Copyright 1999 Federal News Service, Inc.
Federal News Service
AUGUST 3, 1999, TUESDAY
SECTION: IN THE NEWS
HEADLINE: PREPARED TESTIMONY OF
TAXPAYERS FOR COMMON SENSE
HOUSE COMMITTEE ON RESOURCES
SUBCOMMITTEE ON ENERGY AND
MINERAL RESOURCES AUGUST 03, 1999
Good Afternoon, Ms. Chairwoman. I am Jill Lancelot, Legislative
Director and Co-founder of Taxpayers for Common Sense. Taxpayers for Common
Sense is dedicated to cutting wasteful government spending, subsidies and tax
breaks through research and citizen education. We support a balanced budget and
common sense tax reform. We are a politically independent organization that
seeks to reach out to taxpayers of all political beliefs in working towards a
government that costs less, makes more sense and inspires more trust. Taxpayers
for Common Sense is non-profit and non-partisan. Taxpayers for Common Sense
receives no government grants or contracts.
We thank the Committee for
giving us this opportunity to present our views regarding the subsidies given to
the hard-rock mining industry under the 1872 Mining Law. To put my testimony in
context, I would like to state two principles that guide TCS's work. First, all
resources on public lands belong to the American taxpayer - they are taxpayer
assets held in trust for current and future generation of Americans. Second,
these taxpayer assets should be used m a way that provides a fair return to
current and future generations of taxpayers. This could be achieved through
instituting market based bidding procedures for access to public lands, and
imposing an equitable royalty on the extracted minerals.
THE 1872 MINING LAW
The 1872 Mining Law governs the extraction of precious hard-rock minerals
such as gold, silver, and platinum that are located on public lands belonging to
the American people. The 1872 Mining Law was passed in order to spur rapid
development of the American frontier. Droves of Americans headed West after
hearing stories about motherlodes of gold in 'them thar hills.' Yet in the late
1990's, the richest motherlode is located in Washington D.C., where lawmakers
have been hamstrung by their own colleagues from reforming the 1872 law to stop
the legally mandated giveaway of valuable taxpayer assets.
The 1872 Mining
Law is an anachronism--it is a policy from another era. The goals for which it
was designed are no longer relevant. The time has come for the repeal of this
law which gives new meaning to the term "entitlements". First, this law entitles
large multinational corporations to take, for the price of a McDonald's
hamburger, full title to mineral-rich lands owned by the American taxpayer.
Second, it entitles them to take, free of any charge, gold and other precious
minerals found on public lands. Third, the law entitles them to ignore the costs
for cleaning up the toxic hazards they leave behind. Moreover, companies from
other countries such as Canada, Great Britain, Australia, France, and South
Africa share in these entitlements. Such results could not have been foreseen
when the law was enacted over 125 years ago.
ROYALTY-FREE MINERALS ARE GIVEN
"A royalty is compensation paid to the owner of a right, for the use of
it"-- according to The Random House Dictionary. The royalty represents the price
of the mineral rights. Therefore, it makes sense that payment for the extraction
of minerals should be paid to the owner of the resource. In the case of public
lands which are owned by the American public, the mining companies that extract
precious hard- rock minerals should compensate the owners for the privilege of
using these precious resources. Yet those companies, many of them foreign-
owned, do not pay taxpayers one penny for the extraction of such valuable
minerals on the public lands. Under the 1872 Mining Law these mining companies
are allowed to extract gold, silver, palladium and other precious metals, for
free. By comparil and natural gas companies are charged a 12.5 percent royalty
for extracting resources from public lands. Coal companies pay as well--for coal
mined on the surface, a royalty rate of 12.5 percent is paid and 8 percent for
coal mined underground.
Taxpayers for Common Sense sees no reason why the
hard-rock mining industry is treated any differently than other extractive
industries. The special treatment accorded the hardrock mining industry has cost
the hard-working American taxpayer billions of dollars. The Mineral Policy
Center estimates that $245 billion worth of sub-surface minerals has been given
away since the enactment of the 1872 Mining Law.
Moreover, when many of
these same companies operate on state-owned lands or private lands they do pay a
royalty. The royalty paid on state lands is as high as 10 percent in some cases
with an average state gross royalty at roughly 4 percent. By the same token,
mining companies compensate the owner when mining on private lands. The average
on private lands is a net smelter (gross income minus processing costs) return
of 2-4 percent.
There is solid evidence that shows there is an equitable way
that taxpayers can receive fair value for their assets. Taxpayers for Common
Sense would prefer a market driven competitive bidding system for access to the
desired land. In lieu of that however, we would support a 12.5 percent net
THE LAND GIVE-AWAY
Another scandalous taxpayer
give-away is the practice of "parenting". A company that discovers a valuable
mineral on its mining claim can gain title to the land for a very small
price--no more than $5.00 an acre. The value of the sub-surface minerals is
ignored. As an example of the extent to which this 'entitlement' is abused, the
Economic Report of the President, (February 1997) states that "In 1994,...a
mining company patented a claim in northern Nevada with a gross mineral value of
$10 billion, for which the Department of the Interior collected only $9,765."
The report further stated, "between May 1994 and September 1996 the Federal
government was forced by the General Mining Law to give away over $15.3 billion
worth of mineral in return for which taxpayers received only $19,190."
Furthermore, the 1872 Mining Law placed no restrictions on the resale of
claims on the open market and the taxpayers do not have the opportunity to share
the profits. There have been several turn-arounds with considerable profits. For
example, in 1970, an Arizona businessman patented 61 acres of land for $153. In
1980, he sold the land to a developer for $400,000 plus an 11 percent share in
In another example, just outside a popular ski resort in
Keystone, Colorado the Forest Service in 1983 sold gold miner Mark Hinton 160
acres of land for $2.50 an acre, or $400. Six years later, he sold it for $1
We commend the Congress for enacting the current patent moratorium.
Taxpayers for Common Sense would like to see a permanent ban on patenting.
TAXPAYERS PAY FOR CLEAN-UP
After the mining companies have carted
away the valuable minerals they leave the toxic aftermath for the taxpayer to
clean up. The U.S. Treasury faces staggering costs to clean up the environmental
degradation on public mine sites from which companies have walked away.Consider
the Summitville mine in Colorado, where taxpayers are paying $30,000 a day to
clean up a mine that left taxpayers with cyanide leach pits that will cost a
minimum of $142 million to clean up.
Already over-burdened taxpayers should
not be left to pay for the clean up that should be the responsibility of the
mining company. These are business costs that should be borne by the company
doing business. One remedy is that companies mining on public lands should be
required to post adequate bonds that cover the full cost of cleanup and
reclamation thereby sparing taxpayers from picking up the tab.
MILLSITE PROVISION -THE ONLY TAXPAYER PROTECTION
for Common Sense believes that there is only one provision in the entire 1872
Mining Law that provides protection for the taxpayer - the
millsite provision. Although the Bureau of Lands Management's
manual has been cited as the body of work governing mining practices, this
manual is not the law. In fact, if the manual does not specifically enforce the
5-acre millsite limit, it is in direct violation of the law.
The language of the 1872 Mining Law is clear in its intentions of limiting the
area of a millsite to only 5 acres. The 1872 Mining Law states,
in reference to non-mineral lands, or millsites, that "no
location hereafter made of such nonadjacent land shall exceed 5 acres..." 1
Clearly, the millsite provision is included in current law and
should be recognized as such.
This provision is important for taxpayer
protection. As previously stated, the mining law allows public lands containing
precious taxpayer-owned hard-rock minerals to be practically given away (or
patented) for $2.50 to $5 an acre. Since 1994, a moratorium on such patenting
has been renewed yearly on the annual Interior Appropriations bills. However, a
number of mining applications that were submitted before the moratorium have
been "grandfathered". In other words, these applications can still be processed
and mining companies can still take title to taxpayer-owned lands at
outrageously low prices. A number of these applications would allow the
patenting of millsites. If enforced, the
millsite provision would prevent at least some of these
applications from being approved, thus saving taxpayer dollars.
publications have cited this money-saving provision. In June 1970, the Public
Land Law Review Commission published a report citing the 5-acre
millsite provision as part of the 1872 Mining Law. The
Commission acknowledged the provision as "present law", yet it recognizes that
the 5-acre limit "has been inadequate for mining operations in many cases." 2
The problem, therefore, is not a question of what the General Mining Law
states - the law is quite clear. The problem lies in the fact that the new
methods mining companies employ have created a need to use more land per
operation, as the 5-acre millsite limit is no longer enough. As
this is the current situation, let us not argue about the
millsite provision. Instead, let us transcend the differences
on both sides and engage in true reform of this 127-year-old law -- it is in the
interest of both taxpayers and mining companies. However, it is imperative that
reform of this antiquated law be comprehensive and not piecemeal in nature.
Thus, Taxpayers for Common Sense believes that the 5-acre limit is clearly
stated in the 1872 Mining Law and enforcement of this provision is appropriate
and proper. We applaud the Department of the Interior and the Solicitor on the
decision to do so in November 1997, and we applaud the recent House vote that
reaffirmed this provision of the law.
Under the combined
abuses perpetuated by the 1872 Mining Law and the tax loopholes, taxpayers are
hit four times over. The mining law: 1. takes taxpayer-owned precious metals for
free; 2. acquires land for no more than $5 an acre; and 3. leaves taxpayers with
the bill for cleanup. Should the millsite provision in the 1872
Mining Law not be enforced, it would exploit taxpayers even more.
policies were originally enacted, they may have been called progress. However,
over a century later we call it corporate welfare.
We sincerely hope that as
we enter the Twenty-First Century, we can have an open and honest discussion
that will lead to comprehensive mining law reform.
United States Code, Section 42 (1964).
2 One Third of the Nation's Land: A
Report to the President and to the Congress by the Public Land Law Review
Commission, June 1970, p. 128.
August 5, 1999