A2 A2
Water Research Institute director updates WV legislators on rare earth recovery efforts, urges law clarifying ownership

The long-term environmental problem of acid mine drainage in West Virginia could offer a long-term economic solution.

West Virginia Water Research Institute Director Paul Ziemkiewicz made that pitch recently to the state Joint Economic Development Commission. The institute is assessing the feasibility of scaling up acid mine drainage treatment technology to support a nationwide supply chain of valuable rare earth elements and critical minerals.

“What we’re aiming for is the ability to not only treat acid mine drainage, get the environmental improvements, but also get a revenue stream coming back,” Ziemkiewicz said.

Ziemkiewicz advised the commission to pass draft legislation he said the Water Research Institute is developing with the state Department of Environmental Protection to clarify who owns the resources resulting from treated acid mine drainage. Acid mine drainage forms when pyrite is exposed and reacts with water and air to form sulfuric acid and dissolved iron, which can form the orange and red sediments in the bottom of streams.

“We’re trying to treat acid mine drainage ahead of time before it gets into streams and, better yet, realize some revenue in the meantime,” Ziemkiewicz said.

The institute was awarded $5 million in 2019 by the federal Department of Energy to scale up recovery of rare earth elements from acid mine drainage sludge. Work includes construction of a facility at a new acid mine drainage treatment plant near Mount Storm. The DEP’s Office of Special Reclamation is the plant designer and builder, Rockwell Automation is providing sensor and control technology and TenCate Corporation is engineering materials for rare earth element extraction.

“We’re working on a process to basically take your small [acid mine drainage] treatment systems and turn those into rare earth recovery units,” Ziemkiewicz said.

The acid mine drainage treatment plant is under construction and was initially scheduled to begin operations by November. The pandemic has delayed delivery of needed materials and pushed the tentative completion date to January 2022, according to DEP acting spokesman Terry Fletcher.

The facility could treat 1,000 gallons of acid mine drainage daily. Nonvaluable solids removed during the clarification process would be pumped into storage plants, while valuable rare earth elements would be separated for further processing. The treated acid mine drainage then would be directed to the receiving stream.

Rare earth elements are a group of 17 metallic elements whose magnetic, electrochemical and other properties make them key components of cellphones, televisions, computer hard drives and other electronic devices as well as defense applications, including lasers and radar and sonar systems.

Rare earths are relatively abundant in the Earth’s crust, but minable concentrations are less common than for most other mineral commodities, according to the U.S. Geological Survey.

Former President Donald Trump issued an executive order in 2017 defining critical minerals as essential to U.S. economic and national security.

The United States had 1.5 million metric tons of rare earth elements in reserve as of January — 3% of China’s total reserves, according to U.S. Geological Survey data.

With the U.S. trying to get ahead in the rare earths market, Ziemkiewicz said, he has sensed an opportunity for West Virginia.

“We certainly want to have the central concentrate for the whole United States and hopefully central Canada coming [to West Virginia], and then this would be our major supply of rare earth elements and critical minerals for the United States,” Ziemkiewicz said. “It may sound grandiose, but what the heck? Think big, realize big.”

Researchers still are seeking to determine whether they “actually have a commercial process, and if not, what we have to do about it,” James Wood, director of the West Virginia University Energy Institute, told the commission. “We’ll get to the point of talking about commercialization once we see the data lead us in that direction.”

Ziemkiewicz’ water institute is a program of the WVU Energy Institute.

Money to support the strained state Special Reclamation Fund is another potential benefit from rare earth element recovery, Ziemkiewicz said.

A report released in June by the state Legislative Auditor’s Office Post Audit Division warned state mine cleanup funds are nearing insolvency.

“So what do we need to do to make West Virginia a leader in this area? Technology is one thing. Legislation and policy are another thing,” Ziemkiewicz said. “That’s where you good people come in.”

Ziemkiewicz recommended state lawmakers embrace legislation the Water Research Institute and the DEP have worked on together stating that whomever treats acid mine drainage also owns any valuable elements coming from the drainage.

“What we want to do is advance this legislation that would say that whoever treats the acid mine drainage, whoever takes on the environmental liability of treating acid mine drainage, ultimately gets the benefit of any attractive feedstocks,” Ziemkiewicz said.

WV oil and gas industry registers disapproval of well property tax valuation methodology with state lawmakers

State tax officials still are not properly valuing oil and gas wells under a rule proposed to comply with a new law using what industry representatives said would be a fairer formula.

Industry representatives registered their complaints about the emergency rule, while tax officials defended it at a recent West Virginia Joint Natural Gas Development Committee meeting.

“[W]e think it’s exceeded its statutory authority under [HB] 2581,” Marc Monteleone, co-chairman of the Gas & Oil Association of West Virginia tax committee, told the committee.

The Legislature approved House Bill 2581 in response to a 2019 ruling in which the state Supreme Court held that the Tax Department improperly capped deductions for gas well operating expenses.

Monteleone argued the rule has allowed the tax commissioner too much leeway to determine property tax valuation rather than going by actual income and expenses reported on tax returns. He also expressed concern the capitalization rate had been lowered significantly, which he said made no sense given uncertainty in the oil and gas market. He said the move was aimed at keeping oil and gas companies paying roughly the same amount of property tax as before.

A capitalization rate is used to find the rate of return expected for a real estate investment property, calculated by dividing a property’s net operating income by its current market value. A lower capitalization rate means valuation goes up, reflecting a lower level of risk.

“[W]e’re just trying to create a tax scheme that gets us back to the same number we were paying last year,” Monteleone said.

The new capitalization rate more accurately reflects the risk of capital investment, said acting state Tax Department Deputy Commissioner Erin Winter.

“We think reasonableness is the starting point of any inquiry into the actual cost is the most workable solution for us,” Winter said. “The Tax Department will continue to work with industry moving forward to ensure completeness, accuracy and make sure the actual value is determined and that we will work with the counties to ensure compliance by the industry.”

Harrison County Assessor Joseph R. “Rocky” Romano testified he had not spoken with Tax Department officials during the rule proposal process.

“This is the first time that the [state] Assessors Association has had a say in this,” Romano said. “When the assessors don’t have a say, our county commissioners haven’t heard anything either, because they get their information from the assessors in each county.”

HB 2581 was initially reworked in the Senate Judiciary Committee to allow more latitude for the Tax Department to reform how it values wells after members of both parties expressed concern about the bill’s impact on local government revenues.

County school boards and commissions would have absorbed most of a projected revenue loss of $9.1 million stemming from additional expenses allowed by HB 2581 if it was enacted as initially passed by the House, according to the Tax Department.

Delegate Lisa Zukoff, D-Marshall, asked for an updated Tax Department analysis of revenue impacts from the emergency rule.

The Legislature approved HB 2581 on the last day of the legislative session after Delegate Dianna Graves, R-Kanawha, contended a compromise version of the bill would not hit counties nearly as hard financially as the original version, partially due to a new tax on natural gas liquids, including propane, ethane and butanes.

The state defines emergency rules as conditions of a legislative rule that allow needed changes to be in effect while going through the rulemaking process. They can be valid for up to 15 months or until a legislative rule becomes effective.