SUPPLEMENTAL ENVIRONMENTAL PROJECT DESCRIPTION AND BUDGET
Battle Mountain Community Drinking Water Improvement Project
Appendix to Consent Decree — Supplemental Environmental Project No. 2
Date: January 28, 2025
Prepared by: Calderwood & Harkness LLP (Matter No. 1039-00003)
Prepared for: Torchlight Mining Corp., for submission to the U.S. Department of Justice, Environment and Natural Resources Division, and the U.S. Environmental Protection Agency, Region 9
Reference: 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
Classification: Appendix to Consent Decree — Supplemental Environmental Project No. 2
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I. INTRODUCTION AND PURPOSE
1.1 Background of the Consent Decree
This Supplemental Environmental Project Description and Budget (this "SEP Description") is submitted in connection with the proposed consent decree in the multi-site enforcement action styled United States of America and State of Montana v. Torchlight Mining Corp., et al., Civil Action No. 9:24-cv-00087-DWM, pending in the United States District Court for the District of Montana, Missoula Division, before the Honorable Donald W. Molloy.
The enforcement action was brought jointly by the United States of America, acting through the U.S. Department of Justice, Environment and Natural Resources Division ("DOJ ENRD"), at the request of the U.S. Environmental Protection Agency, Office of Enforcement and Compliance Assurance ("EPA OECA"), and by the co-plaintiff States of Montana, Nevada, and West Virginia, against Torchlight Mining Corp. ("TMC" or "Torchlight"), a corporation organized under the laws of the Province of Ontario, Canada, and its U.S. subsidiaries: Torchlight Mining (U.S.) Inc., a Delaware corporation; Torchlight Specialty Chemicals, Inc., a Delaware corporation; Ridgecrest Mine Holdings, LLC, a Montana limited liability company; and Bonanza Creek Mining, LLC, a Nevada limited liability company (collectively, the "Defendants").
The lead case attorney for EPA OECA is Margaret Coulson. The lead trial attorney for DOJ ENRD is Philip Orenstein, under the supervision of Katherine Rowe-Halpern. The State of Montana participates through the Montana Department of Environmental Quality ("MT DEQ"). The State of Nevada participates through the Nevada Department of Environmental Protection ("NV DEP"), with lead state counsel Ricardo Fuentes, Deputy Attorney General, Nevada Attorney General's Office. The State of West Virginia participates through the West Virginia Department of Environmental Protection ("WV DEP").
The enforcement action alleges violations of federal environmental law at four separate mining and chemical-processing facilities operated by the Defendants across the States of Montana, Nevada, and West Virginia. The alleged violations encompass the Clean Water Act ("CWA"), 33 U.S.C. §§ 1251 et seq.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. §§ 6901 et seq.; and the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601 et seq. The violations span a period of approximately five years and involve, among other things, unpermitted discharges of pollutants to waters of the United States, improper management and disposal of hazardous wastes, and failure to comply with reporting and corrective action requirements.
The proposed consent decree, which is expected to be lodged with the Court on or about May 15, 2025, resolves all claims asserted in the complaint and provides for a comprehensive settlement including, without limitation: (a) a total civil penalty of $31.5 million; (b) total nominal remediation costs estimated at $343.5 million across the four sites; (c) reimbursement of EPA's past costs in the amount of $18.1 million; and (d) implementation of three Supplemental Environmental Projects ("SEPs") with a total combined value of $12.0 million. The grand total estimated settlement obligation is approximately $409.9 million in nominal terms.
1.2 Purpose of This SEP
This document describes the Battle Mountain Community Drinking Water Improvement Project (the "Project" or "SEP No. 2"), one of the three Supplemental Environmental Projects required under the consent decree. The purpose of this SEP Description is to set forth in detail the scope, schedule, budget, reporting requirements, and other terms of the Project so that the Court, the United States, the co-plaintiff States, and the public may evaluate the Project's consistency with applicable law and EPA policy.
The Project involves the comprehensive upgrade of the existing municipal water treatment facility and associated distribution infrastructure serving the Town of Battle Mountain, an unincorporated community in Lander County, Nevada. Battle Mountain is the community most proximate to the Bonanza Creek Gold Mine, one of the four facilities at which violations were alleged in this enforcement action. The Project is specifically linked to, and provides remediation for community impacts arising from, the environmental violations at the Bonanza Creek Gold Mine, located approximately 28 miles south of Battle Mountain on County Road 447, Mile Marker 12, Lander County, Nevada 89820.
The Bonanza Creek Gold Mine is owned and operated by Bonanza Creek Mining, LLC, a Nevada limited liability company (Nevada Secretary of State Entity No. E0518294731), which is wholly owned by Torchlight Mining (U.S.) Inc., which is in turn a wholly owned subsidiary of Torchlight Mining Corp. Bonanza Creek Mining, LLC is one of the named Defendants in the enforcement action and is jointly and severally liable with the other Defendants for the obligations under the consent decree.
The total budget for the Project is $3,500,000, as set forth in detail in Section IV of this SEP Description. This amount is part of the $12.0 million total SEP commitment required under the consent decree.
1.3 Nexus to Environmental Violations at Bonanza Creek
The Bonanza Creek Gold Mine is an active open-pit heap-leach gold mining operation situated in Lander County, Nevada, approximately 28 miles south of the Town of Battle Mountain. The mine has been operational since 2001 and encompasses a mine footprint of approximately 5,600 acres, with a total controlled property area of approximately 12,400 acres. The mine's operations include conventional open-pit mining, heap-leach gold extraction using dilute cyanide solutions, solution collection and processing, and associated waste management activities.
The enforcement action alleges multiple violations of federal and state environmental law at the Bonanza Creek facility, including the following principal categories:
Clean Water Act Section 301 Violations. The complaint alleges three documented unpermitted discharges of cyanide-bearing process solution from the heap-leach pad to an ephemeral tributary of the Reese River, a water of the United States. Each discharge resulted from failures of the geomembrane liner system underlying the heap-leach pad. The three documented discharge events occurred on March 17, 2022; August 9, 2022; and January 22, 2023. Sampling conducted by EPA Region 9 and NV DEP personnel documented concentrations of weak-acid-dissociable ("WAD") cyanide at 0.62 mg/L in heap-leach pad underdrain samples, compared to the applicable discharge limit of 0.022 mg/L under the facility's Nevada Pollutant Discharge Elimination System ("NPDES") permit. Mercury concentrations averaged 12.4 µg/L across multiple samples, significantly exceeding the applicable water-quality criterion of 0.77 µg/L. Elevated selenium concentrations were also detected in pit-lake water at the facility.
Resource Conservation and Recovery Act Section 3004 Violations. The complaint alleges that Bonanza Creek Mining, LLC improperly managed spent heap-leach ore as hazardous waste, in violation of RCRA Subtitle C requirements, including failures in characterization, storage, and disposal of materials exhibiting the toxicity characteristic for cyanide and mercury.
Migratory Bird Treaty Act Violations. Federal inspectors documented 17 avian mortalities in the mine's solution ponds between 2021 and 2023, including deaths of migratory bird species protected under the Migratory Bird Treaty Act ("MBTA"), 16 U.S.C. §§ 703–712.
The civil penalty allocated to the Bonanza Creek facility under the consent decree is $7.9 million. The estimated total remediation cost for the Bonanza Creek site is $63.2 million over a 20-year period, with a net present value of approximately $47.1 million at a discount rate of 3%. The EPA Region 9 regulatory office has jurisdiction over the Bonanza Creek facility, and the EPA Project Coordinator assigned to the site is Jennifer Whitfield.
The Project described in this SEP Description provides direct environmental and public health benefits to the community most proximate to, and potentially affected by, the Bonanza Creek facility's historical releases. The residents of Battle Mountain, who depend upon the municipal water supply drawn from the Humboldt River basin and local groundwater sources, face heightened vulnerability to water quality degradation associated with mining activities in the region. By upgrading the community's drinking water treatment and distribution infrastructure, the Project addresses the nexus between the Bonanza Creek violations and the environmental and public health concerns of the affected community.
1.4 SEP Policy Compliance
The Project has been designed to comply with EPA's Supplemental Environmental Project Policy, as updated in 2015 (the "SEP Policy"). The SEP Policy identifies the following categories of eligible Supplemental Environmental Projects: (a) public health projects; (b) pollution prevention projects; (c) pollution reduction projects; (d) environmental restoration projects; (e) environmental compliance promotion projects; and (f) emergency planning and preparedness projects.
The Project qualifies under two of these categories. First, the Project qualifies as a "public health" SEP because it directly improves the quality and reliability of the drinking water supply serving the Battle Mountain community, thereby reducing exposure to contaminants of concern, including metals that are among the principal pollutants associated with the Bonanza Creek violations. Second, the Project qualifies as a "pollution reduction" SEP because the advanced filtration and treatment upgrades will achieve measurable reductions in contaminant concentrations in the treated water delivered to the community.
Critically, the Project is not otherwise legally required of Torchlight Mining Corp. or any of its subsidiaries by any existing statute, regulation, permit condition, judicial order, or other legal obligation. The Project goes beyond any obligations imposed under the consent decree's remedial action provisions for the Bonanza Creek facility. Torchlight has no pre-existing duty to fund or participate in the improvement of the Battle Mountain municipal water system, and no regulatory agency has previously required any such action. The Project therefore satisfies the SEP Policy's fundamental requirement that a Supplemental Environmental Project must involve activities that the defendant is not otherwise legally obligated to perform.
II. PROJECT DESCRIPTION
2.1 Overview
The Project consists of the comprehensive upgrade of the existing municipal water treatment facility and associated distribution infrastructure serving the Town of Battle Mountain, Lander County, Nevada. Battle Mountain is an unincorporated community located along the Humboldt River corridor in north-central Nevada, with a population of approximately 3,600 residents. The community serves as a regional center for Lander County and includes residences, commercial establishments, schools (including Battle Mountain High School and Lander County School District elementary facilities), a community health center, and various public facilities.
The current water treatment infrastructure in Battle Mountain was originally constructed in the mid-1980s and has been in continuous operation for approximately four decades. The existing facility relies on conventional sand-filtration technology and basic chlorination for water treatment. The system draws raw water from the Humboldt River basin and from local groundwater sources. Due to the age of the infrastructure, the treatment plant is operating at or near its design capacity and is increasingly challenged to meet the growing demands of the community. The facility's treatment capabilities, while adequate at the time of original construction, do not reflect modern treatment standards or technologies, particularly with respect to the removal of trace metals such as arsenic, mercury, and selenium, which are of heightened concern in the mining-influenced environment of the region.
The Project will enhance the treatment facility's capacity to remove metals and other contaminants of concern from the raw water supply. The Project also addresses deficiencies in the distribution system, where aging cast-iron piping contributes to lead and copper leaching and pressure losses, and installs modern water quality monitoring equipment to provide continuous, real-time data on treated water quality. Additionally, the Project includes a multi-year community outreach and education component to increase public awareness of drinking water quality issues and household water conservation practices.
2.2 Scope of Work
The Project encompasses five principal components, an engineering and design effort, project management oversight, and a contingency allowance, as described below.
Component 1 — Advanced Filtration System
Component 1 involves the design, procurement, and installation of a new granular activated carbon ("GAC") and multi-media filtration system to replace the existing aging sand-filtration units at the Battle Mountain water treatment facility. The new filtration system will be designed and sized to treat the facility's full design flow rate and will employ a combination of GAC adsorption and multi-media depth filtration to achieve enhanced removal of mercury, arsenic, selenium, and other trace metals, as well as turbidity and organic constituents, from the treated water.
The advanced filtration system will be designed to reduce concentrations of regulated metals to levels below the Safe Drinking Water Act ("SDWA") maximum contaminant levels ("MCLs"). Specifically, the system will be designed to achieve the following treatment targets for key contaminants:
• Arsenic: below 10 µg/L (SDWA MCL: 10 µg/L)
• Mercury (inorganic): below 2 µg/L (SDWA MCL: 2 µg/L)
• Selenium: below 50 µg/L (SDWA MCL: 50 µg/L)
• Turbidity: below 0.3 NTU in 95% of monthly measurements (EPA Surface Water Treatment Rule)
The GAC media will be selected based on pilot testing and manufacturer specifications to optimize adsorption capacity for the contaminants of concern in the Battle Mountain raw water supply. The multi-media filtration component will provide supplementary particulate and turbidity removal to ensure compliance with all applicable drinking water standards. The system design will include provisions for backwashing, media replacement, and spent media disposal in accordance with applicable waste management regulations.
Component 2 — Treatment Plant Upgrades
Component 2 encompasses the rehabilitation and expansion of the existing treatment building and the modernization of key treatment systems. This component includes the following elements:
(a) Chemical Feed Systems. Installation of new chemical feed systems for chlorination (sodium hypochlorite), pH adjustment (lime or caustic soda), and coagulation/flocculation (aluminum sulfate or polyaluminum chloride). The new chemical feed systems will replace aging equipment and will be designed with redundant feed pumps, chemical containment, and automated dosing controls.
(b) SCADA System Modernization. Replacement of the facility's outdated supervisory control and data acquisition ("SCADA") system with a modern, programmable logic controller-based SCADA platform. The new SCADA system will provide centralized monitoring and control of all treatment processes, automated alarm and notification capabilities, data logging and trending, and remote access for operational staff.
(c) Backup Generator Installation. Procurement and installation of a diesel-powered backup generator system of sufficient capacity to power all critical treatment operations during utility power outages. The generator system will include an automatic transfer switch, fuel storage with secondary containment, and a sound-attenuation enclosure. This element is critical to ensuring uninterrupted treatment operations during emergency conditions, including wildfire-related power shutoffs, which have become increasingly frequent in the region.
(d) Building Rehabilitation. Structural and architectural improvements to the existing treatment building, including HVAC upgrades, electrical panel replacement, lighting improvements, and necessary modifications to accommodate the new filtration system and chemical feed equipment.
Component 3 — Distribution System Improvements
Component 3 involves the replacement of approximately 3,200 linear feet of aging cast-iron distribution mains with modern PVC or ductile-iron piping in the most vulnerable sections of the Battle Mountain distribution network. The sections targeted for replacement have been identified based on a condition assessment conducted by the Battle Mountain water utility and Lander County, and represent the portions of the distribution system most susceptible to lead and copper leaching, pressure losses, and service disruptions due to pipe failures.
The pipe replacement work will be performed within existing public rights-of-way, and will include excavation, removal and proper disposal of existing cast-iron pipe, installation of new piping and appurtenances (valves, fittings, hydrants, and service connections), backfill, compaction, and surface restoration. All distribution system improvements will be designed and constructed in accordance with Nevada Administrative Code requirements for public water systems, including applicable provisions of NAC Chapter 445A.
Component 4 — Water Quality Monitoring Equipment
Component 4 involves the procurement and installation of continuous online water quality monitoring instrumentation at the treatment plant outfall and at three strategic locations within the distribution system. The monitoring instrumentation will include sensors and analyzers for the following parameters:
• Turbidity (nephelometric turbidimeters)
• pH (electrochemical pH sensors)
• Residual chlorine (amperometric or colorimetric analyzers)
• Conductivity (inductive or contacting conductivity sensors)
• Metals analyzers (online analyzers for arsenic and mercury at the treatment plant outfall)
The monitoring stations will be connected to the upgraded SCADA system and will transmit data in real time to the treatment plant control room. The system will include automated alarm and notification functions to alert operational staff of any excursions beyond established water quality thresholds. Data will be logged and archived electronically for a minimum retention period of five years, consistent with applicable regulatory requirements.
The three distribution-system monitoring points will be located at representative locations within the distribution network to provide spatial coverage and early detection of water quality changes between the treatment plant and the point of use. The specific monitoring locations will be determined during the engineering design phase in consultation with the Battle Mountain water utility and NV DEP.
Component 5 — Community Outreach and Education
Component 5 involves the development and delivery of a comprehensive public education program focused on drinking water quality, household water conservation, and lead and copper awareness. The program will be implemented over a three-year period, commencing during the construction phase and continuing for at least 12 months following the completion of construction activities. The community outreach and education program will include the following elements:
(a) Bilingual Educational Materials. Development and distribution of educational materials in both English and Spanish, including informational brochures, fact sheets, and frequently-asked-questions documents addressing drinking water quality, the Project's scope and benefits, household water conservation practices, and guidance on reducing lead and copper exposure from household plumbing.
(b) Community Workshops. Organization and facilitation of community workshops and public meetings at accessible locations within Battle Mountain (e.g., the Lander County Convention Center, Battle Mountain Civic Center, or local school facilities). A minimum of four community workshops will be conducted over the three-year program period.
(c) School Presentations. Development and delivery of age-appropriate educational presentations on water quality and conservation for students at Battle Mountain High School and Lander County School District elementary schools. Presentations will be developed in coordination with school administrators and will be aligned with Nevada science education standards where practicable.
(d) Digital Outreach. Creation of a project-specific webpage or digital information portal providing project updates, construction schedules, water quality data summaries, and educational resources. The digital platform will be maintained for the duration of the community outreach program.
2.3 Project Location
The Project is located in and around the Town of Battle Mountain, Lander County, Nevada. Battle Mountain is situated approximately 28 miles north of the Bonanza Creek Gold Mine site, along the Humboldt River corridor in north-central Nevada. The community is accessible via Interstate 80 and serves as the Lander County seat.
The treatment facility upgrades (Components 1, 2, and 4) will be performed at the existing municipal water treatment facility, which is located on municipal property within the town limits of Battle Mountain. The distribution system improvements (Component 3) will be performed within existing public rights-of-way in the Battle Mountain area. The community outreach and education activities (Component 5) will be conducted at various public venues within Battle Mountain and through digital platforms.
No work under this Project will be performed on private land without the landowner's consent or at any location outside of the Battle Mountain community and its municipal water system service area.
2.4 Beneficiaries
The Project will benefit the approximately 3,600 residents of Battle Mountain and surrounding areas served by the municipal water system. The beneficiary population includes households, businesses, schools, the community health center, and other public facilities that rely on the municipal water supply for potable water.
The Project is expected to provide particular benefit to low-income households and minority populations within the Battle Mountain community, consistent with EPA's environmental justice priorities and Executive Order 14,096 on Revitalizing Our Nation's Commitment to Environmental Justice for All. Demographic data from the U.S. Census Bureau indicates that the Battle Mountain area includes significant populations of Hispanic/Latino residents and households with incomes below the federal poverty level. These populations may face disproportionate health risks from inadequate water quality due to limited access to point-of-use water treatment alternatives and limited ability to purchase bottled water as a substitute supply.
The bilingual community outreach component (Component 5) is specifically designed to ensure that the Project's educational benefits are accessible to Spanish-speaking community members, who constitute a meaningful portion of the Battle Mountain population.
Additionally, the Project benefits the broader Lander County community by improving the resilience and reliability of the municipal water treatment infrastructure, which serves as a critical element of the region's public health and emergency preparedness capabilities.
III. PROJECT IMPLEMENTATION
3.1 Implementation Schedule
The following table sets forth the anticipated implementation schedule for the Project. All milestone dates are measured from the Effective Date of the consent decree. The target Effective Date is June 14, 2025, which is 30 calendar days after the expected date of entry of the consent decree by the Court on May 15, 2025.
The implementation schedule is subject to adjustment for force majeure events as defined in the consent decree, provided that Torchlight provides timely notice to EPA and DOJ of any such events and their anticipated impact on the schedule. Any requested schedule modifications that are not attributable to force majeure events will require prior written approval from EPA Region 9 and DOJ ENRD.
3.2 Project Management
Torchlight Mining Corp., acting through its U.S. subsidiary Torchlight Mining (U.S.) Inc., will serve as the responsible party for all Project funding and oversight obligations. Torchlight's day-to-day management of the Project will be led by Gareth Linford, Vice President of Environmental Health & Safety, Torchlight Mining (U.S.) Inc. Mr. Linford will serve as the primary point of contact for EPA, DOJ, and NV DEP with respect to Project implementation matters.
Torchlight has engaged the following consultants and professionals to support Project implementation:
Engineering and Project Management Consultant. Pinnacle Creek Environmental, LLC ("Pinnacle Creek"), a multi-disciplinary environmental engineering and consulting firm, will serve as Torchlight's project management consultant for engineering oversight, design review, and reporting. The engagement lead for Pinnacle Creek is Dr. Astrid Bergmann, P.E., Senior Principal. Pinnacle Creek's principal office is located at 320 Willowbrook Drive, Suite 100, Bozeman, Montana 59715. Pinnacle Creek will be responsible for coordinating with the engineering design contractor, overseeing construction activities, reviewing contractor submittals and pay applications, and preparing progress reports and the SEP Completion Report on Torchlight's behalf.
Nevada Local Counsel. sagebrush Law Group, PLLC ("Sagebrush"), will serve as Nevada local counsel for Torchlight in connection with the Project. The lead partner for this engagement is Denise Quartaro. Sagebrush's principal office is located at 3960 Howard Hughes Parkway, Suite 500, Las Vegas, Nevada 89169. Sagebrush will be responsible for permitting coordination, state regulatory interface with NV DEP, coordination with Lander County government, and review of the MOU with the Battle Mountain water utility.
Torchlight will retain a qualified engineering design and construction contractor through a competitive procurement process to perform the detailed design and construction work for Components 1 through 4. The selected contractor will be required to demonstrate relevant experience with municipal water treatment system design and construction, hold appropriate state and local contractor licenses, and maintain adequate insurance coverage. Contractor selection is expected to be completed during Months 1 through 3 of the implementation schedule.
3.3 Coordination with State and Local Authorities
Torchlight will coordinate closely with Nevada state and local authorities throughout the implementation of the Project. Specific coordination requirements include the following:
(a) Nevada Division of Environmental Protection. As a co-plaintiff in this enforcement action, NV DEP has a direct interest in the successful implementation of the Project. Torchlight will coordinate with NV DEP, through its Deputy Attorney General Ricardo Fuentes, regarding all aspects of the Project that require state regulatory review or approval, including drinking water system design standards, permitting requirements, and construction inspection.
(b) Lander County Government and Battle Mountain Water Utility. Torchlight will execute a memorandum of understanding with Lander County and/or the Battle Mountain water utility within the first three months following the Effective Date. The MOU will establish the roles and responsibilities of Torchlight, the County, and the water utility with respect to Project design, construction, operations and maintenance responsibilities following completion, ownership of installed improvements, and access to the treatment facility and distribution system for construction purposes.
(c) Permitting. All design and construction work will comply with the Nevada Administrative Code, applicable state drinking water standards (including NAC Chapter 445A and the requirements of the Nevada Bureau of Safe Drinking Water), and the requirements of the Safe Drinking Water Act. Torchlight will obtain all required state and local permits prior to commencement of construction activities, including, as applicable, construction permits, right-of-way encroachment permits, building permits, and any permits required under Nevada's environmental review process.
3.4 Role of Independent Monitor
The consent decree provides for the appointment of an independent environmental monitor to oversee compliance with the consent decree's terms, including the implementation of all three SEPs. The Court has designated Verdant Analytics, Inc. ("Verdant Analytics") as the independent environmental monitor for this matter. The engagement lead for Verdant Analytics is Dr. Kamal Osei, Senior Managing Director. Verdant Analytics' principal office is located at 1550 NW Couch Street, Suite 400, Portland, Oregon 97209.
Verdant Analytics will conduct periodic reviews of SEP progress as part of its quarterly compliance audits and will include SEP status updates in its annual public reports filed with the Court under the consent decree. The independent monitor's responsibilities with respect to the SEPs include, without limitation: reviewing progress reports and financial records; conducting periodic site inspections; verifying that Project expenditures are consistent with the approved budget; evaluating whether the Project scope and schedule are being maintained; and providing independent assessments of Project completion to assist EPA in making its certification determination.
The estimated total cost of the independent monitor engagement across all consent decree compliance activities is approximately $4.8 million over the anticipated five-year monitoring period, or approximately $960,000 per year. The portion of these costs attributable to monitoring the three SEPs is included within this overall budget and is not separately charged to the individual SEP budgets.
IV. BUDGET
4.1 Total Project Budget
The total budget for the Battle Mountain Community Drinking Water Improvement Project is $3,500,000. This amount represents the minimum financial commitment by Torchlight Mining Corp. for the Project, as required under the consent decree. The budget is structured to ensure full implementation of all five Project components, plus engineering and design, project management, and a contingency allowance for unforeseen construction conditions.
4.2 Budget Breakdown by Component
The following table presents the budget breakdown by component:
The budget estimates set forth above are based on preliminary engineering assessments, vendor quotations, and comparable project costs for similar municipal water treatment upgrades in the western United States. Final costs may vary from the estimates shown above based on competitive bid results, actual construction conditions, material price fluctuations, and other factors. Torchlight's obligation to complete the full scope of work described in this SEP Description is not limited by the estimated budget; cost overruns will be borne by Torchlight as described in Section 4.4 below.
4.3 Funding Mechanism
All Project costs will be funded directly by Torchlight Mining Corp. through its U.S. subsidiary, Torchlight Mining (U.S.) Inc. Torchlight may elect, at its sole discretion and subject to EPA approval, to disburse Project funds from either of the following sources:
(a) The Remediation Trust Fund established pursuant to the consent decree and held by Larchfield Trust Company, N.A. (Trust Agreement No. LTC-REM-2025-1177; Trust Officer: David Henshaw; principal office: 200 South Tryon Street, Suite 1100, Charlotte, North Carolina 28202); or
(b) TMC's general corporate funds.
If Torchlight elects to fund the Project from the Remediation Trust Fund, it shall provide written notice to EPA Region 9 and DOJ ENRD at least 30 calendar days prior to any disbursement request, and the disbursement shall be subject to the terms and conditions of the Trust Agreement and the consent decree provisions governing Trust Fund use.
The $3.5 million Project budget is part of the $12.0 million total SEP commitment under the consent decree. The three SEPs funded under the consent decree are:
• SEP No. 1: Flint Creek Watershed Restoration Project — $5,500,000
• SEP No. 2: Battle Mountain Community Drinking Water Improvement Project — $3,500,000
• SEP No. 3: Institute Community Air Quality Monitoring Network — $3,000,000
It is important to note that the SEP expenditures are entirely separate from, and in addition to, the following financial obligations of the Defendants under the consent decree:
• Total nominal remediation costs across all four sites: $343,500,000
• Total civil penalty: $31,500,000
• EPA past-costs reimbursement: $18,100,000
The total estimated settlement obligation under the consent decree is approximately $409.9 million in nominal terms, inclusive of all remediation costs, penalties, past-costs reimbursement, SEP expenditures, and independent monitor costs.
4.4 Budget Controls and Cost Overruns
The consent decree imposes the following budget controls and obligations with respect to Project costs:
(a) Cost Overruns. Torchlight Mining Corp. shall bear any and all cost overruns beyond the $3,500,000 budget. The consent decree requires that the full scope of work described in this SEP Description be completed regardless of actual costs. In the event that actual costs exceed the budgeted amount, Torchlight shall be responsible for funding the excess from its own resources without any reduction in its other obligations under the consent decree.
(b) Cost Underruns. If actual Project costs are less than $3,500,000, the difference shall not reduce Torchlight's overall SEP obligation under the consent decree. In such event, Torchlight shall, within 60 days of the final accounting, propose supplementary project elements for EPA approval to expend the remaining funds on activities that are consistent with the purpose and nexus of this SEP. Any proposed supplementary elements shall be subject to the same review and approval process as the original Project scope.
(c) Audit Rights. All Project expenditures are subject to audit by the independent monitor (Verdant Analytics, Inc.) and by EPA. Torchlight shall maintain detailed financial records of all Project expenditures, including contracts, purchase orders, invoices, payment records, and supporting documentation, and shall make such records available to the independent monitor and EPA upon request. Torchlight shall also maintain records sufficient to demonstrate that all expenditures were reasonable, necessary, and directly related to the implementation of the Project scope described herein.
V. REPORTING AND CERTIFICATION REQUIREMENTS
5.1 Progress Reports
Torchlight Mining Corp. shall submit semi-annual progress reports to EPA Region 9 and to DOJ ENRD throughout the implementation of the Project. Progress reports shall be submitted to:
• EPA Region 9: Attention Jennifer Whitfield, EPA Project Coordinator for the Bonanza Creek Gold Mine
• DOJ ENRD: Attention Philip Orenstein, Lead Trial Attorney
Each progress report shall include, at a minimum, the following information:
(a) A narrative summary of all activities completed during the reporting period, organized by Project component;
(b) A financial summary of expenditures to date compared to the approved budget, including a breakdown by component and a forecast of anticipated expenditures for the next reporting period;
(c) An updated schedule showing the status of all milestones, identification of any schedule deviations, and a description of corrective measures being taken to address any delays;
(d) Photographic documentation of construction activities and completed work elements;
(e) A description of upcoming activities planned for the next reporting period;
(f) A summary of any coordination with NV DEP, Lander County, the Battle Mountain water utility, or other state and local authorities during the reporting period;
(g) A summary of any community outreach activities conducted during the reporting period (once Component 5 activities have commenced); and
(h) Identification of any issues, challenges, or risks that may affect the Project's scope, schedule, or budget, together with proposed mitigation measures.
The first semi-annual progress report shall be due six months after the Effective Date of the consent decree (target: approximately December 14, 2025). Subsequent reports shall be due every six months thereafter until submission of the SEP Completion Report. Torchlight shall submit all progress reports in both hard copy and electronic format.
5.2 SEP Completion Report
Torchlight Mining Corp. shall prepare and submit a final SEP Completion Report within 90 calendar days of the date of final completion of all Project activities (target: approximately September 14, 2028, based on a final completion date of June 14, 2028). The SEP Completion Report shall be submitted to EPA Region 9 and DOJ ENRD, with copies to NV DEP, the independent monitor (Verdant Analytics, Inc.), and the Court.
The SEP Completion Report shall include, at a minimum, the following:
(a) A comprehensive description of all work performed under each of the five Project components, including any deviations from the scope described in this SEP Description and an explanation of the reasons for any such deviations;
(b) Final as-built drawings for all constructed improvements (Components 1 through 4);
(c) Water quality data demonstrating the improved treatment performance of the upgraded facility, including pre-construction baseline data and post-construction performance data for key parameters (turbidity, arsenic, mercury, selenium, residual chlorine, and pH);
(d) A summary of all community outreach and education activities conducted under Component 5, including the number and dates of community workshops, school presentations, and other events, the number of participants, and copies of all educational materials distributed;
(e) A final financial accounting of total Project expenditures, with supporting documentation including copies of all major contracts, purchase orders, invoices, and payment records;
(f) A certification that the Project was implemented in accordance with the requirements of the consent decree and this SEP Description; and
(g) A certification signed by an authorized officer of Torchlight Mining Corp. attesting to the accuracy and completeness of the information contained in the Completion Report.
5.3 Certification of Completion
Upon submission of the SEP Completion Report, Torchlight Mining Corp. shall formally request that EPA issue a written certification that the Project has been satisfactorily completed in accordance with the terms of the consent decree and this SEP Description. The certification request shall be addressed to EPA Region 9, with copies to DOJ ENRD and NV DEP.
EPA, in consultation with NV DEP and the independent monitor (Verdant Analytics, Inc.), shall review the SEP Completion Report and all supporting documentation and shall issue a written determination within 90 calendar days of receipt of the Completion Report. EPA's determination shall either: (a) certify that the Project has been satisfactorily completed; (b) identify specific deficiencies that must be corrected before certification can be issued, in which case Torchlight shall have a reasonable period (not to exceed 120 days) to cure the identified deficiencies and resubmit the Completion Report; or (c) determine that the Project has not been satisfactorily completed, in which case the stipulated penalty provisions of the consent decree shall apply.
Failure to complete the Project in accordance with the consent decree schedule and scope may result in the imposition of stipulated penalties as follows:
• $1,500 per day per violation for the first 30 days of non-compliance;
• $3,000 per day per violation for days 31 through 60 of non-compliance; and
• $5,500 per day per violation for each day of non-compliance thereafter.
Stipulated penalties shall begin to accrue on the date of the missed milestone or deadline and shall continue to accrue until the violation is cured. Payment of stipulated penalties shall not relieve Torchlight of its obligation to complete the Project in accordance with the consent decree.
5.4 Recordkeeping
Torchlight Mining Corp. shall maintain all Project records for a minimum period of 10 years following the date of EPA's certification of Project completion. Project records subject to this retention requirement include, without limitation: all contracts and subcontracts; purchase orders; invoices and payment records; engineering design documents, plans, and specifications; as-built drawings; permits and permit applications; inspection reports and field notes; sampling data and analytical results; photographic and video documentation; correspondence with EPA, DOJ, NV DEP, Lander County, the Battle Mountain water utility, the independent monitor, contractors, and consultants; community outreach materials; progress reports; and the SEP Completion Report.
All Project records shall be maintained at Torchlight's principal U.S. office or at a secure off-site records storage facility designated by Torchlight, and shall be made available for inspection and copying by EPA, DOJ, NV DEP, and the independent monitor upon reasonable request. In the event that Torchlight proposes to destroy any Project records after the expiration of the 10-year retention period, it shall provide at least 90 days' prior written notice to EPA Region 9 and shall afford EPA the opportunity to request copies of any records proposed for destruction.
VI. ENVIRONMENTAL AND PUBLIC HEALTH BENEFITS
6.1 Nexus to Bonanza Creek Violations
The Project addresses drinking water quality concerns in the community closest to the Bonanza Creek Gold Mine, where multiple unpermitted releases of cyanide-bearing and mercury-laden process solutions occurred between 2022 and 2023. As described in Section 1.3 above, the Bonanza Creek facility is located approximately 28 miles south of Battle Mountain, and the documented discharges involved the release of process solution to an ephemeral tributary of the Reese River, which flows northward through the region.
Although the municipal water supply for Battle Mountain has not been directly contaminated by the Bonanza Creek releases to date, the community bears a disproportionate environmental burden from its proximity to active mining operations. The presence of the Bonanza Creek facility — with its documented history of liner failures, unpermitted discharges, and avian mortalities — creates ongoing public concern regarding the potential for future contamination of the community's water sources. The Humboldt River basin and local groundwater aquifers that supply the Battle Mountain water system are part of the same regional hydrologic system that could be impacted by current or future releases from mining operations in the area.
The Project provides tangible, measurable public health improvements to a community that is directly impacted by the presence of the Bonanza Creek facility and the environmental legacy of mining operations in Lander County. By upgrading the community's water treatment infrastructure to modern standards, the Project ensures that Battle Mountain residents will have access to drinking water that meets or exceeds all applicable federal and state water quality standards, including enhanced protection against the specific contaminants — mercury, arsenic, and selenium — that are associated with the Bonanza Creek violations.
6.2 Quantifiable Benefits
The Project will deliver the following quantifiable environmental and public health benefits:
(a) Enhanced Metals Removal. The advanced GAC and multi-media filtration system (Component 1) will achieve reliable removal of mercury, arsenic, and selenium from the treated water supply to concentrations below SDWA MCLs. This represents a significant upgrade from the existing sand-filtration system, which was not designed to provide targeted metals removal.
(b) Improved System Reliability and Emergency Preparedness. The installation of a backup generator system and SCADA modernization (Component 2) will ensure uninterrupted treatment operations during utility power outages and will provide real-time monitoring and control capabilities that are critical to maintaining consistent water quality under all operating conditions.
(c) Reduced Lead and Copper Exposure. The replacement of approximately 3,200 linear feet of aging cast-iron distribution mains (Component 3) will reduce the potential for lead and copper leaching from corroded piping into the delivered water supply, thereby reducing residents' exposure to these contaminants at the point of use.
(d) Continuous Real-Time Water Quality Monitoring. The installation of continuous online water quality monitoring instrumentation (Component 4) at the treatment plant outfall and at three distribution-system monitoring points will provide early warning of any treatment excursions or water quality anomalies, enabling rapid corrective action before affected water reaches consumers.
(e) Increased Community Awareness. The three-year community outreach and education program (Component 5) will increase public awareness of drinking water quality issues, household water conservation practices, and measures that residents can take to reduce their own exposure to lead and copper from household plumbing. The bilingual nature of the program ensures that these benefits are accessible to the entire community, including Spanish-speaking residents.
6.3 Environmental Justice Considerations
The Project has been designed with explicit attention to environmental justice principles, consistent with EPA's environmental justice policies, the SEP Policy, and Executive Order 14,096. The following environmental justice considerations have informed the Project's design:
(a) Demographics. The Battle Mountain community includes significant populations of low-income households and minority residents, particularly Hispanic/Latino families. According to U.S. Census Bureau data, Lander County's median household income is substantially below the national median, and the poverty rate exceeds the national average. These populations face disproportionate environmental and health risks from inadequate water treatment infrastructure because they are less likely to have access to point-of-use filtration systems or the financial resources to purchase bottled water as an alternative supply.
(b) Disproportionate Environmental Burden. The Battle Mountain community bears a disproportionate environmental burden from the concentration of mining operations in Lander County, including the Bonanza Creek Gold Mine. The Project helps to offset this burden by providing the community with modern water treatment infrastructure that is commensurate with the environmental challenges of the region.
(c) Bilingual Outreach. The community outreach and education component (Component 5) has been specifically designed to include bilingual (English/Spanish) educational materials, community workshops, and school presentations, ensuring that Spanish-speaking community members have full and equitable access to the information and resources provided through the Project.
(d) Community Input. Torchlight will work with Lander County, the Battle Mountain water utility, and community organizations to solicit and incorporate community input into the design and implementation of the Project, particularly with respect to the distribution system improvement priorities (Component 3) and the community outreach program (Component 5).
VII. LEGAL AND REGULATORY FRAMEWORK
7.1 Consent Decree Authority
The Project is authorized under the consent decree entered in United States of America and State of Montana v. Torchlight Mining Corp., et al., Civil Action No. 9:24-cv-00087-DWM, in the United States District Court for the District of Montana, Missoula Division. The consent decree requires the Defendants to implement three Supplemental Environmental Projects with a combined total value of $12.0 million as part of the overall settlement.
The consent decree's SEP provisions are set forth in Section XII of the consent decree and in the appendices thereto. This SEP Description constitutes Appendix D-2 to the consent decree and, upon entry of the consent decree by the Court, will become a binding obligation of the Defendants.
The consent decree's terms are subject to approval by the Court. The target date for lodging of the consent decree is May 15, 2025. Following lodging, the consent decree will be subject to a public comment period of not less than 30 days, as required by 28 C.F.R. § 50.7. Upon resolution of any public comments and approval by the Court, the consent decree will be entered as a final judgment. The Effective Date of the consent decree is defined as 30 days after the date of entry, yielding a target Effective Date of June 14, 2025.
The grand total estimated obligation of the Defendants under the consent decree is approximately $409.9 million in nominal terms, encompassing total nominal remediation costs ($343.5 million), the civil penalty ($31.5 million), EPA past-costs reimbursement ($18.1 million), total SEP expenditures ($12.0 million), and independent monitor costs ($4.8 million).
7.2 EPA SEP Policy Compliance
The Project satisfies all requirements of EPA's Supplemental Environmental Project Policy (2015), including the following key criteria:
(a) Nexus Requirement. The SEP Policy requires that a Supplemental Environmental Project must have a sufficient nexus to the underlying violations being resolved. The Project satisfies this requirement because it is designed to reduce or prevent the same types of pollution, and to address the same environmental and public health concerns, as the violations at the Bonanza Creek Gold Mine. Specifically, the Project addresses water quality concerns relating to mercury, arsenic, and other metals — the same category of contaminants that were the subject of the Bonanza Creek CWA violations — in the community most proximate to the Bonanza Creek facility.
(b) Not Otherwise Required. The SEP Policy requires that a Supplemental Environmental Project must involve activities that the defendant is not otherwise legally required to perform. The Project satisfies this requirement because Torchlight Mining Corp. and its subsidiaries have no pre-existing legal obligation to fund, construct, or operate improvements to the Battle Mountain municipal water system. The Project goes beyond any obligations imposed by the consent decree's remedial action provisions for the Bonanza Creek facility.
(c) No Penalty Offset. The SEP Policy provides that no portion of the cost of a Supplemental Environmental Project may be used to offset the civil penalty or remediation obligations imposed under the consent decree. The $3.5 million Project budget is entirely separate from, and in addition to, the $31.5 million civil penalty, the $343.5 million in remediation costs, and the $18.1 million in EPA past-costs reimbursement required under the consent decree.
7.3 Tax Treatment
Torchlight Mining Corp. acknowledges that expenditures for Supplemental Environmental Projects may not be claimed as a federal income tax deduction to the extent prohibited by applicable tax law and the EPA SEP Policy. The SEP Policy provides that a defendant may not claim a federal tax deduction for the portion of a SEP payment that the defendant treats as satisfying its penalty obligation or for which a tax deduction is otherwise prohibited by law.
Torchlight will consult with its external auditor, Ridgeline Accounting Partners LLP (engagement partner: Frances Whitmore, CPA, CA), regarding the proper accounting treatment of the Project expenditures under applicable U.S. Generally Accepted Accounting Principles and applicable tax law. Torchlight will also ensure that its tax reporting with respect to the Project expenditures is consistent with the terms of the consent decree and the SEP Policy.
Nothing in this SEP Description shall be construed as tax advice to Torchlight or any other party, and all questions regarding the tax treatment of SEP expenditures shall be resolved by Torchlight and its advisors in accordance with applicable law.
VIII. CONTACT INFORMATION
8.1 Torchlight Mining Corp.
General Counsel: Miriam Soo-Hwan Park Torchlight Mining Corp. 750 Copper Ridge Boulevard, Suite 200 Helena, Montana 59601
Vice President, Environmental Health & Safety: Gareth Linford Torchlight Mining Corp. 750 Copper Ridge Boulevard, Suite 200 Helena, Montana 59601
Chief Financial Officer: Carolyn Bracebridge Torchlight Mining Corp. 1800 Bayfield Tower, 401 Bay Street Toronto, Ontario M5H 2Y4, Canada
8.2 Outside Counsel