DRC-2012-001945 - 0901a0688030af65

State of Utah
GARYR HERBERT
Governor
GREG BELL
Lieutenant Governor
Department of
Environmental Quality
Amanda Smith
Executive Director
DIVISION OF RADIATION CONTROL
Rusty Lundberg
Director
DRC-2012-001945
MEMORANDUM
TO
Through
FROM
DATE
SUBJECT
File
Phil Goble, Section Manager
Russell J Topham, P E
June 28, 2012
Results of Review of May 25, 2012 Demson Mines USA (DUSA) Response to Apnl 19,
2012 Division of Radiation Control (DRC) Request for Information Regarding DUSA
March 2012 Surety Submittal, White Mesa Mill, Blanding, Utah
On April 19, 2012, the DRC sought revision to the DUSA Surety Four items appeared in the Request for
Information the DRC transmitted to DUSA on April 19
1.0 Provision for Engineering and Redesign
The approved Reclamation Plan provides means to close the facility at the end of its anticipated design life
The DRC observed that untimely closure would require adjusting the Reclamation Plan to meet conditions
at the time of closure that may differ fi-om those anticipated in the design of the Reclamation Plan The
DRC requested, and DUSA provided 2 25% additional funding in the Surety for engineenng redesign for
use in the event of untimely closure
Finding DUSA has complied with the DRC request for additional funding for engineering redesign
2.0 Usmg RSMeans as the Basis of the Surety Estimate
DUSA based its Surety estimate on General Decision UTl200043 for Heavy Constmction in San Juan
County, Utah and on third-party vendor quotes ^
The General Decision represents negotiated mimmums to pay umon labor NUREG-1620, Appendix C, p
C-4 encourages Surety reviewers to compare unit costs to standard constmction cost guides, citing
RSMeans as one source of such cost data Upon doing so, DRC Staff noted that the RSMeans data for labor
generally exceeded the rates incorporated in the Surety Estimate RSMeans provides an average wage
actually paid by contractors for labor Both data sets included figures with and without labor burden (taxes,
benefits, etc) DRC Staff concluded that reliance on the General decision would underestimate the cost of
labor Therefore, the DRC requested that DUSA use RSMeans as the source of labor rates for the Surety
Third-party vendor quotes can include courtesy discounting and other concessions to DUSA which may
not transfer to the DRC upon the need to exercise the Surety RSMeans provides pricing for most items for
195 North 1950 West • Salt Uke City, UT
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Page 2
which DUSA had employed third-party quotations Comparison of values between the third-party
quotations and the RSMeans database revealed close correlation between the two Given that using
RSMeans eliminates one source of potential underestimation of costs, the DRC requested using RSMeans
as the source for pncing where DUSA has relied on third-party quotes (primarily matenals and equipment)
DUSA declined to adopt RSMeans as the source of umt costs for estimating Surety requirements DUSA
claims that RSMeans does not apply to the Blanding area DUSA contends that RSMeans' lack of
adjustment for prevailing non-union labor in rural San Juan County results in overpricing labor DUSA
cites correlation between wages it pays its present labor force and the negotiated union minimum presented
in the General Decision DUSA contends that the DRC's contractor can access the same labor pool as
DUSA, thus reducing costs DUSA further contends that local adjustment factors in RSMeans fail to
capture rates prevailmg in more rural areas DUSA also asserts a belief that equipment rental rates provided
through third-party quotation represent a more accurate local cost than RSMeans, notwithstanding the close
correlation between the two
I do not find DUSA's arguments persuasive The DRC has no assurance that local contractors can provide
the scope of service required to provide closure DUSA cites favorable companson of the wage rates it has
employed with those paid at "other mining operations (Lisbon Copper), and oil and gas producers in the
area " Had DUSA included information about rates paid at the Atlas cleanup site near Moab, or
comparison of rates paid during the Monticello site cleanup versus those demanded in the local labor
market at that time, I may have found DUSA's argument more persuasive The DRC has no assurance that
local contractors can or will provide the services required at the rates DUSA pays its staff While present
vendor quotations correlate well with RSMeans equipment rental rates, the DRC has no assurance that
future quotations will maintain this correlation
Finding Reliance on existing methodologies fails to provide the assurance the DRC requires on behalf of
the public It serves Comparing the DUSA estimate with external data sets such as RSMeans leads to the
conclusion that the DUSA Surety underestimates labor costs Expectation that the DRC or its contractors
can access the same labor market as DUSA assumes too much
3.0 Costs Associated with the Amended Nitrate Stipulated Consent Agreement (SCA)
During review, DRC Staff could not clearly identify how DUSA had incorporated the provisions of the
SCA into the Surety DUSA provided clanty in the revised Surety, and in its response letter
Finding DUSA has provided information necessary to assure the DRC that the Surety includes funding for
activities related to the SCA The DRC has not concluded its review of these costs, so DUSA should
anticipate possible adjustments
4.0 Contingency Funding
Citing an industry history of costs far outpacing surety provisions, the DRC requested increasing the
contingency line item in the Surety from its current level of 15% to 25% The methods employed to
estimate Surety needs have improved over time However, little history exists to demonstrate that the
improved estimation methods have accounted for a sufficient number of unknowns for the DRC to rely on
mimmums in its estimates Current guidance cites 15% as the minimum value of the contingency line item
to seek in Surety When asked to increase this item to 25%, DUSA responded that the guidance and its
license called for a minimum of 15%, and, therefore, DUSA would provide that minimum, considenng it
adequate Effectively, the DUSA response is that meeting the minimum requirement is the maximum it will
do
Page 3
Item 3 0 above addresses a nitrate plume identified onsite A chloroform plume also exists Plume
remediation rarely occurs according to plan Field conditions vary from those anticipated, or those
extrapolated from geoprobe sampling Pump-and-treat methods often fail fully to meet remediation
objectives With two known plumes onsite, and the potential (given the chemicals used onsite) for
additional plumes to exist, the DRC cannot overlook this item In this regard, the provision in the SCA that
DUSA complete 5 years of remediation, then assess progress, identifies an additional level of uncertainty
involved m the reclamation of the site
Finding Reliance on the mandated minimum 15% contingency exposes the taxpayers of the State to
undesirable levels of risk of cost overruns Unforeseen work requirements continue to plague more recent
closure projects The estimates may have improved, but the record does not support the conclusion that the
industry has yet identified a formula that compensates sufficiently for the unknowns encountered in
cleanup Given the unpredictable nature ofplume remediation, the DRC could argue for contingency
funding many times larger than it has proposed to date However, to avoid arbitrary and unnecessary
levies, I recommend the DRC maintain its request for 25% contingency, and evaluate the progress of
current remediation efforts As the current efforts progress, the DRC can adjust remediation plans and
Surety requirements as needed The DRC should hold firm on its request for 25% contingency
5.0 Explicit Identification of Mobilization and Management/Support in the Surety
DUSA had included Mobilization and Management/Support in the Miscellaneous category in the Surety
This created extra work in reviewing the Surety to determine that adequate funding provisions existed in
the Surety The DRC requested restmctunng the Surety to show these items explicitly DUSA has
complied with the DRC's request
Finding Mobilization and Management/Support now appear as separate line items in the Surety, as
requested