The operations of Cameco are subject to numerous laws and regulations regarding environmental matters and the management of hazardous wastes and materials. Changes in environmental laws and regulations, or more stringent application of existing standards, could cause additional expense, capital expenditures, restrictions or delays in the operation, exploration or development of the Company's properties.
Cameco Initiatives
Cameco's environment and safety department manages the Company's environmental assessment and regulatory compliance and reporting function. Cameco conducts regular environmental and safety audits of its sites. Annual expenditures of over $15 million are dedicated to environmental monitoring, environmental assessment and health and safety programs.
Like other large industrial organizations, Cameco utilizes chemicals in its operations which could be hazardous to health and the environment if handled incorrectly. Employees are trained in the proper use of hazardous substances and in emergency response.
Cameco has had a formal Environmental and Safety Policy in place since 1992, and has developed an employee Environmental Awareness Program to reinforce this formal policy. The Company has an Environmental and Safety Committee of the Board of Directors and a program of environmental audits. To promote better communication with communities in Northern Saskatchewan on environmental and other matters, the company organized the Northern Community Liaison Committee in 1990 and, with Cigar Lake Mining Corporation and Cogema Resources, the Athabasca Working Group in 1993. The Company also cooperates with the Environmental Quality Committees organized more recently by the Province of Saskatchewan.
Canada
Environmental matters related to Cameco's operations in Canada are the subject of ongoing public scrutiny and regulatory review by the Atomic Energy Control Board of Canada ("AECB"), Saskatchewan Environment and Resource Management ("SERM") and the Ontario Ministry of the Environment ("MOE").
Decommissioning and Reclamation
Once reserves of a particular deposit in Canada have been exhausted or after processing activities have been permanently suspended, Cameco and its partners are required by law to decommission operating sites including waste rock and tailings management facilities and reclaim those areas affected by their activities, to the satisfaction of provincial/state and federal regulatory authorities. Cameco annually accrues amounts for future reclamation costs based on the estimated life of the facility, units of production and estimates of future decommissioning and reclamation costs. The annual accrual and total provision is formally reviewed by the Company every two years as well as for license renewal applications. If required, the future accrual rate is then adjusted. As of December 31, 1997, Cameco had accrued a total accounting provision of $88.0 million. See Note 9 to Cameco's 1997 Consolidated Financial Statements.
Both the AECB and SERM have regulations requiring financial assurances for decommissioning and reclamation of minesites. To conform with SERM's requirements Cameco submitted decommissioning plans for all mine sites by March 31, 1997. Although SERM does not require financial assurances until March 31, 1999, the AECB is requiring financial assurances for uranium mines when licences are renewed. Financial assurances in the form of letters of credit were supplied for Rabbit Lake in 1996 and Key Lake in 1997. The letters of credit for McArthur River were increased effective January 2, 1998 reflecting the new construction. Fuel Services operations located in Ontario are not currently covered by financial assurance regulations but decommissioning plans have been filed with the AECB.
Pursuant to the Reorganization of SMDC and ENL (now CEI), Cameco assumed the ownership and primary responsibility for the management of wastes existing at the time of the Reorganization ("Historical Waste") at the Port Hope Conversion Facility, the Blind River Refinery, the Port Granby Waste Site and the Welcome Waste Site ("Historical Facilities"), all located in Ontario. The Company assumed liability for the first $2 million of all costs in respect of any claim arising out of or related to the Historic Waste and all decommissioning and reclamation costs at the Historical Facilities and 23/98ths of the next $98 million of such costs. CEI retained liability for the balance of the costs up to $100 million and for all the costs in excess of $100 million, effectively capping Cameco's liability at $25 million. A total of approximately $3.8 million has been spent to date. See Note 22(a) to Cameco's 1997 Consolidated Financial Statements. As no defined plan or time schedule for carrying out the reclamation of any of the Historical Facilities has yet been prescribed or required by applicable regulatory authorities, the Company has not established any reserves for this liability. The Government of Canada established a Task Force to search for a new site to receive the Historical Waste. In 1995, a non-binding public referendum was held in Deep River, Ontario, concerning the possible construction of a low level radioactive waste disposal facility. This referendum was approved, but the federal government and the Town of Deep River failed to reach agreement on a compensation package by the deadline of December 31, 1996. Deep River withdrew from the negotiations in early January, 1997 and subsequent efforts failed to produce a new agreement. The federal government is now discussing other disposal options with the Town of Port Hope.
The initial tailings facility at the Key Lake Mine was commissioned in 1983. In 1989, it became evident that the tailings facility was not operating as originally planned and that ice formation and slower than anticipated tailings consolidation were occurring. Concern was expressed by AECB and SERM that this situation could compromise the proposed decommissioning plan. Extensive studies were conducted over the next two years, resulting in the development of a plan for thawing the ice and promoting drainage and consolidation of the tailings. This plan was approved by the relevant regulatory agencies and its effectiveness was demonstrated in 1992-93. Implementation of the plan was deferred until the feasibility of nickel and cobalt recovery from the tailings prior to their final decommissioning could be evaluated. This evaluation was completed in 1996. A pilot plant showed that the recovery is technically feasible, although the process is complex, but current market conditions and projections were judged inadequate to support the project. In the course of the work on tailings consolidation, it also became apparent that the existing tailings facility had insufficient capacity for all the tailings to be generated by the Key Lake operation. A plan was developed in consultation with the regulatory authorities to use the Deilmann Pit for tailings disposal. Mining of the pit was accelerated to ensure that it would be exhausted before use for tailings disposal. A project proposal was submitted to the relevant regulatory agencies in 1991 and in February 1994 an EIS was filed for this project. Approvals to use the Deilmann Pit for tailings disposal were received from the relevant regulatory agencies in 1995 and the new facility was put in operation in January 1996, with overall performance exceeding predictions. Timing of the decommissioning work on the original tailings facility is linked to the outcome of proposals to extend the life of the Key Lake facility by processing ore from the McArthur River project, future plans for the new tailings facility, and future market situations for nickel and cobalt. In the meantime, active tailings thawing is assumed in arriving at decommissioning cost estimates for financial assurances.
Cameco has also been actively researching the issue of waste rock decommissioning at both its Key Lake and Rabbit Lake mines. Waste rock decommissioning plans for the Rabbit Lake Collins Bay A-Zone and D-Zone developments were submitted in 1995, accepted in 1996, and have been implemented for both developments. Regulatory design approval to commence full scale decommissioning of the original Rabbit Lake tailings facility was received in January 1997 and the work started in 1997. Final decommissioning plans for other Rabbit Lake waste rock piles and Key Lake waste rock piles continue to be developed, based on extensive characterization and predictive modeling work. Conceptual plans for the work have been accepted by regulatory agencies, and form an integral part of site costs estimates for financial assurances.
Regulatory Compliance
Certain regulatory issues have been identified which may necessitate a response from Cameco over the next few years in order to ensure that Cameco remains in compliance. Of particular significance is that the International Commission on Radiological Protection ("ICRP") has recommended that occupational exposure limits for radiation be set at 100 millisieverts per 5 year period and that the limit for members of the public be 1 millisievert per year. These limits are currently in place in Saskatchewan. The current levels under Canadian federal law are 50 millisieverts and 5 millisieverts, respectively, per year. The Nuclear Safety and Control Act was passed by the Senate in March 1997. The AECB has drafted new regulations under this Act which will incorporate these and other ICRP recommended changes. The Act and regulations are expected to come into force in 1999.
Other potentially significant regulatory issues which may necessitate a response by Cameco in the near term relate to management of low-concentration nickel discharges in open-pit dewatering effluent at Key Lake and compliance with new Ontario effluent regulations respecting liquid effluents at Blind River (undiluted effluent toxicity requirements) and at Port Hope (cooling water flow-through suspended solids loadings). Technical solutions to these potential problems are being pursued in cooperation with the Ontario Ministry of Environment.
Federal-Provincial Environmental Review Panel
On April 18, 1991, in response to the proposed development of several uranium properties in Northern Saskatchewan, the Governments of Saskatchewan and Canada established the Joint Panel to assess the environmental and public concerns arising out of three non-Cameco-related projects which had filed EISs, and two Cameco projects, McArthur River and Cigar Lake, which had filed preliminary project proposals. The members of the Joint Panel were appointed in August 1991.
The Joint Panel held public meetings in early 1992 regarding McArthur River and Cigar Lake to identify issues and establish guidelines for the preparation of EISs. In July 1992, Cameco submitted an EIS for the limited purpose of underground exploration at McArthur River. This EIS was reviewed by the public in the fall of 1992 and the Joint Panel held public hearings in December 1992. In January 1993, the Joint Panel recommended that the McArthur River underground exploration program, as proposed by Cameco in its EIS, be allowed to proceed, subject to certain conditions. All of these conditions were met and the underground exploration was completed.
The McArthur River and Cigar Lake projects are being designed and developed to address a variety of technical challenges. Because of the radioactivity of the high grade uranium ore, non-entry mining techniques, remote-controlled equipment, shielding and innovative ore-handling technology will be employed to reduce the radiation exposure of the workers. The technical challenges are expected to be addressed through the use of innovative technology, which has been proven in test mining but not yet applied on an industrial scale. The EISs for production mining of both new developments were submitted to the Joint Panel in 1995. Decisions to mill Cigar Lake and Midwest ores at an expanded McLean Lake operation triggered a request from the Panel for a separate EIS dealing with the combined tailings issues. Hearings on the non-Cameco Midwest project were held in May and June 1996, while McArthur River and the non-tailings aspects of the Cigar Lake project were considered in September and October 1996 hearings. On February 28,1997, the Joint Panel issued its report which recommended that development of McArthur River be approved subject to certain conditions. Federal and Provincial governments responded by approving the project. SERM and AECB licensing was received in May 1997 and construction commenced in August 1997.
In December 1996, the Joint Panel requested additional information on the Cigar Lake/Midwest project proposals, dealing with tailings management issues at the proposed expanded McLean Lake mill. Public hearings were held in August 1997, in La Ronge, Saskatchewan. The Panel issued its report in November 1997, recommending approval of both projects, subject to the resolution of some concerns over tailings management and waste rock management. The federal and provincial government responses to the Panel report are expected in early 1998.
Kyrgyzstan
Pursuant to the financing agreements related to the Kumtor gold project, the project participants agreed that all construction, development and, once in operation, production activities related to the project must be conducted in accordance with environmental laws that would be applicable had the project been located in Saskatchewan.
U.S. Environmental Regulation
The Company's operations in the United States are subject to numerous federal, state and local regulations governing among other things, air emissions, water discharges, hazardous materials handling and disposal and site reclamation. Certain United States environmental remediation laws, such as the federal "Superfund" law, can impose joint and several liability for site clean-up, without regard to fault, upon certain categories of parties such as waste generators who sent waste to a disposal site.