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[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]

EFFECT OF MINING CLAIM FEES ON DOMESTIC EXPLORATION: ARE THEY WORTH 
                                  IT?

=======================================================================

                           OVERSIGHT HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                         COMMITTEE ON RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             March 29, 2001

                               __________

                           Serial No. 107-12

                               __________

           Printed for the use of the Committee on Resources

 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house
                                   or
         Committee address: http://resourcescommittee.house.gov

                                 ______

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________________________________________________________________________

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                         COMMITTEE ON RESOURCES

                    JAMES V. HANSEN, Utah, Chairman
       NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska,                   George Miller, California
  Vice Chairman                      Edward J. Markey, Massachusetts
W.J. "Billy" Tauzin, Louisiana       Dale E. Kildee, Michigan
Jim Saxton, New Jersey               Peter A. DeFazio, Oregon
Elton Gallegly, California           Eni F.H. Faleomavaega, American 
John J. Duncan, Jr., Tennessee           Samoa
Joel Hefley, Colorado                Neil Abercrombie, Hawaii
Wayne T. Gilchrest, Maryland         Solomon P. Ortiz, Texas
Ken Calvert, California              Frank Pallone, Jr., New Jersey
Scott McInnis, Colorado              Calvin M. Dooley, California
Richard W. Pombo, California         Robert A. Underwood, Guam
Barbara Cubin, Wyoming               Adam Smith, Washington
George Radanovich, California        Donna M. Christensen, Virgin 
Walter B. Jones, Jr., North              Islands
    Carolina                         Ron Kind, Wisconsin
Mac Thornberry, Texas                Jay Inslee, Washington
Chris Cannon, Utah                   Grace F. Napolitano, California
John E. Peterson, Pennsylvania       Tom Udall, New Mexico
Bob Schaffer, Colorado               Mark Udall, Colorado
Jim Gibbons, Nevada                  Rush D. Holt, New Jersey
Mark E. Souder, Indiana              James P. McGovern, Massachusetts
Greg Walden, Oregon                  Anibal Acevedo-Vila, Puerto Rico
Michael K. Simpson, Idaho            Hilda L. Solis, California
Thomas G. Tancredo, Colorado         Brad Carson, Oklahoma
J.D. Hayworth, Arizona               Betty McCollum, Minnesota
C.L. "Butch" Otter, Idaho
Tom Osborne, Nebraska
Jeff Flake, Arizona
Dennis R. Rehberg, Montana

                   Allen D. Freemyer, Chief of Staff
                      Lisa Pittman, Chief Counsel
                    Michael S. Twinchek, Chief Clerk
                 James H. Zoia, Democrat Staff Director
                  Jeff Petrich, Democrat Chief Counsel
                                 ------                                

              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                    BARBARA CUBIN, Wyoming, Chairman
              RON KIND, Wisconsin, Ranking Democrat Member

W.J. "Billy" Tauzin, Louisiana       Nick J. Rahall II, West Virginia
Mac Thornberry, Texas                Edward J. Markey, Massachusetts
Chris Cannon, Utah                   Solomon P. Ortiz, Texas
Jim Gibbons, Nevada,                 Calvin M. Dooley, California
  Vice Chairman                      Jay Inslee, Washington
Thomas G. Tancredo, Colorado         Grace F. Napolitano, California
C.L. "Butch" Otter, Idaho            Brad Carson, Oklahoma
Jeff Flake, Arizona
Dennis R. Rehberg, Montana
                                 ------                                

                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on March 29, 2001...................................     1

Statement of Members:
    Cubin, Hon. Barbara, a Representative in Congress from the 
      State of Wyoming, Prepared statement of....................    15
    Gibbons, Hon. Jim, a Representative in Congress from the 
      State of Nevada............................................     6
    Rahall, Hon. Nick J. II, a Representative in Congress from 
      the State of West Virginia.................................     6
        Prepared statement of....................................     7
    Markey, Hon. Edward J., a Representative in Congress from the 
      State of Massachusetts, Prepared statement of..............    46

Statement of Witnesses:
    Anderson, Robert, Deputy Assistant Director, Minerals, Realty 
      and Resource Protection, U.S. Bureau of Land Management....    13
        Prepared statement of....................................    14
    Calbom, Linda, Director of Financial Management and 
      Assurance, U.S. General Accounting Office..................     8
        Prepared statement of....................................     9
    Craig, Steven D., Vice President, Golden Phoenix Minerals, 
      Inc........................................................    33
        Prepared statement of....................................    35
    Septoff, Alan, Reform Campaign Director, Mineral Policy 
      Center.....................................................    29
        Prepared statement of....................................    30
    Tangen, J. P., Director, Alaska Miners Association...........    23
        Prepared statement of....................................    24

Additional materials supplied:
    Kohlmoos, William B., Reno, Nevada, Letter submitted for the 
      record by The Honorable Jim Gibbons........................     2
    Viljoen, Ben, Chairman, Esmeralda County Board of 
      Commissioners, Esmeralda County, Nevada, Letter submitted 
      for the record by The  Honorable Jim Gibbons...............     4

 

 
EFFECT OF MINING CLAIM FEES ON DOMESTIC EXPLORATION: ARE THEY WORTH IT?

                              ----------                              

                        Thursday, March 29, 2001

                     U.S. House of Representatives

              Subcommittee on Energy and Mineral Resources

                         Committee on Resources

                             Washington, DC

                              ----------                              

    The Subcommittee met, pursuant to notice, at 2:40 p.m., in 
Room 1324, Longworth House Office Building, Hon. Jim Gibbons, 
presiding.
    Mr. Gibbons. [Presiding.] The Subcommittee on Energy and 
Mineral Resources will come to order.
    The Chairwoman, Barbara Cubin, is detained. She will be 
here momentarily and we are going to get this hearing underway. 
I want to welcome the ranking member, Mr. Rahall of West 
Virginia, and all the witnesses here today who are going to 
testify.
    For the record, without objection, in order to make things 
flow a little more smoothly, I would like to enter into the 
record two letters, a letter from Mr. William Kohlmoos of Reno, 
Nevada, dated March 22nd, relating to the effect of mining 
claim fees on domestic exploration, and the letter from the 
Esmeralda County Board of Commissioners, dated March 21st, 
regarding the effect of mining claim fees on revenue streams 
for the county.
    [The letters follow:]
    [GRAPHIC] [TIFF OMITTED] T1409.004
    
    [GRAPHIC] [TIFF OMITTED] T1409.005
    
    [GRAPHIC] [TIFF OMITTED] T1409.006
    
    [GRAPHIC] [TIFF OMITTED] T1409.007
    
    STATEMENT OF HONORABLE JIM GIBBONS, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF NEVADA

    Mr. Gibbons. Before we begin, I think it's important that 
we set the stage on what this hearing is about. This is an 
oversight hearing on the effect of mining claim fees on 
domestic exploration.
    Personally, I have a problem with some of the rhetoric 
that's being used out there to portray everything about the 
mining industry in the worst possible light, while at the same 
time failing to acknowledge that mining provides a substantial 
benefit, both individually and to our society as a whole. 
Without mining, and the knowledge of how to use metals, we 
would still be living in the Stone Age.
    World War II has been termed a ``war of copper mines and 
steel mills''. Using raw materials produced by miners, American 
industry was able to produce enough war materials for itself 
and our allies, and because of that, America became the arsenal 
of democracy and, in large part, the mining industry was able 
to produce raw materials in record amounts.
    Much of the environmental damage from mining was done 
during this time when our ability to produce energy and metals 
for the war effort would determine our future as a free Nation. 
I think I would rather deal with this environmental damage than 
with the consequences of losing World War II.
    As a result, I think our mining industry has been given a 
black eye. I think today's technology in mining is certainly 
vastly different than it was of yesterday, and hopefully we can 
enlighten the public and enlighten the Committee with your 
testimony here today, with regard to this very issue which has 
an effect on the United State' resources and its ability to 
maintain this country as the number one country in the world.
    Mr. Gibbons. With that, I would turn to my friend, Mr. 
Rahall, for any opening remarks he may have.

STATEMENT OF HONORABLE NICK J. RAHALL, II, A REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF WEST VIRGINIA

    Mr. Rahall. Thank you, Mr. Chairman.
    Mr. Chairman, I just want to state at the outset that the 
title of this hearing, certainly, in my mind, does not suggest 
any intention to give this subject matter an objective overview 
or review. I mean, look at the title. ``Effects of Mining Claim 
Fees on Domestic Exploration: Are They Worth It?'' Obviously, 
that leads one to believe there is a predisposition toward 
these fees--not worth it, whatever ``it'' may be.
    I simply wanted to point this out to set the stage here. In 
my view, one focus of this hearing should be on the beneficial 
effect that the mining claim holding fee has had on reducing 
speculation on public domain lands. Another focus should be on 
how the fee provides for at least some, albeit minimal, return 
to the American people for the use of their lands. But that is 
perhaps not going to be the case today.
    This hearing apparently is intended to be a forum to 
disparage the fees on the basis of some relatively minor 
discrepancies in BLM's accounting for how it used fee receipts.
    The fact of the matter is that the mining claim holding fee 
was first put into effect during Fiscal Year 1993, and was 
reauthorized by an appropriations bill through the end of this 
fiscal year.
    It would seem to me that sufficient time has passed for the 
industry to become accustomed to this fee. And it would seem to 
me that paying this fee, instead of digging up $100 worth of 
dirt under the mining law's assessment work requirement, is a 
more efficient way to operate.
    Now, I happen to think that the authorizing committees of 
Congress should do their job. That's this Committee. That's why 
I introduced H.R. 1085, to make this holding fee permanent.
    Certainly, when you look at the Bush budget blueprint, it 
becomes apparent that many Interior Department programs are 
going to be squeezed--to probably put it mildly. Under that 
circumstance, I see no reason why the mining industry should 
notfinance a portion of the costs associated with administering 
the mining law program.
    Further, I see no reason why this Committee, the 
authorizing committee, should not do its job and move this 
legislation, rather than sit idly by while the appropriators do 
our jobs for us.
    Thank you.
    [The prepared statement of Mr. Rahall follows:]

Statement of The Honorable Nick Rahall, Ranking Democrat, Committee on 
                               Resources

    At the outset, I would note that the title of this hearing does not 
suggest any intention to give the subject matter an objective review. 
Titling this hearing--Effects of Mining Claim Fees on Domestic 
Exploration: Are They Worth It? obviously leads one to believe there is 
a predisposition toward these fees not worth it. . . . . . whatever it 
may be.
    I simply wanted to point this out to set the stage here. In my 
view, one focus of this hearing should be on the beneficial effect the 
mining claim holding fee has had on reducing speculation on public 
domain lands. Another focus should be on how the fee provides for at 
least some albeit minimal return to the American people for the use of 
these lands. But that is perhaps not going to be the case. This hearing 
apparently is intended to be a forum to disparage the fees on the basis 
of some relatively minor discrepancies in BLM's accounting for how it 
used fee receipts.
    The fact of the matter is that the mining claim holding fee was 
first put into effect during Fiscal Year 1993, and was reauthorized by 
an appropriations bill through the end of this fiscal year. It would 
seem to me that sufficient time has passed for industry to have grown 
accustomed to this fee. And it would seem to me that paying this fee, 
instead of digging up $100 worth of dirt under the Mining Law's 
assessment work requirement, is a more efficient way to operate.
    Now I happen to think that the authorizing committees of Congress 
should do their job. That is why I introduced H.R. 1085 to make this 
holding fee permanent. Certainly, when you look at the Bush Budget 
Blueprint, it becomes apparent that many Interior Department programs 
are going to be squeezed. Under that circumstance I see no reason why 
the mining industry should not finance a portion of the costs 
associated with administering the mining law program. And I see no 
reason why this Committee, the authorizing committee, should not do its 
job and move this legislation rather than stand idly by while the 
appropriators do our jobs for us.
    Thank you.
                                 ______
                                 
    Mr. Gibbons. Thank you, Mr. Rahall.
    Right now I would like to introduce the two witnesses that 
are on the panel before us. We have with us the Director of 
Financial Management and Assurance from the U.S. General 
Accounting Office, Linda Calbom, and Deputy Assistant Director, 
Minerals, Realty and Resource Protection, U.S. Bureau of Land 
Management, Mr. Robert Anderson.
    Miss Calbom, the floor is yours. Welcome.

 STATEMENT OF LINDA M. CALBOM, DIRECTOR, FINANCIAL MANAGEMENT 
         AND ASSURANCE, U.S. GENERAL ACCOUNTING OFFICE

    Ms. Calbom. Thank you. Mr. Vice Chairman and members of the 
Subcommittee, I am happy to be here today to discuss certain 
cost charges made to the Bureau of Land Management Mining Law 
Administration Program. I will refer to the program as MLAP as 
I go through my short statement here.
    We last reported on this program about a year ago, when we 
briefed Subcommittee staff on BLM's administration and use of 
mining maintenance fees. That work resulted in BLM undertaking 
a review of its contracts and services charged to MLAP to 
determine if improper charges of this nature had been made to 
the program.
    In addition to that, the Subcommittee asked that we review 
labor charges to MLAP, which make up the bulk of the costs of 
the program, and also, to take a look at the methodology that 
BLM used in its review of MLAP charges for contracts and 
services. And finally, we determined whether BLM employees were 
aware of the sources of MLAP funding.
    My statement today will focus on the results of our work in 
these three areas. There is a detailed discussion of our 
findings in our report that is actually being released today.
    As far as our review of the labor charges, we performed a 
survey of BLM employees who charged labor to the program during 
the first 10 months of Fiscal Year 2000. This review covered 
nine administrative states and offices which reported 
obligations of over $23 million in Fiscal Year 2000. That's 
about 72 percent of the total obligations for the program.
    As you can see from Chart 1 that we have here--hopefully 
you can see it. If not, those of you who can't, it's attached 
to the back of my statement. About half of the employees 
reported working and charging the same amount of time to the 
program, which is as it should be. However, almost 39 percent 
reported that they charged more time to the program than they 
actually worked, while only about 11 percent reported charging 
less time than actually worked.
    These improper charges mean that BLM's financial records do 
not reflect the true cost of the program. They are also in 
direct conflict with BLM's policy, which stresses--and I will 
quote--``Charging work tasks, employee salaries, procurement or 
contract items, or equipment purchases to any subactivity other 
than the benefiting subactivity, violates the terms of the 
Appropriations Act.'' It's pretty clear.
    Based on our survey sample, we estimated a net overcharge 
to the program of almost 11 percent for the 10-month period 
that we looked at, resulting in a potential overcharge of about 
$1.2 million for the nine offices included in our review. Our 
analysis of BLM records also showed that certain employees 
received bonuses and awards from MLAP funds for work unrelated 
to mining.
    BLM's policy is that any bonuses and awards received as a 
result of labor performed should be charged to the subactivity 
that benefited from the labor, which makes sense. However, 
awards were given to individuals for tasks unrelated to MLAP 
operations, including assisting in the moving of a BLM office 
to a new facility, and as compensation for not using BLM's 
relocation service when selling a private residence as part of 
a lateral transfer.
    As far as the review BLM did of its contracts and services, 
our earlier work had indicated some problems in this area. So 
BLM reviewed contracts and services over $1,500 that were 
charged to the program during fiscal years 1998 and 1999. We 
found that the methodology BLM used was appropriate and 
thorough, and that it did identify the majority of contracts 
and services improperly charged to the program during that 
time.
    The contracts that were reviewed represented over $8 
million, or almost 90 percent of the total contracts and 
services obligated to the program during that time period. Of 
that, BLM determined that about $716,000 in contracts and 
services should not have been charged to the program.
    The improper payments, as shown in Chart 3 which we have 
here, included things such as $34,000 for janitorial services, 
which actually represented a full year's contract cost for 
these services in a field office that only was partially 
involved in MLAP; $30,000 for the appraisal of Federal coal 
leaseholds, which, of course, isn't included in the program; 
$25,000 for an attorney in an EEO settlement for an employee 
who had not worked on MLAP tasks; and $2,000 for a habitat 
survey of a threatened and endangered species of butterfly in 
an area with no active mining.
    Although BLM has taken appropriate steps to correct these 
past improper charges of contracts and services to MLAP, it has 
not established specific procedures to prevent the recurrence 
of similar improper charges in the future.
    Finally, as was requested, we asked in our survey whether 
BLM employees were aware of the source of MLAP funding. The 
short answer is no. Approximately 70 percent stated they were 
not aware of the source of the funding.
    We made a number of recommendations in our report to 
address the issues I have discussed here today, but the bottom 
line is, until BLM makes some significant changes, there will 
continue to be a high likelihood of improper use of MLAP funds, 
and little reliance can be placed on the accuracy of reported 
MLAP cost information.
    That concludes my statement, Mr. Vice Chairman.
    [The prepared statement of Ms. Calbom follows:]

   Statement of Linda M. Calbom, Director, Financial Management and 
               Assurance, U.S. General Accounting Office

    Madam Chairman and Members of the Subcommittee: I am pleased to be 
here today to discuss our review of certain charges made to the Bureau 
of Land Management's (BLM) Mining Law Administration Program (MLAP). 
Accurate cost information is crucial for proper program management and 
is especially important for MLAP since this program is partially funded 
through mining fees that the Congress has designated to be used only 
for mining law administration operations.
    We last reported on this program a year ago when we briefed your 
office on BLM's administration and use of mining maintenance fees. That 
work resulted in BLM undertaking a review of its contracts and services 
charged to MLAP in the previous two fiscal years and identifying some 
improper charges to that program. Our prior work also led to your 
request that we (1) review labor charges to MLAP during the first 10 
months of Fiscal Year 2000, (2) review the methodology that BLM used in 
its review of MLAP charges for contracts and services during fiscal 
years 1998 and 1999 and evaluate its approach for correcting improper 
charges, and (3) determine whether BLM employees were aware of the 
sources of MLAP funding.
    My statement will focus on the results of our work in these three 
areas. A detailed discussion of our findings is contained in our report 
Bureau of Land Management: Improper Charges Made to Mining Law 
Administration Program (GAO-01-356), which is being released today.
    In brief, BLM employees we surveyed disclosed that many of the 
hours charged to MLAP during the first 10 months of Fiscal Year 2000 
did not accurately reflect hours actually worked on MLAP. Based on our 
survey sample, we estimate a net overcharge of almost 11 percent for 
the 10 month audit period, resulting in a potential overcharge of about 
$1.2 million \1\ for the nine BLM administrative states \2\ and offices 
included in our review.
---------------------------------------------------------------------------
    \1\ Since this figure is derived from sample data, it is subject to 
sampling error. Taking this random variation due to sampling into 
account, we are 95 percent confident that the actual overcharge ranges 
between $0.6 and $1.9 million. This result offers assurance that a net 
overcharge for MLAP occurred for the survey period.
    \2\ Administrative states are BLM's administrative offices, which 
in some cases have jurisdiction over areas beyond the boundaries of the 
state named. Our work examined 9 of BLM's 18 administrative states and 
offices.
---------------------------------------------------------------------------
    BLM's review of contracts and services over $1,500 that were 
charged to MLAP during fiscal years 1998 and 1999 employed a 
methodology that was appropriate and identified the majority of the 
contracts and services that were improperly charged to MLAP operations 
during that time period. Specifically, BLM determined that about $716, 
000 in contracts and services should not have been charged to MLAP. 
Finally, in response to our survey, approximately 70 percent of BLM 
employees stated they were either not aware of the source of MLAP 
funding or did not know that the program is partially funded by fees 
collected from miners and designated for MLAP operations.
    To address the weaknesses identified through our work, we have made 
recommendations to BLM intended to create more specific criteria and 
clearer policies related to the use of MLAP funds.
                               background
    BLM's MLAP is responsible for managing the exploration and 
development of locatable minerals on public lands. Locatable minerals 
include the so-called "hardrock minerals," such as copper, lead, gold, 
silver, and uranium. MLAP operations include activities such as:
     Lreviewing and approving plans and notices of mining 
operations,
     Lconducting inspections and enforcement to ensure 
compliance with the terms of plans and notices of operation and related 
state and local regulations, and
     Lidentifying and eliminating cases of unauthorized 
occupancy of mining claims.
    MLAP operations do not include work on nonlocatable or common 
variety minerals, such as sand or gravel, or oil and gas work.
    The program is funded through mining fees and by appropriations to 
the extent that the fees are inadequate to fund the program. \3\ Since 
1993, mining fees have included an annual $100 mining maintenance fee 
on unpatented mining claims and sites and a $25 location fee on new 
claims and sites. The maintenance fees are collected in lieu of the 
annual $100 worth of labor or improvements (also called "assessment 
work") required by the Mining Law of 1872. The authorization for these 
fees expires on September 30, 2001.
---------------------------------------------------------------------------
    \3\ BLM has general statutory authority to use receipts from mining 
fees for MLAP operations. Annual appropriations acts establish an 
amount of BLM's appropriation for Management of Land and Resources 
(MLR) to be used for MLAP operations. The appropriations acts require, 
however, that the mining fees that BLM collects be credited against the 
MLR appropriation until all MLR funds used for MLAP are "repaid." To 
the extent that fees are insufficient to fully credit the MLR 
appropriation, the MLR appropriation absorbs the difference and 
therefore partially funds MLAP.
---------------------------------------------------------------------------
            some labor costs were improperly charged to mlap
    Our survey of BLM employees showed that the number of hours charged 
to MLAP were not a reliable record of the number of hours actually 
worked on the program. According to employees, the number of hours 
charged to MLAP were often in excess of the number of hours worked on 
MLAP issues, or were charged for work unrelated to mining. In addition, 
some employees received bonuses or awards from MLAP funds although they 
charged no hours to the program.
    Our survey population consisted of BLM employees who charged labor 
hours to MLAP during the first 10 months of Fiscal Year 2000. The nine 
administrative states and offices included in our review reported MLAP 
obligations of over $23 million in Fiscal Year 2000, representing 
approximately 72 percent of total reported MLAP obligations. In this 
survey population, about one- half of the employees reported working 
and charging the same amount of time to the program. However, almost 39 
percent reported that they charged more time to MLAP than was actually 
worked, while only about 11 percent reported charging less time to MLAP 
than was actually worked. These results are summarized in Attachment 1.
    These improper charges to MLAP mean that BLM's financial records do 
not reflect the true cost of the program. They are also in conflict 
with BLM's policy, which stresses that "Charging work tasks, employee 
salaries, procurement or contract items, or equipment purchases to any 
subactivity other than the benefiting subactivity violates the terms of 
the Appropriations Act." BLM's policy also emphasizes that ``records of 
actual costs and accomplishments must be (as) accurate as possible.'' 
Based on our survey sample, we estimate a net overcharge to MLAP of 
almost 11 percent for the 10- month audit period, resulting in a 
potential overcharge of about $1.2 million for the nine BLM 
administrative states and offices included in our review.
    Many employees reported that the improper charges to MLAP were 
driven by BLM's funding allocations \4\ rather than the actual work 
performed. In other words, charges were improperly made to MLAP because 
that subactivity had funds available for obligation. Based on our 
survey, approximately 56 percent of the employees who charged more time 
than worked to MLAP said they did so because funds were available in 
that program. Employees also stated that they charged MLAP based on 
directions from their supervisor or a budget officer. Approximately 50 
percent \5\ of the employees who charged more time than worked to MLAP 
reported that they did so based on the directions of a supervisor or 
budget officer. Again, this is in direct conflict to BLM's policy that 
indicates charging a subactivity simply because "money is available 
there" is a violation of the appropriations act. These results are 
summarized in Attachment 2.
---------------------------------------------------------------------------
    \4\ OMB Circular A-34 defines allocation as one method of 
restricting Federal funds available for obligation. It is used broadly 
to include any subdivision of funds below the suballotment level, such 
as subdivisions made by agency financial plans or program operating 
plans, or other agency restrictions.
    \5\ Employees could provide more than one explanation, therefore 
the percentages listed above do not total to 100 percent.
---------------------------------------------------------------------------
    Of the employees who stated that they charged more time to MLAP 
than they actually worked, some reported charging time for such non- 
MLAP related tasks as processing applications to drill oil and gas 
wells; working on environmental remediation projects; doing recreation 
management; preparing mineral reports for land exchanges; and 
conducting work on common variety minerals, such as sand and gravel. 
BLM officials characterized these tasks as generally not appropriate 
for MLAP.
    Our analysis of BLM records also showed that certain BLM employees 
received bonuses and awards from MLAP funds for work unrelated to 
mining. In clarifying BLM's policy, BLM's Director of Budget stated 
that any bonuses and awards received as a result of the labor performed 
should be charged to the subactivity that benefited from that labor. 
However, awards were given to individuals for tasks unrelated to MLAP 
operations, \6\ such as assisting in the moving of a BLM office to a 
new facility and as compensation for not using BLM's relocation service 
when selling a private residence as part of a lateral transfer. When 
asked why such bonuses and awards had been charged to MLAP, BLM 
officials either could provide no explanation or stated that MLAP had 
been charged by mistake.
---------------------------------------------------------------------------
    \6\ We also found individuals who received awards from MLAP funds 
for MLAP- related work, even though the hours and associated labor were 
not charged to MLAP. BLM officials stated that charging these awards to 
MLAP was appropriate and that the associated labor should also have 
been charged to the program. Not charging the associated labor costs to 
MLAP resulted in program costs being understated.
---------------------------------------------------------------------------
blm effectively identified contracts and services improperly charged to 
       mlap but needs additional procedures to prevent recurrence
    BLM's review of contracts and services over $1,500 that were 
charged to MLAP during fiscal years 1998 and 1999 employed a 
methodology that was appropriate and thorough and identified the 
majority of the contracts and services improperly charged to MLAP 
operations during that time period. The contracts reviewed represented 
over $8 million, or almost 90 percent, of the contracts and services 
obligated to MLAP during that time period. BLM determined that about 
$716,000 in contracts and services should not have been charged to 
MLAP. The improper payments, as shown in Attachment 3, included:
     Lover $34,000 for janitorial services,
     L$30,000 for the appraisal of Federal coal leaseholds,
     L$25,000 for an attorney in an Equal Employment 
Opportunity settlement for an employee who had not worked on MLAP 
tasks, and
     L$2,000 for a habitat survey of a threatened and 
endangered species of butterfly in an area with no active mining.
    In addition, our review identified an additional $40,000 for two 
contracts and services that were improperly charged to MLAP. These 
contracts and services were for a cooperative agreement for geographic 
information system support and a biological survey. BLM officials 
agreed and stated that correcting adjustments would be made to the 
proper appropriation for the additional $40,000.
    BLM prepared an instruction memorandum to provide guidance on 
correcting the contracts and services charges that were improperly 
charged to MLAP in fiscal years 1998 and 1999. BLM officials have told 
us that they are identifying the appropriations for fiscal years 1998 
and 1999 that should have been charged for these costs and that there 
are sufficient funds to make the correcting adjustments of about 
$716,000.
    Although BLM is taking the appropriate steps to correct these past 
improper charges of contracts and services to MLAP, it has not yet 
established specific procedures to prevent the recurrence of similar 
improper charges in the future. Until such procedures are established 
and implemented, there continues to be a high risk of improper use of 
MLAP funds for unrelated contracts and services.
          many employees are unaware of source of mlap funding
    Finally, as requested, in our survey we asked BLM employees whether 
they were aware of the source of funding for MLAP. Approximately 70 
percent of BLM employees who responded were either not aware of the 
source of MLAP funding or did not know that the program is partially 
funded by fees collected from miners and designated for MLAP 
operations.
                              conclusions
    In summary, the costs of some labor and a number of contracts and 
services were improperly charged to MLAP, resulting in other 
subactivities benefiting from funds intended for MLAP operations. 
Therefore, fewer funds have been available for actual MLAP operations. 
Although BLM has taken steps to make correcting adjustments for some of 
these improper charges, it has not established specific guidance or 
procedures to prevent improper charging of MLAP funds from recurring in 
the future. Until additional procedures for MLAP are developed and 
effectively implemented, the Congress and program managers can only 
place limited reliance on the accuracy of MLAP cost information.
                  recommendations for executive action
    We have included in our report the following four actions that the 
Director of the Bureau of Land Management should take to address the 
issues I have discussed here today:
     Lmake correcting adjustments for improper charges to 
appropriation accounts;
     Lremind employees that time charges and other obligations 
are to be made to the benefiting subactivity as stated in BLM's Fund 
Coding Handbook and develop a mechanism to test compliance;
     Lprovide detailed guidance clarifying which tasks are 
chargeable to MLAP operations, such as those listed in the background 
section of our report; and
     Lconduct training on this guidance for all employees 
authorized to charge MLAP.
    Madam Chairman, this concludes my statement. I would be happy to 
answer any questions that you or the Members of the Subcommittee may 
have.
                                 ______
                                 
    Mr. Gibbons. Thank you very much.
    Mr. Anderson.

   STATEMENT OF ROBERT ANDERSON, DEPUTY ASSISTANT DIRECTOR, 
   MINERALS, REALTY AND RESOURCE PROTECTION, BUREAU OF LAND 
MANAGEMENT, ACCOMPANIED BY LARRY BENNA, BUDGET DIRECTOR, BUREAU 
                       OF LAND MANAGEMENT

    Mr. Anderson. Thank you.
    Madam Chairman and members of the Committee, I appreciate 
the opportunity to appear here today to discuss the Bureau of 
Land Management's operation of the Mining Law Administration 
Program and our use of the dedicated funds from the $100 claim 
maintenance fee and the $25 location fee.
    I have with me today Larry Benna, who is our Budget 
Officer, just in case the budget comes up. Larry is directly 
behind me. Thank you, Larry, for coming.
    At the request of the House and Senate authorizing 
committees, the General Accounting Office, GAO, conducted a 
review of BLM's use of the Mining Law Administration moneys in 
nine States and the BLM headquarters office. The GAO reported 
that in Fiscal Year 1998, $18.6 million, or approximately two-
thirds of the $27.8 million expended in the mining law program, 
was spent on labor, while obligations for operations amounted 
to approximately $9.2 million. In examining the operational 
dollars spent by BLM in Fiscal Year 1998, GAO's report 
highlighted several contracts which appeared questionable.
    In response to GAO's report, the Director of BLM promised 
quick remedial action to address any instances of improper 
contract charges to the Mining Law Administration Program. 
Thereafter, the BLM conducted an intensive in-house examination 
of all contracts in which over $1,500 was charged to the Mining 
Law Program. The BLM also expanded the scope of this review to 
include Fiscal Year 1999.
    The BLM review disclosed that certain contract charges that 
should have been made to other programs were erroneously made 
to the mining law program. In response, the BLM subsequently 
refunded $716,000 of erroneous charges to the Mining Law 
Administration Program through internal budget adjustments. The 
identified contracts and services charges have been corrected 
and the use of the recovered mining law funds is being tracked 
and monitored.
    Most recently, the GAO conducted a limited review of labor 
spending in the first 10 months of Fiscal Year 2000. The GAO 
surveyed a sample of 125 employees and asked for their 
understandings and recollections concerning how their time was 
charged last year. The GAO report estimated that, based on 
projections of this sampling, approximately $1.2 million in 
mining law administration funds were on BLM activities that did 
not directly relate to mining law administration.
    We are firmly committed to improving cost accountability in 
the Mining Law Administration Program. We are making 
improvements in guiding and training our employees in the 
proper uses of mining law funding. In addition, we will focus 
on better methods of monitoring mining law funds.
    We have already taken some steps in this direction. For 
example, prior to GAO's survey of labor charges, we initiated a 
survey of the mining law workload and the skill mixes in our 
field and state offices. We will use the results of this survey 
to better align budget and staffing to correspond with the 
workload.
    As the GAO found in its survey, a significant amount of 
miscoding of time resulted from field offices not having 
funding to match program workloads. Additionally, through a 
newly developed web-based Management Information System, the 
BLM now has access to workload and cost data on a current 
basis. As the agency becomes more familiar and proficient with 
the use of this data tool, our ability to monitor and track 
costs and obligations by program will be enhanced.
    In response to the GAO's recommendations, we will issue by 
the end of April, 2001 additional instructions to our field 
offices on the types of work activities and operational 
expenses which may be charged to the mining law program.
    The BLM appreciates the advice and assessment the GAO has 
given to our Mining Law Administration Program. We are 
committed to making improvements aimed at ensuring that Mining 
Law Administration funds are properly directed to the 
management of this program.
    Madam Chairman, this concludes my prepared statement, and 
we would be happy to answer your questions.
    [The prepared statement of Mr. Anderson follows:]

Statement of Bob Anderson, Deputy Assistant Director, Minerals, Realty 
           and Resource Protection, Bureau of Land Management

    Madame Chairman and members of the Committee, I appreciate the 
opportunity to appear here today to discuss the Bureau of Land 
Management's (BLM) operation of the mining law administration program 
and our use of the dedicated funds from the $100 claim maintenance fee 
and $25 location fee.
    Through Interior Appropriation Acts, the BLM has been authorized 
since Fiscal Year 1993 to charge a $100 maintenance fee to mining 
claimants. This fee substitutes for an earlier requirement that mine 
claimants perform $100 worth of labor or make $100 worth of 
improvements, collectively referred to as assessment work, in order to 
maintain a claim under the General Mining Law of 1872. The BLM is 
authorized to retain the maintenance fee and use it to defray 
administration costs associated with operation of BLM's mining program. 
Those operators qualifying as small miners are exempt from the $100 
holding fee, but continue to be required to perform $100 worth of 
assessment work annually.
    At the request of the House and Senate authorizing committees, the 
General Accounting Office (GAO) conducted a review of BLM's use of the 
Mining Law Administration monies in nine states and the BLM 
headquarters office. The GAO reported that in Fiscal Year 1998, $18.6 
million, or approximately two thirds of the $27.8 million expended in 
the mining law administration program, was spent on labor, while 
obligations for operations amounted to approximately $9.2 million. In 
examining the operational dollars spent by BLM in Fiscal Year 1998, 
GAO's report highlighted several contracts which appeared questionable.
    In response to GAO's report, the Director of the BLM promised quick 
remedial action to address any instances of improper contract charges 
to the mining law administration program. Thereafter, the BLM conducted 
an intensive in-house examination of all contracts in which over $1,500 
was charged to the mining law administration program. The BLM also 
expanded the scope of this review to include Fiscal Year 1999.
    Our review revealed that most contracts were legitimately charged 
to mining law administration. For example, the GAO identified a 
contract for $3,500 to Hollywood Show Lights, which at first glance 
might raise questions. Hollywood Show Lights provides specialized 
lighting facilities and vehicles principally to the movie industry. 
However, further BLM clarification of the contract disclosed that 
Hollywood Show Lights provided staff and heavy equipment to the BLM for 
the removal of trash and material from an unauthorized use site on a 
mining claim in the Tick Canyon area of Los Angeles County. Upon 
review, both the BLM and the GAO determined this to have been a proper 
utilization of mining law administration funds.
    The BLM review disclosed that certain contract charges that should 
have been made to other programs were erroneously made to the mining 
law administration program. In response, the BLM subsequently refunded 
$716,000 of erroneous charges to the mining law administration program 
through internal budget adjustments. The identified contracts/services 
charges have been corrected and use of the recovered mining law funds 
is being tracked and monitored.
    Most recently, the GAO conducted a limited review of labor spending 
in the first 10 months of Fiscal Year 2000. The GAO surveyed a sample 
of 125 employees and asked for their understandings and recollections 
concerning how their time was charged last year. The GAO report 
estimated that, based on projections of this sampling, approximately 
$1.2 million in mining law administration funds were used on BLM 
activities that did not directly relate to mining law administration. 
In our February 2001 response to the GAO, we stated that we would 
attempt to make appropriate adjustments and restore the misdirected 
funds. However, unlike our review of contract expenditures, we believe 
it to be difficult, if not impossible, to reconstruct accurately all of 
our employees labor charges in order to identify where possible 
misdirection of labor costs may have occurred and should be adjusted. 
In addition to requiring a significant commitment of resources, this 
process would most likely result in questionable conclusions as 
corrective actions would necessarily rely on employees recollections of 
time spent doing work as much as a year ago. After discussions with the 
GAO which are scheduled to take place in the next two weeks, we intend 
to review the GAO's survey results and correct specific instances of 
miscoding in Fiscal Year 2000.
    We are firmly committed to improving cost accountability in the 
mining law administration program. We are making improvements in 
guiding and training our employees in the proper uses of mining law 
administration program funding. In addition, we will focus on better 
methods of monitoring mining law administration funds. We have already 
taken some steps in this direction. For example, prior to GAO's survey 
of labor charges, we initiated a survey of the mining law 
administration workload and the skill mixes in our field and state 
offices. We will use the results of this survey to better align budget 
and staffing to correspond with workload. As the GAO found in its 
survey, a significant amount of miscoding of time resulted from field 
offices not having funding to match program workloads. Additionally, 
through a newly developed web- based Management Information System 
(MIS), the BLM now has access to workload and cost data on a current 
basis. As the agency becomes more familiar and proficient with the use 
of this data tool, our ability to monitor and track costs and 
obligations by program will be enhanced. The MIS will facilitate better 
and more intensive monitoring of expenditures.
    In response to the GAO's recommendations, we will issue by the end 
of April, 2001, additional instructions to our field offices on the 
types of work activities and operational expenses which may be charged 
to the mining law administration program.
    The BLM appreciates the advice and assessment the GAO has given to 
our mining law administration program. We are committed to making 
improvements aimed at ensuring that mining law administration funds are 
properly directed to the management of this Program.
    Madame Chairman, this concludes my prepared statement. I would be 
pleased to answer any questions that you or the other members of the 
Committee may have.
                                 ______
                                 
    Mr. Gibbons. Thank you very much, Mr. Anderson. We will try 
to adhere to the five-minute rule for those of us who wish to 
question you during this period of time.
    I'm going to defer my questioning to the Chairwoman of the 
Subcommittee, Mrs. Cubin from Wyoming, if she has any questions 
at this time.
    [The prepared statement of Mrs. Cubin follows:]

  Statement of The Honorable Barbara Cubin, Chairman, Subcommittee on 
                      Energy and Mineral Resources

    The Subcommittee meets today, in our oversight capacity to review 
the Bureau of Land Management's handling of the mining law 
administration program supported by claim fees. Since 1993, hardrock 
mining claim holders have been required to annually pay $100 per lode 
claim, placer claim or millsite which they wish to hold for the 
following year. Holders of ten or fewer claims nationwide may elect to 
perform the traditional assessment work requirement rather than pay 
this fee.
    This so-called holding fee will expire after the collection due 
this September 1st unless reauthorized. The current authorization is a 
product of an interior appropriations act rider from Fiscal Year 1999. 
Prior to this time the fee was levied upon miners via the 1993 budget 
reconciliation act, and initially it was a product of another 
appropriations bill.
    A somewhat unusual aspect of the claim holding fee is that the BLM 
collects the funds from the miners but does not deposit them into the 
general treasury for later appropriation. Rather, the fees are an 
offset against what sums BLM is annually appropriated for Management of 
Land and Resources. Then, if the fee collection falls short of mining 
law administration program needs, the difference is to come from 
general funds.
    Our first panel will testify as to the manner in which BLM has 
spent the holding fees collected expressly for the purpose of mining 
law administration. Last Congress, our Senate counterparts and I asked 
the General Accounting Office to review these expenditures. We wanted 
to know how well, or poorly, the BLM was doing toward insuring that 
expropriated dollars from the miners wasn't being spent on salaries, 
contracts and other program costs which should have been paid from 
appropriated dollars out of the general fund.
    Lo and behold, the GAO's auditors learned what many had surmised--
BLM personnel too often code their time and expenses to budget accounts 
deemed to be flush with cash. Like Willie Sutton who said that he 
robbed banks because that's where the money is , apparently some 
supervisors in BLM have elected to have folks code to mining law 
administration whether they worked in that area or not, because the 
funds were available.
    While we should be no less concerned if appropriated dollars are 
misspent, the mis-expenditure of a fee collected directly for a 
specific purpose is especially worrisome to those paying the freight. 
How can Congress rationally debate reauthorization of this fee if we 
don't know how the BLM is actually spending the money? Likewise, the 
debate must consider the impacts of fee reauthorization upon our 
domestic industry and the economies of the rural communities which have 
supported public land minerals exploration over the decades.
    Our second panel of witnesses today will address the issue of the 
large reduction of holding fees collected since the late 1980's. 
Initially the sum of holding fees collected was over $35 million per 
year, but the drastic fall-off in mining claims has diminished this 
total to barely $21 million last year. In the late 1980's, prior to 
this fee, BLM reported that some 1.2 million mining claims were of 
record in their data base. Now the figure is less than 250,000. Most 
likely multiple factors were at work to cause this result, but 
imposition of the holding is clearly a candidate for part of the blame.
    I look forward to our distinguished panel enlightening us upon 
these issues.
                                 ______
                                 
    Mrs. Cubin. Mr. Chairman, I do have some questions.
    My first question is for Mr. Anderson. I have in front of 
me the verdict of a trial that occurred in the United States 
District Court for the District of Wyoming. It's a sexual 
harassment case. The verdict just came in, for a million 
dollars awarded to the plaintiff, in a suit against the BLM.
    I just want to make sure that none of that million dollars 
that is being awarded to the plaintiff come out of this fund. I 
just want to go on record in making sure that that doesn't 
happen. Can you give me any assurances that that won't happen?
    Mr. Anderson. I'm glad I brought my budget guy today. 
Larry?
    Mr. Gibbons. For the record, if you do testify, please 
identify yourself with your name and your position.
    Mr. Benna. Good afternoon. My name is Larry Benna. I'm the 
Budget Director for the Bureau of Land Management. I appreciate 
the opportunity to be here.
    In response to the question, again, as the document you 
have just came from the courts, I'm not intimately familiar 
with it. But I don't imagine we would charge things to that, 
but I will review that for the record and provide a detailed 
response.
    Mrs. Cubin. I appreciate that, although I can tell you that 
I'll bet, if you were asked prior to the GAO study, it would be 
hard to imagine some of the expenditures that came out of this 
fund would be made as they were made. So I will be watching, I 
guess, is what I need to say.
    This is also to Mr. Anderson. There were nearly 760,000 
active mining claims in early 1993, before the $100 claim 
maintenance fee was levied. This was dropped to just under 
333,000 active claims in September of '94, which is a loss of 
427,000 claims. As of September, 2000, there were almost 
236,000 active mining claims, which translates to a loss of an 
additional 97,000 claims.
    Do you think that the loss of any of these 663,000 active 
mining claims since this fee was imposed have had an impact on 
exploration levels in the United States?
    Mr. Anderson. There may be some, but in our analysis of the 
metal prices, especially for gold, and the location of claims, 
we find there is a very close parallel in the comparison of 
metal prices and the number of claims that are staked in any 
given year, and also dropped in a given year.
    Mrs. Cubin. So it's not your testimony, is it, that the 
price of metals is the only reason that these claims have 
dropped? I can tell you from firsthand knowledge, I know that 
the fee has impeded exploration in the country.
    Mr. Anderson. I'm sure there's merit to your opinion, Madam 
Chairman. Of course, the metals market--
    Mrs. Cubin. Certainly it's important as well, Mr. Anderson. 
I can see that.
    Mr. Anderson. And the cost of doing business and the profit 
margin all have a role to play in this as well.
    Mrs. Cubin. Probably it's a multifaceted problem, including 
access as well, so I completely agree with your answer.
    In prior years, did the fees that were collected fully fund 
the Mining Law Administration Program before the $100 fee was 
charged?
    Mr. Anderson. Before the...?
    Mrs. Cubin. Oh, okay. The early years of the $100 holding 
fee, excuse me. Did it fully fund the Mining Law Administration 
Program?
    Mr. Anderson. Yes.
    Mrs. Cubin. GAO states that most BLM employees that they 
interviewed were unaware of the funding sources. Given that 
this funding comes primarily from holding fees, don't you think 
that that is an important thing that employees should know, in 
keeping track of their time and expenses?
    Mr. Anderson. We sure do, Madam Chairman. We have to do a 
better job in making sure that they know where this funding 
comes from, and also how to use this funding.
    As mentioned in my testimony, we have already made an 
impact on our field offices, and also here in the Washington 
office, on how those funds are to be used. We have three memos 
that have gone out on various aspects of the program, and on 
coding, on the use of mining law funds. So I think there is a 
heightened awareness right now as we speak, and there will be 
more as we put out more guidance in the future.
    Mrs. Cubin. Thank you.
    Mr. Gibbons. Thank you very much, Mrs. Cubin.
    Mr. Rahall.
    Mr. Rahall. Thank you, Mr. Chairman.
    If the claim maintenance fee were revoked, where would the 
money to administer the mine law program, including approval of 
permits and enforcement of mining regulations, come from? If 
the maintenance fee were revoked, where would the money for 
everything else come from?
    Mr. Anderson. We would have to ask the Congress to 
appropriate that money.
    Mr. Rahall. Okay. Do you expect President Bush to include a 
claim maintenance fee in his budget request?
    Mr. Anderson. I would like to defer that question to our 
budget officer here.
    Mr. Benna. I had a strange feeling you would.
    Mr. Rahall, with all due respect, perhaps we can respond to 
that after the President's budget has been released. It's due 
for release on April 9th. We are exercising some considerable 
caution about discussing that prior to the actual release of 
the budget. I think that would be my statement for now.
    Mr. Rahall. You can't be caught on the record then?
    Mr. Benna. No, sir.
    Mr. Rahall. Okay, thank you.
    Thank you, Mr. Chairman.
    Mr. Gibbons. Thank you.
    Mr. Otter.
    Mr. Otter. Thank you, Mr. Chairman.
    Mr. Anderson, how many different programs like the Mining 
Law Administrative Program does the BLM have within its 
category of receipts?
    Mr. Anderson. I'll let Larry Benna answer that question.
    Mr. Otter. Larry, you're getting double duty today.
    Mr. Benna. I guess it comes with the territory.
    I don't think I can give you the actual number of specific 
accounts. I can provide that for the record. We do have other 
programs that are receipt-based. For example, we do operate a 
recreation program that is funded from recreation fees. We do 
have various other charges, like our range improvement fund is 
funded out of 50 percent of the grazing fees that are 
collected. We do also make several payments to states and 
countries that come from receipts that are generated from 
public land activities. We've got several other programs that 
we operate based on service charges--for example, processing 
rights of way. So it's fairly in-depth.
    Mr. Otter. Thank you. Perhaps I can cut to the quick here, 
then, or to the chase.
    Is it the practice then of the BLM, in authorizing its 
expenditures from each of these funds, to assign a certain duty 
time or amount of time per employee, say, to grazing and 
recreation, to mining law? Is that the practice?
    Mr. Benna. I think our general practice is to instruct our 
employees to allocate funding based on the work that they're 
actually planning to do, and then we ask them to record their 
time and their cost based on the work they actually do perform.
    Mr. Otter. Great. Could you ballpark for me, then, the 
total funds that would come into BLM under all the programs 
that it has?
    Mr. Benna. You mean receipt funds?
    Mr. Otter. Yes, but not from general fund appropriations, 
but from fees, dues, recreational expenses, whatever.
    Mr. Benna. I think a ballpark number, again without having 
documents in front of me, in Fiscal Year 2000, I think we 
collected somewhere on the order of between $1.6 and $1.8 
billion.
    Mr. Otter. One point six to one point eight billion.
    Mr. Benna. Yes, sir.
    Mr. Otter. Miss Calbom, when you were going through this 
audit, am I to believe that you only audited the mining 
administration fund?
    Ms. Calbom. Yes, that's correct.
    Mr. Otter. Have you any reason to believe that similar 
mistakes and misappropriations were made for this billion, six 
hundred? Have we any reason not to believe that there was 
likewise mistakes made in the misassignment of hours worked per 
program charged for that money, for a billion, eight hundred 
million?
    Ms. Calbom. It is certainly possible, given the findings 
that we had in looking at this program.
    Mr. Otter. Has the GAO looked at that?
    Ms. Calbom. We have not at this point, no.
    Mr. Otter. Okay. Thank you, Mr. Chairman.
    Mr. Gibbons. Thank you, Mr. Otter.
    Mr. Inslee.
    Mr. Inslee. Thank you, Mr. Chair.
    You know, we're going to a policy where citizens have to 
pay for parking their car on the side of the road going through 
the national forests, and have to be increasing fees to take 
their kids for a picnic in a national park, and have got to pay 
a fee to park in an area where you get out and go cross-country 
skiing. You have got to have a fee every time you turn around 
to walk through our national lands. And yet, I see people are 
proposing that hard rock miners should be able to essentially 
have a free rental to do explorations on land, with significant 
changes to the land, for free, when my citizens have to pay to 
walk their kid around, which doesn't do a darned thing to the 
park land or the forests.
    They also want to transfer the cost of this maintenance 
expenditure from the miners, who stand to make a billion 
dollars a year, which is what is estimated they take out of 
public lands each year, they want to transfer the cost of that 
program, onto my citizens, who have to pay money for the mere 
purpose of walking their kid 20 feet from their parked car.
    I just want to ask any of you three at the table, does that 
seem right to you?
    Mr. Anderson. The 1872 mining law, of course, has been 
around for a long time. Not to raise another issue, but the 
mining law states that the land shall be free and open to 
exploration and development. Of course, that was 125 years ago.
    There are merits on both sides. The real reason for 
assessment work was to prompt substantive work toward the 
discovery of a valuable mineral. That hasn't always occurred 
with assessment work. In fact, there have been a few reports 
that say just the contrary, that miners would file their 
affidavits of assessment work but wouldn't do the work itself. 
So, in 1993, of course, Congress imposed this $100 fee, and I 
think it has been an advantage to the taxpayer in terms of 
helping administer these programs under the mining law.
    That's a roundabout answer. I can't give you a yes or a no.
    Mr. Inslee. Well, I'll give you three options: Yes, no, or 
I prefer not to answer that question, as to what you truly 
believe.
    Mr. Anderson. Well, I guess--
    Mr. Inslee. Any three is fine with me, as long as they're 
honest.
    Mr. Anderson. I guess I would choose not to answer the 
question, with that--
    Mr. Inslee. I appreciate that.
    Miss Calbom, how would you answer that question?
    Ms. Calbom. Well, what our work was focusing on was looking 
at the cost of the program and how well the costs are being 
accounted for. The original idea of charging the fee was that 
it was supposed to be a self-funding program. I guess our 
concern is that you can't tell whether it's a self-funding 
program or not if you don't know the true costs of the program.
    You know, in making a determination, I don't know whether a 
fee should be charged or not, or how much it should be, but I 
do know that, when you're trying to determine that, you need to 
know the true cost of the program.
    Mr. Inslee. Is there any other activity that causes this 
potential substantial damage to the land that does not pay any 
fee for the right to use Federal lands? I am told oil and gas 
pays some royalty; I'm told kids pay to picnic on Federal 
lands. Is there any others, like hard rock mining, that do not?
    Mr. Anderson. I can't think of any, no.
    Mr. Inslee. Madam Chair, I really hope that you--actually, 
Madam Chair is not in the chair at the moment, is she.
    Mr. Chair, I hope you entertain Mr. Rahall's issue here for 
continuing this fee, because I really believe it was 
inappropriate to shift these costs to the general taxpayer, who 
is already getting charged for having picnics. I hope you 
seriously bring this to the Committee's attention. Thank you 
very much.
    Mr. Gibbons. Mr. Inslee, I would report that even the two 
industry witnesses that are going to testify here later today 
do not suggest the fee should be eliminated, so I would hope 
you will listen to what they have to say.
    The purpose of this fee, of course, was not to stop 
exploration on land. The purpose of this fee was to assist the 
BLM with its administration of the mining laws and programs 
that are affected through the course of the 1872 mining law. So 
to suggest that the MLAP and the fee assessment was to 
substitute for exploration misstates the purpose and the 
character of the fee. It simply was an alternative that the 
Administration thought in 1993 was necessary to assist the BLM 
with their administration.
    With that, let me turn to Miss Calbom and ask a question. 
In your testimony today, of course, you indicated that you 
surveyed some BLM employees. Who was included in this survey? 
Was it administrative? Did you question the administrative side 
of the BLM, or was it simply the employees? And how did you 
carry out this survey?
    Ms. Calbom. What we did was we took a look at anyone who 
charged time to the program, so that would include supervisors, 
employees and--
    Mr. Gibbons. If I may interrupt you, and I apologize, did 
you look for specific authorizing authorities, whether it was 
written or otherwise, from the Administration, on how this time 
was to be charged or how this money was to be used in this 
whole process?
    Ms. Calbom. Oh, yes. These funds were clearly earmarked to 
be used just for MLAP operations.
    Mr. Gibbons. What I'm asking, though, were there directions 
given, directives given by the BLM, or through its management, 
as to how this money would be authorized and spent, or charged?
    Ms. Calbom. There were some directions given...if I may 
confer with my colleagues for a moment. [Conferring.]
    The budget justification is probably the closest thing that 
describes the particular activities that should be charged to 
this program. That's one of the recommendations we make, that 
there needs to be better communication to the employees as far 
as what should be included. Because, back to your original 
question, what our survey showed was that a lot of people 
really didn't understand what was supposed to be included.
    As far as how we did our survey, if you would like me to go 
ahead and answer that question, as I said, we identified 
individuals who charged time to the program. I believe there 
were about 744 individuals. We did a statistical sample of 125 
individuals from that population, and then we sent out our 
survey ahead of time to them. We called them and actually 
interviewed them over the phone. We were actually able to reach 
all but nine people, and those people had either left BLM or 
were on extended sick leave. So we had a very good return rate 
on that survey.
    Mr. Gibbons. Let me ask a follow-up question.
    Does the BLM have an obligation to reimburse the MLAP 
program under this misappropriation or misuse that you have 
identified?
    Ms. Calbom. It is, in fact, a purpose violation. I believe 
they have reimbursed the program for the contracts and 
services. I don't believe the labor portion has been reimbursed 
at this point.
    Mr. Gibbons. Do you know how much of the $716,000 
outstanding amount is assessed only to labor?
    Ms. Calbom. The $716,000 related to the contracts and 
services, and that's the piece I think that was, in fact, 
reimbursed.
    We had made a statistical estimate, which you can't go by 
exactly, but we estimated about $1.2 million in labor 
overcharges had occurred. But that was only for a 10-month 
period and it didn't include all the states and offices. And 
there was a range to that estimate as well. So--
    Mr. Gibbons. So this amount, the $1.2 million, could 
actually be extensive, if you went back to the time of the 1993 
period through the period which you did your audit?
    Ms. Calbom. It certainly would likely be larger than that, 
yes.
    Mr. Gibbons. Mr. Anderson, do you wish to comment on the 
payback obligation of the labor cost?
    Mr. Anderson. Let me just answer that, and maybe Larry can 
supplement it.
    For the 125 employees that they interviewed, we plan to 
meet with the GAO in the upcoming weeks to determine, from the 
information they have--and we don't have that information yet--
the names of the people who coded their time to the mining law 
fund. We plan to investigate this further to see if we can 
determine exactly when they charged their time through 1990, 
what, in fact, they should have charged their time to.
    As to the other employees, out of the 700, the 500 or so, 
we do not plan to go back for those employees because it would 
be difficult to do so. We could certainly interview them, but 
after this time period, I'm not sure how well their memories 
might serve them as to where they spent their time. It might 
not be efficient to do that.
    Mr. Gibbons. Miss Calbom, one quick question, and then I'll 
turn it over for a second round.
    Is your opinion that the misapplication of the time and/or 
use of the MLAP funds is a violation of statutory law?
    Ms. Calbom. I would have to turn to our legal counsel on 
that. [Conferring.]
    As I did mention before--I guess I did know the answer--it 
is a purpose violation and it would violate the MLAP 
appropriation.
    Mr. Gibbons. So, Mr. Anderson, you do understand the 
importance of that violation?
    Mr. Anderson. Yes, sir.
    Mr. Gibbons. And the requirement would then be you would 
have an obligation to correct it?
    Mr. Anderson. Yes.
    Mr. Gibbons. I think my time is up. Mrs. Cubin, do you have 
more questions?
    Mrs. Cubin. No, Mr. Chairman.
    Mr. Gibbons. I think right now we would have only one 
remark, and that would be this Committee and the members of 
this Committee may have additional written questions which they 
would like to submit to you in writing. I would ask that you do 
answer them specifically and, once you have completed your 
answers, return them. We request that they be returned, once 
you receive them, within two weeks of receipt of those 
questions, if you can possibly comply with that time frame.
    With that, we would like to excuse you and thank you for 
your testimony here before us today. We appreciate the time you 
have taken. Thank you.
    With that, we would like to call up the next panel, 
Attorney-at-law Mr. J.P. Tangen, testifying on behalf of the 
Alaska Miners Association; Mr. Alan Septoff, Reform Campaign 
Director of the Mineral Policy Center; and Mr. Steve Craig, 
Vice President, Golden Phoenix Minerals, Inc.
    Gentlemen, in order to get moving, I would ask that you 
look at our little timer that's in front of you. We try to keep 
our comments within a five-minute time frame. We are certainly 
not going to ask you to leave if you exceed that, but we would 
like to be reasonable. Both the Committee members and the 
witnesses that are around you would appreciate some adherence 
to at least a proximal time of five minutes.
    If you wish, this Committee, without objection, would 
receive your written testimony in the record and you may 
summarize, for your own convenience, your written testimony.
    If that is understood by all, I would ask Mr. Tangen to 
begin. Welcome to the Committee. We look forward to your 
testimony.

 STATEMENT OF J.P. TANGEN, DIRECTOR, ALASKA MINERS ASSOCIATION

    Mr. Tangen. Thank you, Mr. Chairman. I appreciate the 
opportunity to be here today. My name is J.P. Tangen, and I am 
appearing today before this Subcommittee on a topic that 
significantly affects the mining industry in Alaska.
    I am here today as a director of the Alaska Miners 
Association. The Alaska Miners Association is an industry 
support organization of approximately 1,000 individual miners, 
engineers, scientists, and providers of goods and services to 
the mining industry in Alaska.
    Our organization has been representing miners and 
associated interests in Alaska since territorial days and draws 
its heritage from the hearty souls who crossed the Chilkoot 
Trail and who mined the beaches of Nome a century ago.
    The key ingredients of the Mining Law of 1872, and what has 
made it possible for Alaska's miners to persevere, are the twin 
concepts of self-initiation and security of tenure. Alaska 
miners know, or at least they did know until the mining law 
reform movement emerged, that all they needed to do was to go 
on to the vacant and unappropriated public domain, or Forest 
Service lands, and locate a claim. If they followed relatively 
simple rules, their title would be unassailable.
    Further, by doing a modest amount of annual labor for the 
benefit of their claims, their tenure was secure forever. That 
labor could be measured in sweat equity and required little 
cash beyond that needed for a few barrels of diesel fuel. An 
old cat and a welding torch meant that the locator could prove 
up his claim. If it was as big as he hoped, and as rich as he 
dreamed, he could turn it over to a major mining company and 
live off the proceeds. If it was something less, he might be 
able to work it himself for wages, or slightly better. Or, if 
there was nothing there at all, he could move on to another, 
more promising site.
    When, in 1992, FLPMA was amended to provide for rental 
payments in lieu of labor, the statutory framework changed. 
Rental payments are sometimes acceptable to major mining 
companies that have substantial financial resources upon which 
to draw, and can make decisions to hold or release large blocks 
of claims based upon a few drill holes, or perhaps a slightly 
better find on the far side of the world. For those of us 
committed to Alaska, however, neither abandoning a claim nor 
paying five dollars per acre, as the same may be escalated, is 
a satisfactory result.
    The requirement for holding fees in lieu of annual labor on 
a mining claim in order to protect one's title has a pernicious 
aspect to it. Those fees serve to feed a large and growing 
bureaucracy performing tasks that appear to us to be of 
questionable necessity or objective value. It would be one 
thing if the fees were calculated to result in an expanded 
industry, but no one pretends that this is the case. Since the 
fee's inception, the number of claims on BLM and Forest Service 
lands in Alaska has plummeted, as miners have sought minerals 
elsewhere. The anticipated revenue stream derived from these 
fees is a small fraction of what was hoped for. There is no 
evidence that over the past decade the fee structure has 
advanced the industry or the national interest in producing 
mineral commodities domestically. When coupled with the 
December 5, 1996 opinion of former Solicitor Leshy prescribing 
BLM's obligation under FLPMA to charge fees for a variety of 
governmental activities which ostensibly ``benefit'' the miner, 
it appears that this exercise is more motivated by the desire 
to stop mining than by the desire to protect the public 
interest.
    A small seasonal placer operation on a remote Alaska creek 
cannot always afford a five-dollar-per-acre fee for simply 
holding a claim from one year to the next. A Federal mining 
claim is typically 20 acres. An acre is equal in size to a 
square 208 feet on a side. For the miner who holds more than 
ten claims, five dollars an acre can be a considerable amount 
of money for a relatively small amount of ground. This is 
especially true if he also has to pay for inspections and 
environmental impact statements, public hearings, validity 
determinations and more, as proposed under the new 3809 
regulations recently released by the Clinton Administration. If 
these 3809 regulations survive, and if the BLM fees regulations 
now being circulated for comment survive, and if the rental 
payments regulations survive, the small miners of Alaska may 
not.
    I wish to make it clear that the Alaska Miners Association 
is not unilaterally opposed to a holding fee in lieu of annual 
labor. In some instances, it may be an appropriate alternative. 
What we are opposed to is the size of the fee and its 
disposition. We believe that operators should have the option 
of performing labor to protect their holdings, even if the 
number of claims in which they have an interest exceeds ten. 
There is no apparent justification for an arbitrary limit of 
ten. Because the more obvious mineral deposits have often been 
developed, larger and lower grade occurrences are now being 
brought into production. Small operators are unduly stifled by 
a ten-claim limit.
    The effect of these regulations ought to be to encourage 
exploration and, where warranted, development of valuable 
mineral deposits on Federal lands. The experience over the past 
10 years has been to the contrary.
    I appreciate the opportunity to testify, Mr. Chairman, and 
I will submit my entire testimony for the record.
    [The prepared statement of Mr. Tangen follows:]

     Statement of J. P. Tangen, Director, Alaska Miners Association

    Good afternoon. My name is J. P. Tangen. I want to thank you for 
the opportunity to present testimony to the Subcommittee today on a 
topic that significantly affects the mining industry in Alaska. I am 
appearing here today as a director of the Alaska Miners Association. 
The Alaska Miners Association is an industry support organization of 
approximately 1,000 miners, engineers, scientists, and providers of 
goods and services to the mining industry in Alaska. Our organization 
has been representing miners and associated interests in Alaska since 
Territorial days and draws its heritage from those hearty souls who 
crossed the Chilkoot Trail and who mined the beaches of Nome a century 
ago.
             holding fees as a part of the national policy
    The issue before the Subcommittee today is an excellent example of 
the problem we have with how our national mining policy is currently 
being implemented. We believe that the Minerals Policy Act of 1970 (30 
U.S.C. 21a) articulately expresses what should be the national policy 
regarding mining. We believe this policy should be on an equal footing 
with the national environmental policy. We believe that the 
contribution which the mining industry has made to the United States 
over the past two hundred years is so significant that the industry 
should be protected and defended by Americans everywhere, rather than 
vilified for actions which predate the adoption of contemporary 
standards.
    Beginning in 1989, the members of our association together with 
miners large and small across the United States came under attack when 
Senator Dale Bumpers introduced his first version of legislation to 
repeal the 1872 Mining Law. The Bumpers proposal included, among other 
things, payment of an annual rental fee as a substitute for the 
assessment work requirement. The following January, Representative Nick 
Joe Rahall introduced H.R. 3866 to reform the Mining Law of 1872. 
Rahall's bill contemplated payment of a rental fee and included a 
required amount of diligent expenditures or an additional payment in 
lieu of diligent development expenditures. At the end of the 1990 
legislative session, the Senate Energy and Natural Resources Committee, 
as a part of the budget reconciliation process, nearly passed an annual 
$100 per claim holding fee on the holders of Federal mining claims.
    In 1991, Rahall and Bumpers reintroduced their legislation. The 
Rahall bill once again would have required a rental fee and a diligent 
development expenditure or a payment in lieu of diligent development, 
while the Bumpers bill would have required a holding fee of $5 per 
acre, increasing by $5 every five years.
    In 1992, the Bush administration's budget bill included a $100 per 
claim annual holding fee. Specifically, Amendment 18 to the Department 
of the Interior and Related Agencies Appropriations Act, 1993 (Public 
Law No. 102-381) in one page [did away] with 120 years of law and 
judicial decisions concerning maintenance of unpatented mining claims. 
7 A small miner exemption was included in the Act; however, 
due to the way it was interpreted by the BLM, many small miners were 
confused about its provisions and lost their claims.
---------------------------------------------------------------------------
    \7\ Hubbard, Randall E., Rental Fees, Assessment Work, and 
Maintenance Requirements for Unpatented Mining Claims Getting Simpler? 
40 Rocky Mountain Mineral Law Institute 8-8 (1994)
---------------------------------------------------------------------------
    The 1993 Omnibus Budget Reconciliation Act (Public Law No. 103-66) 
did not improve the situation. That Act was implemented by a set of 
regulations finalized on August 30, 1994 that extensively detailed the 
requirements to be imposed on mining operations. The Interior and 
Related Agencies Appropriation Act for Fiscal Year 1999 (Public Law 
105-277) changed the rules once again. The interim final rule that 
followed on August 27, 1999, clarified the small miner exemption. At 
last this exemption was made effective in protecting those operators 
with ten claims or less.
    I would like to make two points today with regard to this specific 
amendment to the General Mining Law. First, we believe it negatively 
modifies the essence of the Mining Law of 1872 and second, it 
apparently does not accomplish what it was designed to do.
                the nature and purpose of the mining law
    We regard the mining law of 1872, as amended, to be an essential 
implementation of a fundamental American right. First and foremost, the 
law contributes to the free economy by enlarging the economic pie. 
Every time a miner recovers an ounce of gold or a pound of zinc from 
the public domain, he has made a contribution to the common wealth. 
That commodity, like the product of the farmer and the forester and the 
fisherman ultimately makes the world a better place. If that commodity 
finds its way into the economy as a gold contact on a computer 
motherboard or a galvanized nail for a new home, the world is improved 
thereby. Those professions that create such new wealth are unlike the 
stockbroker or the pipefitter. Without a constant supply of new 
commodities, the stockbroker would have no stock to broker and the 
pipefitter would have no pipes to fit. If an item cannot be grown, 
initially it has to be mined.
    We are not insensitive to the concerns about the environment. But 
environmental demands have been a moving target for the past thirty-
five years, and before that they were not on the national radar screen 
at all. If environmental standards ever come to repose, the mining 
industry will embrace them just as it has embraced the health and 
safety laws that once were a hot issue before environmentalism was in 
vogue, and the wage and hour standards before that. The resolution of 
environmental issues in conjunction with mining activities should not 
demand killing the industry that produces necessary commodities, but 
encouraging it to flourish in a manner acceptable to all people.
    Minerals are not evenly distributed across the face of the earth. 
They are concentrated in specific locations dictated by diverse 
geological factors. Outcroppings are rare. Even in a highly mineralized 
environment such as Alaska, the discovery of a valuable mineral deposit 
is laborious, costly, time-consuming and infrequent. Experienced and 
well-trained individual prospectors have an even chance with the best-
financed major mining companies of making a significant new discovery.
    It is the hope for a profit that drives exploration efforts. 
Venture capital is always hard to come by and with commodity prices 
generally depressed, as they have been during the past decade, other 
investment opportunities have siphoned off much of the funding that 
previously made exploration on Federal land in Alaska possible. 
Notably, mineral exploration on state and Native land in Alaska has not 
suffered the same fate over recent years because of the supportive 
attitude of the state toward mining. Of the four large mines currently 
operating in Alaska, two are on state land, one is on Native land and 
one is partly and Native land and partly on Federal land managed by the 
Forest Service. None are on land managed by the BLM. This dichotomy 
suggests that commodity prices and availability of capital alone are 
not dispositive of why miners are not exploring on Federal land.
                 self-initiation and security of tenure
    The key ingredients of the Mining Law of 1872, and what has made it 
possible for Alaska's miners to persevere, are the twin concepts of 
self-initiation and security of tenure. Alaska's miners know, or at 
least they did until the mining law reform movement emerged, that all 
they needed to do was go onto the vacant and unappropriated public 
domain (or Forest Service lands) and locate a claim. If they followed 
relatively simple rules, their title would be unassailable. Further, by 
doing a modest amount of annual labor for the benefit of their claims, 
their tenure was secure forever. That labor could be measured in sweat 
equity and required little cash beyond that needed for a few barrels of 
diesel fuel. An old cat and a welding torch meant that the locator 
could prove up his claim. If it was as big as he hoped and as rich as 
he dreamed, he could turn it over to a major mining company and live 
off the proceeds. If it was something less, he might be able to work it 
himself for wages or better. Or if there was nothing there at all, he 
could move on to another, more promising site.
    When, in 1992, FLPMA was amended to provide for rental payments in 
lieu of labor, the statutory framework changed. Rental payments are 
sometimes acceptable to major mining companies that have substantial 
financial resources upon which to draw and which can make decisions to 
hold or release large blocks of claims based upon a few drill holes or 
perhaps a slightly better find on the far side of the world. For those 
of us committed to Alaska, however, neither abandoning a claim nor 
paying $5 per acre (as the same may be escalated) is a satisfactory 
result.
                       mining and the environment
    We are not unmindful of the concerns raised by extreme 
environmentalists who worry about everything from chemical spills to 
interrupted wilderness experiences. For the most part, their public 
positions are irresponsible, exaggerated and misleading. Twenty-first 
century mining in Alaska is characterized by extensive reclamation and 
a commendable track record of safe operations, not only in terms of 
personnel, but also in terms of the environment. No significant 
activity occurs without difficulties, but for every such problem there 
is a reasonable remedy. Ironically, mining operations from a previous 
era when reclamation was not a standard are broadly deemed historical 
artifacts to be protected and preserved. From Skagway to Kennecott to 
Kantishna to Nome, Alaska's mining history is the stuff tourists pay to 
see and Park Rangers are quick to protect.
                         bureaucratic excesses
    The requirement for holding fees in lieu of annual labor on a 
mining claim in order to protect one's title has a pernicious aspect to 
it. Those fees serve to feed a large bureaucracy performing tasks that 
are of questionable necessity or objective value. It would be one thing 
if the fees were calculated to result in an expanded industry, but no 
one pretends that is the case. Since the fees inception the number of 
claims on BLM and Forest Service lands in Alaska has plummeted as 
miners have sought minerals elsewhere. 8 The anticipated 
revenue stream derived from these fees is a small fraction of what was 
hoped for. There is no evidence that over the past decade that the fee 
structure has advanced the industry or the national interest in 
producing mineral commodities domestically. When coupled with the 
December 5, 1996, opinion of former Interior Solicitor Leshy 
prescribing BLM's obligation under FLPMA to charge fees for a variety 
of governmental activities which ostensibly benefit the miner, it 
appears that this exercise is more motivated by the desire to stop 
mining than by the desire to protect the public interest.
---------------------------------------------------------------------------
    \8\ See Attached Table.
---------------------------------------------------------------------------
    A small seasonal placer operation on a remote Alaska creek cannot 
always afford a $5.00 per acre fee for simply holding a claim from one 
year to the next. A Federal mining claim is typically 20 acres. An acre 
is equal in size to a square 208 feet on a side. For the miner who 
holds more than ten claims, $5.00 per acre can become a considerable 
amount of money for a relatively small amount of ground. This is 
especially true if he also has to pay for inspections and environmental 
impact statements and public hearings and validity determinations and 
more as proposed in the new 3809 regulations, recently released by the 
Clinton administration. If these 3809 regulations survive, and if the 
BLM fees regulations now being circulated for comment survive, and if 
the rental payments regulations survive, the small miners of Alaska may 
not.
    Former Secretary Babbitt promoted the myth of miners ripping off 
the public interest by securing title to mineral lands for a token 
price. Most miners don't seek patent. Babbitt's statements belied more 
than the elements of a land purchase transaction. They implied, quite 
unfairly, that the extraction of minerals from the ground was an easy 
and remunerative process. No matter what the technique, whether by 
placer or by hardrock, whether by gravity or flotation, whether in the 
Brooks Range or on the Kenai, the act of recovering minerals from an 
unrelenting host is just plain hard work. If the miner in Alaska had to 
deal with nothing other than metallurgy and the elements, it would be a 
challenge. When regulation and oversight are thrown into the mix, the 
chore becomes a much heavier burden.
    I wish to make it clear that the Alaska Miners Association is not 
unilaterally opposed to a holding fee in lieu of annual labor. In some 
instances it may be an appropriate alternative. What we are opposed to 
is the size of the fee and its disposition. We believe that operators 
should have the option of performing labor to protect their holdings, 
even if the number of claims they have an interest in exceed ten. There 
is no apparent justification for an arbitrary limit. Because the more 
obvious mineral deposits have often been developed, larger and lower 
grade occurrences are now being brought into production. Small 
operators are unduly stifled by a ten claim limit. The effect of these 
regulations ought to be to encourage exploration and, where warranted, 
development of valuable mineral deposits on Federal lands. The 
experience over the past 10 years has been to the contrary.
                               conclusion
    The Alaska Miners Association wants to be on the record in support 
of flexibility under the law. The payment of a fee in lieu of 
performing annual labor on Federal mining claims is acceptable as long 
as the fee is reasonable and an alternative. We are opposed to being 
forced into one avenue or the other. We believe that fees derived from 
mining operations ought to be used for the benefit of the industry to 
strengthen it, not weaken it. The contribution which the mining 
industry makes to our national prosperity is significant. Intemperate 
regulation is not in the public interest.
    I cannot speak for miners in other states or locations, but over 
the years I have known and represented Alaska miners from Candle to 
Ketchikan and from Chicken to Cooper Landing. None have grown wealthy 
by mining commodities from Federal lands in Alaska. Mining in Alaska is 
not akin to pumping oil from Prudhoe Bay. Mining is labor intensive and 
frequently provides only bacon and beans for a family. It is hard but 
good work and provides a necessary benefit for all Americans, and 
perhaps all of the world. It deserves your protection.
                                 ______
                                 
                                 [GRAPHIC] [TIFF OMITTED] T1409.003
                                 
    Mr. Gibbons. Thank you very much for your testimony. We 
will receive your full and complete written testimony into the 
record, without objection.
    Mr. Septoff.

 STATEMENT OF ALAN SEPTOFF, REFORM CAMPAIGN DIRECTOR, MINERAL 
                         POLICY CENTER

    Mr. Septoff. Good afternoon. I am Alan Septoff, Reform 
Campaign Director of the Mineral Policy Center. Thanks for 
inviting me to testify today.
    MPC is an environmental organization dedicated to 
protecting communities and the environment from adverse impacts 
of mineral development.
    So is the claim maintenance fee worth it? Although the 
invitation doesn't frame the question this way, I assume the 
complete question the hearing intends to ask is, ``Is the claim 
maintenance fee worth it to the public?'' In our opinion, 
unsurprisingly, the answer to that question is yes. It is yes 
because the fee's impact on exploration is relatively 
insignificant, it's yes because the fee cuts down on land 
fraud, and it's yes because it funds environmental regulations 
in the public interest.
    To that end, MPC takes this opportunity to wholeheartedly 
endorse H.R. 1085, the Claim Maintenance Act of 2001, sponsored 
by Nick Rahall. It would make permanent the claim maintenance 
fee and the patenting moratorium.
    Other issues aside, the claim maintenance fee is worth it 
simply because it's the only return that taxpayers receive for 
the disposition of their own minerals. Twenty-two million 
dollars per year isn't much, especially considering the BLM 
estimates that over one billion dollars in public minerals are 
mined each year, but it's more than nothing.
    Let's take a look at the fee's impact on explorations. Some 
suggest that the claim maintenance fee forces the mining 
industry to look overseas to invest exploration dollars. A 
prominent international mining industry survey contradicts that 
view. Notwithstanding the claim maintenance fee, it has ranked 
the State of Nevada the most attractive climate for mineral 
investment in the world for the past three years running. It 
has also ranked Alaska in the top ten for investment climate 
three years running, as well.
    The Nevada State Bureau of Minerals conducts an annual 
exploration survey, which provides some of the more credible 
evidence that the claim maintenance fee negatively impacts 
exploration. Let's take a closer look at it.
    Perhaps most revealing, the 1999 survey shows that, even as 
worldwide spending on exploration decreased, exploration 
spending in the State of Nevada actually increased. Also, the 
same survey reveals that the claim maintenance fee has a 
relatively limited impact upon exploration investment. The 
Nevada survey asked respondents to rank the importance of 11 
different factors influencing exploration investment. For small 
budget respondents, the impact of the claim maintenance fee 
ranked 8th most important out of 11 factors surveyed. For 
larger explorers, the impact of the claim maintenance fee on 
exploration investment ranked dead last.
    Land speculation. The number of valid mining claims dropped 
in half the year the claim maintenance fee became effective. 
That drop can be interpreted in at least two ways. One, 
exploration activity decreased, and two, land speculation 
decreased. Anecdotal evidence, past GAO and CBO analysis, and 
President Bush Senior's 1991 budget proposal, indicate that 
speculation was at least as significant as exploration.
    People are always looking for something for nothing, and 
without the claim maintenance fee, that's exactly what they 
get. Even with the claim maintenance fee, unscrupulous 
marketers try to sell information about staking mining claims 
as free land. By no means the only example, the addendum to my 
testimony that comes from the www.governmentland.com website 
serves to illustrate the problem.
    The GAO verified the problem. In its 1990 report, 
``Unauthorized Activities Occurring on Hardrock Mining 
Claims'', GAO surveyed 59 mining claims, on which 33 had 
unauthorized activities.
    Also in 1990, the Congressional Budget Office predicted 
that a yearly claim holding fee would actually benefit mining 
activity because it would clear speculative use of mining 
claims, thus opening up land formerly closed to folks who 
actually intend to mine.
    To that end, in 1991, President Bush's budget proposal 
included a claim maintenance fee along with an estimate that 
the fee would reduce the number of inactive claims by over 
225,000 in the first year.
    As the GAO identified, the claim maintenance fee funds most 
of the Mining Law Administration Program. MLAP includes the 
enforcement of the 3809 mining regulations, which among other 
things protects taxpayers from assuming the burden of 
environmental clean-up costs when mining companies default.
    Especially in a new era, when proposed general 
appropriations for Interior-related budget items are declining, 
continuing a dedicating funding source for enforcement seems 
wise.
    In closing, I would like to note two things. One, in 1990, 
the BLM and the Forest Service estimated that 80 percent of the 
1.2 million claims then active weren't used for mining. Twenty 
percent of 1.2 million, the remainder, is 240,000, or just 
slightly more than the number of active claims today after the 
claim maintenance fee has been in effect.
    Two, I would like to note that we find it interesting that 
the GAO report investigates only improper labor charges to 
MLAP. The GAO has a well-deserved reputation for nonpartisan 
analysis of all things Federally fiscal. Why wasn't the GAO 
requested to answer the question posed by this oversight 
hearing: ``Is the claim maintenance fee worth it?'' Perhaps 
it's because they have already given it: ``We recommend the 
Federal Government require claim holders to pay the Federal 
Government an annual holding fee.''
    That concludes my comments, and I thank you for the 
opportunity to testify.
    [The prepared statement of Mr. Septoff follows:]

  Statement of Alan Septoff, Reform Campaign Director, Mineral Policy 
                                 Center

    Chairwoman Cubin, members of the Subcommittee. Good afternoon. My 
name is Alan Septoff I am Reform Campaign Director of Mineral Policy 
Center. Thank you for inviting Mineral Policy Center to testify before 
this Subcommittee on the worthiness of the claim maintenance fee.
    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.
    Hundreds of community groups and organizations with millions of 
members support our efforts to reform the 1872 Mining Law and improve 
public policy and industry practices related to mining.
    MPC believes that responsible mining can and does occur on our 
public lands.
                 the claim maintenance fee is worth it.
    We believe the claim maintenance fee is definitely worth it. It 
protects the Nation's interest in our public lands in several different 
ways: it protects the public's financial interest in mineral resources; 
it protects the public's lands from fraudulent use; it protects the 
public's environmental interests by funding the enforcement of the 
BLM's surface management regulations.
    To that end, Mineral Policy Center would like to take this 
opportunity to wholeheartedly endorse HR1085, the Claim Maintenance Act 
of 2001, sponsored by Resources ranking member Nick Rahall of West 
Virginia. It would make permanent the claim maintenance fee and the 
patenting moratorium. In one fell swoop it would end the biggest public 
land giveaway left on the books and ensure that dedicated funds exist 
to enforce mining regulations.
                               subsidies
    Before I launch into the rest of my testimony, I would like to 
start with a reminder. The1872 Mining Law is still the law of the land 
when it comes to the disposition of publicly owned hardrock minerals on 
publicly owned lands. Aside from the claim maintenance fee and a 
nominal $25 initial claim location fee, the mining industry pays 
NOTHING to the owners of public minerals for the value of those 
minerals the taxpayers of the United States. This is in marked contrast 
to the royalties that the coal, oil and natural gas industries pay to 
taxpayers, and in marked contrast to the royalties that hardrock mining 
companies pay one another. Although it is true that the mining industry 
must invest considerable capital in order to extract and process 
minerals, so must a General Motors invest in capital before it can 
produce cars but GM still must pay to obtain the raw materials that go 
into its finished product.
    Additionally, lest we forget, the 1872 Mining Law still allows 
valid mining claim holders to buy mineral bearing public lands for $5 
per acre. Such purchases would be going on today if not for the 
patenting moratorium that must be renewed each year (excepting 
grandfathered claims). Hopefully, even an industry friendly President 
will see that it makes no sense to give away billions of dollars in 
mineral rich lands, and will choose to support the moratorium renewal 
this year. The total of these mineral giveaways? Since 1872, we 
estimate that the American taxpayer has essentially given away to the 
mining industry over $240 billion in mineral value and a land area the 
size of the state of Connecticut.
    These giveaways are just part of the story, other mining industry 
subsidies still lurk out there such as the percentage depletion 
allowance: a double subsidy that allows mining companies to deduct the 
costs of mining a mineral deposit that they acquired without payment.
    This subsidy litany is a long winded way of saying that, other 
reasons aside, the claim maintenance fee is worth it simply because it 
is the only return that taxpayers receive for the disposition of their 
own minerals. $22 million per year isn't much, considering the BLM 
estimates that the value of minerals annually taken from BLM-managed 
public land is in excess of $1 billion, but it's more than nothing.
               claim maintenance fee -- is it worthwhile?
    It is undeniable that the number of valid claims on public lands 
dropped precipitously the year the claim maintenance fee became 
effective. It is undeniable that number of valid claims on public lands 
have remained below pre-claim maintenance fee levels ever since. 
Additionally, annual mineral industry surveys performed by the Nevada 
Division of Minerals indicate that the claim holding fee is one of the 
factors that limit exploration in Nevada. Let's take those three facts 
together at face value, and assume that the claim maintenance fee does 
reduce exploration investment in the United States.
    That assumption frees us to address the real question of this 
hearing: given the impacts of the claim maintenance fee, are those 
impacts worth it to the owners of the public minerals the American 
taxpayers. In our opinion, unsurprisingly, the answer to that question 
must be yes. Beyond the value of simply requiring the mining industry 
to pay SOMETHING for the minerals it extracts from public lands, we 
believe the claim maintenance fee's benefits exceed its costs to the 
PUBLIC for several reasons: (1) claim drops notwithstanding, recent 
mining industry surveys reveal that U.S. states are consistently among 
the most attractive sites for mining capital investment; (2) the claim 
maintenance fee significantly cuts down on land speculation and land 
fraud; (3) the claim maintenance fee is a dedicated source of funding 
for the enforcement of mining regulations in an era where land 
management budgets may be shrinking.
                       investment attractiveness
    Some have suggested that the claim maintenance fee forces the 
mining industry to look elsewhere to invest exploration dollars. A 
prominent international mining industry survey by the Fraser Institute 
9 contradicts that view. Notwithstanding the claim 
maintenance fee, it has ranked the state of Nevada the most attractive 
climate for mineral investment in the world for three years running. It 
has ranked Alaska in the top ten for investment climate three years 
running as well.
---------------------------------------------------------------------------
    \9\  Fraser Institute Annual Survey of Mining Companies 2000/2001
---------------------------------------------------------------------------
    The Nevada Bureau of Minerals exploration surveys 10, 
indicating that the claim maintenance fee negatively impacts 
exploration in the state, bear closer examination. Perhaps most 
revealing, the 1999 survey shows that even as worldwide spending on 
exploration decreased, exploration spending in the state of Nevada 
increased.
---------------------------------------------------------------------------
    \10\  State of Nevada, Commission of Mineral Resources, Division of 
Minerals, Nevada Exploration Survey 1999.
---------------------------------------------------------------------------
    Second, the survey actually reveals that the claim maintenance fee 
has relatively limited impact upon exploration investment. The survey 
asked respondents to rank the importance of 11 different factors 
influencing exploration investment in Nevada. Included among those 
factors were geology (mineral potential), commodity prices, uncertainty 
about mining law reform, and claim maintenance fees. Responses were 
reported in three categories: respondents with an exploration budget 
greater than $1 million, respondents with an exploration budget less 
than $1 million and overall respondents. For all respondents, geology 
and commodity prices were the two most important factors affecting 
exploration investment. Interestingly, all respondents ranked 
uncertainty about mining law reform more important than the impact of 
claim maintenance fees. For small exploration budget respondents, the 
impact of the claim maintenance fee ranked 8th most important out of 11 
factors. For large exploration budgets, the impact of the claim 
maintenance fee on exploration investment ranked dead last.
                   land speculation & claim validity
    The immediate impact of the claim maintenance fee on the number of 
valid claims can be interpreted in two ways: (1) exploration activity 
decreased; (2) land speculation decreased. Anecdotal evidence, past GAO 
and Congressional Budget Office analysis, and President Bush Senior's 
1991 budget proposal, would seem to indicate that the latter is at 
least as significant as the former.
    People are always looking for something for nothing and without the 
claim maintenance fee, that's what they get. Even with the claim 
maintenance fee, unscrupulous marketers try to sell information about 
staking mining claims as free land only tangentially related to mineral 
development. By no means the only example, the attached printout from 
the website http://www.governmentland.com serves to illustrate the 
problem.
    The GAO verified the problem. In its 1990 report, Unauthorized 
Activities Occurring on Hardrock Mining Claims, GAO surveyed 59 mining 
claims, on which 33 had unauthorized activities (residences).
    In 1990, the CBO stated that a yearly claim holding fee would 
actually benefit mining activity, because it would clear inactive 
(speculative) claims, thus opening up land formerly closed to hardrock 
mining. 11
---------------------------------------------------------------------------
    \11\  As reported in GAO/RCED-90-111, page 7.
---------------------------------------------------------------------------
    To that end, in 1991, President Bush's budget proposal included a 
claim maintenance fee along with an estimate that the fee would reduce 
the number inactive claims by over 225,000 in the first year. 
12
---------------------------------------------------------------------------
    \12\  Ibid The right to mine under the 1872 Mining Law is only 
vested if you have a valid claim. According to case law, a claim is 
valid only if a prudent person could reasonably expect to mine the 
mineral deposit at a profit while complying with all applicable 
statutes and regulations. Unfortunately, in part due to expense and 
with certain exceptions, the Federal Government only checks the 
validity of mining claims if they are being patented. So, a claim 
holder doesn't have to prove they have found anything valuable to 
control a claim under the 1872 Mining Law. The claim maintenance fee 
serves as a rough, low-threshold proxy for a validity exam. If a claim 
holder doesn't think it's worth $100 per year to them, it probably 
doesn't contain a valuable mineral deposit or the reasonable prospect 
of a valuable mineral deposit. The claim maintenance fee is supposed to 
fund validity examinations, but the fee is inadequate to perform such 
exams on all claims staked.
---------------------------------------------------------------------------
                enforcement of environmental regulations
    As the GAO identified, the claim maintenance fee funds most of the 
Mining Law Administration Program. The Mining Law Administration 
Program includes the enforcement the 3809 regulations. The 3809 
regulations are responsible for, among other things, protecting 
taxpayers from assuming the burden of environmental cleanup costs when 
mining companies default. The Center for Science in Public 
Participation estimates potential taxpayer liability for cleanup at 
currently operating mines may exceed $1 billion. 13 
Especially in an new era where proposed general appropriations for 
Interior-related budget items are in decline, continuing a dedicating 
funding source for enforcement of surface mining regulations seems 
wise.
---------------------------------------------------------------------------
    \13\  Hardrock Reclamation Bonding Practices in the Western United 
States, prepared by James Kuipers of Center for Science in Public 
Participation for the National Wildlife Federation, Feb. 2000.
---------------------------------------------------------------------------
    mining industry political budget vs. claim maintenance fee waste
    The GAO estimates that approximately $1.2 million, roughly 5 
percent, of claim maintenance fee revenues are spent on BLM activity 
not related to the Mining Law Administration Program. Relative to other 
government programs and the private sector, we are unqualified to judge 
whether 5 percent is an egregious, typical, or low amount of resource 
misallocation.
    We do know that the annual mining industry lobbying budget dwarfs 
$1.2 million. In 1998, the last year for which complete data is 
available, the Center for Responsive Politics reports that the mining 
industry spent $9.2 million on lobbyists and $3.8 million in donations 
to political candidates. Assuming the GAO misallocation estimate holds 
approximately true year to year, the mining industry spent ten times 
more, $13 million, than the misallocated portion of claim maintenance 
fee revenues. $13 million also constitutes approximately half of all 
claim maintenance fee revenues.
                               gao report
    In closing, I would like to note that Mineral Policy Center finds 
it interesting that the General Accounting Office report investigates 
only improper labor charges to the Mining Law Administration Program. 
The GAO has a well-deserved reputation for nonpartisan analysis of all 
things Federally fiscal. Why wasn't GAO requested to answer the 
question posed by this oversight hearing: is the claim maintenance fee 
worth it? Perhaps it is because they have already given it: [we 
recommend the Federal Government] require claim holders to pay the 
Federal Government an annual holding fee in place of the annual work 
requirement. 14
---------------------------------------------------------------------------
    \14\  GAO/RCED-90-111, page 7.
---------------------------------------------------------------------------
    Thank you for the opportunity to testify.
                                 ______
                                 
    Mr. Gibbons. Thank you, Mr. Septoff.
    We would like to welcome Mr. Craig from Nevada. We 
appreciate your being here, from Golden Phoenix Minerals. Mr. 
Craig.

 STATEMENT OF STEVEN D. CRAIG, VICE PRESIDENT, GOLDEN PHOENIX 
                         MINERALS, INC.

    Mr. Craig. Good afternoon, ladies and gentlemen, Mr. 
Chairman and members of the Subcommittee. My name is Steve 
Craig and I'm Vice President of Golden Phoenix Minerals, which 
is based in Reno, Nevada.
    Golden Phoenix is a junior exploration and development 
company. I am a trained exploration geologist with 26 years of 
experience in all aspects of exploration.
    When the $100 maintenance fee was authorized via rider in 
1993, Congress thought this was a good way to reduce the 
environmental impact on public lands by eliminating the $100 
per claim assessment work requirement. When the rider was 
passed, the western United States was experiencing a major gold 
exploration and mining boom. Unfortunately, Congress may not 
have been fully aware of the devastating impact the maintenance 
fees would have on the gold boom and all the people that made a 
living from it.
    When the maintenance fee was enacted in 1993, the entire 
exploration community experienced shock and disbelief. Many 
individuals had hundreds of claims, and they couldn't afford to 
pay the BLM the $5,000, the $50,000, or more required to hold 
them. Larger companies could pay the new fees, but if they were 
not budgeted or some claims were considered to be of low 
potential, then they were dropped. Thousands of claims were 
dropped to save money.
    This resulted in less money than was predicted for the 
government. As my chart on page 3 of my written testimony 
shows, the number of claims held in Nevada dropped from about 
340,000 to under 150,000 claims. People could not afford to 
hold mining claims and explore them at the same time. Of the 
claims that had their maintenance fees paid, most were paid by 
large companies at the operating mines, or by small companies 
which had some cash. The $100 maintenance fee basically wiped 
out the individual prospector overnight, and most of the 
exploration conducted by companies.
    Communities like Silver Peak, Eureka, Tonopah and Ely were 
literally devastated because the prospectors stopped coming to 
town to spend money. They stopped paying the county fees on 
their claims, which the counties used for different programs. 
They didn't buy gas, groceries, truck repairs or motel rooms. 
Stores closed, gas stations went out of business, and heavy 
equipment operators had to sell their equipment. Rural Nevada 
shut down. Thousands of people lost their jobs, including a lot 
of my friends.
    The $100 maintenance fee has affected the way Golden 
Phoenix conducts its business. The company has two key 
employees, has very limited financial resources, and has 
typically struggled its entire existence. The company is also 
one of the very few left in Nevada that is attempting to find 
and develop ore bodies.
    During the last three years, the $100 maintenance fee was 
constantly in the forefront of our planning. We had to save and 
scrimp to make those payments. If we failed to meet them, then 
we would lose the properties that contained drilled 
mineralization, and the company would be forced to shut down 
under bankruptcy.
    We went through considerable stress over this. Essentially, 
the $100 maintenance fee was a double whammy. We needed to 
explore our properties, but we had to spend our money on 
maintenance fees just to keep the claims. During the last three 
years the company has dropped five of its properties because we 
could not pay the maintenance fees. The last filing year, we 
paid $45,400 to hold our claims on our last two properties. 
Currently, our bank account is empty.
    Since the $100 maintenance fee was instituted, the entire 
infrastructure of the exploration community has been eroded 
away. The attack on the mining industries during the Clinton 
years has been the ``Perfect Storm'', just like the movie. Many 
companies engaged in exploration have shut down or moved 
overseas, and we have lost hundreds of skilled people, foremost 
exploration geologists, self-educated prospectors, claim 
surveyors, assayers, drillers and technicians. We need a 
lifeline tossed to us, not an anchor.
    In summary, the $100 maintenance fee has had a devastating 
effect on the mineral exploration industry. There has been a 
loss of a large number of jobs in the rural communities where 
exploration takes place, and less exploration has created the 
future loss of raw minerals for industrial America, the effect 
of which we have yet to feel.
    I urge Congress to eliminate or significantly reduce the 
$100 claim maintenance fee and, by so doing, create 
opportunities for the discovery of additional mineral resources 
by the American prospector.
    Mr. Chairman, this concludes my prepared remarks.
    [The prepared statement of Mr. Craig follows:]

Statement of Steven D. Craig, Vice President, Golden Phoenix Minerals, 
                                  Inc.

    I am here today to tell you about the devastating effect the $100 
per claim maintenance fee has had on individuals, rural communities, 
the mining industry, and the future supply of minerals to the United 
States.
                        basics of mining claims
    The right to locate a mining claim on public lands administered by 
the Bureau of Land Management (BLM) or the United States Forest Service 
(USFS) is granted under the general mining law. Claims are self 
initiated by persons or companies who want to explore and develop the 
minerals under the claim. The surface and minerals continue to remain 
under the jurisdiction of the BLM or USFS.
    A typical mining claim's maximum size is 600 feet wide and 1500 
feet long and covers about 20 acres. A total of 32 claims will normally 
cover one square mile, or 640 acres. One mining claim usually does not 
cover an entire mineralized zone. Consequently, hundreds of claims may 
have to be staked to cover the zone and other potential undiscovered 
zones.
    A mining claim is required to be filed with the county in which it 
is located, and in Nevada, costs $26.50 for the initial filing and 
another $5.50 annually. The same claim also has to be filed with the 
BLM, which requires a $100 maintenance fee and a one-time $35 filing 
fee for a total of $135. Then, every September 1 thereafter, the BLM 
collects a $100 maintenance fee to keep the claim valid. Non payment to 
the county or BLM invalidates the claim.
    On an acre basis, the combined initial filing fees average $8.075 
per acre, or $5,168 per square mile, thereafter it is $6.75 per acre or 
$4320 per square mile. For simple comparison, the annual geothermal 
leasing fees may be as low as $1.00 per acre or $640 per square mile, 
and oil and gas rental fees may be as low as $$1.50 per acre or $960 
per square mile.
    The county filing fees that are collected in Nevada are distributed 
to the county and to the Nevada Division of Minerals. The counties use 
the fees to fund the recordation and management of the claims. The 
Division of Minerals uses the filing fees to fund the state abandoned 
mine program. None of the fees collected by the BLM assist the counties 
or state, but go instead to the U. S. Treasury.
              stages in the exploration and mining process
    The reason the general mining law was developed was to give all 
citizens of the United States an opportunity to earn a good living and 
to supply the Nation with important metals. Back when the mining law 
was passed, the Nation needed gold and silver, and it wanted to 
populate the wide-open spaces of the West. As time went by and as the 
Nation needed new supplies of different metals for its growth, the 
prospector was out looking for the metal that was in demand.
    Now let me discuss the different stages of the exploration and 
mining process. Please be aware that if the first exploration stage is 
unsuccessful, then the other stages do not take place. Furthermore, 
extensive permitting and bonding is required by state and Federal 
agencies at every step in the process.
    The first stage is grassroots exploration, or prospecting. 
Prospecting identifies mineralized areas, and if they have potential 
for a discovery, then they are acquired under the location rules of the 
general mining law. After the claims are located, the surface is 
further examined and the subsurface tested with drilling or trenching. 
The persons that usually do the initial prospecting and staking of 
mining claims are single individuals or persons employed by a company. 
The cost to stake mining claims usually average about $100 per claim 
and this is a direct cost to the locator, before the filing fees are 
paid.
    The second stage is discovering a potential economic ore body and 
defining its size, grade and economic viability. A junior mining 
company usually does this step, but only if it has the financial 
resources. Major companies will also do this, but only after they have 
acquired the property from a prospector or a junior. The amount of 
money that may be spent during this phase is from $1 million to $10 
million. Generally, a large portion of the money that is spent stays in 
the community, which is near the ore body.
    The third stage is building the mine facilities and developing the 
ore deposit. The amount of construction investment ranges from $25 
million to $200 million to build the mine, and with considerable risk. 
Again, a significant amount of this money stays in the communities it 
is spent. Only medium to large sized companies have the expertise and 
finances to complete this step.
    The fourth stage is mining the orebody, which results in long term 
jobs, payback and profit for the company, and tax money to different 
government entities.
    The fifth stage is closure and reclamation of the mine to the 
standards committed to in the original operating plan and which a 
reclamation performance bond guarantees. When completed, the land 
returns to its previous use, which in the West is usually range for 
wildlife or cattle. The amount of money spent during this phase ranges 
from $1 million to $20 million.
    The timeframe for discovering and exploring for an economic deposit 
may be from three to 10 years. It may take another three to five years 
and $30 to $200 million of investment to develop a mine. Much of this 
money is spent locally to the benefit of nearby rural communities.
                          the $100 fee in 1993
    When the $100 maintenance fee and $25 filing fee (later increased 
to $35) were authorized via a rider in 1993, Congress thought this was 
a good way to reduce the environmental impact on public lands by 
eliminating the $100 per claim assessment work requirement. When the 
rider was passed, the Western United States was experiencing a major 
gold exploration and mining boom. Unfortunately, Congress may not have 
been fully aware of the overall five stages of exploration and mining 
process, as I described above. Nor was Congress able to predict the 
devastating impact the maintenance fees would have on the first stage 
of exploration to individuals, communities, mining companies, and the 
potential future well being of the United States.
    The chart below shows the number of active claims on an annual 
basis in Nevada since 1982. Practically all of these claims were 
located over gold prospects and mines, while only a small number were 
located over copper, silver or lead-zinc prospects. The chart shows the 
impact the maintenance fee has had on Nevada since its passage in 1993. 
In the last three years, claim numbers continue to decline due this fee 
and low gold price.
[GRAPHIC] [TIFF OMITTED] T1409.001

                           gold price history
    The following chart shows the history of the gold price from 1979 
to the present. At the time of the introduction of the maintenance fee, 
the gold price rose from about $330 per ounce to near $400 per ounce 
and remained at that level for several years. These data suggest a 
strong correlation between the decline in mining claims in 1993/1994 
and the maintenance fee imposed on mining claim owners. The decline in 
claim numbers was not due to a decline in gold price.
[GRAPHIC] [TIFF OMITTED] T1409.002

                          the fee takes effect
    When the maintenance fee was enacted in 1993, the entire 
exploration community experienced shock and disbelief. Many individuals 
had hundreds of claims, and they couldn't afford to pay the BLM the 
$5000, $50,000, or more required to hold them. Larger companies could 
pay the new fees, but if the fees were not budgeted, or some claims 
were considered to be of low potential, then they dropped thousands of 
claims to save money. This resulted in less money to the government 
than had been predicted. As the chart shows, the number of claims held 
in Nevada dropped from about 350,000 to under 150,000 claims. People 
could not afford to hold mining claims while they explored them and 
with the hope that a large company might lease them. Of the claims that 
had their maintenance fees paid, most were retained by large companies 
at the operating mines or by small companies with some cash.
    The $100 maintenance fee basically wiped out the individual 
prospector and most of the exploration conducted by companies. 
Essentially, the very first step in the exploration and mining process 
had literally been eliminated and the following steps in the mining 
process would not take place.
    The "One Job Creates Seven Jobs" Rule John Dobra, a mineral 
economist at the University of Nevada-Reno, has studied the creation of 
other jobs in communities from just one mining job. He reports that for 
each employee of a mining company, seven more jobs are created in 
communities both near and far from the mining site. This job creation 
has tremendous economic implications to rural communities.
    The same is true for prospectors and explorationists. When the $100 
maintenance fee was instituted, the prospectors stopped going to the 
field to look for good mineralized areas. They stopped paying the 
county fees on their claims, and they didn't buy gas, groceries, truck 
repairs, sample bags, or motel rooms. They didn't contract bulldozers, 
backhoes or drill rigs. Assay labs didn't have samples to analyze. 
Basically, all the people that depended on the exploration activities 
of prospectors and geologists could no longer make a living.
    Communities like Silver Peak, Eureka, Tonopah, and Ely were 
literally devastated because the prospectors stopped coming to town to 
spend money. Stores closed, gas stations went out of business, and 
heavy equipment operators sold their equipment. Rural Nevada shut down. 
Thousands of people lost their jobs, including a lot of my friends.
       the impact to golden phoenix, a junior exploration company
    The $100 maintenance fee has affected the way Golden Phoenix 
Minerals has conducted its business. The company was incorporated in 
1997, just when resource companies fell in disfavor with investors, 
tech stocks were looking to make a run on the markets, and the gold 
price was starting its decline to $250 per ounce. The company is a 
publicly traded junior company with two key employees, has very limited 
financial resources, and has typically struggled its entire existence. 
The company is also one of the very few left in Nevada that is 
attempting to find and develop ore bodies. We hope we can survive until 
better times come.
    In the 1998 filing period, the company was in desperate times. Our 
money had run out, and we were just realizing that we would not be 
getting paychecks. We dropped four exploration properties for a total 
of 241 mining claims and saved $24,100. In the 1999 filing period, we 
dropped two more of the properties and reduced the other properties for 
a total of 190 claims. Our payment to the BLM that year was $48,700, 
which we got from some limited investor financing. We were living on 
our savings and hadn't seen a pay check for a year. In 2000, our 
finances were better, but we reduced our claim blocks again by another 
33 claims, to save money. That year we paid $45,400 to the BLM.
    During the last three years, the $100 maintenance fee was 
constantly in the forefront of our planning. We had to save and scrimp 
to make those payments. If we failed to meet them, then we would lose 
the properties that held drilled defined mineralization, and the 
company would be forced to shut down under bankruptcy. We went through 
considerable stress over this. In addition to paying the filing fees, 
we still spent any available money on the properties to explore them. 
Essentially, the $100 maintenance fee was a double whammy. We needed to 
explore our properties, but we had spent the money on the maintenance 
fees just to keep the claims.
    This past December we became very excited about a new mineralized 
area that we had discovered, which had gold values of up to one ounce 
per ton. We contracted a land surveyor to locate 120 claims, which cost 
us over $12,000 in direct costs to complete. As it turned out, when it 
came time to file the claims, we didn't have the $19,380 required to 
file the claims in the county and BLM, and the claims are now invalid. 
We are out $12,000 plus the claims.
          the potential long-term impact on the united states
    The United States is the major economy in the world, and energy and 
raw materials allow it to enjoy high living standards. However, 
California is finding out that electricity does not come from a light 
switch. They will have to spend several years building power plants 
before that light switch is secure. The same goes for mining. We have 
shut the switch off and the country will suffer for it in the future. 
By taking away the incentive to find ore deposits in this country, the 
long-term viability and productivity of the mining industry will grind 
to a halt, and it is definitely grinding to a halt. Even though we can 
get some of our raw materials from foreign countries, this is not risk 
free, nor is it secure.
    Since the $100 maintenance fee was instituted, the entire 
infrastructure of the exploration community has been eroded away. The 
attack on the exploration and mining industries during the Clinton 
years has been the Perfect Storm , just like the movie. Many small to 
medium sized mining companies engaged in exploration shut down or moved 
overseas, where the risk to operating was perceived to be less. We have 
lost hundreds of skilled people, foremost exploration geologists, self-
educated prospectors, claim surveyors, assayers, drillers, and 
technicians. Most of these people now have other employment and may not 
come back even with changes in the laws and regulations.
    The low price of gold, the legislative land withdrawals, the 
maintenance fee and ever tougher environmental regulations have all 
come together in the Perfect Storm to severely weaken the exploration 
industry. We need a lifeline, not an anchor. It may take awhile for 
exploration to recover.
                         proposed alternatives
    What do we do about the $100 maintenance fee? The best thing we can 
do is to get rid of it. However, if getting rid of the $100 fee is not 
possible, the Committee could consider the following alternatives:
     LAllow assessment work and permitting costs to be filed in 
lieu of the $100 maintenance fee.
     LReduce the maintenance fee to $20 per year, retain the 
one time $35 filing fee, and require the money be kept in the county of 
origin.
     LIf the fee is retained, then pro-rate the initial cost of 
filing so that only a full year requires $100, a half-year is $50 and 
so forth.
                                summary
    The $100 maintenance fee has had a devastating effect on the 
mineral exploration industry, including individual prospectors, small 
companies, and major mining concerns. There has been the loss of a 
large number of jobs in the rural communities where exploration takes 
place. Less exploration has created the future loss of raw minerals for 
industrial America, the affect of which we have yet to feel. I urge 
Congress to eliminate or significantly reduce the $100 mining claim 
maintenance fee and, by doing so, create new opportunities for the 
discovery of the additional mineral resources by the American 
prospector.
                                 ______
                                 
    Mr. Gibbons. Thank you very much, Mr. Craig.
    Before I turn to Mrs. Cubin for questions, I do want to 
kind of clear up the record here.
    It seems that there is some misinterpretation or 
misstatements out there, that since 1866 real or bona fide 
mining claimants have had the legal tools to overstake or 
``speculatively'' hold mining claims and earn the right to mine 
the claimed area. Unfortunately, the holding fee isn't 
necessary to clear nonbona fide miners from this land. There 
are other legal tools to do that.
    Also, I would say that it certainly is a disservice to say 
that the untrue statements of an unscrupulous person published 
is in any way a justification to say the mining claim fee is 
necessary. That is certainly not necessary as well.
    With that, I would turn to Mrs. Cubin for her questions.
    Mrs. Cubin. Thank you, Mr. Chairman.
    I think the major concern with the $100 fee is the effect 
that it has on the grassroots type miner and on the small 
companies. Certainly the big companies can afford to pay it.
    It might come as a surprise to you, Mr. Septoff, that I 
agree with you and the GAO, that there ought to be some annual 
fee charged or, in lieu of that, a way to encourage exploration 
by the small miners, the grassroots people, as I will call 
them, without making it impossible for them to produce minerals 
that would benefit our country--maybe increase the number of 
claims that are exempt or start with a low fee for a few years 
and then drastically escalate the fee, so that we just don't 
have land tied up.
    But as the Chairman said earlier, I don't think anyone is 
necessarily saying that we don't need something here, but I 
think we need to open the discussion and do something, not only 
to protect the smaller miners, which is laudable in and of 
itself, but also to have the minerals, as Mr. Craig stated, for 
the use of the country.
    Having said that, I wanted to ask Mr. Craig, at the present 
time, how much of what I'm calling grassroots exploration and 
claim staking is going on in Nevada?
    Mr. Craig. Well, I am pretty active in the exploration 
community in Nevada. That's what I did for 26 years. I keep 
track of a lot of activities, just because I like that as a 
hobby.
    I would say that exploration has shut down. Where I'm 
getting most of that information is from my friend, Rob Berry, 
who handles land management services. He actually works with 
the BLM and even tells them how many active claims they have, 
because they've got so much going on they can't keep track of 
how many claims they have, so they have to go to a private 
industry person to get that information.
    According to Rob, there's only been about 2,000 to 3,000 
claims staked and filed since last September 1st.
    Mrs. Cubin. To put this in perspective, why there are so 
many claims, it's because the claims are 20 acres.
    Mr. Craig. Yes, 20 acres.
    Mrs. Cubin. If you explore, exploring 20 acres for a one-
man operation--Well, just put that 20 acres in perspective in 
terms of a small miner and a large miner, why you would have so 
many claims. I think that's one thing that people don't 
understand.
    Why would you have so many claims that would cost you 
$45,000 a year?
    Mr. Craig. Well, the best business practice for mining 
deposits--and notice I said ``deposits''. When you get to a 
mineralized area, there are always multiple deposits. There are 
many deposits. Often you don't know where they all are. So as 
part of the exploration process, you stake a lot of claims over 
prospective areas. And yes, it may seem like that's 
speculation, but that's what exploration is. You're speculating 
that you're going to find a deposit. So most of the time, large 
deposits occupy many claims.
    Mrs. Cubin. Mr. Tangen, you stated that the rental fee is 
especially hard on independent prospectors and junior 
companies. What do you mean by these terms, and why is rental 
so hard on these people?
    Mr. Tangen. As Mr. Craig indicated about junior companies 
or small companies, most new mineral discoveries are made by 
self-employed, independent prospectors, or small exploration 
companies, which are known as juniors, as opposed to large 
mining companies. These individuals and juniors are 
entrepreneurs, characterized by high skill, innovative, high 
energy, determination, et cetera, but with low financing.
    For these companies, every dollar is carefully guarded and 
carefully spent. Every dollar that goes to pay rent is a dollar 
that's not available for exploration.
    Dollars spent on exploration are often spent in rural 
areas, as Mr. Craig suggested, for gas, groceries, and provide 
far greater benefit than the same money going into the Federal 
treasury. Mining operations, in addition, come in a variety of 
sizes, have several phases. The earliest phase is prospecting 
and raw exploration.
    The United States in general, and Alaska in particular, has 
not been completely prospected. Early phase exploration is 
frequently undertaken by so-called junior companies, who raise 
capital on the open market. This capital is extremely hard to 
come by, and every dollar that does not go directly into the 
ground--that is to say, in this case, every dollar that is 
siphoned off by the government--is an additional dollar that 
has to be raised.
    The point is that this money is hard to come by. And when 
it goes to the Federal Government, it doesn't beneficiate the 
property.
    Mrs. Cubin. With the Chairman's permission, one more 
question.
    Just for the record, from your experience, if all three of 
you would like to answer, does the small miner exemption work, 
and why?
    Mr. Tangen. In Alaska you have a situation in which the 
small miner exemption has been made workable as a result of 
recent changes in the regulations. But we have a situation in 
which the sideboards on it are too small. The ten claims limit 
is beneath the number that is reasonable.
    Mom and pop operations on a remote creek in Alaska would 
frequently have 30 or more claims. An exploration geologist, 
again as Mr. Craig has suggested, going out and finding a new 
prospect, might have no real handle on how big that deposit 
might be, so he could possibly locate a thousand claims or 
more.
    The term ``small miner'' is probably a misconception. I 
think what we have is a situation in which we either have 
junior prospectors on the one hand, or small financial 
operators on the other. It shouldn't relate to the number of 
claims that they have.
    Mr. Septoff. We honestly don't know much about small 
miners, and part of that is because small miners, for the most 
part, are notice mines.
    Mrs. Cubin. Are what? Excuse me.
    Mr. Septoff. Notice mines. And BLM doesn't release 
information about notice mines publicly.
    What we do know for a fact is that there are between 30-
35,000 separate individuals holders of mining claims, and of 
those 30-35,000, between 25-30,000 fall under the small miner 
exemption.
    Mrs. Cubin. Mr. Craig?
    Mr. Craig. I personally haven't dealt with the small miner 
exemption, so this is what I'm getting from my friends.
    What I have been told is that there is so much confusion, 
especially from the BLM, about what their assessment work 
actually applies to and so forth, that they've thrown up their 
hands and they prefer to pay the $100, just so they can keep 
their claims active. There seems to be a lot of bureaucracy 
involved with how the small miner is treated by the BLM.
    Mrs. Cubin. Thank you, Mr. Chairman, and I thank the 
members of the panel.
    Mr. Gibbons. Thank you, Mrs. Cubin.
    Gentlemen, I know there is an impact. It is also indicated 
from your statements on counties, et cetera. But my question 
is, when you go to determine information about a potential or 
existing mining claim, where do you get the information? Is it 
through the county or through the BLM now?
    Mr. Tangen or Mr. Craig.
    Mr. Craig. I can clearly say that, if I want to get good 
information quickly, I go to the county. BLM's accounting of 
mining claims is completely redundant. It's duplicated.
    Mr. Gibbons. So the expense of the BLM charging to have 
information about mining claims is duplicative to the effort of 
the county?
    Mr. Craig. The county has been doing this for 130 years, 
and they've done a great job. I go there first.
    Mr. Gibbons. If you were to do a title search on a mining 
claim, where would you go?
    Mr. Craig. I would go to the county. They have all the 
records.
    Mr. Gibbons. Does the county require it to be recorded in 
any way?
    Mr. Craig. Yes. Yes, they do.
    Mr. Gibbons. Either Alaska or Nevada, I'm sure you could 
testify as to the overall impact. I heard in someone's 
statement--I believe it was Mr. Tangen. Did you talk about the 
impact on communities, or was it Mr. Craig?
    Mr. Tangen. I think both of us to some extent did.
    Mr. Gibbons. My thought is that, in your statements, are 
you proposing that this mining claim fee be adjusted? What 
suggestions would you give to us--and this is a question to all 
three of you--what suggestions would you give to us with regard 
to the mining claim fee? How should we look at adjusting it, if 
it's necessary to adjust, to accommodate the concerns that you 
have?
    Mr. Tangen. If I may, sir, let me start.
    I have three significant, specific suggestions that I would 
urge you to make. First of all, I would urge you to lift the 
ten-claim limit, so that it's either open or it's a much larger 
number.
    Second of all, I would urge that it be optional; that is to 
say, if the operator has the ability and desire to put the 
money into the ground, then that should be an offset, if not 
100 percent, perhaps 75 percent or something like that.
    The third point is to reduce the size of the amount. Again, 
the situation in which the $5 per acre amount is burdensome at 
this point in time, perhaps a lesser fee, perhaps half that or 
whatever, perhaps a graduated fee over time.
    I should point out, for instance, that under the Alaska 
mining law, for mining on State land, in which there is three 
times as much land open to mining under State law than there is 
under Federal law in Alaska at this point in time, for the 
first 10 years the fee is set at one rate and then thereafter 
it is raised and raised a second time. So there are 
administrative alternatives to it.
    Mr. Gibbons. Mr. Septoff.
    Mr. Septoff. We certainly agree that the claim maintenance 
fee should be increased over time.
    I don't know how the ten claim limit was set to begin with, 
so I can't really comment on that. What I can comment on, and 
would like to remind everybody, is that the claim maintenance 
fee applies to all claims, not just to small miners. When the 
claim maintenance fee went into effect, to begin with, it was 
supposed to be indexed for inflation. It started at $100 and it 
was supposed to be adjusted, I think every five years, for 
inflation. And it hasn't changed since. So we would think it 
should be indexed for inflation, which I believe would have it 
over $200 now, but I'm not quite sure.
    Mr. Gibbons. Mr. Craig?
    Mr. Craig. Well, knowing how the government works, they 
don't want to give up any fees. But may I suggest we reduce the 
maintenance fee to something that is on par with something like 
geothermal leasing or coal and gas leasing. In Nevada--and I 
don't know what all the costs are, and I don't want to open up 
a bunch of issues here--but in Nevada, geothermal leases are a 
dollar an acre. That makes that $20 a claim. I think that's 
right on par with what the Federal Government is leasing land 
out for.
    Another issue that I wanted to bring up is that if we 
wanted to stake claims today, on March 29th, we have 90 days to 
file those claims, and that puts us at June 29th, which means 
we would have to pay a $100 maintenance fee, plus the $35 
filing fee and recording fee, $130 per claim, and then, one 
month later, two months later, we have to pay another $100 just 
to hold those claims. So that's why we're not going to see a 
lot of claims filed the rest of the year, because why pay rent 
on something for the amount of time that you've got. So that 
would be something else. If we're going to retain the fees, 
then at least prorate them to time.
    Mr. Gibbons. Thank you.
    Mr. Tangen, in your testimony you talk about the number of 
claims that are in Alaska, public versus state land, or other 
non-Federal lands I should say.
    What has been the experience of the number of mining claims 
filed since '93 on Federal versus non-Federal lands in Alaska? 
Do you have that information?
    Mr. Tangen. Yes, sir. Attached to my written testimony is a 
graph which displays the number of claims in Alaska, Federal 
claims and State claims. I know that you can't see it here, but 
the fact is that, in 1990, there were approximately 25,000 
Federal claims and approximately, a little bit over 30,000 
State claims.
    Since that period of time, the number of Federal claims has 
fallen off dramatically, and then has held at a fairly low 
level, around the 11,000 claim level.
    In the meantime, the number of State claims went down for a 
little while, as reflected by the commodity prices, I think, 
generally the price of gold. But since 1996, the number of 
claims on State and private land in Alaska has increased--and 
by private land, I'm essentially referring to land owned by 
Native Regional Corporations--until we have approximately 
45,000 State of Alaska claims on State and private lands.
    Mr. Gibbons. So what you're saying is there's no parallel 
to the fact that metal prices have driven down all mining 
claims across the board, because non-Federal claims have risen, 
even though the metal prices have been down--
    Mr. Tangen. Absolutely. To a certain extent, the commodity 
prices had an impact, but that impact has now been factored 
into the business decisions. Mining claim locations have 
essentially been on the increase.
    The attitude of the State of Alaska toward mining is 
substantially more friendly than the attitude of the Federal 
Government toward mining on Federal ground. In the past decade, 
especially the past half-dozen years, the burden that has been 
put on the miner in Alaska to go out and locate a mineral 
deposit on Federal ground has been onerous; whereas during that 
same period of time, our Governor, a Democratic governor, has 
publicly and repeatedly announced that Alaska is open for 
business and has basically welcomed the mining industry on to 
State land and private land.
    Mr. Gibbons. Well, you're competing directly with Nevada, 
so I don't wish you well in that effort. But thank you very 
much.
    [Laughter.]
    Mr. Tangen. Well, we don't hold a candle to Nevada. Don't 
misunderstand. Nevada has some very, very big operations, 
claims and companies.
    Mr. Gibbons. I'm only joking, of course.
    Mr. Craig, in your 26 years of experience--and, of course, 
I have a similar background to yours, and some experience as 
well--but looking at the claim maintenance fee versus 
assessment fees, as they used to be charged, as assessment work 
used to be charged, not always, if a person holds a mining 
claim, is anything being extracted out of the ground? So the 
fact that it's called a fee for a billion dollar industry, or 
whatever--I mean, some people are holding these claims in 
expectation of having the opportunity to develop, explore and 
market their commodities.
    Is it your experience that everyone who pays a fee is 
getting something out of that ground?
    Mr. Craig. No. I think when someone pays the fee, they have 
the right to hold the claim for another year. The only way 
they're going to get anything out of the ground is if they can 
get some work done on that ground.
    Mr. Gibbons. And the fee itself doesn't necessarily 
prohibit exploration--
    Mr. Craig. No, it doesn't prohibit.
    Mr. Gibbons. It doesn't stop disturbance.
    Mr. Craig. But if you are going to get something out of 
that claim, you have to advance it somehow by doing work on it.
    Mr. Gibbons. All right.
    Now, in your estimate, what hoops do you have to jump 
through to develop a mine?
    Mr. Craig. Oh, tremendous hoops. This exploration-mining 
industry is the most regulated industry, I swear, in the United 
States. Just to get a drill hole done on a piece of--well, let 
me back up. Let me just start all over again.
    Let me just talk about our Borealis property, where the 
property is under jurisdiction of the U.S. Forest Service. It 
had been mined previously by Echo Bay Minerals. There is 10 
million tons of crushed, leached material on drill pads.
    I put in a plan of operation to the U.S. Forest Service and 
it took six months for them to get back to me, and in the 
interim, to get back to me for the amount of bonding it would 
take to reclaim the disturbance I proposed, but they wanted us 
to do an archaeological survey on top of the leach pads, which 
I thought was a little out of line. And because I was going to 
use a buggy-mounted rig, where there's going to be no 
disturbance, they wanted a $20,000 exploration bond put down. 
That's when I said we're not going to disturb any land. We can 
explore without disturbing the land.
    So I still haven't reached a consensus with the Forest 
Service on that.
    Mr. Gibbons. What is an estimated cost that it would take 
to get a gold mine into production today? Just kind of a 
ballpark average figure, starting from the day you would out on 
the ground today.
    Mr. Craig. Okay. If we walked out on the ground today to do 
exploration, it would probably cost a couple of million, five 
to ten million dollars, just to do exploration and studies, 
drilling holes. If we wanted to build a mine, it would be 
anywhere from a minimum of $30 million all the way up to $200 
million. And all of this is under tight scrutiny by the Federal 
Government, the State government, EPA, the Army Corps of 
Engineers. Permits have to be gotten, studies have to be done.
    Also, that's another fallout of this whole decline in the 
exploration industry. Archaeologists are out of jobs now. These 
are the people who go out and study whole areas that were 
funded by mining companies. Things like that.
    Now, obviously, once the mine is put into production, then 
there's mining that takes place, people have jobs, numerous 
Federal taxes are paid. This is where the Federal Government 
really scores big. A lot of taxes are paid. It's not a free 
ride. The government gets a lot of money out of a mine once 
it's put into production.
    This $100 maintenance fee is a real problem up front. It 
seems fairly small to our friends who don't like mining, but 
where the government really comes out ahead is on all these 
taxes, income taxes and so forth.
    Now, after the mine is exhausted, then it's still going to 
cost anywhere from one million to ten million to thirty million 
dollars of costs to reclaim the lands. Again, our requirements 
today are not like back in 1849, where we have all of these 
dirty pictures, you know, that show up in the press. The 
reclamation that's done today, especially in Nevada, is superb. 
You drive along I-80, drive by the Lone Tree Mine, Marigold 
Mine, you see round hills out there. You go, huh, that's kind 
of interesting. Now it looks very nice. There's grass on it, 
sometimes you see cows on it. It's been totally reclaimed.
    So there is a lot of money that the mines generate over the 
years, and a lot of it goes to the Federal Government, and a 
lot of people get paid.
    Mr. Gibbons. So what you're saying is it's not a free ride. 
Simply because you go out there and stake a claim, it is not 
free ride to get the minerals out of the ground, whether it's 
gold, a precious commodity, or some other mineral, which may be 
beneficial to society, beneficial to the way we live today.
    Mr. Craig. That's right.
    Mr. Gibbons. As I hear you, even from the smallest 
operation, it could cost anywhere from $30-40 million for the 
smallest operation, to $200 million and above for some of the 
larger operations, before they're able to begin to get a 
profit, or any income coming back to them from that operation, 
that mine, whichever they may have. So they've got to put out 
an investment.
    Mr. Craig. It's all front end investment.
    Mr. Gibbons. Front end loaded, and in hopes of making it to 
a point where the commodity will pay back the cost of their 
investment.
    Certainly I think all of us on this Committee can 
understand the value of mining. I mean, no one in this room, I 
would hope, would say that we don't need mining in this 
country, simply because everyone knows it takes 44,000 pounds 
of mined metals and minerals per person, per year, to create 
the quality of life that we have, including everything from 
health care all the way down to the vehicles we drive, and the 
telephones and anything else we communicate with is all done 
with mining.
    With that, I have noticed we've kept you here now for two 
hours, maybe a little in excess. I do want to thank all three 
of you for, one, taking time out of your busy day to testify 
here today--you presented us with some valuable information, 
information and ideas--but I think it will be helpful for us as 
a Committee to make decisions about where we're going on this 
issue of a mining claim maintenance fee.
    Certainly we have our work cut out for us, but we would 
also ask you that there may be members of this Committee who 
may wish, or the staff of the Committee itself, may wish to 
submit written questions to you, that we hope you would answer 
in the faith that they're given, to provide us with the 
necessary information to help us make our job a little easier.

    [A statement submitted for the record by The Honorable 
Edward J. Markey follows:]

   Statement by The Honorable Edward J. Markey, a Representative in 
                Congress from the State of Massachusetts

    Thank you, Mr. Chairman. Our public lands are our national 
treasure. They are wilderness areas of incomparable grandeur. They 
remind us of what our pioneering fathers first saw as they strode 
across this land. But for some special interests, our public lands 
represent our national treasure chest. For out of these lands they draw 
oil, wood, silver, and gold. And it is true these resources benefit our 
nation. But we are at a point in history where we have the capability 
to step back and think carefully about our use of these resources we 
must think about not just today's needs, but tomorrow's generations. 
What do we leave to our grandchildren?
    As you know, I oppose the President's proposal to drill for oil in 
the Arctic National Wildlife Refuge. I cannot support allowing oil 
companies to rip into the pristine biological heart of the Refuge for a 
few drops of oil when we have technological substitutes at hand. But at 
least with the on-going oil extraction from public lands, the public 
gets a more reasonable return on the development. The American taxpayer 
receives 12.5 percent of the value of the oil extracted. The extraction 
of coal and natural gas also yield the same benefit. But with silver 
and gold, there is no such royalty. The mining enterprises move in, dig 
in, and pull out the jewels from the treasure chest, and the benefit to 
the owners of the land are these nominal fees that are the subject of 
our hearing today.
    And at what cost to our future generations? Mining is not an 
inherently environmentally friendly venture. Cyanide, sulfuric acid, 
and heavy metals can be generated and spread across the land as a 
result of mining activities. The EPA says that mine wastes have 
polluted 12,000 miles of our nation's waterways and 180,000 acres of 
lakes and reservoirs. Uncontaminated soil can impact streams as well 
when the supporting vegetation is stripped away.
    The Mining Act of 1872 was intended to encourage the development of 
the West. But this was passed back when Ulysses S. Grant was President 
and Robber Barons like Jay Gould, Jim Fiske, Andrew Carnegie and 
Cornelius Vanderbilt were calling the shots. We are long beyond the 
days of wooden-wheeled wagons rambling through the wilderness in search 
of buried treasure. Instead we have environmental degradation as the 
result of a billion-dollar-a-year industry on public lands. Are the 
mining fees worth it? At the very least, these fees represent a minimal 
offset to mining activities in our public lands.
    Some of you may remember the old Bee Gees song, ``The New York 
Mining Disaster of 1941,''
    I keep straining my ears to hear a sound.
    Maybe someone is digging underground, or have they given up and all 
gone home to bed, thinking those who once existed must be dead.
    Today, we don't need to strain our ears to hear the sound of the 
mining industry digging on public grounds. They may hope we've given up 
and all gone home to bed, but mining reform is not yet dead.
    I look forward to the testimony of today's witnesses.
                                 ______
                                 
    With that, I want to thank you again, and will excuse you 
as witnesses. There are no other panels to be heard today, so I 
will once again thank everyone for attending and call this 
hearing to a close.
    [Whereupon, at 4:08 p.m., the Subcommittee adjourned.]

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