U.S. GOVERNMENT PRINTING OFFICE

44–977 CC WASHINGTON : 1997

NEW WORLD MINE PROPOSED BUYOUT

HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY

AND MINERAL RESOURCES

OF THE

COMMITTEE ON RESOURCES

HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS

FIRST SESSION

MAY 20, 1997, WASHINGTON, DC, 1997

Serial No. 105–40

Printed for the use of the Committee on Resources

(
(II)

COMMITTEE ON RESOURCES

DON YOUNG, Alaska, Chairman

W.J. (BILLY) TAUZIN, Louisiana

JAMES V. HANSEN, Utah

JIM SAXTON, New Jersey

ELTON GALLEGLY, California

JOHN J. DUNCAN, JR., Tennessee

JOEL HEFLEY, Colorado

JOHN T. DOOLITTLE, California

WAYNE T. GILCHREST, Maryland

KEN CALVERT, California

RICHARD W. POMBO, California

BARBARA CUBIN, Wyoming

HELEN CHENOWETH, Idaho

LINDA SMITH, Washington

GEORGE P. RADANOVICH, California

WALTER B. JONES, JR., North Carolina

WILLIAM M. (MAC) THORNBERRY, Texas

JOHN SHADEGG, Arizona

JOHN E. ENSIGN, Nevada

ROBERT F. SMITH, Oregon

CHRIS CANNON, Utah

KEVIN BRADY, Texas

JOHN PETERSON, Pennsylvania

RICK HILL, Montana

BOB SCHAFFER, Colorado

JIM GIBBONS, Nevada

MICHAEL D. CRAPO, Idaho

GEORGE MILLER, California

EDWARD J. MARKEY, Massachusetts

NICK J. RAHALL II, West Virginia

BRUCE F. VENTO, Minnesota

DALE E. KILDEE, Michigan

PETER A. DEFAZIO, Oregon

ENI F.H. FALEOMAVAEGA, American

Samoa

NEIL ABERCROMBIE, Hawaii

SOLOMON P. ORTIZ, Texas

OWEN B. PICKETT, Virginia

FRANK PALLONE, JR., New Jersey

CALVIN M. DOOLEY, California

CARLOS A. ROMERO-BARCELO ́ , Puerto

Rico

MAURICE D. HINCHEY, New York

ROBERT A. UNDERWOOD, Guam

SAM FARR, California

PATRICK J. KENNEDY, Rhode Island

ADAM SMITH, Washington

WILLIAM D. DELAHUNT, Massachusetts

CHRIS JOHN, Louisiana

DONNA CHRISTIAN-GREEN, Virgin Islands

RON KIND, Wisconsin

LLOYD DOGGETT, Texas

LLOYD A. JONES, Chief of Staff

ELIZABETH MEGGINSON, Chief Counsel

CHRISTINE KENNEDY, Chief Clerk/Administrator

JOHN LAWRENCE, Democratic Staff Director

SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

BARBARA CUBIN, Wyoming, CHAIRMAN

W.J. (BILLY) TAUZIN, Louisiana

JOHN L. DUNCAN, JR., Tennessee

KEN CALVERT, California

WILLIAM M. (MAC) THORNBERRY, Texas

CHRIS CANNON, Utah

KEVIN BRADY, Texas

JIM GIBBONS, Nevada

CARLOS ROMERO-BARCELO ́ , Puerto Rica

NICK J. RAHALL II, West Virginia

SOLOMON P. ORTIZ, Texas

CALVIN M. DOOLEY, California

CHRIS JOHN, Louisiana

DONNA CHRISTIAN-GREEN, Virgin Islands

——— ———

BILL CONDIT, Professional Staff

SHARLA BICKLEY, Professional Staff

LIZ BIRNBAUM, Democratic Counsel
(III)

C O N T E N T S

Page

Hearing held May 20, 1997 ..................................................................................... 1

Statements of Members:

Cubin, Hon. Barbara, a Representative in Congress from the State of

Wyoming; and Chairman, Subcommittee on Water and Power Resources ........................................................................................................... 1

Prepared statement of ............................................................................... 2

Hill, Hon. Rick, a Representative in Congress from the State of Montana . 18

Prepared statement of ............................................................................... 18

Romero-Barcelo ́, Hon. Carlos, Resident Commissioner from Puerto Rico ... 3

Prepared statement of ............................................................................... 4

Statements of witnesses:

Clark, Michael, Executive Director, Greater Yellowstone Coalition ............ 10

Prepared statement of ............................................................................... 39

Elers, Karl E., Chairman, Crown Butte Mines, Inc. ..................................... 8

Prepared statement of ............................................................................... 34

McGinty, Kathleen, Chair, Council on Environmental Quality, Executive

Office of the President .................................................................................. 4

Prepared statement of ............................................................................... 31

Additional material supplied:

Combest, Hon. Larry, a Representative in Congress from the State of

Texas, prepared statement of ....................................................................... 58

Memorandum to Subcommittee members ...................................................... 44

Newspaper article ............................................................................................. 55
(1)

NEW WORLD MINE PROPOSED BUYOUT

TUESDAY, MAY 20, 1997

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ENERGY & MINERAL RESOURCES, COMMITTEE ON RESOURCES, Washington, DC.

The Subcommittee met, pursuant to notice, at 1:30 a.m., Room

1324, Longworth House Office Building, Hon. Barbara Cubin

(Chairman of the Subcommittee) presiding.

STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF WYOMING; AND CHAIRMAN, SUBCOMMITTEE ON WATER AND POWER RESOURCES

Mrs. CUBIN. Come to order. The Subcommittee is meeting today

to hear the testimony on the agreement reached by the United

States, the environmental community, and the mining industry in

the New World Mine proposed buyout.

Under Rule 4[g] of the committee rules, any oral opening statements at hearings are limited to the Chairman and the Ranking

Minority Member. This will allow us to hear from our witnesses

sooner and help members to keep their schedules, so I won’t talk

to the other members.

Today the Subcommittee meets in its oversight capacity to review the agreement reached among the Clinton Administration,

Crown Butte Mines Incorporated and the Greater Yellowstone Coalition to buy out the proposed New World mining project near

Cooke City, Montana. Until late last week, we had intended to discuss the methodology proposed to buy out the old private oldgrowth timber lands in the Headwaters Grove of Humboldt County,

California, as well. But this was because the Administration had

proposed to fund both of these deals via schemes involving Mineral

Leasing Act receipts. All that changed when the White House and

the Congressional negotiators decided to add $700 million to fund

priority land acquisitions and exchanges to the 5-year budget

agreement. Therefore, if the budget resolution on the floor later

today is adopted, the funding for these two acquisitions would likely be through the usual mechanism of an appropriation from the

Land and Water Conservation Fund and not the original plan to

divert mineral lease receipts. That is certainly something that I

had questioned earlier on.

So why are we here today? Because I believe that the authorizing

committee with jurisdiction over mining interests generally has an

obligation to hear this issue. Was a legitimate property right of

Crown Butte Mines, Incorporated, threatened in a governmental
2

taking by the endless delays in the environmental documentation

and permitting? Would Yellowstone National Park likely have been

imperiled by the building of this proposed New World Mine? In

sum, when the facts are this case are brought to light, do they support this buyout agreement?

Let me say at the outset that I am not urging the permitting of

a gold mine next door to a place that I cherish, that I have gone

to since I was a child. That is Yellowstone National Park. But that

doesn’t mean that I am ready to recommend to the Appropriations

Committee to write a $65 million check to Crown Butte Mines.

And, yes, I realize that unless and until the owner of the private

lands and the mineral rights buys into the agreement, there really

is no deal. But, in my opinion, it is time to ask the parties to the

agreement to state for the record why they believe it to be in the

best public interest to do this deal.

Remember, just saying it is in the public interest to do the deal

doesn’t make it so. That is why an environmental impact statement

was in the works, so that permitting decisions would be made on

a scientifically sound basis. Perhaps more than anything else in the

New World deal, the termination of the EIS process bothers me

greatly. Will ratification of this deal by Congress in the context of

a check made out to Crown Butte Mines and drawn on the United

States Treasury establish a precedent for short circuiting the environmental process when people become fearful that a permit might

be imminent, whether it is for a mine or trees of whatever?

Understanding the background leading up to the August 1996

agreement, I assure you, is critical to forging a willingness to pay

attitude here in Congress. It is time to stop doing this deal behind

our backs and then announcing a done deal. We are fully capable

of deciding whether or not to spend $65 million of taxpayers’ money

to protect Yellowstone National Park, but don’t expect us to write

a check on the basis of a handshake between President Clinton, Director Clark and Chairman Elers.

[The prepared statement of Hon. Barbara Cubin follows:]

STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS FROM THE

STATE OF WYOMING

Today the Subcommittee meets in its oversight capacity to review the agreement

reached among the Clinton Administration, Crown Butte Mines, Inc., and the Greater Yellowstone Coalition to buy-out the proposed New World mining project near

Cooke City, Montana. Until late last week we had intended to discuss the methodology proposed to buy out private old-growth timber lands in the Headwaters Grove

of Humboldt County, California, as well. This was because the Administration had

proposed to fund both these deals via schemes involving Mineral Leasing Act receipts. All that changed when White House and Congressional budget negotiators

decided to add $700 million to fund ‘‘priority land acquisitions and exchanges’’ to

the five-year budget agreement. Therefore, if the budget resolution on the floor later

today is adopted, the funding for these two acquisitions would likely be through the

usual mechanism of an appropriation from the Land and Water Conservation Fund,

and not the original plan to divert mineral lease receipts.

So why are we here today? Because, I believe the authorizing committee with jurisdiction over ‘‘mining interests generally has an obligation to hear this issue. Was

a legitimate property right of Crown Butte Mines, Inc. threatened with a governmental taking by the endless delays in environmental documentation and permitting? Would Yellowstone National Park likely have been imperiled by the building

of the proposed New World mine? In sum, when the facts of this case are brought

to light, do they support this agreement?

Let me say at the outset that I am not urging the permitting of a gold mine next

door to a place I do indeed cherish, Yellowstone National Park, but that doesn’t
3

mean I am ready to recommend the appropriations committee write a $65 million

check tomorrow to Crown Butte Mines. And, yes, I realize that unless and until the

owner of the private lands and mineral rights buys into the agreement there really

is no deal. But, in my opinion, it is time to ask the parties to the agreement to say

for the record why they believe it to be in the public interest to do this deal.

Remember, just saying its in the public interest to do this deal, doesn’t make it

so. That’s why an environmental impact statement was in the works—so permitting

decisions would be made on a scientifically sound basis. Perhaps more than anything else in the New World deal, the termination of the EIS process bothers me

greatly. Will ratification of this deal by Congress—in the context of a check made

out to Crown Butte Mines and drawn on the United States Treasury—establish a

precedent for short-circuiting the environmental process when people become fearful

a decision to permit a mine (or log trees, for that matter) appears imminent?

Understanding the background leading up to the August 1996 agreement, I assure

you, is critical to forging a ‘‘willingness to pay’’ attitude here in Congress. Its time

to stop doing this deal behind our backs and then announcing a done deal. We’re

fully capable of deciding whether or not to spend $65 million of taxpayers’ money

to protect Yellowstone Park, but don’t expect us to write the check on the basis of

a handshake between President Clinton, Director Clark and Chairman Elers.

Mrs. CUBIN. I turn now to Subcommittee Ranking Member, Mr.

Romero-Barcelo, for any opening statement he might have.

STATEMENT OF HON. CARLOS ROMERO-BARCELO ́ , RESIDENT

COMMISSIONER FROM PUERTO RICO

Mr. ROMERO-BARCELO ́. Thank you, Madam Chair. Madam Chair,

we appreciate the opportunity to hear from the Clinton Administration, the Greater Yellowstone Coalition and the Crown Butte Mine

Corporation today on the proposal to protect Yellowstone National

Park from the adverse effects of the proposed New World Mine.

And we understand that this hearing will not address the Headwaters proposal since the recent budget negotiations have rendered

our jurisdictional interest moot.

Before I mention anything, I just want to bring forward just a

memory that I have. Whenever I think of the Yellowstone National

Park, I remember when I went there with my family and our children were small. And we wanted to see—above all we wanted to

see Old Faithful. One of the children decided that they had to go

to the boy’s room, and so we figured we had enough time. So we

went to take my son to the boy’s room. We came back out. Old

Faithful had already steamed out and we were so disappointed.

Anyway, it was a wonderful experience to visit Yellowstone National Park. It is a wonderful park.

We are pleased that the President and Republican leadership

chose to include the provision in the recently agreed to budget for

acquisition of the New World Mine’s mining claim and also to acquire the Headwaters Redwoods Forest through the Land and

Water Conservation Fund Act. Yellowstone is our nation’s first national park. The Headwaters Forest in California is the largest unprotected stand of ancient old-growth redwood trees in the world.

Extreme and serious pressures that would have severely affected

these areas prompted, indeed even forced, the Administration to

step in and try to save them.

According to the Minerals Management Service, the revenues

generated by the Outer Continental Shelf Leasing program are rising, up to nearly $6 billion this year, with anticipated revenues

more than $10 billion by the year 2000. One of the more recent
4

OCS lease sales brought in some 826 million to the Federal Treasury in 1 day.

Since this is a primary source of funding for the Land and Water

Conservation Fund, it is indeed appropriate that the Federal Government buy the New World and the Headwater properties outright rather than resort to complicated land exchanges.

Thank you, Madam Chair.

[The prepared statement of Hon. Carlos Romero-Barcelo ́ follows:]

STATEMENT OF HON. CARLOS A. ROMERO-BARCELO ́, A RESIDENT COMMISSIONER IN

CONGRESS FROM THE STATE OF PUERTO RICO

Madame Chair, we appreciate the opportunity to hear from the Clinton Administration, the Greater Yellowstone Coalition and the Crown Butte Mine Corporation

today on the proposal to protect Yellowstone National Park from the adverse effects

of the proposed New World Mine. We understand that this hearing will not address

the Headwaters proposal since the recent budget negotiations have rendered our jurisdictional interest moot.

We are pleased that the President and the Republican leadership chose to include

provision in the recently agreed to budget for acquisition of New World Mine’s mining claims and also to acquire the Headwaters Redwoods Forest through the Land

& Water Conservation Fund Act. Yellowstone is our nation’s first national park. The

Headwaters Forest in California, is the largest unprotected stand of ancient oldgrowth redwood trees in the world. Extreme and serious pressures that would have

severely affected these areas prompted—indeed even forced—the Administration to

step in and save them.

According to the Minerals Management Service, the revenues generated by the

Outer Continental Shelf Leasing program are rising, up to nearly $6 billion this

year, with anticipated revenues more than $10 billion by the year 2000. One of the

more recent OCS lease sales brought in $826 million to the Federal treasury in 1

day!

Since this is the primary source of funding for the Land and Water Conservation

Fund, it is indeed appropriate that the Federal Government buys the New World

and Headwaters properties outright rather than resort to complicated land exchanges.

Mrs. CUBIN. Thank you, Mr. Barcelo ́. Now I will introduce our

panel of witnesses. We have Ms. Kathleen McGinty, Chair, Council

of Environmental Quality for the Executive Office of the President;

Mr. Karl Elers, Chairman, Crown Butte Mines, Incorporated; and

Mr. Mike Clark, Executive Director of the Greater Yellowstone Coalition. And before we start, I would like to swear in the witnesses.

I believe that you were notified that you would be sworn in. And

I hope that is OK with you. So would you mind standing and I will

administer the oath.

[Witnesses sworn.]

Mrs. CUBIN. Thank you. We do that for all witnesses in this Subcommittee, so don’t make any inference from it at all.

Let me remind the witnesses that under our committee rules

they must limit their oral statements to 5 minutes, but that their

entire statement will appear in the record. And that way we can

move along with our questioning more quickly.

The Chair now recognizes Ms. McGinty to testify.

STATEMENT OF KATHLEEN McGINTY, CHAIR, COUNCIL ON ENVIRONMENTAL QUALITY, EXECUTIVE OFFICE OF THE PRESIDENT

Ms. MCGINTY. Thank you, Madam Chair and members of the

Subcommittee, for the opportunity to testify before you regarding

the President’s effort to protect Yellowstone National Park. The
5

Yellowstone agreement was borne of and reflects this Administration’s commitment to preserve and protect for future generations of

Americans the world’s first national park and indeed the crown

jewel of our national park system. This agreement is reflective also

of our commitment, wherever possible, to work in partnership with

industry and other interest groups to achieve our environmental

goals.

Let me express at the outset, Madam Chair, the President’s deep

gratitude to the Congressional leadership who have now joined us

in this effort to protect Yellowstone by securing in the budget

agreement the funds necessary to get this job done. Let me also,

if I might, at the outset just recognize and commend those whom

I share the podium with here, Crown Butte, now Battle Mountain,

and the environmental groups represented by the Greater Yellowstone Coalition. In every instance and at every moment they have

acted in absolute good faith and have worked honorably to keep the

best interests of Yellowstone and the economy paramount.

As mandated by NEPA, my role is to advise the President on environmental policy matters and coordinate activities of Federal

agencies and departments with regard to matters across agency jurisdictional lines. Accordingly, I do chair the Executive Committee

and oversee the interagency team that is assembled to ensure implementation of the Yellowstone National Park agreement.

Madam Chair, to turn to some history here, in 1989 Crown Butte

Mines, Incorporated, a subsidiary of a Canadian mining company,

proposed a gold, copper and silver mining complex located less than

three miles from the northeast border of Yellowstone National

Park. The rights to minerals at the New World Mine sight had

been obtained under the 1872 Mining Act. Under Federal law,

therefore, the U.S. Government had no choice. We were obligated

to process the company’s proposal to mine these minerals and use

Federal lands for a large tailings impoundment.

Crown Butte submitted a plan for review that called for 15 years

of operation, six major facilities, a 70 to 100 acre tailings impoundment behind a proposed 90-foot tall dam. The tailings impoundment would have been expected to contain the highly acidic waste

rock and metals in perpetuity.

The EIS process began in April 1993. The EIS was originally expected to be issued as a draft in April 1994, however work slowed

when the preliminary findings began clearly to show that major adverse impacts on Yellowstone were threatened, specifically, significant environmental damage to the Clark’s Fork of the Yellowstone

River, a federally designated wild and scenic river, where identified

risks to critical grizzly bear habitat and to Yellowstone Park itself

were highlighted.

Interagency review of the preliminary drafts of the EIS also

showed the need for new studies, and in particular to examine

groundwater flows. The preliminary draft EIS was made widely

available and reviewed not only in Montana but throughout the

United States. This occasioned the identification of still more concerns. For example, many analysts, including mining engineers,

were critical of the proposed submerged tailings system. Concerns

were raised, among other things, about seismological risks in the

area. It was highlighted, for example, that this area had experi-
6

enced more than 4000 earthquakes within a 180-mile radius. The

need for more analysis concerning containment of the 5.5 million

tons of highly acidic waste rock that would be generated by the

mine was also raised as, again, were risks associated with the

tailings impoundment.

In March 1995, Wyoming Governor Geringer wrote to Montana

Governor Racicot to say that the alternative preferred by the company could have a significant adverse impact on Wyoming water

resources and suggested that the tailings impoundment be subjected to a wholly separate review. Moreover, again because of the

highly acidic nature of the ore body, Governor Geringer called for

a 75 to 100 million dollar bond to be posted to cover any potential

liabilities from damages.

As concerns about the EIS grew, court battles were also beginning. Crown Butte was embroiled in a citizen’s suit brought under

the Clean Water Act by a coalition of 14 environmental groups. In

October 1995, the company was found liable by a Federal District

Court. Simultaneously, legislation was introduced in both the

House and the Senate to interfere with or block the mine. With

concern therefore growing all around and from all fronts, it became

abundantly clear that there would be years of contentious litigation

over the mine regardless of whether the Federal Government approved or denied the company’s application.

Faced with this potential for costly and resource intensive litigation, the environmental groups and the company entered into discussions in an effort to identify creative options to address their

differences. In February 1996, Crown Butte, their parent Hemlo

Gold, and the Greater Yellowstone Coalition came to Washington,

approached CEQ together to explore whether the Administration

would be willing to consider a novel approach to the problem. And

that is exchanging Federal assets in exchange for the company’s

agreement to cease and desist further pursuit of the mine.

At that point, my staff formed a small interagency working group

to assess implications and possible elements of such an approach.

They concluded that there were enough common interests among

the parties that we should pursue more detailed discussions. All

parties agreed that confidentiality was necessary and appropriate

because the discussions would involve issues regarding ongoing and

potential future litigation and because premature release of information could adversely affect the company’s stock.

In April 1996, the Administration appointed Mr. John Schmidt,

who was then the Associate Attorney General of the United States,

and Mr. Jim Pipkin, Counselor to the Secretary of Interior, to further the discussions with the environmental group and the company. Regular discussions were held focusing primarily on, first,

the value of the mine, second, the cleanup and restoration of environmental impacts associated with many years of small scale mining in the area, resolving protracted legal proceedings, and finally,

resolving potential Federal enforcement actions.

In August 1996, the discussions came to fruition. At that time

President Clinton, Crown Butte Mines and a coalition of environmental groups announced that the parties had reached an agreement in principle to protect Yellowstone and the surrounding area.

Moreover, the agreement would ensure that environmental impact
7

of historic mining in the area would be remediated and that years

of costly and contentious litigation would be avoided. The August

12 agreement, therefore, represented a major milestone in the effort to protect Yellowstone. However, the agreement did not complete the job. Rather, as an agreement in principle it laid out a

plan of action, actions when completed would protect the park.

Two of the most significant action items included, first, the un- dertaking of the Federal Government to identify $65 million of Federal assets to be exchanged to Crown Butte, and second, Crown

Butte’s undertaking to acquire the property it currently leases from

Ms. Margaret Reeb, a Montana resident and the other major landowner in addition to Crown Butte in the area.

To turn briefly to the Federal Government’s undertaking, immediately upon conclusion of the agreement in principle, the Federal

agencies began the work of identifying the necessary assets. In the

course of this effort, we reviewed surplus military installations,

General Services Administration surplus property, National Forest

timber lands, leased and unleased coal lands and other Federal

lands. We actively participated in and supported Governor Racicot’s

Montana Initiative to explore a mix of timber and coal lands in

Montana.

For various reasons, each of these properties ultimately proved

unsuitable for the exchange. Some properties were contaminated,

for example. Others had previously been committed to other uses,

while still others were opposed by various interest groups.

After this exhaustive search and rigorous effort, we therefore

proposed to divert mineral royalties from existing mines in Montana. While diversion of royalties was generally favorably received,

the required offset we chose, the Conservation Reserve Program,

proved to be controversial. It was in this context that the President

and Congressional leadership took the issue up in the balanced

budget negotiation. To reiterate what I expressed at the outset, the

President is extremely appreciative of the leadership support in securing the funds now necessary to protect Yellowstone for future

generations.

To summarize that budget provision relevant to this matter, an

additional $700 million is proposed to be reserved from the Land

and Water Conservation Fund on top of the President’s request for

the fund for this year. Of that amount, $315 million is reserved for

priority Federal land exchanges, namely $65 million for the completion of this agreement to protect Yellowstone and $250 million

to secure the Headwaters Forest in Northern California. The budget agreement is, therefore, a major milestone in the effort to protect

Yellowstone. These are new and additional funds so other priorities

will be protected. And indeed, the remaining $385 million can be

put to priorities agreed by the Congress and the Administration.

However, several more steps need to be completed before the Yellowstone agreement can be implemented. First, Crown Butte must

fulfill its obligation to acquire the property it leases from Ms. Reeb.

Second, evaluation of the property must be completed. And finally,

the budget resolution must be passed and then acted upon by the

Appropriations Committee.

Madam Chair, I am confident that this is a fair way to resolve

a potentially long, bitter and expensive battle to save Yellowstone.
8

We in the Administration have been proud to work with the environmental groups represented here and with the Crown Butte

Company, all who have acted honorably, in good faith and with the

best interests of Yellowstone and the economy in mind. Madam

Chair, saving Yellowstone does require that many people come together to find common ground on behalf of this truly national

treasure. You have spoken eloquently about Yellowstone and indeed, the need to find bipartisan solutions. I hope that we can work

closely with you and other Members of Congress now to finish this

important job.

Thank you for the opportunity to speak to this important initiative, and I am certainly available to take whatever questions you

might have.

[The prepared statement of Kathleen McGinty may be found at

end of hearing.]

Mrs. CUBIN. Thank you very much. Mr. Elers.

STATEMENT OF KARL E. ELERS, CHAIRMAN, CROWN BUTTE

MINES, INC.

Mr. ELERS. Thank you, Madam Chair and the members of the

Subcommittee. My name is Karl Elers, and I am Chairman of the

Board of Directors of Crown Butte Mines, Inc, a Montana corporation. I assumed that position in March of this year. This is my first

appearance before a Congressional committee, and I appreciate the

invitation to be here.

The letter of invitation to testify indicated the committee’s interest in the agreement reached between Crown Butte, the Administration and certain environmental interest groups in August 1996.

Crown Butte found the decision to enter into the August exchange

agreement a difficult one. A brief chronology of the events leading

up to our decision to execute the agreement will shed some light

on why Crown Butte decided on this course of action. And toward

this end, I think I will be giving a lot of the same chronology as

Ms. McGinty, but from the perspective of Crown Butte, obviously.

The area in dispute, known as the New World Mining District,

is a historic district dating back to 1869. In 1978, the U.S. Congress specifically considered and excluded the New World District

from the Absaroka-Beartooth Wilderness due to past mining activity and the present mineral potential. Proposing a state-of-the-art

mine with a strong reclamation plan to remediate historic mining

disturbances made sense, yet Crown Butte became the focus of a

national and international debate.

The permitting process for the New World property began formally over 6 years ago in November 1990 when Crown Butte submitted its operating permit application. The permitting process for

the New World property proved to be complex and time consuming

and was met with unusually high opposition. In all, more than 25

separate state, Federal and county permits would be required prior

to approval of the project. A revised operating permit application

was resubmitted to the lead agencies in 1992 following extensive

changes resulting from the decision by Crown Butte not to use cyanide in the processing.

Crown Butte responded to a total of six reviews of the operating

permit application before it was declared complete in 1993 and the
9

EIS process began. Crown Butte was initially informed that the

draft EIS would be available in late 1994. This date was not met.

In 1994, Crown Butte was advised by the agencies that a draft of

the EIS would be issued by the end of the second quarter of 1995.

This date was not met and Crown Butte was subsequently advised

by the State of Montana that the draft EIS would be released in

the fall of 1995. This date was also not met. In March 1996, Crown

Butte was advised by the lead agencies that the draft EIS would

be released by late spring or early summer of 1996. The draft EIS

had not been released by August 12, 1996, when Crown Butte executed the exchange agreement. The EIS process has been suspended pursuant to the terms of the exchange agreement.

As I mentioned earlier, the Crown Butte District is in a historic

mining area. Crown Butte’s activities at the site have included reclamation of historic mining activities. And in December 1992, the

company received an excellence award for outstanding commitment

to environmental protection from the U.S. Forest Service. This

award recognized the company’s innovative and successful efforts

to mitigate historic adverse environmental impacts.

In 1994, following a complaint by special interest environmental

groups, the Corps of Engineers alleged that some of the company’s

reclamation activities had been in violation of the Clean Water Act.

Crown Butte responded that it did not believe these allegations

were accurate, and in September 1995 the Corps issued Crown

Butte a Section 404 permit authorizing future reclamation activities.

Under the Comprehensive Environmental Response and Liability

Act, or CERCLA, the EPA initiated an investigation of continuing

environmental impacts from previous activities in the Henderson

Mountain vicinity.

In January 1995 interest groups filed a complaint against the

company with the Department of the Interior contesting Crown

Butte’s mineral patent applications, which effectively asked that

the patents not be issued.

In February 1995 the groups requested the U.N. World Heritage

Committee to investigate whether Yellowstone qualified for inclusion on the list of world heritage sites in danger. Such determination would require the U.S. to take unspecified steps to protect Yellowstone.

In June of that year, a senior Interior Department official stated

that Yellowstone was in danger. The U.N. committee visited Yellowstone in September 1995, and the National Park Service, a cooperating agency in the New World EIS, hosted the event. In December 1995, the committee declared Yellowstone a world heritage

site in danger.

By June 1995, Crown Butte had exhausted its cash resources

and has since been forced to rely on loans totaling approximately

$5 million to date to sustain day-to-day operations.

In August of that year the President took an aerial tour of the

mine site. The tour was followed by the Secretary of the Interior

withdrawing an area of approximately 19,000 acres, including the

New World property, from location under the Mining Law.

In October 1995, the District Court ruled on a complaint filed by

the interest groups, finding that Crown Butte was in violation of
10

the Clean Water Act for not yet having obtained an NPDES permit

for water coming from historic mine workings. A trial was set but

has been stayed in light of the exchange agreement.

Madam Chair and members of the Subcommittee, I am sure you

can readily see that what began as an attempt to build a modern,

state-of-the-art mine in an area where historic mining has occurred

for over a century and which was specifically excluded from wilderness designation by the Congress, quickly became a battle of national and international proportions.

By mid-year 1996, Crown Butte had already been in the permitting process for almost 6 years and promised dates for the release

of the DEIS had consistently not been met. Crown Butte had run

out of cash and the whole process had become fraught with delays

and uncertainty. The company found the decision to enter into the

exchange agreement a difficult one. Crown Butte has always believed its proposal to build and operate safely and responsibly a

small state-of-the-art underground gold mine at New World was

not only environmentally sound of itself, but also represented the

best way to remediate historic mining activities which date back

more than 100 years.

In the end, the exchange agreement provided a practical solution

to a unique set of circumstances. The protracted permitting delays,

legal challenges facing ongoing development and potential liabilities related to historic mining caused the economics of the project

to deteriorate. Crown Butte’s management ultimately decided the

agreement was in the best interests of the shareholders and would

compensate them, in some measure, for the amount they have

spent to date in acquiring, exploring and attempting to permit the

property.

Madam Chair and members of the committee, that concludes my

statement and I, too, would be pleased to respond to questions.

[The prepared statement of Karl Elers may be found at end of

hearing.]

[Supplemental information of Karl Elers may be found at end of

hearing.]

Mrs. CUBIN. Thank you, Mr. Elers. The Chair now recognizes

Mike Clark.

STATEMENT OF MICHAEL CLARK, EXECUTIVE DIRECTOR,

GREATER YELLOWSTONE COALITION

Mr. CLARK. Thank you, Madam Chair and members of the Subcommittee. My name is Michael Clark. I am the Executive Director

of the Greater Yellowstone Coalition, a Bozeman, Montana-based

group with field offices in Cody, Wyoming, and Idaho Falls, Idaho.

We are 14 years old. We have a membership of 7400 members, 119

corporate members and 120 organizational members. Our mission

is to preserve and protect the Greater Yellowstone ecosystem and

the communities it sustains.

Today I also represent the Beartooth Alliance, the Gallatin Wildlife Association, Montana Wildlife Federation, the Wyoming Wildlife Federation and the Wyoming Outdoor Council. Each of these

groups has worked closely with us on the New World Mine.

Thank you for the invitation to testify on the agreement negotiated in 1996 between the Clinton Administration, Crown Butte
11

companies and the conservation community. Congress now has the

key role in creating and approving legislation that will resolve this

issue permanently. We welcome your leadership. We look forward

to working with you in completing the agreement.

We continue to believe that the New World agreement is a good

deal for the American people. We also acknowledge that it has been

far more difficult to achieve than we had originally thought, but it

is still a valid way of resolving this situation. Without the agreement, the mining companies and the conservation community

would still be locked in a major confrontation over the threat of a

gold mine outside Yellowstone. The agreement provides a method

for ending this battle and for allowing each of us to move on to

other issues.

The agreement provides the company with a fair exchange for its assets. It creates a $22.5 million reclamation fund to clean up and

restore the polluted lands on Henderson Mountain. It provides research funds to study the situation, offering the possibility that the

cleanup could benefit other polluted mining sites in the interior

west. And it ensures that the wild character of the lands adjacent

to Yellowstone and the Absaroka-Beartooth Wilderness will be protected from industrial development for the region’s wildlife and for

the benefit of future generations.

We are supportive of the efforts recently to use the Land and

Water Conservation Fund to complete this agreement. We now look

to the leadership of Congress to conclude the deal by passing new

legislation that will resolve this situation.

I would like to ask that you add to my written testimony recognition of two groups that worked with us that were not included in

that testimony. These are the Mineral Policy Center and the National Parks and Conservation Association, which worked with us

very closely on this situation.

Thank you. I will be glad to answer any questions.

[The prepared statement of Michael Clark may be found at end

of hearing.]

Mrs. CUBIN. Thank you. Thank all of you very much. I think I

will start the questioning. Let us go ahead and put the light back

on so that we will limit our questions to 5 minutes each.

I would first of all like to ask unanimous consent to allow Rick

Hill, Representative from Montana, to sit with us and to question

the witnesses. OK, hearing no objection.

OK, I will start out. Ms. McGinty, I applaud your efforts for

working with all the parties involved and in reaching an agreement. I think it helps everyone when that can happen. I do have

some concerns and questions. I do indeed recognize that the budget

negotiators have agreed to $700 million of additional funds available through the LWCF for priority land acquisition. My math, and

yours too, says that this deal costs $315 million, and yet the price

tag is 700 million. I would like to know what other things you plan

to spend it on, particularly if part of the buyout will be private oil

and gas rights that are adjacent to the Everglades, and also if part

of the money is intended to go to Escalante to buy out the school

sections and the lands that are not Federal lands there.

Ms. MCGINTY. Yes, thank you. There are several parts to this aspect of the budget agreement. As the committee is aware, the Land
12

and Water Conservation Fund itself is a fund with a balance on the

order of, I think as the Ranking Member noted in his opening remarks, on the order of $11 billion. What this budget agreement

says is that of that $11 billion balance $700 million will be reserved in 1998 in addition to the President’s request for fiscal year

1998 for two things. One is 315 million of that 700 million will go

to the priority land exchanges, 65 million for New World Mine and

250 million for Headwaters.

The balance, Madam Chair, to get more specifically to your question, will—is available for unidentified purposes, but for purposes

that the Congress in consultation with the Administration may

identify other priorities. It will just go through the normal process

that the Congress in consultation with the Administration follows

every year in allocating the Land and Water Conservation Fund.

Mrs. CUBIN. It just seems so extravagant based on our current

financial situation. It stymies me. While I might agree that—and

do agree that if the buyout takes place it ought to come from the

Land and Water Conservation Fund, but then I am asked to put

in an additional $315 million for something I don’t even know what

it is. That is troublesome to me, but I applaud you. You have done

a good job based on your priorities and your job is. I think it is the

budgeters and the negotiators, maybe, that I need to take this up

with.

Ms. MCGINTY. It will come back, just to be clear. That money will

be—the remainder, the 385 million of the 700——

Mrs. CUBIN. Right.

Ms. MCGINTY [continuing] as opposed to the two things for Yellowstone and Headwaters. That will be up to the Congress in the

normal course to decide how those moneys should be appropriated

in consultation——

Mrs. CUBIN. Sure.

Ms. MCGINTY [continuing] with the agencies.

Mrs. CUBIN. I realize that. However, I still think it goes a little

bit farther than I would like to see it go.

I recognize that this deal and Headwaters both involve corporate

interests being bought out of their permitting dilemmas, and I believe at this stage that Crown Butte may have been unfairly treated during the process in terms of delays and all of the problems

that they run into. But my question is this. Would an individual

miner or small landowner have received compensation as Crown

Butte appears to be going to?

My Chairman Don Young, for example, has small miners in

Denali Park in Alaska and in another area that have wrestled with

the Federal Government for over 15 years trying to get their just

compensation. And I just wonder why Battle Mountain Gold’s interests are to be bought out and John Q. Public appears to be sent

packing in this area.

Ms. MCGINTY. Well, I will take the first part of the question,

Madam Chair. The imperative here was to protect Yellowstone National Park, and what we attempted to do, again in partnership

with the company and the environmental groups that were involved was to say is there a way to resolve what has at this point

become quite a heated battle over this issue, resolve it in an amicable way that both protects the environment, Yellowstone Park, and
13

is respectful of the company’s legitimate property interests. And

that is why we were—we came together to forge this agreement.

Mrs. CUBIN. Mr. Elers, let me say up front that I realize you

were not in your current position when this agreement was brokered, when it was proposed. Therefore when I say you, I am not

talking about you. I am talking about the collective you, which

would be your company.

I believe that too much misinformation and manipulation relating to the development of this mine has occurred. I believed, as did

a vast majority of my constituents, that the Administration in an

attempt to stop development of this mine intervened in the established EIS process and stopped it by offering a deal to Crown

Butte. It is commonly believed in my state that the EIS was coming out to be favorable for the development of the mine and that

the President would go to any legal means to prevent that from

happening, therefore, if not violating the process at the very least

compromising it.

It is also very commonly believed that the CEQ held a metaphorical gun to your head by telling you that the mine would never be

developed and so your only alternative was to take the deal. Then

1 day some representatives from the Administration came to my office and I learned from them that in fact Crown Butte approached

CEQ with the brokering and assistance, admirably so, of the Greater Yellowstone Coalition. Therefore, for virtually months I had

been relating misinformation to my constituents and to the press

and never once did anyone from Crown Butte bother to come forward and say, no, the Administration didn’t step in and stop this,

we made the first move.

I am sure that the truth lies somewhere between Crown Butte’s

out of the clear blue coming in and saying I want to make a deal

and ‘‘that you will never get your mining permits so you better

deal.’’ I am sure that the truth lies somewhere in between there.

I suppose we will never know exactly what it is.

I understand that the Department of Interior provided this Subcommittee with a box of documents, mostly related to how the deal

to divert oil, gas and coal leases, coal lease revenues from the U.S.

Treasury to the mining company to pay for the deal. The Forest

Service also sent up a huge box of things. And I—because they

didn’t come until late Friday night, I haven’t had the opportunity

to go through them and I don’t know when I will, but what I do

know is that before this Subcommittee makes any recommendations on this buyout I will personally go through every single document that is furnished to us, and that could take a very, very long

time.

Having said that, I would like to ask you the question. In your

statement, and this is a quote, it says the draft EIS had not been

released by August 12, 1996, when Crown Butte executed—oh, excuse me, that is not the one I wanted to ask.

When you say that the Park Service hosted the U.N. committee

on the world heritage at Yellowstone National Park in 1995, does

that mean that they paid for the heritage committee to come over

here? Do you know the answer to that?

Mr. ELERS. I don’t know the answer to that, Madam Chair.

Mrs. CUBIN. Do you know the answer to that, Ms. McGinty?
14

Ms. MCGINTY. No, I don’t, Madam Chair.

Mrs. CUBIN. While I am concerned that Crown Butte has been

less than forthcoming in this matter, I am also concerned that

Crown Butte wasn’t exactly getting the fair deal that they are

guaranteed under the Constitution. The Administration appears to

have been dealing with a stacked deck. It appears that all of the

resources of the Department of Interior and CEQ were ready to be

used if necessary against the mining company, the State of Montana or any other citizen who was against development of the

mine. The President even interrupted his own vacation to take an

aerial tour of the site, so there is little doubt in my mind that the

EIS was not going to be published by a Federal agency with a preferred alternative to allow the mine to be developed.

So let me ask you, Mr. Elers, and then I better give up my time.

Is your parent company’s gold mine in South America subject to

this same kind of treatment by the Bolivian Federales?

Mr. ELERS. No, Madam Chair, they are certainly not. The Bolivian government, with whom we have had a relationship now for

about 10 years—about 9 years—has been very supportive of our

mining activity and anxious to see it through to development. I

might also point out that we were subject to the covenants of international lending agencies, the Bolivian government’s environmental standards, as well as our own corporate standards of environmental protection in developing that mine. But that mine was

developed very expeditiously.

Mrs. CUBIN. So is it fair for me to say that the New World Mine

is just another example of why so much investment capital is moving out of the United States into other countries?

Mr. ELERS. That is a fair assessment. Certainly speaking for our

own parent company organization, we have moved most of our exploration activities outside of the United States.

Mrs. CUBIN. Thank you very much. Mr. Barcelo ́. Mr. ROMERO-BARCELO ́. Thank you, Madam Chair.

Ms. McGinty.

Ms. MCGINTY. Yes.

Mr. ROMERO-BARCELO ́. I enjoyed your testimony.

Ms. MCGINTY. Thank you, sir.

Mr. ROMERO-BARCELO ́. I would like to ask a question. I realize

that you are not the Administration’s expert witness on the Mining

Law of 1872, so I ask that you refer this question to the Department of Interior.

Ms. MCGINTY. Yes.

Mr. ROMERO-BARCELO ́. For a written response.

Ms. MCGINTY. I would be happy to.

Mr. ROMERO-BARCELO ́. My question is as follows. Is Mr. Elers

correct in his assertion that application of the comparative value

test would be contrary to the longstanding practice of the Department of the Interior?

Ms. MCGINTY. Well, sir, you have guessed right. I am not the expert on that, but I would be happy to have the Department respond

to you in writing immediately.

Mr. ROMERO-BARCELO ́. And more to the point, is imposition of

this test consistent with law and legal precedent?

Ms. MCGINTY. I will also have to have the Department respond.
15

Mr. ROMERO-BARCELO ́. And finally, the other question is also,

can Crown Butte’s patent applications be approved under the patent moratorium put in place by Congress?

Ms. MCGINTY. Similarly, I will need to provide a written response from the Department.

Mr. ROMERO-BARCELO ́. I would appreciate that. And now, Mr.

Elers, this question relates to the Crown Butte’s patent applications under the 1872 Mining Law. Why do you say in your testimony that the imposition of the comparative value test would be

contrary to the longstanding practice of the Department of the Interior in determining whether or not to grant Crown Butte’s application to patent or to acquire the mining claims in question?

Mr. ELERS. The patent applications, we believe, were subjected

to a lot more challenge than a normal patent application would be

subjected to due to their proximity to Yellowstone.

Mr. ROMERO-BARCELO ́. That is the reason why you make that

statement, in other words?

Mr. ELERS. I believe that is the primary reason.

Mr. ROMERO-BARCELO ́. And also in your testimony you state that

Crown Butte’s proposal for the New World Mine would have represented the best way to remediate the effects of hundreds of years

of mining disturbances. How would Crown Butte have accomplished this?

Mr. ELERS. Through water treatment, through remediation of the

longstanding leakage of acid mine drainage from existing historic

mines, and also in surface disturbances through continuing to reclaim areas that were surface mined, particularly, I believe, during

World War II for copper. A lot of that work has been done. A lot

of work yet remains to be done.

Mr. ROMERO-BARCELO ́. Thank you very much, Mr. Elers.

Mr. ELERS. Thank you, sir.

Mr. ROMERO-BARCELO ́. And, Mr. Clark, I would like to ask you—

Ms. McGinty and Mr. Clark, would you care to respond to Mr.

Elers’ explanation of the remediation and how it would work on the

New World site? First of all Mr. Clark.

Mr. CLARK. I am sorry, sir. I couldn’t hear everything you asked.

Mr. ROMERO-BARCELO ́. I said would you care to respond to Mr.

Elers’ explanation of the remediation and how it would work at the

New World site, what he just said.

Mr. CLARK. Well, the company proposed to use its milling operations to clean up that site if it were in full operation. Obviously

with the mine not going ahead, that will not occur, but the reclamation agreements that we negotiated allows for $21⁄2 million to

be spent on the site. That is a huge amount of money for our region, and we think that that amount of money will go a long way

toward cleaning up the existing pollution on that site. So we think

that when this is over that site will be much better than it was and

we will be able to walk away with it, all of us, with our heads held

high.

I am also hopeful that research activities that are proposed to be

conducted there will have application in other parts of the interior

west where historic mining sites also occur.

Mr. ROMERO-BARCELO ́. Thank you very much. And, Ms. McGinty,

you agree with Mr. Clark’s statement?
16

Ms. MCGINTY. Yes, absolutely, sir. In fact, I think one of the

most important parts of this agreement is that that money that

Crown Butte has put on the table will be available immediately to

begin the cleanup job that even today is affecting water quality in

the area. It will create jobs in terms of getting the cleanup job underway and I think it will be a very important step forward for the

area.

Mr. ROMERO-BARCELO ́. Thank you, Ms. McGinty. And finally, Mr.

Clark, for the record, why did the Greater Yellowstone Coalition

and other environmental groups consider the New World Mine unacceptable?

Mr. CLARK. I have only been at the Greater Yellowstone Coalition for 3 years. The decision to fight the mine that was made by

the Greater Yellowstone Coalition was made before I was there,

but I believe that decision was made in 1993 or 1994. So it was

well underway by the time I arrived. The early determination was

that a mine of that size poised on the mountains above Yellowstone

and above the Clarks Fork River was an unacceptable risk because

it would create irreversible impacts in the region.

And I think that is an important distinction for us, because, for

example, we do think that logging should go on. We think that

grazing in the public lands should go on. We think that activities

like that, as long as they are not irreversible, are ones that could

occur on the public lands if these are not major environmental consequences. But in that site, at that location, we thought that a

mine of that size operating the way it was proposed was an unacceptable risk to Yellowstone. And we concluded that no risk was acceptable to the Yellowstone Park, so we made a determination that

is quite different from the way we ordinarily look at industrial proposals in our region.

Mr. ROMERO-BARCELO ́. In other words, there is no way, in your

opinion, that a gold mine could be created and operated safely at

the New World site?

Mr. CLARK. We would be against an industrial scale gold mine

operating at that site, sir.

Mr. ROMERO-BARCELO ́. Thank you very much.

Mrs. CUBIN. Thank you. Mr. Duncan.

Mr. DUNCAN. Ms. Cubin, I am going to yield my time back to Mr.

Hill, because he is—this is involving his state. But I do want to say

that I continue to be concerned about the secrecy that is involved

in some of these situations. Just a few days ago we held a hearing

in another Subcommittee of this committee about the Utah land

grab of the Grand Staircase Escalante, the property that you mentioned earlier. And that went on for months and there was intentional efforts made in that case to keep that hidden from the public

and keep that secret.

And now I read that there was the same type of secrecy in the

Headwaters situation in California. And I don’t know anything

about that situation out there, whether it would have been good or

bad, but I can tell you that we are told that some of these laws

like the antiquities law and others have been used for many years

but they have not been used with the secrecy that is going on at

this time. We have never had things like this happen in this country before. And apparently there are too many people at high levels
17

in this government who are so arrogant and so elitist that they

think they should be allowed to run this country with no input

from the Congress or from the people. And I think it is a very sad

situation, a very sad day in this country.

And with that, I yield my time to Mr. Hill.

Mrs. CUBIN. I think Mr. Hill wants the time altogether, so I ask

unanimous consent——

Mr. DUNCAN. He can have my time.

Mrs. CUBIN [continuing] to recognize Mr. Dooley and then put

yours altogether.

Mr. DOOLEY. Thank you, Mrs. Cubin. And I apologize for being

delayed as I had a conflict. And I really don’t have any questions

at this time, so I will be brief. I would say, though, that I really,

you know, want to commend Ms. McGinty and the Administration

for the work that they have done in specific reference to the Headwaters. This is an issue that I have been involved in in a legislative capacity for the last, oh, I guess it was almost 6 years where

we have tried to find a way that we can ensure that we provide

an adequate level of protection for what is a fairly unique natural

resource.

And the reason I am commending the Administration is that I

think in this case that they approached this with the objectives of

trying to ensure that we would respect the private property rights

of an individual and at the same time achieve the objective of what

I think that most of us would agree would be embraced by the majority of the American people in preserving the Headwaters Forest.

And I am very pleased that in the process of negotiating the budget

agreement that they were able to secure the potential that this can

be purchased.

I had some concerns about the original plan in terms of the sale

of some Federal assets, even oil and gas leases, which while in

itself might not have been impossible to orchestrate and to achieve,

though certainly would have added an additional degree of complexity to consummating this Headwaters purchase. I would hope

that the Administration, though, would be very diligent in ensuring

that we reach an agreement on the HCP for the Headwaters as

well as the sustained yield, which are also integral components of

bringing this Headwaters issue to conclusion.

But I think it is, you know, with Mr. Duncan’s concern certainly

we can’t have—we need to have openness in this process. I felt

pretty, you know, kept apprised of this and certainly I appreciate

the Department of Interior’s interest in working with a lot of the

local oil producers in my district. I just hope that come October

that we have finished this and it is off the table and out of the political arena.

And I think we could probably—I could certainly say the same

with the Crown Butte Mines issue, that hopefully we can resolves

that and achieve, I think, the objective, which will be reflecting the

values of the American people, and at the same time demonstrating

our commitment to respect the private property rights of individuals. So thank you.

Mrs. CUBIN. Thank you, Mr. Dooley. I ask unanimous consent for

Mr. Hill to be able to give an opening statement.

Mr. HILL. Thank you, Madam Chairman.
18

Mrs. CUBIN. No objection.

STATEMENT OF HON. RICK HILL, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF MONTANA

Mr. HILL. I want to thank you, Madam Chairman, for holding

the hearing today and for allowing me to take part as an ex officio

member of the Subcommittee. The people of Montana have not

been given very much information on the substance of the proposed

New World Mine buyout, and I am hoping today that we can get

to the bottom of some of the issues and questions that I have received on this.

Most of the discussions and negotiations have taken place behind

closed doors, so today maybe we will have the opportunity to be

privileged to what some of those discussions were.

The opinion of Montanans is mixed about whether the proposed

buyout is good or bad for Montana. Much of the confusion over this

buyout can be attributed to the lack of knowledge. And given the

latest development, Montanans remain puzzled. It is my hope

today that our witnesses will shed some light on whether the proposal the President signed is still in play or whether they are now

considering other options. I hope also that they will shed some

light on how we got to this point, how were the interests of Montana and taxpayers and the environment weighed in the negotiations.

I remain optimistic that we can see a way clear to resolve the

issue. And I believe an important first step is the completion of an

environmental impact statement. I have asked in a letter to the

President, which I ask unanimous consent to have inserted in the

record, that the environmental impact statement on the New World

Mine be completed. Before we ask the taxpayers to pay for a property, it only seems right that the taxpayers know what they are

buying.

I have not yet received a response to my request, and I hope

today that Ms. McGinty can shed some light on the President’s

views on the importance of completing an environmental analysis

on this proposal. The people appearing in front of us today have

worked long and hard on the effort. No one wants to see that effort

wasted, including this member. Through the conversations we have

today I would hope—it would be nice if we can discern a path toward a common goal of doing what is good for the people of Montana and Yellowstone Park.

[The prepared statement of Mr. Hill follows:]

STATEMENT OF HON. RICK HILL, A REPRESENTATIVE IN CONGRESS FROM THE STATE

OF MONTANA

I want to thank Chairman Cubin for holding this hearing today and for allowing

me to take part as an exofficio member of this subcommittee. The people of Montana

have not been given much information on the substance of the proposed New World

Mine buy-out and I hope that through this hearing today we can get some important

questions answered.

Most of the discussions and negotiations have taken place behind closed doors, so

I am interested in hearing from those who have been privy to the discussions. The

opinion of Montanans seems to be mixed as to whether the proposed buy-out is good

or bad for our state. Much of the confusion over the buy-out can be attributed to

a lack of knowledge. Given the latest developments, Montanans are all a little puzzled.
19

It is my hope that our witnesses today can shed some light on whether the proposal the President signed is still in play or if they are now considering other options. I also hope we can shed some light on how we have come to this point. How

were the interests of Montana the U.S. taxpayers and the environment weighed in

the negotiations?

I remain optimistic that we can see a way clear to resolve this issue. I believe

an important first step is the completion of the environmental impact statement. I

have asked in a letter to the President, which I ask unanimous consent to have inserted in the record, that the environmental impact statement on the New World

Mine project be completed. Before we ask the taxpayers to pay for a property, it only

seems right that the taxpayers know what they are buying. I have yet to receive

a response to my request and hope that Ms. McGinty can shed some light on the

President’s views on the importance of completing the environmental analysis.

The people appearing in front of this committee today have worked long and hard

on this effort. No one wants to see that effort wasted. Through the conversation we

have today it would be nice if we can discern a path toward our common goal of

doing what’s best for the people of Montana and Yellowstone Park.

Mr. HILL. As this process has gone forward, I have actually tried

to help make this agreement complete. I believe that the agreement is incomplete. The President’s political priorities have been

addressed in this agreement. The Greater Yellowstone Coalition’s

narrow priorities have been represented in this agreement. Crown

Butte’s economic priorities have been represented in this agreement, but the people of Montana have not been represented in this

agreement or even had the opportunity to be represented in any capacity in any stage of the negotiations.

The concerns with the people of Montana and the concerns of the

State of Montana and the communities who have been impacted or

will be impacted are very important to me. I have participated and

tried to develop the Montana Initiative that Ms. McGinty referred

to, yet nothing in this proposal, nothing in this proposal at this

stage reflects any of the values that were part of that negotiation.

We have had one proposal that involved the trading of public

lands in Montana, which has now been jettisoned. We had another

proposal that involved using the CRP, the Conservation Reserve

Program, as a mechanism for this. That has now been jettisoned.

I have to tell you frankly, although I have tried to be helpful in

this process, it seems like this is a moving dynamic situation. And

not one single instance has anybody from the White House or any

of the parties involved tried to consult with me in the process.

So anyway, I would ask that that statement be inserted in the

record, and I do have some questions. Starting with you, Ms.

McGinty, let me understand this. Is the purpose of this buyout to

avoid legal liability on the part of the government? Is that part of

the motivation here?

Ms. MCGINTY. Sir, I am not aware of any legal liability on the

part of the government. The motivation is to protect Yellowstone,

but to do it in a way that is respectful of private property rights.

Mr. HILL. So it is your view, then, that the U.S. Government

does not have any liability or any potential liability as a consequence of the activities that occurred here with regard to the

New World Mine, either on the part of Crown Butte or on the part

of Greater Yellowstone Coalition.

Ms. MCGINTY. I am not aware of any legal liabilities that the

Federal Government would have in this case, no, sir.

Mr. HILL. OK, so then the purpose of the buyout is to protect

Yellowstone Park from environmental damage, is that correct?
20

Ms. MCGINTY. Yes, sir, and in a way that is respectful of the

company’s rights.

Mr HILL. But one of the objectives is to protect Yellowstone Park

from potential harm?

Ms. MCGINTY. I would say a paramount objective, certainly.

Mr. HILL. And so could you tell me on what objective criteria the

assessment was made that there was potential environmental damage to Yellowstone Park?

Ms. MCGINTY. Certainly. The work that had been done pursuant

to the environmental impact statement had produced a significant

amount of commentary that, for example, expressed concern about

the seismological risks in the area, 4000 earthquakes had occurred

in this area. The ore body is highly acidic. Those earthquakes combined with acidic ore body posed a grave threat to, for example, the

Clark’s Fork of the Yellowstone River, a wild and scenic river. Critical grizzly bear habitat concerns were raised about that habitat

being adversely impacted. The record is replete with concerns

raised by many, including Governor Geringer of Wyoming, very

concerned that Wyoming’s water resources would be severely damaged if the mine were sited in, for example, some of these other

things like an earthquake would have or could have happened at

the site.

Mr. HILL. And the purpose of the environmental impact statement was to make—to raise those environmental risks and require

Crown Butte to propose how it would mitigate those risks, is that

correct?

Ms. MCGINTY. In the face of Crown Butte’s proposal to the government to assess what the environmental impacts of that proposal

might be, yes, to itemize them clearly, to see if they could or could

not be mitigated. Some of these concerns, for example seismological

risk, there is not a way necessarily to stop mother nature from

having earthquakes. So some could be mitigated, some could not,

but that certainly is the work that was underway, yes.

Mr. HILL. Obviously Crown Butte does not have the power to

stop earthquakes, but certainly they would have within their power

to develop the mine in a fashion that would mitigate the potential

environmental risks associated with an earthquake. Wouldn’t that

be part of what they would be required to address in their environmental impact statement?

Ms. MCGINTY. Part of the process is to see if such a result could

be achieved, yes.

Mr. HILL. And so all of the risks that you just described, which

may or may not be valid risks, but they are risks that were raised

in the scoping process and the environmental assessment——

Ms. MCGINTY. Yes.

Mr. HILL [continuing] were part of the responsibility of Crown

Butte as we go through the environmental impact process to address in some fashion. Would that not have been part of that process or the expectation of that process?

Ms. MCGINTY. Well, it would be part of Crown Butte’s responsibility, but also other parties to the EIS process. For example, the

Park Service certainly would have a responsibility to ensure that

Yellowstone Park was not threatened. The Forest Service similarly

that Gallatin National Forest was not threatened.
21

Mr. HILL. And all those agencies were invited to be participants

in this process, is that not correct?

Ms. MCGINTY. Yes, and they were participating.

Mr. HILL. I think the superintendent of Yellowstone Park kind

of withdrew from that process toward the end because of his opposition, but aside from that—so in the end, at the time the environmental impact statement would be completed, we would then have

a complete picture of what those environmental risks are and what

efforts were possible to deal with those risks, is that correct? Is

that what the expectation of that would have been?

Ms. MCGINTY. That would have been the effort, yes. I think it

would have been a very significant undertaking yet to put that picture together.

Mr. HILL. And at that point in time when that would have been

completed, had Crown Butte not been able to address those environmental hazards that you have described as the President’s concern, this mine wouldn’t have gone forward, would it?

Ms. MCGINTY. I suppose if the risks could not be mitigated, that

various parts of the permitting process—the EIS itself would not

necessarily have said yes or no to the mine. What would follow

from the analysis there were various permitting activities, whether,

for example, the Corps of Engineers would be able to issue a wetlands permit.

Mr. HILL. So what you are saying is that the various permits,

probably a dozen or more permits, the decision on those permits

would have been based upon whether or not the environmental

risks could or could not have been mitigated. My question to you,

then, is that if in fact this mine poses all the risks that cannot be

mitigated that you have identified as the reason for the President

taking this action, why in the world should the taxpayers pay anything for this?

Ms. MCGINTY. Well, I wouldn’t assume, sir, that actions couldn’t

be taken somehow to minimize some of those risks. That is the calculation that we all were faced with. The issue was there is a

chance that a mine could be sited in this area. There is a chance

that it might not. Balancing those risks, we thought that this

agreement that both ensured the protection of Yellowstone Park,

ensured the protection of the economies around Yellowstone Park

that have been built up over the last century and a quarter, and

ensured the company’s rights, was the best balance of interests

that could be achieved.

Mr. HILL. So you—if I might have one last question on this line.

So the White House is in possession, then, of documents, material,

the environmental impact statement at this stage. I believe maybe

other agencies have done assessments of their involvement in this

process and evaluation of these hazards. If I might—this is just a

yes or no question. Will you make and will you instruct all those

agencies to make that information available to this committee, any

information that is in the possession of any of the agencies that

deals with these environmental evaluations that you examined objectively, so that this committee could also do that objective analysis?
22

Ms. MCGINTY. Yes, and I would remind you, sir, that the EIS is,

and all of these assessments are fully public and have been

throughout the process.

Mr. HILL. In any agency, any other agency that has done any internal evaluations of this both—I mean, involving this particular

project?

Ms. MCGINTY. Yes, any analysis that was done to comment on

the proposal being made——

Mr. HILL. No.

Ms. MCGINTY [continuing] to assess the——

Mr. HILL. I want any subsequent analysis as well. I mean, any

analysis of this whole thing that has been done by various government agencies. Is there any reason this committee can’t have—be

in possession of that?

Ms. MCGINTY. I can’t imagine a reason. And in fact, as the

Chairman pointed out at the opening, we have already produced,

I think, a significant amount of documents from various agencies

on this matter.

Mr. HILL. And if there are others that we can identify——

Ms. MCGINTY. We would be happy to work with you on that, certainly.

Mr. HILL. Thank you. Thank you, Madam Chair.

Mrs. CUBIN. Yes, and I would ask also that you would work with

the committee staff to identify documents we have and what you

don’t. So thank you for that.

Mr. Cannon.

Mr. CANNON. Thank you, Madam Chair. If my colleague from

Montana would like to continue asking questions, I would be happy

to yield my time to him.

Mr. HILL. Thank you. Thank you very much. Going on, Katie, I

don’t mean to be—I am not picking on you here. I just want to get

this thing all fleshed out here.

Ms. MCGINTY. That is fine. That is fine.

Mr. HILL. Because I seriously do want to be part of the solution,

but I can tell you that I don’t believe that the people of Montana

have been considered in this solution at this point. And I am not

convinced yet that the people in those communities have. I am not

arguing here to try to make this project a reality. I am trying to

find a way for the people of Montana to be treated fairly in the

process. Now I know that you and I might disagree about whether

that has occurred or not, but that is what I am after here. And I

am also trying to flesh this out.

In your testimony you list conditions for a fair and equitable

deal. Let me read to you what they were. That there be a reliable

long-term protection of Yellowstone Park. And I think that is a

value that we all share. That Crown Butte receive reasonable value

for its investment with Federal assets of sufficient liquidity to meet

the company’s needs. Reasonable value, I think we may have some

disagreement about. That the company should pay for the cleanup

of contamination, past contamination. That the company get reposed on the pending litigation and that the plan recognize the

uniqueness of Yellowstone and the importance of mining to the

economy.
23

And it is that question that I want to just talk about a little bit

in that last point, and that is the uniqueness of Yellowstone and

the importance of mining to the economy. It is my understanding

that the use of the Land and Conservation Fund does have, at least

historically, provisions for the completion of some economic assessment, how is the local economy going to be impacted, that it has

of course an evaluation of the environmental risks and that there

be a determination of recreational value if that is its historical purpose.

And so do I have your assurances that if in fact—and incidentally, the budgeteers are not quite of the mind set you are that the

intention of this money that is being put into the Land and Conservation Fund was for this purpose. But presuming that you intend to use it for that purpose, which you have been clear here, are

we going to see the Administration require the completion of those

steps before this deal would be consummated?

Ms. MCGINTY. Two things. First of all, the President has the

commitment of the Congressional leadership on this matter. Second, absolutely, and the agreement itself is expressly conditioned

on the completion of the kind of analyses that you highlight. A full

assessment will be done so that pursuant to law we can make the

determination that this exchange is in the best interests of the

American people.

Mr. HILL. So if Congress made some attachment to this proposition that clarified that, at least in principle the Administration

would not have any objection to that?

Ms. MCGINTY. Well, I would be interested to discuss it with you.

Mr. HILL. OK.

Ms. MCGINTY. I would just remind——

Mr. HILL. I am just talking in general terms at this point, obviously. So are you suggesting that there is an agreement with the

leadership in the negotiations with the President that is different

from the agreement that is represented in the budget agreement

that we are about to vote on today? Because the budget agreement

is not specific with regard to this. Is there some written agreement

between the President and the leaders in Congress with regard to

specifically that that $700 million provision, part of that is to be

earmarked for this transaction?

Ms. MCGINTY. In fact, the budget resolutions now passed by the

committee, the budget committees in the House and Senate, specifically earmark $315 million for priority land exchanges. That

$315 million figure is derived from $65 million for the—in order to

protect Yellowstone and the balance, 250 million——

Mr. HILL. Is there some written communication that confirms

that between the White House and Congressional leadership?

Ms. MCGINTY. As part of the overall budget agreement, yes.

Mr. HILL. No, I mean independently. The agreement doesn’t

specify this transaction. You are saying it is your understanding

that that is what it means, but there is nothing that is specific to

this transaction in the budget resolution.

Ms. MCGINTY. This is part of the agreement that the Congressional leadership reached with the President of the United States.

Mr. HILL. Is that agreement in writing independent of the budget?
24

Ms. MCGINTY. The budget agreement is indeed in writing, yes,

sir.

Mr. HILL. I mean independent of the budget resolution.

Ms. MCGINTY. Whatever documents have been produced, the

agreements reached between the President and the Congressional

leadership has been part and parcel of all of that effort, yes, sir.

Mr. HILL. As you know, I wrote to the President. I made reference to it, that I believe the environmental impact statement

should be completed for the reasons that I have described. You just

recently indicated that you would agree that economic assessment

and some environmental assessment is required under the Land

and Conservation Fund. Will the EIS be completed or not or will

some alternative environmental assessment be completed prior to

the consummation of this deal if it is consummated?

Ms. MCGINTY. Because there is no proposal, we do not intend,

no, sir, to complete the EIS that was pending at the time the

agreement was reached in August 1996. Now, there is an EIS underway that analyzes the impacts of the withdrawal of some lands

in this area that Mr. Elers referred to from mining activity. That

is underway, but the EIS relevant to the former proposal to site a

mine is not underway pursuant to our agreement with the company. And we do not have the intention to bring that back up.

Mr. HILL. OK.

Ms. MCGINTY. Thank you.

Mr. HILL. Thank you very much. As you know, Margaret Reeb

was not included as a party to the agreement, and she is actually

the owner substantially of this property and of the mineral deposit,

is that correct? I am a little concerned that in the conversation that

has occurred here there has been some suggestion that this project

was allowed to go forward because of Crown Butte’s ability to patent mining claims under the 1872 Mining Act. It is true that Margaret Reeb’s claims are patented claims, but these are claims that

were made substantially in the past that she has acquired over

some several years. I think decades, is that correct?.

So it is not really the application of the 1872 Mining Law that

is dealing with those mineral deposits, is that correct?

Ms. MCGINTY. The original claims derived from the 1872 mining

law——

Mr. HILL. Right. I mean, there are property all over the West

that people own homes on and everything that are old patented

mining claims.

Ms. MCGINTY. Sure. Many, many people have secured interests

pursuant to the 1872 Mining Law.

Mr. HILL. Right, but this isn’t something that is current. This

isn’t a current—this is not an effort to in the current state to try

to add some patented mining claims. In fact, what we are

looking——

Ms. MCGINTY. Oh, no, there are no new proposals. No.

Mr. HILL. I just wanted to clarify that just, you know, for the

record.

Can you give us some suggestion of the timing of the announcement of this?

I am sorry, Madam Chairman. I will——

Mrs. CUBIN. We will do a second round, Rick.
25

I asked the question earlier and I think you answered it, but I

didn’t get the answer well enough to write it down here. Do you

plan in the future, Katie, to buy out those oil and gas rights that

are adjacent to the Everglades? Is that part of the priority list with

the extra $385 million?

Ms. MCGINTY. We have no proposal currently in mind to that

end, no.

Mrs. CUBIN. And what about the oil and gas, what about the interest in the Escalante Grand Staircase? Is that to be—I am just

trying to get an idea of what—$385 million is a whole bunch of

money and I am just trying to get an idea of what sort of things

that extra money is for besides the Headwaters and the Crown

Butte.

Ms. MCGINTY. Yes. We have specifically in mind only the Yellowstone agreement and the Headwaters agreement. The balance of

the $385 million would be subject to discussions between the various committees and the agencies to identify priorities that would

be of mutual agreement.

Mrs. CUBIN. But as of this time there has been no discussion at

all about what that money will be spent for?

Mrs. MCGINTY. No, ma’am.

Mrs. CUBIN. Well, then I have to congratulate you on the job you

did all the more, because you beat the guys, I will tell you. Let us

go to—it is true. I am impressed.

Let us go back to the World Heritage Committee of the United

Nations that came into Yellowstone Park, if you can answer this

question. Do you know if a cooperating agency has ever before

hosted an international committee to come here and make judgment about a site outside the normal process like they did this

time? Has that ever happened before?

Ms. MCGINTY. It may. I am not personally aware of an instance.

Mrs. CUBIN. Did anyone in the Administration believe that the

U.N. committee and their decision was of—I mean, I don’t know exactly how to say this. I guess the point I am going to make is for

6 years professionals from agencies from the two prime agencies

that were doing the study, cooperating agencies, for 6 years a decision was not able to be made as to whether or not the development

of the mine would jeopardize Yellowstone. And, you know, I think

we are all singing out of the same book on saving Yellowstone, but

then in 3 days the U.N. committee came in and determined that

it was going to be a threat. Now did anybody in the Administration

really think that signified anything more than political maneuvering? I mean, how much substance, how much weight did that

carry?

Ms. MCGINTY. I have to say, Chairman, I can’t speak to it in detail because I actually was unaware of it and didn’t learn about it

until after the committee had come and gone and issued its recommendation.

Mrs. CUBIN. Mike, do you know any—what is your feeling on

that? Do you think that that is a real substantive decision made

after 3 days when, as I said, for 6 years professionals couldn’t decide and thousands and hundreds of thousands of dollars had been

spent? Was that a political thing or was there any substance to it,

do you think?
26

Mr. CLARK. Well, the committee made a decision based not simply on the threat of the mine but its perception that there were

many activities occurring around the edge of the park that would

affect the long-term viability of the park. And that included not

just mining but private land development, logging, issues like that

that could affect the habitat. The commission is empowered to

carry out a treaty——

Mrs. CUBIN. Right.

Mr. CLARK [continuing] which is largely symbolic. Other sites include the pyramids of Egypt and the Galapagos Islands, the Eiffel

Tower. It is largely a symbolic situation, I think, but it does direct

attention. It has the power to say to the public there is something

wrong here or there is something that needs to be considered carefully.

Mrs. CUBIN. So, but, in my opinion, it is just sort of grand-standing. The timing and everything was—this is why I feel that Crown

Butte, you know, maybe wasn’t treated quite fairly, because of this

kind of grand-standing and any amount of money and any amount

of resources that the government might have, since we paid for

those people to come here, I think, was being used against Crown

Butte. And I don’t exactly think that is fair. While, you know, I

don’t necessarily disagree with the agreement that was made, I

wouldn’t like those things to continue on. We have to open up clear

open and honest channels for communication and I don’t think that

this demonstrated that very well.

Mr. Hill.

Mr. HILL. Thank you, Madam Chair. Mike, your interest in this

and your concern with regard to this proposition, obviously there

is the threat to the value of the park, but also contamination at the

site and existing contamination of water, surface water and

groundwater, and also potential risks to the Clark Fork from the

mine waste site. Is that a fair characterization of——

Mr. CLARK. Those are certainly some of our concerns, sir.

Mr. HILL. And would you identify this site as a site involving

some serious environmental problems, existing problems?

Mr. CLARK. The historic mining pollution which exists there is

significant for the area around the mine and has been for many

years.

Mr. HILL. And part of the reason that you were part of this

transaction and your insistence was that part of Crown Butte’s responsibility here would be to clean up that site.

Mr. CLARK. That is correct, sir.

Mr. HILL. Mr. Elers, as you went through the process of trying

to obtain—complete the EIS for the purpose of moving toward permitting, were there suggestions made to you that this could be listed as a Super Fund site or that EPA could be brought in to magnify your liabilities as some sort of a leverage to try to bring you

to the table?

Mr. ELERS. Congressman, I am not sure if that occurred during

the permitting process or if it were brought up during the early

stages of trying to hammer out an agreement as ultimately occurred, but certainly there was a fear that Super Fund designation

could be applied to the site with or without our mine ever being

developed.
27

Mr. HILL. And, I mean, I get a sense sort of by hook or by crook

they were going to stop this mine. And eventually that—you became—you realized that, that that is what brought you to the

table.

Mr. ELERS. Well, I don’t think it would be argued by anyone that

the Administration was very concerned about there being a mine

developed and they were open and clear in their discussing with us

their opposition to it.

Mr. HILL. And if this was listed as a Super Fund site, the liabilities could have been immense, is that correct?

Mr. ELERS. Super Funds are not minor affairs, that is correct,

sir.

Mr. HILL. Katie, I would ask you, do you know of a single instance where the Land and Water Conservation Fund has been

used for the purchase of a toxic waste site?

Ms. MCGINTY. Well, sir, this site will not be a toxic waste site.

Mr. HILL. No, I am asking you the question. Do you know of an

instance where the Land and Water Conservation Fund was used

for the purpose of purchasing a toxic waste site?

Ms. MCGINTY. I am not an expert on the usages.

Mr. HILL. You are not aware——

Ms. MCGINTY. I am not personally——

Mr. HILL. The answer is that you are not aware of any?

Ms. MCGINTY [continuing] aware, not off the top of my head, no.

Mr. HILL. I guess, you know, maybe there is something unique

about government. In business you use money to buy assets, not

liabilities. And one of the concerns that I have, and I have expressed it repeatedly here, is the Federal Government buying a liability, not an asset. I mean if in fact this site and the development

of this site poses all the risks and hazard that you have described,

then it seems to me that the taxpayers should have no liability

whatsoever.

Katie, I——

Ms. MCGINTY. Well, sir, most of those—excuse me. Most of those

risks and hazards were potential and would have been eventuated

if the mine were sited.

Mr. HILL. But some of them would have been managed, as Mr.

Clark pointed out.

Ms. MCGINTY. Sure.

Mr. HILL. The development of the site was also going to manage

some of those risks. IN fact, one of the reasons that the provisions

of the agreement are the way they are is because mining wasn’t

going to take place and so some alternative method of mitigating

the current existing hazards had to be dealt with. But, Katie——

Ms. MCGINTY. That is why——

Mr. HILL [continuing] let me ask you a question then. There is

an article—I guess this is in Time magazine May 12, dealing with

Margaret Reeb, who is the owner of the property. And incidentally,

she is not a party to this agreement, is she? Was Margaret Reeb

a party to the agreement between the President, Greater Yellowstone Coalition and Crown Butte?

Ms. MCGINTY. No, she is not a party to the agreement.

Mr. HILL. But she does own—substantially, she owns the mineral

interest here, is that correct?
28

Ms. MCGINTY. I believe she has both land and mineral interests

in the area, yes.

Mr. HILL. And she has expressed, I know, to me and to my staff,

concern and opposition to this agreement going forward. Have you

ever had any conversations with her?

Ms. MCGINTY. I have not spoken with her personally, no, sir.

Mr. HILL. Mike, have you ever had a conversation with her?

Mr. CLARK. I have tried to, sir. Two days after the announcement, she approached two of my staff in the parking lot in Livingston and asked why we had not talked to her prior to the announcement. I called her up the next day and asked for a luncheon

and she agreed to that. On the day of the luncheon she called and

left word that on advice of her attorneys she could not talk to me

because she was carrying on confidential negotiations with Crown

Butte.

Mr. HILL. You have never suggested to her that she should get

on board?

Mr. CLARK. She has thus far been unwilling to meet with me, sir.

Mr. HILL. But, I mean, you have never communicated to her that

kind of an expression that states basically you should get on board?

Mr. CLARK. I have tried to meet with her, but she has on advice

of her attorneys been unwilling to do so.

Mr. HILL. OK, Katie, I would just ask—there is a quote in here.

I will first ask if it is accurate. It says that Katie McGinty, the

Chairman—Mrs. Reeb is saying that she doesn’t want to be part

of this agreement and she is concerned about it. In fact, she says

she went into shock when she read about it. But let me quote from

this. It says it may be that all she will end up with title to her

property and no opportunity to mine. Katie McGinty, the Chairwoman of the White House Council on Environmental Quality says

ominously there are other ways for us to arrange this agreement.

What did you mean by there are other ways? Are you suggesting

that you will just leave her out of the transaction, that she will be

left without any value left in her asset?

Ms. MCGINTY. Not at all. And in fact, this agreement is expressly

conditioned at our insistence as well as the insistence of the parties

to the agreement that Ms. Reeb’s interest will be respected. It is

expressly a part of this agreement. And the agreement is conditioned on that principle.

Mr. HILL. I would like to ask some more questions later about

that, if I could, Madam Chairman.

Mrs. CUBIN. I just have one last question for Mr. Clark. Our Subcommittee oversees most of the actions of the USGS, as you know.

And one of their strong suits now, we are told, are the scientists

that they have and their ability to predict acid mine drainage potential and to suggest remediation strategies. I wonder why doesn’t

the GYC trust the USGS to make judgment about the reclamation

potential for Henderson Mountain in the context of permitting the

New World Mine?

Mr. CLARK. Well, we would welcome any agency that has the capacity to take a look at that situation. And we were glad to see

USGS and other scientists looking at that situation. In addition, we

hired our own consultants to look at it to give us an independent

analysis of what might occur there. And when we looked at the
29

mine, we looked at all those factors. We looked at all the information we could obtain, but we also used our own consultants. And

incidentally, we looked at reclamation activities there in terms of

the actual cost and the methods of doing it. Our estimates by our

consultants were very much similar to that of the company’s as we

entered into the final round of negotiations. So we were in agreement with the company on how the cleanup could occur and roughly how much it would cost.

Mrs. CUBIN. The reason I asked the question is because GYC

didn’t like the results of the USGS study on the thermal—the geothermal features of, you know, pumping the water out of there.

And so I just wondered if you were just going to choose in the future to not regard USGS’s opinions and their science opinions and

just get your own or whatever.

Mr. CLARK. Well, in regard to the geothermal situation, which is

a proposal by a landowner to drill a deep well and use the hot

water near Mammoth, there were a number of conflicting opinions

about that. We used a number of senior scientists who had spent

their whole careers looking at the geothermal fields around Mammoth, and their conclusion was that there was some risk if that

well was developed commercially it might well affect the Mammoth

Hot Springs area. I think in all these situations there is a range

of opinion amongst the scientists, and we just believe that you

should always take the most conservative perspective and minimize

the risk to the park.

Mrs. CUBIN. So you are not saying if you give us the answer we

want, then that is the one we will take and if you don’t give us the

answer we want, we won’t take it, we will keep looking until we

find someone that will give us what we want? That is what that

sounds like to me.

We do have a vote. Rick, if you have just a question or more, I

would like to adjourn the meeting before we go to vote, and then

we will submit any questions in writing that we weren’t able to ask

today if that is OK.

Mr. HILL. If I might, Madam Chairman, three short questions.

Mike, I would just ask you is your organization opposed to mining

on public land?

Mr. CLARK. Mining on?

Mr. HILL. Public lands.

Mr. CLARK. No, sir, we are not.

Mr. HILL. So it is not the goal of your organization to prevent

mining in Montana?

Mr. CLARK. This is the only mine that we have ever opposed.

Mr. HILL. What is the appropriate buffer for non-mining activities surrounding Yellowstone Park?

Mr. CLARK. I am sorry, sir, what?

Mr. HILL. What is the appropriate buffer for non-mining activities surrounding Yellowstone Park.

Mr. CLARK. We have never said there should be a buffer around

the park. We have said that we should look at each proposal that

potentially could have an impact on our region and assess that proposal itself.
30

Mr. HILL. OK, so you don’t have any specific, I mean, two miles,

three miles, five miles, ten miles? You just—you look at it site by

site?

Mr. CLARK. The only buffer that I am aware of that we have ever

supported is a band of land around the geothermal fields.

Mr. HILL. OK.

Mr. CLARK. But that is dealing with a specific piece of legislation.

Mr. HILL. I would ask you, Katie, Mrs. Reeb seems pretty insistent that she is not going to be party to this deal. What happens

if she doesn’t come to terms with the agreement? Does that vacate

the whole agreement, in your view?

Ms. MCGINTY. Well, sir, as part of the agreement the Crown

Butte Company is in regular contact with her. I know——

Mr. HILL. But if they can’t deliver on that provision of the agreement, you said it is a requirement of the agreement, does that vacate the whole deal?

Ms. MCGINTY. Well, I wouldn’t want to speculate on it. I have

full confidence that the company will fulfill its obligations under

the agreement. The company has worked in good faith and I have

confidence that they will produce this part of their obligation as

well.

Mr. HILL. So can I be assured at this point there are no discussions going on in any capacity that indicate that there might—in

the event that she doesn’t reach agreement, that there will be some

alternative? Those discussions are not going on right now?

Ms. MCGINTY. Well, we will continue to have as a top priority

the protection of Yellowstone. Right now we are——

Mr. HILL. No, but I am just asking about the contingency in the

event that she doesn’t agree. Is there discussions going on right

now with regard to a contingency if that would occur?

Ms. MCGINTY. There are not.

Mr. HILL. OK, thank you very much, Madam Chairman.

Mrs. CUBIN. I thank the witnesses for their valuable testimony.

I thank you for coming up here today. As I said earlier, the members of the Subcommittee will present additional questions in writing and the hearing record will be kept open for that purpose.

If there is no further business, then this meeting is adjourned.

Ms. MCGINTY. Thank you, Madam Chair, Mr. Hill.

Mr. ELERS. Thank you.

Mrs. CUBIN. Thank you.

[Whereupon, at 3:05 p.m., the Subcommittee was adjourned; and

the following was submitted for the record:]
31

STATEMENT OF KATHLEEN A. MCGINTY, CHAIR, COUNCIL ON ENVIRONMENTAL

QUALITY, EXECUTIVE OFFICE OF THE PRESIDENT

Madame Chair, members of the Subcommittee, thank you for the opportunity to

testify before you regarding the role of the Council on Environmental Quality (CEQ)

in the Administration’s proposal for the protection of Yellowstone National Park.

The Yellowstone agreement was borne of and reflects this Administration’s commitment to preserve and protect for future generations of Americans the world’s first

national park and the crown jewel of our national park system. And, the agreement

is reflective of our commitment, wherever possible, to work with industry and other

interest groups in partnership to that end.

As mandated by the National Environmental Policy Act (NEPA), my role is to advise the President on environmental policy matters and coordinate activities of the

Federal agencies and departments with regard to environmental matters that cross

agency jurisdictional lines. Accordingly, I chair the Executive Committee and oversee the interagency team assembled to ensure implementation of the Yellowstone

National Park agreement.

YELLOWSTONE NATIONAL PARK

In 1989 Crown Butte Mines, Inc., a subsidiary of a Canadian mining company,

proposed a gold, copper and silver mining complex located partially on private property and partially on public lands managed by the Forest Service, less than three

miles from the northeast border of Yellowstone National Park. The Forest Service

and the State of Montana started preparing an environmental impact statement on

the proposal to assess the environmental effects of Crown Butte’s proposed plan of

operations for the mine or another mine alternative. Crown Butte submitted a plan

that called for 15 years of operation, with six major facilities, plus a 70-100 acre

tailings impoundment behind a 90 foot tall dam. The tailings impoundment would

have been expected to contain the highly acidic waste rock and metals in perpetuity.

The Forest Service also faced a decision regarding whether to issue Pacific Power

Company a Special Use permit to construct and operate a 69 KV power line on National Forest land.

The rights to the minerals at New World Mine had been obtained under the 1872

Mining Act. Under Federal law, the U.S. Government was therefore obligated to

process the company’s proposal to mine these minerals using Federal lands for a

large tailings impoundment and other ancillary facilities. As a necessary prerequisite to this decision process, the company was required to fund data gathering

and analysis for the Environmental Impact Statement (EIS) under the provisions

of NEPA.

The EIS process began in April 1993. The EIS was originally expected to be

issued as a draft in April 1994. However, because the preliminary findings showed

that there could be major adverse impacts on the Clark’s Fork of the Yellowstone

River, a federally designated Wild and Scenic River, on grizzly bear habitat, and on

Yellowstone National Park itself, work on the draft was extended. Interagency review of preliminary drafts of the EIS also showed a need for critical additional studies, including groundwater studies better to characterize the conditions at the proposed New World Mine site. These studies were needed to inform the Federal and

state permitting agencies’ analysis of the potential impacts of permitting the mine,

and, if a mine were permitted, whether specific additional operating conditions were

warranted. In addition, certain Federal agencies determined that additional information was needed for a risk assessment relating to the proposed tailings impoundment.

The preliminary draft EIS was made widely available and reviewed, not only in

Montana, but throughout the U.S. Many analysts, including mining engineers, were

critical of the submerged tailings system (see the Engineering News–Record editorial

of March 14, 1994). Comments were raised concerning, among other things, seismological risks in an area that had experienced more than 4000 earthquakes within

a 180 mile radius; the need for more analysis concerning containment of the 5.5 million tons of highly acidic waste rock that would be generated by the mine; the risks

associated with the tailings impoundment; and importantly, the lack of information

necessary to assess the potential impact of the proposed mine on groundwater. In

fact, in March 1995, Wyoming Governor Geringer wrote Montana Governor Racicot

to say that the alternative preferred by the company could have Wyoming water resources and suggested that the tailings impoundment should be the subject of a separate review. By late 1995, it was clear to everyone that there were significant

issues involved with the development of the proposed New World Mine.

Because of the highly acidic nature of the ore body at the New World mine, for

example, the Governor of Wyoming suggested that $75-$100 million was the appro-
32

priate bonding level. In addition, since the plan of operation called for ‘‘dewatering’’

a portion of Henderson Mountain, the Yellowstone Water Compact, a negotiated

agreement between the State of Montana and the Department of the Interior regarding rights to water flowing into and out of Yellowstone National Park may have

required Crown Butte to replace the diverted water. Moreover, Crown Butte was

embroiled in a citizen’s suit brought under the Clean Water Act by a coalition of

14 environmental groups in a Federal District Court in Montana. In October 1995,

the company was found liable by the Federal District Court, and it was therefore

abundantly clear that there would be years of contentious litigation over the mine,

regardless of whether the Federal Government approved or denied the company’s

application.

Faced with this potential for costly and resource intensive litigation, the environmental groups and the company entered into confidential discussions in an effort

to identify creative options to address their differences. In February 1996, Crown

Butte, Hemlo Gold, and the Greater Yellowstone Coalition approached CEQ together

to explore whether the Administration would be willing to consider a novel approach

to the problem: exchanging Federal assets to Crown Butte in exchange for the company’s agreement to cease and desist further pursuit of the mine. My staff formed

a small interagency working group to discuss the implications and possible elements

of such an approach. They concluded that the proposal could provide a solution to

the New World Mine problem that was fair and equitable for all concerned if the

following conditions were met: (1) there be reliable, long-term protection for Yellowstone Park; (2) Crown Butte receive reasonable value for its investment with Federal assets with sufficient liquidity to meet the company’s needs; (3) the company

should pay for the cleanup of contamination at the site, with appropriate oversight

and participation by Federal and State agencies and public interest groups; (4) the

company get repose on the pending litigation and potential Federal environmental

claims; and (5) the plan recognize the uniqueness of Yellowstone and the importance

of mining to the economy. Based on the work group’s analysis and their discussions

with the company throughout February 1996, we concluded there were enough common interests and that we should pursue more detailed discussions. Before entering

into any detailed discussions, however, Crown Butte insisted, and the parties

agreed, that the talks be strictly confidential. Confidentiality was necessary and appropriate because the discussion would involve issues regarding ongoing and potential future litigation and because premature release of information could adversely

affect the value of the company’s stock.

New World Mine is located in an area approximately 19,000 acres in size. Much

of the area involves intermixed parcels of public and private lands patented under

the 1872 Mining Law, and Federal lands subject to unpatented mining claims under

that law. Most of the private lands at issue here are held by Crown Butte or Ms.

Margaret Reeb, a Montana resident, who leased her lands to Crown Butte. Although

there are other patented and unpatented claims in this general area that are owned

by others, these claims are not critical to the development of the New World Mine

or relevant to the goals of the Agreement.

To followup on the overture of the company and the conservation organizations,

in April 1996, we appointed Mr. John Schmidt, the Associate Attorney General, and

Mr. Jim Pipkin, Counselor to the Secretary of the Interior, to open discussions with

the President of Crown Butte and the Chairman of Hemlo Gold, the Crown Butte

parent company. Over the next several months, they held regular discussions with

Mr. Ian Bayer, Chairman of Hemlo Gold and Mr. Joe Baylis, President of Crown

Butte. These discussions focused primarily on (1) the value of the mine; (2) the

cleanup and restoration of the environmental impacts associated with many years

of mining; (3) resolving the protracted lawsuit, referenced above, brought against

the company by certain environmental organizations; and (4) resolving potential

Federal enforcement actions.

On August 12, 1996, President Clinton, Crown Butte Mines and a coalition of environmental groups announced that the parties had reached an agreement to protect

Yellowstone and the surrounding area, to address the environmental impacts of historic mining in the New World Mine District, and to resolve pending or potential

litigation and enforcement. The essential details of the Agreement are as follows:

Crown Butte will forgo development of the New World Mine, the United States will

transfer to Crown Butte $65 million in Federal assets in exchange for title to all

of the lands essential to development of the mine, specifically including patented

and unpatented mining claims held by Crown Butte and fee title to lands leased

by Crown Butte from Margaret Reeb; the company will place $22.5 million in a trust

fund to remediate historic environmental contamination in the New World Mine

District; and the parties will enter into a consent decree implementing the cleanup

and restoration actions, and settling the existing litigation by the environmental
33

groups and potential environmental claims by the Federal government. Although

there are a number of conditions contained in the Agreement, the two major contingencies are (1) identification by the United States of $65 million of Federal assets

that can be exchanged to Crown Butte, and (2) Crown Butte’s acquisition of the

property it leases from Margaret Reeb. The agreement also stipulates that the

United States will also work with the State of Montana, the environmental groups

and the public appropriately to address contamination in the New World Mine District; and will perform a title search. In addition, the United States will subject this

exchange to a valuation to verify the value of the property offered by Crown Butte.

The agreement expressly stipulates that ‘‘consummation of the transfer of property

is subject to confirmation by a valuation that the District property has a fair market

value of at least $65 million.’’

As you know, the Administration proposed a diversion of Federal royalties from

currently producing coal, oil and gas operations in Montana to fulfill the terms of

the agreement. When we made this proposal to Crown Butte on March 11, 1997,

we underscored that this type of asset required Congressional approval. We proposed this approach after a rigorous analysis of the alternatives. In the course of

this effort we reviewed surplus military installations. General Services Administration surplus property, National Forest timber lands, leased and unleased coal lands,

and other Federal lands. We also actively participated in and supported Governor

Racicot’s ‘‘Montana Initiative’’ (discussed further below) to explore a mix of timber

and coal lands entirely in Montana. For various reasons, each of these properties

ultimately proved unsuitable for the exchange. Some properties were contaminated,

for example. Others had previously been committed to other uses, while still others

were strenuously opposed by various interest groups. After an exhaustive search

and rigorous effort, we proposed to divert mineral royalties from existing mines in

Montana. While diversion of royalties generally was favorably received, the required

budget offset we chose, the Conservation Reserve Program, proved to be controversial. After consultation with many Members of Congress, we reexamined the possibility of using the Land and Water Conservation Fund and have concluded this is

an appropriate method.

Current Status

Complete details of the agreement to protect Yellowstone were made fully and

publicly available on August 12, 1996. In September 1996, Mr. Schmidt and Mr.

Pipkin briefed Congressional staff on the terms ofthe agreement. In October 1996,

I traveled to Montana with Mr. Schmidt and other Administration officials personally to brief the Governors of Montana and Wyoming, as well as Senator Conrad

Burns. Since that time we have apprised the Governors, Members of Congress and

congressional staff, of all relevant developments. On March 13, we provided the Interior Subcommittee of the House Appropriations Committee answers to questions

they posed regarding the agreement.

Immediately after the August 12, 1996 agreement was reached, a Federal interagency group worked to identify Federal assets to use in an exchange with Crown

Butte. In late November, Governor Racicot asked the Federal Government to consider a ‘‘Montana Initiative’’ (noted above) to satisfy the terms of the agreement. Administration officials met with the Governor and encouraged the development of

such an initiative. Moreover, noting the timeframes outlined in the Agreement, the

Administration dedicated considerable resources to assist the Governor in the development of the initiative. Specifically, the Administration offered technical help

through the Bureau of Land Management and the Forest Service to support the initiative. When it was clear that the Montana Initiative would not reach fruition in

the necessary timeframe, the Administration agreed with Crown Butte’s proposal

that the United States extend the relevant deadline for 30 days.

Despite these efforts, however, as details of the ‘‘Montana initiative’’ became public, every potential property discussed proved to be highly controversial with various

Montana constituencies, including ranchers, Indian Tribes, small mill owners, conservationists, and some local governments. Because of the deadlines under the

Agreement, it became apparent to Crown Butte and to the government that properties identified through the Montana Initiative could not properly be evaluated and

delivered to Crown Butte within the time frames called for in the Agreement. Therefore, in order to meet our March 12 obligation to identify exchange property to

Crown Butte, the Administration determined the most appropriate asset to be the

Federal share of royalties from federally owned mineral estates—coal, oil and gas—

that are currently under lease and production in Montana. In proposing this asset

to Crown Butte, the United States underscored that Congressional approval would

be necessary if the agreement were to be concluded on these terms.
34

As you know, Madame Chair, the Administration and congressional leaders have

reached an agreement on a detailed budget agreement that establishes basic parameters for revenues, savings, and spending levels (both mandatory and discretionary)

and will obviate our proposal to divert coal, oil and gas royalties. When the details

of the agreement are final, there should be sufficient funds to acquire these high

priority national resources without having to divert Federal coal, oil, and gas royalties or requiring any other offset. Within the discretionary levels, the agreement reserves $700 million in fiscal year 1998 budget authority for priority Federal land

acquisitions and exchanges. The Administration’s top priorities are New World mine

and Headwaters Forest proposals. Together with the Congressional leadership, we

plan to work with the Budget and Appropriations Committees to achieve these

goals.

Several more steps need to be completed before this agreement can be implemented. First, Crown Butte must demonstrate that it can fulfill its obligation to acquire the property it leases from Ms. Reeb. Second, a valuation of the property must

be completed. And, finally, the budget resolution must be passed and then acted

upon by the Appropriations Committee. I am confident this is a fair way to resolve

a potential long, bitter and expensive battle to save Yellowstone, and we in the Administration are very appreciative of the support of the Congressional leadership to

see this effort through.

Madame Chair, saving Yellowstone requires that many people come together to

find common ground on behalf of this truly national treasure. You have spoken eloquently about Yellowstone and indeed, the need to find bipartisan solutions. I hope

we can work closely with you and other Members of Congress in protecting Yellowstone, and address the many critical issues related to this challenge. Thank you for

the opportunity to speak to this important initiative. I would be pleased to answer

any questions you may have.

STATEMENT OF KARL E. ELERS, CHAIRMAN OF THE BOARD, CROWN BUTTE MINES,

INC.

Madam Chairwoman and the Members of the Subcommittee, my name is Karl

Elers and I am Chairman of the Board of Directors of Crown Butte Mines, Inc., a

Montana corporation. I assumed that position in March of this year. This is my first

appearance before a congressional committee and I appreciate the invitation to be

here.

The letter of invitation to testify indicated the committees’ interest in the agreement reached between Crown Butte, the Administration and certain special interest

groups in August 1996. Crown Butte found the decision to enter into the August

12, 1996 Exchange Agreement a difficult one. By mid-year 1996, Crown Butte had

already been in the permitting process for almost 6 years, promised dates for the

release of the Draft Environmental Impact Statement had consistently not been met

and the whole process had become fraught with delays and uncertainty. The Exchange Agreement provided a practical resolution to a unique set of circumstances

and Crown Butte’s management decided that the Agreement was in the best interest of the shareholders of the Company.

A brief chronology of the events leading up to our decision to execute the agreement will shed some light on why Crown Butte decided on this course of action. I

hope it will assist the Committee in a better understanding of the current regulatory processes and the challenges they pose for those of us trying to operate in

a responsible manner.

The area in dispute, known as the New World District, is a historic mining district dating back to 1869. A number of small mines and a copper smelter operated

in this area intermittently until 1951. Sporadic exploration and development continued from l955 until 1987 when the property was acquired and the issues now under

review began.

I think it is also worth noting at this point, that in 1978 the Congress specifically

considered and excluded the New World District from the Absaroka–Beartooth Wilderness due to past mining activity and mineral potential. Proposing a state-of-theart, underground gold mine with a strong reclamation plan to remediate historic

mining disturbances made sense. Yet, Crown Butte became the focus of a national

and international debate.

To fully appreciate what has transpired during the process I would like to divide

my remarks into two areas. First, the Permit & EIS Process which will highlight

the events directly related to the permitting process, and second, Additional Concerns which will briefly describe a variety of other activities specifically designed
35

to thwart the project. From this discussion, I hope you will be able to understand

the circumstances that lead to Crown Butte’s willingness to execute a settlement

agreement in August 1996.

Permit & EIS Process

The permitting process for the New World Property began formally over 6 years

ago in November 1990 when Crown Butte submitted an eleven volume document

as its Operating Permit Application. This permitting process and related environmental studies continued to be Crown Butte’s main project activities up to August

1996. The permitting process for the New World Property proved to be complex and

time consuming and it was met with unusually high opposition.

Mining activities on Federal lands within the state of Montana fall under the jurisdiction of both Federal and state agencies. The Gallatin and Shoshone National

Forests were designated as the lead for the Federal agencies and the Montana Department of Environmental Quality was designated as the lead state agency for review of the application and development of an EIS for the project.

A number of other state and Federal agencies were designated as cooperating

agencies. These include the U.S. Environmental Protection Agency (‘‘EPA’’), the U.S.

Army Corps of Engineers (‘‘the Corps’’), the National Park Service, the U.S. Bureau

of Land Management (BLM), the U.S Bureau of Reclamation, the Montana Department of Health and Environmental Sciences and the Wyoming Department of Environmental Quality. In all, more than 25 separate Federal, state and county permits

would be required prior to approval of the project. The major permits cover site construction, power line construction, mine operation, reclamation, modification of wetlands, water discharge, stormwater run-off and erosion control, air quality, and occupational health and mine safety.

As part of the Operating Permit Application, baseline studies was completed on

a number of resource areas including aquatics, hydrology, wetlands, old growth, and

wildlife. Geotechnical drilling and analyses were completed on both the proposed

and alternative tailings disposal areas. Initial base-line and geotechnical work was

completed for each alternative to address both regulatory and public concerns regarding the location of the tailings impoundment. Proposed plant and road locations

were similarly evaluated.

During the very early stages of the permitting process opposition arose over the

potential use of cyanide in Crown Butte’s processing at the site. In 1992, Crown

Butte’s metallurgical testwork demonstrated that gold, copper and silver could be

recovered without the use of cyanide. The revised process would use only gravity

separation and froth flotation with gold recoveries indicated to be approximately 88

percent to 92 percent. As a result, Crown Butte withdrew two low grade surface

mineable deposits (Como and McLaren) and the Fisher Mountain deposit from the

permit area.

The Operating Permit Application was resubmitted to the Lead Agancies in November 1992 following extensive changes resulting from the decision to not use cyanide and to amend the Application to exclude the three deposits and to be responsive to agency review and comments upon the initial Application. The Lead Agencies

completed, and Crown Butte responded to, a total of six reviews of the Operating

Permit Application before the revised Operating Permit Application was declared

complete on April 2, 1993.

A determination of completeness of the Operating Permit Application allowed the

EIS process to begin. The EIS is required by state and Federal law and involves

an assessment of the project’s proposed operating plan, a review of alternatives to

this plan, potential impacts of the plan, and methods to mitigate significant impacts.

Responsibility for conducting public scoping meetings, writing the EIS document

and issuing a decision rested with the Lead Agencies. They retained an independent

third party consultant, paid for by Crown Butte, to assist in the process.

During 1993, a scoping document which determined what was going to be evaluated in the EIS process was prepared, and public comment was solicited. A number

of potential environmental issues were identified for further study. The Lead Agencies then initiated the process of determining the impact of Crown Butte’s proposed

plan, identifying possible alternatives and comparing these alternatives. During the

process, the Lead Agencies would select a preferred alternative and produce a draft

of the EIS. The Draft EIS would include a biological assessment which evaluates

potential impacts to threatened or endangered species.

Crown Butte was initially informed that the Draft EIS would be available in late

1994. This date was not met. In 1994 Crown Butte was advised by the Lead Agencies that a draft of the EIS would be issued for public comment by the end of the

second quarter of 1995. This date was not met and Crown Butte was subsequently
36

advised by the State of Montana that the Draft EIS would be released in the Fall

of 1995. This date was also not met.

During the period from January to August 1996, Crown Butte continued its efforts in the permitting process. A study on endangered species was completed and

additional studies of wetlands and water quality issues were conducted. All requested data was provided to the Lead Agencies and internal drafts of sections of

the Draft EIS were circulated by the Lead Agencies to the cooperating agencies,

Crown Butte and the public for review and comment. None of the drafts made available to Crown Butte or the public identified the Lead Agencies’ preferred alternative. In March 1996, Crown Butte was advised by the Lead Agencies that the

Draft EIS would be released for public comment by late spring or early summer of

1996. The Draft EIS had not been released by August 12, 1996 when Crown Butte

executed the Exchange Agreement. The EIS process has been suspended pursuant

to the terms of the Exchange Agreement.

Additional Concerns

As I mentioned earlier, the New World District is a historic area. Crown Butte’s

activities at the site have included reclamation of historic mining activities and the

Company’s recent exploration activities. In December 1992 Crown Butte received an

Excellence Award for Outstanding Commitment to Environmental Protection from

the United States Forest Service. This award recognized the Company’s innovative

and successful efforts to mitigate adverse environmental impacts. In 1994, following

a complaint by special interest groups, the Corps alleged that some of the Company’s reclamation activities, conducted over the preceding 3 years, had been in violation of Section 404 of the U.S. Clean Water Act. Crown Butte responded that it

did not believe these allegations were accurate. In September 1995, the Corps issued

Crown Butte a Section 404 permit authorizing future reclamation activities.

Under the Comprehensive Environmental Response and Liability Act

(‘‘CERCLA’’), the EPA initiated an investigation of continuing environmental impacts from previous activities in the Henderson Mountain vicinity. The investigation

covers 6,720 acres of land, of which the New World Property is a part. Under

CERCLA, certain sites are ‘‘listed’’ on the National Priorities List for cleanup under

Superfund legislation. To determine whether a particular site is listed, EPA conducts a series of investigations and then using the results ranks the potential hazard of the property. The ranking determines the need for future action. A Preliminary Assessment was submitted to the EPA in August, 1994, a Field Sampling Plan

for an Expanded Site Inspection was completed in July, 1995, and an Analytical Results Report was presented to the EPA in April, 1996. While the Henderson Mountain vicinity has been through preliminary investigations, it has not been completely

evaluated or ranked based on potential hazard and is not currently listed on the

National Priorities List for Superfund cleanup.

On January 13, 1995, two special interest groups and an individual filed a complaint against the Company with the U.S. Department of the Interior in connection

with Crown Butte’s Mineral Patent Application. The complaint requests that the

Secretary of the Interior take immediate jurisdiction over the Patent Application,

that the Secretary take any other action necessary, including intervention in the

proceeding, to protect the public interest by preventing the issuance of the patent,

that the Secretary deny the Patent Application, or in the alternative, that the Secretary stay any action on the Patent Application until completion of the EIS then

being prepared by the Lead Agencies. This complaint effectively asks that patents

not be issued. Crown Butte has moved to have the complaint dismissed for numerous reasons. The complainants have claimed that the ‘‘comparative value test’’

should be applied in determining whether Crown Butte’s claims are supported by

a discovery, although imposition of the so-called ‘‘comparative value test’’ would be

contrary to the long-standing practice of the Department of the Interior. There have

been no actions or developments related to this matter since 1995 and the Company

can not at this time predict the ultimate resolution of this matter.

In February 1995, a number of special interest groups requested that the World

Heritage Committee (the ‘‘Committee’’), formed pursuant to the United Nations

1972 Convention Concerning the Protection of World Cultural and Natural Heritage, investigate whether Yellowstone National Park qualified for inclusion on the

‘‘List of World Heritage in Danger.’’ Such a determination would require the U.S.

Government, a signatory to the convention, to take unspecified steps to protect Yellowstone National Park. This request was followed in June 1995 by a letter from

a senior official in the office of the United States Department of the Interior stating

that Yellowstone National Park was in danger. The Committee visited Yellowstone

National Park in September 1995. The National Park Service, a co-operating agency

in the New World EIS, hosted the event. The Committee enumerated both
37

‘‘ascertained threats’’ and ‘‘potential threats’’ to the Park. The ascertained threats

included endemic Yellowstone cut-throat trout, sewage leakage and waste contamination, road construction and visitor pressures year-round. The potential threats included impacts on quantity and quality of surface and ground water and other past

and proposed mine-related activities, and proposed control measures to eradicate

brucellosis in the bison herds. In December 1995, the Committee decided that Yellowstone National Park should be placed on the List of World Heritage in Danger

and asked for continuing reports on the progress of the New World EIS and mitigating actions being taken to ensure in due course the removal of the site from this

list.

By June 1995, Crown Butte had exhausted its cash resources and has been forced

to rely on loans totaling approximately five million dollars to date to sustain day

to day operations. Crown Butte intended to go to the equity markets upon release

of the DEIS to raise the funds necessary to begin development of the site. The protracted delays placed Crown Butte in an unexpected cash bind.

In August 1995, the President interrupted a holiday in Wyoming for an aerial tour

of the mine site. The tour was followed on September 1, 1995, by the Secretary of

the United States Department of the Interior publishing a Notice of Proposed Withdrawal in the Federal Register with respect to an area of approximately 19,100

acres including the New World Property in Park County, Montana. The Notice resulted in a two-year moratorium on the location of new mining claims or millsite

claims in such area. In September 1996, a notice of an amended withdrawal application was published. The amendment added an additional 2,960 acres of land and

included a withdrawal of any private mineral interests that might be acquired by

the United States pursuant to the Exchange Agreement. Pursuant to the requirements of the National Environmental Policy Act (‘‘NEPA’’), the Department of the

Interior has prepared a Draft EIS to evaluate the potential impacts associated with

the withdrawal. The Draft EIS was circulated for public comment and comments

were accepted through April 28, 1997. After reviewing the comments, the Department of the Interior will publish a Final EIS and the Secretary of the Interior is

expected to make a final decision on the proposed withdrawal no later than August

31, 1997. The Company has located millsites for necessary facilities as proposed in

the Company’s Application for a Hard Rock Operating Permit and Proposed Plan

of Operations, but has not located millsites for all alternative facility locations that

were being analyzed in the NEPA process. During the period of any moratorium or

withdrawal, the Company could not locate additional millsites on withdrawn

ground, whether in new areas or to replace millsites in the event they were found

to be invalid.

In September 1993, several special interest groups filed a complaint against

Crown Butte and others in U.S. District Court, District of Montana, alleging that

certain discharges from the New World Property were in violation of the U.S. Clean

Water Act (CWA). On October 13, 1995, the District Court issued a Memorandum

and Order ruling that Crown Butte and one other defendant were in violation of

the CWA for not yet having obtained a CWA National Pollutant Discharge Elimination System permit for water coming from historic workings. The Company had

applied for a CWA stormwater permit in October 1992. Crown Butte requested that

the District Court allow an immediate appeal of the decision be taken to the Ninth

Circuit Court of Appeals, which request was granted in January 1996, and the Company filed a petition with the Court of Appeals. On May, 1996, the Court of Appeals

denied the Company’s petition for permission to appeal, and the District Court subsequently set the matter for trial on the issues relating to civil penalties.

A trial was scheduled for November 1996, but the District Court has stayed all

proceedings in this case in light of the Exchange Agreement.

Conclusion

Madam Chairwoman and Members of the Subcommittee, I’m sure you can readily

see that what began as an attempt to build a modern-day state-of-the-art mine, in

an area where historic mining has occurred for over a century, and which was specifically excluded from wilderness designation by the Congress of the United States,

quickly became a battle of national and international involvement.

By mid-year 1996, Crown Butte had already been in the permitting process for

almost 6 years, promised dates for the release of the Draft Environmental Impact

Statement had consistently not been met and the whole process had become fraught

with delays and uncertainty. Even if Crown Butte had received the Draft EIS, it

would still have been a long way from the issuance of the requisite Final EIS. Uncertainties with respect to Crown Butte’s ability to obtain the necessary permits

would have continued and the effort to obtain such permits would probably have

taken many years. The economic realities of continuing in the face of well organized,
38

well funded opposition and international organizations necessitated tough decisions.

Costs and delays associated with permitting, litigation with significant potential liabilities and appeals had become unduly burdensome given the project economics.

Nevertheless, Crown Butte, as an environmentally responsible mine developer,

found the decision to enter into the August 12, 1996 Exchange Agreement a difficult

one. Crown Butte has always believed that its proposal to build and operate safely

and responsibly a small state-of-the-art underground gold mine at New World was

not only environmentally sound of itself, but also represented the best way to remediate the historic mining disturbances which date back more than 100 years.

In the end, the Exchange Agreement provided a practical resolution to a unique

set of circumstances. The protracted permitting delays, legal challenges facing ongoing development, and potential liabilities related to historic mining in the New

World District caused the economics of the project to deteriorate. Crown Butte’s

management decided that the Agreement was in the best interest of the shareholders because, if consummated, it would provide an end to the long permitting

process which might otherwise continue for many more years with no guarantee of

success or economic return to the shareholders and provide assets that could be liquidated relatively promptly and which would compensate the Company for the

amount it has spent to date in acquiring, exploring and attempting to permit the

property.

CURRICULUM VITAE

KARL E. ELERS

Chairman of the Board of Directors

Crown Butte Mines, Inc.

Karl E. Elers began his mining career in 1962 as a Mining Engineer at Duval

Corporation’s Carlsbad, NM, potash properties. He advanced through a series of

management positions, including Resident Manager assignments for potash and sulphur properties, and Vice President of Project Development. He worked on numerous mineral programs in the Far East, Australia and Latin America in his development work for Duval, and later, as Vice President of Production, directed the company’s copper, gold and industrial minerals operations. In 1985, he served as Senior

Vice President of Operations of Pennzoil Sulphur Company, and later that year became the initial Managing Director of Western Ag-Minerals Company, an industrial

minerals mining and marketing firm.

Elers joined Battle Mountain Gold Company in May, 1987 as Executive Vice

President, and became President in May, 1988. He was named Chairman and Chief

Executive Officer of Battle Mountain Gold in April 1990. In March, 1997 he retired

from the CEO’s office, but continues to serve as Chairman of the Board of Directors

of Battle Mountain Gold. Also in March 1997, Elers was named Chairman of the

Boards of Directors of Crown Butte Resources Ltd. and Crown Butte Mines, Inc.

He earned bachelor’s degrees in both geological engineering and mining engineering from the University of Arizona College of Mines, and completed the Program for

Management Development at Harvard’s Graduate School of Business Administration.

Elers is on the Board of Directors of the National Mining Association and the

SME Foundation of A.I.M.E and was formerly on the Board of Niugini Mining Ltd.

He has previously served on the Board of Directors of the Fertilizer Institute, the

Northwest Mining Association, was Chairman of the Western Governors’ Mining Advisory Council, and was President of the New Mexico Mining Association. He currently serves on a number of international relations and Houston civic boards, and

is a member of the American Institute of Mining, Metallurgical and Petroleum Engineers, and the Canadian Institute of Mining. He was awarded the Order of Simon

Bolivar by the President of the Republic of Bolivia for services to that nation. He

and his wife Sandy reside in Houston, Texas.

SUPPLEMENTAL SHEET

TO THE WRITTEN TESTIMONY OF KARL E. ELERS

Name: Karl E. Elers, Chairman of the Board, Crown Butte Mines, Inc.

Address: 333 Clay Street, 42nd Floor, Houston, Texas 77002-4103

Telephone No.: (713) 653-7244

Summary of Comments:
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Crown Butte, the Administration and certain special interest groups entered into

an Exchange Agreement on August 12, 1996. Mr. Elers testimony recounts the chronology of events that occurred leading up to the agreement.

STATEMENT OF MICHAEL S. CLARK, EXECUTIVE DIRECTOR, GREATER YELLOWSTONE

COALITION

Madam Chair and members of the Committee. Thank you for inviting me to testify today. My name is Michael Clark and I am the Executive Director of the Greater Yellowstone Coalition, a Bozeman, Montana-based organization with field offices

in Cody, Wyoming and Idaho Falls, Idaho. Fourteen years old and with a membership of over 7400 individuals, 119 corporate members and 120 organizational members, GYC’s mission is to preserve and protect the Greater Yellowstone Ecosystem

and the communities it sustains.

The Greater Yellowstone Ecosystem consists of the two national parks, Yellowstone and Grand Teton, and seven national forests, and numerous thriving gateway

communities. The area totals some 18 million acres of public and private land. It

is the only largely intact ecosystem in the Lower 48 states.

Today I also represent the Beartooth Alliance, Gallatin Wildlife Association, Montana Wildlife Federation and the Wyoming Outdoor Council. Each of these conservation groups has worked closely with us on the New World Mine situation.

Thank you for the opportunity to testify today on the New World Mine Agreement

negotiated in 1996 between the Clinton Administration, Crown Butte companies and

the conservation community. Congress now has the key role in creating and approving legislation that will resolve this issue. We welcome your leadership and look forward to working with you in completing this Agreement.

This is an agreement that lays to rest one of the most controversial and contentious public lands battles in the West in recent years. It does so by breaking new

ground in resolving conflicts through forming a consensus solution with three very

different partners that protects the interest of each party. It does so by removing

the threat of a huge mine from the mountains above Yellowstone Park. It does so

by providing a fair market value for the company’s property. And it does so by providing funds for reclamation of the historic mining lands at the site.

Eighteen months ago the idea that the mining companies and the conservation

community would come to you with a common position and a common perspective

would have been unthinkable.

We believe this agreement is a fair deal for the company, for the public and for

the ecosystem which the conservation Unity seeks to protect.

It provides a useful example of how other environmental battles might be settled.

To better understand how we came to this agreement, it may be useful to look at

the actual proposal to create the gold mine at Henderson Mountain within the New

World Mining District.

First, let me say that neither GYC nor the conservation community are in the

business of opposing mines. For GYC, this is the first one we have ever opposed.

We did so because we thought the mine threatened to create irreversible direct and

indirect impacts to Yellowstone Park. We chose to fight against these impacts just

as we have opposed the potential irreversible impacts that could have been caused

by proposals to develop geothermal acquirers near the Park’s boundaries.

The mine plans called for extracting $800 million in gold, silver and copper from

Henderson Mountain, which lies at the head of three key drainages in Greater Yellowstone: Miller Creek, a tributary of the Lamar River which flows through Yellowstone Park and joins the Yellowstone River within the Park, Fisher Creek; which

flows into the Wild and Scenic Clarks Fork of the Yellowstone; and Daisy Creek,

which flows north into the Stillwater River. All of these rivers are tributaries of the

Yellowstone River.

The mine would carve deep tunnels under Henderson Mountain into an ore body

containing very high concentrations of acid-producing materials. It would create a

mill site and a year-round work camp for 175 persons during the 15-18 year mine

life. And it would build a tailings impoundment the size of 70 football fields, containing 5.5 million tons of acidic mine wastes. It would do all of this in an earthquake-prone area, at altitudes above 8,000 feet, where snow often falls 10 months

of the year. In addition, the presence of an industrial-scale mining operation on the

edge of Yellowstone Park and adjacent to the Absaroka–Beartooth Wilderness would

change the wild nature of the place forever.

The mine proposal sparked almost universal opposition in local and regional communities and across the nation. Cooke City residents organized a local group, the
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Beartooth Alliance, which formed the early core of opposition to the mine. Regional

and national groups such as GYC and American Rivers provided scientific and technical support in the permitting process and carried out a public education program

aimed at the general public and the media. The Gallatin Wildlife Association, Montana Wildlife Federation, Sierra Club, Northern Plains Resource Council, Northwest

Wyoming Resource Council, Wyoming Wildlife Federation and Wyoming Outdoor

Council worked with their members to educate the public about the mine proposal.

The Sierra Club Legal Defense Fund provided legal assistance. Many other conservation groups and community groups expressed concern about the proposal to

mine gold near Yellowstone.

Early on, Senator Max Baucus voiced his concerns and that of many constituents

when, in 1993, he sent a letter to the mining companies which said, in part, ‘‘I am

not willing to gamble with a national treasure for short-term gain.’’ The National

Park Service came out against the mine, saying it feared the operations might harm

Yellowstone National Park.

A 1995 poll revealed that Montanans opposed the mine by a 2 to 1 margin. Indeed, by 1995, practically every newspaper in Montana and Wyoming had editorialized against the mine. In Cody, Wyoming, 67 percent of the members of the Chamber of Commerce said they opposed the mine.

Leading national publications, including the NY Times and US News and World

Report, editorialized against the mine and called for a trade or buy-out of the operation.

Wyoming’s Senator Craig Thomas announced his opposition to the mine in 1996,

in a press release stating, ‘‘There is only so long you can withhold your opinion

when in fact you have a strong conviction that this might be the worst place to site

a mine.’’ His statement met with broad support in the region.

These kinds of activities and statements led to the joint agreement in August of

last year to halt the mine proposal and seek a new solution.

The New World Mine Agreement, announced by the President in Yellowstone

Park on August 12, 1996, calls for Crown Butte to cease its efforts to develop the

New World mine and to transfer all of its holdings in the New World Mining District to the Federal Government.

In return, the company was promised Federal assets worth $65 million. Of this

total, $22.5 million would be set aside in an escrowed account to underwrite reclamation of historic mining pollution at the New World mine site. In addition, plaintiffs in the Federal Clean Water Act lawsuit Beartooth et al. v. Crown Butte Mines

et al. agreed to seek a quick and equitable settlement of their lawsuit consistent

with the Agreement.

On April 12, 1997, the Clinton Administration offered to the mining companies

an exchange of Federal royalty payments from Montana coal, oil and gas operations

equal to the $65 million value in the Agreement. One month later Crown Butte

Mines said it would accept the offer if it could be assured that Congress would approve the overall deal.

Under the agreement, Crown Butte’s property has to be appraised under the National Standards Act which requires a fair market appraisal of property purchased

or exchanged by the Federal Government. If the appraisal determines that the company’s property is less in value than the $65 million, a new agreement may be

called for. If the appraisal says the company’s property is worth more on the market, the total amount to be paid by the Federal Government to Crown Butte cannot

exceed $65 million, thus capping the amount for which the Federal Government is

responsible.

If the Federal Government transfers property to Crown Butte, these lands must

also be appraised using standard Federal appraisal measurements. This approach

assures all parties that a market-based assessment is utilized.

To complete the deal, Crown Butte has to also provide to the Federal Government

title to all of its holdings in the New World Mining District, including relevant

leased assets owned by other parties. If this is not possible, the agreement calls for

the three parties to seek a new understanding based upon the assets which each

side can provide. Thus far, Crown Butte has not been able to reach an agreement

with Margaret Reeb, a landowner who had previously signed a long-term mining

lease with Crown Butte to develop her part of the New World ore body. If Crown

Butte cannot reach an agreement with Ms. Reeb, the three parties to the Agreement

will then determine how to conclude the original agreement.

You have asked me to specifically explain how the agreement was negotiated.

The roots of this unique understanding between the conservation community, the

mining companies and the Administration lie in a complex chain of events which

took place in the summer and fall of 1995.
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In September, 1993, nine groups, utilizing the Sierra Club Legal Defense Fund

as counsel, filed suit against several Crown Butte and Noranda companies charging

that they had violated the Clean Water Act in their operations at the mine site. The

Plaintiff Group is composed of: Beartooth Alliance, Greater Yellowstone Coalition,

Gallatin Wildlife Association, Montana Wildlife Federation, Northwest Wyoming Resource Council, Northern Plains Resource Council, Sierra Club, Wyoming Wildlife

Federation, and the Wyoming Outdoor Council. The trial date was set for November,

1996.

The Crown Butte EIS had been delayed for several years due to the complexity

of the proposal and its possible impact on the area. Co-led by the U.S. Forest Service and the State of Montana and financed by Crown Butte mining companies, the

EIS had attracted national attention due to concerns about the possible impact of

the proposed mine on Yellowstone Park and the Clarks Fork of the Yellowstone, Wyoming’s only Wild and Scenic River. As the EIS process continued, major concerns

surfaced that had not been adequately addressed by the EIS drafts.

Growing public concern about the mine’s threatened impact upon Yellowstone National Park were expressed in thousands of letters, e-mail and phone calls to the

White House and Federal elected officials.

In rapid succession, the following took place:

On August 20, 1995, President Clinton flew over the site and then met with conservation community leaders. He expressed his own doubts about the wisdom of a

mine next to Yellowstone and announced a two-year moratorium on mining claims

in the New World Mining District.

In October, 1995, Federal district court Judge Jack Shanstrom ruled that Crown

Butte and its affiliated companies were violating the Clean Water Act for failing to

obtain permits for ongoing water pollution at the New World Mining District. The

companies faced a November, 1996 trial date to assess civil penalties for those violations.

The President’s announcement and the events related above generated major new

media attention on the mine, which resulted in numerous newspaper and TV features on the mine battle.

As these events unfolded, the conservation community began to seek ways to communicate informally with top leadership at Noranda. We indicated that if they

wished to withdraw from the operations, we would cooperate with them in seeking

a consensus on halting the mine and stopping the lawsuit. Finally, we asked for a

meeting with them. In November, 1995, officials at Crown Butte and Hemlo Gold

agreed to a private meeting with representatives of the conservation community.

On December 15, 1995, the meeting took place at Noranda headquarters in Toronto. GYC proposed to the company that it should withdraw from the mining venture and that, if it did so, there might be a way of exchanging company’s assets at

the mine site for Federal assets in other places.

These discussions resulted in the following agreements:

•The company would continue the dialog as long as the talks were kept confidential;

•The company would consider a GYC offer to initiate conversations with the

Clinton Administration to explore a mutual interest in reaching an agreement

to trade out company assets for Federal assets:

• GYC asked for a written statement from the companies authorizing GYC to

make an approach to the Clinton Administration about a possible halt to the

mine and an exchange of assets; and

• GYC and the mining companies mutually agreed that the companies believed

they could permit the mine and operate it safely and that GYC believed that

a safe mine was not possible; therefore, each party would continue its respective

efforts until we could discover if an agreement was possible. The company

would do everything possible to get the mine permitted, the conservation community would do everything in our power to stop approval of the mine.

On January 8, 1996, Crown Butte sent a letter to GYC authorizing an approach

to the Clinton Administration about a possible exchange of assets if the New World

mine was halted.

We immediately asked the staff of the Council on Environmental Quality at the

White House to meet with us and the companies to consider whether or not an exchange of assets was of mutual interest if the New World mine was halted.

On February 1, 1996, representatives of Hemlo Gold and Crown Butte and representatives of the conservation group of plaintiffs met with CEQ staff in Washington DC to discuss a halt to the New World Mine and an exchange of assets.

There was mutual agreement that talks should be pursued. All parties agreed to

keep the
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talks confidential. The prior agreements between GYC and the company to continue

their respective efforts to either permit or halt the mine remained in effect.

In March, 1996, the Clinton Administration created a special task force on the

New World Mine led by Associate Attorney General John Schmidt and Ambassador

James Pipkin of the Interior Department. In the meetings which followed, Ian Byer,

Chairman of Crown Butte and CEO of Hemlo Gold, and Joe Baylis, President of

Crown Butte Mines, LTD, and General Counsel of Hemlo Gold, represented the

company. Doug Honnold, Managing Attorney of the Northern Rockies office of the

Sierra Club Legal Defense Fund and lead counsel for the plaintiffs in the Clean

Water Act lawsuit, and I represented the conservation community and plaintiffs in

our lawsuit.

Discussions among the three parties began immediately and continued through

the spring and early summer of 1996.

In March, 1996, the Wyoming Legislature passed a law giving authority to the

state to deal with out-of-state solid waste coming into Wyoming under its Industrial

Siting Act. The law imposed a fee of $10 per ton on any waste created in another

state that would be stored in Wyoming. It was described on the floor of the Wyoming Senate as a ‘‘rifle shot’’ aimed at the proposed Noranda mine and the possibility of using Wyoming land as a storage facility for the mine’s wastes.

In June, 1997, Hemlo Gold announced that it was merging with Battle Mountain

Gold Company of Houston, Texas and that its ownership in Crown Butte would

transfer to Battle Mountain Gold. Talks continued during this period.

The discussions reached a new intensity in late July since it seemed that an

agreement was within reach. Face-to-face talks began in August and culminated on

August 12, 1996 with President Clinton’s announcement that an agreement had

been reached to halt the mine, to trade assets, to settle the existing Clean Water

Act lawsuit, and to clean-up the historic mining pollution at the site.

Once the agreement was signed, the government began an immediate search for

suitable properties to be used in the exchange. This special effort was led by the

BLM. Our plaintiff groups were not intimately involved in that search although we

did ask for periodic reports and we were given very generic descriptions of the

progress. We developed a set of criteria to guide our response to any proposal. Key

to this was the belief that we did not want to solve a problem on the edge of Yellowstone only to see it become a major environmental problem for some other community.

In December, 1996, Montana Governor Marc Racicot opened discussions about a

possible trade involving timber lands in western Montana and coal lands in eastern

Montana. We met with Gov. Racicot, representatives of the mining companies and

members of the Federal task force on the Crown Butte Agreement to learn of the

proposals. The Montana Wildlife Federation, the Montana Wilderness Association

and the Northern Plains Resource Council were the primary groups that evaluated

these potential exchange lands for the conservation community. They examined the

proposals in detail and concluded that neither proposal was acceptable. Simultaneously, the proposals created a major public outcry over the sale of public lands

in Montana and the proposals were withdrawn.

On April 12, 1997, after a one-month extension of the search, agreed to by all

three parties to the Agreement, the Administration offered royalties from energy deposits in Montana as the method for exchanging $65 million in Federal assets for

the mining companies’ property. One month later Crown Butte said that it would

accept this approach provided that the assets were approved by Congress. Which

brings us to the present time.

Some questions have been raised about why the Crown Butte EIS was halted by

the Agreement. NEPA sets up a process for evaluating and assessing a specific proposal which might have an impact upon the environment. Once the companies decided to halt their proposed mine, there was nothing to do an EIS on. However, the

BLM and the Forest Service are completing an EIS on the proposed withdrawal of

public lands within the New World Mining District from further mining activity.

We believe the approach incorporated in the New World Agreement is a valid one

which has addressed a multitude of very complex concerns about a long-running and

highly contentious public land dispute. This consensus approach, which protected

the interests of the public and the mining companies, may have relevance in similar

situations elsewhere.

We continue to believe that the New World Agreement is a good deal for the

American people. We also acknowledge that it has been far more difficult to achieve

than we had originally anticipated, but it is still a valid way of resolving the New

World Mine situation. Without it, the conservation community would still be involved in a highly confrontational and litiguous confrontation with the mining com-
43

panies and the battle would still be playing out in the front pages of newspapers

and tying up untold hours of time for many Federal public servants.

The Agreement provides a method of ending a long and difficult battle over the

proposed gold mine that threatens Yellowstone Park and the Clarks Fork of the Yellowstone River.

It provides the company with a fair exchange for its assets.

It creates a $22.5 million reclamation fund to clean-up and restore the polluted

lands on Henderson Mountain and it provides research funds to study the situation,

offering the possibility that the clean-up could benefit other polluted mining sites

in the interior West.

And it ensures that the wild character of the lands adjacent to Yellowstone and

the Absaroka–Beartooth Wilderness will be protected from industrial development

for the region’s wildlife and for the benefit of future generations.

We now look to the leadership of the Congress to conclude the New World Agreement by creating and passing legislation which permanently resolves this situation.

Thank you for the opportunity to testify. I will be glad to answer any questions.
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