Pegasus Mine Cleanup Costs and Your Money

At best, Governor Marc Racicot’s environmental policies were bad. At worst they were catastrophic for the state’s long-term future.
 
Racicot had opposed both the 1996 Initiative 122 to strengthen water standards and the 1998 I-137 to ban new open-pit cyanide heap-leach mines. Montanans chose to leave water standards as they were but did vote to ban cyanide mining.
 
During Racicot’s tenure, Montana gold producers fell on hard times. The ban on cyanide mining hit them even harder. Zortman Landusky closed its Malta mine, which sat “adjacent to the Fort Belknap Indian Reservation near the Little Rocky Mountains.”
 
The Start of Cyanide Heap-Leach Mining
 
The mine had started in the late-1970s on 400 acres for Zortman and 800 acres for Landusky. The latter was the first cyanide heap-leach mine in the state. This process involved:
 

“blowing apart mountainsides in search of ore that was thought to hold gold. The waste rocks were pushed aside and the ore was heaped onto ‘leach’ pads, then sprayed with a mixture of cyanide and water. The solution dissolves the gold, similar to the way sugar melts in water. The liquid end product was then processed to capture the gold.”

 
“It was a messy business,” IR reporter Eve Byron went on to say, and those two Pegasus mines became “the poster child for the environmental risks of cyanide heap-leach gold mining.”
 
In 1982, 767 gallons of “cyanide-tainted solution leaked from a containment pond.” Another 51,000 gallons were released “onto lands and into creeks” that same year, something that necessitated the “shutdown of the community’s local water supply system.”
 
The mine had been operated by Pegasus Gold Corp., a company that went bankrupt in 1998. The mine had been operating for 20 years by that point and left a lot of environmental pollution. An expansion of the mine in 1996 had failed to demand adequate reclamation bonds for cleanup and many were unhappy with how things turned out.
 
Pegasus Gold Corp.
 
Gold dropped to around $300 an ounce by November 1997, down from the $468 an ounce it had been ten years earlier.
 
As gold prices plummeted, Pegasus tried to restructure its $120 million debt with eleven different banks. A big problem was the closure of their Australian gold mine, which brought about $433 million in losses for the third quarter that year. Pegasus stock had fallen from a high of $17 in 1996 to $1 by that point.
 
After 17 years in operation – and with 2.5 million ounces of gold pulled from the ground – the Zortman-Landusky and Beall Mountain mines halted operations, throwing “between 300 and 350 people” out of work.
 
By January 1998 the company had declared bankruptcy. The price of gold was again the issue, now down to $290 an ounce, a 19-year low. In 1980 gold had sold for $835 an ounce, and was as high as $415 in 1996.
 
By March 1998 Pegasus announced that they couldn’t pay their Montana property taxes. It amounted to a lot of money – the year’s bill totaled $1.27 million, all earmarked for Jefferson County.
 
At the end of March, however, Pegasus asked a Nevada court to allow it to “pay 26 of its top executives more than $5 million in bonuses and severance pay.” The company’s president was already being paid $350,000 a year and wanted his bonus of $490,000 as well. Jefferson County would have to wait.
 
Due to public backlash, Pegasus agreed to trim 10.9% off those bonuses, but a judge ruled the bonuses could still be paid. By July the Basin Creek mine had shut down as well and then in October the company announced it would reorganize as oppose to liquidate. Doing so would allow it to offer new stock, brining in $65 million, while selling the company would only bring in around $29 million.
 
In December it was ruled that Pegasus would have to pay the state’s Department of Environmental Quality $1 million of the $8.5 million it had sought for cleanup efforts at the Zortman and Landusky mine. The mine was 19 years old by that point.
 
In January 1999 gold was down to $280 an ounce. As a result, Pegasus laid off the 67 workers it had at its Diamond Hill mine near Townsend.
 

 
Mine Cleanup Costs
 
Pegasus put up a $30 million bond to pay for cleanup costs at its Montana mines. That money ran out by the end of 2003.
 
Eventually Montana taxpayers had to pay for the Pegasus mines cleanup, especially the leach pads at Zortman and Landusky. Bonds were issued to do this.
 
In July 2005, for instance, the state announced it’d be spending $2.5 million just to clean up the Basin Creek Mine. In 2006 the U.S. Forest Service had to issue a $6.2 million bond to clean up the Beal Mountain Mine near Anaconda.
 
Total cleanup costs were estimated to be $14.5 million, however. More money would be needed, and none would be coming from the company.
 
By 2018 the state had poured $32 million into cleanup efforts at Zortman-Landusky, while federal agencies had contributed another $45 million.
 
$77 million of taxpayer money, and Pegasus didn’t contribute one dime of it.
 

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Notes
 
Backus, Perry. “Cleanup costs mount at Beal Mountain Mine site.” Helena Independent Record. 1 January 2006.
 
Billings, Erin P. “Millions sought for executives’ bonuses.” Helena Independent Record. 27 March 1998.
 
Billings, Erin P. “Pegasus offers to trim bonuses.” Helena Independent Record. 10 April 1998.
 
Billings, Erin P. “DEQ gets $1M from Pegasus.” Helena Independent Record. 8 December 1998.
 
Billings, Erin P. “Mine lays off Townsend workers.” Helena Independent Record. 22 January 1999.
 
Byron, Eve. “Poster child for heap-leach mining risks.” Helena Independent Record. 14 February 2003.
 
Dennison, Mike. “Pegasus trying to restructure huge debt, officials say.” Great Falls Tribune. 19 November 1997.
 
Farley, Carolynn. “Pegasus can’t pay property taxes.” Helena Independent Record. 14 March 1998.
 
Johnson, Charles S. “Pegasus files Chapter 11.” Helena Independent Record. 17 January 1998.
 
“Pegasus touts reorganization instead of liquidation.” Helena Independent Record. 20 October 1998.
 
Pucket, Karl. “Fort Belknap backs state in bad actor case over Zortman-Landusky pollution.” Great Falls Tribune. 13 September 2018.