Environmental Regulation and NAFTA Investment Claims

1. Environmental Regulationand NAFTA Investment Claims Glamis Gold Ltd. v. United States

2. Glamis’ Claim Against U.S. • In 2003, the Canadian company Glamis Gold Ltd. filed a NAFTA investment claim against the U.S. government seeking $50 million in damages. • Glamis claims that the federal Bureau of Land Management (BLM)--through exercise of FLPMA, NEPA, and its mining regulations—and the state of California--through exercise of state mining laws and regulations--violated NAFTA by failing to provide fair and equitable treatment to the company and by expropriating its investment without compensation.

3. NAFTA Ch. 11 provides foreign investors from party countries extensive investment rights, including: A Right against nondiscriminatory treatment; A Right of national treatment-- treatment no less favorable than that accorded to investors of the party country; A Right to fair and equitable treatment under international law; and A method to enforce and receive compensation for violations of these rights, i.e., expropriation claims. NAFTA Investment Claims

4. Factual Background Glamis Corporate Structure • Glamis Gold, Ltd. is a Canadian mining company. • Glamis Imperial is a U.S. subsidiary of Glamis Gold incorporated and located in Nevada. • Glamis Imperial owns the mineral rights and applied for the permits at issue in the investment claim against the U.S. • Although Glamis Imperial suffered the alleged harm, Glamis Gold initiated the NAFTA claim.

5. Factual Background Federal Legal & Procedural History • The U.S. Mining Law of 1872 allows U.S. citizens to stake claims to mineral rights on federal lands. • Glamis Gold, Ltd.--the Canadian company--established its U.S. subsidiary--Glamis Imperial--in order to claim mineral rights under the 1872 Mining Law. • Over time, Glamis’ U.S. subsidiary staked 187 mining claims on 287 mill sites on almost 1,500 acres of federal Bureau of Land Management (BLM) land in the Imperial Valley of California. • Glamis intended to conduct open-pit, cyanide heap-leach gold mining at the Imperial project and applied to the BLM for approval of a mining plan for the project.

6. Factual Background Federal Legal and Procedural History • Glamis’ Imperial project is located adjacent to the California Desert Conservation Area, an area created by federal statute (FLPMA) to protect its special historical, archeological, environmental, biological, cultural, education, recreation, and economic resources. • The Imperial project was subject to the National Environmental Policy Act and the requirement under that act that BLM prepare an environmental impact statement (EIS) for the project. • When BLM prepared the draft EIS for the Glamis’ Imperial Claim, the agency collected significant evidence and received hundreds of comments regarding the special environmental and archaeological nature of the proposed project site.

7. Factual Background Federal Legal and Procedural History • BLM also sought the opinion of the Advisory Council on Historic Preservation and the Solicitor General. • The Council concluded that the Imperial project would result in irreparable damage to sacred and historic Native American resources. • The Solicitor General concluded that the Imperial project could be denied under FLPMA 601(f), which requires BLM to protect the CDCA from undue impairment and pollution of its streams and waters. • Consequently, BLM issued a final EIS recommending denial of the Imperial project, and, in January 2001, then Secretary of the Interior Bruce Babbitt issued a record of decision (ROD) denying Glamis’ proposal.

8. Factual Background Federal Legal and Procedural History • In 2001, Glamis’ proposal was reconsidered by President Bush’s Administration. • The new Solicitor General issued a legal opinion opposing the opinion of the previous Solicitor General that the Glamis proposal would cause undue impairment. • The new Secretary of the Interior Gale Norton also rescinded the denial of Glamis’ Imperial project • BLM subsequently initiated reconsideration of the Imperial project.

9. Factual Background California Legal and Procedural History • Mining activities in California are governed by the state’s Surface Mining and Reclamation Act (SMARA). • SMARA requires reclamation of mine sites and minimization of water degradation and may require backfilling. • In 2002, California amended its SMARA backfilling regulations to require open pit mines to backfill to the original surface elevation and to prevent groundwater and surface water pollution. • In 2003, the California legislature amended SMARA to prohibit surface mining located within 1 mile of a Native American scared site located in the CDCA unless the mine was backfilled to conditions prior to mining.

10. Factual Background Glamis’ Claim • In December 2002, shortly after it received its Mineral Report for the Imperial project, Glamis requested that BLM suspend its efforts to process the Imperial project permit. • BLM agreed that it would suspend the application if Glamis agreed to hold BLM harmless for the suspension. • Glamis did not agree to hold BLM harmless and in July 2003 filed its NAFTA claim against the U.S.

11. Rights Asserted by Glamis’ • Under NAFTA Art. 1105(1), each party shall accord to investments of investors of another party treatment in accordance with international law, including fair and equitable treatment and full protection and security. • Under NAFTA Art. 1110(1), no party shall directly or indirectly nationalize or expropriate an investment of an investor of another party . . . except: (a) for a public purpose; (b) on a non-discriminatory basis; (c) in accordance with due process of law and the general principles of treatment provided in Art. 1105; and (d) upon payment of compensation. . .

12. Glamis’ Claims Against California • Glamis asserts that the California statutes and regulations regarding backfilling near sacred Native American sites were intended to be discriminatory toward Glamis because of statements made by the Governor and others regarding the need for the legislation in order to protect the Native American sites. • Glamis also asserts that the effective date of the statute and regulations are discriminatory because they apply prospectively to pending applications and not to existing, permitted mining operations. • Glamis argues that California statutory and regulatory backfilling requirements are extraordinary for metallic mineral mines in North America and elsewhere in the world.

13. Glamis’ Damage Claim • Glamis claims $50 million in damages due to exercise of federal and state mining law. • Glamis’ notice of arbitration indicates only $15 million in investment in the Imperial claims. • The additional $35 million in damages is future, expected profit Glamis asserts it would have reaped if permitted to mine the Imperial claims. • However, future, expected profits are not authorized under U.S. takings law. • Glamis CEO admits that the company initiated the claim through NAFTA, instead of through U.S takings law because of the increased chance of recovering compensation.

14. Consequences of SuccessfulGlamis Claim • Undermines states’ legislative and policymaking authority. • California’s mining regulations and legislation are well within the state’s traditional police power to regulate harm to the state’s environment and cultural resources. • If Glamis’ succeeds on its claim, the U.S. government could assert preemptive authority under NAFTA and essentially repeal the California backfilling requirements. • Glamis’ claim also highlights the use of NAFTA to escape U.S. courts and the application of state and U.S. laws in order to seek a more amenable forum that is not subject to U.S. court precedent.