Copyright 1999 Federal Document Clearing House, Inc.
Federal Document Clearing House Congressional Testimony
June 15, 1999
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 4634 words
HEADLINE:
TESTIMONY June 15, 1999 STEPHEN D.ALFERS SENATE ENERGY &
NATURAL RESOURCES FORESTS AND PUBLIC LANDS MANAGEMENT CROWN JEWEL MINE
BODY:
HEARING BEFORE THE SUBCOMMITTEE ON FORESTS
AND PUBLIC LAND MANAGEMENT ENERGY AND NATURAL RESOURCES COMMITTEE UNITED STATES
SENATE With respect to Issues Surrounding The Interior Department Letter of
March 25, 1999, Concerning The Crown Jewel Mine JUNE 15, 1999 STATEMENT OF
STEPHEN D. ALFERS ALFERS & CARVER, LLC THE EQUITABLE BUILDING 730
SEVENTEENTH STREET SUITE 340 DENVER, COLORADO 80202 Stephen D. Alfers is a
partner in the law firm of Alfers & Carver, LLC. Mr. Alfers is a 1976
graduate of the University of Virginia School of Law. He served as a U.S. Naval
officer between 1969 and 1973. He also holds a Master of Arts degree in
economics. Mr. Alfers' practice is concentrated in mining and public lands law.
He has served as an Adjunct Professor of Mining Law at the University of Denver
College of Law for many years. In 1990, he was named the Distinguished
Practitioner in Residence at that institution. Mr. Alfers has numerous
publications to his credit in the fields of mining and public land law,
including "Coping With Mining Law Reform," 37 Rocky Mtn. Min. L. Inst. Surface
Use, Paper No. 2 (Rocky Mtn. Min. L. Found. 1994). He was the co- author with
Coopers & Lybrand of a study commissioned by the American Mining Congress in
1992, "The Economic Impact of Mining Law Reform," and another study comparing
federal royalty proposals in 1993, "A Comparative Analysis of Mining Fees and
Royalties" (Morrison & Foerster/Coopers & Lybrand, 1993). Mr. Alfers has
served as Trustee of the Rocky Mountain Mineral Law Foundation and as a member
of the Board of Directors of the Colorado Mining Association for many years.
Since 1998, he has been the Vice Chairman for Hard Rock Mining of the Colorado
Mining Association. Mr. Alfers has been active in the Colorado Bar Association.
Since 1989, he has been named in Best Layaers in America. INTRODUCTION In
January 1997, after five years of scrutiny, the Bureau of Land Management and
the United States Forest Service issued a Record of Decision approving the
proposed activities for the Crown Jewel Mine in Okanogan County, Washington. To
date, Battle Mountain Gold (BMG) has invested approximately 80 million dollars
in the project, about 16 million dollars of that in reliance upon the 1997
Record of Decision. On March 25, 1999, the Solicitor of the United States
Department of the Interior rendered a decision' stating that the BLM and the
Forest Service were unable to approve the proposed Plan of Operations for the
Crown Jewel Mine because the plan did not comply with the requirements of the
Mining Law of 1872. Battle Mountain Gold's Plan of Operations proposed to
develop 4 patented and 11 unpatented lode mining claims. BMG proposed to use 117
unpatented millsites for ancillary mining facilities. In his
decision, the Solicitor stated that that the BLM and the Forest Service had to
reject the Plan of Operations because the millsite acreage in
the plan exceeded five acres of millsite land for each
associated mining claim. The Crown Jewel Decision stated that "The Mining Law
allows claimants to locate up to five acres of non-mineral land for
millsite use in association with each valid mining claim. ,2
The Decision further stated "any millsite acreage in excess of
five acres per valid mining claim is not valid."' The Crown Jewel Decision
provided that Battle Mountain Gold may locate a maximum of 75
millsite acres, depending on whether all of the fifteen lode
claims in the Plan are valid. Based on information in the Plan, the Decision
stated, the Crown Jewel Mine exceeds the allowable amount of
millsites by at least 490 acres. The Solicitor advised BMG that
they could still develop the mine by seeking a land exchange for the National
Forest and BLM administered land, if the federal agencies, in their sole
discretion, determine that an exchange would be in the public intereSt.4 The
Decision stated that the BLM indicated that use of excess
millsite. acreage on BLM land could be authorized through
approval of a plan of operations under 43 C.F.R. 3809.1-6, if the lands are
still open to the location under the Mining Law.' The Decision also stated that
the BLM was examining the extent to which it may authorize such use through a
lease under FLPMA or the BLM's implementing regulations. In rejecting BMG's
proposed Plan of Operations, the Solicitor relied on his previous Memorandum
issued in November 1997 limiting the patenting of millsites.'
In his Solicitor's Memorandum, the Solicitor reversed years of Interior
Department practice and opined that, under the Mining Law of 1872, no applicant
may obtain more than five acres of patented millsite land for
every one mining claim. The Solicitor's Memorandum dealt mainly with the
patenting of millsites. It directed the BLM to reject those
portions of millsite patent applications exceeding the acreage
limitation. However, the Solicitor's Memorandum also included the following
statement, unsupported by any citation to authority: "In addition, the Bureau
should not approve plans of operations 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 Crown
Jewel Decision, which dealt entirely with the approval of a Plan of Operations,
relied on that one unsupported sentence of the 1997 Solicitor's Memorandum to
reject BMG's Plan of Operation submitted in 1992.9 After news of the vacated
Record of Decision became public, on March 29, 1999, Battle Mountain's market
cap was reduced by more than $ 1 00 million in one day, Battle Mountain's stock
reached an all time low, and the stock price of Crown Resources Ltd., Battle
Mountain's joint venture partner, plunged 46% in one day. Against this backdrop,
the 1999 Emergency Supplemental Appropriations Act 10 passed on May 21, 1999,
revoking the Crown Jewel Decision as to that project for any fiscal year.
Section 3006(c) of the Act further provided that no patent application or plan
of operations submitted prior to the date of the enactment of the Act shall be
denied pursuant to the opinion of the Solicitor of the Department of the
Interior dated November 7, 1997. It is not clear, the extent to which the Crown
Jewel decision otherwise applies to other projects." The Solicitor's Memorandum
instructs the BLM to "not approve Plans of operations 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 Solicitor's command to disapprove plans of operations with
millsites outside its 1: I ratio is extraordinary for a number
of reasons. First, it appears without discussion or citation to authority in a
memorandum entirely devoted to patenting of millsites. Second,
it confuses patentability with surface use and occupancy by interposing the
Solicitor's new test for millsite patentability as a threshold
determination to be made before approval of a plan of operations. The inquiry
into validity or patentability has never been part of surface management under
43 C.F.R. Part 3809. The BLM implemented the Solicitor's Memorandum in an
Instruction Memorandum, IM 98-158 (Aug. 17, 1998). Where there is "excess"
millsite acreage in lands that have been withdrawn from entry
under the mining laws , the BLM will now require surrender of the
millsites as a condition to consideration of the plan of
operation. However, where there is "excess" millsite acreage in
lands open to location, the BLM asserts a new authority to make a determination
of an "unacceptable conflict with other resources." If there is none, the BLM
may approve the plan, treating the plan approval as a discretionary surface use
permit under Sec. 302(b) of FLPMA." If there is an unacceptable conflict, the
BLM asserts discretion to subject the plan approval to conditions for addressing
the resource conflicts. The Crown Jewel Decision did not apply IM 98-154. 16 It
did, however, reject the Plan of Operation on the grounds of the
millsite limitation. Crown Jewel represents a major policy
shift in the surface management of mining activities under the mining laws.
Crown Jewel applies the Solicitor's Memorandum, and in doing so, it introduces
claim or millsite validity as a threshold test for plan
approval under surface management regulations. Surface management regulations
are to regulate access to public lands for activities authorized under the
mining laws. The mining law not only authorizes the use of valid mining claims,
but it also permits access to public lands to prospect for valuable mineral
deposits, stake mining claims, prove up discoveries to validate claims, and then
develop and mine them. The Crown Jewel Decision raises a number of legal and
policy questions about access and surface use under the mining law, which, if
left to stand, call into question whether mines can be developed on public
lands. There are two discrete legal issues: first, whether Congress intended to
limit miners' use of non- mineral land to five (5) acres per mining claim; and,
second, whether Congress intended to restrict the use of the surface of a mining
claim to the support of only that claim. This statement addresses these two
issues. 1. The Five Acre Limitation In his Solicitor's Memorandum, the Solicitor
reached the conclusion that the plain language of the General Mining Law of 1872
limited the acreage of non- mineral land which may be patented to a single five
(5) acre millsite per mining claim." The statutory language
itself contains no such limitation; the rather sparse history of Interior
Department decisions on the topic does not support such a limitation; and the
long standing practice of the Department of the Interior is clearly in conflict
with the Solicitor's limitation. A. The Plain Language of the Statute The plain
language is as follows: (a) Vein or lode and millsite owners
eligible Where nonmineral land not contiguous to the vein or lode is used or
occupied by the proprietor of such vein or lode for mining or milling purposes,
such nonadjacent surface ground may be embraced and included in an application
for a patent for such vein or lode, and the same may be patented therewith,
subject to the same preliminary requirements as to survey and notice as are
applicable to veins or lodes; but no location made on and after May 10, 1872 of
such nonadjacent land shall exceed five acres .... 30 U.S.C. 42(a). Section
42(a) places no acreage limitation whatsoever on the amount of land which may be
used, occupied, and eventually patented. Instead, the language provides that no
single millsite location may exceed five acres. The language
does not limit the number of millsite locations that may be
used, occupied, and eventually patented. B. Cases and Interior Decisions We have
found no court decisions discussing the 1: I ratio, and the Solicitor's
Memorandum cites none. Interior Department decisions from the beginning are, if
anything, directly contrary to the notion of an arbitrary acreage limitation. In
Alaska Copper Co., the Department held that the lode proprietor in that case had
no inherent entitlement to any millsites in the absence of a
showing of necessity, use, and occupancy. The Department not only did not
establish a 1: I ratio or acreage limitation, it rather called for flexibility,
limited by the needs of operations: Whilst no fixed rule can well be
established, it seems plain that ordinarily one millsite
affords abundant facility for the promotion upon a single body of lode claims."
Significantly, the Department used the word "claims" in the plural. It clearly
eschewed a 1: I ratio in favor of a test of demonstrated need. Indeed, in Alaska
Coppe , the Department believed that in many cases a single
millsite location might well serve an entire group of claims.
At the same time the Department rejected a "fixed rule," recognizing the
importance of flexibility to respond to need. The Solicitor's Memorandum cites a
number of Interior Department decisions in support of his 1: I ratio." None of
those cases support the 1: 1 ratio. The clear import of Interior decisions has
been that the mining law limits the amount of non-mineral land that may be
patented by actual necessity, use and occupancy, not an arbitrary acreage
limitation or a 1: 1 ratio of millsites to mining claims." C.
Interior Department Practice In our extensive experience as mining lawyers, we
have never encountered action by federal land managers applying the acreage or
ratio limitation either to millsite patents or to approvals of
plans of operations." The first articulation of such a limitation, so far as we
know, was in the Solicitor's Memorandum. The Solicitor's Memorandum grew out of
the Solicitor's review of grandfathered patent applications and the Interior
Department's search for grounds on which to reject groups of patent applications
with common legal issues. There are approximately 67 grandfathered patent
applications pending in the Interior Department that include
millsites. Fifty-seven (57) of those seek patents for multiple
millsites exceeding the number of mining claims in the
application. One must remember that each of these patent applications have in
their case files signed first half final certificates, evidencing that they have
completed adjudications from the State offices of the BLM determining, in the
case of each patent application, compliance with the mining laws. These FHFCs
are persuasive evidence that at least until the 1994 Moratorium Act, the
Department did not recognize a 1:1I ratio. The practice of the BLM for many
years has been to issue patents to blocks of millsites" and to
approve plans of operations for the use and occupancy of
millsites, both without regard to acreage limitations or the
ratio of millsite locations to mining claims. Indeed,
necessity, use and occupancy appears consistently as the limit upon the extent
of millsite patents. The conclusion we draw is that the
Solicitor is simply wrong. Section 42 does not establish an arbitrary acreage
limitation or ratio limitation on the non- mineral land necessary to support
mining operations. The limitation, instead, is a flexible one depending on
actual necessity, use and occupancy. III.Does The Mining Law Limit Use of The
Surface For Mining Purposes? Although the validity of the mining claims was not
an issue in Crown Jewel, the agencies in a gratuitous broadside questioned the
validity of twenty-two (22) lode claims: "While the Mining Law does permit the
use of a valid lode claim for facilities that are ancillary to mining on that
claim, it does not permit the use of a lode claim for facilities to support
mining solely on other lode claims. For this reason, the lode claims BMG has
identified for mill site use likely are invalid. The only authority for that
assertion cited is Teller v. United States, 1 13 F. 273 (8 th Cir. 1901). Teller
involved the criminal prosecution for the cutting of timber on an unpatented
placer claim for commercial purposes. The issue before the Eighth Circuit Court
of Appeals was whether the defendant could use the surface for non- mining
purposes. The Court affirmed the conviction and stated that the claimant only
had " 'the right of present and exclusive possession' for the purpose of
mining." Teller at 281. The court stated "Possession of a mining claim ... by
well settled authority, confers the right, subject to certain limitations and
conditions, upon a locator, to work the claim for precious metals for all time,
if he desires to do so, but confers no right to take timber, or otherwise make
use of the surface of the claim, except so far as it may be reasonably necessary
in the legitimate operation of mining." Id. at 280. Neither Teller, nor any
other case we have found, holds that the owner of a mining claim can use the
surface solely on that claim. Crown Jewel, of course, was decidedly not about
proposed use of mining claims for non-mining purposes. The mining law, 30 U.S.C.
26 grants the locator of a mining claim the exclusive right of possession and
enjoyment" of the surface. The Surface Resources Act, 30 U.S.C. 612 (a),
prohibits the use of unpatented claims for any purposes other than "prospecting,
mining, or processing operations and uses reasonably incident thereto," but
specifically assures rights to the surface for mining purposes. There is no
indication in 612 (a) that such use is limited to support of a single claim. The
language of the Surface Resources Act, the relevant regulations, 28 and
commentary dealing with this issue, demonstrate that the owner of an unpatented
mining claim can use the surface for mining-related purposes. Cases dealing with
the surface use of a mining claim focus on whether the use is reasonably related
to a legitimate mining operation. We have found no case holding that the surface
of a mining claim can be used only to support mining on that one claim. Surface
Resources Act legislative history demonstrates that one of the purposes of the
act was to correct abuses under the mining laws by persons who located claims on
public lands for purposes other than that of legitimate mining activity, i.e.
obtaining title to timber, blocking access to Federal land, and building summer
homes on the land, among other things." in reference to what is now 30 U.S.C.
612(a), the Committee on Interior and Insular Affairs House Report stated: "In
short, this subsection recognizes essential rights - mining claims can, in the
future, be used for activities related to prospecting, mining, processing and
related activities, though not for unrelated activities. 1531 An author who
examined the issue of use of an unpatented claim stated: A question may arise
whether reduction mills and related facilities or other uses such as tailings
ponds and dumping grounds, all of which have been held to be within the purview
of the millsite statute, may be erected or placed on unpatented
lode claims. There appears to be no clear authority that the
millsite statute provides the exclusive method by which lands
may be appropriated for such purposes. However, Congressional authorization for
the construction of mill buildings on mineral claims may be inferred from the
Multiple Surface Use Act which prohibits the use of unpatented claims for any
purposes other than 'prospecting, mining, or processing operations and uses
reasonably incident thereto.' It seems reasonable to conclude, therefore, that
under most circumstances it would be proper for the holder of an unpatented
claim to use the surface of his claim for millsite purposes.
(Citations omitted.) It is interesting to note that the Surface Resources Act
uses the word "reasonably incident thereto" and does not say "therein" or
"thereon." Also, the list of uses prohibited by 43 C.F.R. 3712.1 are uses that
are not mining related. "On the other hand, a detailed list of permissible
mining related uses could not be found. Whether a particular use is permitted on
an unpatented claim appears to be governed by the 'reasonableness' standard set
forth in the Multiple Surface Act of 1955: mining claims may be used only for
'prospecting, mining, or processing operation and uses reasonably incident
thereto. The Surface Resources Act prohibits the use of unpatented claims for
any purposes other than "prospecting, mining, or processing operations and uses
reasonably incident thereto," and the unsupported assertion in the Crown Jewel
decision that a mining, claim can't be used for facilities to support mining
solely on other lode claims is plainly wrong. V. Conclusion The Solicitor's
Memorandum purports to interpret 42 of the mining law, but Crown Jewel makes
clear that in reality it changes the mining law in two fundamental ways. First,
together the Solicitor's Memorandum and the Crown Jewel Decision dramatically
reduce surface rights under the mining law. Second, the Solicitor's Memorandum
and the Crown Jewel Decision, by introducing "validity" determination to the
surface management approval criteria, replace miners' rights to self initiate
mining rights with agency discretion to approve or disapprove the activities
necessary to obtain property rights. A. Surface Rights For mining, surface is
essential. Without room for processing and other support facilities, a mine
cannot be developed. The Mining Law of 1872 expressly provided for complete
ownership of the surface of mineral lands by granting broad property rights to
the surface, and the Surface Resources Act of 1955 confirmed those property
rights for mining purposes and other purposes related to mining. The Solicitor's
Memorandum drastically limits miners' rights to surface use of non-mineral land,
and dubious language found in the Crown Jewel Decision could be stretched to
drastically constrain miners' surface use of mining claims. B. Self Initiation
The mining law opens the public lands to all citizens to enter upon unoccupied
public land to prospect for mining purposes. That includes prospecting for
minerals, and the use and occupancy of non-mineral land for
millsites. So long as public land remains open to location
under the mining laws, these prospectors do not have to first locate a valid
mining claim in order to lawfully carry out these activities. These pre-location
or pre-discovery activities are, of course, subject to the lawful regulation of
the federal land managers through 43 C.F.R. Part 3809 and 36 C.F.R. Part 228. If
the prospector is successful, the prospector might locate mining claims and
millsites. The act of "locating" involves work on the ground,
including prospecting and discovery (in the case of mining claims) and
establishing use and occupancy for mining purposes (in the case of
millsites). Performance of these acts can take many years, but
all of this activity is, of course, also subject to surface use regulation by
the federal land managers under 43 C.F.R. Part 3809 and 36 C.F.R. Part 228. If
the locator enjoys continued success, it may open a mine, also subject to the
regulatory authority of the federal land managers. All of this activity from
pre-discovery work (such as prospecting, claim staking, and exploration) to
development and mining is specifically authorized by the mining law in 30 U.S.C.
22. It is what is commonly called the "right to mine." It is entirely
self-initiated by miners under the law, and it is not subject to discretion by
the land managers. Regulation, yes, but discretion, no. The Solicitor's
Memorandum and the Crown Jewel decision resting on it amount to a direct assault
on the self-initiating premise of the mining law. The Solicitor's Memorandum
starts with interpreting a statute that deals with the patentability of non-
mineral land. It purports to interpret the statute to hold a five acre
limitation, in the face of long-standing, contrary interpretation by the federal
land managers themselves. In one unsupported statement, the Solicitor's
Memorandum then implicates the approval process for plans of operations, a
process that has nothing to do with the patenting of millsites.
The ink was hardly dry on the Crown Jewel Decision before the Forest Service
circulated a draft memorandum revamping its procedures for approval of plans of
operations. The Forest Service draft guidance resting solely on the Solicitor's
Memorandum, would require the Forest Service to first determine validity of
millsites and mining claims, before approving plans of
operations. The Forest Service draft referred to its action as its "new policy."
The Forest Service draft memorandum totally ignored 3006(c) by requiring this
validity determination, even for protects with existing approved plans of
operations. The Crown Jewel Decision, of course, has nothing to do with
patenting, and everything to do with the approval process for plans of
operation. It rejected a plan of operations for an advance stage project on the
grounds of perceived invalidity of millsites, and it did so,
relying on the Solicitor's Memorandum. The result is that the plan is rejected,
and so long as the Decision stands that applicant lacks sufficient surface
necessary to carry out operations. In the end, the right to carry out mining
activity depends on the favorable discretionary treatment of requests for a
special use permits or land exchanges. As concerning is the impact of the
Solicitor's Memorandum and the Crown Jewel reasoning on other projects, both
advance stage projects like Crown Jewel with approved or pending plans of
operations, and earlier stage exploration projects. These projects typically
have discoveries on core claims, and very promising targets on others. They
typically have unpatented millsites. These protects typically
require more work to prove discoveries and to establish use and occupancy of
non-mineral land. These must have approved plans of operations to validate"
these claims and millsites. When the Solicitor interposes
"validity" as a new criterion in the approval process, he arrogates discretion
either to pen-nit perfecting rights under the mining law or not to permit it.
VI. A Recommendation In 3006(a) the 1999 Emergency Supplemental Appropriation
Act clearly removed the millsite limitation and assured
approval of the Crown Jewel plan of operations. However, a more comprehensive
and permanent response is warranted. Section 3006(c) merely grandfathered
pending patent applications and plans of operations. The Solicitor's Memorandum
has a broad, if not universal impact. All advance stage mining protects and
nearly all exploration or development projects are comprised mainly of patented
and unpatented mining claims and milisites. Recent public land statistics show
that there are on file nearly 250 approved plans, and nearly 390 notices of
surface activity under the mining laws. These approved plans and notices include
the nearly 60 pending multiple millsite patent applications.
Unless permanently protected by Sec. 3006(c), the millsite
patent applications are likely to face scrutiny and probably contests or
third-party protests under the Solicitor's Memorandum. One can expect that most,
if not all of the 250 projects with approved plans, will in the future face
scrutiny of proposed modification of plans. In addition, many of the same 390
earlier stage operations under notice will require in the future approvals of
plans of operations. It is not clear whether the Solicitor's Memorandum, the BLM
Instruction Memoranda, and the reasoning of the Crown Jewel decision might be
asserted against future proposed plans of operations or future proposed
modifications of existing plans of operations, and Congress should act to make
certain that they do not. If Congress does not act, then the issues discussed
here must be left to the courts. Even though the interpretation of the mining
law in the Solicitor's Memorandum should be rejected by courts as unreasonable
and in conflict with the text of 30 U.S.C. 42, the uncertainty, delay, and cost
of litigation itself would be a gross injustice. Congress should act to disavow
permanently the millsite limitation in the Solicitor's
Memorandum, and it should extend the prohibition to all patent applications and
all future plans of operations. It should make clear that the "validity" of
claims or millsites cannot be used to hold hostage the approval
of proposed plans of operations. Further, Congress should assure, contrary to
the dictum in the Crown Jewell decision, that valid lode claims can be used for
mining purposes beyond the boundaries of that one claim. I want to thank the
Committee for this opportunity to appear here today. In addition, I want to
assure the Committee of my continued support in the event the Committee requires
further assistance.
LOAD-DATE: June 16, 1999
