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What is the impact of international investment agreements on state regulation of cyanide heap-leach gold and silver mines? 

On November 2, 1998, Montana voters adopted a ballot measure banning cyanide heap-leach gold and silver mining in the state. 

Cyanide is highly toxic and even in small amounts can present health risks to people, wildlife, and fish.  In addition, cyanide leach mining involves digging a large open pit and pulverizing tons of low grade ore for each ounce of gold extracted.  Montana has experienced serious problems in reclaiming cyanide heap-leach mines and protecting ground water and mountain streams from contamination, especially when mining firms experience financial difficulties or declare bankruptcy as mining operations wind down.

Prior to adoption of the Montana ballot measure, Canyon Resources Corporation, had planned to develop an almost 600 foot deep cyanide heap-leach mine near Lincoln, Montana and close to the banks of the Blackfoot River, a wild and scenic stream immortalized in Norman Maclean's book, A River Runs Through It, and a 1992 Robert Redford movie based on the book.  In 2000, Canyon Resources challenged the 1998 measure in state and federal court arguing that the regulation amounted to a taking of its property rights for which it was entitled to millions of dollars in compensation from the state of Montana.  The federal court deferred to the state courts, and Canyon lost in Montana district court and before the Montana Supreme Court.  The U.S. Supreme Court declined to review the Montana Supreme Court decision.  Canyon Resources then revived its federal case, losing in federal district court, then appealing to the U.S. Federal Court of Appeals for the Ninth Circuit, which considered the case in November 2007.  Canyon Resources, also, supported a ballot initiative (I-147) in 2004 to repeal the 1998 ban, which Montana voters rejected.

The question is whether Canyon Resources, if it had been a Canadian or other foreign corporation, would have been more successful in challenging Montana's ban on cyanide heap-leach gold mining under NAFTA's chapter 11 or some other international investment agreement.  A related question is: if a Canadian or other foreign investor should seek to develop a cyanide heap-leach mine in Montana, would it bring an international investment claim, arguing that Montana's ban violates international property rights protections.  The answers to these questions may be found in the outcome of Glamis Gold v. United States, a pending NAFTA chapter 11 case.

In July of 2003, Vancouver-based Glamis Gold Ltd. filed a NAFTA chapter 11 claim, seeking $50 million from the United States government.  Glamis wants compensation from the United States for alleged financial losses resulting from California land use regulations that require extensive reclamation of open pit, cyanide heap-leach gold mining sites, especially where they are on or near Native American sacred sites and similar sites of special environmental or cultural value.  

In this case the California State Mining and Geology Board acted in 2003 to require that the holes dug by open pit, cyanide heap-leach mines be backfilled and re-contoured after mining operations are completed.  The California legislature also acted at this time to require reclamation of such open pits near sacred sites and other sites of special concern.   

In the early 1990s, Glamis acquired dozens of mining claims in the Imperial Valley, a pristine desert east of San Diego, and proposed constructing a large, open pit mine that would use the "cyanide heap-leach" process to extract gold from low grade ore, in this case requiring approximately 422 tons of ore to be mined to produce an ounce of gold.

Glamis proposed to build the mine next to a protected wilderness in a woodland area that provides a habitat for desert wildlife.  The proposed Glamis project, also, would have tapped 389 million gallons of water every year from the acquifer lying under the Imperial Valley desert.

The area where Glamis proposed digging its gold mine is sacred to the Quechen Indian Nation, and they use it in the practice of their religion and to venerate their ancestors.  Ancient trails of sacred significance to the Quechen people stretch across the area, which abounds in archeological sites.

NAFTA's investment chapter allows a transnational corporation like Glamis to act on its own initiative to bring the United States before an international tribunal.  And, it allows such a transnational investor to seek hundreds of millions of dollars in damages for the acts of state and local governments.

As in other NAFTA investment cases, Glamis is making claims for compensation that would not be accepted by U.S. domestic courts applying the U.S. Constitution.   If Glamis wins, the United States will have to pay to allow California to regulate open pit cyanide heap-leach gold mines.

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