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WISCONSIN LEGISLATIVE COUNCIL

Terry C. Anderson, Director Laura D. Rose, Deputy Director

TO: FROM: RE:

SENATOR TIMOTHY F. CULLEN Anna Henning, Staff Attorney, and Larry Konopacki, Senior Staff Attorney LRB-0821/2, Relating to the Regulation of Metallic Mining and an Occupation Tax on Iron Mining January 22, 2013

DATE:

This memorandum describes LRB-0821/2 (“the bill”), relating to the regulation of metallic mining and an occupation tax on iron mining. The bill modifies procedures for processing metallic mining permits. Key provisions create an overall timeline for permitting decisions and an expedited permitting process for prospecting involving the extraction of less than 10,000 tons of material. With respect to ferrous (i.e., iron) mining, the bill replaces the current net proceeds tax structure with a tax based on the amount of ore extracted.

CHANGES TO THE METALLIC MINING PERMITTING PROCESS
Under Wisconsin law, a mining permit is required before a person may extract metallic minerals for commercial purposes. The Department of Natural Resources (DNR) may issue a metallic mining permit following a multi-stage process involving public hearings, preparation and public review of an environmental impact statement, and the processing of various state and federal permits and approvals relating to environmental and natural resources impacts resulting from mining and activities secondary to mining. Timeline Under current law, the process to obtain a mining or prospecting permit lasts at least 2-1/2 years, and may take longer if a project is complex or generates significant public input. Several deadlines limit the time period within which DNR must act. However, several stages in the process–most notably the time periods during which draft and final environmental impact statements are prepared–are not subject to a statutory timeline. After an applicant submits an application for a mining permit, the DNR prepares a draft environmental impact statement. The DNR must hold an informational meeting regarding a draft environmental impact statement no sooner than 30 days and no later than 60 days after the document is released. The DNR then prepares the final environmental impact statement. After the final
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-2environmental impact statement is released, the DNR must hold a “master hearing” 1 no sooner than 120 days and no later than 180 days after it releases the final environmental impact statement. The DNR must approve or deny a mining permit within 90 days of the completion of the record from the master hearing. Under the bill, the DNR generally must issue or deny a mining permit and related approvals no more than 730 days after the day on which the application for the permit is complete, unless an extension to that timeline is approved. Informational hearings, described below, preparation of an environmental impact statement, and a contested case hearing must occur within the 730-day review period. The bill generally requires the DNR to prepare a final environmental impact statement, hold a public informational hearing, and provide notice of the opportunity for a contested case hearing within 520 days of the date that the application for a mining permit is complete. That 520-day period may be extended for up to a total of 180 days for one or more of the following reasons:    The DNR needs additional time to ensure collaboration with any federal regulatory agency with responsibilities related to the prospecting or mining operation. The DNR needs additional time to evaluate information that becomes available after the applicant files the application. The applicant makes changes to its proposal for the operation.

The bill also allows an applicant to extend the period as often and for any length of time that the applicant determines to be necessary, and allows the DNR and an applicant to negotiate an agreement specifying an alternative timeline. After the DNR provides notice of the opportunity for a contested case hearing, the bill provides for a 160-day period in which the contested case hearing must be completed and a 50-day period in which the DNR must render a final permitting decision. Together, the deadlines generally require a final permitting decision no later than 730 days following the submission of a complete application for a mining permit, plus any extensions granted under the provision described above. Notice of Intent Under current law and the bill, the mining permit application process begins with the submission of a “notice of intent” to submit the permit application. The notice of intent is an indication that the potential applicant is interested in developing a mine and will be collecting data to support an application. The notice of intent generally must be submitted prior to collecting data. Under current law, the notice need not be submitted within any particular time of the submission of the application; however, because it generally must be submitted before any data is collected, it would typically need to

A “master hearing” is a hearing to consider both the mining permit application and applications for various related environmental and natural resource approvals required in connection with a mining permit. Public hearing procedures are discussed in greater detail below.

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-3be submitted well in advance of the permit application.2 Under the bill, the notice of intent for a mining permit application must be submitted at least 12 months before filing the application. Public Hearings and Contested Case Hearing Under current law, the process for obtaining a mining permit involves a minimum of three public hearings: an informational hearing regarding the notice of intent to file an application; an informational meeting regarding a draft environmental impact statement; and a “master hearing” regarding the mining permit, the environmental impact statement, and related environmental and natural resource approvals. The DNR is authorized to hold additional hearings relating to any aspect of the administration of the metallic mining statutes. [s. 293.15, Stats.] A master hearing on a mining permit includes both general public testimony and a contested case hearing. During the public testimony portion of the hearing, all interested persons must be given an opportunity to express their views on any aspect of the matters under consideration. Any person may participate in the contested case portion of the master hearing by filing a written notice of their interest in participating. Persons who participate as parties in the contested case portion of the master hearing may submit legal briefs and evidence and call and cross-examine witnesses, who testify under oath. As under current law, the bill requires the DNR to hold public informational hearings regarding the notice of intent to file an application and following the DNR’s preparation of a draft environmental impact statement. The bill also requires the DNR to hold a public informational hearing following the preparation of the final environmental impact statement. The bill then requires the DNR to provide notice of the opportunity for a contested case hearing, to cover the final environmental impact statement, the mining permit application, and the applications for all related permits and approvals. Following this notice, any person may participate as a party in the contested case hearing by filing a written notice of the person’s interest in participating with the hearing examiner within 30 days of the DNR’s notice. The bill requires the contested case hearing to be concluded no later than the 680th day after the submission of a complete application for a mining permit, plus any extensions to the timeline that were granted under the provisions described above. As described above, the DNR then must issue its final permit decision no later than the 730th day following the date that the application for the mining permit was complete, plus any extensions. Consultation and Coordination The bill creates several new requirements relating to consultation and coordination. Specifically, it requires the DNR to:  Provide assistance to a person who provides notice of intent to file a mining or prospecting permit during the pre-application and application processes.

However, the DNR may consider data collected before the notice of intent is submitted if it determines that the benefits of admitting the data outweigh the policy reasons for excluding it. [s. 293.31, Stats.]

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-4 Work with and consult with federally recognized American Indian tribes or bands in this state during the pre-application and application processes concerning proposed mining in which the tribes and bands have an interest. Work with and provide assistance to other regulatory agencies, including local, state, and federal agencies, during the pre-application and application processes for proposed mining in which the agencies have an interest. After receiving a pre-application notice, seek to enter into a memorandum of understanding with any federal regulatory agency with responsibilities related to the potential mining operation covering timelines, sampling metrology, and any other issue of mutual concern related to processing an application for a mining permit. Seek to take the lead in processes related to processing an application for a mining permit that are undertaken in coordination with federal regulatory agencies.
FOR

EXPEDITED PROCESS MATERIAL

PROSPECTING; EXTRACTION

OF

LESS THAN 10,000 TONS

OF

Under current law, the process for obtaining a prospecting permit involves nearly all of the same steps required to obtain a mining permit. The bill creates an expedited application approval process for metallic mineral prospecting involving the extraction of less than 10,000 tons of material (expedited approval). Under this expedited approval process, the DNR is generally required to approve or deny an application for a prospecting permit for metallic minerals and all related approvals no later than 60 days after the DNR determines that the application is complete. The bill requires the DNR to hold a public informational hearing on the prospecting permit and related approvals within the 60-day review period. The bill specifies that no contested case hearing may be held, and also specifies that no environmental impact statement is required. For prospecting in which 10,000 tons or more of material is proposed to be extracted, a 730-day overall timeline applies to the permitting process, with procedures similar to those applicable to a mining permit.

CHANGES TO RELATED ENVIRONMENTAL AND NATURAL RESOURCE LAWS
Under current law and the bill, various permits and approvals may be required in addition to an exploration license, prospecting permit, or mining permit before a person may explore for or extract metallic minerals in Wisconsin. Many of these approvals relate to environmental and natural resources impacts that may result from metallic mining and activities secondary to mining. Examples of related approvals that may be required include permits for activities affecting wetlands and navigable waters; approvals for high capacity wells; wastewater discharge permits; and air emissions permits. In addition, a metallic mining operation is subject to groundwater quality regulations and regulations governing the construction and monitoring of a mining waste facility. The bill makes changes to certain environmental and natural resource requirements relating to metallic mining.

-5Groundwater Quality Under current law, the DNR develops enforcement standards in consultation with the Department of Health Services (DHS) for certain chemical substances found in groundwater that are of concern for public health. The DNR also establishes preventative action limits, which represent the percentage of an enforcement standard that may trigger action by DNR to prevent further groundwater contamination. Numerical groundwater quality standards under current law are not changed under the bill. Mandatory Intervention Boundary Under current law, the operator of a mining site must monitor groundwater quality at locations approved by the DNR along and within the site’s “mandatory intervention boundary.” If a preventive action limit or enforcement standard is exceeded beyond the mandatory intervention boundary, the DNR must generally require a corrective response to prevent an exceedance of groundwater quality standards at the design management zone boundary.3 The horizontal distance to the mandatory intervention boundary is generally 150 feet from the outer waste boundary, the outer edge of the mine or prospecting excavation, or the outer edge of the underground workings as projected to the land surface. [s. NR 182.075 (1) (c), Wis. Adm. Code.] The bill retains the requirements for a mandatory intervention boundary for metallic mining sites including a general horizontal distance to the mandatory intervention boundary of 150 feet from the outer waste boundary or the outer edge of the excavation. However, the bill allows the DNR and the applicant to agree to expand the horizontal distance to the mandatory intervention boundary by up to an additional 450 feet. Applicability of Groundwater Quality Standards in the Saline Aquifer Current law provides no maximum depth for the application of groundwater quality standards. The bill requires the DNR to study whether, in connection with metallic mining, groundwater standards under ch. NR 140, Wis. Adm. Code, should apply in an aquifer containing saline water. The bill requires the DNR to report its conclusions to the Legislature. Regulation of Mining Waste Mining operations produce waste in the form of overburden (material above the mineral to be mined), tailings (material that remains after the sought-after mineral is extracted and processed), and

Certain projects requiring DNR approval, including mining and prospecting operations, are required to adhere to groundwater quality enforcement standards outside of the boundaries of a designated “design management zone.” The horizontal distance to the boundaries of a design management zone for metallic mining projects is generally 1,200 feet from the outer waste boundary for a mining waste facility and 1,200 feet from the edge of a metallic mineral surface mine or surface prospecting excavation, or the property line, whichever is closer. For mining sites and mining waste sites, if an enforcement standard is exceeded outside the boundaries of a design management zone, the DNR may act to prevent any new releases of the substance from traveling beyond the design management zone or other applicable point of standards application and restore groundwater quality within a reasonable period of time. [s. NR 140.26 (2) (a), Wis. Adm. Code.]

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-6waste rock (rock that does not include sufficient quantity of the sought-after mineral to be processed). Under current law and the bill, a person must obtain a license to operate a mining waste site. Feasibility Report and Plan of Operation As part of the license application process for a mining waste site, an applicant must submit a feasibility report, which must include specified information. Among other information, the feasibility report must include information, based on predictive modeling, to demonstrate that there is a reasonable certainty that the mining waste facility will not result in a violation of the state’s groundwater quality standards. Current law does not specify the time period that the DNR must apply to evaluate compliance with groundwater quality standards. The bill sets a time period of 250 years after the facility is planned to be closed for this purpose. Waste Characterization Studies Under current law, the DNR, with the advice and comment of the metallic mining council, is required to promulgate rules for the identification and regulation of metallic mining wastes. The rules are required to take into consideration the special requirements of metallic mining waste disposal sites and any special environmental concerns that will arise as a result of metallic mining waste disposal. The DNR is also required to consider the research, studies, data, and recommendations of the U.S. Environmental Protection Agency on the subject of metallic mining wastes arising from the agency’s efforts to implement the Federal Resource Conservation and Recovery Act. [s. 289.05 (2), Stats.] The bill requires the DNR to adopt the standards of the American Society for Testing and Materials for testing and other methodologies related to the evaluation of mining waste. After the DNR promulgates rules adopting those standards, it may modify or replace the rules to reflect new technologies or industry practices. Fees Relating to Solid Waste Disposal Under current law, owners or operators of licensed mining waste disposal facilities must pay a recycling fee. The bill exempts prospecting and mining wastes from the recycling fee.

CHANGES TO FEES AND TAXATION; IRREVOCABLE TRUST AGREEMENT
Net Proceeds Occupation Tax and Tonnage Tax Under current law, a net proceeds occupation tax is imposed on net income from the sale of “metalliferous”4 minerals extracted in the state. The tax rate is graduated, ranging from 0% to 15%, depending on the amount of net proceeds per year. The tax brackets are adjusted for inflation. All revenue from the net proceeds occupation tax is transferred to the investment and local impact fund, a fund established to receive revenues relating to metallic mining. The fund is managed by an 11-member

The term “metalliferous” is not expressly defined in the Wisconsin statutes. Examples of common definitions for the term include “containing metal” and “yielding metal.”

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-7board, which makes various mandatory and discretionary payments to local governments. [s. 70.375, Stats.] The bill retains current law with regard to the net proceeds occupation tax as applied to nonferrous mining. With respect to ferrous mining, the bill replaces the net proceeds occupation tax with a tonnage tax for mines that are in operation after December 31, 2012. The tonnage tax equals $2.4125 for each 2,240 pounds of ferrous minerals extracted from mines in this state, based on the average annual amount extracted during the current year and the previous two years, not including any year in which ferrous minerals are not extracted. The bill requires that 70% of the revenue from the tonnage tax is to be transferred to the Investment and Local Impact Fund and 30% of the revenue is to be transferred to the regional Wisconsin diversification program, under which the Wisconsin Economic Development Corporation (WEDC) may make grants or loans to businesses located within 100 miles of the site of a ferrous mine, giving preference to businesses located in close proximity to the site of the mine. WEDC may also disburse this money for catastrophic abatement or response related to a ferrous mine. Payments to Local Governments The Investment and Local Impact Fund Board makes payments to local governments in areas impacted by a metallic mine. The bill also authorizes the board to provide grants to local governments to prepare economic impact studies related to sites at or near the local governments on which exploration or prospecting is being conducted for the potential mining of ferrous minerals or that is the subject of a pre-application process for a permit to mine ferrous minerals. Irrevocable Trust Agreement Wisconsin law requires an applicant to submit a bond6 in connection with metallic mining, conditioned on faithful performance of all of the requirements of the pertinent statutes and administrative rules. The bond must be in an amount equal to the estimated cost to the state, as determined by the DNR, of fulfilling the reclamation plan, in relation to that portion of the site that will be disturbed by the end of the following year. [s. 293.51 (1), Stats.] In addition, an owner of a mining waste facility must demonstrate proof of financial ability to pay for the long-term care of a mining waste site. Under current law, an applicant for a metallic mining permit must propose an irrevocable trust agreement with a trust fund in an amount to assure adequate funds to undertake the prevention and remediation relating to specified events, such as hazardous waste spills and the failure of a mining waste facility to contain waste. [s. NR 132.085, Wis. Adm. Code.] There is no statutory limit on the amount that the DNR can require this irrevocable trust agreement to be.

This tax rate mirrors the rate for a similar tax in Minnesota. Beginning in 2014, the bill requires the DNR to change this rate over time based on the percentage change in the gross domestic product implicit price deflator.
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In lieu of a bond, the applicant may deposit cash, certificates of deposit, or government securities with the DNR.

-8Under the bill, an application for a metallic mining permit must include a proposed irrevocable trust agreement to provide funds for activities to avoid or remedy any adverse environmental consequences from the mining operation. The bill establishes the amount of the irrevocable trust at 20% of the amount of the reclamation bond described above plus 20% of the amount of the proof of financial responsibility for the mining waste site, described above. If you have any questions, please feel free to contact us directly at the Legislative Council staff offices. AH:LAK:jal:ksm