EPAs Proposed Ground Water Protection Standards 40 CFR 192 an Industry Perspective Peter Luthiger Mesteña Uranium LLC

Prologue EPA Notice of Rulemaking – January 26, 2015 The proposed new Subpart of 40 CFR 192 would establish ground water restoration goals and monitoring requirements at ISR facilities Requirements to characterize background ground water chemistry Requirements to meet restoration goals for 13 constituents Requirements for long-term stability monitoring Comment period recently extended to May 27, 2015

Reality Mother Nature made the ground water in and around uranium ore bodies not suitable for use as a source of drinking water EPA attests through the aquifer exemption approval that pre-mining water quality in and around uranium ore bodies is not suitable as a source of drinking water now and in the future Treatment of ground water for use as a public water supply in and around uranium ore bodies would be required whether mining occurs or not

Pre Mining Water Quality Mesteña Uranium – Alta Mesa Project

Is There A Need For This Rulemaking? EPA Protect ground water from potential future contamination Not burden future generations with costs if ground water contamination occurs Regulated Community Has a condition existed in the past that needs fixing? Is there a condition now that needs fixing? Is there a condition that may happen in the future that needs to be prevented?

Scientific / Technical Justification EPA Technical discussion is speculative “..may increase concentrations..” “..potentially reduced risk of exposure..” “..may migrate out of production zone..” “..potentially reduced human health impacts..” “baseline price assumed to be $57 per pound..” No specific example identified by EPA in the proposed rulemaking document or any support documents of ground water contamination of any public water supply attributed to an ISR site

Regulated Community Existing regulatory framework in Texas has been developed over 30+ years from the cooperative effort between stakeholders to ensure protection of the public and the environment. TCEQ – “There have been no documented cases of offsite contamination in south Texas in over 30 years of in situ uranium mining at over 30 different sites.” NRC – “The monitoring data indicated no impacts attributed to the migration of impacted ground water from the existing facility.” Scientific / Technical Justification (continued)

Data More Data Scientific / Technical Justification (continued)

Impact on Property Owners Surface lease Surface owner’s land tied up in extended lease arrangements preventing surface property owners use of their land Mineral estate likely not developed Loss of resource Loss of value of resource Possible regulatory “takings” Excessive consumption of water (i.e., waste) Lowering local and regional water table Costs for new wells, deepen existing wells, reset pumps

Water Use Waste Water pumped from an exempted aquifer is replenished from surrounding water sources which reduces overall water quantity Pre mining water quality in and around the ore body was designated by EPA as not being suitable for use as water supply now or in the future Continued water consumption while chasing an arbitrary statistical result without any incremental future use value = waste EPA stated goal is to protect water quality and quantity Restoration is most consumptive phase of ISR process and continues until goals are achieved

Economic Analysis EPA relying on a “Draft” document Internal Peer Review?? External Peer Review?? EPA chose to omit numerous costs in evaluation Technical consultants (modeling, data evaluation, etc.) G&A cost (insurance, permit fees, financial assurance updates, lease holding costs) OP/EX cost (facility maintenance, personnel) Involving industry would have shown EPA that these costs are substantial and must be included in any valid economic analysis on ISR facilities

Cost to Sales Ratio Significant impact if ratio > 3% Regulatory Flexibility Act/Small Business Regulatory Enforcement Fairness Act guidance (EPA, 2006). EPA revenue estimate based on all US utility purchases Annual compliance costs = $13.5 million (EPA App. D) EPA uses $3 billion in sales $57/lb., this = 52.6 MM lbs.) EPA math results in cost to sales ratio of 0.4% Analysis of impact on ISR should use data from ISR Annual compliance costs = $13.5 million (EPA App. D) Annual US production of 4.6 MM $43/lb. = $198 million ISR annual production is less than 4.6 MM lbs. ISR cost to sales ratio = 6.8% ( $13.5 M/ $198 M) = SIGNIFICANT IMPACT Economic Analysis (continued)

Case Study Mesteña Uranium LLC EPA Costs: Low = $480k; Average = $613k; High = $761k (EPA, App. D) Sales: 500,000 $57/lb. = $28.5 million Ratios: Low = 1.4%; Average = 1.7%; High = 1.9% EPA Conclusion : Ratio < 3% = Not significant Reality Costs: Low = $480k; Average = $613k; High = $761k (EPA, App. D) Sales: less than EPA guess Price: Market price (~ $40/lb.) Economic Analysis (continued)

Mesteña Uranium is SIGNIFICANTLY impacted

Path Forward EPA must rescind proposed 40 CFR 192 rulemaking EPA must then answer this question in a truthful, factual, scientific, defensible and transparent manner: “Is there an actual problem that requires attention?” If answer is no –> time for Shiner and Tito’s If answer is yes –> re-initiate process in a truthful, factual, scientific, defensible and transparent manner Engage stakeholders in a working group process Federal and state agencies ISR mining companies Environmental organizations R&D – Rip off & Duplicate the Texas success story

As Texas Goes, So Should the EPA Texas has demonstrated 30+ years of ISR restoration success Restoration to levels consistent with pre-mining range of water quality in vicinity of ISR operations Naturally occurring geochemical environment controls mobility EPA needs to adopt Texas UIC Restoration Program 30 TAC § years of proven success at protecting USDW. Ongoing improvements to Texas UIC program involving cooperative effort from all stakeholders ensures continued success into the future

Thank You