Platinum mine criminal charges a first for Alaska

Date of publication: 
19 November 2014

BETHEL – Back in August 2011, a federal biologist on a routine flight to survey salmon numbers was taken aback by what he saw in the Salmon River in far Western Alaska around a recently restarted platinum mine.

The water, normally clear despite old mining waste piles in the river and its fragmented watershed, was so murky only 10 salmon could be seen, Mark Lisac, a fisheries biologist based in Dillingham for the Togiak National Wildlife Refuge, wrote in an Aug. 11, 2011, report about what he saw the day before.

In earlier surveys done since 1995, biologists spotted an average of 2,500 salmon, mainly reds, pinks and chums, he wrote.

“I knew right away something was wrong,” Lisac said Wednesday. He took some 400 photos in 2011 to document the mine site, then being operated by XS Platinum Inc., an Australian-led company that soon would be plagued by serious financial troubles.

The photos showed new mining work with turbid ponds, as he describes them, flowing into the river system.

On Tuesday, a federal grand jury in Anchorage handed up a 28-page indictment accusing XS Platinum and five executives of conspiring to violate the federal Clean Water Act and of falsifying compliance reports to the government. The five men — two Australians, a Canadian and two from Washington state — are scheduled to make their first court appearance Jan. 21.

The same day that Lisac flew over the mine, XS Platinum measured the turbidity of water being discharged at 100 times what its permit allowed, the indictment said.

It’s the first federal case in Alaska charging a mining company with criminal violations of the Clean Water Act, said Kevin Feldis, the first assistant U.S. attorney for Alaska.

The nation’s environmental laws, born in the pro-environment movement of the 1970s, require self-policing by companies working on land and in waterways, Feldis said. They are supposed to monitor their own activities and make regular reports to regulators, he said. Feldis is prosecuting the case with a Justice Department environmental crimes trial attorney and a criminal enforcement lawyer with the Environmental Protection Agency.

XS Platinum told regulators it would reuse all mining wastewater on site in a self-contained “zero discharge” system.

The indictment “alleges that just the opposite was true, and that between 2010 and 2011 the mine discharged large amounts of turbid and sediment-filled wastewater,” Feldis said in an email. Those involved then conspired to keep those discharges hidden, the indictment says.

That behavior “is not representative of how Alaska’s miners operate,” Deantha Crockett, executive director of the Alaska Miners Association, said in a written statement Wednesday. Neither XS Platinum nor the five executives charged are members of the trade group, she said.

Authorities should take action against mine operators who don’t hold themselves to “the highest possible standards,” she said.

“If the violations are proven to be true, the company should be held accountable and receive swift and appropriate consequences,” Crockett said in the statement.

The Platinum Creek Mine and its predecessors date back to the 1920s, according to a state Division of Community and Regional Affairs profile of the community of Platinum. An Alaska Native named Walter Smith discovered traces of platinum there in 1926, near a traditional village site called Arviq. Soon small placer miners began working stream beds for platinum. A post office opened. Then in 1936 came the “big strike,” according to the history described by the state. A stampede of prospectors came looking for “white gold.”

The Goodnews Mining Co. bought out many of the small claims and built a big dredge to dig for platinum at the main site about 10 miles from the village of Platinum. There were bunkhouses and a recreation hall, shops and a cafeteria. It was a company town.

By 1975, 545,000 ounces of platinum had been mined, the state history capsule says.

The mining operation later was sold to Hanson Industries Inc., which mined it for a number of years, then in 2007 sold to XS Platinum.

“It’s mind-boggling,”Cabot Christianson, an Anchorage lawyer who represents Hanson Industries Inc., said of the now-empty mining town. He said it looks like a little Kennecott, the historic mining town in Wrangell-St Elias National Park.

Hanson never got what it was owed by XS Platinum and in 2012 Hanson foreclosed and now owns the mine again, Christianson said.

“We had to foreclose on the mine, so obviously there was an adversarial relationship,” he said.

Still, XS Platinum put money into the operation, Christianson said. Environmental engineers who inspected the property for Hanson didn’t find that it was contaminated, he said.

“Some of the properties look, by remote Alaska standards, pretty nice,” he said.

The federal investigation looked only at the operations under XS Platinum. Its parent company was based offshore in the Channel Islands off the French coast of Normandy. It was capitalized with $34 million from more than 100 investors, most from Australia or Europe, the indictment said. The parent company dissolved in 2013.

XS Platinum was trying to rework the area already mined to extract any remaining platinum, Feldis said.

Within days of the observations by the federal biologist in the summer of 2011, crews from the federal Bureau of Land Management, the U.S. Fish and Wildlife Service, the U.S. Army Corps of Engineers, the Alaska Department of Environmental Conservation and the Alaska Department of Fish and Game began inspections of Platinum Creek Mine.

The mine was operating under a permit overseen by DEC. On Sept. 1, 2011, BLM issued an order of non-compliance to XS Platinum and directed the company to comply with state DEC water quality monitoring requirements, the indictment said. The next day, DEC issued a notice that XS Platinum had violated water quality standards.

The five company officials charged in the case are Australians Bruce Butcher, 59, and Mark Balfour, 62; Canadian James Slade, 57; and Washington residents Robert Pate, 62, and James Staeheli, 62.

The officials are accused of knowing about discharges of turbid water and failing to report the information. All but Staeheli also are accused of submitting a false statement to the government.

Butcher, the chief executive officer, decided not to buy a key piece of equipment that would have clarified the water, the charges say.

The indictment quotes an email that it says Butcher sent on July 4, 2010, to Slade and copied to Balfour and Pate.

“I would prefer that we not be engaging the regulators at this stage on our so-called ‘zero-discharge’ plant as all that will do is immediately raise expectations to the point that that will become today’s standard. A standard that we cannot presently meet. A standard that we may never meet,” Butcher is quoted as saying. “We have known for some time about the turbidity and porosity matters that we need to address, and we need to continue to work responsibly at addressing them. But these things take time.”