3.0 Issue: Upper Columbia River Risk Assessment

Context: Stakeholder concern regarding past disposal practices at the Trail Smelter in British Columbia, including subsequent legal action by the Colville Tribe and the State of Washington, led Teck to seek guidance on how to best respond to the issue in our sustainability report. We asked several investor groups to engage with us on the issue and provide us with questions that they have or have heard from the investment community. The following is a result of that collaboration.

What was the timeline of events? (Including disposal practices, legal action, remediation, fines, etc.)

Disposal of granulated slag into the Columbia River is a legacy practice that our affiliate, Cominco Ltd., conducted up to 1995, in accordance with Canadian regulatory permitting and reviews by US and Washington State agencies, and common practice. The discharge of slag ceased in 1995, when new processing methods produced slag suitable for sale to the cement industry.

In 1999, the Colville Tribe petitioned the United States Environmental Protection Agency (EPA) to list Lake Roosevelt and the Upper Columbia River in the Superfund (see below) primarily as a result of past discharge practices of mines, mills, and smelters in the northeastern part of Washington and adjacent British Columbia. The EPA conducted a preliminary investigation in 2002 and determined that elevated concentrations of metals were present in river and the reservoir sediment.

In 2003, Teck began a series of negotiations with the EPA to agree on a voluntary process to assess the risks to human and environmental health resulting from past disposal practices at Trail. These negotiations broke down when the EPA insisted that Teck defer to US jurisdiction despite Trail’s Canadian location. In December 2003, the US EPA issued a Unilateral Administrative Order (UAO) compelling the company to conduct a Remedial Investigation and Feasibility Study (RI/FS) under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA; or “Superfund"). The company declined, based upon its assertion that the US EPA had no jurisdiction over a Canadian Operation, but continued to seek a compromise solution.

In June 2004, two members of the Colville Tribe filed a lawsuit in Federal District Court, seeking to compel the company to comply with the UAO. Teck moved to dismiss based on jurisdiction, but the motion was denied and immediately appealed to the 9th Circuit. The 9th Circuit ruled that the US EPA did have jurisdiction in the matter, since the effects of the discharge came to rest primarily in the US. The company sought an appeal to the US Supreme Court, which denied its petition to hear the case in 2008.

The motion, now effectively dismissed, means that the original complaint and additional claims for natural resource damages and costs filed by the Colville Tribe and the State of Washington will be heard in the Federal District Court. In June of 2006, Teck and the US EPA reached a settlement resulting in the conduct of a voluntary, risk-based assessment of the effects of the disposal practices on Human Health and the Environment. The investigation is now proceeding, and will determine what, if any, risk the historic depositions pose to human health or the environment.

In September 2008, the District Court dismissed the plaintiffs' claims for civil penalties for our failure to obey the EPA order prior to its withdrawal and their claims for costs and attorney's fees. The decision effectively eliminates the risk of penalties in this regard unless facts change after the EPA remedy is implemented.

What was discharged into the Columbia River which caused concern? What are health and environmental risks associated with this discharge? What is the status of the related Human Health and Environment Risk Assessment study?

The primary concern regarding the Trail facility historically was the discharge of slag into the Columbia River. Granulated slag is the final waste product of the smelting process, and is essentially a glass composed primarily of iron, calcium, and silica, with up to 3% base metals. No studies to date indicate that Trail slag poses risks to human health or the environment. Discharge of slag ceased in 1995. Slag is not classified a Hazardous Waste in either Canada or the USA, and is now sold to cement manufacturers.

More recently, charges by plaintiffs in a lawsuit over this discharge claim that the normal liquid effluent of the facility, discharged under strict permits issued by the British Columbia government, are an additional and perhaps more harmful source of contaminants. The research proposed as part of the remedial investigation and feasibility study is designed to assess both of these sources of discharge. Current studies are slated for completion in 2011.

What actions have you taken to alleviate historical impacts and prevent future occurrences?

Trail ceased discharging slag into the Columbia River in 1995 and has since implemented environmental and process changes at the site which have significantly improved operations. The facility complies with all current discharge permits and has voluntarily engaged in projects to further reduce environmental impacts. Notable progress includes the closure of area dumps and implementation of the Trail Blood Lead program, which has markedly decreased exposure levels of children in the area. Teck takes environmental stewardship very seriously, and we continue to work diligently to make Trail an Operation of which we can be proud.

What is the current status of the lawsuit, and what is your expectation for the future? Will it have an impact on the agreement with the EPA?

Following the denial of our petition for review by the US Supreme Court in January 2008, the Lake Roosevelt litigation reverted to the Federal District Court for Eastern Washington. Judgment on the first phase of the litigation dealing with issues associated with an EPA order issued in December 2003 and withdrawn in June 2008 was delivered on September 19, 2008. All the claims associated with the order were dismissed, including the plaintiffs’ claims for costs and attorneys’ fees. On October 3, 2008, the plaintiffs filed a joint motion for partial reconsideration of the decision and asked that it be entered as a final judgment to clear the way for an appeal.

The second phase of the trial is expected to deal with liability and the plaintiffs’ claims for natural resource damages and costs. This phase of the case has been deferred until the remedial investigation being conducted by our affiliate, Teck Cominco American Incorporated, has been substantially advanced or completed. Until such studies have been completed, it is not possible to estimate the amount of damages, if any, that the plaintiffs have sustained or may claim.

Are there any misconceptions you see out in the media that you’d like to clarify?

As noted above, Teck takes environmental stewardship very seriously, and we continue to work diligently to ensure that operations have no lasting deleterious impacts on human health and the environment. From the start, we have made every effort to achieve a mutually-agreeable resolution with US regulatory agencies on this issue and we stand by our commitment to continue assessing past and future impact and implement remedial measures.