Copyright 1999 Federal Document Clearing House, Inc.
Federal Document Clearing House Congressional Testimony
June 15, 1999
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 8147 words
HEADLINE:
TESTIMONY June 15, 1999 STEPHEN D'ESPOSITO SENATE ENERGY &
NATURAL RESOURCES FORESTS AND PUBLIC LANDS MANAGEMENT CROWN JEWEL MINE
BODY:
Statement of Mineral Policy Center Presented
by Stephen D'Esposito President, Chief Executive Officer Mineral Policy Center
To the Subcommittee on Forests and Public Land Management of the Committee on
Energy and Natural Resources Regarding Recent decision by the Departments of
Interior and Agriculture to enforce legal limits on mine waste
dumping on public lands. Chairman Craig, members of the Subcommittee: Good
afternoon. My name is Stephen D' Esposito-I am president of Mineral Policy
Center. Thank you for inviting Mineral Policy Center to testify before this
subcommittee on the recent decision by the Departments of Interior and
Agriculture to enforce legal limits on mine waste dumping on
public lands. Background on Mineral Policy Center Mineral Policy Center (MPC) is
an environmental organization dedicated to protecting the environment and
communities from the adverse impacts of mineral development, and cleaning up
pollution from past mining. Our national office, based in Washington D.C.,
provides support to citizens across the country and around the world. Our field
offices in Colorado and Montana assist communities throughout the western United
States concerned about the impact of mineral development in their backyards. WC
is a non- profit organization with more than 3,000 members. Hundreds of
community groups and organizations support our efforts to reform the 1872 Mining
Law, improve public policy and industry practices related to mining, and protect
our public lands from irresponsible hardrock mining. MPC believes that
responsible mining can and does occur on our public lands. As an organization
that took a strong position that the emergency appropriations bill, which
provided relief funding for Kosovo and victims of Hurricane Mitch, was no place
for a rider on this important environmental issue, we welcome the opportunity to
come before this subcommittee. As we stated in our March II, 1999, letter to
Senator Gorton, "we can all agree, we think, that this issue should be resolved
in an open debate about the whole Mining Law-not via a rider that would expand
the Mining Law for the first time in 127 years. " MPC s Position on Mining,
Mines, and the 1872 Mining Law Mineral Policy Center supports responsible mining
policies and practices. Responsible mining policies would recognize that on
certain-public lands there are resources, and potential uses, more valuable than
mining- that environmentally significant parcels of our public lands should be
protected from mineral development; and that mining companies should meet the
highest environmental protection standards. Responsible mining policies would
also give taxpayers a fair return for valuable land and mineral assets, and
eliminate government subsidies to mine on public lands. Mineral Policy Center
recognizes that there are mining companies that seek to operate in a manner that
protects the environment and other natural resources and restores the land after
mining. We believe that a substantial sector of the industry is legitimately
struggling with issues of environmental protection and environmental and social
sustainability. Listen to the words of the President of Placer Dome, John
Wilson, in a speech to the Pacific Basin Economic Council on May 20th 1997: "We
in Placer Dome have concluded that if a mine cannot afford the full cost of
state-of-the-art systems, then it should not be developed There is no trade-off.
No mine developer has the right to impose on an ecosystem damage from acid rock
drainage just for the sake of economic activity, returns to investors, jobs and
other benefits... The key message here is that there is no room for compromise
in environmental protection. Part of MPC's job is to expose situations where the
industry has compromised environmental protection, and create pressure for
better mining practices and policies. But we also recognize the mining industry
for what it is doing right and what it is trying to do right. In 1989, Mineral
Policy Center applauded Homestake's McLaughlin Mine for its reclamation plan. At
the Viceroy Gold Corporation's Castle Mountain mine in California's Mojave
Desert, the company instituted a plan to conserve water, a precious resource in
the desert.' In MPC's 1997 publication, Golden Streants, Poisoned Streann, we
dedicate an entire chapter to responsible mining practices. The industry has
developed mining technology and techniques that can mitigate and prevent
significant environmental impacts. These should be put to use, industry-wide.
Over the years, mining companies have sought the expertise and advice of MPC.
After the Ok Tedi tailings spill at the BHP mine in Papua New Guinea, MPC
visited the mine site, at the invitation of the company. While recent company
reports unfortunately reveal that the company has been unable to adequately
remediate the impacts of the spill, we believe that its in the interest of all
involved to conduct a thorough evaluation so that lessons are learned and the
same mistakes are not repeated at other mines. MPC has been invited by Placer
Dome to critique and evaluate their new sustainability policy and performance.
We have accepted the invitation because we believe that Placer Dome's policy is
an important undertaking. Are we still critical of some of Placer Dome's actions
and operations? Yes. Do we think that Placer Dome's policy will lead to
on-the-ground results? We are not yet sure. But we think Placer Dome is engaged
in a critically important undertaking, one that deserves our attention and will
hopefully benefit from our input. Placer Dome is now using its environmental and
social sustainability policy to market itself as the world's gold leader. And
recently, Freeport McMoRan approached MPC for comments and recommendations
regarding an upcoming audit of its operations in Indonesia. Mining companies
that operate responsible mine sites will not get the credit they deserve because
public perception will be defined, to a great extent, by the worst industry
actor-the one that has mishandled the spill, walked-away from the cleanup,
showed disregard for community impacts, or polluted local streams and aquifers.
The 1872 Mining Law, and lax environmental mining polices, actually contribute
to this problem because there are few incentives for responsible and efficient
operations and it promotes mining over all other land uses, irrespective of the
merits of those other uses. For every McLaughlin mine there is a Summitville or
a Zortinan-Landusky and stories of taxpayer funded cleanups in the tens or
hundreds of millions of dollars. Guess which stories get the headlines? The 1872
Mining Law sends the wrong signals to mining companies. It does not reward
responsible behavior and it fails to penalize those with poor performance
records. It is a haven for bad actors. Yet, some in the industry will continue
to make the claim that new environmental reforms, or even today's environmental
requirements, will destroy the industry. Perhaps it is because they believe
their companies are poorly poised to operate in an environment that mandates and
rewards environmental performance. While there are technical and engineering
solutions to many environmental problems, technical solutions will not be enough
to fully address the broader environmental, economic, social, and cultural
issues that this subcommittee, and all members of Congress, must grapple with.
Reforming the Mining Law is not, after all, a matter of a technical fix. It is
one thing to design a safe and efficient mine, it is quite another to design
public policy that results in good decisions about the use of public land and
resources. Good public policy must provide a basis for weighing environmental,
social, economic, and cultural issues, as well as technical issues. For example,
in some instances even the best designed, operated and potentially reclaimed
mine should not be built because it is planned for a location that should be
protected. For mining law reform to be a success this subcommittee must grapple
with these underlying issues. To the extent that WC has a spotlight we will
continue to shine it on what the industry is doing wrong and we will also
highlight what the industry is doing right. Perhaps most importantly, we will
also shine it on places that expose the shortfalls of the 1872 Mining Law,
including valuable parcels of public lands, such as the Okanogan Highlands in
eastern Washington. The remainder of this testimony is presented in three parts:
1) an analysis of the shortcoming of the 1872 Mining Law and a description of
necessary reforms, 2) WC's analysis of the recent decision to limit mine
waste dumping by enforcing millsite limits, and 3) recommended actions.
The Mining Law is Obsolete: It's Time For Mining Law Reform The 1872 Mining Law
fails to offer adequate protection for our public lands, for the environment, or
for the taxpayer-and it no longer works for the mining industry. Today, the
prospector's pan has given way to giant earth-moving machines that literally
crumble mountains and dig pits the size of small towns. Recovery of gold nuggets
by hand has been replaced by the use of potentially lethal chemicals such as
cyanide that leach microscopic flecks of gold from massive piles of pulverized
rock. Today's prospectors are multi-national corporations and their mine sites
occupy hundreds of acres of our public land. Of course, those who crafted the
Mining Law in 1872 could not have envisioned the potential environmental impacts
of modem mining. The law is a relic of an era when the federal government's
policy was to encourage settlement and development of the western United States,
and when the environmental protection of public lands was not a national
objective. The law was crafted over 127 years ago to address the issues raised
by a rush of small-scale pick-and-shovel prospectors onto Western public lands.
It was written to encourage mineral development on public lands, to define how
miners would gain access to land, and how they would protect their claims from
other miners. The modem mining industry has outgrown the entire 1872 Mining Law.
The Federal Government owns over 662 million acres of public lands, 29 % of the
land in the country, most of it located in the western United States.' That land
is to be held in trust for all Americans. The land includes our national parks,
wilderness areas, scenic rivers, and national forests. Some of these valuable
lands are protected from mineral development, but on most of these lands,
multinational mining companies get virtually free access, taxpayer subsidies,
and are permitted to operate massive mines with devastating environmental
impacts. The legacy of this outdated law is all to clear-there are now more than
500,000 abandoned mines scattered across every region of the country.' The
abandoned mine problem should serve as a wake-up call. So should the Summitville
mine disaster in Colorado, and the problems that are unfolding as we speak at
the Zortman-Landusky mine in Montana. Mining has polluted 12,000 miles of rivers
and streams and 180,000 acres of lakes.' Cleanup costs could be as high as $72
billion. Public land is given away to mining companies for as little as $2.50 or
$5.00 an acre, with little return to the taxpayer. And, on most public land,
mining trumps all other potential land uses. The cost of inaction is
multi-billion dollar taxpayer giveaways to mining companies in the form of the
transfer of valuable public lands and minerals. To date, MPC estimates that over
$240 billion dollars worth of publicly owned minerals have been transferred to
mining companies. Because there is no royalty for mining on public lands,
taxpayers lose at least $200 million in income to mining companies annually. The
Economic Case For Mining Law Reform Some will argue that now is not the time to
reform the Mining Law because mining companies are already suffering as a result
of today's low minerals prices. But minerals prices have, and always will,
fluctuate. It is in the public's interest to take action that will stimulate
other commercial and non-commercial uses of our public lands, including
preservation. And it is in our interest of the American people to pursue
environmental objectives that will lead to job creation in mining communities or
former mining communities, such as abandoned mine cleanup. Although mining will
continue to be an important element of national and local economies, there are
clearly economic, environmental, and social benefits derived from other
industries and other uses of our public lands, some of which outweigh the
benefits of mining. The time is now for this Congress to address the in
adequacies of current U.S. policies. As Dr. Thomas Michael Power of the
University of Montana points out: "There is nothing in economic theory or
empirical economic experience to suggest that commercial economic value is
always greater than noncommercial economic value. In fact, that often will not
be the case. . . " A mining industry that is rewarded for its environmental
performance, and penalized for its environmental mistakes, will be a healthier
industry, both in the United States and around the world. It is in the interest
of this subcommittee to create incentives for better environmental performance
on our public lands. Improved environmental performance will increase the
competitiveness, marketability, and performance of U.S. mining companies. More
and more experts are concluding that our environmental and economic health, and
our security, will improve if we use our valuable raw materials more wisely. We
should use fewer resources, use them more efficiently, generate less waste, and
re- use more. Policies that benefit extraction should be revised so that we
reward, rather than penalize, re-use and recycling. It is in our national
interest to broaden our definition of the mining industry to include not just
those companies that extract metals, but those that recycle. There is no
justification, economic or otherwise, for policies that provide public subsidies
to mining companies, creating an incentive for inefficient mine operations on
public lands, perhaps in places that are best used for other purposes. These
subsidies lead to an unfair economic advantage for some companies and may result
in inefficiencies and over-supply. As a matter of economics and environmental
protection, and in order to build stronger local economies, we should begin
today to address the massive cleanup liability that exists on our public, state
and private lands. We should begin a national cleanup program for the hundreds
of thousands of abandoned mines. We believe good environmental policy also makes
good economic policy- profitable mining and environmental protection are
compatible, Today, as a result of the 1872 Mining Law, we actually subsidize
inefficient and wasteful mining on our public lands both through direct taxpayer
subsidies and as a result of the lack of environmental safeguards. It's time to
put an end to the subsidies and favors that mining companies receive on public
lands. The net results of 1872 Mining Law reform will be healthier communities
and healthier ecosystems, jobs creation, and, we believe, a healthier mining
industry.' Members of this subcommittee, responsible for protecting our public
land heritage, and concerned about our overall economic health, should consider
some fundamental questions about current public lands policy related to mining.
Why have we singled out mining companies, operating on public lands, for what
amounts to multi- billion dollar corporate welfare payments, especially when we
are struggling with issues such as how to save Social Security and Medicare?
Consider these excerpts from the testimony of Dr. W. Thomas Goerold, a noted
minerals economist to the Senate Energy and Natural Resources Committee,
Subcommittee on Mineral Resource Development and Production, on September 13,
1990: "Current domestic hardrock mineral producers sometimes claim that paying
for federal minerals would be so burdensome that it would force a significant
portion of them out of business. A cursory examination of the evidence does not
support these claims. Producers-
ofleasablemineralsfoundonfederallandshavepaidroyaltiesand land rentals since
1920 and no one questions the health of these industries. Moreover, miners of
hardrock minerals have a long history of routinely paying royalties and rental
payments when these same minerals are found on state or private lands. "
"Hard-rock mineral miners maintain that there is still ajundamental difference
between hardrock minerals production and other businesses, as well as between
hardrock minerals firms and other mineral producers that pay land rental and
royalty fees to the Federal Government for use of publicly owned resources.
Contrary to industry claims, these purported distinctions do not justify the
privileged treatment accorded producers of hardrock minerals. 7he Office of
Technology Assessment supports this view. The OTA believes that the distinctions
between leasable (generally energy and chemical minerals requiring government
permission and payment of lease and royalty fees) and locatable minerals are
more artificial than real. " Do hardrock miners on federal lands have more
importance than automobile manufacturers, retail store owners, or any other
business not eligible for similar government subsidies? Are hardrock miner
producing minerals from federal lands more important than these same producers
mining state or private lands? One argument advanced by mining interests against
the imposition of royalties for federal hardrock minerals is that the Federal
Government already taxes the profits of these companies. 7his is a misleading
argument-most non-mineral businesses do not obtain the inputs to their firms
from the federal government at no cost, yet virtually all pay a federal income
tax. Royalty and rental free mineral operations are analogous to a gift of steel
and rubber to automobile manufacturers, or free office rental to an accounting
firm, courtesy of the U.S. Government.' Mining companies pay royalty rates for
hardrock minerals produced from state lands that typically range from 6.25 to 15
percent gross or net profit on gold production. There are also federal land
parcels in Minnesota, Missouri and Illinois where miners pay royalties for
extraction of hardrock minerals. And even on federal lands, mining companies pay
royalties to other mining companies, but not to the taxpayer." In October 1993,
Newmont Mining Corporation leased 1872 Mining Law claims on BLM Land at Grassy
Mountain in Oregon from the Atlas Corporation. Newmont paid a $22.5 million cash
bonus and a 5 percent net smelter royalty on production. The net impact of this
policy is to make mining more attractive on federal land than on other lands.
"The Federal government by forgiving this normal mineral business cost has
distorted the distribution of economic activity, discouraging mining on private,
state, and tribal land and encouraging it on Federal land."" Continuation of
this policy is not in the country's economic interest. What is Comprehensive
Environmental Reform of the Mining Law? Environmental reform of the 1872 Mining
Law should include an end to land giveaways (called patenting), a fair royalty
for mining on public lands, protection of important public lands from mining,
strong environmental safeguards, and a national abandoned mine cleanup program.
End the Giveaways-Taxpayers Deserve A Fair Financial Return The system of
patenting valuable public land at $2.50 or $5.00 per acre should be abolished.
Patenting is not necessary to mine on public lands. These prices were bargains
in 1872 when the government was seeking to settle the West, today they are
beyond belief. k royalty for mining on public lands should be set at between 8%
and 12.5% based upon a "gross production" or true "net smelter" return. The
royalty should be fixed at an amount that constitutes a fair return to the
public and generates sufficient revenue to begin cleaning up the 557,000
abandoned mines across the United States. Some Lands Should be Protected From
Mining, Give Land Managers Discretion - Land managers should have the authority
and discretion to protect environmentally significant public lands, weigh other
land uses, and deny permits for poorly planned mines. A mining permit
application must clearly demonstrate, before mining begins, how the mining and
reclamation project will occur so as to minimize environmental impacts. Land
managers must have the authority to deny mining permits in environmentally
fragile areas, or critical wildlife habitats and areas otherwise found to be
unsuitable for mining. Enact Environmental Safeguards- Environmental safeguards
must protect water resources and prevent significant long-term environmental
damage. These environmental safeguards should include provisions for water
protection, full cleanup and reclamation, environmental operating standards,
enforcement requirements, and guarantees that the mining company will pay for
full closure and cleanup. Public Participation- The public must have the right
to fully participate in mine decisions on public lands. This includes access to
information, the right to comment on permit and regulatory actions, the right to
petition the government to designate an area unsuitable for mining, the right to
file citizen complaints, the right to accompany an inspector to a site, and
citizen suit provisions to compel enforcement. Abandoned Mine Cleanup- A program
to clean up the hundreds of thousands of unreclaimed and abandoned mine sites
must be instituted. Such a program should be funded by a mineral royalty, rental
fees, and through other sources such as a reclamation fee. Misleading Mining Law
Reform Over the years, a number of bills have been introduced in the Senate
under the reform label that are actually not true reform bills because they fail
to adequately address the fundamental environmental and fiscal shortcomings of
the Mining Law. These bills typically contain miniscule royalties and wide
loopholes for escaping royalty payment, fail to address important environmental
protection issues, and do not allow land managers to weigh other uses of public
lands. A telltale signs of a sham reform bill is the use of a "net proceeds"
royalty. The "net proceeds" royalty allows companies to deduct so many costs
before paying a royalty that the taxpayer ends up with almost nothing. Why Do
Environmental Organizations Representing Millions of Members Support the
Millsite Decision To Limit Mine Waste Dumping on Public Lands?
MPC believes the millsite ruling, effectively enforcing limits on mine
waste, is based upon an accurate interpretation of this provision of
the 1872 Mining Law. It is widely accepted that the Mining Law's millsite
restriction does not meet the needs of many of today's mining operations, but
neither does this antiquated law meet the needs of taxpayers, communities near
many of today's mines, or the environmental health of our public lands. The
massive waste piles produced at many of today's mines have outgrown the Mining
Law. In a March 23, 1999, letter to Secretary of the Interior Bruce Babbitt and
Forest Service Chief Michael Dombeck, Mineral Policy Center, Friends of the
Earth, Natural Resources Defense Council, Sierra Club, The Wilderness Society,
U.S. Public Interest Research Group, Okanogan Highlands Alliance, Western
Organization of Resource Councils, and Grassroots Environmental Effectiveness
Network (GREEN) petitioned the government to reject the Plan of Operations for
the Crown Jewel Mine because it was over the millsite claims limit. To quote
from the letter: In this case, the federal land agencies must determine whether
to approve a mining plan that is proposed on public lands that do not contain
valid mining and millsite claims under the 18 72 Mining Law.
Anumberofotherproposedopenpitgoldminesonfederallandfacesimilariss ues. 1he most
pressing examples include the Imperial Project in southern California and the
Yarnel/Mine adjacent to the town of Yarnell, Arizona. 7hus, your decisions at
Crown Jewel will have ramifications across the West. For more than twenty years
the government has been permitting illegal mine waste dumping
on public lands. To allow Battle Mountain Gold to proceed with the Crown Jewel
mine, without challenging the decision, considering the Solicitors Opinion of
November 7, 1997, would have amounted to implicit acceptance of this practice,
and that mining companies could choose to ignore portions of the law that they
do not like. The Okanogan I-Eghlands might not have the name-recognition of
Yellowstone National Park but it deserves protection nonetheless. This forested
mountain rising from rolling hills supports farms, ranches, hunting, and
fishing. It is the headwater for five creeks. Despite the money spent by Battle
Mountain Gold, the mine plan is, for a number of reasons, deficient. The
Washington Department of Ecology even predicts that the mine will violate water
quality standards." Over 7,000 linear feet of headwaters would be destroyed.
Acid mine drainage is likely a threat. Withdrawing groundwater will reduce the
flow of water to the five creeks, and there will likely be a significant loss of
wildlife." This assumes that everything goes as predicted. Too often today, we
find that predictions of long-term environmental impacts are optimistic,
underestimating the problems that actually result once the mine begins
operation. What Fundamental Environmental Problem Does The Milsite Decision
Address? The recent millsite ruling, which is the subject of this hearing, seeks
to address a fundamental environmental problem--today's mines are dramatically
larger and produce more waste than the pick-and-shovel operations that the
Mining Law was written to govern. In the late 1970s to early 1980s, the
widespread adoption of chemical leaching technology made the mining of extremely
low- grade mineral ores economically feasible. With chemical leach technology,
such as cyanide leaching, it takes several tons of ore to yield one ounce of
minerals. Once the mineral is extracted, the tons of leftover tailings and waste
material must go somewhere. Consequently, land for waste disposal is at a
premium. A modem pit mine is dug hundreds of feet deep. The waste material from
a 20 acre, several hundred feet deep hole may not fit on 5 acres. Management of
this waste presents a significant public policy challenge since waste from mines
can pollute surface and groundwater resources with acid mine drainage and heavy
metals such as arsenic. Cyanide and other processing chemicals can also lead to
water contamination problems. The Law Supports the Millsite Decision In order to
mine on public land, under the Mining Law of 1872, miners must stake a claim for
the land they intend to use. There are two basic types of claims: mining claims
and millsite claims. Mining claims contain the mineral, such as gold, to be
mined. To be valid, the claim must contain a valuable mineral deposit, one that
can be mined economically. Mining claims can be up to 20 acres in size. Millsite
claims were originally intended for facilities that allowed the ore to be
processed; today they are used for processing facilities and to dump large piles
of waste rock and tailings (i.e. what's left after the mineral has been
extracted). To be valid, a millsite claim cannot contain a valuable mineral. The
logic being that land containing such minerals would be underutilized if used
only for processing facilities or waste piles. On March 25, 1999, the U.S.
Departments of the Interior and Agriculture released a joint decision stating
that they were "unable to approve the proposed Plan of Operations" for the Crown
Jewel Mine, in Okanogan County, Washington." They rejected the Plan of
Operations for this large open-pit, cyanide-leach gold mine in eastern
Washington State, because it did not comply with the requirements of the Mining
Law of 1872 (30 U.S.C. 22) that limit claimants to one 5-acre millsite claim for
each mining claim. Specifically, the mining law holds that millsite claims are
limited to 5 acres in size and allows only one 5-acre millsite claim per mining
claim. It has been recognized that in some instances, each 5-acre millsite claim
allowance, per mining claim, can be broken up into more than one, smaller,
millsite claim as long as the total does not exceed 5 acres. The language of the
Mining Law is crystal clear. In regard to lode claims, "no location made on and
after May 10, 1872, of such nonadjacent land shall exceed five acres." For
placer claims the law was amended in 1960 to state, "no location made of such
non-mineral land shall exceed five acres." According to the Department of the
Interior, Battle Mountain Gold (BMG), the mine operator, proposed to use 117
unpatented mill sites, totaling approximately 565 acres, and to develop 15 lode
mining claims. 15 The Mining Law limits BMG to a maximum of 75 acres of mill
site claims. It is interesting to note that the position of BMG, at least
according to DOI documents, has not been that DOI's interpretation of the Mining
Law was incorrect. Rather, BMG argued that the decision should not be applied to
the Crown Jewel mine since a Record of Decision, regarding the final EIS, had
already been issued. The March 25, 1999, decision references the November 7,
1997, Solicitor's Opinion entitled "Lintitations on Patenting Millsites under
the Mining Law of 1872." This 1997 Opinion reviews the millsite limit in detail.
The conclusion is unequivocal: "the plain language of the Mining Law indicates
that only one five- acre millsite claim per mining claim may be patented." The
Solicitor's recommendation is as follows, "Because the statute does not support
issuing patents for millsite claims totaling more than five acres per placer or
lode claim, the Department should reject those portions of millsite patent
applications that exceed the acreage limitation. In addition, the Bureau of Land
Management should not approve plans of operation which rely on a greater number
of millsites than the number of associated claims being developed unless the use
of additional lands is obtained through other means." The Opinion also finds
that BLM regulations (43 C.F.R. 3864) also specify a limit of one 5-acre
millsite claim per valid mining claim. This is true of both the first
regulations issued by the General Land Office in 1872 and the current BLM
regulations. Before the March 25th decision mining companies were sometimes
permitted, albeit illegally, more than one 5-acre millsite claim per mining
claim. Although the Bureau of Land Management and the U.S. Forest Service have
permitted multiple millsite claims in some instances, they had no basis under
the Mining Law, or under regulations, for such approvals. In the notes to the
Solicitors Opinion there is a description of the results of a survey of BLM
State Offices on the issue. The evidence presented in the notes is that there
was "no general or uniform policy or practice among the BLM State Offices" and
that many patents issued were not for multiple millsites--i.e. they did not
violate the millsite limit. Clearly, mine patents have been, and are being,
approved for mines that are within the millsite limit. The Solicitor's Opinion
notes that the current BLM's Handbook for Mineral Examiners may be the source of
the problem. It provides for the granting multiple millsite claims, per mining
claim. However, as the Solicitor makes clear in his opinion, no authority is
cited for these statements." While this explains why some BLM field staff may
have approved plans of operations that were over the millsite limit, it does not
change the fact that the limit exists in both the Mining Law and BLM's
regulations. History Supports the Millsite Decision There is ample evidence that
Congress, DOI, and many in the mining industry understood the strict millsite
limit contained in the Mining Law. Prior to 1960, the Mining Law allowed
millsite claims only in connection with vein or lode claims, not with placer
claims. In 1960, Congress explicitly amended the Mining Law to permit the
location of millsites in connection with placer claims. The legislative history
of the amendment makes it clear that Congress and the Department of Interior
understood both the millsite limits in the existing statute and the amendment
which permitted only one five-acre millsite claim in connection with a placer
claim. The amendment was passed and signed only after input from the Department
of Interior caused Congress to remove language that would have permitted
millsites "for each individual claimant" and allowed for a larger millsite claim
of "IO acres for each individual claimant." The amendment was changed as
requested by DOI, which sought to have the millsite limit for placer claims
match that of lode claims. The report language was explicit: T he word "ten" was
stricken and the word "five" inserted in lieu thereof. The purpose of this
amendment is to restrict the area of a millsite in conjunction with a placer
claim to 5 acres of land to make it conform with the allowable millsite acreage
for lode claims which has been the statutory requirement since 18 72 ... T he
words 'for each individual claimant" were stricken so as to impose a limit of
one 5-acre millsite limit in an individual case preventing the location of a
series of 5- acre millsites in cases where a single claim is jointly owned by
several persons .... In essence, S.2033 merely grants to holders of placer
claims the same rights to locate a 5-acre millsite as has been the case since
1872 in respect to holders of lode claims, and the committee unanimously urges
enactment. In 1968, the leading mining industry trade association (the American
Mining Congress, the predecessor of today's National Mining Association), in a
statement submitted to the Public Land Law Review Commission, acknowledged that
the law permits only one millsite claim per mining claim. "When the mining law
was enacted in 1872, provision was made for the acquisition of five-acre
millsites to be used for plant facilities on mining claims. The typical mine
then was a high-grade lode or vein deposit from which ores were removed by
underground mining. The surface plant was usually relatively small, and
acquisition of five-acre millsites in addition to the surface mining claims ...
adequately served the needs of mines ... Today, the situation is frequently
different ... A mine having 500 acres of mining claims may, for example, require
5,000 acres for surface plant facilities and waste disposal areas. It is obvious
that such activities may not be acquired through five-acre millsites. " "
(emphasis added) In 1974 in United States v. Swanson, 14 IBLA 158 the Interior
Board of Land Appeals stated that: A claimant is entitled to receive only that
amount of land needed for his milling and milling operations, and this amount
can embrace a tract of less than five acres. 1he statute states that the
location shall not "exceed five acres. ". . . The reference to five acres in the
statute is clearly a ceiling measure, not an absolute, automatic grant. In 1979,
the Congressional Office of Technology Assessment confirmed this interpretation
of the Mining Law's millsite provision. There could be as many millsites as
there are mining claims, and each millsite would be at most one-fourth the size
of the typical 20-acre claim, so that millsites, in the aggregate, would be
one-fourth the size of the ore body encompassed by the claims. The Impacts of
Enforcing the Millsite Decision Will this be the end of mining on public lands?
No, there are mining methods, such as underground mining, that do not
necessarily require such vast amounts of space for processing and waste dumping.
It is also important to remember that open-pit mining takes place on non-federal
lands. In those instances, mining companies successfully assemble the necessary
lands through acquisition, leases, or by purchasing mineral rights. As the
Solicitor's Opinion made clear, mining companies can seek to acquire necessary
millsite acreage through land exchanges and special uses permits. Both methods
do require the company to meet additional hurdles. Under FLPMA, payment must be
at fair market value, rather than $2.50 or $5.00 per acre, and land managers
could exercise discretion to prevent "unnecessary" or "undue" degradation of
public lands. But these are not unreasonable conditions. The decision may have
an impact on marginal, low-grade deposits. But there is no reason why federal
policy should be used to subsidize the mining of such deposits on public lands.
In fact, it should be the government's policy to create a level playing field
for all mining companies-whether the land is owned by the federal government,
the state, or private citizens. We do not expect open-pit mining to end on
public lands as a result of this decision, nor would we expect, does DOI or the
Forest Service. What will the economic impacts of this decision be on the
industry? The economic impacts of this decision on the entire industry, much
less on a particular company, are difficult to predict. As a report from Lehman
Brothers demonstrates, the primary determinants of the health of mining
companies today, especially gold mining companies, are metals prices,
oversupply, and the decisions of central bankers worldwide. However, to truly
assess the potential economic impacts of this decision on the industry or any
particular company, one would have to look at a range of issues including the
proportion of open-pit mining that takes place on public land, For example, of
the open-pit mines likely to be opened in the next 5 years, how many are on
public lands in the United States and how many of those are likely to be
significantly impacted by this decision? Answers to questions like this are
necessary to accurately predict the potential economic impact of this decision.
There is no doubt that this ruling presents a challenge to Battle Mountain Gold
and any other mining company that was planning to open a large-scale open pit
mine on public lands in the future and expected that DOI or the Forest Service
would grant them more public land for waste dumping than they are legally
entitled to. But the provision should not be overturned simply because mining
companies do not like it, or expected an exemption to the Mining Law. What is at
issue here is not just the impact on Battle Mountain Gold, or other mining
companies. There are significant economic impacts on surrounding communities
that must be weighed. Dr. Power, chair of Economics at the University of Montana
gave this opinion of the potential economic impacts of the Crown Jewel Mine,
"Given that the quality of the region's natural environment is an important part
of its economic base and the source of the region's ongoing economic vitality,
anything that threatens that natural environment has also to be seen as
threatening that economic base and economic vitality. " It is undisputed that
the applicant has spent significant financial resources in support of the Crown
Jewel Mine. It is also true that the local community groups and Confederated
Tribes of the Colville Reservation have spent considerable (albeit fewer)
resources in opposition to the mine. However, this is irrelevant to the
agencies' decision making process. The federal government's duty to uphold the
law is not dependent on the amount of money a project applicant, or any other
person, has spent in pursuit of its objectives. What are the environmental
impacts? This ruling simply enforces the status quo that should have been
enforced by DOI and the Forest Service. For those mines that need additional
public lands, outside those already granted by the Mining Law, DOI and the FS
will have additional environmental tools and greater discretion. Do we expect
that some mines, those proposed in environmentally-sensitive places, will be
rejected as a result? We hope so. Do we expect that DOI will permit some mines
through means such as land exchanges and special use permits? Yes. Our
Recommendations The millsite limit should be enforced until the Mining Law is
reformed. It is certainly ironic that the industry is now complaining about, and
seeking to change, a specific provision of the law that they have fought for 127
years to protect. But we do not think that the law should be amended, and
weakened, as a favor to one company, or even an entire industry. A broad and
full public debate on reforming the Mining Law is what is needed. Today, at this
hearing, we are looking at this problem from the wrong side. The problem is not
the millsite limit. The millsite limit is a symptom, the problem is that the
1872 Mining Law is outdated. It does not fit today's mining industry, it does
not protect taxpayers, and it does not protect the environment. Congress, and
those in industry, should see this decision as an opportunity to address the
fundamental problem of the 1872 Mining Law. The industry should not be granted
one-time exemptions to the parts they do not like or that no longer fit. Some
believe that since this provision has not been enforced in the past, it should
not be enforced now. We disagree. The law should be followed and enforced. If I
drive down a stretch of interstate every day for ten years and drive at 75 mph
despite the fact that the speed limit is 65 mph, and never get a ticket, it does
not mean that the speed limit has magically become 75 mph. If a state trooper
decides to pull me over and give me a ticket, the speed limit is still 65 mph,
even if it has never been enforced on that stretch of road. The state trooper
will not buy the argument that the law is not the law simply because it has
never been enforced on this particular stretch of road, nor will a judge. Unless
the law is changed the speed limit should be enforced. Until the 1872 Mining Law
is reformed the millsite limit should be enforced. Some believe that our
interpretation of the millsite limit under the 1872 Mning Law, and the one
followed by the Departments of Interior and Agriculture, is legally flawed. We
disagree. But for those who hold this view there is an obvious remedy and it is
not this subcommittee or the Congress. It is the courts. Some believe that there
is an urgent need to address this issue with a narrow rider on an appropriations
bill, addressing only this issue. There should be no rush to judgement. There is
no need. What is needed is a thorough consideration of all of the issues and all
of the potential impacts and consultation with all interested parties. It is not
the job of Congress to solve the problems of one company, or the perceived
problems of one industry. This subcommittee and the larger Congress has an
obligation to weigh the interest of the mining industry, the taxpayer,
communities that live near mines, and environmental organizations--i.e. the
broader public interest. Some believe there is an urgent need to address this
issue because of concerns about retroactivity. We do not think a rush to
judgement on these important issues should be driven by such concerns, and we do
not believe this issue should be applied retroactively. If necessary, we would
support a resolution or amendment specifying that there would be no retroactive
application of this issue. Our objective is not to penalize mining companies
that may have benefited from the incorrect application of the Mining Law by
either DOI or the Forest Service. Our objective is that this provision now be
applied. Some will argue that because of today's low metal prices, now is not
the time for reform of the Mining Law. There is no doubt that the current
economic situation, driven by low metals prices, poses significant problems for
some companies and at some mines. The lower gold prices have forced companies to
stop production at higher cost mines and to look for ways to produce more
efficiently and effectively, just like any other business. These economic
conditions have presented opportunities for some companies, especially those
with low operating costs and strong financial positions, and for gold companies
that practice hedging. In the past two years, the average total cash cost for
gold mines world wide has fallen from approximately $265 per ounce to $200. The
industry has begun to adapt to market forces- some companies have benefited
others have not. Some gold companies, as a result of hedging, have been selling
gold at an average of $400 per ounce. But a discussion of the current market for
metals, and the health of particular companies, actually misses the point. When
mining companies mine on private and state land they pay royalties. In Montana
and California the royalty is approximately 5%." Newmont Mining currently pays a
private land owner in Nevada a 18% royalty." There are companies mining
profitably today and paying a royalty. The challenge for this committee is to
set a royalty that is fair to the taxpayer and that makes sense irrespective of
metals prices at any particular point in time. After all, once a royalty is set,
it should be appropriate for both good times and bad times for metals prices.
That is precisely why we propose a royalty that is a percentage of production,
not a flat fee. The Way Forward, Comprehensive Reform of the 1872 Mining Law We
recommend that this subcommittee hold public hearings on Mining Law reform and
attempt to resolve any issues related to millsite limits as part of
comprehensive reform of the Mining Law. Why? Because these decisions should be
made in the context of a larger assessment of the environmental and economic
merits of a particular mine plan. As a matter of policy we think this issue
should be resolved as part of comprehensive Mining Law reform. We do not support
a rider to an appropriations bill that would grant an exemption to the millsite
limit and amount to de facto expansion of the Mining Law. The entire Mining Law
is outdated and obsolete, we should reform all of its provisions, not just the
one's that some in the industry object to. Further, an issue of such
significance, should not simply be attached to a spending bill, It should be
debated on its own merits. If this subcommittee is determined to seek resolution
of just the millsite issue, and not other elements of the Mining Law, the
appropriate action would be a stand-alone bill to amend the Mining Law. While we
would disagree with the merits of such an amendment, we would support the
process, because it would allow an full and open debate of the issue and a vote
tied specifically to the merits. Votes would not be held hostage to the pressure
to pass spending bills and other political considerations. Conclusion There is
growing public frustration with the privileges and prerogatives of mining
companies operating on our public lands. The regulatory decision-making process
is broken. The root cause is the 1872 Mining Law. Citizens are growing
increasingly frustrated because they perceive the decision-making process as
stacked against their interests. Mining companies are now frustrated as well.
They complain about the pace of regulatory decisions, the costs, and now the
1872 Mining Law, which they have spent decades and untold millions seeking to
defend. It is time for a fix. But the fix is not a one-time Band-Aid designed by
the industry to fix the part they do not like. Such a solution will only
increase public frustration and outrage. The public supports comprehensive
Mining Law reform. Voters in Montana have taken their frustrations to the
polls-last year passing a ban on cyanide leach mining. There is a growing chorus
of editorial opinion in support of Mining Law reform and in opposition to
one-time favors to mining companies. Today, much of the public is unwilling to
accept the results of mining regulatory decisions because they believe the
regulatory decision making process is broken. Because of the abuses allowed by
the Mining Law, citizens do not believe they have had their day in court. They
believe the playing field is not level, that the deck is stacked against them.
Reform of the 1872 Mining Law would dramatically alter this equation-creating a
level playing field and a fair decision making process. Even those who oppose
specific mine proposals are more likely to accept the decisions that result from
such a process. In our view, such a result is in the interest of the general
public, concerned community groups, environmental organizations, and the mining
industry. This is the challenge that is in front of this subcommittee today.
LOAD-DATE: June 17, 1999 
