Ridenbaugh Press/Water Rights

Energy Fuels Inc. announced on September 26 that it has reached a key settlement with two of the Objectors to the Company’s water rights’ application for the proposed Pinon Ridge Uranium and Vanadium Mill.

On Wednesday September 21, a settlement agreement was filed in State of Colorado District Court, Water Division 4, whereby Energy Fuels settled with Sheep Mountain Alliance and Living Rivers, two regional conservation groups who intervened in the water application as Objectors. In that settlement agreement SMA and LR agreed to withdraw their opposition to the Company’s water rights application in exchange for Energy Fuels implementing certain environmental and water supply protections. The Water Judge quickly approved the settlement agreement as an Order of the Court.

This settlement will lead to the Company obtaining a Final Decreed Conditional Water Right that will provide the water needed to construct and operate the Pinon Ridge Mill. A similar settlement with the Bureau of Land Management has already been approved by the Court. The only other remaining Objector, the Colorado Water Conservation Board, has given preliminary approval for a settlement pending the purchase of upstream water, which is readily available from the watershed.

“This water settlement is a major milestone for Energy Fuels and the Pinon Ridge Mill,” said Steve Antony, President and CEO of Energy Fuels. “In the Western United States water is scarce and highly significant for all projects. By settling with all of the Objectors, we will secure the water needed for the Mill and add flows to the Dolores River for enhanced wildlife and habitat protection.”

Mr. Antony continued, “We were confident of prevailing in Water Court, but we believe this settlement is in the best interests of Energy Fuels. Perhaps more importantly, it shows that Energy Fuels and Sheep Mountain Alliance can reach mutually acceptable agreements that protect the environment.”

Energy Fuels Inc. is a uranium and vanadium mineral development company. The Company received a Final Radioactive Materials License from the State of Colorado for the proposed Pinon Ridge Uranium and Vanadium Mill in March 2011. The Mill will be the first uranium mill constructed in the United States in over 30 years.

A water court in Colorado declared invalid about 140,000 acre feet of conditional water rights White River Basin which had been assigned for use by oil shale mining companies.

The implications may be narrow, however, because the rights were eliminated on what amounted to a technicality: A declaration that they had been abandoned because a governing entity planning to use them lacked a board quorum during an extended period.

A Division 6 Water Court decision out of Steamboat Springs today, Writing at Steamboat Springs on July 1, Judge Michael A. O’Hara, III handed down a summary judgment in favor of critics of applications from the Yellow Jacket Water Conservancy District. The rights, located generally for projects east of Meeker, go back more than 30 years and originally were issued mainly for more traditional uses such as agriculture and city uses; most now were issued for oil shale and coal.

Water sources involved included the 80,000-acre-foot Sawmill Mountain Reservoir, 28,000-acre-foot Ripple Creek Reservoir, 33,541-acre-foot Lost Park Reservoir, along with water sources associated with them.

The Philadelphia Inquirer has weighed in about the growing battle over drilling water rights and the practice of fracking.

The paper said in a May 19 editorial, “A gold-rush approach to high-pressure drilling for natural gas has no place in Pennsylvania. Especially not in the watershed that quenches the thirst of 15 million people in the Philadelphia region and beyond.

“So, it’s troubling that, despite their own moratorium on drilling in the Delaware River basin, interstate regulators are moving ahead on preliminary requests by some drillers to pull millions of gallons of water from rivers to the north.”

The paper also noted that, in the development of fracking operations, ” it would make more sense for the commission to focus first on determining whether gas drilling can be done safely in the Delaware basin, if at all. The arrival of this industry with its potential boost to the state’s economy has been marred too often by a drill-now, regulate-later mentality. It wasn’t until several years into the gas boom that Harrisburg boosted drilling fees and strengthened safeguards.

“This week, the state’s largest operator – Chesapeake Energy Corp. – agreed to a record $1.1 million fine for contaminating private water supplies in Bradford County, and for a tank fire at a well site in Washington County.”

Los Andes Copper Ltd. said in February that it has made the final payment under the agreement to purchase consumptive water rights for 250 litres per second. These water rights are now held by the company free and clear of any encumbrance.

The company has made the final option payment in respect of certain mineral claims in addition to the core San Jose claims, providing the company with 100% ownership of all mineral claims surrounding the core of the Vizcachitas project. The consolidation of the San Jose claims, announced by press release on December 21, results in the entire resource comprising the Vizcachitas property being under unified ownership for the first time in decades, and allows the company to take the steps necessary to advance the project to development.

Management is currently finalizing the details of a work program that will include additional drilling in the core San Jose claims, completion of a scoping study and work required for the start of the pre-feasibility stage in respect of Vizcachitas.

Midway Gold Corporation reported in January that it has executed a lease agreement for water rights needed to develop its Pan project in White Pine County, Nevada. It is anticipated that the acquisition of these water rights will advance permitting efforts and also help fulfill requirements for the Pan project Feasibility Study, which is expected to be completed in the first half of 2011.

The water lease provides for a 10 year primary term, extendable by 15 years, and annual payments at a rate of the water used. Midway estimates, that at anticipated production levels, the cost of water under the lease will be approximately US$1.00 per ounce of gold produced. Midway can also use water for exploration and other project related purposes prior to commencing production.

“We are excited to have negotiated a beneficial agreement for water rights to develop Pan,” said Ken Brunk, President and COO of Midway. “This lease provides us with the certainty needed in the engineering and design phase and reinforces our plan to construct Pan as a low cost gold producer in Nevada.”

In 2010, Midway announced the results of a Preliminary Economic Assessment (“PEA”) which demonstrates robust economics and technically favorable attributes of the Pan project. (See press release dated July 20, 2010 and the subsequent NI 43-101 Technical Report filed on SEDAR July 20, 2010 for further details.) Highlights from the PEA include:

Mine life of 7.5 years based upon 327,000 ounces of gold produced for sale.

A new report released on December 9 in Edmonton, Alberta, said that contaminants and low water levels in the Athabasca River system are impacting treaty rights.

The peer reviewed study was conducted with the Athabasca Chipewyan First Nation and the Mikisew Cree First Nation. It examined traditional land and water use, and the impact of contaminants and low water levels in the lower Athabasca River system.

Chief Roxanne Marcel of the Mikisew Cree First Nation said “This study confirms what our elders and Chiefs have been telling government for years – that our treaty rights are being impacted by the quality and quantity of the water. When water levels are down, we can no longer access our Traditional Lands by boat, which limits our fishing, trapping and hunting. Our members have been stranded. We no longer drink the water. We see our rights along with our River deteriorating before
us.”

Treaty 8 was signed on July 13, 1899, protecting hunting, fishing and trapping rights. These rights are guaranteed by Canada’s Constitution, and affirmed by the United Nations Declaration on the Rights of Indigenous People.

Chief Allan Adam of the Athabasca Chipewyan First Nation said “This study is the kind of research we have repeatedly asked the government to do, and is the type of information needed to properly assess the impacts of development on Treaty Rights. It provides an opportunity for meaningful dialogue between our First Nations and the Governments of Alberta and Canada. If the Governments are to fulfill their Treaty obligations with us, the information and recommendations in this study must be considered in plans for water withdrawals from the Athabasca River.”

Dr. David Schindler, water scientist and a peer reviewer of the study said that “This is an important report. The way in which the treaty was obtained and is now being ignored by our political leaders must rank as one of the darkest chapters in Canadian History.”

In publishing this report, the Mikisew Cree First Nation and Athabasca Chipewyan First Nation are also issuing an invitation to the Premier and federal and provincial Ministers to deal seriously with water quality and quantity issues downstream of the tar sands, something that even the federal Auditors General says they aren’t doing. The Chiefs said “We are inviting them to visit Fort Chipewyan early in 2011, to hear directly from our communities, to work with us to deal with the quality and quantity of water in the Athabasca River, and to address impacts to Treaty 8.”

The report maps how Treaty rights have been adversely affected by low flow, and by fear of contaminants in the river. It provides recommendations, and suggests rights-based thresholds to guide tar sands-related water withdrawals. Dr. Craig Candler, principal author and president of Firelight Research Group, says “This study is a great example of First Nations working together to commission quality community-based research. The results and the recommendations are clear. The communities have been saying these things for years. This report just brings what the community already knows together with credible social science.”

Wyoming like other states is facing tough budget times, but departing Governor Dave Freudenthal is advising the legislature to add abut $310,000 to the state water rights budget because ongoing and new mining activity is making more state oversight of water necessary.

The mining, of natural gas, oil and coal, is concentrated in the southeastern parts of the state. The mines use large volumes of water, and increasingly local long-time water right holders have been selling rights to them.

The Cheyenne Wyoming Tribune-Eagle reported on December 5, “The potential boom also threatens to change water management in southeast Wyoming as farmers and ranchers sell their water rights and developers apply for temporary water use agreements, said Harry LaBonde, deputy state engineer. Development in the area also is likely to include hydraulic fracturing, which pumps millions of gallons of water and chemicals underground to drill a well and maximize its output. Each site requires 4 million to 5million gallons of water.”

Concerns about use of water for mining have spread to some seemingly unlikely places.

Such as Carollton, Ohio, where a group of residents said they plan to meet on December 4 to discuss their issues with the use of water by a proposed (by the Rosebud Mining Company) mine in the area.

Rosebud, based at Cadiz, Ohio, describes itself: “Since 1979, Rosebud Mining Company has actively produced high quality bituminous coal from mines located in Western Pennsylvania and Ohio. The company now operates eighteen deep mines, six surface mines, and seven preparation plants in Armstrong, Beaver, Cambria, Clearfield, Elk, and Indiana counties in Pennsylvania along with Carroll, Columbiana, Jefferson, Stark, and Tuscarawas counties in Ohio. Currently, Rosebud Mining Company is the third largest underground coal producer in Pennsylvania, providing steam and metallurgical coals to domestic & international customers.”

Carroll County neighbors, organized as the Carroll Concerned Citizens, said the state Department of Natural Resources has not much responded to their concerns, and “without water protections afforded by the Ohio Constitution.”

The mining company General Moly said on August 20 that Eureka Moly LLC, the Company’s 80% owned subsidiary, entered into an agreement with the Eureka Producers’ Cooperative whereby Eureka Moly will fund a Sustainability Trust in exchange for the cooperation of the EPC with respect to Eureka Moly’s water rights and permitting of the Mt. Hope project.

Based on the agreement, the EPC will dismiss its judicial appeal and withdraw its protests to Eureka Moly’s water applications and will not file any further protests to any change applications Eureka Moly files prior to production from the Mt. Hope project. Additionally, the EPC has agreed not to oppose, delay, or protest any of Eureka Moly’s mining and milling plans set forth in the Plan of Operations filed with the Bureau of Land Management (BLM), including efforts to obtain permits for the Mt Hope project from federal, state and local authorities and agencies. The EPC will support Eureka Moly in its efforts to cause other Protestants or Appellants to end their protests or appeals to any permits or approvals required for the Mt. Hope project.

Bruce D. Hansen, Chief Executive Officer of General Moly Inc., said, “I am pleased that we could reach this significant milestone that creates a Sustainability Trust for the farming community and ends the EPC’s opposition to the Mt. Hope project. This Trust will, over time, materially reduce water consumption and help sustain the Diamond Valley aquifer. The Mt. Hope mine will be a neighbor for over 40 years in this community, and it is extremely important that we support the sustainability of the agricultural business community. We want farming in the area to survive and thrive for decades to come.”

Jim Gallagher, a spokesman for the EPC said, “We appreciate the efforts that Eureka Moly has put forth in communicating with the EPC and understanding our concerns. The Sustainability Trust will benefit the agricultural industry and the community of Eureka. We are eager to get the Mt. Hope Mine into production.”

The Sustainability Trust will be tasked with developing and implementing programs that will serve to enhance the sustainability and well-being of the agricultural economy in the Diamond Valley Hydrographic Basin through reduced water consumption, which may include the Trust purchasing and relinquishing water rights in Diamond Valley to help bring the Diamond Valley basin into a more sustainable water balance. The Trust’s activities will be governed by a five member Board including one Eureka Moly representative.

A water right approval for General Moly Inc. mining operations in Eureka County was bounced back to state regulators who were told to do a more precise job this time of filling in objectors on the actual water conditions in the area.

General Moly, which is based in Lakewood, Colorado, was seeking 11,300 acre-feet per year for the Mount Hood molybdenum mine. The Nevada State engineer’s office had approved the request. The court said however, that objectors were not given the most recent available water modeling information, and should be before a final decision is made.

The company’s statement:

The Court’s decision remands the water rights applications back to the State Engineer to reconsider in a new hearing, a date for which has not been set.

The Court ruled that the Petitioners’ (Eureka County and certain farmers in the Diamond Valley) due process rights to a full and fair hearing were violated when the State Engineer considered and relied upon an updated version of the Company’s hydrology model that had not been presented to the Petitioners.

Bruce D. Hansen, Chief Executive Officer, said, “this procedural flaw is disappointing given the strong legal and technical findings by the State Engineer to determine that the Company’s water applications should be granted for the Mt. Hope project. The updated model referenced in the State Engineer’s decision had substantially the same conclusions as the model the petitioners had reviewed. With our final hydrology models being completed this week, all parties involved will now be reviewing a single, final model, so this procedural issue can be avoided moving forward.”

The Company anticipates the State Engineer will promptly schedule a new hearing, again grant the Company’s water rights applications, and does not believe the new hearing will impact the Mt. Hope construction or production time lines. The Company continues to believe it has every right to be granted access to water for the Mt. Hope project. The District Court’s decision is separate from and does not impact the Federal permitting process and the work associated with the Environmental Impact Statement.

Tim Arnold, Mt. Hope General Manager, said, “We are clearly disappointed that the State Engineer’s original ruling was not upheld. We will continue to work with the Commissioners of Eureka County and the farmers in Diamond Valley to find a solution to their opposition to our water applications. Our scientific studies continue to indicate that our water pumping in Kobeh Valley, 15 miles to the west of Diamond Valley, will have virtually no impact to their water table and we will continue to engage and educate all stakeholders on that issue. Additionally, we will continue to develop a comprehensive long-term monitoring and mitigation plan.