Fool's gold: How the pursuit of precious metal made and broke two towns


Havre Daily News/Zach White

This composite image shows the Landusky water treatment plant. In the background to the left is a mountain untouched by mining. To the right is Gold Bug Mountain, which was covered with cyanide-soaked rock piles in the 1980s and filled over with topsoil and vegetation during reclamation after Pegasus Gold declared bankruptcy in the late 1990s.

This is the version run in the Dec. 29 issue of the Havre Daily News. To read the unabridged version, with additional information, photos and other supplements, click here. Also watch for videos later this week.

Standing near the back of his corrugated steel workshop on a cold December morning on his family's ranch, just outside the thick woods around the town of Landusky, Harold Heppner recalls his childhood in the Little Rockies, before the cyanide heap leach mines came and went, when there were still brooke trout in the streams coming down the mountains.

As he looks down at the headlight he is working on, he also recalls when Pegasus Gold, which ran the mine until it went bankrupt and left the area in 1997, started shipping bottled water in to the Landusky Community Hall, which used to be the school when enough children still lived there to warrant one, after a cyanide spill because it was cheaper than testing everyone's well water for possible contamination.

On the other side of the mountains, the residents of the town of Zortman are also nostalgic.

Clayton Wallace, the owner of the Miner's Club Bar and Cafe, talks over coffee in his empty restaurant about when he and about 350 other people were employed by the mine and the town was not mostly filled with retirees like himself.

Two hours later, toward the end of the cafe's bi-weekly community lunch, four of the women of Zortman finish their pie and reminisce about a time when the children in town still had a school and didn't have to make a 100-mile round trip bus ride to Malta every morning.

The parts of the past that each long for may be different, but both Heppner and the people of Zortman can agree that the present, with nearly $2.5 million being spent on cleaning the former mine in 2010 alone and both towns slipping away to join their populous productive pasts in history, is not what they want.

How Zortman Landusky came to lose their resources, jobs and clean water

The history of Zortman, Landusky and the mountains that surround them begins, geographically, millions of years ago, when magma bubbled up through the earth and cooled into the peaks that make up the Little Rockies, and the rest of Montana's island mountain ranges, trapping inside deposits of certain minerals that humans would eventually decide were precious.

Far more recently than that, within the past few thousand years, those mountains in their unusual location became an important place for the native peoples of this region in the North American plains, including the White Clay people, also known as the Gros Ventres, and the Assiniboine, or Nakoda. People of both tribes currently live on Fort Belknap Indian Reservation which neighbors the area.

Morris "Davy" Belgard is one of the founding members of the White Clay Society which works to preserve the ceremonies, language and traditions of the White Clay Nation, a name he prefers to the more common "Gros Ventres. "

According to Belgard, the oldest known name for the Little Rockies is the Wolf Mountains, and they were a holy place, a safe place, a gathering place. His ancestors saw the peaks throughout the plains they roamed as massive lodges that served as dwellings for great spirits. In fact, the main peak that was shaved and blown apart for the Zortman and Landusky mines has been called Spirit Mountain by the reservation residents. The people would climb the peaks, build or settle into a stone, U-shaped, 3-foot-tall fasting nest and pray, fast and communicate with the spirits for around four days.

Belgard said his grandmother used to climb a peak near his family's home in Hays, where she would fast and collect a medicinal plant used to stop bleeding after child birth.

Here comes the man

Image courtesy of the Montana State University-Northern Vande Bogart Library

In this photograph taken circa 1896, miners work at the Alabama Mine in the Little Rockies.

As settlers and homesteaders began pouring into the area in late 1800s, the tribes that once had wandered across all borders were increasing split up and confined to the new reservations.

The Fort Belknap Indian Reservation was established in 1888, seven years after what Belgard said was probably the last good bison hunt before they were nearly exterminated.

At least the residents of the new reservation could still have access to their holy mountains which were still included in the reservation boundaries.

Then some of the settlers in the area also found a use for the Little Rockies, or "bay thub, " that was less spiritual.

By the time the reservation was established, prospectors had already found gold and were climbing into the mountains to mine the metal in creek bed placer mines.

These early pioneers were satisfied with panning for gold for about a decade until the real treasure was discovered in the 1890s — gold deposits deep inside the mountains.

When underground gold deposits were discovered on land the U. S. government had just promised the residents of Fort Belknap only a few years before, they realized their mistake and, with the help of William C. Pollock, George Bird Grinnell and Walter M. Clements, quickly set about fixing it.

The Grinnell Treaty was signed on Oct. 9, 1895, and the golden chunk along the southern edge of the reservation was removed for $360,000 to be given to the tribe over four years in the form of supplies for farming, setting up and staffing schools, the agency and other buildings for the tribes and "in such other ways as may best promote their civilization and improvement. "

The agreement, which was signed by the three U. S. agents and 334 men from the reservation states that the residents who had one generation before roamed the plains and hunted buffalo would receive agricultural supplies and clothing and "preference shall be given to endeavour by honest hard labor to support themselves, and especially to those who in good faith undertake the cultivation of the soil and engage in pastoral pursuits as a means of obtaining a livelihood. "

Except the very next section begins with, "As the scarcity of water on this reservation renders the pursuit of agriculture difficult and uncertain, and since the reservation is well adapted to stock raising, and it seems probable that the main reliance of these Indians for self-support is to be found in cattle-raising. "

The treaty also says near its end that the terms of the agreement were "fully interpreted to said Indians and they made to understand the same. "

Listening to Fort Belknap Community Council president Tracy "Ching" King and reading transcripts of discussions of the agreement from 1895 that Belgard provided, the men who signed did not necessarily "understand" the actual terms. Or they actually understood implications of the agreement that were not explicitly included in the treaty's 19th century legalese.

According to King, the agreement of the tribes was based less on believing the price was fair and more on misunderstandings and fears the tribes had for their health and that of their children after the decimation of bison populations.

"Back then, the tribes didn't know English, so the interpreters interpreted that and the starvation tactic was used, " King said. "The tribes were coerced into signing the land back. "

In the discussion that Belgard shared, an Assiniboine or Nakoda man named The Male told the government officials that "I have not had anything to eat since this morning, and I am getting empty now and I feel like I would like to see the council over soon now, and I wonder how these young men would like to starve.

"I would like to exchange that mineral land over there for food that we may live. "

Many of the men in the talks argued unsuccessfully for a 10-year treaty, basically a lease, rather than a one-time purchase

In the end. the land was sold to the government and opened to mining claims, while the tribes began their half-hearted (at most) move toward their mandated way of life.

As people moved into the southern Little Rockies and converted the mountains into a labyrinthine search for weath, they formed two new towns, Zortman and Landusky.

Out with the old mines, in with the new

According to Wayne Jepson, a Department of Environmental Quality hydrologist, the underground mining operations that first burrowed into the earth in the 1890s started to die out in the 1950s.

It wasn't until the development of a new technology, cyanide heap leach mining, in the late 1960s that interest in Zortman Landusky was reignited.

The cyanide heap leach process starts with blasting sections of a mountain into rubble. This rubble is then placed in a leach pad where it is soaked in a solution of cyanide, a highly toxic compound of carbon and nitrogen, that would sap the gold particles out of the rubble.

The cyanide solution was then sucked from the pad and taken to a processing plant where the gold was taken out at high purity. Then the solution was sent back to the pads for more gold.

In 1979 Pegasus Gold filed an Environmental Impact Report with DEQ proposing to place these new leach pads on top of the old holy mountain.

As the project was approved, Zortman Landusky became one of dozens of similarly styled mines popping up all over Montana after a spike in gold prices in 1980, though none would ever match the sheer size what would eventually become Zortman Landusky's nearly 1,200 acres of pad space.

Through the '80s and early '90s Pegasus constructed more than a dozen pads named for their year of construction in the Zortman Landusky area. The biggest were the 87 and 91 leach pads, covering about 250 acres of the now bald Gold Bug Mountain, or Spirit Mountain.

The pine fur cap became a poisonous, yet profitable, yarmulke.

For a few years, everything seemed to be working out great. Millions of dollars in gold were coming off the mountain. Some of those dollars were even making their way into the pockets of hundreds of employees coming to the mine from Lewistown, Havre and Malta.

But as the mid-90s neared, Pegasus made the first few faltering steps toward failure.

Then come the problems

Havre Daily News/Zach White

Fort Belknap Community Council president Tracy "Ching" King shows a sample of water from Swift Gulch, the stream that runs north from the mines onto the reservation.

Wayne Jepson started work for DEQ in 1991. The following year he started working on the Zortman Landusky mine.

Within two years he and his colleagues found the mine was not meeting water quality standards and the state of Montana sued Pegasus Gold.

The 1994 lawsuit was joined by the Bureau of Land Management, the Fort Belknap reservation and eventually the U. S. Environmental Protection Agency.

After some back and forth, the case was settled in a consent decree "which required the company to take a number of actions to post additional bonds, to build water treatment facilities, to pay some fines as well as few other things, " according to Jepson.

The new bonds required Pegasus, or its insurers, to guarantee $800,000 a year for water treatment and set up a trust fund for the state of close to $15 million for further treatment.

"Zortman was the second mine for which the state held a bond for long-term water treatment, the first one being Golden Sunlight (a cyanide vat leaching mine that still operates east of Butte) and at that time that was a very small bond for water treatment, long term, " Jepson said. "I think it was predicted that it would need to treat 15 gallons a minute of water pumped out of the Golden Sunlight pit forever.

"The situation at Zortman was much more extensive, " Jepson added.

Jepson started looking into posssible new costs, but wasn't able to finish while Pegasus still existed.

Pegasus began constructing water treatment plants on both the Zortman and Landusky sides of the mountain as a part of the decree.

Pegasus also started working on a new plan to expand Zortman Landusky mine, extensively. The new mining plan would have also included additional, more comprehensive, bonding to cover water treatment.

But the new plan was held up by appeals to the consent decree that lasted longer than the company did.

Rich Adams, a field manager for BLM based out of Malta, said he sees the humor in the poor timing.

"I always joke with the minerals guys that maybe we should have let them keep mining and not get away, " Adams said.

Despite their legal troubles, Pegasus shutting down the mine was its own decision, according to Clayton Wallace, who, before his retirement, worked for the mine for about a decade starting in 1996.

"When they first shut down, they weren't broke, " Wallace said. "They didn't go broke for a year to a year and a half. They had $400 million in the black while they waited for permits."

But that money was burning a hole in Pegasus' pockets.

Jepson said that Pegasus had gone all-in on a new venture around that time.

"They invested heavily, a few hundred million dollars on a project in Australia, " Jepson said. Much that investment they had borrowed in advance Jepson said. "They overextended themselves. "

Then the price of gold plummeted.

The price that had hovered between $350 and $400 an ounce for almost a decade, dropped by 30 percent from 1996 to its 2001 low of $271.04, the lowest price paid for gold in 23 years. In the past decade, however, that price has increased nearly five-fold.

With prices so low, Pegasus lost everything. The Australia project fell through. The company had shut down several sites in several states already, but now, just months after completing their water treatment plant at Landusky and with a substantial expansion in the works, Pegasus was forced to close the crown jewel of Montana gold mining and declare bankruptcy.

Governments gets in the way

When Pegasus shut down and took Zortman Landusky mine with it, DEQ was forced to step in and clean up the mess.

Reclamation workers started containing cyanide in 1999.

What DEQ and their cleanup contractor Spectrum Engineering didn't prepare for was a surprisingly rapid rise in acidity.

Bill Maehl, project manager for Spectrum Engineering, noticed the acidity after his firm got started at the mine in June 1999.

"The initial projections on the leach pads was that they would probably go more and more acidic in a 10- to 20-year time frame, " Maehl said. "And yet we saw them go acidic in about 6 to 9 months. "

The acidity came from sulfur-rich compounds called sulfides, primarily iron sulfide or "fool's gold, " in the mountain. While blowing the mountain apart for the leach pads, and even digging into it 100 years ago, these sulfides were exposed to water and oxygen they had never seen before.

This exposure caused a chemical reaction that turned the water into sulfuric acid, which in turn started leaching other metals out of the surrounding rocks, like cadmium, selenium, copper, zinc, aluminum and large amount of iron from a massive 10,000-year-old ferricrete deposit, which was also exposed by the century of mining.

Luckily for the teams, they soon found their new unexpected problem solved the one they had expected: the acidity broke down the cyanide into other compounds, Jepson said, including carbon dioxide that joined the atmosphere and nitrogen compounds called nitrates that stayed in the water.

Just two years after Pegasus had walked away from the mess, it was already growing beyond anyone's expectations.

Luckily Pegasus' bonds and trust fund were still there after the bankruptcy to help take care of the problems. Even though they had only paid for 75 percent of the trust fund before they went under, the state of Montana filled in some of the gaps.

Maehl said the situation would have been a lot worse with those funds.

"When they first bonded the site they envisioned … they were planning on just puncturing the liners and just letting the water go, " Maehl said.

The process they ended up doing involved filling in the open pit that the ore on the leach pads came from. In fact some of the leach pad rocks were put back in the pit. The rest of the leach pads were covered with top soil and tall grasses, making mountain meadows.

Then the focus of the project was just to keep all of the water, with its acidity and various metals, from getting off the mountain without being cleaned at least once.

One hiccup with this plan was the nitrates left in the water that could not be eliminated with the treatment plants left by Pegasus.

According to the EPA, high levels of nitrates are dangerous for infants who can suffer from "blue-baby syndrome" and possibly die if they drink it.

So Spectrum built a third treatment plant filled with bacteria that eat the nitrates in the water when fed a molasses-like food.

But the high acidity was killing the bacteria. So they started treating the water with lime to cancel the acidity, then mixed in the bacteria to handle the nitrates, then treated it with lime again.

That worked for a while.

"When we started in '99 we had some fairly high levels up there, " Maehl said. "For about a six- or seven-year period, it was going down at about a 45 degree angle, a nice straight line heading down and then all of a sudden it almost levelled off, and we have seen very little decrease in nitrate levels since then. "

Maehl said he thought maybe it was all the rock-shifting from reclamation keeping nitrate levels up.

Changing water levels, as the ponds by rain and pumped out for treatment, could explain it, as each cycle gives the rock "a nice fresh rinse", as Maehl put it.

As if that weren't enough, another new problem popped up a few years ago in the northward creek called Swift Gulch that runs onto the reservation, right by the tribal powwow and sundance grounds and then through the town of Hays.

The water was filled with rust, and, according the Maehl, has an acidity or pH level of about 3.5, the same as orange juice.

A treatment plant was built on the stream in 2008, then upgraded last year.

Many on the reservation already have concerns about the water coming onto their land.

King said he hears concerns from people frequently and believes the pollution could be the cause of many health problems suffered by residents of southern Fort Belknap.

A spokesperson for the Fort Belknap hospital said they were not aware of any specific instances of health problems from the water.

Ward Van Wichen, administrator for the hospital in Malta, said that he had not heard of anyone coming in with pollution-related health problems in his time there recently, or when he worked as a nurse at the hospital from 1992 to 1994, while the mine was running.

Part of King's concern stems from his belief that not as much is being done to clean water heading north onto the reservation as there is for water heading to Zortman or Landusky.

Maehl, Adams and Jepson all denied his claims. While acknowledging that the Zortman and Landusky water treatment plants are in fact larger, they all explained that the Swift Gulch facility, which King refers to as the "porta-potty" because of it's smaller size and his perception of its quality, was made more recently, with greater understanding of the needs to fulfill, and uses newer, better, more efficent technology, where machines mix lime while spinning rather than sitting in the older massive settling tanks.

The new housing for the Swift Gulch plant was one of a few projects that were built in the past year with money from the American Recovery and Reinvestment Act, appropriately.

Others include about 30 million gallons in holding ponds on top of the reclaimed 87 and 91 leach pads and a wind turbine to be built next summer to help cover some of the massive and growing energy costs of running the many operations on the mountain.

The holding ponds were built to help store excess water until the plants can get around to cleaning it. But even those new ponds were not enough for the unusually high amount of water that has fallen in the past two years. This past year is nearing 38 inches of precipitation, "which would be double what we've had, ever, " Maehl said.

The lime trucks that normally go through Roundup had to take back roads while that town was underwater this spring.

Wayne Jepson said that one of the holding ponds on the Zortman side overflowed this spring when a landslide fell into it and blocked the pump. As the water flowed down the mountain, through the town of Zortman and out onto the plains toward Highway 191, Jepson said tests showed signs of contamination and acidity past Zortman, though it quickly dissipated once out of the mountains.

Gerald Martin is a Gros Ventre, or White Clay, resident of Hays and one of Spectrum's seven-member team that runs the plants every day but Christmas. During a particularly bad day this spring, Martin saw Swift Gulch running high in Hays and hurried to the brand new treatment plant. When he arrived both an excavator and the treatment plant were about to wash away. The overflowing creek had already washed away a portion of dirt from under the treatment plant's foundation. Martin hopped in the excavator, moved it to safety and dug a new path for the water, away from the water plant. The area has since been restructured to prevent it from happening again.

Even now, the plants are running longer than they have before as the staff try to catch up on filtering all of this year's water to be ready to handle another possible wave this upcoming spring without further incident.

What happens in Landusky, Stays in Landusky's water

The intent of the voters, according to Jepson's belief about the 1998 voter initiative and its tie to the Pegasus implosion, was to avoid another catastrophe like the one at Zortman Landusky.

The water there, according to all existing plans, will need to be cleaned "in perpetuity", which means different things to different people involved. Though with the twists and turns of the past 15 years of water cleaning, all of their answers contain a lot of uncertainty.

Bill Maehl has the most positive estimate for the project.

"Things will obviously get better, " Maehl said. "At some point the leach pads are going to clean themselves up. I don't know whether that's 10 years or 50 years. "

Jepson believes it will take a little longer than 50 years.

"These areas would have to continue to be treated with money from this trust fund, for, we say, perpetuity, " Jepson said. "Which means anything from 100 years, 1,000 years or forever. "

While Rich Adams is more in line with Jepson's longer view.

"I think forever and forever, until there's another process developed that we haven't thought of, " Adams said.

On the flip side we could say we'll just walk away from it, but I don't think we want to deal with those environmental consequences. "

There is substantial worry among all of those concerned about finances. After all, it is pretty difficult to pay for a program designed to run for eternity.

Jepson said that when the reclamation began, the $800,000 from Pegasus' bond was mostly able to cover costs, but after all of the surprises they have found and the new challenges popping up all the time, the cost for 2010 had nearly tripled to $2.3 million. This year promises to be even more, with all of the flood damage.

Most of that overflow was handled by BLM's abandoned mine fund, with some help from DEQ.

But with prices where they are, and where they appear to be heading, by the time the $800,000 stops in 2017, the project will need it all the more.

At that time they will receive the $15 million in Pegasus' trust fund, as well as an additional $19 million trust fund that Windy Boy helped set up a few years ago.

So what happens when the total $34 million runs out, probably about a decade into the project 1,000-year timeline?

Jepson said it will be the taxpayers footing the bill for the mess made by Pegasus, whose executives Jepson said were "getting their golden parachutes through bankruptcy court and allowed to take millions in profits, while we get stuck with the short end of the deal. "

While he may not have the resources to take on the problem, Harold Heppner, the middle of 10 kids by the son of a homesteader, standing in boots on a dark dirty floor, wearing coveralls and a mustache, has an idea.

"They should find a way to restore it, " Heppner said. "That'd put people to work. Christ, it took them 15 years to do that much damage. It'd take another 15 to put it back. Maybe that's another way to turn around and put people back to work, is to restore these areas in the whole state of Montana where damage has been done for money. Find ways to replace it, put it back, undo what damage that's done.

"But nobody sees any profit in that. "


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