[Senate Hearing 110-339]
[From the U.S. Government Publishing Office]
S. Hrg. 110-339
REFORM OF THE MINING LAW OF 1872
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HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
TO
RECEIVE TESTIMONY ON REFORM OF THE MINING LAW OF 1872
__________
JANUARY 24, 2008
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Committee on Energy and Natural Resources
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
DANIEL K. AKAKA, Hawaii PETE V. DOMENICI, New Mexico
BYRON L. DORGAN, North Dakota LARRY E. CRAIG, Idaho
RON WYDEN, Oregon LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota RICHARD BURR, North Carolina
MARY L. LANDRIEU, Louisiana JIM DeMINT, South Carolina
MARIA CANTWELL, Washington BOB CORKER, Tennessee
KEN SALAZAR, Colorado JOHN BARRASSO, Wyoming
ROBERT MENENDEZ, New Jersey JEFF SESSIONS, Alabama
BLANCHE L. LINCOLN, Arkansas GORDON H. SMITH, Oregon
BERNARD SANDERS, Vermont JIM BUNNING, Kentucky
JON TESTER, Montana MEL MARTINEZ, Florida
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
Frank Macchiarola, Republican Staff Director
Judith K. Pensabene, Republican Chief Counsel
C O N T E N T S
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STATEMENTS
Page
Alexander, Ryan, President, Taxpayers for Common Sense........... 74
Barrasso, Hon. John, U.S. Senator From Wyoming................... 6
Bernholtz, Alan, Mayor, Crested Butte, CO........................ 19
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................ 1
Bisson, Henri, Deputy Director, Bureau of Land Management,
Department of the Interior..................................... 8
Cantwell, Hon. Maria, U.S. Senator From Washington............... 2
Cobb, William E., Representing the National Mining Association,
Phoenix, AZ.................................................... 14
Cress, James F., Partner, Holme Roberts & Owen, LLP, Denver, CO.. 65
Dombeck, Mike., Ph.D., Representing Trout Unlimited, Stevens
Point, WI...................................................... 11
Domenici, Hon. Pete V., U.S. Senator From New Mexico............. 2
Murkowski, Hon. Lisa, U.S. Senator From Alaska................... 6
Otto, James M., Independent Consultant, Boulder, CO.............. 59
Salazar, Hon. Ken, U.S. Senator From Colorado.................... 4
Tschudy, Deborah Gibbs, Deputy Associate Director, Minerals
Revenue Management, Minerals Management Service, Department of
the Interior................................................... 55
Wanamaker, Randy, Executive Director, BBC Human Resource
Development Corporation, Juneau, AK............................ 25
APPENDIXES
Appendix I
Responses to additional questions................................ 91
Appendix II
Additional material submitted for the record..................... 117
REFORM OF THE MINING LAW OF 1872
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THURSDAY, JANUARY 24, 2008
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 9:30 a.m., in
room SD-366, Dirksen Senate Office Building, Hon. Jeff
Bingaman, chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW
MEXICO
The Chairman. All Right. Let's go ahead with the hearing. I
thank everyone for being here. Welcome to the hearing regarding
reform of the Mining Law of 1872. We're going to hear from two
panels this morning: One will focus on surface management
issues associated with hard rock mining. The other will address
the topic of royalties. Witnesses from the Administration are
here to provide technical information. Efforts to
comprehensively reform the mining laws have been ongoing
literally for decades and have repeatedly failed. When the
mining law was enacted in 1872 in the aftermath of the
California gold rush, Congress sought to encourage settlement
in the West.
In 1920, Congress enacted the Mineral Leasing Act and
reformed oil and gas and coal, and certain other minerals, from
the removed oil and gas and coal and certain other minerals,
from the operation of the Mining Law. In so doing, Congress
enacted a management regime for the leasing of these other
minerals and required payment of a royalty to the United States
for oil and gas and coal. However, as we all know, the Mining
Law of 1872 continues to govern the disposition of hard rock
minerals from Federal lands. While Congress had stepped in and
prevented the patents of land through annual appropriations
riders, adding provisions allowing the transfer of mineralized
Federal lands from $2.50 to $5.00 or $5.00 per acre continue to
be found in the U.S. Code. In addition, under the mining law,
billions of dollars of hard rock minerals can be mined from
Federal lands without the payment of royalty. Federal Land
Management Environmental Laws apply, but there are no specific
statutory provisions under the mining law setting surface
management or environmental standards. There are a growing
number of people saying this Congress may well be the time to
achieve the long-awaited reform. The House of Representatives
passed a comprehensive reform bill in November.
I look forward to working with Senator Domenici and other
interested Senators on both sides of the aisle in putting
together a Senate version of reformed legislation. We will
continue to work hard on this and see what progress can be made
and require compromise on all sides. Again, thanks to all the
witnesses. Let me call on Senator Domenici and briefly any of
the other Senators who want to make short statements before we
begin the testimony.
Senator Domenici.
[The prepared statement of Senator Cantwell follows:]
Prepared Statement of Hon. Maria Cantwell, U.S. Senator From Washington
Mr. Chairman, thank you for holding this important hearing on
updating the 1872 Mining Law. I'd also like to thank each of the
witnesses for being here.
135 years ago, President Ulysses S. Grant signed this into law and
it still governs mining of hardrock minerals on more than 270 million
acres of public lands in the West. In Washington state, our public
lands provide enormous economic and conservation benefits that increase
the quality of life for all our citizens, including clean water, clean
air, wildlife habitat, and access to mountains and rivers for
recreational users.
What is clear to me is that after 135 years the time is now to
balance environmental stewardship with what's best for our economy. If
we don't have meaningful reform, many of America's most treasured
places, including Roadless areas, will continue to be claimed for
mining. I have fought hard to preserve our nation's Roadless areas that
provide clean drinking water, essential fish and wildlife habitats, and
world-class recreational opportunities. These areas are no place for a
large-scale mining operation. And yet, there are almost 13,000 existing
mining claims in these areas, including more than 400 in Washington
State.
While responsible mineral development is a legitimate use of our
public lands, this outdated law allows mining in some of America's most
environmentally sensitive areas.
The legacy of this archaic law can be seen throughout the West.
Hundreds of thousands of abandoned mines litter our public lands--
including an estimated 3,800 abandoned mines in Washington. The U.S.
Environmental Protection Agency estimates a $50 billion price tag to
clean them up, and also notes that 40 percent of western headwaters are
contaminated by runoff from abandoned mines. Many mining operations
continue to leave a legacy of perpetual water pollution and the 1872
Mining Law contains no environmental or reclamation standards to deal
with this issue.
Under certain interpretations, mining is prioritized over all other
land uses, leaving federal land managers unable to balance mining with
other important public uses like recreation, wildlife conservation, and
water quality. This prevents responsible federal land management and
prevents local communities from providing their input on the impact
mining may have on their quality of life.
This issue isn't just about proposals from years past. Just
recently, it has been proposed to put a hardrock mine near Mount St.
Helens National Monument. This clearly would put this treasured, and
historical, place at severe risk. The 110,000-acre National Volcanic
Monument allows scientists and more than 200,000 visitors per year to
see the changes in the landscape and the volcano. Hiking trails provide
breathtaking views of crystal clear lakes, pinnacle studded ridges and
wildflower laden mountain slopes in the park's backcountry. If
approved, this mine could jeopardize critical scientific research,
family recreational opportunities, threatened salmon and steelhead runs
in the river, and municipal water supplies.
The time has come to end the preferential treatment that hardrock
mining receives under the 1872 Mining Law and to craft mining reform
legislation that responsibly balances mineral development while
protecting iconic places and western waters. Mr. Chairman, I look
forward to working with you to pass legislation that manages our
nation's natural resources in an environmentally and fiscally
responsible manner.
STATEMENT OF HON. PETE V. DOMENICI, U.S. SENATOR FROM NEW
MEXICO
Senator Domenici. Thank you. I apologize for getting here a
little bit late this morning. I'm ready to proceed as you have
indicated. We're here to receive testimony on this old law and
changes to it that maybe will end it. This committee has
received a biil H.R. 2262 from the House of Representatives. In
reacting to their work I have been clear about my desire to
start with a clean slate. The question remains what is
appropriate for inclusion in the Senate bill to reform the
Mining Law? I believe the list is a short one, not a long one
like many, consisting of three things. One, a replacement of
the patenting with a more modern form of secure tenure; Two,
imposition of a perspective, profit-based royalties system; and
three, the establishment of an abandoned locatable mine
reclamation fund to clean up sites that threaten the
environment and public safety.
You must remember that in addition to the House bill the
committee has much more to consider and rely upon to inform our
decisionmaking. They include several existing administrative
and legislative processes for withdrawal of Federal lands from
mineral activity. They reflect an increasing reliance on
foreign countries for minerals and information about the danger
of this trend. Dozens of laws including the Clean Water Act and
National Environmental Policy Act, Endangered Species Act,
which are written to protect the environment an do apply to
hard rock mining. A 1999 report from the National academy of
science concluded that existing environmental protections work
together in a way that is ``complicated'', but ``generally
effective''. Because this knowledge and experience is clear,
efforts to expand and reform beyond patenting royalty and
abandoned mine issues are merely solutions in seach of a
problem.
I want to reform the mining law in this Congress. I agree
with Mr. Chairman that this would probably be the appropriate
time. For those who have mining in their states, I think they
ought to be thinking also whether this an appropriate time. I
think any deep thought on the subject would indicate to them
that this is the right time. Given what is at stake in our
efforts to reform the Mining Law I have significant
reservations about supporting legislation that fails to strike
an appropriate balance. The margin of error here is very thin.
Extraneous provisions must therefore be regarded with a
significant level of skepticism. Countries like China and
Russia have undertaken a 50-year or longer view of the world
and continue to lock down long-term supply arrangements to
State mining company investments in places like Africa,
Australia, and South America. This has created a new form of
mercantilism that lies in the face of our own country's
promotion of free trade. Whatever happens with U.S. mining law
reform, it is going to have a long-term implication for all of
North America. Absent development of new resources in the
United States, the Chinese and Russians will have enormous
pricing power by the next century. Minerals present the very
basic bedrock of infrastructure technology for Defense and
industry. The policies that we put in place must encourage some
degree of self-reliance. It is for this reason that reform
efforts must maintain or increase the viability of domestic
minerals production. I look forward to working not only with
your Mr. Chairman, but certainly under your leadership with
other senators who together have shown that we can get things
done in this committee. That will surprise people when we're
finished. Thank you, very much.
The Chairman. Thank you, very much. I know some of our
witnesses are from Colorado and Senator Salazar has indicated a
desire to make a few statements, so I'll call on him at this
point.
STATEMENT OF HON. KEN SALAZAR, U.S. SENATOR
FROM COLORADO
Senator Salazar. Thank you, very much Chairman Bingaman and
Senator Domenici for holding this very important hearing. I do
want to at the outset note on this panel, as well as the second
panel, we'll have three witnesses from the State of Colorado.
We have on this panel, Alan Bernholtz, who is the Mayor of the
Town of Crested Butte, where today they have 150 inches on the
ground for those of you who are interested in skiing at Crested
Butte. On the second panel, Jim Cress, who is from the very
well-known and well-established western law firm of Holme
Roberts & Owen, and Jim Otto who is a consultant and also a
Professor at the Colorado School of Mines and the University of
Denver. I would like to welcome those Colorado witnesses. I
have a formal, written statement I will submit for the record.
Mr. Chairman, if I may make this comment, in my view it
seems to me that the three issues that were laid out by Senator
Domenici are issues that we can't grapple with, I think they
are the kind of rifle shots that can help us deal with mining
law problems that have too long alluded any possibility of
solution. I think the tenure issues of patent reform are
important. I think dealing with the royalty on the hard rock
mineral mining could bring us into the same kind of approach
we've taken since the 1920 Mineral Leasing Act is important. I
think dealing with abandoned mines and trying to figure out a
revenue stream to help us deal with the hundreds and thousands
of abandoned mines we have across the west in this country is
very important. Finally I would say, good Samaritan legislation
is something that will help us get to a point where we clean up
our watersheds and deal with hundreds of thousands of abandoned
mines, many of which are located in my State of Colorado. Thank
you, very much.
The Chairman. Thank you, very much.
[The prepared statement of Senator Salazar follows:]
Prepared Statement of Hon. Ken Salazar, U.S. Senator From Colorado
Thank you Mr. Chairman and Ranking Member Domenici for holding
today's hearing on reform of the Mining Law of 1872.
I would like to begin by acknowledging that three of our nine
distinguished witnesses this morning are residents of my state of
Colorado, highlighting the prominence of mining expertise in our state.
I would like to welcome the Honorable Alan Bernholtz, Mayor of
Crested Butte, Colorado. Prior to his election as mayor, Alan served on
the Crested Butte Town Council for six years. He is the owner of
Crested Butte Mountain Guides, co-founder of the Crested Butte
Avalanche Center, and has been a tireless organizer of town events
through the years and knows his corner of the Western Slope inside and
out. On our second panel, which will focus largely on the question of a
new federal royalty system, we are fortunate to have two world-class
experts on mining law and royalty systems from Colorado.
Mr. Jim Cress is a partner at the law practice of Holme Roberts &
Owen in Denver. He has extensive experience in U.S. federal mineral
royalty matters, and has advised clients on the development,
implementation and interpretation of mining law in the U.S., Asia, the
former Soviet Union, and Latin America.
Prof. Jim Otto wears two hats as both the director of graduate
studies in the Environmental/Natural Resources Law Program at the
University of Denver and as a professor of mineral economics and
director of the International Global Resources and Management Institute
at the Colorado School of Mines. He has worked with the World Bank and
the United Nations, and is the lead author of a World Bank study of
mining royalty systems throughout the world. Welcome, Jim, and our
other witnesses as well.
There is no denying that hard-rock mining has played a vital role
in the development of the western States. When Ulysses S. Grant signed
the Mining Law in 1872, few could have envisioned the growth and
transformation the West has undergone in the 135 years that have passed
since that moment.
In 1872 the West was a different world. The population of the free
territory of Colorado was only about 50,000 people, but was growing
rapidly largely due to the growth of the mining industry. Settlement of
the West was the primary motivation behind the Mining Law and the other
major federal land-grant laws of that period, and looking back those
policies largely succeeded. In fact, the gold and silver rush of the
late 19th century helped put Colorado on the map.
Today, Colorado and our neighbor states in the west are
experiencing a new ``mineral rush.'' As global market prices for
molybdenum, gold, uranium, and copper have climbed rapidly, the pace of
new mining claims has exploded. Colorado leads the nation in this claim
surge: the number of active claims rose 240% between 2003 and 2007,
from about 5,400 to about 18,400.
This surge in claims also makes many deeply uncomfortable due to
the proximity of many of these new claims to some of our nation's most
treasured national parks and natural monuments. Active claims within
five miles of the Grand Canyon have grown from just five in 2003 to
more than 800 today. Furthermore, local communities are becoming
increasingly skeptical about the impacts of new major mining
operations.
In some respects it is incredible that the Mining Law of 1872 still
stands today. In 1872, hard rock mining was considered the ``highest
and best use'' of mineralized lands. Over the years, mining has more or
less maintained its position of priority over other land uses. An
undeniable principle of our discussion today is that our land use
priorities have evolved. Federal mining policy must acknowledge that
our public lands are valued not only for their mineral content, but
also for their water and natural resources, recreational value, and
wildlife habitats.
Furthermore, I believe there is consensus that the hard-rock mining
industry--like the oil, gas, and coal industries--must pay some kind of
royalty or rent for the right to extract mineral resources from our
public lands. The lack of a federal revenue stream from mining
operations on federal lands has particularly hindered efforts to
address the critical issue of the environmental, health, and safety
risks posed by abandoned mines. There are of course many questions
regarding the structure and implementation of a federal royalty system,
and I look forward to an in-depth discussion of this issue.
Responsible development of our mineral resources is critical to our
economy and our environment. Hard rock minerals are vital to the
production of countless products, and the mining industry employs
thousands of people across the country. We must find a way to ensure
that mineral development occurs in a manner consistent with the needs
of mining communities and the protection of the environment,
particularly our water resources.
Finally, I am committed to making cleanup of abandoned and inactive
mines a priority in this legislation. The EPA estimates that there are
half a million abandoned mines around the nation, and that the cost of
cleaning them up could approach $50 billion. Good Samaritans--the
people and companies who are willing to clean up mine sites in whole or
in part, even though they are not legally responsible--deserve greater
certainty and reduced liability for actions they perform in the service
of their communities. Good Samaritans are critical to addressing the
less fortunate aspects of the history of the mining industry.
I believe we are closer than we have ever been in the past to
moving forward with legislation that will allow Good Samaritan cleanups
to take place. Toward that end, I plan to reintroduce a bill in this
session of Congress that builds upon the work of the Western Governors'
Association, the EPA, and the progress we made on the bill I introduced
in the last Congress. I look forward to working with my colleagues to
encourage the clean up of abandoned mine sites.
I welcome the members of our distinguished panels and look forward
to discussing these important issues.
The Chairman. Let me ask if other Senators have some
comments they want to make before we hear from the witnesses.
Yes, Senator Murkowski.
STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR
FROM ALASKA
Senator Murkowski. Thank you, Mr. Chairman. I want to take
just a brief moment to welcome one of our witnesses here this
morning, Mr. Randy Wanamaker from the Community of Juneau,
Alaska. He has been involved, and has been for some time, in
the Kensington Gold Mine Project there. He's also a local
official in Juneau as the Deputy Mayor of the City, and is
thorough in working very hard to make sure that this project
works for the local people, encouraging native hire, and doing
all the right things in the community.
I am pleased, Mr. Chairman, to hear your comments and those
echoed by Senator Domenici about how we intend to approach
mining law reform. I think it is well recognized that it is
long overdue and is important to be evaluated in assessing how
we move forward. I had an opportunity in December to speak to
the Alaskan Miner's Association. I will tell you from an
industry perspective in my State, they're quite concerned about
what they have seen come out of the House, and they have asked
that the Senate review things, as Senator Domenici has said,
basically from a clean piece of paper, that we truly look at
this comprehensively, evaluate it very critically. Many of my
constituents throughout the industry are quite concerned,
again, as to some of the provisions they are streaming out of
the House bill. I think we need to recognize not only the
economic importance that we realize from within the mining
industry historically in this Nation, but as has been noted,
just the security aspect of a minerals industry and a
recognition that with our very necessary and needed minerals,
we are putting ourselves in the same position that we are
currently with oil. We are 60 percent reliant on foreign
sources, foreign nations, some are our friends, some not our
friends, for this very necessary commodity. It is the same way
with our minerals, and it allows for a level of vulnerability
that I think we need to be discussed in this Nation. We need to
be discussing what our policy is as it relates to hard rock
minerals, and there are precious minerals rale that we need
throughout industry. I'm pleased that this committee is moving
forward with this, and I look forward to working with you and
all members. Thank you.
The Chairman. Thank you, very much. Any other statements,
Senator Barrasso.
STATEMENT OF HON. JOHN BARRASSO, U.S. SENATOR
FROM WYOMING
Senator Barrasso. Thank you, very much Mr. Chairman. I
appreciate your efforts as well as Senator Domenici's and your
leadership on this issue. I am also I'm troubled, as Senator
Murkowski is, with some of the things that have come out of the
House. I'm very happy we're taking a fresh look at this and
will make some decisions on our own, and I appreciate these
series of hearings. I think, for the record, that I believe any
mining reforms should be built on principles of
competitiveness, certainty, and common sense.
I think that respect to competition, I understand first-
hand that mining provides essential materials that are vital to
our economy. I'm concerned from a national security standpoint,
as we just heard from Senator Murkowski. I spoke in some
specifics in our meeting in December--alloy metals, that are
necessary for the development of today's artificial joints, the
artificial hips that I used in my previous experience as an
orthopedic surgeon. I think domestic mineral production accrues
significant benefit--labor, wages, benefits to consumers to
goods in advanced technology, benefits to states and
communities through tax revenue, and benefits to investors. For
a number of reasons, specifically national security issues, I'm
especially concerned with any provision that will result in
pushing even more mining operations overseas. To me one of the
most troubling provisions with respect to competition, includes
expansive veto authority over mining operations by future
administrations. I think Congress should be very careful in
delegating such expansive authority to the administration. I
believe that this industry must retain security of being able
to mine long-term. Once commitments are made, they need to be
able to rely on those decisions. Business plans have been
predicated upon a well understood legal framework. They make
decisions; they make contracts long-term based on those
conditions and plans. Those should remain consistent.
I don't think we should punish today's operators by
adversely changing the legal framework in the middle of the
game. I think the taxpayers deserve certainty, certainty with
respect to reclamation, and also with respect to community
jobs, with respect to environmental protections, and certainty
with respect to any future public compensation. A good dose of
common sense is critical. Examples of this are liability
reform, good Samaritan provisions, efficient and effective
administration of environmental laws, and reclamation and
revenue collection. Government policies should not stand in the
way of creative reclamation efforts. We heard about that in
September. I am also troubled, Mr. Chairman, with issues that
affect the State of Wyoming with abandoned mine land funds from
coal. I understand this is very different. The Federal
Government still owes the State of Wyoming over $580 million
dollars and we have still not seen one penny. So if we're
talking about public revenue collection to do reformation in
the bill, I think we need to make sure those funds are directed
back to the states and the communities where it will do the
most good. So again Mr. Chairman, I appreciate the opportunity
to hear these panels and help work with the members of the
committee to find good solutions. Thank you, Mr. Chairman.
The Chairman. Very good. I think that's the end of our
statements. We'll welcome the witnesses. I will give the list
of our witnesses on the first panel: Henri Bisson is Deputy
Director with the Bureau of Land Management. We appreciate you
being here. William Cobb is the representative from the
National Mining Association. Thank you, for being here. Mike
Dombeck, who is well-known to this committee, is here today
Representing Trout Unlimited and is currently living in
Wisconsin. Randy Wanamaker, earlier mentioned, is with BBC
Human Resources Development Corporation in Juneau, Alaska, and
Alan Bernholtz, who is the Mayor of Crested Butte is here. We
appreciate all the witnesses being here. Why don't we start
with you, Mr. Bisson, then go right across the table there and
hear from each of you. If you would summarize your testimony in
about 5 or 6 minutes for us, tell us the main points that you
think we need to know about, we will include the full, prepared
statement in the record. Thank you.
STATEMENT OF HENRI BISSON, DEPUTY DIRECTOR, BUREAU OF LAND
MANAGEMENT, DEPARTMENT OF THE INTERIOR
Mr. Bisson. Thank you, Mr. Chairman. I appreciate this
invitation to come up here and participate in the oversight
hearing this morning. Members of the committee as well I thank
you on mining Law reform and to share with you on current
information on the BLM hard rock mining program on Federal
lands.
I will summarize my testimony. We often take for granted
the availability of gold, silver, copper, lead, zinc, and other
minerals and their contributions to the quality of life we
enjoy in this country, computers and cell phones tooth paste
and cosmetics, medicines, cars, and appliances that make our
home safe, convenient and comfortable, would not exist without
the types of minerals discovered and developed under the 1872
mining law. For over 135 years the 1872 mining law has served
to ensure reliable and affordable domestic supply minerals
critical to our economy and national security.
The Federal Land Policy and Management Act, which was
enacted in 1976, provides that the secretary shall take any
action necessary to prevent unnecessary or undue degradation of
lands and sets forth the BLM's multiple use mandate. These
provisions of FLPMA are implemented alongside the 1872 mining
law. Other State and Federal laws also play a critical law in
ensuring that hard rock mining operations on public lands occur
in an environmentally sound manner. Although, the 1872 Mining
law itself is over 100 years old, statutory requirements that
comply with State and Federal law, such as the Clean Water Act,
Clean Air Act, Endangered Species Act, National Environmental
Policy Act, Wilderness Act, and National Historic Preservation
Act ensure that mining operations meet today's cultural and
environmental needs. BLM service management regulations were
issued under the authority of FLPMA in 1981, amended in 2000
and again in 2001. The regulations provide a sound framework to
prevent unnecessary or undue degradation of public lands during
hard rock mining reclamation. Under the regulations, all mining
and milling activities are conducted under a plan of
operations, approved by the BLM, following environmental
analysis underneath it. A mining operator must also provide
financial guarantees, recovering the full cost to reclaim the
operation.
Currently, the BLM holds financial guarantees in excess of
1.1 billion dollars to cover the cost of reclamation of mining
operations on BLM managed public land. We belive that the
existing statutes and related regulations provide sufficient
authority to regulate mining operations when properly monitored
and enforced by State and Federal regulatory agencies. However,
we recognize historic mining practices have had adverse
consequences on natural resources and the environment. The
current regulations are designed to avoid recurrence of that
history. Abandoned mine lands, a legacy of past practices, are
addressed through an active program. Between 2000 and 2007, BLM
has inventoried 5,500 sites, remediated physical safety hazards
at more that 3,000 sites, and restored water quality at
hundreds of sites on thousands of acres. BLM will continue its
efforts to do this important work.
In conclusion, the Administration supports the
environmentally responsible development of hard rock minerals
on public lands and would like to work with Congress to update
the mining laws, including the authorization of production
payments, administrative penalties. The Administration also
believes that any legislative solution must be accomplished in
a way that provides a reasonable level of certainty for the
industry, while pursuing goals to protect our environment. We
appreciate your expressed interest in taking a fresh look at
hard rock mining law reform, and we look forward to working
with Congress, industry, and other interested parties as we
move forward with this effort. Thank you for the opportunity to
testify, and I will be happy to answer any questions.
[The prepared statement of Mr. Bisson follows:]
Prepared Statement of Henri Bisson, Deputy Director, Bureau of Land
Management, Department of the Interior
Thank you for the opportunity to participate in this oversight
hearing on Mining Law reform and to share with you current information
on the Bureau of Land Management's (BLM) hardrock mining program on
Federal lands, including the various statutes and regulations that
govern this program.
the 1872 mining law, the federal land policy and management act,
environmental statutes and other applicable laws
For over 135 years, the 1872 Mining Law has served to assure a
reliable and affordable domestic supply of minerals--gold, silver,
copper, lead, zinc, and uranium--critical to our economy and national
security. The 1872 Mining Law also promoted the settlement of the
western United States by providing an opportunity for any citizen of
the United States to explore the available public domain lands for
valuable mineral deposits, stake a claim, and, if the mineral deposit
could be mined, removed, and marketed at a profit, patent the claim.
Patenting results in the claimant acquiring ownership not only of the
mineral resources, but also of the lands containing these mineral
deposits at the statutory price of $2.50 or $5.00 per acre. A
moratorium has been in place since 1994 on BLM's processing of new
patent applications.
By 1976, when the Federal Land Policy and Management Act (FLPMA)
was enacted, settlement of the West was no longer the primary force
driving federal land and resource management policies. FLPMA provides
that the Secretary shall take any action necessary to prevent
unnecessary or undue degradation of the lands. Today, these provisions
and the multiple use mandates of FLPMA are implemented alongside the
1872 Mining Law.
Other state and Federal laws also play a critical role in ensuring
that hardrock mining operations on public lands occur in an
environmentally sound manner. Although the 1872 Mining Law itself is
over 100 years old, statutory requirements to comply with state and
Federal Laws, such as the Clean Water Act; Clean Air Act; Endangered
Species Act; National Environmental Policy Act (NEPA); Wilderness Act;
and National Historic Preservation Act, ensure that mining operations
meet today's cultural and environmental needs.
Mineral withdrawals provide a vital tool to protect special areas.
Millions of acres of Federal land have been withdrawn from mineral
entry through either statute or policy. Withdrawn areas include
Federally-designated wilderness areas, national parks, national
wildlife refuges, and many other specially-designated areas. In
addition, through the public NEPA process, and compliance with other
environmental laws, mining operators review alternatives to their
processes, providing an opportunity to employ new methods and
technologies.
blm's management and regulation of mining
Consistent with the statutes discussed earlier in this testimony,
BLM offers the opportunity for responsible development that serves the
economic, social, and environmental interests of the Nation. The BLM
has accomplished this through the principles of sustainable
development, promulgation of surface management regulations, issuance
of policy guidance, and implementation of an active program to
remediate abandoned mine lands.
Sustainable development is the basis for a policy framework that
ensures that minerals and metals are produced, used, and recycled
properly. In the context of mining, the United States joined 193 other
nations in 2002 in signing the Sustainable Development Plan of
Implementation applicable to mineral resources.
BLM's surface management regulations were issued under the
authority of FLPMA in 1981 and amended in 2000 and 2001. The
regulations provide a sound framework to prevent unnecessary or undue
degradation of public lands during hardrock mining and reclamation.
A congressionally-mandated study conducted by the National Research
Council (NRC) Board on Earth Sciences and Resources examined the
environmental and reclamation requirements relating to mining of
locatable minerals on public lands and the adequacy of those
requirements to prevent unnecessary or undue degradation of public
lands. The NRC Report, ``Hardrock Mining on Federal Lands (1999)''
provided 16 recommendations, including nine recommendations for the
BLM's surface management regulations. The 2000 and 2001 revisions to
BLM's surface management regulations incorporated all nine of those
recommendations.
Under the regulations, all mining and milling activities are
conducted under a plan of operations approved by the BLM, and following
environmental analysis under NEPA. The BLM must disapprove any mining
operation that would cause unnecessary or undue degradation of the
public lands. A mining operator, as well as an exploration operator
(exceeding casual use), must provide financial guarantees covering the
full cost to reclaim the operation. BLM may require an operator to
establish a trust fund or other funding mechanism to ensure the
continuation of long-term treatment to achieve water quality standards
and for other long-term, post-mining reclamation and maintenance
requirements after a mine is closed. In response to previous GAO
recommendations, the BLM has implemented a tracking system under which
BLM state directors are required to certify each fiscal year that the
reclamation cost estimates for proposed and operating mines have been
reviewed and are sufficient to cover the cost of reclamation.
Currently, the BLM holds financial guarantees in excess of $900 million
to cover the costs of reclamation of mining operations on BLM-managed
public lands.
BLM policy guidance reinforces the surface management regulations.
Originally set out in 1984, the internal policy was last updated by the
BLM Director in 2006. This policy guidance emphasizes that mineral
exploration and development can occur concurrently or sequentially with
other resource uses. The policy promotes balancing environmental,
social, and economic needs while practicing environmental stewardship
and promoting stakeholder participation. These efforts include:
reviewing and processing notices and plans of operations to
prevent unnecessary or undue degradation;
requiring financial assurances to provide for reclamation of
the land; and
considering alternative forms of reclamation after a mine is
closed such as using the land for landfills, wind farms,
biomass facilities and other industrial uses, in order to
attract partnerships to utilize the existing mine
infrastructure for a future economic opportunity.
We believe that the existing statutes and related regulations
provide sufficient authority to regulate mining operations when
properly monitored and enforced by state and Federal regulatory
agencies. However, we recognize historic mining practices have had
adverse consequences on natural resources and the environment. The
current regulations are designed to avoid a recurrence of that history.
Abandoned Mine Lands, a legacy of past practices, are addressed
through an active program. This year, the Forest Service and the BLM
are celebrating 10 years of success with the hardrock abandoned mine
lands program. The program seeks to mitigate hazards present at
abandoned mines; restore watersheds for natural resources; and protect
public health and safety, recreation, fish and wildlife. Between 2000
and 2007, the BLM has inventoried 5,500 sites and remediated physical
safety hazards at more than 3,000 sites. The BLM has also restored
water quality at over 280 sites through 2003 and on more than 3,000
acres between 2004 and 2007.
Addressing abandoned mine lands is a challenge and the BLM will
continue its efforts to do this important work.
mining's importance to the united states
We often take for granted the availability of gold, silver, copper,
lead zinc and other minerals and their contribution to the quality of
life we enjoy in this country. In 2006, the total value from domestic
metals production was approximately $23.5 billion. Computers and cell
phones, toothpaste and cosmetics, medicines, cars, sporting equipment,
and appliances that make our homes safe, convenient, and comfortable--
none of these would exist without the types of minerals discovered and
developed under the 1872 Mining Law. These minerals, and the capability
to produce them domestically, are also vital to the United States'
economic and domestic security.
As much as we enjoy these conveniences, it is the mineral products
used in areas such as agricultural production, communication,
transportation, technology, and national defense that make a truly
profound contribution to our way of life. The phenomenal advance of
culture, science and technology remains dependent on mineral resources.
In an example that is close to home for Americans, the automobiles most
of us drive every day contain nearly 50 pounds of copper, and the newly
popularized hybrid vehicles require even more--about 75 pounds for each
car, by some estimates. Most vehicle manufacturers specify that the
copper used be ``new'' copper.
Metal mining is an international business, with purchasing and
sales conducted through the London Metals Exchange, the New York
Commodities Exchange and secondary exchanges. Metal marketing operates
within a free market system, in which the price is determined by what a
willing buyer and a willing seller agree upon. The international prices
for the metals are fixed daily on the exchanges, and costs of
production control the economics of particular companies. If operating
and capital costs reach a certain point compared to the prevailing
market price, the mining company may cease production until costs go
down or the price goes up.
Mining companies that are affected by these global markets in turn
impact small communities throughout the West where employment
opportunities are often limited. By some estimates, for every direct
job in mining, three supporting jobs are created. Producers must buy
fuel, pipes, wire, and other industrial products, and these
requirements are often contracted out to local fuel distributors,
hardware suppliers, and related businesses. Producers pay Federal,
state, and local income and property taxes.
conclusion
The Administration supports the environmentally responsible
development of hardrock minerals on public lands and would like to work
with Congress to update the Mining Law, including the authorization of
production payments and administrative penalties. The Administration
also believes that any legislative solution must be accomplished in a
way that provides a reasonable level of certainty to the industry while
pursuing goals to protect our environment. We appreciate your expressed
interest in taking a fresh look at hardrock mining law reform and we
look forward to working with Congress, industry, the environmental
community, and other interested parties as you move forward with this
effort. Thank you for the opportunity to testify. I will be glad to
answer any questions.
The Chairman. Dr. Dombeck, go right ahead.
STATEMENT OF MIKE DOMBECK, REPRESENTING TROUT UNLIMITED,
STEVENS POINT, WI
Mr. Dombeck. Chairman, Senator Domenici, thank you for the
invitation to testify. It's good to be back. I'm now a
Professor at the University of Wisconsin at Stevens Point. In
addition to my years with the Forest Service and the Bureau of
Land Management, I started out as a fishing guide and am a avid
hunter and angler. In fact, I think of I have probably either
fished or hunted in every one of your States, and still not
enough, however. In fact, I a couple of years ago, I just got
my first elk in Idaho. I understand that New Mexico has some
really big ones as well. I haven't made that venture yet. At
any rate, I'm here testifying on behalf of Trout Unlimited, the
Theodore Roosevelt Conservation Partnership and the National
Wildlife Federation and millions of hundreds of anglers and
sportsmen and women that they represent. I also have a letter
signed by about 22 of these organizations, including many of
them businesses that I would like to ask be submitted for the
record.
The Chairman. We'll include that in the record.
Mr. Dombeck. I certainly want to emphasize that mining is a
legitimate use of public land, and is incredibly important and
has been for a long, long, time. Under the 1872 Mining Law,
however, mining really does take precedence over other uses on
public lands, including hunting and fishing and once claimed a
mining operation, the public land managers in my view, really
do not have the discretion as they do to prohibit mining under
the current framework of the 1872 Mining Law like they have on
the disposition of many other minerals, as you mentioned in
your Opening statement, Mr. Chairman. The legacy of the 1872
Mining Laws from the standpoint of fish and wildlife and
aquatic resources I think is extensive. For example, EPA
estimates 40 percent of the western headwater streams are
degraded by abandoned mines.
The public lands national forest BLM lands really are a
treasure, a tremendous resource for hunting, fishing,
recreation, outdoor activities. More than 50 percent of the
Nations blue ribbon trout streams are on these lands. Eighty
percent of some of the most critical habitats for elk are found
on public lands. Many, many populations of imperiled species
are also on these public lands. In addition, the national
forests provide drinking water to about 60 million Americans in
33 States. Mr. Chairman, in your letter in invitation, you
asked that I find that on five very important areas on how to
modernize this law. I'll just very quickly summarize those
areas. A fair royalty for any minerals taken from public lands,
and a portion should be invested in abandoned mine clean up.
Very important. Affirm the values of fish and wildlife habitat,
water resources, and hunting and fishing on public lands and
make it clear that they should be on equal par with mining on
public lands as multiple uses. Agency managers should be given
the discretion to make logical, science-based, decisions on
land health and where to mine, as wells where not to mine.
Funding and common-sense liability relief should be made
available for those would be Good Samaritans and volunteers who
want to help clean up abandoned mines on public lands. Finally,
mining reform legislation should prohibit patenting or sale of
public lands. I really commend this committee. You have a rare
opportunity to improve this law, to modernize this law, and the
sportsmen and women around the country are counting on you to
help them with that. Thank you, for the opportunity to testify,
and I'll be happy to answer any questions.
[The prepared statement of Mr. Dombeck follows:]
Prepared Statement of Mike Dombeck, Representing Trout Unlimited,
Stevens Point, WI
Mr. Chairman and Members of the Committee: Thank you for inviting
me here to testify today. My name is Mike Dombeck. I am a professor at
the University of Wisconsin-Stevens Point. Formerly, I served as chief
of the U.S. Forest Service and director of the Bureau of Land
Management (BLM). I'm a former fishing guide, and still an avid hunter
and fisherman. I'm pleased to present testimony on the need to reform
the laws that govern mining of hard rock minerals from public lands on
behalf of Trout Unlimited (TU), the National Wildlife Federation and
the Theodore Roosevelt Conservation Partnership, organizations that
represent millions of sportsmen and women, wildlife and fish
professionals, and outdoor recreation-related businesses.
Mining is a legitimate use of public lands, but there are few laws
more in need of an overhaul than the 1872 Mining Law. The 1872 Mining
Law, signed into existence 135 years ago by President Ulysses Grant, is
the most outdated natural resource law in the nation. Under the 1872
law, mining takes precedence over all other public land uses, including
hunting and fishing. The Secretary of the Interior must sell public
land to mining companies, often foreign-owned, for as little as $2.50
per acre. Furthermore, mining companies pay no royalties for hard rock
minerals including; gold, copper and zinc that belong to all citizens.
The price of uranium, gold and other heavy metals continues to drive
companies to stake claims across the West. Mining claims dot millions
of acres of public land across the West. Once claimed, it is nearly
impossible to prohibit mining under the current framework of the 1872
Mining Law, no matter how serious the impacts might be.
The legacy of the 1872 Mining Law is extensive, and the damage from
mining is still ongoing today. For example, the EPA estimates that 40
percent of western headwater streams are degraded by abandoned mines.
The following are some examples of impacts to water and fish and
wildlife habitat caused by specific mines in the recent past as well as
threats from proposed mines.
A Canadian mining company is pushing to develop a large,
open pit, cyanide leach gold mine at the headwaters of the
Boise River. The Boise River is responsible for more than 20
percent of the city's municipal water supply, as well as
supplying critical wildlife and fish habitat, irrigation for
agriculture and recreational opportunities. The Mayor of Boise
has opposed the mine.
One of five known grizzly bear populations in the lower 48
states as well as imperiled bull trout may be eliminated due to
a proposed silver mine in the Cabinet Mountain Wilderness in
northwestern Montana.
In 1992, the Summitville mine in Colorado released a toxic
brew including cyanide and acid mine drainage, killing all fish
and wildlife in a 17 mile stretch of the Alamosa River. Cleanup
costs at the now-Superfund site exceed $150 million.
Historic placer mining operations have affected Resurrection
Creek in the Chugach National Forest, Alaska, by re-channeling
the stream and separating it from its floodplain. These impacts
degraded fish rearing and spawning habitat along the river, as
well as adjacent wildlife riparian habitat for species like
bears and eagles.
The Beal Mountain Mine, located in the Beaverhead Deerlodge
National Forest and operated from 1989 through 1998, has
polluted valuable trout waters with cyanide, selenium and
copper. Using more recent cyanide heap-leach technologies, the
mining company promised that there would be no discharge of
pollutants into receiving waters. The technologies failed and
waters downstream have been contaminated with selenium and
other heavy metals. The Forest Service and the Montana
Department of Environmental Quality are working to contain the
contamination which may have to be treated in perpetuity. With
the mining company bankrupt, the taxpayers must pay the bill.
Professional resource managers at the Forest Service and BLM need
to have the ability to make science-based decisions about where and
when mining on public land should occur. Without this discretion,
professional land managers cannot maintain their commitments as
stewards of the public trust.
Public lands managed by the BLM and the Forest Service harbor some
of the most important fish and wildlife habitat and provide some of the
finest hunting and angling opportunities in the country. For example,
public lands contain well more than 50 percent of the nation's blue-
ribbon trout streams and are strongholds for imperiled trout and salmon
in the western United States. More than 80 percent of the most critical
habitat for elk is found on lands managed by the Forest Service and the
BLM, alone. Pronghorn antelope, sage grouse, mule deer, salmon and
steelhead, and countless other fish and wildlife species are similarly
dependent on public lands.
The national forests are a major source of water and of particular
importance in the West. Forest Service and EPA scientists have
determined that the national forests alone provide drinking water to
more than 60 million people in 33 states.
Mr. Chairman, in your letter of invitation, you asked that I
comment on five very important questions about the types of
environmental reforms that may be needed to modernize this law so that
its provisions protect fish and wildlife resources, and hunting and
fishing. I will summarize my responses by providing you with the five
major ways the law needs to be changed.
Any reform of the 1872 Mining Law should contain the following
provisions:
A fair royalty from any minerals taken from public lands, a
portion of which should be invested in an abandoned mine clean
up fund. Since 1977, royalties associated with coal mining have
generated $7.4 billion to help clean up abandoned mines and
recover lands and waters and communities affected by coal
mining. We need a similar fund for hard rock mining. And a
sensible reform should include all mining operations, present
and future. Almost every commodity developed off public lands--
coal, wood fiber, oil, gas, and forage--has dedicated funding
for mitigation of impacts and restoration measures. The only
commodity that lacks such a dedicated fund is hard rock
minerals. As a result, non-profit organizations such as TU,
local communities, and state agencies, are dependent on
cobbling funding from an array of private, state, and federal
sources to get work done on the ground.
Affirm the values of fish and wildlife habitat, water
resources, and hunting and fishing, on public lands and make it
clear that mining should not be the dominant use of our federal
lands. Professional land managers that work for the Forest
Service and BLM believe the 1872 Mining Law makes hard rock
mining a dominant use of public lands. Mining reform
legislation needs to reaffirm the doctrine of multiple-use and
recognize the inherent value of public lands for other
important uses and values, including hunting and fishing
opportunities and fish and wildlife habitat. This is a major
priority for sportsmen, land management agencies, and other
users of public lands.
Agency managers should be given the discretion to make
logical decisions based on land health about where to mine and
where not to mine. Special places with important fish and
wildlife and water values such as wilderness areas, National
Parks, Fish and Wildlife Refuges, and inventoried roadless
areas ought to be placed off-limits to mining entirely.
Discretion ought to be afforded to managers on other lands to
allow for balanced and reasoned decisions about ecological,
social, and economic values. And on highly mineralized lands
with low fish and wildlife values, and high levels of mining
company investment, mining companies ought to have a higher
degree of certainty that mining projects can proceed in
accordance with other laws and regulations.
Funding and common-sense liability relief must be made
available for would-be Good Samaritans and volunteers to clean
up abandoned mines. Abandoned mines are one of the single most
important, least addressed environmental challenges in the
nation. The geographic scope of the problem is staggering. EPA
estimates that abandoned hard rock mines degrade nearly 40
percent of all western headwater streams. The enormity and
scope of the problem have led to a collective sense of futility
that has fostered inactivity in many places. Good Samaritans,
who have no connection to the abandoned mine waste or interest
in re-mining it for profit, should be provided with reclamation
incentives and commonsense liability relief.
Finally, mining reform legislation should prohibit the
patenting or sale of public lands. The U.S. Government has
practically given away more than three million acres of our
public lands to mining companies through the practice of
patenting. It is troublesome that anyone can stake a claim on
public lands and then buy the land for as little as $2.50 an
acre. With the increase in the price of metals, so have the
number of claims staked. For example, in Arizona, the number of
claims filed in the state has risen 80 percent since 2003.
Thousands of these claims are within five miles of the Grand
Canyon National Park, a crown jewel of the American public but
also prime wildlife habitat for mule deer.
This Committee, and the Senate, have a rare opportunity to improve
this law. The House has passed a strong reform bill. Key Senators have
expressed their willingness to explore changes to it. We urge you to
carefully consider our recommendations, draft a good bill, and move it
through the Senate as quickly as possible next year. Sportsmen and
women around the nation, especially in the West, are counting on you to
end the long stalemate and reform the 1872 Mining Law.
Thanks for the opportunity to testify. I'll be happy to try and
answer any questions that you may have.
The Chairman. Thank you, very much.
Mr. Cobb.
STATEMENT OF WILLIAM E. COBB, REPRESENTING THE NATIONAL MINING
ASSOCIATION, PHOENIX, AZ
Mr. Cobb. Good morning, Mr. Chairman, and members of the
committee, my name is William Cobb, and I'm the Vice President
of Environmental Services, Freeport McMoran Mining Company,
which is part of Freeport McMoran Copper & Gold. We're the
world's second largest producer of copper. I'm testifying today
on behalf of the national mining association. I appreciate the
opportunity to testify before the committee on this issue of
great importance for the domestic mining industry. I am a
member supporting reform of the Mining Law and look forward to
working with this committee to try and resolve this issue
during this Congress.
Let me first start. The current environmental regulations
demonstrate that the need for restrictive standards are
unnecessary. Mining on public lands is an extremely regulated
enterprise. There are a wide variety of Federal, State, and
local environmental, regulations that govern mineral
exploration, development, operation, closure and reclamation,
including specific mining environmental standards administrated
by the Bureau of Land Management and the Forest Service and
there are similar standards at the State level. First of all,
Federal environmental laws such as the National Environmental
Policy Act, the Clean Air Act, the Clean Water Act, Solid Waste
Disposal Act, the Resource Conservation and Recovery Act, the
Drinking Water Act, the Toxic Substances Control Act, and many
others. While the protection statutes such as the Endangered
Species Act and comprehensive western State Regulations that
deal with the long-term protection of drinking water quality
and quantity, the management of disposal of solid waste, and
the reclamation of mining sites.
In addition, the Bureau of Land Management and the Forest
Service have sufficiently strengthened their financial
assurance requirements. These agencies require financial
assurance which is periodically reviewed to cover the full cost
of reclaiming the operation, assuming that a third party
conducts the effort. There are similar requirements at the
State level. There is no one size fits all regulatory approach
that makes sense for the hard rock mining industry,
particularly a means of eliminating future Superfund sites.
Prescriptive standards lack the flexibility needed to address
the wider array of mine sites and types. In lay terms a copper
mine in Arizona has different operational life periods,
different operational enclosure issues than a gold mine in
Idaho. Even the National Academy of Sciences concluded that the
establishment of a single Federal regulatory regime for hard
rock mining is unnecessary and ill advised. Existing Federal
financial insurance requirements when combined with sustained
environmental compliance are what it takes to assure that
public does not ultimately become responsible for reclamation
of mine sites on Federal lands. We believe that existing
authorities adequately protect special places and the right to
deny approval is not necessary. Access to Federal lands for
mineral exploration and development is critical to maintain a
strong domestic mining industry. Efforts to amend to amend the
Mining Law must recognize existing authorities to close certain
special places to mining activity. Congress has already closed
land to mining, to wilderness, national parks, national
wildlife refuges, recreational ares, and wild and scenic
rivers.
Congress has also granted additional authority to the
executive branch to close Federal lands to mining. New closures
of Federal land based on vague and subjective criteria would
arbitrarily impair domestic mineral and economic development.
Because there are existing tools available to protect special
resources in environmental sensitive areas, it is not necessary
to give the Secretary of Interior the right to stop the mining
project if it meets all environmental and other legal
requirements. Mine projects that are capital-intensive
undertakings and require years of exploration and development
before projects realize positive cash-flows. Recently announced
mining projects are being contemplated both within and outside
the United States, including Freeport McMoran's restart of its
Climax mine in Colorado, that range from hundreds of millions
of dollars to multi-billion dollars. As witnessed in other
countries, legal and regulatory uncertainties can chill the
climate for large capital investments. We can see the same
thing in the United States resulting in serious consequences
for our economic and national security.
There is a growing reliance on foreign sources of minerals
as the committee has kindly identified. Despite reserves of 78
important mine materials, the United States attracts only 8
percent of worldwide domestic dollars. Even with adequate
domestic resources, our Nation is becoming more dependent on
foreign sources to meet our country's strategic and critical
minerals requirements. In conclusion, the U.S. mining industry
is committed to conducting its operations in an environmentally
and fiscally sound manner. For many companies, we have
demonstrated this commitment, through the implementation of
environmental management systems, which are a method of
improving overall environmental performance, improving
environmental compliance, achieving closure and reclamation
success. The industry hopes and expects that mining law
legislation will recognize and honor our commitments to
continue this improvement in environmental performance, and the
industry's contribution to our national well-being. NMA
appreciates the opportunity to provide this testimony this
morning and I am ready to address the questions when
appropriate. Thank you.
[The prepared statement of Mr. Cobb follows:]
Prepared Statement of William E. Cobb, Representing the National Mining
Association, Phoenix, AZ
Good morning, Mr. Chairman and members of the Committee. My name is
William Cobb, and I am the Vice President of Environmental Services for
Freeport McMoran Mining Company, part of Freeport McMoran Copper &
Gold. I am testifying today on behalf of the National Mining
Association (NMA). NMA appreciates the opportunity to testify before
the Committee on this issue of great importance to the domestic mining
industry. NMA members support reform of the Mining Law and look forward
to working with the Committee to try to resolve this issue during this
Congress.
NMA is the principal representative of the producers of most of
America's coal, metals, industrial and agricultural minerals; the
manufacturers of mining and mineral processing machinery, equipment and
supplies; and the engineering and consulting firms, financial
institutions and other firms that serve our nation's mining industry.
Our association and our members, which employ or support 170,000 high-
wage jobs, have a significant interest in the exploration for, and
development of, minerals on federal lands. The public lands in the
Western states are an important source of minerals, metal production
and reserves for the nation's security and well-being. Mining on
federal lands provides for high-wage employment, vitality of
communities, and for the future of this critical industry.
current environmental scheme
Mining on public lands is a pervasively regulated enterprise with a
vast range of federal, state, and local environmental laws and
regulations governing mineral exploration, development, operation,
closure and reclamation. Under current law, companies that engage in
hardrock mining and related activities on the public lands are subject
to a comprehensive framework of federal and State environmental,
ecological, and reclamation laws and regulations to ensure that
operations are fully protective of public health and safety, the
environment, and wildlife including:
Specific mining environmental standards administered by the
Bureau of Land Management and the Forest Service, the federal
surface land management agencies, and supplemented by state
laws;
All major applicable federal environmental laws such as the
National Environmental Policy Act, the Clean Air Act, the Clean
Water Act, the Solid Waste Disposal Act, the Resource
Conservation and Recovery Act, Superfund, the Safe Drinking
Water Act, the Toxic Substances Control Act and many others;
Wildlife protection statutes administered by the Department
of the Interior and/or States such as the Endangered Species
Act.
Comprehensive Western State laws and regulations dealing
with the protection of groundwater quality and quantity, both
for operations and closure, the management and disposal of
solid waste, and the reclamation of mining sites, which
typically focus on the establishment of post-mining habitat for
wildlife.
As seen by the number of approvals and permits the typical mining
operation on federal lands must obtain before commencing construction,
mining is heavily and thoroughly regulated. Depending on a project's
complexity, the environmental assessment and permitting process can
take upwards of a decade to complete. Typical environmental permits and
approvals include:
A plan of operations from the BLM or Forest Service,
requiring a reclamation plan, closure plan, and cultural
resources plan. The plan of operations is scrutinized under the
National Environmental Policy Act (NEPA), usually requiring the
preparation of an environmental impact statement (EIS), which
evaluates potential environmental impacts of the mining
operation, assesses alternatives and requires the
identification of mitigation measures to reduce potentially
significant environmental impacts. The EIS process has evolved
to address broader issues and many times it is known as the
ESIA or Environmental and Social Impact Assessment.
Air quality permits from EPA or state agencies with
delegated programs under the Clean Air Act. The complexity of
the air quality permits increases if there are substantial
onsite processing facilities. All sites must have an approved
fugitive dust control program. Water quality permits from EPA
or state agencies with delegated programs under the Clean Water
Act.
Water quality permits can include discharge permits,
stormwater management permits and section 404 permits. States
also require permits to address potential impacts to ground
water, both during operations and closure to protect the
reasonably foreseeable beneficial uses of groundwater
resources.
Rights to use or consume water from appropriate state
authorities
Hazardous waste permits that govern storage, transportation
and disposal of laboratory or processing wastes.
Authorization under the National Historic Preservation Act
if cultural or historic resources are present.
Permits to construct tailings ponds or other impoundments.
These laws and regulations that govern mining on federal lands are
``cradle to grave,'' covering virtually every aspect of mining from
exploration through mine reclamation and closure. The National Academy
of Sciences (NAS) reviewed the existing federal and state regulatory
framework for hardrock mining and concluded that the existing laws were
``generally effective'' in ensuring environmental protection. Hardrock
Mining on Federal Lands, National Academy of Sciences, National Academy
Press, 1999, p. 89.
Since the NAS study was published, the federal land management
agencies have acted to make this effective regulatory program even
stronger. For example, BLM and the Forest Service have significantly
strengthened their financial guarantee requirements. BLM's regulations
now require financial guarantees for all mining and exploration
disturbances, no matter how small, before activities can proceed. Both
agencies require the financial guarantee to cover the full cost to
reclaim the operation, as if the agencies were to contract with a third
party to conduct reclamation. In addition, the agencies can now require
the establishment of a trust fund or other funding mechanism to ensure
the continuation of long-term treatment to achieve water quality
standards and for other long-term, post-mining reclamation and
maintenance requirements. State-specific regulations require the
establishment of financial assurance using a variety of specified
forms.
Furthermore, the agencies require periodic review of reclamation
funding. BLM has implemented a tracking system under which BLM state
directors are required to certify each fiscal year that the reclamation
cost estimates for proposed and operating mines have been reviewed and
are sufficient to cover the cost of reclamation. Similarly, the Forest
Service requires annual review of financial assurances. The
improvements in financial assurance requirements, combined with
sustained environmental compliance, will ensure that the public will
not ultimately become responsible for reclamation of mine sites on
federal lands.
new prescriptive standards are unnecessary and inappropriate
The existing comprehensive framework of federal and state
environmental and cultural resources laws already regulates all aspects
of mining from exploration through mine reclamation and closure.
Additional federal regulation is unnecessary, duplicative and
unreasonable.
Critics of the current regulatory framework often cite the lack of
a single set of prescriptive standards for all mines as the impetus for
new environmental regulations. Prescriptive standards lack the
flexibility needed to address the wide array of site specific
circumstances and mining sectors; in lay terms, a copper mine in
Arizona has different operational and closure issues than a gold mine
in Idaho. At least two studies conducted by the National Academy of
Sciences have concluded that the establishment of a single federal
regulatory regime for hardrock mining is unnecessary and ill-advised.
See Surface Coal Mining of Non-Coal Minerals (1979); Hardrock Mining on
Federal Lands (1999). Both studies cautioned against applying
inflexible, technically prescriptive environmental standards because
``simple `one-size-fits-all' solutions are impractical as mining
confronts too great an assortment of site-specific technical,
environmental, and social conditions.'' Id.
existing authorities adequately protect special places
Access to federal lands for mineral exploration and development is
critical to maintain a strong domestic mining industry. Federal lands
account for as much as 86 percent of the land area in certain Western
states. These same states, rich in minerals, account for 75 percent of
our nation's metals production and will continue to provide a large
share of the future metals and hardrock minerals produced in this
country.
Efforts to amend the Mining Law must recognize existing authorities
to close certain ``special places'' to mining activity. Congress has
closed lands to mining for wilderness, national parks, wildlife
refuges, recreation areas, and wild and scenic rivers. Congress also
has granted additional authority to the Executive Branch to close
federal lands to mining. The Antiquities Act authorizes the president
to create national monuments to protect landmarks and objects of
historic and scientific interest. Finally, Congress authorized the
Secretary of the Interior to close federal lands to mining pursuant to
the land withdrawal authority of the Federal Land Policy and Management
Act. As a result of these laws and practices, new mining operations are
either restricted or banned on more than half of all federally owned
public lands. These existing laws and authorities are adequate to
protect special areas. New closures of public land, based on vague and
subjective criteria without congressional oversight, would arbitrarily
impair domestic mineral and economic development.
In addition, the federal land management agencies have land use
planning processes to identify natural or cultural resources or
environmental and social sensitivities that require special
consideration. These planning processes are used to identify areas that
need to be withdrawn as well as any terms, conditions, or other special
considerations needed to protect other resource values while conducting
activities under the operation of the mining laws. Other mechanisms
available to federal land management agencies for protecting valuable
resources and sensitive areas include use of advisory guidelines to
identify categories of resources or lands that deserve special
consideration and the adoption of sitespecific mitigation measures in a
plan of operations to protect cultural values, riparian habitat,
springs, seeps, and ephemeral streams that are not otherwise protected
by specific laws.
right to deny approval
With the existing tools available to protect special resources and
environmentally sensitive areas, there is no need to provide additional
federal authority to address where mining claims should be denied on
federal lands due to environmental or other concerns. In particular, it
is not necessary to give the Secretary of Interior the right to stop a
mining project when all environmental and other legal requirements are
met. Such authority is simply not needed to protect against unnecessary
or undue degradation as the federal land management agencies have other
statutory and regulatory means of preventing irreparable harm to
significant scientific, cultural, or environmental resource values. The
Department of the Interior exercises case-by-case discretion to protect
the environment from any unnecessary or undue degradation through the
process of approving or rejecting individual mining plans of
operations.
Not only is such federal authority unnecessary to protect the
environment or special resources, providing such authority creates
significant uncertainty regarding ultimate mining project approval.
Mining projects will not be able to attract investments if there is no
certainty that the project can obtain approval even when the operator
complies with all relevant laws and regulations. Investors need to know
that a mining project in the United States can obtain approval and
proceed unimpeded as long as the operator complies with all relevant
laws and regulations. Mining projects--from exploration to extraction
to reclamation and closure--are time- and capital-intensive
undertakings, requiring years of development before investors realize
positive cash flows. Recently announced mining projects being
contemplated both within and outside the United States, including
Freeport McMoran's restart of its Climax Mine in Colorado, have ranged
from hundreds of millions of dollars to multi-billion dollars.
Uncertainty in the legal regime applicable to mining projects can chill
the climate for capital investments in domestic mining projects and
have serious consequences for our economic and national security. If
the investments critical for bringing a mine to fruition tend to
migrate toward projects planned in other countries, the United States
will become even more reliant on foreign sources of minerals.
growing reliance on foreign sources of minerals
Despite reserves of 78 important mined minerals, the United States
currently attracts only eight percent of worldwide exploration dollars
and Freeport McMoran's greenfield exploration budget is the same. As a
result, our nation is becoming more dependent upon foreign sources to
meet our country's strategic and critical metals and minerals
requirements, even for minerals with adequate domestic resources. The
2007 U.S. Geological Survey Minerals Commodity Summaries reported that
America now depends on imports from other countries for 100 percent of
17 mineral commodities and for more than 50 percent of 45 mineral
commodities. This increased import dependency is not in our national
interest particularly for commodities critical to pending strategic
programs such as reducing greenhouse gas emissions or undertaking
energy efficiency efforts. Increased import dependency causes a
multitude of negative consequences, including aggravation of the U.S.
balance of payments, unpredictable price fluctuations, and
vulnerability to possible supply disruptions due to political or
military instability.
Our over-reliance on foreign supplies is exacerbated by competition
from the surging economies of countries such as China and India. As
these countries continue to evolve and emerge into the global economy,
their consumption rates for mineral resources are ever-increasing; they
are growing their economies by employing the same mineral resources
that we used to build and maintain our 6 economy. As a result, there
exists a much more competitive market for global mineral resources.
Even now, some mineral resources that we need in our daily lives are no
longer as readily available to the United States.
conclusion
The U.S. mining industry has fully embraced the responsibility to
conduct its operations in an environmentally and fiscally sound manner.
For many mining companies, we have demonstrated this commitment through
the implementation of environmental management systems, which are a
method of improving overall environmental performance, environmental
compliance, and closure and reclamation success. The industry hopes and
expects that Mining Law legislation will recognize and honor both its
commitments to continuous improvement in our environmental performance
and the industry's contribution to our national wellbeing.
NMA appreciates the opportunity to provide this testimony.
The Chairman. Thank you, very much. Next is Alan Bernholtz,
the Mayor of Crested Butte. Go right ahead.
STATEMENT OF ALAN BERNHOLTZ, MAYOR,
CRESTED BUTTE, CO
Mr. Bernholtz. Good morning. I want to start by thanking
our humble Chairman and distinguished members of the committee
for the opportunity to testify regarding the reform of the 1872
Mining Law. I am the Mayor of the Town of Crested Butte,
Colorado, and Crested Butte is a nationally registered historic
district and world class ski and recreation community, with a
resident population of 1,600 people. We are located 230 miles
southwest of Denver, and Crested Butte is surrounded by
federally designated wilderness areas. Crested Butte is
concerned over a number of issues raised in the debate over
reform of the 1872 Mining Law. Some of these issues paramount
concerns for our community.
We respectfully submit that any reform must take into the
critical importance of municipal watersheds in western
communities. Watershed protection must take precedence over
industrial mining development. Local governments must be given
a much larger role of designation of where mining development
can happen and be undertaken. The ability of local governments
in certain critical areas withdrawn from entry and development,
must be an essential tenet of any reform legislation. We
believe Crested Butte offers plenty of examples of the problems
with application of the 1872 Mining Law in modern times. At
Crested Butte, it is our clean environment and our recreational
opportunities on public land that allowed us to thrive as a
prominent, international recreation destination. These values
are threatened by a large-scale industrial mining project
proposed on U.S. Forest Service Land on Mt. Emmons a/k/a as Red
Lady, just one mile from our town boundary. This project is
also known as the Lucky Jack Project proposed in the town's
municipal watershed. The map you have in front of you this
mornings depicts the location of the town's watershed overlaid
by the projects proponents claims. We submit this map to the
honorable chairman and the committee for the record.
Based on an initial understanding of the Lucky Jack
Project, the mine will dump hundreds and thousands of tons of
mine wastes and mine tailings into our watershed, disturb
thousands of acres of prime wildlife habitat, and eliminate
critical recreational areas from public use and essentially
turn pristine National Forest lands outside of our town into a
permanent industrial dump site. At present, the Lucky Jack
Project will be regulated by the provisions of an antiquated
1872 Mining Law. Although we are just now beginning to
understand, is clear to us the current law fails to protect the
interests of our community. The residents of Crested Butte have
been staunchly unified in any mine development since the late
1970s. We have businesses, reeves, and even ski lifts named
after Red Lady. Red Lady is a a primary source of the town's
water and popular recreational area, and an important part of
the fabric of our community.
Crested Butte actually has a rich history in mining and we
are not opposed to responsible mining. We are proud of our
heritage. As a former miner community, we recognize the
importance of a strong and stable mining industry. Times have
changed. Today our community depends on a healthy, intact
watershed and long-term and sustainable economic prospects
based on recreation and tourism. Mining will not better our
community; it would actually destroy it. Under the Government's
interpretation of the 1872 Mining Law, the Forest Service is
powerless to deny the Lucky Jack Project. At best, the Forest
Service can only ''minimize adverse impacts``. In light of
this, we ask the following: Why if the Lucky Jack Project would
so negatively affect or communities water supply and the local
recreation-based community, of course, powerless to deny this
project. The form of the 1872 Mining Law must at its course,
contain a new environmental standards to protect public
resources from adverse impacts. At a minimum, Congress must
grant the BLM and the Forest Service the authority to balance
other public needs, uses, and values on public land in
evaluating a mining proposal. The Federal agency with public
input must then decide that the mining is appropriate use of
and suitable for those public lands in question.
In situations like ours, mining is not the preferred use of
Federal land. The protection of our municipal watershed and the
maintenance of our vital recreation-based economy must be the
deciding factor. Each mine project and public resources
impacted there must be only approved on a case-by-case basis.
Certain lands must not be open for location or entry. At a a
minimum, municipal water sheds and lands critical to local
recreation-based economies must be withdrawn from entry because
local communities are best able to ascertain the importance
surrounding public lands. These communities deserve the right
to have a direct say in withdrawal decisions. It is also
important to recognize the critical need for local and State
regulation of hard rock mineral development. It is imperative
that Congress recognize State and local laws that regulate
mineral development and its impacts. On behalf our community,
we thank you, very much for the opportunity to come forward
this morning. The future of Crested Butte is dependent on the
protection of our water, our land, and our economy, which all
are at risk without your comprehensive reform of antiquated
1872 Mining Law.
Accordingly, we request that Congress as expeditiously as
possible to bring mining regulations into the 21st century.
Thank you.
[The prepared statement of Mr. Bernholtz follows:]
Prepared Statement of Alan Bernholtz, Mayor, Crested Butte, CO
Honorable Chairman and Members of the Committee: Thank you for the
opportunity to submit our comments and respond to the Committee's
questions regarding reform to the 1872 Mining Law. As the Mayor of a
small community in western Colorado surrounded by federal land, I
understand the importance of sensible and effective public lands
management that meets the needs of small communities like ours and all
Americans.
Crested Butte is keenly interested in a number of issues related to
the reform of the 1872 Mining Law, but several are of paramount
concern. At the outset, any reform must consider the essential
importance of municipal watersheds to the health and vitality of
western communities. Watershed protection must take precedence over
industrial mining development. Relatedly, state, local and tribal
governments must be given a much larger role in the determination as to
whether and where mining development can proceed. The ability of these
governments to have certain critical areas withdrawn from entry and
development must be a central tenet of any reform legislation.
crested butte, colorado
Crested Butte is a world-class ski town and National Historic
District with a resident population of approximately 1,600 persons. We
are located 230 miles southwest of Denver. Crested Butte is sandwiched
between the Raggeds, Maroon Bells and West Elk Wilderness areas--50
miles directly upstream from the Black Canyon of the Gunnison National
Park.
Crested Butte has a rich mining history and we are proud of our
heritage. Times have changed though and our residents and economy no
longer depend on mining. In our community, skiing, fishing, hiking and
mountain-biking, to name a few, are the life-bloods of our economy. It
is our clean environment and recreational opportunities, enhanced
greatly by our abundant public lands that have allowed us to thrive.
As a former mining town, we recognize the importance of a strong
and stable mining industry. We are cognizant, however, that the future
of our community depends on a healthy, intact watershed and long-term
and sustainable economic prospects not subject to the boom-and-bust
cycle of mineral development. We believe that comprehensive reform can
achieve these goals.
the lucky jack project
Of all the issues facing Crested Butte, like those of most
communities across America, none are more important than protecting our
quality of life, the health of our citizens, our environmental values
and the economic vitality of the community. Today, as we prepare to
testify before the Committee, all of these values are threatened by a
large-scale industrial mining project proposed on United States Forest
Service (Forest Service) lands just one mile outside our Town boundary.
This project, a/k/a the ``Lucky Jack Project'' is proposed in our
watershed where the Town obtains its domestic water. A map depicting
the location of the Town's municipal watershed is attached hereto.
Currently, the Lucky Jack Project will be regulated by the antiquated
provisions of the 1872 Mining Law. Although we have just begun our
review of this proposed molybdenum mine, it is clear to us that current
federal law materially fails to protect the interests of our community,
local residents and businesses and the tourists that visit and sustain
Crested Butte.
Based on our initial understanding of the Lucky Jack Project, the
mine will dump hundreds of thousands of tons of mine wastes and mine
tailings into Crested Butte's watershed, disturb thousands of acres of
prime wildlife habitat, eliminate critical recreational areas from
public use and essentially turn pristine National Forest lands outside
of our Town--all of which are surrounded by federally designated
wilderness--into a permanent industrial dump site.
As depicted in red on the attached map,* the project proponents
(U.S. Energy Corp. and Kobex Resources, Ltd. (collectively, ``U.S.
Energy/Kobex'')) have filed mining and millsite claims on large areas
of the Gunnison National Forest right above the Town. We obtained the
red highlighted portion of the map from U.S. Energy/Kobex's website on
the date of this correspondence. These claims are slated for U.S.
Energy/Kobex's network of waste dumps, pipelines, roads and related
facilities.
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* Map has been retained in committee files.
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1872 mining law
Under the federal government's interpretation of the 1872 Mining
Law, the Forest Service is powerless to deny the Lucky Jack Project. At
best, under the agency's mining regulations located at 36 CFR Part
228A, the Forest Service can only ``minimize adverse impacts'', but
cannot deny the proposed project to protect public resources and local
interests.
Public resources and local interests are vital to Crested Butte. In
addition to the need to protect our watershed, the Town relies heavily
on various forms of tax revenues from tourists, local residents and
businesses, second homeowners and other recreational users of public
lands--the same lands that will be impacted by the Lucky Jack Project.
None of these values are considered by the Forest Service in its
perfunctory duties under the 1872 Mining Law. Due to the vital
importance of reform of the 1872 Mining Law to this community, both the
Town and Gunnison County passed unanimous resolutions urging the
immediate and comprehensive reform of this antiquated law. We have
attached the Town's August 7, 2007 resolution and the September 18,
2007 County resolution for your reference.**
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** Documents have been retained in committee files.
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specific reform issues and responses
The resolutions cited above outline, in our view, the minimum
conditions for reform--The Town's specific answers to the questions
posed by the Committee in its January 7, 2008 correspondence are as
follows:
(1) Should legislation provide for new environmental
standards for hardrock mineral activities? If so, what should
those standards be and what transition rules would be
appropriate for their implementation?
Reform of the 1872 Mining Law, must, at its core, contain new
environmental standards to protect public resources from adverse
impacts. The current regulatory standards, especially the completely
ineffective ``minimize adverse impacts'' requirement in the Forest
Service regulations, must be substantially strengthened. At a minimum,
Congress must establish the principle that proposed mining operations,
in certain situations, be denied as a matter of sound public policy and
law. Both the Bureau of Land Management (BLM) and the Forest Service
must be given the authority to balance other public uses and values on
public lands in determining whether a specific mining proposal can be
approved.
For example, under the current mining law and regulations, mining
in Crested Butte's watershed is considered by the Forest Service as
``the highest and best use'' of the public lands above our Town--
regardless of the impacts to our watershed and other values. This is
directly contrary to the health and vitality of our community. The
decision whether mining can occur must be balanced with the needs of
the community, especially regarding the protection of watershed
integrity and the economic values inherent in high-quality waters and
lands.
The federal land agencies must have the authority to consider and
protect the non-mining values that are so important to towns like
Crested Butte. Each mining proposal must be judged on its own merits.
In some situations, such as ours, mining is not the preferred use of
federal land. In this case, watershed protection, the maintenance of a
vital recreation-based economy and similar values are paramount to the
residents of this area. In other areas of the western United States,
however, mineral development may be considered the best use of federal
land and mining should proceed accordingly. Each situation is different
and the federal land agencies must have the authority and discretion,
with substantial input from the local communities affected thereby, to
recognize that mining may not be the most beneficial use of public
land.
Regarding the implementation of the much-needed authority to
protect other valued public resources from mining development, any
reform to the 1872 Mining Law must apply, at a minimum, to all projects
that have not received required federal, state and local approvals and
have not undergone thorough and comprehensive environmental reviews.
Existing operations may be conducted under their current approvals, but
any revision or expansion to existing operations must be subject to any
new requirements.
(2) Should legislation designate categories of lands as not
available for-location and entry? If so, what categories should
be designated?
Yes. Certain lands should not be available for location and entry.
At a minimum, municipal watersheds must be withdrawn from location and
entry. Other values, such as roadless areas, wild and scenic rivers,
prime wildlife habitat, Native American sacred grounds, and lands
important to local recreation-based economies, such as Crested Butte's,
also deserve withdrawal. Because local residents, businesses and
elected officials are best able to ascertain the importance of local
public lands for these values, it is critical that states, counties and
municipal governments (as well as tribal governments) have a direct say
in these withdrawal decisions. Thus, H.R. 2262's provision enabling
these governments to petition for withdrawal must be enacted. It is
important that the standard for approving such a petition be reasonable
and that such petitions be granted as a matter of course except in
cases of a vital national interest that requires that lands be kept
open for mineral entry.
(3) Should the legislation address situations where mining
claims should not be developed due to environmental or other
concerns? If so, how should this he addressed?
Yes. As with the withdrawal of lands from mineral entry, certain
lands, as a general matter, must be protected from mineral development.
Each mine project, and the public resources to be impacted thereby,
must be viewed on a case-by-case basis. This must occur at the outset
of the permitting process. If existing claims are proposed for mineral
development, the federal land agency, with the invited and
comprehensive input from local communities and the affected public,
must then decide if mining is the appropriate use of that public land.
Some mining operations, due either to their significant impacts or due
to the location of the proposed development, must be deemed unsuitable
for those lands. Other projects, due to proposed environmental
safeguards and the lack of important resources or public concern,
should be permitted to go forward.
In the case of Crested Butte, it is clear that industrial mineral
development of the public lands on Mt. Emmons and within the Town's
statutorily established municipal watershed would result in significant
adverse environmental impacts that are not addressed under the 1872
Mining Law. The Town's watershed represents a prime example of an area
that is clearly unsuitable for mineral development.
It is also important to recognize the critical need for local and
state regulation of hardrock mineral development. Some mining companies
have argued that such close-tothe-ground regulations are pre-empted by
federal mining policies and laws. That is wrong and frankly makes no
sense as it is the local communities that are directly affected
thereby. It is imperative that local and state statutes and regulations
that limit or prohibit mineral development and its impacts under
certain circumstances be recognized by Congress as an integral part of
natural resource development and regulation in the western United
States.
(4) What additional financial assurances, if any, should be
required for mining operations?
Although the BLM and Forest Service regulations regarding financial
assurances have improved in recent years, significant improvements are
still necessary. For example, under current BLM and Forest Service
regulations and policies, the agency and the mining company determine
the amount of the financial assurance with little or no public input
(i.e., the financial assurance amount is determined after the mine is
approved and the National Environmental Protection Act (NEPA) process
concluded). Further, the financial assurances only cover what the
company is proposing to do as part of its initial plan of operations.
These warranties never account for the potential for spills, leaks and
other problems. Mining companies must be required to establish, in
addition to the basic ``reclamation'' financial assurances, a trust
fund or other mechanism to account for potential failures. The western
United States, even in the ``state-of-the-art'' era of modern mining,
is riddled with examples of such problems that were not predicted by
the company or the regulator. The Summitville Mine disaster in Colorado
is one of the most egregious examples, with cleanup costs exceeding
$200 million and counting. In that case, the State of Colorado required
only a bond for less than $5 million. The result of this disaster is
that the taxpayer has been forced to largely foot the bill. This is
unacceptable. Closer to home, Crested Butte residents live with the
threats posed by a defunct silver/lead/zinc mine that continues (and
has for the last 30 years) to discharge contaminated water directly
into our watershed. While at the same time the Environmental Protection
Agency (EPA) is in the process of re-mediating the Standard Mine
Superfund less than one mile away. This Superfund site is also in the
Town's municipal watershed. Yearly treatment costs for the water
running out of the defunct mine exceed $1 million with no end in sight.
State and federal reclamation laws failed to protect against this
situation. We should not make the same mistake twice. Any reform of the
1872 Mining Law must account for such contingencies and should contain
comprehensive provisions ensuring that in the future local communities
do not have to deal with the mess left behind by inadequate financial
assurances.
(5) What type of additional enforcement and compliance
provisions, if any, are needed?
The current system of lax enforcement and compliance must be
substantially strengthened. For example, under current regulations the
agencies have little authority to issue cease and desist orders without
complicated and lengthy legal proceedings, even in the face of clear
environmental harm. The agencies must have the authority to curtail, or
halt if necessary, any activity not in compliance with the applicable
plan of operations.
Further, under current law, there are no citizen inspection or
enforcement provisions, even on the public's land. At a minimum, a
citizen suit provision similar to those contained in the Clean Water
Act and the Surface Mining Control and Reclamation Act (for coal mines)
is needed. Such provisions have been part of these laws since the 1970s
and have worked well in the past. Communities such as Crested Butte
must be able to seek legal redress for violations of federal mining and
public land laws.
conclusion
On behalf of the people of Crested Butte and all those that visit
and enjoy our special place, thank you very much for the opportunity to
bring our concerns to your attention. The future of Crested Butte is
dependent on your protection of our water, our land and our economy.
All of this is at risk without real, comprehensive reform of the
antiquated 1872 Mining Law. We request that Congress act as
expeditiously as possible to bring mining regulation into the 21st
Century.
The Chairman. Thank you, very much. Our final witness on
this panel is Mr. Wanamaker, from Juneau, Alaska, go right
ahead.
STATEMENT OF RANDY WANAMAKER, EXECUTIVE DIRECTOR, BBC HUMAN
RESOURCE DEVELOPMENT CORPORATION, JUNEAU, AK
Mr. Wanamaker. Good morning Mr. Chairman and members of the
committee. Thank you for this opportunity to comment with
regards to mining law reform. I am an Tlingit Indian from
general Alaska. I'm a Registered Environmental Assessor and
Certified Professional Geologist with over 30 years of
experience in State, Federal, and private service. I have
served as the Executive Director for the BBC Human Resource
Development Corporation for the past two-and-a-half years.
The BBC provides preemployment separation and preparation
services to Alaska residents with an emphasis on helping
Alaskan natives and other minority groups. Our tribe has 26,000
members and a 62 percent unemployment rate among young adult
males. I also served as the Deputy Mayor of the City and
Borough of Juneau, the capital of Alaska. Juneau is a community
with a mining history. Mining is located in the heart of my
tribe's ancestral lands, hard rock mining that operates to this
day. As a tribal member and an as an elected official and as a
science professional, I know both the challenges and the
benefits of mining. With the help of my colleagues, we have
prepared and submitted written answers to the important
questions you are considering. I will not repeat those
technical answers because they are available for later review.
I will summarize my other issue that highlight three important
points. The first point is the description of the social
economic benefits responsible mining can bring to a town with
tax revenues, social and economic stability. As a minority
group member, keeping social economic parity to stimulate jobs
with benefits. The second point is a short descriptions of how
cities and county can effectively participate in the Federal
State permit process.
It is possible for local governments to work closely with
other agencies and with mining for the benefit of their
community relative to due process and without compromising
their governmental powers. Everyone wins when Government and
industry forms strategic partnerships. The third point is a
brief description of the value of simplifying, streamlining and
rationalizing the overly-complex permit study and review
process. This would benefit the public, the economy, the
regulatory process, and the court system by helping to avoid
the need for unnecessary appeals and litigation. The solutions
to environmental management and reclamation issues can be
achieved through the simplification and streamlining of the
current Federal system so that a rational, easy to follow
process is the result. To help illustrate my three points, I
have provided you with supplemental information for your later
review. That information tells me how the historic mine
operators work with the Tlingit Indians when they encountered
them.
Mr. Wanamaker. This was a peaceful process in which both
sides benefited. There were no wars, no bloodshed and there
were no lingering environmental problems for our town.
Different mines in our town are benefiting Juneau in many ways.
Kensington operated by Coeur Alaska is the most successful
Affirmative Action project in Alaska's history. The story of
Kensington includes more than the expense of the Affirmative
Action project. According to a scientific pole conducted on
behalf of the City and Borough of Juneau, 76 percent of the
citizens of Juneau have answered from important to very
important. The high level of acceptance is not as the result of
trading solutions for jobs, but is the result of a public
collaboration of Juneau citizens to ensure responsible projects
that go beyond simply getting the permit. Coeur Alaska has
earned this social likeness. In summary, I have provided you
with another way to look at mining law reform, and the and
social economic views describing how responsible mining can
benefit a town and it's minority members, minority members who
are usually a majority of the unemployed an the underemployed.
Thank you for this opportunity to comment.
[The prepared statement of Mr. Wanamaker follows:]
Prepared Statement of Randy Wanamaker, Executive Director, BBC Human
Resource Development Corporation, Juneau, AK
Here is my input by question, as requested.
Question 1. Should this legislation provide for new environmental
standards for hardrock mineral activities? If so, what should those
standards be and what transition rules would be appropriate for their
implementation?
Answer. The Reform Bill should not contain environmental standards
for hardrock mineral activities. There already exists a myriad of
federal, state and local statutes, rules and regulations and required
authorizations which place strict environmental criteria on mining
activities. For example, the Clean Water Act regulates stormwater and
discharges from mines and related facilities as well as dredge and fill
activities. The Resource Conservation and Recovery Act, Clean Air Act
and Superfund to mention a few regulate mining and protect the
environment. Moreover, each state has its own set of statutes and
regulations which ``mirror'' these federal requirements.
Kensington, for example, has over 50 individual state and federal
permits. This does not include the local City and Borough Allowable Use
Permit, grading and building permits, communications and transport
authorizations. The project has a Plan of Operations, Monitoring and
Mitigation Plans, a Reclamation Plan, a Spill Contingency Plan and a
Transportation Mitigation Plan. All of these incorporate environmental
best management practices. They are required by existing laws and
regulations, which are often already duplicative and overlapping. No
new regulations are needed in any Mining Law Reform Act.
Question 2. Should the legislation designate categories of land not
available for location and entry? If so, what categories should be
designated?
Answer. Legislation already exists that accomplishes this
objective. The legislation includes the Alaska Native Claims Settlement
Act and Alaska National Interest Lands Conservation Act legislation
which establish Wilderness and Wild & Scenic Rivers, National
Monuments, National Wildlife Refuges and others. These existing laws
are more than adequate to accomplish such an objectives.
Question 3. Should the legislation address situations where mining
claims should not be developed due to environmental or other concerns?
If so, how should this be addressed?
Answer. The National Environmental Policy Act already accomplishes
this objective. NEPA requires that mining claims located on federal
lands must be evaluated for environmental and socio-economic impacts of
developing that land prior to authorization of use by the administering
agency. These evaluations are thorough and exhaustive. They address
both adverse and beneficial impacts, as well as cumulative effects. In
the case of Kensington, three of these studies were conducted at a
combined costs of over $30 million. These required over 20 years of
investigation and analysis, utilized highly qualified an even world
renown scientists and engineers, and also involved separate risk
analyses prepared by third-party (outside) experts. These NEPA-required
evaluations further require that the applicant avoid, minimize and/or
mitigate environmental impacts especially for sensitive areas. Examples
include wetlands, streamside areas, wetlands, historic sites and
others.
Question 4. What additional financial assurances, if any, should be
required for mining operations?
Answer. There should be no additional financial assurances required
by this legislation. Federal agencies like the Bureau of Land
Management and US Forest Service already require ``full cost'' bonding.
These costs are typically prepared by qualified third-party
consultants. They address the costs of reclamation, plus
administration, plus regular updating, plus escalation factors. The
agencies presume that a third-party will also conduct the reclamation
activities. Any additional financial assurances would be duplicative
and unnecessary, as most states also require full cost bonding, which
already duplicates federal requirements for state, private and Native-
owned land. Examples include: Alaska (ADNR), Nevada (NDEP) and Idaho
(IDL and IDEQ).
Question 5. What type of additional enforcement and compliance
provisions, if any, are needed?
Answer. No additional enforcement and compliance provisions are
needed in any Mining Law Reform. Current enforcement is by USFS, BLM,
EPA and Corps of Engineers. State enforcement in Alaska, as an example,
is also provided by Alaska Department of Natural Resources, Alaska
Department of Environmental Conservation and Alaska Department of Fish
& Game. Further, most other states have similar oversight roles of
enforcement. MSHA also administers the Mine Safety and Health Act.
other comments
I am going to suggest an alternate way to conduct mining reform but
first I am going to outline the benefits of mining to the Juneau
Community along with a description of the problems experienced by one
of the most studied and responsible mining development projects in
North America, the Kensington Gold Mine.
The mining industry has brought a great many benefits to the Juneau
municipality and our citizens. This is especially true of the good
paying jobs mining has provided for our aboriginal population of Alaska
Natives. In addition to the Alaska Natives, Samoans, Filipinos,
Vietnamese, Black Americans and returning veterans have all enjoyed
recent employment as a result of our local mining industry. This is
significant when you consider that adult Alaska Natives currently
experience a 62% unemployment rate in Southeast Alaska.\1\ The mining
industry pays an average wage of $70,000 per year plus health and
retirement benefits. By contrast, in spite of Juneau being the home of
state government, the average Juneau salary is $41,000 per year.
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\1\ These December 31, 2007 unemployment figures are provided by
the Central Council of Tlingit and Haida Indian Tribes of Alaska TANF
Program. The Tlingit and Haida Tribe has 26,000 members.
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Juneau has two mines, Greens Creek and the Kensington Gold Mine.
Greens Creek is an operating silver lead zinc copper mine located
on nearby Admiralty Island. It has been operating in this Wilderness
and National Monument since 1988. It employs 260 people with a payroll
and benefits worth 23 million dollars per year to the Juneau economy.
It pays an average of $900,000 per year in property taxes and is a
consistent contributor to local non-profit organizations and community
activities. Greens Creek employees and family members volunteer for
many community activities including the arts, youth activities and
local government such as the Planning Commission or ad hoc City
Commissions. In short they are the types of citizens every municipality
wants.
The Kensington, owned and operated by Coeur Alaska, is a nearly
fully constructed gold mine located 45 miles northwest of Juneau. It is
awaiting a final round of permit review for a new tailings facility as
a result of 11th hour litigation brought by environmental groups. It is
in heart of the ancestral grounds of the Tlingit Tribes of Northern
Lynn Canal and the Tlingit People are among its most staunch
supporters. It has been in permitting and development since 1987 and it
employed up to 410 people during construction from 2005 to 2007 at a
cost to date of $238 million. It is expected to operate for about ten
years with a work force of 200 people and payroll and benefits worth 18
million dollars per year. It will pay an estimated $1,450,000 per year
in property taxes. Approximately 170 direct and indirect support jobs
are expected. The mine will purchase an estimated 9.3 million per year
in local goods and services and generate approximately $450,000 in
sales taxes. Kensington will become Juneau's second largest private
industry employer and Juneau's largest taxpayer.
The Kensington Gold Mine is also a consistent contributor to local
non-profit organizations and a supporter of community activities.
Kensington employees, family members and contractors also volunteer for
many community activities including the arts, youth activities and ad
hoc City Commissions. They also are the types of citizens every
municipality wants. The Kensington enjoys broad based local support
from the City Government, local minority populations, civil rights
groups, non-profits, state and federal employees and many other
citizens and organizations of Juneau and Southeast Alaska. This support
was earned through comprehensive community outreach and affirmative
action programs to ``Build Relationships of Trust'' with the
stakeholders of the Kensington Gold Mine area. The outreach and
affirmative action programs are described in the attached document
entitled ``Community and Alaska Native Outreach''. A partial list of
Kensington supporters is attached entitled ``Kensington Gold Mine
Supporters''.
Also attached are two official Economic Surveys conducted on behalf
of the City and Borough of Juneau.* The first is entitled ``2006
Economic Indicators'' the second is ``2007 Economic Indicators''. Both
surveys were conducted by the Juneau Economic Development Council
through a contract with a professional socioeconomic survey firm, The
McDowell Group. They are scientific and representative of the
community.
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* Surveys and additional material have been retained in committee
files.
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The surveys show the economic value of the wages and taxes to the
City and Borough of Juneau. The surveys also show the high level of
citizen support the Kensington Gold Mine has in the Juneau Community.
The 2006 survey shows that 76% of the households in Juneau think the
Kensington is important to very important to Juneau's economy.
The Kensington is viewed as important to very important for a
variety of reasons. But it is not a case of trading pollution for jobs.
The overwhelming majority of Citizens of the community think that the
Kensington has received rigorous review by the state, federal and local
agencies and that the Kensington Operator, Coeur Alaska, has used the
community input to more than meet the criteria for simply permitting
the mine. In short the community and the City and Borough Assembly
believe that Coeur Alaska has more than adequate safeguards for
protecting the environment while operating and beyond.
Part of the reason the Kensington is viewed as so important is that
a large part of Southeast Alaska is in economic and population decline.
The loss of timber industry jobs, changes to the commercial fishing
industry and the high cost of fossil fuel energy in rural Alaska have
all contributed to the economic stagnation, severe unemployment and
underemployment that affect rural Alaskans, primarily Alaska Natives.
These Alaska Natives come to Juneau seeking employment but lack the
vocational training skills needed for most employment. Coeur Alaska,
through partnerships with the BBC Human Resource Development
Corporation and the State of Alaska Department of Labor, University of
Alaska Southeast, Central Council of Tlingit and Haida Indian Tribes of
Alaska and local labor organizations has successfully recruited and
trained a large number of Alaska Natives, other minority group members
and other Alaska residents for the jobs at the Kensington Gold Mine. It
is the most successful private industry, completely voluntary,
affirmative action project in Alaska history.
The opening of the mine is jeopardized by an 11th hour litigation
brought by Lynn Canal Conservation, Sierra Club Juneau Chapter and
Southeast Alaska Conservation Council. To summarize, the environmental
groups filed litigation over a regulatory definition of waste and lost
in Alaska's Federal District Court. They promptly appealed and were
successful in having the case removed from the Alaska District Court to
the Ninth Circuit Court of Appeals where they obtained an opinion that
the operating plan was flawed due to the definition of waste used by
the Ninth Circuit Court of Appeals three judge panel. (Ironically, a
different three judge panel of the Ninth Circuit Court of Appeals
recently reached a different opinion in a similar case upholding the
Rock Creek Mine also located in Alaska.)
The immediate result of this litigation by the environmental groups
was that hundreds of Alaska Natives and other Alaska residents already
employed or waiting for the job training and the opening of the
Kensington lost their jobs or the opportunity for job training and jobs
when the mine opens.
A severe public reaction and loss of popular support forced the
environmental groups to offer to work with Coeur Alaska to develop a
tailings disposal plan and an amended operating plan that they would
support and help to permit. The amended operating plan has been
developed by Coeur Alaska but it remains to be seen if the
environmental groups will honor their public commitments to help
facilitate the review and permitting of the amended mine plan. In the
meantime the hundreds of unemployed people seeking job training for the
Kensington jobs now face an uncertain future. There is simply no other
long term family wage job available in the region and the permitting
for an amended operation plan could take up to two years if the
environmental groups try to obstruct the project further.
The negative public reaction was a surprise to the environmental
groups but it should not have been. They did not pay heed to the public
surveys showing overwhelming support for the Kensington, nor did they
pay attention to the amicus briefs or intervenor status motions filed
by numerous parties such as the City and Borough of Juneau, the State
of Alaska and non-profit groups such as the Southeast Conference, a
regional economic development organization representing legislators,
tribes, cities, non-profits and private industry. All of these
organizations or individuals believe in the integrity of the federal,
state and local agency reviews used for the Kensington permits. They
also overwhelmingly believe that the environmental groups true purpose
was simply to prevent mining, not to protect the environment.
It is this type of activity by environmental extremists without
regard for the integrity of the federal, state and local permitting
process or the needs and rights of their neighbors that prompts my
suggestion for meaningful mining reform. To best serve the public, the
environment, the judicial system and the economy, mining reform should
be to streamline, rationalize and simplify what has become a Byzantine
and unnecessarily complex process.
Federal laws for clean water and clean air and reclamation are more
than adequate to protect the environment. State laws mirror the federal
laws and processes. In my experience municipal governments feel
overwhelmed by the complexity and poorly understood mining permit
process and they think they need to duplicate the entire Environmental
Impact Statement process. That is not necessary.
What municipal governments can do is to participate fully in the
federal-state study and mine permit review processes. They should
provide the input they know best such as local socio-economic concerns.
In mine permitting, municipalities should focus on traditional
municipal responsibilities such as lights, dust, traffic, noise control
and zoning requirements. In addition the municipalities can form
strategic partnerships with the mining industry, labor, non-profit,
state and university job training programs to identify, recruit, train
and dispatch local citizens interested in good paying jobs so that
their citizens can obtain those jobs if the mine is approved.
If the Senate Committee on Energy and Natural Resources is
interested in detailed information as to how to simply, rationalize and
streamline the current mine permitting process, my colleagues in the
environmental and mining industries will gladly assist a prompt and
comprehensive review in the interests of the common good.
Thank you for this opportunity to comment.
attachment 1.--supporters of the kensington gold mine
The State of Alaska; The State of Alaska, Office of the Governor;
Alaska State Legislature; Alaska State Chamber of Commerce; Alaska
State District Council of Laborers; Alaska State Troopers; Alaska
Department of Fish and Game; Alaska Department of Commerce, Community,
and Economic Development; Alaska Department of Commerce; Alaska
Department of Environmental Conservation; Alaska Department of Natural
Resources; Alaska Department of Revenue; Alaska Department of
Transportation; Alaska Brewing Company; Alaska Coastal Aggregates;
Alaska Coastal Homes; Alaska Employment Group; Alaska Industrial
Hardware; Alaska Marine Lines; Alaska Miners Association; Alaska Native
Brotherhood Grand Camp; Alaska Pacific Bank; Alaska Public Entity
Insurance; Alaska Travel Adventures; Alaska Department Of Labor; Alaska
Electric Light & Power; AIH--Outside Sales; Allen Marine Alaska Marine;
Lines; Alaska Native Brotherhood Grand President; Baxter Bruce &
Sullivan, Attorneys at Law; BBC Human Resource Development Corporation;
BEP Toner Recycling; Berners Bay Working Group; Bikin--Economic
Development; Bureau of Land Management; Capital Office; Carlton Smith
Co.; Carpenters Local 2247--Alaska Regional Council of Carpenters;
Catholic Community Services; Central Council of Tlingit & Haida Indian
Tribes of Alaska; City and Borough of Juneau; City and Borough of
Juneau Assembly; City of Hoonah; Coastal Helicopters; Coldwell Banker
Race Realty; Copy Express; Cycle Alaska; Department of Commerce and
Community Economic Development; Delta Sigma Phi; Department of
Education and Early Development; DeWitt & DeWitt, lobbyist; Don Abel
Building Supply; Duran Construction; Extended Stay; Filipino Community
Association; Gastineau Contractors; Goldbelt, Inc.; Greater Ketchikan
Chamber of Commerce; Greens Creek; Gruening & Spitzfaden APC; Haines
Borough; Haines Chamber of Commerce; Hangar on the Wharf; Holland
America Westours; Huna Totem Corporation; Hyak Mining; IBEW Local 1547;
ICMA; Inland Boatman's Union; Juneau Brass; Juneau Chamber of Commerce;
Juneau Economic Development Council; Juneau Gold Rush Commission;
Juneau Job Center; Juneau Board of Education; Juneau Urgent Care; Kake
Tribal Corp.; KeyBank; Klukwan, Inc.; Kootznoowoo Corp.; Laborers Local
942; Legend Charters; Metcalfe Communications; Nature Conservancy;
Northland Services; PacWest; Petro Marine; Princess Cruises & Tours,
Alaska Region; R&M Engineering; Resource Development Council; Sealaska
Corporation; Smith Barney; Southeast Alaska Fishermens Alliance;
Southeast Alaska Gillnetters; Southeast Alaska Native Economic Futures
Coalition; Southeast Conference; Spickler/Egan Financial Services; SE
Coordinator Knowles Campaign; Territorial Sportsmen; Tlingit Haida
Central Council Job Development; Trucano Construction; Tyler Rental;
University of Alaska Southeast; United Fishermen of Alaska; Wings of
Alaska.
attachment 2.--community and alaska native outreach for the kensington
gold mine
Juneau, Alaska
Juneau is the Capital City of Alaska and is a unified city-borough
government with a population of 32,000 people. Juneau, originally the
fishing grounds of numerous Tlingit clans, is located I northern
Southeast Alaska in Gastineau Channel. The presence of gold in Juneau
was made known in the late 1800's when Kowee, an Auk Tlingit leader,
brought gold to the attention of prospectors. Following prospecting
work with the help of local Natives, Juneau was established as a gold
mining town and numerous mines were built and operated. These mines
paved the way for timber, fishing, and eventually government being
located in Juneau as the population increased and it became a regional
hub.
Coeur d'Alene Mines
Corporation Coeur d'Alene Mines Corporation is the world's largest
primary silver producer, as well as a significant, low-cost producer of
gold. The company has mining interests in Nevada, Idaho, Alaska,
Argentina, Chile, Bolivia and Australia.
Coeur Alaska, Inc.
In 1987, Coeur Alaska, a wholly-owned subsidiary of Coeur d'Alene
Mines Corporation, acquired an interest in the Kensington Gold Mine
located 45 miles north of Juneau--in 1995 Coeur acquired a full
interest in the mine. For over 20 years, Coeur has worked and invested
over $238 million in the exploration, development and construction of
the Kensington Gold Mine. Coeur has conducted a community outreach
process best described as sound science coupled with an open dialogue
with the affected community resulting in a project that goes beyond
good engineering and permitting requirements.
The Kensington is located on Northern Lynn Canal, near Berners Bay,
an estuary deemed an Aquatic Resource of National Importance by the
U.S. Environmental Protection Agency. This area is also part of the
ancestral land of the Tlingit People of Southeast Alaska. In addition
the area has important fishery and recreation values enjoyed by many
user groups. Coeur quickly realized the project would face unique
challenges.
In order to meet the multiple challenges faced by the Kensington,
Coeur initiated an ongoing community outreach program. This
multifaceted program addressed the challenges through communications
designed to identify the circumstances, problems or activities needing
attention; working to find solutions and determine mutual benefits;
and, seeking effective solutions. This approach resulted in solutions
to community and user group concerns that are transferable and
sustainable. A brief summary of the history, approach, solutions,
effectiveness and transferability for some of the many challenges
follow.
A hallmark of Coeur Alaska's exploration and development processes
is the ongoing solicitation of comments from all segments of the local
communities as well as from local, state and federal government
agencies. The process of seeking comments goes beyond meeting permit
requirements, the process is used to fully understand the many user
groups and stakeholder interests in order to ``Build Relationships of
Trust'' with the community.
Early on it became evident to Coeur that the user groups of the
land in and around the Kensington Mine have this in common: While they
would like to benefit from jobs and economic opportunity, they also
have intimate ties to the land. These ties to the land are all
different, each has sub-components and each requires working with
different parties in order to understand and meet their concerns. In
addition, the ties are sometimes competing interests so that solutions
to meet the concerns of one group may not meet the concerns of another.
Coeur acknowledged these complex relationships by working with ALL
of the user groups in order to understand their concerns and address
them, rather than just follow the letter of the law in order to obtain
our permits. By outreach and understanding, Coeur sought to ``Build
Relationships of Trust'' and become part of the community. The ties to
the land near the Kensington are based on the following interests;
Environment
Economic
Recreation
Historic
Ancestral
Subsistence
Environment
From the outset, Coeur recognized the area in and around the
Kensington Mine is regarded as special to numerous environmental
advocacy groups. From the beginning Coeur has met with the many
interest groups to determine their concerns and to obtain their input
for mitigation and project planning they could endorse, not just
accept.
As part of the environmental community outreach, Coeur, in
association with the Southeast Alaska Presidents Association, a non-
profit Alaska Native Business Alliance, helped to organize and sponsor
a successful two day regional environmental compliance conference. This
conference, held in Juneau in 1995, featured environmental compliance
obligations, problems and successes experienced by regional industries,
non-profit and environmental organizations, municipalities, state and
federal agencies. Conference speakers and participants included
personnel from all levels of non-profit and agency organizations and
private industry.
The goal of the conference was to bring together the public, the
regulated community and the regulators in an effort to identify and
better understand the obligations, practices, problems, successes and
solutions for environmental compliance. It is thought that a better
understanding of the needs and roles of the public, the regulated and
the regulators will lead to improvements in the permitting and
compliance process and increased community acceptance.
Topics of the conference included;
Permitting Process and Environment
Human Health
Clean Air Act Amendments
Fuel handling and Marine Oil Spill Response
Water Quality
Forest Practices Act
Spill Response and Environmental Compliance Obligations
Hazardous and Solid Waste
Participants included;
Lt. Governor Fran Ulmer
Alaska Department of Law
Sierra Club Legal Defense Fund
Alaska Department of Fish and Game
Alaska Department of Natural Resources
City and Borough of Juneau
Southeast Alaska Conservation Council
U.S. Coast Guard
U.S. Army Corps of Engineers
U.S. Environmental Protection Agency
Southeast Alaska Presidents Association
Douglas Island Pink and Chum Hatchery
Health Sea, Inc.
Alaska Department of Environmental Conservation
Alaska Division of Governmental Coordination
Echo Bay Mines
Coeur d'Alene Mines
Klukwan Forest Products
Goldbelt, Incorporated
White Pass Fuel
Southeast Alaska Petroleum Response Organization
Anchorage Municipal Power and Light
First Bank Alaska
Bayliss Environmental Services
Easton Environmental
The Environmental Compliance Conference was a definite success.
People traveled from across the state to attend and participate while
the public gained a better understanding of environmental compliance
issues. The goal of improved outreach was met when the regulated
community and the regulators identified key areas where they should
form working groups to improve regulatory programs and requirements.
The increased understanding, communications and cooperation
resulting from the Environmental Compliance Conference were key in
helping to ``Build Relationships of Trust'' with the community.
The working group concept is effective, transferable and
sustainable. It has since been used by the City and Borough of Juneau
to address community needs and solutions for a wetlands mitigation
banking program. Coeur Alaska was pleased to be part of the working
group to help develop the Juneau Wetlands Mitigation Banking Program.
As a part of the outreach effort to environmental advocacy groups,
over a period of several years, Coeur negotiated a mitigation and
litigation avoidance agreement to address their concerns. The groups
involved included local chapters of the Audubon Society, Sierra Club
and local groups such as the Friends of Berners Bay. Although most of
the environmental organizations were satisfied, two organizations
declined ratification of the agreement. In spite of this, the benefits
from this outreach were that the identified mitigation issues were
adopted by Coeur anyway and the great majority of the people of the
community and region appreciated and respected the reasonable approach
Coeur had taken. The outreach was acknowledged by the general public
for going beyond what was required, for doing more than meeting permit
conditions.
As a part of the Kensington operations plan, Coeur and the public
have formed the Berners Bay Working Group, a group of stakeholders,
organized to monitor and advise Coeur as to the possible effect of mine
operations on the Bay.
Economic
Economic interests are based on commercial fisheries, future access
and utility corridors and a desire to expand the employment and
economic base of the community. All of these modern economic interests
began in the late 1880s' when gold, fish and timber drew explorers and
developers to the Southeast Alaska Region.
Outreach efforts to commercial fishermen began at the outset of
Coeur's involvement with the community. Meetings, focus groups and
surveys were initiated with fishermen and fishermen organizations.
These outreach efforts were held in order to properly understand the
types, needs, seasons, practices and locations of the various
fisheries. Through many one on one meetings and group meetings, Coeur
and the fishermen discussed and planned for the mitigation for water
quality, tailings disposal, facility locations and potential fishing
and gear losses due to mining activities. As a result of this sustained
outreach, fishermen and fishermen organizations are among the most
consistent supporters of the Kensington Project. Supporting
organizations include the United Fishermen of Alaska and United
Southeast Alaska Gillnetters.
In other economic focus meetings, Coeur met with agencies, groups
and individuals working on long term plans for road and utility
corridors and ferry terminal sites in and around the Kensington area.
These corridors and sites are considered key to long term economic
development through improved access to Juneau, the State Capital. Due
to the cooperative planning efforts, road and utility corridors and
ferry terminals were designated that are not disruptive to the
Kensington while meeting the needs of the transportation planning
authorities.
The National Environmental Policy Act process for the Juneau Access
Road is complete and it is proceeding towards construction.
Economic and employment interests includes the desire of the
community to benefit from the jobs and economic opportunities once the
environmental and land use concerns were satisfactorily addressed.
These interests are of utmost importance as the region has entered a
period of population loss and economic stagnation due to the loss of
thousands of high paying jobs in the timber industry and major changes
in the commercial fishing industry and markets. Other employment needs
included the long term chronic problem of Alaska Native unemployment
and under-employment and a lack of opportunity for high school
graduates which results in the migration of youth out of the state.
To help realize the economic and employment needs of the community
and region, and to help Coeur meet its manpower needs at the
Kensington, a region wide employment and training project was
established. This project was established with the support and in
partnership with various Native Corporations, state agencies, non-
profit manpower training and labor organizations. This project is the
BBC Human Resource Development Corporation.
In 1993 Coeur began working with local Tlingit leaders willing to
help develop a cooperative relationship to address cultural and
environmental concerns while ensuring the responsible development of
the Kensington Project. After expressions of mutual interest, Coeur
began working very closely with leaders from three of the Alaska Native
Corporations based in Juneau. These corporations, formed pursuant to
the Alaska Native Claims Settlement Act were Klukwan, Inc., Kake Tribal
Corporation and Goldbelt, Incorporated. All of these corporation's
Tlingit shareholders have ancestral ties to the land around the
Kensington Gold Mine.
The Berners Bay Consortium (BBC) was organized in October 1994 by
Goldbelt, Inc., Klukwan, Inc., and Kake Tribal, Corporation. Their goal
is to increase business and Tlingit employment opportunities by working
with Coeur, while protecting the cultural, subsistence and
environmental values of an area long important to the Tlingit People of
Southeast Alaska. All three Native Corporations realized it would be
hard to offer their services to a major project such as the Kensington
individually, but by cooperating and combining their resources and by
partnering with local non-Native firms and other local organizations,
they could offer much more.
Coeur d'Alene Mines and it's subsidiary Coeur Alaska the owner/
operator of the Kensington Project, were seeking a partnership to
accomplish important operational, environmental and public involvement
goals. Their agreement with the three Native Corporations is not just
for the purpose of business development, it includes the wise use of
human, natural and business resources of all of the parties.
As part of the implementation of the agreement for business and
employment preference, the BBC members and Coeur entered into an
agreement in January 1996. This agreement led to the organization of
the BBC-Human Resource Development Corporation in July of 1996. The
BBC-HRDC members are Coeur Alaska, Inc., Klukwan, Inc., Kake Tribal,
Corporation, and Goldbelt, Inc.
The BBC-HRDC is the organization that is responsible for
identifying, recruiting, screening, training, and dispatching of
qualified Alaska Natives and Alaska residents to the Kensington
Project. It is important to note that the employment preference is
binding on all contractors and subcontractors not just Coeur Alaska,
Inc. and that it is the responsibility of all four members of the BBC-
HRDC to assist all Kensington contractors and subcontractors to become
aware of, and honor, this obligation.
The target of the 1996 agreement and business plan is resources.
The concept was and is to capitalize on the companies' developmental
capabilities to achieve commercial successes, and environmental
opportunities. The resources used to achieve these goals are: human,
natural and business.
The 1996 agreement provides general areas of business preference
for the Consortium and each consortium member with an opportunity to
preferentially bid on previously identified services.
The State of Alaska has provided grants for training employees
because of the effectiveness of the BBC-HRDC approach. In addition,
numerous organizations including the University of Alaska, Department
of Labor and the Department of Community and Regional Affairs and the
Central council of Tlingit and Haida Indian Tribes of Alaska have all
cooperated with the BBC-HRDC in order to utilize each other's strengths
and to avoid duplication of services in training new employees for the
project.
The sustainability, effectiveness and transferability of this
employment and economic agreement have been proven. In the 10+ years
since the agreement began, the BBCHRDC has been successfully
identifying, recruiting, training and dispatching qualified employees
to the Kensington and other projects. Coeur Alaska has consistently
been able to exceed the Alaska Native employment goals established by
the BBC Agreements.
Following the establishment of the BBC-HRDC, and as the innovative
approach became known, invitations have flowed in for presentations to
describe it's goals and accomplishments. Among others, the Executive
Director of the BBC-HRDC has made presentations to the Alaska Miners
Association, National Tribal Employment Rights Officers Convention,
Alaska Tribal Employment Officers Rights Convention and the Yukon First
Nations Economic Conference and Summit. In addition, presentation
papers were prepared for the BC-Yukon Chamber of Mines Mineral Round Up
and for Indigenous Peoples in New Zealand seeking information on
working with mining interests.
Recreation
The recreational users became known and familiar to Coeur
immediately. The recreational users of Berners Bay, near the
Kensington, are a varied group with different uses of the Bay. These
uses include:
Wildlife Watching
Small boat family recreation
Recreational fishing, crabbing and clamming
Airboats
Kayaking
Berners Bay, near the Kensington Mine is an estuary deemed an
Aquatic Resource of National Importance by the U.S. Environmental
Protection Agency. The estuary is rich in wildlife, marine mammals,
fish and, it is an important recreation area for the community of
Juneau.
In order to identify the needs and use patterns of the various
Berners Bay recreation groups, Coeur reviewed agency recreational
studies and management plans and met with the responsible agency
personnel. In addition, Coeur conducted public meetings and an
independent survey of recreational users and commercial recreational
interests, in order to determine their reaction to Kensington plans and
to obtain mitigation suggestions.
As a result of the input and understanding reached through the
outreach, Coeur, the agencies and public have developed an operational
plan that avoids negative effects to the various user groups. This
avoidance was made possible by the survey and outreach work which
identified Kensington facility sites and transportation routes that
avoid the great majority of existing recreational user routes and sites
in Berners Bay.
Wildlife watching, small boat family recreation, recreational
fisheries, airboats and kayaking are all successfully avoided. These
recreation activities, times and places have been clearly identified
and will be avoided. In addition, Coeur and the public have formed the
Berners Bay Working Group, a group of stakeholders, in order to monitor
and advise Coeur as to the possible effect of mine operations on the
Bay.
Historic
Historic uses of Berners Bay include using the area for hunting,
camping, hiking, exploring, logging and mining. At present, hunting,
camping, hiking and exploring are the current uses of the area and they
will not be affected by mine operations. Logging is not a viable use
for most of the area while mining is relatively restricted in area due
to current land use designations. The successful outreach to the
historic user interests was largely accomplished through the
recreational user group forums and processes.
Ancestral
The area of the Kensington Project, on Lynn Canal and near Berners
Bay, is part of the ancestral homelands of the Tlingit People of
Southeast Alaska. Berners Bay is very important to the Tlingit People
because of cultural values including village sites, numerous
petroglyphs and burial sites. In addition, it is an important
traditional subsistence resource area. The east side of Lynn Canal and
the Berners Bay area are part of the Great Migration Route of the
Tlingit Kaagwaantaan Clan. Berners Bay proper is a traditional trading
and subsistence harvest area. Berners Bay was also an important
gathering area where Coastal Tlingit Clans met to trade and renew
social and economic ties with each other and with Interior Tlingit of
Canada who came down routes along the icefields leading to Berners Bay.
In recognition of the ancestral ties to the lands in and around the
Kensington, Coeur initiated and maintained contact with the leaders of
the Tlingit People of the Juneau Region. The purpose of the contact was
to determine any Tlingit concerns regarding the Kensington Project and
to determine how to address those concerns. The outreach has been
successfully maintained as Coeur is developing the mine with the
participation of the Tlingit People through a combination of employment
training, jobs, cultural awareness, mitigation, operations monitoring
and business support programs.
The success of the cultural outreach effort to the Tlingit
Community can be found in the letters from Mr. Austin H. Brown, an
Elder of the Tlingit Dakl'aweidi Clan who actively supported the
Kensington Project (Mr. Brown is recently deceased). According to
traditional Tlingit Custom, Mr. Brown's family owns the Kensington land
at Sherman Creek and his support for the Kensington and the ancillary
Goldbelt Project was expressed through his letters to Tribal
Governments, Native Organizations and Native Leaders as well as state,
federal and municipal agencies. This outreach success is duplicated in
the oral and written records of public testimony expressed by Tribal
Governments, Elders and traditional leaders of other Principal Clans in
the Kensington Gold Mine--Berners Bay area.
Subsistence
Subsistence is a integral component of the Tlingit Identity. It is
more than the gathering of food, it is an essential part of Tlingit
heritage. Subsistence activities feed, clothe and define key aspects of
Tlingit Culture. The gathering and use of food and other natural
resources are part of specific Tlingit Clan traditions and subsistence
areas are often considered territorial clan or family areas with
enforceable rights. Subsistence has been a part of the traditions in
and around the Kensington and Berners Bay area for thousands of years
and is practiced even today.
Due to the importance of subsistence and due to the legal
protections for subsistence that exist in federal law, Coeur worked to
ensure that Coeur understands and respects the subsistence tradition.
This was deemed a critical issue by Coeur in view of the important ties
to Berners Bay for the more than 5,000 Tlingits within the Berners Bay
Region.
The Coeur outreach for subsistence understanding began with a
review of the existing information available through federal, state and
tribal governments. It was quickly learned that the most comprehensive
understanding of the subsistence use patterns would come from meeting
with the actual subsistence users.
Coeur went beyond the requirements of the National Environmental
Policy Act and the National Historic Preservation Act by reaching out
to the traditional cultural bearers and subsistence users of the
Berners Bay area through personal interviews facilitated by the BBC
leadership. Through the facilitated interviews, Coeur learned cultural
aspects of clan history for the Kensington and Berners Bay area that
did not come out through the usual permit process. Coeur was able to
acknowledge and respect this history satisfactorily as evidenced by the
letters of support from Mr. Brown and numerous Traditional Cultural
Bearers, Clan Elders and federally recognized tribal organizations.
Summary
Coeur identified and addressed many challenges in meeting community
concerns regarding the Kensington Gold Mine. The success of the
community outreach effort can be attributed to seeking an in depth
understanding of the basis for the concerns and doing more than meeting
permit conditions. Coeur set out to become a part of the community now
and for the future by ``Building Relationships of Trust''.
Attachment 3.--Kensington Social License
introduction
``Earning a Social License'' is a term for a community outreach
program used by progressive mining companies. This program uses
positive, informed communications and outreach to establish a mutually
supportive relationship with all segments of a community near a mining
project.
Three things form the basis for the success of Coeur d'Alene Mines
Corporation in developing Alaska Native support for Coeur's
reintroduction of mining in Southeast Alaska. These are, understanding
the history of mining and its early relationship with the Tlingit
People, the Alaska Native Claims Settlement Act, and a patient, open
and cooperative approach on the part of Coeur to develop a positive and
mutually supportive relationship with local Tlingit People near the
Kensington Gold Project.
The cooperative outreach effort by Coeur included discussions with
commercial fisherman, recreational users, municipal leaders and other
local people of the Lynn Canal region of Southeast Alaska. Coeur
recognized early on that an informed discussion with the local resource
users, based on sound science and openness, would be necessary to
ensure project success.
The Kensington Gold Project is located on the mainland
approximately 45 miles north of Juneau and 38 miles south of Haines,
along the east side of Lynn Canal. Coeur Alaska, Inc. is a wholly owned
subsidiary of Coeur d'Alene Mines Corporation. Coeur Alaska is the
project owner and operator of the Kensington, a completely constructed
underground gold mine with a mill and numerous support facilities. The
project is constructed and ready to operate but is currently engaged in
operating plan revisions in order to meet environmental groups demands
to end further litigation. Coeur Alaska hopes to begin recruitment and
training for the final phase of construction in the summer of 2008, if
a permitting schedule can be maintained.
The area of the Kensington project, on Lynn Canal and near Berners
Bay, is part of the ancestral homelands of the Tlingit People of
Southeast Alaska. Berners Bay is very important to the Tlingit People
because of cultural values including village sites, numerous
petroglyphs and burial sites. In addition, it is an important
traditional subsistence resource area. The east side of Lynn Canal and
the Berners Bay area are part of the Great Migration Route of the
Tlingit Kaagwaantaan Clan while Berners Bay proper is a traditional
trading and subsistence harvest area. Berners Bay was also an important
gathering area where Coastal Tlingit Clans met to trade and renew
social and economic ties with each other and Tlingits from the interior
of Canada who came down routes along the icefields to Berners Bay.
During the late part of the 19th century and the early 20th century
the mountainous areas of Juneau, Lynn Canal and Berners Bay were
extensively explored and numerous mines, both small and large, were
developed. Among these was the Kensington Mine.
According to family and clan oral history, as taught to the author,
and based on interviews with descendants of Tlingits who lived through
the development and the closure of mining in the early part of the 20th
century, mining and mining companies were generally not disruptive to
the traditional Tlingit way of life. The early mining companies
employed Tlingits in all phases of mining and provided work schedules
to accommodate the subsistence lifestyle of the Tlingit People and the
seasonal lifestyle of the local commercial fishermen who worked in the
mines. Tlingits were paid and treated the same as non-Tlingit
employees. In fact, mining companies often hired local Tlingits for
their knowledge of the region to help guide exploration parties and to
build in difficult terrain and they often paid for the land when the
land belonged to a Tlingit family or clan while other industries and
the government did not.
Modern Tlingit Elders remember the fairness and benefits of past
mining employment and many actively support the current efforts of
Coeur to reopen the Kensington. They also believe the Kensington will
provide good paying jobs and provide a path and encouragement for young
Tlingits to pursue careers in technical fields and allow them to remain
in our ancestral region with their families and culture. This is
especially important because Southeast Alaska Natives suffer from a 62%
adult unemployment rate. (* from Central Council Tlingit and Haida
Indian Tribes of Alaska TANF figures for 2007)
In 1993 Coeur began looking for local Tlingits willing to help
develop a cooperative working relationship to address cultural and
environmental concerns while ensuring the responsible development of
the Kensington Project. After expressions of mutual interest, Coeur
began working with leaders from three of the Alaska Native Corporations
based in Juneau. These corporations, formed pursuant to the Alaska
Native Claims Settlement Act (ANCSA), were Klukwan, Inc., Kake Tribal
Corporation and Goldbelt, Incorporated.
history, goals
The Berners Bay Consortium was organized in October 1994 by
Goldbelt, Inc., Klukwan, Inc., and Kake Tribal, Corporation in
order to increase business and Tlingit employment opportunities
in Southeast Alaska, while protecting the cultural, subsistence
and environmental values of an area long important to the
Tlingit People of Southeast Alaska.
All three companies realized it would be hard to offer their
services to a major project such as the Kensington
individually, but by cooperating and combining their resources
and by partnering with local non-Native firms and other local
organizations, they could offer much more.
Coeur d'Alene Mines Corporation, and its wholly owned
subsidiary Coeur Alaska, Incorporated the owner/operator of the
Kensington Project, were seeking a partnership to accomplish
important operational, environmental and community relations
goals. Their agreement with the three Native Corporations is
not just for the purpose of business development, it includes
the wise use of human, natural and business resources of all of
the parties.
the participants
``Coeur the Precious Metals Company'' is the largest primary
silver producer in the U.S. and is the recipient of over 12
major national and international environmental awards since
1987. Their motto, and their corporate way of conducting
business, is ``producing and protecting''.
Kake Tribal Corporation is an ANCSA village corporation,
headquartered near Juneau in Kake Alaska. It has approximately
600 Shareholders, 22,000 acres of land, operations in seafood,
fueling, construction, timber and environmental remediation.
Klukwan, Incorporated is an ANCSA village corporation
headquartered in Haines Alaska near the Kensington Mine site.
It has approximately 300 Shareholders, 23,000 acres of land,
operations in mining, construction, timber, barging, explosive
sales and stevedoring.
Goldbelt, Inc. is an ANCSA urban corporation headquartered
in Juneau. It has over 3000 Shareholders, 33,000 acres of land,
operations in tourism, passenger 8A government service
operation companies, and Goldbelt owns a hotel and the Mount
Roberts Tram.
Together the corporations represent approximately 9,000
Shareholders, Shareholder spouses and other family members.
More than half of all Shareholders and their families live and
vote in the northern Southeast region near the Kensington Mine.
The purpose of the Consortium is to provide environmental,
cultural resource, and subsistence guidance, permitting and
political support, and to promote community acceptance for
Coeur Alaska's resource project, the Kensington.
The Consortium members chose to work with Coeur because of
Coeur's strong environmental record in its mining operations.
In return for their guidance and support, Coeur Alaska
negotiated and entered into an agreement to provide business
and employment preference to the Consortium membership.
Early on, the partnership was coined ``The beginning of the
future.'' by all of the parties.
As part of the implementation of the agreement for business
and employment preference, the BBC members and Coeur d'Alene
Mines Corporation entered into an agreement in January 1996.
This agreement led to the organization of the BBC-Human
Resource Development Corporation in July of 1996. The BBCHRDC
members are Coeur Alaska, Inc., Klukwan, Inc., Kake Tribal,
Corporation, and Goldbelt, Inc.
The BBC-HRDC is the organization that is responsible for
identifying, recruiting, screening, training, and dispatching
of qualified Alaska Natives and other Alaskans to the
Kensington Project. It is important to note that the employment
preference is binding on all contractors and subcontractors not
just Coeur Alaska, Inc. and that it is the responsibility of
all four members of the BBC-HRDC to assist all Kensington
contractors and subcontractors to become aware of, and honor,
this obligation.
The target of the 1996 agreement and business plan is
resources. The concept was and is to capitalize on the
companies' developmental capabilities to achieve commercial
successes, and environmental opportunities. The resources used
to achieve these goals are: human, natural and business.
The 1996 agreement provides general areas of business
preference for the Consortium and each consortium member with
an opportunity to preferentially bid on previously identified
services.
The contracting preference applies to any affiliation the
BBC members may form but it does not preclude non-BBC companies
from bidding for work.
Affiliation means any person, corporation, partnership joint
venture or other entity in which the BBC member(s) control at
least 25% of the voting power.
general areas of interest for coeur alaska projects
During mine exploration and development; drilling, camp
construction, camp services and expediting;
Construction of mine infrastructure including secondary
development facilities, including but not limited to power,
water, sewer, transportation of supplies and production,
warehousing, housing, community facilities, and various
business establishments;
Land Exchanges;
Road construction;
Assistance in permits; and
Employment recruitment, training, orientation, and referral
and labor dispatch services.
kake tribal corporation interests
Construction and rehabilitation of fuel tanks-fuel supplies
and fuel management services-surface rehabilitation-timber
debris cleanup; Camp catering and camp operations;
Environmental monitoring, and remediation;
Operation of a fish buying station; and
General construction contracts.
klukwan, inc. interests
Drilling contracting;
Electrical work;
Underground rehabilitation and construction;
Barging services;
Transportation of ore and concentrates;
Camp and dock construction;
Provision of explosives and mine supplies; and
Provision of housing in the Haines community.
goldbelt, inc. interests
Land use master planning and State access planning;
Construction of and operation of fish buying stations;
Marine terminal and related facilities;
Construction of mining housing in Juneau;
Terminal and camp construction and camp operations; and
Waterborne transportation of workers either by high speed
catamaran or other means.
employment preference opportunities
Applies to prime contractors, subcontractors and Coeur;
Preference applies to qualified shareholders, spouses,
descendants, other Native Shareholders, Native Americans in
Alaska, and Alaska residents;
Preference does not apply to members of these groups that
are not qualified for good reasons such as health;
Preference applies to a goal of 13.5% of all employees
during mine construction;
Preference applies to a goal of 25% of all employees during
mine operations;
Preference is a goal and not a limitation because all
shareholders are Alaska residents;
Preference is for all levels and types of employment, not
just entry level and blue collar positions;
employment training
The BBC-HRDC was established to provide an employment
training and dispatch organization to meet the needs of the
Kensington Project.
The employment organization will and has recruited,
screened, trained and dispatched employees from all over
Southeast Alaska.
The employment project chose to partner with existing Alaska
organizations such as the Alaska Department of Community and
Regional Affairs, the University of Alaska Southeast, the
Tlingit and Haida Central Council and the Southeast Regional
Resource Center rather than duplicate existing services.
The employment project includes non-Natives in its
recruitment, training and dispatch efforts, especially those
Alaska residents displaced from their jobs in the fishing or
timber industry.
This open, non-discriminatory effort, helps to employ the
maximum possible number of Alaskans on the project without
regard to ethnic origin.
One effort of the employment project is focused towards
those residents seeking a career development path, especially
high school graduates and women and other individuals facing
barriers to employment.
Coeur Alaska supports this employment concept and is helping
by providing the employment project with its labor needs
information, and has affirmed its support by financial
contributions for funding of the employment project.
Through a combination of all of these efforts, all residents
of Alaska will benefit from the 1996 BBC and Coeur agreement.
The BBC-HRDC conducted an employment training program for
Natives and Southeast Alaska residents. This program is
conducted in cooperation with organized labor, the Alaska
Department of Labor, the Tlingit and Haida Central Council, the
University of Alaska Southeast, and Coeur Alaska.
Most students successfully complete the courses and most of
the students are successfully placed with Coeur and
subcontractors after the course. The remaining students gain
employment as new openings occur or with other mining
companies. Coeur achieved a 49% employment rate for Alaska
Natives, spouses, descendents or affiliated employees during
construction from 2005 to 2007 making this the most successful
affirmative action project in Alaska history.
The project continues to identify and enter new people into
the employment skills database for future evaluation, training
and referral. These new employees will be trained for new
construction and actual mine operations.
The database has over 500 Alaska residents in it. These
people have low to high skill levels and, the database includes
everything from the completely inexperienced, to geologists,
biologists, water treatment plant operators, engineers and
equipment operators.
The mission of the BBC-HRDC is to provide employment ready
people, capable of providing the highest level of consistent
service, to the client, Coeur Alaska. The BBC-HRDC works to
identify its strengths, weaknesses, opportunities and threats
in an effort to improve how it implements the employment
service.
joint accomplishments and opportunities
Joint Sponsorship of an Environmental Compliance Conference
for Southeast Alaska
Improved Access for Coeur to the Alaska Congressional
Delegation, the State Legislature the State Executive
Administration, and the Alaska workforce
Implementation of a concurrent reclamation program at the
Jualin and Kensington Mines, through contracts with Klukwan,
Inc.
Cooperative spill contingency training program at the
Kensington with SEAPRO, a Southeast Alaska spill prevention and
response organization.
Implementation of a proactive environmental cleanup program
at the Kensington-Jualin Property with Kake Tribal Corporation.
Initial work activities with BBC members to implement a
federal land exchange at the Kensington-Jualin Property to
improve transportation and facilities access and management.
Involvement in the development of the Goldbelt Cascade Point
Master Plan including alternative planning and design for
water-based transportation to the Kensington Mine property.
Completion of a Phase One Commercial Fishermen's Acceptance
for a Water Quality Plan for the Kensington.
Successful Implementation of a Native Involvement Program
for acceptance of the Kensington Mine Plan (enlisting BBC,
Tlingit and Haida Central Council, Sitka Tribes of Alaska,
Kootznoowoo, Inc., Juneau Alaska Native Brotherhood, et al
support).
Successful Approval of the Site Specific Criteria for the
Kensington Mine National Pollutant Discharge Elimination System
Permit (BBC, Tlingit and Haida Central Council, Sitka Tribes of
Alaska, Kootznoowoo, Inc., Juneau and Haines Alaska Native
Brotherhood, et al support).
Initiation of discussions with two regional corporations to
evaluate and explore Native subsurface mineral interests (Some
delay has been experienced due to the recent market turmoil but
Coeur's interest remains high).
The following is a partial list of positions that Tlingits and
other Alaska residents successfully trained for and/or were placed in
since the BBC-HRDC training programs began in March 1997:
Coeur Alaska--Equipment Operator VI
Coeur Alaska--Core Sampler
Coeur Alaska--Lead Equipment Operator
Coeur Alaska--Environmental Technician
Connors Drilling--Drillers Helpers
Coeur Alaska--Kitchen Helpers
Redpath, Alaska Industrial Company, The Industrial Company--
Laborers
Connors Drilling, Kensington, Greens Creek--drillers helpers
Coeur Alaska--Equipment Operator VI--Kensington
Coeur Alaska--Water and Waste Water Treatment Plant Operator
Coeur Alaska--Mining Engineering Assistants and Interns--
Kensington
Coeur Alaska--Core Sampler--Kensington-fourteen people
Initiation of project development activities at Kensington include:
Contracting with Kake Tribal for the exploration program
food catering and camp services.
Contracting with Klukwan, Inc. to provide exploration
drilling services Land Use Agreement with Goldbelt for
transportation access and support
coeur commitment to the bbc
The management philosophy at Coeur is focused and resolute.
We know our business, and we understand the opportunities and
challenges we must deal with in order to achieve our goal of
enhancing the Companys value to our Shareholders.
We also recognize the individual Native Corporations'
responsibilities to their Shareholders, namely--increased
shareholder employment and the ability to offer fundamentally
sound business opportunities.
Coeur is committed to environmentally sound mineral resource
development in Southeast Alaska. Like land, water and minerals,
employment and business opportunities are resources, ``sources
of wealth or revenue.'' We believe all these resources can best
be developed through alliances or partnerships, and that the
Native Corporations involved in or considering the Berners Bay
Consortium must also protect and wisely manage the resources if
they are to achieve economic and social self sufficiency.
For its part in the formation of a long-term business
alliance, Coeur has attempted to open a constructive dialogue
with Goldbelt, Kake Tribal and Klukwan. Coeur has identified
(we believe) the foundation for what could evolve into an even
stronger, mutually beneficial business arrangement.
Quotation above from a memorandum dated 11-2-98 to Randy Wanamaker from
Rick Richins, Vice President Environment and Government Affairs, Coeur
d'Alene Mines Corporation.
letter of coeur support
Positioned for Future Growth in Southeast Alaska
Coeur d'Alene Mines Corporation through our wholly owned
subsidiary, Coeur Alaska, Inc., is firmly committed to
developing mineral resources in Southeast Alaska. With the
ongoing activities at Kensington and our exciting new
opportunities at the Jualin Mine Project, Coeur is convinced of
its ability to adapt to local conditions and needs, and develop
in an environmentally responsible manner.
While we have become an international producer of precious
metals, much of Coeur's long term growth ambition lies in our
desire to ``produce and protect'' locally. To do this will
require not only a local presence, but also local partnerships
which can in turn maximize the use of local resources. Those
resources are the people, their capabilities and their services
they provide.
Coeur knows our business, the mining business. We understand
the combined resources of Berners Bay Consortium are needed to
achieve our goal of project development. We (Coeur and the
Consortium) also share a common goal--enhancing the economic
well being of our Shareholder. With your support, I am
confident we can achieve both our goals through the successful
implementation of this ``Business Plan.''
Dennis E. Wheeler,
Chairman, President and Chief Executive Officer.
Above contained in a memorandum from Rick Richins dated 11-2-98 to
Randy Wanamaker.
current status--future outlook
For its efforts, Coeur achieved its goal of successfully permitting
and constructing the Kensington, through community involvement,
community acceptance, and local hire by using the services of the
Alaska Native Partners of the Berners Bay Consortium. However due to
recent last minute litigation by environmental groups, Coeur has
conducted additional economic and engineering feasibility studies and
will re-permit the tailings disposal option with Alaska Native and
Juneau Community support in order to begin operations. The only
uncertainty is the end of new demands by the environmental groups.
The overall outlook for the Kensington re-permitting is good and
the Consortium of Alaska Natives and the people of Juneau are ready and
willing to assist Coeur with all of their resources once a final
tailings plan is approved. For its part, Coeur has expressly stated its
intent to fully implement the Alaska Native Social License in the form
of its business and employment agreements with the Berners Bay
Consortium.
The commitments to the Consortium were honored in the preference
for contracts and subcontracts for mine construction valued at
$238,000,000 (USD). In addition Coeur Alaska achieved approximately 49%
hire of Alaska Natives, Native Spouses, descendents or BBC company
affiliated employees during construction. This is the most successful
private industry affirmative action project in Alaska history.
Once operations begin there will approximately 225 permanent jobs
with an annual estimated payroll of $18,000,000 (USD) plus retirement
and benefits, 150 to 190 indirect and contract positions and annual
mine support contracts. Alaska Natives and other locals are eagerly
awaiting the beginning of operations in this economically distressed
region.
In recognition of its community outreach and economic importance,
Coeur Alaska received the Bureau of Land Management ``2006 Hardrock
Mineral Community Outreach and Economic Sustainability Award''.
The support of the City and Borough of Juneau is demonstrated in
the amicus briefs filed in support of the Kensington during the
litigation brought by the environmental advocacy groups.
The Chairman. Thank you, very much. We will start with a
few questions. It seems to me we have a disagreement about the
extent of current authority in Federal agencies to deal with
potential degradation of public lands. Mr. Bisson, you make it
clear in your testimony, I believe; you say the statutes and
regulations provide sufficient authority to regulate mining
operations when properly monitored and enforced by State and
Federal regulatory agencies and current regulations are
designed to avoid recurrence of what problems have existed in
the past. What's your view of the claims that Mr. Bernholtz is
making about the lack of authority of the Forest Service to do
anything other than go ahead and approve the mining operation.
As he states in his testimony current law does not give the
Forest Service authority to do anything to deny the proposed
project. It can take action to minimize adverse impacts, but it
cannot deny the project. What is your thought on that?
Mr. Bisson. Senator, I'm not aware of the specific facts
regarding the Mr. Emmons project at this point. I know that the
Forest Service, like the BLM, has to make undue, unnecessary
degradation standards and they must comply with that standard.
The company through a plan of operations must comply with it.
I'm frankly not aware of that specific case.
The Chairman. Now, is it your thought in order to comply
with that standard, you can deny them the right to mine?
Mr. Bisson. If, in fact, based on information that I've
been provided, if in fact the company cannot meet that
standard, then a mining plan of operation can be denied. What
normally happens is through mitigation, through the NEPA
process, sufficient mitigation is included in the package, that
most frequently those mining operations are permitted with
significant mitigation, but there are situations such as, you
know, if there's an impact on an endangered species that would
lead to a jeopardy opinion that, in fact, there are situations
where a point of operations had been denied.
The Chairman. Are there examples where a plan of operation
has been denied on the basis of the type of concerns that the
Mayor of Crested Butte has raised about endangerment of the
water supply?
Mr. Bisson. I'm not aware of one.
The Chairman. Dr. Dombeck, what is your take on this
difference of opinion as to what authority? You've been a head
of both the Forest Service and the BLM. Do you believe those
agencies currently have authority to deny mining operations if
they think there's undue degradation of the environment?
Mr. Dombeck. I would refer to authority on that.
I think what we have is, we have the 1872 Mining Law
perceived and operationally viewed by most employees as under a
different umbrella than the disposition of other minerals. I'm
certainly not the expert in this, but these other authorities,
the other minerals sort of the law lays out a sequence of
things that we don't see in the 1872 Mining Law. So my
understanding is when a claim is invalidated, then it becomes
much more difficult to prohibit that if there's a serious
problem as the Mayor of Crested Butte indicated.
The Chairman. Any of the rest of you have views on that we
ought to hear? I don't remember hearing anybody volunteer. Mr.
Cobb, did you want to make a statement?
Mr. Cobb. I just would like to add to that. As we have
heard about concerns about protecting watersheds, again
recognize we have the Clean Water Act. That is the fundamental
mechanism in terms of taking a look at discharges from the
mining operation and the potential impacts associated with
those. Again, there is a lot of public involvement in the Clean
Water Act process. As we take a look at permits that might be
issued underneath that Act. Again, that is a fundamental
mechanism in terms of regulating those impacts. Of course, you
can either get amendments to a plan of operation or a denial of
a permit out of the Clean Water Act as it pertains to
protecting watershed.
The Chairman. So, it's your view that there are
circumstances where the ability of a mining company to proceed
with the development of a mine have been prohibited, but under
the Clean Water Act more likely than under other statutes; is
that what I understood you to say?
Mr. Cobb. The Clean Water Act is one mechanism. That
mechanism would also been be considered through NEPA in terms
of the types of issues that would be evaluate in the EIS, for
example.
The Chairman. OK. Yes, Mr. Bernholtz.
Mr. Bernholtz. Let me make a comment on that. The NEPA
process is a factual-based information that is done and studied
and paid for by the proponents of the mining operation. Are
don't have an unbiased or balanced view of what impacts are
really happening. As far as the Clean Water Act, the Clean
Water Act really goes in effect once something has actually
gone wrong. If we see a problem with the water the Clean Water
Act goes into effect but it doesn't actually stop actions from
happening. The mining company operations are going to come in
and say, well, we are going to have a problem, so the Clean
Water Act will take into effect. The Clean Water Act needs to
go into effect after there is some kind of leakage or problem
with the water.
The Chairman. Let me ask just one final question, Mr.
Bisson, is it your testimony that there are circumstances where
the head of BLM has denied the ability of a mining project to
go forward because of some determination the BLM director has
made?
Mr. Bisson. That determination was probably not made at the
directors level. It was probably made by a field manager or by
a district manager or by a State director in the process of
revealing a plan of operations.
The Chairman. But there are cases where in reviewing the
plan of operations, the BLM says, we're not going to let you
mine here?
Mr. Bisson. Yes, sir.
The Chairman. Could you give us some examples?
Mr. Bisson. I would be happy to follow up in writing but I
can tell you when I was district manager of the California
Desert District, my recollection is that I made the decision to
deny some mining plans of operations because of conflicts of
with the desert tortoise, which was a listed species.
The Chairman. OK. So, in case there is a conflict with the
Endangered Species Act, you personally are aware of that. If
you could give us a list of those circumstances, that would be
very useful.
The Chairman. Senator Domenici.
Senator Domenici. Thank you, Senator Bingaman. Thanks to
all your witnesses. Dr. Dombeck, I just wanted to share with
everyone here that you and I had the occasion to meet each
other on a very, very, wonderful day. You were celebrating with
some of your friends at a local, small hotel, and I came in
there to see if the room you were in would be big enough for us
to celebrate our golden wedding anniversary. You saw me looking
around and you generously got up and introduced yourself, and I
felt very comfortable, and I had almost forgotten about you.
Those years past, I now remember you quite well, and I
thank you for recommending that we use that room because we had
a marvelous occasion just a day later, and it was good to see
you. Let me start my questioning by quoting from what I stated
in my opening remarks, I said a 1999 report from the National
Academy of Science which concluded that existing environmental
protections work together in a way that is ''complicated but
generally effective``. Now, I think what we have is a series of
environmental laws that have been adopted after the mining law,
obviously, and that have been held to apply, but it's not as
clear cut and as clean as if you had a bunch, a group of laws
that just applied to mining. That people are somewhat scared
about these laws and whether they're going to apply to the
satisfaction of the opponent. I'm satisfied that the
environmental laws of the United States apply to mining. Now,
Dr. Dombeck, you were in both the Forest Service and the BLM. I
don't know if you remember, but is it not true that the Clean
Water Act and all these other acts that we have applied in your
day to mining operations and application for mining operations
or do you not remember?
Mr. Dombeck. I would say that it's view differently.
Senator Domenici. What is?
Mr. Dombeck. The mining and the hard rock mining under the
1872 Mining Law as viewed as under somewhat of a different
umbrella. I think the professionals in the agencies, and there
are lots of really, really good employees that applied the
thing that Henri had indicated and continually tried to do
better, but it seems as though we still lack the force of law
or the level of putting hard rock mining on the same plane, as
say, oil and gas and all other multiple uses, whether it be
grazing, hunting, fishing and so and the water quality issue,
well the Clean Water Act I assume is an after the fact. I think
an example might be the Montana example of the Beal Mountain
Mine, an apparently modern mine which touted some of the best
technologies, and yet both the State of Montana and the agency
they're stuck with a really, a major, major problem as a result
of things not working, so something isn't working.
Senator Domenici. You can't tell by looking at all mines
when they were started with reference to the new laws we're
talking about. If you go back far enough, we didn't have a
Clean Water Act, right? We didn't have a Clean Air Act. We
didn't have any. I wonder if these words, ``undue and
unnecessary degradation'' where do they apply? You used those
words, I think, or somebody did.
Mr. Bisson. I did. They come right out of our regulations.
I can't define it right off top of my head, a definition that
describes what it means. It is a standard that must be met
before we approve a plan of operations.
Senator Domenici. Doesn't a mine have to apply for a Clean
Water Act application before it proceeds?
Mr. Bisson. To do any mining on Federal lands, they have to
submit a plan of operations, and they have to submit a plan for
how they will address the requirements of other laws like Clean
Water, like Endangered species. We don't do a NEPA process. We
look at the projected impacts. We require certain mitigation to
mitigate those impacts. It's a very extended process.
Senator Domenici. I want to state for myself and then I
will yield, and I thank you again, Mr. Chairman, for the
hearing. From my standpoint, I'm fully aware that we have many
mines that were started in an era when we did not have
appropriate regulations of defining them. We even had laws that
were far too generous in terms of patented land when the
government gave up much too much land to mining operations.
Those all have to be fixed. Many of them already have, but I'm
not interested in writing a new mining law that intentionally
makes it so difficult to mine, that you don't mine. If there
are people who want that kind of law written, then I'm not
their brother. I'm not going to be helping them. I think we
need to write the right kind of law to assure that the right
kind of environmental laws will apply, but not so excessive and
so multiple that you won't be able to mine. That's what I'm
looking for. I say to the young Mayor, I was a mayor in not
such a small town, I was in Albuquerque, so we didn't have any
miners coming in and mining in our town. I respect your
enthusiasm and your forthrightness and I think you must be
protected. But I also think you have to understand we have to
have laws, it can't be just your wishes, there have to be some
rules that apply to everybody, including those who are working
in your area. I note you want to say something to me, so go
right ahead.
Mr. Bernholtz. I understand what you said, Senator
Domenici, and I agree with you there should be regulations to
allow mines to happen. We are not opposed to mining. But you
had mentioned that those Beal mines were really old and we
didn't have laws in effect then, but there are examples of
mines approved under the Clean Water Act, such as the
Summitville Mine, that was a huge disaster with leakage, and it
destroyed the watershed in that area after the Clean Water Act
was enacted. So it does still happen. We need to protect our
water, especially in the western States where water is still
important to us, we have to be extra careful. We're following a
law that is over 100 years old right now that just should be
updated to current regulations just like we did with oil and
gas coal, we did it with coal, we did it with ranching, we did
it with logging. We're just asking that those laws be updated
and take into account the watersheds of local communities.
Senator Domenici. You didn't hear what I said. I said that
the Clean Water Act that applies was not written in 1892. It
was written to apply today, and it's modern, and if it applies
it ought to work. The NEPA is a new law. It's not a law after
the fact. If it didn't work in some cases it doesn't mean we
didn't have a law. It means that perhaps it wasn't properly
executed. But we're not too far apart--you and I in our
thinking. I just don't want to write whole new code for every
single item if you already have two rules of law for
everything.
Mr. Bernholtz. I agree. I may look young but I understand
how laws work, too.
Senator Domenici. You are great. You are terrific.
The Chairman. Senator Tester.
Senator Tester. Thank you, Mr. Chairman. I have not met Dr.
Dombeck like you have. Thank you, Senator Domenici, but I will
tell you that the Beal Mine started in 1989, and it went
through 1998. The upshot of all of it is that ultimately now
the taxpayers are going to be paying for part of it. So, the
Clean Water Act didn't work. I agree with you, though. We need
to make sure it does work. I don't think there's a person on
this panel who doesn't understand that water is pretty damn
important for everybody and also understand that there's room
for everybody to make a living here.
We need to make sure the regulations are streamlined and
work as well as possible. I've got a few questions that deal
with the priority for clean up. We've got a lot of mines in
Montana, a lot of abandoned mines. This could be directed to
Mr. Bisson, but it can be to anybody on the panel, does the
Federal Government currently have a priority list on mine clean
up?
Mr. Bisson. Senator, I have a document which was prepared
in late 2006. It identifies the priorities for every western
State. So, this is really not abandoned mine lands.
Senator Tester. So it is a pretty complete inventory?
Mr. Bisson. It is as complete as we have currently.
Senator Tester. It is complete like the States have?
Mr. Bisson. Yes, sir.
Senator Tester. OK. Is there a clean up cost associated
with that priority?
Mr. Bisson. The estimates are in there.
Senator Tester. All right. Right now we can continue with
you if you want, Henri, since patenting was put on a hold in
1994, what mechanisms does the industry use at this point to
ensure the security of tenure they desire?
Mr. Bisson. I'm trying to understand the question.
Senator Tester. The patenting is put on hold.
Mr. Bisson. Yes, sir.
Senator Tester. What do you do to give the company some
solace that they're able to mine to recap their investment,
recoup their investment.
Mr. Bisson. A patent is irrelevant in terms of whether they
can proceed with mining or not. The only patents issued are the
ones that were grandfathered in 1994.
Senator Tester. OK.
Mr. Bisson. All but 38 of those have either been issued or
contested because we didn't feel they had a valid existing
right.
Senator Tester. How do you transfer the mineral? Have the
claims gone up or down since 1994?
Mr. Bisson. I can tell you last year we had an increase of
92,000 mining claims on BLM lands.
Senator Tester. So the claim is all you need? You don't
have to have a transfer of minerals?
Mr. Bisson. If you have a mining claim, in a valid
discovery you can submit a plan of operations to develop that
mineral. You don't need a patent to be able to develop that
mineral.
Senator Tester. OK. Which agencies are involved in clean up
of mines and things like that?
Mr. Bisson. You know, I think it depends on the State where
the mine may be. In some cases it maybe be BLM, the Forest
Service, E.P.A., other agencies.
Senator Tester. Are there jurisdictional boundaries clearly
delineated?
Mr. Bisson. I think there's probably a lot of overlapping
jurisdiction.
Senator Tester. How about communication?
Mr. Bisson. I know there are examples of excellent
communication involved in clean ups, and I don't know, but I
would expect there are samples of bad communications in terms
of these efforts to clean sites up.
Senator Tester. All right. One of the things that Dr.
Dombeck alluded to, and then the Mayor alluded to it, but one
of the things that came out of State legislature panel is we
spend at the State level a lot of money on mining clean up.
What happens in the end is the mining company goes broke and
the bonding was either insufficient or something else happened,
and you end up with technologies that failed and you have got a
mess. With the Clean Water Act being recently changed by Court
decision to imply only to navigable waters, does this have an
impact? Mr. Cobb, I would like you to respond to this and
anybody else. Does this have an impacted on how now the clean
up is treated and how the claims are granted and how the
reclamation process moves forward?
Mr. Cobb. Let me just start with the reclamation and the
clean up part of the question.
Senator Tester. Sure.
Mr. Cobb. The issue is really, and we see this at the State
level and the State of New Mexico is on my mind because we're
doing $100 million worth of reclamation in the State of New
Mexico right now. You're trying to protect both surface water
and ground water.
Senator Tester. Right.
Mr. Cobb. Those standards have not changed relative to the
definition. We are still trying to achieve the perfection of
downstream usage. The usage includes fisheries, recreational
use, drinking water purposes, a whole range of things goes into
what we are trying to achieve from a reclamation perspective.
That will come to bear in terms of what we're trying to do with
abandoned mine lands. I think one of the issues that we have to
deal with is this because of the number of abandoned mine
lands. Were are in essence going to be addressing watersheds on
a piece-by-piece basis. We are going to make incremental
improvements, and one of the issues we will have to wrestle
with going forward is, you can't necessarily try and overlay a
Superfund clean up mentality on abandoned land mines and try to
swallow the whole whale. We have do this one bite at a time. Of
course that is the vision on that, how you get a public/private
partnership and incrementally improve watersheds in the United
States.
Senator Tester. My time has run out. Just real quickly, Mr.
Chairman, if I might. The issues in this industry are around
any industry that is out there. Whether it is wildlife or
impacts on our highways or whatever; the main issue from my
prospective is indeed water. I guess because of mines like Beal
and Zortman-Landusky in terms of water, there's been some
failures, let's put it that way. I would be interested in
talking with any of the members of this panel on how we can
streamline the regulation and make it effective so that we
don't have taxpayers paying for clean up for perpetuity on
waters that quite honestly more closely resemble battery acid
than they do drinking water. That's all. Thank you.
The Chairman. Senator Barrasso.
Senator Barrasso. Thank you, very much, Mr. Chairman. Mr.
Bisson, you refer to the list of the priority, the list of the
clean ups that I think Senator Tester asked about. As I was
looking through one of the documents we had in preparation for
this meeting, they talked about abandoned mind land issues. The
number seemed to be staggering to me. I was visiting with
Senator Martinez about it. It said some estimates placed
abandoned mine sites at over half a million nationwide, with 65
thousand abandoned mine sites on BLM lands alone, and I guess
testimony from the EPA and the House Committee on Energy and
Minerals. Do those numbers seem accurate to you, sir?
Mr. Bisson. I can't speak to abandon mines, other than on
BLM lands. Our current inventory is in the vicinity of 12 to 15
thousand. We believe there are substantially more. We had a
team assembled in the mid-90s that estimated it was somewhere
between 70 and 90 thousand sites. Some of those are in a mine
shaft that is unprotected. There are different kinds of sites
that are left out there.
Senator Barrasso. This is from Tony Ferguson, U.S. Forest
Service October 2 hearing in 2007. Sixty-five thousand there,
another 38.5 on Forest Service land. I was curious. The numbers
just seemed large. I didn't know if there was any national
inventory. It didn't sound like there really was.
Mr. Bisson. There is a Web site the committee staff can go
and take a look. I think the best information is probably on
the BLM Forest Service communicator website and we're trying to
get tribes and states and others to put sites up there as well
so the public can learn where these sites are and be aware of
them.
Senator Barrasso. Mr. Cobb, in my opening statement I
referred to a section that has to do with the ability to reject
or veto a mining claim by the Secretary of the Interior. I
don't think you would specifically addressed that in your
statement. I don't know if you have thoughts on that. Even if
all other environmental and legal requirements are met, should
the Secretary have the right to accept or veto a mining claim?
Mr. Cobb. I thought I had gotten to that, but we believe
that is not necessarily, and given the multitude of
environmental regulations out there in terms of protecting
public health and environment, we don't think you necessarily
need special veto authority for that to be accomplished.
Senator Barrasso. It just seems if everything else is met
it would be inappropriate that you would want to give the
Administration the opportunity to make those decisions.
Mr. Cobb. Right.
Senator Barrasso. Mr. Bernholtz, I don't question any of
your community's concern for protecting the watershed. It just
seems very appropriate. I just want to follow up a little bit
on the exchange with Senator Domenici and with what we have
heard here today. Are your concerns, do they fall under
enforcement issues rather that authority issues? I note from
your written testimony I think you said you kind of suggest a
system of lax enforcement and compliance. Could you give some
examples of that, obvious State or Federal regulations where
this is lax?
Mr. Bernholtz. Currently in our watershed, we have a
Superfund site that is actually ongoing right now in the same
area on the same mountain, Mt. Emmons, that was just abandoned,
like Senator Tester said, the company went belly up and went
broke and the left the taxpayers to pick up the burden. It's
right in our watershed. That's one example.
Senator Barrasso. Thank you, Mr. Chairman.
The Chairman. I want to thank you, very much.
Senator Corker.
Senator Corker. Thank you, Mr. Chairman. We were discussing
earlier we didn't know whether Dr. Dombeck exists in all our
states. The Mayor from Crested Butte had the best deal. We
thank all of you for being here. I'm very interested in this
balance that needs to exist, and having been a mayor I can
understand your concern especially about the water issue that
you were talking about. I know it has been discussed by Mr.
Bisson that those things have to be done in advance. Mr.
Wanamaker said that local government was able to be involved. I
would love for any of you all again to respond. I know we
talked a great deal about the quality of water issue, but is it
easily done in advance or is it usually done after there's a
problem? I think that's something that's very key to what we
would be looking at down the road.
Mr. Bisson. If I could respond to that, Senator, and
certainly if somebody else wants to go first, that's fine. When
a mining company wants to mine on Federal lands, they have to
submit a plan of operations. They go through a process to look
at what impacts could be projected from it. We attempt to
include mitigation. We require them to submit data, frequently
require significant amounts of data to determine what the
baseline is and what the impacts might be from various actions.
The other thing that I really feel I need to say is that we
have a financial assurance requirement. We require these
companies to put down sufficient financial assurance to allow
us to reclaim any of the damage that they may do throughout the
life of the mine, and at the end of the mine. We have 1.1
billion right now. We have the ability to require companies to
set up trust funds to take care of these problems should we
anticipate some problems in the future. I'm not aware of any
mining that we permitted since 2001, when we put the new
regulations in place where a company has simply gone belly up
is what I have heard expressed and left a mess for us. I'm just
not aware of any. Everything were are dealing with abandoned
mines preexist those 2001 regulations.
Senator Corker. Mr. Mayor, do you feel like on the local
level, you all have the ability to be involved in that in a way
that keeps any water, if the water issues occur and they're
bonded that's fine, except you already have the damage to your
community. So, do you feel like there are proper assurances on
the front end to deal with this?
Mr. Bernholtz. No, sir, Senator Corker, we don't believe
that's actually true. We currently have a water treatment plant
that is operating in the mine that we talked about, the Red
Lady Mine. We have a 48-hour notification process, so if the
water plant were to stop operating at current level, then we
wouldn't know for 48, hours, and we're talking about our
watershed and our drinking water and the creek that runs
through the center of our town that we have events in, people
plan, people have picnics by. We would know that the water is
contaminate. We wouldn't be alerted for 48 hours, and I don't
believe that's sufficient.
Senator Corker. Mr. Cobb, you obviously feel like a number
of laws that we have in place already deal with this issue. I
think there's going to be some focus on this down the road. Are
you saying in essence we do not need to in any way focus on
regulations relating to the new mining law?
Mr. Cobb. That would be correct. There are no other
industry specifics other than environmental laws that I can
think of. Environmental laws we have in the United States apply
to everybody. I want to echo prior statements about NEPA and
what needs to be done during the environmental review process
and taking a look holistically at all the issues and addressing
those issues. Again, I come back to if there are environmental
issues associated with watersheds and water quality, those
issues have to be addressed prior to a permit being issued. You
cannot go to construction without directing those issues.
Again, my point is, we've learned a lot since those Summitville
mines in the 90s and in discussions in which the EPA is one of
the receivers of clean up of abandoned mines in this country,
sustained environmental compliance is what is necessary to make
sure we don't have those issues, and from a personal
perspective, our company in the Climax mine in Colorado, we
have three watersheds that come off that mine, one of which
goes to Don reservoir which represents 7 percent of the city of
Denver's water supply. We have operated that facility for
decades. There's not been an issue. We maintain sustained
environmental compliance because we understand what the
downstream issues are associated with that watershed. Again,
there are no needs to go back and create a new environmental
set of regulations associated with development of the mine
projects.
Mr. Bernholtz. Senator, as a former mayor of a town, if
were to tell the townspeople that the water has been
contaminated but don't worry, we have sufficient money to clean
that up, how do you think your constituents would feel about
that? They wouldn't be very appreciative of that fact. The
Climax Mine is a great example in the State of Colorado where
there are many acres of acid leech fields that there is no fish
living in and there is no aquatic wildlife, and there are no
people playing there. You don't even have any kind of
recreational opportunity for anyone. I believe that the
regulations should be to a higher standard, and that we should
have regulations to prevent mines from actually happening if
they are not appropriate for the use of public lands, if they
are not suitable.
Senator Corker. Thank you.
Mr. Bisson. I would like to add if I could, I think most of
the laws at least it is my understanding regulate impact except
for maybe the Endangered Species Act, and I think what is
missing is of the discretion for field manager to balance the
multiple uses. Again that for some reason under the 1872 mining
law the perception is that hard rock mining is sort of under a
different roof. Obviously, none of us need more of the things
we have to comply with that aren't necessary. The thing we
really have to do is avoid the impact up front and avoid the
problems we need to fix things like the Beal mine and the
problems you have perhaps, Mr. Mayor.
Senator Corker. Thank you for your testimony. Thank you,
Mr. Chairman.
The Chairman. Thank you, very much.
Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman and thank you
gentlemen for you testimony this morning. It is interesting to
hear the back-to-back comments from the Mayor from Crested
Butte and the Deputy Mayor from Juneau. I have never been to
Crested Butte and really want to go. It sounds like you rely on
recreation and tourism for a good part of your economic base.
Certainly the community of Juneau is also a tourism-based town.
Juneau is also surrounded by wilderness area I see here on your
map that you've got wilderness on two sides of your community
here, and yet Mr. Wanamaker, you have indicated in your
testimony that through whether it is efforts at Affirmative
Action to make sure that local people in the community enjoy
the economic benefits of the mining operation or whether it is
the balance that has been achieved one way or another.
You have used the terminology, the social license to mine.
Go into that a little bit more in detail because I think this
is where ultimately we find this balance that Senator Corker is
talking about. It is a balance with the laws, the regulations,
the permits that put in place, the an then a level of
commitment by the local people that this is an industry that we
welcome. This is an economic opportunity that we want to have.
In a community like Juneau that is perhaps as politically
diverse as any in the State of Alaska and many would say it
braces a very green approach to economic livelihood to have 76
percent of the people there to say this is very important to
our community. It is significant. Can you just speak to how you
get to this social license to mine?
Mr. Wanamaker. Thank you, Senator. The process that would
be used, when the Coeur Mining Company came to Juneau, they
reopened the old Kensington Mine. They looked at the community
and saw a well educated government town, 30,000 people that
were not automatic acceptors of an industry like this. So what
they looked at, they identified all the different user groups
that would be affected by their operations, commercial
fishermen, recreational fishermen, sports fishermen, guided
tours, kayakers, subsistence users, native people who use the
land to live on according to traditional ways and resources.
All of these groups should be affected and the area of the mine
is surrounded by land that subsides for nondevelopment purpose,
not wilderness, not noticing the classification. Too, they
looked at it, and they said, well, we have to work with the
people and find out what it is we need to do to be accepted and
to become part of the community because we're going to affect
the stakeholders.
So they met with the different stakeholders and they
explained to them what they want to do, the kind of mine they
thought think would build, and they asked for their input
continuously, how can they avoid impact issues, what could they
do to mitigate fishery concerns? What could they do for
subsistence concerns? What could they do to avoid impact in
identifying, potential impacts on cultural and historical
resources from native villages and the burial sites that were
in the area. We went through all these groups and met with them
continuously and brought them at together public meetings and
went beyond what is required in the permitting process.
They engaged the community and different stakeholders
continuously, and because they genuinely adopted the ideas and
concerns and explained how they could meet them from the
different user groups, they were able to gain acceptance, and
they put them into their operating plan they submitted to the
Forest Service. They showed the community how they would meet
those concerns, how they would be addressed, and the agency of
the community agreed that these were appropriate solutions, and
they were beyond what the permit environments would have
demanded of them. So in the end, they have a community that is
united with them. They're in an important watershed for
fisheries, for recreation, for guided tours and cultural and
historical resources, they're in ancestral lands with burial
sites, and the tribes, the commercial fishermen, the
recreationalists, the city assembly itself, and the various
recreational user groups have all accepted and endorsed the
project. That's because they took their concerns to heart and
made them part of their mine operating plan.
Senator Murkowski. Again, it sounds like they went above
and beyond what was actually required by law. Mr. Chairman, I
know that I am over my limit. I have one very quick question to
Mr. Cobb if I may. I mentioned in my comments, along with
several others here this morning, about the national security
aspect of mining and the resources, and in your written
testimony you speak to the fact that we are competing with
China and India for the minerals on which we depend. You state
that right now our country is dependent on imports from other
countries for more than half of 45 mineral commodities and all
of 17 other mineral commodities. You also stated that we only
attract 8 percent of worldwide development dollars into this
country for mineral exploration and activity. Is this because
of what is viewed as a more cumbersome permitting process? In
your opinion, why do we see that imbalance there?
Mr. Cobb. You have the statistics correct. It's a variety
of factors. As I said before in the testimony, there are
certainty elements and whether that is legal, regulatory or
political, those all come to bear in terms of attracting
exploration investments around the world. The United States
competes for those dollars. We are a worldwide mining company.
Those statistics apply to us as well. It is a balancing amongst
all those things. We have a great resource in the United
States. What we need is certainty around access, certainty for
tenure to be able to develop these projects because, again, as
I indicated in my oral testimony, recently it was asked from
major mining projects around the world, hundreds of millions of
dollars to multi-billion dollars. For companies to put that
kind of money into a project, you need to understand that for
the socializing to operate and community acceptance, the
ability to get permits, the ability to maintain permits, and of
course, if you're demonstrating sustained compliance, do you
have the longevity to recoup the money. All those factors come
together to play out today in terms o where exploration dollars
go.
Senator Murkowski. Thank you, Mr. Chairman. I appreciate
the extra time.
The Chairman. Senator Craig.
Senator Craig. Thank you, very much Mr. Chairman. Mike,
it's great to have you back before the committee in a different
capacity. I've not lost track of you, but I'm glad you're
enjoying your new professional involvement. Mr. Wanamaker, I
also want to say, I watched it very closely over the last
decade the development of the Kensington Mine because that is
owned by a parent company out of Idaho, the Coeur d'Alene
Mining Operation, which is a very responsible citizen, as you
reflected, in their efforts to develop properties across the
country that are in compliance with all the laws.
Mr. Chairman, what I thought I might do instead of asking
question is offer a little reflection because since 1981 I have
been involved in efforts to change the 1872 Mining Law, and
I've changed along with the effort a little bit over time.
First of all, I think it is important to say, that the 1872
Mining Law, and Mike, you don't need to hedge around it, it has
a bias in it. Its bias is development. That's why it was put in
place. Its biased was the right to discover, the right to
develop a property right and the right to develop. That's what
the intent of the law was. That bias still exists today.
There's no question about that. The problem that the Mayor
expresses, we, some, I don't want to change the bias. We want
to give a Federal agency the right to deny discovery, or should
I say valid, existing right and claim based on the discovery
because it's incompatible with the surrounding area or a
watershed or something like that. That right does not exist
today. What does exist are the changes that I've watched happen
since I've been here. I'm in my 28th year here, NEPA passed in
1969, was signed in 1970 and started getting regulated into law
in the 1970s. When I got here in the 1980s, the National
Environmental Policy Act was in place. What was rapidly coming
behind it was FLPMA. That's the undue and unnecessary language
that Mr. Bisson speaks about. That became a new part of it.
What is left of 1872 Mining Law today? When I first entered the
debate and looked at it, the only thing that's left is the
right to discovery, the right to develop a valid and existing
right.
We're denying patents, basically, anymore except for the
bias, what we put into the law, except for the 38 patents that
were grandfathered in; so, patents don't exist anymore largely
speaks in new discovery. The reason, in part, they don't exist
is the multi-billions of dollars it takes to develop a mine. A
patent existed in 1872 so that if a discovery was found, a
discoverer could take it to the bank, and say, I have a
property right and I want to borrow money against the property
to develop the sub service. That's largely why patents existed.
Of course, a lot of people from mega homes in the west now
exist on old patents and for some environment interests that is
a disturbing fact that it is a reality of private property that
a patent ultimately becomes. What is significant today, the
National Academy spoke to it in 1999, is there are now some 30-
plus laws across the board that entered the arena of the 1872
mining law, to move a claim, and a valid right and a discovery
to a permitting process and ultimate operation, and that's why
the millions and billions exist today. It costs a lot of money
to get into compliance. I disagree with you, Mayor, only in the
way you praised the concern about the EISs.
The reason mining companies pay for them today is because
they would wait a century for the government to pay for them
and they can't. So they go out and hire a professional company
that does EISs quite often, overviewed by the government,
overviewed by the BLM, monitored very closely by them to
complete the process for them, and to submit that to the
Government. Is there a bias because they paid for it? You might
argue that; I disagree with that. I disagree with that because
the Federal Government has the right to say, no, it's wrong and
you ought to change, this, and this, and this, and it goes to
public process and it goes to public theory. I see that as the
environment in which mining operates today on public lands in
the continental United States. It has become a very
complicated, very expensive process. What's lacking is what has
changed in Crested Butte. Crested Butte is no longer an old
mining town. It is a modern, sophisticated, recreational
community. You love it; it is beautiful; and you don't see
mining as compatible to the current Crested Butte environment.
I am not going to dispute that. If I were a Crested Butte
resident, I may agree. I have to argue with you though property
rights are property rights. That still exists within the bias
of the Federal Law based on the development concept of 1872.
Here is how I have changed.
I no longer insist on patents, and I think land ought to
revert back to the Federal Government. I think we ought to be
much stricter on bonding so we don't have walkaways and we
don't have legacies. I think we ought to develop a royalty
system on our part, and I think it ought to be part applied to
abandoned mine lands so we can clean them up. I also think
there would be partnerships on clean up. You know, in the
residue and tailings of old mines that were operated very
inefficiently 100 years ago or 80 years ago or 60 years ago or
70 years ago, there may be valid mineral today. A partnership
between the Federal Government and a mining company to go in
and clean up a property and glean from it residue that's
valuable ought to exist. I've run out of my time. I really
believe for the sake of our country, we're talking about energy
today. Are we're talking about new technologies. We're talking
about filtering systems and dynamics to make a cleaner world
exist and it all takes metals and minerals. I don't want to be
dependent on China or them, especially if in China they're
mined in an environmentally unsound way and that often is the
case. But let's simply give the right of denial because we
don't like the color of the cloth.
Let's make sure that all laws are in compliance, let's
expand the bonding process, let's protect our environment,
let's make sure reclamation after the fact is there and a
reversion is involved to return that property to the Federal
Government and the citizens of the country. That's the kind of
mining law I will support. I will not support arbitrary and
capricious denials that are based simply on the color of the
cloth. I don't think that is fair. I don't think it can work in
our country today effectively if we are to sustain a mineral
industry which is underlying our ability to become a cleaner
world and it clearly is. Thank you all, very much for your
testimony. We'll work you and your interest as we try to
resolve this. I want to be right straightforward with you,
there are conditions that can be expected. There are changes
that can be made, but the bill that came over from the house
has phenomenally unacceptable things to this Senator, and I'll
fight it and oppose it. Thank you, Mr. Chairman.
The Chairman. Thank you, very much. We have another panel
waiting to testify. Let me just clarify one thing. Mr. Cobb,
you said earlier that it is inappropriate to write in
environmental requirements in this legislation because whether
industry has that kind of specific standards if I understood
your testimony. The Surface Mining Act that applies only to
coal does contain quite a few requirements, as I understand it
that don't apply to hard rock minerals. So it's not
unprecedented for the Congress to consider those types of
issues in determining how to regulate a permit, development of
a mineral; Would you agree with that or not?
Mr. Cobb. I would agree with that.
The Chairman. I guess what I was trying to explain was that
in a broad context, take a look at the application of the whole
ranges of regulations that identified my oral testimony, that
was quite everybody. Unless there's some other burning
question, let me thank this panel very much for your testimony
and we will call forth the second panel. On this second panel,
we have four witnesses. First is Deborah Gibbs Tschudy, who is
the Deputy Associate Director of Minerals Review Management in
the Minerals Management Service; James Cress, who is with Holme
Roberts & Owen, a law firm in Denver, Colorado. James Otto, who
is an independent consultant from Boulder, Colorado, and Ryan
Alexander who is for Taxpayers for Common Sense here in
Washington, DC. The main focus of this panel is to talk about
the royalty issue, so we very much welcome all of you here. If
you could each summarize your statement, and then we will
undoubtedly ask some questions. Ms. Tschudy, why don't you
start? Is that the correct pronunciation?
Ms. Tschudy. Yes, sir it is.
The Chairman. If you could go ahead, please.
STATEMENT OF DEBORAH GIBBS TSCHUDY, DEPUTY ASSOCIATE DIRECTOR,
MINERALS REVENUE MANAGEMENT, MINERALS MANAGEMENT SERVICE,
DEPARTMENT OF THE INTERIOR
Ms. Tschudy. Mr. Chairman and members of the committee
thank you for the opportunity to appear here today to provide
technical information regarding the possible reform for the
Mining Law of 1872. Through its Minerals Revenue Manage
program, the Minerals Management Service collects, accounts for
disbursements being verified, royalty payments from all
leasable minerals, which includes oil, natural gas, coal, oil
shale, sodium, potash, phosphates, and all minerals on acquired
land. The Bureau of Land Management administers these leases.
The revenues collected MMS are one the largest sources of non-
tax revenue for the Federal Government. In physical year 2007
MMS collected over $11.4 billion in mineral revenue, including
nearly $1 billion from Federal and Indian coal leases and over
$59 million from Federal and Indian non-coal solid mineral
leases.
My written testimony provides a description of the
statutory basis for the current mineral royalty program on
Federal leases, as well as the description of the key
components for oil, gas, and coal, non-coal solid minerals, and
hard rock minerals on acquired land. In general, royalty
payments in the context of oil, gas, and coal are based on the
production volume, the lease royalty rates and the value of the
product. The royalty rate is the percentage of the value of the
production removed or sold from the lease and is generally 12.5
percent for oil, gas, and surface coal mines, and 8 percent for
underground coal mines. Federal and Indian oil, gas, and lease
terms provide for the Secretary of Interior to determine the
value of production. The Secretary does so through the
promulgation of regulations. Having the value determined by
regulations, allows the flexibility to change the valuation
methodology in response to changes in either market conditions
or operations.
Valuation regulations for oil, gas, and coal allow
deductions for the cost of processing natural gas or washing
coal and transporting production to the point-of-sale. The
costs that are not deductible include one production-related
costs, for example, the costs of exploration, drilling or
mining; two, marketing costs; and three, placing oil gas or
coal in marketable conditions. Those are the costs associated
with field processes that take place on or near the lease such
as separation, heating, cooling, dehydration, compression for
natural gas and crushing and sizing for coal. Royalties for
non-coal solid minerals such as the sedimentary minerals of the
sodium and potassium are based on the growth value of primary
products. Royalty rates for sodium and potassium are generally
five to 6 percent of the gross value, and the minimum royalty
rage of 2 percent is set by statute. Unlike oil, gas, coal or
sedimentary minerals, hard rock minerals such as gold, silver,
uranium and the base metals like lead, zinc, and copper, must
generally undergo physical processing and intensive chemical
processing to produce salable products. The MMS currently
collects royalties from a large lead, zinc, and copper
operation on Federal Land in Missouri. The lessee sells the
zinc and copper concentrates at arms-length prior to smelting.
In this case, the lease document, itself, actually defines
gross value as the price paid in an arms-length sale of the
zinc and copper mineral concentrate without deduction for
processing and mining costs.
The lease terms allow for deductions for transportation
from the mine to the mill. The lead concentration on the other
hand, is smelted by the lessee prior to sale of the final lead
product. In this case the lease term states that gross value is
based on the net smelter return methodology. You take prices
received for the metals, less the cost to ship, smelt, and
refine the mineral concentrate. MMS verifies the first value
calculation by auditing the lessee's sales records and the
costs of transportation. Verifying the net smelter return
calculation requires an audit of the sales records, the
transportation costs and the smelting costs. If a royalty
program is to be established for hard rock minerals, we offer
five basic principles that should be considered. First is
simplicity. Based on our experience, a successful royalty
program must be clear and well defined in the statute, assure
care contemporaneous compliance, minimize administrative costs
and litigation both to the Federal Government and to the
industry by reducing the complexity of the royalty calculations
and associated deductions. It must be applied prospectively,
and it must provide a fair return to taxpayers.
Second, a successful program must have adequate audit and
compliance resources. Today we ensure compliance for about 150
coal mines and other solid mineral mines with approximately 35
audit and compliance staff. Third, a successful program must be
effective and efficient and have an automated reporting system.
We have in place a flexible and easy-to-use web-based system
for companies to report royalties and production for solid
mineral leases today. However, implementing a royalty for hard
rock minerals on Federal leases, would require system
modification. Fourth is audit and investigative authority. The
MMS currently has authority under the Federal Oil and Gas
Royalty Management Act to conduct audits and inspections,
demand records, require record keeping, conduct hearings and
investigations, issue subpoenas, and assess interest on late
payments. This authority would be necessary to carryout an
effective audit and investigative program for hard rock
minerals. Finally, a strong and effective enforcement program
is a key component of a successful royalty program for any
mineral. The civil and criminal penalty authority covered under
sections 109A and B of the Federal Oil and Gas Royalty
Management Act is sufficient to carry out an effective
enforcement program.
In summary, the Administration would like to work with
Congress to update the Mining Law, including authorization for
a clear and effective royalty program that is easily
verifiable. The Administration also believes that any
legislative solution must be accomplished in a way that
provides a reasonable level of certainty to the industry while
pursuing goals to protect or environment. Finally, the
Administration believes that royalty provisions should be set
at a level that does not threaten the continued, reliable
domestic mineral production upon which this Nation relies.
Thank you.
[The prepared statement of Ms. Tschudy follows:]
Prepared Statement of Deborah Gibbs Tschudy, Deputy Associate Director,
Minerals Revenue Management, Minerals Management Service, Department of
the Interior
Mr. Chairman and Members of the Committee, thank you for the
opportunity to appear here today to provide technical information
regarding possible reform of the Mining Law of 1872.
Through its Minerals Revenue Management (MRM) Program, the Minerals
Management Service (MMS) collects, accounts for, substantiates, and
disburses revenues associated with leasing and mineral production from
Federal onshore and offshore lands and Indian lands. In Fiscal Year
2007, MMS collected over $11.4 billion in mineral revenues.
statutory basis for current program
The Mineral Leasing Act of 1920 (MLA), (30 U.S.C. Sec. Sec. 181 et
seq.) established a type of mineral category called ``leasable''
minerals. Under the MLA, deposits of coal, potassium, sodium,
phosphate, oil shale, native asphalt, tar sands, oil, and gas were made
subject to disposition through a leasing process. This leasing process
allowed the United States to maintain title to the land and establish
the type of lease, the duration of the lease, acreage limitations, and
royalty and rental terms. MMS collects and disburses revenues from
these leases including royalties on these types of minerals.
The Materials Act of 1947 established another type of mineral
category called ``salable'' minerals for which minerals commodities are
sold by the Bureau of Land Management (BLM). Under this Act, deposits
of common varieties of sand, stone, gravel, pumice, pumicite, cinders,
clay, and petrified wood were made subject to disposition through a
sales process. The Bureau of Land Management collects revenues from
sales of this type.
The Mineral Leasing Act for Acquired Lands of 1947 (30 U.S.C.
Sec. Sec. 351 et seq.) extended the mineral leasing laws (the Mineral
Leasing Act, etc.) to all lands acquired by the United States. The Act
allowed the United States to maintain title to the land and establish
lease terms for all minerals found on acquired land. MMS collects and
disburses royalties on these types of minerals.
All minerals found on Indian tribal and allotted lands are
administered using a leasing process under the Tribal Lands Leasing
Act, Indian Mineral Leasing Act, and other statutes. Solid mineral
leases on Indian lands are negotiated between the mine operator and the
tribe or an allottee on a case-by-base basis. Neither the general
mining laws nor the Federal leasing laws are applicable to Indian
lands; however, MMS accounts for these mineral royalties on behalf of
Indian tribes and allottees.
The Federal Oil and Gas Royalty Management Act of 1982 (FOGRMA) (30
U.S.C. Sec. Sec. 1701 et seq.) required the development of
comprehensive fiscal and production accounting and auditing systems to
accurately determine oil and gas royalties, interest on late payments,
fines, penalties, and other payments owed, and to collect and account
for such revenues in a timely manner.
description of the current royalty program
The MMS collects, accounts for, disburses, and verifies royalty
payments from all leasable minerals, which include oil, natural gas,
coal, oil shale, sodium potash, phosphate, and all minerals on acquired
lands. The term ``hardrock mineral'' is often used as a synonym for
locatable minerals and includes the base and precious ores, ferrous
metal ores, and certain classes of industrial minerals. Examples
include gold, silver, platinum, copper, lead, zinc, magnesium,
tungsten, bentonite, barite, feldspar, fluorspar, uranium, and uncommon
varieties of sand, gravel, and dimension stone.
Following is a summary of the key components of the current royalty
program for 1) oil, natural gas, and coal, 2) non-coal solid minerals,
and 3) hardrock minerals on acquired lands.
Oil, Natural Gas, and Coal
Royalty payments in the context of oil, gas, and coal are based on
the production amounts, the lease royalty rate, and the value of the
product. In general, all production is subject to royalty payments,
except in limited cases where royalty payments are statutorily or
administratively waived for policy reasons, for unavoidably lost
production, or for production used on or for the benefit of the lease.
Royalty is computed on the basis of the quantity and quality of
production at the point of royalty determination.
The BLM establishes the royalty rate for oil, gas and coal produced
from Federal onshore leases. The royalty rate is a percentage of the
value of the production removed or sold from the leased lands and there
is a statutory minimum of 12.5 percent for oil, gas, and surface coal
mines, and 8 percent for underground coal mines. The MMS establishes
royalty rates for Federal offshore resources.
Federal and Indian oil, gas, and coal lease terms provide for the
Secretary to determine the value of production. The Secretary does so
through the promulgation of regulations. Having the value determined by
regulations allows flexibility to change the valuation methodology in
response to changes in the market conditions and operations.
In general, the royalty value of production from Federal leases is
based upon the gross proceeds accruing to the lessee from its arm's-
length sale of oil, gas, or coal. An arm's-length sale is a bona fide
transaction between independent parties. If production is not sold at
arm's-length, then the value is determined by other market indicators
such as comparable sales, publicly available prices, etc. Valuation
regulations allow deductions for the costs of processing natural gas or
washing coal and transporting production to the point of sale. The
costs of that are not deductible include: 1) production related costs,
2) placing oil, gas, or coal into marketable condition, and 3)
marketing (i.e., finding or maintaining a market for the oil, gas, or
coal production). The costs of placing production in marketable
condition are generally field processes that take place on or near the
lease such as mechanical separation, heating, cooling, dehydration, and
compression for natural gas; and crushing and sizing for coal. These
activities are distinguishable for 1)natural gas processing in which
elements or compounds (e.g.: natural gas liquids) are removed from the
natural gas stream and sold or otherwise disposed of, and 2) coal
washing in which the value of the coal is enhanced.
Non-Coal Solid Minerals
Royalties for non-coal solid minerals, in this case the sedimentary
minerals sodium and potassium, are based on the gross value of primary
products, defined as naturally occurring components of ores or brines
and the first marketable products produced from the processing of raw
ore or brine. The royalty value of an arm's-length sale is the actual
selling price, less deductions. Royalties on products sold under non-
arm's-length conditions, are generally based on the weighted average
sales price of the lessee's arm's-length sales of the same product,
sold in bulk at the mine. Secretarial guidelines for sodium and
potassium allow three types of deductions:
When the sales price includes delivery to a destination
remote from the mine, the lessee may deduct transportation
costs from sales price.
When the sales price includes the cost of packaging, the
lessee may deduct packaging costs from sales price.
When the product sold contains material not derived from the
Federal lease, the lessee may deduct the cost of purchasing
those non-lease materials from the sales price.
The BLM establishes royalty rates for sodium/potassium leases--
generally 5 or 6 percent of gross value. The minimum royalty rate set
by statute is 2 percent.
Hardrock Minerals on Acquired Lands
Unlike oil, natural gas, coal, or sedimentary minerals, hardrock
mineral deposits must generally undergo physical processing and
intensive chemical processing to produce salable products, such as
gold, silver, uranium, or copper. Final products are the purified base
or precious metals.
MMS has no role in the oversight of hardrock mining operations for
mining claims on original public domain lands because companies are not
currently required to pay royalties on production from these lands.
However, MMS does collect royalties from hardrock operations on certain
acquired lands authorized under the Reorganization Plan No. 3 of 1946
(5 U.S.C. Appendix). For example, the MMS currently collects royalties
from a large lead, zinc, and copper operation on Federal acquired lands
in Missouri. The royalty rate established in the lease is 5 percent of
gross value of the lead, zinc, or copper mineral concentrates processed
from the ore. The lessee sells the zinc and copper concentrates at
arm's-length prior to smelting. In this case, the lease defines gross
value as the price paid in an arm's-length sale of the zinc and copper
mineral concentrates without reduction for processing or mining costs.
The lease terms allow for deductions for transportation from the mine
to the mill.
The lead concentrate is smelted by the lessee prior to sale of the
final lead product. In this case, the lease term states that gross
value is based on the net smelter return methodology using prices
received for metals less the costs to ship, smelt, and refine all
mineral concentrates.
MMS verifies the gross value calculation by auditing the lessee's
sales records and costs of transportation. Verifying the net smelter
return calculation requires an audit of sales records, transportation
costs, and smelting costs.
challenges associated with implementing a royalty program for all
hardrock minerals
If a royalty program is to be established for all hardrock
minerals, we offer five basic financial management principles that need
to be considered.
1. Simplicity. Based on our experience, a successful Federal
royalty program should:
be clear and well defined in statute,
minimize litigation,
minimize the complexity of royalty calculations and
associated deductions,
assure contemporaneous compliance,
minimize administrative costs to the Federal Government and
lessees,
be applied prospectively, and
provide a fair return to taxpayers.
2. Adequate audit and compliance resources. Today, MMS,
State, and Tribal auditors ensure compliance for about 150 coal
and other solid mineral mines with approximately 35 audit and
compliance staff. BLM inspectors also inspect mines and verify
the production reported to MMS. The BLM currently administers
approximately 350,000 hardrock mining claims and estimates that
there are 620 active plans of operations; these are claims or
mines that are either producing or have development drilling
occurring on the claim. Additional audit and compliance
resources would be needed to implement a royalty program for
all hardrock minerals.
3. Efficient and effective automated reporting system. The
MMS has in place a flexible and easy-to-use web-based system
for companies to report royalties and production for solid
mineral leases. Both large mining operations and small hardrock
reporters use this system. Implementing a royalty program for
all hardrock minerals would require modifications to MMS's
system including establishing an interface with BLM's systems.
4. Audit and investigative authority. The MMS currently has
authority under FOGRMA to conduct audits and inspections,
demand records, require record keeping, conduct hearings and
investigations, issue subpoenas, assess interest on late
payments, etc. (30 U.S.C. 1701 et seq.). This authority would
be necessary to carryout an effective audit and investigative
program for hardrock minerals.
5. A strong and effective enforcement program is a key
component of a successful royalty program for any mineral. For
example, the enforcement provisions in FOGRMA, at 30 U.S.C.
Sec. Sec. 1719 and 1720, provide a starting point for creating
an effective enforcement program.
conclusion
The Administration would like to work with Congress on any update
of the Mining Law and believes that any legislative solution must be
accomplished in a way that provides a reasonable level of certainty to
the industry while pursuing goals to protect our environment. The
Administration believes that if Congress chooses to apply royalties to
hardrock minerals, the royalty provisions should be set at a level that
does not threaten the continued, reliable domestic mineral production
on which this Nation relies.
The Chairman. Thank you, very much. Professor Otto, go
right ahead.
STATEMENT OF JAMES OTTO, INDEPENDENT CONSULTANT, BOULDER, CO
Mr. Otto. Thank you for the opportunity to present my views
concerning the issue of royalties. I appear here today as a
private citizen, expressing my own views, not representing any
group. I have worked on mining law and fiscal issues in about
40 nations, and have assisted many of the world's largest
mining countries in the development of mining, laws
regulations, and fiscal systems. In some cases, my mining
taxation works only by the consumed Government, other times by
the United Nations, the World Bank, and occasionally by the
private sector. My most recent book is entitled, Mining
Royalties and distributed by the World Bank to the ministries
of finance and mining in different countries.
You have invited me here today to give my opinion on
several very specific questions, and I'll go through those now.
How should a royalty on hardrock minerals be structured, should
they be net or gross or a combination of the two. In my
experience, I highly recommend that a gross proceeds-type of
royalty be considered. It is transparent, easy to administer,
and avoids most tax minimization strategies. Should the rate be
variable depending on the commodity? There are many types of
minerals and the profit margins differ quite substantially.
Many nations do discriminate the clean mineral types. Some
nations have long lists of minerals with a different royalty
rate and a different royalty basis defined for each, and in
other nations they classify minerals into groups and have a
uniform approach to each group of minerals. In other nations,
they have a uniform system to all minerals. My recommendation
is to have a uniform system for all hardrock minerals. What
should the royalty rate be? The key to deciding an appropriate
royalty is to set it at a rate most minds can bear and still
make reasonable profit.
In most countries, that royalty is about 2 to 5 percent,
based on its proceeds. Rates higher than 5 percent are
exceptionally rare. The House has the rate around 8 percent.
That would be the highest in the world and across the board for
those proceeds from royalty. I'm unable to offer a third
opinion as to whether that's an appropriate rate for the United
States because the United States has depletion allowance. In
fact, this is a negative royalty, and I haven't done the models
to determine what the different royalty rate would be. My
recommendation is that if the gross proceeds basis is used, the
royalty rate should be no higher than 5 percent. If you use a
form of net back or profits-based royalty, the rate should be
greatly in excess of 5 percent. How should the royalty be
administered? The royalty can be based on a system of self-
assessment on paper. A standard reporting form should be
developed and an agency of Government familiar with mining and
royalty payments, such as the Minerals Management Service,
should be assigned the responsibility and provided funding to
put in place support and resources be required. What types of
enforcement and compliance provisions are needed? Law should
cover at least the basic topics as the requirement for the
royalty payer to keep and hold certain types of sales records;
empowerment of the Government to inspect records, audit
returns, and adjust returns; the ability of the royalty payers
to challenge adjusted returns, or the penalty for false returns
or no returns.
Of key importance, as said today, is the necessity to
control transfer of pricing practices where the minerals are
sold at less than that an open market value to affiliated
companies. What should the transition rules for new royalty be?
In almost all nations where I have assisted in fiscal reforms,
there are rarely any special transition provisions provided. I
would recommended that royalty be applied equally to all
hardrock mines as of an effective date. Would a royalty put
U.S. producers at a disadvantage to producers in other
countries? The impact of the overall tax system is going to
decide the competitiveness of the U.S. industry. In taking a
look at what is competitive, generally a total effective tax
rate, the combined effect of all the income taxes, State taxes
and so forth should be in range of 40 to 60 percent. If the
effective tax rate is in excess of about 60 percent, over the
long-term industry will dwindle and the revenues will decline.
My concluding remarks, the current mining law is out of date
and it suffers from a host of problems and among these there is
does not lay the groundwork for social license to operate. By
this I mean the acceptance by our society that the mining
industry can play a positive role. The public perceives the
industry as a polluter and creator of ugly scars on the
landscape, and is inherently unsafe.
Today many communities view proposed mines as not an engine
of economic growth, but an industry that must be kept out of
their back yard. The imposition of a royalty, especially one
where revenues are earmarked for reclamation and local
investment, may help the industry to regain a social license to
operate. Finally, I recommend that royalty based on gross
proceeds or net smelter returns and be applied to all minerals
at a uniform rate and that the rate not exceed 5 percent. Thank
you.
[The prepared statement of Mr. Otto follows:]
Prepared Statement of James Otto, Independent Consultant, Boulder, CO
Thank you for the opportunity to present my views concerning the
issue of royalty considerations to be taken into account with regard to
reform of the Mining Law of 1872.
I appear here today as a private citizen, expressing my own views,
and not representing any group. I have worked on mining policy, law and
fiscal issues for twenty five years. I have assisted many governments
in the development of their mining policies, laws, agreements and
fiscal systems including many of the world's most important mining
nations. Examples of my recent mining taxation related work includes:
lead consultant to the Treasury on the bill to introduce royalties in
South Africa, mining sector fiscal analysis for the Peruvian government
prior to the introduction of royalty, analysis of the mining fiscal
systems including royalty in Australia, Bolivia, Egypt, Guinea,
Indonesia, Mali, Mongolia, Mozambique, Papua New Guinea, Philippines,
Saudi Arabia, Yemen, Zambia, and others. In some cases my mining
taxation work is funded directly by the concerned government, other
times by multi-lateral agencies like the World Bank, IFC or United
Nations, and occasionally by the private sector. My books on the
subject of mining laws and mine taxation are considered by some as
standard references worldwide. My most recent co-authored book is
titled Mining Royalties and it has been distributed by the World Bank
to most mining and finance ministries and departments worldwide.
In my work for governments who are undertaking mineral sector
fiscal reform, I advise that when designing a tax system, law-makers
should be aware of the integrated impact that all taxes, royalties and
fees can have on mine economics and potential levels of future
investment. When determining which types and levels of taxes to apply
to the mining sector, policymakers should consider not only ways to
achieve individual tax objectives, but also take into account the
cumulative impact of all taxes. Such awareness should recognize the
importance of each tax type in achieving specific objectives. The
overall tax system should be equitable to both the nation and the
investor and be globally competitive.
(1) How should a royalty on hardrock minerals produced on
Federal lands be structured?
--Should it be net or gross or a combination of the
two?
In its simplest forms, a royalty tax liability is calculated based
either on a set amount per unit volume ($/cubic foot) or per unit
weight ($/ton), or is based on a percentage of the value of the mineral
commodity being extracted or sold (% x value). In the first instance,
unit based royalties, the determination of the royalty liability is
straight forward being solely dependent on the physical quantity or
volume of the material produced but in the second case, value-based
royalties, the assessment is more difficult because a value must be
assigned to the commodity being sold. A third and more complex method
relies on some measure of net profit or net back. For a net profit
royalty, a measure of sales revenue is reduced by the deduction of
certain allowable production and other costs to determine a net profit,
and in a net back scheme some costs are allowed as deductions but
usually not primary mining costs. Net profit and net back royalties are
calculated as a % times net profit or net back.
The advantage to government of unit and value based royalties is
that they are fairly straight forward to calculate and pose fewer
opportunities for tax minimization strategies. Their weakness is that
low profit mines will have the same royalty basis as high profit mines,
and this may impact them with regard to decisions about mine life, ore
cut-off grade, and whether to continue operations when prices are low.
Most Canadian provinces levy a form of net profits royalty, as do a few
other jurisdictions including Nevada. In my experience, when a country
is considering royalty reform, companies will argue strongly for a net
profits type of royalty. However, most governments apply royalties
based on units and/or on gross value (or net smelter return). Unit
based royalties are in common use mainly for construction minerals and
sometimes coal but are less often applied to most other minerals.
Determining the value of the commodity for a value based royalty is
not always straight forward. Different commodities each pose their own
special problems and a nation may use several different valuation
methods. Not only will different commodities often be valued by
different methods but even a single commodity may pose assessment
challenges depending on the condition to which it has been processed.
For example, take the following situation. A copper deposit is located
which contains some ore suitable for recovery by smelting and some
which is recoverable by leaching. The mine management determines that
three products will be produced for sale: raw ore, a copper
concentrate, and from an electro-winning plant, copper metal. The three
copper products will obviously command very different sales values in
the market. How should the three sales products be valued for royalty
purposes? I usually advise nations that when devising a value based
royalty to use a sales invoice (gross proceeds or net smelter return)
based system for most minerals. A net smelter return (NSR) reflects the
value of the mineral after deducting certain restricted costs not
related to mining operations (such as the transport costs of the
mineral to a third party facility that processes the mineral to a
higher valued state and the charges associated with that processing).
Recommendation: I suggest that a gross proceeds type royalty be
considered. It is transparent, is simpler to administer than other
royalty types, and avoids most taxpayer tax minimization practices. The
approach could be stated as an election by the taxpayer to pay based on
either a pure gross proceeds basis or a net smelter return basis, with
net smelter return carefully defined in the law.
--Should the rate be variable depending on commodity?
There are many different types of minerals and their extraction
costs, prices received and profit margins may differ substantially. For
example, the average gold mine probably has a higher profit potential
over the long run than an average copper mine. Should not the royalty
for gold thus be higher than for copper? Many nations do discriminate
between mineral types. In some nations like India and Indonesia, long
lists of minerals appear in their laws along with separate rates or
amounts for each mineral type. Other nations classify minerals into
groups and apply a different royalty to each mineral group. Still
others apply a uniform system regardless of the mineral type. In my
visits with tax authorities in many nations, those responsible for tax
collection almost invariably prefer a uniform system, with the one
exception being construction minerals. There are a variety of reasons
for preferring a uniform system, and I will illustrate two reasons.
Many mines produce one or more multi-metal concentrates. For example, a
zinc concentrate may contain recoverable amounts of zinc, lead, silver,
and gold. If different royalties apply to each mineral, how can the
amount of royalty be calculated? A second reason to avoid royalty
discrimination between mineral types is that it invariably leads to
sustained efforts by producers of one mineral type to lobby for a
reduction in their rate to the lowest rate on any other mineral so that
there is a ``level playing field.'' My advice to most governments is to
have a uniform royalty approach to all minerals, with the exception of
construction type minerals and coal.
Recommendation: a uniform royalty rate should apply to all hardrock
minerals.
(2) What should the royalty rate be?
This is a difficult question. For marginally economic mines, any
royalty may result in them becoming sub-economic leading to closure.
For highly profitable mines, a low rate may see the government
needlessly forgoing revenue. The key is to achieve a royalty that most
mines can bear and still make reasonable profits. The experience of
many nations with substantial mining industries has been that for most
minerals a royalty rate of between 2 and 5% of mineral value (gross
proceeds or net smelter return) works well. Rates higher than this may
over the long run result in lower income tax and royalty yields because
fewer new mines will meet minimum rate of return decision criteria in
times of average prices and some will not be built (the income tax base
will be smaller). Additionally, capital may flow to lower taxing
jurisdictions. Almost all companies would view a gross proceeds royalty
of greater than 5% as punitive. A draft bill considered by the House of
Representatives (H.R. 2262) would impose an NSR of 8%, one of the
highest value based royalty rates that I have encountered in my work.
Is this rate too high? I am unable to offer a firm opinion on that
without further study, and the main reason is another feature of the US
tax system--the depletion allowance. Very few nations have a depletion
allowance for mineral production. Such an allowance is viewed by most
nations as a form of negative/reverse royalty and most nations have
rejected this concept. In most nations, the concept of a royalty is
that payments should be made to government as non-renewable minerals
are mined. Conversely, a depletion allowance allows an income tax
deduction as non-renewable minerals are mined. Thus, over the life of a
mine the impact of a high royalty is offset to some extent by lowering
income tax through a depletion allowance (assuming that most mines pay
income tax). Even given the depletion allowance there is a strong
argument in favor of a royalty rate much less than 8%. While taxpayers
with multiple operations may be able to take advantage of depletion
allowances in most years because they are taxed on income from all
operations, the taxpayer with a single mine will not enjoy the benefits
of depletion during the early years of the project when it already has
substantial other deductions or when its taxable income falls to zero
because of low commodity prices. An 8% gross value type royalty will
have a major impact on independent mines. If the U.S.A. did not offer a
depletion allowance, I would certainly counsel that a net smelter
royalty should be set in the 3 to 5 percent range.
Recommendation: if a gross proceeds/net smelter return royalty
basis is used the royalty rate should be no higher than 5%. If a form
of net back or net profits tax is used, the rate should be
substantially higher than 5% and the optimal rate would depend on what
types of costs are allowed in calculating the royalty basis.
(3) How should the royalty be administered by the Federal
Government?
--How can administration be simplified?
The royalty can be based on a system of self-assessment and
standard reporting forms should be developed. An agency of government
familiar with mining and royalty payments, such as the Minerals
Management Service, should be assigned responsibility and provided
funding to put into place requisite administrative support. Royalty can
be paid annually.
--What types of enforcement and compliance provisions
are needed?
The basic provisions should cover at least basic topics such as:
the requirement for the royalty payer to keep and hold sales records;
the empowerment of government to inspect records, audit returns, and
adjust returns; the ability of the royalty payer to challenge an
adjusted return; penalties for false returns or no returns.
Consideration could be given to incorporating by reference relevant
provisions in the income tax law. Of key importance is the necessity to
control transfer pricing practices.
Transfer pricing is a major and growing concern with regard to
royalty in many nations. The term transfer pricing refers to a practice
where the mine product is sold to an affiliated company at a price less
than the product would have been sold to an unaffiliated party. It in
effect transfers profit from one tax entity to another. If a royalty is
based on some measure of sales value (such as a gross proceeds/net
smelter return) this is a concern. The industry is consolidating, and
sale of minerals between affiliated companies is common. In mining laws
and model agreements that I have recently drafted I strive to reduce
the potential for transfer pricing with regard to royalty. For example,
I may require special reporting of any sale to an affiliate, with
affiliate being defined very aggressively (for example a 5% ownership
interest test, rather than a just a control test).
(4) What should the transition rules for a new royalty be?
In nations where I have assisted in mineral sector fiscal reform
efforts, there are rarely any special transition rules. The one
exception is where a special agreement has been negotiated between a
company and the government and the agreement contains fiscal
stabilization provisions. If the agreement has gone to their Congress
(parliament) and been ratified as a law, the usual practice is to
grandfather that agreement, often with the intent to avoid future
litigation. The Congress has substantial experience with the
introduction of new features in other aspects of the national tax
system and could follow its usual practice.
Recommendation: The tax should be equally applied as of an
effective date.
(5) Should the U.S.A. impose a royalty on locatable minerals?
Most nations impose some form of royalty on minerals when the
nation is the owner of the mineral. There are very few exceptions and
over the past few years some countries that previously had no royalty
now either have one or are planning to introduce one. Almost all new or
recently amended mining laws include a royalty provision. The rationale
for a royalty varies from country to country. In some, it is perceived
as a form of ownership transfer tax, where the nation is provided a
fiscal payment as the mineral moves from national ownership into
private ownership. In other nations, it is justified as a form of usage
fee--the royalty is considered as the regulatory fee paid in exchange
for the ``right to mine'' in much the same way as a driver pays an
annual registration fee to register and use a car on public roads. In
this later case, questions about minerals ownership are mute which may
be an important factor in the U.S.A. where for perfected claims
minerals may no longer belong to the government. Regardless of the
rationale, the primary reason behind imposing a royalty in most nations
is to increase the amount of money flowing to the government, either to
the general budget or for earmarked purposes. Most nations impose
royalty and it is time for the U.S.A. to do so also.
(6) Will a royalty put U.S.A. producers at a disadvantage to
producers in other nations?
Any increased cost, such as a royalty, puts a U.S.A. producer in a
worse off position to compete. Increased costs may discourage
investment into the sector both by US and foreign firms. However,
almost all nations have royalty. In my advice to governments, I urge
policy makers to take into account the complete tax system when
considering a change in any part of it. It is the impact of the tax
system as a whole that will determine whether most mines are able to
operate profitably, and with sufficient profits to reinvest in new
exploration to replace reserves. In extensive studies by myself and by
the International Monetary Fund it has been determined that many
mineral producing nations impose a fiscal system on mines that results
in a total effective tax rate (ETR) in the range of 40 to 50%. ETR is
simply the amount of all taxes and fees paid to government divided by
before tax profit, calculated over the life of the mine. In my mining
fiscal studies for other nations, I typically use a cashflow
spreadsheet for one or more model mines and build in all the various
taxes and fees and incentives. The model then calculates the ETR and
the investor's rate of return. Such models are very useful to assist
lawmakers in understanding the impact on a typical mine of various
royalty rates in times of high and low commodity prices. They also
allow a better understanding of the ways that the tax system works in a
holistic way. For example, to what extent does the depletion allowance
offset the impacts of a high royalty? To what extent does the ability
to deduct a royalty from income subject to income tax affect profits? I
don't know if such modeling has been done to assist in setting a
proposed royalty method and rate in your reform effort. If the method
and rate is contentious, I suggest that such modeling may be a useful
tool for lawmakers to have so as to understand whether the rate is
reasonable. Taken alone without reference to the rest of the tax
system, a gross proceeds or net smelter return royalty applied to all
minerals at rate of 8% will perhaps be the world's highest (rates on
individual minerals are sometimes higher than 8%). Lawmakers should
take care to create a royalty system that provides a real and fair
return to the government but that allows the industry to make adequate
profits to invest in new tax paying mines.
concluding remarks
The current mining law is badly out of date. It suffers from a host
of problems and among these is that it does not lay the groundwork for
``a social licence to operate.'' By this I mean the acceptance by our
society that the mining industry plays a positive role in our well-
being. The public perceives the industry as highly polluting, causing a
proliferation of abandoned eye-sores, putting workers at high risk, and
contributing little to the national or local economy. Today, many
communities view a proposed mine not as an engine for economic growth,
but an industry that must be kept out of their back yard. The
imposition of a royalty, especially one where revenues are earmarked
for reclamation and local investment, may help to regain the industry's
social licence to operate. Since 1990, over 100 nations have replaced
or made major amendments to their mining laws. It is time for the
U.S.A. to do the same.
The Chairman. Thank you, very much.
Mr. Cress.
STATEMENT OF JAMES F. CRESS, PARTNER, HOLME ROBERTS & OWEN, LLP
Mr. Cress. Thank you, Mr. Chairman, and members of the
committee. I appreciate the opportunity to speak to you today
on the issue of hardrock mining royalties. I am a lawyer. I
have been in private practice for about 20 years. I have during
that time represented landowners and mining companies in their
negotiations both with the U.S. and governments in other
countries. I would like to start by talking about the
difference between a gross royalty and a net royalty, and then
talk a little bit about some of the comparisons we did with
oil, and gas, and coal, even though it is not the best
comparison. A gross royalty, I believe, is a blunt instrument.
It's not the best or fairest measure of the value for minerals
contained in Federal lands. That Government brings to the table
millions of acres of Federal lands of generally unknown mineral
potential.
There's some knowledge, but to some extent it is really
unknown. The way the hardrock industry works, you have got to
discover those minerals. You have to expend millions of dollars
to discover a mineral body. They tend to be very small, and
then to determine whether that mineral body is recoverable, you
have to look at the metallurgy. I brought a sample that almost
didn't get through security of what comes out of these mines.
Which is ore. It is a chunk of rock that has to be processed,
as Ms. Tschudy said, considerably from the point at which it
comes out of the ground. If you are lucky, it looks like this.
This is an sample of molybdenite, and you can actually see the
higher concentration of molybdenite on the surface of this side
of the rock. But often these days it looks like this. So the
amount of processing that goes into hardrock minerals is just a
quantum, absolutely different that what you have with oil and
gas and coal.
The other thing to consider is, how are minerals found?
There's an entire segment of the industry that finds mineral
deposits. These tend to be individual geologists or people
working in small groups together and small businesses. The
Northwest Mining Association consists of a lot of these folks,
and they find mineral deposits that are promising and then
interest from a larger company or a company with mining ability
to develop those. They can't mine them themselves. How do they
get paid for that activity? They get paid through a royalty, in
an overriding royalty. So, you have got to leave room for that
system to continue to work, and it relates also to why you
can't just impose the transition rules. Those agreements are in
place on existing claims on many of them. The gross royalty
will also take a larger percentage of profit when prices are
low, and commodities are notoriously volatile in terms of their
up and down prices. Even at $900 gold today, we haven't seen
the heights of the 1980s when gold was over 2 thousand in
current dollars. Gross royalty discriminates more among types
of minerals and among high and low cost operations. For this
reason, I would recommend that you look at a net royalty system
similar to what Nevada has in their net proceeds of mine tax.
That doesn't take care of the all inequities of the gross. If
you apply a uniform rate, that allows each operation to deduct
a particular cost structure.
For a molybdenum mine, that structure is one complete set
of processing streams, and for a gold mine it is a completely
different set, and for a copper mine it completely different.
Then so, a net royalty that allows these cost deductions is
probably the best way to go. The reason that oil, and gas, and
coal pay this amount, and I have added to my package today a
small picture that depicts this, is that those products are
valued essentially at the mine mouth. The oil comes out of the
ground and there is a market for in its true form when it comes
out of the ground and there is a market for it when it comes
out of the ground and the royalty is assessed at that point.
Similarly, coal typically comes out of the grown and it is
crushed and there is a market for the coal at that point. Some
coal has to be washed because it contains a lot of ash. That
cost is deductible. As Ms. Tschudy has indicated, gas can
sometimes be put directly in the pipeline to the point
intended. If it needs to be processed, that cost is deductible
under the current law.
So, what you really have is a valuation of coal and oil and
gas at right here about the mine mouth. What is proposed in
H.R. 2262 using gross income for mining a definition not really
designed for royalty at all, is considerably in excess of that.
It really is an unfair burden to put on the royalty producers
or mining companies. Finally, I think that if you're looking
for comparisons, private royalty negotiations and individual
examples that have been made as I listed in some of my written
testimony, are really an unfair comparison. I think they need
to look at what the states have been doing. You should look at
successful regimes and one that has collected revenue over
decades like Nevada's and look at what it's been doing there.
Finally, for administration, I believe that although a net
royalty is complex, our MMS is capable of handling it I
believe. In Canada, they tried the net smelt return royalty,
and it was a disaster in British Columbia, and they adopted
developed a profits-based approach. We have the luxury of the
administrative capacity to administer those. In developing
countries they often do not. I understand that recommendation
of Professor Otto as to this. I would be happy to answer any
questions. Thank you.
[The prepared statement of Mr. Cress follows:]
Prepared Statement of James F. Cress, Partner, Holme Roberts & Owen,
LLP, Denver, CO
Mr. Chairman and members of the committee, my name is Jim Cress,
and I am testifying today as a mining lawyer in private practice on the
subject of mining royalties. I am a partner at Holme Roberts & Owen, a
109-year old law firm that represented miners in Colorado in the late
1800's and today represents mining companies around the globe. I have
specialized for nearly 20 years in U.S. and international mining law,
as well as oil and gas and coal law. I have represented mining
companies and landowners in negotiating royalties for gold, silver,
copper, coal, uranium, oil and gas and other minerals, and have advised
clients on royalty compliance for private, federal and state royalties
and severance taxes. In my international practice, I have negotiated
royalty and tax sharing agreements with governments from Asia to the
Americas. I have taught in the Graduate Studies program in Natural
Resources and Environmental law at the University of Denver Sturm
College of Law, am a contributing author to the Rocky Mountain Mineral
Law Foundation's American Law of Mining treatise, and am the former
Chair of the Mineral Law Section of the Colorado Bar Association. Thank
you for the opportunity to appear and speak on the important issue of
hardrock mining royalties.
A royalty on hardrock minerals can and should be structured to
promote a fair return to the public and a viable domestic mining
industry. Fairness and continued viability of hardrock mining on
federal lands should be the cornerstone of any royalty regime.
significant problems with a gross royalty
A gross royalty will adversely impact investment in mining projects
compared to a net royalty
A royalty assessed on gross income increases the economic risk of a
given mining investment, and acts as a disincentive to investment. As a
consequence, a company looking to develop a project will require a
higher required pretax and after-tax rate of return to accommodate the
increased risk. Because a royalty assessed on net income has a smaller
effect on the variability of after-tax rates of return, it is a better
basis for assessing a royalty.
The difference between these two royalty methodologies becomes even
more evident when volatility in commodity prices are taken into
consideration. Simply put, as commodity prices decrease, the rate of
return required to justify a mining investment increases more
dramatically under a gross royalty than under a net royalty. Because
the other costs of the mining operation are relatively fixed, the gross
royalty takes a bigger bite out of the shrinking income pie as prices
decrease.
Because the royalty assessed on gross income will cause a larger
reduction in after-tax income when profits are low (or negative) than a
royalty assessed on net income, the royalty on gross income can
exacerbate industry downturns by causing a greater reduction in the
cash flows of mining companies when profits are low. In this way, gross
royalties are inconsistent with the principle of sustainable
development. A gross royalty reduces the volume of an ore deposit that
can be recovered. Each deposit of metallic minerals will have varying
grades of mineral, generally requiring extensive concentration and
refining to be marketable. The portion of the deposit with grades too
low to be recovered economically is either removed as waste or left
undisturbed in the ground. A gross royalty raises the ``cutoff point''
between recoverable ore and waste, shortening the life of a mine by
causing what otherwise would be valuable minerals below the cutoff
point to be lost. These lost reserves generally can never be recovered,
because once the mine is closed and reclaimed, the stranded reserves
are usually uneconomic to recover on their own.
A gross royalty is not a fair measure of the value of hardrock minerals
in federal lands
Any royalty payment to the United States for hardrock minerals
should be based on the value of the United States' ownership interest
in the land. That interest is limited to the minerals in the ground,
and it cannot justifiably be extended to require a royalty to be paid
on values added by the mining company after mining, through processing,
refining and selling the mineral products. The United States makes
available raw land, and any minerals in the land for development, but
the United States contributes nothing to the costs and effort of
discovering, mining, processing and transporting the minerals to
market. In addition, the mineral potential of the millions of acres of
federal land is not uniform, and a royalty needs to be set low enough
to provide an incentive for mineral exploration across a broad range of
lands with differing mineral potential.
A gross royalty is punitive in periods of low commodity prices
Since a gross royalty approach generally does not allow deductions
for mining costs, a mining company would have to pay the royalty
regardless of how high those costs may be for difficult mining
situations or for low grade ores. This would require a mining company
to continue paying a royalty even when it is operating at a loss, and
that royalty could even cause the loss. No mine can be operated long at
a loss. The result would be that some mines would shut down
prematurely, creating loss of jobs, federal state and local taxes not
paid, and suppliers of goods and services suffer. The result is lost
economic benefits affecting both those directly involved in the mining
activity and the governmental entities, including the United States,
that are sustained by those activities.
Moreover, the premature loss of a mine before maximum economic
recovery of the mineral deposit is achieved is a blow to the
sustainable development of our natural resources, since some of the
impacts of the operation will be felt without maximizing the benefits
to society and affected communities. In times of high prices, mining
operations can be expanded to recover lower grade or harder to process
minerals, because the higher prices support the additional costs of
recovering these minerals. A gross royalty can erode this ability to
maximize recovery of the entire deposit.
A net proceeds or net income royalty, in contrast, does not cause a
mining operation to operate at a loss. A net royalty automatically
reduces during periods of low prices and increases again when prices
are higher, permitting mining operations to weather periods of low
commodity prices and maximize the recovery of marginal ore during
periods of high prices.
Due to the cyclical nature of demand for mineral commodities, there
have been and will always be periods of lower commodity prices. A net
royalty provides the best incentive to explore for minerals on federal
lands throughout economic cycles.
A gross royalty unfairly imposes a different levy on different
minerals, while a net royalty is generally more equitable among
minerals
Gross income is closer to net income for some minerals than for
other minerals, resulting in a distortion between minerals if the
royalty is based on gross income. For example, the end of the on-site
mining process for a gold mine is typically a ``dore'' of 90% gold
mixed with silver and other metals, which is then refined into 99.5%
pure gold at an offsite refiner. The end of the on-site mining process
for a copper mine is a typically a concentrate that is much further
from the final refined copper product. A gross royalty applied at the
end of the on-site mining process thus has a disproportionate impact on
these two very different mineral products.
A net proceeds or net income royalty cannot overcome the fact that
income for royalty purposes will be determined at different points for
different minerals, but it promotes more equal treatment of minerals by
allowing deductions for the differing cost structures of various
minerals, mining methods and scales of operation. If one mineral
requires more extensive processing than another, this will
automatically be taken into account by permitting a deduction of the
higher costs of the more processing-intensive mineral.
royalty rate
Determining what rate is appropriate to apply across dozens of
commodities and millions of acres of federal land with differing
mineral potential should not be a matter of opinion or guesswork.
Congress should look closely at the type and rate of hardrock mineral
royalty that has worked in states and countries that have maintained
vibrant mining industries. Nevada's net proceeds approach is
particularly worth studying, as an example of a regime that has been in
place for decades during which time mining has remained a critical part
of the state's economy.
administration of a royalty
Complexities exist in any royalty approach, so the goal should be a
fair return
The gross royalties currently imposed on oil and gas, coal, and
trona, potassium and other bedded deposits are not simple to
administer. Detailed regulations of the Department of the Interior
contain complex processing deductions for gas, coal washing allowances,
and transportation deductions. Any royalty regime for hardrock minerals
is likely to be even more complex, because the Department will be faced
with a greater number of mineral commodities, disparate mining and
processing methods, and differing scales of operation. Complexity is
thus unavoidable, and the priority of Congress in fashioning a hardrock
royalty should be achieving a fair return rather than chasing the
illusory goal of simplicity of administration.
Even the gross royalty proposed in H.R. 2262 will not avoid
controversies in administration. H.R. 2262 contains a gross income
royalty based on the definition of ``gross income from mining'' for
depletion purposes under Section 613(c) of the Internal Revenue Code.
Currently, the Federal courts are split on exactly where the ``mining''
process ends under Section 613(c) for the solvent extraction/
electrowinning (SX/EW) method of recovering metals from solution. One
federal circuit has held that the end of the mining process occurs
after solutions are extracted and concentrated (the end of the solvent
extraction phase). Sunshine Mining Company v. United States, 827 F.2d
1404 (9th Cir. 1987). Another circuit has held that ``mining''
concludes only after the metal is deposited onto cathodes from solution
using an electrolytic procedure (the end of the electrowinning phase).
Ranchers Exploration & Dev. Corp. v. United States, 634 F.2d 487 (10th
Cir. 1980). H.R. 2262 incorporates all of these complexities into the
federal royalty system, along with the potential for different
interpretations by the Department of the Interior and the Internal
Revenue Service on the same issues. H.R. 2262's approach is not a
recipe for either fairness or simplicity of administration.
A net proceeds royalty can more fairly be applied uniformly across
different minerals and mining methods
The ``fairest'' royalty regime would be tailored to the individual
characteristics of each mineral deposit after the characteristics of
the deposit were known, but such a system would be difficult if not
impossible to administer and the uncertainty regarding the amount of
the royalty would act as a disincentive to mining investment. A royalty
based on net income or net proceeds can be applied to many different
minerals, mining methods and sizes of mining operation without the need
to differentiate between the types of minerals being produced. Because
it is based on revenues less allowable costs, the net calculation can
be applied across different minerals, mine methods and scales of
operation.
A net proceeds royalty can be structured to ameliorate concerns about
administration of the royalty
Specifying the definition of ``income'' for royalty purposes and
permissible types of deductions in the statute itself can help provide
an appropriate balance between ease of administration and maintaining a
strong, viable domestic mining industry. For example, the Nevada net
proceeds of mine tax is based on a list of permissible deductions
contained in the statute itself, with some of the details of those
deductions elaborated in the Nevada regulations. A federal hardrock
royalty should also specify the definition of income and permissible
deductions.
Hardrock royalty enforcement provisions should not slavishly follow oil
&
gas precedent
Royalty enforcement and compliance provisions should be simple and
designed to give the Department of the Interior adequate enforcement
authority. They should not be slavishly modeled on existing enforcement
statutes, or some royalty enforcer's ``wish list'' of enforcement
authority as H.R. 2262's provisions appear to be. Many of the
enforcement provisions of H.R. 2262 appear to be closely modeled on the
provisions of the Federal Oil & Gas Royalty Management Act of 1982
(``FOGRMA''), 30 U.S.C. Sec. Sec. 1701 et seq., Pub. L. No. 97-451,
Sec. 2, 96 Stat. 2448 (1983). FOGRMA was enacted to address the
historical problem of theft of ``hot oil'' from federal lands as
documented by the Linowes Commission. See Report of the Commission on
Fiscal Accountability of the Nation's Energy Resources, U.S. GPO 1982-
0366-617/523 (1982). No such historical abuses exist for hardrock
mining operations, and some of the provisions of FOGRMA (duties imposed
on third party transporters, for example) make little sense in the
hardrock context.
Other royalty enforcement provisions of H.R. 2262 go well beyond
FOGRMA's requirements, for no apparent reason. These include the
requirement that any ``person paying royalties'' essentially assume all
liability for correct payment on behalf of the claim owners. H.R. 2262
also exceeds the requirements of any other federal royalty statute by
requiring retention of royalty records for seven years after bond
release for a hardrock mining operation, which may mean decades of
record retention for any mine that operates for 10 or 20 years, a back-
door attempt to avoid any meaningful statute of limitations for royalty
audits. The Department's audit authority is also inexplicably broader
than under FOGRMA, extending to all third parties that are directly or
indirectly involved with production or sale of minerals. The Department
is authorized to impose penalties for underpayment that far exceed the
penalties provided under FOGRMA, again without any legislative history
or basis for these more onerous requirements. Penalties are provided
for without FOGRMA's six year statute of limitations on enforcement of
those penalties. H.R. 2262 imposes joint and several liability on all
owners of any interest in a claim for royalties on ``lost or wasted''
minerals from a claim, which will inject both the Department and every
owner of an interest in a claim into second-guessing the mining and
processing methods for development of the claim. This provision in
FOGRMA addressed a documented issue with unauthorized flaring or
venting of gas from oil and gas wells, which has no parallel in
hardrock mining operations. These provisions appear to be solutions to
problems not shown to exist in the hardrock context.
Enforcement provisions for a hardrock royalty should include a
reasonable statute of limitations, not exceeding six years, for record
retention and government claims for underpayment of royalties. The
enforcement provisions should also allow for a hearing on the record in
the event that penalties are imposed for underpayment. Interest should
be chargeable for both underpayments and overpayments of royalties, at
the same rate. Congress should not incorporate wholesale provisions
from oil & gas statutes that were designed to redress problems that
have not been shown to exist for hardrock operations.
Any hardrock royalty legislation should allow for royalty reductions
and waivers on a case by case basis
All current federal royalty statutes for oil and gas, coal and
other minerals permit the Department of the Interior to grant royalty
waivers and reductions on a case by case basis. The same flexibility
should be provided in any hardrock mining statute. In order to avoid
administrative complexity, any hardrock royalty will probably have to
be applied in a fairly uniform manner across a large number of
commodities and mining and processing methods. Any inequities created
by this broad brush approach can be partially addressed by providing a
mechanism for specific operations to apply for royalty relief, in order
to address economic hardships or to maximize the economic recovery of
minerals from each deposit.
transition rules for a new royalty should be legally defensible and
fair to avoid potential takings litigation and promote certainty
A grandfathering of at least some existing unpatented mining claims
from the new royalty is both required by law and required to treat
fairly parties that have made significant investments in federal lands
prior to the enactment of the royalty. Moreover, it may be advisable to
grandfather some claims that may not constitute fully vested property
rights, in order to have a simple, bright-line test for which claims
are subject to the new royalty, which will reduce uncertainty, reduce
administration and litigation costs for the government and promote
mining investment.
It is settled law that unpatented mining claims supported by a
``discovery'' of a ``valuable mineral deposit'' create
Constitutionally-protected property rights in the owner of the claim.
Imposition of a royalty on such claims is likely to trigger significant
``takings'' litigation against the government. A royalty is in no way
comparable to the imposition of simple federal filing requirements on
unpatented mining claims, which was upheld by the Supreme Court in
United States v. Locke, 471 U.S. 84 (1985). Grandfathering claims with
a valid discovery as of the date of enactment from the royalty is thus
the minimum transition approach that is legally defensible, as
Professor Leshy agreed in his prior testimony before this Committee.
The problem with protecting only claims with a valid discovery is
that determining which of the hundreds of thousands of mining claims
has a discovery would be an unprecedented administrative challenge for
the Department of the Interior. Under a long line of court cases and
administrative decisions, a mining claim does not have to be currently
producing to support a ``discovery''; a reasonable prospect that the
claim could be profitably mined is sufficient. Currently, the
Department requires an administrative hearing in order to contest
claims for lack of a discovery. Due process requires a hearing for
claimants on this issue. The Department has limited staff trained in
the specialized rules applicable to determining whether a ``discovery''
exists. It would be unworkable for the Department to adjudicate
hundreds or thousands of these mining claim validity cases to determine
which claims can be legally subjected to a new federal royalty.
To avoid the royalty transition becoming an administrative
gridlock, Congress should apply the royalty only to claims located
after the enactment of the law or to claims that are not included in a
plan of operations approved by the Department prior to the date of
enactment (without a requirement for commencement of commercial
production). Having a ``bright line'' test will save administrative
costs and will also promote certainty about the application of the new
royalty, which will encourage investment.
it is inherently unfair to apply approaches from coal, oil and gas or
privately negotiated royalties
Hardrock minerals are different, and should be treated differently than
coal and oil and gas
Why should hardrock minerals not be subject to the 8 percent or
greater royalty imposed on oil & gas and coal? The dramatically
different characteristics of the minerals themselves and the ways in
which they are explored for and developed justifies different
treatment.
Oil and gas are fluid and usually collect in sedimentary basins.
Exploration for oil and gas usually consists of seismic studies to
detect the type of structures where oil and gas are found. These
studies are conducted at relatively low cost and usually without the
need to acquire more than an easement over the property to be explored.
When a promising prospect is identified leases are acquired, a well is
drilled and core samples, drill stem tests and logs are taken to
determine whether the well is successful. The costs of drilling can
sometimes be quite high, but a single well can also drain a large area
because of the fluid characteristics of oil and gas. Development of a
field is usually accomplished through initial exploratory wells
followed by development wells that are drilled in locations reasonably
expected, as a result of the information gathered from seismic studies
and the initial wells, to maximize production from the same reservoir.
Once one or more exploratory wells have discovered an oil and gas pool,
identification of the size and shape of the reservoir can be conducted
with relatively low risk and expense.
After extraction, oil must be processed and refined before it is
ultimately consumed as vehicle fuel or other product. The royalty on
oil produced under federal leases is not based upon the value of these
refined products, however; it is measured by the value of the crude oil
at the lease or wellhead, prior to such processing and refining. Unlike
many other minerals, there is a market for oil in its crude, unrefined
state and therefore a ready value for royalty purposes before the value
added by refining and processing. Most oil is sold at the wellhead into
this crude oil market and that wellhead sales price establishes the
value of the oil for federal royalty purposes. Thus, it is somewhat
misleading to call the federal royalty on oil a ``gross'' royalty.
Because the royalty is typically based on the value of the crude oil
prior to processing and refining, the royalty is, in essence, ``net''
of those costs, equivalent to a net or mine mouth royalty on the value
of raw ore in a hardrock operation.
Similarly, federal royalty on gas is also based upon the value of
the gas at the lease. After gas is extracted, often the only thing
required for consumption by the ultimate end-user is transportation
(the cost of which, if paid by the producer, is deducted before
royalties are calculated). Sometimes further processing is required to
remove sulfur and separate gasoline, butane and other constituents from
the gas. The royalty, however, remains payable on the value of the gas
at the lease or wellhead and the processing costs incurred by the
producer downstream of the lease are deducted under the federal rules
before calculating royalty, to arrive at essentially a ``net'' value at
the lease.
Coal is a solid mineral of generally uniform quality and
composition. In the West, where most federal deposits exist, coal beds
often consist of vast deposits of great thickness, in Wyoming averaging
80 feet and up to 200 feet. Little exploration for coal is required,
and it is relatively easy to determine the quality of the coal and the
thickness of a seam prior to mining with drilling and sampling. The
western coal miner thus knows much about the characteristics of the
mineral he has to sell prior to actual mining. At the same time, coal
mining is an extremely labor and capital-intensive enterprise. Because
of the need to construct facilities, obtain equipment, employ workers,
and comply with substantial permitting requirements, it can take years
to design, permit and construct a mine. For these reasons, coal from
federal lands in the West has often been sold under fixed, long-term
contracts entered into prior to construction of a mine. Based on the
certainty of a market provided by these contracts, the coal miner can
lease sufficient reserves to mine over the life of these long-term
contracts and make the considerable capital investments required to
construct the mine. Additionally, many long term coal contracts and
state utility laws allow for the pass through of the royalty burden to
the consumer, while no such pass-through is available for many hardrock
minerals, which are sold and priced in global markets.
While the 12.5% royalty imposed on coal in 1976 was a considerable
increase over the coal royalties typical at the time, the royalty did
not take effect for many federal coal leases until they were
readjusted, which occurred over a period of 20 years. In the meantime,
the demand for low-sulfur western coal boomed due to the increasingly
stringent requirements of the Clean Air Act, and transportation costs
out of the Powder River Basin decreased, which permitted the large
surface coal mines developed in Wyoming during this period to bear the
increased royalty burden, which in any event was generally passed on to
utilities (and consumers) under long term coal contracts. The higher-
cost coal production in Colorado and North Dakota did not fare as well
as Wyoming. Colorado's production initially plummeted, and North
Dakota's fared little better, and only because North Dakota mines are
associated with mine mouth power plants and because the state made
efforts to prop up the industry by lowering taxes and discouraging
import of coal from Wyoming. The higher BTU or heating value and low
sulfur content of Colorado coal has allowed the market to rebound since
that time, and to bear the 8% royalty applicable to Colorado's
underground coal deposits (although some Colorado mines have operated
under royalty reductions during economic downturns).
In addition, the federal coal royalty regulations permit the
deduction of the most material processing cost, coal washing, and
transportation. Thus, the federal coal royalty is not a gross royalty
in the strictest sense, and is more akin to a net or mine mouth royalty
on the value of raw ore in a hardrock operation.
Oil and gas and coal are not the only leasable minerals on federal
lands. Sodium, potash, and phosphate are also leasable minerals. These
minerals are commonly occurring, low margin industrial and fertilizer
minerals the economics of which cannot support a 12.5% or even an 8%
royalty. The statutorily established base rate for phosphate is 5% and
for sodium and potassium is 2%. That is because the nature of these
commodities and the economics around their extracting and marketing
differ from oil and gas and coal. In practice, these mines have
operated under government-sanctioned reduced royalties during periods
when economic conditions and foreign competition threatened to close
the mines.
These examples demonstrate clearly why prevailing royalties differ
from mineral to mineral. Specific analyses can be made for many other
types of minerals. It is clear, however, that application of a gross
royalty at a rate of 8% to hardrock minerals simply because that is
what is done with coal and oil and gas would be overly simplistic and
dangerously naive.
Hardrock minerals are, by comparison, scarce and hard to find.
Unlike oil and gas and coal, the size and shape of a hard rock ore
deposit, the quality of the ore, the mineral composition, the value of
the mineral products, the metallurgical processes required, the mining
methods, the commodity prices and the capital costs all vary for each
operation. Commercial ore bodies may be found under as little as a few
acres of land. Exploration is conducted through exploratory drilling
which gives initial clues regarding the deposit, followed by many
expensive development drill holes to define a deposit for development
and expensive feasibility studies of the metallurgical and other
processes that will maximize production of the target mineral. Once a
prospect is identified, development commences at considerable cost,
with the capital and labor intensiveness of large coal mines, but
without the geologic or metallurgical certainty of coal mines nor the
economic certainty and incentive of long-term coal sales contracts,
which are not customary for most hard rock minerals. The prices of hard
rock minerals have historically been subject to great fluctuation.
Because hardrock deposits were often concentrated by ancient subsurface
magma flows which have been altered by subsequent faulting, the
concentration of metals and their location can vary considerably over
relatively small distances, unlike the relatively constant quality of
western coal deposits. As a result, portions of a hardrock deposit may
be economic while other portions may contain near- or sub-economic ore
that is extremely sensitive to the addition of royalty and other
burdens. The combination of price volatility and the variations in the
concentration and the chemical and geological characteristics of the
minerals within an ore body can turn a profitable mine into valueless
rock with a sudden downturn in the market.
Hard rock minerals, therefore, require considerably different
approaches to exploration and extraction than do oil and gas and coal.
Oil and gas and coal are relatively plentiful, and occur over
relatively large areas where found. Hardrock minerals are scarce and
occur in small concentrations, and must be discovered by expending
considerable money pursuing elusive geological clues. The period
between exploration and extraction for hard minerals is much more
lengthy than with oil and gas or coal, and since hard minerals prices
are not stable, the risk of the project becoming uneconomic before
production begins is substantial. These factors are some of the reasons
that hard rock mining transactions and agreements are considerably
different from each other and from those dealing with oil and gas and
coal. These factors also weigh in favor of a royalty reduction
provision in the bill, so that site-specific determinations can be made
to reduce costs and achieve the maximum economic recovery from federal
mineral deposits.
While individual royalties for specific commodities would
theoretically be the best approach, such a system might be too
difficult to administer. The most reasonable approach given the large
number of commodities to be covered would be a uniform net royalty that
permits deduction of mining and processing costs. The Nevada net
proceeds tax provides a model that has been tested in practice, and you
should consider a similar approach for federal lands.
Gross or net smelter return approaches used in private negotiations are
inappropriate comparisons
A negotiated royalty between private parties is not analogous to
the federal government's imposition of a royalty on millions of acres
of unexplored federal lands. Private royalties are negotiated on a case
by case basis for each property. Usually, the royalty negotiated
depends on what information is known about the property at the time of
the negotiation. The less that is known, generally the lower the
royalty.
An 8% gross royalty, such as contained in the H.R. 2262, for lands
not proven to contain a mineral deposit is unheard of. I am aware of
only one royalty of this magnitude in 20 years of practice. At the time
Newmont's Gold Quarry royalty was negotiated, there was a known ore
body containing eight million ounces of gold on the property, Newmont
had existing mine facilities already built on adjacent land, and the
owner conveyed the mineral rights to the surrounding area (measuring
roughly 25 miles by 15 miles), free from any royalty. That royalty-free
land has since proven to contain millions of ounces of additional gold.
Clearly, this is not the typical case on unexplored federal land.
Other examples of large ``gross royalties'' cited by mining
opponents (see, for example, Earthworks ``Fact Sheet,'' H.R. 2262's
Royalty: Industry Charges Itself Higher Rates (10-29-07)) turn out on
closer examination not to be gross royalties at all, or are explained
by the circumstances of the individual negotiation. They are in no way
``typical'' private royalties.
For example, the AU Mining Inc. royalty cited by Earthworks was on
a small underground mine (producing only 133,000 ounces in the last 10
years) that has average grades of more than 16 ounces per ton of ore,
considerably higher than most operations. Moreover, the royalty burden
apparently could not be sustained even with these ultra-high grades,
forcing AU Mining to give the property back to the owner, LKA
International, in a transaction providing for a much lower royalty
capped at a maximum of $12 million.
The Barrick Pipeline royalty cited by Earthworks is actually a
highly-negotiated series of royalties covering different areas in the
mine, consisting of sliding-scale gross smelter return royalties (GSR1
ranging from 0.40% to 5.0% and GSR2 ranging from 0.72% to 9.0%), a
0.71% fixed gross royalty (GSR3), and a 0.39% net value royalty (NVR1).
The 9% royalty was granted on lands adjacent to an existing mine, known
to contain millions of ounces of gold, in exchange for other royalty
interests in an adjacent mine that was going into production at a later
date. The Pipeline royalties resulted from an exchange of royalties in
proven reserves with determinable values, and are in no way comparable
to a royalty negotiated when the mineral value of the property is
unknown.
The ``gross royalty'' paid by High River Gold on its Taparko-Boroum
mine in Burkina-Faso is not a royalty at all, but a form of financing
known as a ``production payment'' (an arrangement similar to a loan,
with larger repayments of the ``principal'' in the form of gold at the
beginning of the operation, decreasing to a much smaller royalty
``tail'' after recovery of the principal). The company receiving the
royalty provided $35 million to High River Gold to construct the mine.
High River Gold will repay this with $35 million in gold through a
temporary gross smelter royalty, which will then terminate and be
replaced by a 2% royalty.
These atypical royalty arrangements in fact prove the point that a
royalty on specific mining properties is negotiated based on what is
known about the mineral value at the time of the negotiation (unlike
the federal royalty, which must be designed to encourage exploration on
millions of acres of land with unknown mineral potential). Private
royalties are generally negotiated based on existing information about
the particular property, including drill hole data and studies or
analyses of the target mineral body. The purpose of the federal royalty
is to encourage exploration and discovery across millions of acres
which are not yet proven to contain mineral deposits.
In privately-negotiated royalties, there are almost as many royalty
rates and calculations as there are minerals. Each is dependent upon
the nature of the product that is produced and sold, customs and
practices in the industry, the strength of the market for the
particular mineral, the mining cost/processing cost ratio, the
specifics of the property for which the royalty is being negotiated,
and many other factors. Use of a net royalty for federal lands avoids
the need for extensive, mineral-specific legislation. All mines measure
net revenues, or profits, and bear determinable operating costs.
Therefore, a reasonable percentage net proceeds royalty can be applied
and achieve a reasonable return for the use of federal lands, without
disproportionate impacts on any particular mineral industry.
In my experience, other countries are paying considerable attention
to the appropriate royalty and tax burden to encourage mineral
exploration and development. The United States has relatively low grade
deposits of many hardrock minerals, relatively high labor and
production costs, and stringent environmental and operating
requirements. These costs must also be balanced in determining whether
a royalty is necessary on federal lands and if so, how much royalty
should be charged. Congress should not impose a royalty without careful
consideration of the economic and competitive impacts.
States have not generally adopted gross royalties, and states that have
gross royalties use much lower rates than H.R. 2262
Another ``fact'' cited by opponents of mining is that a
``majority'' of states have adopted gross royalties. See, for example,
Earthworks ``White Paper,'' ``A Hardrock Mining Royalty: Case Studies
and Industry Norms'' (102-07). In most cases where ``gross royalties''
are allegedly imposed by states, the royalty percentage is a fraction
of the 8% royalty in H.R. 2262 or the royalty is imposed on ore or an
earlier stage product, in some cases after deduction of mining and
processing costs. See, e.g., Ariz. Rev. Stat. Sec. 425201--5202 (2 \1/
2\% royalty on 50% of net proceeds); Colo. Rev. Stat. Sec. 3929-101 et
seq. (2.25% of gross value of ore, excluding any value added subsequent
to mining, subject to an exemption of first $19 million in in come and
credits for property taxes paid); Idaho Code Sec. 47-1201 et seq. (1%
of the gross value of the ore, after deducting costs of mining and
processing); Mont. Code Ann. Sec. Sec. 15-6-131, 15-23-503, (1.6% net
smelter return royalty on gold dore and bullion); New Mexico Code,
Chapter 7, Art. 26 Sec. 7-26-4 and 7-26-5 (0.5% for copper, 0.2% for
gold and silver, and 0.125% for lead, zinc and other metals, on 50% of
the value of the minerals). These state royalties are considerably
lower than the 8% gross income royalty in H.R. 2262 and in some cases
are essentially the equivalent of a net proceeds royalty.
british columbia's failed experiment with a ``net smelter returns''
royalty
is instructive
In 1974, British Columbia enacted the Mineral Royalties Act, which
imposed royalties on mines located on Crown Lands and the Mineral Land
Tax Act and subjected owners of private mineral rights to royalties
equivalent to those applied to Crown Lands. The government imposed a
net smelter royalty of at 2.5% in 1974, and 5% thereafter.
The results were devastating for British Columbia mineral
development. During the period the royalty was in effect, no new mines
were developed, several marginal mines ceased operations, and non-fuel
mineral output fell, despite increased prices. As a result, revenue
collected from royalties on metal mines declined from $28.4 million in
1974 to $15 million in 1975. During the two year period the royalties
were in effect, nearly 6,000 mining-related jobs were lost. In 1972,
$38 million Canadian was spent on exploration expenditures. In 1975,
exploration expenditures fell to $15.3 million Canadian (a 60% decline)
while exploration expenditures in the Pacific Northwest--outside
British Columbia--increased. New mine exploration and development
spending (excluding coal) decreased from an annual average of $131
million in the years 1970-1973 to an estimated $20 million in 1975 (an
85% decline). In 1972, 78,901 new claims were staked. In 1975 the
number of new claims staked fell to 11,791 (an 85% decline).
The royalty was repealed in 1976. After the royalty was repealed,
BC Mine Minister Tom Waterland said that ``[t]he Government's decision
to introduce royalties in 1974 was the result of inadequate
understanding of the realities of mineral resource development and the
economic characteristic of that development.''
I thank the Committee for the opportunity to address this important
public lands issue, and I am happy to answer any questions you may
have.
The Chairman. Thank you, very much.
Ms. Alexander.
STATEMENT OF RYAN ALEXANDER, PRESIDENT, TAXPAYERS FOR COMMON
SENSE
Ms. Alexander. Thank you, Chairman Bingaman. As you know,
my name is Ryan Alexander and I am President of Taxpayers for
Common Sense, were a national, non-partisan, budget watchdog
group. I'm going to address just a few taxpayer concerns about
the existing law. Public lands are taxpayer assets, and we
believe they should be managed in a way that preserves their
value, ensures a fair return from private interests using them
for profit, and avoids future liability. The 1872 Mining Law
has failed on all these counts. Three are primary ongoing
injuries to taxpayers under the current law, the giveaway of
Federal lands; the extraction of Federal mineral assets without
taxpayer compensation; and the creation of taxpayer liability
by allowing for abandonment of contaminated mine lands.
Under the Mining Law of 1872, as I think you all know, a
claimant can patent or purchase mining claims for either $2.50
or $5.00 an acre. The public is prohibited from charging market
value and put that into perspective, the 2006 purchasing power
of $2.50 from 1872 is just 15 cents, $5.00 is 31 cents. The
transfer of public funds to the private sector and affect and
bargain basement prices needs to be stopped permanently. The
one-year patent moratorium is not a good solution for either
the mining industry or for taxpayers. In the current system,
the United States retains title to minimal land as a result of
several land. The taxpayers receive no compensation. Since
enactment of the 1872 law, the total value of minerals systems
taken without compensation is estimated at $245 billion
dollars. Continuing the practice of simply giving these away is
irresponsible stewardship of some of our most valuable assets.
The oil and gas industry generally pays 12.5 percent in
royalties on what they extract from onshore Federal lands.
Private landowners and states routinely require payments
for mining on Federal lands. Taxpayers for common sense would
like to see Congress pass a royalty income, 12.5 percent income
royalty for hardrock minerals commensurate with other
extractive industries. A gross income royalty is value-based
and ensures the royalty will automatically adjust to changes in
the marketplace. TCS is not aware of other proposals such as
net revenue or net profits royalty, because we believe these
offer too much opportunity for gamesmanship on what deductible
costs will be. As one expert said, the distinguishing feature
of a net profits royalty is that, depending on the exact
definition in the mining lease and the actual calculations, it
will very often be zero. The royalty based on gross income will
be easiest system to administer for the Government and will
require the least complex enforcement systems. Finally, failure
to reform the Mining Law today, will leave taxpayers with a
huge and growing liability for toxic waste and water
contamination left behind by abandoned mines. The potential
unfunded liability for remediation of hardrock mining ranges
from 20 to 54 billion. Senator Barrasso said that people don't
have a great number on this, but those numbers are also cited
as low numbers, although regulations for bonding were tightened
with the section 3809 rules, we believe they are still too weak
to adequately protect taxpayers.
To address these unfunded liabilities, we ask the Senate to
require financial assurance and operations plans, and restrict
mining in areas where the risk of extensive clean-up is too
great. We urge the Senate to consider legislation that would
enable a portion of revenue to be generated by mining fees and
royalties to be deposited in the General Treasury, once
liabilities at the time of enactment have been discharged.
Mining fees and royalties collected should also be directed
toward the highest priority clean-up sites: ones with the
greatest public safety concerns or highest risks for further
environmental damage, rather than directed to States with the
largest current production. In closing, no private landowner
would set a price for land and stick with it for 135 years, no
private landowner would simply give away the minerals on their
land for nothing. No private landowner would give away land for
nothing. No private land owner would allow it, especially
without paying for clean-up. Taxpayers deserve better and the
time for reform is now. Thank you.
[The prepared statement of Ms. Alexander follows:]
Prepared Statement of Ryan Alexander, President, Taxpayers for
Common Sense
Good morning Chairman Bingaman, Ranking Member Domenici, members of
the Subcommittee. Thank you for the opportunity to testify before you
this morning on reform of the Mining Law of 1872. My name is Ryan
Alexander and I am President of Taxpayers for Common Sense, a national
non-partisan budget watchdog group.
Since its inception in 1995, TCS has advocated reform of the
General Mining Law of 1872 for one simple reason: this anachronistic
law is a clear example of taxpayer injustice. Public lands are taxpayer
assets, and should be managed in a way that preserves their value,
ensures a fair return from private interests using them for profit, and
avoids future liability.
Unfortunately, the system of ``management'' set out in the 1872 law
has allowed public lands and valuable public assets to be exploited for
private profit at the expense of taxpayers. There are three primary
ongoing injuries to taxpayers under the 1872 law that must be addressed
by any meaningful reform effort: the giveaway of federal lands; the
extraction of federal mineral assets without taxpayer compensation; and
the creation of taxpayer liability by allowing the abandonment of
contaminated mine lands.
Under the 1872 Mining law billions of dollars of gold, uranium,
silver, and copper are taken from public lands by mining interests each
year. Unlike other extractive industries, companies that mine for gold,
silver, copper, uranium and other precious metals do not have to pay a
fee when operating on federal land, essentially allowing these valuable
minerals to be given away for free. In contrast, the oil, gas and coal
industries pay more than a 12% royalty, and they and the hardrock
mining companies may pay even more when mining on private, state or
tribal lands.
The law also allows the sale of federal lands at 19th century
prices. Under the law, federal lands are sold for no more than $5 an
acre--considerably below today's market value. Not only have mining
companies been able to gain title to land valued at tens of millions of
dollars for as little as tens of thousands of dollars, but the land can
be developed for other purposes, including commercial enterprises, such
as condominiums, ski resorts and casinos.
The 1872 law also saddles taxpayers with the hefty clean-up costs
of the toxic aftermath of mining operations. Not only do American
taxpayers underwrite the profits, but they are also forced to pay for
the damages left behind. These damages have been estimated to cost
upwards of $50 billion.
giveaway of federal land
Under the Mining Law of 1872, a claimant can ``patent'' or purchase
a mining claim for either $2.50 or $5.00 per acre--the public is
prohibited from charging market value for land subject to a claim. Just
to put that in perspective, the 2006 purchasing power of $2.50 from
1872 is just 15 cents, $5.00 is 31 cents. That's how little we are
valuing taxpayer's property. Staking a claim on federal land simply
requires an annual maintenance fee of $125 per acre plus an additional
$30 location fee and $15 new mining claim service fee for first timers.
A couple examples of taxpayers getting soaked by patenting:
In Crested Butte, Colorado the federal government sold 155
acres to the Phelps Dodge mining company for approximately
$790, despite a company estimate that the land could produce up
to $158 million in after-tax profits over 11 years. This is in
an area where land prices range as high as $1 million per acre.
In Nevada, in 1994, American Barrick paid $9,765 for 1,950
acres that contained an estimated $10 billion in gold.
In some cases, it appears that mining patents have been little more
than a ruse for developers to get their hands on valuable federal
property before flipping it for other, more lucrative uses. A few
examples:
In 1983, the Forest Service sold 160 acres near the
Keystone, CO ski resort for $400. Six years later the land sold
for $1 million.
In 1970, a businessman bought 61 acres in Arizona for $153.
Just ten years later he sold it to a developer for $400,000,
plus a share of future profits
In FY1995, Congress began enacting one-year patent moratoriums.
Patent applications that were in the pipeline have been grandfathered,
but new patents have not been issued since then. However, continuing
the decade-long practice of one-year extensions makes little sense for
the mining industry or taxpayers.
We urge the Senate to permanently end the patenting of federal
land. The Congressional Research Service points out a critical fact:
ending the practice of patenting ``will not stop the production of
valuable mineral resources from the public lands, but will prevent the
further transfer of ownership of public lands to the private sector.''
Transfer of public lands to the private sector at bargain basement
prices should be stopped permanently.
gold and other valuable minerals for free
After charging a pittance for the land, the Mining Law of 1872
gives private interests valuable minerals for free. Despite the private
sector extracting public assets from the ground, taxpayers receive no
compensation whatsoever. Since enactment of the 1872 law, the total
value of minerals that have been taken without compensation is an
estimated $245 billion.
By comparison, the oil and gas industry generally pays 12.5 percent
in royalties on what they extract from onshore federal lands. Private
landowners and states also routinely require payment for mining on
their lands. Taxpayers for Common Sense would like to see Congress pass
a 12.5% gross income royalty, commensurate with other extractive
industries.
A gross income or net smelter return is essentially the gross
income for the mineral product that the mine receives from a refinery
or smelter. This ensures that the royalty automatically adjusts to
changes in the market and does not over -or undercharge. TCS is aware
of other proposals such as net revenue or net profits royalty, but we
believe these offer too much opportunity for gamesmanship on what the
deductible costs will be. A royalty based on net smelter or gross
income will be the easiest system to administer for the federal
government and will require the least complex enforcement systems. In a
recent report the World Bank recently found more than 68% of the
countries imposing a royalty use the gross income or net-smelter
system.
Mineral Business Appraisal, geologic and mining experts in the
appraisal of all types of mineral property, describe net profits
royalty, noting ``[t]here are virtually no buyers for this type of
royalty because of the creative accounting that the mining operator can
use to depress the royalty payment amount. The distinguishing feature
of a net profits royalty is that, depending upon the exact definitions
in the mining lease and the actual calculations, it will very often be
zero.''
The state of Alaska provides a glaring example of how big a loss a
net-proceeds royalty would be for US taxpayers. The state imposes a 3%
net-proceeds royalty on mining operations on state lands. Over the last
ten years Alaska has collected only $1.2 million in royalties despite
the extraction of more than $1.2 billion worth of gold from state
lands. According to these figures provided by the Alaska Department of
Natural Resources, Alaska has imposed a less than one/tenth of one
percent royalty on mining operations. Clearly, this type of royalty
would continue the federal government's massive giveaway.
According to Mineral Business Appraisal, net smelter ``royalty
payments are also fairly simple to calculate and administer in that
only the selling price and quantity of mineral product produced or sold
are required for their determination.'' In addition, ``this type of
royalty will usually have the highest market value of all the royalty
types.'' Simple, predictable, and valuable--that is the way to
calculate royalties in the best interest of the taxpayer.
high costs of clean-up
Finally, failure to reform the General Mining Law of 1872 will
leave taxpayers with a huge and growing liability for toxic waste and
water contamination left behind by abandoned mines. Too often, after
all the minerals have been removed, mining operations cease, move their
jobs out of town to another--often related--mining operator, and leave
communities with a mess and taxpayers holding the bag to pay for clean
up. A 2004 report by the U.S. Environmental Protection Agency (EPA)
Inspector General indicated that the Superfund National Priority List
contained 63 hardrock mining sites and another nearly 100 sites could
be added in the future. The price tag for cleaning up all of these
sites was $7--$24 billion, with more than half of that amount likely to
be stuck on taxpayers. Because clean-up takes such a long time, it is
likely that some of the businesses currently on the hook will no longer
remain viable and the taxpayer's share of clean-up will increase.
The potential unfunded liability from hardrock mining sites is even
larger. A 2004 report by the EPA put the cost of remediation of hard
rock mines at $20--$54 billion. Although regulations for bonding were
tightened with Section 3809 rules, they are still too weak to
adequately protect taxpayers. According to a June 2005 report by the
Government Accountability Office (GAO), the Bureau of Land Management
(BLM) indicated that 48 hardrock operations on BLM land had ceased
without reclamation since the agency began requesting some form of
financial assurances in 1981. BLM estimated the costs of reclaiming 43
sites at $136 million, which the GAO says is a low-ball estimate.
To address these unfunded liabilities, TCS asks the Senate to
require financial assurance and operation plans, and restrict mining in
areas where the risk of an expensive clean-up is too great. Moreover,
we urge the Senate to consider legislation that would enable a portion
of the revenue generated by mining fees and royalties to be deposited
in the General Treasury, once liabilities at the time of enactment have
been discharged. Mining fees and royalties collected should also be
directed towards the highest priority clean-up sites: ones with the
greatest public safety concerns or highest risks for further
environmental damage, rather than directed to states with the largest
current production.
Over the years, the Department of Interior has had to be prodded
repeatedly to require adequate financial assurances in the form of
surety bonds and other tangible assets. Clearly, further legislation to
ensure taxpayers are not stuck with the tab for cleaning up mining
messes is required.
other considerations
In addition to not paying a royalty for the valuable resources they
extract from public lands, hardrock mining companies enjoy preferential
tax treatment that other industries do not receive. They are allowed to
expense certain costs for exploration and development; they receive a
depletion allowance, which is a fixed percentage deduction against
gross income; and, they are allowed to deduct the costs of closing a
mine and the associated reclamation costs before a mine is actually
closed.
Because of the way the depletion allowance is applied, mining
companies may actually receive more in deduction credits than their
investment in the mine. And the combination of tax preferences and
other more standard deductions available to them means that mining
companies often pay an effective tax rate much lower than the statutory
corporate rate of 30 percent.
Taxpayers for Common Sense also supports the end of the percentage
depletion allowance tax break for the mining industry. We support the
Elimination of Double Subsidies for Hardrock Mining Industry Act of
2007 introduced by Senators Feingold and Cantwell and urge the
committee to include this in their larger mining reform legislation.
progress towards reform
Taxpayers for Common Sense believes there are many lessons to be
learned from the recent efforts towards reform of the 1872 General
Mining Law. We were pleased to see the inclusion of a royalty on all
mines in the recently passed reform bill in the House of
Representatives. As a means to ease the transition, H.R. 2262
implements a 4% royalty on existing mines--half of the royalty payment
required of new mines. We do not believe this is the most appropriate
way to address the concerns of ongoing operations concerned with an
adjustment to a royalty payment for the extraction of taxpayer-owned
minerals. Rather, this approach deprives taxpayers of compensation from
operations that have long been exploiting our assets while at the same
time failing to address the underlying transition concern of a sudden
change in the cost of doing business. Instead, we would support a three
year graduated phase in of a royalty for existing mines. While this may
present a short term increase in administrative costs, we believe it is
a more fair approach for both the taxpayer and the mining industry.
The House passed bill establishes two trust funds which absorb all
of the revenue generated by the royalties and other fees associated
with the legislation. As the Senate considers this legislation TCS
urges Congress to direct a portion of the revenue generated by mining
reform legislation to be deposited in the General Treasury. The
minerals are extracted from land owned by all taxpayers, and all
taxpayers should reap the financial benefits.
Finally, two arguments that were offered by those fighting reform
in the House of Representatives are worthy of a brief mention in order
to save the Senate from lengthy consideration of these specious
arguments. First, many advocates of the status quo argued that mining
operations in the United States would be dramatically undercut by the
implementation of a royalty for minerals extracted from public lands.
The evidence simply does not support this claim: mining companies
continue to mine state lands where royalties are required and routinely
pay royalties to owners as a part of structured agreements to mine
private lands. Moreover, the mining industry is hardly an industry on
the margins of profitability. To quote PriceWaterhouseCoopers' 2007
annual report on the mining industry, which covers over 80 percent of
the industry, ``net profits increased by 64% compared to 2005, and are
now 1,423% higher than their 2002 level.''
In addition, the contention has been made that the imposition of a
royalty on future revenues from mining operations on public lands would
give rise to legitimate claims under the Takings Clause under the Fifth
Amendment of the U.S. Constitution. This contention is frivolous and it
should be rejected. Property rights in general, but in particular when
it is based on a grant of rights in public lands, do not create
immunity from reasonable regulation to protect the public interest.
Moreover, the imposition of fees, royalties, and other similar monetary
assessments, including taxes, has generally been viewed as outside the
scope of the Takings Clause. A royalty on minerals extracted from
public lands is especially appropriate given the fact that the claims
at issue are based on a grant from the federal government. Actual title
to the minerals and the lands on which they are located remain with the
United States, and the exploitation of these interests has significant
effects on other publicly owned lands.
conclusion
Taxpayers have waited far too long for real reform of the Mining
Law of 1872. Taxpayers for Common Sense forward to working with the
committee to ensure key taxpayer reforms to the General Mining law of
1872 are enacted into law.
The Chairman. Thank you, very much. Let me start with a few
questions. Professor Otto, one of the suggestions that I think
I understand you have been making is that if we adopt a law
that imposes a royalty as it applies from the effective date of
the law to all mining operations, so that existing mines that
were put in operation without any royalty applied would still
have to pay that royalty. That's something which I understand
many of the mining companies would object to strenuously
claiming that they have some kind of a legal basis for
objecting. Have you looked into that? Is there any legal basis
for objecting to the enactment of a royalty on existing mining
operations that are in place for some time?
Mr. Otto. I have not looked into it.
The Chairman. You have not looked into it. Mr. Cress, is
this an issue that you have looked into?
Mr. Cress. Yes, sir it is, Senator. You're absolutely
right, and I believe Professor Lesche spoke to this committee
about the same issue. Do mining claims, unfounded mining claims
that have a discovery of valuable minerals are protected
property rights under well settled law. The problem is that
it's difficult to determine which claims have a discovery and
which claims don't, but a producing mine, I would tell you, I
have to be very careful about trying to impose a royalty on a
producing mine because I think It clearly is claimed to be
under discovery, but there are also operations so far along in
development with reserves so large that they would qualify as
well under the law. The legal minimum, I think, to exempt, we
have to exempt existing claims that have a discovery. That,
however, would be administratively very difficult. Currently
the Department of the Interior has a process requiring an
administrative law judge in a hearing to challenge whether a
particular claim has a discovery. They have even done so in a
number of cases, generally high profile claims in wilderness
areas and recreation areas. It is an expensive, time-consuming
process that requires experts to understand economics, the
metallurgy and all the things that go into determining whether
you have a discovery. I don't think that's workable for the
number of claims we have out there. That is one reason for my
recommendation that we either start, propose the royalty on new
claims that are located after the date of the Act. That would
be a very bright line test for claims that are subject to an
approved plan of operations as of the date of enactment because
that would also be evidence that they were pretty far along in
discovery, but wouldn't require you to go to the administrative
hearing on each and every one of those claims.
The Chairman. Mr. Cress, you testified that one of the
problems with the gross royalty on gross value is that it would
take a higher percentage of profits when commodity prices are
low.
That's what we have today in the case of oil and gas. We
have 12.5 percent royalty on oil and gas production in the
continental United States, even a higher royalty now in
offshore production. When the price of oil comes down, it does
represent a higher percentage of profits, that's correct, but
no one has ever, I guess some have complained that is unfair
but at the same time others have thought it's not unreasonable
for the Government to get some reasonable return for the
resource regardless of the price of the commodity.
Mr. Cress. I agree with that. I think the real question is
what is reasonable. That's the most difficult question. For oil
and gas the cost structure is just completely different and in
deep waters there are different provisions that would apply
there, and there have been some relief provisions to encourage
additional exploration there. I think that's one reason that I
also recommend in my written testimony that there be in the
bill a discretionary royalty relief provision, exactly what is
in the Mineral Leasing Act of 1920. That has been quite
important for a number of industries. One, in fact, is the
potash industry in New Mexico. That industry mines about 90
percent or more of the potash mine in the United States. It's
used for fertilizer. They worked for many, many years subject
to dumping and competition from mainly Canadian exporters into
the United States. They went through some hard times. The way
that was administered by the BLM and the MMS was to allow for
some reductions in the royalty there to keep the industry
going. That's succeeded and today the industry is thriving and
is now paying royalties of 5 percent. I think royalty relief
got them down to 2 percent for a period, but those operations
have stayed open. I think that safety valve is very important.
The Chairman. Senator Barrasso would be next.
Senator Barrasso. Thank you, very much, Mr. Chairman, Ms.
Tschudy, Senator Domenici left a question if I could ask--
mining companies annually submit corporate income tax forms to
the Internal Revenue Service. Could that administration help
simplify the administration of profits-based royalty?
Ms. Tschudy. As far as I know, the I.R.S. corporate income
taxes are on a corporate basis based on their income. Royalties
by definition are a percentage of the value or the amount of
production extracted from the lease or their mine or property
specific so those I.R.S. corporate income tax forms may not be
of significant benefit in a royalty program.
Senator Barrasso. There is a situation in Wyoming where
Congress has imposed an administrative fee of 1 percent of the
total, which should be split 50/50 on $2 billion, which has
cost the State of Wyoming about $20 million to figure out how
you divide the money. I know our State does it a lot cheaper
than what the Federal Government is imposing. I am looking for
any way that we minimize the overhead and minimize the expense
to the States and certainly minimize what is happening in the
State of Wyoming. I know Senator Tester from Montana is in a
similar situation trying to deal with some of these significant
costs that the Federal Government is imposing on the State. We
are going to try to fight those sorts of things.
If I can ask Mr. Cress and Mr. Otto, Mr. Otto, you had
talked about the royalty, the gross royalty, and Mr. Cress
handed out a nice sheet as to bentonite which is a big product
in Wyoming, where they are almost manufacturing the bentonite.
They dig it out and then process it. Where do you draw that
line. Are you further down the line than Mr. Cress is in terms
of the added expense that goes into a production of a product
this is like gold or silver? It has value out there.
Mr. Otto. Virtually all minerals require some processing
before they can be sold, so the question with regard to royalty
is at what point in that value change do you make the
assessment, and in keeping with one of the objectives that was
brought out here in terms of simplification of administration,
usually the first point of sale is often used as that
benchmark, with no deductions for various costs, unless they're
associated with the next smelter return. So, mine mouth value
is used by many, many countries. It works very well. It's
simple to administer, tax avoidance is quite minimal because
there's no reduction or costs. If any costs are aloud as a
deduction, they should be on the next smelter return basis not
dealing with the cost of production.
Senator Barrasso. OK. We talked about the first point of
sale, wouldn't there then be an incentive to mine at one
location sell there, and then conduct the value added process
elsewhere?
Mr. Otto. Could be.
Senator Barrasso. Might be there. You talked about trying
to look at the total taxes that are on something. You made some
comment about 5 percent--shouldn't be more than 5 percent of
gross. Is that on top of the taxes already being paid? When I
look at local taxes, State taxes, ad valorem property taxes,
State corporate income taxes, sales taxes, is it 5 percent on
top of all of those other taxes or do you take that all into
consideration?
Mr. Otto. I would recommend that the 5-percent royalty or
whatever royalty would be assessed would be allowed as a tax
deduction when computing income tax, which is the standard
practice in all countries. In terms of being competitive
worldwide, if you want the U.S. industry to flourish, one of
considerations companies look at is the tax load. Do we invest
here, to do it in Chile? Do we make more profit here. Does it
make more sense to mine it here versus copper mines in Chile.
Take a look at what the overall tax load is. There are not so
concerned about is it royalty or income tax or export duty but
what is the total impact on my project. Now, in the studies I
do, I do comparative studies worldwide, most countries are
taxing, the total effective tax rate is between 40 to 60
percent on the mining industry; so, too much above that,
industry is not going to flourish. It's not going to develop in
mines. If it is lower than that, the political pressures drop
there, to raise the tax rate into that range.
The last time I included U.S. in my studies is the year
2000 we did a global study for the mines. It showed that for
the State of Nevada for a typical gold mine they're right
around 50 percent of the effective tax rate. Arizona in copper
is around 50 percent also and that's without royalties. It is
right in the middle of the 40 to 60 percent range. I have not
run those models for Arizona and Nevada since 2000. Things
changed. I have not taken a look at what the impact of the
royalty would be. I think if we were to take a look at an 8
percent royalty, 10 percent royalty, certainly when prices are
low you have a lot of mines closing down. You also have fewer
mines being developed because they wouldn't be able to meet
their minimum rates of return required for investment. An 8-
percent royalty would be the highest in the world, of general
gross proceeds.
Senator Barrasso. My time is up. I'd like to comment that
you touched on one aspect why a company may make a decision to
use the taxation and there are also clearly litigation
liability issues companies may take into consideration, as well
as regulations that impact all of these companies. So, as we
look about sending things overseas and the national risks and
national security risks that we talked about earlier, I think
it's not just taxation. Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Tester.
Senator Tester. Thank you, Mr. Chairman. I appreciate the
testimony of each of the witnesses, even though some are
diametrically opposed to one another, you all make very good
points. My first question is for Debra Gibbs Tschudy. It goes
back to the chairman's comments at the very beginning about the
applicability to a royalty tax. In the previous panel, I think
Henri Bisson said that there were 93 thousand additional claims
this last year for mining. Would those be eligible for this
royalty if it was implemented now or would that, since the
process has been already been started, would we end up, from
your perspective, end up in some sort of court problem if we
tried to apply it even to the ones that are not started but
made the point?
Ms. Tschudy. It depends on how the law is ultimately
modified. In the statement of Administration policy last
November, the Administration did say that they strongly opposed
the H.R. 2262 because the bill would impose a royalty where
property rights have already been invested. I believe our
solicitors are concerned that there might be and would
generally be a takings cross challenges by the industry if we
were to apply the royalty to existing mining claims.
Senator Tester. OK. This question is for both Mr. Cress and
Mr. Otto. It doesn't matter if we're talking about gross or we
are talking about net on the application of royalty, but there
are a lot of different minerals out there, many, many, many,
you guys know that. Some are worth a lot of money, and some not
that aren't worth much money, and some that are harder to get
to than others, but do you think that the royalty, if applied,
whether it's on net or gross basis, should be the same across
the board whether you're talking about bentonite as Senator
Barrasso talked about or gold or silver or copper or do you
think that it should vary and tell me why, no matter what your
thought is. If it should vary, why if it should be left the
same. Go ahead, either one Mr. Cress or Mr. Otto.
Mr. Cress. Senator, I think that in terms of most States
that have imposed either royalty or severance taxes have
differentiated to some extent, some have and some haven't, they
all get to, however, if you look closely at the language I
spent some time trying to get this out of my written testimony,
often even when you are talking about a gross, it's gross value
of ore, which is this stuff that comes out of the ground or
gross value at the mine mouth that they are trying to get to. I
think differentiating between minerals theoretically might be a
good idea. I think in States they do it because they're
targeting sometimes specific mines and operations because each
State in Colorado molybdenite, for example, bears it's own tax.
Senator Tester. Do you think it's good idea to differences
in the royalty percentage?
Mr. Cress. If your goal is simplicity, you should set the
bar at a reasonable rate for everybody and then have single
rate. That's my recommendation that's why. I came out.
Senator Tester. Mr. Otto.
Mr. Otto. I agree. Let me give you just one example of how
to best simplify things quite dramatically. If you have a mine
that's operating, a mass of sulphide deposits, oftentimes they
will be producing a zinc concentrate that will also contain
silver and lead, and they have a lead concentrate that also has
zinc and gold and you may have a silver concentrate that has a
mixture of different minerals. If you have a different royalty
rate for each mineral, things get complicated in trying to
determine what the royalty liability would be. This is common
for many, many, types of mineral deposits. Where I would speak
to the usefulness of differentiation would be, for example,
coal versus hardrock minerals or construction minerals versus
hardrock minerals. They don't have the same source of
production.
Senator Tester. Got you. Thank you, very much. Both you
fellows have both worked in other countries or at least
monitored what other countries are doing. Can you give me an
idea whether most other countries go with gross proceeds or net
proceeds when applying for royalty? What are other countries
doing?
Mr. Cress. I think Professor Otto can speak to this because
this study exhaustingly talks about this. I think many, many
countries do have small gross royalties. I guess I would look
at some of the more developed countries for which maybe our
system is more analogous, they tend to have more complex
systems; that is in Canada and several of the provinces have
net profits based royalties which they're able to administer
apparently just fine. There is a problem in developing
countries with the lack of administrative capacity.
Senator Tester. So you are saying most developing countries
use probably the gross proceeds, most of the countries like the
United States, Canada, more developed countries are using that
net profits.
Mr. Cress. You see more of a net approach.
The Chairman. Mr. Otto, very briefly.
Mr. Otto. Very few countries either developing or developed
use a net profit basis with. The exceptions would be Canada,
which has very successfully implemented a profit-based
approached, one state in Australia. It is very, very rare.
Almost everybody uses some sort of net smelter or gross
approach with just a few exceptions.
Senator Tester. I want to thank the panel once more. Ms.
Alexander, I didn't ask you any questions, but I want to tell
you that I really appreciate the last comments you made
comparing private landowners to publicly owned lands.
Ms. Alexander. Thank you, very much.
The Chairman. Next is Senator Corker. I think we have a
vote starting about 12. So, if we can get all the questions
done before we all leave for the vote, that would be great.
Senator Corker.
Senator Corker. Thank you, Mr. Chairman. This has been an
outstanding panel. I think each of you have been very clear in
your comments and insights, and I just want to thank you. I
think it has been excellent testimony. I have a bias toward
simplicity. Mr. Cress when talking about the royalties and how
when obviously prices are low for commodities or minerals then
royalty would be a bigger piece of the profits. That would be
true of every expense that exists. I mean, that would be true
of labor; that would be true of insurance; that would be true
of power. That would be true of every single expense that
exists. So I would have some so difficulty understanding why it
need be any different, if you will, as it relates to the
royalty application.
Mr. Cress. I think because few of those costs really
literally can be and they are fixed costs. So, you're turning
the royalty also into a fixed cost, and the result of that is
the premature closure mines and the loss of reserves. To me I
can use sustainable development in the context of hard rock
mineral development as once you have opened the mine, getting
every last ounce out the ground you can because you have got
the impact of that mine there, and royalty, having a net
royalty, is a way to try and ride out those difficult periods.
Senator Corker. Just as an observation, I was saying that 5
percent royalty would be somewhat minimal compared to the other
costs, and that maybe we're making a bigger thing out of the
price stage, if you will, and the effect on profits, but I
would just tend to lean on the side of such, yet, I have
enjoyed some of your other arguments. I would think that your
bureau, Ms. Tschudy, would have a difficult time on net profits
basis in that I assume mining entities own different companies,
and apply overhead and apply administrative costs unevenly, and
depending on how they wish, obviously, as a corporation or a
conglomerate it has to be done appropriately, but it seems to
me cost shifts could occur to lower profits coming out of the
mine; is that correct?
Ms. Tschudy. Yes, sir. In general the more deductions you
allow, the more resources will be required, and the more
difficulty in auditing those resources. We look first to an
arms-length sale of the first marketable product. If you have
an arms-length sale, that is easy and simple. That's the gross
value method, but if there is a transfer to an affiliate we may
have to do a net smelter return calculation. But again as long
as a product sold at arms-length, we can look to the gross
value which is relatively simple. If start to you allow a lot
of deductions, it does get costly and complex. We spend most of
our time in the courtroom today arguing about what are
allowable deductions.
Senator Corker. Speaking about those courtroom costs we all
have in business, relating to just dealing with issues and the
complexities and some of the gamesmanship, if you will, to sort
of drive down the actual profits coming out, would there be
some benefit to the mining operations, Mr. Cress, if it was
just simple and you didn't have to deal with the auditing
issues, the court cases that come from that and also just the
internal gymnastics that might need to be played to keep the
profits already coming out of the mine?
Mr. Cress. There is obviously a benefit to not having
litigation, but the cost differential between a gross and a net
depending on what you're talking about can be such a large
percentage of operating margin, that the complexity from the
companies perspective is worth it. The other thing I would
point out, when you talk in terms of a net profit, royalty, the
type British Columbia has, for example, that's not really what
I'm proposing. The Nevada model is not a clear net profits
under which you can deduct all kinds of corporate overhead,
going all the way up to the mother ship. The net proceeds
royalty actually limits the deductions and defines then in the
statute. On a scale of royalties, net profits is at one end and
the total gross is at the other. Net proceeds is somewhere over
here to the left.
Senator Corker. It is sort of semi-gross?
Mr. Cress. It is semi-net, but it's not an unlimited net as
Ms. Tschudy says, that defining those deductions carefully in
the statute, which Nevada did is the key to minimizing that
litigation that you're talking about.
Senator Corker. Our time is almost up. I didn't hear
something that was in the background about the cut-off time
from when we actually apply this royalty. Would you state that
one more time as to when that should begin so that there isn't
litigation based on previous entitlements?
Ms. Tschudy. The Administration believes that the law
should be applied perspectively to avoid taking challenges of
the law, so they should not be applied to existing claims but
rather to new claims.
Senator Corker. So the 93 thousand claims would all be
grandfathered in without royalty?
Ms. Tschudy. I'm sorry. I'm not familiar with the number of
claims. I'm not an attorney as well. I know the Administration
office and the Department of the Interior had been concerned
about H.R. 2262 and possible takings challenges. Again, the
Administration supports a royalty system that would be applied
perspectively. I don't know what affect that has on 93
thousand, where those stand.
Mr. Corker. Thank you, and again Ms. Alexander I will say
the same thing as Senator Tester, thank you.
The Chairman. Senator Murkowski, I was confused about the
12 vote; it is at 2. You can take all the time you want.
Senator Murkowski. I hadn't gotten the message, but I
appreciate you correcting that, I thank you. Thank you to those
of you here this morning. I do want to take just a moment and
correct the record. Ms. Alexander, in you're written testimony
you didn't indicate, in oral testimony, but in your written
testimony you refer to how Alaska operates their net proceeds
royalty and indicate that in your opinion, it is an example of
something that doesn't work, and you've indicated that the
State imposes a 3-percent net proceeds royalty on mining, and
that over the past 10 years we've only collected $1.2 million
in royalties. You do specifically state this is as to gold from
the State. It's my understanding in addition to 3-percent net
royalty from the State land, we also have the 7 percent net
proceeds tax on all the mining in the State, so essentially the
State's revenue takes from mining operation is a combination of
the royalty and the special mining license tax, and eventually
the income tax, and that total is a total approximately of $420
million. It does not include payments to municipalities that
total approximately $110 million. So I did want to make sure it
was clear in the record that we are in fact receiving more
through our State royalties there in the State of Alaska.
Mr. Otto, I wanted to ask you about the whole aspect of
competition. You've heard my concern that in the area of
minerals I fear that we're going the same way or that we are
already in the same direction as we are with oil in being so
reliant on foreign sources. As we talked about being
competitive in a world marketplace within the mining industry,
you've indicated that the gross royalties should be in the area
of 2 to 5 percent, but we also recognize all of the other costs
that are associated. In an effort to be competitive, if we had
a rate such as 8 percent which is what the Rahal Bill is
advocating, that would put us in the category of being the
highest royalty, effective royalty rate in the world; am I
correct in that?
Mr. Otto. It would be the highest gross proceeds royalty
across the board. There are a few exceptions here and there of
individual minerals in other countries. In terms of the total
effective tax rate, I don't know what it would be because I
haven't run that model.
Senator Murkowski. That leads to my question because I have
looked at your background. It is extremely impressive,
extremely extensive in so far as the mining taxation work, and
you have great credibility as you sit before us and offer your
opinions here most certainly. You've indicated in response to
Senator Barrasso's questions that you haven't had an
opportunity since 2000 to look at the U.S. situation in terms
of how we stack up to other nations, and if you haven't, who
has? I don't want us here in Congress to be embarking on an
comprehensive mining law reform where we're basically picking
numbers out of the air because it is a round number and it
looks good, but then to find out that effectively we're cutting
ourselves out of a global marketplace because that number
wasn't a number that allows us to be competitive. Is there
anybody out there who is really doing a critical analysis. I
think mining law reform is going to move. I am hopeful that
something positive happens. I really don't want us to make a
mistake in misjudging in what a reasonable and fair royalty
would be. So, is there anybody else out there that we should be
talking to?
Mr. Otto. I have undertaken fiscal reforms in probably 20
countries now dealing with the mining industry. In every single
instance they have done some modeling to determine what the
impact would be on typical mines, how that would effect not
only that individual mine but how that would look in comparison
to the fiscal systems in other countries.
Senator Murkowski. Do you know of anybody?
Mr. Otto. I don't know of anybody who has done that
recently and included the United States. The International
Monetary Fund had some models that I've worked with, the World
Bank. They do not include the United States in those models.
Senator Murkowski. Why do they not?
Mr. Otto. I think it comes down to funding. If you take a
look at organizations like the World Bank and IMF their and
clientele does not include the United States. A person like
myself I release these studies from time-to-time. The last time
I raised the funding to do a global study was in 2000. I'll
probably do another one in 2010. In 2000 I included the U.S. I
don't know of anybody else who is doing international
comparative tax studies.
Senator Murkowski. Mr. Chairman, that might be something
that we would like to look into so again we don't make a
mistake from a legislative perspective.
The Chairman. I think it is a very good suggestion. We do
expect to ask CBO to do an analysis on the royalty models. They
did that back in the 90s when this issue was seriously debated
and we are going to ask the do it again.
Senator Murkowski. Thank you.
Mr. Otto. I would add if you do want some examples the
royalty book published by the World Bank last year, in the back
was a diskette that has the specific royalty legislation from
about 35 countries, and it has examples of net proceeds, net
back, profits gross, all the different types of approaches. If
you're looking for some concrete examples, that might be a very
good place to look.
The Chairman. We appreciate that good suggestion.
Senator Craig.
Senator Craig. It has been a very fascinating panel. I must
tell you, over the years in trying to understand net versus
gross, you all bring a lot of fascinating information to the
table. I will also say, Ms. Tschudy, I always thought it ought
to be simple because we don't want it gamed. Clearly, a way of
enforcing in a clean and simple manner is critical I think
overall. We just here in this committee in the last few years
got into an interesting dispute over what we meant and what you
all meant when we were enforcing deep water royalties. There
are a lot of nuances that are part of the regulation and what
was the congressional intent of the time and the implementation
versus somebody today saying somebody is ripping us off or
getting too much money out there. That we ought to try to avoid
it for a lot of reasons, credibility with the taxpayer, Ms.
Alexander is awfully important here, and that there appears to
be and is a fair return to the taxpayer for the allowance of
the use of the resource, for the development of and the
exploitation of the resource.
Let me go back to claims versus permits and the issue of
property and taking. That fascinates me because I'm little bit
concerned that if we're trying to get our act together and
attempting to apply a royalty, I've been willing to think
prospectively, but at the same time, when does a claim become a
property right, at the moment a stake is driven into the
ground? When does the taking occur? I guess that's part of what
the Justice Department is a little worried about. I can
understand a permitted property because the government gives it
away for X amount of money, not a lot. So that becomes private
property, so when the Federal Government reaches in and on top
of it after the fact places a royalty, I can see that as
arguably opaque. I see some difference between a patent and a
claim in my own mind. Now do you know, and maybe I should have
asked this of Mr. Bisson, of those 90 thousand, were most of
those uranium? Do we know what they were?
Ms. Tschudy. I'm sorry. I don't know.
Senator Craig. I don't know there has been a flurry because
of what we're doing in nuclear, and the potential of uranium
and all of that, but none of them have been developed. There's
been a lot of filings out there, some might be developed in
time based on all of the proceedings, what we discussed with
the earlier panel. So that is something that obviously we would
have to clarify. There's no question about it and I'm not too
fearful of running some legal challenges when we draw our line.
That oftentimes happens with what we do here, when public
policy changes. At the same time, I don't want to see us taking
property. I think that's wrong. I have always been a defender
of private property rights, whether it is the owning of the
mining claim versus fee simple property. So I think that is
something Mr. Chairman, that obviously, we don't necessarily
needlessly need to stumble into a hassle of litigation if we
attempt to bring down a royalty on hardrock.
The Chairman. Mr. Otto, is your book available? Can I go to
Yahoo and get it?
Mr. Otto. Yes.
The Chairman. Good. How much will it cost me? Let me put it
this way, is it fine print and multiple pages?
Mr. Otto. It was written with the intent to be used by
policymakers. So, it tries to cover all the various issues
including the one you just brought up dealing with ownership.
The Chairman. OK.
Mr. Otto. If I might say a word on that.
The Chairman. Please do.
Mr. Otto. When you think about what is a royalty, countries
take two basic different approaches. Some view it as an
ownership transfer tax in which case you have all the property
issues. Others view it merely as an administrative charge, in
the same the way you would charge for a license plate on a
privately owned car. It is the right to use or the right to
mine the mineral, in which case there is no property interest
whatsoever involved. So if the concern is litigation depending
on how the legislation is written, you may be able to avoid the
property issues by not forming it as an ownership transfer type
of tax, but rather an administrative user's fee type of charge.
Senator Craig. My staff just handed the book to me. I've
got some weekend reading. All right.
That's obviously part of the debate we've got to get
involved in because I clearly understand, as most on this
committee understand and as our staff understands, there's a
world of difference in a variety of resource developments from
oil to gas to coal obviously to hardrock minerals my interests
primary have been because of the geologic character of the
State of Idaho are the mineral costs involved to get them out
to mine mouth or beyond.
At the same time, if we're going to do this and do it right
and develop a revenue stream for the right reasons, we've got
to show flexibility to the market and the variances in world
pricing and at the same time a reasonable return to the
taxpayer for the exploitation of this resource, so, well, I
thank you all very much for your time in this. Mr. Chairman, I
think that I'm glad to hear that we're going to look at some
application. I mean the moment I saw 8 percent gross, I thought
the game here is to eliminate mining. It is not to allow a
reasonable return for mining to exist and remain so in a
competitive world because it is a world market as the Senator
from Alaska has clearly shown. That remains important for all
of us. Again, thank you.
The World Bank book, this is your book and you did this for
the World Bank and the CDs?
Mr. Otto. Yes.
Mr. Chairman. All right. Thank you all very much. Thank
you, again for being here. I think it's been very useful
testimony. That will conclude our hearing.
[Whereupon, at 12:15 p.m. the hearing was adjourned.]
APPENDIXES
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Appendix I
Responses to Additional Questions
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Responses of Ryan Alexander to Questions From Senator Bingaman
Question 1. You've suggested that mining fees and royalties should
be directed toward the highest priority clean-up sites. What is your
view of the provisions included in the House-passed bill on this topic?
Answer. Taxpayers for Common Sense opposed the inclusion of an
amendment offered by Representative Heller regarding this issue. Before
final passage, the amendment was accepted altering the House-passed
version to direct 50% of the royalty revenue in the abandoned mine
clean-up fund to the state from which the royalty revenue was
generated.
We are gravely concerned that this provision, if passed into law,
will have detrimental effects on states that have many abandoned mines
sites but are producing fewer minerals today. This amendment will send
nearly 50% of all clean-up funds to the state of Nevada. While Nevada
has abandoned mines, other states like Arizona, Colorado and California
have more sites, many very close to population centers, and should be
higher priority clean-up sites. These abandoned mine sites jeopardize
public watersheds, threaten community safety and create numerous
taxpayer liabilities. For these reasons, directing 50% of the funds to
the highest producing states rather than the highest risk sites is not
in the best interest of federal taxpayers.
Question 2. Mr. Cress has suggested that mining reform legislation
should simply grandfather existing mining claims rather than set up a
process for administratively determining which current claims support a
valid ``discovery.'' How do you view this suggestion?
Answer. Taxpayers for Common Sense believes all existing claims on
federal lands should be subject to a royalty. While we are sensitive to
the industry concern about certainty and the conditions under which
their plans were made, we believe grandfathering existing mines in
perpetuity exacts too great of a cost to taxpayers. While our
preference would be for a gross royalty imposed on all mines at the
same time, we would be open to a phase-in for existing mines to allow
them to adjust their operating plans.
To address the question about Mr. Cress's suggestion directly: the
suggestion that grandfathering all existing claims presents the easiest
administrative option is inaccurate, unfair to taxpayers, and bad
policy. There is an existing and orderly process for determining
whether there is a valid claim, which is a well defined term under the
mining law; no additional administrative process need by created.
Mining cannot commence on public lands without an approved plan of
operations, and the vast majority of mining claims are never proposed
for development. Moreover, to grandfather in all claims expands the
taxpayer giveaway rather than limits it. Finally, grandfathering all
existing claims would create a perverse incentive for speculators to
rush to stake claims prior to final enactment of the law.
Question 3. Do you agree that transfer pricing may be a greater
concern given mergers and consolidation within the mining industry?
What additional safeguards may be necessary to prevent this result?
What other suggestions do you have for improving the transparency of
hardrock royalty collections, for purposes of ensuring a fair return to
U.S. taxpayers?
Answer. Taxpayers for Common Sense agrees with Professor Otto that
the trend towards consolidation, and the subsequent increase in
transactions between related parties poses challenges to using transfer
pricing as the basis for royalty calculation. To best ensure a fair
return for the taxpayers, royalty calculation for arms' length
transactions should be based on the transfer price itself; calculation
for transfers between related parties could be based on average
quarterly prices for arms-length transactions for the same mineral.
In addition, mining operators should report, on an operation by
operation basis, the quantity of locatable minerals extracted from
public lands, along with the quantity realized for sale. These figures
are already calculated by mining companies for the Securities and
Exchange Commission, but SEC reporting groups public and private
production together. The disaggregation of these figures would provide
an added safeguard against gamesmanship. Operators should also report
the acreage of public lands consumed for mining as well as for other
ancillary uses, including waste disposal and staging.
Response of Ryan Alexander to Question From Senator Cantwell
Question 1. The state of Alaska imposes a 3% net proceeds royalty
on minerals taken from lands owned by the state. According to the
Alaska Department of Natural Resources, the State of Alaska has
received $1.2 million over the last 10 years from the net proceeds
royalty. Over that time, more than $1.2 billion worth of gold was
extracted from mines operating on state lands--meaning less than 0.10%
of the value of gold mined was returned to Alaskan taxpayers. There are
over a half million abandoned hardrock mines across the west, including
thousands of mines in my state of Washington. Local communities and
Native American tribes have to bear the costs of pollution created by
these mines, but there is no dedicated federal funding source for clean
up.
Do you believe a net proceeds royalty could generate enough money
to clean up the estimated $50 billion in abandoned mine liability?
Answer. The Congressional Budget Office estimates that the 8
percent royalty included in H.R. 2262 which is an ad valorem type
royalty based upon the value of production, not the value of profits,
will generate $40 million per year in the near term, and would
gradually increase as new mines are permitted if the law is enacted in
its current form. A net proceeds royalty however would generate much
less revenue. As you mentioned, the state of Alaska imposes a 3% net-
proceeds royalty on state lands but has collected a royalty of less
than one tenth of one percent on mining operations. Although, as
Senator Murkowski mentioned in the hearing, the mining industry does
provide other revenue to state and local communities in the form of
taxes and fees, these are costs all industries incur and do not lessen
the need for a fair royalty. The case is much the same in Nevada, where
a net proceeds royalty is also collected and generates little revenue.
Overall, a net proceeds royalty would provide far too great an
opportunity for gamesmanship and manipulation leading to abuse, and
difficulties administering and overseeing its collection. Recognizing
this, the Minerals Management Service also recommended the committee
enact a gross income rather than a net proceeds royalty. Furthermore,
most countries worldwide impose a gross income or net smelter royalty
instead of the more complex net proceeds royalty.
For these reasons, it is clear a net proceeds royalty would not
create enough funds to even begin to address the current $50 billion
abandoned mine liability taxpayers face. We urge the committee to
support a gross income royalty similar to the House passed H.R. 2262.
______
Responses of Mike Dombeck to Questions From Senator Domenici
Question 1. You state in your testimony that the 1872 Mining Law
allows mining to take precedence over all other public land uses,
including hunting and fishing.
Are there not current and existing authorities for the federal
government to protect special areas and resources from mining?
Answer. First, federal land managers can withdraw federal lands
from mineral development. However, in my experience as the chief of two
agencies, this mechanism is far too cumbersome to work well. There are
too many administrative hurdles for already strapped agencies to
overcome. It is a virtually useless mechanism.
Second, under limited circumstances, the Endangered Species Act
(ESA) and the Clean Water Act can stop proposed mines. If the FWS or
NOAA Fisheries determine that a proposed mine on federal lands would
jeopardize the existence of a listed species, the agencies have the
authority to stop the proposal. Under the CWA, the EPA could deny CWA
Section 402, regulating point source discharges, and 404 permits,
regulating the deposition of dredged and fill material into waters of
the United States, if the proposed mine is required to obtain the
permits. Use of these permit denial authorities rarely happens for any
activity, let alone mine development.
The overwhelming problem is that these and all other laws protect
only against a relatively narrow range of impacts. Many other aspects
of environmental degradation from mines are not covered, such as
destruction of fish and wildlife habitat of non-listed species
(including hugely valuable recreational species such as elk, pronghorn
antelope, wild brown trout), and groundwater resource depletion or
pollution. Even the CWA has huge hole in it regarding mines because it
does not regulate nonpoint source pollution, and much of mining
pollution is nonpoint pollution.
That is why I so strongly believe, as I stated in my testimony,
that special places with important fish and wildlife and water values
such as wilderness areas, National Parks, Fish and Wildlife Refuges,
and inventoried roadless areas ought to be placed off-limits to mining
entirely, and that there should be at least one new mechanism in the
Senate Bill to allow federal land managers to deny mine proposals in
other situations where the benefits of conserving fish, wildlife and
water resources clearly outweigh the benefits of the proposed mine.
Lastly, I would observe that all other federal land resource users
face up to such a mechanism on a regular basis, including, forestry,
mining, and grazing, Mining should too.
Question 2. You state in your testimony that mining reform
legislation should prohibit the patenting or sale of public lands.
If patenting is eliminated, how would you propose providing the
security of tenure necessary to attract the large investments needed to
make domestic mining projects a reality?
Answer. I believe that a long term permitting system should be
adopted to allow for security of tenure, while giving land managers
leeway to determine the parameters of the mine on a particular piece of
land. Again, land managers already do permitting on a range of
activities, from firewood cutting to grazing to recreational use, such
as float trips on rivers on federal lands. The same kind of mechanism
could be used, while allowing for the longer term use.
Responses of Mike Dombeck to Questions From Senator Cantwell
Question 1a. As you know, our nation's public lands provide
enormous economic and conservation resources benefits that add to the
quality of life for all citizens and future generations. Many of our
public lands are still pristine and undeveloped, providing clean water,
clean air, wildlife habitat, and proximity to mountains and rivers.
Roadless areas, for example, provide clean drinking water, essential
fish and wildlife habitat and world-class recreational opportunities.
An analysis of Bureau of Land Management data by Environmental Working
Group shows that mining claims in Forest Service Roadless Areas in 12
Western states increased almost 50 percent from 9,000 claims in January
2003 to more than 13,000 as of July 2007. In Washington state, there
are over 400 mining claims in Roadless areas.
The 1872 Mining Law has long been interpreted as mandating hardrock
mining as the ``highest and best'' use of public lands. Federal land
managers have argued that the 1872 Mining Law forces them to approve
any mining project proposed on public lands regardless of competing
resources values.
What is the effect of mining on these important wilderness lands
such as Roadless areas and Wild and Scenic River systems?
Answer. National Park, Wilderness and Wild and Scenic designations
have fairly strong statutory protections against activities such as
mines, and generally I have seen few direct threats of mines proposed
directly in these areas. The law is not clear, though, on whether a
mine or a protected area would win out of if pitted against each other.
I believe the Senate bill should include a clear prohibition on mines
in these areas.
Question 1b. A greater threat from mining is to inventoried
roadless areas and from projects that are close by to, or even under,
these protected areas. Examples include the following: I know of a coal
mining operation on and under a roadless area in Utah; and a proposed
silver mine under the Cabinet Mountain wilderness in western Montana
which threatens that special place. So while the highest levels of land
protection, such as wilderness designation, have helped prevent
development of mines in those areas, real threats remain and should be
addressed in this legislation.
Under current law, what can land managers do to balance mineral
activities with other uses of public land when considering whether to
approve a mining application?
Answer. That is exactly the problem; there is no such balancing
now. The Senate bill must give federal land managers authority to
balance the benefits of fish, wildlife, and water values against mine
values, and in at least limited cases where the latter values are
superior to the former, the bill should allow the federal managers to
deny the proposal.
Question 1c. Given the significant increase in mining claims within
Roadless Areas and given that Roadless Areas were designated to be
protected areas, shouldn't we withdraw Roadless Areas from further
mining activity?
Answer. I doubt you can find a person more committed to protecting
inventoried roadless areas than me. I strongly agree.
Question 2. In a recent L.A. Times article, Death Valley National
Park Superintendent James T. Reynolds expressed concern about mining
activity on the border of the Park's boundaries. He stated: ``I hope
the public understands the destruction that will occur. Development
will have far-reaching impacts that our grandchildren will have to
address. Unfortunately, we don't have the authority to stop [the mining
activity].'' Under the current law, our land managers appear to be in a
bind. Mining pollution can--and does--travel vast distances. For
example, beneath the Bingham Canyon Mine in Utah there is a plume of
contaminated groundwater that covers 72 square miles. In 1996, the
federal government paid $65 million to buy out patented claims to a
gold mine just three miles from Yellowstone National Park. The mine
would have been located at the headwaters of three streams that flow
into Yellowstone. While land managers can challenge the validity of
claims near National Parks and Monuments, but this process is time
consuming and expensive.
Given that thousands of mining claims have recently been staked
within five miles of many National Parks and Monuments including the
Grand Canyon and Mount St. Helens, shouldn't federal officials have the
capacity to protect these treasured lands from mining impacts?
Answer. Please see my answers above to your questions. I strongly
agree.
Question 3a. While many environmental statutes like the Clean Water
Act are applicable to hardrock mining operations, a key issue for us to
consider is whether the coverage of these environmental laws is
sufficient. In September, University of California Hastings
Environmental Law Professor John D. Leshy told this committee that
these other laws do not comprehensively address the myriad of
environmental threats posed by hardrock mining, such as groundwater
depletion and pollution and disruption of wildlife habitat. Professor
Leshy testified that existing environmental statutes do not require the
government, in making decisions about whether to approve proposed
mines, to weigh the value of mining against other values and uses of
the public lands.
Why isn't the Clean Water Act sufficient to protect water resources
from mining development in Washington or elsewhere in the West?
Answer. Please note my detailed answer to Senator Domenici's
similar question above. In short, I strongly agree with Mr. Leshy's
assessment. In the CWA in particular, neither nonpoint pollution nor
groundwater pollution is regulated, which are precisely some of the
biggest threats posed by hardrock mines.
Question 3b. What environmental safeguards would sufficiently
protect water resources from mining development in Washington or
elsewhere in the West?
Answer. As I stated above, prohibiting hardrock mines in special
places, such as wilderness areas, National Parks, Fish and Wildlife
Refuges, and inventoried roadless areas would be a critically important
step. Further, as I said above, there should be at least one new
mechanism in the Senate Bill to allow federal land managers to deny
mine proposals in other situations where the benefits of conserving
fish, wildlife and water resources clearly outweigh the benefits of the
proposed mine.
Question 4. My state of Washington has experienced significant
damage from mining and is, in fact, home to some of the nation's
largest Superfund sites. When it comes to combating the damage
inflicted by mining, I understand that the Superfund program is good
for addressing high contaminant concentrations but that it still
neglects the majority of mined areas.
Can you tell us whether you believe Superfund is sufficient to
address the impacts of mining in Washington and elsewhere?
Answer. I am not an expert on Superfund policy, but my years of
experience tell me that that Superfund is most certainly not sufficient
to address the impacts of mining in Washington or elsewhere. First,
Superfund generally is designed to clean up large messes that have
already occurred, not prevent new ones from occurring. Second, only a
small fraction of old, polluted mines qualify for Superfund clean up,
so there are literally thousands of polluted abandoned mine sites in
Washington and the West which do not qualify. To be clear, Superfund is
helping clean up mining pollution on the ground, and we are thankful
for that, but it is occurring in a limited fashion.
Therefore, as I said in my testimony, a new abandoned mine
restoration funding and program, similar to the eastern coal abandoned
mine restoration program, should be a key part of the Senate bill.
Question 5. A growing number of mine sites in this country now
require water treatment in perpetuity to prevent further contamination
of important water resources. Due to the severity of water quality
impacts from acid mine drainage, many hardrock mines across the West
require water treatment in perpetuity. For example, acid drainage into
the Columbia River in Washington state from a Canadian mine will
continue for thousands of years.
Shouldn't mines be required to prevent this type of damage?
Answer. Mines absolutely should be required to use all means
available to prevent this type of costly long term damage, and if a
mine proponent cannot guarantee that it will not occur, the mine should
not be developed.
______
Responses of James F. Cress to Questions From Senator Domenici
Question 1. A gross royalty is typically portrayed as easier to
calculate and collect than a net, profits-based royalty. Both, however,
tend to require that some level of deductions be incorporated. Is the
extent to which a gross is simpler than a net overstated in some
respects?
Answer. The differences between ``gross'' and ``net'' royalties are
sometimes overstated, and there is considerable misunderstanding about
hardrock royalties when the focus is purely on whether they are
``gross'' or ``net.'' The two components to a royalty based on the
value of mineral production are the royalty rate (percentage) and the
``royalty base,'' or the value of the mineral or mineral product to
which the royalty rate is applied. The royalty base is what
differentiates a ``gross'' royalty from a ``net,'' but it is not a
choice between two alternatives. Rather, it is a continuum which can
vary from the value of the land prior to exploration on the claim to
the value of the final salable product (fabricated copper or gold, for
example), as illustrated in my handout at the hearing titled ``Gross
vs. Net: What is a Fair Royalty Burden''.*
---------------------------------------------------------------------------
* Graphic has been retained in committee files.
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As described in my testimony, coal and oil and gas often have a
readily identifiable royalty base at the point they are extracted from
the ground, so the federal royalty on those minerals is essentially the
value of the minerals on the lease in their crude state. Crude oil is
sold in local and international markets and the price of the product
that comes out of the ground is generally readily ascertainable at the
well. Gas is also often sold at the well head, in some cases without
any processing. It is simple and straightforward to calculate and pay a
royalty where the minerals have a value without processing, at the
point they are removed from the ground. The royalty base is the raw
mineral value and you just apply the royalty rate to that value.
These simple ``gross royalties'' for federal oil and gas and coal
become immediately complex, however, where processing and
transportation is required. For example, the federal royalty
regulations for gas permit the deduction of the processing costs (see
30 C.F.R. Part 206, Subpart D) and the costs of transporting gas from
the lease to the processing plant, which may be many miles away (see 30
C.F.R. Sec. Sec. 206.156, 206.157). These regulations are quite
detailed, reflecting the fact that the processed gas and the other
salable products are sold far from the lease, and the value of the
unprocessed federal minerals has to be determined by netting back to
the lease for royalty purposes by deducting the processing and
transportation costs. To complicate matters, the contractual
arrangements by which gas is processed and transported often involve
pipelines and gas processing plants owned by the same company, or an
affiliate of the company, that holds the oil and gas lease, so the
value of the gas processing and transportation may need to be
determined without an arms-length contract. Coal washing and
transportation allowances can introduce similar complexity (see 30
C.F.R. Part 206, Subpart F). Ms. Gibbs Tschudy testified that while
these deductions are the most complex part of the federal oil and gas
and coal royalty system to administer, the MMS is capable of auditing
and administering them.
The value of the minerals in place on the claim is the fairest
place to determine the royalty base, because it reflects the actual
contribution of the government to the mining operation. The government
contributes unexplored land, and does not contribute exploration
dollars, development costs, construction financing and operational
expenses, all of which must be contributed by the mining company before
any minerals are removed from the ground and eventually processed into
a salable metal or other mineral product. Unfortunately, unlike coal
and oil and gas, there is rarely a market for raw hardrock minerals at
the point they are removed from the government's land--they are
generally still trapped in rock, requiring crushing, transporting,
milling, smelting, refining and other processing to free the contained
metals and other minerals and fabricate a metal or other product that
can be sold in a market and serve as the basis to determine royalty
value. As discussed below in response to question 3, the states have
often recognized that fairness requires the use of a severance tax or
royalty base that is calculated on a net profits or net proceeds basis,
or on the gross value of the raw minerals such as unprocessed ore,
which is equivalent to the federal royalty basis for coal and oil and
gas.
Question 2. Mining companies annually submit Corporate Income Tax
forms to the Internal Revenue Service. Could the information contained
in those documents simplify the administration of a profits-based
royalty?
Most information from corporate income tax returns will not be
directly relevant, because the royalty will be calculated on the
minerals produced from only certain federal mining claims and tax
returns are based on company-wide income and cost figures. Many
companies mine from a combination of private, state and federal lands
(sometimes at the same operation), and their income tax returns will
aggregate all of the costs and expenses from the private, state and
federal lands. Mining companies in calculating the royalty, and the
government in collecting and auditing the royalty payments, will need
to allocate the costs of production and the value of the minerals
produced to only the federal mining claims that bear the royalty. This
is true regardless of whether the royalty is gross or net. This will
limit the usefulness of tax return information for federal royalty
administration.
Although income tax returns in general will not be useful to
simplify royalty administration, the depletion provisions of the
Internal Revenue Code could theoretically be used to design a net
royalty that might be calculated based primarily on existing
information from tax returns and thus simpler to administer. In
calculating depletion under Section 613 of the Code, mining companies
must calculate their ``taxable income from the property.'' See I.R.C.
Sec. 613(a); Treas. Reg. Sec. 1.613-5. Taxable income from the
property is the gross income from mining, less certain defined
allowable deductions attributable to mining processes. These tax code
provisions are similar enough to a royalty calculation that they could,
with certain modifications (such as the addition of deductions for
depletion, other royalties and severance taxes, and reclamation), be
used to calculate a fair net royalty for mining claims. The depletion
provisions of the Code are quite complex, but mining companies have
been calculating depletion for almost 100 years, and there already
exists a considerable body of administrative interpretation and case
law. One of the useful tensions in using the depletion provisions of
Section 613 as a basis for a federal royalty is that the higher the
depletion deduction claimed by the taxpayer, the higher the federal
royalty will be if it is based on the same calculation, thus minimizing
any temptation to ``game'' the royalty calculation.
In order to achieve administrative simplification, however, the
mining royalty statute would have to expressly state that the royalty
is to be calculated in the same manner as required under the Internal
Revenue Code and the Treasury Regulations, including judicial decisions
and administrative decisions and interpretations of the Internal
Revenue Service. The Department of the Interior should be expressly
prohibited in the mining royalty statute from adopting any definition
of ``taxable income'' and should have no separate authority to audit or
adjust ``taxable income.'' The royalty value should be based on the
Internal Revenue Service's regulations, and the Service should have the
exclusive authority to audit or adjust ``taxable income'' in connection
with tax enforcement, with the Department of the Interior limited to
using the Service's tax calculations in determining the federal
royalty. Any duplicative, independent interpretation by the Department
of the Interior of ``taxable income'' would destroy the administrative
efficiency of this approach.
There are a number of other issues that would need to be addressed
for a royalty based on Section 613 depletion calculations. For example,
there will need to be a separate calculation of ``taxable income''
under Section 613 for federal mining claims subject to the royalty,
excluding any federal mining claims not subject to the royalty and any
state or private mineral properties. Also, to achieve the desired
administrative simplicity and the tension between depletion and royalty
described above, the person paying the royalty will have to be the same
as the taxpayer calculating depletion. These issues might make it
difficult to write a royalty based on ``taxable income'' under Section
613.
Note that H.R. 2262 uses the ``gross income'' portion of Section
613, but ignores the deductions resulting in ``taxable income'' that
are essential for a fair royalty burden. H.R. 2262 also does not
require the Department of the Interior to use the taxpayer returns and
IRS regulations to calculate ``gross income,'' with the result that the
administrative burden on both government and industry may actually be
increased by requiring complex calcuations under two different sets of
rules. H.R. 2262's approach is thus neither administratively simple nor
fair.
Question 3. In the United States, what sort of royalty (or tax)
rates and structures have individual states imposed on mining
operations?
Do States tend to impose a gross royalty or is a net approach more
common?
Answer. Western states, in which most federal lands are located
that would be subject to a federal hardrock royalty, tend to impose two
types of burdens on hardrock mining: royalties on mineral production
from state lands and severance taxes on private, state and federal
mineral production. Both are calculated using a percentage of the value
of the mineral produced, so both can be useful as comparisons for a
federal royalty. One caveat is that state tax and royalty systems tend
to have characteristics that are designed for the specific minerals
that are produced in the state (copper and beryllium in Utah, for
example, or molybdenum in Colorado) that may not be applicable or
desirable policy for a nationwide royalty on federal lands.
The approaches of the western states to royalties and severance
taxes, including the use of net or gross, vary considerably (with more
than one approach sometimes used in the same state), but most states
include a net approach or an approach based on the gross value of ore
or mine mouth value, which is equivalent to a net. Western states
apparently do not perceive that net approaches impose undue burdens on
the state in calculating and collecting royalties and severance taxes.
No state imposes a flat royalty on gross income without any deductions,
such as the royalty under H.R. 2262. In addition to their varied
approaches to the royalty or severance tax base, the states all impose
significantly lower royalty or severance tax rates than the 8% gross
royalty proposed in H.R. 2262, even when severance taxes and state
royalty rates are added together in those states that have both. Rates
tend to be lower for gold, copper and other metals.
Significantly, almost all of the western states already impose a
severance tax on mining from federal lands. Any federal royalty will
have to be added on top of these existing burdens, making it crucial
that the royalty not be so high that the combined burden makes future
mining uneconomic.
It is important to look closely at the statutes and regulations
when characterizing the state systems, since what may appear to be a
``gross'' approach may actually be based on the ``gross value of ore,''
``gross value less processing costs,'' ``gross value at the mine
mouth'' or another royalty base that is functionally equivalent to a
net approach. ``[T]he definition of the royalty basis is critical to
understanding the rate. When comparing royalty rates in different
jurisdictions, care must be taken not to compare rates unless the
royalty base is identical.'' Otto, et al., ``Mining Royalties: A Global
Study of Their Impact on Investors, Government, and Civil Society'' p.
62 (World Bank 2006)(``World Bank Study'').
The various western state approaches to royalty and severance tax
base are discussed below in a continuum from the most ``net'' to the
most ``gross'' approaches.
net profits or net proceeds
A number of states define the royalty base or severance tax base on
a net profits or net proceeds basis. These state burdens are truly
``net,'' in the sense that the royalty base is typically determined
after deduction of all mining and processing costs and transportation.
Alaska imposes a royalty of three percent of net income on mining
from state lands. Alaska Stat. Sec. 38.05.212 (elec. 2008). Alaska
also imposes an additional mining license tax (similar to a severance
tax) that is calculated as a percentage (between three and seven
percent) of the net income from the property. (This mining license tax
was ignored in the numbers cited by Taxpayers for Common Sense, which
included only the net income royalty, resulting in an inaccurate
estimate of the actual government take on state lands, as corrected by
Senator Murkowski.) Producing mines are exempted from the tax for three
and a half years, in order to allow them first to recover their capital
costs. Alaska Stat. Tit. 43, Ch. 65. (elec. 2008).
Nevada imposes a severance tax of between 2 and 5 percent of net
proceeds. Nev. Rev. Stat. Ann. Ch. 362. (elec. 2008). ``Net proceeds''
is defined as the gross value of the mineral product, less deductions
for extraction costs, processing, refining and sale costs, costs of
transportation from the mine to the place of processing and sale,
marketing costs, maintenance and repair costs for machinery, facilities
and equipment used in mining, processing and transportation,
depreciation of such facilities and equipment, insurance costs, costs
of employee benefits, development costs, royalties, and certain
administrative overhead costs. Id. Sec. 362.120; Nev. Admin. Code Ch.
362. This tax is phased in as the percentage of net proceeds to gross
proceeds increases, with the lower rate applying to operations
generating $4 million or less in annual net proceeds.
California imposes a royalty on state lands on a lease-by-lease
basis. One basis used is a percentage of the net profits derived from
mineral extraction operations. See Cal. Pub. Resources Code Sec. 6895
(elec. 2008).
Montana taxes the net proceeds of minerals other than coal,
bentonite and metal mines (metal mines are taxed on a net smelter
returns basis as described below). Mont. Code Ann. Sec. 15-6-131(1),
(2). Id. Sec. 15-23-503. The ``net proceeds'' tax base is defined as
gross receipts received from the sale of concentrates or metals, less
allowable deductions. Deductions allowed include royalties paid, costs
of labor, machinery and supplies used in mining operations and
development, costs of improvements, repairs or replacements to the
mine, mill or reduction works, and depreciation of the mill and
reduction works, transportation from mine to mill or place of sale,
marketing costs, insurance, environmental, reclamation and mine safety
compliance costs, sampling and assaying charges, engineering and
geological service charges.
South Dakota imposes several types of severance taxes. One tax is a
10% net profits tax imposed on gold and other precious metals. S.D.
Cod. Laws Sec. 10-39-45.1 (elec. 2008).
``Net profits'' are defined as gross receipts from the sale of
precious metals, less deductions for the cost of extraction,
transportation from mine to mill, the costs of reduction, refining and
sale, marketing costs, costs of maintenance and repairs of mining,
processing and transportation machinery, equipment and facilities and
administrative facilities, interest costs, insurance costs, employee
benefits, depreciation of machinery, equipment and facilities, mine
exploration and development costs, reclamation costs, royalty payments,
state and local taxes, and general administrative expenses incurred
within the state. Id. Sec. Sec. 10-39-44, 10-39-45.2.
Arizona also had a royalty on state land of five percent of the net
value of minerals, until a 1989 state supreme court decision overturned
this method as being inconsistent with the State's enabling act. Ariz.
Rev. Stat. Sec. 27-234 (repealed); see Kadish v. Arizona State Land
Department, 155 Ariz. 484; 747 P.2d 1183 (1987). Arizona illustrates an
important point about the western state royalty systems. The federal
government generally granted lands to the states under federal enabling
(statehood) acts, which granted the lands in trust for the benefit of
public schools and other specified purposes. The limitations of these
state enabling acts are generally incorporated in the state
constitutions of the western states, and may impose limits on the type
of royalty imposed and minimum requirements for the income that must be
generated and collected by the state from these state trust lands for
the public school or other beneficiaries of the trust. The federal
government is not subject to these trust responsibilities on federal
lands, and Congress is free (within the limits of the Constitution) to
impose a net royalty, or no royalty at all, on federal lands.
gross value of ore or mine mouth value
A number of western states have imposed royalties or severance
taxes that are based on the gross value of the unprocessed ore or mine
mouth value. This is the functional equivalent of a net proceeds or net
profits approach, with deductions for all processing and transportation
costs and, in some states, mining costs.
Colorado's severance tax is 2.25% of the gross value of the ore,
excluding any value added subsequent to mining, and subject to an
exclusion for the first $19 million in income and credits for property
taxes and any state land royalties. Colo. Rev. Stat. Sec. Sec. 39-29-
102 to -104 (elec. 2008). Colorado state land royalties are determined
on a case by case basis, see Colo. Rev. Stat. Sec. 36-1-113 (elec.
2008), but gross value of ore has been used for some minerals, and net
smelter returns for others. See ``Royalties in the Western States and
in Major Mineral-Producing Countries,'' GAO/RCED-93-109, p.28 (GAO
1993) (``1993 GAO Report'').
Idaho imposes a license tax (equivalent to a severance tax) of 1%
of the gross value of ore, after deducting all costs of mining and
processing the ore. Idaho Code Sec. Sec. 47-1201, 47-1202 (elec.
2008). Idaho, like Colorado, imposes state land royalties on a case by
case basis in each lease, see Idaho Code Sec. 47-710 (elec. 2008), and
has in the past also used a royalty of between 2.5% (for certain
metals) to 10% (for certain non-metallic minerals) of the value of the
unprocessed ore. See 1993 GAO Report, p.30.
Utah has imposed a royalty on minerals extracted from state lands
of a specified percentage of the value of the minerals, including a
royalty of 4% of the gross value of the ore sold for metals other than
uranium. See 1993 GAO Report, p.43.
South Dakota imposes a royalty on leases of state lands of not less
than 2% of the gross returns from the sale of ores and mineral products
derived therefrom, less smelting and reduction charges and
transportation and any other ``customary and appropriate charges''
determined by the state land commissioner. S.D. Cod. Laws Sec. 5-7-55
(elec. 2008). If the ore is sold, this constitutes a royalty on the
``gross value of ore'' without a deduction for mining costs.
Wyoming's severance tax is based on the fair market value of the
minerals at the mouth of the mine, after extraction. Wyo. Stat. Sec.
39-14-703 (elec. 2008). This royalty base is also equivalent to the
value of ore, like the states above, but without a deduction for mining
costs.
Montana imposes a royalty on state lands of at least 5% of the
market value of the minerals recovered. Mont. Code Ann. Sec. 77-3-116
(elec. 2008). Montana has in the past defined this royalty as a
percentage of the value of the raw minerals recovered from the claim,
See 1993 GAO Report, p.32, which is similar to the ``gross value of
ore'' used in the states described above.
Oregon imposes a royalty of 5% on most metallic minerals removed
from leases of state lands. Or. Admin. R. Sec. Sec. 141-071-0410, -
0610 (elec. 2008). The royalty base is calculated on the gross value of
minerals at the mine mouth. Id. Sec. 141-071-0620; See 1993 GAO
Report, p.41.
net smelter return and similar approaches
Several states employ net smelter return or similar methodologies
in their royalties or severance taxes. Net smelter return approaches
are more common in state land royalties, which may be in part because
of the trust requirements imposed by state enabling statutes on state
lands, as discussed above.
Montana imposes a license tax (similar to a severance tax) on metal
mines of 1.6% of the net smelter returns for precious and base metals.
The tax is 1.8% on mineral concentrates prior to shipment to the
smelter. Mont. Code Ann. Sec. Sec. 15-23-801, 15-37-102, 15-37-103
(elec. 2008). The tax base is the receipts received from the sale of
concentrates or metals, less allowable deductions. Deductions allowable
in calculating the tax include treatment and refinery charges, costs of
transportation from the mine or mill to the smelter, roaster or other
processing facility, quantity, price, impurity and penalty charges, and
interest. Id. Sec. 15-23-801(5). Treatment and refinery charges
include labor cost, utility and fuel costs, costs of maintenance,
repairs and supplies, materials, depreciation, rental of equipment,
pollution control costs, costs of training, freight, engineering,
insurance and licensing attributable to smelting and refining,
administrative services and all third party treatment and processing
costs. Id. Sec. 15-23-801(2).
New Mexico imposes a royalty on state lands of not less than 2% of
the gross returns from the smelter or other processing facility, less
the costs of smelting or reduction and transportation. N.M. Stat. Ann.
Sec. 19-8-22 (elec. 2008). This is functionally a net smelter returns
royalty. The royalty percentage is not less than 5% for uranium and
certain other minerals.
South Dakota imposes a royalty on leases of state lands of not less
than 2% of the gross returns from the sale of ores and mineral products
derived therefrom, less smelting and reduction charges and
transportation, and any other ``customary and appropriate charges''
determined by the state land commissioner. S.D. Cod. Laws Sec. 5-7-55
(elec. 2008). If concentrates or metals are sold and no other
deductions are allowed by the commissioner, this is equivalent to a net
smelter return.
As an alternative to the net profits royalty base described above,
California may impose on a case-by-case basis a royalty on state lands
based on 10% of the gross value of the mineral production less
processing and transportation charges, which is similar to a net
smelter return calculation. See Cal. Pub. Resources Code Sec. 6895
(elec. 2008).
gross with flat cost deduction
Two states use a ``gross with flat cost deduction'' severance tax
system. This approach attempts to approximate the economic burden of a
net profits or net proceeds tax, while minimizing the administrative
burden by eliminating the need to audit mine-specific cost deductions,
by allowing a flat deduction of a percentage of gross proceeds to
approximate the deduction of mining and processing costs. These states
apply different tax rates to different minerals, and permit different
flat cost deductions for different types of mineral products. This is
not a ``net'' approach, however, because the flat cost deduction treats
all mining operations the same regardless of their actual costs; this
system is effectively a small gross burden that varies for different
minerals. The administrative simplicity of the flat deduction has been
somewhat offset by the need to amend the statute more frequently to
ensure that the size of the flat cost deduction reflects actual costs
to the extent possible, and to address concerns of particular mineral
producers with higher processing costs, such as beryllium miners in
Utah.
New Mexico imposes a severance tax of between 1/8 and 1/2 of 1%
(depending on the metal or mineral) of the ``taxable value'' Taxable
value is the value of a specific mineral product (concentrates for
molybdenum, copper, lead and zinc, concentrate or dore for gold) less
50% to 66-2/3% of that value to approximate the costs of mining and
processing. The tax rate and cost deductions differ for various
minerals.
Utah's severance tax is 2.6% of the ``taxable value,'' which is
determined based on the product sold. If the mineral product sold is
ore, the taxable value is 80% of the gross proceeds, with the 20% of
the value excluded approximating a deduction for mining and
transportation costs. If the product sold is metal (other than
beryllium), the taxable value is 30% of the gross proceeds, with the
remaining 70% of gross proceeds approximating a deduction for mining,
processing and transportation costs. Beryllium formerly had a taxable
value of 20% of the gross proceeds, with an 80% deduction for costs,
but taxable value is now equal to 125% of the mining costs. For
intermediate mineral products such as copper concentrate, the taxable
value is based on the amount of contained metal in the product if the
intermediate product is further processed rather than being sold at the
point of taxation.
gross receipts from first marketable product
Washington imposes a royalty on minerals extracted from state lands
of 5% of the gross receipts. ``Gross receipts'' are based on the value
of the first marketable product, subject to the deduction of
transportation costs. Wash. Admin. Code Sec. Sec. 332-16-035, 332-16-
155. This royalty appears to be either a gross or net burden depending
on the mineral product sold, whether ore, concentrates or finished
metals. Washington has no severance tax, which may help offset the
impact of this potentially more gross royalty calculation.
unit-based severance taxes on specific minerals
Several states impose an additional, unit based severance tax on
particular minerals. A unit-based tax is not based on a percentage of
the value of the mineral, such as the net and gross ad valorum
approaches described above, but is a flat dollar amount per unit of
mineral produced. These taxes tend to be aimed at large producers or
particular minerals in these states, presumably because the states have
determined they are able to bear a higher tax burden. Unit-based
royalties are not a good basis for designing a federal royalty, which
must apply to many commodities and many types of mining operations.
Colorado imposes an additional severance tax of five cents per ton
of molybdenum ore for all tons over 625,000 produced in a calendar
quarter. The quantity limitation limits the tax primarily to two of the
largest molybdenum mines in the world that have operated in Colorado
for decades.
South Dakota imposes a severance tax on gold of $4 per ounce, plus
an additional $1 to $4 dollars per ounce depending on the gold price.
Id. Sec. 10-39-43.
Question 4. Can you discuss the importance of allowing discretion
for some form of royalty relief for mining operations?
Under what circumstances might royalty relief be appropriate, and
what are the costs and benefits associated with a decision to provide
relief?
Answer. The Mineral Leasing Act of 1920 permits the Secretary of
the Interior to reduce royalties for oil and gas, coal, potassium and
other leasable minerals ``whenever in his judgment it is necessary to
do so in order to promote development, or whenever in his judgment the
leases cannot be successfully operated under the terms provided
therein''. 30 U.S.C. Sec. 209 (elec. 2008). Discretionary royalty
relief has provided significant flexibility to the United States to
maximize the economic recovery of mineral deposits and to assist
mineral industries with difficult operating or economic challenges.
Royalty reductions have aided the development of underground coal in
Colorado and strategic potash deposits in New Mexico and Utah and have
maximized production from marginal ``stripper'' oil wells and heavy oil
recovery throughout the west.
Discretionary royalty relief would be just as important in the
imposition of a hardrock royalty system. The proposed federal hardrock
royalty will apply to dozens of minerals that are produced by many
different mining and processing methods. The desire for administrative
simplicity will probably result in a single royalty rate and
calculation applying to many different minerals and types of
operations, something that has never been attempted in federal royalty
laws. A discretionary royalty relief provision will enable the
Department of the Interior to address some of the inequities between
commodities and operations that may be created by this ``one size fits
all'' approach.
A discretionary royalty relief provision should at a minimum permit
royalty reductions under the same circumstances as are currently
provided by the Bureau of Land Management for royalties on other solid
minerals. Those five categories are: (1) for expanded recovery, where
adverse geological or engineering conditions exist, or where the
federal resources are likely to be bypassed because recovery is higher
in cost due to the royalty than nearby non-federal resources; (2) for
extension of mine life, to encourage the greatest ultimate recovery of
mineral resources; (3) a financial test for unsuccessful operations,
where operating costs exceed the value of production; (4) a financial
test in combination with expanded recovery or extension of mine life,
where financial information supports an even lower rate than would
otherwise be allowed for either expanded recovery or extension of mine
life alone; and (5) geographic area royalty rate differentials, where
the federal royalty is higher than surrounding state or private
royalties and could cause the federal resources to be bypassed or
remain undeveloped. See 55 Fed. Reg. 6841, 6844 (Feb. 27, 1990)(
amendment of Solid Mineral Royalty Reduction Guidelines); ``New Royalty
Rate Reduction Guidelines for All Federal Solid Leasable Minerals,''
BLM Instruction Memorandum No. 87-552 (June 26, 1987)(notice published
at 52 Fed. Reg. 24347 (June 30, 1987)).
There are other examples of royalty relief based on royalty
reduction statutes applicable to oil and gas. Royalty relief for
marginal production could be provided similar to the ``marginal
property production incentive program'' established under Section 343
of the Energy Policy Act of 2005, 42 USC Sec. 15903 (elec. 2008), with
automatic thresholds that would apply until the Department of the
Interior adopted rules after study. Discretionary royalty relief could
also be provided to encourage the mining of new deposits near existing
operations, similar to the royalty relief under the Outer Continental
Shelf Deep Water Royalty Relief Act. 43 U.S.C. Sec. 1337; 30 C.F.R.
Parts 203 & 260 (elec. 2008).
The benefits of providing royalty relief include maximizing federal
mineral production from existing operations, consistent with the
principles of sustainable development, and encouraging new production
that might not otherwise be developed. Royalty reductions can also
assist a mineral sector affected by unfair foreign competition or
temporary market forces from going out of business, thus preserving
high-paying American jobs.
For example, underground coal mines in Colorado have been developed
with royalty reductions. Colorado coal has a high BTU or heating value
compared to Wyoming surface-mined coal, and is a low sulfur fuel that
meets Clean Air Act requirements. The royalty reductions have helped to
offset the difficult geological and engineering challenges that these
mines encounter, mining up to 2,000 feet or more below the surface
under difficult roof control conditions.
Similarly, federal royalty reductions have assisted the development
and continued operation of strategically important potash deposits in
southeastern New Mexico. The U.S. imports about 80% of its potash
requirements, essential for fertilizer and certain industrial
applications requiring potassium. Approximately 75% of U.S. domestic
production is in southeastern New Mexico, mostly on federal lands,
where production commenced in the 1920s. Since 1964, royalty reductions
have been used periodically to permit the New Mexico producers with
older, more mature operations, to compete with Canadian and Russian
producers, who have much higher potash grades and larger deposits. In
times of higher prices, these operators have paid higher royalties.
Some of the potash royalty reductions used have been sliding scale
royalties based on the grade of the potash ore being mined, an
innovative approach that permits operations to continue to process
lower grades by automatically adjusting the royalty downward when lower
grades are encountered in the variable-grade ore, and automatically
increasing the royalty when higher grades are encountered.
The cost to a royalty reduction can be measured by the foregone
royalties, but that must be offset by the royalty value of additional
mineral production from extended mine life or new deposits, and the
federal, state and local taxes paid by operations that remain in
business or are able to expand production (and their employees).
There really is little downside to including a discretionary
royalty relief provision in a hardrock royalty. There will be some
administrative burden for the Bureau of Land Management to consider
royalty reduction applications, but it has been doing so successfully
for years for coal, potash, and other solid minerals. The cost of not
including a royalty reduction provision is potentially great. Without
this statutory authority, the Department of the Interior will probably
have no implied authority to reduce royalties for individual operations
or industry segments, regardless of the policy reasons that may from
time to time favor a reduction.
Question 5. What might be the exploration and development
implications of having claim maintenance fees vary dependent upon
whether or not there is an approved and operational Plan of Operations?
For instance, the amount could be set lower for active and higher
for inactive claims, or vice-versa.
Answer. Claim maintenance fees should not be made so high as to
discourage exploration and development. Since they are paid whether or
not a claim contains an operating mine, they constitute a fixed cost.
Generally, claim fees that are lower in the initial years of
exploration and increase over time may provide an incentive to either
explore claims or relinquish them. Imposing a higher fee on claims that
are not included in an application for a plan of operations for
exploration or development within a certain number of years would also
provide an incentive to explore and develop the claims.
Question 6. Mill-site claims have proven to be a contentious issue
in the past. Does the concept of a requirement for payment of a fair
market rental on lands required for ancillary use activities make
sense?
Answer. A reasonable payment for use of lands included in a mining
plan of operations would be acceptable if the payment was in return for
the use of the lands for the purposes approved in the plan of
operations. The controversies over mill sites and the use of federal
surface within a plan of operations boundary engendered by certain
solicitors opinions of the Department of the Interior have been
detrimental to mineral exploration and development in the United
States. A statutory solution that results in a fair payment and also
eliminates these uncertainties would be very helpful.
The payment should not be based on ``fair market value,'' however.
Congress should provide for a fixed payment, to avoid the
administrative complexity of having the Department of the Interior
determine ``fair market value.'' For example, ``fair market value''
determinations for federal land exchanges have made exchanges very time
consuming. The payment should be in lieu of any other payment under the
Federal Land Policy and Management Act or other statutes such as
federal cost recovery laws.
Question 7. Considering the large number of participants in the
development of a mine (including the operator, owner, co-owners,
royalty owners and others), who should be liable for payment of a
federal royalty?
Answer. Because the royalty is a property interest carved out of an
unpatented mining claim, the owner or co-owners of the mining claim
should be liable for the royalty. The royalty will need to be
calculated and paid by the operator, however. An owner or co-owner of
the claim is sometimes, but not always, also the mine operator. If the
operator is not the owner, the owner or co-owners will need to make
arrangements for the operator to pay the royalty on the owner's behalf,
since the operator will have access to the mineral production and sales
information, and the cost information necessary to calculate the
royalty. This can be done by voluntary contractual arrangements between
the owners and operators, and the government need not legislate a
liability scheme for owners and operators.
Care should be taken not to introduce onerous and unfair burdens on
royalty owners and others, such as the joint and several liability
imposed by Subsections 102(b)(2) and 102(h) of H.R. 2262 on owners that
assign their claims to others, and joint and several liability for the
``negligent'' loss of minerals by any other owner or co-owner. Such
provisions have no parallel in existing royalty enforcement in the
United States, and will be unworkable and spawn considerable
litigation.
Question 8. To what extent does the imposition of a royalty on
operational mines constitute an assertion of a property interest?
Answer. A mining claim supported by a discovery of a ``valuable
mineral deposit'' is a vested interest in real property under long-
standing Supreme Court precedent. See Ickes v. Virginia-Colorado
Development Corp., 295 U.S. 639, 79 L. Ed. 1627, 55 S. Ct. 888 (1935) ;
Wilbur v. United States ex rel. Krushnic, 280 U.S. 306, 74 L. Ed. 445,
50 S. Ct. 103 (1930) ; Clipper Mining Co. v. Eli Mining & Land Co., 194
U.S. 220, 48 L. Ed. 944, 24 S. Ct. 632 (1904) ; St. Louis Mining &
Milling Co. v. Montana Mining Co., 171 U.S. 650, 43 L. Ed. 320, 19 S.
Ct. 61 (1898) ; Belk v. Meagher, 104 U.S. (14 Otto.) 279 (1881). A
mining claim does not have to be part of an operational mine in order
to constitute a property interest, since the concept of ``discovery''
under the mining law has been interpreted for over a century to extend
to claims that are being explored or developed and for which ``a person
of ordinary prudence would be justified in the further expenditure of
his labor and means, with a reasonable prospect of success, in
developing a valuable mine. . . .'' Castle v. Womble, 19 Pub. Lands
Dec. 455, 457 (1894); see generally 2 American Law of Mining 2d Ch. 35
(Rocky Mtn Min. L. Fdn. elec. 2007).
A royalty interest is generally understood to be a property
interest, and royalties not limited in term have generally been treated
as real property interests, rather than personal property. See 3
American Law of Mining 2d Sec. 85.02 (Rocky Mtn Min. L. Fdn. elec.
2007)(Royalty as property). As a result, Congress risks takings claims
by seeking to impose a royalty on existing mines, since the royalty
takes a portion of the property interest and, at high levels such as
those proposed in H.R. 2262, could put some operations out of business.
The recent case of United States v. Locke, 471 U.S. 84 (1985),
cited by Professor Leshy in response to a similar question by Senator
Bingaman, did not overturn more than 100 years of precedent stating
that a mining claim supported by a discovery is a property interest.
The Locke case involved the imposition of a statutory filing
requirement for mining claims which provided that the failure to file
the claims within three years after enactment of the law would
constitute an abandonment of the claim. The law did not require payment
of a royalty or fee or otherwise impose a regulatory burden on mining
claimants so severe that it was found to be a taking. Certainly there
is no assurance that the Supreme Court would condone under Locke the
taking of a portion of the minerals mined from an unpatented mining
claim, which is the essence of the property right. Ms. Gibbs Tschudy
testified that the Justice Department is concerned enough about the
potential for takings claims that it has recommended that any royalty
apply only to claims located after the date of enactment.
Question 9. We must account for how a royalty will impact the
United States as a global competitor for hard rock mining investment
dollars.
Internationally, what is a typical `government take' from hard rock
mining operations? How does that compare to existing taxes, fees and
other costs of doing business here in the United States?
Answer. There is probably no typical ``government take'' from
hardrock mining, as government taxation and resource policies range
from encouraging of mineral development to ruinous depending on the
policy needs and objectives of the country. However, the Committee is
absolutely correct to focus not only on the royalty rate and the
``net'' or ``gross'' royalty base, but on the entire tax and royalty
burden applicable to mining. Mining companies take the same holistic
view of the cost of doing business when they are deciding where to
invest their exploration and mine development capital.
Professor Otto and others have conducted two studies comparing
government take in various countries, which included Arizona and Nevada
(two of the highest mineral producing western states). The most recent
study was published in 2000. Otto, Batarseh & Cordes, ``Global Mining
Taxation Comparative Study (Second Edition)'' (Institute for Global
Resources Policy & Management Mar. 2000) (``Global Mining Taxation'').
The study evaluated all of the direct and indirect taxes on mining
(including royalties) in 24 countries, including a range of developed
and developing countries. The authors then modeled the impact of
``government take'' in these countries on two hypothetical mineral
deposits, a gold mine and a copper mine, to evaluate and compare the
burden imposed by these tax and royalty regimes.
Professor Otto testified before this Committee that his studies
have shown that many mineral producing countries impose a total
effective tax rate (government take) in the range of 40 to 50%. It is
extremely significant that, at least as of 2000, the effective tax rate
for Nevada in his study was 49.3% for a medium-profitable gold mine,
before the imposition of any federal royalty. See Global Mining
Taxation, Section 4.5, pp. 95-96 and Table 27. With a 10% drop in the
gold price, Nevada's effective tax rate jumped to a confiscatory 63%.
Id. p. 101 and Table 28. Similarly, the effective tax rate for the
hypothetical copper mine in Arizona was 49.9%, before the imposition of
any federal royalty. Id. Section 4.5, pp. 95-96 and Table 27. These
studies suggest that even a small federal royalty could take the United
States out of the 40-50% effective tax rate range typical for
successful mineral producing countries, making the U.S. less
competitive for mining investment.
In the absence of an updated study of current ``government take''
in each of the western states compared to other countries, caution
would dictate that a net profits or net proceeds royalty be considered
that is more sensitive to profitability and commodity price swings. As
described by Professor Otto, this has been a trend in countries with
diverse economies and effective tax systems that incorporate income-and
profit-based taxes towards the use of such royalties:
[S]ome nations with competent tax administration structures
have been moving toward profit-or income-based mining tax
systems. Almost all Canadian provinces have replaced
traditional forms of royalty with mining taxes based on
adjusted income. Likewise, Nevada, in the United States, and
the Northern Territory in Australia use profit-or income-based
royalty systems. These jurisdictions enjoy a relatively high
level of mineral sector investment and also benefit from
significant mineral sector fiscal revenues.
World Bank Study, p. 37. These jurisdictions are probably better
models for the United States in fashioning a hardrock mineral royalty
than developing countries, which may lack the government capacity to
administer a net royalty and therefore often use a net smelter or other
form of gross royalty.
Question 10. What impact does the size of a given `government take'
have on reserves, mine life, and the amounts of saleable minerals that
are ultimately produced from mines?
Answer. As discussed in connection with question 4 on royalty
relief, a larger government take can result in premature mine closures.
A lower government take may result in not only greater recovery from
existing deposits, but more discovery of new mines due to the increased
exploration activity that is generated by a lower government take.
______
Responses of James M. Otto to Questions From Senator Bingaman
Note: in my answers below, in some cases I cite a country example. This
refers to the royalty law for the named country as contained in the
diskette found in the rear sleeve of my book J. Otto et al, ``Mining
Royalties,'' World Bank, 2006.
Question 1. In addition to the ``gross proceeds'' and ``net
profit'' royalties described in hearing testimony, some jurisdictions
have also implemented hybrid royalties--which incorporate
characteristics of both models. Could you describe an example, and the
pros and cons of instituting a hybrid royalty for hardrock minerals?
Answer. Most nations do not use a hybrid approach, but several do.
The policy reason for a hybrid is simple: collect at least a minimum
amount of tax (usually based on a gross proceeds basis) and a higher
amount if the mine is very profitable or if prices are high. Three
examples are:
1) a graduated royalty where the royalty rate applied to
gross proceeds goes up or down according to the price of the
commodity (premise: as the price of the commodity goes up, a
mine will be able to pay more than when the price is low).
Example: Bolivia.
2) a graduated royalty where the royalty rate applied to
gross proceeds goes up or down based on a simple ratio of the
value of the minerals extracted to working profits (premise:
mines with higher profits can pay higher royalty) Example:
Ghana
3) where the taxpayer pays the higher of a gross proceeds
royalty or a net profits tax (guarantees some revenue to the
treasury even if no profits are made) Example: Dominican
Republic.
Pro: all 3 types capture additional revenue when prices are high
and at least some revenues are received even when prices are low
Con: 1 above, this is basically a gross proceeds royalty but the
taxpayer or tax administrator needs to look up the rate in each tax
period based on the commodity price during that period.
Con: 2 above, this is basically a gross proceeds royalty but the
taxpayer must calculate a measure of market value to a measure of
profits as defined in the law, during the tax period and then do a
table look up to determine the rate. This means that the company may
practice tax minimization strategies to increase working profit so as
to achieve a lower royalty rate.
Con 3 above, this is more work for the company with no real
downside for government.
Question 2. Your testimony suggests that a net profit-based royalty
might be more susceptible to ``tax minimization strategies'' than a
gross income-based model. Are there specific examples of these
strategies that you can offer? Are there any of which we should be
particularly mindful at the outset?
Answer. The complete toolkit of tax minimization strategies that
can be used to minimize income tax can be used to manipulate profit-
based royalty as well. For example, timing new investment costs so as
to reduce royalty when prices are high.
Question 3. Your testimony describes ``transfer pricing'' as a
growing concern in the area of hardrock royalties--particularly given
the consolidation that has occurred within the mining industry. Please
elaborate on this concern, and perhaps detail some of the measures that
can be taken to avoid this result.
Answer. I have seen a dramatic increase in transfer pricing over
the past decade, in some cases resulting in very substantial losses to
the treasuries of the governments concerned. If there is a profit based
royalty, there are two edges to the transfer pricing sword--inflated
prices being paid to affiliates who provide finance, goods and services
to the mine, and sales of the mineral--a price is paid by the buyer
that is lower than the market price. There are a number of protections
that I build into mining laws and agreements that I draft ranging
beyond simple arms length price requirements, for example the need to
report any transactions to an affiliate (where there is 5% equity
cross-holding or other criteria).
Responses of James M. Otto to Questions From Senator Domenici
Question 1. Mining companies annually submit Corporate Income Tax
forms to the Internal Revenue Service. Could the information contained
in those documents simplify the administration of a profits-based
royalty?
Answer. Probably not. Income tax is based on all income earned by a
corporation not just income earned from mineral sales. Royalty is
almost always based on a measure linked in some way to mineral sales.
For this reason, jurisdictions that impose a profits-based royalty
specially define how to calculate profits and exclude or limit certain
types of income and costs. Example: see Canadian provincial royalty
legislation.
Question 2. We must account for how a royalty will impact the
United States as a global competitor for hard rock mining investment
dollars.
Internationally, what is a typical `government take' from hard rock
mining operations? How does that compare to existing taxes, fees and
other costs of doing business here in the United States?
Answer. A typical government take is an effective tax rate of
between 40 and 60% percent. The effective tax rate (ETR) is simply the
amount of all taxes and fees paid to government divided by the before
tax profit. In almost all nations where I have assisted in the design
of the mining fiscal system, I have estimated the ETR for several model
mines based on that nation's fiscal system. This allows policy makers
to see how the fiscal system (and proposed changes to the system)
compares to those in other nations and how it would affect the mine's
economics. Such studies typically cost from USD15,000 to 45,000. The
last ``public'' study I completed was in 2000, and describes the fiscal
systems and calculates ETR for two model mines in over 20 jurisdictions
including 2 US states. On January 29, 2008 a team from the GAO visited
my office at the request of your Committee and received a copy of that
study. The studies I do for governments are usually much more detailed
than the global study, for example, showing the ETR for a wide range of
prices.
Question 3. What impact does the size of a given `government take'
have on reserves, mine life, and the amounts of saleable minerals that
are ultimately produced from mines?
Answer. This is a complex issue which is covered in detail in my
book ``Mining Royalties.'' The simple answer is that if a gross
proceeds tax is kept low, there will be little impact on most mines but
if it is high, it will affect mine design and may result in lower
reserves and a shortened mine life.
Question 4. You speak of the importance of taxes in making royalty
policy, but single out a single feature of the entire tax code (the
depletion allowance) as a justification for higher federal royalties.
Can you explain how the depletion allowance works and why you chose to
exclude other state & federal fees, taxes, and other costs in your
testimony?
Answer. All taxes and fees are important as are tax incentives. In
my studies for governments undertaking mining sector fiscal reform I
always use a holistic approach where every tax and fee and incentive is
evaluated so that interactions and cumulative effect can be understood
by policymakers. Most counties have a very similar toolkit of taxes,
fees and incentives. The US stands apart from almost all other nations
in that it provides a depletion allowance. In most nations minerals
belong to the state and one rationale for a royalty is that some sum
must be paid to the state as its nonrenewable mineral is mined
(depleted). Most nations have rejected the concept that a company
should receive a tax incentive to deplete the nation's resources--such
an allowance is viewed by many economists as a form of ``negative
royalty.'' There are however positive aspects to a depletion allowance,
for example, the policy premise is similar to depreciation. As the
resource is used up, it will need to be replaced through exploration
and the deletion allowance can be used for this purpose. Most taxes and
fees levied on the mining industry are similar to those in other
nations and I singled out depletion allowance because of its
``negative'' royalty connotations. Obviously, a five minute
presentation can only cover a few issues. My ``standard'' mining
taxation presentation for senior government officials is about 90
minutes long.
Question 5. Considering the large number of participants in the
development of a mine (including the operator, owner, co-owners,
royalty owners and others), who should be liable for payment of a
federal royalty?
Answer. The taxpayer holding title to the mined property or if
there is no title, then the holder of the right granted by government
to mine the property.
Question 6. To what extent does the imposition of a royalty on
operational mines constitute an assertion of a property interest?
Answer. I am not an expert in US property rights. However, this
same issue comes up in other nations. In my view, the property rights
issue can probably be avoided depending on the language used in the
statute. There are several ways that nations approach the concept of a
royalty tax. One view is that it is a form of ownership transfer tax
where the miner is paying the government for the transfer of the
mineral from public to private ownership. If this approach is taken,
there is perhaps grounds for a ``takings'' based legal action for mines
where the mineral has already passed hands before the enactment of the
new law. However, some nations structure their tax as a usage tax and
what is taxed is not the transfer of mineral ownership but instead the
right to undertake the activity (to mine). Take for example, a driver's
licence. The tax does not involve the automobile, it is levied on the
grant of permission to drive.
Question 7. Can you discuss the importance of allowing discretion
for some form of royalty relief for mining operations?
Under what circumstances might royalty relief be appropriate, and
what are the costs and benefits associated with a decision to provide
relief?
Answer. The mineral sector is cyclical and price changes are
greater than in most other industries. Most mines will from time to
time run at a loss. While some fiscal mechanisms help smooth revenue
flows, such as income tax loss carry-forward, costs that must be paid
regardless of profitability, such as some forms of royalty, can
aggravate a mine's economic situation in a downturn possibly resulting
in closure. Some nations, but not most, thus allow a mine to apply for
either relief from royalty or for royalty payments to be deferred until
a future date. When is exemption or deferral warranted? In some nations
the decision is left entirely to the discretion of a government
official. In my opinion, if relief power is given to an official, then
I suggest that the discretion be bounded. For instance, such
discretionary power should not allow individual mines to be exempted on
a case by case basis, but where a class of mines is under duress,
perhaps allow that class of mines to be exempted but only for up to a
defined time period that cannot be extended (perhaps 3 years). The
benefits to be gained are that more mines remain open. If closed, there
is a negative impact throughout the local economy, costs can be imposed
on local government, local government will receive lower taxes such as
property tax, and the state and federal government will probably have
lower fiscal revenues over the long run (once closed many mines do not
reopen). Examples are provided in my book ``Mining Royalties.''
Response of James M. Otto to Question From Senator Cantwell
Question 1a. In your testimony, you stated that most nations impose
some form of royalty on minerals when the nation is the owner of the
mineral. There are very few exceptions and over the past few years some
countries that previously had no royalty now either have one or are
planning to introduce one. In addition, mining companies in the United
States receive a multi-million dollar double subsidy in the form of the
percentage depletion allowance. The percentage depletion allowance
allows mining companies to take tax deductions on mineral deposits they
received from public lands for free and costs the taxpayer an estimated
$100 million a year.
Shouldn't mining companies be required to pay a royalty similar to
what other extractive industries pay in this country, generally 8%--16%
of the gross value of the mineral?
Answer. When one considers appropriate rates for royalty there are
several considerations to take into account and I will mention three.
One is whether or not the mineral being produced is subject to
competition from foreign-sourced minerals. Low-valued bulk commodities
like sand, gravel, aggregates, coal and iron ore have very substantial
transportation costs and thus foreign mined minerals are at a large
cost disadvantage. Royalties on these bulk commodities can be
relatively high and still allow domestic producers a cost advantage
over foreign minerals. In many nations, the royalties on ``bulk''
minerals are high relative to those on hard-rock minerals. Secondly,
miners have many jurisdictions to choose from when deciding where to
invest. Most nations tax hard-rock minerals at around a rate of 2 to 5
percent. Rates above 5% are extremely rare. Companies will look outside
the US for new investment opportunities. Thirdly, if too high a royalty
is assessed, there will be fewer companies willing to explore and
discover new tax paying mines. Companies undertake economic feasibility
studies to determine whether their minimum rate of return criterion is
satisfied. A gross proceeds tax of 8 to 16% (a fixed cost) would result
in many potential mines not being built. If an objective of government
is to maximize fiscal revenue from the industry over the long run, too
high a royalty rate may result in lower revenues (see below).*
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* Graph has been retained in committee files.
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Question 1b. Mining companies are already required to report the
value of minerals mined to the IRS to calculate taxes. Why should
reporting to the Interior Department to calculate a royalty be
different?
Answer. I am not familiar with the income tax reporting
requirements for minerals and cannot comment directly on this question.
However, almost all nations require separate reporting, and
standardized forms can be used. What is important is that whatever
agency is responsible for royalty oversight must be familiar with the
mining industry and minerals value. At the present time, the Minerals
Management Service is best equipped for this function.
______
Responses of Alan Bernholtz to Questions From Senator Domenici
Question 1. In discussing Mount Emmons, you have shared your
opinion that existing environmental protections are insufficient. The
National Academies of Science disagree with that assertion.
Since the Lucky Jack property was patented and is now privately
held, is there something other than altering the environmental
regulations associated with hard rock mineral activities that you would
like this Committee to do, in the context of mining law reform, that
would not likely result in a Federal taking for which we would have to
compensate the owner?
Answer. As an initial matter, to be clear, although the ore body
for the Lucky Jack Project is now on patented private land, the
remainder of the proposed project would be located largely on
unpatented mining or millsite claims on lands owned by the federal
government and managed by the U.S. Forest Service. Attached hereto is
the map** that we submitted along with our written testimony on January
17, 2008, reflecting the project proponents' (U.S. Energy/Kobex) mining
or millsite claims filings highlighted in red. Again, we obtained the
red highlighted portion of the map from U.S. Energy/Kobex's website on
that date. The federal courts have uniformly held that government
regulation of mining on federal lands is not a ``taking.''
---------------------------------------------------------------------------
** Map has been retained in committee files.
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Regarding the scope of existing federal regulation of mining on
public lands, the Forest Service's current position is that the agency
cannot deny or significantly restrict mining and can only ``minimize
adverse impacts'' to surface resources. In our situation, according to
the Forest Service, the agency is powerless to consider the impacts to
the Town, our economy and our quality of life as part of the agency's
permitting decision.
As detailed in our written testimony to the Committee, the central
focus of Mining Law reform must include provisions allowing the federal
land management agencies to balance the needs of mineral development
with the needs of the local community, the environment and other uses
of public lands. We believe that mining should not be afforded a
preference of use on federal land and should be considered along with
other equally-important uses of federal land such as watershed
protection, wildlife preservation, hunting and fishing and the economic
benefits of recreational use of those lands.
Question 2. You contend that mining law reform should include an
opportunity for towns to seek withdrawal of certain federal lands from
mining.
Three months ago, this Committee held a hearing on the Surface
Mining Control and Reclamation Act of 1977. Section 601 of that law
permits your Governor, who I assume you could approach about your
concerns, to petition for the withdrawal of land from mining for many
of the reasons you have shared with us today.
The Federal Land Policy and Management Act of 1976 also contains
withdrawal authority, as does the Antiquities Act of 1906. And any
member of Congress can introduce withdrawal legislation at any time.
Why are these existing authorities insufficient?
Answer. Although the ability of the federal government to withdraw
lands from mineral entry has existed for decades under these
authorities, it is entirely at the discretion of the Secretary of the
Interior. These authorities offer no direct pathway to achieve a
withdrawal to protect water supplies or other resources. As such, there
is no recourse available to a community if a withdrawal petition is
denied. The current HR 2262 provides, in contrast, that such a
withdrawal petition would be approved unless the withdrawal would be
against the national interest. We believe that this is the proper
approach.
Regarding SMCRA Section 601, that provision largely deals with
split-estate lands and only applies to federal land whose surface use
is ``of a predominantly urban or suburban character, used primarily for
residential or related purposes.'' That is not the case on the vast
majority of western public lands and is not the case for the Forest
Service lands proposed for the Lucky Jack Project. Accordingly, we
cannot approach our Governor about a petition for withdrawal pursuant
to SMCRA as Section 601 does not apply.
Responses of Alan Bernholtz to Questions From Senator Cantwell
Question 1. In 12 western states, mining claims have increased more
than 80 percent since January 2003. Over an eight-month period from
September 2006 to May 2007, the Bureau of Land Management recorded
50,000 new mining claims. Many of these new claims are near many of our
national parks and monuments. In Washington state, there are 204 mining
claims within five miles of the Mount St. Helens National Monument, 104
of which were staked just since January 2003 and cover over 1,700 acres
of public land. This dramatic surge in claims is especially problematic
because once a claim is staked, the federal government interprets
mining law as providing virtually no way to stop hard rock mining at
that site, short of buying out mining claims or other congressional
intervention, even when mining is in plain view of national parks and
Monuments such as Mount St. Helens.
What is the effect of developing mining operations in sensitive
areas near national parks, monuments, wilderness areas, and in
watersheds for municipal water supplies?
Answer. Industrial mineral development in these sensitive areas is
incompatible with the natural resources of these areas. Although new
mining claims and new mining operations are not allowed within the
borders of National Parks, Wilderness Areas and National Monuments,
current federal law allows such operations to be conducted immediately
adjacent to these areas. The federal land manager may not consider the
values of these areas when reviewing the proposed mine and cannot use
harm to these areas as grounds to deny proposed operations (except in
limited situations of cross-border pollution under environmental laws).
For municipal water supplies, there are even less constraints on
mining. Unless one can show that a mining operation will violate water
quality standards of the Clean Water Act prior to mine construction
(which is very difficult to establish prior to mine operation), the
Forest Service's position is that they cannot deny or restrict mining
in watersheds and can only ``minimize adverse impacts.''
Question 2. How much latitude do land managers have to address
these claims?
Answer. As noted above, the Forest Service which controls the land
surrounding Crested Butte believes that they cannot reject mining
operations to protect these areas, absent proof that the proposed
operation will violate existing environmental laws such as the
Endangered Species Act. Contrary to the beliefs of some members of the
Committee and the views espoused by the mining lobby, the National
Environmental Protection Act does not allow the Forest Service to
reject a plan of operations for a mine where the environment or a
watershed will be damaged. It only allows the Forest Service to make an
informed approval of the plan of operations.
Question 3. Do you believe that state, local and tribal governments
should be able to petition to protect certain areas of local importance
from mining?
Answer. Yes. We believe HR 2262 takes the proper, common sense
approach. That legislation allows state, local and tribal governments
to petition the Secretary of the Interior for a withdrawal. Such a
withdrawal petition would be approved in certain circumstances unless
the withdrawal would be against the national interest.
Question 4. How has not having this capacity affected our ability
to protect our national treasures and local communities?
Answer. Under current law, local communities are in large part
powerless to protect their watersheds, economies and quality of life in
the face of proposed industrial mineral development. The threat of such
industrial development may have negative impacts on critical waters,
recreation-based economies and the sales and use taxes derived
therefrom, as well as severe impacts to the overall quality of life in
rural and recreation-based communities.
______
[Responses to the following questions were not received at
the time the hearing went to press:]
Questions for Deborah Gibbs Tschudy From Senator Bingaman
Question 1. In his testimony, Professor Otto described ``transfer
pricing'' as a growing concern in the area of hardrock royalties. The
central concept is that a mine operator may sell its product to an
affiliated company, for less than it would sell the same product to an
unaffiliated company. The practical effect is to retain profits under
the same corporate umbrella, but minimize royalty payment liability for
the mine operator. As a technical matter, what are some of the
safeguards that could be instituted to avoid this result?
Question 2. Your testimony discusses MMS' collection of hardrock
mining royalties on certain Federal acquired lands (in contrast to
original public domain lands). In the specific example you cite of a
mine in Missouri, a royalty of five percent of gross value is applied.
From about how many of these acquired land/hardrock operations (or
leases) does MMS collect a royalty? How customized are the lease terms,
as it relates to royalties?
Question 3. Your testimony mentions the need for adequate audit and
compliance resources upon institution of a royalty for hardrock
minerals. Please describe the kinds of activities that would need to
occur, to ensure a successful start to the program.
Question 4. Your testimony mentions the need for an interface with
BLM's systems (a topic that has also surfaced within the context of
challenges facing the MMS oil and gas royalties program). Could you
describe the kinds of information that would need to pass back and
forth between MMS and BLM, which could help ensure the timely and
accurate collection of hardrock royalties?
Questions for Deborah Gibbs Tschudy From Senator Domenici
Question 1. It is my understanding that the 8 percent gross royalty
contained in H.R. 2262 would generate between $70 and $80 million per
year. How much would a 5 percent net proceeds royalty, similar to what
exists in Nevada likely generate on an annual basis?
Question 2. Considering the large number of participants in the
development of a mine (including the operator, owner, co-owners,
royalty owners and others), who should be liable for payment of a
federal royalty?
Question 3. To what extent does the imposition of a royalty on
operational mines constitute an assertion of a property interest?
Question 4. In your opinion, what considerations might a court make
in deciding if a ``fee'' constitutes a tax versus a royalty?
Question 5. In your testimony, you stated that unlike oil, natural
gas, coal, or sedimentary minerals, hardrock mineral deposits must
generally undergo physical processing and intensive chemical processing
to produce salable products.
Can you elaborate on that statement and its implications for the
determining the type and amount of royalty that should be imposed on
hard rock minerals?
Question 6. We must account for how a royalty will impact the
United States as a global competitor for hard rock mining investment
dollars.
Internationally, what is a typical `government take' from hard rock
mining operations? How does that compare to existing taxes, fees and
other costs of doing business here in the United States?
Question 7. What impact does the size of a given `government take'
have on reserves, mine life, and the amounts of saleable minerals that
are ultimately produced from mines?
Question for Deborah Gibbs Tschudy From Senator Wyden
Question 1. Ms. Tschudy, you stated in your testimony that the
Administration would prefer a royalty program that resembles the
program established under the Energy Policy Act of 2005. This program
authorizes the federal government to continue to receive physical
quantities of oil and gas royalty-in-kind payments provided the
Secretary of Interior determines that receiving royalties in-kind
provides benefits to the United States greater than or equal to those
that it would have received in-value. Furthermore, in this Act there
are various provisions that grant the Department of Interior the
authority to reduce royalty payments to maintain or stimulate oil and
gas development offshore and for marginal wells (Title III Subtitle E).
Given the serious problems identified by the Department of Interior
Inspector General with the royalty-in-kind program for oil and gas, why
should the same approach used by this troubled program be used for
hardrock minerals? In particular, why should the BLM be given authority
to reduce royalties on hardrock minerals given the problems that have
arisen with the royalty relief provisions for oil and gas?
______
Questions for Henri Bisson From Senator Bingaman
Question 1. How many patent applications are pending that (1) were
filed with the Secretary not later than September 30, 1994 and (2) had
fully complied with all requirements applicable to the patent
application by that date? How many such patent applications have been
granted since September 30, 1994? How many applications filed on or
before September 30, 1994 are still pending? What is the status of
these applications? Please provide a list that includes location,
identity of applicant and status of the application.
Question 2. How much was collected in claim maintenance fees over
each of the past 10 years? How much was collected in claim location
fees over each of the past 10 years? Of these amounts, how much have
been dedicated to program administration?
Question 3a. How many claimants qualified for the small miner
exemption from the fee requirements (i.e., hold less than 10 claims on
public land) during each of the past 5 years?
Question 3b. How many claimants hold less than 25 claims on public
land?
Question 4. How many mining claims are there on BLM lands? How many
on National Forest System lands? Please provide by state.
Question 5. How many mining claims have been located in each of the
past 10 years? Please provide by state and type of mineral, if
available.
Question 6. What is the value of hardrock minerals produced on
federal lands during each of the past 20 years? Please provide this
data by state, if available.
Question 7. How many acres of federal land have been patented since
enactment of the Mining Law of 1872? How many acres have been patented
in each of the past 30 years?
Question 8. Does BLM currently require a bond for exploration
activities? What authorization is required prior to exploration
activities on federal lands?
Question 9. Does BLM currently approve plans of operation for
hardrock mining on Forest Service lands?
Question 10. What is the average life of a hardrock mine?
Question 11. Can the Secretary require modification of an approved
plan of operations for a hardrock mine? What standards must be met in
order for the Secretary to require such a modification? How often has
the Secretary required such modifications in the past?
Question 12. Would authority to use bonding pools be useful for
purposes of posting reclamation bonds? Are bonding pools currently
used?
Question 13. Has the Administration taken a position on whether
patenting should be eliminated?
Question 14. Does the Administration have a position on whether a
royalty should be imposed on the production of hardrock minerals from
federal lands? If so, what structure (net vs. gross)? And what rate?
Question 15. Your testimony also references the inclusion of
administrative penalty authority in any update of the law. Why is this
important?
Question 16. Is there any reason that there should not be a
statutory requirement for reclamation bonding, permitting for greater
than casual use, and approval of plans of operation?
Question 17a. Your testimony indicates that between 2000 and 2007,
BLM inventoried 5500 abandoned sites. Does BLM have an inventory of the
universe of abandoned hardrock sites on federal lands (including BLM
and Forest Service)? If so, please provide a listing of the sites by
state.
Question 17b. How much money does BLM expend annually on abandoned
hardrock mine sites?
Question 17c. How much money would be needed to conduct a
comprehensive inventory and undertake needed reclamation?
Question 18. Does the Department have data on how many abandoned
hardrock mines exist on Indian lands? If so, please provide by tribe.
Does the Department have an estimate of the amount needed to reclaim
these sites?
Question 19. Does the Department have data on how many abandoned
hardrock mines exist on state and private lands? If so, please provide
by state. Does the Department have an estimate of the amount needed to
reclaim these sites?
Question 20. Under current law, does the Secretary have discretion
to prohibit the development of a mine once a valid mining claim is
located on federal lands and all environmental laws are complied with?
If so, under what circumstances and what standards apply?
Question 21. The NRC Committee in its 1999 Report on Hardrock
Mining on Federal Lands indicated that it had been ``consistently
frustrated by the lack of reliable information on mining on federal
lands.'' The report goes on to state that ``without more and better
information, it is difficult to manage federal lands properly and
assure the public that its interests are protected.''
What has the BLM done to address this problem?
Question 22. How many plans of operation have been approved by BLM?
How many plans are pending approval?
Question 23. Is it the Department's legal position that a royalty
can be imposed on existing mining claims? On mines with approved plans
of operation? Please provide any legal opinion or analysis that you
have undertaken that addresses this issue.
Questions for Henri Bisson From Senator Domenici
Question 1. The problem of abandoned mines and mine shafts, located
on old mining claims, has been a long-standing public safety issue.
Does the Department have a strategy for addressing this issue? How has
this work been funded?
Question 2. BLM currently collects fees for mining claims, part of
which offsets the BLM's cost of administering the mining laws. Is it
correct that BLM collects far more from these fees than BLM is given to
administer the program? If Congress were to ask BLM to use excess
mining revenues to address the public safety issue associated with
abandoned mines, what progress could we expect to see?
Question 3. Can the Secretary of the Interior modify a Plan of
Operations after it has been approved?
Question 4. What is a sufficient amount of money, on an annual
basis, to reclaim abandoned mines? How long would it take with that
amount of money to clean up our highest priority abandoned hard rock
mine sites?
Question 5a. Under what circumstances can an Interior Secretary say
``no'' to mining? For example, what if an endangered species lives in
an area where a Plan of Operations has been submitted, could the
Department say ``no'' to that request for permission to mine?
Question 5b. Has this ever happened?
Question 6. In considering changes to the Mining Law of 1872, it is
important to remember that what we are talking about is a land use
statute. Can you elaborate upon the legal and practical distinctions
between federal property laws and federal environmental laws?
Question 7. How many patent applications are pending after having
been grandfathered with the annual moratorium that has been enacted
since 1995? What plan does the Department have in place to resolve the
fate of these applications?
Question 8. Among existing land designations available,
administratively to the Department or legislatively to the Congress,
which ones are (by definition) inclusive of a withdrawal from location
and entry under the Mining Law of 1872? Are there other designations
that tend to result in such a withdrawal, without their definition
explicitly requiring it?
Question 9. What might be the exploration and development
implications of having claim maintenance fees vary dependent upon
whether or not there is an approved and operational Plan of Operations?
For instance, the amount could be set lower for active and higher
for inactive claims, or vice-versa.
Question 10. Pursuant to Section 601 of the Surface Mining Control
and Reclamation Act, on how many occasions has the Department been
contacted by the Governor of a State about the propriety of mining
operations near areas of urban character?
Question 11. Through the years, some environmental problems have
resulted from mining. How do we reconcile these problems with the 1999
report from the National Academies of Science, which concluded that
existing environmental protections are ``complicated but generally
effective''?
Question 12. Mill-site claims have proven to be a contentious issue
in the past. Does the concept of a requirement for payment of a fair
market rental on lands required for ancillary use activities make
sense?
Question 13. How often does the Interior Department inspect federal
lands where mining activities are taking place? What is the nature of
these inspections?
Question 14. Please list all fees and financial transactions
(including the amount or how the amount is calculated) that are
currently paid by those engaging in mineral activities on federal land,
from prospecting through reclamation and release of a financial
assurance.
Question 15. Does the Interior Department believe that the existing
legal and regulatory framework for mining is sufficient to protect
units of the National Conservation System from unnecessary or undue
degradation of the values for which such units were established in the
first place?
Question 16. In implementing the recommendations of the 1999
National Academies of Science report, the Interior Department did not
increase civil penalties. Is there a justification, however, for doing
so? Would that authority strengthen the Department's ability to ensure
that unnecessary or undue degradation of federal lands does not result
from mineral activities thereon?
Question 17a. Is there any expectation that bonds, or other
financial assurances, posted in the last decade will be insufficient
for complete reclamation as a result of unforeseen impacts having
resulted from mineral activities?
Question 17b. If so, does the Department have existing
administrative authority to adjust the level of required bonding or
other financial assurance (up or down), subsequent to a Plan of
Operations approval, if the original amount is found insufficient or in
excess of what will ultimately be needed?
Question 18. How often does the Department review the sufficiency
of bonds and other financial assurances to fully reclaim mined lands?
Question 19. How would you respond to Mayor Bernholtz's assertion
at the hearing that existing financial assurance requirements need to
be strengthened?
Question 20a. H.R. 2262, which has been referred to this Committee,
asserts in its Section 104 that payment of fees and compliance with
applicable laws provides authority to use and occupy federal land for
the purpose of prospecting and exploration.
Understanding that any decision to place a permanent ban patenting
creates a host of problems for investors' security of tenure, is it
reasonable or practicable that this approach would be applied to mining
activities as well?
Question 20b. Are there any examples of timely fee payment and
compliance with applicable law vesting an entity with certain property
rights that could serve as a model for how we fill the vacuum left by
the absence of patenting?
Question 21a. Combined, how many acres of land are managed by the
BLM and Forest Service?
Question 21b. Of that acreage, how may have been designated as
Wilderness Study Areas, designated as Areas of Critical Environmental
Concern, included in the Wild & Scenic Rivers System, designated for
potential addition to that System, or identified as inventoried
Roadless in the November 2000 Forest Service Final EIS maps?
Question 21c. What percentage of the total acreage managed by the
two agencies do those categories represent?
Question 22. How does the process for designating Wilderness Study
Areas, Areas of Critical Environmental Concern, Wild & Scenic Rivers,
and Roadless areas differ from the FLPMA process of withdrawal from
location and entry under the Mining Law of 1872?
Question 23. For everything from fishing boats to oil rigs, there
are examples of the federal government requiring by law that no-one
engage in certain activities on federal land without a permit. The
process by which hard rock minerals are located on and extracted from
federal lands is different, however.
Can you elaborate on why this might be warranted?
Questions for Henri Bisson From Senator Cantwell
Question 1a. Recently, the Bureau of Land Management released a
draft Environmental Assessment for issuing a hardrock minerals lease
near Mount St. Helens in the headwaters of the Green River. The Green
River is a municipal water supply and home to listed species of salmon
and steelhead. Mine development activity could significantly harm and
potentially eliminate these fish populations. Also, acid rock drainage
from the mine's leaching process could contaminate the municipal water
supply for nearby communities including Kelso, Castle Rock, and
Longview. The land in question was purchased by the government under
the authority of the Weeks Act using Land and Water Conservation Funds,
which are appropriated by Congress for conservation and recreation
purposes to ``promote or protect the navigation of streams on whose
watersheds they lie.''
Can you explain how leasing this land to a mining company is in the
public interest or compatible with ``promoting or protecting the
navigation of streams on whose watersheds they lie?''
Question 1b. Can you explain how leasing this land to a mining
company is compatible with the preservation of the integrity of the
Green River, or whether it aids in the preservation of the scenic
beauty of such an area?
Question 1c. Residents of Kelso, Castle Rock, and Longview in my
state of Washington have expressed concern about the proposed mine near
Mount St. Helens. Do you believe they should have a right to petition
for the withdrawal of these lands from mining?
Question 2a. The 1872 Mining Law has long been interpreted as
mandating hardrock mining as the ``highest and best'' use of public
lands. Federal land managers have argued that the 1872 Mining Law
forces them to approve any mining project proposed on public lands
regardless of competing resources values. Yet, you stated in your
testimony that current environmental laws
Can you please provide a detailed list of examples of when the
Bureau of Land Management denied a proposed mining operation based on
the predicted inability of the proposed mine's ability to comply with
the ``undue and unnecessary degradation'' standard set forth in the
Federal Land Policy and Management Act?
Question 2b. Can you please provide a detailed list of examples of
when the Bureau of Land Management denied a proposed mining operation
based on the predicted inability of the proposed mine's ability to
comply with other environmental laws?
Question 3a. In your testimony, you indicated that the
Administration believes that the existing statutes and related
regulations pertaining to hardrock mining provide sufficient authority
to prevent adverse consequences on natural resources and the
environment as a result of mining. Some argue that pollution from mines
results almost entirely from historic operations and that ``modern''
mines are governed by numerous statutes and regulations and are
environmentally responsible, problem-free operations. It is true that
historic mining polluted and continues to pollute rivers, streams and
aquifers and that, until 1976, there were no federal regulations
written specifically to govern hardrock mining operations on publicly
owned land. But, it is also clear that the patchwork of laws that have
governed hardrock mining operations since 1976 are not enough to ensure
that western watersheds and communities are protected. Mines that began
operations in the past three decades have spilled cyanide, killed
aquatic life, caused pollution that will require treatment in
perpetuity, and burdened the taxpayers with enormous liabilities. For
example, soon after mining began at the Grouse Creek Mine in Idaho in
1994, the tailings impoundment began to leak cyanide. As a result of
ongoing violations, the Forest Service posted signs which warned:
``Caution, do not drink this water.'' In 2003, the Forest Service
declared the mine site an ``imminent and substantial endangerment.''
There are other examples of modern mines that are far from ``problem-
free,'' including the Beal Mountain and Kendall mines in Montana, the
Formosa mine in Oregon, and the Jerritt Canyon mine in Nevada.
Can you explain how existing statutes and related regulations
pertaining to hardrock mining provide sufficient authority to prevent
adverse consequences on natural resources and the environment in light
of these examples of pollution and contamination?
Question 3b. Do you believe additional legal tools could address
these situations?
Question for Henri Bisson From Senator Wyden
Question 1a. Mr. Bisson, you stated that existing regulations which
are currently in place are already adequate to manage hard rock mining
activities and any subsequent environmental damage. However, there are
still cases where existing hardrock mining activities and/or abandoned
mines continue to negatively impact human health and the environment.
For instance, in my own State of Oregon, Formosa Mine in Douglas County
is a copper and zinc mine that operated in the early 1900's, then
reopened in 1989 and operated until 1993. The primary impact is acid
mine drainage and metal contamination that has eliminated about 18-
stream miles of prime habitat for the threatened Oregon Coast coho
salmon and steelhead. The Oregon Department of Environmental Quality's
(DEQ) 2004 evaluation of cleanup options for the site indicated that
cleanup could cost more than $10 million dollars. DEQ has spent over
$1.2 million since 2000 to investigate and undertake interim cleanup
actions to minimize the environmental damage caused by the mine. DEQ
has been unable to undertake further cleanup and is instead, working
closely with the U.S. Environmental Protection Agency, the U.S. Bureau
of Land Management, and the U.S. Department of Interior to find
alternative funding to complete the cleanup. It seems to me that BLM
and other responsible regulatory agencies are failing to enforce the
existing mining and environmental regulations that you referenced in
your testimony.
Mr. Bisson, can you explain which environmental statutes apply to
mining and how they are applied? Can you also explain to me how the BLM
and other responsible agencies will proactively ensure the enforcement
of existing regulations to prevent negative human health and
environmental impacts instead of reacting to the actual impacts to
human health and the environment after they have occurred?
Question 1b. Furthermore, during your testimony, discussions
occurred regarding the Bureau of Land Management's ability to limit or
deny hardrock mining operations to prevent the unnecessary or undue
degradation of public land resources that would result in substantial
irreparable harm to these resources. You mentioned that BLM had within
the past few years denied a number of hardrock mining operations and
that BLM you would supply to the Committee the names and locations of
the mines that were denied operation. Can the Bureau of Land Management
also please provide the reasons why (e.g., undue degradation to public
lands, environmental regulations) these hardrock mining applications
were denied. Additionally, can the Bureau of Land Management also
provide the number of hardrock mining operations approved in the same
year as those operations that were denied?
______
Questions for William E. Cobb From Senator Domenici
Question 1. For everything from fishing boats to oil rigs, there
are examples of the federal government requiring by law that no-one
engage in certain activities on federal land without a permit. The
process by which hard rock minerals are located on and extracted from
federal lands is different, however.
Can you elaborate on why this might be warranted?
Question 2. Does Freeport-McMoran wait until closure of a mine to
start reclamation? How are inactive mining sites treated?
Question 3. Can you elaborate further on the importance of secure
tenure and regulatory certainty to the maintenance and growth of a
domestic mining industry?
Question 4. What role could a ``Good Samaritan'' provision play in
the clean-up of AML sites?
Question 5. Is there a risk that eligibility requirements for a
``Good Samaritan'' could be too stringent to allow those with actual
mining and reclamation expertise to qualify?
Question 6. Some mining critics have produced studies, including
one by Earthworks, claiming that hardrock mines harm water quality. Do
you have any comments on the Earthworks report?
Question 7. In considering changes to the Mining Law of 1872, I
believe that it is important to remember that what we are talking about
is a land use statute. Can you elaborate upon the legal and practical
distinctions between federal property laws and federal environmental
laws?
Question 8. What might be the exploration and development
implications of having claim maintenance fees vary dependent upon
whether or not there is an approved and operational Plan of Operations?
For instance, the amount could be set lower for active and higher
for inactive claims, or vice-versa.
Question 9. Through the years, some environmental problems have
resulted from mining. How do we reconcile these problems with the 1999
report from the National Academies of Science, which concluded that
existing environmental protections are ``complicated but generally
effective''?
Question 10. Mill-site claims have proven to be a contentious issue
in the past. Does the concept of a requirement for payment of a fair
market rental on lands required for ancillary use activities make
sense?
Question 11a. H.R. 2262, which has been referred to this Committee,
asserts in its Section 104 that payment of fees and compliance with
applicable laws provides authority to use and occupy federal land for
the purpose of prospecting and exploration.
Understanding that any decision to place a permanent ban patenting
creates a host of problems for investors' security of tenure, is it
reasonable or practicable that this approach would be applied to mining
activities as well?
Question 11b. Are there any examples of timely fee payment and
compliance with applicable law vesting an entity with certain property
rights that could serve as a model for how we fill the vacuum left by
the absence of patenting?
Questions for William E. Cobb From Senator Cantwell
Question 1a. Mr. Cobb, residents of Kelso, Castle Rock, and
Longview in my state of Washington have expressed concern about mining
operations near where they live, and I understand that residents of
Boise, Idaho and Crested Butte, Colorado have expressed similar
concerns. In your testimony, you expressed opposition to extending to
local and tribal governments the right to petition for the withdrawal
of certain lands important for clean drinking water, recreation, and
endangered species habitat. You argued that the National Environmental
Policy Act's public process is sufficient to enable local and tribal
governments to work with the federal government to deny a mine. Yet, in
a recent Environmental Impact Statement scoping document for a proposed
gold mine, the U.S. Forest Service emphasized that it ``does not have
the authority to select the no action alternative'' under the 1872
Mining Law.\1\
---------------------------------------------------------------------------
\1\ USDA Forest Service, Boise National Forest, ``Atlanta Gold
Project Environmental Impact Statement Scoping Document,'' February
2004, http://atlantagoldeis.com/Documents/AtlantaGoldScoping.pdf.
---------------------------------------------------------------------------
When local communities are struggling to meet their funding needs,
why would you oppose streamlined legal tools to address these
situations?
Question 1b. Are you saying that local communities should
essentially be at the mercy of global demand for minerals because under
the current law, because land managers don't feel they have much
authority to prevent mines from going forward?
Question 1c. Shouldn't local citizens have a say in the actual
decision to open mining operations in their community not just the
chance to submit input through the public environmental scoping
process?
Question 2a. Mr. Cobb, in your testimony you expressed opposition
to protecting special places, including Roadless areas, from mining
claims. But when the federal government enacted the Roadless Rule in
2001 to protect our last Roadless areas inside National Forests, the
Forest Service found that ``maintaining these areas in a relatively
undisturbed condition saves downstream communities millions of dollars
in water filtration costs. Careful management of these watersheds is
crucial in maintaining the flow and affordability of clean water to a
growing population.'' Metal mining, on the other hand, is the leading
source of toxic pollution in the United States according to the
Environmental Protection Agency's Toxics Release Inventory. And, the
western United States is growing more and more littered with mining
Superfund sites including a new site designated in Oregon in fall 2007.
Do you agree that maintaining Roadless areas is a more cost
effective way to ensure local communities have clean drinking water
than spending millions to clean up new Superfund sites?
Question 2b. If no, why not?
Question 3. Water treatment can be a significant economic burden
for federal, state, and local government if a mining company files for
bankruptcy or refuses to cover water treatment costs. For example, acid
runoff from the Summitville Mine in Colorado killed all biological life
in a 17-mile stretch of the Alamosa River. The site was designated a
federal Superfund site, and the EPA is spending $30,000 a day to
capture and treat acid runoff. In South Dakota, Dakota Mining Co.
abandoned the Brohm mine in 1998, leaving South Dakota with $40 million
in reclamation costs - largely due to acid mine drainage. And, at the
Zortman Landusky Mine in Montana, the State of Montana was left with
millions in water treatment costs when Pegasus Gold Corp. filed for
bankruptcy in 1998.
When perpetual pollution is predicted, as is the case of in the
Phoenix Project in Nevada, shouldn't an additional burden be put on the
company to provide an independently-guaranteed reclamation bond to
cover the full cost of maintaining treatment in perpetuity?
Appendix II
Additional Material Submitted for the Record
----------
Dear Senators Bingaman and Domenici: We the undersigned
organizations represent millions of hunters and anglers, fish and
wildlife professionals and businesses, and others who recreate on and
enjoy our public lands. For many years, Congress has considered reform
of the General Mining Law of 1872.
On November 1, 2007, the House of Representatives passed HR 2262,
the Hardrock Mining Reform and Restoration Act, by a strong bipartisan
vote of 244 to 166. Now is the time for the Senate to take up a
hardrock mining bill that will provide sensible reform and protect fish
and wildlife resources on America's public lands.
We urge you to take action on modernizing the 135-year-old mining
law this Congress, and we offer our assistance and support.
Public lands managed by the Bureau of Land Management (BLM) and the
Forest Service harbor some of the most important fish and wildlife
habitat and provide some of the finest hunting and angling
opportunities in the country. For example, public lands contain well
more than 50 percent of the nation's blue-ribbon trout streams and are
strongholds for imperiled trout and salmon in the western United
States. More than 80 percent of the most critical habitat for elk is
found on lands managed by the Forest Service and the BLM, alone.
Pronghorn antelope, sage grouse, mule deer, salmon and steelhead, and
countless other fish and wildlife species are similarly dependent on
public lands.
Mining is a legitimate use of public lands, but there are few laws
more in need of an overhaul than the 1872 Mining Law. The 1872 Mining
Law, signed into existence 135 years ago by President Ulysses Grant, is
the most outdated natural resource law in the nation. Under the 1872
law, mining takes precedence over all other public land uses, including
hunting and fishing. The Secretary of the Interior must sell public
land to mining companies, often foreign-owned, for as little as $2.50
per acre. Furthermore, mining companies pay no royalties for hard rock
minerals, gold, copper and zinc that belong to all citizens. It is
estimated that since the 1872 Mining Law was enacted, the U.S.
government has given away more than $245 billion of minerals through
royalty-free mining and patenting.
As you consider legislative reform of the 1872 Mining Law,
America's sportsmen urge you to consider the following recommendations:
Recover a fair royalty from all minerals, present and
future, taken from public lands and establish a fund for fish
and wildlife habitat improvement projects associated with past
mining.
End mining's priority status on public lands.
Ensure that resource professionals have full discretion in
the planning and permitting processes to protect public lands
where high fish, water and wildlife values exist.
Allow ``Good Samaritans'' reclamation incentives and common-
sense liability relief.
Prohibit the patenting or sale of public lands under this
law; keep public land in public hands.
Provide for harmonious integration of state and federal
wildlife habitat and population objectives in permit operating
plans.
Thank you for considering our recommendations, and we look forward
to working with you to ensure that mining on public lands is modernized
to the benefit of fish, wildlife and water resources.
Sincerely,
Archery Trade Association; American Sportfishing
Association; B.A.S.S.; Backcountry Hunters
and Anglers; Bowhunting Preservation
Alliance; Berkley Conservation Institute;
Conservation Force; Catch-A-Dream
Foundation; Federation of Fly Fishers;
Dallas Safari Club; Izaak Walton League of
America; International Hunter Education
Association; National Wildlife Federation;
North American Bear Foundation; North
American Grouse Partnership; Pope and Young
Club; Orion--The Hunters Institute; Quality
Deer Management Association; Trout
Unlimited; Pure Fishing; Theodore Roosevelt
Conservation Partnership; Wildlife
Management Institute.
______
Dear Gina,
I request that the 1872 mining law and act not be changed in any
way from it's original intent. Please let me know you reviewed this e-
mail.
Thank You,
James Scheller.
______
ECO Star Energy SystemsTM,
Athol, ID, January 24, 2008.
Honorable Committee Chairman, Distinguished Committee Members: My
message truly needs to be heard (get out) and if, it remains buried in
a dusty archive for one day, a historian to find, and behold, ``this is
the way it could have been'' not what the sordid historical result
actually was: First, there is nothing wrong with our so-called
``outdated'' 1872 Mining Law. What is wrong is that our law-makers see
a new source of revenue and control, and can't stand to leave well
enough alone till eventually affecting the demise of our great
nation.--I would personally consider it an offense, even an act of
treason to change the Mining Law of 1872, or tamper with it. We don't
use its power now, our ignorance. The USA is good at: (A) Stimulating
investment--trade (B) then killing the goose that laid the golden eggs.
1. We need to know just when ``enough is enough'' in
protecting our environment and the eco-system, and to look at
the substance beyond the veil when making policy decisions, or
``judicial incursion.''
2. We need to recognize that mining concerns are using
reclamation as a ``toe in the door'' to create mischief and we
are not fully assured as to whether or not the reclamation
issues can be dealt with.
3. We need to know that there is a new breed of mining
companies that ``mine the people'' instead of mining the
resource.--Do people really care whether or not any ore is
truly processed in the end?
4. We need to know that U.S. Department of the Interior (DOI)
Bureau of Land Management (BLM) is not doing its job according
to charter, but ``just collects your money'' when dealing with
filing fees for mining claims.--And the BLM has created a
``lawyer's dream'' as result of faulted due diligence.
5. We need to know that U.S. Fish and Wildlife Service
(USFWS) is an advisory agency to the Forest Service (via
consultation doc.) and do not enforce protection of so-called
``endangered species.''
6. We need to know that the U.S. Department of Agriculture
(USDA) Forest Service (FS) like the BLM does not get involved
in property disputes (mining claims) allegedly, but when
issuing permits, or not issuing permits, it becomes apparent
that a de facto decision of ownership has been rendered.
7. We need to know that Mining Companies issuing stock put a
percentage towards actual mining, and much goes toward
``covering your flanks (both of them)''--known as ``CYA'' in
government circles--and raising more money . . . the Security
and Exchange Commission (SEC) ``pulp mill'' respectfully is a
great deal of the incumbent cost, and however necessary, it is
impossible to deter the ``determined.''
8. We need to know that federal government agencies, and
state environmental protection agencies, do not work seamlessly
as would be desired on the mining laws.--Memorandums of
Understanding (MOU)s between the agencies such as the USDA FS
and the State Department of Lands, or now, the respective state
Department of Environmental Quality (DEQ) and mining project
MOU's try, but fail.
9. We need to know that the individual State has its unique
resources, history, peoples, cultures, and economic drivers,
and a state's mining laws are tailored for that reason,
including the State's other laws--Constitution, and though
agreeable with federal mining law, its law is unique to that
State!
My father, my namesake, opened the full Senate with prayer on April
16, 1953. Of a different and more innocent era (when everyone was
present--accounted for), he asked: Divine Guidance for leaders of our
nation, and that we do the right thing personally and for our
constituency. The U.S. Constitution, in my opinion, was more revered
then, and laws were believed not tampered with or ``legislated from the
bench.''
The 1872 Mining Law, Title 30 USC, ``Mineral Lands and Mining'' not
unlike the U.S. Constitution was sacred and not ``tampered with'' for
the most part as the general populace then believed. Today, nothing is
sacred. Everything under the sun, except the questionable federal tax
system, is subject to sunset, abolishment, or revision and
modification. The drivers for this are ``special interest'' motivated,
and generally do not uphold or strengthen our system of laws and
government. We are not a ``nation of law'' but a nation of lawyers . .
. .
It is heartening to see case law (of the Mining Act) setting
precedence dating back early the last Century. Changing the 1872 Mining
Law, under color of law, as a reform is nothing more than ``clearing
the slate'' of affirmative law and rewriting ``Mineral Law and Mining''
subjectively, a ``knee jerk'' attempt at undermining the mining act to
satisfy international pressures, activists' shrill, questionable
science, political expedience.
All we need is another legislative reform screw-up. Any changes
needs to be suspect. Take the Tax Reform Act of the 1980's. What a
joke, and what a mockery on the American public. To quote ``As Good As
It Gets'' All Congress needs to do is ``get its hot sweaty hands'' on
the 1872 Mining Law and its virtue is lost forever. Now Congress wants
to assess royalties in their lust for money, for control. They will
need to create a new bureaucracy to collect the ``windfall'' for a
time, and then it becomes another albatross on the U.S. taxpayer.
Inherent with our democratic form of government is that overriding
mass ignorance and self-serving political expediency prevails instead
of true, self-sacrificing, visionary leadership.--What Congress needs
to do is get smart and be brave and quit being myopic--effectively
stupid, thus being political giants instead of cowards:
A. Enact a tariff or head fee on any ``off shore'' entity
directly-indirectly mining American resources.
B. Due to the volatile nature of mining stocks, movements of
ownership's values need to be limited.
C. Have new classes taught at all levels of school as
mandatory (like American History, should be):
(1) Geology, in a real sense, focusing on the
evidence and not someone's social agenda!
(2) Why is it that ``Minerals are the Foundation of
Civilization?''--focus on this always:
(3) What happens to society (our civilization, the
USA) when we can not harvest minerals?
(4) What happens when adversaries can harvest
strategic base metals expediently, cheaply?
(5) What happens to our natural resources when our
adversaries have their boot on our neck due to our
leaderships' continued foolishness and myopia and
avarice . . . what will happen?
(6) Have Capital Hill classes taught on ``Mines And
Madness'' Copyright 2007 by Jim Ebish:
Back Page: ``Learn how wealth is created by mining entrepreneurs
and how to profit from the coming economic boondoggle brought on by the
ignorance of politics where history, science, and logic are trumped by
big hair, junk science and fabricated war stories. The folly of our
generation is the irrational protection of the environment through the
ill-conceived National Environmental Policy Act (NEPA) and other
similar laws. Enacted in 1970 as a result of the 1969 Santa Barbara oil
spill, NEPA halted virtually all progress in America. Many businesses
now have denationalized their operations, sending a high standard of
living to foreign shores. The loss of domestic mining and manufacturing
will negatively impact all Americans, although the idle rich will feel
less pain than the rest of us normal folks. Environmental shills and
hucksters, using airhead celebrities to promote their cause, have been
empowered by NEPA to deter any development which is not part of their
trendy lifestyle . . . .''
What Congress needs to do is get smart . . . brave . . . quit
being stupid . . . political giants . . . cowards (continued):
Ultimately, there will be a heavy price to pay. Get ready for
higher taxes, more swaggering government goons wielding lively
truncheons, increased regulation, and a lower standard of
living. If you think that the zombies and fatties of the
Transportation Security Administration who hassle hapless
codgers at the airport are ridiculous, you ain't seen nothing
yet. Get ready for a turd-world existence. At the dawn of the
21st Century, the sun may set on America unless significant
changes are made to NEPA and similar government gobbledygook.
Wise up!
--The Author (6), Jim Ebish MSc.
([email protected]) is a Registered Professional
Geologist (RPG) Stratabound Metals Expert consultant in
the Pacific Northwest based in Spokane, WA.--Order his
book for more specifics.
(7) Knowledge is power! This effort to reform the
1872 Mining Law is flawed, but to reform the
associated, probably outdated, environmental process
(NEPA) and educate practical care of our environment by
emerging populace will prove many-times rewarded in the
near term.
D. We need to have a resurgence of mining mill operations and
smelter operations and assay offices. Just like in the ``old
days'' when one could make a strike, ``prove it'' then process
the ore for value.
E. Today, what good is it to get the ore out of the ground,
prove its worth, and not be allowed to mill and crush the
(hard-rock) ore, then ``float the ore'' to clarify the
metallurgical components, yielding a ``high-grade''
concentrate, and then smelter the ore to produce the final
enriched, purified metal.
F. That ``off shore'' facilities in processing the ore,
whether raw ore or concentrated ore, the bottom line is that
foreign countries have the U.S. at a distinct advantage: If you
as a Senator a/k/a U.S. Congressman do care enough to not screw
with the 1872 Mining Law, but rather make sure:
(1) That needed new refineries for oil and gas
(liquids and gases) are immediately underway.
(2) Those new smelters for hard-rock refinements
(solids) are constructed in critical locations.
(3) That personnel is trained appropriately to man
the smelters and refineries, and
(4) That state assay offices exist not unlike a
library for training and lab work in proving up metal
ore as it is being exposed, working in conjunction with
professional assay firms . . .
(5) Rather than tamper with the 1872 Mining Law, we
need to have better and more power generation
facilities, nuclear, wind, solar, hydro and geothermal,
celesta-magnetic, etc.
G. In the next few years or decades, the author will no
longer walk this earth, and thank God for that. If what is
reasonably presented has not been expediently dealt with, the
United States of America will become (as it already is) a sub-
standard, second-rate country. In the past, the USA has gone
down to its roots and demonstrated new worth and a new future
and a new destiny, but no more.
Even since its founding, the United States has had incumbent in its
government the seeds of its eventual demise. These seeds were found in
secret societies, like cancer throughout all civilization, composed of
people who actually believed they were smarter and were privileged
characters. The truth is they were advantaged. This has not changed.
The so-called ``New World Order'' is a ruse to bind up the sovereignty
of the U.S. citizen into subservience. Those in power do not seem to
care and rightfully so, for they are the privileged characters, and
want to keep it that way and the nation's future be damned.
I am testifying before this committee not because I expect my
recommendations and comments to bear any fruit, but to bear witness
that what was stated would happen actually did happen, and the
leadership of our nation had the golden opportunity do the right thing
and did their usual, the exact opposite of reason, logic. I will rest
easy knowing that my integrity is intact and not unlike the hatred of
history at purity of thought, expect ``all they can do is dig up my
bones, if they can find them, and burn them at the stake.''
1. Should this legislation provide for new environmental standards
for hard-rock mineral activities? If so, what should those standards be
and what transition rules would be appropriate for their
implementation?
We do not need any more environmental standards for hard-rock
mineral activities. The miner is inundated with federal, state and
local statutes, rules and regulations even before required
authorizations which place strict environmental criteria on mining
activities. Federal: The Clean Water Act regulates storm-water and
discharges from mines and attendant facilities. The Clean Air Act and
Superfund and Resource Conservation and Recovery Act regulate mining
and protect the environment. States: each has companion statutes and
regulations that correspond with federal requirements. Permits are
needed from the property claim holder (especially if a lease), for
ingress/egress, for power transmission, mill siting areas, ventilation
and material process facilities, etc. requiring soil engineering, civil
and survey engineering, building permits, road use permits, and even to
snow plow and transportation impact permits on national forests. Also
permitted and controlled and (hopefully oversights) are plan of
operations (POO), mitigation and exit strategies, monitoring and
quality control measures, spill recovery and containment, reclamation
of the habitat, etc. and a host of best management plans for timber
removal, road development, site development, etc.--Flora and fauna and
endangered species and natural habitat eco-systems are consistently at
the forefront of any decision.
2. Should the legislation designate categories of land not
available for location and entry? If so, what categories should be
designated?
NO! What we need is less government and more freedom! Wilderness
Acts, Wild and Scenic Rivers, Parks and National Monuments, National
Wildlife Refuges, and so on are encroaching on rights of our citizens
to exploit their legacy. The only entities that benefit are federal
employees paid to supervise the closed lands.
3. Should the legislation address situations where mining claims
should not be developed due to [alleged] environmental or other
concerns? If so, how should [these hosts of perceived concerns] be
addressed?
This question is covered in part in No. 1. (supra) From Mines and
Madness, ``The folly of our generation is the irrational protection of
the environment through the ill-conceived National Environmental Policy
Act (NEPA) and other similar laws. . . . NEPA halted virtually all
progress in America. Many businesses now have denationalized their
operations, sending a high standard of living to foreign shores. . . .
loss of domestic mining and manufacturing will negatively impact all
Americans . . . Environmental shills and hucksters . . . have been
empowered by NEPA to deter any development . . . American business,
under a relentless siege by the big guns of the environmental cult for
nearly four decades, is all but defeated.''--The NEPA requires that
mining claims located on federal lands must be evaluated for
environmental and socio-economic impacts of developing that land prior
to authorization of use by the administering agency. NEPA evaluations
are thorough, exhaustive, and even questionable: They address adverse--
beneficial impacts, and cumulative effects on wetlands, streamside
areas, historic sites and archaeological sites. NEPA studies cost in
the tens of millions and require over 20 years of investigation and
analysis, and have utilized highly qualified and even world renowned
scientists and engineers, and also involved separate risk analyses
prepared by third-party (outside) experts. These NEPA-required
evaluations further require that the applicant avoid, minimize and/or
mitigate environmental impacts especially alleged as so-called
sensitive areas, and are generally cost-prohibitive, ``killing the
mining venture in its infancy.''
4. What additional financial assurances, if any, should be required
for mining operations?
NONE, except to assure dollars reside in the U.S. as opposed to
``off-shore.'' Federal agencies like Bureau of Land Management (BLM)
and U.S. Forest Service already require ``full cost'' bonding, and
memorandums of understanding (MOU) such as between the FS and Montana
DEQ are created to ensure agency coordination: if only they would (due
diligent) do their jobs. These costs are typically prepared by
qualified third-party consultants. Consultants address associated costs
of reclamation, plus administration, plus regular updating, plus
escalation factors. The agencies presume that a third-party will also
conduct the reclamation activities. Any additional financial assurances
would be duplicative and unnecessary, as per MOU, states also require
full-cost bonding, which already duplicates federal requirements for
state, private and Native-owned land. States: Alaska (ADNR), Montana
(MT DEQ), Nevada (NDEP) and Idaho (IDL, IDWR and IDEQ).
5. What type of additional enforcement and compliance provisions,
if any are needed?--Term Limits for Congress would be a great start:
holding Congress members to the same rules as the rest of the nation!
NONE! As restated, the prevailing DC mindset is: ``change is needed
for change sake'' and has no bearing in fact or law as to reality, ``if
it works, don't fix it.''--What we need is less government and more
freedom!--
No additional enforcement and compliance provisions are needed in
any present Mining Law, or in the much touted Mining Law Reform, as if
it already exists. What is seriously needed is fundamental tax reform,
not mining reform! Current enforcement is by the alphabet soup of
entities: USFS, BLM, USFWS, EPA and Corps of Engineers, and the myriad
counterparts of local and states' regulatory and enforcement
agencies.--State enforcement in Alaska, as an example, is also provided
by Alaska Department of Natural Resources, Alaska Department of
Environmental Conservation and Alaska Department of Fish & Game.--
Further, most other states have similar oversight roles of enforcement.
MSHA also administers the Mine Safety and Health Act.
There needs to be a moratorium on 11th hour litigation brought by
environmental groups, or legislating from the bench by activist judges
without a stake in the issues or the outcome. It should be obvious by
now that activist groups with a ``green'' agenda have a true purpose to
prevent mining, at any cost, not protect the environment.
The only meaningful mining reform would be to place a moratorium on
just how much a group can interfere with progress of hardrock mineral
mining, so vital to our nation. If slated to be put up for a local or
state-wide vote, and the initiative passes, then the environmental guys
are ``out `a here'' for good on that project and its location.
The 1872 Mining Law, signed by President Ulysses Grant, is a model
natural resource law, and has roots not unlike the United States
Constitution. Under the 1872 law, mining takes precedence over many
other public land uses, including hunting and fishing, and rightfully
so... Mining is a legitimate use of public lands, and there are few
laws that have fueled the wheels of progress more than the 1872 Mining
Law. That the Secretary of the Interior ``must'' sell public land to
mining companies, often foreign-owned, for as little as $2.50 per acre
escapes me, or I would be ``standing in line'' to buy this land. Mining
companies pay royalties by virtue of their high-risk venture that in
this day and age is fraught with pitfalls such as activist judges and
militant environmentalists or wildlife groupies.
To say, ``hard rock minerals including; gold, copper and zinc that
belong to all citizens'' is a little like communism. The opportunity
for harvesting these minerals is available to all, not necessarily the
mineral itself, or it would never make it out of the ground. The legacy
of the 1872 Mining Law has been two-fold, and though the damage from
early mining activities is alleged to be still ongoing today, policy-
makers need to offset the benefits to the nation over its tenure. Are
EPA estimates valid that 40 percent of western headwater streams are
degraded by abandoned mines? This could be an incredible exaggeration
of fact--an unscientific collation of empirical data.
I represent a mining consortium of pioneer miners and loggers who
have done nothing detrimental to the land. We are in one of five known
grizzly bear populations in the contiguous states.--A Canadian mining
firm in the 1990's, according to the Forest Service, imperiled the bull
trout population in the Libby Creek drainage basin due to toxic
discharges. This was/is after an alleged temporary hiatus when that
mining was shut down, a proposed vital copper-silver mine adjacent to
(and under) the Cabinet Mountains' Wilderness in remote northwest
Montana.
Professional resource managers at the Forest Service and BLM need
oversight to ensure science-based decisions in lieu of political-based
decisions, not about where and when mining on public land should occur.
With this oversight professional land managers will appropriately
maintain their commitments as fair stewards serving our public trust.
The BLM and the Forest Service manage public land with some of the
most important fish and wildlife habitats that provide some of the
finest hunting and fishing in the nation. Revett Minerals, in Troy,
Montana, also in the Cabinet Mountains, Rock Creek Mine is one good
example of mining stewardship where they recently provided the Kootenai
National Forest Service with a safe harbor for endangered wildlife. It
has been noted that more than 80 percent of the most critical habitat
for elk is found on lands managed by the Forest Service and the BLM.
Pronghorn antelope, sage grouse, mule deer, salmon and steelhead, and
other species of fish and wildlife species are on public lands . . . .
Mining companies, not unlike true wildlife supporters (hunters and
fishers), can and will enhance the eco-system.
The national forests are a major source of water and of particular
importance in the West integral with overall headwaters, streams, lakes
and rivers. It is alleged that the Forest Service and EPA scientists
have determined that the national forests alone provide drinking water
to more than 60 million people in 33 states. Truly domestic mining
companies, under existing law, are fully capable and willing to enhance
water sources, aquifers and natural reservoirs, and under contract and
reclamation bond will leave our waterways and drainage basins in a much
better state in the future. All that is needed is delegating the
existing oversight to the appropriate government agencies.
Existing--new mining companies and hard-rock mining ventures should
not be burdened with so-called ``fair royalties'' from any minerals
taken from public lands. The general public that has benefited from
abandoned mines, or the dynamics of exploration, should fund the
cleanup. Congress might as well fund the cleanup with their retirements
and so on and live like the rest of the nation. Since 1977, royalties
associated with coal mining have generated $7.4 billion to help clean
up abandoned mines and recover lands and waters and communities
affected by coal mining. That is coal mining, not hard-rock mining.--We
do not need a fund for hard rock mining.--What is alleged to be a
sensible reform to include all mining operations, present and future
will chase away investment dollars, and break the backs of exploration.
Commodities developed off public lands such as coal, wood fiber, oil,
gas, etc. need to be reassessed as to mitigation of impacts and
restoration measures. Hard-rock mining, the foundation of our
civilization as we know it, needs to be left alone and not tampered
with.
Mining should be the dominant use of our federal lands for the
preservation of our economy.--We do need to reassess values of fish and
wildlife habitat, water resources, and hunting and fishing, on public
lands aside from activists' shrill, and legal and political
manipulation. The Forest Service and BLM believe the 1872 Mining Law
makes hard rock mining a dominant use of public lands which is the
correct course to follow. Mining reform legislation will compromise the
balance of shared use in our volatile time of questionable eminent
domain and questionable ``road closures.'' There is inherent value in
public lands for family sabbaticals, hunting and fishing opportunities
and fish and wildlife, flora and fauna eco-systems and habitats. Our
utmost priority as a hopefully to remain a sovereign nation is to
preserve our heritage, and ensure our economic and national security by
the proper use, management and care of natural resources while
exploiting the benefits of our bountiful land.
Under the 1872 Mining Law, mining companies and ventures can have
``round-table'' discussions with agency managers and jointly make
visionary and logical decisions based on protecting our land and/or
natural resources. Being told when or where to (not) mine is an
incursion of Constitutional freedom. Well-meaning but misguided
activists would like to dictate by court order or law to influence what
they allege is important for fish and wildlife and fresh water. We are
not dealing with band-aide policies. Our Congressionally designated
wilderness areas, the sanctuaries and estuaries of Fish and Wildlife
Refuges, our National Parks are our heritage as are our hard-rock
mineral deposits, and not the emotional or political agenda of
misguided souls. The encroaching areas designated ``road-less'' ought
to be placed off-limits, not to mining, but to recreation such as snow-
mobiles and ``busting through the woods'' use of all-terrain-vehicles
(ATV) entirely, to restate, not to mining. So-called professional land
managers have too much discretion. Round-table discussions with all
truly responsible will afford to managers with guidelines on all
incumbent lands to allow for balanced and reasoned decisions about
ecological, social, and economic values. On highly mineralized lands
with low fish and wildlife values, and high levels of mining company
investment, mining companies ought to have a higher degree of certainty
that mining projects can proceed in accordance with existing federal/
state policies--laws, statutes, codes and regulations.
Funding and practical reclamation provisions can be made available
to those who want to ``clean up the forests'' including systematically
un-polluting abandoned mines and watersheds.--Abandoned mines are or
have been one of the paramount issues facing the nation. Those who
quote questionable EPA estimates, ``That abandoned hard rock mines
degrade nearly 40 percent of all western headwater streams'' might take
a proactive stance and better utilize monies wasted on frivolous
litigation and use their funding to promote ``pristine cleanups!'' The
scope and magnitude of reclamation alleged gives environmental
activists opportunity to prove their sincerity.
Mining legislation should be reinstated, not ``reformed,'' again
allowing patenting/sale of public lands. The U.S. Government has, like
homesteading, opened up million acres of our public lands to mining
companies and individual, small miners through the practice of
patenting. Those without a ``stake'' in the sacrifices of exploratory
mining, whine about resourceful people who claim on public lands and
then allegedly ``buy the land'' for as little as $2.50 an acre. True,
there have been abuses without jurisdictional oversight. It should be
heartening that with the increase in the price of metals, so have the
number of claims being staked.--Mining is risky and expensive!--
Congress should abolish the edict of former Secretary of Interior and
re-open public lands to mineral patenting.
This Committee on Energy and Natural Resources has a high calling,
and with the full United States Senate, have the timely opportunity to
reinstate the 1872 Mining Law in its full measure, with comprehensive,
complete revisions for agency oversights, reviewed by Congress as
needed. The House reform bill needs to be ``set back'' to justify its
cause and effect ramifications over the next Century.--Our great
nation's posterity will not prevail in national and economic security
if influenced by unfound diatribes of ``a long stalemate calling for
reforming:'' 1872 Mining Law.
It is broadcast that watershed protection must take precedence over
industrial mining development which is true for all types of
development, including the sprawl of cities in arid or coastal regions
or where water resources are a premium. Mining concerns have a unique
situation to classify, nurture and protect our precious water for
permits.
Our pre-eminent economic and military security is past vulnerable
with a growing reliance on foreign sources for important minerals and
processing or our own ore. As stated, ``Despite reserves of 78
strategic mined minerals, the United States currently attracts only
eight percent of worldwide exploration dollars . . . '' ``As a result,
our nation [has and] is becoming more dependent upon foreign sources to
meet our country's strategic and critical metals and minerals
requirements, even for minerals with adequate domestic resources.--The
2007 U.S. Geological Survey Minerals Commodity Summaries reported that
America now depends on imports from other countries for 100 percent of
17 mineral commodities and for more than 50 percent of 45 mineral
commodities.'' This is unconscionable and needs to be changed.
Reforming the 1872 Mining Law, with increased burdens on mining
ventures is the absolute wrong course. ``This increased import
dependency is not in our national interest particularly for commodities
critical to pending strategic programs such as reducing greenhouse gas
emissions or undertaking energy efficiency efforts. Increased import
dependency causes a multitude of negative consequences, including
aggravation of the U.S. balance of payments, unpredictable price
fluctuations, and vulnerability [as] to possible supply disruptions due
to political or military instability. [Over the last several decades,]
our over-reliance on foreign supplies is exacerbated by competition
from the surging economies of [aggressive] countries such as China and
India. As these countries continue to evolve and emerge into the global
economy, their consumption rates for mineral resources are ever-
increasing; they are growing their economies by employing the same
mineral resources that we used to build and maintain our economy. As a
result, there exists a much more competitive market for global mineral
resources. Even now, some mineral resources that we need in our daily
lives are no longer as readily available to the United States.'' This
has been well stated and portends our eventual demise.
Conclusive reports: ``The U.S. mining industry has fully embraced
the responsibility to conduct its operations in an environmentally and
fiscally sound manner . . . .'' Reuters, on January 28, 2008, reported
``Zambia will introduce a windfall tax on base metals at a minimum rate
of 25 percent and increase mineral royalties to 3 percent from 0.6
percent . . . '' New increased royalties and reintroduction of
withholding taxes in the base metals sector ``will make the country
less attractive for future mining investment.'' New taxes in copper-
rich Zambia are effective April 1, 2008. Killing the goose that laid
the golden eggs (copper and cobalt), the country's economic lifeblood,
is foolish at best. That the U.S. Senate has taken the ``high road'' in
deliberating a ``rewrite'' (reform) of the 1872 Mining Law, as has been
``corrupted'' by ancillary legislation, is commendable! When ``making
sausage,'' let us not forget our heritage.
National Security issues of domestic mining production ``built on
competitiveness, certainty and common sense.'' The Bush Administration,
in the latest round of talks on possible changes to the US Mining Law
intimated a possible imposition of royalties on hardrock minerals on
public lands, according to Mineweb, Jan. 25, 2008. (1) Replacing the
current system of mine and mill patenting with a more modern form of
``secure tenure'' is open to question; (2) Imposing prospective and
profits-based royalties is inadvisable at best; (3) Establishing
abandoned locatable mine reclamation funding to clean up sites that
allegedly threaten the environment and public safety can come out of
the General Fund, just like Social Security. A ``clean sheet'' approach
would encompass the 1872 Mining Law as mote. Environmental--other laws
have all but smothered the climate of investment and development in
mineral mining. We need ``to also recognize the economic performance of
mines and the security of tenure issues vital to mining investment. My
mining concerns are best documented ``where the rubber meets the road''
in the attached letters.
Attached are two (2) letters of note, and import, to the
deliberations concerning the 1872 Mining Law: Simplicity can not happen
in our government with imposition of a ``royalty program'' for hardrock
mining. As evident by a Mining Lease apparently ignored by a U.S.
mining company, with foreign and ``domestic'' handlers, litigation will
be the norm instead of the exception: ``It's all about money, and
`follow the money.''' Providing a ``fair return'' to taxpayers is
translated to ``putting another albatross around taxpayers' neck, along
with the boots of our adversaries.'' The federal bureaucracy to manage
adequate audit and compliance, above and beyond the present, will go
asymptotic and ``break the backs'' of new and existing mining
enterprises.--An efficient and automated reporting system can be
managed by the individual states that have a stake in the production of
mineral mining.
1. Letter to PAUL BRADFORD, Forest Supervisor USDA Forest
Service--Kootenai National Forest of 1/31/08
2. Letter to Bradford and MARK WILSON, Montana State
Supervisor--U.S. Fish & Wildlife Service of 1/31/08
State and federal environmental agencies and public lands
regulatory agencies already have an efficient, effective automated
reporting system that is becoming more automated. For example is the
BLM LR2000 database, and the county and state Bureau of Land Management
location/date, owner, type and recordation of mineral mining claims.
The audit and investigative authorities are already in place. All that
is needed, as evidenced by attached letters is Congressional,
Department of Interior, Inspector Generals' simplified oversight of
Forest Service, et al decisions. What is seriously lacking, not a fault
of the 1872 Mining Law, is enforcement of ownership, policy and
permitting.
That some Senators rightfully--strongly oppose the 8% gross royalty
shows some gravity in Congress. Even considering a ``modest'' 2% to 5%
gross royalty is fearful as to its import and implications. William E.
Cobb rightfully stated, ``the existing comprehensive framework of
federal and state environmental and cultural resources already
regulates all aspects of mining... Additional federal regulation is
unnecessary, duplicative . . . unreasonable.'' He opposes giving the
Secretary of Interior the right ``to stop a mining project when all
environmental and other legal requirements are met.'' His astute
observation could not be stated any better. The doctrine of ``multiple
use'' needs to recognize the demerits of so-called ``recreation'' vs.
our meritorious capability for ``national survival.''
There is absolutely nothing wrong with the current demand of
commodities driving companies and individuals to ``stake their claims''
for strategic metals and as the price of uranium, gold and other heavy
metals continues to drive companies to stake claims across the West.--
Mining claims dot millions of acres of public land across the West.--
Righteously, once a mineral stake is claimed, it is nearly impossible
to prohibit mining under the current framework of the 1872 Mining Law,
no matter how [alleged to be] serious the impacts might be!--Enough
Said . . . .
Respectfully Submitted,
Frank Wall,
National Resource Specialist, Forensic Engineer & Mining
Consultant.
attachment.--letter #1
31 January 2008.
Paul Bradford,
KNF Forest Supervisor, USDA Forest Service, Kootenai National Forest,
1101 Highway 2 West / Libby, MT.
Regional Forester, Policy Oversights, USDA FS Northern Regional Office,
P.O. Box 7669 / Missoula, MT.
Dear Mr. Bradford:
Re: Trespass by Mines Management--Montanore Minerals on FS lands--LCV
claims . . .
Per FOIA request, I possess a copy of a letter you wrote to Eric
Klepfer, V.P. Operations of Montanore Minerals Corporation dated August
7, 2007, that has been grossly ignored.
Your letter is ``very specific'' on MMC's ``proposed mining
activities associated with the Libby Creek adit within [and adjacent
to] the Cabinet Mountains' Wilderness on the Kootenai National Forest
(KNF). Based on [your] review of this information [submitted by MMC
June 5 & July 3, 2007] and analyses by Forest Service experts, I have
[you] determined that MMC must [first] obtain Forest Service approval
of a plan of operations [(POO)] as required by Forest Service Locatable
Mineral Regulations at 36 CFR 228 Subpart A prior to dewatering and
continuing excavation, drilling, and development work at the Libby
Creek adit. Previously, we issued a temporary snowplowing permit for
the road to the Libby Creek adit which has now expired. In lieu of a
new permit for future snowplowing and annual road use, we are
requesting that you include this request in a proposed plan of
operations. Please file a plan of operations which includes all of the
proposed Libby Creek adit activities including future snowplowing and
annual road use authorizations for our review and approval.''--The
following flies in the face of reason:
Mines Management Inc. announcement on third quarter earnings
states, ``Advanced Exploration and Delineation Drilling Program''--
``During the third quarter of 2007, the Company [(MMI as MMC)]
continued preparations for the exploration and delineation drilling
activities at the Libby adit site. The water treatment plant components
were delivered during the quarter [July--Sept. 2007] and installation
of the plant was completed October 31, 2007, with testing and startup
activities beginning on November 1, 2007. Other activities included the
delivery of major mine equipment, pump stations, power load centers and
other key equipment necessary for the delineation drilling program.
Installation of the ventilation duct work was completed for the first
several hundred feet of the adit. [That is: on Libby Creek
VenturesTM mining claims on Forest Service lands.]
On January 25, 2008, your executive assistant Barbara Edgmond
confirmed via email, ``Mr. Bradford has been advised of your phone call
today and the concerns you have that MMI's third quarter report stated
they have moved equipment to the adit and are working on the
ventilation system.'' This, combined with receipt of your response to
my FOIA request dated November 29, 2007, for documents dated from
November 2, 2007 to January 16, 2008 is rather inconsistent. Please
note the: (a.) Letter from MMC dated 12/19/07 requesting temporary FS
approval to plow the Libby Creek Road; (b.) FS letter to MMC dated 12/
27/07 approving this request as of the date of this letter . . .
mitigation measures (as outlined last year) will apply, including the
gate management locations; (c.) Email from MMC dated 12/27/07 stating,
``Thank you for your timely . . . approval.''
Mr. Bradford, you further stated in your reply to my FOIA request
noted above, that my wanting to know the disposition (of MMC within the
adit) was not within the purview of the FOIA. Fair enough, but two
months later? Let me restate, ``Not within the context of an FOIA
request.''--Let's cut to the chase. Please affirm or deny whether or
not MMC is in the Libby Creek adit on national forest lands. And if so,
where is their approved plan of operations, plan of action, or permit
of authority (POO, POA, POA2)? I believe the answer is MMI
a/k/a MMC does not have one, did not have, and will not have one . . .
My reasoning is that for Libby Creek VenturesTM to
demonstrate under the doctrine of pedis possessio in the 1872 Mining
Law, occupancy of its rightful mining claims, and to continue to
demonstrate ``boots on the ground,'' that Mines Management Inc., under
any alias or operational subsidiary/entity, needs to ``get off LCV
property'' which is also on the national forest lands. And the USDA
Kootenai National Forest needs to enforce the law and quit playing
``footsie'' with alleged outlaws as is evident as shown and noted
above.
Dating back to on or before September 11th, 2006, when MMI first
interfered with LCV's rightful exercise of exploration drilling on its
mining claims, the Montana DEQ and the USDA Forest Service have
enjoined with each other to support MMI and undermine the rightful
exercise of LCV's mining heritage, even to the point of quitting. Why
is this so? Today, MMI had the audacity to file a civil action against
LCV and its components, to include the undersigned, and one claim is
that LCV did not exercise pedis possessio.
USDA KNF FS and Montana DEQ have been/are denying LCV its rightful
exercise of its small miner initiatives to explore and to hold under
the doctrine of pedis possessio; full unequivocal use of its senior
mining claims duly registered with DOI BLM; that's why! MMC is
allegedly operating under color of law with permissiveness of the FS
and DEQ.
Note: http://www.fs.fed.us/r1/kootenai/projects/projects/adit-plan/
index.shtml (pdf l 20mb)
Getting back to basics, last year I sent you an email January 15,
2007, which states in its beginning, ``As we discussed on Wednesday,
January 10th, 2007 at Noon (MST), please accept the following: All of
the Libby adit is on FS and FS Wilderness lands . . . I allege was a
long-range dispossessory plan . . . the fact MMI is encroaching on LCV
permitting or permitted rights . . . a USDA KNF `fairness' review
covering all permits issued and all permits [was] required for the
Montanore Project. `IT IS ONLY FAIR!'''--did this happen?
LCV, et al (claim holders and Wall) are being sued by MMI, MMC and
Newhi: stating in their lawsuit that there is a controversy as to who
owns the mining claims and the adit, which according to the suit needs
to be adjudicated. Shouldn't the Forest Service hold off on permits?
Meanwhile, MMI needs to stay out of the Libby Creek adit and all of the
mining claims in contention until this is resolved in court and the FS
and DEQ needs to quit interfering with LCV's mandatory exercise of its
ownership under pedis possessio.
Thank you for attending to this matter.
Frank Reginald Wall.
attachment.--letter #2
31 January 2008.
Paul Bradford,
KNF Forest Supervisor, USDA Forest Service, Kootenai National Forest,
1101 Highway 2 West / Libby, MT.
R. Mark Wilson,
Field Supervisor (via email), U.S. Fish and Wildlife Service (USFWS),
Division of Ecological Services, 585 Shepard Way / Helena, MT.
Dear Mr. Bradford and Mr. Wilson:
Re: Trespass by Mines Management--Montanore Minerals on FS lands--LCV
claims . . .
On Wednesday, December 19, 2007, I sent an email to Mark Wilson
that reads--
Re: Grizzly Bear and Bull Trout concerns on Cabinet
Mountains' drainage basins...
I was talking to people at Revett Minerals about the grizzly
bear (Usus arctos horribilis) habitat issue. In the discussion,
I was alerted that (our--LCV) having an approved POO in the
grizzly (and/or bull trout) habitat is a significant issue!
However, in that you did not know of our being in the same
habitat/environ eco-system as Mines Management, possibly the
Kalispell office USFWS, we at Libby Creek Ventures were
wondering just how many other mining concerns have, or would/
could have, an approved POO in our specific area of operations.
Libby Creek Ventures holds 58 lode mining claims, one being a
placer claim, along with three tunnel sites, as overlaid, on
Libby and Ramsey Creek drainage basins up to the CMW east
boundary and on the forest roads.--Sec. It is felt that you
could get a more prompt, qualified response from the Forest
Service than if we [meaning Libby Creek VenturesTM]
asked them.
Would you please tell us how many mining concerns can operate
in this region, meaning adjacent or under the Cabinet
Mountains' Wilderness? You asking and collaborating with the
Forest Service on this and giving us an official
``reading''.per same would be most helpful. Our concern is that
approved POO's might be viewed by the federal government kind
of like water rights with the state: First in place, is first
right to limited or vulnerable resource(s). For example, let's
say that ten or more mining firms applied for a plan of
operations in this area.
Is there an ascendancy of ``first come''--``first-in-line, or
first right'' as far as impacting the Grizzly Bear? If you
wrote a letter on this to Paul Bradford, KNF FS supervisor, and
qualified this critical situation it would be of great help.
This would alleviate our concerns in that: If Mines Management
a/k/a Montanore Minerals (Newhi) received an approved POO from
the USDA KNF Forest Service, then we might find ourselves ``out
on a limb'' literally, and having spent a lot of time,
resource--money, to no avail, in pursuing our long-term mining
venture.
As I discussed with you today, we received an approved POO
(which is currently valid--to be expanded) from the FS and DEQ
early this year, but have been held up in executing our Phase I
and Phase II POO due to a noted lack of cooperation by USDA FS,
and Mines Management. As mentioned, this involves our concerns
of safety issues and our potential liability of harming
personnel or equipment in the adit (that shouldn't be in the
adit) while we are commencing our initial ``hammer in-the-
hole'' drilling efforts: of our targets in close proximity!
[last year]
The scenario that could play out, is like having ``too many
cooks'' in the kitchen. What's the limit? Who's first?--Sec.
The bottom line: is there a ``pecking order'' of ascendancy in
``rights'' of POO, and is there a ``saturation element'' or
point of ``diminishing returns'' with respect to having an
approved POO in the grizzly bear habitat--environ? And, if this
is the case, what is, or will be, the federal government's
position or policy with respect to the same?--Sec. Mark, any
feedback or help with respect to this, in writing, would be
most appreciated. Thank you . . . .
On 12/20/07--Re: FS & DEQ Approved Plan of Operations Concerns . .
. (subject of email): Mark Wilson replied via email, ``We understand
your question(s) and my staff and I will be discussing it in the near
future, and will get back with you shortly after the first of the
year.''
On or around January 24, 2008, the undersigned had a conference
call with Mark Wilson and Ann Vandehey, USFWS Section 7 Coordinator of
the Endangered Species Act. We discussed a ``consultation document'' as
being the means by which the USFWS interacted with the USDA FS on
decision-making criterion. We also discussed ``nexus'' being a buzzword
for ingress and egress to private or patented property using federal
roads for access and using federal lands for infrastructure impact such
as power lines, tailings, mill sites, tunnel/adit portals, etc. For
example, ``displacement'' by creating new roads, etc. is undesirable in
Grizzly Bear habitats. Excessive (any) ground water disturbances are
extreme concerns in Bull Trout watersheds.
As subsequent follow up to the conference call, there was no USFWS
(Kalispell, MT) notation available which contradicts the FS record of
an August 2006 Decision Memo to LCV signed by KNF FS Ranger Malcolm
Edwards on 9/12/06, and specifies all categories of review/analysis:
IN PART--``Water, Riparian areas and Fish: The proposed action
would not occur within the riparian habitat conservation area (RHCS) of
Libby Creek. . . . Sec. Wildlife and Threatened and Endangered
Species: Sec. Effects to threatened and endangered wildlife species
were analyzed for this project. No effect is expected to any TE
wildlife species within the project area. Effects to sensitive species
were also analyzed for this project. The project is not likely to
impact individuals [?] or their habitat and would not contribute to a
trend toward federal listing or loss of species viability. Sec. The
wildlife analysis is available in the project file.''--Please make
copies of the wildlife analysis, and species list so noted, to all
affected parties.
ALSO IN PART--``V. JUSTIFICATION FOR CATEGORICAL EXCLUSION--Sec.
This project is being categorically excluded from documentation in an
EA [(Environmental Assessment)] or EIS under category 32.1 (3). . . .
Sec. Federally listed species proposed for Federal listing, or
proposed critical habitat, or Forest Service sensitive species: There
will be no effect to threatened and endangered species within the
projected area. Consultation with the U.S. Fish and Wildlife service
was not necessary. Sec. The project is not likely to impact
individuals or their habitat and would not contribute to a trend toward
federal listing or loss of species viability. Sec. Species list and
analysis is available in the project file at the district.--[Excerpts
of page 2 & 3]
IN PART--``VI. PUBLIC INVOLVEMENT--Sec. . . . Comments were
solicited from the District Wildlife Biologist, Archaeologist,
Botanist, Weed Specialist, Hydrologist, Fisheries Biologist . . . ''
``VII. FINDINGS REQUIRED BY OTHER LAWS--Sec. . . . The Endangered
Species Act . . . Sec. Under provisions of this Act, federal
agencies are directed to seek to conserve endangered and threatened
species and to ensure that actions are not likely to jeopardize the
continued existence of these species. Since affects to threatened and
endangered species have all been determined to be ``no effect'',
consultation with the U.S. Fish and Wildlife Service was not necessary.
The biological assessments for the Libby Creek Ventures Drilling
Project are located in the Project Record. I have determined that my
decision is in compliance with the Endangered Species Act.--[Excerpts
from page 4 & 6 of 8 pages--Comprehensive vetting process]
``APPENDIX A--Response to Comments [alleged public comments one of
two received]--Comment: Concern was expressed regarding the location of
the drillholes with respect to the Montanore Minerals Corporation Libby
Creek Evaluation Adit. Interception of the adit by a drillhole could
potentially cause impacts to water quality or quantity in the Montanore
adit. Response: A letter from the Libby District Ranger specifying
these concerns will be submitted to Arnold Bakie of Libby Creek
Ventures.''--[Excerpt from page 8 of 8--This is not their property!]
It should be evident, as events before and since 9/11/2006,
questionable choices were made.
On 01/10/07--One year ago, LCV and the KNF FS entered into an
agreement entitled RPOOA (Revised Plan Of Operations Addendum), the
purpose of which was to--``resolve appeal issues as outlined in Libby
Creek Ventures (LCV) appeal of October 26, 2006 per 36 CFR 251.93 .'' A
review of the content of the RPOOA with respect to the Decision Memo
is: this is an addendum to the plan which was submitted on May 26,
2006: an extension (FS) for cause was granted.
Quid pro quo: Provision ``10. Claim Ownership Sec. Approval of
this Plan of Operations does not constitute certification or
recognition of ownership to any person named herein. If another party
[such as MMI a/k/a MMC] proposes a conflicting plan that would prevent
the FS from administering the mining regulations (6 CFR 228 Subpart A)
it would be the sole responsibility of the concerned parties to resolve
such conflict. In some situations the FS may require resolution prior
to authorizing surface disturbing activities.'' And provision ``11.
Claim Validity Sec. Approval of the Plan of Operations does not
constitute recognition of the validity of any mining claim named
herein, or of any mining claims now hereafter covered by this plan.''
On December 18, 2007, Arnold Bakie and I received your Libby Creek
Ventures Drilling Project Appeal Decision which in effect (if not
appealed to a second level of review) reverts to RPOOA and any effort
to perform expert hydrology--structural evaluation studies are thereby
stymied. Access to the Libby Creek Ventures AditTM is also
effectively denied even though on FS lands.
Under any reasonable observation, by a prudent man, a jury of peers
or a judicial review, will conclude, ``beyond a reasonable doubt'' that
USDA KNF Forest Service and Montana DEQ have effectively and
consistently ``taken sides'' and denied Libby Creek
VenturesTM their rights under the 1872 Mining Law of
occupancy--exploration--mining under the doctrine of pedis possessio.
There is only one solution at the present, and that is for the USDA
Forest Service and Montana DEQ under their Memorandum of Understanding
to deny all permits and licenses to Montanore Minerals and Mines
Management until such time as ``claim ownership'' and ``claim
validity'' has been adjudicated. Furthermore, LCV has an approved even
a tour de force RPOOA of its POO.
The LCV POO (as revised and amended) was approved by FS and DEQ
jointly before Revett's Rock Creek approval and before Mines
Management's Montanore project which has yet to be approved even though
MMI allegedly acts as if it has all the needed permits and licenses.
The approvals give LCV ``first come, first right'' with respect to its
present--expanded POO for exploration mining under the Small Miner
Excursion Statement (SMES) and need for buffers for environmental air
quality, water quality and impacts under the Endangered Species Act.
Any consideration for any permits or licenses to MMI, MMC, et al would
have to consider that LCV has first right in pursuing its long-range
objectives in SMES hard-rock exploration and mining in the Libby Creek
and Ramsey Creek watersheds and attendant forest service lands.
Any speculation or comments as to LCV minimal exposure to mining
has to take into account that LCV first submitted a plan almost two
years ago for four (4) simple drillholes on the side of the national
forest road and in front of any gates (before MMI's interference).
Notice: One hole will be drilled in situ of the three (3) approved, and
the other three (of the four original holes that were bonded) will be
moved closer to the Cabinet Mountains' Wilderness eastern boundary line
and in similar close proximity to FS trails, with minimal or no
disturbances!
Under the 1872 Mining Law and federal and Montana mining codes,
regulations and statutes, LCV is required to perform annual assessment
work, maintenance work and diligently work its mining claims: lode and
placer, and tunnel sites! To not perform with due diligence is to lose,
by abandonment, as Noranda has done, all rights in perpetuity to any
undiscovered minerals. The FS and MT DEQ have a fiduciary obligation to
not interfere with LCV exercising its rights. Under the doctrine of
pedis possessio, LCV demands that the FS rescind any/all MMI permits.
If MMI (or the Montana DEQ for MMI) wants to do mining, then they need
to speak with LCV.
After seeing a bundle of bailing wire on the south shoulder of FS
#2316 at the entrance to the Johnstone Placer Patent, that could injure
life or limb, human or animals, and after seeing steel rebar on the top
of a stump sticking sideways in the forest, that could injure life or
limb, human or animals, and after seeing the shoddy snow-plowing job
performed by MMI last year, and after seeing all the dust generated by
MMI and MMC along the forest service roads, it is my contention
(photos) that MMI has or had good intentions, but does not necessarily
deliver.
Libby Creek VenturesTM demands that its sign be posted
on the seasonal gate closure and that Montanore Minerals Corp. (MMC)
sign be removed. It is an affront to LCV that MMC not only has keys to
those gates, but has a common sign with the USDA Forest Service and FS
logos This is unquestionably illegal at worst and poor judgment at
best. LCV was castigated in its ``48 Hour Notice'' for safety reasons
September, 2006, being alleged to be using FS stationery.
It is and has been from day one, and as can be proven empirically,
that LCV has performed using ``best management practices'' in the
forests and on the forest roads and trails and forest watersheds. LCV,
in studying how to best explore for minerals, has determined to access
ore targets from existing forest roads and trails, and take every
effort to minimize or eliminate all-together any discharge of water.
LCV will create and maintain very clean and functional man and mining
operations' facilities and tunnel sites, and will not impact the
feeding and nocturnal habits of animal species including endangered
fish, fowl and mammals. LCV intends to leave the forest in a more
natural and desirable condition than when first encountered! This is
the Code of the West, and that is to leave minimal or no traces of
occupation or habitation. It is true that these are goals which, in
reality, might require minor changes for practical reasons.
This letter and its counterpart ``Demand for Quid Pro Quo Under
Doctrine of Pedis Possessio'' will be entered as exhibits to U.S.
Senate testimony pursuant to [not] reforming the 1872 Mining Law as a
demonstration that there is nothing wrong with this law, just
enforcement thereof being rather deficit when it comes to heading off
litigation when such can be avoided.
I am inviting the Senate Committee on Energy and Natural Resources
to review the de facto background from a Forest Service perspective
which leads one to believe that all is legitimate:
1. ``Vested interest?'' http://www.fs.fed.us/r1/kootenai/
projects/projects/montanore/index.shtml
2. Adit LCV's Property: http://www.fs.fed.us/r1/kootenai/
projects/projects/adit-plan/index.shtml
3. Stale data: http://www.fs.fed.us/r1/kootenai/projects/
projects/montanore/involvement.shtml
4. 6/05? http://www.fs.fed.us/r1/kootenai/projects/projects/
montanore/final--scoping--letter.pdf
5. ??? http://www.fs.fed.us/r1/kootenai/projects/projects/
montanore/permits--lic--app--table.pdf
All is not legitimate as the Forest Service has ignored Libby Creek
VenturesTM senior position and ownership of its mining
claims. The FS acts as if there is not a breach between Noranda's
termination of a valid lease and Noranda's junior partner Mines
Management Inc.'s attempts at ``acquiring possession'' of LCV's
property by trespassing on it with Montana DEQ and USDA FS ``looking
the other way'' over LCV's oral, official and written protests. LCV is
not even afforded ``equal time'' or consideration: (1) Where does LCV
show up on ``seasonal road closure'' signs accessing LCV's mining
claims? (2) Where does LCV show up on the ``permits, licenses, etc.''
website noted above, as being the first and foremost permission (the
owner) required, and (3) Where does LCV show up on the adit plan or the
project website noted above? It DOES NOT!
The adit-plan (see link) states ``Notification to resume suspended
. . . '' and should be ``Notification to resume terminated . . . '' as
Noranda terminated its operations thus voiding Permit #00150 as to `` .
. . resume suspended'' implies that there was intent to defraud the
Mining Lease holder LCV.
And as any prudent person can observe, a 20 MB pdf document hardly
qualifies as a ``minor revision'' to the ``Hard Rock Operating Permit
#00150'' regardless of how this is glossed over! To say, ``Minor
Revision'' is akin to saying, ``minor surgery'' about a heart
transplant operation: Who is kidding who? Two-hundred and twenty-four
pages (224 of revision 2) October, 2006, has obviously been in work for
some time, and with the Forest Service's cooperation all along.
Now, since May of 2006, when ``called on board'' to sort out this
mess of valid ownership and prior possession by LCV as successor-in-
interest to the Mining Lease holder of a thirteen-year lease and
``Grant of Easement'' which should not have been in question, I have
very diligently reviewed the record for any shortfalls; and there were
and are none!--I have worked with the USDA Forest Service (FS) and the
Montana Department of Environmental Quality (DEQ), the two ``governing
agencies'' and have gotten virtually nowhere with respect to
appropriately and reasonably and systematically exploring LCV mineral
targets. The FS and DEQ have supported the trespassers at virtually
every critical occasion, taking the side of Mines Management, Inc.
If the Forest Service refuses to ``step up to the plate'' and
suspend Mines Management, Inc. a/k/a Montanore Minerals Corp.
operations within the adit on national forest lands, which are also
valid mineral mining claims of LCV and thus maintain a neutral posture
until ownership is adjudicated within the Lincoln County District
Court, Cause No. DV-07-248, then a prompt and comprehensive
Congressional Investigation is called for.--A USDA Inspector General
Oversight review is also warranted, and also, right soon!--The FS and
DEQ need to do their jobs of fairly enforcing their respective federal
and state mining law, codes and regulations!
I have had to do Internet searches using search engines to get to
the bottom of this as the Forest Service has not timely notified the
LCV mining claim holders, who the FS ``should have known, and would
have had to have known'' were principally affected by Mines
Managements' exploits and efforts. I have noted that ``after the fact''
public notices and public meetings on the decision-making process were
evident to LCV principals, and no notification was properly given
except what was published in local news and/or discretely posted on FS
project website.
It's hard for me to believe otherwise that there was not a policy
to keep LCV ``in the dark'' on this and not let LCV know ``what was
happening'' until such time that inertial forces were in place to make
it virtually impossible to correct-the-record and assert occupancy
under the doctrine of pedis possessio. Mines Management was using the
Johnstone Placer Patent as a means of ``toe in the door'' and allegedly
subverting any means of LCV to protect its rights.
My accompanying letter to you, Mr. Bradford and the Regional
Forester pertaining to oversights is an unequivocal--``DEMAND FOR QUID
PRO QUO UNDER DOCTRINE OF PEDIS POSSESSIO''--It should be
unquestionable in its message and mission . . . As you are fully
aware, I have made it a point to establish a ``chain of evidence'' on
this alleged illicit activity and alleged conspiracy if none other than
History.--Being a defendant in a lawsuit of which I have NO mineral
interest shows the extent Mines Management is stretching to suppress my
message and silence my voice of injustice.
As I'm sure you are aware, sooner or later, the Good Lord willing,
justice will prevail!
As noted on this letter to you, Mr. Bradford and also to Mr.
Wilson, this DEMAND FOR ``FIRST COME--FIRST RIGHT'' UNDER DOCTRINE OF
PEDIS POSSESSIO--As of the date of RPOOA approval by the FS, now a year
ago, is asking the two of you to come to a ``meeting of the minds''
with respect to Libby Creek Ventures'TM posture in the
Cabinet Mountains' Wilderness. Please expedite, officiate--clarify your
position and bring this controversy to a conclusive end result.--
Anything less is a miscarriage . . . .
Why is it that when policy making comes about, the small miner gets
excluded? Small miners are where many discoveries of valuable ore have
been brought to the ``light of day.'' Note the following excluded LCV
holding ``first position'' in: http://www.missoula.com/news/node/925
... ``Mining companies at odds over Cabinet Mountains drilling''
(meaning Revett and MMI).
Please act on my request so that LCV does not ``have the rug jerked
out from under it'' more than has already occurred. And as you know,
this has been due to ``not knowing'' of adversity stalking its
property, while at the same time LCV was complying with the mining
regulations.
Libby Creek VenturesTM is required by the 1872 Mining
Law to fully demonstrate, under the doctrine of pedis possessio,
diligent occupancy of its rightful mining claims, and to consistently
demonstrate ``boots on the ground!''--Mines Management Inc., under any
alias or operational subsidiary/entity, needs to ``get off LCV
property'' which is also on national forest lands.--The USDA Kootenai
National Forest needs to enforce the laws involving LCV!
To Recap my assertions: Dating back to on or before September 11th,
2006, when MMI first interfered with LCV's rightful exercise of
exploration drilling on its mining claims, the Montana DEQ and the USDA
Forest Service have enjoined with each other to support MMI and
undermine the rightful exercise of LCV's mining heritage, even to the
point of forcing LCV to give up: Today, MMI had the audacity to file a
civil action against LCV and its components, to include the
undersigned, and one claim is that LCV did not exercise pedis
possessio.
LCV, et al (claim holders and Wall) are being sued by MMI, MMC and
Newhi: stating in their lawsuit that there is a controversy as to who
owns the mining claims and the adit, which according to the suit needs
to be adjudicated. Shouldn't the Forest Service hold off on permits?
Meanwhile, MMI needs to stay out of the Libby Creek adit and all of the
mining claims in contention until this is resolved in court and the FS
and DEQ needs to quit interfering with LCV's mandatory exercise of its
ownership and diligent occupancy under pedis possessio.
USDA KNF FS and Montana DEQ have been/are denying LCV its rightful
exercise of its small miner initiatives to explore and to hold under
the doctrine of pedis possessio; full unequivocal use of its senior
mining claims duly registered with Lincoln County Office of Recorder,
Libby, Montana and the U.S. Department of Interior (DOI) Montana BLM.
LCV is the rightful claim holder and expects a written ruling of
``first come--first right'' respecting its POO and select endangered
species.
Respectfully submitted for your prompt execution,
Frank R. Wall.
______
Waldo Mining District,
Cave Junction, OR, January 23, 2008.
Hon. Jeff Bingaman,
Chairman.
Hon. Pete V. Domenici,
Ranking Minority Member.
Dear Energy & Natural Resources Committee Members; I am writing you
today as President of the Waldo Mining District, which was established
in May of 1851 (in what is now SW Oregon); and as an individual Miner &
Prospector for the last 28 years. I, and thousands of other individual
citizens like me, beg you to hear our plea, and remember us in your
important deliberations; the outcome of which could destroy the living
American Heritage of the ``Individual Miner/Prospector''.
One hundred thirty-six years ago a Bill was passed by Congress
unique to all the world and history. This Bill, the U.S. Mining Law of
1872, was promulgated from a blend of earlier mining laws, traditions,
and most importantly from the methods and customs practiced by the
miners themselves throughout the American west. For the first (and
only) time in human history, individual citizens, without any prior
approval from a government, and acting solely on their own initiative
and at their own expense; were granted the right to enter the Public
Lands to search for, locate, and extract the valuable minerals needed
to supply this country's needs and build a sound economy.
Was the 1872 Mining Law a success? For the answer to that question,
all one has to do is look to history. At virtually no cost to the
Nation and for well over one hundred years, most or nearly all of this
country's mineral requirements have been met by domestic mining. All
the iron for all the steel to build the railroads, bridges, buildings,
all the weaponry and ships to fight two World Wars (and then some), the
automobile industry, etc.; all the copper needed to light the world;
etc.; and enough gold to pay for it all came from mining under the 1872
Mining Law . . . and along the way, the United States became the
richest and most powerful nation on Earth.
Last year, the House of Representatives passed H.R. 2262, the
``Hardrock Mining and Reclamation Act of 2007'', which if enacted,
would utterly destroy what little remains of this Nations once great
mineral industry. This Committee now contemplates its own possible
revision of the 1872 Mining Law. Because of the seriousness of these
matters, and for the sake of this Nations continued wealth, security,
and for the protection of a truly unique American heritage, I urge you
to consider the following Testimony in your deliberations.
part i: in response to those proposing revision
Although the 1872 Mining Law has been attacked and amended many
times since enactment, a more recent series of attacks in the last
twenty or so years has brought us to today, where over-whelming and
complete revision is being proposed. Those proposing the revision of
the 1872 Mining Law seem to be driven by the extremist environmental
community, and a handful of Congressional members that ought to know
better. In response to at least some of the ``propaganda'', I submit
the following:
A. CLAIM: Mining in the United States is destroying the
environment.
RESPONSE: 99+% of all serious environmental harm from mining
occurred before the 1960's & 1970's. Since the passage of tough federal
and state environmental protection laws (e.g.; ESA, CWA, NEPA, etc.),
no legally operating mine in this country poses a serious risk to the
environment. Long gone are the days of unregulated environmental
destruction. Amending the 1872 Mining Law will not undue the
environmental damage of the past . . . and the laws are already in
place to keep any such damage from occurring in the future.
The Committee is urged to keep in mind that ``some'' level of
environmental disturbance will occur from mining (i.e.; you can't dig a
hole without moving some dirt). Due to the site-specific nature of
mineral operations, the best way to minimize the effects from mining is
to control it at the local level. Bureau of Land Management and
National Forest Service mining regulations already require NEPA
analysis approved Plans of Operation for all mining operations likely
to cause a significant surface disturbance. This approval process can
take anywhere from a year or two to well over ten years. If anything,
this process is already too burdensome and prohibitive for all but a
simple pick & shovel operation (which even then may require permitting
at the state level).
Amending the 1872 Mining Law to place even tighter environmental
protection restrictions and control on mining will bring nearly all
mining to a screeching halt, destroying the industry along with
hundreds of communities and thousands of families and individuals
dependent on the mining industry.
B. CLAIM: All mining operations should be bonded to guarantee
reclamation.
RESPONSE: Current Bureau of Land Management and National Forest
Service mining regulations already require 100% reclamation bonding for
all mineral operations that create a significant surface disturbance.
This generally includes all but the smallest levels of mining, from 1-
man with a bulldozer or backhoe to the largest of mines. Amending the
1872 Mining Law with tighter bonding requirements will only work to
make a bad situation worse, as especially for the smaller operations,
no one will issue a bond on mining operations forcing the operator to
post a 100% cash bond, bankrupting many operations before they even
stick a shovel in the ground.
C. CLAIM: Mining operations are getting the minerals for ``free'';
there should be a royalty.
RESPONSE: Mining, as with almost all other business, is all about
spending money in the hope of making even more money. The big
difference with mining is that small fortunes can be spent just to
determine if a deposit is worth developing. For every successful mine
there are dozens of unsuccessful prospects. To place a further economic
burden on the successful mining operation by imposing a royalty (i.e.;
``tax'') will do nothing but put that many more mines in the
``unsuccessful'' list.
No mining operation is getting something for nothing . . . larger
operations expend millions of dollars in exploration and development
work before any mineral comes out of the ground. That's millions of
dollars of investment money spent into local communities as wages,
supplies, lodging, etc. and to equipment supplies worldwide . . . plus
all the continued expenses if the mine is successful. Even the smallest
of operations, such as the 1-man with a small underwater vacuum
(``suction dredge'') may invest $3-10,000 in equipment.
No miner is getting anything for free . . .
Another problem with the royalty issue is the potential ``takings''
issues, in that the owners of existing mining claims already own the
minerals as granted and guaranteed by the existing law.
D. CLAIM: Miners are patenting land for $2.50--$5.00 per acre.
RESPONSE: No one is patenting land for $2.50--$5.00 per acre. The
proof is that if land could be patented for that amount, there would be
no land left to patent! In reality, since the early 1990's, Congress
has placed a moratorium on the patenting of mining claims. Furthermore,
even when patents were still being issued, most claimants expended $20-
30,000 (in 1980's dollars) per acre before and during the patenting
process.
Considering the incentive value of the patenting of mining claims,
it would seem wiser to find a way to continue the practice rather than
totally abolish it. I respectfully suggest that the problem with
patenting is the fault of Congress, who in over 100 years never revised
the payment amounts of $2.50--$5.00 per acre. At the time of enactment,
even $2.50 was a lot of money to pay for an acre of land, let alone
mountainous wilderness. If based on the value of an ounce of gold in
the late 1800's (i.e.; $20/oz), $2.50 was equal to 1/8th of an ounce.
At today's price (nearly $900/oz), that same 1/8th of an ounce is now
worth $112.50.
E. CLAIM: The Mining Law needs revision because it's
``antiquated''.
RESPONSE: One of the more popular battle cries, opponents to the
Mining Law argue that the Law needs massive revision just because it's
an old law. If that were the case, then maybe Congress should consider
the creation of the Natl. Park Service and Yellowstone Natl. Park . . .
as they too were enacted in 1872. Or how about the U.S. Constitution
and the Bill or Rights . . . they are even older than the Mining Law
and following this logic (old must be bad) suggests the oldest needs to
be revised first. Maybe we should revise the Declaration of
Independence . . . as it's oldest of all.
Revising the Mining Law just because its 136 years old is nothing
but bad news for this nation. ``If it ain't broke, don't fix it'' seems
to aptly apply . . . and it ain't broke, at least not in the sense
proclaimed by those seeking reform. (It is broke in the sense that the
environmental protection pendulum has swung way too far into the realm
of needlessly restrictive to the point of prohibitive, causing untold
economic hardship throughout the West.
part ii: protecting the individual miner/prospector
I beg the Committee's indulgence to bring up a special issue in
regards to any reform of the 1872 Mining Law, which is the plight of
the Individual Miner/ Prospector. Yes, we are still out there,
searching for our own version of the American Dream. Every summer the
gold regions of the West are visited by thousands of individuals and
families usually in pursuit of placer gold using methods used 150 years
ago. The most popular form of this ``small-scale'' mining is with a
``surface suction dredge''.
Contrary to what the extremist environmentalist community claims,
suction dredge mining is the most environmentally friendly method yet
devised for the recovery of heavy minerals, such as gold, from active
streambed gravels. For the most part, all signs of the operations are
reclaimed naturally with one winter flow; and, as numerous studies have
shown, suction dredge mining, as currently regulated by the individual
states, has a net beneficial affect on the environment.
The largest of the common suction dredges is the 8'' dredge. It
might have a floating barge 8 ft. wide X 16 ft. long, and be powered by
a 40 hp Volkswagon engine. These dredges are used in larger rivers, and
might move 1-3 cu/yrds/hr. For the most part, suction dredge and lessor
mining/prospecting operations do not require an approved Plan of
Operations under current BLM or FS regulations, but do require state
permits which regulate for the protection of fish and fish habitat,
etc..
By far, this level of small-scale mining is the most popular . . .
and the most like the gold rush days 150 years ago. By the thousands,
individuals spend their summer vacations or retirement out in the great
outdoors, practicing the methods developed over 5,000 years ago. And
just like during the gold rush days, some go away empty-handed, most
find at least something, many pay their expenses, and a certain few
actually do pretty good. For the most part, nobody is getting rich. All
however are continuously pumping their own money into the operation, on
average of $2-3,000 per person per year.
Next up the scale of operations involves mechanized earthmoving,
typically a small 1-2 man (or husband & wife) seasonal bulldozer-
backhoe trommel & sluice operation. Even the smallest of these
operations usually requires an approved Plan of Operations and
reclamation bond. This level of operations is not as popular as the
smaller levels of operations due to the considerably higher costs
involved (a medium sized dozer or backhoe along with pumps, and some
type of wash plant will cost $50,000 on up), the tremendous burden of
getting an approved Plan of Operations and posting a bond, along with
the plethora of state permits that may be required. Currently, this
level of mining is nearly impossible due to the complexity of the
regulations and the undue delays in the approval process. There are
literally thousands of small-scale mineral deposits throughout the West
well worth working at this level (but are far too small to work at the
large scale) . . . but aren't being developed due to the burden of
obtaining approval. Any more restriction placed on this level of mining
will stop the few hundred operations still in existence.
part iii: requests to the committee
In order to preserve and protect the small-scale miners and
prospectors, and along with them the hundreds of small communities and
businesses dependent on the economic boost brought by mining, I
respectfully urge the Committee to incorporate the following items in
any proposed revision to the 1872 Mining Law:
A. GRANDFATHERED RIGHTS: All existing claims at the time of any
revision must have grandfathered rights back to the rights granted on
the date of location.
B. RETAIN THE 10-CLAIM SMALL-SCALE MINERS EXEMPTION: In order to
maintain the small-scale mining industry (which pumps well over $20-
30,000,000 into the economy annually), the exemption on the $125 per
claim per year maintenance fee and the performing of assessment work
must be retained.
C. OCCUPANCY: Small-scale miners & prospectors must be able to
occupy the areas they are working for several reasons:
1. Remoteness of the area, lack of or poor roads makes daily
commute expensive and time consuming.
2. Many travel hundreds of miles in pursuit of a prospect,
and must be able to freely come and go (and stay) to have any
chance of success.
3. Valuable equipment must be guarded at all times from
threats of all sorts, natural and human. This usually requires
occupancy on or near the claim. In sight of the equipment.
4. Valuable minerals must be guarded from theft. An open
deposit is a tempting target when the claim owner is not
around.
D. NO APPROVAL NEEDED FOR INSIGNIFICANT DISTURBANCE: Current BLM
and FS regulations are sufficient to protect the Public Lands from any
unnecessary disturbances. Any revision to the Mining Law should not
contain any pre-set arbitrary conditions, as each mining operation is
site-specific and needs the management of local authorities to be
affective. Operations deemed not likely to cause a significant surface
disturbance, at least up to an including most suction dredge mining
operations, should not require an approved Plan of Operations. Simple
exploration with a dozer or backhoe should also not necessarily require
Plan approval. It really needs the local man on the ground to determine
the possible extent of the disturbance, and the possible protection
measures reasonably needed.
Low thresholds for needing an approved Plan of Operations will
cause the extinction of the smaller levels of mining, and will bury the
BLM and FS in endless and needless tons of paperwork. It is currently
estimated that the average ``simple'' FS Plan of Operations takes over
$20,000 to approve, and most Natl. Forests are budgeted to approve 1-2
Plans per year. Simply requiring all suction dredge miners to obtain an
approved Plan would cause the submittal of thousands of Plans to the
FS, which would destroy the suction dredge industry (due to delays),
and take all the efforts of the whole FS staff to even make a dent in
the pile of Plans to be approved. And all for no good reason.
E. NO ROYALTY ON SMALL-SCALE MINING: Even if the Committee proposes
a royalty, all small-scale operations producing less than $100,000
annual net profit should be exempted to avoid placing undue economic
hardship on the small miner, and to save the collection agency
thousands of hours of paperwork attempting to collect trivial amounts
of money (i.e.; the govt. would probably spend way more in the
collection and any amount collected).
And although I believe a royalty is wrong, and harmful to the
industry on the whole, if there must be a royalty, then it should be on
``net'' returns, not on the ``gross'' as proposed by the House. A
royalty on the ``gross'' will work to make way too many mining
prospects uneconomical.
F. NO SPECIAL STATUS FOR THIRD PARTY APPEALS & SUITS: Already one
of the main reasons for lengthy undue delays in obtaining approval on
Plans of Operation is the constant harassing interference usually by
non-profit tax-exempt environmental organizations (NGOs) out to save
the planet. The laws, rules and regulations already give all interested
parties ample opportunity to raise issues of concern and object to any
proposed mining operation requiring an approved Plan.
Just by following the FS appeal process (and without going to
court), NGOs can and do tie up and delay approval of almost any Plan
for proposed mining for easily a year or more based on the flimsiest
excuse or slightest technicality in preparation of the required NEPA
analysis and document. What's worse, even after forcing the FS into
spending on average over $30,000 preparing the required NEPA documents,
and after causing the total waste of years of the miners life waiting
for approval (and as many individual small-scale miners get involved in
mining in their later years, many fall into ill health or even die
while waiting 2, 3, 4, all the way up to 10 or more years for approval;
even when the NGOs that caused all this are found to be wrong, they
loose nothing.
Even if they loose the appeals (of which there are at least two
levels available), there is always the option of suing in court to stop
or just delay the proposed mining operation. (Sometimes the window of
opportunity for the miner is less than the time it takes to fight his
way to approval, and he either goes broke from legal fees, or grows too
old or dies. The NGOs know that with the right arguments and a
determined effort, they can easily delay the approval of any Plan of
Operations for at least ten years. Even though they can cost the FS and
the miner thousands of dollars in defense, even when they are found
wrong and loose in court, in many instances, they (the NGOs) somehow
receive legal fees paid by the taxpayers. (NOTE: The whole
environmental protection industry has grown by leaps and bounds beyond
the realm of simply over-protective. A whole ``environmental law''
industry has formed milking the taxpayers of hundreds of millions of
dollars. They actually get paid for destroying this Nation's natural
resource industries . . . in part by the very taxes paid by those same
industries.
Please do not give the future of the United States Mineral Industry
over to the hands of the NGOs by giving them or other third parties
special status, they already have far too much influence and is costing
this Nation dearly.
part iv: closing statement
The basic premise of our whole system of government is that the
least amount of government governs best, and the closer we get to
individual freedom and capitalism the better off we all are. Mining of
minerals is a prerequisite for all civilization. So is a clean and
healthy environment. The two are not necessarily incompatible, but
rather can go hand-in-hand so that they both thrive.
Under the current levels of regulation (and contrary to what some
might say), no legally operating mining operation is seriously harming
the environment. On the other-hand, many overly and unnecessarily
restrictive regulations and policies are unnecessarily harming the
mineral industry.
Considering that everything humankind needs ultimately comes from
one of two sources (i.e.; agriculture or mining), there can be no doubt
that a strong nation requires a strong domestic mineral industry. I
respectfully submit to this Committee that due to the over-whelming
success of the 1872 Mining Law, any reform of the 1872 Mining Law
should work to strengthen the mineral industry, not act to further
destroy it.
republican democracy & the americn dream in action
I can think of no other law still on the books today that practices
the tenants of pure republican democracy and the ``American Dream''
like the 1872 Mining Law. In the tradition of a Horatio Alger ``rags to
riches'' story (whereby the poor hero achieves success and wealth
solely through honest hard work), the rights granted in the 1872 Mining
Law alone allow nearly anyone to pursue the American Dream of Self-
Sufficiency and Happiness. Without the 1872 Mining Law, none of the
tremendous benefits to the Nation (e.g.; national economic wealth,
mineral self-sufficiency, the taming and settling of the West,
technology, millions of jobs, etc.), would have occurred, and this
Nations history would be quite different.
I, Tom Kitchar, do herby swear that the above is true and correct
to the best of my knowledge and understanding, and I humbly thank the
Committee for considering my Testimony.
Respectfully submitted by,
Tom Kitchar,
President.
______
Orion Mining,
Richland, OR.
Hon. Jeff Bingaman,
Chairman, Senate Energy and Natural Resources Committee.
Hon. Pete V. Domenici,
Ranking Minority Member, Senate Energy and Natural Resources Committee.
Dear Committee Members: There are great concerns here in the West
if the 1872 mining law were materially changed in any way. Ever since
the Sierra Clubs ``Mine Free by '93'' campaign failed to end mining in
this country, a tremendous campaign of misinformation has been waged
about the Mining Law of 1872 in general and small scale mining in
particular. Yet contrary to activist's propaganda, The Mining Law is as
current as any law on the books, and is as important to our sustainable
economic and National security as our founding principles of the US
Constitution.
Environmental mythology holds that Congress passed the Mining Law
to accelerate development of the west. Simply not true. The nation's
first mining laws followed the first discovery of gold in North
Carolina in 1803. When California was admitted to the Union in 1850,
they already had 250,000 people. The diverse mining laws of 1849, 1865,
and 1870 were consolidated into one Mining Law, in 1872. And almost
every major community in the west was already a settlement. Even
Yellowstone Park was created in 1872.
It is hard to understand this ongoing dispute about the area of the
1872 Mining law without reference to history. The California gold rush
in 1849 took place without much law to guide it so the miners developed
their own rules and customs. They evolved in the miners' meetings,
which were used to govern mining camps before any official government
existed at these remote locations. Among the earliest successful
prospectors in the 1849 California gold rush were experienced miners
from Cornwall, England, Chile, participants in the Dahlonega, Georgia
gold rush of 1829, and other experienced prospectors and miners, who
already knew something about what practical rules were needed. That the
rules were so successful may reflect this combination of practical
experience with considerable learning, for in 1849 hardly a camp
existed on the great Sierra slope that did not contain miners who were
graduates of colleges and law-schools or were lawyers of considerable
experience. The miners' meetings operated as might be expected of a
highly democratic process. They favored the interests of those who were
there--mostly individuals and small firms without much capital. A much
more centralized governmental process in Washington might have favored
those with influence in the national government--perhaps those who
might want to protect large firms from having to pay huge amounts to
buy claims from small scale Miners or prospectors who discovered
minerals but lacked the capital to extract them or preserve the true
wealth for the political elite at the expense of the working man. It
has never relay been a fight over protecting the environment but who is
in control of local economic and social resources.
The Law defined who could claim mineral rights and how they were to
be administered. That's all. Other approaches were possible, and might
have commended themselves to people with different interests. Justice
Field took the position, to the great displeasure of the miners; that
under the common law after Alta California became American, minerals
passed to the owner of the land, so that the miner could not invade
land privately held. Another alternative might have been the Mexican,
based on the Spanish custom, whereby the sovereign was entitled to a
royal share, or royalty, of one fifth of the gold. Yet another approach
might be the English, where unlike the Spanish quinto, if any gold or
silver was found in a mine the king was entitled to the whole, at least
if the precious metals were worth more than the base metals (though by
two statutes of William and Mary, the king allowed the owner to keep
the mine provided that the gold and silver must be sold to the king for
the value of the tin in the ore). In the American gold rushes in the
West, as in our revolution from the crown the miners made the rules, so
the miners made the money, not the king, sovereign or their politically
elite governmental equivalent but the common man, the one doing the
hard highly risky laborious work. This stimulated a great deal of
successful mining, both large and small scale.
The nations' tax, environmental, and corporate laws cover
governance of all these raised issues. Today, activists ridiculously
proclaim that mining is exempt from these laws because of the 1872
Mining Law. Since 1872 though, the Mining Law has been continuously
updated, most recently in 1993. The Mining Law has been severely
narrowed through amendments, and restricted through hundreds of court
cases and a plethora of environmental laws. In actuality, the only
portion of the Mining Law that remains as originally written, is the
title.
Mining played an integral role in America's development and growth,
especially in the West. In fact, the history of the American West is
tied directly to mining and the mines that gave birth to small, rural
communities. Cities such as Park City, UT and Denver, CO got their
start as mining towns and prosper today. Even though most of the gold
in the California and other western gold rushes was found on federal
land, the federal government adopted a mining law scheme late, long
after the customs of ownership by discovery and extraction had been
established. The California gold rush of 1849, Colorado in 1859, the
Comstock Lode and other strikes in Nevada in 1859-60, Idaho in 1862-63,
Montana in 1863, and quite a few others, all preceded the federal
mining laws. As in the software industry in the 1990s, the industry
developed, many vast individual fortunes were made, and the national
wealth was greatly increased, all by a new kind of property, before
much of the legal framework for the industry developed.
However, some communities have turned into ghost towns when mines
closed their doors, jobs disappeared and no economic center remained.
This is still a threat to thousands of American families and
communities throughout the rural West. Though it is not due to the
threat of closing of mines but of over regulation of the Western rural
landscape.
The present 1872 mining law solves this crisis by allowing small
and artisanal miners as well as mining companies to work
collaboratively with communities to provide a continued source of
economic development after the mineral resource has been depleted. When
it came, in skeletal form in 1866, and in substantially its current
form in the Mining Law of 1872, the federal statutory law of mining
``received'' customary law in much the same way that the states had
received the common law. The statute, still in force, says ``all
valuable mineral deposits'' in federal lands ``shall be free and open
to exploration and purchase'' under prescribed regulations ``and
according to the local customs or rules of miners in the several mining
districts, so far as the same are applicable and not inconsistent with
the laws of the United States.'' Thus, instead of following any of the
alternative schemes, which might have preserved more government
authority or revenue, Congress expressly adopted the ``local customs or
rules of the miners.'' The most important of those customs created the
property right based on discovery and extraction of valuable minerals,
in the absence of any title. Thus, the history of mining customs has
unusual relevance because in this area, as Faulkner said, ``the past
isn't dead--it isn't even past.'' Despite much contemporary hostility
to the Mining Law of 1872 and high level political pressure by
influential individuals and organizations for its repeal, all repeal
efforts have so far failed, and it remains the guiding law. The miners'
custom, that the finder of valuable minerals on government land is
entitled to exclusive possession of the land for purposes of mining and
to all the minerals he extracts, has been a powerful engine driving
exploration and extraction of valuable minerals, the very foundation of
our economy, and has been the law of the United States since 1872. The
provision specifically allows miners and companies to purchase, or
``patent,'' their mining lands and work with other businesses to
provide sustainable private income to rural communities. Without making
these lands private, reclamation laws require companies to remove
everything as they leave, including roads, buildings, power plants and
power lines, water and sewer lines, and more to the determent of the
local communities.
Unfortunately, several special interest groups have dishonestly
portrayed the 1872 Mining Law as a giant land sale and giveaway to
developers. Not only is this rhetorically false, it is an affront to
the rural American families and communities whose livelihoods depend on
sustained economic development. A mineral claim is a parcel of land
containing precious metal in its soil or rock.'' Under the Mining Law
of 1872, there are three stages in patenting a mining claim.
The first stage is ``location'' of a claim. ``A location is the act
of appropriating such a parcel,'' generally by posting notice on the
ground. ``The locators of all mining locations . . . so long as they
comply with the laws . . . shall have the exclusive right of possession
and enjoyment of all the surface located within the lines of their
locations, and of all veins, [and] lodes.
At the second stage, the prospector is required to perform
improvements or assessment work. Until a patent has been issued
therefore, not less than $100 worth of labor shall be performed or
improvements made during each year. However the prospector spends many
times this amount today in trying to comply with multitude of
governmental agency rules.
The third stage, the prospector may apply for a patent (though at
present this is temperately suspended). A person who has ``located'' a
mining or millsite claim can apply for a patent (the term for a
government conveyance of title to an individual of public land) with
the Bureau of Land Management, show compliance with the laws regarding
location, post notice of application, and file proof of notice. After
further publication of notice, the applicant files papers showing that
the requisite labor has been expended on the claim and that the
description is correct, and further proof of the requisite publication
of notice.
At This point, if no adverse claim has been filed, ``it shall be
assumed that the applicant is entitled to a patent'' upon payment of a
nominal fee, unless it is shown that the applicant has failed to comply
with the mining laws.
I find it appalling that the Washington DC establishment has
allowed the Mining Law to be so misrepresented. We as a nation cannot
allow the scare tactics of a few anti-energy, anti-development, anti-
private property, and anti-people special interests to threaten
American families, our national security and the vary foundation for
our form of self governess.
We've heard a great deal about the outsourcing of American industry
in recent years. One aspect of this problem that doesn't get the
attention it deserves is the outsourcing of strategic mineral mining to
foreign countries to the determent of the US manufacturing, balance of
trade, economy and national security.
For more than a decade, a moratorium has been in place on patenting
any mining claims in the United States under the 1872 Mining Law. That
has resulted in the loss of investments in mining and our nation is
forced to look overseas for some desperately needed minerals.
To bring some of these mining jobs back home it's time to lift the
moratorium on patenting in the 1872 law.
Contrary to activist's mythology, tax laws require mining companies
to pay royalties. Royalties are paid directly to the states, and not
the black-hole of the federal government. All mining states have
royalties paid under different scenarios. Two royalties are paid on
metals in Montana, the Metals Mine License Tax and the Resource
Indemnity Tax. Montanans irresponsibly banned gold mining in 1998, and
the royalty lost to Montana schools alone, is $200 million dollars!
Environmentalists claim mining is allowed to operate without regard
to other public land interests. This is so untrue; the reality is that
65% of our lands are closed to mineral entry. Wilderness consumes 35%
of the public lands and supports only 10% of total recreation use. The
0.5% of our lands employed by mining though, has benefited mankind by a
40:1 multiple, that tourism will never equal, and the industry
continues to strongly support the multiple-use concept and reclamation
after the minerals are depleted.
Consider that our roads, bridges, railroads, transmission, and
energy facilities are in shambles in this country. Hybrid electric
vehicles consume 30% more copper and new CAFE standards will require
new metal alloys.
Considering existing royalties, and the highest corporate and
property taxes in the industrialized world, the question begs; where
are the metals going to come from when mining is banned by our tort-
driven, ``taxaholic'', NIMBLY attitudes towards our land?
The GAO and independent studies have demonstrated that the Mining
Law allows the maximum benefit to the public in terms of taxation,
production, and revenue; so leave it alone. The nation's environmental
laws continue to fail because they are court-driven and are
obstructionist, not protectionist. Environmental NGO's continue to
lobby for single-use designation for our public lands. The public
beware. The threat to our land is not from the Mining Law of 1872!
To alter or change the 1872 Mining Law in the present political
climate would really be a violation of the public trust, since the
citizens in each State have elected to Congress members of the Senate,
in part, to protect the sovereignty and the property of not only the
States but to protect the rights of the individual as stated in the
constitution and the US Codes of law.
I expect Congress to protect these rights of the people as well as
our National Security both economic and social.
Thank you for taking this testimony.
Arthur Sappington,
Owner/Operator.
______
Southeast Alaska Conservation Council,
Juneau, AK, February 5, 2008.
Hon. Jeff Bingaman,
Chair, Senate Committee on Energy and Natural Resources, Washington DC.
Re: Comments for the Hearing Record on Reform of the Mining Law of 1872
Dear Senator Bingaman: Like most Americans, the Southeast Alaska
Conservation Council (SEACC) supports strong and healthy communities
and appreciates the jobs associated with mining. Mining must be done in
a way that protects our clean water and way of life. SEACC works to
ensure that mining in Southeast Alaska is done responsibly. We support
reforming the Mining Law of 1872 to hold the mining industry fully
accountable for protecting our public resources and providing a fair
return to U.S. taxpayers for the use of public lands.
Mr. Randy Wanamaker, with the Berners Bay Consortium Human Resource
Development Corporation, testified on January 24, 2008, before the
Senate Committee on Energy and Natural Resources. Mr. Wannamaker used
examples from the Kensington Mine project, near Juneau Alaska, as the
basis for his opposition to reform of the Mining Law of 1872. With our
testimony, SEACC hopes to provide the Committee with a balanced
perspective of mining law reform and the Kensington Mine project. We
respectfully request that this letter and accompanying attachments be
included in the official record for the January 24, 2008 hearing.
Founded in 1970, SEACC is a grassroots coalition of 15 volunteer,
non-profit conservation groups made up of local citizens in 13
Southeast Alaska communities and is dedicated to preserving the
integrity of Southeast Alaska's unsurpassed natural environment while
providing for balanced, sustainable uses of our region's resources.
protecting resources, water and communities is good for business
The Mining Law of 1872 was enacted over 135 years ago, and the
federal government interprets it as a mandate that mining is the
highest and best use for public lands. This approach fails to address
issues that are critical for today, such as mining royalties, abandoned
mine cleanup, and protecting special places and clean water. Mining law
reform, such as the provisions outlined in H.R. 2262, would help ensure
that mining stays a part of our economic future in a responsible way.
Mining proponents claim that reform to the Mining Law of 1872 would
damage the industry. The truth is that responsible development that
protects clean water, wildlife and special places is good for business.
That is especially true in Southeast Alaska, where some of our
strongest industries, such as commercial fishing and tourism, rely on
these resources.
better water quality protections are needed
Unfortunately, federal law does not sufficiently protect surface
and groundwater quality from the impacts of hardrock mining. The Mining
Law of 1872 contains no environmental provisions. The Clean Water Act
does not address impacts to groundwater. And, the Resource Conservation
and Recovery Act (RCRA) provides exemptions for mining waste. A 2006
scientific, peer-reviewed study found that more than 75% of the major
hardrock mines surveyed exceeded water quality standards.\1\ Of the
mines surveyed, 84% were modern mines that began operating after the
advent of modern environmental laws. Coeur d'Alene Mines Corporation's
Rochester Mine in Nevada illustrates this very issue. Despite the
company's assertions that existing laws would protect water resources,
the mine has resulted in numerous groundwater quality exceedances for
pollutants such as cyanide.\2\
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\1\ Kuipers and Maest, ``Comparisons of Predicated and Actual Water
Quality at Hardrock Mines,'' 2006.
\2\ Ibid.
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mining law reform should ensure that mining is balanced with other
land uses
Mr. Wannamaker asserts that the National Environmental Policy Act
(NEPA) provides sufficient protection for special places, and provides
federal land managers sufficient authority to balance mining with other
important land uses. This is not true. NEPA requires only that the
environmental impacts of a mining proposal be considered by federal
decisionmakers; it does not require federal agencies to choose the most
protective option. Furthermore, the 1872 Mining Law prioritizes mining
over all other land uses, precluding federal land managers from
effectively protecting areas of special value (e.g., spawning habitat,
municipal water supplies, or important cultural resources) even if
identified through the NEPA process.
mining law reform should require full cost, independently guaranteed,
reclamation bonding
Mining law reform should ensure that there is sufficient,
independently guaranteed, financial assurance to cover the full cost of
reclamation and closure. Too often, taxpayers are left bearing the
burden when reclamation bonds are inadequate.\3\ To date, the EPA
estimates the full cost of abandoned mine cleanup at $50 billion.\4\
---------------------------------------------------------------------------
\3\ Government Accountability Office, ``Hardrock Mining: BLM Needs
to Better Manage Financial Assurances to Guarantee Coverage of
Reclamation Costs,'' June 2005, GAO-05-377.
\4\ US EPA, Office of Solid Waste and Emergency Response,
``Cleaning Up the Nation's Waste Sites: Markets and Technology
Trends,'' September 2004.
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The State of Alaska's reclamation bonding does not adequately
protect the taxpayer or ensure reclamation because it authorizes
corporate guarantees. As a form of financial assurance, corporate
guarantees provide no guarantee at all. A corporate guarantee is simply
a written promise, or ``IOU,'' by the corporation that it will fulfill
its reclamation obligation. There are no hard assets, cash, or cash-
equivalents behind it.
Circumstances such as mergers, hostile takeovers or dramatic
fluctuations in metal prices often occur very rapidly, leaving what
might appear to be a healthy corporation in difficult financial
circumstances. Many companies using corporate guarantees have failed or
declared bankruptcy.\5\
---------------------------------------------------------------------------
\5\ Government Accountability Office, ``Environmental Liabilities:
EPA Should Do More to Ensure that Liable Parties Meet Their Cleanup
Obligations,'' August 2005, GAO-05-658.
---------------------------------------------------------------------------
existing laws did not cause unnecessary delays at the kensington mine
Mr. Wannamaker asserts that existing federal environmental laws and
conservation groups caused unnecessary delay in permitting the
Kensington Mine, In truth, it was Coeur d'Alene Mine Corporation's push
to permit a mine using an illegal waste disposal method that delayed
the process. The Kensington Mine had received the necessary permits for
dry-land mine waste disposal in 1998. But the company chose not to
proceed with mine operations and instead, it redesigned the mine to
ensure a maximum profit. This new plan called for dumping chemically
processed waste (tailings) into a lake. These toxic tailings would have
killed all fish and most other aquatic life. If it had proceeded, the
Kensington Mine would have been the first mine in over 30 years to be
permitted to dump chemically processed tailings into a lake. Not
surprisingly, the 9th Circuit Court of Appeals ruled that this lake
dumping plan violated the Clean Water Act.\6\ The Kensington Mine could
have been in operation now for a number of years, if Coeur d'Alene Mine
Corporation had not abandoned its initial design in favor of a legally
risky one--one that ultimately proved illegal.
---------------------------------------------------------------------------
\6\ United States Court of Appeals for the Ninth Circuit, ``SEACC
v. Corps,'' May 22, 2007, No. 06-35679.
---------------------------------------------------------------------------
Before passage of the Clean Water Act in 1972, mining companies
frequently dumped their tailings in the nearest lake or river, often
with catastrophic consequences for those water bodies, for fish, and
for human health. What the Kensington Mine proposed to do with their
tailings has been illegal for decades. In fact, in 1982 the
Environmental Protection Agency (EPA) adopted regulations specifically
prohibiting this practice for all new gold mines. The EPA studied the
mining industry nationwide and concluded that the discharge of mine
tailings into navigable waters was unnecessary because feasible
alternatives existed and were already in use at most mines. More
recently, and for the Kensington Mine specifically, the EPA determined
that disposal of tailings on dry land would be the environmentally
preferable alternative.
Mr. Wanamaker was correct in stating that most people in Southeast
Alaska want the Kensington Mine to go forward, but many Alaskans also
want development at the Kensington to be done right and to have
Alaska's clean water protected. Most recently, SEACC worked one-on-one
with Coeur d'Alene Mines, to develop a mining plan that would dispose
of the mine's waste in a way that protects water quality and moves the
project forward. SEACC and other conservation groups have described
this new plan as promising.\7\
---------------------------------------------------------------------------
\7\ Alan Suderman and Kate Golden, Juneau Empire, ``Coeur submits
Kensington proposal,'' January 27, 2008.
---------------------------------------------------------------------------
SEACC has long encouraged the approach to responsible development
that is embodied in the House's mining reform bill. We encourage the
Senate to use this bill as the basis for Mining Law reform and to
include these important principles in any reform bill that is
introduced in the Senate:
allow mining to be balanced with other land uses
The federal government currently interprets the 1872 Mining Law to
mandate that mining is the highest and best use for public lands.
Federal land managers give preference to mining over all other land
uses--from recreation to clean water to hunting. Land managers should
have the authority to deny mine proposals and balance mining with other
valuable land uses.
establish environmental and reclamation standards
Strong standards are needed to make sure damage to land and water
is prevented. Perpetual pollution should be banned and mines should be
required to reclaim public lands to sustain post-mining uses.
gives local communities a voice in land use decisions
State, local, and tribal governments should be able to put lands
important to their community off-limits to mining.
implement fiscal reforms
The sale of public lands to corporate interest should be
permanently ended, and mining companies should be required to pay for
the minerals they extract from taxpayer's lands. Mining companies
should pay a gross royalty similar to what other extractive industries
pay for what they extract from public lands.
create funds to clean up abandoned mines
Money generated by this new royalty should go to clean-up the more
than 500,000 abandoned mines that litter western landscapes.
protect special places from mining
Treasured areas like Wild and Scenic Rivers, Roadless Areas, Areas
of Critical Environmental Concern and Wilderness Study Areas are not
appropriate places for a mine. These areas should be put off limits to
new claims.
I would be pleased to answer any additional questions you may have
on mining reform or the Kensington Mine.
Sincerely,
Rob Cadmus,
Water Quality and Mining Organizer.
______
Statement of John E. Antonio, Governor of the Pueblo of Laguna,
Laguna, NM
i. introduction
This statement is submitted by the Pueblo of Laguna (``Pueblo'' or
``Laguna'') to apprise the Committee of the Pueblo's concerns over
mining and to assist the Committee in developing language to reform the
Mining Law of 1872.
The Pueblo of Laguna is a federally recognized Indian tribe located
45 miles west of Albuquerque, New Mexico, and has approximately 8,000
members who are affiliated with six (6) different villages. The
Pueblo's lands consist of 560,000 acres in Cibola, Sandoval, Bernalillo
and Valencia Counties, and contain the site of what was once the
world's largest open pit uranium strip mine: the Jackpile-Paguate Mine.
The Jackpile-Paguate Mine, which began operating in 1953, was finally
shut down in 1982 but then laid dormant for 7 years before reclamation
activities began. During that time, stockpiled waste was blown into
surrounding areas, including the Paguate village, located just 30 feet
from the mine. In addition, rain caused waste from the mine to flow
into surface water tributaries. After years of negotiating with the
company who conducted the mining, reclamation began in 1989 and was
completed in 1995.
Despite efforts to reclaim the mine after it closed, the mine
continues to have a tremendous impact on the long-term health and
environmental landscape at the Pueblo. Many Pueblo members who worked
in the mine or lived near the mine suffer from cancer-related illnesses
and other health conditions. Two surface water tributaries near the
mine, the Rio Paguate and the Rio Moquino, and the Rio San Jose have
since tested positive for radiation contamination. Groundwater is also
at risk for radiation contamination. Because water is scarce in our
arid part of New Mexico, the contamination of our water resources is
devastating to our people and the entire region. Although no official
studies have been conducted to establish a direct correlation between
the mining activities and the increase in cancer among individuals who
live near or worked at the mine, significant statistical information is
being compiled on former mine workers applying for benefits under the
Radiation Exposure Compensation Act (``RECA''). Many of these
applicants have been diagnosed with cancer-related illnesses. In
addition, other studies that are now being conducted may show a direct
correlation between uranium mining activities and various respiratory
and kidney problems, and may even extend to problems related to
diabetes. Testimony on these and related issues was recently presented
in Grants, New Mexico, at a New Mexico legislative hearing on the
impacts of uranium mining.
As a result of our experiences with mining, the Pueblo is opposed
to any mining on or near Pueblo lands. In 2007, our Tribal Council
passed a resolution to establish a moratorium on any uranium mining and
development. However, in the event that mining is permitted near our
lands, the Pueblo seeks to be included in the process and have adequate
protections in place.
ii. mining at laguna
A. Uranium Mining, Generally
Uranium, a silvery-white, radioactive metal similar in appearance
to a piece of silver or steel, is never found in its pure form in
nature. It is always found combined with other elements into different
chemical compounds, which are highly poisonous. Uranium has been used
to make material for nuclear weapons and to make fuel for nuclear power
plants. Deposits of minerals that include large amounts of uranium,
large enough to make mining worthwhile are rare. However, the ``Four
Corners'' area of Arizona, Colorado, New Mexico and Utah contains some
of the richest deposits of uranium ores in the world.
Open pit mining is used when the ore is close to the surface and
involves removing the ``overburden'', or top layers of soil and rock
that cover the ore. The overburden is hauled off and often stored in
huge piles. Underground mining requires drilling, blasting and digging
into the earth and the ore is obtained by the use of elevators. Holes
are drilled to provide ventilation because the decay of uranium results
in a radioactive gas called radon. Radon can build up in underground
mines causing serious health problems for miners. In addition,
underground water can cause problems.
Once the uranium is obtained, the next process is ``milling'', or
removing the valuable mineral from the mined ore. The ore is crushed
and then mixed with water to form slurry. The slurry is mixed with
chemicals to separate out the uranium ore from the rest of the rock,
referred to as ``leaching''. The liquid containing the uranium ore, or
``leachate'', is then filtered from the rest of the slurry and further
concentrated by a precipitation process. Water is then removed and the
precipitate is dried to produce ``yellowcake'', which is then packaged
and shipped to an enrichment plant. Material left over from the milling
process is referred to as ``tailings'', which are still dangerous
because of the radioactive elements they contain.
B. Uranium Mining at Laguna
The Grants Mineral Belt, which stretches from east of Gallup, New
Mexico to Laguna, New Mexico and includes Laguna Pueblo lands, has
especially rich uranium deposits. In May 1952, the Anaconda Mining
Company (later Atlantic Richfield or ARCO) entered into a lease with
the Pueblo to mine uranium on 4,988 acres of Laguna land near Paguate
Village. Additional leases were signed in 1963 and 1976 for 2,560 and
320 acres, respectively, for a total of 8,000 acres. As a result,
Anaconda operated one of the world's largest open pit uranium mines at
the Pueblo from 1953 until 1982. Before the first lease was signed with
the Pueblo, Anaconda had signed an agreement with the U.S. Atomic
Energy Commission (``Commission''), which made Anaconda the sole ore-
buying agent for the Commission. In fact, a majority of uranium
produced on Indian land between 1950 and 1968 went to the Commission.
Anaconda utilized 3 open pit mines and 9 underground mines at
Laguna to produce 24 million tons of uranium-bearing ore. More than 400
million tons of earth had to be moved to obtain the ore. Mining
conducted from the 9 underground mines primarily began in the 1970s.
The Jackpile-Paguate Mine, located in the Village of Paguate, was the
deepest open pit mine at 625 feet. It operated 24 hours a day, 7 days a
week, 365 days a year for 30 years and employed as many as 800 members.
At its peak, the mine employed the majority of the workforce at Laguna
and neighboring communities.
ARCO closed the mine on March 31, 1982, after which it laid dormant
for 7 years before any efforts to reclaim the mine began. More than
2,000 acres of land and several pits needed to be reclaimed. One pit
measured over 600 feet deep, and a few pits were filled with
contaminated water that had seeped up over the years. A draft
environmental impact statement found ARCO primarily responsible and
recommended reclaiming the mine because the site was a public health
and safety hazard, noting that more serious hazards would develop if
the site was left unreclaimed. Reclamation began in 1989 after ARCO and
the Pueblo reached an agreement by which the Pueblo would perform the
reclamation. However, the $43 million provided by ARCO was well below
the $400 million required to fully reclaim the mine. The Pueblo tried
to reclaim the mine as best as possible, despite the lack of funding
and the fact that there were standards for reclaiming a uranium mine in
place at the time.
In reclaiming the mine, the Laguna Construction Company used the
overburden to partially backfill some of the pits. It was specially
sloped and terraced to keep it in place and prevent wind and rain from
washing it away. Next, a layer of rock, or shale, of up to 12 feet
thick was put into the pits to keep radiation from coming up into the
air. An additional foot and a half of topsoil was placed over the top
and then seeded with grasses and other native plants. High grade ore
piles that were still on the surface were covered with layers of top
soil and reseeded with native vegetation. The Pueblo's reclamation
process, the first attempt in the world to reclaim an open pit uranium
mine, was completed in 1995 but the Pueblo continue to monitor the mine
and its ongoing impacts. And, because the $43 million provided by ARCO
only enabled the Pueblo to conduct minimal reclamation, much work still
remains to be done to fully reclaim the mine and reduce the health and
environmental impacts.
iii. mining impacts on laguna
The Village of Paguate, whose outer village boundaries lie only 30
feet from the edge of the largest open pit in the mining area, was
significantly affected by the mine. In this village of approximately
1500 residents, blasting caused old stone houses to crack apart, and
dust from the mine coated homes, crops and clothes. Paguate residents
on the south and eastern sides of the village, closest to the mine,
recall dust that seemed to linger for hours after a blast and cracks on
the walls of homes.
Despite the reclamation efforts, former mining employees as well as
Pueblo members living in Paguate and downwind continue to report
growing numbers of cancer-related illnesses. Contaminated surfaces and
groundwater sources still exist. Of the 24 million tons of ore mined
from the Jackpile-Paguate Mine, approximately 23.7 million tons were
left as tailings, which are still dangerous because of radioactive
elements they contain. Water contaminated from the milling and
precipitation process was pumped into big ponds to evaporate away. In
addition, water that flows through the old mine, including the Rio
Moquino and the Rio Paguate, is contaminated from radioactive elements.
Many Laguna members have died, and others suffer from high incidences
of diabetes, reportedly linked to radiation exposure attributed to
uranium mining. In addition, radiation exposure can cause damage that
may not show up for 10-40 years.
Currently, little is known about the stability of the radioactive
pollutants and additional risks, which may involve migration into local
groundwater supplies or into the atmosphere. Meanwhile, the mine
continues to have a tremendous impact on the long-term health and
environmental landscape at the Pueblo, where many residents and former
mine employees continue to experience deleterious health effects. The
mine contaminated parts of the reservation with toxic, radioactive
materials and miners who worked at the Jackpile Mine were not warned of
the exposure to radiation, including radon gas and radioactive dust.
iv. the pueblo urges the committee to reform the mining law of 1872
Based on the Pueblo's experience with the Jackpile Mine, the Pueblo
is opposed to any further mining on or near Pueblo lands. The Pueblo
fears that the State of New Mexico, the U.S. Department of Agriculture,
and the U.S. Forest Service will permit additional uranium exploration
and mining because of the current high demand for uranium, fueled by
dwindling uranium stockpiles from existing sources and new orders for a
large number of nuclear-fueled power plants worldwide.
The Pueblo has spent over 50 years dealing with the impact of
uranium mining and knows first-hand the hardships suffered by
communities in the proximity of such hardrock mines. It is for this
reason that the Pueblo urges the Committee to support legislation
reforming the Mining Law of 1872. At a minimum, such legislation should
include provisions for funding legislative objectives through royalties
paid by hardrock mining operations. In addition, the bill should
include four provisions that the Pueblo considers to be particularly
prudent, useful, and of great importance, as follows:
A. Establish New Environmental Standards for Hardrock Mining on Federal
Lands
Many federal lands adjoin Indian Country and share water resources
essential to the health and welfare of tribes. Therefore, it is
imperative that any new legislation include adequate environmental
standards to protect the health and welfare of the adjoining tribal
communities. Although some witnesses who testified at the Committee
hearing on January 24 indicated that the statutes currently in place
are sufficient to assure that hardrock mining is conducted
appropriately, the Pueblo knows first-hand that additional
environmental standards are necessary. The Pueblo respectfully requests
to Committee to provide input into the development of new environmental
standards.
B. Establish a Hardrock Reclamation Account for the Clean-Up of
Hardrock Mines
Many hardrock mines leach dangerous pollutants from pits, tunnels,
and tailing piles into surface and ground water on tribal lands. New
legislation should include a Reclamation Account and authorization for
the Secretary to use that account for reclamation and restoration of
land and water resources adversely affected by past mining activities
on federal and tribal lands. In addition, the funds should be available
directly to the tribes to undertake reclamation activities. For
example, Anaconda, the original operator of the Jackpile Mine, agreed
to pay $43 million for the reclamation of the land at the Pueblo caused
as a result of the mining operations at the Jackpile-Paguate Mine.
However, an environmental impact statement estimated that it would cost
$400 million to successfully reclaim the Jackpile Mine. The Pueblo did
its best to reclaim the site of the Jackpile mine, which was the first
attempt in the world to reclaim an open pit uranium mine, but
additional reclamation work still needs to be done at the mine.
Adequate funding is necessary to ensure reclamation successfully
remediates environmental damage and addresses other consequences from
mining.
C. Establish a Hardrock Community Impact Assistance Account Fund
New legislation should also include the establishment of a Hardrock
Community Impact Assistance Account Fund (``Account'') to help
communities, including tribal communities, that have been adversely
impacted by pollution from hardrock mining. The Account should provide
assistance for the planning, construction, and maintenance of public
facilities and the provision of public services to Indian tribes that
are socially or economically impacted by mineral activities conducted
under the general mining laws.
D. Enable Tribes to Participate Meaningfully in the Permitting Decision
Tribes should be permitted to take an active role throughout the
hardrock mining permitting process. Often, tribes are not included in
the process at all or are included at the tail end of the process. The
Pueblo encourages the Committee to include language in the bill that
would provide tribes a seat at the table from the beginning of the
permitting process. In addition, tribes should be permitted to petition
for withdrawal of federal land from the general mining laws, including
petitions based on value of a watershed to supply drinking water,
wildlife habitat value, and cultural, religious, or historic resources
that are important to the Indian tribe. For example, Mount Taylor is
sacred to the Pueblo of Laguna and other tribes. It is also the site of
the world's deepest uranium mine shaft and some of the largest
unreclaimed mill tailings piles in the United States. Current mining
proposals seek to obtain access to Mount Taylor for mining. However,
the Pueblo is strongly opposed to such proposals because of the
cultural and religious significance it has for the Pueblo. If the
Pueblo is engaged in the permitting process from the beginning, our
concerns can be addressed and potential solutions or alternatives may
be identified before the interested parties invest in the idea of
mining at such an important site.
v. conclusion
In closing, thank you for allowing the Pueblo to present this
statement to the Committee. We respectfully request the Committee's
favorable consideration of our requests.
______
Lucky Jack Project,
Gunnison, CO, February 6, 2008.
Hon. Jeff Bingaman,
Chairman, Committee on Energy and Natural Resources, United States
Senate, Washington, DC.
Hon. Pete Domenici,
Ranking Member, Committee on Energy and Natural Resources, United
States Senate, Washington, DC.
RE: Comments for the Record--Senate Energy and Natural Resources
Committee January 24, 2008 Oversight Hearing on Reform of the Mining
Law of 1872
Dear Chairman Bingaman and Ranking Member Domenici: The Lucky Jack
Project is submitting these comments to supplement the hearing record
for the January 24, 2008 Oversight Hearing on Reform of the Mining Law
of 1872 to provide the Senate Energy and Natural Resources Committee
(the Committee) with accurate information about the proposed Lucky Jack
Project in Gunnison County, Colorado. Our comments also discuss several
of the Mining Law issues debated during the hearing.
As you will recall, the testimony from the Mayor of Crested Butte,
Colorado, the Honorable Alan Bernholtz, focused on the Lucky Jack
Project. Unfortunately, many of Mayor Bernholtz's remarks contained
inaccurate and misleading information about the project, the regulatory
requirements for the project and the applicable federal permitting
process. Because we are concerned that Mayor Bernholtz's testimony may
have confused the Committee, we respectfully ask that you consider our
comments as you deliberate the important issue of how to update the
1872 Mining Law.
We believe that an accurate assessment of the regulatory
requirements and permitting process that apply to mineral projects on
public lands will clearly reveal that the existing comprehensive
environmental regulatory framework and the associated and extensive
public involvement process are working well. Therefore, the sweeping
Mining Law changes that Mr. Bernholtz recommended in his testimony are
unnecessary. These changes are also harmful because they would thwart
development of important projects like the Lucky Jack Project (and any
similarly situated projects elsewhere in the country) and deprive
Colorado and the Nation of the substantial benefits that will result
from the responsible development of this world-class, domestic
molybdenum deposit.
Because molybdenum is an essential alloying element in many types
of steel, including stainless steel, it is indispensable to America's
industry, infrastructure and national defense. It is also a crucial
environmental metal used as a catalyst to reduce the sulfur content of
fuels. Given these important uses for molybdenum, and the ever-
increasing competition for molybdenum on world markets, Mayor
Bernholtz's position that Congress should amend the Mining Law to give
his community veto power to categorically reject this mine proposal
without regard to, and despite, the existing, robust environmental
review and permitting process is not in the best interest of the Nation
or the State of Colorado.
we attempted to alert the mayor's to the errors in his written
testimony
It is indeed regrettable that Mayor Bernholtz's testimony contains
so many factual errors because we had provided many months earlier--and
had continued to provide in meetings, conversations and on our website
accurate information related to the project. Moreover, upon seeing a
copy of the Mayor's written testimony, we went to great lengths to try
to warn him about the errors it contained. We contacted Crested Butte
Town Manager, Ms. Susan Parker, on January 22, 2008, to voice our
concerns about the testimony's mistakes and inaccuracies and to offer
our help in making corrections. Following up our conversation with Ms.
Parker, we provided her and Mayor Bernholtz with the attached letter
prior to the hearing.
As you can see, our January 23, 2008 letter to Mayor Bernholtz
presents specific and detailed corrections for the inaccuracies in the
written testimony he submitted to the Committee. We were hoping that
the Mayor would use our letter to correct his remarks and to avoid
repeating these errors in his oral testimony.
Unfortunately, the Mayor chose to ignore our letter. At the
hearing, he repeated the same misleading and inaccurate statements
about the project that he included in his written testimony. He also
made a number of incorrect and misleading comments about the regulatory
requirements for the project and the permitting process that will
evaluate the Lucky Jack Project. We respectfully request that you
review our January 23''. letter to gain an accurate understanding of
the Lucky Jack Project, our commitment to develop an environmentally
responsible mine and our ongoing efforts to engage the Mayor and the
Town of Crested Butte in a meaningful dialogue about our project. Table
1 summarizes our January 23rd letter.
------------------------------------------------------------------------
Table 1 Summary of Kobex's January 23, 2008 Letter to Mayor Bernholtz
-------------------------------------------------------------------------
Correction Supplied in
False/Misleading Claim in Mayor Kobex's Letter to Mayor
Bernholtz's Testimony Bernholtz
------------------------------------------------------------------------
Mining is an historic artifact that is no The West Elk and Elk Creek
longer important to Crested Butte and coal mines are the County's
Gunnison County. largest individual tax
payers, contributing
approximately 30% to the
County's general fund.
------------------------------------------------------------------------
Mining is incompatible with tourism. Tourism and mining co-exist
in many places in Colorado
such as Steamboat Springs,
Winter Park, Vail, Glenwood
Springs, and Cripple Creek,
as well as in other places
like Salt Lake City, Utah.
------------------------------------------------------------------------
The mine will dump hundreds of thousands Nothing will be dumped into
of tons of mine wastes and mine tailings the watershed. Mine
into Crested Butte's watershed. tailings will be stored and
will undergo ongoing
reclamation outside of the
watershed. Approximately
half of the tailings will
be placed back inside the
mine using advanced paste-
and-fill tailings
management technology.
------------------------------------------------------------------------
The mine will disturb thousands of acres As currently planned, the
of prime wildlife habitat. Lucky Jack Project will
disturb about 350 acres,
part of which is land
previously disturbed by
former mining activities.
------------------------------------------------------------------------
The mine will eliminate critical The 350 acres of planned
recreational areas from public use. disturbance will be
reclaimed in compliance
with stringent state laws.
------------------------------------------------------------------------
The mine will turn pristine National The 350-acre estimated
Forest lands into a permanent industrial project footprint will
waste dump site. affect previously disturbed
land on unpatented and
patented mining claims--not
pristine National Forest
lands. This disturbance
will comply will all
applicable regulations and
will be reclaimed.
------------------------------------------------------------------------
The mining claims and millsites are slated This will be a modern
for U.S. Energy/Kobex's network of waste underground mining project
dumps, pipelines, roads and related specifically designed to
facilities. avoid subsidence or other
impacts to the overlying
surface. The above-ground
facilities will be confined
to a small area that
includes previously
disturbed land.
------------------------------------------------------------------------
Industrial mineral development of the The project must meet many
public lands on Mount Emmons and within stringent State and federal
the Town's statutorily established legal requirements designed
municipal watershed would result in to avoid or mitigate any
significant adverse environmental impacts. possible significant
environmental impacts.
------------------------------------------------------------------------
An historic silver/lead/zinc mine Contaminated water is not
discharges contaminated water directly discharged into the
into the Crested Butte watershed. Annual watershed. U.S. Energy and
water treatment costs exceed $1 million. Kobex operate and pay for a
water treatment facility
that uses proven and
reliable, state-of-the-art
water treatment technology.
Treated water is discharged
into Coal Creek below the
Town's water intake. This
water treatment facility
has operated for over 25
years in compliance with
permit regulations which
have been in place. The
proposed Lucky Jack Project
will reduce--if not
eliminate--the future need
for this water treatment
facility.
------------------------------------------------------------------------
the nepa process will give the town of crested butte many opportunities
to participate in the environmental review for the lucky jack project
We believe the concerns the Mayor and the Town of Crested Butte
have about the Lucky Jack Project can and would be best addressed by
participating in the National Environmental Policy Act (NEPA) process
that the U.S. Department of Agriculture's Forest Service will conduct
to evaluate the Lucky Jack Project. Public participation is at the
heart of the NEPA process which is designed to give interested
parties--like the Town of Crested Butte--an important and effective
opportunity to influence agency decisions about project proposals.
The NEPA process requires federal agencies like the Forest Service
to prepare an environmental analysis in the form of an Environmental
Assessment (EA) and/or an Environmental Impact Statement (EIS).
Although no final decision has been made in the case of the Lucky Jack
Project, the Grand Mesa, Uncompahgre and Gunnison National Forests may
choose to prepare an EIS.
Federal agencies typically require project proponents to reimburse
the agency for the costs of preparing NEPA documents. Because
developing NEPA documents is a time consuming and substantial task, it
is common for agencies to hire third-party contractors to prepare the
documents. These contractors write NEPA documents under the direct
supervision of the agency to reflect the agency's findings regarding
the proposed project.
During the hearing, Mayor Bernholtz voiced his opinion that NEPA
documents are biased because project proponents pay for them. As
Senator Craig explained to the Mayor, this simply is not true. Federal
agencies carefully review internal drafts of NEPA documents to ensure
they properly express the agency's viewpoints and conclusions. In this
way, federal agencies exert complete control over the content and
findings presented in NEPA documents. Thus, such documents are
decision-making tools in which federal agencies are the sole decision
makers.
The analysis of project alternatives is the cornerstone of the NEPA
process as agencies consider ways to reduce environmental impacts and
improve project proposals. NEPA environmental analyses provide a
detailed comparison of the impacts associated with the project
proponent's proposed action and one or more project alternatives.
Agencies select a preferred alternative on the basis of this analysis
and disclose the reasons for selecting the preferred alternative.
Typically, public comments help shape the alternatives evaluated in
NEPA documents. It is very common for the public involvement and
alternatives analysis processes to have a significant effect on
projects because agencies often select a preferred alternative that
incorporates suggestions and comments from the public.
A recent Northwest Mining Association (NWMA) white paper, attached
hereto, documents how public comments gathered during the NEPA process
influence agency decisions about project proposals. Section V of this
white paper presents case histories for 27 mineral projects and
documents the changes made to these projects as a result of the NEPA
process and the existing environmental regulations governing milling on
public lands:
The case histories show a consistent pattern of thorough
environmental reviews during which both BLM and the USFS
identified and imposed environmental controls, project
modifications, and mitigation requirements to The Honorable
Jeff Bingaman The Honorable Pete Domenici February 6, 2008 Page
6 eliminate or minimize environmental impacts. It is also
evident from the case histories that the NEPA process gives the
public ample opportunities to participate in these
environmental reviews and influence regulators' decisions about
project proposals. (NWMA white paper, Page 1.)
Table 3 in this white paper (Pages 17--18) shows the changes that
were made to 11 mineral projects on National Forest System lands as a
result of public comment and agency requirements to modify the proposed
projects in order to avoid, minimize or mitigate environmental impacts.
These case histories stand in direct contrast to the following
assertion in Mayor Bernholtz's testimony:
Under the federal government's interpretation of the 1872
Mining Law, the Forest Service is powerless to deny the Lucky
Jack Project. At best, under the agency's mining regulations
located at 36 CFR Part 228A, the Forest Service can only
'minimize adverse impacts,' but cannot deny the proposed
project to protect public resources and local interests.
(Testimony, Page 3).
The white paper illustrates how the Mayor's statement is incorrect
and misleading. As shown on Table 3, the Grand Mesa, Uncompahgre and
Gunnison National Forests recently rejected the Robin Redbreast Plan of
Operations as explained in the following excerpt from the Forest
Supervisor's May 11, 2007 Record of Decision:
It is my decision that the `plan of operations' as submitted
cannot be approved, and that changes or additions to the plan
of operations are necessary to minimize or eliminate adverse
environmental impacts from mineral activities on National
Forest System (NFS) lands, as required by Forest Service
Regulations (36 CFR 228A). (Record of Decision, Page 3).
The Lucky Jack Project, which is located in the same National
Forest as the Robin Redbreast Project, will be subjected to an
identical level of scrutiny and will be evaluated with a similarly
critical eye. We will bear the burden of proof to demonstrate that the
Lucky Jack Project will comply with the Forest Service requirement at
36 CFR Sec. 228.8A to minimize adverse environmental impacts and
comply with all other federal laws and regulations.
Mayor Bernholtz's testimony also demands that ``...the Forest
Service must be given the authority to balance other public uses and
values on public lands in determining whether a specific mining
proposal can be approved.'' (Testimony, Page 3). What Mayor Bernholtz
fails to recognize is that the NEPA process already requires the Forest
Service to achieve this balance by evaluating how mineral activities
may impact other land uses and developing project alternatives and
mitigation measures to avoid or minimize these impacts.
A 1999 National Research Council report entitled ``Hardrock Mining
on Federal Lands'' characterizes NEPA as the backbone of the
environmental and regulatory program for evaluating proposed mining
projects:
The NEPA process is the key to establishing an effective
balance between mineral development and environmental
protection. (NRC Report, page 6).
The case histories presented in the NWMA white paper clearly
demonstrate how the NEPA process and the Forest Service's Section 228A
surface management regulations work together to achieve land management
objectives--including balancing multiple uses of public lands,
protecting the environment, and responding to public comments.
the clean water act will fully protect the town of crested
butte's watershed
In his response to questions during the hearing, Mayor Bernholtz
also incorrectly described how the Clean Water Act will govern the
Lucky Jack Project, arguing that the law would not proactively regulate
and protect water quality. To the contrary, that is the primary purpose
of this law--not, as the Mayor stated, to respond only after-the-fact
if pollution occurs.
We are certain that the Committee is well aware of the scope of the
Clean Water Act and how the Section 402 Clean Water Act National
Pollutant Discharge Elimination System (NPDES) permit program imposes
stringent requirements on discharges to surface water resources. In
Colorado, where the Clean Water Act program has been delegated to the
State, a Colorado Discharge Permit System (CDPS) permit is required and
ensures similar protections. However, the Committee may not be aware
that the Forest Service issued a policy in March 2007 that specifically
requires project proponents to obtain a Clean Water Act Section 401
Water Quality Certification from either the U.S. Environmental
Protection Agency or the state agency with primacy for the NPDES permit
program before the Forest Service can approve a Plan of Operations.
This new policy, in Section 2817.23a of the Forest Service Manual 2800
on Minerals and Geology, Chapter 2810--Mining Claims, establishes the
following requirement:
1. CWA Sec. 401--Water Quality Certification: Pursuant to
CWA Sec. 401, both the Forest Service and the mining operator
have CWA requirements to meet. If the mining activity ``may
result in any discharge into the navigable waters,'' (CWA,
Title IV, Sec. 401(a) (1), 33 U.S.C. 1341(a), 1972) the mining
operator must obtain a 401 certification from the designated
CWA federal, state or tribal entity, typically the state. This
401 certification from the designated entity certifies that the
operator's mining activities and associated best management
practices (BMPs), mitigation and/or reclamation is in
compliance with applicable provisions of state, federal and/or
tribal water quality requirements of the CWA. The mining
operator must give a copy of this 401 certification to the
Forest Service prior to the Agency approving the Plan of
Operations. Pursuant to CWA, the Forest Service cannot
authorize a Plan of Operations until the 401 certification has
been obtained or waived by the designated entity. Finally, the
Forest Service may not authorize a Plan of Operations if the
designated entity denies the certification. (Italics emphasis
added.)
Therefore, in the case of the Lucky Jack Project, the Grand Mesa,
Uncompahgre and Gunnison National Forests cannot approve the Lucky Jack
Project Plan of Operation until the Colorado Department of Public
Health and Environment issues the Clean Water Act Section 401 Water
Quality Certification. This new certification mandate provides the Town
of Crested Butte with ample assurance that the Forest Service and the
State of Colorado will not approve the Lucky Jack Project until we
provide rigorous proof that the project will comply with all applicable
federal and state water quality protection requirements.
where should mining be allowed?
Mayor Bernholtz's testimony states that the Mining Law should give
local communities the power to place areas off-limits to mining. In
response to his remarks, there was considerable discussion during the
hearing about where mining should be allowed to occur and the question
of whether local communities should be allowed to preclude mining on
public lands.
In considering this question, we respectfully ask the Committee to
give due consideration to the fundamental geologic fact that mineral
deposits only occur in specific and limited places as the result of
special geologic conditions. Mineral deposits are therefore rare and
hard to find. They cannot be moved and must be developed where they are
located. Laws, regulations, and policies governing mining must
recognize and accommodate this unique aspect of mining--miners do not
get to choose where mines are located.
This geologic constraint makes mineral projects very different from
other industrial endeavors in which project developers can pick a
location to minimize public concerns about their project. The Lucky
Jack Project does not have that option--we cannot develop this project
somewhere else--it must be mined where the minerals are located inside
of Mount Emmons.
The current Mining Law and extensive regulatory regime governing
mining on public lands recognizes this fact about mineral deposits. Any
changes to the Mining Law must continue to acknowledge the geological
restrictions that dictate where mineral deposits are located.
Additionally, we wish to point out to the Committee that many
communities throughout the West originated as mining towns. This is
especially true in Colorado where towns like Aspen, Breckenridge,
Durango, Telluride, Cripple Creek, Central City--and Crested Butte--all
started out as communities to support adjacent mines. Today, these
popular tourist destinations thrive in the midst of some of Colorado's
most important and famous historic mining districts, refuting Mayor
Bernholtz's claim that mining and tourism are incompatible.
the lucky jack project is committed to working closely with the town of
crested butte
As explained in our January 23rd letter to Mayor Bernholtz, we have
reached out to the Town of Crested Butte on numerous occasions to
provide information about the Lucky Jack Project, to learn more about
their concerns, and to seek their input with the hope of finding common
ground. We have made a number of presentations to various community
groups and held open houses in Crested Butte and in Gunnison in
September 2007. This process will continue, and expand, in 2008 and
beyond.
We are currently planning to create the Lucky Jack Community
Advisory Board that will include representatives from the Town of
Crested Butte, the other nearby communities, the conservation
community, area chambers of commerce and several citizens at large.
This advisory group will serve as a formalized means of access to
company officials. Advisory Group meetings will be open forums designed
to foster communication with the objective of disseminating
information, developing collaborative solutions to problems,
identifying synergies and capitalizing upon opportunities.
We are hopeful that after listening to Mr. Randy Wanamaker's
testimony that Mayor Bernholtz and the Town of Crested Butte will
resolve to work closely with us. As Mr. Wanamaker stated:
Everyone wins when government and industry form strategic
partnerships.
Mr. Wanamaker described a template for community and company
interaction that we believe would be ideal for the Lucky Jack Project,
the Town of Crested Butte, and other nearby communities.
We are confident that if the Town of Crested Butte will work with
us, together we will find common ground that will lead to a strategic
partnership between the Lucky Jack Project and the Town--just like the
strategic partnership that Mr. Wanamaker described between Coeur Alaska
and the City of Juneau, Alaska.
conclusion
We very much appreciate this opportunity to add these comments to
the hearing record. Please do not hesitate to contact us if you have
questions about these comments or the Lucky Jack Project. Additionally,
we would like to extend an open invitation to you, members of the
Committee and to congressional staff to tour the Lucky Jack Project.
Please come see for yourselves that the Lucky Jack Project is an
exceptional opportunity to develop an environmentally responsible,
world-class molybdenum mine that will become an important domestic
source of this essential metal.
Sincerely yours,
Roman Sliklanka,
Chairman, Kobex Resources, LTD.
Keith G. Larsen,
Chairman--CEO U.S. Energy Corp.
Attachment 1.--Letter to Mayor Bernholtz From Lucky Jack Project
January 23, 2008.
Hon. Alan Bernholtz,
Mayor of the Town of Crested Butte, P.O. Box 39, Crested Butte, CO.
Re: Written testimony of Town of Crested Butte for oversight hearing of
U.S. Senate Committee on Energy and Natural Resources concerning 1872
Mining Law
Dear Mayor Bernholtz: Kobex Resources Ltd. (``Kobex'') has reviewed
a copy of the written testimony (``Testimony'') prepared by the Town of
Crested Butte (``Town'') and delivered in a letter dated January 17,
2007, to Senator Jeff Bingaman for an oversight hearing of the U.S.
Senate Committee on Energy and Natural Resources concerning proposed
changes to the General Mining Act of 1872 (the ``Mining Law''). In its
Testimony, the Town is urging the Committee to pursue comprehensive
changes to the Mining Law that the Town believes are necessary to
protect the local economy, environment and public interest. In
particular, the Town wants federal legislation to stop the development
of a world-class molybdenum mining project by Kobex and U.S. Energy
Corp. on nearby Mt. Emmons (the ``Lucky Jack Project'' or ``Project'').
In preparing its Testimony, the Town unfortunately has relied on a
set of profoundly inaccurate, unsupported and misleading factual claims
about the Lucky Jack Project and related matters. In addition, the Town
has made a series of wholly inaccurate and misleading statements and
conclusions regarding applicable law. We are discouraged by this,
because time and again--for example, at a presentation to Town
officials and residents on September 25, 2007--we have endeavored to
provide accurate and factual information about the Project and the
strict legal process it will follow. Yet little to none of that
information seems to be represented in what you are offering in
Testimony to a Committee of the United States Senate.
We discussed our concerns regarding the Testimony in a conversation
with the Town Manager, Susan Parker, on the evening of January 22,
2008, prior to her departure for Washington, D.C., to attend the Senate
hearing. Based on this conversation, we understand that Ms. Parker is
now in the process of revising portions of the Testimony. This letter
is written to assist the Town in that revision process and to correct
certain errors and misstatements in the Testimony. We are providing it
to you now to give you an opportunity to properly amend the Testimony
before the hearing commences.
The inaccurate, unsupported and misleading factual information
cited in your Testimony includes the following:
False/misleading claim: ``Times have changed though and our
residents and economy no longer depend on mining. In our
community, skiing, fishing, hiking and mountain-biking, to name
a few, are the life-bloods of our economy.'' Testimony, p. 1.
--Correction needed: Times have changed, but it is inaccurate to
suggest that mining has been relegated to history. In fact,
mining continues to play a very active and important role
in the lives of the residents of Gunnison County, of which
the Town is a part. For example, the West Elk and Elk Creek
coal mines are the County's largest individual tax payers,
contributing approximately 30% towards the County's general
fund. Along with the rest of Gunnison County, the Town of
Crested Butte and its residents benefit significantly from
this economic support. In this respect, it is also a
mistake to presume and inaccurate to state that the Town
relies (or, for that matter, should even attempt to rely)
solely on tourism to support itself. To be sure, tourism is
an important source of revenue for the Town, but it is
hardly the only source of revenue--and that is a good
thing. Economic diversification helps ensure that the
Town's economy is not hitched to only one engine that, when
it stalls, will bring everything behind it to a screeching
halt. Indeed, where tourism produces low-wage, service-
sector jobs, mining creates opportunities for careers in
highly-paid, skilled positions. Finally, mining and tourism
are by no means mutually exclusive, and it is highly
disingenuous to say otherwise. Consider, for example, the
robust tourism industries of Salt Lake City, Utah, and
Steamboat Springs, Winter Park, Vail, Glenwood Springs and
Cripple Creek, Colorado, all of which have active mining
and/or oil and gas operations in their vicinities.
False/misleading claim: ``... the mine will dump hundreds of
thousands of tons of mine wastes and mine tailings into Crested
Butte's watershed....'' Testimony, p. 2.
--Correction needed: As an initial matter, it must be emphasized
that the plan of operations for the Lucky Jack Project is
still under development. Therefore, the Town has no basis
to say one way or another what any future mine will or will
not do. In any event, however, the mine will under no
circumstances be ``dumping'' anything into the Town's
watershed. Mine tailings will be temporarily stored outside
of the Town's watershed and later placed back into the mine
itself utilizing advanced paste and fill technology.
Throughout this process, the project site will be
reelamated in accordance with State laws.
False/misleading claim: ``... the mine will... disturb
thousands of acres of prime wildlife habitat....'' Testimony,
p. 2.
--Correction needed: The total surface footprint of the Lucky Jack
Project is currently estimated to be approximately 350
acres, part of which constitutes land that was previously
disturbed from former mining activities. This represents a
substantially reduced environmental footprint and is an
order of magnitude smaller than what was proposed by Amax
previously.
False/misleading claim: ``... the mineeliminate critical
recreational areas from public use....'' Testimony, p. 2.
--Correction needed: As noted above, the total surface footprint of
the Lucky Jack Project is currently estimated to be
approximately 350 acres, part of which constitutes land
that was previously disturbed from former mining
activities. In any event, the small amount of land on which
the Project is planned will be reclaimed as required under
stringent State laws.
False/misleading claim: ``... the mineessentially turn
pristine National Forest lands outside of our Town--all of
which are surrounded by federally designated wilderness--into a
permanent industrial dump site.'' Testimony, p. 2.
--Correction needed: Again, the current estimated footprint of the
Lucky Jack Project is 350 acres, portions of which include
previously disturbed land and patented mining claims which
cannot be accurately described as ``pristine National
Forest lands.'' In accordance with State and federal law,
mine tailings will be processed and disposed of in an
environmentally sound manner using modem mining technology
and the project site will be reclaimed in accordance with
State laws.
False/misleading claim: ``These claims [mining and millsite
claims associated with the Lucky Jack Project] are slated for
U.S. Energy/Kobex's network of waste dumps, pipelines, roads
and related facilities.'' Testimony, p. 2.
--Correction needed: The mining phase of the Lucky Jack Project is
planned to be underground, using modern mining methods
designed to avoid subsidence or any other impact to the
surface above. Above-ground activities will be limited to a
relatively small area comprising in part previously
disturbed land.
False/misleading claim: ``... it is clear that industrial
mineral development of the public lands on Mt. Emmons and
within the Town's statutorily established municipal watershed
would result in significant adverse environmental impacts....''
Testimony, p. 5
--Correction needed: As noted above, the plan of operations for the
Lucky Jack Project is still under development. Therefore,
the Town has no rational basis for concluding whether the
project will have adverse environmental impacts at all, let
alone significant adverse environmental impacts. Moreover,
portions of the Project's anticipated footprint fall on
previously disturbed land and on patented mining claims.
What can be said, even at this early planning stage, is
that, in order to proceed at all, the Lucky Jack Project
will be required to meet a host of stringent State and
federal legal requirements specifically designed to
mitigate any possible significant environmental impacts or
avoid them altogether.
False/misleading claim: ``... Crested Butte residents live
with the threats posed by a defunct silver/lead/zinc mine that
continues (and has for the last 30 years) to discharge
contaminated water directly into our watershed. ... Yearly
treatment costs for the water running out of the defunct mine
exceed $1 million with no end in sight.'' Testimony, p. 6.
--Correction needed: Contaminated water from historic mining
operations is not being discharged into the Town's
watershed. In fact, water emanating from historic mining
operations at the project site is being collected and
transported to a water treatment plant operated and paid
for by U.S. Energy and Kobex. Only after undergoing state-
of-the-art treatment is the water discharged into Coal
Creek at a point below the Town's water intake, all of
which is done in accordance with federal and State law.
Additionally, part of the plan of operations for the
Project will involve measures designed to significantly
reduce, if not eliminate, the need for a water treatment
plant to treat water from mine workings on the Project
site.
It is imperative that the Town correct these factual errors in its
Testimony to avoid the danger of providing false and misleading
information to a Committee of the United States Senate and leaving its
members with an inaccurate picture and understanding of the nature of
the Lucky Jack Project and related matters.
In addition to factual errors, the Town's Testimony relies on a
series of inaccurate and misleading statements and conclusions of law.
Most notably, the Testimony mischaractefizes the basic purpose and
scope of the Mining Law and suggests that, but for the Mining Law's
``antiquated provisions,'' the mining industry in the United States
operates in a legal vacuum, unimpeded by any laws, regulations or other
restrictions on its activities. This is evident, for instance, in your
assertion that ``industrial mineral development of the public lands on
Mt. Emmons and within the Town's statutorily established municipal
watershed would result in significant adverse environmental impacts
that are not addressed under the 1872 Mining Law.'' Testimony, p. 5
(emphasis added).
The Mining Law establishes a process for acquiring and protecting
mining claims on federal lands. It represents an undeniably important
part of the regulation of the mining industry in the United States.
However, it is only one part of a much larger picture. By focusing only
on the Mining Law, the Town's Testimony gives the patently false
impression that nothing else exists to regulate mining activities in
the United States when, in fact, nothing could be further from the
truth.
In reality, any mining operation in the United States, including
the Lucky Jack Project, is subject to a comprehensive set of federal
laws and regulations involving multiple agencies of government. Without
limitation, this includes the National Environmental Policy Act of
1969, 42 U.S.C. Sec. Sec. 4321-4370c; the Clean Water Act, 33 U.S.C.
Sec. Sec. 1251-1387; the Clean Air Act, 42 U.S.C. Sec. Sec. 7401-
7671q; the Resource Conservation and Recovery Act, 42 U.S.C. Sec. Sec.
6901-6992k; the Federal Mines Safety and Health Act of 1977, 30 U.S.C.
Sec. Sec. 801-962; and the implementing regulations for each. Colorado
adds its own level of oversight and regulation under the Colorado Mined
Land Reclamation Act, C.R.S. Sec. Sec. 34-32-101 et seq., and various
statutory and regulatory counterparts to the federal programs described
above. In short, the Lucky Jack Project will have to go through a
lengthy and thorough review and approval process to demonstrate
compliance with a series of strict legal requirements and standards
before it can proceed.
Through its Testimony, the Town is demanding that the entire legal
process described above should be subverted and made subject to
perceived ``public interest'' of Crested Butte's residents. Obviously,
this raises an issue of regulatory takings, where the Town would
essentially be depriving Kobex and U.S. Energy of their property
rights. Additionally, however, it ignores the fact that, according to a
scientific poll conducted in September 2007, two-thirds of Gunnison
County residents polled believe that mining in the County ``can be done
in an environmentally responsible way'' and that ``the community should
work with the partners of the Lucky Jack Project, Kobex Resources and
U.S. Energy, instead of working against them.'' It also ignores the
compelling national public interest in pursuing responsible development
of strategic minerals (including molybdenum) within the United States.
Global demand for these strategic minerals is only going to rise,
subjecting the United States to an ever-increasing amount of
competition with China, India, Europe and other countries and regions.
One only has to look to the Middle East, on which the United States is
dependent for energy, to begin to understand the enormous problems that
ensue when we fail to achieve a measurable level of self-sufficiency at
home.
The molybdenum resource inside Mt. Emmons is one of the richest
deposits known anywhere in the world. Using modern mining technologies
and methods, the resource can be extracted in an environmentally and
socially responsible manner, benefiting the people of the United
States, the State of Colorado and the Town of Crested Butte.
We strongly urge the Town to correct both the factual and legal
errors and misstatements in its Testimony and provide the Committee
with accurate information on which to base its decisions and formulate
policy. As always, if you have any questions or need any further
clarification or information regarding anything discussed in this
letter, we are ready, willing and able to assist.
Respectfully,
Perry Anderson.
Attachment 2.--Northwest Mining Association (white paper)
The Environmental Provisions in the House Mining Law Bill (Hr. 2262)
Are Solutions in Search of a Problem
27 mineral project case histories demonstrate why the sweeping changes
in this bill are unnecessary to protect the environment
Prepared by: Debra W. Struhsacker, Environmental Permitting &
Government Relations Consultant, Reno, NV and Jeffrey W. Todd,
Environmental Consultant Boerne, TX
I. Executive Summary
The House Mining Law bill, H.R. 2262, contains sweeping changes to
the public participation process and environmental standards for
hardrock exploration and mining projects on federal lands. Written as
if starting with a blank slate, H.R. 2262 ignores the fact that a
public participation process and comprehensive and effective
environmental standards already exist. As such, H.R. 2262 reinvents the
wheel--but adds some corners to that wheel to slow it down and
ultimately stop hardrock exploration and mining on federal lands.
This Northwest Mining Association white paper presents
environmental permitting case histories for 27 hardrock exploration and
mining projects on U.S. Bureau of Land Management (BLM) and U.S. Forest
Service (USFS) lands to document how the existing public participation
process and the environmental laws and regulations governing hardrock
minerals on federal lands effectively protect the environment. These
case histories clearly demonstrate that the existing BLM and USFS
standards and regulations for mining and the National Environmental
Policy Act (NEPA) environmental review process work seamlessly together
to provide the agencies with sufficient regulatory authority to
regulate mineral projects.
The case histories show a consistent pattern of thorough
environmental reviews during which both BLM and the USFS identified and
imposed environmental controls, project modifications, and mitigation
requirements to eliminate or minimize environmental impacts. It is also
evident from the case histories that the NEPA process gives the public
ample opportunities to participate in these environmental reviews and
influence regulators' decisions about project proposals. The following
is a summary of key findings:
The case histories document that the existing land
management regulations governing mineral activities on federal
lands satisfy Congressionally-mandated land management
objectives to prevent unnecessary or undue degradation of BLM
lands and to minimize adverse impacts on National Forest System
lands.
--BLM and the USFS already have clear and effective authority with
which to regulate mineral projects. The case histories show
how the agencies use these authorities to require project
modifications or to demand specific environmental controls
or mitigation measures to eliminate or minimize impacts.
Agency-imposed changes span the gamut from adding
environmental protection, mitigation, or monitoring
measures, to selecting a project alternative that differs
from the applicant's project proposal, to denying proposed
projects that the agencies believe would violate federal
laws and regulations.
--The case histories do not reveal any inadequacies or gaps in the
current regulations or suggest that the environmental
provisions in H.R. 2262 would be useful or desirable.
--The case histories show that both BLM and the USFS have
verifiable track records of effectively tailoring the on-
the-ground application of their environmental performance
standards to provide optimal environmental protection and
reclamation success at a given site. The case histories
provide examples of agency requirements for site-specific
measures to protect cultural resources, wildlife and
fisheries habitat, scenic values, water quality, air
quality, wetlands, public safety, species of concern,
special mine waste management measures, and protocols
addressing noxious and invasive species controls.
--The case histories also demonstrate how the NEPA process and the
agencies' surface management regulations work together to
achieve the agencies' land management objectives. Agency
mandated changes to proposed projects typically respond to
public comments received in conjunction with the NEPA
process.
The H.R. 2262 definition, ``undue degradation,'' is
unrealistic and unworkable because it changes the current FLPMA
standard of ``unnecessary or undue degradation,'' which
recognizes that some degradation may be necessary (i.e.,
unavoidable) in order to mine.
--The undue degradation definition in H.R. 2262 singles out
hardrock mining compared to all other activities on public
lands by imposing a higher, impractical, and unfair
standard that precludes unavoidable degradation due to
mining.
--The case histories do not identify any real-life, on-the-ground
problems with the unnecessary or undue degradation standard
or suggest any need to change this standard.
All of the environmental provisions in H.R. 2262 are at odds
with the 1999 National Research Council (NRC) report entitled
``Hardrock Mining on Federal Lands.''
--This prestigious and unbiased report found that the then existing
regulations provided adequate environmental protection at
mines on public lands. BLM's regulations were updated in
2001 to fill the five regulatory gaps identified in the NRC
Report. H.R. 2262 treats these same gaps as if they remain
unfilled.
--The NRC Report places special emphasis on the effectiveness of
the NEPA process for gathering public input, evaluating
environmental impacts, and identifying any unnecessary or
unacceptable impacts associated with proposed mineral
projects. The H.R. 2262 parallel public participation
process for mining projects will not improve public
participation. It will only add redundant bureaucratic
hurdles to an already time-consuming mine permitting
process and create additional burdens on the agencies, the
public, and mining companies.
--The NRC Report also stressed the importance of using site-
specific, environmental performance standards to achieve
optimal environmental and reclamation results at the
diverse geographic and ecological settings in which mining
occurs. The prescriptive technology-based standards
included in H.R. 2262 are inappropriate and will produce
second-rate environmental results.
The environmental provisions in H.R. 2262 are solutions in
search of a problem.
--The new public participation process is not needed to give the
public more opportunities to comment on proposed mining
projects.
--The new definition of undue degradation and the new environmental
standards are not needed to protect the environment.
--BLM's October 2000 EIS for the 3809 rulemaking predicted that the
alternative containing a Significant Irreparable Harm
standard and environmental standards similar to those in
H.R. 2262 would result in ``significant adverse effect to
mining-dependent communities, including declines in social
well-being due to potential for up to 75% decrease in some
types of mining.''
--The real purpose of H.R. 2262 is to create intolerable delays in
the permitting process, to eliminate all impacts from
mining, and ultimately to stop exploration and mining on
federal lands.
II. Background
The U.S. House of Representatives passed H.R. 2262, the Hardrock
Mining and Reclamation Act of 2007, on November 1, 2007. H.R. 2262 is a
disastrously bad bill for the mining industry--and, more importantly,
for the country. It eliminates security of land tenure, creates
insurmountable regulatory hurdles, empowers third-parties to petition
to withdraw lands from mining--even after valuable minerals have been
discovered, and creates new unrealistic and impractical standards for
mining. Two outcomes are certain if H.R. 2262 becomes law:
1. H.R. 2262 will severely curtail mineral production on
America's public lands; and
2. H.R. 2262 will dramatically increase the Nation's already
extensive reliance on foreign minerals due to the significant
reduction in domestic mineral production.
The unfair and burdensome gross royalty in H.R. 2262 will certainly
cause economic hardships and will contribute substantially to the two
negative outcomes listed above. However, the environmental components
of H.R. 2262 will be equally responsible for reducing domestic mineral
production and increasing the country's dependence on foreign minerals.
The environmental and regulatory problems in H.R. 2262 are two
fold. First, Title I, Sec. 2(a)(19) of H.R. 2262 creates a new
unrealistic and unfair environmental performance standard, ``undue
degradation,'' for mineral activities. This undue degradation standard
imposes what is essentially a ``zero-impact'' mandate on hardrock
mining--in marked contrast to other sanctioned activities on federal
lands. Second, the new and duplicative public participation process and
the problematic environmental standards in Title III, ``Environmental
Considerations of Mineral Exploration and Development,'' will cause
intolerable uncertainties and delays and create insurmountable
roadblocks. Taken together, the undue degradation standard and Title
III reflect an underlying philosophy that mineral activities must not
affect the environment and are clearly intended to thwart exploration
and mining on federal lands.
As each of the case histories proves, current regulations and
policies are effectively minimizing impacts from mineral activities and
mitigating those impacts that cannot be avoided. But H.R. 2262 chooses
to ignore this successful track record. Instead, this bill proposes
radical changes in an apparent attempt to fix a system that clearly is
not broken.
If the goal of H.R. 2262 were to address the well recognized
shortcomings in the current Mining Law--the lack of a royalty or a fund
to reclaim historic abandoned mined lands (AML)--the bill would not
include the undue degradation standard or Title III. Unfortunately,
H.R. 2262 has a much different goal. Rather than making the surgical
changes needed to require royalty payments and to create an AML fund,
H.R. 2262 takes a very different approach that proposes far-reaching
changes that are specifically designed to stop hardrock exploration and
mining on federal lands.
III. Comparing Flpma's Unnecessary or Undue Degradation Mandate With
the H.R. 2262 Undue Degradation Standard
a. the flpma mandate to prevent unnecessary or undue degradation
The term ``undue degradation'' originates in the Federal Land
Policy and Management Act of 1976 (FLPMA), 43 U.S. C. 1701 et seq.
Section 302(b) of FLPMA requires the Secretary of the Interior to
manage the public lands to prevent ``unnecessary or undue
degradation.'' The FLPMA unnecessary or undue degradation standard,
often described in shorthand as ``U&UD,'' applies to all activities on
BLM-administered public lands. As such, it is not a standard that is
unique to mining.
Fundamental to FLPMA's U&UD standard is the plainly-stated concept
that human activities cause degradation--and some degradation is
necessary to achieve FLPMA's stated public land management goals at 43
C.F.R. Sec. 1701. In the case of mineral production, FLPMA establishes
the following Congressional declaration of policy at 43 U.S.C.
Sec. 1701(a)(12):
Congress declares that it is the policy of the United States
that--the public lands be managed in a manner which recognizes
the Nation's need for domestic sources of minerals, food,
timber, and fiber from the public lands including
implementation of the Milling and Minerals Policy Act of 1970
(84 Stat. 1876, 30 U.S.C. 21a) as it pertains to the public
lands.
The Minerals Policy Act of 1970 states:
The Congress declares that it is the continuing policy of the
Federal Government in the national interest to foster and
encourage private enterprise in (1) the development of
economically sound and stable domestic mining, minerals, metal
and mineral reclamation industries, (2) the orderly and
economic development of domestic mineral resources, reserves,
and reclamation of metals and minerals to help assure
satisfaction of industrial, security and environmental needs...
Practical, on-the-ground standards to implement the FLPMA U&UD
mandate must consider two fundamental geologic realities: 1) mineral
deposits can only be found in geologically favorable places; and 2)
mines can only be developed where mineral deposits are found. The
current BLM and USFS regulations for hardrock minerals reflect this
reality by being responsive to the wide range of geographic settings
and environments in which hardrock minerals are located and developed.
The environmental impacts associated with mining are always site
specific and dependent upon site topography, climate, hydrology,
mineralogy, mining method, and other factors that may be unique to a
particular project.
BLM Regulations to Prevent U&UD
BLM's surface management rules for hardrock minerals at 43 C.F.R.
Subpart 3809 (hereinafter called ``the 3809 regulations'') implement
the FLPMA mandate to prevent U&UD. BLM's environmental performance
standards at Sec. 3809.420 include a comprehensive list of site-
specific, outcome-based performance standards for mineral activities
that define how mineral projects must be designed, operated, and
reclaimed in order to comply with the FLPMA U&UD requirement. These
environmental performance standards also consider the diversity of
settings in which hardrock exploration and mining occur.
The case histories discussed in Section V demonstrate BLM's track
record of effectively tailoring the on-the-ground application of the
Sec. 3809.420 environmental performance standards to provide optimal
environmental protection and reclamation success at a given site, and
the agency's commitment to prevent U&UD. These case histories provide
ample proof that BLM's interpretation and management of the 3809
regulations prevents U&UD and show that the existing regulations are
working as intended to protect the environment and achieve BLM's land
management objectives. As described in Section V, BLM consistently
exercises its authority to require project proponents to modify their
project proposals to address site-specific concerns in order to comply
with the U&UD mandate. The case histories show absolutely no need for
the far-reaching environmental changes in H.R. 2262.
The USFS Regulations Use a Minimize Adverse Impacts Standard
The USFS regulations at 36 C.F. R. Part 228, Subpart A (hereinafter
called ``the 228A regulations) for locatable minerals take a similarly
practical approach that recognizes mining creates some necessary and
unavoidable impacts and that miners must avoid and minimize impacts
whenever and wherever feasible:
Sec. 228.8 Requirements for environmental protection: All
operations shall be conducted so as, where feasible, to
minimize adverse environmental impacts on National Forest
surface resources...
The USFS regulations at Sec. 228.8 provide detailed requirements
for air quality, water quality, federal solid waste disposal and
management, scenic values, fisheries and wildlife habitat, roads, and
reclamation. This section of the regulations mandate compliance with
federal environmental protection laws and establish the concept that
impacts must be minimized ``to the extent practicable.'' For example,
the paragraph dealing with solid wastes says:
All garbage, refuse, or waste, shall either be removed from
National Forest lands or disposed of or treated so as to
minimize, so far as is practicable, its impact on the
environment and the forest surface resources. All tailings,
dumpage, deleterious materials, or substances and other waste
produced by operations shall be deployed, arranged, disposed of
or treated so as to minimize adverse impact upon the
environment and forest surface resources. (36 C.F.R.
Sec. 228.8(c))
Similarly, the paragraph on solid wastes states:
In addition to compliance with water quality and solid waste
disposal standards required by this section, operator shall take all
practicable measures to maintain and protect fisheries and wildlife
habitat which may be affected by the operations. (36 C.F.R.
Sec. 228.8(e))
The requirements for protecting scenic values and road building
also contain requirements to minimize impacts to the extent
``practicable.''
The USFS requirement to ``minimize adverse impacts'' is
functionally similar to the FLPMA mandate to prevent U&UD. The USFS's
standard requires miners to take appropriate steps to avoid, minimize,
or mitigate impacts. Like FLPMA and BLM's 3809 regulations, the USFS
regulations for mining recognize that some impacts are unavoidable. The
use of the word ``practicable'' in the USFS regulations adds the
concept of economic feasibility based upon a consideration of site-
specific factors.
The case histories described in Section V for exploration and
mining projects on National Forest System lands demonstrate that the
USFS requirement in the 228A regulations to minimize adverse impacts
requirement is successfully protecting the environment. These case
histories also show that the USFS regularly exercises its regulatory
authority to require changes to project proposals in order to comply
with the minimize adverse impacts standard. Just like the case
histories for projects on BLM-administered lands, the USFS case
histories document a consistent agency commitment to enforce all
environmental protection standards and requirements.
The case histories include two projects that the USFS approved
using a NEPA Categorical Exclusion (CE). Yet in spite of the
streamlined NEPA process used for these projects, the USFS placed
numerous environmental protection requirements and conditions on both
projects, documenting the broad scope of the USFS's 228A regulatory
authority. The case histories also include one project where the USFS
used the 228A regulations to reject a project proposal.
The Case Histories Show No Need for the H.R. 2262 Undue Degradation
Standard
Taken together, the case histories for projects on both ELM and
USFS lands present compelling evidence that the existing environmental
regulations and performance standards are working well and should not
be changed. Even if the undue degradation standard in H.R. 2262 were
practical or achievable--which it most certainly is not--there is
absolutely no on-the-ground need or justification for this new
standard. The only reason to include the undue degradation standard in
H.R. 2262 is to eliminate all exploration and mining on federal lands.
b. the h.r. 2262 undue degradation standard creates a higher standard
for mining compared to other activities on public land
Title I, Sec. 2(a)(19) of H. R. 2262 defines undue degradation as
``irreparable harm to significant scientific, cultural, or
environmental resources on public lands that cannot be mitigated.''
This ``undue degradation'' standard is radically different from the
FLPMA U&UD standard and the USFS ``minimize adverse environmental
impacts'' standard because it fails to recognize that some degradation
is unavoidable in order to mine. The practical meaning of the H.R. 2262
undue degradation standard is that it empowers BLM and the USFS to deny
plans of operation for proposed mineral projects even if the project
complies with federal environmental laws and regulations and can
satisfy all other environmental standards and requirements.
H.R. 2262 singles out hardrock mining by placing a higher standard
of environmental performance on mining activities while preserving the
U&UD standard for all other activities on public lands. Thus, the world
according to H.R. 2262 recognizes and accepts the necessary (i.e.,
unavoidable) degradation associated with hiking, fishing, camping,
hunting, ORV use, developed recreation, logging, extracting coal or oil
and gas, film making, livestock grazing, and all other activities that
impact public lands. However, it does not acknowledge or accommodate
the necessary degradation associated with hardrock mining. In this
manner, the definition of undue degradation imposes an impractical,
unrealistic, and unfair standard hardrock mining.
Irreparable Harm is Not a New Concept
H.R. 2262 is not the first mining proposal to introduce the concept
of irreparable harm or to create an irreparable harm-based standard. In
1997, then Secretary of the Interior Bruce Babbitt announced he
intended to use the rulemaking process to change the 3809 regulations
as a surrogate for Congressional action to amend the Mining Law. In
November 2000, after a four-year long rulemaking process, BLM published
new 3809 regulations. This version of the rule, hereinafter referred to
as the ``2000 Sec. 3809 rule,'' included a new and controversial
standard--Substantial Irreparable Harm (SIH). BLM added SIH to the
definition of unnecessary or undue degradation in the final rule,
without giving the public an opportunity to comment.
It should be noted that BLM analyzed an alternative (Alternative 4)
in the EIS for the 3809 rulemaking that included an SIH concept.
However, BLM did not select this as the Agency Preferred Alternative in
the EIS due in part to the severe economic hardships associated with
this alternative. The following excerpt from the EIS describes the
dramatic impact Alternative 4 would have on mining communities:
Potential for significant adverse effect to mining-dependent
communities, including declines in social well-being due to
potential for up to 75% decrease in some types of mining.
(October 2000 EIS, Surface Management Regulations for Locatable
Minerals, page 121.)
The undue degradation standard in H.R. 2262 is clearly modeled
after Alternative 4 and the SIH standard in the 2000 Sec. 3809 rule.
In fact, most of the H.R. 2262 Title III environmental provisions
are modeled after the prescriptive environmental performance standards
included in Alternative 4 in the EIS prepared for the 3809 rulemaking.
It should be abundantly clear from the environmental consequences
described in the 3809 EIS that this approach--whether in regulations or
in statute--will be disastrous for western mining communities. It will
also be disastrous for the Nation as we become even more reliant on
imported foreign minerals to replace what used to be produced from U.S.
mines.
The SIH standard is not currently in the Sec. 3809 rules because
in 2001, then Secretary of the Interior Gale Norton reopened the Sec.
3809 rulemaking. Secretary Norton issued a final rule in October 2001
which does not contain the SIH standard. The 2001 final Sec. 3809 rule
(hereinafter referred to as the ``2001 Sec. 3809 rule'') preserved
many aspects of the 2000 Sec. 3809 rule, but eliminated SIR from the
definition of undue or unnecessary degradation and from Sec. 3809.415.
Secretary Norton's decision to remove SIH from the 2001 Sec. 3809
regulations was based in part upon an October 2001 Department of the
Interior Solicitor's Opinion (M-37007) which found that the SIH
provision is not consistent with FLPMA. Additionally, the way in which
SIR was added to the 2000 Sec. 3809 rule violated the Administrative
Procedures Act and NEPA.
c. a recent nrc study demonstrates there is no justification for
changing u&ud
In 1998, Congress appropriated $800,000 in the FY 1999 Omnibus
Appropriations Bill (Department of the Interior and Related Agencies
Appropriations Act, 1999 P.L. 105-277, Division A, Title I, Sec. 120)
for a National Research Council (NRC) study of hardrock mining on
federal lands. The purpose of this study was to ``identify and consider
the adequacy of federal and state environmental, reclamation and
permitting statutes and regulations applicable in any state or states
where mining or exploration of locatable minerals on federal lands is
occurring, to prevent unnecessary or undue degradation.''
The NRC published its findings in a 1999 report entitled Hardrock
Mining on Federal Lands (hereinafter called ``the NRC Report.'') This
carefully researched and impartial study contains significant useful
information regarding the scope and effectiveness of the state and
federal regulations for hardrock mining. In the context of H.R. 2262,
the NRC Report provides an appropriate framework for evaluating the
environmental components of the bill including the substitution of
undue degradation for U&UD, and the many far-reaching provisions in
Title III that are discussed in Section IV.
The NRC Report does not suggest any environmental problems or
regulatory deficiencies stemming from the FLPMA mandate to prevent
U&UD. Because Congress specifically directed the NRC to examine the
adequacy of the environmental regulations to prevent U&UD, it is highly
unlikely that this report would overlook any environmental problems due
to the U&UD standard itself. Therefore, the NRC report's finding that
the existing regulations are protecting the environment strongly
supports the conclusion that the U&UD standard is resulting in
environmental protection at exploration and mining projects on BLM
lands and that the ``minimize adverse impacts'' standard in the USFS's
228A regulations is providing similarly satisfactory environmental
protection on National Forest System lands.
Because the NRC Report was thoroughly researched, unbiased, and
independently reviewed, its findings are considered authoritative.
Based on the NRC Report, it is clear that there is no justification for
changing the environmental performance standard for mining from U&UD to
the undue degradation standard in H.R. 2262. The NRC Report
demonstrates that the current FLPMA U&UD standard for projects on BLM
lands and the USES standard to minimize adverse impacts for projects on
National Forest System lands are working well and consistently achieve
their stated goals.
IV. The New Procedures and Standards in Title III Seek To Solve
Problems and Fill Gaps That Do Not Exist
Title III includes a new and duplicative public participation
procedure and impractical environmental standards. H.R. 2262 creates
both the public participation procedure and the new environmental
standards out of whole cloth--as if there are no existing public review
processes or environmental standards.
The 1999 NRC Report provides useful information for assessing the
need for the new public participation process and the environmental
standards in H.R. 2262 Title III. As discussed below, it is clear from
the NRC Report that these elements of Title III are both unnecessary
and undesirable and seek to fix problems and fill gaps where none
exist.
a. title iii creates a new public participation process for mining that
duplicates nepa
The new public review requirement in Section 304(i) is one of the
most troublesome aspects of Title III. This section requires the
Secretary of the Interior and the Secretary of Agriculture to:
. . . jointly promulgate regulations to ensure transparency
and public participation in permit decisions required under
this Act, consistent with any requirements that apply to such
decisions under section 102 of the National Environmental
Policy Act of 1969.
It is clear from Section 302(a) that H.R. 2262 intends to layer the
new mining-specific public participation process described in Section
304(i) onto the existing NEPA process. The H.R. 2262 public
participation process is not a substitute for NEPA--rather it is a
parallel process:
To the extent practicable, the Secretary and the Secretary of
Agriculture shall conduct the permit processes under this Act
in coordination with the timing and other requirements under
section 102 of the National Environmental Policy Act of 1969
(42 U.S.C. 4332).
The NEPA Process Provides Ample Public Participation Opportunities
There is no demonstrated need whatsoever for creating a new and
duplicative public participation process unique to mining projects on
federal lands. The NEPA process already affords the public ample
opportunities to provide comments on proposed mining projects on
federal land. For example, the Battle Mountain Field Office of BLM has
received over 6,000 comments on the July 2007 Draft Environmental
Impact Statement (EIS) for the Cortez Hills Expansion Project. For the
Buckhorn Access Project in Washington, the Okanogan and Wenatchee
National Forests received over 100 letters during project scoping, 116
letters on the Draft Environmental Assessment (EA), and 42 letters on
the subsequent Draft EIS. The Idaho Falls District Office and the USFS/
Caribou-Targhee National Forest received 1,055 original comment letters
and a staggering 37,561 identical form letters on the October 2007
Draft EIS the agencies jointly prepared for the Smoky Canyon Mine.
(Although Smoky Canyon is a phosphate mine which is governed by the
regulations for leasable minerals rather than hardrock minerals, the
NEPA statistics dramatically illustrate that the NEPA process already
gives the public unfettered ability to comment on proposed mineral
projects.)
Given the robust nature of public response to NEPA documents for
mining projects, there is simply no evidence that the public is being
deprived of an opportunity to provide comments or would benefit from a
mining-specific public participation process like that proposed in H.R.
2262. BLM's and the USFS's administration of the NEPA process is
clearly complying with the NEPA requirement to seek public comment and
the volume of responses being received more than satisfies NEPA's
objectives to obtain public comment.
It should be evident from the sheer number of public comments
submitted in response to recent draft NEPA documents that BLM and USFS
are already burdened with an enormous administrative task of
cataloguing and responding to comments. Adding a mining-specific public
participation process that would run in parallel to the NEPA process
would be an administrative nightmare for all parties--BLM, the USFS,
and the interested public. The current NEPA process is more than
adequate.
In addition to soliciting public comments on proposed projects
through the NEPA process, both the BLM and USFS permitting processes
includes administrative appeal procedures that give the public a formal
opportunity to challenge the adequacy of the agency's NEPA analysis and
its decisions to approve or deny a proposed project. Interest groups
frequently use these administrative procedures to try to overturn
agency decisions.
Once again, H.R. 2262 is a solution in search of a problem. The
proposed mining-specific public participation process in Title III sets
out to fill a gap that simply does not exist. There is absolutely no
need to duplicate the well-established, highly-structured NEPA public
review process that federal agencies have used to make decisions about
significant federal actions since 1970.
The NRC Report Concludes that the NEPA Process is Protecting the
Environment
The 1999 NRC Report mentioned in Section III characterizes NEPA as
the backbone of the environmental and regulatory program for evaluating
proposed mining projects: ``The NEPA process is the key to establishing
an effective balance between mineral development and environmental
protection.'' (NRC Report, page 6). H.R. 2262 destroys this balance.
The NRC Report found the NEPA process to be a meaningful
opportunity to evaluate ways to make a proposed mine the best possible
project for the community and the environment and confirms that the
NEPA process is adequate in scope to accommodate all potential issues.
In summary, the NRC Report presents the following findings regarding
the efficacy of the NEPA process for hardrock mineral projects (NRC
report pages 108--110):
The NEPA process and its various state equivalents provide
the most useful and efficient framework for evaluating proposed
mining activities;
NEPA provides the most comprehensive and integrated
framework for undertaking an environmental evaluation that
includes the full range of environmental concerns, whether or
not they are specifically addressed by some other regulatory
program, as well as cultural and other concerns.
NEPA environmental reviews examine tradeoffs between
different and sometimes competing values, and promote a better
understanding of the implications of the many decisions
involved in the preparation and approval of a mine's operating
plan....No other regulatory program provides such a
comprehensive, integrated mechanism for decision making.
The NEPA process ensures that the decisions are based on
careful analyses of site-specific conditions. An operating plan
for mining activities must adapt and respond to site-specific
conditions and sensitivities. The NEPA process allows this
responsiveness; regulatory programs relying on inflexible,
technically prescriptive standards often do not.
The NEPA process allows the agencies to be responsive to
changes in technology and site-specific conditions. Less
flexible regulatory approaches do not allow this flexibility
and, as a result, can cause technologies to be ``frozen,''
often with adverse impacts for both the mining operators and
the environment.
The inescapable conclusion from these NRC Report findings is there
is absolutely no need to create the new public participation process in
H.R. 2262. According to the NRC Report, the NEPA process is not only
adequate--it is ideal for gathering public input, evaluating
environmental impacts, and identifying any unnecessary or unacceptable
impacts associated with proposed mining projects.
There is no demonstrated need for the new public participation
process mandated in Section 304(i). It is unnecessary and is completely
at odds with the findings in the NRC Report.
The Case Histories Also Document That NEPA Is Effective and that
Another Public Participation Process is Not Necessary
The case histories presented in Section V for projects on both BLM
and USFS lands provide compelling and specific evidence of the pivotal
role that NEPA plays in the environmental review and permitting process
for mineral projects on federal lands. These case histories
consistently document that issues and concerns are raised during public
scoping for NEPA documents and in public comments on draft NEPA
documents.
More importantly, the case histories provide a verifiable track
record of how BLM and the USFS consider public comments when making
decisions about proposed projects. It is clear from the case histories
that public comments frequently influence agency decisions. Both BLM
and the USFS routinely require changes to a proposed project in
response to public comments or select one of the alternatives analyzed
in the NEPA document rather than the project proponent's Proposed
Action. The case histories also show how the NEPA process and the 3809
and 228A regulations work smoothly together to evaluate and refine a
project proposal to prevent U&UD on BLM lands or to minimize adverse
impacts on National Forest System lands.
b. title hi contains impractical and unattainable standards and
duplicative requirements
Title III contains impractical and unattainable standards and
requirements as well as numerous requirements that duplicate existing
BLM and USFS regulations and policies. The problematic standards are
designed to make securing permits for new exploration, mining, and
ancillary activities very difficult--and in some cases impossible.
The duplicative requirements are another example of the way in
which H.R. 2262 provides a solution to an imaginary problem. The
regulatory agencies have already developed comprehensive and effective
programs that provide environmental protection at mines on federal
lands.
------------------------------------------------------------------------
Table 1 Examples of Impractical or Unattainable Environmental Standards
and Duplicative Requirements in Title III, H.R. 2262
-------------------------------------------------------------------------
H.R. 2262 Impractical or Unattainable
Standard Discussion
------------------------------------------------------------------------
Limits exploration permits to 10 years It typically takes more than
Sec. 304(e) 10 years to discover,
explore and define a
mineral deposit. The
exploration case histories
do not demonstrate a need
for this limit.
------------------------------------------------------------------------
Limits life of mine permits to 20 years-- Some deposit types take
with one possible 20-year renewal Sec. longer to mine than 20
304(d)(1)(A--B) years. Some mines have
operated for over 100
years. The possibility (but
no guarantee) of a 20-year
one-time permit renewal
creates too much
uncertainty to make the
necessary investment
decisions to develop the
mine. The mining case
histories do not
demonstrate a need for this
limit.
------------------------------------------------------------------------
This arbitrary time limit
will cause premature mine
closures, leaving minerals
in the ground, and wasting
mineral resources. This
will hurt local and state
economies that depend on
mining.
------------------------------------------------------------------------
Restricts Plans of Operations to claims Most surface mines use more
with valid discoveries and requires claims without a discovery
discretionary permits to use federal than valid claims. Limiting
lands for processing facilities, roads, Plans to valid claims and
mine waste storage areas, etc. Sec. the requirement to obtain
304(a)(1)(A--B) discretionary approvals to
use non-mineralized ground
creates too much
uncertainty to make the
necessary investment
decisions to develop the
mine.
Additionally, this creates a
new onerous requirement to
establish the validity
status of each claim and
distinguish it in the
permitting process.
Inserting claim validity
into the permitting process
will create an enormous
administrative burden for
the agencies and further
delays for permit
applicants. The mining case
histories do not
demonstrate a need for this
limit and requirement.
------------------------------------------------------------------------
Limits water treatment to 10 years after This will make mining of
mine closure Sec. 304(c)(H) many sites that use water
treatment during mining
difficult or even
impossible. There should be
no prohibition against long-
term water treatment so
long as the applicant
provides adequate financial
assurance and/or a long-
term funding mechanism to
operate the treatment
facility. From a practical
perspective, it is unclear
how applicants will be able
to demonstrate this during
the permitting process
before the water treatment
system is built.
------------------------------------------------------------------------
Only claim holders may apply for an Mine operators are commonly
operations permit Sec. 304(a)(1) different entities than the
claim owners. It is fairly
unusual for a claim owner
to operate the mine. This
restriction reflects a lack
of understanding of typical
mining industry business
relationships.
------------------------------------------------------------------------
Operations must prevent ``material damage This may prohibit the
to the hydrologic balance outside the development of both surface
permit area''Sec. 304(c)(E) and underground mines that
require significant
dewatering, a common need
in many mines
------------------------------------------------------------------------
Preserving cultural, paleontological and It may be impossible to
cave resources preserve these resources at
sites where the orebody and
these features are co-
located. (See
3809.420(b)(8)(i)). Current
mitigation policies are
appropriate.
------------------------------------------------------------------------
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Title III Proposes Using Inappropriate Technology-Based Standards
Although duplicating requirements that are in existing regulations
is not necessarily problematic, the fact that H.R. 2262 Sec. 307(b)
gives the Secretaries the discretionary authority to require the use of
technology-based design standards versus outcome-based performance
standards creates a serious problem. The NRC Report clearly establishes
that one-size-fits-all, technology-based standards are inappropriate
for mineral projects given the need to accommodate site-specific
conditions. For example, Recommendation No. 9 in the NRC Report states:
BLM and the Forest Service should continue to base their
permitting decisions on the site-specific evaluation process
provided by NEPA. The two land management agencies should
continue to use comprehensive performance-based standards
rather than using rigid, technically prescriptive standards.
(NRC Report, page 108).
The NRC Report explains that technology-based standards are
especially unsuitable for mineral projects in light of the rapidly
changing nature of mining methods and environmental protection
technology. Federal land managers need to have the authority to require
the newest and best technology rather than having to adhere to specific
technologies that may be outmoded or not optimal for a certain site.
Many of the case histories described in Section V describe how BLM
and the USFS have required site-specific environmental controls to
respond to unique ecological conditions at project sites. It is clear
from these case histories that imposing cookie-cutter-type, technology-
based standards would not have been ideal at these sites.
The technology-based standards sanctioned in Sec. 307(b) are likely
to result in inferior environmental protection and reclamation compared
to the performance-based standards currently in place. Thus, in the
case of Sec. 307(b), H.R. 2262 does not solve any identified
environmental problem. Instead, it promotes second-rate environmental
results.
c. blm has already taken care of all of the gaps identified in the nrc
study--the title iii measures are not necessary
Although the NRC Report clearly states that the regulations in
place during the 1998--1999 timeframe were adequate to protect the
environment, the Report also identified five regulatory gaps. The NRC
Report contains specific recommendations for how BLM should modify its
regulations to fill these gaps. The 2001 3809 regulations contain a
number of specific changes to eliminate the gaps discussed in the NRC
Report. Table 2 lists the gaps identified in the NRC Report and the
2001 gap-filling measures.
A number of the requirements in Title III mimic the gap-filling
measures contained in the 2001 Sec. 3809 rules. Because BLM's rules
already respond to all of the shortcomings identified in the NRC
Report, these Title III provisions are unnecessary, Once again, there
are no remaining gaps that need to be filled; Title III seeks to fill
gaps that have already been filled.
------------------------------------------------------------------------
Table 2 Changes Made in 2001 to the 3809 Rules in Response to the NRC
Report
-------------------------------------------------------------------------
NRC Report Issue or Gap Changes Made
------------------------------------------------------------------------
Require financial assurance for all mining 3809.500, 3809.503
and exploration activities that are not
classified as casual use
------------------------------------------------------------------------
Mandate Plans of Operation for any mining 3809.5, 3809.11(b)
or milling operation regardless of size
------------------------------------------------------------------------
Develop criteria and procedures for 3809.430--434
modifying Plans of Operation
------------------------------------------------------------------------
Adopt regulations that define temporary 3809.401(5)
closure and require interim management
plan;
------------------------------------------------------------------------
Plan for and assure long-term, post- 3809.401(3)(ix)
closure management of closed and
reclaimed mines
------------------------------------------------------------------------
V. Case Histories Demonstrate the Environmental Provisions in H.R. 2262
Are Unnecessary to Protect the Environment
a. blm and usfs use nepa and the surface management regulations
effectively to achieve environmental protection and land management
objectives
The case histories listed in Table 3 and discussed below
demonstrate that BLM and the USFS consistently--in fact on almost all
projects--require companies to modify proposed Plans of Operation for
exploration and mining projects. The agencies imposed these changes to
eliminate, minimize, or mitigate impacts to one or more environmental
resource and/or to respond to issues raised during public scoping and
in public comments submitted on draft NEPA documents.
All of the examined case histories underscore the effective
relationship between the NEPA process and the 3809 and 228A surface
management regulations. The NEPA process provides BLM and the USFS with
an analysis tool to identify and quantify potential environmental
impacts, to analyze project alternatives, and to develop appropriate
mitigation and monitoring measures to minimize impacts. Once the NEPA
process has identified project alternatives, analyzed impacts
(including those associated with the No Action alternative), and
specified mitigation measures, BLM and the USFS then use their
respective authorities in the 3809 and 228A regulations to require
project applicants to modify the project proposal to enhance
environmental protection, and to eliminate or minimize impacts whenever
and wherever possible. The case histories show that NEPA and the
surface management regulations work seamlessly together to achieve the
agencies' land management mandates--to prevent unnecessary or undue
degradation from mining on BLM lands and to minimize adverse
environmental impacts from mining on National Forest System lands.
The changes made to projects as a result of the NEPA process
include agency-required mitigation and other measures and stipulations
that go beyond those offered by the project proponent. In fact, it is
highly unusual for BLM and the USFS to NOT mandate additional
requirements for a project. The case histories include many examples of
BLM and USFS invoking their respective 3809 and 228A authority to
select an ``Agency Preferred Alternative'' that differs (sometimes
substantially) from the project proponent's ``Proposed Action.''
Additionally, even some projects approved under a NEPA Categorical
Exclusion (CE) may have extensive environmental protection requirements
attached.
Alternatively, project proponents sometimes chose to modify their
project proposals in response to the issues and concerns identified
during NEPA public scoping and in public comments submitted on draft
NEPA documents. It is not uncommon for companies to take the lead in
changing their Proposed Action by adding new mitigation, monitoring,
and environmental protection measures, or by changing some aspect of
the project proposal based on public input and agency suggestions. This
is often preferable to waiting for the agency to impose these changes
in the form of agency-required measures or as an Agency-Preferred
Alternative that differs from the Proposed Action. Project proponents
typically make these changes in close coordination with BLM and the
USFS. Either way, whether a company initiates the changes or whether
the agencies require the changes, the process results in a project with
enhanced environmental protection and mitigation measures that ensure
compliance with the mandate to prevent unnecessary or undue degradation
on BLM lands and to minimize adverse impacts on National Forest System
lands.
It is thus readily apparent from the case histories that the
existing regulations for mineral activities on both BLM and National
Forest System lands, coupled with the NEPA environmental review
process, are working well. There is nothing in the case histories to
suggest that an additional public review process or different
environmental standards are warranted. The agency track records and the
environmental measures described in the case histories provide
compelling substantiation that the environmental provisions in H.R.
2262 seek to reinvent the wheel, to solve imaginary problems, and to
fill gaps that do not exist.
b. case histories for mineral projects on blm and usfs lands
The 27 case histories summarized in Table 3 and discussed below
were developed from NEPA EIS and EA documents for proposed exploration,
mining, and mining-related projects on BLM and National Forest System
lands in Nevada, Arizona, California, New Mexico, Idaho, Washington,
Oregon, and Colorado. Each project described below presents a clear
example of how the agencies' surface management regulations authorize
BLM and the USFS to require additional or modified environmental
protection, mitigation, and monitoring measures, and other project
changes that differ from the applicant's Proposed Action.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
BLM Case Histories
Cortez Gold Mines. Cortez Pipeline Gold Deposit. Final EIS. January
1996. Battle Mountain District Shoshone--Eureka Resource Area,
Battle Mountain, Nevada
This EIS demonstrates how the project proponent, Cortez Gold Mines
(Cortez), responded to public concerns and potential environmental
impacts identified during the NEPA process by amending the Proposed
Action to address these issues. Cortez modified its original project
proposal by adding a number of ``Applicant-Committed Design Measures''
to mitigate public concerns and potential impacts. Additionally, BLM
stipulated agency-required mitigation measures ``to reduce potential
significant impacts that may occur despite the applicant-committed
design measures.'' BLM designated Cortez's Proposed Action modified
with the ``Applicant-Committed Design Measures'' and the agency-
required mitigation measures as the Agency-Preferred Alternative.
One of the Applicant-Committed Measures added to the proposed
project was a long-term $1,000,000 interest-bearing contingency fund to
provide for long-term monitoring and corrective action, if required,
for pit lake water quality and/or dewatering-related impacts. BLM State
Director, Ms. Ann Morgan, describes this fund in a January 12, 1996
``Dear Interested Party'' letter as a fund established ``in the
interest of protecting the environment.'' Ms. Morgan's letter also
describes changes made to the Proposed Action as a result of the NEPA
evaluation as follows:
A number of refinements to the proposed action have resulted
from public comments on the Draft Environmental Impact
Statement. These refinements have been incorporated into the
proposed action and the Pipeline Project Plan of Operations.
Santa Fe Pacific Gold Corporation. Lone Tree Mine Expansion Project.
Final EIS. September 1996. Winnemucca District Office,
Winnemucca, Nevada
BLM selected Santa Fe Pacific Gold Corporation's (SFPG's) Proposed
Action, modified with mitigation and monitoring measures, as the
Agency-Preferred Alternative. BLM's Record of Decision (ROD) approves
the Lone Tree Mine Expansion Project Plan of Operations subject to ten
stipulations and numerous mitigation and monitoring requirements for
water resources; soils; avian, terrestrial, and aquatic wildlife;
livestock; recreation; air resources; geology; visual resources;
vegetation; and cultural resources.
Homestake Mining Company. Ruby Hill Project. Final EIS. January 1997.
Battle Mountain District, Battle Mountain, Nevada
As a result of the NEPA analysis conducted for the Ruby Hill
Project, BLM selected a Preferred Alternative that consisted of
Homestake Mining Company's (Homestake's) Proposed Action, plus a
Partial Backfill Alternative that was one of the alternatives
considered in detail in the EIS. This backfilling alternative would
result in a slightly larger (approximately 6 acres) area that could be
reclaimed. Additionally, BLM stipulated several agency-required
mitigation measures to address community concerns about visual impacts,
noise and vibration from blasting, and air quality due to dust
generated by mining activities. These mitigation measures are described
as being developed by BLM in collaboration with Homestake and included
the development of an advisory group in Eureka County. The advisory
group was established to identify areas where monitoring for dust,
noise, or blasting vibration may be needed, and to develop additional
mitigation to address impacts that could not be fully identified in the
EIS (i.e., before mining started). The BLM also required a visual
resources mitigation measure to reduce the height of a waste rock dump
visible from town.
Newmont Mining Company. Trenton Canyon Project. Final EIS. August 1998.
Winnemucca District Office, Winnemucca, Nevada
For the Trenton Canyon Project, BLM selected an Agency Preferred
Alternative comprised of Newmont Mining Company's Proposed Action,
modified with the Partial Sequential Backfill Alternative evaluated in
the EIS. As described in the EIS, the Agency-Preferred Alternative
would reduce the total area of mine disturbance, reduce or eliminate
some overburden disposal areas, reduce the reclamation effort for the
overburden disposal areas, maximize the total amount of land reclaimed
to beneficial use, and reduce potential sedimentation to a nearby
creek.
Glamis Marigold Mining Company. Marigold Mine Expansion Project. Final
EIS. March 2001. Winnemucca Field Office, Winnemucca, Nevada
BLM selected a partial backfill alternative as the Agency-Preferred
Alternative for the Marigold Mine Expansion Project. This alternative
requires the project proponent, Glamis Marigold Mining Company (GMMC),
to add partial backfilling of the 8-South Pit to the Proposed Action.
BLM required this backfilling alternative to eliminate the potential
for a pit lake to form in this pit. This alternative also reduces
surface disturbance associated with the project, thereby lessening
impacts to soils, vegetation resources, wildlife habitat, range
resources, and recreation. BLM also required GMMC to perform water
resources, air quality, and cultural resource mitigation and monitoring
measures in addition to those included in the Proposed Action.
Oil-Dri Corporation. Reno Clay Plant Project. Final EIS. September
2001. Carson City Field Office, Carson City, Nevada
BLM selected an alternative project access route as the Agency-
Preferred Alternative. This alternative required the project proponent,
Oil-Dri Corporation of Nevada (Oil-Dri), to change the access route to
the project in response to public concerns about traffic safety and
social concerns related to transporting the clay product from the
processing facility. The Proposed Action involved constructing
approximately 0.8 mile of new access road on public land. At the Final
EIS stage, BLM rejected this aspect of Oil-Dri's Proposed Action. The
Agency-Preferred Alternative required Oil-Dri to construct a new access
road on private land.
BLM also stipulated the following agency-required mitigation
measures beyond those included in the Proposed Actions:
1. Restricting the hours of nighttime operation and
prohibiting backfill operations in the North Mine areas on
weekends and holidays to address public concerns about noise;
2. Enforcing a 25-miles per hour speed limit on all haul,
access, and transport routes to reduce traffic impacts; and
3. Potential temporary changes to Oil-Dri's operating
schedule to accommodate planned recreational events on public
land.
It is interesting to note that the Draft EIS selected the Proposed
Action as the Agency Preferred Alternative. At that time, the private
land needed for Alternative C was not available. However, during the
interim between the Draft and Final EIS documents, Oil-Dri was able to
obtain the private land. BLM responded by changing the agency's
Preferred Alternative. This is a good example of how BLM used their
authority to prevent unnecessary or undue degradation to public land.
The BLM-required changes to this project demonstrate that BLM has ample
authority to prevent unnecessary or undue degradation.
Newmont Mining Company. Leeville Project. Final EIS. ROD September
2002. Elko Field Office, Elko, Nevada
In the Draft EIS for the Leeville Project, BLM selected an Agency-
Preferred Alternative that added the three alternatives analyzed in
detail in the Draft EIS to Newmont Mining Company's (Newmont's)
Proposed Action, These alternatives included eliminating the canal
portion of the water discharge pipeline system, backfilling the
production and ventilation shafts with waste rock rather than with
reinforced concrete as proposed by Newmont, and relocating the waste
rock disposal facility and refractory ore stockpile to eliminate 118
acres of new surface disturbance. In addition, BLM required Newmont to
prepare and add a comprehensive, longterm Mitigation and Monitoring
Plan to the Final EIS.
Battle Mountain Gold. Phoenix Project. Final EIS. ROD November 2003.
Battle Mountain Field Office, Battle Mountain, Nevada
Battle Mountain Gold (BMG) conducted gold, exploration, mining and
recovery operations in the Copper Canyon area (Lander County, Nevada)
since the 1980s under various Plans of Operations and EAs. A Plan of
Operations submitted in 1994 was updated four times to incorporate
additional information developed in the interim. The Phoenix Project,
an expansion of open pit gold operations in four pits, Was determined
by the BLM to be significant enough in size, scope and impact to
warrant preparation of a full EIS. The BLM Battle Mountain Field Office
selected BMG's proposed alternative analyzed in the Phoenix Project
Final EIS as modified by the BLM with mitigation and monitoring
requirements, as the BLM's preferred alternative.
Prior to construction, the BLM required BMG to: 1) Submit an
approved long-term funding mechanism to satisfy all costs to implement
the Contingent Long-Term Groundwater Management Plan; 2) Submit
financial guarantee for reclamation; 3) Implement the monitoring and
mitigation measures developed with the BLM and discussed in the ROD;
and 4) Secure all required federal, state, and local permits. Approval
of the BMG Plan of Operations and the FEIS was contingent upon 37 wide-
ranging additional requirements as set forth in the ROD. These very
specific requirements again illustrate the latitude and flexibility
allowed the BLM under the 3809 rules to alter mining proposals to
manage and protect public lands at the site-specific level.
Phelps Dodge Tyrone Inc. Copper Mountain South Pit Expansion. Final EA.
January 2005. ROD March 2005. Las Cruces Field Office, Las
Cruces, New Mexico
Phelps Dodge Tyrone Inc. proposed to expand the existing Copper
Mountain Pit at the Tyrone Mine by 31 acres in order to mine and
recover approximately 72 million pounds of copper. The BLM determined
that an EIS was not necessary and conducted an EA instead. The BLM's
preferred alternative consisted of the Phelps Dodge proposed action and
a FONSI was issued with additional BLM requirements relative to noxious
weed monitoring and control, special status plant and wildlife species,
dust control, and acid producing material monitoring. This project was
conducted under existing 3809 rules.
Geodesy Resources, Inc. Nick Claims Mining Project. Final EA. January
2005. ROD September 2007. Winnemucca Field Office, Winnemucca,
Nevada
Geodesy Resources, Inc. proposed a gold placer mining operation at
the Nick Claims in Pershing County, Nevada. Geodesy's initial proposal
was modified during the public comment period. The BLM Winnemucca Field
Office preferred alternative consisted of the proponent's alternative
as modified with seven stipulations added by the BLM during the
Environmental Assessment process. These stipulations pertained to
cultural resource protection and data recovery, weedy and invasive
species control, wildlife mitigation and monitoring relative to the
Migratory bird Treaty Act with provisions relative to nesting birds,
development of a detailed reclamation plan, spill response and control,
permits and Rights of Way, and a fire prevention plan. This project was
conducted under the 3809 rules presently in effect.
Matcon Corporation, Inc. Jawbone Canyon Project. Final EA and ROD.
2006. Ridgecrest Field Office, Ridgecrest, California
Matcon Corporation, Inc. submitted a Plan of Operations under the
3809 rules to excavate and commercially develop a deposit of zeolite on
claims administered by the BLM Ridgecrest Field Office in California.
The BLM determined that an Environmental Assessment would suffice given
the nature of the disturbances described in the Plan of Operations.
Following an in-depth review and assessment of the Plan of Operations,
the BLM required of the proponent six additional mitigation measures
and four additional reclamation requirements in addition to those
measures and stipulations discussed in CFR Title 43, Subpart 3809.420.
Quaterra Resources, Inc. Uranium Exploration, Rock Mining Claims. Final
EA and ROD. September 2006. Arizona Strip Field Office, St.
George, Utah
In 2006, Quaterra Resources submitted a Plan of Operations to the
BLM for uranium exploration on BLM administered claims on the Kanab
Plateau. The BLM required that an Environmental Assessment (EA) be
conducted. The EA detailed 11 mitigation measures required of the
proponent by the BLM. These measures involved cultural and
archaeological resources, noxious weeds, reclamation, drill-hole
abandonment, waste management, wildlife, and water quality and usage.
MGC Resources, Inc. Spring Valley Exploration Project. Final EA April
2007. ROD May 3007. Winnemucca Field Office. Winnemucca Nevada
In September 2005, MGC Resources, Inc. submitted a Plan of
Operations (upgraded from the Notice level) to the BLM for mineral
exploration activities that would cause disturbances on approximately
76 acres of public and private lands in Pershing County, Nevada with
various drill pads, sumps, new roads, and ancillary activities that
accompany intensive mineral exploration. The BLM, Winnemucca Field
Office determined that an Environmental Assessment would suffice to
assess the impact of the proposed project. Following completion of the
EA and a 30-day comment period, the BLM selected MGC's proposed
alternative, but added significant mitigation and monitoring
requirements in approving the project in the ROD. Monitoring and
mitigation requirements involved prevention of noxious and invasive
weeds, surveys or and monitoring for breeding birds and bird nests and
their protection under the Migratory Bird Treaty Act. Compliance
monitoring was very specific and detailed. This exploration project was
conducted under existing 3809 rules.
Cortez Gold Mines. Cortez Hills Expansion Project. Draft EIS. July
2007. No ROD. Battle Mountain Field Office, Battle Mountain,
Nevada
Cortez Gold Mines (CGM) proposed a Plan of Operations for a
significant expansion of its gold mining and processing operations in
the BLM Battle Mountain Field Office jurisdictional area. The Draft EIS
was submitted in July 2007. While the Record of Decision has not been
released at the time of this document, the final two paragraphs in the
Executive Summary are emblematic of BLM's approach to selecting an
alternative that differs from the Proposed Action in order to minimize
environmental impacts and enforce the land management directive to
prevent unnecessary or undue degradation:
Chapter V, Section B.2.b. of the BLM's National Environmental
Policy Act Handbook directs that ``the Manager responsible for
preparing the EIS should select the BLM's preferred
alternative. ... For externally initiated proposals, ... the
BLM selects its preferred alternative unless another law
prohibits such an expression. ... The selection of the
preferred alternative should be based on the environmental
analysis as well as consideration of other factors that
influence the decision or are required under another statutory
authority.
The BLM has selected a preferred alternative based on the
analysis in this EIS. This preferred alternative is the
alternative that best fulfills the agency's statutory mission
and responsibilities, considering economic, environmental,
technical, and other factors. The BLM has determined that the
preferred alternative is the Proposed Action as outlined in
Chapter 2.0 with mitigation measures specified in Chapter 3.0
of this EIS.
Spirit Minerals LP. Big Ledge Project Mining and Processing. Final EA,
November 2007. ROD December 3, 2007. Elko Field Office, Elko,
Nevada
Spirit Minerals proposed to incorporate an approved Plan of
Operations for the Big Ledge barite mine exploration into a mine plan
that would allow the company to expand and renew mining for barite on
fee lands and federal lands. The BLM determined that an EIS was not
necessary and conducted an EA instead. The BLM's preferred alternative
consisted of Spirit Minerals proposed action and a FONSI was Issued
with additional BLM requirements relative to protection of cultural
resources, establishment of buffer strips, fencing, and monitoring and
inspection plan.
Tonkin Springs LLC. Tonkin Springs Exploration Project, Draft EA.
December 2007. No ROD. Battle Mountain Field Office, Battle
Mountain, Nevada
Tonkin Springs LLC submitted a Plan of Operations to upgrade its
long-time mineral exploration project from the Notice level. The BLM,
Battle Mountain Field Office, determined that an Environmental
Assessment would suffice to assess the impact of the proposed project.
While no ROD has been issued at the date of this document, it is worth
noting that Tonkin Springs LLC committed to 31 specific conditions
regarding environmental protection. These conditions were developed
with specific input from the BLM and included air quality, cultural
resources, waste, water quality, wetlands, public safety, fire
management, wildlife, invasive and weedy species control, and
protection of wild horses and burros.
USFS Case Histories
American Independence Mines and Minerals, Inc. Golden Hand Mine
Project. EIS. 1988, 1996, 2003. Krassel Ranger District,
Payette National Forest, Idaho
American Independence Mines and Minerals, Inc. first submitted a
Plan of Operations to mine on patented claims within the Frank Church-
River of No Return Wilderness as authorized under the 1872 Mining Laws.
The USFS did not deny the right of the proponent to mine their claims
within the wilderness area. However, through a long and disputed
process, the USFS required the proponent to make numerous changes to
their plan in order to protect the environment and address the many
environmental issues that arose relative to access, water quality,
development methods, etc. The proponent's proposed plan, Alternative B
was not accepted by the USFS during the EIS process. Rather, the USFS's
Agency Preferred Alternative was Alternative C which contained
significant agency-directed protective changes as allowed under the
USFS rules.
Utility Block Co. Cerro Del Pino Pumice Mine. EA and ROD. 2006. Jemez
Ranger District, Santa Fe National Forest. Sandoval County, New
Mexico
Utility Block Co. submitted a Plan of Operations to mine pumice
from an approximate 6 acre open pit on USFS-administered lands. The
USFS determined that an EA would suffice for NEPA analysis of the
project. Following analysis of the EA, the USFS issued a FONSI for the
project that selected the proponent's alternative but added 19 specific
conditions for approval plus a monitoring stipulation. These conditions
included safety, threatened and endangered species, visual aesthetics,
erosion control, waste management, and others.
Mt. Moriah Stone Quarry. Mount Moriah Stone Quarry Phase II. EA and
ROD. December 2006. Ely Ranger District, Humboldt-Toivabe
National Forest. White Pine County, Nevada
Mt. Moriah Stone Quarry submitted a Plan of Operations to the USFS
to mine quartzite building stone materials from a 50-acre site on USFS-
administered lands. The USFS determined that an EA would suffice for
NEPA analysis of the project. Following analysis of the EA, the USFS
issued a FONSI for the project that selected the proponent's
alternative but added 34 specific conditions for approval plus a
monitoring stipulation. These conditions included safety, waste rock,
weeds, wildlife, wildfires, erosion control, and reclamation.
Oregon Department of Transportation. Star Rock Pit Project. EA and ROD.
2006. Blue Mountain Ranger District, Malheur National Forest.
Grant County, Oregon
The Oregon Department of Transportation submitted a Plan of
Operations to the USFS to expand the existing Star Quarry on USFS
administered lands to continue to provide high quality aggregate
materials, some of which would be used by the USFS. The USFS determined
that an EA would suffice for NEPA analysis of the project. Following
analysis of the EA, the USFS issued a FONSI for the project that
selected the proponent's alternative but added 11 multi-component
additional environmental protection and design elements, mitigation
measures, best management practices and monitoring for approval. This
project is a good example of the interaction of the USFS and its rules
when the project proponent is another agency (in this case a state
agency), and illustrates that the USFS can and generally does add
additional conditions to project approval.
Oregon Department of Transportation. Tamarack QuarryExpansion. EA and
ROD. 2006. Zig Zag Ranger District, Mt. Hood National Forest.
Clackamas County, Oregon
The Oregon Department of Transportation submitted a Plan of
Operations to the USFS to expand the existing Tamarack Quarry on USFS
administered lands to continue to provide high quality aggregate
materials, some of which would be used by the USFS. The USFS determined
that an EA would suffice for NEPA analysis of the project. Following
analysis of the EA, the USFS issued a FONSI for the project that
selected the proponent's alternative but added a number of multi-
component additional environmental protection and design elements,
mitigation measures, best management practices and monitoring for
approval. This project is another good example of the interaction of
the USFS and its rules when the project proponent is another agency (in
this case a state agency), and illustrates that the USFS can and
generally does add additional conditions to project approval.
Mr. Joe Vines. Black Diamond Star Milling Claim. Categorical Exclusion.
2006. Three Rivers Ranger District, Colville National Forest.
Ferry County, Washington
Mr. Joe Vines submitted a Plan of Operations to the USFS seeking
approval to continue removal of decorative stone materials from his
existing claim. Following USFS review and public scoping and
notification, the USFS determined to grant a categorical exclusion to
NEPA under its rules. However, as conditions of approval under the CE,
the USFS required the proponent to adhere to 16 specific conditions
pertaining to access, blasting, threatened and endangered species,
invasive weeds, reclamation, cultural resources, safety, and others.
Even though this project was approved using a CE, it illustrates the
ability of the USFS to apply specific environmental protection
conditions under the existing rules to any project on USFS administered
lands.
Teck Cominco American Inc. 2007 Exploration Drilling. Categorical
Exclusion. 2007. Sullivan Ranger District, Colville National
Forest. Pend Oreille County, Washington
Teck Cominco American submitted a Plan of Operations to the USFS
seeking approval for mineral exploration and drilling 8 drill holes at
different locations on USFS administered lands. Following USFS review
and public scoping and notification, the USFS determined to grant a
categorical exclusion to NEPA under its rules. However, as conditions
of approval under the CE, the USFS required the proponent to adhere to
13 specific conditions pertaining to drilling and abandonment of drill
holes, access, threatened and endangered species, invasive weeds,
reclamation, cultural resources, safety, waste handling, and others.
Even though this project was approved using a CE, it is another
excellent example of the ability of the USFS toa 1 specific
environmental protection conditions under the existing rules to any
project on USFS administered lands.
Crown Resources/Kinross Gold. Bockhorn Access Project. January 2007.
FEIS and ROD. Tonasket Ranger District, Okanogan and Wenatchee
National Forests. Tonasket, Washington
Crown Resources submitted a Plan of Operations to access their
patented claims and fee lands for the purpose of developing an
underground mine on private land and hauling the ore to an existing
milling facility which also is on private land. The USFS prepared an
Environmental Assessment but then determined that an EIS would be
required to approve the project. During the EIS process, the USFS
developed and ultimately selected an Agency Preferred Alternative,
Alternative BI, which made a number of modifications to the Proposed
Action. In addition to selecting this alternative, the USFS added 15
terms and conditions including a $967,000 reclamation bond for access
area reclamation.
Formation Capital Corporation. Idaho Cobalt Project. EIS. February
2007. Salmon-Cobalt Ranger District. Salmon-Challis National
Forest, Lemhi County, Idaho
In 2001, Formation Capital submitted a Plan of Operations to mine
and process polymetallic ore on USFS unpatented mining claims in the
Salmon-Challis National Forest. Over the intervening years, the USFS
and Formation negotiated a series of agency-required and requested
changes under the USFS 's land management rules. The proponent's
proposal was detailed in the DEIS as Alternative II. However, using its
authority to select an Agency Preferred Alternative, the USFS selected
Alternative IV. Under this alternative, tailings backfill and any waste
rock left underground as backfill will be amended with limestone or
equivalent material to limit metals mobility and potential impacts to
groundwater. The remainder would be disposed of in the disposal
facility using a dry stacking method, and thus, eliminating the need
for a tailings dam.
USFS Yampa Ranger District. Red Dirt Pit Expansion. EA and ROD. January
2007. Yampa Ranger District, Yampa, Colorado
The USFS proposed to expand the Red Dirt aggregate pit in order to
produce additional rock materials for various projects within the
Medicine Bow-Routt National Forest. As with any project proponent, once
a Plan of Operations was submitted, the NEPA process was triggered. The
USFS determined that an EA would suffice given the size and scope of
the project. Through internal review of the project and input from
several members of the public, the USFS imposed 16 specific conditions
on the project, including stipulations regarding timing of operations,
wildlife, dust control, traffic control, and others.
Robert and Marjorie Miller. Robin Redbreast Unpatented Lode Claim
Mining Plan of Operations.-id ROD. May 2007. Ouray Ranger
District, Grand Mesa, Uncompahgre, and Gunnison National
Forests, Hinsdale County Colorado
In this highly contentious case that in a previous variation went
before the IBLA, the Millers submitted a Plan of Operations to extract
minerals under the 1872 Mining Law on USFS unpatented claims located
entirely within the Uncompahgre Wilderness Area. The Plan of Operations
included access to the claims, mining plans, and plans for on-site
housing. The USFS made this statement in the EIS and in the ROD:
The Millers have established a statutory right to develop the
Robin Redbreast lode claim. This is accepted as a premise on
which all analysis in the FEIS, and this Decision, is based.
The ROD denies approval of the Plan of Operations. The USFS stated
their denial as follows:
It is my decision that the ``plan of operations'' as
submitted cannot be approved, and that changes or additions to
the plan of operations are necessary to minimize or eliminate
adverse environmental impacts from mineral activities on
National Forest System (NFS) lands, as required by Forest
Service Regulations (36 CFR 228A). (See ``Legal Framework''
FEIS).
The USFS ROD goes on to say:
I wish to address potential criticism that environmental
protection measures required through this decision are imposed
either unfairly, or as a purposeful means to prevent mining. I
am fully cognizant of the long history of dispute between the
agency and the Millers, culminating in decisions by OHA and
then IBLA. I have read these decisions and I fully acknowledge
the Millers right to mine and develop the mineral deposits on
the Robin Redbreast mining claim. This is made clear in the
``Legal Framework'' section of this ROD, and is a foundation
for the EIS (See Chapter I, FEIS).
At the same time, I have a positive duty to ensure that,
considering the environmental effects identified in the FEIS,
all reasonable and feasible environmental protection measures
are in place and are enforced. The fact that this mining claim
lays within the Uncompahgre Wilderness at 11,500 feet in
elevation calls for protection measures and requirements
appropriate for this setting. With the assistance of my
Interdisciplinary (ID) Team, I have exercised every possible
diligence to ascertain that those measures or alternatives that
are required are necessary and reasonable when considering the
location and nature of the proposed mining activity and cost
and effectiveness of required measures. I have made these
decisions specifically in accordance with the requirements at
36 CFR, Part 228, Subpart A, as cited in the Legal Framework
section of the FEIS.
The USFS as stated that the Millers are free to resubmit a modified
Plan of Operations. However, this case is an example of the agency
exercising its ability under the rules to deny approval of a project as
submitted because it did not, in the agency's view, comply with all
federal laws and regulations.