney General, West Virginia Attorney General's Office.
The government's retained technical expert is Cascade Geosciences, Inc., of Seattle, Washington. Dr. Patricia Voss, Ph.D. in Hydrogeology, serves as the independent technical reviewer for remedy selection and cost estimation, particularly at the Ridgecrest and Bonanza Creek Sites. Dr. Voss's cost estimates for these sites have exceeded those prepared by TMC's consultant, Pinnacle Creek Environmental, creating a gap that will be a central issue in consent-decree negotiations.
E. TMC Advisors and Counsel
TMC's advisory team for this matter is as follows:
Lead outside counsel: Calderwood & Harkness LLP. The engagement is led by Harrison Wexford (Partner, Environmental Litigation) and Beatrice Holloway (Partner, Environmental Regulatory), with associate support from Elliot Nguyen and Grace Nakamura. The matter is designated as Matter No. 1039-00003.
Montana local counsel: Holcroft, Dane & Weiss LLP ("HDW"), of Helena, Montana. The lead attorney is Russell Dane, a partner specializing in natural resources and environmental law in Montana state courts and administrative proceedings. HDW provides counsel on Montana-specific regulatory and procedural issues related to the Ridgecrest and Gallatin Sites.
Nevada local counsel: sagebrush Law Group, PLLC, of Reno, Nevada. The lead attorney is Denise Quartaro, who advises on Nevada mining law, water rights, and state environmental regulatory matters related to the Bonanza Creek Site.
West Virginia local counsel: Baxter, Tully & Crane PLLC ("BTC"), of Charleston, West Virginia. The lead attorney is Nathan Tully, who advises on West Virginia environmental regulatory and enforcement matters related to the Kanawha Bend Site.
Environmental remediation consultant: Pinnacle Creek Environmental, LLC, of Bozeman, Montana. The engagement is led by Dr. Astrid Bergmann, P.E., Senior Principal. Pinnacle Creek provides remedial investigation/feasibility study ("RI/FS") support, remediation design, cost estimation, and long-term monitoring program design for all four sites. Pinnacle Creek's cost estimates form the basis for TMC's remediation cost projections set forth in this memorandum.
Financial advisor: Northspire Capital Markets, Inc. The engagement is led by Vivian Okafor, Managing Director, Liability & Risk Advisory. Northspire advises on financial assurance structuring, reserve adequacy, insurance recovery strategy, and credit facility impact analysis.
External auditor: Ridgeline Accounting Partners LLP, of Calgary, Alberta. The lead engagement partner is Frances Whitmore, CPA, CA. Ridgeline serves as TMC's external auditor for purposes of financial statement preparation and will be consulted regarding the appropriate accounting treatment of the consent-decree obligations under ASC 450 and IAS 37.
III. Site-by-Site Factual Summary and Regulatory History
This section sets forth the factual background for each of the four sites at issue, including site descriptions, environmental conditions, regulatory history, the specific violations alleged by the government, and our preliminary assessment of remediation costs. Site location maps and detailed contaminant data are included in Appendices C and D, respectively.
A. Ridgecrest Copper-Molybdenum Mine (Ridgecrest Site)
1. Site Description and Operations
The Ridgecrest Copper-Molybdenum Mine is located at 14200 Ridgecrest Mine Road, Drummond, Granite County, Montana 59832. The mine footprint encompasses approximately 3,200 acres, with the total controlled property — including buffer lands, access corridors, and ancillary infrastructure — extending to approximately 8,700 acres. The site is situated in a mountainous area at an elevation of approximately 5,400 feet, within the Flint Creek watershed of the upper Clark Fork River basin.
The Ridgecrest Site is an open-pit copper-molybdenum mine that has been in operation since 1978. Active mining operations ceased on December 31, 2019, and the site is currently in the closure and reclamation phase. During its operational period, the mine produced copper and molybdenum concentrates through a conventional milling and flotation circuit, supplemented by a solvent-extraction/electrowinning ("SX/EW") circuit that was installed in 1996 to recover copper from low-grade oxide ores and leach solutions.
The mine is operated by Torchlight Mining (U.S.) Inc. The real property and mineral rights are held by Ridgecrest Mine Holdings, LLC. Both entities are wholly owned subsidiaries of TMC.
Key infrastructure at the site includes: (i) the open pit (approximately 1,800 feet in diameter and 950 feet deep); (ii) a 425-acre tailings storage facility ("TSF"); (iii) the SX/EW circuit and associated leach pads; (iv) a concentrator and mill complex; (v) waste rock storage areas comprising approximately 180 million tons of material; and (vi) ancillary infrastructure including roads, power lines, a water treatment facility, and administrative buildings.
2. Environmental Conditions
The principal environmental concern at the Ridgecrest Site is acid mine drainage ("AMD"), which is generated by the oxidation of sulfide minerals — primarily pyrite and chalcopyrite — in exposed waste rock, pit walls, and the tailings impoundment. AMD from the site is characterized by extremely low pH (as low as 2.3 in certain seeps) and elevated concentrations of dissolved metals.
The following contaminant concentrations have been documented in AMD discharge and associated surface water and groundwater:
• Dissolved copper: Average concentration of 47 mg/L, which exceeds the Montana chronic aquatic-life surface-water standard of 0.0087 mg/L by a factor of approximately 5,400. This represents the single most significant exceedance across all four sites and has resulted in documented impairment of aquatic life in Flint Creek for a distance of approximately 14 miles downstream of the site.
• Molybdenum: Average concentration of 1.2 mg/L in AMD discharge, significantly exceeding applicable standards for livestock watering and irrigation use.
• Selenium: Average concentration of 0.082 mg/L, exceeding the EPA chronic aquatic-life criterion of 0.0031 mg/L.
• Sulfate: Average concentration of 3,400 mg/L, contributing to total dissolved solids loading in receiving waters.
The 425-acre tailings impoundment has been identified as a primary source of contamination. Documented seepage from the tailings impoundment to Flint Creek has been confirmed through a series of monitoring wells installed between 2018 and 2021. Seepage rates have been estimated at approximately 50–75 gallons per minute, carrying dissolved metals directly into the surface water system. Additionally, the SX/EW circuit generated waste streams that are characteristic hazardous wastes under RCRA, based on toxicity characteristics for copper and selenium (D007 and D010, respectively), and these waste streams were not managed in accordance with applicable RCRA requirements.
3. Regulatory History
The Ridgecrest Site has a significant regulatory history. The site was proposed for listing on the National Priorities List ("NPL") under CERCLA, though formal listing has not been finalized. In lieu of NPL listing, the site is currently addressed under an Administrative Order on Consent ("AOC"), Docket No. CERCLA-08-2022-0039, executed on September 15, 2022, between EPA Region 8 and TMC's U.S. subsidiaries. The AOC required TMC to conduct a remedial investigation and feasibility study and to implement certain interim measures to control AMD discharge.
Prior to the AOC, EPA commenced a removal action at the site on January 15, 2021, pursuant to CERCLA § 104. The removal action addressed the most immediate threats, including the installation of temporary Bramwell Group and treatment systems and the stabilization of actively eroding waste rock areas. The removal action was completed on May 30, 2023, at a total EPA cost of $14.3 million. This amount is the subject of the CERCLA § 107 cost-recovery claim in the pending enforcement action.
The Montana Department of Environmental Quality has been actively involved in regulatory oversight at the site since at least 2015 and has joined the federal enforcement action as co-plaintiff/intervenor.
4. Alleged Violations
The government alleges the following violations at the Ridgecrest Site:
• CWA § 301, 33 U.S.C. § 1311: Unpermitted discharges of AMD — containing dissolved copper, molybdenum, selenium, and other pollutants — from point sources at the mine site (including tailings impoundment seepage collection points and waste rock drainage channels) to Flint Creek, a navigable water of the United States. The discharges occurred without a National Pollutant Discharge Elimination System ("NPDES") permit or, in Montana, a Montana Pollutant Discharge Elimination System ("MPDES") permit. The government alleges that these unpermitted discharges have been ongoing for an extended period, with documented evidence of discharges dating back to at least 2017, and have caused significant impairment of Flint Creek's designated beneficial uses, including cold-water aquatic life and recreational fishing.
• RCRA § 3004, 42 U.S.C. § 6924: Mismanagement of hazardous waste generated by the SX/EW circuit. The government alleges that waste streams from the circuit — including spent electrolyte solutions, raffinate, and associated sludges — exhibit the toxicity characteristic for copper (D007) and selenium (D010) and were not managed, stored, treated, or disposed of in compliance with applicable RCRA hazardous waste management standards. Specifically, the government alleges that these wastes were disposed of on the heap-leach pad and in unlined containment areas without RCRA permits and without meeting applicable treatment standards.
• CERCLA § 107, 42 U.S.C. § 9607: Cost recovery for $14.3 million in EPA removal-action costs incurred between January 15, 2021 and May 30, 2023. The government asserts that TMC, TM(US), and RMH are liable as current owners and operators of the facility from which there has been a release or threatened release of hazardous substances (including copper, selenium, and molybdenum), which caused the United States to incur response costs that were not inconsistent with the National Contingency Plan ("NCP").
5. Remediation Cost Estimates
The Ridgecrest Site represents by far the largest single-site exposure in this enforcement action and drives the overall economics of the settlement. Remediation will be required over a period of approximately 30 years and will encompass construction of a permanent Bramwell Group and treatment system, stabilization and capping of the tailings impoundment, Flint Creek water quality restoration (including habitat improvements), and long-term monitoring.
TMC's consultant, Pinnacle Creek Environmental (Dr. Astrid Bergmann), has prepared a remediation cost estimate of $187.5 million over 30 years, which translates to an NPV at a 3% discount rate of approximately $127.4 million. The government's technical expert, Cascade Geosciences (Dr. Patricia Voss), has produced a significantly higher estimate of $224.0 million over the same timeframe. The primary differences between the two estimates relate to the scope of the AMD treatment system (specifically, whether a passive or active treatment approach is appropriate for the post-closure period), the extent of tailings impoundment stabilization required, and the duration and intensity of long-term monitoring.
The midpoint between the two estimates is $205.75 million. Based on our assessment of the relative merits of each party's technical position and the dynamics of the negotiation to date, we anticipate that the negotiated remediation cost figure for the Ridgecrest Site will settle at approximately $198.6 million. This figure is used in our aggregate financial exposure calculations throughout this memorandum.
B. Gallatin Chemical Works (Gallatin Site)
1. Site Description and Operations
The Gallatin Chemical Works is located at 8800 Industrial Park Lane, Belgrade, Gallatin County, Montana 59714. The facility occupies approximately 145 acres within the Belgrade industrial park area, situated in the Gallatin Valley at an elevation of approximately 4,460 feet. The facility is bounded to the north by agricultural land, to the east by other industrial operations, to the south by a state highway corridor, and to the west by residential development that has encroached on the area over the past two decades.
The Gallatin Site is a specialty chemical manufacturing facility that has been in continuous operation since 1993. The facility manufactures flotation reagents — including sodium xanthate and dithiophosphate collectors — that are used in mineral processing operations at TMC's mines and sold to third-party mining companies. The facility also produces various other specialty chemicals used in the mining industry.
The Gallatin Site is operated by Torchlight Specialty Chemicals, Inc. The facility is an active, ongoing operation, and TMC has no plans to cease operations at the site. This distinguishes the Gallatin Site from the Ridgecrest Site, where active mining has ceased, and introduces additional considerations regarding the coordination of remediation activities with ongoing manufacturing operations.
2. Environmental Conditions
The principal environmental contaminant of concern at the Gallatin Site is carbon disulfide ("CS₂"), a volatile organic compound used as a feedstock in the manufacture of xanthate reagents. Groundwater monitoring data from the site's network of monitoring wells has revealed CS₂ concentrations as high as 890 µg/L, which exceeds the EPA Maximum Contaminant Level ("MCL") of 10 µg/L by a factor of approximately 89. The CS₂ plume extends approximately 2,200 feet downgradient from the primary source area and is migrating toward a municipal water supply well field, though it has not yet reached the well field at current monitoring levels.
In addition to CS₂, xanthate decomposition products — including carbon disulfide breakdown compounds and various organic sulfur species — have been detected in subsurface soils and shallow groundwater. Volatile organic compounds, including toluene and xylene, have been identified in subsurface soils at concentrations exceeding Montana Tier 1 action levels, likely attributable to solvent use and storage practices at the facility.
Three solid waste management units ("SWMUs") have been identified at the facility: (i) a former chemical waste storage area adjacent to the main production building; (ii) a concrete-lined process sump that has experienced structural degradation and is no longer watertight; and (iii) a former drum staging area where soil contamination has been documented. Each of these SWMUs is subject to RCRA corrective action requirements.
3. Regulatory History
The Gallatin Site is a RCRA-permitted facility operating under RCRA Permit No. MTD098712456, issued by EPA Region 8 with MT DEQ concurrence. The permit includes corrective action requirements for the three identified SWMUs. TMC has been found to be in non-compliance with certain corrective action milestones specified in the permit, contributing to the enforcement action.
The Montana Department of Environmental Quality has been actively engaged in regulatory oversight at the Gallatin Site and has joined the federal enforcement action as co-plaintiff/intervenor with respect to this facility.
4. Alleged Violations
The government alleges the following violations at the Gallatin Site:
• RCRA §§ 3004 and 3005, 42 U.S.C. §§ 6924, 6925: The complaint alleges that TMC (through TSC) has operated an unpermitted hazardous-waste storage unit at the facility — specifically, the former chemical waste storage area adjacent to the main production building, which the government contends has been used for storage of reactive and ignitable hazardous wastes without a RCRA permit for storage. The complaint further alleges that TSC has failed to perform required corrective action at the three identified SWMUs in accordance with the corrective action schedule set forth in RCRA Permit No. MTD098712456. The government contends that TSC missed the deadlines for submission of the Corrective Measures Study ("CMS") and has failed to implement interim measures to prevent further migration of CS₂ in groundwater.
• CWA § 301, 33 U.S.C. § 1311: The complaint alleges 14 documented exceedances of MPDES permit effluent limits for CS₂ and total suspended solids ("TSS") between January 2021 and June 2024. These exceedances are established by TSC's own Discharge Monitoring Reports ("DMRs"), which are submitted to MT DEQ on a monthly basis pursuant to the facility's MPDES permit. The DMR data, which constitutes self-reported compliance data, provides an essentially irrefutable evidentiary basis for the alleged permit exceedances.
5. Remediation Cost Estimate
Pinnacle Creek Environmental has prepared a remediation cost estimate for the Gallatin Site of $42.8 million over a 15-year period. On an NPV basis at a 3% discount rate, this equates to approximately $34.1 million. The remediation program will encompass a corrective measures study for the three SWMUs, implementation of corrective measures, CS₂ groundwater remediation (likely including a combination of soil vapor extraction, air sparging, and monitored natural attenuation), and VOC soil treatment at the former drum staging area and other contaminated locations.
The government's technical expert, Cascade Geosciences, has not prepared a separate cost estimate for the Gallatin Site, and the parties appear to be in general agreement regarding the scope and cost of remediation at this facility. We therefore use Pinnacle Creek's estimate of $42.8 million as the basis for our financial projections.
C. Bonanza Creek Gold Mine (Bonanza Creek Site)
1. Site Description and Operations
The Bonanza Creek Gold Mine is located on County Road 447 at Mile Marker 12, Lander County, Nevada 89820, approximately 28 miles south of the town of Battle Mountain. The mine footprint encompasses approximately 5,600 acres, with the total controlled property — including buffer lands, water rights areas, and ancillary infrastructure — extending to approximately 12,400 acres. The site is situated in the Basin and Range physiographic province at an elevation of approximately 5,100 feet, in a semi-arid environment characterized by sparse vegetation and limited precipitation (approximately 8 inches annually).
The Bonanza Creek Site is an open-pit heap-leach gold mine that has been in operation since 2001 and is currently an active mining operation. Gold is recovered through a conventional cyanide heap-leach process, in which crushed ore is placed on lined leach pads and irrigated with a dilute sodium cyanide solution. The gold-bearing pregnant solution is collected, processed through a carbon-in-column ("CIC") circuit, and the gold is recovered by electrowinning and refining. Barren solution is recycled to the leach pads.
The mine is operated by Torchlight Mining (U.S.) Inc. The real property, mineral rights, and water rights are held by Bonanza Creek Mining, LLC. Both entities are wholly owned subsidiaries of TMC.
2. Environmental Conditions
The principal environmental concerns at the Bonanza Creek Site relate to process-solution releases from the heap-leach pad and contamination of solution ponds.
Cyanide contamination: Weak acid dissociable ("WAD") cyanide concentrations in the heap-leach pad underdrain have been measured at 0.62 mg/L, compared to the applicable discharge limit of 0.022 mg/L — an exceedance factor of approximately 28. WAD cyanide has been detected in surface water and shallow groundwater downgradient of the heap-leach pad, attributed to documented liner failures.
Mercury contamination: Mercury concentrations in process solutions and affected surface water average 12.4 µg/L, compared to the applicable water-quality criterion of 0.77 µg/L — an exceedance factor of approximately 16. Mercury is naturally present in the ore body at elevated concentrations and is mobilized during the leaching process.
Selenium contamination: Elevated selenium concentrations have been documented in the developing pit lake, creating a long-term concern for eventual pit-lake discharge or overflow.
Liner failure: The heap-leach pad has experienced a documented tear in its high-density polyethylene ("HDPE") liner system, which has been identified as the source of three documented process-solution releases to an ephemeral tributary of the Reese River. These releases occurred on March 17, 2022; August 9, 2022; and January 22, 2023. Each release was reported to NV DEP and EPA pursuant to applicable spill notification requirements, but the government contends that the underlying conditions constituting an unpermitted discharge from a point source to a water of the United States are continuing violations independent of the individual release events.
Avian mortalities: Seventeen avian mortalities have been documented in the mine's solution ponds between 2021 and 2023. The affected species include migratory birds protected under the MBTA. TMC has implemented certain wildlife deterrence measures, including partial netting coverage of the solution ponds and periodic hazing, but the government contends that these measures have been inadequate, as evidenced by the continued occurrence of bird deaths.
3. Regulatory History
The Bonanza Creek Site is subject to RCRA corrective action requirements and CWA enforcement. The site holds a Nevada Water Pollution Control Permit governing process-solution management, and the three documented releases have been identified as violations of that permit as well as unpermitted discharges under the CWA.
The Nevada Division of Environmental Protection has been actively involved in regulatory oversight of the site and has joined the federal enforcement action as co-plaintiff/intervenor.
The three documented releases are specifically identified in the complaint:
• March 17, 2022: Approximately 15,000 gallons of cyanide-bearing process solution released through the torn liner area, migrating approximately 800 feet to an ephemeral tributary channel.
• August 9, 2022: Approximately 8,500 gallons of process solution released through the same liner failure zone, with surface expression observed in the ephemeral channel.
• January 22, 2023: Approximately 22,000 gallons of process solution released, representing the largest single release event. This release coincided with an unusually wet precipitation event and resulted in visible process-solution flow in the ephemeral tributary for a distance of approximately 1.5 miles.
Additionally, the 17 documented avian mortalities in solution ponds between 2021 and 2023 form the basis for the MBTA claim. The first documented mortality occurred on March 8, 2021, and involved two American avocets found dead in the pregnant solution pond.
4. Alleged Violations
The government alleges the following violations at the Bonanza Creek Site:
• CWA § 301, 33 U.S.C. § 1311: Unpermitted discharge of process solution — containing WAD cyanide, mercury, and other pollutants — from the heap-leach pad (a point source) to an ephemeral tributary of the Reese River (a water of the United States) on three documented occasions. The government contends that the ephemeral tributary constitutes a "water of the United States" under the CWA as interpreted by the Supreme Court in Sackett v. EPA, 598 U.S. 651 (2023), based on evidence of a relatively permanent surface-water connection to the Reese River during seasonal flow events. This jurisdictional issue is discussed further in Section IV.A.2 below.
• RCRA § 3004, 42 U.S.C. § 6924: The government alleges that spent heap-leach ore — that is, ore that has been leached and from which gold recovery is no longer economically viable — constitutes a RCRA hazardous waste based on its characteristic reactivity due to residual cyanide content (D003 classification). The government contends that TMC has managed this spent ore without complying with applicable RCRA hazardous waste management standards, including requirements for characterization, manifesting, and disposal.
• MBTA, 16 U.S.C. § 703: The 17 documented avian mortalities in solution ponds between 2021 and 2023 are alleged to constitute violations of the MBTA's prohibition on the "take" (including killing) of migratory birds. This claim is addressed separately in Section IV.D below and will be the subject of a more detailed standalone memorandum.
5. Remediation Cost Estimate
Pinnacle Creek Environmental has prepared a remediation cost estimate for the Bonanza Creek Site of $63.2 million over a 20-year period. On an NPV basis at a 3% discount rate, this equates to approximately $47.1 million. The remediation program will encompass heap-leach pad liner repair and enhanced containment (including installation of a secondary containment system), cyanide and mercury remediation in affected surface water and groundwater, solution-pond wildlife protection measures (including comprehensive netting systems and enhanced hazing protocols), and long-term monitoring.
The government's technical expert, Cascade Geosciences, has indicated informally that its cost estimates for the Bonanza Creek Site may exceed Pinnacle Creek's figure, though a formal written estimate has not been provided. We have used Pinnacle Creek's estimate of $63.2 million for purposes of this memorandum but note that the final negotiated figure could be higher.
D. Kanawha Bend Chemical Plant (Kanawha Bend Site)
1. Site Description and Operations
The Kanawha Bend Chemical Plant is located at 2200 Chemical Valley Road, Institute, Kanawha County, West Virginia 25112. The facility occupies approximately 78 acres within the Kanawha Valley industrial corridor, commonly known as "Chemical Valley," an area with a long history of chemical manufacturing. The facility is situated approximately one mile from the Kanawha River and is bordered by a residential community to the east, other industrial facilities to the north and south, and a tributary of the Kanawha River to the west.
The Kanawha Bend Site is a chemical manufacturing facility that has been in continuous operation since 1985. The facility produces leaching agents and other chemicals used in mining operations, and also operates a sulfuric acid regeneration unit that processes spent sulfuric acid from TMC's mining operations and from third-party customers.
The facility is operated by Torchlight Specialty Chemicals, Inc. Like the Gallatin Site, Kanawha Bend is an active, ongoing operation, and TMC has no current plans to cease operations at the facility.
2. Environmental Conditions
The Kanawha Bend Site presents a complex suite of environmental contamination issues reflecting its nearly four decades of chemical manufacturing activity.
Soil contamination: Sulfuric acid residuals have been identified in soils surrounding the sulfuric acid regeneration unit, with pH values as low as 1.8 — representing extremely acidic conditions that have rendered the affected soils essentially sterile and incapable of supporting vegetation. Heavy metal contamination has been documented in subsurface soils near a former waste lagoon, with lead concentrations as high as 4,200 mg/kg and arsenic concentrations as high as 890 mg/kg. These concentrations significantly exceed applicable residential and industrial soil screening levels.
Groundwater contamination: A dense non-aqueous phase liquid ("DNAPL") plume — consisting of chlorinated solvents, principally trichloroethylene ("TCE") and perchloroethylene ("PCE") — has been identified in the fractured bedrock aquifer beneath the facility. DNAPL remediation in fractured bedrock presents formidable technical challenges, as the DNAPL migrates through fracture networks in ways that are difficult to characterize and treat. The DNAPL plume is the most technically challenging remediation issue at the Kanawha Bend Site and is expected to require a multi-phase approach including detailed fracture-network characterization, targeted DNAPL recovery, in-situ chemical oxidation, and long-term monitoring.
Former waste lagoon: A former surface impoundment that was used for disposal of process wastewater and chemical residuals has not been properly closed in accordance with RCRA requirements. The lagoon is a continuing source of contamination to soil and groundwater.
3. Regulatory History
The Kanawha Bend Site is a RCRA-permitted facility operating under RCRA Permit No. WVD048823915, issued by EPA Region 3 with WV DEP concurrence. The permit includes corrective action requirements for identified SWMUs and areas of concern.
The West Virginia Department of Environmental Protection has been actively involved in regulatory oversight of the site and has joined the federal enforcement action as co-plaintiff/intervenor.
A significant event in the site's regulatory history occurred on June 14, 2020, when a release of sulfuric acid from the regeneration unit reached a tributary of the Kanawha River. The release resulted in a fish kill and necessitated an EPA emergency response under CERCLA § 104. The EPA emergency response — which included neutralization of the acid release, containment of contaminated surface water, and initial soil remediation — was conducted at a total cost of $3.8 million. This amount is the subject of the CERCLA § 107 cost-recovery claim in the pending enforcement action.
4. Alleged Violations
The government alleges the following violations at the Kanawha Bend Site:
• RCRA §§ 3004 and 3005, 42 U.S.C. §§ 6924, 6925: The complaint alleges that TMC (through TSC) has failed to properly close the former surface impoundment in accordance with RCRA closure requirements, including the requirements for removal or decontamination of waste residues, installation of a final cover system, and post-closure care. The complaint further alleges that TSC has engaged in unpermitted treatment of listed hazardous wastes, specifically K062 (spent pickle liquor from steel finishing operations — by analogy, spent sulfuric acid from the regeneration process) and D002 (corrosive waste), without a RCRA permit for treatment. These allegations relate to TSC's practice of blending and neutralizing various acidic waste streams at the facility without having obtained a RCRA permit specifically authorizing treatment of these waste types.
• CERCLA § 107, 42 U.S.C. § 9607: Cost recovery for $3.8 million in EPA emergency response costs incurred in connection with the June 14, 2020 sulfuric acid release. The government asserts that TMC, TM(US), and TSC are liable as current owners and operators of the facility.
5. Remediation Cost Estimate
Pinnacle Creek Environmental has prepared a remediation cost estimate for the Kanawha Bend Site of $38.9 million over a 20-year period. On an NPV basis at a 3% discount rate, this equates to approximately $29.0 million. The remediation program will encompass interim stabilization of sulfuric acid-contaminated soils and heavy metal-contaminated soils, DNAPL investigation and remediation in the fractured bedrock aquifer, closure of the former surface impoundment in accordance with RCRA requirements, and long-term monitoring.
The DNAPL remediation component is the most significant cost driver and source of uncertainty in the Kanawha Bend estimate. Remediation of DNAPL in fractured bedrock is notoriously difficult and costly, and actual costs could exceed current projections if the DNAPL plume is found to be more extensive or more deeply penetrated into the fracture network than currently understood.
IV. Statutory Liability Analysis
This section presents our assessment of TMC's liability under each of the statutes at issue, applied to the specific facts of each site. Our overall conclusion is that the government has a strong case on the merits across all sites and all applicable statutes, and that TMC's available defenses are limited and unlikely to prevail at trial.
A. Clean Water Act (CWA) — Section 301
1. Applicable Legal Standards
Section 301(a) of the CWA, 33 U.S.C. § 1311(a), broadly prohibits "the discharge of any pollutant by any person" except in compliance with enumerated provisions of the Act, including the NPDES permit program under § 402. The term "discharge of a pollutant" is defined as "any addition of any pollutant to navigable waters from any point source." 33 U.S.C. § 1362(12).
The CWA imposes strict liability — that is, there is no requirement that the government prove intent, knowledge, or negligence on the part of the discharger. The government must establish five elements: (i) a discharge, (ii) of a pollutant, (iii) from a point source, (iv) to navigable waters (i.e., "waters of the United States"), and (v) without a permit or in violation of permit terms. See, e.g., Sierra Club v. ICG Hazard, LLC, 781 F.3d 281 (6th Cir. 2015); Piney Run Preservation Ass'n v. County Comm'rs of Carroll County, 268 F.3d 255, 265 (4th Cir. 2001).
Civil penalties for CWA violations are authorized under § 309(d), 33 U.S.C. § 1319(d), at amounts currently up to $64,618 per day per violation (as adjusted for inflation pursuant to the Federal Civil Penalties Inflation Adjustment Act).
2. Site-Specific Application
Ridgecrest: The CWA liability at the Ridgecrest Site is among the strongest claims in the government's complaint. The discharge of AMD — containing dissolved copper at concentrations approximately 5,400 times the Montana chronic aquatic-life standard — from the tailings impoundment and waste rock drainage channels to Flint Creek constitutes a textbook violation of CWA § 301. Flint Creek is indisputably a navigable water (it is a perennial tributary of the Clark Fork River, a Section 10 navigable water). The tailings impoundment seepage collection points and waste rock drainage channels are point sources as that term has been broadly construed by the courts. The discharges occurred without an NPDES/MPDES permit. TMC's liability for this violation is, in our assessment, clear and essentially indisputable. No viable defense to the discharge itself has been identified.
Gallatin: The CWA violations at the Gallatin Site are established by TMC's own Discharge Monitoring Reports, which document 14 separate exceedances of MPDES permit effluent limits for CS₂ and total suspended solids between January 2021 and June 2024. Self-reported DMR data is routinely used by EPA and DOJ as the primary evidentiary basis for permit-exceedance enforcement actions, and courts consistently accept DMR data as sufficient to establish CWA violations. TMC's defense options are extremely limited for these violations, as the Company itself reported the exceedances to the regulatory agency. The only potential defense — the upset/bypass defense discussed below — has limited applicability and evidentiary support.
Bonanza Creek: The CWA case at the Bonanza Creek Site is strong but presents one jurisdictional issue. The government must establish that the ephemeral tributary of the Reese River, into which the three documented process-solution releases flowed, constitutes a "water of the United States" under the CWA. Following the Supreme Court's decision in Sackett v. EPA, 598 U.S. 651 (2023), which narrowed the definition of "waters of the United States" for purposes of CWA jurisdiction, the government must demonstrate that the ephemeral tributary has a "relatively permanent" surface connection to a traditionally navigable water. Based on our review of the hydrological data, the ephemeral tributary does convey surface flow to the Reese River during seasonal precipitation and snowmelt events, and the Reese River itself is a relatively permanent body of water with a continuous surface connection to the Humboldt River. The government is likely to establish the jurisdictional nexus under the Sackett framework, though this is the one element of the CWA case that could be contested. The substantive violations — discharge of WAD cyanide and mercury at concentrations well above applicable limits — are clear.
3. Assessment of Defenses
Permit shield defense: This defense, which protects a permittee from enforcement for discharges of pollutants that are disclosed in the permit application and not specifically limited in the permit, is inapplicable to the Ridgecrest and Bonanza Creek violations. At Ridgecrest, the AMD discharges are unpermitted — there is no NPDES/MPDES permit in place, so there is no "shield" to invoke. At Bonanza Creek, the three process-solution releases were unauthorized discharges from a torn liner, not permitted discharges. At Gallatin, the violations consist of exceedances of permit limits, not discharges of pollutants not addressed in the permit; the permit shield defense does not protect against violations of explicit permit limits.
upset/bypass defense: The CWA regulations, 40 C.F.R. §§ 122.41(n)–(o), provide affirmative defenses for permit exceedances caused by upsets (unintentional, temporary noncompliance caused by factors beyond the permittee's reasonable control) or bypasses (intentional diversion of waste streams from treatment facilities under certain limited circumstances). This defense may have limited applicability to some of the Gallatin exceedances — specifically, those that occurred during equipment malfunctions at the wastewater treatment system — but the evidentiary support is thin. TMC's operational records do not consistently document that the conditions required for the upset defense (including that the upset was beyond reasonable control and that the permittee exercised operational diligence) were met during the relevant exceedance events.
Overall CWA liability assessment: The government has a very strong case at all three CWA sites. The likelihood of prevailing on a CWA liability defense at trial is, in our assessment, less than 15%.
B. Resource Conservation and Recovery Act (RCRA) — Sections 3004, 3005
1. Applicable Legal Standards
RCRA § 3004, 42 U.S.C. § 6924, establishes standards applicable to generators and owners/operators of treatment, storage, and disposal facilities ("TSDFs") for hazardous waste. These standards encompass requirements for waste characterization, labeling, manifesting, storage, treatment, disposal, and recordkeeping. RCRA § 3005, 42 U.S.C. § 6925, requires a permit for the treatment, storage, or disposal of hazardous waste.
RCRA § 3004(u), added by the 1984 Hazardous and Solid Waste Amendments, requires corrective action for releases of hazardous waste or hazardous constituents from solid waste management units at RCRA-permitted facilities. Corrective action obligations attach to the facility's RCRA permit and require the permittee to investigate and remediate releases from all SWMUs, regardless of when the releases occurred.
Like the CWA, RCRA imposes strict liability for civil enforcement — no knowledge or intent element is required. Civil penalties under RCRA § 3008(a), 42 U.S.C. § 6928(a), are currently set at up to $70,117 per day of noncompliance (as adjusted for inflation).
2. Site-Specific Application
Ridgecrest: The government alleges mismanagement of hazardous waste from the SX/EW circuit. The central issue is whether the waste streams from the circuit — principally spent electrolyte solutions, raffinate, and associated sludges — exhibit the toxicity characteristic for copper (D007, TCLP threshold 25 mg/L) and/or selenium (D010, TCLP threshold 1.0 mg/L). Based on available analytical data, TCLP testing of SX/EW circuit wastes has yielded copper concentrations ranging from 32 to 118 mg/L and selenium concentrations ranging from 0.8 to 3.4 mg/L, indicating that many of the tested samples exceed the D007 threshold and some exceed the D010 threshold. The government's RCRA hazardous waste determination is therefore likely supportable, though TMC may contest individual sample results and argue that certain waste streams are not representative of the overall waste generated by the circuit.
Gallatin: The RCRA violations at the Gallatin Site are relatively straightforward. The three identified SWMUs are documented in the facility's RCRA permit, and corrective action obligations are established by the permit terms. TMC's failure to meet corrective action milestones is documented in the administrative record. The allegation that TSC has operated an unpermitted hazardous-waste storage unit is supported by EPA inspection reports documenting the storage of reactive and ignitable wastes at the former chemical waste storage area without a permit for storage. TMC's liability for these RCRA violations appears strong.
Bonanza Creek: The RCRA case at the Bonanza Creek Site presents the most contestable issue in the entire enforcement action. The government's position is that spent heap-leach ore constitutes a RCRA hazardous waste based on the reactivity characteristic (D003) due to residual cyanide content. The D003 characteristic applies to wastes that are capable of generating toxic gases when mixed with water or mild acid; residual cyanide in spent ore could, under certain conditions, generate hydrogen cyanide gas. This classification is contestable — the mining industry has long maintained that spent heap-leach ore, once the cyanide degradation process is sufficiently advanced, does not exhibit the reactivity characteristic. TMC's position, supported by Pinnacle Creek's data, is that the residual cyanide in the spent ore has degraded to levels that do not trigger the D003 characteristic under standard testing protocols. However, the government has its own analytical data suggesting that certain portions of the spent ore retain sufficient cyanide to exhibit reactivity, and the regulatory analysis is complicated by the fact that different portions of the heap may contain ore at varying stages of cyanide degradation. This issue creates significant litigation risk for TMC, as the outcome depends on complex factual and technical determinations that a court would likely resolve based on competing expert testimony.
Kanawha Bend: The RCRA allegations at the Kanawha Bend Site relate to the failure to close the former surface impoundment and the unpermitted treatment of K062 and D002 wastes. The former impoundment has been identified as a source of ongoing contamination, and the failure to close it in accordance with RCRA closure requirements is well-documented. The government's allegation regarding unpermitted treatment of K062 and D002 wastes relates to TSC's practice of blending and neutralizing acidic waste streams, which the government characterizes as "treatment" of hazardous waste requiring a RCRA permit. TMC's liability for these violations appears strong, particularly given the documented contamination emanating from the unclosed impoundment and the administrative record supporting the government's characterization of the blending/neutralization activities as treatment.
3. Assessment of Defenses
Mining waste exclusion (Bevill Amendment): RCRA § 3001(b)(3)(A), 42 U.S.C. § 6921(b)(3)(A), commonly known as the Bevill Amendment, temporarily exempts certain mining wastes from regulation as hazardous waste under RCRA Subtitle C, pending completion of an EPA study and rulemaking. The Bevill exclusion applies to "solid waste from the extraction, beneficiation, and processing of ores and minerals." This exclusion is potentially applicable to some wastes at the Ridgecrest and Bonanza Creek Sites — specifically, overburden, waste rock, and tailings from the extraction and beneficiation process.
However, the Bevill exclusion has significant limitations. First, wastes from the SX/EW circuit at Ridgecrest may not qualify as "extraction" or "beneficiation" wastes; EPA has taken the position that SX/EW is a "mineral processing" activity whose wastes are not Bevill-exempt. Second, spent heap-leach ore at Bonanza Creek presents a similarly complex question — while heap leaching is generally considered a beneficiation activity, the government may argue that the spent ore, once removed from the active leach circuit, is no longer within the scope of the Bevill exemption. The applicability of the Bevill Amendment to the specific waste streams at issue is a complex factual and regulatory question that would require extensive technical and legal analysis to resolve. In our preliminary assessment, the Bevill Amendment provides a partial but uncertain defense at best.
Mixture/derived-from rule arguments: Under the RCRA mixture rule, 40 C.F.R. § 261.3(a)(2), a mixture of a listed hazardous waste and a solid waste is itself a hazardous waste. Under the derived-from rule, 40 C.F.R. § 261.3(c)(2), any waste derived from the treatment, storage, or disposal of a listed hazardous waste is itself a hazardous waste. TMC may be able to argue that certain waste streams at the Kanawha Bend Site — particularly those characterized as K062 — are not properly classified as K062 because the specific industrial process giving rise to the waste does not precisely match the K062 listing description. However, this argument is technicall

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