Between A Rock And The EPA: A Fight Over Alaskan Minerals Is Making A Big Splash In Washington

According to British mining giant Anglo American PLC (LON: AAL) and its partner, Canada's Northern Dynasty Minerals (NYSEANEX: NAK), the Pebble Mine prospect -- located near the headwaters of Bristol Bay in the southwestern part of the state -- is thought to hold about 80 billion pounds of copper, 5.6 billion pounds of molybdenum and 107 million ounces of gold. 

It is a massive prospect. The rough value of the mineral deposits tops $500 billion, say the companies, which have already spent $500 million over the last five years on pre-licensing assessments and environmental analysis, with plans to start digging by 2015.

But sadly for Anglo and Northern, the Pebble Project could be buried before ground has even been broken.

The immediate issue is a fish: Bristol Bay is home to the largest sockeye salmon fishery in the world, and some locals are terrified the mine will pollute the area's streams and ruin the $480 million-a-year fishing business.

Local activists have compared the potential impact of the mine's effluent to BP's Gulf of Mexico disaster and the Exxon Valdez oil spill off Alaska, saying the region's fish stocks will become unsellable if the project goes ahead.

After protests and petitions, the fight has gone all the way to the top, with the Environmental Protection Agency set to announce a final decision on the project within weeks.

But the real fight here isn't over the salmon; it's over how much power the EPA really has. Specifically, it is a fight over whether or not the agency can scotch a project before plans for that project have been formally submitted.

While the agency has not said when it will release its final assessment, environmental groups who pressed for the study are hoping the agency will finalize its report and invoke what's known as a Section 404(c) veto as quickly as possible.

They want this to happen, however, before Pebble's prospectors have submitted a single plan for the project.

"Even without a catastrophic dam failure," Lindsey Bloom, an organizer with opposition group Trout Unlimited told Fox News, "there would be cumulative effects over time that would have an adverse effect on fish and other animals in the region."

The EPA, whose job it is to assess the impact of major projects like Pebble, released a draft assessment of the project in May. In its summary, the EPA noted that the Pebble mine could "affect the Bristol Bay watershed's fish and would consequently have impacts on wildlife and human welfare."

The unfavorable report goes on to mention a litany of potential environmental hazards which, according to activists who spoke with Fox News, essentially buried the project.

Under the Clean Water Act, the EPA may issue a permit, which is known as a 404, allowing companies the right to discharge certain amounts of effluent into the water table. The EPA also has the ability, under rule 404(c), to veto a project it deems will violate the act.

The battle for the mine has entered its final stages, with the EPA's peer review panel meeting publicly this week in Anchorage, then privately on Thursday.

In its report, the EPA states: "This is not an in-depth assessment of a specific mine, but rather an examination of the impacts of mining activities at the scale and with the characteristics realistically foreseeable in the Bristol Bay region."

"Details of a mining plan for the Pebble deposit or for other deposits in the watershed may differ from our mine scenario; however, our scenario reflects the general characteristics of mineral deposits in the watershed."

A pre-emptive strike against the Pebble Project by the EPA could have wide-ranging ramifications, industry groups say, and Washington is starting to sit up and take notice. For example, the Army Corps of Engineers issues roughly 60,000 404(s) discharge permits annually, giving the environmental go-ahead for everything from mines to shopping malls.

On Monday, House Subcommittee on Investigations and Oversight Chairman Rep. Paul Broun, R-Ga., asked EPA Administrator Lisa Jackson for a personal briefing on the agency's draft study.

"As chairman of the Investigations and Oversight Subcommittee, I take my oversight responsibilities very seriously, especially when it involves scientific studies and assessments by federal agencies within the committee's jurisdiction -- such as the EPA," Broun said in the request letter. "I've asked Administrator Jackson to schedule this briefing by the end of the month, and I look forward to her timely response to my request."

Arguing on behalf of Canada's Northern Dynasty, regulatory lawyer Thomas Collier hinted that the EPA may also be blurring the line between scientific mandate and political maneuvering.

"I see no policy reasons or scientific basis for beginning this study without an important prerequisite -- a mine plan -- and for rushing it to conclusion," Collier said, according to Equities.com. "I do see, however, a possible political explanation. Could EPA be rushing to complete an assessment that could be used as a basis for a 404(c) veto of Pebble in the event President Obama is not re-elected and a new administration takes office?"

Industry groups are also ramping up opposition to the EPA's decision to press ahead with the assessment even before Anglo American and Northern Dynasty submit a formal proposal.

"From a consumer perspective, there's always a concern the EPA will use to abuse its regulatory reach and take what should otherwise be a local issue back to Washington D.C.," said David Holt, president of the Consumer Energy Alliance.

"This use of the veto potentially takes billions of barrels of oil and trillions of cubic feet of natural gas out of production at a time when the U.S. needs it most," he said. "404 is just another example of potential regulatory reach by the government. They've made a preliminary report and speculated at the potential impact of Pebble mine without a plan from the miners themselves."

And if previous experience is anything to go by, Holt's concerns are well founded.

Last year, consulting firm the Brattle Group investigated the wider economic impacts of the EPA's use of section 404(c) after the agency used it to withdraw a permit from mining firm Arch Coal three years after granting it a discharge permit.

In 2007, the Army Corps of Engineers issued a Section 404(s) discharge permit to Arch Coal for its Spruce No. 1 Mine in West Virginia. But after operating within their 404 guidelines for three years, in January 2011 the EPA decided to revoke it.

According to Prof. David Sunding of the University of California-Berkeley, the Brattle report's author, the EPA's "after-the-fact" veto of Arch Coal's 404 license, "Alters the incentives to invest in projects requiring a permit under Section 404."

"The EPA's action has a chilling effect on investment in activities requiring a 404 authorization across a broad range of markets. The possibility of permit revocation has highly pernicious effects on investment. Investment, in some cases, is not only delayed, but entirely deterred."