Council supports potential mine's use of city water

Oct. 26—CHEYENNE — The City Council approved an agreement Monday night that would allow a potential gold and copper mine to use municipal water.

Under an agreement with the Cheyenne Board of Public Utilities, the mine could use a maximum of of 600 gallons per minute, amounting to 968 acre-feet a year. This would be less than half of what the HollyFrontier refinery used at peak production, BOPU Director Brad Brooks told the council.

Brooks said in a Tuesday interview that the city uses about 14,000 acre-feet of water annually. It has the rights to about 22,000 acre-feet, he noted.

The mining company, Wyoming King Gold Co. or Gold King Corp., only expects operations to last about a decade at its planned site about 20 miles west of Cheyenne. The water agreement will end Jan. 1, 2037, and is contingent on the mine receiving all necessary permits and approvals for operation, Brooks said.

The firm is owned by gold exploration and development company U.S. Gold Corp., a spokesperson clarified to the Wyoming Tribune Eagle.

On top of around $15 million in water use revenue for the city over the development and life of the mine, Brooks said, the company would pay nearly $5 million for a "system impact fee," which would be used to upgrade water systems and look for future water sources for the city.

The BOPU director said revenue from the project is needed to develop water resources in the area — specifically at Belvoir Ranch, a $40 million project. This water system development could bring in another 3,300 acre-feet of water for the city each year.

Prudent move?

Although the council ultimately voted to approve the resolution, there was lengthy back and forth about whether it was prudent.

Council member Pete Laybourn, the only "no" vote, raised concerns over potential curtailment and the increasing severity of droughts. He said BOPU and council members did not seem concerned enough about possible complications.

"Throughout this entire process, Mr. Mayor, members of council, there seems to be this idea, and it's a pretty strong idea, that someday we're going to get this water back. Someday, we're going to have wet years again," Laybourn said. "When I look at climate change throughout the world, throughout this country, throughout the state and in our city, I think that is a profoundly unrealistic expectation."

Laybourn said this belief amounted to "climate denialism," and that no one could accurately predict how increasing temperatures and growing drought severity may impact the city's water supply.

"We are in a situation here beyond just this mine, beyond just this contract, of the future of our city, its growth and as management," Laybourn said. "I very much appreciate the professionalism of the staff of (BOPU), but this is out of our hands, and the results need to be carefully monitored."

A clause would require the mine to reduce its water usage if there is a drought or a call for curtailment of Colorado River water usage, Brooks explained Monday night. Curtailment could happen as early as 2028, Brooks said, based on a recent estimate by the Wyoming State Engineer's Office. He said BOPU had been "actively looking for" additional water sources in preparation for curtailment.

Earlier in the meeting, council member Michelle Aldrich said she found it "ironic" the council has just voted to postpone for two weeks an authorization to form a water conservation action committee.

Although she initially said she'd vote "no," Aldrich changed her vote to "yes." She said the mining business seemed to have followed the city's ordinances, adding that the city may need to change how it formulates water use agreements for outside entities to prevent negative impact on residents.

Gold mining

For more than two years, U.S. Gold Corp. has been working toward opening a mine at a gold and copper deposit outside of Cheyenne.

Called the CK Gold Project, it would be located at the site of the dormant Copper King Mine, which is near Curt Gowdy State Park. U.S. Gold Corp. is also exploring potential mining projects in Nevada and Idaho.

The water would come from the city's raw water line, meaning it will not be treated. According to the company's application, "no chemicals will be discharged into any city sewer system or leach field."

U.S. Gold Corp. has said no cyanide will be used in its operations.

The company expects the mine to operate for about 10 years, following about a year and half of construction, said Jason Begger, spokesperson for the CK Gold Project. A two-year reclamation will follow the mining, with a plan to restore the area to grazing land, for which it's currently used.

Estimates from the company say 1,000 to 1,200 workers could be hired to construct the operation. When the mine is up and running, it would employ about 220 people over several shifts. The company plans to bus workers to and from the site to reduce traffic.

The potential mine would be partially located on state land allocated to help fund public schools. A 2012-13 estimate put revenues for K-12 education from this project at about $36 million.

Begger said it's hard to know the true amount because current royalty rules aren't written with hard rock mines in mind, according to the spokesperson. Instead, these statutes are written for material like coal or oil.

"It's safe to say tens of millions of dollars" could go to state education coffers, Begger said.

The company completed a pre-feasibility study last December. The Wyoming Department of Environmental Quality is currently reviewing materials it submitted as part of a mine permit application.

Although it's just one of several permits and reviews, the mine permit is most vital to the project's viability. Following this 60-day review period, the DEQ may ask for more information, and then would do a more detailed review of the application.

Approval of this permit application would likely not happen until 2024, the company has said. This would be followed by a push to raise capital.

Other arguments

Retired Cheyenne attorney Larry Wolfe addressed the council Monday night. He said he was asked by Laybourn to review the water purchase agreement, and that he found contradictions that could make BOPU and the city vulnerable to litigation.

Wolfe called gold "the most speculative" of mining operations, and said he was glad council members had brought up the question of whether there will be enough available water.

Wolfe said he began his career as a lawyer for the Wyoming Attorney General's Office, representing the state engineer's office and the Wyoming Water Development Commission. He said he served as the state's lawyer to the Upper Colorado River Commission.

Pat Crank, a local attorney representing the mining company, pushed back, saying these were largely policy, not legal, considerations. Crank said "much of what Mr. Wolfe raises tonight is fear and unknowns."

Brooks added that BOPU's legal counsel had already agreed to several changes suggested by Wolfe and Laybourn. He said none seemed to be "deal killers."

City attorney Stefanie Boster confirmed the council could not argue the terms of the contract between BOPU and the mining company. The council's job, Boster said, was simply to authorize or not authorize the agreement.

Hannah Black is the Wyoming Tribune Eagle's criminal justice reporter. She can be reached at hblack@wyomingnews.com or 307-633-3128. Follow her on Twitter at @hannahcblack.