1039-00003 · Torchlight Mining Corp · Consent Decree/Drafting & Negotiation

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INTERNAL MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT PREPARED IN ANTICIPATION OF LITIGATION

FROM: Elliot Nguyen, Lead Associate, and Grace Nakamura, Working Associate, Calderwood & Harkness LLP

TO: Harrison Wexford, Responsible Partner, Calderwood & Harkness LLP

DATE: November 12, 2024

RE: Annotated Review and Issue Identification — DOJ First Draft Consent Decree (circulated November 8, 2024) in United States of America and State of Montana v. Torchlight Mining Corp. et al., Civil Action No. 9:24-cv-00087-DWM (D. Mont.)

MATTER NO.: 1039-00003

CONFIDENTIALITY NOTICE: This memorandum is a privileged and confidential attorney-client communication and attorney work product prepared in anticipation of litigation. It is intended solely for the use of the addressee and other authorized attorneys at Calderwood & Harkness LLP and authorized representatives of Torchlight Mining Corp. in connection with the above-referenced matter. Unauthorized disclosure, distribution, or copying of this memorandum is strictly prohibited. If you have received this memorandum in error, please contact the sender immediately.

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I. Introduction and Purpose

This memorandum provides a comprehensive, section-by-section annotated review of the United States Department of Justice's first draft consent decree in United States of America and State of Montana v. Torchlight Mining Corp. et al., Civil Action No. 9:24-cv-00087-DWM, pending before the Honorable Donald W. Molloy in the United States District Court for the District of Montana, Missoula Division. The first draft consent decree was circulated by Philip Orenstein, Trial Attorney, Environment and Natural Resources Division ("ENRD"), United States Department of Justice, and Margaret Coulson, Senior Enforcement Counsel, Office of Enforcement and Compliance Assurance ("OECA"), United States Environmental Protection Agency, on November 8, 2024.

The purpose of this memorandum is threefold. First, it identifies key provisions of the DOJ draft that require revision, negotiation, or further analysis before Torchlight Mining Corp. ("TMC" or the "Company") submits its redline response. Second, it flags specific issues that require discussion with TMC's internal team, including Miriam Soo-Hwan Park, General Counsel, and Gareth Linford, Vice President of Environmental, Health, and Safety ("EHS"). Third, it recommends specific changes for incorporation into TMC's redline of the consent decree.

In preparing this memorandum, we have reviewed the DOJ draft consent decree and its accompanying appendices in their entirety, cross-referencing the draft against the agreement in principle reached on July 30, 2024, the existing Administrative Order on Consent for the Ridgecrest site (Docket No. CERCLA-08-2022-0039, executed September 15, 2022), the Tolling Agreement executed April 22, 2024, and our prior internal analyses of TMC's enforcement exposure at each of the four subject sites.

We note that comments on the technical and remediation provisions of the draft consent decree have been separately solicited from Pinnacle Creek Environmental, LLC ("Pinnacle Creek"), specifically from Dr. Astrid Bergmann, P.E., TMC's lead environmental remediation consultant. Additionally, comments on state-specific provisions have been solicited from TMC's local counsel in each affected jurisdiction: Holcroft, Dane & Weiss LLP (Russell Dane) in Montana; sagebrush Law Group, PLLC (Denise Quartaro) in Nevada; and Baxter, Tully & Crane PLLC (Nathan Tully) in West Virginia. The technical and state-specific comments, once received, will be integrated into a separate unified Comment Compilation Memorandum, which will serve as the basis for the final TMC redline.

The target date for submission of TMC's redline to DOJ and EPA is mid-December 2024, consistent with the informal timeline discussed between counsel. This memorandum is organized to follow the structure of the DOJ draft consent decree, proceeding article by article, and concludes with a prioritized summary of issues and recommended changes, followed by a discussion of next steps and applicable deadlines.

Throughout this memorandum, individual issues are identified by sequentially numbered "Issue Flags" (Issue Flag 1 through Issue Flag 70) for ease of cross-referencing in subsequent work product and in discussions with the client.

II. Overview of DOJ Draft Structure

The DOJ's first draft consent decree is a substantial document of approximately 187 pages (exclusive of appendices), organized into twenty-two articles designated by Roman numerals. The appendices (Appendices A through G) add approximately 94 pages of supplemental material. The overall structure is consistent with the standard format employed by DOJ's Environment and Natural Resources Division for multi-site, multi-statute environmental enforcement consent decrees, though the scale and complexity of this particular decree — encompassing four distinct sites across three states, five defendant entities, and three federal environmental statutes — place it at the upper end of the range.

The articles of the DOJ draft are organized as follows:

• Article I. Jurisdiction and Venue

• Article II. Applicability

• Article III. Definitions

• Article IV. Effective Date

• Article V. Civil Penalty

• Article VI. Compliance Requirements (subdivided by site into four sub-articles: VI.A — Ridgecrest Copper-Molybdenum Mine; VI.B — Gallatin Chemical Works; VI.C — Bonanza Creek Gold Mine; VI.D — Kanawha Bend Chemical Plant)

• Article VII. EPA Past-Cost Reimbursement (CERCLA § 107)

• Article VIII. Supplemental Environmental Projects (SEPs)

• Article IX. Remediation Trust Fund and Financial Assurance

• Article X. Reporting Requirements

• Article XI. Stipulated Penalties

• Article XII. Force Majeure

• Article XIII. Dispute Resolution

• Article XIV. Information Collection and Retention

• Article XV. Effect of Settlement / Reservation of Rights

• Article XVI. Costs

• Article XVII. Notices

• Article XVIII. Modification

• Article XIX. Termination

• Article XX. Public Participation

• Article XXI. Signatories / Service

• Article XXII. Integration / Appendices

The appendices to the draft consent decree are designated as follows:

• Appendix A: Site Maps

• Appendix B: Remediation Schedules

• Appendix C: Supplemental Environmental Project Descriptions

• Appendix D: Sampling and Monitoring Plan

• Appendix E: Financial Assurance Forms

• Appendix F: Independent Monitor Terms of Reference

• Appendix G: Notice List

The draft names all five Torchlight defendant entities: Torchlight Mining Corp. (the Canadian parent corporation), Torchlight Mining (U.S.) Inc. (the U.S. operating subsidiary), Torchlight Specialty Chemicals, Inc. (operator of the Gallatin and Kanawha Bend facilities), Ridgecrest Mine Holdings, LLC (the Montana special-purpose entity holding real property at the Ridgecrest site), and Bonanza Creek Mining, LLC (the Nevada special-purpose entity holding real property at the Bonanza Creek site). The draft treats all five entities as collectively "Defendants" throughout, without differentiating their respective roles, which, as discussed below, raises significant concerns regarding liability allocation.

The co-plaintiffs in the action are the United States of America (acting through EPA and DOJ), the State of Montana (acting through the Montana Department of Environmental Quality ("MT DEQ")), the State of Nevada (acting through the Nevada Division of Environmental Protection ("NV DEP")), and the State of West Virginia (acting through the West Virginia Department of Environmental Protection ("WV DEP")). The case is assigned to the Honorable Donald W. Molloy, United States District Judge, in the Missoula Division of the District of Montana.

III. Section-by-Section Annotated Review

A. Article I — Jurisdiction and Venue

Summary of DOJ Draft

Article I of the DOJ draft consent decree recites the basis for the Court's subject-matter jurisdiction over this action, invoking federal question jurisdiction under 28 U.S.C. §§ 1331 and 1345, as well as specific jurisdictional grants under the Clean Water Act ("CWA"), Section 309(b), 33 U.S.C. § 1319(b); the Resource Conservation and Recovery Act ("RCRA"), Section 3008(a), 42 U.S.C. § 6928(a); and the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), Section 113(b), 42 U.S.C. § 9613(b). Venue in the District of Montana is predicated on the location of the Ridgecrest and Gallatin sites within the district, as well as the agreement of all parties to consolidate all claims arising from the four subject sites into a single action for purposes of a comprehensive, multi-site resolution.

Article I further includes a provision whereby all Torchlight defendant entities consent to the personal jurisdiction of the Court for purposes of the consent decree and its enforcement.

Issue Flags. Issue Flag 1 — Consent to Personal Jurisdiction. The DOJ draft includes a broad consent to personal jurisdiction clause that is not expressly limited to matters arising under or related to the consent decree. As drafted, this provision could be construed as a general consent to personal jurisdiction in the District of Montana for any civil proceeding brought by the United States or any co-plaintiff, regardless of subject matter. This is particularly concerning for the Canadian parent entity, Torchlight Mining Corp., which does not otherwise have a general presence in Montana sufficient to establish personal jurisdiction under traditional due process analysis. We recommend that TMC's redline revise this clause to specify that the consent to personal jurisdiction is limited solely to proceedings arising under or relating to the enforcement, interpretation, or modification of the consent decree, and does not constitute a general consent to jurisdiction in the District of Montana or any other forum for unrelated proceedings.

Issue Flag 2 — Venue Consolidation Language. The consolidation of claims arising from the Nevada (Bonanza Creek) and West Virginia (Kanawha Bend) sites into the District of Montana is achieved by the parties' mutual consent, which is memorialized in Article I. While TMC has no objection in principle to this consolidation — indeed, it was TMC's preference to resolve all four sites in a single proceeding — we flag this provision for review by Nathan Tully (Baxter, Tully & Crane PLLC) and Denise Quartaro (Sagebrush Law Group, PLLC) to confirm that the venue consolidation does not create complications under West Virginia or Nevada state law, respectively, particularly with respect to any state-law claims or obligations that may be addressed collaterally in the decree. We do not anticipate substantive objections, but prudence requires confirmation from local counsel.

Recommendation. We recommend minor revisions to narrow the consent-to-jurisdiction clause to proceedings arising under the consent decree. Subject to confirmation from local counsel on venue consolidation, Article I is otherwise acceptable.

B. Article II — Applicability

Summary of DOJ Draft

Article II establishes the scope of the consent decree's binding effect. The DOJ draft provides that the consent decree "shall apply to and be binding upon" all defendants, as well as their "officers, directors, employees, agents, successors, and assigns." The article further provides that any entity that acquires any of the four subject sites shall be bound by the terms of the consent decree applicable to that site, and that the defendants shall include appropriate notice and transfer provisions in any conveyance document.

Issue Flags. Issue Flag 3 — Overbroad Successor/Assign Language. The DOJ draft's successor and assign language is not limited to successors or assigns of the specific facilities or the environmental liabilities associated with the four subject sites. As drafted, the provision could be read to impose consent decree obligations on any purchaser of TMC's assets or business lines, even if the acquired assets are wholly unrelated to the Ridgecrest, Gallatin, Bonanza Creek, or Kanawha Bend facilities. This is an overreach that could have significant commercial implications for TMC. For example, if TMC were to divest its Torchlight Specialty Chemicals, Inc. subsidiary's non-environmental product lines, or sell mining properties in other jurisdictions, a purchaser could argue — or the government could assert — that the acquirer has become a "successor" bound by the decree.

We recommend that TMC's redline propose narrowing the successor/assign clause to apply only to (a) successors or assigns of the specific facilities identified in the decree (i.e., the four subject sites), and (b) successors or assigns who expressly assume the environmental liabilities addressed by the decree. In addition, TMC should propose a carve-out confirming that transfers of assets in the ordinary course of business that are unrelated to the four subject sites do not trigger the applicability provision.

Issue Flag 4 — "Officers, Directors, Employees" Language. The binding of "officers, directors, [and] employees" in their individual capacities raises potential directors' and officers' ("D&O") liability implications. While this language is standard in EPA consent decrees and is generally understood to bind individuals only in their representative capacities (i.e., as agents of the corporate defendants), the language is sufficiently broad that it could be cited as a basis for personal liability claims in the event of a decree violation. We recommend flagging this concern for Harrison Wexford and cross-referencing the D&O coverage analysis currently being prepared under Clearwater Mutual Insurance, Ltd., Policy No. CMI-DO-2023-10221 (Brendan Forsythe, Account Manager). While we do not recommend requesting a revision to this provision — as it is standard and any revision request would likely be rejected — it is important that TMC's officers and directors, particularly Douglas K. Prennell (CEO), Miriam Soo-Hwan Park (General Counsel), and Gareth Linford (VP, EHS), understand the potential implications.

Recommendation. We recommend proposing a narrowed successor/assign clause that limits applicability to successors of the specific facilities and environmental liabilities, with a carve-out for ordinary-course transfers unrelated to the four sites. The D&O language should be flagged for Harrison Wexford but not revised in the redline.

C. Article III — Definitions

Summary of DOJ Draft

Article III of the DOJ draft contains approximately forty-five defined terms, including standard terms such as "Consent Decree," "Day" (defined as calendar day), "Defendants," "Effective Date," "EPA," "Interest," "Paragraph," "Performance Standards," "Plaintiffs," "RCRA Corrective Action," "Remedial Action," "SEP," "Site," "United States," and "Work." The definitions are generally consistent with standard EPA consent decree practice, but several definitions require substantive revision.

Issue Flags. Issue Flag 5 — Definition of "Defendants." The DOJ draft defines "Defendants" to mean, collectively, all five Torchlight entities: Torchlight Mining Corp., Torchlight Mining (U.S.) Inc. (EIN: 83-2047156), Torchlight Specialty Chemicals, Inc. (EIN: 47-3819204), Ridgecrest Mine Holdings, LLC (Montana Secretary of State ID: E1042738), and Bonanza Creek Mining, LLC (Nevada Secretary of State Entity No.: E0518294731). This collective definition groups all five entities together without distinguishing their respective roles, operational responsibilities, or liabilities at each of the four subject sites.

The failure to differentiate among the defendant entities is problematic for several reasons. First, it creates ambiguity regarding which entity or entities bear primary responsibility for compliance obligations at each site. Second, it could be interpreted as imposing joint and several liability on all five entities for all consent decree obligations at all four sites, even though, for example, Bonanza Creek Mining, LLC has no connection to the Kanawha Bend or Gallatin facilities, and Ridgecrest Mine Holdings, LLC has no connection to the Bonanza Creek, Gallatin, or Kanawha Bend sites. Third, the grouping undermines TMC's ability to pursue insurance recovery under policies that are specific to individual entities and sites.

We recommend that the definition of "Defendants" be revised to identify each entity individually and that the compliance obligations in Article VI be attributed to the specific entity or entities responsible for each site. At minimum, the definitions section should include separate defined terms for each defendant entity, and the operative provisions of the decree should specify which entity or entities are responsible for which obligations.

Issue Flag 6 — Definition of "Site." The DOJ draft defines "Site" broadly to include the specific property at each location as well as "all areas where contamination attributable to the Defendants has come to be located." This open-ended definition is a significant concern. By extending the "Site" beyond the defined property boundaries to encompass any area where contamination may have migrated, the DOJ draft effectively creates an unbounded geographic scope for TMC's remediation obligations.

The controlled properties at each site are well-defined: Ridgecrest encompasses approximately 8,700 acres of controlled property; Gallatin encompasses 145 acres; Bonanza Creek encompasses approximately 12,400 acres of controlled property; and Kanawha Bend encompasses 78 acres. However, contamination migration — particularly acid mine drainage at Ridgecrest and groundwater contamination at Gallatin and Kanawha Bend — may extend beyond these property boundaries. We recommend tying the definition of "Site" to specific legal descriptions or tax parcel numbers, with a separate provision addressing off-site contamination migration that establishes TMC's obligation to address off-site contamination only as specified in the remedial action work plans approved by EPA, rather than as an open-ended obligation to remediate any and all areas affected by contamination.

Issue Flag 7 — "Effective Date." The DOJ draft defines the "Effective Date" as the date of entry of the consent decree by the Court. Article IV (discussed below) provides that the Effective Date shall be thirty days after the date of entry. Assuming the target entry date of May 15, 2025, the Effective Date would be June 14, 2025. This definition is acceptable and consistent with standard EPA practice. No revision is recommended.

Issue Flag 8 — "Performance Standards." The definition of "Performance Standards" in the DOJ draft is circular: it defines Performance Standards as "the standards set forth in the remedial action work plans to be developed pursuant to Article VI." Because the remedial action work plans have not yet been developed, this definition is effectively meaningless at the time of decree entry. This is particularly problematic because several provisions of the decree — including the stipulated penalties provision (Article XI) and the termination provision (Article XIX) — are triggered by compliance or non-compliance with "Performance Standards."

We recommend inserting objective, measurable criteria into the definition, or at minimum providing that Performance Standards shall be determined by reference to applicable federal and state water quality standards (e.g., Montana surface water quality standards for Ridgecrest; Nevada water quality criteria for Bonanza Creek), applicable soil cleanup levels, and risk-based corrective action standards, as supplemented by site-specific standards to be established in the remedial action work plans. This approach provides a floor of objective standards while preserving flexibility to develop site-specific criteria in the work plans.

Recommendation. We recommend substantial revisions to the definitions of "Defendants" (disaggregate entities), "Site" (tie to specific legal descriptions), and "Performance Standards" (insert objective criteria). Minor editorial revisions to other definitions may be appropriate but are not substantive concerns.

D. Article IV — Effective Date

Summary of DOJ Draft

Article IV provides that the Effective Date of the consent decree shall be thirty days after the date of entry of the decree by the Court. The article further provides that the Effective Date shall trigger the commencement of all deadlines and compliance periods set forth in the decree and its appendices.

Issue Flags. Issue Flag 9 — No Substantive Issue. The thirty-day post-entry Effective Date is consistent with standard EPA consent decree practice and allows sufficient time for the parties to take preparatory steps before compliance obligations begin to accrue. Based on the target entry date of May 15, 2025, the Effective Date would be June 14, 2025. All timeline calculations in this memorandum are based on this assumed Effective Date.

Recommendation. We recommend accepting Article IV as drafted. No revisions are needed.

E. Article V — Civil Penalty

Summary of DOJ Draft

Article V establishes a total civil penalty of $31.5 million, payable to the United States. The penalty is payable in four equal quarterly installments of $7,875,000 each, with the first installment due thirty days after the Effective Date (approximately July 14, 2025), and subsequent installments due at twelve, twenty-four, and thirty-six months after entry of the decree (approximately May 15, 2026, May 15, 2027, and May 15, 2028, respectively).

The draft allocates the total penalty among the four sites as follows:

These site-level allocations are consistent with the figures agreed upon in the agreement in principle reached on July 30, 2024, following the productive court-ordered mediation before Magistrate Judge Clara Finnegan on May 15, 2024.

Issue Flags. Issue Flag 10 — Entity-Specific Penalty Allocation. While the site-by-site penalty allocation in the DOJ draft is consistent with the agreement in principle, the draft does not specify whether the penalties are apportioned among the individual defendant entities or imposed jointly and severally on all five defendants. This ambiguity is significant for several reasons.

First, from a corporate governance and financial reporting perspective, TMC needs to allocate the penalty obligation to the appropriate subsidiary entity for each site. Second, joint and several liability for the full $31.5 million penalty would expose the Canadian parent corporation, Torchlight Mining Corp., to the full penalty amount regardless of which subsidiary's operations gave rise to the violations. Third, the allocation is critical for insurance recovery purposes. TMC's Pollution Legal Liability policy (Meridian PLL Policy No. MEI-ENV-2021-04738) provides coverage on a per-entity, per-site basis, and the absence of entity-specific allocation in the decree could complicate or preclude recovery under the policy.

We recommend that TMC's redline request an entity-specific penalty allocation, assigning each site's penalty to the entity or entities that operated or owned the facility at the relevant times. A reasonable allocation would assign the Ridgecrest penalty ($14.2 million) to Torchlight Mining (U.S.) Inc. and Ridgecrest Mine Holdings, LLC; the Gallatin penalty ($5.8 million) to Torchlight Specialty Chemicals, Inc.; the Bonanza Creek penalty ($7.9 million) to Torchlight Mining (U.S.) Inc. and Bonanza Creek Mining, LLC; and the Kanawha Bend penalty ($3.6 million) to Torchlight Specialty Chemicals, Inc. The parent entity, Torchlight Mining Corp., should not be a primary obligor for any site-specific penalty, though a parent guarantee may be appropriate.

Issue Flag 11 — Interest on Late Payments. The DOJ draft specifies that interest on any late payment shall accrue at the rate established under 28 U.S.C. § 1961, commencing on the date of the payment default. While the interest rate provision is standard and acceptable in substance, the draft does not include any grace period before interest begins to accrue. A fifteen-day grace period is a reasonable and commonly accepted feature in consent decrees of this magnitude, and we recommend requesting its inclusion.

Issue Flag 12 — Payment to "the United States" / State Penalty Shares. The DOJ draft directs all penalty payments to "the United States," with no allocation or distribution to the state co-plaintiffs (Montana, Nevada, and West Virginia). The draft is entirely silent on whether a separate agreement between the United States and the state co-plaintiffs addresses the sharing of penalty proceeds, or whether the states expect to receive separate penalty payments directly from TMC. This ambiguity must be resolved. If the states expect separate penalty payments, those obligations are not addressed in the decree and could represent additional, unquantified financial exposure for TMC. We recommend that TMC's redline include a request for clarification from DOJ and the state co-plaintiffs on this point, and that the decree either (a) explicitly state that the $31.5 million penalty represents the total civil penalty obligation to all plaintiffs (federal and state) or (b) identify any separate state penalty obligations and incorporate them into the decree.

Issue Flag 13 — Tax Treatment. Civil penalties imposed under the CWA and RCRA are generally not deductible under Section 162(f) of the Internal Revenue Code (as amended by the Tax Cuts and Jobs Act of 2017). While this is not a consent decree drafting issue per se, it has significant financial implications for TMC's financial modeling and reserve calculations. We recommend confirming the non-deductibility analysis with Northspire Capital Markets, Inc. (Vivian Okafor) and Ridgeline Accounting Partners LLP (Frances Whitmore) for purposes of financial statement footnoting and environmental reserve adjustments.

Recommendation. We recommend requesting an entity-specific penalty allocation among the five defendant entities; adding a fifteen-day grace period before interest accrues on late payments; clarifying the state co-plaintiffs' share (if any) of the civil penalty; and noting the non-deductibility of the penalty for financial modeling purposes.

F. Article VI — Compliance Requirements

F.1. General Observations on Article VI

Article VI is by far the longest and most complex article in the DOJ draft consent decree, spanning approximately seventy-eight pages of the 187-page draft. It is subdivided into four sub-articles (VI.A through VI.D), one for each of the four subject sites. Each sub-article establishes: (a) the substantive remedial action obligations applicable to the site; (b) interim milestones and deadlines for completion of specific remediation tasks; (c) performance standards that must be achieved as a condition of demonstrating compliance; (d) operations and maintenance ("O&M") obligations that continue after completion of active remediation; and (e) institutional controls (including deed restrictions, land use controls, and groundwater use restrictions) that must be implemented and maintained.

As a general matter, the remediation timelines proposed by the DOJ draft are aggressive relative to the technical assessments prepared by Pinnacle Creek Environmental, LLC. Input from Dr. Astrid Bergmann, P.E., will be critical for developing TMC's counter-proposals on specific milestones and deadlines. We have flagged the most significant timeline discrepancies below, but we note that additional adjustments may be warranted once Pinnacle Creek's formal technical comments are received (expected November 22, 2024).

F.2. Article VI.A — Ridgecrest Copper-Molybdenum Mine

Summary of DOJ Draft. Article VI.A addresses the comprehensive remediation of the Ridgecrest Copper-Molybdenum Mine, located in Granite County, Montana. The Ridgecrest site has an active mine footprint of approximately 3,200 acres within a total controlled property of approximately 8,700 acres. The mine was operational from 1978 through December 31, 2019, when active mining ceased. The primary environmental issues at Ridgecrest include acid mine drainage ("AMD") from exposed waste rock and open pit surfaces, seepage from a 425-acre tailings impoundment to Flint Creek, and elevated concentrations of dissolved copper (average 47 mg/L, compared to the Montana chronic aquatic life surface water quality standard of 0.0087 mg/L), molybdenum (average 1.2 mg/L), selenium (average 0.082 mg/L), and sulfate (average 3,400 mg/L) in surface water and groundwater.

The DOJ draft references the existing Administrative Order on Consent ("AOC") for the Ridgecrest site (Docket No. CERCLA-08-2022-0039, executed September 15, 2022) and incorporates obligations that build upon and expand the requirements of the AOC. The draft establishes a thirty-year remediation timeline, with interim milestones at regular intervals.

Issue Flags. Issue Flag 14 — Remediation Cost Estimate. The DOJ draft uses EPA's estimated remediation cost of $224.0 million over thirty years as the basis for financial assurance calculations and as the benchmark for the scope of remedial action at Ridgecrest. This figure does not reflect the negotiated remediation cost established in the July 30, 2024 agreement in principle. TMC's own estimate, prepared by Pinnacle Creek Environmental, is $187.5 million. The figure agreed upon by the parties in the agreement in principle was $198.6 million, with a net present value at a three-percent discount rate of approximately $134.9 million (calculated as $198.6 million × 0.6795). The DOJ draft's failure to incorporate the negotiated figure is a critical error that must be corrected in TMC's redline. The $25.4 million discrepancy between the DOJ draft figure ($224.0 million) and the negotiated figure ($198.6 million) directly affects the financial assurance requirements under Article IX and, more fundamentally, establishes an incorrect baseline for the scope of remediation work.

Issue Flag 15 — Remedial Action Work Plan Deadline. The DOJ draft requires TMC to submit a comprehensive Remedial Action Work Plan ("RAWP") for the Ridgecrest site within ninety days of the Effective Date. Based on the assumed Effective Date of June 14, 2025, this would yield a deadline of approximately September 12, 2025. Pinnacle Creek Environmental (Dr. Bergmann) has advised that one hundred eighty days (i.e., approximately December 14, 2025) is the minimum feasible timeline for preparation of a technically adequate RAWP, given the need for additional hydrogeological characterization of the tailings impoundment seepage pathway, completion of supplemental groundwater monitoring well installation, and integration of the AMD treatment system alternatives analysis. The ninety-day deadline is unrealistic and, if maintained, would almost certainly result in the submission of an incomplete work plan that would require significant revision, thereby delaying the overall remediation schedule. We recommend requesting a one hundred eighty-day deadline.

Issue Flag 16 — Remedy Construction Commencement. The DOJ draft requires commencement of remedy construction at Ridgecrest within eighteen months of the Effective Date (approximately December 14, 2026). TMC's position, supported by Pinnacle Creek's preliminary schedule analysis, is that construction commencement should occur within twenty-four months of the Effective Date (approximately June 14, 2027). The six-month difference is significant in light of the complexity of the AMD treatment system design, the need for extensive state permitting (including Montana Pollutant Discharge Elimination System ("MPDES") permits and hard rock mining reclamation permits under Montana's Metal Mine Reclamation Act), and the practical constraints imposed by Montana's construction season (generally May through October). A twenty-four-month commencement deadline is consistent with the milestone table currently being developed by Pinnacle Creek and represents a realistic, achievable target.

Issue Flag 17 — NPL Listing and CERCLA Covenant Not to Sue. The DOJ draft references the proposed listing of the Ridgecrest site on the National Priorities List ("NPL") under CERCLA but does not resolve the relationship between the consent decree obligations and any future NPL listing. This is a critical gap. If EPA subsequently lists Ridgecrest on the NPL, TMC could face duplicative investigation and remediation obligations under CERCLA's Superfund program, in addition to the obligations established by the consent decree. Moreover, NPL listing would expose TMC to additional CERCLA liability, including liability to third parties for contribution claims under CERCLA Section 113(f).

We recommend that TMC's redline include a covenant not to sue by the United States for future CERCLA liability at the Ridgecrest site, subject to standard reopeners for (a) previously unknown conditions that present a substantial threat to public health or the environment, and (b) new information regarding the nature or extent of contamination that was not known or reasonably available at the time of decree entry. This covenant is justified by the comprehensive nature of the consent decree's remediation obligations at Ridgecrest and by the fact that the consent decree essentially replaces a Superfund remedy with an equivalent, court-supervised remediation program.

Issue Flag 18 — Cross-Reference to Past-Cost Reimbursement. EPA's cost recovery claim for removal actions at Ridgecrest totaling $14.3 million (conducted January 2021 through May 2023, coordinated by Dr. Samuel Tesfaye, EPA Region 8 On-Scene Coordinator) is addressed in Article VII rather than in Article VI.A. This structural separation is acceptable, but a cross-reference between Article VI.A and Article VII should be included to ensure clarity regarding the relationship between the remediation obligations and the past-cost reimbursement obligations at Ridgecrest.

Recommendation. We recommend the following revisions to Article VI.A: (1) correct the remediation cost figure from $224.0 million to the negotiated $198.6 million; (2) extend the Remedial Action Work Plan submission deadline from ninety days to one hundred eighty days; (3) extend the construction commencement deadline from eighteen months to twenty-four months; and (4) add a CERCLA covenant not to sue with standard reopeners. Additionally, a cross-reference to Article VII should be added.

F.3. Article VI.B — Gallatin Chemical Works

Summary of DOJ Draft. Article VI.B addresses RCRA Corrective Action at the Gallatin Chemical Works, a 145-acre specialty chemical manufacturing facility located in Belgrade, Gallatin County, Montana. The facility has been operational since 1993 and is currently active, operated by Torchlight Specialty Chemicals, Inc. under RCRA Permit No. MTD098712456.

The DOJ draft requires corrective action to address three Solid Waste Management Units ("SWMUs"), carbon disulfide ("CS₂") groundwater contamination (maximum detected concentration of 890 µg/L, compared to the federal Maximum Contaminant Level ("MCL") of 10 µg/L), xanthate decomposition products in soil and groundwater, and volatile organic compound ("VOC") contamination (toluene and xylene) in subsurface soils. The corrective action program is structured as a phased process, beginning with a Corrective Measures Study ("CMS") and proceeding through remedy selection, design, implementation, and long-term monitoring.

Issue Flags. Issue Flag 19 — Corrective Measures Study Deadline. The DOJ draft requires submission of the CMS within twelve months of the Effective Date (approximately June 14, 2026). Pinnacle Creek Environmental considers this timeline feasible, and we recommend accepting it without modification.

Issue Flag 20 — Compliance Schedule Shield for CWA Exceedances. The recitals to the consent decree reference fourteen MPDES permit effluent limit exceedances for CS₂ and total suspended solids at the Gallatin facility during the period January 2021 through June 2024, which form the basis for the CWA violations alleged in the complaint. However, the compliance schedule in Article VI.B does not specify interim effluent limits during the corrective action period. This is a significant omission.

During the corrective action period — which may extend for several years — the ongoing operations at the Gallatin facility will continue to generate wastewater discharges. If the corrective action disrupts existing treatment systems or if interim conditions result in continued exceedances, TMC could face additional CWA enforcement actions for the very exceedances that the corrective action is designed to eliminate. We recommend requesting either (a) the establishment of interim effluent limits that are achievable during the corrective action period, or (b) a "compliance schedule shield" provision that provides protection from additional CWA enforcement for exceedances that occur during the corrective action period, provided that TMC is implementing the corrective action in good faith and in accordance with the approved schedule. Compliance schedule shields are recognized under EPA's CWA enforcement policy and are routinely included in consent decrees that require long-term corrective action at active facilities.

Issue Flag 21 — Cessation of Unpermitted Hazardous Waste Storage. The DOJ draft requires Torchlight Specialty Chemicals, Inc. to cease operation of the unpermitted hazardous waste storage unit at the Gallatin facility within sixty days of the Effective Date (approximately August 13, 2025). This requirement addresses EPA's finding that TSC was operating a hazardous waste storage unit without the required RCRA Part B permit.

While the obligation to bring the storage unit into compliance is not disputed, the sixty-day timeline for cessation may not be operationally feasible without disrupting ongoing production at the Gallatin facility. The unpermitted storage unit currently holds process intermediates and waste streams that are integral to TSC's manufacturing operations. Gareth Linford (VP, EHS) should assess whether sixty days provides sufficient time to arrange alternative compliant storage and adjust production processes. If the sixty-day timeline is infeasible, we recommend requesting one hundred twenty days, with an interim containment protocol to be implemented within sixty days that addresses EPA's immediate concerns regarding the unpermitted unit while allowing TSC to transition to compliant storage.

Issue Flag 22 — Estimated Remediation Cost. The estimated remediation cost for the Gallatin facility is $42.8 million over fifteen years, with a net present value at a three-percent discount rate of approximately $34.1 million (calculated as $42.8 million × 0.7969). This figure is consistent with Pinnacle Creek's estimate and does not present a substantive concern.

Recommendation. We recommend requesting a compliance schedule shield for interim CWA exceedances during the corrective action period. We also recommend that Gareth Linford assess the feasibility of the sixty-day RCRA storage unit closure timeline and, if necessary, request an extension to one hundred twenty days with an interim containment protocol. The CMS deadline and remediation cost estimate are acceptable.

F.4. Article VI.C — Bonanza Creek Gold Mine

Summary of DOJ Draft. Article VI.C addresses the remediation of the Bonanza Creek Gold Mine, a large-scale open-pit heap-leach gold mining operation located on approximately 5,600 acres of active mine footprint within a total controlled property of approximately 12,400 acres in Lander County, Nevada. The facility has been operational since 2001, and active mining operations are ongoing.

The primary environmental issues at Bonanza Creek arise from documented heap-leach pad liner failures and resulting cyanide and mercury contamination. Three process-solution releases to an ephemeral tributary of the Reese River have been documented: March 17, 2022; August 9, 2022; and January 22, 2023. Sampling data show Weak Acid Dissociable ("WAD") cyanide concentrations of 0.62 mg/L (compared to the applicable discharge limit of 0.022 mg/L), mercury concentrations averaging 12.4 µg/L (compared to the water quality criterion of 0.77 µg/L), and elevated selenium concentrations in pit-lake water.

In addition, the DOJ draft references seventeen documented avian mortalities at the Bonanza Creek solution ponds during the period 2021 through 2023, which EPA and the U.S. Fish and Wildlife Service have attributed to exposure to process solutions. These mortalities form the basis for potential violations of the Migratory Bird Treaty Act ("MBTA").

Issue Flags. Issue Flag 23 — Liner Repair and Containment Commencement. The DOJ draft requires commencement of liner repair and containment measures within twelve months of the Effective Date (approximately June 14, 2026). Pinnacle Creek considers this timeline feasible, and it is consistent with the milestone framework established in the agreement in principle. We recommend accepting this deadline without modification.

Issue Flag 24 — Avian Deterrence Systems. The DOJ draft requires TMC to install avian deterrence systems (including netting and hazing equipment) on all solution ponds at the Bonanza Creek facility within ninety days of the Effective Date (approximately September 12, 2025). The ninety-day timeline is reasonable. However, the draft specifies that the deterrence systems must employ "best available technology" without defining that standard. The phrase "best available technology" is inherently ambiguous and could be interpreted differently by EPA, TMC, and the independent monitor (Verdant Analytics, Inc., Dr. Kamal Osei) in future compliance audits.

We recommend defining the standard by reference to specific industry guidance, such as the U.S. Bureau of Mines Information Circular 9286 ("Cyanide Hazards to Birds and Other Wildlife from Gold Mining Operations"), the U.S. Fish and Wildlife Service's guidance on avian protection at mining operations, and applicable Nevada Division of Environmental Protection guidance. Defining the standard by reference to specific publications provides an objective benchmark for compliance and reduces the risk of future disputes over the adequacy of TMC's deterrence measures.

Issue Flag 25 — MBTA Violations and Release. The seventeen avian mortalities are referenced in the recitals of the consent decree as a basis for the enhanced monitoring requirements at Bonanza Creek, but the MBTA violations are not separately penalized in Article V. The $7.9 million Bonanza Creek penalty encompasses CWA and RCRA violations only. This suggests that DOJ intended the consent decree to resolve the MBTA exposure, but the covenant not to sue in Article XV does not explicitly cover MBTA violations.

This ambiguity is dangerous. If the MBTA exposure is not explicitly resolved by the decree, TMC remains vulnerable to a separate MBTA enforcement action by the Department of the Interior or a citizen suit by environmental advocacy groups. We recommend requesting explicit MBTA release language in Article XV (Effect of Settlement / Reservation of Rights). This issue is discussed further in connection with Article XV below (Issue Flag 57). We also cross-reference the separate MBTA exposure memorandum currently in preparation, with a target completion date of November 22, 2024.

Issue Flag 26 — Estimated Remediation Cost. The estimated remediation cost for the Bonanza Creek site is $63.2 million over twenty years, with a net present value at a three-percent discount rate of approximately $47.1 million (calculated as $63.2 million × 0.7454). This figure is consistent with Pinnacle Creek's estimate. No substantive concern.

Issue Flag 27 — Operational Flexibility for Ongoing Mining. The DOJ draft does not address the interaction between TMC's ongoing active mining operations at Bonanza Creek and the remediation obligations imposed by the consent decree. This is a significant omission. Bonanza Creek is an active mine generating substantial revenue, and TMC cannot cease mining operations while performing liner repairs and containment measures. The remediation activities must be coordinated with, and cannot unreasonably interfere with, TMC's mining and ore processing operations.

We recommend inserting an operational flexibility provision that expressly protects TMC's ability to continue mining and processing ore at Bonanza Creek concurrently with the implementation of remediation measures, subject to compliance with all applicable permits and the terms of the consent decree. The provision should state that the consent decree shall not be construed to require the cessation or curtailment of mining operations except as specifically required by the remedial action work plan or as necessary to prevent an imminent threat to human health or the environment.

Recommendation. We recommend the following revisions to Article VI.C: (1) define the avian deterrence standard by reference to specific industry guidance; (2) seek explicit MBTA release language in Article XV; and (3) add an operational flexibility provision preserving TMC's ability to continue mining operations during remediation. The liner repair timeline and remediation cost estimate are acceptable.

F.5. Article VI.D — Kanawha Bend Chemical Plant

Summary of DOJ Draft. Article VI.D addresses RCRA Corrective Action at the Kanawha Bend Chemical Plant, a 78-acre chemical manufacturing facility located in Institute, Kanawha County, West Virginia. The facility has been operational since 1985 and is currently active, operated by Torchlight Specialty Chemicals, Inc. under RCRA Permit No. WVD048823915.

The DOJ draft requires corrective action to address sulfuric acid residuals in soils (pH as low as 1.8 in the vicinity of the former waste lagoon), heavy metal contamination (lead at concentrations up to 4,200 mg/kg and arsenic at concentrations up to 890 mg/kg) near the former waste lagoon, and Dense Non-Aqueous Phase Liquid ("DNAPL") contamination consisting of chlorinated solvents in the fractured bedrock aquifer underlying the site. The DOJ draft also references EPA's emergency response at the site in June 2020, necessitated by a sulfuric acid release from the former waste lagoon, at a cost of $3.8 million (addressed in Article VII as a past-cost reimbursement obligation).

Issue Flags. Issue Flag 28 — Interim Stabilization Measures Deadline. The DOJ draft requires completion of interim stabilization measures within twelve months of the Effective Date (approximately June 14, 2026). Pinnacle Creek Environmental advises that eighteen months (approximately December 14, 2026) is a more realistic timeline, given the significant challenges associated with DNAPL characterization in fractured bedrock. Fractured bedrock aquifer systems present unique hydrogeological challenges that make DNAPL delineation and remediation design inherently more complex and time-consuming than comparable work in unconsolidated sedimentary aquifer systems. The additional six months are needed to complete the DNAPL characterization, evaluate stabilization alternatives, and design the interim stabilization measures with sufficient technical rigor to ensure their effectiveness. We recommend requesting an eighteen-month deadline.

Issue Flag 29 — Surface Impoundment Closure Method. The DOJ draft requires closure of the former surface impoundment "in accordance with RCRA closure standards" within six months of the Effective Date, but does not specify whether closure shall be accomplished by closure-in-place (with an engineered cap and long-term monitoring) or by clean closure (complete removal and decontamination). This ambiguity is significant because the cost differential between the two approaches is substantial. The surface impoundment involves listed hazardous wastes K062 (spent pickle liquor from steel finishing operations, applicable because the facility processes acidic waste streams) and D002 (corrosivity characteristic hazardous waste). Clean closure of an impoundment containing these wastes would require complete excavation and off-site disposal of all impoundment contents and contaminated liner materials, at an estimated cost that could exceed $15 million. Closure-in-place with an engineered cap and long-term monitoring is estimated at approximately $4.5 million.

TMC's strong preference is closure-in-place. This approach is technically appropriate for the site, as the impoundment is located in an area where institutional controls can effectively restrict future land use and groundwater use. We recommend that TMC's redline propose specific closure-in-place language, including specifications for the engineered cap design, long-term groundwater monitoring requirements, and institutional controls, consistent with RCRA closure standards at 40 C.F.R. Part 265, Subpart G.

Issue Flag 30 — Cross-Reference to Past-Cost Reimbursement. EPA's past-cost reimbursement of $3.8 million for the June 14, 2020 sulfuric acid release emergency response is addressed in Article VII. Combined with the $14.3 million in Ridgecrest past costs, the total past-cost reimbursement obligation is $18.1 million. A cross-reference between Article VI.D and Article VII should be included for clarity.

Issue Flag 31 — Natural Resource Damage Claims. The DOJ draft does not address potential Natural Resource Damage ("NRD") claims arising from the contamination of the Kanawha River tributary resulting from the June 2020 sulfuric acid release. NRD claims are brought by federal and state natural resource trustees (typically the U.S. Department of the Interior and the relevant state agency) and can represent substantial additional liability beyond the remediation costs and civil penalties addressed in the consent decree. Given that the sulfuric acid release resulted in documented harm to aquatic resources in the Kanawha River tributary, the risk of NRD claims is real and should be addressed in the consent decree.

We recommend seeking a covenant not to sue from the United States (on behalf of all federal natural resource trustees) for NRD claims arising from conditions at Kanawha Bend and at Ridgecrest (where AMD discharges to Flint Creek also present NRD exposure). At minimum, the decree should clarify whether the settlement is intended to resolve any potential NRD claims or whether NRD claims are expressly reserved. If NRD claims are reserved, TMC needs to understand the magnitude of the residual exposure for financial planning purposes.

Recommendation. We recommend the following revisions to Article VI.D: (1) extend the interim stabilization measures deadline from twelve months to eighteen months; (2) specify closure-in-place as the method for closure of the former surface impoundment; (3) add a cross-reference to Article VII for past-cost reimbursement; and (4) seek an NRD covenant not to sue or, at minimum, clarification of the NRD reservation.

G. Article VII — EPA Past-Cost Reimbursement (CERCLA § 107)

Summary of DOJ Draft

Article VII addresses TMC's obligation to reimburse EPA for past costs incurred in connection with removal actions and emergency response at the Ridgecrest and Kanawha Bend sites, pursuant to CERCLA Section 107, 42 U.S.C. § 9607. The total past-cost reimbursement obligation is $18.1 million, consisting of $14.3 million for removal actions conducted at the Ridgecrest site during the period January 2021 through May 2023 (coordinated by Dr. Samuel Tesfaye, EPA Region 8 On-Scene Coordinator) and $3.8 million for the emergency response to the sulfuric acid release at the Kanawha Bend site in June 2020.

The DOJ draft requires payment of the full $18.1 million in a single lump sum within sixty days of the Effective Date (approximately August 13, 2025).

Issue Flags. Issue Flag 32 — Lump-Sum Payment Timing. The requirement to pay $18.1 million in a single lump sum within sixty days of the Effective Date is aggressive when considered in the context of TMC's other near-term cash obligations under the consent decree. The first civil penalty installment of $7,875,000 is due within thirty days of the Effective Date (approximately July 14, 2025). Combined, TMC would face total cash outlays of $25,975,000 within sixty days of the Effective Date. This front-loaded payment schedule places significant stress on TMC's near-term liquidity and should be restructured to allow more manageable cash flow.

We recommend requesting that the past-cost reimbursement be paid in two equal installments: $9,050,000 at sixty days after the Effective Date (approximately August 13, 2025) and $9,050,000 at one hundred eighty days after the Effective Date (approximately December 11, 2025). This restructuring does not reduce the total payment obligation but provides TMC with additional time to manage its cash flow. The proposed installment structure should be discussed with TMC's CFO, Carolyn Bracebridge, and with Northspire Capital Markets (Vivian Okafor) to ensure alignment with TMC's financial planning.

Issue Flag 33 — EPA Cost Certification. The DOJ draft does not include a certification from EPA that the stated amounts ($14.3 million for Ridgecrest and $3.8 million for Kanawha Bend) represent the full and complete costs incurred by EPA at those sites. Without such certification, EPA could seek additional cost recovery in the future for costs that were incurred but not included in the $18.1 million figure, or for costs incurred after the date of the decree but attributable to pre-decree activities. We recommend requiring EPA to certify that the $18.1 million represents all past costs incurred at both sites through a specified date, and that the covenant not to sue in Article XV covers any additional past-cost claims.

Recommendation. We recommend restructuring the past-cost reimbursement into two equal installments at sixty and one hundred eighty days after the Effective Date, and requiring EPA to certify that the $18.1 million figure represents the entirety of its past costs at Ridgecrest and Kanawha Bend.

H. Article VIII — Supplemental Environmental Projects (SEPs)

Summary of DOJ Draft

Article VIII establishes TMC's obligation to fund and implement three Supplemental Environmental Projects ("SEPs") totaling $12.0 million. The three SEPs are as follows:

1. Flint Creek Watershed Restoration Project (Montana) — $5,500,000. This SEP involves stream-bank stabilization, riparian area replanting, and fish-passage improvements along approximately twelve miles of Flint Creek downstream of the Ridgecrest Copper-Molybdenum Mine in Granite County, Montana.

2. Battle Mountain Community Drinking Water Improvement Project (Nevada) — $3,500,000. This SEP involves the upgrade of the municipal water treatment facility in Battle Mountain, Lander County, Nevada, the community nearest to the Bonanza Creek Gold Mine.

3. Institute Community Air Quality Monitoring Network (West Virginia) — $3,000,000. This SEP involves the installation and ten-year operation of six ambient air quality monitoring stations in the Institute/South Charleston area of Kanawha County, West Virginia, serving the community surrounding the Kanawha Bend Chemical Plant.

Issue Flags. Issue Flag 34 — Milestones and Reporting. The DOJ draft provides adequate descriptions of each SEP but lacks defined completion milestones and reporting requirements. Without specific milestones, TMC's compliance with the SEP obligations could be assessed on an ad hoc basis, creating uncertainty and potential disputes. We recommend developing a comprehensive SEP Compliance and Reporting Schedule that establishes specific milestones for each SEP (e.g., design completion, contractor selection, commencement of field work, fifty-percent completion, and final completion), together with periodic reporting requirements (e.g., semi-annual progress reports to EPA and the relevant state co-plaintiff). This schedule should be developed as a separate appendix to the consent decree and cross-referenced in Article VIII.

Issue Flag 35 — SEP Credit Against Penalty or Remediation. The DOJ draft provides that the SEP expenditures are "in addition to and not in lieu of the civil penalty." We recommend confirming with DOJ whether EPA's SEP Policy (as updated in 2015 and subsequently revised) permits the $12.0 million SEP commitment to be credited in any way against the penalty or remediation obligations. Under the current EPA SEP Policy, SEPs are generally not creditable against civil penalties; rather, they are a mechanism by which a defendant can obtain a reduction in the penalty amount in exchange for committing to environmentally beneficial projects. However, the DOJ draft does not indicate that any penalty reduction was applied in consideration of the $12.0 million SEP commitment. This should be clearly understood by the client's financial team, including CFO Carolyn Bracebridge and the advisors at Northspire Capital Markets (Vivian Okafor), for purposes of financial planning and reserve calculations.

Issue Flag 36 — SEP Nexus Requirement. Each of the three proposed SEPs satisfies EPA's requirement that a SEP bear a sufficient nexus to the violations or the affected community. The Flint Creek SEP is directly related to the Ridgecrest site's impact on the Flint Creek watershed. The Battle Mountain SEP is related to the community nearest to the Bonanza Creek site. The Institute Air Quality SEP is related to the community surrounding the Kanawha Bend facility. We have no substantive concerns regarding nexus.

Recommendation. We recommend developing detailed milestones and a reporting schedule for each SEP, to be incorporated as a new appendix to the consent decree. We also recommend confirming the SEP credit/non-credit status with DOJ for financial planning purposes.

I. Article IX — Remediation Trust Fund and Financial Assurance

Summary of DOJ Draft

Article IX establishes the requirement for financial assurance in the total amount of $245.0 million, to be posted within ninety days of the Effective Date (approximately September 12, 2025). The draft specifies acceptable financial assurance instruments, including surety bonds, trust funds, letters of credit, insurance policies, and corporate guarantees (the last subject to a financial test demonstrating the guarantor's ability to fund the remediation). The financial assurance is intended to guarantee TMC's performance of all remediation obligations at all four sites.

Issue Flags. Issue Flag 37 — Basis for $245.0 Million Figure. The $245.0 million financial assurance figure appears to be based on EPA's higher remediation cost estimate of $224.0 million for Ridgecrest alone, rather than on the negotiated figure of $198.6 million. TMC's proposed financial assurance structure is as follows:

Although the total amount of TMC's proposed financial assurance package ($245.0 million) coincidentally matches the DOJ draft's requirement, the basis for the calculation should be corrected to reflect the negotiated remediation cost of $198.6 million for Ridgecrest. The aggregate financial assurance figure should be recalculated from the ground up based on the negotiated remediation costs at all four sites, plus an appropriate contingency factor. We note that the aggregate remediation cost across all four sites, using the negotiated figures, is approximately $347.4 million ($198.6 million for Ridgecrest + $42.8 million for Gallatin + $63.2 million for Bonanza Creek + $42.8 million for Kanawha Bend). The $245.0 million financial assurance figure, even after correction, may be defensible as representing the maximum reasonably anticipated obligation during any single time period, but the basis must be documented and agreed upo

INTERNAL MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT PREPARED IN ANTICIPATION OF LITIGATION
FROM: Elliot Nguyen, Lead Associate, and Grace Nakamura, Working Associate, Calderwood & Harkness LLP
TO: Harrison Wexford, Responsible Partner, Calderwood & Harkness LLP
DATE: November 12, 2024
RE: Annotated Review and Issue Identification — DOJ First Draft Consent Decree (circulated November 8, 2024) in United States of America and State of Montana v. Torchlight Mining Corp. et al., Civil Action No. 9:24-cv-00087-DWM (D. Mont.)
MATTER NO.: 1039-00003
CONFIDENTIALITY NOTICE: This memorandum is a privileged and confidential attorney-client communication and attorney work product prepared in anticipation of litigation. It is intended solely for the use of the addressee and other authorized attorneys at Calderwood & Harkness LLP and authorized representatives of Torchlight Mining Corp. in connection with the above-referenced matter. Unauthorized disclosure, distribution, or copying of this memorandum is strictly prohibited. If you have received this memorandum in error, please contact the sender immediately.
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I. Introduction and Purpose
This memorandum provides a comprehensive, section-by-section annotated review of the United States Department of Justice's first draft consent decree in United States of America and State of Montana v. Torchlight Mining Corp. et al., Civil Action No. 9:24-cv-00087-DWM, pending before the Honorable Donald W. Molloy in the United States District Court for the District of Montana, Missoula Division. The first draft consent decree was circulated by Philip Orenstein, Trial Attorney, Environment and Natural Resources Division ("ENRD"), United States Department of Justice, and Margaret Coulson, Senior Enforcement Counsel, Office of Enforcement and Compliance Assurance ("OECA"), United States Environmental Protection Agency, on November 8, 2024.
The purpose of this memorandum is threefold. First, it identifies key provisions of the DOJ draft that require revision, negotiation, or further analysis before Torchlight Mining Corp. ("TMC" or the "Company") submits its redline response. Second, it flags specific issues that require discussion with TMC's internal team, including Miriam Soo-Hwan Park, General Counsel, and Gareth Linford, Vice President of Environmental, Health, and Safety ("EHS"). Third, it recommends specific changes for incorporation into TMC's redline of the consent decree.
In preparing this memorandum, we have reviewed the DOJ draft consent decree and its accompanying appendices in their entirety, cross-referencing the draft against the agreement in principle reached on July 30, 2024, the existing Administrative Order on Consent for the Ridgecrest site (Docket No. CERCLA-08-2022-0039, executed September 15, 2022), the Tolling Agreement executed April 22, 2024, and our prior internal analyses of TMC's enforcement exposure at each of the four subject sites.
We note that comments on the technical and remediation provisions of the draft consent decree have been separately solicited from Pinnacle Creek Environmental, LLC ("Pinnacle Creek"), specifically from Dr. Astrid Bergmann, P.E., TMC's lead environmental remediation consultant. Additionally, comments on state-specific provisions have been solicited from TMC's local counsel in each affected jurisdiction: Holcroft, Dane & Weiss LLP (Russell Dane) in Montana; sagebrush Law Group, PLLC (Denise Quartaro) in Nevada; and Baxter, Tully & Crane PLLC (Nathan Tully) in West Virginia. The technical and state-specific comments, once received, will be integrated into a separate unified Comment Compilation Memorandum, which will serve as the basis for the final TMC redline.
The target date for submission of TMC's redline to DOJ and EPA is mid-December 2024, consistent with the informal timeline discussed between counsel. This memorandum is organized to follow the structure of the DOJ draft consent decree, proceeding article by article, and concludes with a prioritized summary of issues and recommended changes, followed by a discussion of next steps and applicable deadlines.
Throughout this memorandum, individual issues are identified by sequentially numbered "Issue Flags" (Issue Flag 1 through Issue Flag 70) for ease of cross-referencing in subsequent work product and in discussions with the client.
II. Overview of DOJ Draft Structure
The DOJ's first draft consent decree is a substantial document of approximately 187 pages (exclusive of appendices), organized into twenty-two articles designated by Roman numerals. The appendices (Appendices A through G) add approximately 94 pages of supplemental material. The overall structure is consistent with the standard format employed by DOJ's Environment and Natural Resources Division for multi-site, multi-statute environmental enforcement consent decrees, though the scale and complexity of this particular decree — encompassing four distinct sites across three states, five defendant entities, and three federal environmental statutes — place it at the upper end of the range.
The articles of the DOJ draft are organized as follows:
• Article I. Jurisdiction and Venue
• Article II. Applicability
• Article III. Definitions
• Article IV. Effective Date
• Article V. Civil Penalty
• Article VI. Compliance Requirements (subdivided by site into four sub-articles: VI.A — Ridgecrest Copper-Molybdenum Mine; VI.B — Gallatin Chemical Works; VI.C — Bonanza Creek Gold Mine; VI.D — Kanawha Bend Chemical Plant)
• Article VII. EPA Past-Cost Reimbursement (CERCLA § 107)
• Article VIII. Supplemental Environmental Projects (SEPs)
• Article IX. Remediation Trust Fund and Financial Assurance
• Article X. Reporting Requirements
• Article XI. Stipulated Penalties
• Article XII. Force Majeure
• Article XIII. Dispute Resolution
• Article XIV. Information Collection and Retention
• Article XV. Effect of Settlement / Reservation of Rights
• Article XVI. Costs
• Article XVII. Notices
• Article XVIII. Modification
• Article XIX. Termination
• Article XX. Public Participation
• Article XXI. Signatories / Service
• Article XXII. Integration / Appendices
The appendices to the draft consent decree are designated as follows:
• Appendix A: Site Maps
• Appendix B: Remediation Schedules
• Appendix C: Supplemental Environmental Project Descriptions
• Appendix D: Sampling and Monitoring Plan
• Appendix E: Financial Assurance Forms
• Appendix F: Independent Monitor Terms of Reference
• Appendix G: Notice List
The draft names all five Torchlight defendant entities: Torchlight Mining Corp. (the Canadian parent corporation), Torchlight Mining (U.S.) Inc. (the U.S. operating subsidiary), Torchlight Specialty Chemicals, Inc. (operator of the Gallatin and Kanawha Bend facilities), Ridgecrest Mine Holdings, LLC (the Montana special-purpose entity holding real property at the Ridgecrest site), and Bonanza Creek Mining, LLC (the Nevada special-purpose entity holding real property at the Bonanza Creek site). The draft treats all five entities as collectively "Defendants" throughout, without differentiating their respective roles, which, as discussed below, raises significant concerns regarding liability allocation.
The co-plaintiffs in the action are the United States of America (acting through EPA and DOJ), the State of Montana (acting through the Montana Department of Environmental Quality ("MT DEQ")), the State of Nevada (acting through the Nevada Division of Environmental Protection ("NV DEP")), and the State of West Virginia (acting through the West Virginia Department of Environmental Protection ("WV DEP")). The case is assigned to the Honorable Donald W. Molloy, United States District Judge, in the Missoula Division of the District of Montana.
III. Section-by-Section Annotated Review
A. Article I — Jurisdiction and Venue
Summary of DOJ Draft
Article I of the DOJ draft consent decree recites the basis for the Court's subject-matter jurisdiction over this action, invoking federal question jurisdiction under 28 U.S.C. §§ 1331 and 1345, as well as specific jurisdictional grants under the Clean Water Act ("CWA"), Section 309(b), 33 U.S.C. § 1319(b); the Resource Conservation and Recovery Act ("RCRA"), Section 3008(a), 42 U.S.C. § 6928(a); and the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), Section 113(b), 42 U.S.C. § 9613(b). Venue in the District of Montana is predicated on the location of the Ridgecrest and Gallatin sites within the district, as well as the agreement of all parties to consolidate all claims arising from the four subject sites into a single action for purposes of a comprehensive, multi-site resolution.
Article I further includes a provision whereby all Torchlight defendant entities consent to the personal jurisdiction of the Court for purposes of the consent decree and its enforcement.
Issue Flags. Issue Flag 1 — Consent to Personal Jurisdiction. The DOJ draft includes a broad consent to personal jurisdiction clause that is not expressly limited to matters arising under or related to the consent decree. As drafted, this provision could be construed as a general consent to personal jurisdiction in the District of Montana for any civil proceeding brought by the United States or any co-plaintiff, regardless of subject matter. This is particularly concerning for the Canadian parent entity, Torchlight Mining Corp., which does not otherwise have a general presence in Montana sufficient to establish personal jurisdiction under traditional due process analysis. We recommend that TMC's redline revise this clause to specify that the consent to personal jurisdiction is limited solely to proceedings arising under or relating to the enforcement, interpretation, or modification of the consent decree, and does not constitute a general consent to jurisdiction in the District of Montana or any other forum for unrelated proceedings.
Issue Flag 2 — Venue Consolidation Language. The consolidation of claims arising from the Nevada (Bonanza Creek) and West Virginia (Kanawha Bend) sites into the District of Montana is achieved by the parties' mutual consent, which is memorialized in Article I. While TMC has no objection in principle to this consolidation — indeed, it was TMC's preference to resolve all four sites in a single proceeding — we flag this provision for review by Nathan Tully (Baxter, Tully & Crane PLLC) and Denise Quartaro (Sagebrush Law Group, PLLC) to confirm that the venue consolidation does not create complications under West Virginia or Nevada state law, respectively, particularly with respect to any state-law claims or obligations that may be addressed collaterally in the decree. We do not anticipate substantive objections, but prudence requires confirmation from local counsel.
Recommendation. We recommend minor revisions to narrow the consent-to-jurisdiction clause to proceedings arising under the consent decree. Subject to confirmation from local counsel on venue consolidation, Article I is otherwise acceptable.
B. Article II — Applicability
Summary of DOJ Draft
Article II establishes the scope of the consent decree's binding effect. The DOJ draft provides that the consent decree "shall apply to and be binding upon" all defendants, as well as their "officers, directors, employees, agents, successors, and assigns." The article further provides that any entity that acquires any of the four subject sites shall be bound by the terms of the consent decree applicable to that site, and that the defendants shall include appropriate notice and transfer provisions in any conveyance document.
Issue Flags. Issue Flag 3 — Overbroad Successor/Assign Language. The DOJ draft's successor and assign language is not limited to successors or assigns of the specific facilities or the environmental liabilities associated with the four subject sites. As drafted, the provision could be read to impose consent decree obligations on any purchaser of TMC's assets or business lines, even if the acquired assets are wholly unrelated to the Ridgecrest, Gallatin, Bonanza Creek, or Kanawha Bend facilities. This is an overreach that could have significant commercial implications for TMC. For example, if TMC were to divest its Torchlight Specialty Chemicals, Inc. subsidiary's non-environmental product lines, or sell mining properties in other jurisdictions, a purchaser could argue — or the government could assert — that the acquirer has become a "successor" bound by the decree.
We recommend that TMC's redline propose narrowing the successor/assign clause to apply only to (a) successors or assigns of the specific facilities identified in the decree (i.e., the four subject sites), and (b) successors or assigns who expressly assume the environmental liabilities addressed by the decree. In addition, TMC should propose a carve-out confirming that transfers of assets in the ordinary course of business that are unrelated to the four subject sites do not trigger the applicability provision.
Issue Flag 4 — "Officers, Directors, Employees" Language. The binding of "officers, directors, [and] employees" in their individual capacities raises potential directors' and officers' ("D&O") liability implications. While this language is standard in EPA consent decrees and is generally understood to bind individuals only in their representative capacities (i.e., as agents of the corporate defendants), the language is sufficiently broad that it could be cited as a basis for personal liability claims in the event of a decree violation. We recommend flagging this concern for Harrison Wexford and cross-referencing the D&O coverage analysis currently being prepared under Clearwater Mutual Insurance, Ltd., Policy No. CMI-DO-2023-10221 (Brendan Forsythe, Account Manager). While we do not recommend requesting a revision to this provision — as it is standard and any revision request would likely be rejected — it is important that TMC's officers and directors, particularly Douglas K. Prennell (CEO), Miriam Soo-Hwan Park (General Counsel), and Gareth Linford (VP, EHS), understand the potential implications.
Recommendation. We recommend proposing a narrowed successor/assign clause that limits applicability to successors of the specific facilities and environmental liabilities, with a carve-out for ordinary-course transfers unrelated to the four sites. The D&O language should be flagged for Harrison Wexford but not revised in the redline.
C. Article III — Definitions
Summary of DOJ Draft
Article III of the DOJ draft contains approximately forty-five defined terms, including standard terms such as "Consent Decree," "Day" (defined as calendar day), "Defendants," "Effective Date," "EPA," "Interest," "Paragraph," "Performance Standards," "Plaintiffs," "RCRA Corrective Action," "Remedial Action," "SEP," "Site," "United States," and "Work." The definitions are generally consistent with standard EPA consent decree practice, but several definitions require substantive revision.
Issue Flags. Issue Flag 5 — Definition of "Defendants." The DOJ draft defines "Defendants" to mean, collectively, all five Torchlight entities: Torchlight Mining Corp., Torchlight Mining (U.S.) Inc. (EIN: 83-2047156), Torchlight Specialty Chemicals, Inc. (EIN: 47-3819204), Ridgecrest Mine Holdings, LLC (Montana Secretary of State ID: E1042738), and Bonanza Creek Mining, LLC (Nevada Secretary of State Entity No.: E0518294731). This collective definition groups all five entities together without distinguishing their respective roles, operational responsibilities, or liabilities at each of the four subject sites.
The failure to differentiate among the defendant entities is problematic for several reasons. First, it creates ambiguity regarding which entity or entities bear primary responsibility for compliance obligations at each site. Second, it could be interpreted as imposing joint and several liability on all five entities for all consent decree obligations at all four sites, even though, for example, Bonanza Creek Mining, LLC has no connection to the Kanawha Bend or Gallatin facilities, and Ridgecrest Mine Holdings, LLC has no connection to the Bonanza Creek, Gallatin, or Kanawha Bend sites. Third, the grouping undermines TMC's ability to pursue insurance recovery under policies that are specific to individual entities and sites.
We recommend that the definition of "Defendants" be revised to identify each entity individually and that the compliance obligations in Article VI be attributed to the specific entity or entities responsible for each site. At minimum, the definitions section should include separate defined terms for each defendant entity, and the operative provisions of the decree should specify which entity or entities are responsible for which obligations.
Issue Flag 6 — Definition of "Site." The DOJ draft defines "Site" broadly to include the specific property at each location as well as "all areas where contamination attributable to the Defendants has come to be located." This open-ended definition is a significant concern. By extending the "Site" beyond the defined property boundaries to encompass any area where contamination may have migrated, the DOJ draft effectively creates an unbounded geographic scope for TMC's remediation obligations.
The controlled properties at each site are well-defined: Ridgecrest encompasses approximately 8,700 acres of controlled property; Gallatin encompasses 145 acres; Bonanza Creek encompasses approximately 12,400 acres of controlled property; and Kanawha Bend encompasses 78 acres. However, contamination migration — particularly acid mine drainage at Ridgecrest and groundwater contamination at Gallatin and Kanawha Bend — may extend beyond these property boundaries. We recommend tying the definition of "Site" to specific legal descriptions or tax parcel numbers, with a separate provision addressing off-site contamination migration that establishes TMC's obligation to address off-site contamination only as specified in the remedial action work plans approved by EPA, rather than as an open-ended obligation to remediate any and all areas affected by contamination.
Issue Flag 7 — "Effective Date." The DOJ draft defines the "Effective Date" as the date of entry of the consent decree by the Court. Article IV (discussed below) provides that the Effective Date shall be thirty days after the date of entry. Assuming the target entry date of May 15, 2025, the Effective Date would be June 14, 2025. This definition is acceptable and consistent with standard EPA practice. No revision is recommended.
Issue Flag 8 — "Performance Standards." The definition of "Performance Standards" in the DOJ draft is circular: it defines Performance Standards as "the standards set forth in the remedial action work plans to be developed pursuant to Article VI." Because the remedial action work plans have not yet been developed, this definition is effectively meaningless at the time of decree entry. This is particularly problematic because several provisions of the decree — including the stipulated penalties provision (Article XI) and the termination provision (Article XIX) — are triggered by compliance or non-compliance with "Performance Standards."
We recommend inserting objective, measurable criteria into the definition, or at minimum providing that Performance Standards shall be determined by reference to applicable federal and state water quality standards (e.g., Montana surface water quality standards for Ridgecrest; Nevada water quality criteria for Bonanza Creek), applicable soil cleanup levels, and risk-based corrective action standards, as supplemented by site-specific standards to be established in the remedial action work plans. This approach provides a floor of objective standards while preserving flexibility to develop site-specific criteria in the work plans.
Recommendation. We recommend substantial revisions to the definitions of "Defendants" (disaggregate entities), "Site" (tie to specific legal descriptions), and "Performance Standards" (insert objective criteria). Minor editorial revisions to other definitions may be appropriate but are not substantive concerns.
D. Article IV — Effective Date
Summary of DOJ Draft
Article IV provides that the Effective Date of the consent decree shall be thirty days after the date of entry of the decree by the Court. The article further provides that the Effective Date shall trigger the commencement of all deadlines and compliance periods set forth in the decree and its appendices.
Issue Flags. Issue Flag 9 — No Substantive Issue. The thirty-day post-entry Effective Date is consistent with standard EPA consent decree practice and allows sufficient time for the parties to take preparatory steps before compliance obligations begin to accrue. Based on the target entry date of May 15, 2025, the Effective Date would be June 14, 2025. All timeline calculations in this memorandum are based on this assumed Effective Date.
Recommendation. We recommend accepting Article IV as drafted. No revisions are needed.
E. Article V — Civil Penalty
Summary of DOJ Draft
Article V establishes a total civil penalty of $31.5 million, payable to the United States. The penalty is payable in four equal quarterly installments of $7,875,000 each, with the first installment due thirty days after the Effective Date (approximately July 14, 2025), and subsequent installments due at twelve, twenty-four, and thirty-six months after entry of the decree (approximately May 15, 2026, May 15, 2027, and May 15, 2028, respectively).
The draft allocates the total penalty among the four sites as follows:
These site-level allocations are consistent with the figures agreed upon in the agreement in principle reached on July 30, 2024, following the productive court-ordered mediation before Magistrate Judge Clara Finnegan on May 15, 2024.
Issue Flags. Issue Flag 10 — Entity-Specific Penalty Allocation. While the site-by-site penalty allocation in the DOJ draft is consistent with the agreement in principle, the draft does not specify whether the penalties are apportioned among the individual defendant entities or imposed jointly and severally on all five defendants. This ambiguity is significant for several reasons.
First, from a corporate governance and financial reporting perspective, TMC needs to allocate the penalty obligation to the appropriate subsidiary entity for each site. Second, joint and several liability for the full $31.5 million penalty would expose the Canadian parent corporation, Torchlight Mining Corp., to the full penalty amount regardless of which subsidiary's operations gave rise to the violations. Third, the allocation is critical for insurance recovery purposes. TMC's Pollution Legal Liability policy (Meridian PLL Policy No. MEI-ENV-2021-04738) provides coverage on a per-entity, per-site basis, and the absence of entity-specific allocation in the decree could complicate or preclude recovery under the policy.
We recommend that TMC's redline request an entity-specific penalty allocation, assigning each site's penalty to the entity or entities that operated or owned the facility at the relevant times. A reasonable allocation would assign the Ridgecrest penalty ($14.2 million) to Torchlight Mining (U.S.) Inc. and Ridgecrest Mine Holdings, LLC; the Gallatin penalty ($5.8 million) to Torchlight Specialty Chemicals, Inc.; the Bonanza Creek penalty ($7.9 million) to Torchlight Mining (U.S.) Inc. and Bonanza Creek Mining, LLC; and the Kanawha Bend penalty ($3.6 million) to Torchlight Specialty Chemicals, Inc. The parent entity, Torchlight Mining Corp., should not be a primary obligor for any site-specific penalty, though a parent guarantee may be appropriate.
Issue Flag 11 — Interest on Late Payments. The DOJ draft specifies that interest on any late payment shall accrue at the rate established under 28 U.S.C. § 1961, commencing on the date of the payment default. While the interest rate provision is standard and acceptable in substance, the draft does not include any grace period before interest begins to accrue. A fifteen-day grace period is a reasonable and commonly accepted feature in consent decrees of this magnitude, and we recommend requesting its inclusion.
Issue Flag 12 — Payment to "the United States" / State Penalty Shares. The DOJ draft directs all penalty payments to "the United States," with no allocation or distribution to the state co-plaintiffs (Montana, Nevada, and West Virginia). The draft is entirely silent on whether a separate agreement between the United States and the state co-plaintiffs addresses the sharing of penalty proceeds, or whether the states expect to receive separate penalty payments directly from TMC. This ambiguity must be resolved. If the states expect separate penalty payments, those obligations are not addressed in the decree and could represent additional, unquantified financial exposure for TMC. We recommend that TMC's redline include a request for clarification from DOJ and the state co-plaintiffs on this point, and that the decree either (a) explicitly state that the $31.5 million penalty represents the total civil penalty obligation to all plaintiffs (federal and state) or (b) identify any separate state penalty obligations and incorporate them into the decree.
Issue Flag 13 — Tax Treatment. Civil penalties imposed under the CWA and RCRA are generally not deductible under Section 162(f) of the Internal Revenue Code (as amended by the Tax Cuts and Jobs Act of 2017). While this is not a consent decree drafting issue per se, it has significant financial implications for TMC's financial modeling and reserve calculations. We recommend confirming the non-deductibility analysis with Northspire Capital Markets, Inc. (Vivian Okafor) and Ridgeline Accounting Partners LLP (Frances Whitmore) for purposes of financial statement footnoting and environmental reserve adjustments.
Recommendation. We recommend requesting an entity-specific penalty allocation among the five defendant entities; adding a fifteen-day grace period before interest accrues on late payments; clarifying the state co-plaintiffs' share (if any) of the civil penalty; and noting the non-deductibility of the penalty for financial modeling purposes.
F. Article VI — Compliance Requirements
F.1. General Observations on Article VI
Article VI is by far the longest and most complex article in the DOJ draft consent decree, spanning approximately seventy-eight pages of the 187-page draft. It is subdivided into four sub-articles (VI.A through VI.D), one for each of the four subject sites. Each sub-article establishes: (a) the substantive remedial action obligations applicable to the site; (b) interim milestones and deadlines for completion of specific remediation tasks; (c) performance standards that must be achieved as a condition of demonstrating compliance; (d) operations and maintenance ("O&M") obligations that continue after completion of active remediation; and (e) institutional controls (including deed restrictions, land use controls, and groundwater use restrictions) that must be implemented and maintained.
As a general matter, the remediation timelines proposed by the DOJ draft are aggressive relative to the technical assessments prepared by Pinnacle Creek Environmental, LLC. Input from Dr. Astrid Bergmann, P.E., will be critical for developing TMC's counter-proposals on specific milestones and deadlines. We have flagged the most significant timeline discrepancies below, but we note that additional adjustments may be warranted once Pinnacle Creek's formal technical comments are received (expected November 22, 2024).
F.2. Article VI.A — Ridgecrest Copper-Molybdenum Mine
Summary of DOJ Draft. Article VI.A addresses the comprehensive remediation of the Ridgecrest Copper-Molybdenum Mine, located in Granite County, Montana. The Ridgecrest site has an active mine footprint of approximately 3,200 acres within a total controlled property of approximately 8,700 acres. The mine was operational from 1978 through December 31, 2019, when active mining ceased. The primary environmental issues at Ridgecrest include acid mine drainage ("AMD") from exposed waste rock and open pit surfaces, seepage from a 425-acre tailings impoundment to Flint Creek, and elevated concentrations of dissolved copper (average 47 mg/L, compared to the Montana chronic aquatic life surface water quality standard of 0.0087 mg/L), molybdenum (average 1.2 mg/L), selenium (average 0.082 mg/L), and sulfate (average 3,400 mg/L) in surface water and groundwater.
The DOJ draft references the existing Administrative Order on Consent ("AOC") for the Ridgecrest site (Docket No. CERCLA-08-2022-0039, executed September 15, 2022) and incorporates obligations that build upon and expand the requirements of the AOC. The draft establishes a thirty-year remediation timeline, with interim milestones at regular intervals.
Issue Flags. Issue Flag 14 — Remediation Cost Estimate. The DOJ draft uses EPA's estimated remediation cost of $224.0 million over thirty years as the basis for financial assurance calculations and as the benchmark for the scope of remedial action at Ridgecrest. This figure does not reflect the negotiated remediation cost established in the July 30, 2024 agreement in principle. TMC's own estimate, prepared by Pinnacle Creek Environmental, is $187.5 million. The figure agreed upon by the parties in the agreement in principle was $198.6 million, with a net present value at a three-percent discount rate of approximately $134.9 million (calculated as $198.6 million × 0.6795). The DOJ draft's failure to incorporate the negotiated figure is a critical error that must be corrected in TMC's redline. The $25.4 million discrepancy between the DOJ draft figure ($224.0 million) and the negotiated figure ($198.6 million) directly affects the financial assurance requirements under Article IX and, more fundamentally, establishes an incorrect baseline for the scope of remediation work.
Issue Flag 15 — Remedial Action Work Plan Deadline. The DOJ draft requires TMC to submit a comprehensive Remedial Action Work Plan ("RAWP") for the Ridgecrest site within ninety days of the Effective Date. Based on the assumed Effective Date of June 14, 2025, this would yield a deadline of approximately September 12, 2025. Pinnacle Creek Environmental (Dr. Bergmann) has advised that one hundred eighty days (i.e., approximately December 14, 2025) is the minimum feasible timeline for preparation of a technically adequate RAWP, given the need for additional hydrogeological characterization of the tailings impoundment seepage pathway, completion of supplemental groundwater monitoring well installation, and integration of the AMD treatment system alternatives analysis. The ninety-day deadline is unrealistic and, if maintained, would almost certainly result in the submission of an incomplete work plan that would require significant revision, thereby delaying the overall remediation schedule. We recommend requesting a one hundred eighty-day deadline.
Issue Flag 16 — Remedy Construction Commencement. The DOJ draft requires commencement of remedy construction at Ridgecrest within eighteen months of the Effective Date (approximately December 14, 2026). TMC's position, supported by Pinnacle Creek's preliminary schedule analysis, is that construction commencement should occur within twenty-four months of the Effective Date (approximately June 14, 2027). The six-month difference is significant in light of the complexity of the AMD treatment system design, the need for extensive state permitting (including Montana Pollutant Discharge Elimination System ("MPDES") permits and hard rock mining reclamation permits under Montana's Metal Mine Reclamation Act), and the practical constraints imposed by Montana's construction season (generally May through October). A twenty-four-month commencement deadline is consistent with the milestone table currently being developed by Pinnacle Creek and represents a realistic, achievable target.
Issue Flag 17 — NPL Listing and CERCLA Covenant Not to Sue. The DOJ draft references the proposed listing of the Ridgecrest site on the National Priorities List ("NPL") under CERCLA but does not resolve the relationship between the consent decree obligations and any future NPL listing. This is a critical gap. If EPA subsequently lists Ridgecrest on the NPL, TMC could face duplicative investigation and remediation obligations under CERCLA's Superfund program, in addition to the obligations established by the consent decree. Moreover, NPL listing would expose TMC to additional CERCLA liability, including liability to third parties for contribution claims under CERCLA Section 113(f).
We recommend that TMC's redline include a covenant not to sue by the United States for future CERCLA liability at the Ridgecrest site, subject to standard reopeners for (a) previously unknown conditions that present a substantial threat to public health or the environment, and (b) new information regarding the nature or extent of contamination that was not known or reasonably available at the time of decree entry. This covenant is justified by the comprehensive nature of the consent decree's remediation obligations at Ridgecrest and by the fact that the consent decree essentially replaces a Superfund remedy with an equivalent, court-supervised remediation program.
Issue Flag 18 — Cross-Reference to Past-Cost Reimbursement. EPA's cost recovery claim for removal actions at Ridgecrest totaling $14.3 million (conducted January 2021 through May 2023, coordinated by Dr. Samuel Tesfaye, EPA Region 8 On-Scene Coordinator) is addressed in Article VII rather than in Article VI.A. This structural separation is acceptable, but a cross-reference between Article VI.A and Article VII should be included to ensure clarity regarding the relationship between the remediation obligations and the past-cost reimbursement obligations at Ridgecrest.
Recommendation. We recommend the following revisions to Article VI.A: (1) correct the remediation cost figure from $224.0 million to the negotiated $198.6 million; (2) extend the Remedial Action Work Plan submission deadline from ninety days to one hundred eighty days; (3) extend the construction commencement deadline from eighteen months to twenty-four months; and (4) add a CERCLA covenant not to sue with standard reopeners. Additionally, a cross-reference to Article VII should be added.
F.3. Article VI.B — Gallatin Chemical Works
Summary of DOJ Draft. Article VI.B addresses RCRA Corrective Action at the Gallatin Chemical Works, a 145-acre specialty chemical manufacturing facility located in Belgrade, Gallatin County, Montana. The facility has been operational since 1993 and is currently active, operated by Torchlight Specialty Chemicals, Inc. under RCRA Permit No. MTD098712456.
The DOJ draft requires corrective action to address three Solid Waste Management Units ("SWMUs"), carbon disulfide ("CS₂") groundwater contamination (maximum detected concentration of 890 µg/L, compared to the federal Maximum Contaminant Level ("MCL") of 10 µg/L), xanthate decomposition products in soil and groundwater, and volatile organic compound ("VOC") contamination (toluene and xylene) in subsurface soils. The corrective action program is structured as a phased process, beginning with a Corrective Measures Study ("CMS") and proceeding through remedy selection, design, implementation, and long-term monitoring.
Issue Flags. Issue Flag 19 — Corrective Measures Study Deadline. The DOJ draft requires submission of the CMS within twelve months of the Effective Date (approximately June 14, 2026). Pinnacle Creek Environmental considers this timeline feasible, and we recommend accepting it without modification.
Issue Flag 20 — Compliance Schedule Shield for CWA Exceedances. The recitals to the consent decree reference fourteen MPDES permit effluent limit exceedances for CS₂ and total suspended solids at the Gallatin facility during the period January 2021 through June 2024, which form the basis for the CWA violations alleged in the complaint. However, the compliance schedule in Article VI.B does not specify interim effluent limits during the corrective action period. This is a significant omission.
During the corrective action period — which may extend for several years — the ongoing operations at the Gallatin facility will continue to generate wastewater discharges. If the corrective action disrupts existing treatment systems or if interim conditions result in continued exceedances, TMC could face additional CWA enforcement actions for the very exceedances that the corrective action is designed to eliminate. We recommend requesting either (a) the establishment of interim effluent limits that are achievable during the corrective action period, or (b) a "compliance schedule shield" provision that provides protection from additional CWA enforcement for exceedances that occur during the corrective action period, provided that TMC is implementing the corrective action in good faith and in accordance with the approved schedule. Compliance schedule shields are recognized under EPA's CWA enforcement policy and are routinely included in consent decrees that require long-term corrective action at active facilities.
Issue Flag 21 — Cessation of Unpermitted Hazardous Waste Storage. The DOJ draft requires Torchlight Specialty Chemicals, Inc. to cease operation of the unpermitted hazardous waste storage unit at the Gallatin facility within sixty days of the Effective Date (approximately August 13, 2025). This requirement addresses EPA's finding that TSC was operating a hazardous waste storage unit without the required RCRA Part B permit.
While the obligation to bring the storage unit into compliance is not disputed, the sixty-day timeline for cessation may not be operationally feasible without disrupting ongoing production at the Gallatin facility. The unpermitted storage unit currently holds process intermediates and waste streams that are integral to TSC's manufacturing operations. Gareth Linford (VP, EHS) should assess whether sixty days provides sufficient time to arrange alternative compliant storage and adjust production processes. If the sixty-day timeline is infeasible, we recommend requesting one hundred twenty days, with an interim containment protocol to be implemented within sixty days that addresses EPA's immediate concerns regarding the unpermitted unit while allowing TSC to transition to compliant storage.
Issue Flag 22 — Estimated Remediation Cost. The estimated remediation cost for the Gallatin facility is $42.8 million over fifteen years, with a net present value at a three-percent discount rate of approximately $34.1 million (calculated as $42.8 million × 0.7969). This figure is consistent with Pinnacle Creek's estimate and does not present a substantive concern.
Recommendation. We recommend requesting a compliance schedule shield for interim CWA exceedances during the corrective action period. We also recommend that Gareth Linford assess the feasibility of the sixty-day RCRA storage unit closure timeline and, if necessary, request an extension to one hundred twenty days with an interim containment protocol. The CMS deadline and remediation cost estimate are acceptable.
F.4. Article VI.C — Bonanza Creek Gold Mine
Summary of DOJ Draft. Article VI.C addresses the remediation of the Bonanza Creek Gold Mine, a large-scale open-pit heap-leach gold mining operation located on approximately 5,600 acres of active mine footprint within a total controlled property of approximately 12,400 acres in Lander County, Nevada. The facility has been operational since 2001, and active mining operations are ongoing.
The primary environmental issues at Bonanza Creek arise from documented heap-leach pad liner failures and resulting cyanide and mercury contamination. Three process-solution releases to an ephemeral tributary of the Reese River have been documented: March 17, 2022; August 9, 2022; and January 22, 2023. Sampling data show Weak Acid Dissociable ("WAD") cyanide concentrations of 0.62 mg/L (compared to the applicable discharge limit of 0.022 mg/L), mercury concentrations averaging 12.4 µg/L (compared to the water quality criterion of 0.77 µg/L), and elevated selenium concentrations in pit-lake water.
In addition, the DOJ draft references seventeen documented avian mortalities at the Bonanza Creek solution ponds during the period 2021 through 2023, which EPA and the U.S. Fish and Wildlife Service have attributed to exposure to process solutions. These mortalities form the basis for potential violations of the Migratory Bird Treaty Act ("MBTA").
Issue Flags. Issue Flag 23 — Liner Repair and Containment Commencement. The DOJ draft requires commencement of liner repair and containment measures within twelve months of the Effective Date (approximately June 14, 2026). Pinnacle Creek considers this timeline feasible, and it is consistent with the milestone framework established in the agreement in principle. We recommend accepting this deadline without modification.
Issue Flag 24 — Avian Deterrence Systems. The DOJ draft requires TMC to install avian deterrence systems (including netting and hazing equipment) on all solution ponds at the Bonanza Creek facility within ninety days of the Effective Date (approximately September 12, 2025). The ninety-day timeline is reasonable. However, the draft specifies that the deterrence systems must employ "best available technology" without defining that standard. The phrase "best available technology" is inherently ambiguous and could be interpreted differently by EPA, TMC, and the independent monitor (Verdant Analytics, Inc., Dr. Kamal Osei) in future compliance audits.
We recommend defining the standard by reference to specific industry guidance, such as the U.S. Bureau of Mines Information Circular 9286 ("Cyanide Hazards to Birds and Other Wildlife from Gold Mining Operations"), the U.S. Fish and Wildlife Service's guidance on avian protection at mining operations, and applicable Nevada Division of Environmental Protection guidance. Defining the standard by reference to specific publications provides an objective benchmark for compliance and reduces the risk of future disputes over the adequacy of TMC's deterrence measures.
Issue Flag 25 — MBTA Violations and Release. The seventeen avian mortalities are referenced in the recitals of the consent decree as a basis for the enhanced monitoring requirements at Bonanza Creek, but the MBTA violations are not separately penalized in Article V. The $7.9 million Bonanza Creek penalty encompasses CWA and RCRA violations only. This suggests that DOJ intended the consent decree to resolve the MBTA exposure, but the covenant not to sue in Article XV does not explicitly cover MBTA violations.
This ambiguity is dangerous. If the MBTA exposure is not explicitly resolved by the decree, TMC remains vulnerable to a separate MBTA enforcement action by the Department of the Interior or a citizen suit by environmental advocacy groups. We recommend requesting explicit MBTA release language in Article XV (Effect of Settlement / Reservation of Rights). This issue is discussed further in connection with Article XV below (Issue Flag 57). We also cross-reference the separate MBTA exposure memorandum currently in preparation, with a target completion date of November 22, 2024.
Issue Flag 26 — Estimated Remediation Cost. The estimated remediation cost for the Bonanza Creek site is $63.2 million over twenty years, with a net present value at a three-percent discount rate of approximately $47.1 million (calculated as $63.2 million × 0.7454). This figure is consistent with Pinnacle Creek's estimate. No substantive concern.
Issue Flag 27 — Operational Flexibility for Ongoing Mining. The DOJ draft does not address the interaction between TMC's ongoing active mining operations at Bonanza Creek and the remediation obligations imposed by the consent decree. This is a significant omission. Bonanza Creek is an active mine generating substantial revenue, and TMC cannot cease mining operations while performing liner repairs and containment measures. The remediation activities must be coordinated with, and cannot unreasonably interfere with, TMC's mining and ore processing operations.
We recommend inserting an operational flexibility provision that expressly protects TMC's ability to continue mining and processing ore at Bonanza Creek concurrently with the implementation of remediation measures, subject to compliance with all applicable permits and the terms of the consent decree. The provision should state that the consent decree shall not be construed to require the cessation or curtailment of mining operations except as specifically required by the remedial action work plan or as necessary to prevent an imminent threat to human health or the environment.
Recommendation. We recommend the following revisions to Article VI.C: (1) define the avian deterrence standard by reference to specific industry guidance; (2) seek explicit MBTA release language in Article XV; and (3) add an operational flexibility provision preserving TMC's ability to continue mining operations during remediation. The liner repair timeline and remediation cost estimate are acceptable.
F.5. Article VI.D — Kanawha Bend Chemical Plant
Summary of DOJ Draft. Article VI.D addresses RCRA Corrective Action at the Kanawha Bend Chemical Plant, a 78-acre chemical manufacturing facility located in Institute, Kanawha County, West Virginia. The facility has been operational since 1985 and is currently active, operated by Torchlight Specialty Chemicals, Inc. under RCRA Permit No. WVD048823915.
The DOJ draft requires corrective action to address sulfuric acid residuals in soils (pH as low as 1.8 in the vicinity of the former waste lagoon), heavy metal contamination (lead at concentrations up to 4,200 mg/kg and arsenic at concentrations up to 890 mg/kg) near the former waste lagoon, and Dense Non-Aqueous Phase Liquid ("DNAPL") contamination consisting of chlorinated solvents in the fractured bedrock aquifer underlying the site. The DOJ draft also references EPA's emergency response at the site in June 2020, necessitated by a sulfuric acid release from the former waste lagoon, at a cost of $3.8 million (addressed in Article VII as a past-cost reimbursement obligation).
Issue Flags. Issue Flag 28 — Interim Stabilization Measures Deadline. The DOJ draft requires completion of interim stabilization measures within twelve months of the Effective Date (approximately June 14, 2026). Pinnacle Creek Environmental advises that eighteen months (approximately December 14, 2026) is a more realistic timeline, given the significant challenges associated with DNAPL characterization in fractured bedrock. Fractured bedrock aquifer systems present unique hydrogeological challenges that make DNAPL delineation and remediation design inherently more complex and time-consuming than comparable work in unconsolidated sedimentary aquifer systems. The additional six months are needed to complete the DNAPL characterization, evaluate stabilization alternatives, and design the interim stabilization measures with sufficient technical rigor to ensure their effectiveness. We recommend requesting an eighteen-month deadline.
Issue Flag 29 — Surface Impoundment Closure Method. The DOJ draft requires closure of the former surface impoundment "in accordance with RCRA closure standards" within six months of the Effective Date, but does not specify whether closure shall be accomplished by closure-in-place (with an engineered cap and long-term monitoring) or by clean closure (complete removal and decontamination). This ambiguity is significant because the cost differential between the two approaches is substantial. The surface impoundment involves listed hazardous wastes K062 (spent pickle liquor from steel finishing operations, applicable because the facility processes acidic waste streams) and D002 (corrosivity characteristic hazardous waste). Clean closure of an impoundment containing these wastes would require complete excavation and off-site disposal of all impoundment contents and contaminated liner materials, at an estimated cost that could exceed $15 million. Closure-in-place with an engineered cap and long-term monitoring is estimated at approximately $4.5 million.
TMC's strong preference is closure-in-place. This approach is technically appropriate for the site, as the impoundment is located in an area where institutional controls can effectively restrict future land use and groundwater use. We recommend that TMC's redline propose specific closure-in-place language, including specifications for the engineered cap design, long-term groundwater monitoring requirements, and institutional controls, consistent with RCRA closure standards at 40 C.F.R. Part 265, Subpart G.
Issue Flag 30 — Cross-Reference to Past-Cost Reimbursement. EPA's past-cost reimbursement of $3.8 million for the June 14, 2020 sulfuric acid release emergency response is addressed in Article VII. Combined with the $14.3 million in Ridgecrest past costs, the total past-cost reimbursement obligation is $18.1 million. A cross-reference between Article VI.D and Article VII should be included for clarity.
Issue Flag 31 — Natural Resource Damage Claims. The DOJ draft does not address potential Natural Resource Damage ("NRD") claims arising from the contamination of the Kanawha River tributary resulting from the June 2020 sulfuric acid release. NRD claims are brought by federal and state natural resource trustees (typically the U.S. Department of the Interior and the relevant state agency) and can represent substantial additional liability beyond the remediation costs and civil penalties addressed in the consent decree. Given that the sulfuric acid release resulted in documented harm to aquatic resources in the Kanawha River tributary, the risk of NRD claims is real and should be addressed in the consent decree.
We recommend seeking a covenant not to sue from the United States (on behalf of all federal natural resource trustees) for NRD claims arising from conditions at Kanawha Bend and at Ridgecrest (where AMD discharges to Flint Creek also present NRD exposure). At minimum, the decree should clarify whether the settlement is intended to resolve any potential NRD claims or whether NRD claims are expressly reserved. If NRD claims are reserved, TMC needs to understand the magnitude of the residual exposure for financial planning purposes.
Recommendation. We recommend the following revisions to Article VI.D: (1) extend the interim stabilization measures deadline from twelve months to eighteen months; (2) specify closure-in-place as the method for closure of the former surface impoundment; (3) add a cross-reference to Article VII for past-cost reimbursement; and (4) seek an NRD covenant not to sue or, at minimum, clarification of the NRD reservation.
G. Article VII — EPA Past-Cost Reimbursement (CERCLA § 107)
Summary of DOJ Draft
Article VII addresses TMC's obligation to reimburse EPA for past costs incurred in connection with removal actions and emergency response at the Ridgecrest and Kanawha Bend sites, pursuant to CERCLA Section 107, 42 U.S.C. § 9607. The total past-cost reimbursement obligation is $18.1 million, consisting of $14.3 million for removal actions conducted at the Ridgecrest site during the period January 2021 through May 2023 (coordinated by Dr. Samuel Tesfaye, EPA Region 8 On-Scene Coordinator) and $3.8 million for the emergency response to the sulfuric acid release at the Kanawha Bend site in June 2020.
The DOJ draft requires payment of the full $18.1 million in a single lump sum within sixty days of the Effective Date (approximately August 13, 2025).
Issue Flags. Issue Flag 32 — Lump-Sum Payment Timing. The requirement to pay $18.1 million in a single lump sum within sixty days of the Effective Date is aggressive when considered in the context of TMC's other near-term cash obligations under the consent decree. The first civil penalty installment of $7,875,000 is due within thirty days of the Effective Date (approximately July 14, 2025). Combined, TMC would face total cash outlays of $25,975,000 within sixty days of the Effective Date. This front-loaded payment schedule places significant stress on TMC's near-term liquidity and should be restructured to allow more manageable cash flow.
We recommend requesting that the past-cost reimbursement be paid in two equal installments: $9,050,000 at sixty days after the Effective Date (approximately August 13, 2025) and $9,050,000 at one hundred eighty days after the Effective Date (approximately December 11, 2025). This restructuring does not reduce the total payment obligation but provides TMC with additional time to manage its cash flow. The proposed installment structure should be discussed with TMC's CFO, Carolyn Bracebridge, and with Northspire Capital Markets (Vivian Okafor) to ensure alignment with TMC's financial planning.
Issue Flag 33 — EPA Cost Certification. The DOJ draft does not include a certification from EPA that the stated amounts ($14.3 million for Ridgecrest and $3.8 million for Kanawha Bend) represent the full and complete costs incurred by EPA at those sites. Without such certification, EPA could seek additional cost recovery in the future for costs that were incurred but not included in the $18.1 million figure, or for costs incurred after the date of the decree but attributable to pre-decree activities. We recommend requiring EPA to certify that the $18.1 million represents all past costs incurred at both sites through a specified date, and that the covenant not to sue in Article XV covers any additional past-cost claims.
Recommendation. We recommend restructuring the past-cost reimbursement into two equal installments at sixty and one hundred eighty days after the Effective Date, and requiring EPA to certify that the $18.1 million figure represents the entirety of its past costs at Ridgecrest and Kanawha Bend.
H. Article VIII — Supplemental Environmental Projects (SEPs)
Summary of DOJ Draft
Article VIII establishes TMC's obligation to fund and implement three Supplemental Environmental Projects ("SEPs") totaling $12.0 million. The three SEPs are as follows:
1. Flint Creek Watershed Restoration Project (Montana) — $5,500,000. This SEP involves stream-bank stabilization, riparian area replanting, and fish-passage improvements along approximately twelve miles of Flint Creek downstream of the Ridgecrest Copper-Molybdenum Mine in Granite County, Montana.
2. Battle Mountain Community Drinking Water Improvement Project (Nevada) — $3,500,000. This SEP involves the upgrade of the municipal water treatment facility in Battle Mountain, Lander County, Nevada, the community nearest to the Bonanza Creek Gold Mine.
3. Institute Community Air Quality Monitoring Network (West Virginia) — $3,000,000. This SEP involves the installation and ten-year operation of six ambient air quality monitoring stations in the Institute/South Charleston area of Kanawha County, West Virginia, serving the community surrounding the Kanawha Bend Chemical Plant.
Issue Flags. Issue Flag 34 — Milestones and Reporting. The DOJ draft provides adequate descriptions of each SEP but lacks defined completion milestones and reporting requirements. Without specific milestones, TMC's compliance with the SEP obligations could be assessed on an ad hoc basis, creating uncertainty and potential disputes. We recommend developing a comprehensive SEP Compliance and Reporting Schedule that establishes specific milestones for each SEP (e.g., design completion, contractor selection, commencement of field work, fifty-percent completion, and final completion), together with periodic reporting requirements (e.g., semi-annual progress reports to EPA and the relevant state co-plaintiff). This schedule should be developed as a separate appendix to the consent decree and cross-referenced in Article VIII.
Issue Flag 35 — SEP Credit Against Penalty or Remediation. The DOJ draft provides that the SEP expenditures are "in addition to and not in lieu of the civil penalty." We recommend confirming with DOJ whether EPA's SEP Policy (as updated in 2015 and subsequently revised) permits the $12.0 million SEP commitment to be credited in any way against the penalty or remediation obligations. Under the current EPA SEP Policy, SEPs are generally not creditable against civil penalties; rather, they are a mechanism by which a defendant can obtain a reduction in the penalty amount in exchange for committing to environmentally beneficial projects. However, the DOJ draft does not indicate that any penalty reduction was applied in consideration of the $12.0 million SEP commitment. This should be clearly understood by the client's financial team, including CFO Carolyn Bracebridge and the advisors at Northspire Capital Markets (Vivian Okafor), for purposes of financial planning and reserve calculations.
Issue Flag 36 — SEP Nexus Requirement. Each of the three proposed SEPs satisfies EPA's requirement that a SEP bear a sufficient nexus to the violations or the affected community. The Flint Creek SEP is directly related to the Ridgecrest site's impact on the Flint Creek watershed. The Battle Mountain SEP is related to the community nearest to the Bonanza Creek site. The Institute Air Quality SEP is related to the community surrounding the Kanawha Bend facility. We have no substantive concerns regarding nexus.
Recommendation. We recommend developing detailed milestones and a reporting schedule for each SEP, to be incorporated as a new appendix to the consent decree. We also recommend confirming the SEP credit/non-credit status with DOJ for financial planning purposes.
I. Article IX — Remediation Trust Fund and Financial Assurance
Summary of DOJ Draft
Article IX establishes the requirement for financial assurance in the total amount of $245.0 million, to be posted within ninety days of the Effective Date (approximately September 12, 2025). The draft specifies acceptable financial assurance instruments, including surety bonds, trust funds, letters of credit, insurance policies, and corporate guarantees (the last subject to a financial test demonstrating the guarantor's ability to fund the remediation). The financial assurance is intended to guarantee TMC's performance of all remediation obligations at all four sites.
Issue Flags. Issue Flag 37 — Basis for $245.0 Million Figure. The $245.0 million financial assurance figure appears to be based on EPA's higher remediation cost estimate of $224.0 million for Ridgecrest alone, rather than on the negotiated figure of $198.6 million. TMC's proposed financial assurance structure is as follows:
Although the total amount of TMC's proposed financial assurance package ($245.0 million) coincidentally matches the DOJ draft's requirement, the basis for the calculation should be corrected to reflect the negotiated remediation cost of $198.6 million for Ridgecrest. The aggregate financial assurance figure should be recalculated from the ground up based on the negotiated remediation costs at all four sites, plus an appropriate contingency factor. We note that the aggregate remediation cost across all four sites, using the negotiated figures, is approximately $347.4 million ($198.6 million for Ridgecrest + $42.8 million for Gallatin + $63.2 million for Bonanza Creek + $42.8 million for Kanawha Bend). The $245.0 million financial assurance figure, even after correction, may be defensible as representing the maximum reasonably anticipated obligation during any single time period, but the basis must be documented and agreed upo

INTERNAL MEMORANDUM

MATTER NO.: 1039-00003

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