Will Damocles sword of Mt. Emmons mine finally be retired?
World’s largest molybdenum producer might leave ore body
This story was originally published in the March 2, 2016, issue of Mountain Town News, an e-magazine distributed to paid subscribers. See here for subscription information.
by Allen Best
Crested Butte has been chattering in recent weeks about the possibility that the Damocles sword of molybdenum mining, which has been hanging over it since the ore body was discovered in 1976, will finally be removed.
More surprising, perhaps, was who might remove the threat: a mining company that is the world’s largest supplier of molybdenum.
The molybdenum deposit is located within Mt. Emmons, nicknamed the Red Lady, because of the alpenglow on its snow-covered slopes. In 1977, American Metals at Climax—commonly shortened to Amax—began laying plans for molybdenum mining there, about a mile and a few hundred feet above Elk Avenue, the main street for Crested Butte.
At the time, two molybdenum mines were already operating in Colorado: the Climax Mine near Leadville and the Henderson Mine near Georgetown.
Crested Butte didn’t throw out a welcome mat and offer to become the third. It tried to downscale the operation. But then, the price of molybdenum plummeted in 1981 and the plans went dormant. Amax, in time, was purchased by mining company Phelps Dodge, which was then swallowed by Freeport-McMoRan. You’ll hear that name again shortly.
The mining deposit has a separate history. It was spun off to several would-be operators, most recently U.S. Energy. A small company, it was mostly invested in oil and gas production. As oil and gas prices skidded last year, it slashed overhead and moved operations from Wyoming to Denver, to be closer to the deal-making. It also began looking to get rid of Mt. Emmons and the obligation that came with it: the water treatment plant.
The water treatment plant is located at the Keystone Mine, where lead and zinc were mined into the 1960s. Molybdenum was discovered through that mining. But after mining ended, the water treatment plant was added in 1981 to clean the water from the mine, tainted by high levels of metals, before it trickled into Coal Creek, at the base of Mt. Emmons.
Coal Creek, in turn, flows through Crested Butte and provides most of the town’s water.
U.S. Energy was paying the bills even as it was free-falling toward what some feared would be bankruptcy. On Feb. 12, the company announced sale of Mt. Emmons to get out from under the $3 million annual cost of the molybdenum project, with the water treatment being part of it. Almost immediately, state water officials in Colorado and local governments announced a memorandum of understanding, or MOU, with the new owner.
Who would be willing to take on the expense of the water treatment plant? None other than the previously mentioned Freeport-McMoRan. Why?
Probably because of U.S. Energy’s precarious financial state. Had it gone bankrupt, liability for operation of the water-treatment plan would have reverted to the last surviving owner of the Mt. Emmons claim. That would be Freeport, because of the companies it had swallowed along the way, now including Amax, the company that built the plant in 1981.
“It’s better to voluntarily step up than get dragged in kicking and screaming,” suggests George Sibley, a long-time observer of Crested Butte affairs.
Freeport probably hopes to somehow get out from under the obligation of running the water-treatment plan forevermore, says Jim Schmidt, a Crested Butte town councilman who moved there in 1976, the year the ore body was discovered.
“I’m sure in Freeport’s best-case scenario, the communities will run it or somebody else will be on the hook to run it,” he says. But perhaps the company would share costs, he adds.
The plant costs at least $1 million a year to operate, but there may be ways to shave the costs substantially. Schmidt has heard estimates that an upgraded plant can be operated for $250,000 to $500,000. Others have talked about the possibility of figuring out ways to eliminate ongoing costs.
The important thing to understand, says Alli Melton, the public lands coordinator for High Country Conservation Advocates, a group formed in the 1970s to fight the mining project, is that the information needed to make informed decisions was not available before. Now, that information will be shared as potential technical solutions are explored by Crested Butte, Gunnison County, Colorado state officials with responsibility for both water and mine reclamation, and Freeport. The process and goals are identified in the MOU.
But why would Freeport, the world’s largest producer of molybdenum, be willing to explore retiring the ore deposit, as was indicated in the MOU and in the public announcements?
Officials close to the situation suggest a variety of motives. The deposit may look to be less attractive than it once was as other deposits have been discovered; the local community is even more skeptical of mining than it was in 1977, when mining was only 15 years in the community’s rear-view mirror, and permits would be needed from town and county governments plus the state; and it’s within a community’s watershed–all create an impractical site for molybdenum mining, says John Belkin, the Crested Butte municipal attorney.
“I think it’s an accumulation of a lot of different things,” he says.
Then there’s this: the price of molybdenum has plummeted by more than two-thirds in the last five years. Molybdenum is used to make steel, among other uses. The fall in oil and gas prices has meant a drop in energy production. That means a drop in need for molybdenum oxide, as reflected in the prices of this chart from MetalPrices.com.
Because of that drop, Freeport is hastening the closure of its Henderson Mine, located near Georgetown. (See story, page 11). It will, however, continue operations at Climax.
“Climax Molybdenum Co. will operate the Climax and Henderson molybdenum mines in a flexible manner to meet market requirements,” said Freeport in response to questions from MTN. Climax Molybdenum is a subsidiary of Freeport.
Operations are also being curtailed at another Freeport operation, the Sierrita mine in Pima County, Arizona. The copper and molybdenum complex produces about 24 million pounds annually of molybdenum.
Henderson is producing 10 million pounds annually, down from 27 million pounds.
In a prepared statement, Freeport also told MTN that the company intends to work cooperatively with Crested Butte and Gunnison County to “pursue disposition of the mining and mill site claims and fee simple lands in a mutually beneficial way.”
The statement also spoke about “long-term funding for environmental issues at the site,” and “site-specific standards for Coal Creek.”
How might the mining deposit be retired without being developed? Crested Butte officials cite the potential for administrative actions, but only for a limited time, perhaps 10 or 20 years, before the ore body can be claimed again. A permanent solution can be achieved through congressional legislation. The various options have many complications, but this fact is perhaps pertinent: Crested Butte and Gunnison have taken care to draw in the staff of U.S. Sen. Michael Bennet, a middle-of-the-road Democrat from Colorado.
Crested Butte and Gunnison County initiated a response to U.S. Energy’s deteriorating financial status early last August, in the memories of some just before the spill from the Gold King Mine near Silverton.
“We were paying attention to the financial status of U.S. Energy given the downturn in oil and gas prices, and we were obviously very concerned about the health and welfare of our watershed,” says Todd Crossett, the Crested Butte town manager.
Colorado environmental officials responded to the request for measures to ensure continued water treatment by inviting Freeport to join in discussions. Those discussions, by all accounts, have been amicable. Belkin, the attorney, calls Freeport “our partner.”
“It seems like we have the right landscape now—with Colorado Sen. Michael Bennet, the Obama administration, and our partner Freeport-McMoRan—to resolve this long-standing issue,” said Belkin.
Resolve, in the Crested Butte lexicon, means to remove that sword forever.
“I think it’s interesting and pretty significant that you do have a very large mining company acknowledging that mining at this particular site is not in its best interests,” says the group’s Mellon. “I don’t know if there’s another instance like this that you can point to.”
How can this happen, to avoid another mining company arriving to stake the claim, remains the big question, but here’s a historical curiosity to ponder. Patented mining claims continue to be governed by a federal law, the General Mining Act of 1871, which was approved by Congress only 7 years after the Civil War ended and 6 years before the townsite was laid out. For decades, environmental advocates have been trying to get the law changed.
Like sand dunes forming, changes sometimes take forever. Then, like earthquakes, change can happen suddenly.
But as several people have said, the devil in this narrower story about Crested Butte remains in the details. This effort isn’t over the finish line. And too, keep in mind that the demand for molybdenum has not gone away. The steel in the new high-rises of Denver, the sturdy pipes in the solar farms of Nevada, and the towers all have molybdenum to make them stronger.