DIAND -Opening Comments for Nanisivik Public Hearing-July 22-24, 2002

Good Morning Mr. Chairman and Board members. My name is Paul Smith. I am the Manager of Water Resources for DIAND 's Nunavut Regional Office in Iqaluit. I've already introduced the other members of our team. Beside me is Lee Webber, our legal counsel from the Dept. of Justice. Brent Murphy and Don Haley , both with EBA Engineering Ltd., and John Brodie, of Brodie Consulting Ltd. As I noted earlier, the representatives from EBA assisted us in the preparation of our review of the A&R plan.

Mr. John Brodie prepared our RECLAIM estimate and will be available to answer questions related to it.

Mr. Chairman, I would like to say at the outset that DIAND has full confidence in the knowledge, judgement and experience of all board members, and we trust that you will make the right decisions. I respectfully request thatyou produce a licence which the DIAND Minister will be able to sign without hesitation and gives due regard to the requirements of the other regulatory agencies which also have important roles to play and issues that they must attend to with respect to Nanisivik . We will speak to these other regulatory agencies in more detail, but for now, let me just note that these agencies include DIAND as the administrator of Crown leases regarding minerals and regarding portions of the surface, the Commissioner (that is the GN) as administrator of other surface leases, DFO / CCG as the authority responsible for the dock and Environment Canada, which administers the new Metal Mining Effluent Regulations.

I will not be reiterating the bulk of the recommendations that are contained within our written intervention. Suffice it to say that, as you heard today, there remain significant information deficiencies which have been identified by ourselves and the other intervenors. These deficiencies include various studies, assessments, and drawings required to ensure that a proper review and consideration can be made by the public and to the various regulatory agencies. Further, the conceptual nature of the A&R plan as presented does not give a clear indication of what is the overall objective of the company. Once I've finished my presentation, I'll ask Mr. John Brodie to speak to these issues.

It will also be important that all stakeholders be able to review the results of the Phase II ESA and have the opportunity to comment of the next steps.

We will limit our oral comments to the most noteworthy issues including several issues raised by the GN within their intervention. At the same time, we would ask the Board to consider as well the comments on other issues that are contained in our written intervention.

Issues Related to the Review of the A&R Plan

We are of the view that, in the weeks following the public hearing, the regulators which must approve the various components of the A&R plan should continue to meet with the Proponent in an effort to reach a stage where all responsible agencies are comfortable with the plan. We see the role of the NWB as critical in coordinating all issues relating to water that must be addressed within the A&R plan. Likewise, the other regulating agencies (GN, DFO, DIAND) must also undertake whatever processes they deem necessary in order to obtain any additional information that will allow them to approve their respective sections of the A&R plan.

Our intervention was divided into two main sections. The bulk of our comments related to our review of the A&R plan and commented on the various components of the plan where additional information would be required. We also attempted to identify areas where coordination would be required to address the overlap between land related and water related issues.

The second section of our intervention addressed components to be considered within a renewed licence.

Of these, I offer the following...

Security Requirements

For several years, DIAND has promoted the policy that security required under a water licence should reflect the total water related reclamation costs to safeguard against a situation where a mine operator is unwilling to fulfill its reclamation obligations, and also to safeguard against a situation where, despite best intentions, a company is unable to fulfill its reclamation obligations. As a department, we have learned the hard way that not having full security can result in serious liabilities to the Crown - which means to the taxpayers of this country who end up paying for the reclamation of abandoned sites. The Giant and Colomac mines, in the NWT, are a couple of cases from which we have learned this lesson.

In 1996 when the Nunavut Water Board first considered the renewal of the Nanisivik licence, the department presented the argument that security must be more representative of the actual clean- up costs. At that time, the owner of the mine advised that it estimated the reclamation costs at approximately $9 million. The NWB set security at $6 million with the intention of requiring the balance upon the next licence renewal. Of course, this renewal now before us is not for a continuation of mining and milling activities, but rather closure and reclamation. Therefore, it is now appropriate to require an amount of security which is substantially greater than $6 million. And in light of the estimate which we have provided to the Board, it is also appropriate to require an amount which is substantially greater that $9 million referred to by the mine owner in 1997.

To aid in the assessment of more accurate reclamation costs, the department wanted a means of modeling the costs based upon 3rd party rates. This was 10 years ago and it was John Brodie that did the initial work on a computer model, known as RECLAIM. Over the past 10 years, the RECLAIM model has undergone continued refinement and improvement. Both the NWT and Nunavut Water Boards have used RECLAIM and have indicated a high degree of comfort in its accuracy. A relevant example is the application by Echo Bay Mines to have their security amended. The original estimate, developed by Brodie using RECLAIM, was used by the Board as the basis for setting the security amount. The Board did make adjustments to the RECLAIM figure, partly in response to another estimate (in effect, a tender) provided by an independent contractor.

In this case, the RECLAIM estimate that Brodie Consulting Ltd. prepared for us indicates a 3rd party reclamation cost at of approximately $27.5 million. This is the amount to reclamate the entire site. You will note on Page 9 of Mr. Brodie's report there is a table which summarizes the various components of the mine site and the associated costs. In this table there is a line item called 'Buildings and Equipment' and cost associated with that item is $2.34 million. That item is land-related, and the $2.34 million should therefore be omitted when determining the amount of security to be required under the water licence. However, all the other components do have the ability to impact water. Therefore, we would simply subtract $3.07 million (which is $2.34 million plus the contingencies that apply to this land-based item) from the $27.5 million total, leaving $24.4 million. We propose that the Board set security at no less than $24.4 million.

The Board may have regard to the factors that are mentioned in section 12(2) of the Waters Regulations. Here, it is relevant to note that Nanisivik is a mine which has been in existence for some time; and in this connection I would refer the Board to DIAND's draft Mine Reclamation Policy, and to that draft Policy's comments regarding existing mines. As I learned today, the policy is no longer draft and the Minister of DIAND has asked the Board to consider the principles and intent of the policy in the issuance of water licences.

Term of Licence

As has been expressed in a number of interventions, the proposed post-closure monitoring period is thought to be insufficient to allow for the complete assessment of the reclamation activities.

We recommended that the licence have a term of 10 years (2 years for closure activities and an additional 8 years for post-closure monitoring). While this is greater than what the company proposed, we would submit that should post monitoring assessment indicate that an acceptable steady state condition develop at those locations being monitored then Licensee can make an application to the Board and other regulatory agencies, as appropriate, to have monitoring requirements reduced.

Progress reports, inspections, and multiple jurisdictions will presumably mean more inspections at different times. The regulatory agencies must agree that when an inspection takes place its results are to be shared with the other groups.

Post-Closure Monitoring Requirements

Our initial review of the A&R plan indicated that it was broad in scope. However, we also note that there remains a significant amount of information to be provided, and that the plan is therefore still quite conceptual in nature. Accordingly, it is not yet possible for us to provide fully-developed recommendations concerning post-closure monitoring requirements. When the Proponent provides supplemental information, we will be better able to provide such recommendations.

We made some general recommendations within our intervention for areas and parameters that would require sampling. The current licence provides a rational place to start from. The applicant has indicated that, in the closure and post-closure phases, that applicant itself would determine the location and frequency of sampling, and the parameters to be analyzed for. We fundamentally disagree that the applicant alone should determine these matters. Instead, we recommend that all regulatory stakeholders be able to review monthly and annual reports in order to consider any requests from the applicant. A reduction of the analytical program might be accepted if it were demonstrated that metal levels had stabilized below the licence limits.

The Proponent also states that there will be sampling in some areas during reclamation activities, but not during the ensuing post-closure period. We do not necessarily agree with this and can not accept such a proposal without having being provided with a rationalization for each separate location that the proponent would apply this concept to.

Another significant development that has happened recently is the introduction of the new Environment Canada Metal Mining Effluent Regulations, in June 2002. These regulations will apply to Nanisivik Mine and under these regulations the company will be required to undertake an environmental effects monitoring study.

Accordingly, I would like to ask the NWB to ensure when terms and conditions are being developed for the licence, that there is an appropriate meshing with the requirements of Environment Canada under the new regulations.

Unfortunately representatives from EC were unable to attend in person and can not speak to the requirements that these new regulations will impose on Nanisivik. I'd like to request that the NWB undertake to contact EC in order to determine how the regulations apply to Nanisivik mine so that:

- duplication of regulatory effort will be minimized

- respective jurisdictions of the NWB and EC are accommodated.

I believe that it would also be beneficial if the NWB asked EC to prepare, for the benefit of all parties, a summary of the requirements of the MMER as it relates to Nanisivik.

As an aside, within the GN intervention, they have correctly noted that water licence conditions can not be less strict than the MMERs.

Approval of the A&R Plan

As previously mentioned, approval of the A&R plan is a requirement not only of the Board, but also DIAND; for our land leases, the GN; for their land leases, and DFO; for the dock area. DIAND, Lands Administration initiated a review of the Crown land leases via the Lands Advisory Committee. LAC is aiming to solicit comments and concerns related to the various Leases and the A&R plan. In order to keep in step with the NWB schedule, our Lands Administration chose similar deadlines for comments and will be requesting that the Company submit their response to information deficiencies by August 19, 2002.

Other Considerations

The Bulk Fuel Storage area is owned by Canzinco Ltd. and the company plans to remove and reclamate the site per their A&R plan once the plan has been approved. This infrastructure appears to sit outside of the DFO/CCG administered area. Consequently, it sits on DIAND administered Crown land and the department therefore has certain concerns as to the fate of this infrastructure. Principally, we would expect that if the CCG continues to use the dock, if CCG requires fuel resupply for staging, and if the storage facility is to remain for this purpose, then control of the facility, will be transferred to the CCG. We will work with the CCG to ensure this transfer is complete prior to the schedule set by the company (August 2003) for the removal of this infrastructure. The department is not willing to accept any liability associated with this facility and if the tank farm and associated piping are not accepted by the CCG, then we will expect the company to reclaim this area in accordance with the company's approved A&R plan.

We have no desire to take away from the Board any part of its work. But the Board may find that, in performing the task of drafting terms for the licence, the Board can draw upon useful assistance from the various interested parties. So, DIAND would like to suggest that the Board involve the interested parties at some stage of the drafting process - perhaps by circulating a 1st draft to the interested parties.

Thank you Mr. Chairman. That concludes my comments. I'll now pass the microphone to John Brodie and then to Lee Webber.