GAO-12-189R Hardrock Mining Financial Assurances 

United States Government Accountability Office 

Washington, DC 20548

December 12, 2011

The Honorable Doug Lamborn

Chairman

The Honorable Rush Holt

Ranking Member

Subcommittee on Energy and Mineral Resources

Committee on Natural Resources

House of Representatives

Subject: Hardrock Mining: BLM Needs to Revise Its Systems for Assessing the Adequacy of 

Financial Assurances

In a July 2011 testimony before your subcommittee, we summarized the key findings of our 

prior work on hardrock mining, including the adequacy of financial assurances.1

As a result, you asked us to update our prior work assessing the hardrock mining financial 

assurances held by BLM and determine (1) the value and adequacy of financial assurances 

that operators use to guarantee reclamation costs for hardrock mining operations on BLM 

land and (2) the status of BLM’s efforts to address issues we previously identified regarding 

the Bond Review Report and supporting documentation used to determine the adequacy of 

hardrock mining financial assurances.

At this 

hearing, we stated that the Department of the Interior’s Bureau of Land Management (BLM) 

had taken actions to strengthen its processes, but the financial assurances that it had in 

place, when we last reported on this issue in 2008, were inadequate to cover estimated 

reclamation costs from hardrock mining operations, and the agency’s Bond Review Fiscal 

Report (Bond Review Report) inaccurately calculated this shortfall. At the July 2011 hearing, 

the BLM witness testifying for the department stated that the agency had corrected these 

issues in response to the concerns we identified in the past. 

To determine the value and adequacy of financial assurances for hardrock mining 

operations on BLM land, we obtained financial assurance data from BLM’s Bond Review 

Report, which aggregates data from BLM’s LR2000 database and includes data on bonds 

covering a single operation, as well as bonds covering all of an operator’s mining operations 

within one state (known as statewide bonds) or all of its mining operations in the United 

States (known as nationwide bonds). Because LR2000 data is updated daily, we took steps 

to ensure that we only analyzed data on mining operations that had progressed past the 

preliminary stages of BLM’s mine approval process by collecting data from LR2000 on those 

operations where the bond amount had been estimated, determined, or accepted as of 

December 1, 2010, or earlier. We chose December 1, 2010, as a cutoff date in consultation 

 

1

GAO, Abandoned Mines: Information on the Number of Hardrock Mines, Cost of Cleanup, and Value of 

Financial Assurances, GAO-11-834T (Washington, D.C.: July 14, 2011).
Page 2 GAO-12-189R Hardrock Mining Financial Assurances

with BLM officials because they suggested this date would yield the most accurate data and 

would reflect corrections and revisions made by BLM state office and field office officials in 

response to guidance contained in various instructional memoranda (IM). We analyzed 

these data to summarize the number of hardrock mining operations, the total number and 

value of financial assurances, and the number of operations with inadequate financial 

assurances and the value of those financial assurances. Data for Alaska are not maintained 

in LR2000 and not reported in the Bond Review Report and are, therefore, not included in 

this analysis. To assess the reliability of LR2000 data and the Bond Review Report, we 

spoke with BLM information technology officials in Lakewood, Colorado, who are 

responsible for administering the system; BLM state and field office staff who enter 

information into the system; and BLM managers at its Washington, D.C., headquarters office 

who use information from the system. We discussed the structure and history of LR2000 

and obtained a copy of BLM’s Bond Review Report specifications that were used to create 

the Bond Review Report. We also conducted electronic testing of these data by, for 

example, counting records and looking for outliers in the data, to identify obvious errors in 

accuracy and completeness. We present data from LR2000 in this report and believe these 

data are sufficiently reliable for this update. To determine whether BLM addressed issues 

we previously identified regarding its bond adequacy reporting, we obtained the fiscal year 

2010 state director certifications and the related corrective action plans for the 11 BLM 

states with hardrock mining operations—Alaska, Arizona, California, Colorado, Idaho, 

Montana, Nevada, New Mexico, Oregon, Utah, and Wyoming. We analyzed the 

certifications to determine whether BLM’s policies in IM 2009-153 were implemented. 

Specifically, we determined whether the states had submitted a certification that addressed 

whether financial assurances were reviewed within the specified time frames and whether 

financial assurances were adequate. We also analyzed the certifications to see if the BLM 

state offices had submitted a corrective action plan to address any deficiencies. 

We conducted this performance audit from July 2011 to December 2011 in accordance with 

generally accepted government auditing standards. Those standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We believe that the 

evidence obtained provides a reasonable basis for our findings and conclusions based on 

our audit objectives. 

Background

The General Mining Act of 1872 encouraged the development of the West by allowing 

individuals to stake claims and obtain exclusive rights to the gold, silver, copper, and other 

valuable hardrock mineral deposits on land belonging to the United States. Since then, 

thousands of operators have extracted billions of dollars worth of hardrock minerals from 

land managed by BLM.2

BLM issued regulations in 1981 requiring all operators of hardrock mines to reclaim the land 

disturbed by mining when operations cease.3

 

2

BLM and the U.S. Department of Agriculture’s Forest Service are the two principal agencies responsible for 

managing the federal land open for hardrock mining.

BLM amended the regulations in 2001 to 

require all mining operators to provide bonds or other financial assurances before beginning 

exploration or mining operations on BLM land for both notice-level hardrock mining 

3

An operator is a person who conducts operations under the mining laws, including exploration, mining, and 

processing hardrock minerals.
Page 3 GAO-12-189R Hardrock Mining Financial Assurances

operations—those disturbing 5 acres of land or less—and plan-level hardrock mining 

operations—those disturbing over 5 acres of land and those in certain designated areas, 

such as the national wild and scenic rivers system.4 These financial assurances must cover, 

among other things, the estimated cost as if BLM were to contract with a third party to 

reclaim the operations according to the reclamation plan.5

In June 2005, we reported that some current hardrock operations on BLM land do not have 

adequate financial assurances in place, and some had no or outdated reclamation plans or 

cost estimates on which the financial assurances should have been based.

Having adequate financial 

assurances to pay reclamation costs for BLM land disturbed by hardrock operations is 

critical to ensuring that the land is reclaimed if the mining operators fail to do so. 

6

However, subsequently in June 2006, BLM took actions to respond to our recommendations 

by issuing IM 2006-172, which, among other things, provided guidance for generating the 

Bond Review Report in LR2000—an automated information system BLM uses to manage 

financial assurances.

In that report, 

we concluded that BLM lacked a process and critical management information needed for 

ensuring that adequate financial assurances are actually in place, as required by federal 

regulations and BLM guidance. As a result, we recommended that BLM strengthen its 

management of financial assurances for hardrock operations on its land. At that time, BLM 

did not concur with our recommendations. 

7

In 2008, we again reviewed BLM’s oversight of hardrock mining operations and found that 

the financial assurances that it had in place were inadequate to cover estimated reclamation 

costs by about $61 million and that the agency’s Bond Review Report inaccurately 

calculated this shortfall.

BLM uses this report to determine if adequate financial assurances 

are in place for mining operations. IM 2006-172 also directed BLM state directors to 

annually review the Bond Review Report to determine if all reclamation cost estimates are 

adequate, take action to address inadequate cost estimates, and submit a certification to 

BLM’s Washington, D.C., headquarters office that the financial assurances are adequate to 

cover reclamation costs. 

8

 

4

43 C.F.R. Part 3809. Operators may also provide a single bond to cover all mining operations statewide or 

nationwide.

Specifically, the Bond Review Report did not separately calculate 

the value of each inadequate financial assurance but instead calculated an aggregate value 

of all financial assurances across all operations (including those that were inadequate and 

those that were greater than required). Because a financial assurance that is greater than 

the amount required for an operation cannot be transferred to a different operation with 

inadequate financial assurances, the Bond Review Report incorrectly depicted the degree to 

which some financial assurances were inadequate. At that time, BLM officials agreed to take 

steps to modify LR2000.

5

When BLM identifies a need for it, the operator must also establish a trust fund or other funding mechanism to 

ensure the continuation of long-term treatment to achieve water quality standards and for other long-term, 

postmining maintenance requirements.

6

GAO, Hardrock Mining: BLM Needs to Better Manage Financial Assurances to Guarantee Coverage of 

Reclamation Costs, GAO-05-377 (Washington, D.C.: June 20, 2005).

7

BLM, Bond Review Report—LR2000, IM 2006-172 (Washington, D.C.: June 2006).

8

GAO, Hardrock Mining: Information on Abandoned Mines and Value and Coverage of Financial Assurances on 

BLM Land, GAO-08-574T (Washington, D.C.: Mar. 12, 2008).
Page 4 GAO-12-189R Hardrock Mining Financial Assurances

BLM’s Financial Assurances for Some Hardrock Operations Continue to Be 

Inadequate

Based on the data we reviewed from BLM’s Bond Review Report, mine operators had 

provided financial assurances valued at approximately $1.5 billion to guarantee reclamation 

costs for 1,365 hardrock operations on federal land managed by BLM. We determined that 

57 hardrock operations had inadequate financial assurances—amounting to about $24 

million less than needed to fully cover estimated reclamation costs. Nevada had the largest 

number of hardrock mining operations and the largest number of inadequate financial 

assurances. Table 1 shows the number and value of BLM-held financial assurances and the 

number and value of inadequate financial assurances, by state.

Table 1: The Number and Value of Hardrock Financial Assurances, and the Number and Value of 

Inadequate Financial Assurances, by State

State Total operations

Value of financial 

assurances a

Operations with 

inadequate financial 

assurances

Total value of 

inadequate financial 

assurances

Arizona 140 $9,759,003 2 ($755)

California 135 14,423,442 8 (98,142)

Colorado 84 2,572,706 1 (153,400)

Idaho 57 1,529,926 2 (22,500)

Montana 64 68,264,970 0 0 

South 

Dakota

4 104,908 0 0 

Nevada 491 1,152,432,561 24 (23,853,662)

New Mexico 27 1,109,596 0 0 

Oregon 92 2,211,033 7 (36,775)

Washington 11 3,026,072 2 (35,300)

Utah 127 11,003,275 6 (11,953) 

Wyoming 133 185,712,192 5 (89,613)

Total 1,365 $1,452,149,685 57 ($24,302,101)

Source: GAO analysis of BLM’s Bond Review Report.

Notes: These data include operations where the bond amount had been estimated, determined, or accepted as of December 1, 

2010, or earlier. In addition, data for Alaska are not maintained in LR2000 and not reported in the Bond Review Report. 

a

Includes both plan- and notice-level operations. 

BLM Has Not Fully Addressed Issues GAO Previously Identified

As we have reported, BLM has taken some steps to strengthen and improve its 

management of hardrock financial assurances but has not yet addressed the issues we 

identified in 2008 regarding how the Bond Review Report calculates the total value of those 

financial assurances that are inadequate.9

To improve its management of hardrock financial assurances, BLM in 2009 issued IM 2009-

153, which, among other things, directs periodic review of reclamation cost estimates for all 

ongoing operations to ensure the current cost estimate and the amount of the required 

financial assurance continue to meet applicable regulatory requirements.

 

10

 

9

However, we 

GAO-11-834T. 

10IM 2009-152, Financial Guarantees for Notices and Plans of Operations.
Page 5 GAO-12-189R Hardrock Mining Financial Assurances

found that only two BLM state offices—Montana and Wyoming—fully implemented IM 2009-

153 by conducting timely reviews of financial assurances and ensuring that financial 

assurances for hardrock operations under their purview were adequate. Although some 

BLM state offices reported that they had not always succeeded in conducting reviews of 

financial assurances in a timely manner, or had not always secured adequate financial 

assurances, they all had submitted a certification that included an action plan for addressing 

these deficiencies. In addition, in reviewing the Bond Review Report, we found that the 

implementation of IM 2009-153 has helped BLM reduce the amount of its inadequate 

financial assurances since 2008 by about $37 million. Table 2 summarizes the contents of 

the fiscal year 2010 state director certifications required by IM 2009-153. 

Table 2: Summary of BLM Fiscal Year 2010 State Director Financial Assurance Certifications.

BLM state office

Notice-level 

financial 

assurances 

were reviewed 

every 2 years

Plan-level 

financial 

assurances 

were reviewed 

every 3 years a a

Notice-level 

financial 

assurances 

were adequate 

Plan-level 

financial 

assurances 

were adequate

A corrective 

action plan 

was submitted, 

if necessary

Alaska Yes Yes b Yes b

Arizona No No Yes Yes Yes

California No No Yes Yes Yes

Colorado Yes Yes Yes No Yes

Idaho No No Yes Yes Yes

Montana Yes Yes Yes Yes Yes

Nevada No No No Yes Yes

New Mexico No Yes Yes No Yes

Oregon No No Yes No Yes

Utah No No No No Yes

Wyoming Yes Yes Yes Yes Yes

Source: GAO analysis of BLM’s Fiscal Year 2010 state directors’ financial assurance certifications.

a

Notice-level operations are those causing a surface disturbance of 5 acres or less; plan-level operations are those disturbing 

over 5 acres of land or those in certain designated areas. 

b

Data for Alaska are not maintained in LR2000 and not reported in its annual financial assurance certification. 

Regarding the issue with the Bond Review Report that we identified in 2008, BLM has not 

modified LR2000 to correct how it calculates the value of inadequate financial assurances. 

Consequently, the Bond Review Report, as currently designed, provides inaccurate 

summary information by offsetting the shortfalls of some operations’ financial assurances 

with surpluses from the financial assurances of other operations. For example, the Bond 

Review Report we examined estimated that the total financial assurances in place were 

about $7 million more than needed to fully guarantee estimated reclamation costs. However, 

we found that the report’s estimated financial assurances were incorrect. By separately 

assessing the adequacy of financial assurances on an operation-by-operation basis, we 

determined that BLM’s hardrock financial assurances, when aggregated, were about $24 

million less than needed. As we have previously noted, higher-than-needed financial 

assurances for particular operations—which total $7 million by BLM’s own calculation—

cannot be used to offset the shortfall in other financial assurances for other operations. 

Hence, the Bond Review Report that we examined misrepresents the overall adequacy of 

the financial assurances by about $31 million. 
Page 6 GAO-12-189R Hardrock Mining Financial Assurances

Conclusions

Having adequate financial assurances to pay for reclamation costs for BLM land disturbed 

by hardrock operations is critical to ensuring that the land is reclaimed if operators fail to 

complete the reclamation as required. Since we first reported on these issues in 2005, BLM 

has taken important steps to improve its processes for ensuring that adequate financial 

assurances are actually in place by issuing two IMs that detail the steps BLM offices should 

take to ensure that hardrock financial assurances are adequate. However, the Bond Review 

Report—a key management tool supporting these processes—still provides misleading 

summary-level data on the overall adequacy of BLM-held financial assurances. Without 

separating the operation-specific calculations from summary-level data on adequate and 

inadequate financial assurances, Congress and the public cannot be assured that they have 

an accurate picture of BLM’s efforts to ensure that enough funds are in place to fully cover 

estimated reclamation costs at each hardrock mining operation.

Recommendation for Executive Action

To ensure that BLM’s Bond Review Report provides reliable and accurate data on the total 

value of inadequate financial assurances, we recommend that the Secretary of the Interior 

direct the Director of BLM to revise LR2000 and its Bond Review Report to calculate and 

report the value of inadequate hardrock financial assurances on an operation-by-operation 

basis in order to more accurately represent the adequacy of BLM’s hardrock financial 

assurances.

Agency Comments

We provided a draft of this report to the Department of the Interior for review and comment. 

Interior did not provide written comments to include in this product. However, in an e-mail 

received November 28, 2011, the agency liaison stated that Interior concurs with the 

recommendation and is beginning to implement it. Interior also provided technical 

comments in its e-mail response, which we incorporated as appropriate.

As agreed with your offices, unless you publicly announce the contents of this report earlier, 

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If you or your staff have any questions about this report, please contact me at 

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Relations and Public Affairs may be found on the last page of this report. Key contributors to 

this report were Elizabeth Erdmann (Assistant Director), Andrea W. Brown, Casey L. Brown, 

and Jacqueline Wade. 

Anu K. Mittal

Director, Natural Resources

 and Environment

(361324)
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