An illegal gold milling site near Mancos has raised the ire of Montezuma County officials who recently found out it falls within county jurisdiction.

The Red Arrow Gold Corporation, operated by Craig Liukko, set up an unauthorized milling site at a warehouse located at 1000 W. Grand, just outside of Mancos town limits.

The site was recently ordered to cease and desist by the Colorado Division of Reclamation, Mining and Safety, who fined Liukko $337,167 for operating a mill without a license and five other mining violations.

Inspectors found dangerous levels of mercury inside the building and arsenic pollution in tailing piles outside the site and at the mine site in the nearby La Plata mountains. The Environmental Protection Agency is evaluating the sites for cleanup and remediation.

"We did not know it was there, and did not receive any plans from the operator that it was going on," said county planning director Susan Carver. "It is a violation of the land use code because it is an industrial use that requires a high-impact permit and hearings before the county planning board and commission."

Carver said Red Arrow Gold Corporation could face penalties for non-compliance but the decision would be up to the county commissioners.

"Operations there have ceased at this point," she said. "It is a concern because of the health hazards for neighbors and for employees. Safeguards would have been required and evaluated under our permit system."

Commissioner Larry Don Suckla, who represents the Mancos area, was angered by the illegal mill site.

"It is very upsetting because (the mill) broke the rules and created a risk to the safety of county residents and the town of Mancos as well," he said. "This type of operation is far different than panning for gold."

The commissioners are considering holding a community meeting with mine regulators to inform the public of the situation. Whether the county will levy penalties of its own, Suckla said, "Everything is on the table at this point. I feel like we were misled."

According to state mine regulators, there is no safety hazard to the public because the sites are secured. Both the mine in the mountains and the contaminated mill site have been gated and locked. There is no public access, and the cease-and-desist order will not be lifted until the cleanup has been performed to state and federal standards.

Tailings with high levels of arsenic were deposited at a nearby private farm, according to DRMS officials, and in a storage area of the Western Excelsior lumber mill nearby.

The farm is not accessible to the general public, officials said, and the lumber mill has been asked to rope off the tailings pile, which reportedly is used to suppress waste fires.

During cleanup operations, all the contaminated tailings will be relocated to the mill site and decontaminated or hauled off to a hazardous waste disposal site.

Decontaminating the milling site and mine have been handed over to the EPA and are in the planning stages.

State mine regulators are expecting a cleanup to be completed by the end of the year.

Red Arrow is being foreclosed upon for defaulting on a loan, and the operator has filed for bankruptcy, according to the county treasurer's office. The illegal milling was discovered when the assets fell into receivership and the properties were investigated by a court appointed guardian.

Foreclosure documents show that Red Arrow and He-Man LLC took out a $25,000,000 commercial loan from Maximillian Investors LLC of Delaware. As of April first, the outstanding principal balance was $8,769,398.

The mill-site property and warehouse is owned by William Boyd and was being leased to Liukko, according to the assessors office.

When contacted by phone, Boyd was reluctant to comment. He said he had been blocked from accessing his property.

When asked what his plans were for the land, he responded. "I had some plans, but not anymore."

jmimiaga@cortezjournal.com