U.S. GOVERNMENT PRINTING OFFICE

40–682 CC WASHINGTON : 1997

HARDROCK MINERAL BONDING

OVERSIGHT HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY

AND MINERAL RESOURCES

OF THE

COMMITTEE ON RESOURCES

HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS

FIRST SESSION

ON

HARDROCK MINING BONDING REGULATIONS AND THE

DECISION ON THE SECRETARY OF THE INTERIOR

TO PUBLISH ON FEBRUARY 28, 1997, A FINAL RULEMAKING ON BONDING OF ‘‘HARDROCK’’ MINING OPERATIONS ON PUBLIC LANDS

MARCH 20, 1997—WASHINGTON, DC

Serial No. 105–8

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

NICK LAMPSON, Texas

RON KIND, Wisconsin

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 Rico

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 March 20, 1997 ................................................................................. 1

Statements of Members:

Cubin, Hon. Barbara, a U.S. Representative from Wyoming; and Chairman, Subcommittee on Energy and Mineral Resources ............................ 1

Ensign, Hon. John, a U.S. Representative from Nevada .............................. 5

Romero-Barcelo ́, Hon. Carlos, a U.S. Resident Commissioner from Puerto

Rico ................................................................................................................. 3

Young, Hon. Don, a U.S. Representative from Alaska; and Chairman,

Committee on Resources .............................................................................. 4

Statements of witnesses:

Hanneman, Karl, President, Alaska Mining Association, Anchorage, AK .. 27

Prepared statement ................................................................................... 40

Hocker, Philip, President, Mineral Policy Center, Washington, DC ............ 29

Prepared statement ................................................................................... 44

Jones, Paul, President, Minerals Exploration Coalition, Golden, CO .......... 25

Prepared statement ................................................................................... 37

Leshy, John, Solicitor, Department of the Interior ........................................ 6

Prepared statement ................................................................................... 36

Additional material supplied:

Summary of Bonding Requirements relating to minerals exploration ........ 69

Mine’s toxic leaks render river lifeless ........................................................... 80

Bankrupt mine costly to EPA .......................................................................... 81

Communications submitted:

Barlow, Leo H. (Sealaska): Letter of March 25, 1997, to Hon. Barbara

Cubin .............................................................................................................. 61

Cubin, Hon. Barbara: Letter of March 24, 1997, to Hon. Bruce Babbitt

(DOI) .............................................................................................................. 50

Ely, Marion F., II: Letter of March 27, 1997, to Hon. Barbara Cubin ......... 66

Glavinovich, Paul S. (minerals consultant): Letter of March 24, 1997,

to Representative Barbara Cubin ................................................................ 63

Hanneman, Karl (AMA): Letter of April 7, 1997, to Hon. Barbara Cubin .. 65

Joint letter from six organizations dated March 12, 1997, to Hon. Bruce

Babbitt (DOI) ................................................................................................. 54

Jones, Paul C. (Minerals Exploration Coalition):

Letter of March 28, 1997, to Hon. Barbara Cubin ................................. 67

Letter of March 28, 1997, to Hon. Nick Joe Rahall ................................ 78

Knowles, Gov. Tony (AK): Letter of March 14, 1997, to Hon. Bruce

Babbitt (DOI) ................................................................................................. 48

Leshy, John (DOI): Letter of April 3, 1997, to Hon. Barbara Cubin ............ 52
(1)

HARDROCK MINING BONDING REGULATIONS

THURSDAY, MARCH 20, 1997

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

The Subcommittee met, pursuant to call, at 12:35 p.m., in room

1324, Longworth House Office Building, Hon. Barbara Cubin

(Chair of the Subcommittee) presiding.

STATEMENT OF HON. BARBARA CUBIN, A U.S. REPRESENTATIVE FROM WYOMING; AND CHAIRMAN, SUBCOMMITTEE ON

ENERGY AND MINERAL RESOURCES

Mrs. CUBIN. The Subcommittee on Energy and Mineral Resources will please come to order. The Subcommittee is meeting

today to hear testimony on Hardrock Mining Bonding Regulations.

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

keep members on their busy schedules, and, boy, can we attest to

that. Therefore, if any other members who are not here have any

statements then they can be included in the record later for all of

you to see.

Today the Subcommittee will review the decision of the Secretary

of the Interior to publish on February 28th of this year a final rulemaking on bonding of hardrock mining operations on the public

lands administered by the Bureau of Land Management. This may

come as a shock to some who characterize me as anti-environmentalist. In fact, I have even been called an eco-thug because of

my position on State primacy for coal mining regulation.

But I do not oppose financial assurances from companies who are

mining in this country to guarantee to the people of this country

that reclamation of lands disturbed by mines will take place. I absolutely believe in it and it should be done in the finest way.

My coal miners in the Powder River Basin are bonded, as are oil

and gas operators, and others. I think this is as it should be and

I do believe in bonding. That is not the reason for this hearing.

However, from where I sit, it appears to me that this Administration has decided to ignore the Administrative Procedures Act mandate to ask for meaningful public input on proposed rules and regulations before coming out with a final rule which will significantly

impact a group of our citizens.
2

And let me state in my State we have very, very little hardrock

mining which makes or should make it even clearer that the issue

of bonding is not what is at point here, the issue is to insure the

integrity of the process. That is what I view as the Subcommittee’s

responsibility in this case.

In the case at hand, way back in July of 1991, during the middle

of the Bush Administration, the BLM proposed a rule concerning

financial guarantees for reclamation of mining operations conducted under the general mining law. That was nearly five and

one-half years ago, and some 220 responses were received before

the 90-day comment period closed. On February 28 then of this

year a final rule was published by the Department of the Interior

with an effective date of March 31, 1997.

In my mind, that is an awfully long shelf-life for public comments. A lot has happened in the last five years. Like bread, public

input can go stale. Technology can be made stale with the passage

of time. There are many things that are in the proposed rule that

were not even covered in the input in the first five years ago.

I am not suggesting that the Department of the Interior to have

thrown out the entire six-year-old responses on the last proposal of

the bonding issue, but I am only suggesting that the Secretary

ought to have exercised good judgment and recognized the need to

reask the public for meaningful input and repropose this final rule

for timely comment.

Now, I recognize that some rulemakings in other agencies like

the EPA, for example, can drag on for years and years, but it seems

that those air quality regulations and other environmental

rulemakings are often proposed and reproposed and re-re-proposed.

They go on for a long time but they are not put on the shelf, ignored, and then picked up five and one-half years later.

And the public has a bite at those regulations each time, so it

is not a case of dormant rules suddenly being awakened and

sprung on an unsuspecting group of citizens. But that is what it

looks to me like is happening here.

Furthermore, the rule at issue is a part of the so-called 3809 surface management regulations for the BLM, for which the Secretary

has announced the formation of a task force to review the adequacy

of the program. In other words, the entire plan of the Secretary’s

mandate under FLPMA, ‘‘to prevent unnecessary and undue degradation of public lands’’ will be scrutinized.

I understand that the BLM plans to hold scoping meetings in

several western locations in the relatively near future. If the Secretary could not wait for that task force to review the current bonding regulations for the revision of the entire 3809 section, at a minimum I think he could have directed the final rule to have been

reproposed after a 60-day period where there could be up-to-date,

meaningful input from the public.

And the comments that the Department would receive from reproposing the bonding rule would include insights that were not

available in 1991 because the regulatory landscape of the various

western States has changed in the intervening six years. My guess

is that these State regulatory bodies, individually, or collectively

through the Western Governors’ Association would have something
3

to say about this final rule but they have been frozen out from commenting on the rule.

Alaska’s legislature, for example, agreed to form a statewide

bond pool to insure small miners would have access to financial

guarantees for reclamation, but my understanding is, and I have

read a letter from the governor of Alaska, that the final rule of the

BLM is ambiguous at best about whether such a pool provides satisfactory assurance.

In other words, will seasonal placer mine operators be caught up

in the interpretation of this rule just as they need to make decisions on whether or not to improve their equipment or move in

equipment?

At the same time in the lower 48 States, will Nevada’s statewide

bonding pool, a surety of last resort as it has been described to me,

be a satisfactory financial assurance? And if so, what is the possible impact upon the total liability of the pool and is it enough to

prompt a finding of an unfunded mandate upon the State? I think

these are legitimate questions that have not been posed to the public and have been only if considered at all done internally and the

law strictly requires for public input.

Closer to home, how will the mine operators who utilize in-situ

leach methods to recover uranium, this would be in my home area,

from the Powder River basin, how will they be impacted? And does

reclamation, as defined in 3809 for bonding purposes, include neutralization of the aquifers when other Federal and State laws clearly apply, not reclamation in the traditional sense of reshaping and

revegetating the land?

And what about the imposition of criminal penalties in the final

rule for operators who fail to comply with a notice of non-compliance? Is it really within the jurisdiction of an agency to determine

what should be felony law? Regardless of one’s view of the BLM as

public law enforcement agents, is not this a change from the 1991

proposal? Is there sufficient rationale alone in that one subject to

seek more input? I believe that there is.

Certainly when summed up together with the questions that I

have already mentioned and others that I have not and there are

many others, it is clear to me that the Secretary should have done

the right thing and asked the public for meaningful input at this

time on this rule. I reiterated my sense that financial assurances

are a necessary part of doing business on the public lands today,

but I surely do not see the reason why the public should have been

shut out from the opportunity for meaningful comment on this rule.

It is my desire to respectfully request that the Secretary withdraw the final rule and at the very minimum extend a 60-day comment period. With this statement, I welcome our witnesses to this

hearing and recognize the Ranking Member, Mr. Romero-Barcelo ́

for his opening remarks.

STATEMENT OF HON. CARLOS ROMERO-BARCELO ́ , RESIDENT

COMMISSIONER FROM THE COMMONWEALTH OF PUERTO

RICO

Mr. ROMERO-BARCELO ́. Thank you, Madam Chair. I would like to

begin by saying that you are to be commended in holding a hearing

today on the Bureau of Land Management’s new requirement for
4

hardrock mining on public lands. The new rule, published in the

Federal Register on February 28 of this year, will do much to ensure that miners, and not the public, pay for restoring public lands

after mining is complete.

This is an important change in policy. Therefore, we hope that

any questions or issues regarding the procedures used to implement the new rule will be answered during this hearing. The underlying policy of the final rule is sound. Under this new rule, the

Bureau of Land Management will require all miners to maintain

full financial bonds, or guarantees, for 100 percent of the cost of

restoring public land that their activities have disturbed. This is a

significant change from the previous policy that exempted miners

disturbing less than five acres of public land from providing proof

of such protection.

The Inspector General of the Department was extremely critical

of the previous policy stating that it did not provide an adequate

guarantee that mining operators would reclaim the land after mining. Reclamation is necessary to ensure that environmental damage, such as acid mine drainage, groundwater and drinking water

contamination, does not occur. Reclamation also ensures that the

land can again be used for other purposes, like recreation, once

mining is complete.

The Bureau of Land Management first proposed changing the

rules in 1991. The process is finally complete with the issuance of

the new regulation. American taxpayers have for too long borne the

risk and expense of cleaning up after unscrupulous miners. Now,

under the BLM’s new rules, the cost of cleaning up the disturbance

caused by mining will be placed squarely on the mining community’s shoulders where it should be.

Activities that do not disturb the land, such as panning for gold

in mountain streams, will not require a bond. But anyone engaged

in mining activity that disturbs the land such as digging or excavating will be required to post a bond or other financial guaranty

covering 100 percent of the cost of reclamation. The Bureau of

Land Management will release the bond after reclamation is completed. The rule also requires that a professional engineer certify

the projected costs of reclamation.

The Bureau of Land Management already requires reclamation

of land disturbed by mining. By requiring bonds, with 100 percent

of costs taken into account and increasing the minimum dollar requirement, the Bureau of Land Management is ensuring that reclamation will occur without tax dollars. Thank you, Madam Chair.

Mrs. CUBIN. Thank you for your remarks. Ms. Green, do you

have any opening remarks?

Ms. CHRISTIAN-GREEN. Thank you, Madam Chair. I have no

opening remarks.

[Statements of Mr. Young and Mr. Ensign follow:]

STATEMENT OF THE HONORABLE DON YOUNG, A U.S. REPRESENTATIVE FROM ALASKA;

AND CHAIRMAN, COMMITTEE ON RESOURCES

Madam Chairman, we are here today because high level bureaucrats in the Department, under the guise of Secretary Babbitt, have once again decided that Washington, D.C. knows best. After more than five years of silence on bonding, Washington, D.C. wants to impose a new bonding rule on miners by decree. Washington,

D.C. does not want the opinion of the Congress, it does not care what the States
5

have done, and it has no intention of allowing any public input into this decision.

But, we have laws which mandate that they follow a fair process before making

rules. We are asking the Department of Interior today to demonstrate that, in making this bonding rule, they have respected both the letter and the spirit of the laws

mandating a fair process.

In my district, most mines are small placer gold mines. They employ about five

people and produce less than 700 ounces of gold each year. Together, they produce

the bulk of Alaska’s gold. They are critical to Alaska’s economy. They are essential

in rural areas where mining may be the sole source of jobs.

These mines are actually small businesses. Many are family-owned and operated.

In fact some of today’s Alaska miners are descendants of the hardy participants in

Alaska’s original gold rushes.

Most placer mines affect only a few acres each season and use simple technology.

Old stream deposits are dug up, the gravel washed, and the gold removed by gravity. Toxic discharges are not a problem. The State of Alaska requires reclamation

and has a bonding system. That system ensures reclamation while providing bonds

at reasonable cost to Alaska’s independent miners. The state system works. But

along comes Secretary Babbitt, after five years of hibernation, to ‘‘fix’’ the problem.

The Department is trying to fix a problem that the states are handling just fine.

What does this new Washington, D.C. rule mean for individualistic, hard-working

Alaska placer miners?

—They must comply with inflexible, costly regulations.

—They will have to hire expensive engineers to certify reclamation plans.

—If Washington, D.C. refuses to accept bonds underwritten by the Alaska state

bonding pool, they will have to lay out huge sums of cash or marketable securities.

Many small mining businesses in Alaska will not survive this rigid Washington,

D.C. rule.

Finally, Madam Chairman, I have a letter from the Governor of the State of Alaska to Interior Secretary Babbitt, which expresses his concern regarding this rule on

hardrock bonding and asks that the Secretary reconsider this new rule. I request

that this letter be made part of the written record of this hearing.

Thank-you Madam Chairman.

STATMENT OF HONORABLE JOHN ENSIGN, A U.S. REPRESENTATIVE FROM NEVADA

Thank you, Madam Chairman, for the opportunity to testify before the Subcommittee on the final rule published by the Bureau of Land Management concerning bonding of hardrock mining operations on BLM lands.

In a state like Nevada, where 87% of the land is federally owned and the mining

industry is the second largest employer in the state, we all must keep a watchful

eye of the land management practices of our federal agencies. Likewise, in a state

with such a federal presence, it is extremely important that the federal agencies

work in harmony with local officials and the public. There must be constant communication between the agencies, the land users and local officials.

In the case of this final rulemaking, it appears that little or no effort was afforded

to the public to communicate with the BLM in regards to this action. The Administrative Procedures Act specifically mandates that the public be given ample opportunity to comment on such proposals. In July of 1991 a similar proposal was suggested by the Bush Administration. The public was granted the customary comment

period, yet no further action was taken. Now, nearly seven years later, this proposal

becomes a final rule. It is irresponsible of this Administration not to solicit additional comments from the public. In the past seven years, my State of Nevada has

changed dramatically and I think similar changes have occurred all over the West.

I do not want to give the impression that I am opposed to bonding. The largest

mines in Nevada are currently required to bond 100% of the reclamation costs because they operate in excess of five acres. It is important that we do all we can to

ensure that the land is reclaimed to its original state. We also must recognize the

technological gains and advancements the industry has made to prevent many of

the mistakes of the past.

I simply believe that all interested parties should be given the opportunity to respond to this proposal before it becomes final. A lot of changes have occurred in the

past seven years and I believe it would be beneficial to the Bureau to understand

new and current comments on the proposal. I hope this Administration would recognize the importance of recent views and make this proposal available for the public’s

comments.

Thank you, Madam Chairman.
6

Mrs. CUBIN. Now if all of the witnesses that will testify before

the committee today would please stand and raise your right hand

to be sworn in.

[Witnesses sworn.]

Mrs. CUBIN. Our first panel then, I would like to call Mr. Leshy,

who is the Solicitor for the Department of the Interior, and ask for

his testimony. I would like to remind all of the members of the

panel that we have a time limit of five minutes for your presentation and if you could stick as closely to that as possible, that

would be appreciated. And we have some lights down there to tell

you when to go and when to caution and when to stop so do whatever you need. Mr. Leshy.

STATEMENT OF JOHN LESHY, SOLICITOR, U.S. DEPARTMENT

OF THE INTERIOR

Mr. LESHY. Thank you, Madam Chair, and members of the Subcommittee, I appreciate the opportunity to testify here today to discuss the final rule on bonding for hardrock mining operations. The

authority for these rules comes from the Federal Land Policy and

Management Act which directs the Secretary of the Interior—it is

his duty, not his discretion—to prevent unnecessary and undue

degradation of public lands from, among other things, hardrock

mining operations conducted under the old Mining Law.

Most members of the mining industry are responsible operators

who live up to their reclamation obligations, but there is no denying that when protective measures are not taken or are inadequate,

the consequences can be very costly, and unfortunately sometimes

the costs are passed on to Federal taxpayers and not borne by the

mining industry. There is a substantial record on which we acted

in strengthening these hardrock rules.

Your letter of invitation asked me specifically to address why

BLM had published new regulations after they ‘‘appear to have

been dormant over five years.’’ With all due respect, I think it is

impossible to say that the public policy debate about environmental

regulation of hardrock mining has been anything like dormant at

any time over the last five years.

This bonding regulation is a central part of that debate and I do

not think anyone concerned with the subject could have possibly

believed that Interior had put environmental regulation, including

the bonding regulation, in some sort of deep freeze. There have

been thousands, maybe millions of words spoken about hardrock

mining environmental regulation over the last several years.

I must reject the suggestion that we somehow behaved irresponsibly by suspending work on the final rule after we published the

draft rule in 1991, while we waited for Congress to grapple with

and we hoped enact acceptable reform of the Mining Law. In fact,

deferring to Congress and waiting for it to act in the 103rd and

104th Congresses was a very responsible thing to do. I think it

would have been terribly confusing had we come out in the middle

of a congressional debate on the subject with a final bonding rule.

That deference to congressional action explains a substantial

part of the time between the draft and final rule. The other part

of the time was taken up by our need to carefully and fully comply

with the numerous procedural hoops in the rulemaking process
7

that Congress and the President have created for rulemakings. A

number of these requirements are new. Compliance with the Paperwork Reduction Act alone here took several months in between

the draft and final rule.

Some might think it a little ironic that, because during the time

between the draft and final rule we decided to defer to congressional action and we took great pains to comply with the requirements, most of them from Congress, on the rulemaking process, we

are now criticized. Frankly, I think if the reverse had been true—

that if we had not waited for Congress or if we had not done a

careful job jumping through these rulemaking hoops—we would

have been severely criticized. I guess no good deed goes

unpunished.

Your letter also asked me to address the merits of publishing the

rule as a final rule without meaningful recent public input. There

are several things to say about that. First, we had substantial public input on the draft regulations. It was meaningful. We carefully

considered those comments in putting together the final rule. There

has been no effort or attempt here to short circuit full consultation

with the public as a normal part of the rulemaking process.

I must say a careful consideration of public input here was in

stark contrast to that of the BLM in the Bush Administration. In

1990, the director of the BLM made some very substantial changes

in the bonding policy of the BLM without publishing a rule at all,

but instead by simple memorandum signed by the director, without

going out for public comment. It made many more significant

changes in the previous practice than the changes between the

draft and final rule here, and those changes were made, I repeat,

without any effort to get public comment.

The differences here between the draft rule published in 1991

and the final rule published earlier this year are relatively insignificant in the overall context of the proposal. The draft rule would

have required bonds for all notice mines and all plan mines. So

does the final rule. The only difference is in the level of bonding

required. The draft rule would set the level at full cost for certain

categories of mining and a prescribed maximum per acre for other

categories. The final rule requires full cost for all categories with

some mandatory minimums.

Both the draft and final rules enlarged the categories of qualifying bond instruments. There are few differences in the kind of instruments accepted between the two: the final expanded in one

area and contracted in a couple of others. There are a few other

changes primarily for clarity. The basic structure, approach, and

most of the details remain the same. Changes are exactly the kinds

of changes that are within the original scope of the rulemaking and

are the kinds of changes one would expect in a normal rulemaking

process in response to public comment.

There is nothing out of line here, legally or otherwise. We look

at this, in conclusion, as really a simple matter. A mining claimant

operating under the old Mining Law of 1872 is offered a practically

unparalleled opportunity in modern American life—access to explore for and develop valuable public property while paying the

owners of that property, the taxpayers, pocket change.
8

If a claimant cannot provide some assurance to the taxpayer that

he, and not the taxpayer, will bear the cost of restoration, protecting water quality and the health of the land, then that person

or entity should not be out there on the public lands threatening

water, air and land. We are glad, Madam Chair, that you share

that policy.

We think the final bonding regulation is a reasonable effort to

protect the nation’s hardworking taxpayers. They deserve nothing

less than satisfactory guarantees that they will not be left holding

the bag for careless or irresponsible mining operations, and we

have found no reason in law or policy to delay the implementation

of the rule. Thank you for the opportunity to testify. I am, of

course, happy to answer questions.

[Statement of Mr. Leshy may be found at end of hearing.]

Mrs. CUBIN. Thank you for your testimony. I have to say I am

somewhat surprised. I frankly think that these issues are much too

important to be partisan and I truly regret that you felt the need

to bring up something that happened in the Bush Administration

and try to justify actions taken by you or the Secretary or whomever. We have got to get the partisan politics out of natural resource issues, out of environmental issues, out of development

issues, Mr. Leshy, because nobody has any credibility when it is

partisan.

We have to depend on the process. We have to hold the process

inviolate because only by protecting the process can we protect the

resource and can we protect the American people and their right

to be compensated for their minerals and their right to have their

land reclaimed. And I would appreciate it if you appear in front of

this Subcommittee again that we leave the politics out of this.

You started your testimony by saying that the debate has not

been dormant about this bonding or about these regulations over

the past five-and-a-half years. I would suggest certainly there has

not been anything dormant about discussing bonding issues and

environmental issues but certainly the specific regulations and the

changes from the draft rules to the final rules in my mind are significant while I realize we have a difference of opinion.

In fact, after I read them I wondered if you had read both the

draft and the final because there are lots of differences and they

are major. I am sorry that you feel that no good deed goes

unpunished but you cannot deny this is an unique instance where

comments are taken 5–1/2 years ago, draft rules come out 5–1/2

years ago, and now it is jerked off the shelf, switched around.

Well, I guess that is enough of that. I do appreciate the fact that

you are here. I wish your testimony had been more insightful as

to why the Secretary chose not to seek new comments on this rule.

There were no reasons offered as to why no new comments were

asked. Perhaps you can help us understand that decision in a

minute, but let me say up front I was trained as a chemist, not a

lawyer, and although several of our colleagues today are lawyers

they will help me out on those issues but I do know that the Administrative Procedures Act which guides rulemaking has been interpreted by the courts to require agencies to solicit meaningful

public input before imposing a final rule.
9

I would suggest that input from up to ten years ago may not be

meaningful, is not meaningful at this point in time. You may be

aware that I wrote the Secretary asking for internal documents

within the Department which may shed light on the final decision

on why this decision became final. These have not yet been provided to me.

I appreciate the Department for providing the Subcommittee

with some of the documents that I requested for this hearing. However, the Congress and this Subcommittee have a responsibility

under House Rule 10 and 11, Committee Rule 6 in Article 1 of the

U.S. Constitution that requires this Subcommittee to have virtually

unfeddered access to nearly all departmental documents.

Therefore, I expect all requested documents to be produced. Any

observer would probably agree that the rule we are looking at

today was finalized in a highly irregular manner. I intend that we

get to the bottom of this issue of the issuance of this rule. Doing

so absolutely requires access to the documents that I requested

without conditions that inhibit the legitimate oversight functions of

this Subcommittee.

While the President’s concerns are understood, I want to make

three points from the Subcommittee’s perspective. This must also

be very clearly understood by you, by the Secretary, and by the

President. While it is for the President to assert deliberative process privilege himself, this privilege is not available to the Department.

Secondly, under congressional precedent, it is for the Congress to

determine in its sole and sound discretion whether to accept any

claim of any attorney privilege that the executive exerts. I intend

to take the views and desires of the Department in making this decision but nonetheless it does not change the basic fact.

Third, even if documents are qualified for the attorney-client

privilege disclosure to Congress does not waive that privilege as to

third parties. So the Department should not be concerned with releasing documents or limiting access to them. Furthermore, we are

talking about a rule that is a final rule. The Subcommittee is simply trying to bring the decisionmaking process concerning that rule

into the true light of day.

The rule itself may very well come to be the rule that is accepted

and acceptable to everyone involved, but my job and the job of this

Subcommittee is to protect the integrity of the process in order that

we can protect the people of these United States. I would appreciate your sending me the rest of the documents as soon as you can

so that we can get to work so that I can understand why this

unique process has occurred. I would like to know the reasons for

bringing this out as a final rule at this late date.

Mr. ROMERO-BARCELO ́. Madam Chair.

Mrs. CUBIN. Mr. Barcelo ́.

Mr. ROMERO-BARCELO ́. I just wanted to make sure, I understand

that the Department believes some of the documents to be turned

over are considered privileged documents and if that is so I am

sure that before they turn over the documents they would like to

enter into some kind of a written agreement or stipulation to make

sure that those privileged documents are not made available to

anyone else.
10

Mrs. CUBIN. Mr. Barcelo ́, I would suggest to you that that is not

within the authority nor the purview of the Department. The President, yes, but the Department, no.

Mr. LESHY. May I speak to that issue?

Mrs. CUBIN. Excuse me?

Mr. LESHY. May I speak to that issue, Madam Chair?

Mrs. CUBIN. Please.

Mr. LESHY. The concern expressed by Congressman RomeroBarcelo ́ is exactly right. We have no desire to withhold documents

that you have requested. We will make them available to you. The

procedure we are trying to work out here on quite short notice,

since we got the document request I think last week, is a procedure

that we have worked out with any number of congressional committees, I think including this one in the past, which is to just have

an understanding that the documents we turn over to you will not

be disclosed outside of the committee without at least checking

with us, because they involve things that could become privileged

in litigation and if they are disclosed——

Mrs. CUBIN. Well, Mr. Leshy, why did we have to have this hearing for you to tell us that?

Mr. LESHY. We have told you that previously. My deputy wrote

the committee counsel a letter a couple days ago, I believe, which

spelled all this out. They have had numerous phone conversations.

I thought it was well on its way to being resolved. We are asking

for no special treatment here.

We have worked this out with Congressman Burton’s committee,

we have worked this out with any number of other committees

under which we make available documents that could be sensitive

where we could waive privilege if litigation ensued over a matter,

documents that we would normally keep privileged and not disclose

in litigation. All we are trying to work out is an understanding of

how these documents will be treated. We are not trying to withhold

any documents.

Mrs. CUBIN. Just because you give them to us does not waive the

privilege in a judicial process.

Mr. LESHY. We have to have an understanding about what you

are going to do with the documents in order for us to be assured

when we turn them over that the privilege——

Mrs. CUBIN. And I believe you have had that under—I believe

that you have understood very well. I believe that you have been

very disagreeable about providing those documents to us but there

is no question there has never been—how simple can it be? We

want to understand how the decision for the final rule was derived

and we need these documents. How simple can it be?

Mr. LESHY. We have reached arrangements like this with any

number of other committees without difficulty. We are simply trying to reach an equivalent understanding here. We have had no

problem in this area. We have had numerous discussions with your

counsel and your staff on this. I thought we were working this out.

Mrs. CUBIN. We can get you a letter today if it will be satisfactory and I hope the documents will be coming forthwith. Mr. Romero-Barcelo ́, do you have questions?
11

Mr. ROMERO-BARCELO ́. Do I understand it is all right to word the

agreement, to make an agreement as to how the committee is going

to proceed with what is considered privileged documents?

Mrs. CUBIN. We will agree to discuss why we need the documents. However, we are not obligated to do that and I would like

to make that very clear on the record. I will give them a written

assurance as to how we will handle the documents if that is the

problem.

Mr. ROMERO-BARCELO ́. Is that a concern of the Department?

Mr. LESHY. The concern of the Department is simply that some

of the documents that have been requested, that we are willing to

supply, are documents that we could assert a disclosure privilege

on if the matter concerning these rules ends up in litigation, and

we need to just have an assurance, an understanding with the committee, about how those documents will be treated.

Again, this is something we have worked out with any number

of congressional committees on matters like this. This is not anything unique to this arrangement, and we have worked this out

without problem everywhere else. I am not sure why we are having

a problem here.

Mrs. CUBIN. We are having the problem here, Mr. Leshy, because

of the time involved. Just as you seem to think it is all right to

use testimony that is ten years old, 5–1/2 years old to make a final

rule, you think that time span is acceptable, I do not think it is

acceptable to request documents and be stonewalled and that is

what I feel has happened in this case. But you will have the letter

today.

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

Mrs. CUBIN. I do not know who was—OK, Mr. Cannon, do you

have any questions for Mr. Leshy?

Mr. CANNON. I do, Madam Chair, thank you. Let me just at the

beginning that I find attempts to not communicate documents most

irritating and highly consistent with many other activities in this

Administration. I do not think it moves toward a good public policy

or development of public policy.

One of the things that I am deeply interested in is how this issue

got pushed forward again. I assume, Mr. Leshy, you were a party

to some discussions about bringing this issue, the rules, forward

again. What precipitated that? Who got together and decided that

we ought to have these rules promulgated?

Mr. LESHY. Thank you, Mr. Cannon. There is absolutely nothing

irregular about the process that was followed here. In the Bush Administration in about 1989 the decision was made to do a rulemaking on bonding—1990, I think. In 1991 proposed rules were

published. In 1993 the process had advanced to the point where the

final rule was being prepared.

At the time the Congress, both Houses, were very seriously debating Mining Law reform. That Mining Law reform legislation

would have superseded these rules. As you may recall, both Houses

of Congress in 1993 and ’94 passed Mining Law reform bills and

there was a very long conference committee deliberation and it was

not until October of 1994 that that failed.

Up until that failure I think many, many people thought that

there would be Mining Law reform. We made the judgment in 1993
12

as Congress was debating it that we would only introduce serious

confusion and consternation into the process and cause a great deal

of understandable concern in the industry as to what was going on

if we came out with a rule while Congress was debating this subject, so we made what I thought was a very rational decision in

early ’93 to put it on hold until Congress solved the problem for us.

Now Congress did not solve the problem, so in early 1994 we resumed the process of going forward with a final rule. Congress in

the meantime had added on some new requirements in the rulemaking process and we wanted to do this very carefully and thoroughly and make sure we complied with everything and it frankly

took a couple years to put all that together to come out with a final

rule.

There was nothing irregular about the process. Rulemaking often

takes years. We looked very carefully at the issue the Chair raised,

about are we somehow behaving inconsistently with the law to

come out with a final rule that has been several years since the

draft rule——

Mr. CANNON. My question does not go to irregularity. I have

heard your discussion of that. At the point in time, I think you

were saying it was in October of ’94, there was apparently some decision that Congress was not or it was apparent that Congress was

not moving forward and that the Department should take up the

rulemaking again. Who was part of that discussion? I take it you

were. Who else was there and what was the nature of the discussion?

Mr. LESHY. Frankly, I cannot recall. I am sure I was involved.

I am sure the Secretary was involved. I am sure Assistant Secretary Armstrong was involved. Probably Acting Director Dombeck

of the BLM and the people, the career people in the BLM who had

worked on this process and several other people.

It was a logical—if you put yourself back at that time, we had

made a very serious effort with the Congress to try to get Mining

Law reform, and when that failed at the very end of the 103rd Congress, then we all said to ourselves, OK, now what do we do and

what do we have in process that we have interrupted while we had

been waiting for Congress.

There were a number of things we had in process. We had a rule

on use and occupancy of mining——

Mr. CANNON. Pardon me, I would actually like to just focus on

the issue of that meeting. The Secretary was quoted in I believe

the Washington Post the other day as being critical of Congress’

failure to do things that needed to be changed and then went forward to say that these rulemakings were going to go forward to do

things that he thought was right.

I am wondering what was actually said in that meeting or if you

have any recollection of the discussion because I do not think it is

proper for the Department to substitute its judgment for Congress

and if we have issues that are difficult here they ought to be perhaps left to wait on us. So what I am really wondering is what happened in that discussion? Who took the initiative, do you recall? Do

you have any recollection of the nature of the discussions about

what Congress did or said or failed to do and what the context was

for moving the rule forward?
13

Mr. LESHY. I do not recall specifically what the discussions were,

although I can surmise what they were about. You have to remember that this bonding rule was to address a problem that was identified in the Reagan and Bush Administrations as a problem that

needed to be addressed. That was why the proposed rule was published. That is why the rulemaking process was started. It was suspended while Congress was considering the same subject——

Mr. CANNON. We do have a limited time. Would you summarize

for me what was said if you can do that.

Mr. LESHY. I imagine that after Mining Law reform went down

in the 103rd Congress we all got together and said, OK, now what,

since Congress has failed to address this problem this year, what

are we going to do on the initiatives we had underway that we suspended while we were waiting for Congress to act.

And as I said, that included the bonding rule, it included use and

occupancy regulations, it included a policy on acid rock drainage,

and it included a number of other things, so all of these things that

had been put to one side while Congress was deliberating, we now

essentially said, OK, there is no reason to put them to one side. We

are following and carrying out the commitment made in the Bush

Administration to upgrade the bonding rules and so we put that

back into the active calendar.

Mr. CANNON. My time is now out. Thank you very much, Mr.

Leshy.

Mr. LESHY. Thank you.

Mrs. CUBIN. Mr. Rahall, do you have questions? That is right, I

yielded to you. Mr. Barcelo ́. Mr. ROMERO-BARCELO ́. Thank you, Madam Chair. Mr. Leshy, it

would appear that the mining operators with mines of five acres

or less on public lands feel that the rule is unfair and it would

place a costly burden on them. How would you respond to these

concerns?

Mr. LESHY. First of all, this is not an issue on which there was

really a difference between the draft and final rules. That is, the

draft rule would have required bonds for all operations including

those under five acres. So does the final rule. So the discussion we

had been having about that issue is not really directly relevant to

the impact on small miners.

The second thing to say is that many States already impose such

bonding requirements, and where they do, these rules defer to

them where they are the equivalent to the Federal practice, so this

is not a brand new sweeping requirement that applies everywhere

where nothing applied before. Third, we did as part of the effort

over the last year make a very serious analysis of the impact of

this on small miners. That was part of the so-called ‘‘determination

of effects’’ of the rule that is required by one of the regulatory reform acts.

Actually we worked very hard on that to make it as accurate as

we could. It lays out what might be the maximum impacts and we

think they are really frankly pretty marginal. Most operations

under five acres either will not be hit with a new requirement because they are already part of this under State law, or where they

are hit with a new requirement it will be phased in to some extent

and they can handle it, and if there are a few marginal operations
14

that cannot handle it, frankly I think the policy judgment that has

been made, and I think it is the correct one, is that those people

should not be operating on public lands if the net result of their

operations is going to be the taxpayer foots the bill to clean up.

Mr. ROMERO-BARCELO ́. For the record, do you have any numbers

of how many hardrock mines have been abandoned without being

reclaimed, actual number?

Mr. LESHY. There is a fairly rich record of that in the GAO, General Accounting Office reports. The GAO issued several reports in

the mid to late ’80’s. We have asked the BLM informally for some

further information on that. There are dozens of operations, I think

it is fair to say, that over the last several years where people have

walked away and left a cleanup mess that the taxpayer will have

to pay for. So these rules address a genuine problem.

Mr. ROMERO-BARCELO ́. On the other hand, Mr. Hocker, who will

be testifying after you suggests disappointment in the rule. He

feels that the Department should have made the rule stronger. And

how do you respond to the concerns that the rules are weak and

they do not meet the Secretary’s legal obligations to protect the

public lands?

Mr. LESHY. Well, what we have tried to do there, Congressman,

is strike a balance between the concerns that you expressed about

the impacts on small miners and the taxpayers’ interest in not paying for these cleanups. We recognize the rules could have been

stronger in certain areas but we think they are reasonable accommodation of a healthy mining industry and the taxpayers—the

needs of the environment and the interests of the taxpayers.

Mr. ROMERO-BARCELO ́. As you prepared the final rule how do you

consider the effect of the changes in the State law since 1991, was

that taken into consideration and if so, how?

Mr. LESHY. Well, the general approach of the final rule, like the

draft rule, is to say basically these are the Federal standards and

if State laws meet those standards, so that if you get a bond under

State law and it is the equivalent essentially of the Federal standard, we will not require anything else. We are not going to duplicate State requirements.

So to that extent, when States change their laws, they are automatically incorporated or accommodated in the rule. The rule does

not specifically go out and say, ‘‘Nevada is fine,’’ and ‘‘Wyoming

needs to do more,’’ or whatever. We just simply say that this is the

Federal floor, and if a miner complying with State law will meet

or exceed that floor, then the BLM will defer essentially to that.

Mr. ROMERO-BARCELO ́. And how will the changes in the State

law affect the rule, the bonding rule?

Mr. LESHY. Again, future changes in the State law would be handled the same way. That is, if a State that falls below the Federal

floor now would improve its law to come up to the Federal floor

then we would defer to the State law. We do not want to duplicate

State law where we think it meets Federal standards.

Mr. ROMERO-BARCELO ́. In other words, where the State protects

the lands more than the rule the State law applies?

Mr. LESHY. Generally speaking, that is true. A State can impose

more stringent reclamation or bonding requirements and apply

them to Federal——
15

Mr. ROMERO-BARCELO ́. But not lose their requirements.

Mr. LESHY. But not loosen them. We do not think we can do that

and have the Secretary live up to his legal obligation to protect

public lands from unnecessary and undue degradation.

Mr. ROMERO-BARCELO ́. And how difficult is it to secure a bond

for small miners?

Mr. LESHY. Well, I can get you more information on that. The

BLM people that deal with this issue on a daily basis think that

these rules can be complied with in the vast majority of cases without great difficulty. I should note that one of the changes made in

the rule, from the previous rule that was in effect, actually enlarges the category of instruments that will suffice to meet the financial standards.

In other words, we have to some extent raised the bonding requirements, but we have also enlarged the ways you can comply,

so in that sense the changes operate in favor of the industry.

Mr. ROMERO-BARCELO ́. What are the guarantees, financial guarantees, does the Bureau of Land Management accept? I guess I

have run out of time.

Mr. LESHY. They are enumerated——

Mr. ROMERO-BARCELO ́. Briefly.

Mr. LESHY. They are enumerated in the final rule. There is a

whole list of them, stocks, municipal bonds, the normal kind of surety bond you would go out and acquire, and various other kinds of

assets that you can essentially post as security for your operation

and they are listed completely in the final rule.

Mr. ROMERO-BARCELO ́. Thank you, Mr. Leshy.

Mr. LESHY. Thank you.

Mrs. CUBIN. Mr. Gibbons.

Mr. GIBBONS. Thank you, Madam Chairman. Mr. Leshy, I share

the Chairman’s sentiments about the unwillingness of your agency

to come forward with documents that are requested and I share

also her sentiments when I listen to your answers, how vague they

are, because you only say that the reason you are not submitting

those documents is because you have a belief that some of the documents may possess some privileged information.

You cannot hide the whole bundle of documents under such a request and I would share with the Chairman in her request to get

these documents to us because I am very concerned about the substitution of what your agency believes is the information we should

have. We should have every piece of paper in this committee that

your agency has that we ask for, privileged or not. Now let me ask

a final question.

Mr. ROMERO-BARCELO ́. Would you yield for a minute?

Mr. GIBBONS. You know, I will in a minute if I can, Mr. Barcelo ́.

Mr. ROMERO-BARCELO ́. All right.

Mr. GIBBONS. I appreciate your concern in this matter and perhaps we will get into a dialog or colloquy without interrupting Mr.

Leshy’s answers to this. I am sure that we are all going to share

in that. Mr. Leshy, has not the BLM or the Department of the Interior sought out or established a 3809 task force to review Mining

Law regulations?

Mr. LESHY. Yes.
16

Mr. GIBBONS. Doesn’t it seem odd to you that 3809 also includes

bonding requirements and that if you produce this proposed change

today that a review of the 3809 regulations would also produce a

proposal to change bonding regulations?

Mr. LESHY. The 3809 task force that the Secretary directed be established in January of this year is looking at a whole range of——

Mr. GIBBONS. Mr. Leshy, just answer the question, will the 3809

task force look at bonding issues?

Mr. LESHY. It may.

Mr. GIBBONS. So we could see another change to the bonding requirements under 3809 review, yet you are telling us that because

you feel that you have got to rush through this change today after

a hiatus since 1991 of information and public output and State regulatory changes that it has got to be done today?

Mr. LESHY. The bonding inadequacy was identified as a problem

ten years ago. Every day that goes by without it being addressed

puts the taxpayers at risk. The effort was well on the way, nearly

on the brink of completion, in 1993.

Mr. GIBBONS. Mr. Leshy, if it puts the taxpayers at risk, why did

you wait so long to get to it today? Have you not had this issue

before you since 1991?

Mr. LESHY. As I said before, we waited essentially for two reasons. One is to try to let Congress try to reform the law, and, second, to make sure we complied with all the regulatory requirements.

Mr. GIBBONS. Obviously, you did not need to wait for Congress,

did you?

Mr. LESHY. Well, I can just imagine that if we had put a bonding

rule out in 1993 that we would have been hauled up perhaps before

this committee or another one being asked what are you doing, we

are fixing this law, why are you throwing this in the middle of it

and confusing everybody? That was a great concern and I think

frankly it was a reasonable decision to defer until Congress enacted

Mining Law reform.

This was not a casual effort by Congress. Both Houses of Congress for the first time in 125 years passed bills to reform the Mining Law and there was a six-month conference——

Mr. GIBBONS. I just do not want to see you back here before this

committee if you are going to do it today with this proposal as you

propose, come back with a 3809 review task force committee recommendations and change it again.

I think this is just an extreme inexcusable process that you are

going through today by denying due process and democracy to all

those people who want to contribute, who want to comment on

these changes. Putting that aside, what other BLM requirements

have a bond that is submitted directly to the BLM for them to

hold? What requirements?

Mr. LESHY. I may have to get some further advice here but I am

quite sure that a number of mineral leasing operations bonds are

imposed. Certainly, the Office of Surface Mining and the State coal

regulators impose bonds routinely as a matter of coal mining.

Mr. GIBBONS. Are those held by the State or the BLM?

Mr. LESHY. Well, with respect to coal mining it is the Office of

Surface Mining, the Federal agency and State agencies. I think it
17

is fair to say that in many, many different kinds of developments,

certainly mining activities, oil and gas and coal, bonds are a routine part of doing business at both——

Mr. GIBBONS. Mostly held by States though?

Mr. LESHY. State and Federal agencies. I think the arrangements

are basically the same as I described earlier, that is, if the States

may impose a higher requirement than the Federal floor if they

choose to so to avoid duplication—

Mr. GIBBONS. Is the BLM then going to take responsibility for

managing those funds within its own accounts if it establishes this

requirement for bonds to be submitted directly to the BLM and

held by the BLM?

Mr. LESHY. I may need a little help here. BLM, I think does not

actually hold the bonds. They simply must be certified that the

bonds are there, held by a financial institution, a trust account,

and you can put common stock in a stock account under the

rules——

Mr. GIBBONS. It does not require them to be held by BLM but

it says they can be submitted to the BLM.

Mr. LESHY. The assurance that they are there, the certification

that they are there and available to pay for reclamation costs if the

miner walks away, that is what we need. We do not necessarily

need the cash as long as we can put our hands on the cash if there

is a failure.

Mr. GIBBONS. So we can do this through a State regulation. The

States could do this and the States are doing this today, aren’t

they?

Mr. LESHY. Right. As I explained before, if a miner has to post

a bond under State law that meets the Federal standards, that is

all we require, as we do not want to duplicate and do not duplicate

State law where it is adequate.

Mrs. CUBIN. Mr. Rahall, do you have any questions for the Solicitor?

Mr. RAHALL. Thank you, Madam Chair. John, let us begin with

a little stroll down memory lane. And let me add, by the way, that

it is your book on Mining Law reform written in your earlier career

as a professor that first sparked my interest in the whole arena of

reforming the Mining Law of 1872 when I became chairman of this

Subcommittee in 1985.

So I commend you for that book and your expertise which I think

ranks up there above and beyond the call of duty. And you have

given historical facts here and I appreciate that. We were very

close, very close, in the 102nd Congress of passing a reform bill. We

got a bill out of the House of Representatives about a 3 to 1 margin

bipartisan support including the now Speaker of the House of Representatives who voted for that bill. No, we cannot trust him, what

did you say?

And we have had many other related votes in the House like on

the patent moratorium, etc., which had strong bipartisan support.

But nevertheless the point is that what you have said about you

not being able to go forward at that time because of the conflicting

signals it would send is a very valid point and you are right, had

you tried to do that you would have been hauled up here in a second and asked, and grilled to death about why are you doing this
18

when we are so close and we were so close, we were in conference

committee, to passing a reform bill.

We were right up to the edge until we got the plug pulled out

from under us. So that is very sensible that you waited that long.

You know, there are those, and I am sure we will hear from them

before this afternoon is out——

Mrs. CUBIN. Would the gentleman yield?

Mr. RAHALL. Can I just finish this memory lane bit?

Mrs. CUBIN. What I have to say has to do with memory lane too.

Mr. RAHALL. Oh, OK, you are going to tell me when I was

chairing this Subcommittee.

Mrs. CUBIN. No, Mr. Rahall——

Mr. RAHALL. OK. I yield to the Chair, yes.

Mrs. CUBIN. Thank you. I just wanted to remind the gentleman

that the 104th Congress also passed Mining Law reform and it was

vetoed by the President. That is the only part of memory lane I

was able to stroll down. That is the only reason I remember that.

Mr. RAHALL. Oh, yeah, I was getting to that. You are talking

about sham reform. I am talking about real reform.

Mrs. CUBIN. Oh, OK, there is a difference.

Mr. CANNON. Would the gentleman yield? I suppose sham depends which side of the aisle or which side of the industry you are

from.

Mr. RAHALL. Well, we will get to that too. Darn it, you interrupted my memory. OK, as I was saying, there are some that are

going to be on this panel yet today that are going to come forward

and attack you pretty stringently probably, I would guess, that on

November 10, 1994, that year, the day after the revolution or whatever took place, that you did not come forward that day and do

this, and that what you have done now today is not strong enough.

They are going to say probably there should not be a cap on your

proposed rules. So you are going to take it from both sides. There

is no doubt about it. And I might also recall, and I am sure you

will remember when our good friend, Cy Jamison, at the time and

a former staffmember on this Subcommittee at the time was BLM

director, when he saw was happening back with the Rahall reform

bill started moving, he told us, perhaps it was not on the public

record, I will not go that far, but he was very clear. He told us that

he was seeking to soften our reforms up here in Congress by taking

administrative actions.

Let us not let the record go without that being very clearly put

on it. So I think let us get to the heart of the matter and let us

ask if what you are proposing here, if not this new bonding requirement is actually less stringent, John, less stringent than what

some of the States already are imposing?

Mr. LESHY. I believe that is true, yes. As I said, if States exceed

our requirements obviously a miner has to comply with the State

requirement but has automatically met ours by complying with the

State requirements.

Mr. RAHALL. That concludes my questions then. Thank you,

Madam Chair.

Mrs. CUBIN. Thank you, Mr. Rahall.

Mr. CANNON. Madam Chair, can I ask another question?
19

Mrs. CUBIN. You can. We are going to do a second round. We will

make it real quick. I wanted to just make two points or ask two

questions, if you will. The surety requirements that the State—correct me if I am wrong, but as I understand the final rule the surety

requirements that the States have set up will be approved by the

BLM manager in the State, is that correct, the State bonding

pools?

Mr. LESHY. I think that is right. I am sorry, Madam Chair. I had

to make sure of the answer. Yes, it is the State offices. They make

the determinations about whether or not the State bonds are adequate.

Mrs. CUBIN. And I think that is laudable. I think that is a good

idea. But the only thing that troubles me about this is that the

rules are going to go into effect March 31, 1997—the rule is going

to March 31, 1997, and the States will not have reported to you

what those financial requirements are by that time.

As a matter of fact, estimates are that it will take maybe six

months at minimum into the summer to get that information from

the States compiled and get it to you so why not allow an additional 60 days input because there are things in here that are substantially different than the proposed rule.

And honestly I am so sincere when I tell you this, I do not have

an investment in what those things are. I just have an investment

in protecting the process. So why not? I mean you will not even

have everything you need to implement the law anyway.

Mr. LESHY. Madam Chair, the BLM State offices are in constant

communication with the State regulators because the State regulators and the BLM folks work side by side in hardrock mining regulation and have for many years. Our State people are thoroughly

familiar, our BLM people in those States are thoroughly familiar

with what the State requirements are.

We already accept State bonds in many cases that meet the requirements of the old regulations. Many of those will meet the requirements of the new regulations. Since these rules have come

out, we have had a lot of meetings with the State regulators in

places like Alaska——

Mrs. CUBIN. But, Mr. Leshy, it was from your own office that we

found out that it would not be done by the time the rule went into

effect which leaves the miners in a situation where they do not

have any idea whether the surety of last resort as the State bonding pools are called will be adequate to cover their liability.

So I mean I just—my question to you is not whether or not they

are going to get it done because I heard from your office they are

not going to get it done by March 31 and it will be some months

after that, but that is not the question. The question is assuming

it will not be done, why not just give an additional 60 days after

5–1/2 years?

Mr. LESHY. Madam Chair, I think you are probably talking to

different people in the BLM than I am talking to because the people in BLM I am talking to think there is no problem here with

transition to the new rule. I should also point out that the most

significant change in the new rule is the requirement for bonding

by notice operators. Now the way the notice system works is——
20

Mrs. CUBIN. No, that is not the question. The question is assuming that the work will not be done by March 31 which is just a little while away, why not give an additional 60 days?

Mr. LESHY. I cannot answer the question because I have not been

persuaded, or told by anybody, frankly, in the Department that we

cannot implement these rules on schedule.

Mrs. CUBIN. OK, then, well, you cannot because what if a manager in a State determines that the State pool is not adequate,

then it might require State legislation to make the pool adequate

or to fix it so that it complies with what the manager would require.

I just honestly do not see the rush for this and even though you

say this is nothing new, they did this or that in the Bush Administration and they have done this or that before, the APA is very explicit about having meaningful public comment and this is an

anomaly in the process. Can you cite one single time for me where

draft rule has been on the shelf for 5–1/2 years and then with no

intervening activity at all the final rule comes out from the BLM?

Mr. LESHY. Madam Chair, we looked at this issue when we were

resuming work on the final regulations. Obviously, the BLM and

my office, consulted on, well, do we have any legal problems with

moving forward with this rule? We looked and researched all the

cases under the Administrative Procedure Act. There is not a single

case that we could find that says mere passage of time requires you

to republish as proposed.

Mrs. CUBIN. Well, let me just respond to that for a second. The

CEQ maintains a web site. And with a couple of clicks on the

mouse you can find guidance on CEQ matters such as when EIS

data goes stale. Stale is the quote. And I happen to have here a

page from NEPA Net and there it is. And let me read to you what

it says about stale data.

‘‘EISs that are more than five years old should be carefully reexamined to determine if the criteria in Section 1502.9 compelled

preparation of an EIS supplement. If an agency has made a substantial change in a proposed action that is relevant to environmental concerns or if there are significant new circumstances or information relevant to environmental concerns and bearing on the

proposed action or its impacts a supplemental EIS must be prepared for an old EIS so that the agency has the best possible information to make any necessary changes.’’

OK, I realize this is not EIS. I also recognize what the spirit of

the APA law is, if not the word of the law. And why should the

decision on this rule be different than data that is collected for an

environmental impact statement because essentially it is the same

data?

Mr. LESHY. The court cases in this area, Madam Chair, basically

look at the opposite problem, when an agency is dragging its feet

and not putting out rules fast enough. We have looked at all those

court cases. The basic question they ask is very simple: Is the final

rule within the scope and notice of what was proposed? Are the

changes that are made between the draft and final rule reasonable

in the sense that the people subject to the rule could have anticipated that these kind of changes would have been made?
21

And if you look at the draft and final rules here there is no question in my mind, we are on very, very solid legal ground. Nobody

could look at the draft——

Mrs. CUBIN. That would require a lawsuit by one of the affected

parties but the Congress does have the authority to stop the implementation by proposing legislation and I would certainly hope that

we did not have to go to all of that trouble just to be able to get

what is due the public anyway. But my time is up. Mr. RomeroBarcelo ́, do you have any further questions?

Mr. ROMERO-BARCELO ́. Yes, Madam Chair. Mr. Leshy, I am your

friend here on this panel and I do not mean that in any way whatsoever to anybody else, but I am just trying to set that in front for

the following reasons. I hear as I listen to everything that has been

said and my concern is that to me 60 days in terms of talking

about five years or six years seems like a very short time.

Let us assume that whatever you said is completely correct and

that you have complied with all the legal requirements and that no

one can overturn the rule. Let us assume that. However, if the people that are going to be bound by that rule feel somewhat that they

have not been given an adequate opportunity to address themselves to the rule then the people that you are going to be ruling

are going to be very dissatisfied I would feel that the rule is unfair

even if it is fair.

It is unfair because they feel they did not have a chance. Now

what reason is there for not giving 60 days additional—what harm,

what prejudice would this cause other than the fact that it would

take 60 days longer after five years to where the bonding would not

be required, would not be implemented in some areas?

That seems to be a small harm when you compare that to the

reaction of the people that are going to be bound by the rule that

feel that they were not being given an opportunity.

Mr. LESHY. Congressman, I just must respectfully disagree with

your assessment of what the impact of these rules is going to be.

Our feeling from the meetings that BLM has had with the field

people throughout the west that would be affected by this is that

this is not going to be a big deal.

I have met personally with many representatives of the mining

industry as late as last week, where I discussed many, many issues

of concern to the industry, and these bonding regulations were not

a concern to the people I was talking with because the States imposed these things fairly routinely.

In most places the industry complies with them. We are talking

about essentially a fairly localized impact. We are also talking

about a rule that has been discussed and a subject that has been

addressed for many, many years, a problem first identified in

1985–86. The time has come to draw it to a close and move forward, and we think we can do that with a minimum disruption on

this industry.

Mr. ROMERO-BARCELO ́. Mr. Leshy, I hear everything you said

and it still seems to me that you have not answered my question

about why is it so important, why is 60 days so bad, why is 60 days

so inconvenient when 60 days would allow those people that feel

themselves left out of the process an opportunity to speak up? Why
22

is that such a big problem? I just find it very difficult to see it and

I want to see it but I find it very difficult.

Mr. LESHY. Let me make sure I understand what you are suggesting. You are suggesting a 60-day delay in implementation of

the rule to allow for more comment or exactly what?

Mr. ROMERO-BARCELO ́. Right.

Mr. LESHY. Well, maybe we just have a different perception

about the nature of the problem and whether there is a problem

and how much difficulty might be in store for complying with the

rule. I am happy to take back to the Secretary that suggestion and

see what he wants to do about it, but I can tell you that we considered when this rule ought to be implemented, and what the timeframe ought to be.

Part of the problem is you are starting a field season for mining

operations relatively soon. Delay in implementation could actually

be even more disruptive because then you are into the middle of

the season and you have to worry about a bond, so that is another

consideration that would have to be taken into account here.

The BLM is doing extensive public outreach on this rule, is making sure that everybody out there knows what the requirements

are. And I also have to point out that, as my written statement

points out, there is a certain phase-in to this. The people most affected are the notice miners, operating under five acres, who have

not had a requirement of a bond before in most cases.

You only have to under these rules post a bond when you file a

new notice, so if you are operating this year within the terms of

a notice that you filed last year, you do not need a bond until you

file a new notice. So there is a good deal of transition phase-in to

this requirement anyway. Many of those notice operations will not

have to post a bond this year, because many of them will be operating within the terms of their notice. So there is already a good

deal of accommodation and transition built into this rule as we

have designed it.

Mr. ROMERO-BARCELO ́. I still have a problem that the fact of the

opportunity to speak up to something. That is my problem. In the

democratic system I think that people should be given an opportunity. I just feel from what I have heard it seems we might have

been lacking in that. Thank you.

Mrs. CUBIN. Thank you, Mr. Barcelo ́. Mr. Cannon.

Mr. CANNON. Thank you, Madam Chair. Just to comment following up on Mr. Barcelo ́’s comments. You answered the question,

Mr. Leshy, in the context of the transition under the new rule and

much of that I believe went the lack of urgency for having the rule

in place right now.

In other words, the transition period you talked about means

that it is not an urgent thing to do. I believe what Mr. Barcelo ́ was

talking about was taking the input from people who will be affected

by the rule. And the rule, as I understand it, differs fundamentally

from where I think government is going today.

In other words, in the State of Utah and many other States you

have bonding provisions already. People locally in Utah, I believe,

have a better sense of what they need to do there than people in

Washington do and that is I think the area where the rush to judg-
23

ment has created some difficulty and so I just echo Mr. Barcelo ́’s

views on that.

I think you get a lot more buy-in than you lose in the other areas

which you have actually minimized yourself. Let me ask just one

technical question. In the determination to do the rule the economic effect on small entities BLM used a different definition for

small entity. It is in section 3 of the Small Business Act according

to which the BLM can only change that definition if they have had

consultation with the Small Business Administration Office of Advocacy and, two, after an opportunity for public comment. Did BLM

go through those two steps in this process?

Mr. LESHY. I am sorry. Is the question why we used a different

definition?

Mr. CANNON. No, the question is did you—having used the different definition of small business entity, did you consult with the

Small Business Administration Office of Advocacy and, secondly,

did you offer an opportunity for comment, public comment, on that?

Mr. LESHY. Congressman, I am not frankly sure of the answer.

I will have to supply it after the hearing. Let me make sure I have

your two questions. Did we consult with the SBA Office of Advocacy and did we allow comment on that decision?

Mr. CANNON. Right.

Mr. LESHY. OK. I will get back to you in writing as soon as I can.

Mr. CANNON. Let me just add one other comment. We have heard

about the possibility of a sham legislation which did by the way

pass the House and the reaction in the Department of the Interior.

This is obviously an area where we are having a major transition

in America. I believe that the Department should be careful in the

process of Federalizing issues which do not need to be Federalized

and taking actions that are or could be perceived as being one side

of the issue as opposed to the other side which is the industry.

In fact, we live in America off the fruit of the land. Both the

Speaker’s chair in the House, we have an eloquent statement that

talks about passing laws that will allow for the development of natural resources so that all can enjoy the wealth of America and I

think it inappropriate to act unilaterally with an agenda which is

inconsistent with what I believe is the general view of how we

should develop our resources and whether or not we should Federalize certain aspects of the control of the development of our resources. Thank you.

Mrs. CUBIN. Mr. Rahall, do you have anything further?

Mr. RAHALL. No.

Mrs. CUBIN. Mr. Gibbons.

Mr. GIBBONS. Yes, Madam Chair, thank you very much. Mr.

Leshy, I want to explore a little bit more about some of your comments. In particular, you stated that it would be no big deal the

implementation to this with regard to certain States. I want to talk

about the economic assessment of the rule on the economy. The

BLM states that the impact for both notice and plans will be about

$17.1 million.

From the testimony we have received today, some of the background information that we have looked on bonding pool liabilities,

I think this figure may be grossly underestimated. For example,

sources that I have from the State I represent which is Nevada,
24

our government is very worried about the new rule’s requirement

for a professional engineer to certify reclamation cost estimates

which will push many small miners including junior companies

into seeking refuge in the State bonding pool.

I understand that to be bonded by the pool under the current Nevada law a miner must show three turndowns from commercial

surety companies before being eligible. Now please help us understand how the new requirement for notice level operators to be

fully bonded impact Nevada where State law does not now require

bonding of less than five acres.

Mr. LESHY. Congressman, the determination of effects that you

refer to, which came up with the $17 million figure, as I recall actually made every assumption that it could make in favor of maximizing that figure. In other words, while your information may be

that that is an understated figure, I think the determination of effects discussion itself makes it clear that it is, at least in the BLM’s

view, the maximum figure.

That document also contains an appendix, I believe, which discusses the impact State by State, which shows in terms of small

operators in Nevada the BLM’s estimate, and these are estimates

of people on the ground out there, that perhaps 15 individual operators will cease operations. That is out of a small miner base of

over 8,000. So we are talking about, at least the BLM thinks, a loss

of about two-tenths of 1 percent in the base operation.

I should also say that this determination of effects, I have

worked on a number of rules in my career in the Department, I

think frankly that this was one of the most careful and searching

and full determinations that we have ever done. We sometimes

take these things pretty casually. We made an extra effort here to

do as honest and sober and detailed an assessment as we could of

the impacts of these operations and I think that document, if you

stack it up with other documents like it in other rulemakings, you

will be impressed with the care with which BLM took their job

here of assessing the impact.

We wanted to make sure we knew what we were doing with this

rule, to make sure that we did not impose unnecessary pain or disruption on this industry.

Mr. CANNON. Madam Chair, I have no more questions, thank

you.

Mrs. CUBIN. Having no more questions myself, do any of the others on the panel have questions. Well, if not then, we can proceed.

Thank you very much, Mr. Leshy, for being here. We do have some

questions that we would like to submit in writing in the interest

of time, I know you have to be gone by 2:00. Thank you so much

for your appearance here today.

Mr. LESHY. Thank you very much, Madam Chair.

Mrs. CUBIN. If the second panel could please come forward. I

would like to welcome to this Subcommittee hearing today, Mr.

Paul Jones, President of the Minerals Exploration Coalition from

Golden, Colorado; Mr. Carl Hanneman, President, Alaska Mining

Association from Anchorage, Alaska; and Mr. Philip Hocker, the

President of the Mineral Policy Center, Washington, DC.
25

Thank you for coming. I am sorry that I am not going to be able

to stay for your testimony but I know we will have good representation. Mr. Jones, would you like to begin for us, please?

STATEMENT OF PAUL JONES, PRESIDENT, MINERALS

EXPLORATION COALITION, GOLDEN, COLORADO

Mr. JONES. Thank you, Madam Chair. Good afternoon. My name

is Paul Jones. I am the Executive Director, not the President, of

Minerals Exploration Coalition. I am pleased to be here this afternoon to address your committee on the BLM bonding regulation. I

have over 35 years experience in the mining industry in North and

South America in all levels of activity from that of a junior engineer through the Chief Executive Officer of publicly held companies.

The Minerals Exploration Coalition is an advocate on public policy issues involving access to, and the safe and environmentally responsible use of public lands of the United States for mineral exploration. On February 28, as it has been previously mentioned, the

Bureau of Land Management issued a rule on bonding of mining

and exploration activities on the public lands.

I am very deeply concerned about the manner in which this Administration established this rule. Unfortunately, the rule is formulated and published by the BLM without recent publication of notice to issue a rule, without recent public comment on the proposed

rule, and without consideration of events which affect the need for

or the operation of the rule.

BLM’s notice indicates that the proposed rulemaking process

began in July of 1991, five and one-half years ago. Many relevant

changes have occurred since 1991 which affects the recently issued

rule, particularly changes have occurred since 1991 in the State

regulations affecting mineral exploration on public lands which justify if not mandate that proposed rules should be reissued, a reasonable comment period established, public input taken and used

in the formulation of the new rule, whatever its content.

In January, on the 6th of January, Secretary Babbitt sent a letter to the Assistant Secretary of Lands and Mineral and the Acting

Director of the BLM asking them to prepare a plan to modify the

hardrock mining surface management regulations commonly called

3809 regulations which some of you Members have already mentioned.

When MEC saw that letter, we assumed that any such rule

change that is in the 3809 regulation would follow normal procedures publishing the proposed rule change, taking public comment,

considering that comment, and promulgating the final rule. The

propagation of the rule on bonding of minerals or mineral activity

gives us considerable alarm about how the Secretary plans to formulate new rules under 3809 regulations.

The Mineral Exploration Coalition publishes an Exploration Permitting Directory, and I brought a copy of it just to show you, it

covers 21 States, including all of the western States where most of

the public land is located. In addition, it includes midwestern and

eastern States where mineral mining occurs. The directory also includes BLM and Forest Service regulations on exploration activities.
26

Numerous changes have occurred in this directory since the July

1991 rules were initially published. A review of our directory will

indicate that all 21 States require some form of bonding for either

exploration and/or mining activity on public lands. These basic requirements for the States are shown in Section 5 of this manual

which is a one-page exhibit. I want to give the Clerk a copy of it

for your record.

This exhibit tells what is required, what permit is required,

which forms are provided, if drill holes are required to be plugged

and bonds are to be provided. Sixteen of the 21 States require

bonding for exploration. Two other States require bonding under

certain circumstances. Numerous revisions have been made in our

directory in the past few years that modify the various provisions—

as the States modify their reclamation standards.

In particular, the States of Arizona and New Mexico have come

out with completely new regulations since the 1991 date. The

States of Colorado, Minnesota, Montana and Nevada have made

substantial changes in their regulations. Just two weeks ago we received a complete new set of regulations from the State of Montana.

In the case of Colorado significant changes were made to the Colorado Mined Land Reclamation Act following the Summitville Mine

incident with new rules under the revised act being formulated in

1994. I was personally deeply involved in both the legislative and

rulemaking process in Colorado and will discuss this in more detail

shortly.

In reviewing our permit on the BLM rules, they even came out

with a new set of regulations or a new handbook on reclamation

in 1992, certainly after the closure of the public comment period we

talked about earlier. In the case of the Colorado regulations, I was

the Chairman of the Colorado Mining Association in 1992 and 1993

when the Summitville Mine was abandoned by Galactic Resources.

I was and am Chairman of the CMA Summitville Task Force.

This group—as such I have been involved in the negotiations that

reshaped our State law and the regulations that came out of it. We

made some major changes in the Colorado law all which enhance

the regulation in Colorado of the mining industry. Most significantly about that, we made major changes on our bonding requirements.

I have gone into more detail in my written testimony. In conclusion, I think the red light is on, in conclusion, the Minerals Exploration Coalition believes the new rule regarding bonding on mineral activity on public lands deserves new public comment and reconsideration before implementation.

The changes in the applicable State regulations related to mineral exploration and mining activity have changed considerably

since public comments were taken on the proposed rules in 1991.

These changes without exception have strengthened the requirements on mineral activity, including that on public lands. Adequate

regulation exists in States where exploration occurs on public

lands, thus the need to rush into this new rule is not necessary.

MEC is also concerned about the method of implementation of

the rule on bonding that this method indicates a disregard on the

part of the Administration and of the Department of the Interior
27

for the normal rulemaking process. This gives us much concern on

the upcoming 3809 regulation modifications.

In conclusion, I would like to clearly state that MEC is not opposed to posting bonds on exploration activity if that bond is in a

reasonable amount and is fairly administered. We already post

bonds for most all of our exploration activities. However, MEC believes adequate change has been demonstrated in both the need for

and the circumstances about the BLM rule on bonds to justify additional rulemaking of this issue prior to it being implemented. We

strongly urge the BLM to withdraw this rule, reinstitute the normal rulemaking procedure in this matter. Thank you, and I am

quite willing to take questions.

[Statement of Mr. Jones may be found at end of hearing.]

Mr. GIBBONS. [presiding] Thank you, Mr. Jones. Mr. Hanneman,

you are next.

STATEMENT OF KARL HANNEMAN, PRESIDENT, ALASKA

MINING ASSOCIATION, ANCHORAGE, ALASKA

Mr. HANNEMAN. Thank you, Mr. Chairman. I appreciate the opportunity to talk with you today. My name is Carl Hanneman. I

am President of the Alaska Miners Association, and I am also a

mining engineer and President of Alaska Placer Development. For

the past 17 years I have produced gold from Federal mining claims

in Alaska, both under notices and plans of operations.

And my relationship with BLM over the years has been professional and a positive relationship and it is fair to say that that is

representative of other miners in the State on 3809 issues, but we

have grave concerns about this present proposal, the final rule.

And I would like to deviate somewhat from my prepared remarks

to address some of the issues that have been raised here. There are

basically four reasons why this rule should not be implemented at

this time. It is six years stale now. The second is that there is in

fact substantive changes between this final rule and the proposed.

In the context of the overall 3809 review it is inappropriate to

proceed with the bonding leg of regulations at this time, and there

has certainly been an inadequate analysis of the economic impact

of this on our industry. To summarize some of the changes in the

regulative community that has occurred since the last public comment period, the State of Alaska established a reclamation statute

in 1992.

This bond pool provides coverage for the full cost of reclamation.

For the five-year period since the inception of this rule there were

an average of 104 bonded operations in Alaska. In 1996 there were

112 bonded operations, 59 of these were on Federal lands. Since inception there have been no bond forfeitures or draws against the

bond pool. That is since 1992 all operations larger than five acres

have completed reclamation as required including all those on Federal lands.

All notice level operators, including 96 on Federal lands, of those

96 none have established a record of noncompliance, so I submit

that this data shows that there is no compelling need to adopt this

final rule now, that the program is working in Alaska. I also submit that there is a misconception about the relationship between

BLM and the regulated community.
28

In a January 6, 1997, memo from Secretary Babbitt he states, ‘‘I

understand that in practice it is relatively unusual for BLM to

question what happens on these operations’’. This is simply not the

case. Miners go into the BLM during the winter, prepare their

plans, modify their plans. The authorized officer determines when

the reclamation is going to be sufficient. They visit the sites and

they have significant input to the notice level operators.

No operator can resubmit a notice and proceed under notice in

a subsequent year until his reclamation is complete from the prior

year as determined by the authorized officer. So the Secretary

would just a couple of months ago assert otherwise demonstrates

that the policies are not being driven by current information.

The final rule is substantially different than the proposed rule

and I will just use two examples. One is the bonding amount and

the other are the financial instruments allowed. They went from a

maximum cap on the bond to there being no cap at all. That is a

major change in approach from the aspect of a small miner unable

to obtain a bond so you go from being possibly able to financially

meet the bonding requirement to certainly not being able to.

When you add the cost of third party contractors the BLM has

just simply not considered the fact that most sites in Alaska are

remote, that you have to transport your equipment to those sites,

that the cost of that transportation is very expensive whether it is

overland winter freighting or by barge. Most of Alaska does not

have roads and therefore when they estimate the economic impacts

of the bonding and the bonding amounts there is a substantive

change when they require a third party contractor estimates to

complete the bonding.

Then you look at the type of bonding instruments allowed. They

purport to have added flexibility by adding additional financial instruments. Well, let us look at the ones they eliminated. They

eliminated the right to use real property or mining property, that

is, your house or your mining property. They eliminated the right

to use your mining equipment, so for most small operators in Alaska the assets that they might otherwise have available to meet a

bond have simply been removed. That is a substantive change from

the proposal and demands further review.

Their proposal to promulgate these final regs should be done in

the context of the overall 3809 review. If the argument that is appropriate to look at what Congress was doing and do a thorough

overall review of 3809 policies is appropriate a couple years ago it

is certainly appropriate now. It is premature to be addressing the

bonding leg of this in the context of the task force that has been

established.

With respect to the economic impacts, there are a number of

things here where they have simply inadequately represented or

estimated the economic impacts. One is this cost of transporting

equipment to the sites. They estimated cost to plan operators in

Alaska of $470,000. Under this proposal the cost of my operation

alone would be $312,000 or 66 percent of this total. I am only one

of 59 operators. It is clear that they have misunderestimated the

economic impacts.

I want to make it clear that we do not object to reclamation. In

fact, reclamation can and is being done under the current State
29

program but it is the financial impact of posting the bond when you

cannot even obtain such a bond is what we object to. For the reasons cited above, the AMA believes it has not been provided proper

opportunity for meaningful comment prior to the rule being effective.

In January 1997, Secretary Babbitt announced that BLM has

moved forward to complete ‘‘a Final Rule on hardrock mine bonding

to strengthen financial assurance requirements to meet reclamation responsibilities’’. The Secretary also said ‘‘It is plainly no

longer in the public interest to wait for Congress to enact legislation.’’

I submit that it is in fact Congress, not the Secretary, that

should establish public policy in this regard. If Congress does not

see fit to enact certain laws, on what basis does the Secretary gain

justification for proceeding on his own? The AMA thinks that the

recently issued final rule is flawed. We urge this committee to do

everything in its power to restore integrity to the public process.

Thank you.

[Statement of Mr. Hanneman may be found at end of hearing.]

Mr. GIBBONS. Thank you, Mr. Hanneman. Mr. Hocker.

STATEMENT OF PHILIP HOCKER, PRESIDENT, MINERAL

POLICY CENTER, WASHINGTON, DC

Mr. HOCKER. Mr. Gibbons, Mr. Rahall, thank you very much for

holding this hearing today and thank you both for staying in attendance. We appreciate that very much. I am tempted to join Mr.

Rahall with some trip down memory lane. It is hard to avoid. We

have had hearings in this room when the entire dias was filled on

these topics and I anticipate that in the not too distant future we

may have the entire dias filled again working on reforming the

1872 Mining Law. I look forward to it and I look forward to your

participation in that.

These regulations are the tip of that iceberg. I think it is tremendously important that that iceberg be put in motion this way and

we encourage the Department to move forward. We have talked a

little bit in this memory lane trip about Congress versus the Administration but that seems to be—it is kind of like one of those

weather vanes that different people want to blow one way or the

other.

And it was very clear in the Bush Administration first that the

need for these regulations was widely and unequivocally acknowledged and supported, that the Administration and the Interior Department were committed to carrying out exactly the type of regulations that are under discussion today.

The need for those regulations had been established through

many widespread, thorough, documented studies, hearings held in

this room and also hearings held in the other chamber, studies (of

which I have a few with me here today) prepared by the General

Accounting Office, studies prepared internally by the Interior Department, and in fact even reports by organizations and members

of the mining industry itself.

All of those studies pointed to the need for better protection for

the public interest so that we the taxpayers would not have to pay

to clean up the problems from mismanaged mining on public land.
30

Now I applaud the statements of Mr. Jones and Mr. Hanneman

today because I think they represent responsible mining operators

and I think that their efforts and the care with which they are carrying out their operations, I speak on the basis of my trust in them

and not on personal knowledge of their work, is exemplary.

But we have been through this before. We went through it with

the coal industry, as Mr. Rahall knows. We went through it with

what was known as the two-acre exemption which was an effort to

frankly give special privilege to small coal operators on the theory

that they could not do enough damage to make much difference

and that it would be in the general public interest to let them go

ahead unbonded in order to allow them to persist.

After a long experiment of many years, that experiment was

found to be a failure and Congress in this room and in the chambers made the decision that the two-acre exemption was bad public

policy and needed to be ended. These regulations are in effect a

regulatory extension in hardrock mining of the end of the two-acre

exemption.

Now we believe in the Mineral Policy Center, and although we

have not polled the environmental organizations broadly, I think it

is fair to say that this is their view too, first, that these rules are

long overdue. In fact, we were pleased although somewhat concerned when Director Jamison in 1991 made a commitment in

hearings, according to my recollection, I have not been able to relocate his testimony although we are working on that, that these regulations would be promulgated.

Shortly thereafter, the draft regulations were put forward by the

Department in 1991 and then for no reason that we could determine the Bureau of Land Management did not go forward and

adopt final regulations. Early in 1993 we called Secretary Babbitt’s

people within the Bureau and said, ‘‘OK, how about moving forward with the bonding regulations,’’ and they said, ‘‘Well, we are

looking to see what Congress does, we have not made a decision

on that yet.’’ Our files show records of that telephone conversation.

We urged them at that time in 1993 to move forward with the

adoption of bonding regulations because we believed, and still believe, that the public interest was at risk because of this. Now we

are in 1997. Finally—I think four years later than they should

have—the Clinton Administration has brought forth these rules.

We see no need for further delay. We think there is, in fact, a very

specific reason to move forward with these right now because, as

Mr. Leshy pointed out earlier, because of the timing of the mining

season, because of the annual seasonal nature of many of these activities, a relatively short delay could postpone for an entire year

the effect of these regulations on notice operations.

We quite frankly believe these regulations are far too weak. We

would prefer not to see distinction made between what are called

notice operations and plan operations mining. The U.S. Forest

Service for many years has operated under a system of treating

mining operations of all different sizes essentially under the same

rules. That system has worked well for the Forest Service and we

think it would work well on Bureau of Land Management lands as

well. We would prefer to see that adopted.
31

Furthermore, I think it is worth commenting that what changes

have been made between the draft and the final regulations as we

see them today are well within the scope of the public debate—the

changes that have been made are well within the scope of the public debate which was carried on both in 1991 and was reflected in

very broad industry comments as well as environmental group comments that were made on the draft 1991 regs.

So the changes which Mr. Hanneman and others have referred

to are well within the range of discussion and the type of public

comment and information which was submitted in 1991. There is

no need for, and nothing would be gained by, postponing the implementation of these regulations and soliciting further comment. The

issues have been aired. The issues are on the table. The issues

were fully considered by the Department when these regs were

adopted.

We hope to see the regs strengthened in the near future, but we

see no need for delay in putting this level of protection for the public interest into place right away. Thank you for the opportunity to

comment.

[Statement of Mr. Hocker may be found at end of hearing.]

Mr. GIBBONS. Thank you, Mr. Hocker. Mr. Jones, you listened

and heard the Solicitor earlier talk about his concerns about this

issue and this bill and the need for it, and then Mr. Hanneman

listed out four of his reasons why he thought this bill and its urgency were not necessary at this point in time. You have heard Mr.

Hocker recite almost verbatim what Mr. Leshy talked about. What

is your opinion, what is your analysis of this bill and what impact

do you think it would have on the industry from your perspective?

Mr. JONES. The bonding regulations are not a stand alone issue.

The bonding regulations have to tie in with the other 3809 regulations. Now I am not here today to try to get a lengthy delay in the

bonding process. As I said in my prepared statement and said here

in my verbal statement, MEC does not object to bonding but we are

concerned that there are several things in the regs as we see them

that are cloudy or murky in their meaning.

The bond will be released when BLM is satisfied that reclamation has been completed. What reclamation? What degree of reclamation? What limits of reclamation? Now this is all put together

in the operating plan but this is an important part of the release

language and that is really not addressed in the regs satisfactorily.

There is a requirement in there for professional engineer approvals or workups of the cost estimates and I understand why that is

in there and I understand how it is in there. And that makes good

sense on a mining operation of a large nature. Colorado requires

that but on only certain specific things. If I go out in the public

lands and drill five drill holes, do I have to have a professional engineer go out with me and do an estimate beforehand of what it

is going to cost? And what is that cost going to impact the small

explorations that go out.

There is no criteria in the regulations and maybe this is expecting too much from government, there is no criteria for a maximum

amount of time BLM has to respond on these things, these permit

applications or plan of operations. This is crucial to the small
32

miner. It is crucial to the exploration. It is crucial to the big companies how long this process can go on.

I understand there are probably some small miners that abuse

the process and doing away with the small miner exception I understand is politically probably correct but it will impact these people. It will impact them probably more so than it will impact the

large company and I think this needs more thought into it. One of

the things that I do not believe is in the present regs and I do not

believe it is the present BLM 3809 regs that I think concerns us

is when we file information with BLM on exploration projects, we

need that information contained in a confidential manner.

Under our Colorado State regulations that can be held and if I

go in and ask for a competitor’s exploration plan I will not get to

see it. Exploration is a product of the brain. Our concepts are proprietary. We are out maybe staking claims on the public domain

because I got a better idea than the guy next to me of why there

should be minerals in that area and that needs to be maintained

in a proprietary nature.

These are some of the areas that I am concerned about that need

to be worked on in total, not in part. I do not disagree that we need

to have bonding. I for one believe the States know better what

works in a given State than the Federal Government but I also

have learned over my 35 years that the Federal Government is

going to regulate and I have got to follow their regulations.

So I think there are pieces of this thing that need to be looked

at a little more. There has been a lot of things happened in the five

and one-half years since those things came out originally that I

think there would be much to gain by going through the rulemaking process again. And that is my main contention for being

here today.

Mr. GIBBONS. Real quick like, Mr. Hanneman, you have heard

Mr. Leshy and even Mr. Hocker talk about your field season and

the exploration and the impact of this rulemaking or the lack of it

being rushed through at this current time. What is your impression

of that situation and how would you say the impact would be on

your exploration season if this is delayed 60 days for a comment

period?

Mr. HANNEMAN. Well, the data that demonstrates in Alaska that

there is no compelling need to rush. In five years there has not

been a demand to draw on the bond pool nor has anyone been out

of compliance. So there is no need. With respect to the—it is already close to spring now. There are miners that are already over

the barrel, so to speak, with respect to this reg. It is unclear as to

whether notice level operators will or will not be included when

they are going back on their operations.

It says in the preamble that notice level operators would not be

impacted but in the reg itself it does speak there is no such exemption so there is ambiguity already. Further public comment process

would help, not hinder. With respect to the impacts, the small operator in Alaska simply cannot get a surety and so we have no objection to doing the reclamation. In fact, the Alaska Miners Association was an important part of getting the reclamation law

passed but the inappropriate financial burden of the bond is what

will hurt.
33

And there are several places I have pointed out where BLM has

just simply inadequately addressed the economic impact and we

think that they should look at it again but most importantly in the

context of the whole 3809 reg. In this process they have established

a bond release mechanism that includes language and standards

that is not in existing 3809 so they are in fact establishing reclamation standards and also visiting the notice level operator issue

to the issues that were identified for the task force to address.

So it is premature for them to proceed and attempt to resolve

those issues at this time, not in the context of the whole 3809 review.

Mr. GIBBONS. Thank you. Mr. Rahall.

Mr. RAHALL. Thank you, Mr. Chairman. Mr. Jones, I would like

to ask you about the chart that you handed out for the record. In

this chart I notice that there are four States, Arizona, Missouri and

North Dakota that do not require reclamation bonds, correct?

Mr. JONES. That is correct. Four States or is it three States?

Mr. RAHALL. I have checked off four here, Arizona, Missouri,

North Dakota—I am sorry, I did add—that is right. You are right.

Three, I am sorry.

Mr. JONES. I think there are three and there are two variables.

Mr. RAHALL. Right, two variables. OK. Well, surely all the other

States have different bonding requirements and my question, I

guess, is can you tell us which States have stronger bonding requirements?

Mr. JONES. Not without going through my manual one by one

but I would be glad to make that comparison and put it in writing.

Mr. RAHALL. OK, I appreciate it. I think it would be a help for

all the committee. According to the BLM, Alaska, Nevada, New

Mexico and Utah exempt small operations, is that correct?

Mr. JONES. What are the States?

Mr. RAHALL. Alaska, Nevada, New Mexico and Utah. According

to BLM they all exempt small operations.

Mr. JONES. Our permitting manual does not indicate that Alaska

exempts but I think there are some quirks in Alaska regs that are

slightly different than some of the others. New Mexico, it has a

rule which I do not have with me. I would have to get that for you.

And I can make you a comparison of what each State requires for

bonding or does not require and who it exempts.

Mr. RAHALL. OK, but the bottom line again is these proposed

new bonding regulations really would not be as stringent on some

States as already——

Mr. JONES. For instance, in Colorado it may or may not be. I am

very familiar with the Colorado regs. If it costs $500 an acre to fix

the damage you incur, that is the bond. If it costs $10,000 an acre

to fix the damage required, that is the bond. It is case specific in

Colorado and I think some of the other States are very much that

way. So it is very difficult to make a categorical statement that

BLM is or is not more rigid than all the States.

Mr. RAHALL. OK, but you do agree that there is bonding requirements required, minimum bonding requirements required?

Mr. JONES. As I understand the new bill and regs, they have got

$1,000 for notice of intent minimums and they have got a $2,000

for plan of operations. If that were compared to Colorado and there
34

were a portion of your operation that required $500 per acre to reclaim your bond for that portion would be $500. If you had a portion that required a lot more, say $10,000, that acreage bond would

be $10,000 per acre and your cumulative bond would be a composite of all the pieces.

Under the BLM reg as I see it, and I did not come here to argue

the merits of the bond, but as I understand it, if you got 100 acres

under bond under the BLM plan it is $2,000 times 100 acres. There

is $200,000. So it very definitely may be more or less than it might

be in the State of Colorado.

Mr. RAHALL. Phil, let me ask you, if I might. Is there one State

that stands out as striking the right balance between protecting

the taxpayer while also placing reasonable bonding requirements

on mining operations?

Mr. HOCKER. We would favor the State of California. Let me add,

though, frankly I think a problem that we all face is that predicting from the rules on the books exactly what bond a miner is

actually going to be required to post for a given operation could be

a challenge.

Mr. JONES. It is case specific.

Mr. HOCKER. But I think two things that might help the discussion, first it is our understanding that Arizona should be added to

your list of States that do not require bonding for small operations.

Mr. RAHALL. Yes, that already—that is according to Mr. Jones’

chart too.

Mr. HOCKER. And, secondly, one of the changes that—there were

as has been pointed out some changes between the draft and the

final regulations—one of the changes was that the draft regulations

promoted in 1991 would have capped, placed a cap, as I understand

it, on the maximum level of bonding per acre.

We do not believe that per acre calculation is a wise way to protect the public interest. USEPA was among those, and also many

BLM staff who in 1991 commented, that a per acre cap would not

be appropriate and so BLM has replaced the per acre cap with basically a third party calculation by a responsible professional of the

actual cost to do the job. We think that is an excellent change and

also I would add one that clearly was envisioned in and was within

the scope of comments that were received in 1991.

Mr. RAHALL. It was part of my reform bill that passed the House

of Representatives, is that correct?

Mr. HOCKER. One of the many excellent parts of that bill.

Mr. RAHALL. Thank you, just for the record. No comment from

the other side. Mr. Chairman, let me if granted permission include

as part of the record and perhaps as part of this panel’s testimony

a letter from the American Rivers, Mineral Policy Center, National

Wildlife Federation, Sierra Club, Western Mining Action Project,

and Western Organization of Resource Councils to Secretary Babbitt dated March 12 of this year if that could be just made part of

the record as part of the testimony.

[The letter may be found at end of hearing.]

Mr. GIBBONS. Without objection and I will also say to the witnesses who testified earlier that your written comments will also

be made part of the record as well as though you have made in oral

argument.
35

Mr. RAHALL. Thank you.

Mr. GIBBONS. Mr. Hocker, I just had one question for you and

perhaps it is something you can help me understand a little bit better here as we wrap this up. One of the GAO studies that you

waved about earlier in your testimony indicated that the legacy of

abandoned hardrock mines in this country was about $180 million

or so. Was that not what you just said in your testimony?

Mr. HOCKER. I actually did not bring that particular report with

me because I placed——

Mr. GIBBONS. But you said something about——

Mr. HOCKER. There is such a report, yes.

Mr. GIBBONS. Now isn’t it true that your group’s study puts this

figure at about $36 to $72 billion?

Mr. HOCKER. $32 to $72 billion was the estimate we came up

with. The Interior Department Inspector General calculated $11

billion. There are other numbers floating around.

Mr. GIBBONS. Which one do you place greater belief in?

Mr. HOCKER. Ours.

Mr. GIBBONS. Why?

Mr. HOCKER. First, in all candor, a range of $32 to $72 billion

is a fairly wide range and there is a lot of uncertainty in there. We

tried, sir, to do frankly a type of analysis which we felt was necessary and which we have not seen anyone else do. And the data

on this, and I bet there is unanimity on this panel on this point,

the data are not conclusive. And one thing that I would love to see

this Subcommittee call for would be an adequate expenditure to

really do an assessment and actually inventory this problem.

But what we attempted to do was take the data that were available which were of two kinds. First, counts of the total numbers

of abandoned sites that exist, and, secondly, some costs for the

costs of reclamation of different categories of sites. And clearly to

take the cost of reclaiming the Superfund site and apply that to the

total count which is approximately 552,000 abandoned mines would

be nonsense.

So what we tried to do was to categorize, OK, roughly what percentage of these are fairly minimal sites that do not require any

effort, what percentage are sort of landscape disturbance or pits

which are going to require maybe a few thousand dollars to regrade

and reclaim, which ones are serious water pollution-sites, and

which ones are Superfund sites.

And then we tried to apply reasonable cost projections to each of

those. That was what produced the $32 to $72 billion estimate.

That has been on the table since ’93 and frankly no one has done

a more thorough scientific analysis since then that I am aware of.

Mr. GIBBONS. Thank you. Mr. Rahall.

Mr. RAHALL. No questions.

Mr. GIBBONS. I would like to thank the witnesses for their participation and testimony today. We appreciate it and with that if

there is no other testimony, we will call this hearing to a close.

Thank you very much.

[Whereupon, at 2:37 p.m., the Subcommittee was adjourned; and

the following was submitted for the record:]
36

STATEMENT OF JOHN LESHY, SOLICITOR, DEPARTMENT OF THE INTERIOR

Madam Chair and members of the Subcommittee, I appreciate the opportunity to

appear here today to discuss the final rule on bonding for hardrock mining operations.

Section 302(b) of the Federal Land Policy and Management Act of 1976 (FLPMA)

directs the Secretary to prevent unnecessary or undue degradation of the public

lands from, among other things, activities conducted pursuant to the Mining Law

of 1872 (mining of locatable minerals, such as gold, lead, silver, uranium, and bentonite).

The consequences to the health of the public lands and the implications for the

American taxpayer from inadequate steps to carry out this mandate are potentially

very large, even staggering. The Departments of Agriculture and the Interior are

currently defendants in several lawsuits seeking to hold the government, as landowner, liable for the cost of cleaning up toxic wastes from defunct mining operations

carried out throughout the west under the Mining Law of 1872. The irony is that

after over a century of making publicly owned minerals available for next to nothing, the taxpayers may face cleanup costs running into billions of dollars. Most

members of the hardrock mining industry are responsible operators. But there is no

denying that when protective measures are not taken, or are inadequate, the consequences can be costly.

Some idea of the potential scope of the problem is described in a GAO Report of

April 1988 to the House Subcommittee on Mining and Natural Resources. The GAO

estimated that 424,049 acres of federal land were then unreclaimed as a result of

hardrock mining operations in the 11 western states. 281,581 of these unreclaimed

acres related to abandoned, suspended or unauthorized mining operations. The estimated cost to reclaim this land was about $284 million. The remaining 142,468

acres of federal land were being mined at that time and would eventually need reclamation.

The Bureau of Land Management’s (BLM) original regulations implementing section 302(b) of FLPMA became effective on January 1, 1981. That rule, 43 CFR 3809,

required mining claimants to complete reclamation on Federal lands administered

by the BLM during and upon termination of exploration and mining activities under

the mining laws. The rule classified mining-related activities into three categories:

casual use, notice, and plan of operations. Activities are termed ‘‘casual use’’ if they

involve negligible surface disturbance and do not use mechanical excavating equipment. However, if there is surface disturbance involving mechanical excavating

equipment, notice of the operation must be provided to BLM. Plans of operations

were required where surface disturbance of more than 5 acres, or any disturbance

greater than casual use in some special category lands, was involved. At BLM’s discretion, bonding was required on plans of operation. No bonds were required for casual use or notice operations unless there was a pattern of violations.

The preamble to these regulations promised a review of them within three years.

Since they took effect, much internal and external (GAO and Congressional committees) attention has been directed at, among other things, the adequacy of BLM’s

bonding policies. In addition, the dramatic rise of the gold mining industry in Nevada during the 1980’s increased the public’s awareness of the need for reclamation.

Near the end of the Reagan Administration, the BLM Director established a Mining

Law Administration Program Task Force to address significant issues. The Task

Force’s December 1989 report recommended that BLM’s program ‘‘needs to be

strengthened to meet BLM’s responsibilities,’’ and addressed bonding, among other

things. As a result, a revised bonding policy was issued in August 1990 as a short

term change. In July 1991, a proposed rule on Hardrock Bonding was published in

the Federal Register. The preamble to this proposed rule explained that the Department’s history under the 3809 bonding regulations led BLM ‘‘to conclude that bonding or other financial or surety arrangements would be useful additions to the tools

available to land managers to protect against unnecessary or undue degradation of

the land caused by [notice] operations....’’ (56 FR 31602). The published summary

of the proposed rule explained:

‘‘The proposed rule would require submission of financial guarantees for reclamation for all operations greater than casual use, create additional financial instruments to satisfy the requirement for a financial guarantee, and amend the noncompliance section of the regulations to require the filing of plans of operations by

operators who establish a record of noncompliance.’’ (56 FR 31602).

During the 90-day comment period, which expired on October 9, 1991, the BLM

received over 200 comments on the proposed rule. Some said the policy went too far;

others said it did not go far enough. All of the comments were carefully considered

in developing this final rule.
37

In August 1992, BLM completed a preliminary draft of the final rule incorporating

changes suggested during the comment period. Internal Departmental review of the

preliminary draft final rule was then begun. In addition to the proposed bonding

rule, on September 11, 1992, BLM published a proposed rule which strengthened

the BLM’s enforcement program against the illegal occupancy of mining claims for

non-mining purposes.

Because it appeared at the beginning of the 103rd Congress that action on comprehensive legislation to reform the 1872 Mining Law was likely, completion of

BLM’s bonding and occupancy regulations was suspended. If enacted, the reforms

being considered would have superseded the rules.

Once the 103rd Congress adjourned without enacting Mining Law reform, the Department resumed work on a number of efforts to address shortcomings in regulation of hardrock mining, including the bonding rule. Among these efforts, BLM also

published an acid rock drainage policy in April 1996. The occupancy rule was completed and published in final form on July 16, 1996. Work then focused on finalizing

the bonding rule.

In response to public comment, and after due consideration, some changes were

made between the draft and final rule. These changes are a logical outgrowth of the

proposed rule. While the proposed rule will enhance environmental protection by ensuring consistent application of bonding requirements, the overall impact of the rule

on the hardrock mining industry is actually relatively limited for several reasons.

First, as was noted earlier, the Department already has the discretionary authority

to impose bonds for up to 100% of the costs of reclamation on plan level operators,

and some states already require this level of bonding. In other states, which do not

currently require 100% reclamation bonds, the BLM will be cooperating with operators and state mining administrators throughout the remainder of 1997 to achieve

a smooth transition. Second, the bonding requirement for notice level operators,

which was part of the proposed as well as final BLM rule is not a new requirement

in most states. Moreover, the requirement will be phased in, which will ameliorate

its impact where it is new. Operators with existing notices on file with BLM which

have initiated operations will not be required to provide 100% bonding until they

file a new notice. With past history as our guide, we expect that it will take four

years before all notice level operators are covered.

The BLM has implemented an extensive program to inform interested parties of

this final rule. BLM’s homepage on the Internet (http://www.blm.gov) includes the

final rule as well as background documents including a press release, question and

answer sheet, and a fact sheet. Other outreach efforts include, for example, BLM

staff visits to various mining centers and meetings with miners and mining industry

officials, as well as state regulators.

We believe this rule is a reasonable forward step to carry out our statutory mandate. We will do all we can in implementing this rule to ensure that the health of

the land is preserved, taxpayers’ interests are protected, and any negative implications for the mining community are minimized.

This concludes my statement. I will be pleased to answer questions.

TESTIMONY OF PAUL C. JONES, EXECUTIVE DIRECTOR, THE MINERALS EXPLORATION

COALITION

Introduction.

I am Paul C. Jones, Executive Director of the Minerals Exploration Coalition, an

advocate of the multiple use of public lands of the United States. Today I am

pleased to testify before your Committee today regarding the recently published Bureau of Land Management regulations related to bonding of exploration and mining

activities on the Public Lands.

I have over 35 years experience in the mineral industry in North and South

America in all levels of the industry from junior engineer to Chief Executive Officer

of publicly held corporations.

The Minerals Exploration Coalition, located in Golden, Colorado, is an advocate

on public policy issues involving access to, and the safe and environmentally responsible use of, public lands of the United States for mineral exploration and development. Our membership, including more than 30 corporations, represents a diverse

group of professionals and companies engaged in mineral exploration on public

lands.

Presentation.

On February 28, 1997 the Bureau of Land Management (BLM) published a final

rule in the Federal Register (62 FR 9093-9103) concerning a portion of 43 CFR 3809

relating to the surface management of lands subject to the mining law, more par-
38

ticularly to bonding of exploration and mining activities on the public lands. I am

deeply concerned about the manner in which the Administration established this

rule.

Unfortunately this rule was formulated and published by the BLM, effective

March 31, 1997, without recent publication of a notice to issue the rule, without a

recent public comment period on the proposed rule, and without consideration of

events which affect the need or operation of the new rule. BLM’s notice of Final

Rule stated that the notice of proposed rule was published on July 11, 1991 (56 FR

31602) with the period of public comment closing October 9, 1991—five and one-half

years ago.

Why did the BLM not issue the final rules in 1991 or early 1992, or even in the

early days of the Clinton Administration—not five and one-half years later? What

is the urgency which does not allow re-publication of proposed rule, a new public

comment period, and the formulation of a final rule in this process—five and onehalf years after the period of public comment for the proposed rule was closed.

I suggest, ladies and gentlemen, that many relevant changes have occurred since

1991 which affects, if not makes unnecessary, the recently issued rule. Particularly,

numerous changes have occurred in state regulations affecting mineral exploration

on public lands which justify, if not mandate, newly formatted proposed rules be

issued, a reasonable comment period established, and public input taken and used

in the formulation of the final rule—whatever its content.

On January 6, 1997 Interior Secretary Babbitt sent a letter to the Assistant Secretary, Land & Minerals and the Acting Director, BLM requesting they present

to the Secretary a plan to modify the hardrock mining surface management regulations (43 CFR 3809) commonly called ‘‘3809 Regulations.’’ More recently we have

learned that the Secretary has established a Task Force to review and prepare

modifications of such regulations.

When we at MEC saw the January 6, 1997 letter from Secretary Babbitt we assumed, apparently in error, that any such rule changes related to 3809 Regulations

would follow the normal procedure of publishing proposed rule changes, taking public comment on those issues, and considering that public comment in formulating

the final rule. The propagation of the rule on bonding of mineral related operations

gives us considerable cause for alarm about how the Secretary plans to formulate

new rules under the 3809 Regulations.

The Mineral Exploration Coalition publishes an exploration Permitting Directory

covering the regulations of 21 states, including all western states where most public

land is located. In addition most, if not all, mid-western and eastern states where

metal mining occurs are included. The Directory also includes BLM and U.S. Forest

Service (FS) rules governing exploration activities. This directory is updated on an

annual basis to incorporate any changes in state or federal regulations which occur

in the preceding year. Numerous changes have occurred in the directory in the last

six years.

A review of the MEC Permitting Directory will indicate that all of the 21 states

covered require some form of bonding for exploration and/or mining activity on the

public land. The requirements for prior permitting, reclamation and bonding in each

state may vary, but most states do cover all acreage disturbed without regard to

ownership, whether it be private, state or federal. Sixteen of the twenty one states

require bonding for exploration. Of the states covered in the MEC manual, only

Alaska does not require permitting and bonding of exploration activities on federal

lands.

Numerous revisions have been made to our directory in the past few years as the

individual states have modified their reclamation regulations. A brief review indicate that modifications have been made to the regulations in almost all states since

1991. In particular, the states of Arizona, New Mexico have instituted the regulation of exploration and mining activities since the BLM ask for comments on their

most recent proposed rules in 1991. In addition the states of Colorado, Minnesota,

Montana, and Nevada have made major changes in their legislation and/or regulations governing exploration permitting and reclamation since 1991. Just two weeks

ago the MEC office received a completely revised set of regulations from Montana

to incorporate into the 1997 edition of our directory.

In the case of Colorado significant changes were made to the Colorado Mined

Land Reclamation Act in 1993 following the Summitville Mine incident with new

rules under the revised act being propagated in 1994. I was personally deeply involved in both the legislative and rule making process in Colorado and will discuss

that process in more detail shortly.

A review of the federal permitting section of the MEC Permitting Directory indicates changes were made to both the BLM and FS sections since October, 1991. Of

particular note was the reference on page 4-8 related to BLM Manual Handbook H-
39

3042-1 dated February 2, 1992 and entitled Solid Minerals Reclamation Handbook,

issued obviously after the date of closure of public comment on the 1991 BLM draft

rules. The contents of this handbook appear to be incorporated into the release language of the bonding rule, again without public comment.

In the case of the Colorado Regulations major changes in the underlying legislation and subsequent regulation were made in 1993 and 1994 as a result of the

Summitville Mine abandonment by Galactic Resources Ltd. I was Chairman of the

Colorado Mining Association (CMA) in 1992-93 and Chairman of the CMA

Summitville Task Force from 1993 to the present. As such I participated in the

process of revising our state law (93-247) to correct deficiencies in the law and subsequent change in regulations under that law in 1993-94 and to a lessor extent in

1995.

Major changes of the Colorado Mined Land Reclamation Act were made in 1993.

These changes specifically included modification of the previous law which provided

minimal requirements for small operations, elimination of statewide permitting of

exploration to a system where each project must be separately permitted under a

confidential ‘‘Notice of Intent to Explore’’ system, introduction of a ‘‘Designated Mining Operation’’ classification covering operations which use hazardous chemicals or

have the ‘‘potential’’ to produce acid forming chemicals or heavy metal concentrations in runoff water and, most importantly to this discussion, significantly increased bonding requirements on all operations within the state. Under current regulations, all operations, whether exploration, development, or mining, must be adequately bonded.

Colorado regulations apply to all lands within the state, whether private or government owned (including federal lands). Certain, but not all, portions of the permit

application must be approved by a Professional Engineer. Bonds must be sufficient

to allow the State to conduct the reclamation in the event of abandonment by the

operator. The form of the bond must be fungible and in the name of the State of

Colorado.

Exploration and/or operating bonds under the Colorado Mined Land Reclamation

statute will vary dependent upon the nature of disturbance, pre-activity condition

of disturbed surface, and other relevant conditions. Bonds posted range from $500

per acre to over $10,000 per acre on limited areas.

As you can see from my description of the Colorado regulations, our state adequately regulates both exploration and mining operations on both public and private

lands in the state. Similar regulations apply in most other Western states.

I do not wish to devote time at this hearing to critique specific items of the new

rules which are considered by many as objectionable. However, I will mention several items which deserve meaningful consideration:

—the new rules do not outline specific time frames for the procedures for releasing the bond established for reclamation. All states with which I am familiar establish specific procedures for partial and final release of bonds;

—the requirement for a professional engineer appears overkill on minor exploration plans and operating plans for mining operations of minor impact;

—no criteria is established for a maximum review time allowed BLM for plan approvals, in fact the Q & A sheet states delays are inevitable;

—the elimination of the small miner (5 acre) exemption may be overly restrictive,

both from the standpoint of impact on small operations, and from the impact on

BLM staffing required to administer the program; and

—no method is established for providing confidential treatment of exploration

data or information, a requirement which is of major importance to the exploration

community.

MEC is also concerned about the negative impact this new rule can have on exploration by individual explorationist who are an integral part the U. S. exploration

scene. The self-initiation process provides a very high percentage of the new mineral

discoveries in the United States. We believe the rule in its present form will cause

much confusion on what will consist of ‘‘casual’’ use of public lands for exploration.

Will driving a pickup or jeep along designated roads to inspect an area be classified

as ‘‘casual use’’, or will it require complying with ‘‘notice level’’ requirements and

posting of a bond prior to commencement of the activity? Will a geologist be required to meet ‘‘notice level’’ requirements and post a bond to perform field mapping, take ‘‘chip samples’’, or conduct geophysical surveys on public lands? Will the

staking of unpatented mining claims require advance ‘‘notice level’’ filings. If any

of these issues are the case, we believe such a requirement will be overly restrictive,

costly, and unduly time consuming for the nature of the impact such an activity will

have on the public lands. These items are not adequately addressed in the new

rules.
40

Similar concerns may be expressed for the legitimate ‘‘small miner’’ who operates

in a environmentally sensitive manner, yet does not have the financial resources to

engage a professional engineer to compile a ‘‘notice level’’ or more formal ‘‘plan of

operation’’ for a small, under five (5) acre mining operation.

Conclusion.

The Minerals Exploration Coalition believes the new rule regarding bonding for

mineral activity on the public lands deserve new public comment and reconsideration before implementation. The changes in applicable state regulations related to

mineral exploration and mining activity have changed considerably since public

comments were taken on proposed rule in 1991. These changes, without exception,

have strengthened the requirements for mineral activity, including that on public

lands. Adequate regulation exist in most states where exploration occurs on public

land, thus the need to rush this new rule into effect is unnecessary.

MEC is also concerned that the method of implementation of the rule on bonding

indicates a disregard on the part of the Department of Interior for the normal rulemaking process. This gives us much concern regarding the upcoming activities of

BLM in revising 3809 Regulations.

In conclusion, I would like to clearly state that MEC is not opposed to the posting

of a bond for exploration activity if that bond is in a reasonable amount and is fairly

administered. We already post such bonds for almost all our major exploration activities in the states in which we work. However, MEC believes adequate change

has been demonstrated in both the need for and circumstances about the BLM rule

on bonding to justify additional rule-making on this issue prior to a final rule being

implemented. We strongly urge the BLM to withdraw this rule and re-institute normal rule-making procedures in this matter.

STATEMENT OF KARL L. HANNEMAN, PRESIDENT, ALASKA MINERS ASSOCIATION

Introduction

Good afternoon. My name is Karl Hanneman. I am President of the Alaska Miners Association (AMA), a nonprofit industry support organization with approximately 1000 members. I am also a mining engineer and President of Alaska Placer

Development, Inc., a small private company that for the past 17 years has produced

gold from federal claims in five locations in Alaska, both under notices and plans

of operations. On behalf of the Alaska Miners Association, I would like to thank you

for the opportunity to share our concerns about the BLM Final Rule on bonding.

To summarize the importance of the mining industry in Alaska, it was the fourth

largest industry in 1996. An important element of this industry is the approximately

200 small placer miners that are scattered throughout the state. According to statistics from the State of Alaska, the average small placer miner employs 3 to 4 people.

The mining industry provides one of the few private sector job opportunities in rural

Alaska.

My mining operation is conducted under a plan of operations near the town of

Livengood, 70 miles north of Fairbanks. Unlike the previous locations I have

worked, Livengood has the luxury of being accessible by road. We have been at this

location for 13 years and employ 10-15 people for 8 months per year and 3 people

year round. Although our annual disturbance is about 5 acres, the large settling

ponds that we need to recycle 100% of our process water and our overburden storage

areas brings our total footprint to about 250 acres.

My relationship with BLM Alaska personnel over the years has been positive and

professional and it would be fair to say that this is representative for the industry

as a whole on 3809 issues. I have seen many improvements in mining practices in

recent years, and by and large these have occurred in a constructive atmosphere

with Alaska BLM. However, the AMA has serious concerns about the Final Rule

now presented by BLM headquarters.

Four Reasons that Final Rule should not be adopted.

The following comments will focus on the procedural reasons that the Final Rule

should not be adopted. Although the AMA has serious concerns about many of the

provisions of the Final Rule, our review of specific provisions of the rule will not

be exhaustive, but rather only certain portions will be discussed in order to highlight the fact that BLM needs additional information before being able to proceed

with a proper rule.

Six year old public process is stale

The proposed rule was published on July 11, 1991, with the public comment period expiring on October 9, 1991. During the five and one half years that elapsed
41

before notice of the Final Rule, important changes have occurred within the regulated community and much relevant information has not been properly evaluated.

I cite the State of Alaska reclamation law and BLM field staff practices as examples.

After closure of the comment period on the proposed rule, the Alaska State Legislature passed a State reclamation law. This Statute became effective in 1992 and

applies to all land in Alaska, including state, federal, private, and municipal land.

The law requires prevention of unnecessary and undue degradation of land and

water and contemporaneous reclamation to a stable condition. The law requires

plans with bonding for 5 acres or more and notices with an annual statement of reclamation for less than five acres. A statewide bonding pool was established whereby

a refundable deposit of $112.50 per acre is paid to create a surety and a nonrefundable fee of $37.50 per acre per year is paid to the bond pool. The bonding pool provides coverage for the full cost of reclamation.

During creation of the bonding pool, the AMA worked with the BLM State Division of Mining, and the Alaska State Legislature to ensure that it was established

in a manner that could be used by miners operating on federal lands. The BLM Director at that time encouraged the AMA to establish this bonding pool and get it

in place as rapidly as possible. AMA is presently working with BLM Alaska and

State of Alaska officials to determine if the State bonding pool can provide coverage

under BLM’s Final Rule without adding significant burden on the operators. Despite

very positive attitudes by all directly involved, at this time there is no assurance

that the effort will be successful.

For the five year period since inception, there were an average of 104 bonded operations in Alaska. In 1996 there were 112, 59 of which were on federal land. Since

inception, there have been no bond forfeitures or draws against the bond pool. That

is, since 1992, all operations larger than 5 acres have completed reclamation as required, including all those on federal land. During 1996, no notice operators, including 96 on federal land, established a record of noncompliance.

This new data shows that there is no compelling need to adopt the Final Rule.

It is interesting to note that the February 38, 1997 notice of the Final Rule indicated that ‘‘This Final Rule will advance the BLM’s mission of protecting the public

against unfunded liabilities’’. I wonder who has established this as BLM’s mission?

Since the data does not show any such unfunded liabilities in Alaska, then what

is BLM’s real mission? In any event, it is clear that the five and one half years since

the first comment period closed has simply been too long and BLM headquarters

needs the benefit of this new data so that it can accommodate the successful statewide bonding program that is working in Alaska.

BLM headquarters also needs to learn how closely BLM personnel work with the

mining operators in Alaska to ensure and improve compliance. In this regard, the

January 6, 1991 memo from Secretary Babbitt states with respect to notice level operations: ‘‘I understand that in practice it is relatively unusual for BLM to question

what happens on these operations’’. This statement demonstrates a lack of awareness for the input that BLM staff have on notice level operators in Alaska. It must

first be noted that many operators scale their operations to stay just below the 5

acre annual disturbance threshold. In order to stay below this threshold year after

year, reclamation must be conducted concurrently in such a fashion that the total

unreclaimed acreage does not exceed 5 acres. The BLM authorized officer is the one

that makes the determination as to when the reclamation is sufficient. To work toward this end, miners make frequent visits to BLM offices in the winter to work

with BLM staff on permit applications and notices. Mining plans are developed to

accommodate the requirements of the BLM staff. BLM staff make field visits in the

summer and work with the operator depending upon what equipment and resources

are available. No notice level operator is allowed to continue the next year under

a notice unless the prior years reclamation is completed to the satisfaction of the

BLM staff. Thus BLM staff clearly have significant input to notice operations in

Alaska. That the Secretary would just a couple a months ago contend otherwise

demonstrates that the policies embodied in the recent Final Rule are not being driven by current information.

In stark contrast to statements from BLM headquarters, unfunded liabilities are

not a significant issue in Alaska and BLM staff do in fact have considerable input

to notice operations. These are just a couple of examples, but in order to allow BLM

policy to be based on current data rather than suppositions, it is apparent that BLM

should gather additional information before proceeding with a Final Rule.

The Final Rule has substantive changes that could not have been anticipated from

the proposed rule.
42

The Final Rule has substantive changes that could not have been anticipated from

the proposed rule. To highlight just too examples, I will review bond amounts and

the type of financial instruments allowed. The proposed rule had a maximum bond amount of $2,000 per acre. The Final

Rule has a minimum bond amount of S2,000 per acre with a maximum of 100% of

estimated reclamation costs. This is a major change in approach, from one of a cap

on potential bonding liability, to one that is completely open-ended. In light of the

BLM’s stated desire to rewrite the reclamation standards, this open-ended nature

becomes even more significant. Then in addition, reclamation costs must be calculated as if third party contractors were performing the reclamation after the site

is vacated by the operator. In addition, the calculation must be certified at operator

expense by a third party professional engineer. Each of these changes are substantive in themselves. Taken together, the effect is to raise the bond amount to

a prohibitive level. To evaluate this effect on many operators in Alaska, it is important to note the logistics of typical sites in Alaska, including many that I personally

worked at. Many have no road access. Access can be by many miles of winter trail,

passable only when the ground is frozen. Often a barge trip along a river or the

coast is required before the winter overland travel can begin. This might mean

starting travel many months before any work could be conducted on the claims.

Now consider the types of bonding instruments allowed. The proposed rule allowed a first-lien security interest for mining equipment and first-lien security interests for real property, including mining property. The Final Rule eliminated both

of these options. For many of the small operators in Alaska, mining equipment and

mining property are their major assets. Thus in this Final Rule, not only would the

bonding amount be calculated completely different, but the assets most likely available to the miner to meet the bond are eliminated from consideration. This is indeed

a substantive change that demands further review.

Inappropriate to promulgate the Final Rule when revision of 3809 regulations are

pending.

It is inappropriate to promulgate the Final Rule when review of the entire 3809

regulation is pending. On February 25, 1997 BLM announced a task force to address

(1) the use of best available technologies to prevent unnecessary and undue degradation of public lands; (2) performance standards for the conduct of mining and

reclamation activities; (3) alternatives to the current exemption from reclamation

standards for mining operators of five acres or less; and (4) ways to improve coordination between the BLM and state regulatory programs. According to the press release, BLM expects these issues to generate sufficient public interest and have effects significant enough to justify an EIS. It is therefore inappropriate for these

same issues to be included in the present bonding rulemaking without similar solicitation and evaluation of public input.

Existing 3809 regulations allow release of bonds in accordance with the approved

plan. The Final Rule establishes a new policy that would release 60% of the bond

upon ‘‘backfilling, regrading, establishment of drainage control, and stabilization

and neutralization of leach pads, heaps, leach bearing tailings. The remaining 40%

would be released only upon revegetation to establish a diverse, effective, and permanent vegetative cover and until any effluent discharged from the area has met,

without violations and without necessity for additional treatment, applicable effluent limitations and water quality standards for not less than 1 full year.’’ This language does not exist in the present 3809 regulations. Are these not new performance

standards for the conduct of mining and reclamation activities? Are these not the

same issues identified for the task force to review? In fact they are and it is premature to include them in a Final Rule at this time without full NEPA review.

Similarily, existing 3809 regulations exempt compliant notice operators from

bonding provisions. Not so with the Final Rule, which would require bonding to the

full cost of reclamation of all notice operators and would not release such bonds

until the new reclamation standards had been achieved. Are these not alternatives

to the current exemption from reclamation standards for mining operations of five

acres or less? Are these not the same issues identified for the task force to review?

In fact they are and it is premature to include them in a Final Rule at this time

without full NEPA review.

The full 3809 review is also supposed to address ways to improve coordination between the BLM and state regulatory programs. It is clear that in the Final Rule,

BLM does not have a good understanding of Alaska’s successful reclamation law and

bonding pool program. We encourage improved coordination in this regard. But if

such an effort is important enough to be cited as an objective of the task force, to

be conducted with full NEPA review, it should be completed in that forum and not

bypassed by a six year stale rulemaking
43

There was an inadequate analysis of the economic impact.

BLM has inadequately analyzed the economic impact of the Final Rule. As stated

above, BLM has not correctly considered the cost of getting third party equipment

to remote Alaska sites. For notice operators, BLM assumed 2.5 acre disturbance per

notice and $2,500 per acre reclamation costs. Last year I paid $2,300 just to haul

a small bulldozer to and from a mining property that was on the road system. Access to remote Alaska sites by barge, winter trail, or air would be many times more

expensive. Clearly BLM has missed by an order of magnitude the cost of transporting the equipment, let alone completing any work once on site. Contractors

sending equipment to remote areas of Alaska for major parts of a year will demand

standby rental rates that dwarf BLM’s assumptions. A medium sized bulldozer will

rent in Alaska for $10,000 to $15,000 per month and several months rental drives

the calculated third party costs far beyond those estimated by BLM.

Another inadequate economic analysis involves the BLM assumption that operators currently conducting plan level activities on mining claims that are excluded

from State or native selections would relinquish their claims as a result of the new

rule. BLM has not evaluated the economic impact to the operators who purportedly

would relinquish their claims.

BLM has inadequately estimated the cost to plan operators in Alaska. First, BLM

incorrectly states that a statutory cap on bonds exists in Alaska when the bonding

pool in fact provides full coverage. This again reflects a lack of understanding regarding the Alaska bonding program. Nevertheless, BLM estimates that plan operators will have to provide an additional $1,250 per acre in financial guarantees for

a total of $470,000. For my operation alone, and since there is no assurance that

the state bonding pool will be applicable, my company would have to come up with

an additional $312,500. That is 66% of BLM’s estimate for all of Alaska, and we

are just one of 59 plans. Suffice it to say that BLM’s economic analysis is inadequate.

In trying to soften the blow of the Final Rule, BLM states that ‘‘Again, in reality,

the incremental costs associated with obtaining the surety would be...lower than the

full value of the surety’’. BLM incorrectly assumes that a surety could be obtained

without collateralization of the full surety amount. Insurance agents in Alaska report that bonds are not available without full collaterization and then only for a limited duration, but not for the term of the lease or plan of operations.

The BLM says that the proposal will not adversely affect investment or employment factors locally and any incremental cost associated with this rule will merely

be absorbed without any effect. Certainly for my operation, there would be significant adverse effect and for many other operations as well there would be loss of jobs

and economic activity in areas where there are few other job alternatives.

BLM estimated that there will be a ‘‘short term effect.. on approximately 498 notice operators nationwide, who when faced with the need to obtain a bond for reclamation will either move to other land, downsize their operations, or altogether

cease activities.’’ Given that BLM has underestimated the cost of reclamation using

third party equipment it is clear that they have also underestimated the number

of small entities that will be adversely affected.

BLM estimated that the practical effect of the rule will be the ‘‘removal of some

properties from their inventory of holdings, making them available for other interested parties to develop. They may also quickly enter the marketplace and attempt

to lease the operation out to a junior or major company...’’. This statement demonstrates a lack of understanding about the structure of the Alaska industry. That

notice operators are largely mom & pop operations is a function of that being all

the properties can support. No junior or major company is interested in the meager

cash flow generated by these small deposits. Any potential replacement operators

are likely to be just as financially strapped as the originals. Thus the Final Rule

is clearly designed to help usher the small operator out of business and the economic effect on the small operator has been grossly underestimated.

Summary

For the reasons cites above, the AMA believes that it was not provided the proper

opportunity for meaningful comment prior to the rule becoming effective. On January 6, 1997. Secretary Babbitt announced the BLM has moved forward to complete

‘‘a Final Rule on hardrock mine bonding to strengthen financial assurance requirements to meet reclamation responsibilities’’. The Secretary also said ‘‘It is plainly

no longer in the public interest to wait for Congress to enact legislation.’’ I submit

that it is in fact Congress, not the Secretary, that should establish public policy in

this regard. If Congress does not see fit to enact certain laws, on what basis does

the Secretary gain justification for proceeding on his own? The AMA thinks that the
44

recently issued Final Rule is flawed and we urge this Committee to do everything

in its power to have it withdrawn.

STATEMENT OF PHILIP M. HOCKER, PRESIDENT, MINERAL POLICY CENTER

Chairman Cubin, members of the Subcommittee:

My name is Philip M. Hocker; I am President of Mineral Policy Center. On behalf

of the Center and of many other concerned citizens, I thank you for the opportunity

to testify before this Subcommittee today regarding the Interior Department’s

issuance on 28 February 1997 of new bonding regulations for hardrock mining (‘‘the

new bonding rules ’’).

Summary: ‘‘The Tip of the Iceberg’’ of 1872 Mining Law Reform:

We support the publication of the new bonding rules. They are badly needed, and

long overdue. The process by which they were promulgated has been adequate. We

think the rules themselves are very weak and do not meet the Secretary’s legal obligations to protect the public lands, but they are an important step forward. To put

the rules and this hearing in context:

These bonding rules are only the ‘‘Tip of the Iceberg’’ of reforming the 1872 Mining Law. We know much more lies underneath this beginning. Now that the berg

is finally in motion, it must continue to move forward until all the pieces of comprehensive 1872 Mining Law reform are in place. Existing law gives the Administration the powers to accomplish important parts of this process; we urge the President and Secretary to use those powers vigorously. Still, some of the worst abuses

the 1872 Mining Law makes legal—its giveaways of billions in gold with no royalty,

its careless sale of valuable mineral lands for $5.00 per acre, and its free grant of

a compensable ‘‘right to mine’’ to anyone who can make a profit on the public

lands—these can only be cured by Congress. I urge this Subcommittee to help this

iceberg along by acting promptly to cure these abuses.

Introduction:

Mineral Policy Center is a nonprofit national citizens’ organization of approximately 2,000 members. The Center is dedicated to the adoption of policies which

serve the long-term national interest for environmentally-clean and fiscally-responsible management of our mineral resources. The Chairman of our Board of Directors

is Stewart L. Udall, who served with distinction in the House of Representatives,

and as Secretary of the Interior from 1961 to 1969.

Mineral Policy Center supports responsible mining in the United States and

worldwide—mining which operates with sound environmental controls, mining

which prevents environmental pollution while it is being conducted and which restores the lands after mining is finished, and mining which pays the American people a fair return for valuable public property which the industry exploits. Current

laws do not ensure that all mining operations will meet those standards.

Mining does cause massive, costly, enduring damage to the environment if not

carefully controlled. Allowing mismanaged and irresponsible mining to continue

damages both the environment, the Treasury, and the reputation of the many companies that are operating responsibly. Comprehensive reform is in everyone’s best

long-term interest.

Information Required to be Disclosed:

Mineral Policy Center’s principal office is located at 1612 K Street, NW, Washington, DC 20006. Our telephone number is 202-887-1872—it’s easy to remember.

I am employed by the Center as its President and Executive Director. A summary

of my professional qualifications and experience is attached to this testimony. Neither the Center nor I have received any financial support in the form of Federal

grants or contracts since October 1, 1994.

Adequate Bonding of Hardrock Operations is Needed:

On 15 December 1992, a Canadian mining company gave the American people an

early Christmas present: the Summitville Mine.

The mining company walked away from its cyanide heap-leach gold mine site at

Summitville, over 11,000 feet up in the Colorado Rockies, in the dead of winter. The

U.S. EPA had to take over the site as an emergency measure, to keep the pipes from

bursting and dumping millions of gallons of cyanide into the Alamosa River. Cyanide was not the worst of the Summitville Mine’s environmental problems. That, together with acid mine drainage and copper-metal pollution caused by mining at the

site, and other cleanup measures, will cost the American taxpayers more than $140

million dollars to repair. Those are dollars which cannot be spent to clean up
45

Superfund sites in childrens’ neighborhoods around the country, because there was

not an adequate bond at the Summitville Mine.

Mining has caused massive environmental damage in many areas of the United

States. This is a problem of mining which is being done today, not just of mining

in the past. Mining companies, not the general public, should be responsible for paying the costs of cleanup when mining sites cause pollution problems. America’s largest Superfund site is a 120-mile section of the Clark Fork River in Montana. This

site is contaminated with heavy-metal toxins left behind by sloppy mining in Butte.

The most costly Superfund cleanup in the country has been projected to be the

Torch Lake, Michigan, lakebed—smothered in the tailings dumped by copper mining

operations. Copper is gravely toxic to aquatic life.

The Iron Mountain Mine in California discharges, every day, waters which the

mine has polluted with over a ton of copper and zinc metal. These waters have

caused massive fish kills, contaminated water supplies, and polluted the environment. Costly action must be taken every day to keep these poisons from killing the

salmon fishery in the Sacramento River. Officials predict that the discharge of pollution from the Iron Mountain Mine will continue for three thousand years.

Adequate bonding is needed to protect the public from having to pay the massive

costs of these cleanups. Bonding is an essential tool to ensure that the mining company, not the public, will take financial responsibility. Bonding is a preventive

measure, not an after-the-fact process like Superfund.

Bipartisan Background for the New Bonding Rules:

Many studies and reports have demonstrated the need for improved bonding rules

for Mining Law activities. The General Accounting Office (GAO) reported in ‘‘Unauthorized Activities Occurring on Hardrock Mining Claims’’ (August, 1990) that about

1600 claims ‘‘have known or suspected unauthorized activities occurring on them.’’

In an earlier review of whether mining sites were being reclaimed, GAO reported

that ‘‘Of 246 sites that were inspected, 96 sites, or 39 percent, had not been reclaimed at the time of inspection.’’ (‘‘Interior Should Ensure Against Abuses from

Hardrock Mining,’’ March, 1986).

The bonding rules which the Department of the Interior recently issued are based

on action which was first proposed by the Bush Administration under Bureau of

Land Management (BLM) Director Cy Jamison in 1991. The Bush Administration’s

proposal arose from a review of problems under the 1872 Mining Law, and a series

of studies and Congressional hearings—such as the Oversight Hearing on 7 March

1989 on Mine Reclamation and Bonding which was held by this Subcommittee’s

predecessor under then-Chairman Rahall.

The 1991 proposal to revise the Federal Regulations for bonding was an extension

of earlier BLM agency action, including Instruction Memorandum 90–582, which

recognized the need for increased financial assurance to protect the public from having to pay cleanup costs for irresponsible mining.

Changes in State Requirements Since 1991

The Subcommittee has invited comment on whether ‘‘changes in State laws and

regulations regarding reclamation make untimely the comments solicited [by DoI]

in July, 1991.’’

It is true that there have been changes in state reclamation requirements and

bonding rules since 1991. Yesterday, for example, the legislature of the State of

Idaho raised the minimum bonding level in that state from $1,800 to $2,500. We

have not had time to examine all changes in state reclamation laws and rules which

may have occurred since the 1991 comment period, but I am generally familiar with

the progress that has been made in this area. Given the nature of the 28 February

rules, and the nature of the concerns which were raised in 1991, I see no reason

why comments made by any concerned interest group in 1991 would not still apply.

Thus, I see no need for the Department of the Interior to have solicited fresh comments prior to issuing this final rule.

Relevance of the Question: The new DoI bonding rules subordinate their requirements to relevant state requirements in many, we believe excessive, ways. Mineral

Policy Center does not endorse this position. However, we note that the adoption

of state reclamation rules is not being challenged here today. Since to a very large

extent the new Interior rules allow state rules to be substituted for the new BLM

requirements, there was clearly no need from the viewpoint of a mining operator

for Interior to invite new comment after 1991 based on changes in state requirements. The operator is subject to state requirements in any event; the Interior rules

make little change in that, so no new comment is needed.

Bureau of Land Management’s Responsibility vis-a-vis States: The Federal Land

Policy and Management Act of 1976 (FLPMA) requires the Secretary, and thus the

BLM, to ‘‘take any action necessary to prevent unnecessary or undue degradation
46

of the lands.’’ (Section 302(b)) The Interior Department’s responsibility in this regard cannot be delegated to the states, though there may be inter-agency cooperation. BLM is obliged to base its bonding regulations on what is necessary for the

Bureau to directly ensure that mining operators will provide financial resources to

repair any damage they cause to the public lands.

Shortfalls in State Regulations: Even if BLM did not have a unique responsibility,

there are many significant gaps in state requirements which make them inadequate

protection for the environment of federal lands. A few of the specific areas where

state requirements fall short of minimum federal policy needs are:

True Cost of Reclamation: The cost of reclaiming environmental damage at a mining site can be very large. Because cleanup of acid drainage or other water pollution

may be required, the number of acres disturbed by a miner is often not a good gauge

of the cleanup cost. The new BLM rules correctly require (except, unfortunately, for

‘‘notice-level’’ mining) that the financial guarantee be ‘‘sufficient to cover 100 percent

of the costs of reclamation... calculated as if third party contractors were performing

the reclamation after the site is vacated.’’ This condition was requested in comments

which the US Environmental Protection Agency, and many BLM staff, submitted on

the draft rule which was proposed in 1991 [according to Mine Regulation Reporter, 250ct91].

However, the rules of many states only require a fixed or maximum amount of

bond, calculated on a per-acre basis. Changes in state laws since 1991 have not removed this problem. Arizona passed a new mine reclamation and bonding law in

1994, but that law sets a maximum per-acre security level of $2,000, and allows discretionary reductions below that. Alaska allows miners, rather than posting any

bond at all, to participate in a ‘‘bonding pool,’’ and the liability of the pool for reclamation is capped at $750 per acre. [llAAC 97.425(e)]

Small-Acreage Operations: Small-acreage sites can create very costly or destructive environmental impacts, because size is not a good gauge of potential for damage. Nonetheless, some states do not require ‘‘small operators’’ to post any financial

security. This leaves the public to bear the risk of substantial costs—to finance

someone’s hobby. Arizona exempts operations below five contiguous acres. [§49-

1221] In fact, the Arizona law reassures miners by declaring ‘‘Nothing in this chapter shall prevent an owner or operator... from creating a surface disturbance of five

acres or less.’’ [§49-1223] New Mexico exempts mines of two acres or less from bonding requirements.

Scope of Comments vs. State Changes: The bonding regulations proposed in 1991

drew a large number and wide variety of comments. Some comments, including

those of Mineral Policy Center, addressed broad policy issues relating to mining regulation. Others covered the specific impacts the proposed regulations might have on

mining operators. These comments provided the Interior Department with public

input which covered the entire scope of issues which needed to be addressed in regulations. The changes which have been enacted in state regulation in the intervening

years have not created any qualitative change in the issues—any change which

would require a reconsideration of issues not covered in the original proposal and

comments.

Opportunity to Comment in 1991:

The Interior Department gave widespread public notice in 1991 that new rules

regarding bonding of hardrock mining operations were planned. The draft rules

were published in the Federal Register on July 11th. The deadline for comments

was extended from 9 September to 9 October 1991. The rulemaking proposal was

widely discussed in both mining industry trade publications and in environmental

organization circles.

Mineral Policy Center submitted comments on the proposed rules in 1991. We felt

that the rules proposed in 1991 were too weak to protect the public interest. We

also felt that rules for bonding in isolation had limited usefulness, and that the underlying reclamation standards and permitting process in 43 CFR 3809 needed to

be revised to make new bonding meaningful.

Many of the concerns the Center submitted in our comments 1991 still apply to

the final rule as issued. This Subcommittee’s letter of invitation to testify asked

whether the Center was ‘‘given a meaningful opportunity to comment before publication of the final rule.’’ I would have to say ‘‘yes, we were’’ given that opportunity,

since the comments we formally submitted still apply to the final rule.

Content of the New Bonding Regulations, and the Need for 43 CFR 3809 Revision:

Mineral Policy Center commented in 1991 that the bonding rules which were proposed by BLM Director Jamison then were ‘‘like building a three-legged stool which

is equipped with only one leg—and a short leg, at that.’’ We commented that protecting the public interest required:
47

* Covering all impacts from activities conducted pursuant to the 1872 Mining

Law, including those of ‘‘notice-level’’ operations at any size, as well as casual use;

* Establishing standards for the work to be covered by bonds, which would include water-quality protection and a definition of ‘‘reclamation’’ which would

strengthen and clarify the weak and vague definition in the existing regulations at

43 CFR §3809.0-5(j).

* Requiring that bonds be posted in liquid form readily accessible to the land

manager.

While the 28 February 1997 rules improve on the 1991 proposal, none of the tests

we called for in 1991 has been met. These new bonding rules still fail to protect

the public interest, and they still fail to meet the Secretary’s obligations under

FLPMA.

The complete body of rules adopted in 1980 under 43 CFR 3809 are not adequate;

these new bonding regulations only marginally improve that. We hope the revision

process announced by Secretary Babbitt, to require ‘‘best available technology and

practices’’ as a means to prevent ‘‘unnecessary or undue degradation’’ will be more

effective than these bonding rules.

Conclusion

Madame Chairman, I thank you for inviting me to testify on this important subject. I look forward to working with you and the Subcommittee on these issues as

the Administration proceeds with long-overdue overhaul and strengthening of the

Code of Federal Regulations sections that apply to hardrock mining.

As I said at the opening of my statement, these bonding rules are only the ‘‘Tip

of the Iceberg’’ of reforming the 1872 Mining Law. They must be supported by additional regulatory reforms adopted by the Interior Department as soon as possible.

The Congress must also assist this process by passing comprehensive legislation to

reform the 1872 Mining Law. I urge this Subcommittee to help accelerate this process, by scheduling hearings on H.R. 253, the comprehensive reform bill Representatives Miller and Rahall have introduced, as well as holding hearings on the other

bills pending that address hardrock mining issues.

$32 to $72 Billion Dollars is the estimate which Burden of Gilt, Mineral Policy

Center’s 1993 study, calculated must be paid to clean up the accumulated legacy of

environmental destruction from hardrock mining. Bonding will not pay for that history, but it will keep it from growing in the future.

I would like the record to show my deep thanks to Heather Langford and Sarah

Dawson, of Mineral Policy Center’s staff, for the important assistance they gave me

which made it possible to compile and present this testimony.

I would be pleased to respond to questions.

* * *

Attachments to Statement: ‘‘Mine’s toxic leaks render river lifeless,’’ The Denver

Post, 11Nov91; ‘‘Bankrupt mine costly to EPA,’’ The Denver Post, 24Dec92; Philip

M. Hocker—a brief biographical description.
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