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

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION AND ATTORNEY WORK PRODUCT — DO NOT DISTRIBUTE

CALDERWOOD & HARKNESS LLP MEMORANDUM

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

TO: Harrison Wexford, Responsible Partner, Calderwood & Harkness LLP Beatrice Holloway, Billing Partner, Calderwood & Harkness LLP

CC: Miriam Soo-Hwan Park, General Counsel, Torchlight Mining Corp. Gareth Linford, Vice President, Environmental Health & Safety, Torchlight Mining Corp.

DATE: January 3, 2025

RE: Analysis of Force Majeure and Excusable Delay Provisions — Proposed Consent Decree, United States of America and State of Montana v. Torchlight Mining Corp., et al., Civil Action No. 9:24-cv-00087-DWM, U.S. District Court for the District of Montana, Missoula Division

MATTER NO.: 1039-00003

This memorandum is a privileged and confidential attorney-client communication and attorney work product. It is intended solely for the named recipients and is protected from disclosure by the attorney-client privilege, the work product doctrine, and all other applicable privileges. Do not copy, forward, or distribute this memorandum without the express written consent of Calderwood & Harkness LLP. Inadvertent disclosure does not constitute a waiver of any privilege.

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I. Executive Summary

This memorandum analyzes the force majeure and excusable delay provisions in the proposed consent decree in United States of America and State of Montana v. Torchlight Mining Corp., et al., Civil Action No. 9:24-cv-00087-DWM (D. Mont.). Specifically, this memorandum addresses the force majeure provisions as set forth in the Department of Justice's ("DOJ") first draft consent decree, circulated on November 8, 2024, and Torchlight Mining Corp.'s ("TMC") proposed redline revisions submitted to the government on December 16, 2024. The purpose of this memorandum is to provide a comprehensive analysis of the competing positions, identify areas of concern, and recommend positions for the next round of negotiations with the government. We note that this memorandum is dated January 3, 2025, and therefore precedes the government's anticipated counter-redline, which we expect to receive in mid-January. This memorandum is intended to position the negotiation team to respond effectively and promptly once the counter-redline is received.

The proposed consent decree governs remediation at four geographically dispersed sites: (1) the Ridgecrest Copper-Molybdenum Mine in Drummond, Montana; (2) the Gallatin Chemical Works in Belgrade, Montana; (3) the Bonanza Creek Gold Mine in Lander County, Nevada; and (4) the Kanawha Bend Chemical Plant in Institute, West Virginia. The total nominal remediation obligation across all four sites is approximately $343.5 million, with remediation periods ranging from 15 years (Gallatin Chemical Works) to 30 years (Ridgecrest Mine). Including civil penalties of $31.5 million, EPA past-costs reimbursement of $18.1 million, supplemental environmental projects ("SEPs") of $12.0 million, and independent environmental monitor costs of $4.8 million, the total financial obligation under the consent decree is approximately $409.9 million.

The force majeure provisions are among the most critical protective mechanisms in the consent decree for TMC. The consent decree imposes stipulated penalties of $1,500 per day per violation for the first 30 days of noncompliance, $3,000 per day for days 31 through 60, and $5,500 per day thereafter. Given the multiplicity of milestone deadlines across four sites and three states, a single force majeure event — such as a severe winter storm at the Ridgecrest Mine or a regulatory permitting delay affecting the Bonanza Creek Mine — could trigger cascading delays and rapidly accumulating stipulated penalty exposure. An inadequate force majeure provision would leave TMC financially exposed to penalties for circumstances genuinely beyond its control.

Based on our analysis, we recommend that the negotiation team prioritize the following positions in the next round of negotiations:

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

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

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

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

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

6. Address state co-plaintiff coordination by clarifying notice obligations and the role of state environmental agencies in force majeure determinations.

Each of these recommendations is discussed in detail in the sections that follow.

II. Background and Context

A. The Consent Decree Framework

This action was filed on January 18, 2024, by the United States of America, acting through the Department of Justice, Environment and Natural Resources Division ("ENRD"), and the U.S. Environmental Protection Agency ("EPA"), together with the States of Montana, Nevada, and West Virginia as co-plaintiffs, against Torchlight Mining Corp. and certain affiliated entities. The DOJ litigation team is led by Philip Orenstein, Lead Trial Attorney, ENRD, under the supervision of Katherine Rowe-Halpern, Senior Counsel. The EPA's lead case attorney is Margaret Coulson of the Office of Enforcement and Compliance Assurance ("OECA"). The case is pending before the Honorable Donald W. Molloy, Senior U.S. District Judge, in the United States District Court for the District of Montana, Missoula Division.

Following the filing of the complaint, the parties engaged in extensive settlement discussions. On May 15, 2024, Judge Molloy referred the matter to court-ordered mediation before Magistrate Judge Clara Finnegan. After several mediation sessions, the parties reached an agreement in principle on July 30, 2024, which established the basic framework for the consent decree, including the identification of the four sites, the allocation of remediation responsibilities, the total financial obligations, and the general structure of the stipulated penalty and force majeure provisions.

The DOJ circulated its first complete draft of the proposed consent decree on November 8, 2024. TMC, through Calderwood & Harkness LLP, submitted its redline response on December 16, 2024. The force majeure provision was among several provisions that remained in dispute following the December 16 redline, along with the dispute resolution mechanism, stipulated penalty structure, financial assurance requirements, and certain site-specific remediation standards.

It should be noted that Calderwood & Harkness LLP was engaged by TMC on October 21, 2024, replacing prior counsel Whitfield, Palmer & Goss LLP. We have reviewed the complete litigation and negotiation file inherited from Whitfield Palmer and have conferred with TMC's in-house legal team regarding the prior counsel's negotiation positions. Certain positions taken by Whitfield Palmer in the agreement-in-principle phase regarding force majeure were, in our assessment, insufficiently protective of TMC's interests, and this memorandum recommends a more aggressive posture on several key issues.

B. The Four Sites and Key Remediation Deadlines

The consent decree encompasses four remediation sites located in three states. The geographic spread, diversity of remediation activities, and varying regulatory regimes create unique challenges for the force majeure provisions. Each site is briefly described below, with emphasis on the characteristics that are most relevant to force majeure risk.

1. Ridgecrest Copper-Molybdenum Mine (Drummond, Montana). The Ridgecrest Mine is an inactive open-pit copper-molybdenum mine located approximately 12 miles northeast of Drummond, Montana, in Granite County, at an elevation of approximately 5,800 feet. The site encompasses approximately 3,200 acres, including the open pit, tailings impoundment, waste rock dumps, and associated haul roads and infrastructure. The primary environmental concerns include acid mine drainage discharging to Flint Creek, a tributary of the Clark Fork River, with dissolved copper concentrations measured at 47 mg/L — approximately 5,400 times the Montana surface water quality standard of 0.0087 mg/L. Additional contaminants of concern include molybdenum, arsenic, selenium, and sulfate. The tailings impoundment, which contains approximately 85 million tons of processed ore tailings, has documented seepage into shallow groundwater and surface water.

The negotiated remediation cost for Ridgecrest is $198.6 million over a 30-year remediation period. Key milestones include the submission of the Remedial Action Work Plan by December 14, 2025; EPA review and approval of the Work Plan (no specified deadline in the current draft); commencement of remedy construction by June 14, 2027; and completion of the remediation obligation by June 14, 2055. The Ridgecrest site is particularly susceptible to force majeure events due to its high elevation, severe Montana winters (average snowfall of approximately 60 inches at site elevation), and the limited outdoor construction season, which generally runs from approximately early May through mid-October. The site's remote location also creates logistical challenges for mobilization and demobilization of heavy equipment.

2. Gallatin Chemical Works (Belgrade, Montana). The Gallatin Chemical Works is an active chemical manufacturing facility located in Belgrade, Montana, approximately 8 miles west of Bozeman, in Gallatin County. The facility has been in operation since 1962 and currently produces carbon disulfide (CS₂) and related chemical products. Environmental contamination at the site includes CS₂ groundwater contamination at concentrations of 890 µg/L — approximately 89 times the federal maximum contaminant level ("MCL") of 10 µg/L. The site contains three identified Solid Waste Management Units ("SWMUs"), including a former waste disposal area, a process wastewater lagoon, and a contaminated soils area.

The negotiated remediation cost for Gallatin is $42.8 million over a 15-year remediation period. The key near-term milestone is submission of the Corrective Measures Study by June 14, 2026. Remediation at Gallatin is complicated by the fact that the facility remains in active operation, requiring coordination of remediation activities with ongoing production. The site is also located in a seismically active region (the Intermountain Seismic Belt), and the Gallatin Valley is subject to periodic flooding from the Gallatin River and its tributaries.

3. Bonanza Creek Gold Mine (Lander County, Nevada). The Bonanza Creek Gold Mine is an active open-pit gold mine located in Lander County, Nevada, approximately 45 miles south of Battle Mountain. The mine utilizes heap-leach processing with cyanide solution. Environmental concerns include three documented heap-leach releases: a release of approximately 15,000 gallons of cyanide-bearing solution in March 2022; a release of approximately 8,500 gallons in August 2022; and a release of approximately 22,000 gallons in January 2023. Weak acid dissociable ("WAD") cyanide concentrations in affected surface water have been measured at 0.62 mg/L, compared to the applicable standard of 0.022 mg/L. Mercury contamination is also present in soils and sediments near the heap-leach pads.

The negotiated remediation cost for Bonanza Creek is $63.2 million over a 20-year remediation period. Key milestones include liner repair and containment commencement by June 14, 2026. The Bonanza Creek site presents unique force majeure risks related to extreme summer heat (temperatures routinely exceeding 100°F, creating worker safety concerns under OSHA heat illness prevention standards), flash flooding in ephemeral drainages, drought conditions affecting the availability of water for dust suppression and remediation activities, and the remote location of the site, which is accessible primarily via unpaved roads that may become impassable during severe weather.

4. Kanawha Bend Chemical Plant (Institute, West Virginia). The Kanawha Bend Chemical Plant is an inactive chemical manufacturing facility located in Institute, West Virginia, in the Kanawha Valley industrial corridor (commonly known as "Chemical Valley"). The facility operated from 1948 to 2019, producing sulfuric acid, oleum, and specialty chemical products. Environmental contamination includes sulfuric acid residuals in soils, heavy metals (including lead, cadmium, and chromium) in soils and groundwater, and dense non-aqueous phase liquid ("DNAPL") contamination in fractured bedrock. The fractured bedrock geology significantly complicates remediation, as DNAPL migration pathways are difficult to predict and characterize.

The negotiated remediation cost for Kanawha Bend is $38.9 million over a 20-year remediation period. Key milestones include completion of interim stabilization measures by December 14, 2026. The site is located in a historically flood-prone area along the Kanawha River, and the surrounding Chemical Valley industrial corridor creates additional risks related to industrial incidents at neighboring facilities, utility interruptions, and emergency evacuations that could affect access to the site.

The geographic spread of these four sites across Montana, Nevada, and West Virginia, combined with the diversity of remediation activities (mine closure, active mine operations, chemical facility corrective action, and DNAPL remediation in fractured bedrock), creates a uniquely complex set of force majeure risks. A force majeure provision drafted for a single site in a single jurisdiction would be inadequate for the multi-site, multi-state scope of this consent decree.

C. Stipulated Penalties Exposure

The consent decree's stipulated penalty structure imposes escalating daily penalties for noncompliance with consent decree obligations:

These penalties apply on a per-violation basis, meaning that a missed deadline at each of the four sites constitutes a separate violation, and multiple missed deadlines at a single site each constitute separate violations.

To illustrate the financial exposure: If TMC were to miss a single milestone at one site for a period of 90 days without the protection of an approved force majeure claim, the stipulated penalties for that single violation would be calculated as follows:

• Days 1–30: 30 × $1,500 = $45,000

• Days 31–60: 30 × $3,000 = $90,000

• Days 61–90: 30 × $5,500 = $165,000

• Total for one violation, 90-day delay: $300,000

If, however, a force majeure event such as a severe winter storm at the Ridgecrest Mine were to cause delays in multiple milestones at that site, and cascading delays at the Gallatin Chemical Works (which shares certain contractor resources with Ridgecrest), the aggregate stipulated penalty exposure could easily reach into the millions of dollars within a single year. Over the 30-year life of the Ridgecrest remediation alone, the potential cumulative stipulated penalty exposure from unexcused delays is substantial.

The financial stakes are further amplified by the Escrow Agreement for Stipulated Penalty Deposits, maintained at Larchfield Trust Company, N.A., which requires TMC to make escrow deposits upon the assessment of stipulated penalties. These deposits reduce TMC's available liquidity and may affect its ability to fund ongoing remediation activities, creating a vicious cycle in which penalty assessments impair TMC's capacity to cure the underlying noncompliance.

The force majeure provision is therefore not merely a defensive mechanism — it is a critical financial risk management tool that directly affects TMC's ability to perform its remediation obligations over the multi-decade life of the consent decree.

III. Analysis of the Government's Proposed Force Majeure Provision

A. Text of the Government's Proposed Provision (DOJ First Draft, November 8, 2024)

The DOJ's first draft consent decree, circulated November 8, 2024, contains a force majeure provision at Section XII (Paragraphs 87–95) that closely tracks the standard EPA model force majeure clause. While we do not reproduce the entire provision verbatim in this memorandum, we summarize the key elements below.

Qualifying Events. The government's draft defines force majeure as "any event arising from circumstances beyond the control of [TMC], of any entity controlled by [TMC], or of [TMC's] contractors, that delays the timely performance of any obligation under this Consent Decree despite [TMC's] exercise of due diligence." The provision includes an enumerated list of qualifying events, which consists of: acts of God, war, armed conflict, civil unrest, fires, floods, earthquakes, and labor disputes not caused by or contributed to by TMC.

This enumerated list is notably narrow. It does not include regulatory delays, third-party contractor failures, supply chain disruptions, severe weather events falling short of natural disasters (e.g., extreme cold, heavy snowfall, drought), epidemics or pandemics, utility failures, or judicial delays. While the provision is not expressly limited to the enumerated list (the phrase "including but not limited to" appears in the DOJ's formulation), the absence of these categories from the enumerated list creates ambiguity and provides the government with leverage to argue that unenumerated events are not covered.

Notice Requirements. The government's draft requires TMC to provide written notice to EPA and DOJ within 15 calendar days of the date TMC first knew or should have known of a force majeure event. The notice must identify: (a) the specific force majeure event or events; (b) the affected consent decree obligation or obligations; (c) the anticipated duration of the delay; (d) the actions taken by TMC to prevent or minimize the delay; and (e) a proposed schedule for carrying out the affected obligations after the force majeure event has ended.

Burden of Proof. TMC bears the burden of demonstrating that: (i) the delay was caused by circumstances entirely beyond TMC's control; (ii) TMC exercised "due diligence" to avoid the delay and to minimize its duration; and (iii) TMC took all reasonable steps to mitigate the effects of the delay. The "due diligence" standard, as discussed in Section IV.C below, imposes a high evidentiary burden on TMC.

EPA Discretion. The government's draft provides that EPA shall have sole discretion to determine whether TMC has satisfactorily demonstrated that a force majeure event has occurred and that the delay qualifies for relief. If TMC disagrees with EPA's determination, TMC may invoke the consent decree's dispute resolution mechanism, which provides for informal negotiation, followed by a formal EPA decision, followed by judicial review.

Stipulated Penalties. Under the government's draft, stipulated penalties continue to accrue during any period of claimed force majeure until EPA renders a determination. If EPA approves the force majeure claim, accrued penalties attributable to the excused delay are abated. If EPA denies the claim, the accrued penalties remain due and payable.

Duration of Relief. The government's draft limits the period of excusable delay to the duration of the force majeure event itself, with no provision for a recovery period following the cessation of the event.

B. TMC's December 16, 2024 Redline Proposals

TMC's redline, submitted December 16, 2024, proposed the following modifications to the government's force majeure provision:

Expanded Enumerated Events. TMC's redline expanded the enumerated list of qualifying force majeure events to include: severe weather events (including but not limited to extreme temperatures, heavy snowfall, ice storms, drought, and wildfire); epidemics, pandemics, or public health emergencies declared by federal, state, or local authorities; regulatory permitting delays by state or federal agencies not caused by TMC; delays by EPA in reviewing and approving work plans, corrective measures studies, or other required submissions; unavailability of specialized equipment, materials, or contractor services; and third-party utility failures.

Extended Notice Period. TMC's redline changed the notice period from 15 calendar days to 30 calendar days.

"Reasonable Efforts" Standard. TMC's redline proposed substituting "reasonable efforts" for "due diligence" throughout the force majeure provision, representing a lower standard that would require TMC to demonstrate commercially reasonable steps short of extraordinary measures.

Recovery Period. TMC's redline proposed that the period of excusable delay extend for the duration of the force majeure event plus a "reasonable recovery period," without further defining the term.

Good-Faith Determination Standard. TMC's redline proposed replacing the "sole discretion" standard for EPA's force majeure determination with a "good-faith determination" standard, requiring EPA to exercise reasonable judgment in evaluating force majeure claims.

Penalty Tolling. TMC's redline proposed that stipulated penalties not accrue during any period in which a force majeure claim is pending, regardless of the ultimate disposition of the claim.

The government has not yet responded to these proposals. We anticipate that the government's counter-redline will reject several of TMC's proposals, particularly the 30-day notice period, the "reasonable efforts" standard, and the blanket penalty tolling provision. The analysis and recommendations in Section IV below are designed to identify positions that maximize TMC's protection while remaining within the range of outcomes that the government might reasonably accept.

IV. Analysis and Recommendations

A. Definition of Qualifying Force Majeure Events

The definition of qualifying force majeure events is the most consequential element of the force majeure provision. An overly narrow definition — limited to traditional "acts of God" — would leave TMC exposed to stipulated penalties for a wide range of circumstances genuinely beyond its control. Conversely, the government will resist an overbroad definition that could be used to excuse delays attributable to TMC's own management failures or lack of planning. Our recommendations seek to strike an appropriate balance, focusing on categories of events that are (a) genuinely beyond TMC's control, (b) reasonably foreseeable given the nature and locations of the four sites, and (c) consistent with precedent provisions in comparable EPA consent decrees.

1. Natural Events and Severe Weather

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

This omission is particularly significant for the Ridgecrest Mine and the Bonanza Creek Mine. At the Ridgecrest Mine, located at approximately 5,800 feet elevation near Drummond, Montana, average annual snowfall at the site elevation is approximately 60 inches, and temperatures routinely fall below -20°F during winter months. The effective outdoor construction season at Ridgecrest is limited to approximately May through October — roughly five to six months per year. Heavy early-season snowfall or an unusually late spring thaw could shorten this window further, delaying construction activities and milestone compliance. Similarly, the Bonanza Creek Mine in Lander County, Nevada, experiences extreme summer heat — temperatures routinely exceed 100°F — which creates worker safety concerns under OSHA's heat illness prevention standards and may require suspension of outdoor work activities during peak heat hours. Flash flooding in ephemeral drainages near the mine site can also disrupt operations and damage site infrastructure without constituting a "flood" in the traditional natural disaster sense.

We recommend that the force majeure provision include the following language or its substantial equivalent:

"Severe weather conditions, including but not limited to extreme temperatures (whether heat or cold), heavy snowfall, ice storms, drought conditions, wildfire smoke, and wind events that materially impair the ability to perform outdoor remediation activities at the affected site, as determined by reference to applicable OSHA and MSHA worker safety standards and site-specific operational limitations."

This formulation ties the force majeure claim to an objective standard — applicable worker safety regulations — rather than relying solely on TMC's subjective determination. We believe this objective anchor will make the provision more palatable to the government while still providing TMC with meaningful protection.

In support of this position, we note that several comparable mining consent decrees have included severe weather provisions. As discussed in the Comparative Consent Decree Analysis dated November 20, 2024, the consent decree in United States v. Consolidated Copper Corp., No. 2:18-cv-01234 (D. Ariz. 2020), included a provision excusing delays caused by "extreme weather conditions, including excessive heat, monsoon rains, and flooding, that prevent safe performance of outdoor remediation activities." Similarly, the consent decree in United States v. Iron Range Resources, Inc., No. 0:19-cv-02876 (D. Minn. 2021), included provisions for severe winter weather delays at high-latitude mining sites.

2. Epidemics and Pandemics

The COVID-19 pandemic demonstrated conclusively that public health emergencies can cause widespread disruption to construction and remediation activities, including workforce quarantines, supply chain disruptions, government-ordered shutdowns, and limitations on interstate travel. While the acute phase of the COVID-19 pandemic has passed, the risk of future pandemics or localized epidemics remains significant, particularly given the remote locations of the Ridgecrest and Bonanza Creek sites, where workforce quarantines or access restrictions could halt all site activities.

We recommend that the force majeure provision include "epidemics, pandemics, or public health emergencies declared by federal, state, or local authorities that materially impair TMC's ability to perform remediation activities at one or more of the affected sites." The reference to a declared public health emergency provides an objective trigger for the provision and should address the government's concern about overuse.

As a potential concession, we note in Section VI.C below that TMC may offer to limit pandemic-related force majeure claims to situations where a public health emergency has been formally declared by a government authority with jurisdiction over the affected site. This concession narrows the provision without eliminating it entirely and should be reserved for negotiation if the government resists the inclusion of pandemic provisions altogether.

3. Regulatory and Permitting Delays

This is perhaps the most critical category of force majeure events for TMC, and the one most likely to provoke significant government resistance. Several key remediation milestones under the consent decree are directly dependent upon the issuance of permits, approvals, or authorizations by state and federal regulatory agencies. TMC cannot control the pace of regulatory review, and delays in permit issuance can cascade through the remediation schedule, causing TMC to miss downstream milestones through no fault of its own.

The following permits and approvals are among those required for the four sites:

• Ridgecrest Mine (Montana): Montana Pollutant Discharge Elimination System ("MPDES") permits; hard rock mining reclamation permits under the Montana Metal Mine Reclamation Act; Montana Department of Environmental Quality ("MT DEQ") approval of remediation work plans. The MT DEQ contact is Annika Hedstrom.

• Gallatin Chemical Works (Montana): MPDES permits; hazardous waste management permits under Montana's authorized RCRA program; MT DEQ approval of the Corrective Measures Study and corrective measures implementation plans.

• Bonanza Creek Gold Mine (Nevada): Water pollution control permits issued by the Nevada Division of Environmental Protection ("NV DEP"); mining reclamation permits under the Nevada Mined Land Reclamation Act; state water rights permits (the Bonanza Creek site requires water for dust suppression and certain remediation activities, and Nevada water rights are subject to adjudication by the State Engineer). The NV DEP contact is Ricardo Fuentes.

• Kanawha Bend Chemical Plant (West Virginia): National Pollutant Discharge Elimination System ("NPDES") permits (West Virginia has delegated authority); RCRA-authorized corrective action permits and approvals from the West Virginia Department of Environmental Protection ("WV DEP"). The WV DEP contact is Loretta May Hatcher.

In addition to state-level permits, several milestones require EPA's own review and approval of TMC's submissions. For example, the Ridgecrest Remedial Action Work Plan is due December 14, 2025, but EPA must review and approve the Work Plan before TMC can proceed to the construction phase (construction commencement is required by June 14, 2027). If EPA takes 12 months or longer to review the Work Plan — not an uncommon timeline for complex remediation work plans — TMC's ability to meet the June 14, 2027 construction commencement deadline will be severely compromised.

We recommend the following two-part approach:

First, the force majeure provision should include language excusing delays caused by "the failure of any federal, state, or local governmental authority to issue permits, approvals, or authorizations required for the performance of remediation activities in a timely manner, provided that TMC has submitted complete applications and all supporting materials within the time frames required by this Consent Decree and applicable regulations."

Second, the force majeure provision should specifically address delays caused by EPA itself, including delays in reviewing and approving work plans, corrective measures studies, sampling and analysis plans, and other required submissions. We recognize that the government is likely to resist a provision that effectively penalizes EPA for its own review timelines, but we believe this position is both reasonable and defensible. If EPA's review of the Ridgecrest Remedial Action Work Plan takes 18 months, TMC should not bear stipulated penalties for missing the downstream construction commencement deadline that was premised on a more expeditious review.

An alternative approach, if the government refuses to include EPA review delays within the force majeure provision, would be to negotiate specific deadlines for EPA review of key submissions, with automatic milestone extensions if EPA exceeds those deadlines. This approach would address the same risk through a different mechanism and may be more palatable to the government because it does not characterize EPA delay as a "force majeure event."

4. Third-Party Contractor and Supplier Failures

TMC has engaged Pinnacle Creek Environmental, LLC ("Pinnacle Creek"), led by Dr. Astrid Bergmann, P.E. (Bozeman, Montana), to serve as the primary remediation design and oversight contractor for all four sites. In addition, TMC will need to procure specialized remediation equipment and materials, including geosynthetic liners for the Bonanza Creek Mine heap-leach pad repairs, water treatment systems for the Ridgecrest Mine acid mine drainage, and specialized drilling equipment for the Kanawha Bend DNAPL investigation. Some of these items have long procurement lead times — geosynthetic liners of the specifications required for the Bonanza Creek liner repair, for example, have current lead times of approximately 16 to 24 weeks, and specialized water treatment components for high-flow acid mine drainage systems can have lead times of six months or more.

If a critical-path contractor or supplier experiences a failure — whether due to bankruptcy, labor disputes, manufacturing disruptions, or other causes — that prevents timely delivery of goods or services essential to milestone compliance, TMC should not bear stipulated penalties for the resulting delay, provided TMC exercised reasonable diligence in selecting the contractor or supplier and made reasonable efforts to engage alternative providers.

We recommend including the following language: "Delays caused by the inability to obtain specialized equipment, materials, or contractor services essential to the performance of remediation activities, despite the exercise of commercially reasonable efforts to procure same from the originally engaged provider or alternative providers."

We anticipate that the government will resist a broad third-party contractor excuse provision, arguing that TMC should bear the risk of its own contractor selections. As a compromise, we propose limiting this provision to failures of critical-path contractors and suppliers — i.e., those whose goods or services are on the critical path for milestone compliance and cannot be replaced by alternative providers within a reasonable time. This formulation places an additional burden on TMC to demonstrate both the critical-path nature of the contractor or supplier and the unavailability of timely alternatives, which should address the government's concerns about overuse.

5. Utility and Infrastructure Failures

The Kanawha Bend Chemical Plant and Gallatin Chemical Works are active or recently active industrial facilities that depend on reliable utility services, including electrical power, natural gas, water supply, and telecommunications. Remediation activities at these sites may require continuous power for treatment systems, communications for monitoring and control, and water supply for various remediation processes. An interruption in utility services caused by a third-party utility provider — whether due to grid failures, infrastructure damage, or other causes — could halt remediation activities and cause TMC to miss milestones.

We recommend including "interruptions in utility services, including but not limited to electrical power, natural gas, water supply, and telecommunications, not caused by TMC or its contractors" within the enumerated list of force majeure events. This category is relatively uncontroversial and is included in many commercial force majeure clauses. The qualifier "not caused by TMC or its contractors" addresses the government's interest in ensuring that TMC does not benefit from utility disruptions attributable to its own actions.

6. Legal and Judicial Delays

The proposed consent decree has not yet been entered by the court. The current target date for entry of the consent decree is May 15, 2025, with an anticipated Effective Date of June 14, 2025. All remediation milestones under the consent decree are measured from the Effective Date. If entry of the consent decree is delayed — whether due to extensions of the public comment period, challenges by environmental groups or other third parties, or court scheduling — all downstream deadlines would be affected.

We recommend a provision stating that if entry of the consent decree is delayed beyond the target date, all milestone deadlines shall be automatically extended by a period equal to the period of delay in entry. This should be a standalone provision rather than part of the force majeure clause, as it is not a "force majeure event" in the traditional sense but rather a scheduling adjustment.

Additionally, we recommend addressing the potential impact of third-party litigation on consent decree milestones. If environmental groups or other parties challenge the consent decree during the public comment period or seek judicial review of the decree following entry, the resulting litigation could create uncertainty about the enforceability of specific provisions and could, in extreme cases, result in modifications to the decree that affect milestone deadlines. We recommend a provision providing that TMC shall not be liable for stipulated penalties during any period in which a court order or judicial proceeding materially impairs TMC's ability to perform a specific obligation under the decree.

B. Notice Requirements

1. The 15-Day Notice Period

The government's draft requires TMC to provide written notice to EPA and DOJ within 15 calendar days of the date TMC first knew or should have known of a force majeure event. TMC's December 16 redline proposed extending this period to 30 calendar days.

Both positions have merit and drawbacks. From TMC's perspective, 15 calendar days may be insufficient to identify the full scope and impact of a force majeure event, particularly where the event affects multiple milestones across geographically dispersed sites. Consider a severe winter storm at the Ridgecrest Mine: TMC would need to assess the physical damage to the site and equipment, evaluate the impact on the current construction season, determine whether downstream milestones at Ridgecrest would be affected, assess whether the diversion of Pinnacle Creek resources to Ridgecrest would affect milestone compliance at other sites, and prepare a written notice containing all of the information required by the consent decree. Conducting this assessment and preparing a comprehensive notice within 15 calendar days may not be feasible, particularly if the same storm has damaged site access roads and disrupted communications.

From the government's perspective, however, a 30-day notice period may be perceived as unreasonably long. Prompt notice of force majeure events serves important government interests: it allows EPA to adjust its oversight schedule, deploy resources to monitor the response, and begin its own assessment of the claimed event. A lengthy delay in notice could prejudice EPA's ability to independently verify the force majeure event and its impacts.

We recommend a two-tier notice mechanism as a compromise:

Preliminary Notice (15 calendar days): Within 15 calendar days of the date TMC first knew or should have known of a force majeure event, TMC shall provide a preliminary written notice to EPA and DOJ identifying: (i) the nature of the force majeure event; (ii) the site or sites affected; and (iii) a preliminary identification of the consent decree obligations that may be affected.

Supplemental Notice (30 calendar days): Within 30 calendar days of the preliminary notice, TMC shall provide a supplemental written notice providing: (i) a detailed description of the force majeure event and its impact on specific consent decree obligations; (ii) the anticipated duration of the delay; (iii) a description of the actions taken and planned by TMC to prevent or minimize the delay; (iv) a proposed schedule for carrying out the affected obligations; (v) identification of any cascading effects on other milestones at the same or other sites; and (vi) a statement of whether TMC intends to seek relief from stipulated penalties.

This two-tier approach preserves the government's interest in prompt notification while giving TMC adequate time to prepare a comprehensive analysis of the force majeure event's impacts. The 15-day preliminary notice ensures that EPA is alerted quickly, while the 30-day supplemental notice provides the detailed information needed for EPA to evaluate the claim. This structure is consistent with notice provisions in several precedent consent decrees and should be defensible in negotiations.

Alternatively, if the government rejects the two-tier approach, we recommend proposing a compromise notice period of 20 calendar days for a single comprehensive notice. This splits the difference between the government's 15-day proposal and TMC's 30-day proposal and provides TMC with a meaningful additional window for assessment and preparation.

2. Content of Notice

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

This list is reasonable but incomplete. We recommend adding two additional required elements:

(f) Identification of any cascading effects on other milestones at the same site or other sites under the consent decree, including an analysis of the dependencies between the affected milestone and downstream milestones; and

(g) A statement of whether TMC intends to seek relief from stipulated penalties in connection with the claimed force majeure event, and if so, the specific penalties for which TMC seeks relief.

The inclusion of cascading-effects analysis in the notice is important because it provides EPA with early notice of potential downstream impacts and facilitates proactive schedule management. The inclusion of a statement regarding stipulated penalty relief ensures transparency and avoids later disputes about whether TMC timely claimed penalty relief in connection with a specific force majeure event.

3. Notice Recipients

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

We recommend clarifying that TMC shall also provide concurrent notice to the applicable state environmental agency for events affecting sites within that state's jurisdiction — i.e., MT DEQ (Annika Hedstrom) for events affecting Ridgecrest or Gallatin; NV DEP (Ricardo Fuentes) for events affecting Bonanza Creek; and WV DEP (Loretta May Hatcher) for events affecting Kanawha Bend. While the state co-plaintiffs may argue that notice to EPA is sufficient because EPA will coordinate with the states, experience suggests that direct notice to state agencies avoids later disputes about whether a state was adequately informed of a force majeure claim. Including the state agencies as notice recipients also positions TMC to argue that the states' silence or acquiescence in response to the notice constitutes tacit acceptance of the force majeure claim.

C. Burden of Proof

1. Government's Position: "Due Diligence" Standard

The government's draft places the burden on TMC to demonstrate three elements: (i) the delay was caused by circumstances "entirely beyond TMC's control"; (ii) TMC exercised "due diligence" to avoid the delay; and (iii) TMC took "all reasonable steps" to minimize the delay once it occurred.

The "due diligence" standard is a high bar. In the environmental enforcement context, courts have generally interpreted "due diligence" to require TMC to demonstrate affirmative, proactive steps taken to anticipate and avoid force majeure events — not merely the absence of negligence or fault. This standard may require TMC to demonstrate, for example, that it maintained contingency plans for severe weather, pre-positioned backup equipment, secured alternative contractors, and took other anticipatory measures. The failure to take any specific precautionary step could be cited by the government as evidence that TMC did not exercise "due diligence," even if the force majeure event was genuinely beyond TMC's control.

The requirement that the delay be caused by circumstances "entirely beyond TMC's control" is also noteworthy. The word "entirely" suggests that if TMC's own actions contributed to the delay in any respect — even if the primary cause was a genuine force majeure event — the provision may not apply. This creates risk for TMC in situations where a force majeure event interacts with TMC's own scheduling decisions or resource allocations.

2. TMC's Proposed "Reasonable Efforts" Standard

TMC's December 16 redline proposed substituting "reasonable efforts" for "due diligence" throughout the force majeure provision. "Reasonable efforts" is a lower standard that generally requires commercially reasonable steps short of extraordinary measures. Under a "reasonable efforts" standard, TMC would need to demonstrate that it took steps that a reasonable company in its position would have taken, but would not need to demonstrate that it anticipated and prepared for every conceivable contingency.

The government is likely to resist this substitution. From the government's perspective, the "due diligence" standard is a well-established feature of EPA consent decree force majeure provisions, and departing from it would set a precedent that could undermine the government's negotiating position in other cases.

3. Recommendation. We recommend proposing "commercially reasonable efforts" as a middle ground between "due diligence" and "reasonable efforts." This formulation is well-established in commercial contracts, is frequently used in consent decrees and other enforcement instruments, and has a substantial body of case law interpreting its meaning. The "commercially reasonable" qualifier provides an objective standard — it asks whether TMC's efforts were reasonable in light of the costs, risks, and commercial realities of the remediation project, rather than requiring TMC to take every conceivable precautionary step regardless of cost or practicality.

As an alternative, if the government insists on retaining the "due diligence" formulation, we recommend proposing that "due diligence" be defined within the consent decree to mean "reasonable steps that a similarly situated mining and chemicals company would take under similar circumstances, taking into account the nature and scope of the remediation obligation, the geographic and environmental conditions at the affected site, and the commercially available means of preventing or minimizing the delay." This defined term preserves the government's preferred formulation while providing an objective, industry-based standard for evaluating TMC's efforts. It also provides TMC with a framework for defending force majeure claims by reference to industry practices rather than an undefined and potentially unlimited standard.

D. Tolling of Stipulated Penalties During Force Majeure Claims

1. Government's Position

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

This approach creates significant financial risk for TMC. The dispute resolution process — informal negotiation (30 days), formal EPA decision (30 days), and judicial review (30 days) — can extend for 90 days or longer. During this entire period, stipulated penalties would continue to accrue at the applicable daily rate. For a dispute that takes 90 days to resolve, the accumulated penalties for a single violation would be $300,000 (as calculated in Section II.C above), even if the force majeure claim is ultimately approved and the penalties are abated. If the claim is denied, TMC would owe the full amount.

The government's approach also creates perverse incentives. Because penalties accrue during the dispute period, TMC faces pressure to accept unfavorable EPA determinations rather than exercising its right to dispute resolution and judicial review. This pressure undermines the integrity of the dispute resolution process and may cause TMC to forego meritorious force majeure claims to avoid the financial risk of accumulated penalties during the dispute period.

2. TMC's Position

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

3. Recommendation. We recommend a compromise approach that balances TMC's need for financial protection with the government's interest in maintaining penalty deterrence. Specifically, we propose the following framework:

Option A (Preferred): Tolling During Good-Faith Claims. Stipulated penalties shall be tolled (i.e., paused and not accruing) during any period in which a force majeure claim is pending, provided that: (i) TMC has timely submitted the required notice in accordance with the consent decree; (ii) TMC is continuing to exercise commercially reasonable efforts to minimize the delay; and (iii) TMC's force majeure claim is made in good faith. If the force majeure claim is ultimately approved, the tolled penalties are eliminated. If the force majeure claim is ultimately denied, stipulated penalties shall accrue from the original deadline, but TMC shall receive credit for the period during which the claim was pending and being reviewed in good faith — i.e., penalties would accrue only for the period of delay, not for the dispute resolution period.

The "good faith" requirement addresses the government's concern about strategic or frivolous claims. If TMC files a force majeure claim that is not made in good faith — e.g., a claim based on events that TMC clearly caused or contributed to — the tolling provision would not apply, and penalties would accrue from the original deadline without credit.

Option B (Fallback): Escrow Mechanism. If the government rejects the tolling approach, we recommend proposing that stipulated penalties accrue during the pendency of force majeure claims but are deposited into escrow at Larchfield Trust Company, N.A. (consistent with the existing Escrow Agreement for Stipulated Penalty Deposits) rather than paid directly to EPA. The escrowed funds would be released to TMC if the force majeure claim is approved, or to EPA if the claim is denied. This approach addresses the government's interest in maintaining the financial incentive for compliance while protecting TMC from the irreversible payment of penalties that may ultimately be abated.

We strongly recommend pursuing Option A as the primary position, with Option B held in reserve as a fallback. Option A provides TMC with the most meaningful protection, while the good-faith requirement and continuing-efforts condition should address the government's legitimate concerns.

E. Cascading Delays Across Sites and Milestones

1. Importance of Cascading Delay Provisions

The consent decree establishes multiple milestones at each of the four sites, with many milestones dependent on the completion of earlier milestones. For example, at the Ridgecrest Mine, the construction commencement milestone (June 14, 2027) depends on EPA's prior approval of the Remedial Action Work Plan (due December 14, 2025). If a force majeure event delays the submission or approval of the Work Plan, the construction commencement milestone cannot be met on the original schedule, regardless of TMC's efforts.

Moreover, because TMC operates four sites across three states with shared resources — including the Pinnacle Creek Environmental engagement team, corporate environmental staff, and certain specialized equipment — a force majeure event at one site can affect TMC's capacity to meet milestones at other sites. If, for example, a severe flood at the Ridgecrest Mine requires the emergency diversion of Pinnacle Creek's remediation team from the Gallatin Chemical Works to Ridgecrest, TMC's ability to meet the Corrective Measures Study deadline at Gallatin (June 14, 2026) could be compromised.

The government's draft force majeure provision does not address cascading delays. Under the current draft, if a force majeure event causes an excusable delay in one milestone, TMC would need to file separate force majeure notices for each downstream milestone affected by the cascading delay. This is administratively burdensome and creates the risk that the government may deny force majeure relief for downstream milestones on the ground that the delay in those milestones was caused not by the original force majeure event but by TMC's failure to mitigate the cascading effects.

2. Recommendation. We recommend proposing a cascading delay provision with two components:

Intra-Site Cascading Delays. If a force majeure event causes excusable delay in one milestone at a given site, all subsequent milestones at that site that are dependent on completion of the delayed milestone shall be automatically extended by a period equal to the period of excusable delay, without the need for separate force majeure notices for each cascading milestone, provided that the original force majeure notice identified the risk of cascading delays and the specific downstream milestones that may be affected.

Cross-Site Cascading Delays. If a force majeure event at one site demonstrably affects TMC's capacity to meet milestones at one or more other sites under the consent decree — for example, by requiring the diversion of shared contractor resources, specialized equipment, or corporate management attention — TMC may claim excusable delay at the affected sites, provided that TMC demonstrates: (i) a direct and documented causal connection between the force majeure event at the originating site and the delay at the affected site; (ii) that TMC exercised commercially reasonable efforts to mitigate the cross-site impact; and (iii) that the cross-site delay could not have been avoided through the engagement of alternative contractor resources or other reasonable measures.

The cross-site cascading provision is likely to be more controversial than the intra-site provision, and we have accordingly classified it as a "strong preference" rather than a "must-have" in our negotiation prioritization (see Section VI below). However, we believe it is important to raise this provision in negotiations and to advocate for it vigorously, because the multi-site structure of the consent decree creates genuine cross-site dependencies that are not addressed by the government's standard single-site force majeure template.

F. EPA Review and Determination Process

1. Government's Proposed Process

Under the government's draft, EPA has sole discretion to determine whether a force majeure event has occurred and whether the claimed delay qualifies for relief under the consent decree. The draft does not specify any timeframe within which EPA must render its determination. If TMC disagrees with EPA's determination, TMC may invoke the consent decree's dispute resolution mechanism, which provides for: (i) informal negotiation between the parties for a period of 30 days; (ii) if informal negotiation fails, a formal written decision by EPA within 30 days; and (iii) if TMC disputes EPA's formal decision, judicial review by the court within 30 days of the filing of a motion for review.

2. Recommendations. We have four recommendations regarding the EPA review and determination process:

First, we recommend proposing a deadline for EPA's force majeure determination. The absence of any specified timeframe for EPA's determination creates uncertainty and delays that compound the financial exposure discussed in Section IV.D above. We recommend proposing that EPA shall render a written determination on any force majeure claim within 45 days of receipt of TMC's complete force majeure notice (or supplemental notice, if a two-tier notice mechanism is adopted). This timeframe is sufficient for EPA to conduct a meaningful review while providing TMC with timely certainty regarding its obligations.

Second, we recommend proposing a deemed-approval provision. If EPA fails to respond to a force majeure claim within the specified 45-day period, the force majeure claim should be deemed approved. Alternatively, if the government resists a full deemed-approval provision, we recommend proposing that EPA's failure to respond within 45 days shall result in the automatic tolling of stipulated penalties pending EPA's determination. This deemed-approval or deemed-tolling provision provides an incentive for EPA to render timely determinations and protects TMC from indefinite uncertainty.

Third, we recommend ensuring that the standard of judicial review for force majeure determinations is de novo, not "arbitrary and capricious" or "abuse of discretion." The government's standard consent decree language typically provides that factual disputes are reviewed on the administrative record under an arbitrary and capricious standard, while legal disputes are reviewed de novo. We believe that force majeure determinations inherently involve mixed questions of fact and law — whether a particular event constitutes a force majeure event, whether TMC exercised due diligence, and whether a causal connection exists between the event and the delay — and should be subject to de novo review to give TMC meaningful judicial recourse. A deferential standard of review would effectively rubber-stamp EPA's determination and deprive TMC of a genuine opportunity to challenge an erroneous denial.

Fourth, we note that a detailed analysis of the dispute resolution mechanism is being prepared separately in our Memorandum on Dispute Resolution Mechanism, dated January 6, 2025. The recommendations in this memorandum regarding force majeure dispute procedures should be coordinated with the broader dispute resolution framework to ensure consistency. We recommend that the negotiation team review both memoranda together before preparing the proposed redline language.

G. Duration of Excusable Delay and Recovery Period

1. Government's Position

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

2. TMC's Position and Recommendation

TMC's December 16 redline proposed that the excusable delay period extend for the duration of the force majeure event plus a "reasonable recovery period." This is a critical provision. The cessation of a force majeure event does not mean that remediation activities can resume immediately. After a flood at the Ridgecrest Mine, for example, TMC would need to conduct damage assessments of site infrastructure, dewater flooded work areas, asses

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION AND ATTORNEY WORK PRODUCT — DO NOT DISTRIBUTE
CALDERWOOD & HARKNESS LLP MEMORANDUM
FROM: Elliot Nguyen, Lead Associate, Calderwood & Harkness LLP Grace Nakamura, Associate, Calderwood & Harkness LLP
TO: Harrison Wexford, Responsible Partner, Calderwood & Harkness LLP Beatrice Holloway, Billing Partner, Calderwood & Harkness LLP
CC: Miriam Soo-Hwan Park, General Counsel, Torchlight Mining Corp. Gareth Linford, Vice President, Environmental Health & Safety, Torchlight Mining Corp.
DATE: January 3, 2025
RE: Analysis of Force Majeure and Excusable Delay Provisions — Proposed Consent Decree, United States of America and State of Montana v. Torchlight Mining Corp., et al., Civil Action No. 9:24-cv-00087-DWM, U.S. District Court for the District of Montana, Missoula Division
MATTER NO.: 1039-00003
This memorandum is a privileged and confidential attorney-client communication and attorney work product. It is intended solely for the named recipients and is protected from disclosure by the attorney-client privilege, the work product doctrine, and all other applicable privileges. Do not copy, forward, or distribute this memorandum without the express written consent of Calderwood & Harkness LLP. Inadvertent disclosure does not constitute a waiver of any privilege.
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I. Executive Summary
This memorandum analyzes the force majeure and excusable delay provisions in the proposed consent decree in United States of America and State of Montana v. Torchlight Mining Corp., et al., Civil Action No. 9:24-cv-00087-DWM (D. Mont.). Specifically, this memorandum addresses the force majeure provisions as set forth in the Department of Justice's ("DOJ") first draft consent decree, circulated on November 8, 2024, and Torchlight Mining Corp.'s ("TMC") proposed redline revisions submitted to the government on December 16, 2024. The purpose of this memorandum is to provide a comprehensive analysis of the competing positions, identify areas of concern, and recommend positions for the next round of negotiations with the government. We note that this memorandum is dated January 3, 2025, and therefore precedes the government's anticipated counter-redline, which we expect to receive in mid-January. This memorandum is intended to position the negotiation team to respond effectively and promptly once the counter-redline is received.
The proposed consent decree governs remediation at four geographically dispersed sites: (1) the Ridgecrest Copper-Molybdenum Mine in Drummond, Montana; (2) the Gallatin Chemical Works in Belgrade, Montana; (3) the Bonanza Creek Gold Mine in Lander County, Nevada; and (4) the Kanawha Bend Chemical Plant in Institute, West Virginia. The total nominal remediation obligation across all four sites is approximately $343.5 million, with remediation periods ranging from 15 years (Gallatin Chemical Works) to 30 years (Ridgecrest Mine). Including civil penalties of $31.5 million, EPA past-costs reimbursement of $18.1 million, supplemental environmental projects ("SEPs") of $12.0 million, and independent environmental monitor costs of $4.8 million, the total financial obligation under the consent decree is approximately $409.9 million.
The force majeure provisions are among the most critical protective mechanisms in the consent decree for TMC. The consent decree imposes stipulated penalties of $1,500 per day per violation for the first 30 days of noncompliance, $3,000 per day for days 31 through 60, and $5,500 per day thereafter. Given the multiplicity of milestone deadlines across four sites and three states, a single force majeure event — such as a severe winter storm at the Ridgecrest Mine or a regulatory permitting delay affecting the Bonanza Creek Mine — could trigger cascading delays and rapidly accumulating stipulated penalty exposure. An inadequate force majeure provision would leave TMC financially exposed to penalties for circumstances genuinely beyond its control.
Based on our analysis, we recommend that the negotiation team prioritize the following positions in the next round of negotiations:
1. Expand the definition of qualifying force majeure events to include severe weather events, epidemics and pandemics, regulatory and permitting delays by state and federal agencies (including delays by EPA itself in reviewing required submissions), third-party contractor and supplier failures on the critical path, and utility and infrastructure failures.
2. Negotiate a cure period or penalty-tolling mechanism so that stipulated penalties do not accrue — or are held in escrow — during any period in which a good-faith force majeure claim is pending.
3. Clarify the burden of proof standard by proposing a "commercially reasonable efforts" standard as an alternative to the government's "due diligence" formulation, or alternatively, by defining "due diligence" with reference to an objective industry standard.
4. Modify the notice requirements by implementing a two-tier notice mechanism — a 15-day preliminary notice followed by a 30-day supplemental notice — rather than requiring a comprehensive notice within 15 calendar days.
5. Add provisions for cascading delays so that if a force majeure event causes excusable delay in one milestone, all dependent downstream milestones at the same site (and, where demonstrable, at other sites) are automatically extended.
6. Address state co-plaintiff coordination by clarifying notice obligations and the role of state environmental agencies in force majeure determinations.
Each of these recommendations is discussed in detail in the sections that follow.
II. Background and Context
A. The Consent Decree Framework
This action was filed on January 18, 2024, by the United States of America, acting through the Department of Justice, Environment and Natural Resources Division ("ENRD"), and the U.S. Environmental Protection Agency ("EPA"), together with the States of Montana, Nevada, and West Virginia as co-plaintiffs, against Torchlight Mining Corp. and certain affiliated entities. The DOJ litigation team is led by Philip Orenstein, Lead Trial Attorney, ENRD, under the supervision of Katherine Rowe-Halpern, Senior Counsel. The EPA's lead case attorney is Margaret Coulson of the Office of Enforcement and Compliance Assurance ("OECA"). The case is pending before the Honorable Donald W. Molloy, Senior U.S. District Judge, in the United States District Court for the District of Montana, Missoula Division.
Following the filing of the complaint, the parties engaged in extensive settlement discussions. On May 15, 2024, Judge Molloy referred the matter to court-ordered mediation before Magistrate Judge Clara Finnegan. After several mediation sessions, the parties reached an agreement in principle on July 30, 2024, which established the basic framework for the consent decree, including the identification of the four sites, the allocation of remediation responsibilities, the total financial obligations, and the general structure of the stipulated penalty and force majeure provisions.
The DOJ circulated its first complete draft of the proposed consent decree on November 8, 2024. TMC, through Calderwood & Harkness LLP, submitted its redline response on December 16, 2024. The force majeure provision was among several provisions that remained in dispute following the December 16 redline, along with the dispute resolution mechanism, stipulated penalty structure, financial assurance requirements, and certain site-specific remediation standards.
It should be noted that Calderwood & Harkness LLP was engaged by TMC on October 21, 2024, replacing prior counsel Whitfield, Palmer & Goss LLP. We have reviewed the complete litigation and negotiation file inherited from Whitfield Palmer and have conferred with TMC's in-house legal team regarding the prior counsel's negotiation positions. Certain positions taken by Whitfield Palmer in the agreement-in-principle phase regarding force majeure were, in our assessment, insufficiently protective of TMC's interests, and this memorandum recommends a more aggressive posture on several key issues.
B. The Four Sites and Key Remediation Deadlines
The consent decree encompasses four remediation sites located in three states. The geographic spread, diversity of remediation activities, and varying regulatory regimes create unique challenges for the force majeure provisions. Each site is briefly described below, with emphasis on the characteristics that are most relevant to force majeure risk.
1. Ridgecrest Copper-Molybdenum Mine (Drummond, Montana). The Ridgecrest Mine is an inactive open-pit copper-molybdenum mine located approximately 12 miles northeast of Drummond, Montana, in Granite County, at an elevation of approximately 5,800 feet. The site encompasses approximately 3,200 acres, including the open pit, tailings impoundment, waste rock dumps, and associated haul roads and infrastructure. The primary environmental concerns include acid mine drainage discharging to Flint Creek, a tributary of the Clark Fork River, with dissolved copper concentrations measured at 47 mg/L — approximately 5,400 times the Montana surface water quality standard of 0.0087 mg/L. Additional contaminants of concern include molybdenum, arsenic, selenium, and sulfate. The tailings impoundment, which contains approximately 85 million tons of processed ore tailings, has documented seepage into shallow groundwater and surface water.
The negotiated remediation cost for Ridgecrest is $198.6 million over a 30-year remediation period. Key milestones include the submission of the Remedial Action Work Plan by December 14, 2025; EPA review and approval of the Work Plan (no specified deadline in the current draft); commencement of remedy construction by June 14, 2027; and completion of the remediation obligation by June 14, 2055. The Ridgecrest site is particularly susceptible to force majeure events due to its high elevation, severe Montana winters (average snowfall of approximately 60 inches at site elevation), and the limited outdoor construction season, which generally runs from approximately early May through mid-October. The site's remote location also creates logistical challenges for mobilization and demobilization of heavy equipment.
2. Gallatin Chemical Works (Belgrade, Montana). The Gallatin Chemical Works is an active chemical manufacturing facility located in Belgrade, Montana, approximately 8 miles west of Bozeman, in Gallatin County. The facility has been in operation since 1962 and currently produces carbon disulfide (CS₂) and related chemical products. Environmental contamination at the site includes CS₂ groundwater contamination at concentrations of 890 µg/L — approximately 89 times the federal maximum contaminant level ("MCL") of 10 µg/L. The site contains three identified Solid Waste Management Units ("SWMUs"), including a former waste disposal area, a process wastewater lagoon, and a contaminated soils area.
The negotiated remediation cost for Gallatin is $42.8 million over a 15-year remediation period. The key near-term milestone is submission of the Corrective Measures Study by June 14, 2026. Remediation at Gallatin is complicated by the fact that the facility remains in active operation, requiring coordination of remediation activities with ongoing production. The site is also located in a seismically active region (the Intermountain Seismic Belt), and the Gallatin Valley is subject to periodic flooding from the Gallatin River and its tributaries.
3. Bonanza Creek Gold Mine (Lander County, Nevada). The Bonanza Creek Gold Mine is an active open-pit gold mine located in Lander County, Nevada, approximately 45 miles south of Battle Mountain. The mine utilizes heap-leach processing with cyanide solution. Environmental concerns include three documented heap-leach releases: a release of approximately 15,000 gallons of cyanide-bearing solution in March 2022; a release of approximately 8,500 gallons in August 2022; and a release of approximately 22,000 gallons in January 2023. Weak acid dissociable ("WAD") cyanide concentrations in affected surface water have been measured at 0.62 mg/L, compared to the applicable standard of 0.022 mg/L. Mercury contamination is also present in soils and sediments near the heap-leach pads.
The negotiated remediation cost for Bonanza Creek is $63.2 million over a 20-year remediation period. Key milestones include liner repair and containment commencement by June 14, 2026. The Bonanza Creek site presents unique force majeure risks related to extreme summer heat (temperatures routinely exceeding 100°F, creating worker safety concerns under OSHA heat illness prevention standards), flash flooding in ephemeral drainages, drought conditions affecting the availability of water for dust suppression and remediation activities, and the remote location of the site, which is accessible primarily via unpaved roads that may become impassable during severe weather.
4. Kanawha Bend Chemical Plant (Institute, West Virginia). The Kanawha Bend Chemical Plant is an inactive chemical manufacturing facility located in Institute, West Virginia, in the Kanawha Valley industrial corridor (commonly known as "Chemical Valley"). The facility operated from 1948 to 2019, producing sulfuric acid, oleum, and specialty chemical products. Environmental contamination includes sulfuric acid residuals in soils, heavy metals (including lead, cadmium, and chromium) in soils and groundwater, and dense non-aqueous phase liquid ("DNAPL") contamination in fractured bedrock. The fractured bedrock geology significantly complicates remediation, as DNAPL migration pathways are difficult to predict and characterize.
The negotiated remediation cost for Kanawha Bend is $38.9 million over a 20-year remediation period. Key milestones include completion of interim stabilization measures by December 14, 2026. The site is located in a historically flood-prone area along the Kanawha River, and the surrounding Chemical Valley industrial corridor creates additional risks related to industrial incidents at neighboring facilities, utility interruptions, and emergency evacuations that could affect access to the site.
The geographic spread of these four sites across Montana, Nevada, and West Virginia, combined with the diversity of remediation activities (mine closure, active mine operations, chemical facility corrective action, and DNAPL remediation in fractured bedrock), creates a uniquely complex set of force majeure risks. A force majeure provision drafted for a single site in a single jurisdiction would be inadequate for the multi-site, multi-state scope of this consent decree.
C. Stipulated Penalties Exposure
The consent decree's stipulated penalty structure imposes escalating daily penalties for noncompliance with consent decree obligations:
These penalties apply on a per-violation basis, meaning that a missed deadline at each of the four sites constitutes a separate violation, and multiple missed deadlines at a single site each constitute separate violations.
To illustrate the financial exposure: If TMC were to miss a single milestone at one site for a period of 90 days without the protection of an approved force majeure claim, the stipulated penalties for that single violation would be calculated as follows:
• Days 1–30: 30 × $1,500 = $45,000
• Days 31–60: 30 × $3,000 = $90,000
• Days 61–90: 30 × $5,500 = $165,000
• Total for one violation, 90-day delay: $300,000
If, however, a force majeure event such as a severe winter storm at the Ridgecrest Mine were to cause delays in multiple milestones at that site, and cascading delays at the Gallatin Chemical Works (which shares certain contractor resources with Ridgecrest), the aggregate stipulated penalty exposure could easily reach into the millions of dollars within a single year. Over the 30-year life of the Ridgecrest remediation alone, the potential cumulative stipulated penalty exposure from unexcused delays is substantial.
The financial stakes are further amplified by the Escrow Agreement for Stipulated Penalty Deposits, maintained at Larchfield Trust Company, N.A., which requires TMC to make escrow deposits upon the assessment of stipulated penalties. These deposits reduce TMC's available liquidity and may affect its ability to fund ongoing remediation activities, creating a vicious cycle in which penalty assessments impair TMC's capacity to cure the underlying noncompliance.
The force majeure provision is therefore not merely a defensive mechanism — it is a critical financial risk management tool that directly affects TMC's ability to perform its remediation obligations over the multi-decade life of the consent decree.
III. Analysis of the Government's Proposed Force Majeure Provision
A. Text of the Government's Proposed Provision (DOJ First Draft, November 8, 2024)
The DOJ's first draft consent decree, circulated November 8, 2024, contains a force majeure provision at Section XII (Paragraphs 87–95) that closely tracks the standard EPA model force majeure clause. While we do not reproduce the entire provision verbatim in this memorandum, we summarize the key elements below.
Qualifying Events. The government's draft defines force majeure as "any event arising from circumstances beyond the control of [TMC], of any entity controlled by [TMC], or of [TMC's] contractors, that delays the timely performance of any obligation under this Consent Decree despite [TMC's] exercise of due diligence." The provision includes an enumerated list of qualifying events, which consists of: acts of God, war, armed conflict, civil unrest, fires, floods, earthquakes, and labor disputes not caused by or contributed to by TMC.
This enumerated list is notably narrow. It does not include regulatory delays, third-party contractor failures, supply chain disruptions, severe weather events falling short of natural disasters (e.g., extreme cold, heavy snowfall, drought), epidemics or pandemics, utility failures, or judicial delays. While the provision is not expressly limited to the enumerated list (the phrase "including but not limited to" appears in the DOJ's formulation), the absence of these categories from the enumerated list creates ambiguity and provides the government with leverage to argue that unenumerated events are not covered.
Notice Requirements. The government's draft requires TMC to provide written notice to EPA and DOJ within 15 calendar days of the date TMC first knew or should have known of a force majeure event. The notice must identify: (a) the specific force majeure event or events; (b) the affected consent decree obligation or obligations; (c) the anticipated duration of the delay; (d) the actions taken by TMC to prevent or minimize the delay; and (e) a proposed schedule for carrying out the affected obligations after the force majeure event has ended.
Burden of Proof. TMC bears the burden of demonstrating that: (i) the delay was caused by circumstances entirely beyond TMC's control; (ii) TMC exercised "due diligence" to avoid the delay and to minimize its duration; and (iii) TMC took all reasonable steps to mitigate the effects of the delay. The "due diligence" standard, as discussed in Section IV.C below, imposes a high evidentiary burden on TMC.
EPA Discretion. The government's draft provides that EPA shall have sole discretion to determine whether TMC has satisfactorily demonstrated that a force majeure event has occurred and that the delay qualifies for relief. If TMC disagrees with EPA's determination, TMC may invoke the consent decree's dispute resolution mechanism, which provides for informal negotiation, followed by a formal EPA decision, followed by judicial review.
Stipulated Penalties. Under the government's draft, stipulated penalties continue to accrue during any period of claimed force majeure until EPA renders a determination. If EPA approves the force majeure claim, accrued penalties attributable to the excused delay are abated. If EPA denies the claim, the accrued penalties remain due and payable.
Duration of Relief. The government's draft limits the period of excusable delay to the duration of the force majeure event itself, with no provision for a recovery period following the cessation of the event.
B. TMC's December 16, 2024 Redline Proposals
TMC's redline, submitted December 16, 2024, proposed the following modifications to the government's force majeure provision:
Expanded Enumerated Events. TMC's redline expanded the enumerated list of qualifying force majeure events to include: severe weather events (including but not limited to extreme temperatures, heavy snowfall, ice storms, drought, and wildfire); epidemics, pandemics, or public health emergencies declared by federal, state, or local authorities; regulatory permitting delays by state or federal agencies not caused by TMC; delays by EPA in reviewing and approving work plans, corrective measures studies, or other required submissions; unavailability of specialized equipment, materials, or contractor services; and third-party utility failures.
Extended Notice Period. TMC's redline changed the notice period from 15 calendar days to 30 calendar days.
"Reasonable Efforts" Standard. TMC's redline proposed substituting "reasonable efforts" for "due diligence" throughout the force majeure provision, representing a lower standard that would require TMC to demonstrate commercially reasonable steps short of extraordinary measures.
Recovery Period. TMC's redline proposed that the period of excusable delay extend for the duration of the force majeure event plus a "reasonable recovery period," without further defining the term.
Good-Faith Determination Standard. TMC's redline proposed replacing the "sole discretion" standard for EPA's force majeure determination with a "good-faith determination" standard, requiring EPA to exercise reasonable judgment in evaluating force majeure claims.
Penalty Tolling. TMC's redline proposed that stipulated penalties not accrue during any period in which a force majeure claim is pending, regardless of the ultimate disposition of the claim.
The government has not yet responded to these proposals. We anticipate that the government's counter-redline will reject several of TMC's proposals, particularly the 30-day notice period, the "reasonable efforts" standard, and the blanket penalty tolling provision. The analysis and recommendations in Section IV below are designed to identify positions that maximize TMC's protection while remaining within the range of outcomes that the government might reasonably accept.
IV. Analysis and Recommendations
A. Definition of Qualifying Force Majeure Events
The definition of qualifying force majeure events is the most consequential element of the force majeure provision. An overly narrow definition — limited to traditional "acts of God" — would leave TMC exposed to stipulated penalties for a wide range of circumstances genuinely beyond its control. Conversely, the government will resist an overbroad definition that could be used to excuse delays attributable to TMC's own management failures or lack of planning. Our recommendations seek to strike an appropriate balance, focusing on categories of events that are (a) genuinely beyond TMC's control, (b) reasonably foreseeable given the nature and locations of the four sites, and (c) consistent with precedent provisions in comparable EPA consent decrees.
1. Natural Events and Severe Weather
The government's draft limits force majeure to traditional "acts of God" categories — floods, earthquakes, and fires. While these are appropriate, the list is incomplete in that it does not address severe weather events that, while not rising to the level of natural disasters, can materially impair TMC's ability to perform outdoor remediation activities.
This omission is particularly significant for the Ridgecrest Mine and the Bonanza Creek Mine. At the Ridgecrest Mine, located at approximately 5,800 feet elevation near Drummond, Montana, average annual snowfall at the site elevation is approximately 60 inches, and temperatures routinely fall below -20°F during winter months. The effective outdoor construction season at Ridgecrest is limited to approximately May through October — roughly five to six months per year. Heavy early-season snowfall or an unusually late spring thaw could shorten this window further, delaying construction activities and milestone compliance. Similarly, the Bonanza Creek Mine in Lander County, Nevada, experiences extreme summer heat — temperatures routinely exceed 100°F — which creates worker safety concerns under OSHA's heat illness prevention standards and may require suspension of outdoor work activities during peak heat hours. Flash flooding in ephemeral drainages near the mine site can also disrupt operations and damage site infrastructure without constituting a "flood" in the traditional natural disaster sense.
We recommend that the force majeure provision include the following language or its substantial equivalent:
"Severe weather conditions, including but not limited to extreme temperatures (whether heat or cold), heavy snowfall, ice storms, drought conditions, wildfire smoke, and wind events that materially impair the ability to perform outdoor remediation activities at the affected site, as determined by reference to applicable OSHA and MSHA worker safety standards and site-specific operational limitations."
This formulation ties the force majeure claim to an objective standard — applicable worker safety regulations — rather than relying solely on TMC's subjective determination. We believe this objective anchor will make the provision more palatable to the government while still providing TMC with meaningful protection.
In support of this position, we note that several comparable mining consent decrees have included severe weather provisions. As discussed in the Comparative Consent Decree Analysis dated November 20, 2024, the consent decree in United States v. Consolidated Copper Corp., No. 2:18-cv-01234 (D. Ariz. 2020), included a provision excusing delays caused by "extreme weather conditions, including excessive heat, monsoon rains, and flooding, that prevent safe performance of outdoor remediation activities." Similarly, the consent decree in United States v. Iron Range Resources, Inc., No. 0:19-cv-02876 (D. Minn. 2021), included provisions for severe winter weather delays at high-latitude mining sites.
2. Epidemics and Pandemics
The COVID-19 pandemic demonstrated conclusively that public health emergencies can cause widespread disruption to construction and remediation activities, including workforce quarantines, supply chain disruptions, government-ordered shutdowns, and limitations on interstate travel. While the acute phase of the COVID-19 pandemic has passed, the risk of future pandemics or localized epidemics remains significant, particularly given the remote locations of the Ridgecrest and Bonanza Creek sites, where workforce quarantines or access restrictions could halt all site activities.
We recommend that the force majeure provision include "epidemics, pandemics, or public health emergencies declared by federal, state, or local authorities that materially impair TMC's ability to perform remediation activities at one or more of the affected sites." The reference to a declared public health emergency provides an objective trigger for the provision and should address the government's concern about overuse.
As a potential concession, we note in Section VI.C below that TMC may offer to limit pandemic-related force majeure claims to situations where a public health emergency has been formally declared by a government authority with jurisdiction over the affected site. This concession narrows the provision without eliminating it entirely and should be reserved for negotiation if the government resists the inclusion of pandemic provisions altogether.
3. Regulatory and Permitting Delays
This is perhaps the most critical category of force majeure events for TMC, and the one most likely to provoke significant government resistance. Several key remediation milestones under the consent decree are directly dependent upon the issuance of permits, approvals, or authorizations by state and federal regulatory agencies. TMC cannot control the pace of regulatory review, and delays in permit issuance can cascade through the remediation schedule, causing TMC to miss downstream milestones through no fault of its own.
The following permits and approvals are among those required for the four sites:
• Ridgecrest Mine (Montana): Montana Pollutant Discharge Elimination System ("MPDES") permits; hard rock mining reclamation permits under the Montana Metal Mine Reclamation Act; Montana Department of Environmental Quality ("MT DEQ") approval of remediation work plans. The MT DEQ contact is Annika Hedstrom.
• Gallatin Chemical Works (Montana): MPDES permits; hazardous waste management permits under Montana's authorized RCRA program; MT DEQ approval of the Corrective Measures Study and corrective measures implementation plans.
• Bonanza Creek Gold Mine (Nevada): Water pollution control permits issued by the Nevada Division of Environmental Protection ("NV DEP"); mining reclamation permits under the Nevada Mined Land Reclamation Act; state water rights permits (the Bonanza Creek site requires water for dust suppression and certain remediation activities, and Nevada water rights are subject to adjudication by the State Engineer). The NV DEP contact is Ricardo Fuentes.
• Kanawha Bend Chemical Plant (West Virginia): National Pollutant Discharge Elimination System ("NPDES") permits (West Virginia has delegated authority); RCRA-authorized corrective action permits and approvals from the West Virginia Department of Environmental Protection ("WV DEP"). The WV DEP contact is Loretta May Hatcher.
In addition to state-level permits, several milestones require EPA's own review and approval of TMC's submissions. For example, the Ridgecrest Remedial Action Work Plan is due December 14, 2025, but EPA must review and approve the Work Plan before TMC can proceed to the construction phase (construction commencement is required by June 14, 2027). If EPA takes 12 months or longer to review the Work Plan — not an uncommon timeline for complex remediation work plans — TMC's ability to meet the June 14, 2027 construction commencement deadline will be severely compromised.
We recommend the following two-part approach:
First, the force majeure provision should include language excusing delays caused by "the failure of any federal, state, or local governmental authority to issue permits, approvals, or authorizations required for the performance of remediation activities in a timely manner, provided that TMC has submitted complete applications and all supporting materials within the time frames required by this Consent Decree and applicable regulations."
Second, the force majeure provision should specifically address delays caused by EPA itself, including delays in reviewing and approving work plans, corrective measures studies, sampling and analysis plans, and other required submissions. We recognize that the government is likely to resist a provision that effectively penalizes EPA for its own review timelines, but we believe this position is both reasonable and defensible. If EPA's review of the Ridgecrest Remedial Action Work Plan takes 18 months, TMC should not bear stipulated penalties for missing the downstream construction commencement deadline that was premised on a more expeditious review.
An alternative approach, if the government refuses to include EPA review delays within the force majeure provision, would be to negotiate specific deadlines for EPA review of key submissions, with automatic milestone extensions if EPA exceeds those deadlines. This approach would address the same risk through a different mechanism and may be more palatable to the government because it does not characterize EPA delay as a "force majeure event."
4. Third-Party Contractor and Supplier Failures
TMC has engaged Pinnacle Creek Environmental, LLC ("Pinnacle Creek"), led by Dr. Astrid Bergmann, P.E. (Bozeman, Montana), to serve as the primary remediation design and oversight contractor for all four sites. In addition, TMC will need to procure specialized remediation equipment and materials, including geosynthetic liners for the Bonanza Creek Mine heap-leach pad repairs, water treatment systems for the Ridgecrest Mine acid mine drainage, and specialized drilling equipment for the Kanawha Bend DNAPL investigation. Some of these items have long procurement lead times — geosynthetic liners of the specifications required for the Bonanza Creek liner repair, for example, have current lead times of approximately 16 to 24 weeks, and specialized water treatment components for high-flow acid mine drainage systems can have lead times of six months or more.
If a critical-path contractor or supplier experiences a failure — whether due to bankruptcy, labor disputes, manufacturing disruptions, or other causes — that prevents timely delivery of goods or services essential to milestone compliance, TMC should not bear stipulated penalties for the resulting delay, provided TMC exercised reasonable diligence in selecting the contractor or supplier and made reasonable efforts to engage alternative providers.
We recommend including the following language: "Delays caused by the inability to obtain specialized equipment, materials, or contractor services essential to the performance of remediation activities, despite the exercise of commercially reasonable efforts to procure same from the originally engaged provider or alternative providers."
We anticipate that the government will resist a broad third-party contractor excuse provision, arguing that TMC should bear the risk of its own contractor selections. As a compromise, we propose limiting this provision to failures of critical-path contractors and suppliers — i.e., those whose goods or services are on the critical path for milestone compliance and cannot be replaced by alternative providers within a reasonable time. This formulation places an additional burden on TMC to demonstrate both the critical-path nature of the contractor or supplier and the unavailability of timely alternatives, which should address the government's concerns about overuse.
5. Utility and Infrastructure Failures
The Kanawha Bend Chemical Plant and Gallatin Chemical Works are active or recently active industrial facilities that depend on reliable utility services, including electrical power, natural gas, water supply, and telecommunications. Remediation activities at these sites may require continuous power for treatment systems, communications for monitoring and control, and water supply for various remediation processes. An interruption in utility services caused by a third-party utility provider — whether due to grid failures, infrastructure damage, or other causes — could halt remediation activities and cause TMC to miss milestones.
We recommend including "interruptions in utility services, including but not limited to electrical power, natural gas, water supply, and telecommunications, not caused by TMC or its contractors" within the enumerated list of force majeure events. This category is relatively uncontroversial and is included in many commercial force majeure clauses. The qualifier "not caused by TMC or its contractors" addresses the government's interest in ensuring that TMC does not benefit from utility disruptions attributable to its own actions.
6. Legal and Judicial Delays
The proposed consent decree has not yet been entered by the court. The current target date for entry of the consent decree is May 15, 2025, with an anticipated Effective Date of June 14, 2025. All remediation milestones under the consent decree are measured from the Effective Date. If entry of the consent decree is delayed — whether due to extensions of the public comment period, challenges by environmental groups or other third parties, or court scheduling — all downstream deadlines would be affected.
We recommend a provision stating that if entry of the consent decree is delayed beyond the target date, all milestone deadlines shall be automatically extended by a period equal to the period of delay in entry. This should be a standalone provision rather than part of the force majeure clause, as it is not a "force majeure event" in the traditional sense but rather a scheduling adjustment.
Additionally, we recommend addressing the potential impact of third-party litigation on consent decree milestones. If environmental groups or other parties challenge the consent decree during the public comment period or seek judicial review of the decree following entry, the resulting litigation could create uncertainty about the enforceability of specific provisions and could, in extreme cases, result in modifications to the decree that affect milestone deadlines. We recommend a provision providing that TMC shall not be liable for stipulated penalties during any period in which a court order or judicial proceeding materially impairs TMC's ability to perform a specific obligation under the decree.
B. Notice Requirements
1. The 15-Day Notice Period
The government's draft requires TMC to provide written notice to EPA and DOJ within 15 calendar days of the date TMC first knew or should have known of a force majeure event. TMC's December 16 redline proposed extending this period to 30 calendar days.
Both positions have merit and drawbacks. From TMC's perspective, 15 calendar days may be insufficient to identify the full scope and impact of a force majeure event, particularly where the event affects multiple milestones across geographically dispersed sites. Consider a severe winter storm at the Ridgecrest Mine: TMC would need to assess the physical damage to the site and equipment, evaluate the impact on the current construction season, determine whether downstream milestones at Ridgecrest would be affected, assess whether the diversion of Pinnacle Creek resources to Ridgecrest would affect milestone compliance at other sites, and prepare a written notice containing all of the information required by the consent decree. Conducting this assessment and preparing a comprehensive notice within 15 calendar days may not be feasible, particularly if the same storm has damaged site access roads and disrupted communications.
From the government's perspective, however, a 30-day notice period may be perceived as unreasonably long. Prompt notice of force majeure events serves important government interests: it allows EPA to adjust its oversight schedule, deploy resources to monitor the response, and begin its own assessment of the claimed event. A lengthy delay in notice could prejudice EPA's ability to independently verify the force majeure event and its impacts.
We recommend a two-tier notice mechanism as a compromise:
Preliminary Notice (15 calendar days): Within 15 calendar days of the date TMC first knew or should have known of a force majeure event, TMC shall provide a preliminary written notice to EPA and DOJ identifying: (i) the nature of the force majeure event; (ii) the site or sites affected; and (iii) a preliminary identification of the consent decree obligations that may be affected.
Supplemental Notice (30 calendar days): Within 30 calendar days of the preliminary notice, TMC shall provide a supplemental written notice providing: (i) a detailed description of the force majeure event and its impact on specific consent decree obligations; (ii) the anticipated duration of the delay; (iii) a description of the actions taken and planned by TMC to prevent or minimize the delay; (iv) a proposed schedule for carrying out the affected obligations; (v) identification of any cascading effects on other milestones at the same or other sites; and (vi) a statement of whether TMC intends to seek relief from stipulated penalties.
This two-tier approach preserves the government's interest in prompt notification while giving TMC adequate time to prepare a comprehensive analysis of the force majeure event's impacts. The 15-day preliminary notice ensures that EPA is alerted quickly, while the 30-day supplemental notice provides the detailed information needed for EPA to evaluate the claim. This structure is consistent with notice provisions in several precedent consent decrees and should be defensible in negotiations.
Alternatively, if the government rejects the two-tier approach, we recommend proposing a compromise notice period of 20 calendar days for a single comprehensive notice. This splits the difference between the government's 15-day proposal and TMC's 30-day proposal and provides TMC with a meaningful additional window for assessment and preparation.
2. Content of Notice
The government's draft requires the force majeure notice to identify: (a) the specific force majeure event or events; (b) the affected consent decree obligation or obligations; (c) the anticipated duration of the delay; (d) the actions taken by TMC to prevent or minimize the delay; and (e) a proposed schedule for carrying out the affected obligations after the force majeure event has ended.
This list is reasonable but incomplete. We recommend adding two additional required elements:
(f) Identification of any cascading effects on other milestones at the same site or other sites under the consent decree, including an analysis of the dependencies between the affected milestone and downstream milestones; and
(g) A statement of whether TMC intends to seek relief from stipulated penalties in connection with the claimed force majeure event, and if so, the specific penalties for which TMC seeks relief.
The inclusion of cascading-effects analysis in the notice is important because it provides EPA with early notice of potential downstream impacts and facilitates proactive schedule management. The inclusion of a statement regarding stipulated penalty relief ensures transparency and avoids later disputes about whether TMC timely claimed penalty relief in connection with a specific force majeure event.
3. Notice Recipients
The government's draft requires TMC to provide force majeure notice to EPA (specifically, Margaret Coulson, OECA, and the applicable EPA Regional Project Coordinator — Dr. Samuel Tesfaye for the Ridgecrest Mine and Jennifer Whitfield for the Bonanza Creek Mine) and to DOJ (Philip Orenstein, ENRD). The draft does not specify notice to state co-plaintiffs.
We recommend clarifying that TMC shall also provide concurrent notice to the applicable state environmental agency for events affecting sites within that state's jurisdiction — i.e., MT DEQ (Annika Hedstrom) for events affecting Ridgecrest or Gallatin; NV DEP (Ricardo Fuentes) for events affecting Bonanza Creek; and WV DEP (Loretta May Hatcher) for events affecting Kanawha Bend. While the state co-plaintiffs may argue that notice to EPA is sufficient because EPA will coordinate with the states, experience suggests that direct notice to state agencies avoids later disputes about whether a state was adequately informed of a force majeure claim. Including the state agencies as notice recipients also positions TMC to argue that the states' silence or acquiescence in response to the notice constitutes tacit acceptance of the force majeure claim.
C. Burden of Proof
1. Government's Position: "Due Diligence" Standard
The government's draft places the burden on TMC to demonstrate three elements: (i) the delay was caused by circumstances "entirely beyond TMC's control"; (ii) TMC exercised "due diligence" to avoid the delay; and (iii) TMC took "all reasonable steps" to minimize the delay once it occurred.
The "due diligence" standard is a high bar. In the environmental enforcement context, courts have generally interpreted "due diligence" to require TMC to demonstrate affirmative, proactive steps taken to anticipate and avoid force majeure events — not merely the absence of negligence or fault. This standard may require TMC to demonstrate, for example, that it maintained contingency plans for severe weather, pre-positioned backup equipment, secured alternative contractors, and took other anticipatory measures. The failure to take any specific precautionary step could be cited by the government as evidence that TMC did not exercise "due diligence," even if the force majeure event was genuinely beyond TMC's control.
The requirement that the delay be caused by circumstances "entirely beyond TMC's control" is also noteworthy. The word "entirely" suggests that if TMC's own actions contributed to the delay in any respect — even if the primary cause was a genuine force majeure event — the provision may not apply. This creates risk for TMC in situations where a force majeure event interacts with TMC's own scheduling decisions or resource allocations.
2. TMC's Proposed "Reasonable Efforts" Standard
TMC's December 16 redline proposed substituting "reasonable efforts" for "due diligence" throughout the force majeure provision. "Reasonable efforts" is a lower standard that generally requires commercially reasonable steps short of extraordinary measures. Under a "reasonable efforts" standard, TMC would need to demonstrate that it took steps that a reasonable company in its position would have taken, but would not need to demonstrate that it anticipated and prepared for every conceivable contingency.
The government is likely to resist this substitution. From the government's perspective, the "due diligence" standard is a well-established feature of EPA consent decree force majeure provisions, and departing from it would set a precedent that could undermine the government's negotiating position in other cases.
3. Recommendation. We recommend proposing "commercially reasonable efforts" as a middle ground between "due diligence" and "reasonable efforts." This formulation is well-established in commercial contracts, is frequently used in consent decrees and other enforcement instruments, and has a substantial body of case law interpreting its meaning. The "commercially reasonable" qualifier provides an objective standard — it asks whether TMC's efforts were reasonable in light of the costs, risks, and commercial realities of the remediation project, rather than requiring TMC to take every conceivable precautionary step regardless of cost or practicality.
As an alternative, if the government insists on retaining the "due diligence" formulation, we recommend proposing that "due diligence" be defined within the consent decree to mean "reasonable steps that a similarly situated mining and chemicals company would take under similar circumstances, taking into account the nature and scope of the remediation obligation, the geographic and environmental conditions at the affected site, and the commercially available means of preventing or minimizing the delay." This defined term preserves the government's preferred formulation while providing an objective, industry-based standard for evaluating TMC's efforts. It also provides TMC with a framework for defending force majeure claims by reference to industry practices rather than an undefined and potentially unlimited standard.
D. Tolling of Stipulated Penalties During Force Majeure Claims
1. Government's Position
Under the government's draft, stipulated penalties continue to accrue during any period in which TMC has asserted a force majeure claim but EPA has not yet rendered a determination. If EPA subsequently approves the force majeure claim, the accrued penalties attributable to the excused delay are abated. If EPA denies the claim, the accrued penalties remain due and payable.
This approach creates significant financial risk for TMC. The dispute resolution process — informal negotiation (30 days), formal EPA decision (30 days), and judicial review (30 days) — can extend for 90 days or longer. During this entire period, stipulated penalties would continue to accrue at the applicable daily rate. For a dispute that takes 90 days to resolve, the accumulated penalties for a single violation would be $300,000 (as calculated in Section II.C above), even if the force majeure claim is ultimately approved and the penalties are abated. If the claim is denied, TMC would owe the full amount.
The government's approach also creates perverse incentives. Because penalties accrue during the dispute period, TMC faces pressure to accept unfavorable EPA determinations rather than exercising its right to dispute resolution and judicial review. This pressure undermines the integrity of the dispute resolution process and may cause TMC to forego meritorious force majeure claims to avoid the financial risk of accumulated penalties during the dispute period.
2. TMC's Position
TMC's December 16 redline proposed that stipulated penalties not accrue at all during any period in which a force majeure claim is pending, regardless of the ultimate disposition of the claim. This proposal is understandable from TMC's perspective but is likely to be rejected by the government, as it creates an incentive for TMC to file force majeure claims — even weak or marginal ones — to pause penalty accrual. The government will argue that this would undermine the deterrent effect of the stipulated penalty provision.
3. Recommendation. We recommend a compromise approach that balances TMC's need for financial protection with the government's interest in maintaining penalty deterrence. Specifically, we propose the following framework:
Option A (Preferred): Tolling During Good-Faith Claims. Stipulated penalties shall be tolled (i.e., paused and not accruing) during any period in which a force majeure claim is pending, provided that: (i) TMC has timely submitted the required notice in accordance with the consent decree; (ii) TMC is continuing to exercise commercially reasonable efforts to minimize the delay; and (iii) TMC's force majeure claim is made in good faith. If the force majeure claim is ultimately approved, the tolled penalties are eliminated. If the force majeure claim is ultimately denied, stipulated penalties shall accrue from the original deadline, but TMC shall receive credit for the period during which the claim was pending and being reviewed in good faith — i.e., penalties would accrue only for the period of delay, not for the dispute resolution period.
The "good faith" requirement addresses the government's concern about strategic or frivolous claims. If TMC files a force majeure claim that is not made in good faith — e.g., a claim based on events that TMC clearly caused or contributed to — the tolling provision would not apply, and penalties would accrue from the original deadline without credit.
Option B (Fallback): Escrow Mechanism. If the government rejects the tolling approach, we recommend proposing that stipulated penalties accrue during the pendency of force majeure claims but are deposited into escrow at Larchfield Trust Company, N.A. (consistent with the existing Escrow Agreement for Stipulated Penalty Deposits) rather than paid directly to EPA. The escrowed funds would be released to TMC if the force majeure claim is approved, or to EPA if the claim is denied. This approach addresses the government's interest in maintaining the financial incentive for compliance while protecting TMC from the irreversible payment of penalties that may ultimately be abated.
We strongly recommend pursuing Option A as the primary position, with Option B held in reserve as a fallback. Option A provides TMC with the most meaningful protection, while the good-faith requirement and continuing-efforts condition should address the government's legitimate concerns.
E. Cascading Delays Across Sites and Milestones
1. Importance of Cascading Delay Provisions
The consent decree establishes multiple milestones at each of the four sites, with many milestones dependent on the completion of earlier milestones. For example, at the Ridgecrest Mine, the construction commencement milestone (June 14, 2027) depends on EPA's prior approval of the Remedial Action Work Plan (due December 14, 2025). If a force majeure event delays the submission or approval of the Work Plan, the construction commencement milestone cannot be met on the original schedule, regardless of TMC's efforts.
Moreover, because TMC operates four sites across three states with shared resources — including the Pinnacle Creek Environmental engagement team, corporate environmental staff, and certain specialized equipment — a force majeure event at one site can affect TMC's capacity to meet milestones at other sites. If, for example, a severe flood at the Ridgecrest Mine requires the emergency diversion of Pinnacle Creek's remediation team from the Gallatin Chemical Works to Ridgecrest, TMC's ability to meet the Corrective Measures Study deadline at Gallatin (June 14, 2026) could be compromised.
The government's draft force majeure provision does not address cascading delays. Under the current draft, if a force majeure event causes an excusable delay in one milestone, TMC would need to file separate force majeure notices for each downstream milestone affected by the cascading delay. This is administratively burdensome and creates the risk that the government may deny force majeure relief for downstream milestones on the ground that the delay in those milestones was caused not by the original force majeure event but by TMC's failure to mitigate the cascading effects.
2. Recommendation. We recommend proposing a cascading delay provision with two components:
Intra-Site Cascading Delays. If a force majeure event causes excusable delay in one milestone at a given site, all subsequent milestones at that site that are dependent on completion of the delayed milestone shall be automatically extended by a period equal to the period of excusable delay, without the need for separate force majeure notices for each cascading milestone, provided that the original force majeure notice identified the risk of cascading delays and the specific downstream milestones that may be affected.
Cross-Site Cascading Delays. If a force majeure event at one site demonstrably affects TMC's capacity to meet milestones at one or more other sites under the consent decree — for example, by requiring the diversion of shared contractor resources, specialized equipment, or corporate management attention — TMC may claim excusable delay at the affected sites, provided that TMC demonstrates: (i) a direct and documented causal connection between the force majeure event at the originating site and the delay at the affected site; (ii) that TMC exercised commercially reasonable efforts to mitigate the cross-site impact; and (iii) that the cross-site delay could not have been avoided through the engagement of alternative contractor resources or other reasonable measures.
The cross-site cascading provision is likely to be more controversial than the intra-site provision, and we have accordingly classified it as a "strong preference" rather than a "must-have" in our negotiation prioritization (see Section VI below). However, we believe it is important to raise this provision in negotiations and to advocate for it vigorously, because the multi-site structure of the consent decree creates genuine cross-site dependencies that are not addressed by the government's standard single-site force majeure template.
F. EPA Review and Determination Process
1. Government's Proposed Process
Under the government's draft, EPA has sole discretion to determine whether a force majeure event has occurred and whether the claimed delay qualifies for relief under the consent decree. The draft does not specify any timeframe within which EPA must render its determination. If TMC disagrees with EPA's determination, TMC may invoke the consent decree's dispute resolution mechanism, which provides for: (i) informal negotiation between the parties for a period of 30 days; (ii) if informal negotiation fails, a formal written decision by EPA within 30 days; and (iii) if TMC disputes EPA's formal decision, judicial review by the court within 30 days of the filing of a motion for review.
2. Recommendations. We have four recommendations regarding the EPA review and determination process:
First, we recommend proposing a deadline for EPA's force majeure determination. The absence of any specified timeframe for EPA's determination creates uncertainty and delays that compound the financial exposure discussed in Section IV.D above. We recommend proposing that EPA shall render a written determination on any force majeure claim within 45 days of receipt of TMC's complete force majeure notice (or supplemental notice, if a two-tier notice mechanism is adopted). This timeframe is sufficient for EPA to conduct a meaningful review while providing TMC with timely certainty regarding its obligations.
Second, we recommend proposing a deemed-approval provision. If EPA fails to respond to a force majeure claim within the specified 45-day period, the force majeure claim should be deemed approved. Alternatively, if the government resists a full deemed-approval provision, we recommend proposing that EPA's failure to respond within 45 days shall result in the automatic tolling of stipulated penalties pending EPA's determination. This deemed-approval or deemed-tolling provision provides an incentive for EPA to render timely determinations and protects TMC from indefinite uncertainty.
Third, we recommend ensuring that the standard of judicial review for force majeure determinations is de novo, not "arbitrary and capricious" or "abuse of discretion." The government's standard consent decree language typically provides that factual disputes are reviewed on the administrative record under an arbitrary and capricious standard, while legal disputes are reviewed de novo. We believe that force majeure determinations inherently involve mixed questions of fact and law — whether a particular event constitutes a force majeure event, whether TMC exercised due diligence, and whether a causal connection exists between the event and the delay — and should be subject to de novo review to give TMC meaningful judicial recourse. A deferential standard of review would effectively rubber-stamp EPA's determination and deprive TMC of a genuine opportunity to challenge an erroneous denial.
Fourth, we note that a detailed analysis of the dispute resolution mechanism is being prepared separately in our Memorandum on Dispute Resolution Mechanism, dated January 6, 2025. The recommendations in this memorandum regarding force majeure dispute procedures should be coordinated with the broader dispute resolution framework to ensure consistency. We recommend that the negotiation team review both memoranda together before preparing the proposed redline language.
G. Duration of Excusable Delay and Recovery Period
1. Government's Position
The government's draft limits the period of excusable delay to the duration of the force majeure event itself. Once the force majeure event ends — e.g., once a flood recedes or a wildfire is extinguished — the excusable delay period terminates, and TMC is immediately obligated to resume performance and meet the original milestone deadlines (as adjusted only for the duration of the force majeure event itself).
2. TMC's Position and Recommendation
TMC's December 16 redline proposed that the excusable delay period extend for the duration of the force majeure event plus a "reasonable recovery period." This is a critical provision. The cessation of a force majeure event does not mean that remediation activities can resume immediately. After a flood at the Ridgecrest Mine, for example, TMC would need to conduct damage assessments of site infrastructure, dewater flooded work areas, asses

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