June 9 (Bloomberg) -- Goldcorp Inc., Canada’s largest gold mining company, lost its bid for $50 million in compensation it sought because U.S. environmental restrictions limited its operations.

Glamis Gold Ltd., which was purchased by Vancouver-based Goldcorp in 2006, filed the case under the rules of the North American Free Trade Agreement, arguing that environmental regulations made it impossible to extract gold from a mine it owns the rights to in the California desert.

The tribunal unanimously rejected Glamis’ claim and ordered The company to pay two-thirds of the arbitration costs, the State Department said in a statement.

Jeff Wilhoit, a Goldcorp spokesman, said the company is “disappointed that the government has chosen to turn its back on a job-creation engine.”

Margrete Strand Rangnes, director of the Sierra Club’s trade program, said the case demonstrated how companies try to use Nafta to overturn regulations meant to protect health or safety.

“The fact that Glamis’ claim was even possible, that a foreign company could try to undermine U.S. environmental laws in the name of higher profits, shows why our trade agreements’ foreign investor rules must be altered,” she said.

U.S. Representative Kevin Brady, a Texas Republican, said in a statement that the “decision is further proof that critics are wrong. These provisions preserve the ability of the United States to regulate for the environmental interest.”

Glamis acquired the rights to mine on 1,650 acres of land owned by the Bureau of Land Management in 1987, and had its bid to extract the gold first turned down by the Clinton administration in 2001 on the grounds that it was in the “spiritual pathway” of the Quechan Indian lands, and then reversed and approved by the Bush administration.

Mining Board

California’s mining board then adopted emergency rules in 2002 that gold mines must be backfilled after the mining was complete.

The initial federal delay and then California’s actions “individually and together have resulted in the expropriation of the investor’s investment,” Glamis said in its initial filing in 2003.

Still, Glamis hasn’t lost the right to the land, and in the intervening time gold prices have nearly tripled, according to Public Citizen,a public advocacy group.

“The tribe is never going to allow a mine to be permitted,” said Courtney Coyle, an attorney for the Quechan nation.

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

Last Updated: June 9, 2009 19:10 EDT