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Copyright 1999 Federal News Service, Inc.  
Federal News Service



LENGTH: 1918 words



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 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.
"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 smelter royalty.
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 future profits.
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 million.
We commend the Congress for enacting the current patent moratorium. Taxpayers for Common Sense would like to see a permanent ban on patenting.

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.
Taxpayers 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.
Other 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.
When these 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.
1 30 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.

LOAD-DATE: August 5, 1999

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