|
FACE the Challenges of Preparing Cost Estimates
by Travis Jokerst
Most of you are aware that all surface mining operations in California are required to have financial assurances in place to ensure reclamation is performed in accordance with the approved reclamation plan. If the operator defaults on the reclamation obligation the financial assurance will provide the necessary funding to meet the reclamation plan requirements (SMARA PRC § 2773.1). In order to determine the appropriate financial assurance amount, a Financial Assurance Cost Estimate (FACE) must be prepared. The FACE is adjusted annually to account for new lands disturbed, inflation, and any reclamation that has occurred. In most cases, the financial assurance is a routine annual compliance matter. However, in some cases, the financial assurance requirements can be so great that most operators will not be able to satisfy the cost of maintenance (i.e., bond costs). This condition is encountered where mining results in the creation of an open pit. The reclamation objectives are to backfill the pit with inert fill to establish a beneficial land use in the reclaimed condition.
Backfilling Costs
There are a number of mining operations throughout the state that require backfilling as a form of reclamation. It makes sense; you dig a hole in the ground and then backfill the hole to form a level pad that can be used for a beneficial purpose in the future. Or, backfilling might be required to fill existing ponds or to achieve specific grades. If sufficient fill material is not available on-site, it may need to come from one of the operator's other sites, or maybe the site is used as an Inert Debris Engineered Fill Operation (IDEFO) and tipping fees are accepted. Regardless of how the off-site fill is obtained, Lead Agencies and the Office of Mine Reclamation (OMR) will not accept the FACE unless it includes the cost for the fill itself. This must also include the costs for labor and equipment that would be necessary to transport the fill.
We struggle with this challenge on many of the cost estimates that we prepare. Depending on the average cost of fill in the site's vicinity, total fill costs can and do add thousands or even millions of dollars to the FACE. This seems to be a ridiculous concept when you think about all of the landfill sites throughout the state that make a profit from accepting fill material. Would a lead agency really spend money to buy fill material if they were left with the task of reclaiming a site? Doubtful.
Some public agencies, such as the City of Irwindale, have a unique program that allows the operators within their jurisdiction to enter into a SMARA Transfer Agreement with the City's Reclamation Authority. The Reclamation Authority, a Joint Powers Authority (JPA), is intended to be consistent with the grant authority set forth in PRC § 3803 and 3806 that allow governmental agencies to pledge revenues or budget set aside as financial assurance mechanisms for mining reclamation. The Transfer Agreement establishes a reclamation fund that would take into consideration revenues that are collected from landfilling. Therefore, the individual operators are not required to bond for the cost of fill material; however, the Lead Agency is legally responsible for reclaiming any of the operations that are part of the Transfer Agreement, if the operator fails to do so.
Although there are no specific regulations that require a private operator to bond for the cost of fill materials, Lead Agencies and OMR will not accept the FACE unless fill costs are included. We have already suggested to OMR that regulatory language be adopted to provide relief from this requirement. Without specific regulatory requirements our industry will continue to be subject to a variety of interpretations, therefore we suggest that a legislative solution be considered by our industry.
If you have questions related to this subject, contact Travis Jokerst at 619-284-8515.
| 
