MINERAL EXPLORATION AND DEVELOPMENT 

ACT OF 1993 

IlEARING 

BEFORE THE 

SUBCOMMITTEE ON 

ENERGY ~ MINERAL RESOURCES 

OF THE 

COMMITTEE ON 

NATURAL RESOURCES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRD CONGRESS 

FIRST SESSION 

ON 

H.R. 322 

TO MODIFY THE REQUIREMENTS APPLICABLE TO LOCATABLE MINERALS ON PUBLIC DOMAIN LANDS, CONSISTENT WITH THE PRINCIPLES OF SELF-INITIATION OF MINING CLAIMS, AND FOR OTHER 

PURPOSES 

HEARING HELD IN WASHINGTON, DC 

MARCH 11, 1993 

Serial No. 103-11 

Printed for the use of the Committee on Natural Resources 

U.S. GOVERNMENT PRINTING OFFICE 

WASHINGTON : 1993 

For sale by the U.S. Government Printing Office 

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 

ISBN 0-16-041619-1 
COMMITTEE ON NATURAL RESOURCES 

GEORGE MILLER, California, Chairman 

PHILIP R. SHARP, Indiana DON YOUNG, Alaaka, 

EDWARD J. MARKEY, Muaachuaetta Ranlcing Republican Member 

AUSTIN J. MURPHY, Pennsylvania JAMES V. HANSEN, Utah 

NICK JOE RAHALL II, Weet Vupn.ia BARBARA F. VUCANOVICH, Nevada 

BRUCE F. VENTO, Minneaota ELTON GALLEGLY, California 

PAT WILLIAMS, Montana ROBERT F. SMITH, Oregon 

RON DB LUGO, Vugin Ialanda CRAIG fflOMAS, Wyoming 

SAM GEJDENSON, Connecticut JOHN J. DUNCAN, JR., Tenneuee 

RICHARD H. LEHMAN, California JOEL HEFLEY, Colorado 

BILL RICHARDSON, New Muico JOHN T. DOOLITTLE, California 

PETER A. DEFAZIO, Ore,an WAYNE ALLARD, Colorado 

ENI F.H. FALEOMAVAEGA, American RICHARD H. BAKER, Louisiana 

Samoa KEN CALVERT, California 

TIM JOHNSON, South Dai:ota SCO'IT McINNIS, Colorado 

LARRY LAROCCO, Idaho RICHARD W. POMBO, California 

NEIL ABERCROMBIE, Hawaii JAY DICKEY, Arkanaaa 

CALVIN M. DOOLEY, Califo~ 

CARLOS A. ROMERO-BARCELO, Puerto 

Rico 

KARAN ENGLISH, ArisoDa 

KAREN SHEPHERD, Utah 

NAmAN DEAL, Georgia 

MAURICE D. HINCHEY, New York 

ROBERT A. UNDERWOOD, Guam 

HOWARD L. BERMAN, California 

LANE EV ANS, Illinoie 

PATSY T. MINK, Hawaii 

THOMAS J. BARI.OW ill, K.mtucky 

THOMAS M. BARRETI', Wiacoaain 

DANJBL P. BJWU>, Staff Director 

RICBABD IIBLTZBB, General Counael 

DANIEL VAL KIIIB, Republican Staff Director 

8uBcOMMITl'EB ON ENERGY AND MINERAL RESOURCES 

RICHARD H. LEHMAN, California, Chairman 

PHILIP R. SHARP, Indiana BARBARA F. VUCANOVICH, Nevada, 

AUSTIN J. MURPHY, Pennsylvania Ranliing Republican Member 

EDWARD J. MARKEY, Muaachuaetta CRAIG fflOMAS, Wyolllllll 

NICK JOE RAHALL II, Weat Viqpnia JOHN T. DOOLITTLE, California 

LARRY LAROCCO, Idaho WAYNE ALLARD, Colorado 

NAmAN DEAL, Georgia SCO'IT McINNIS, Colorado 

PETER A. DEFAZIO, Oregon RICHARD POMBO, California 

THOMAS J. BARLOW ID, Kentudty 

IIBLAHIB BBLLBR, Staff Director 

DuoBAB VON HonvANN LAN7.0NB, Profa,ional Staff Member 

LAUUN SceARnlAN, Ckrlt 

WILLIAM CoNDrr, Republican CoMultant on Energy and Mineral Resource, 

cm 
CONTENTS 

Hearing held: March 11, 1993 ............................................................................... . Tut of the bill: ·H.R. 322 ................... : .................................................................... . Member statements: 

Hon. Richard H. Lehman .......................... , ........... : ......................................... . Hon. Barbara F. Vucanovich .......................................................................... . Hon. George Miller ., ........................................................................................ . 

iE:~~l!•-~:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: 

ff~~: ~~t~·:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: 

Hon. John T. Doolittle ..................................................................................... . Witness statements: 

Hon. Bruce Babbitt, Secretary, Department of the Interior ....................... .. Panel consisting of: 

Kathryn Hohmann, Washington director, public lands program, Si- erra Club .................................... ........................................................... . Richard Parka, Northern Plains Resource Council, Billings, MT ........ . Janet E. Hieber, consultant on environmentally abusive federal subp:fn~e'kf ~ ~O:,T:J's~a::t, u~!rii' ·P~licy··~:;;;_;;;;·~~ .. ~~··i;ii~fr 

of Alaska Center for the Environment, American Fisheries Society, . Greater Yellowstone Coalition, Idaho Conservation League, Izaak 

Walton League of America, Oregon Natural Resources Council, 

National Parka and Conservation Association, and Washington Wilderness Coalition ............................................................................ .. Panel consisting of: · RU88ell Fields, director, Nevada Department of Minerals, on behalf 

of Hon. Bob Miller, Governor of Nevada ............................................ .. Douglas C. Yearley, chairman, president, and chief executive officer, 

Phelps Dodge Corp., on behalf of the American Mini!lg Congress .. .. Dr. Richard H. DeVoto, president, Canyon Resources Corp ................ .. John L. Dobra, Ph.D., director, Natural Resource Industry Institute, 

and associate.professor of economics, University of Nevada ............. . Te~ N. Fiske, vice president and general counsel, USA, Echo Bay Mines, also on behalf of the Precious Metal Producers ..................... . Additional material submitted by members and witne88ell: 

Hon. Richard H. Lehman: Letter dated March 24, 1993, from Patrick 

J. Garver, counsel for Barrick Goldatrike Mines, Inc., regarding mineral 

patent applications made by Barrick Goldatrike Mines .......................... .. Hon. Barbara F. Vucanovich: "An Economic Analysis of the Mineral Exploration and Development Act of 1993," prepared by Wade E. Martin, 

Ph.D., Environmental Policy Center, Mineral Economics Department, 

Colorado School of Mines ............................................................................ . Hon. Nick J. Rahall II: - 1. Chronology of hearinp on hardrock mining ...................................... . 2. List of GAO investigations requested by Representative Rahall 

involving matters relatin, to tlie mining law of 1872 ................... .. 3. Prepared statement of ElV18 J. Stahr, Jr., Public Resource Associates ............................................. ..................................................... .. Hon. Larry LaRocco: Prepared statement of the National Association 

of Mining Districts ............................................................. : ........................ .. 

(111) 

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448 
IV 

Additional material aubmitted bJ memben and witne11e1 Continued 

Ruuell Fielda: 

1. Prepared 1tatement of Governor Miller ............................................. . 2. Letter to Chairman Lehman from the Nevada Department of Minerala dated March 15, 1993, and attachmentl, providing information on Nevada'• approach to calculating the State'• net proceeda 

of minea tax ----------········ .. ········· ............... . Do~lu C. Yearley: •.American Mining Congreu Position on the General 

Mining Law" ........... _______ ....................................... . 

Dr. John L. Dobra: ~: ~=-:fi!:0

~r::= dated Marcb .. i'i;"i993; .. ri:;;~ .. J~~ C. Tumuoa =-----------,.-----..................................... . 3. "Gold Growth Through Diacovery" pama ................................... .. 4

· 11,~!-!'o~fu ~!~~t; ............ ~~'. .. ~.~.~: .. ~~ .. ~~~~ 5. Letter to Debbie Mino, Crown Reaoun:ea, dated December 10, 

1992, from John C. Tumuoe _____ ................................ . 

Terry N. Fi.Ike: Prepared statement of the Precious Metal Producers ...... .. 

APPENDIX 

MABCBU,1993 

Additional material 1ubmitted for the bearing record from: 

Subcommittee• Energy and Mineral lfeaouniea, Committee on Natural 

Reaourcea: \ ) 

1. Letter to Secretary Babbitt from Chairman Lehman and Chairman 

Miller dated March 15, 1993, containing po1thearing question• 

relating to R.R. 322 -------······· ......................... . 2. Letter from the Office of the Secretary of the Interior to Chairman 

Lehman dated May 11, 1993, encloeiog '1!11pon•ea to posthearing 

<JUeltiODI ------------............................. . Congressional Budftt Office: Prepared atatement of Jan Paul Acton, Assistant Director, Jlatural Reaourcea and Commerce Division, dated May 4, 1993 ·----.... _ _ _ _ __ , _ _ __ .. , .................. .. 

Congressional Budget Oftice: Prepared statement of Jan Paul Acton1 ABsistant Director, Natural Reaourcea and Commerce Division, aated 

March 16, 1993 __________ .................................. . 

State of Nevada Auembly: Letter from chief clerk of the aaaembly to 

Hon. Thomas S. Foley, S~ of the Houae, enclosing ABaembly Joint 

Resolution No. 22 (Memorial 68) ----........................................ . Department of MiDea and Mineral Reaouniea, State of Arizona: Letter 

from Leroy E. Kiaainger, clin!c:t.or, to Chairman Lehman dated March 11, 1993 ...... ________________ .......................... . 

C.C. Hawley, Ph.D., independent miDiDg geologist: Prepared statement .. .. Minerals Exploration Coalition: Prepared atatement ................................... . Maury Claiborne Newton Ill, Ph.D., conaulting geologist: Letter to Chair- man Lehman dated March 10, 1993 ____ ..................................... .. 

Barrick Gold1trike Minel, Inc.: Letter from Robert M. Smith, president, 

to Secretary Babbitt dated March 12, 1993 .............................................. .. Auociation of American State Geolo«iatl: Letter to Chairman Miller from 

Morria W. Leighton, president, witli attached reaolution ........................ .. Brush Wellman, Inc.: Letter from Hugh D. Hanes, vice president for 

environmental and 1egielative effain, to Chairman Lehman, with eno:i:18= *!=.8¥!c.: Letter rrom C.E. McF;;;~;cp~ide~t; to Chairman 14'thmeo, with enclo,ed information regarding statementl 

made bJ Mr. Richard Pub betbre the eubcommittee on March 11, 1993 .............. ___________ ..................................... . 

Brubaker-Mann, Inc.: Letter to memben of the Natural Re10urcea Committee from Julie Mann. pnment, dated March 4, 1993 ....................... .. David B. and SUBaDDe Wint.comb, MaripoBa, CA: Letters to Chairman Lehman ...... ____________ ............................ . 

aeM!ii 'u:is cerbondale, co: Letter to ~~ .. ~.~~ ... ~~~ 

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H.R. 322, THE MINERAL EXPLORATION AND 

DEVELOPMENT ACT OF 1993 

THURSDAY, MARCH 11, 1993 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON NATURAL RESOURCES, 

SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:05 a.m., in room 

1324, Longworth House Office Building, Hon. Richard H. Lehman 

(chairman of the subcommittee) presiding. 

STATEMENT OF HON. RICHARD H. LEHMAN 

Mr. LEHMAN. The subcommittee will come to order. I ask everyone to take their seats. 

I want to welcome everyone to the hearing this morning. I know 

it is a little uncomfortable back there, but we will all try to do the 

best we can. We are trying to get everybody in who wants a seat. 

At the outset, I certainly want to recognize the presence of the 

Secretary of the Interior this morning. 

We are honored to have you here. We look forward to your testimony. 

Today, we begin consideration of H.R. 322, the Mineral Explo- ration and Development Act of 1993, introduced by our colleague, Congressman Nick Rahall of West Virginia. H.R. 322 would replace the 1872 Mining Law, the last survivor of laws written to encourage settlement of the West. It replaces the 1872 law with a modem 

system designed to: one, eliminate the giveaway of valuable Federal lands; two, garner a fair return for the extraction of hard-rock 

minerals, such as gold, silver, and copper, from those Federal 

lands; three, provide environmental safeguards to minimize the adverse impacts of mining; and, finally, reclaim abandoned hard-rock 

mines in the West. 

Congressman Rahall introduced legislation to reform the 1872 

Mining Law during the last three Congresses. Earlier, in the 102d 

Congress, he introduced H.R. 918, the predecessor to H.R. 322, and 

six hearings were conducted on the bill. It was reported favorably 

by the full committee and then referred to the ~culture and 

Merchant Marine Committees. The House began Floor consideration of the bill late in the last session but did not complete action 

on the measure prior to adjournment last fall. 

[Text of the bill, H.R. 322, follows:] 

(1) 
103D CONGRESS 

1ST SESSION 

2 

H.R.322· 

To modify the requirements applieahle to locatable minerals on public domain 

lands, colllilt.ent with the prineiplea of self-initiation of mining claims, 

and for other purpoeea. 

IN THE HOUSE OF REPRESENTATIVES 

J~'UARY 5, 1993 

Mr. R.ulALL (for himself, Mr. MILLER of California, Mr. VEl\'TO, and Mr. 

LEIDIAN) introduced the following bill: which was referred to the Committee on Natural Reaoorces 

A BILL 

To modify the requirement.s applie.able to locatable minerals 

on public dmnain lands, consistent with the principles 

of self-initiation of mining claims, and for other purposes. 

1 Be it enacted 1>y tlw Senate and House of Representa2 tives of tlw United States of America in Congress assembled, 

3 SECTION 1. SHOKI' TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.-This Act may be cited as the 

5 "Mineral Exploration and Development Act of 1993". 

6 (b) TABLE OF CONTENTS.-

TITLE 1-IIINERAL EXPLORATION AND DEVELOPMENT 

Sec. 101. · Definitions, references and co-rerage 

Sec. 102. Lands open t.o location; rights under this Act. 
3 

2 

Sec. 103. Location of mining claims. 

Sec. 104. Claim maintenance requirements. 

Sec. 105. Penalties. 

Sec. 106. Preemption. 

Sec. 107. Limitation on patent i681ll1Jlce. 

Sec. 108. Multiple mineral development and surface reaources. 

See. 109. Mineral materials. 

TITLE II-ENVIRONMENTAL CONSIDERATIONS OF MINERAL 

EXPLORATION AND DEVELOPMENT 

Sec. 201. Surface management. 

Sec. 202. Inspection and enforcement. 

Sec. 203. State law and regulation. 

Sec. 204. Unsuitability review. 

Sec. 205. Lands not open to location. 

TITLE Ill-ABANDONED MINERALS MINE RECLAMATION FUND 

Sec. 301. Abandoned Minerals Mine Reclamation Fund. 

Sec. 302. Conforming amendments. 

TITLE IV-ADMINISTRATIVE A.1'i'D MISCELLANEOUS PROVISIONS 

Sec. 401. Policy functions. 

See. 402. User fees. 

Sec. 403. Regulations; effective dates. 

Sec. 404. Transitional rules; mining claims and mill sites. 

Sec. 405. Transitional rules; surface management requirements. 

Sec. 406. Basis for contest. 

Sec. 407. Savings clause claims. 

Sec. 408. Severability. 

Sec. 409. Purchasing power adjustment. 

Sec. 410. Royalty. 

Sec. 411. Savings clause. 

Sec. 412. Public records. 

I TITLE I-MINERAL EXPLO2. RATION AND DEVELOPMENT 

3 SEC. 101. DEFINITIONS, REFERENCES, AND COVERAGE. 

4 (a) DEFINITIONS.-As used in this Act: 

5 (1) The term "applicant" means any person ap6 plying for a plan of operations under this Act or a 

7 modification to or a renewal of a plan of operations 

8 under this Act. 

· •HR 322 m 
4 

3 

l (2) The t.erm "claim holder" means the holder 

2 of a mining claim looat.ed or convert.ed under this 

3 Act. Such term may include an agent of a claim 

4 holder. 

5 (3) The t.enn "diligence year" means the an6 nual period commencing on the first day of the first 

7 month following the dat.e a mining claim is locat.ed 

8 under this Act and each annual period thereafter, 

9 except as provided under section 404(b)(2). 

10 ( 4) The t.enn "land use plans" means those 

11 plans required under section 202 of the Federal 

12 Land Policy and Management Act of 1976 (43 

13 U.S.C. 1712) or the land management plans for Na14 tional Forest Syst.em units required under section 6 

15 of the Forest and Rangeland Renewable Resources 

16 Planning Act of 1974 (16 U.S.C. 1604), whichever 

17 is applicable. 

18 (5) The t.erm "legal subdivisions" means an ali19 quot quarter quarter section of land as established 

20 by the official records of the public land survey sys21 t.em, or a single lot as established by the official 

22 records of the public land survey system if the perti23 nent section is irregular and contains fractional lots, 

24 as the case may be. 

•HR mm 
5 

4 

1 (6) The term "locatable mineral" means any 

2 mineral not subject to disposition under any of the 

3 following: 

4 (A) the Mineral Leasing Act (30 U.S.C. 

5 181 and follow.ng); 

6 (B) the Geothermal Steam Act of 1970 

7 (30 U.S.G. 100 and following); 

8 (C) the Act of July 31, 1947, commonly 

9 known as the Materials Act of 1947 (30 U.S.C. 

10 601 and following); or 

11 (D} the Mineral Leasing for Acquired 

12 Lands Act (30 U.S.C. 351 anrl following). 

13 (7) The term "minerc>J activities" means any 

14 activity for, related to or incidental to mineral explo15 ration, mining, beneficiation and processing activi16 ties for any locatable mineral, ineluding access. 

17 When used with respect to this term18 (A) the term "e:irploration" means those 

19 techniques employed to locate the presence of a 

20 locatable mineral deposit and to establish its 

21 nature, position, size, shape, grade and .value; 

22 (B) the term "mining" means the proc23 esses employ~d for the extraction of a locatable 

24 mineral from the earth; 

•HR S22 m 
6 

5 

1 (C) the term "beneficiation" means the 

2 crushing and grinding of locatable mineral ore 

3 and such processes are employed to free the 

4 mineral from other constituents, including but 

5 not necessarily limited to, physical and chemical 

6 separation techniques; and 

7 (D) the term "processing" means proc8 esses downstream of beneficiation employed to 

9 prepare locatable mineral ore into the final 

10 marketable product, including but not limited 

11 to, smelting and electrolytic refining. 

12 (8) The term "mining claim" means a claim for 

13 the purposes of mineral activities. 

14 (9) The term "National Conservation System 

15 unit" means any unit of the National Park System, 

16 National Wildlife Refuge System, National Wild and 

17 Scenic Rivers System, National Trails System, or a 

18 National Conservation Area, National Recreation 

19 Area, or a National Forest Monument. 

20 (10) The term "operator" means any person, 

21 partnership or corporation with a plan of operations 

22 approved under this Act. 

23 (11) The tem1 "Secretary'' means, unless oth24 envise provided in this Act-

•Ba III IB 
7 

6 

1 (A) the Secretary of the Interior for the 

2 purposes of title I and title III; 

3 (B) the Secretary of the Interior with re4 spect to land under the jurisdiction of such Sec5 retary and all other lands subject to this Act 

6 ( except for lands under the jurisdiction of the 

7 Secretary of Agriculture) for the purposes of 

8 title II; and 

9 (C) the Secretary of Agriculture with re10 spect to lands under the jurisdiction of the Sec11 retary of Agriculture for the purposes of title 

12 II. 

13 (12) The term "substantial legal and financial 

14 commitments" means significant investments that 

15 have been made to develop mining claims under the 

16 general mining laws such as: long-term contracts for 

17 minerals produced; processing, beneficiation, or ex18 traction facilities and transportation infrastructure; 

19 or other capital-intensive activities. Costs of acquir20 ing the mining claim or claims, or the right to mine 

21 alone without other significant investments as de22 tailed above, are not sufficient to constitute substan23 tial legal and financial commitments. 

24 (13) The term "surface management require25 ments" means the requirements and standards of 

•BRutm 
8 

7 

1 section 201, section 203 and section 204 of this Act, 

2 and such other standards as are established by the 

3 Secretary governing mineral activities and reclama4 tion. 

5 (b) REFERENCES.-(!) Any reference in this Act to 

6 the t.erm "general mining laws" is a reference to those 

7 Acts which generally comprise 30 U.S.C. chapters 2, 12A, 

8 and 16, and sections 161 and 162. 

9 (2) Any reference in this Act to the "Act of July 23, 

10 1955", is a reference to the Act of July 23, 1955, entitled 

11 "An Act to amend the Act of July 31, 1947 (61 Stat. 

12 681) and the mining laws to provide for multiple use of 

13 the surface of the same tracts of the public · 1ands, and 

14 for other purposes." (30 U.S.C. 601 and following). 

15 (c) COVERAGE.-This Act shall apply only to mineral 

16 activities and reclamation on lands and interests in land 

17 which are open to location as provided in this Act. 

18 SEC. IOI. LANDS OPEN TO LOCATION; RIGHTS UNDER THIS 

19 ACT. 

20 (a) OPEN LANDs.-Mining claims may be located 

21 under this Act on lands and interests in lands owned by 

22 the United States to the extent that23 (1) such lands and interests were open to the 

24 location of mining claims under the general mining 

25 laws on the date of enactment of this Act; 

•RRIDm 
9 

8 

1 (2) such lands and interests are opened to the 

2 location of mining claims by reason of section 204(f) 

3 or section 205 of this Act; and 

4 (3) such lands and interests are opened to the 

5 location of mining claims after the date of enact6 ment of this Act by ·reason of any administrative ac7 tion or statute. 

8 (b) RIGHTS.-The holder of a mining claim located 

9 or converted under this Act and maintained in compliance 

10 with this Act shall have the exclusive right of possession 

11 and use of the claimed land for mineral activities, includ12 ing the right of ingress and egress to such claimed lands 

13 for such activities, subject to the rights of the United 

14 States under section 108 and title II. 

15 SEC; 103. LOCATION OF MINING CLAIMS. 

16 (a) GENERAL RULE.-A person may locate a mining 

17 claim covering lands open to the location of mining claims 

18 by posting a notice of location, containing the person's 

19 name and address, the time of location (which shall be 

20 the date and hour of location and posting), and a legal 

21 description of the claim. The notice of location shall be 

22 posted on a conspicuous, durable monument erected as 

23 near as practicable to the northeast corner of the mining 

24 claim. No person who is not a citizen, or a corporation 

25 organized under the laws of the United States or of any 

•BRIii m 
10 

9 

1 State or the District of Columbia may locate or hold a 

2 claim under this Act. 

3 · (b) UBE OF PuBLIC LAND SURVEY.-Except as pro4 vided in subsection (c), each mining claim located under 

5 this Act shall (1) be located in accordance with the public 

6 land survey system, and (2) conform to the legal subdivi7 sions thereof. Except as provided in subsection (c), the 

8 legal description of the mining claim shall be based on the 

9 public land survey system and its legal subdivisions. 

10 (c) EXCEPTIONS.-(1) If only a protracted survey ex11 ists for the public lands concerned, each of the following 

12 shall apply in lieu of subsection (b): 

13 (A) The legal description of the mining claim 

14 shall be based on the protracted survey and the min15 ing claim shall be located as near as practicable in 

16 conformance with a protracted legal subdivision. 

17 (B) The mining claim shall be monumented on 

18 the ground by the erection of a conspicuous durable 

19 monument at each corner of the claim. 

20 ( C) The legal description of the mining claim 

21 shall include a reference to any existing survey 

22 monument, or where no such monument can be 

23 found within a reasonable distance, to a permanent 

24 natural object. 

•BRm lB 
11 

10 

1 (2) If no survey exists for the public lands concerned, 

2 each of the following shall apply in lieu of subsection (b): 

3 (A) The mining claim shall be a regular square, 

4 with each side laid out in cardinal directions, 40 

5 acres in size. 

6 (B) The claim shall be monumented on the 

7 ground by the erection ·of a conspicuous durable 

8 monument at each comer of the claim. 

9 (C) The legal description of the mining claim 

10 shall be e:ll..-pressed in metes and bounds and shall in11 elude a reference to any existing survey monument, 

12 or where no such monument can be found within a 

13 reasonable distance, to a permanent natural object. 

14 Such description shall be of sufficient accuracy and 

15 completeness to permit recording of the claim upon 

16 the public land records and to permit the Secretary 

17 and other parties to find the claim upon the ground. 

18 (3) In the case of a conflict between the boundaries 

19 of a mining claim as monumented on the ground and the 

20 description of such claim in the notice of location referred 

21 to in subsection (a), the notice of location shall be deter22 minative. 

23 (d) FILING WITH SECRETARY.-(1) Within 30 days 

24 after the location of a mining claim pursuant to this sec25 tion, a copy of the notice of location referred to in sub-

•BR 811 ffl 
12 

11 

1 section (a) shall be filed with the Secretary in an office 

2 designated by the Secretary. 

3 (2) Whenever the Secretary receives a copy of a no4 tice of location of a mining claim under this Act, the Sec5 retary shall assign a serial number to the mining claim, 

6 and immediately return a copy of the notice of location 

7 to the locator of the claim, together with a certificate set8 ting forth the serial number, a description of the claim, 

9 and the claim maintenance requirements of section 104. 

10 The Secretary shall enter the claim on the public land 

11 records. 

12 (e) LANi>s CoVERED_ .BY CLAIM.-A mining claim lo13 cated under this Act shall include all lands and interests 

14 in lands open to location within the boundaries of the 

15 claim, subject to any prior mining claim referenced under 

16 subsections (c) and (d) of section 404. 

17 (f) DATE OF LocATION.-A mining claim located 

18 under this Act shall be effective based upon the time of 

19 location. 

20 (g) CONFLICTING LocATIONS.-Any conflicts be21 tween the holders of mining claims located or converted 

22 under this Act relating to relative superiority under the 

23 provisions of this Act may be :resolved in adjudication pro24 ceedings before the Secretary. Such adjudication shall be 

25 determined on the record after opportunity for hearing. 

•BRmm 
13 

12 

1 It shall be incumbent upon the holder of a mining claim 

2 asserting superior rights in such pl"O(',eedings to dem3 onstrate to the Secretary that 1mch person was the senior 

4 locator, or if such person is the junior locator, that prior 

5 to the location of the claim by such locator6 (1) the senior locator failed to file a copy of the 

7 notice of location within the time provided under 

8 subsection (d); 

9 (2) the amount of rental paid by the senior lo10 cator at the time nf filing the instrument referred to 

11 in subsection 10<,l(d)(l) was less than the amount 

12 required to be paid by such locator; or 

13 (3) the senior locator did not make the diligent 

14 development expenditures reported on the most re15 cent affidavit filed with the instrument referred to in 

16 subsection 104(d)(l), or such expenditures did not 

17 comply with the requirements of subsection 104(b). 

18 (h) EXTENT OF MINERAL DEPOSIT.-The bound19 aries of a mining claim located under this Act shall extend 

20 vertically downward. 

21 SEC. lo.&. CLAIM MAINTENANCE REQUIREMENTS. 

22 (a) IN GENERAL.-(1) Except as provided under sub23 section (b), in order to maintain a mining claim under this 

24 Act a claim holder shall pay an annual rental fee. The 

25 rental fee shall be paid on the basis of all land within the 

•BRSD 1B 
14 

13 

1 boundaries of a mining daim ( as described in notice of 

2 location filed under section H)'.3{d)) at a rate established 

3 by the Secretary of not less than4 (A) $5 per a.ere in each of the first through 

5 fifth diligent.le years following location of the claim; 

6 (B) $10 per RCrt in each of the sixth through 

7 tenth diligence years following location of the claim; 

8 (C) $15 per acre in each of the eleventh 

9 through fifteenth diligence years following location 

10 of the claim; 

11 (D) $20 per acre m each of t.he sixteenth 

12 through twentieth diligence years following location 

13 of the claim; and 

14 (E) $25 per acre in the twenty-first diligence 

15 year following location of the claim, and each dili16 gence year thereaft{w. 

17 (2) The rental fee shall be due ar,d payable at the 

18 time the daim holder files the instrument required under 

19 subsection (d)(l). 

20 (3) The Secretary shall deposit all mo,ieys received 

21 from rental fees 1~ollected under this subsection into the 

22 ~und refen·ed tc, in title III. 

23 (b) DU.JGENT DBVEliJPMF~NT EXPENDITURES.-(1) 

24 A claim holder ma~· elect to reduce the amount of the rent25 al fee required under subs~ction (a) by the amount of dili-

•BR mm 
15 

14 

1 gent development expenditures made for mineral activities 

2 on or to the benefit of a mining claim during the same 

3 diligence year to which the rental fee would otherwise 

4 apply, except that in no event shall such reduction cause 

5 less than an annual rental fee of $2.50 per acre of all 

6 land within the boundaries of a mining claim ( as described 

7 in notice of location filed under section 103(d)) to be paid. 

8 Such expenditures made for mineral activities on or to the 

9 benefit of any one claim, or more than one claim in a 

10 group of contiguous claims held by the same claim holder, 

11 may be deemed to have been performed for the benefit 

12 of the entire group of contiguous claims so long as the 

13 sum total of the expenditures equals. the total amount of 

14 expenditures that would have been made if such expendi15 tures had been made on or .to the benefit of each individual 

16 claim in the group. 

17 (2) Diligent development expenditures shall include 

18 those made for any of the following: 

19 (A) Investigations and surveys, including 

20 geotechnical, geological, geophysical or geochemical 

21 surveys. 

22 (B) Bulle mineral sampling and testing. 

23 (C) Drilling. 

24 (D) Environmental and engineering studies. 

•DIii 1H 
16 

15 

1 (E) The reclamation and restoration of land 

2 disturbed by mineral activities during exploration. 

3 (F) Such other activities that constituted as4. sessment work under the general mining laws prior 

5 to the date of enactment of this Act. 

6 (G) Such other mineral activities as the Sec7 retary may, by rule, establish. 

8 (3) In the event a claim holder elects to reduce the 

9 amount of the rental fee under paragraph (1), such claim 

10 holder shall file an affidavit under this paragraph at the 

11 time such claim holder files the instrument required under 

12 subsection (d)(l). The affidavit shall contain a detailed de13 scription of the value and nature of all diligent develop14 ment expenditures made under this subsection and shall 

15 be of sufficient detail as to permit validation by the Sec16 retary of the expenditure amounts and beneficial nature 

17 of the expenditures. 

18 ( 4) A claim holder shall maintain documentary proof 

19 of diligent development expenditures reported on the affi20 davit referred to in paragraph (3) for a period of 5 years 

21 after the diligence year to which such expenditures apply. 

22 Such documentary proof shall be made available at the 

23 request of the Secretary for the purpose of the validation 

24 referred to in paragraph (3) and the audit referred to in 

25 subsection (f). 

•HR an m 
17 

16 

1 (c) MINIMUM RENTAL.-(1) A claim holder shall only 

2 be required to pay a minimum annual rental fee of $2.50 

3 per acre of all land within the boundaries of a mining 

4 claim (as described in notice of location filed under section 

5 103(d)) under any of the following circumstances: 

6 (A) If a claim holder demonstrates to the &c7 retary that such claim holder is prevented from 

8 making diligent development expenditures under 

9 subsection (b) by reason of10 (i) any judicial proceeding or administra11 tive action; or 

12 (ii) the fact that the mining claim or group 

13 of contiguous claims is surrounded by lands 

14 over which a right-of-way for the performance 

15 of such requirement has been denied, is in liti16 gation, or is in the process of acquisition under 

17 State law, or that other legal impediments exist 

18 which affect the right of the claimant to enter 

19 upon the surface of such claim or group of con20 tiguous claims or to gain access to the bound21 aries thereof or to conduct mineral activities 

22 thereon; 

23 pursuant to such rules as the Secretary may pre24 scribe governing the length and termination of th~ 

25 minimum rental requirement. 

•Hamm 
18 

17 

1 (B) By reason of section 5 of Public Law 94-

2 429, commonly known as the Mining in· the Parks 

3 Act, for any claim subject to such section after the 

4 conversion of such claim under section 404. 

5 (C) By reason of such other law'S that here6 tofore removed the applicability of the assessment 

7 work requirement of the general mining laws for any 

8 claim subject to such laws after the conversion of 

9 such claim under section 404. 

10 (2) The rental fee shall be due and payable at the 

11 time the claim holder files the instrument required under 

12 subsection (d)(l). Included with such instrument shall be 

13 a statement setting forth the reasons why the claim holder 

14 is only required to pay the minimum rental. 

15 (3) The Secretary shall deposit all moneys received 

16 from rental fees collected under this subsection into the 

17 Fund referred to in title III. 

18 (d) INSTRUMENT.-(1) In order to maintain a mining 

19 claim under this Act, a claim holder shall, on or before 

20 the date which is the last day of the third calendar month 

21 after the anniversary date of each diligence year for such 

22 claim, file an instrument with the Secretary containing the 

23 name and address of the claim holder and the serial num24 her assigned to the claim pursuant to section 103(d). The 
19 

18 

1 instrument shall ~ accompanied by, as the case may be, 

2 the following3 (A) the rental fee required for the applicable 

4 diligence year referred to in subsection (a)(l); 

5 (B) the amount of rental fee required due to 

6 the reduction of such fee by diligent development ex7 penditures under subsection (b)(l), and the affidavit 

8 referred to in subsection (b)(3); or 

9 (C) the minimum rental fee referred to in sub10 section (c)(l) and the statement referred to in sub11 section (c)(2). 

12 (2) If, in any diligence year, a claim holder fails to 

13 file the instrument referred to in paragraph (1) within the 

14 period referred to in such paragraph or fails, in any re15 spect, to comply with the requirements of paragraph (1), 

16 the Secretary shall immediately provide notice thereof to 

17 the claim holder and after 30 days from the date of such 

18 · notice the claim shall be deemed forfeited and such claim 

19 shall be null and void, except as provided under subsection 

20 (e). Such notice shall be sent to the claim holder by reg21 . istered or certified mail to the address provided by such 

22 claim holder in the notice of location referred to in section 

23 103(a) or on the last instrument referred to in subsection 

24 {d)(l) filed by such claim holder, whichever is most recent. 

25 In the event such notice is returned as undelivered; the 

.-mm 
20 

19 

I Secretary shall be deemed to have fulfilled the notice re2 quirements of this paragraph. 

3 (e) FAILURE TO COMPLY.-(1) No claim may be 

4 deemed forfeited and declared null and void by the Sec5 retary due to a failure to comply with the requirements 

6 referred to in subsection ( d) if the claim holder corrects 

7 such failure to the satisfaction of the Secretary within 10 

8 days after the date such claim holder was required to file 

9 the instrument referred to in subsection (d)(l). 

10 (2) No claim may be deemed forfeited and declared 

11 null and void by the Secretary due to a failure to comply 

12 with the requirements referred to in subsection ( d) if, 

13 within 10 days after date of the notice referred to in sub14 section (d)(2), the claim holder corrects such failure to 

15 the satisfaction of the Secretary, and if the Secretary de16 termines that such failure was justifiable or not due to 

17 a lack of reasonable diligence on the part of the claim 

18 holder, or that such failure was inadvertent. 

19 (t') AuDITS.-The Secretary is authorized to conduct 

20 such audits of claim holders as he deems necessary for 

21 the purpose of ensuring compliance with the requirements 

22 of this section. For purposes of performing such audits, 

23 the Secretary shall, at reasonable times and upon request, 

24 have access to, and may copy, all books, papers and other 

•BR mm 
21 

20 

l documents that relate to compliance with this seetion of 

2 any person subject· to the pro"isions of this section. 

3 SEC. 105. PENALTIES. 

4 (a) VIOLATION.-Any claim holder who5 (1) knowingly or ·willfully posts on a mining 

6 claim or files a notice of location with the Secretary 

7 under section 103 that contains false, inaccurate or 

8 misleading statements; 

9 (2) knowingly or willfully prepares, maintains, 

l O or submits false, inaccurate, or misleading informal! tion on diligent development expenditures on the af12 fl.davit referred to in section 104(b)(3); or 

13 (3) fails or refuses to permit an audit pursuant 

14 to section 104(f); 

15 shall be liable for a penalty of not more than $5,000 per 

16 violation. Each day of continuing violation may be deemed 

17 a separate violation for purposes of penalty assessments. 

18 (b) REVIEW.-No civil penalty under this section 

19 shall be assessed until the claim holder charged with the 

20 violation has been given the opportunity for a hearing on 

21 the record under section 202(f). 

22 SEC. 108. PREEMPTION. 

23 The requirements of this title shall preempt any con24 flicting requirements of any State, or political subdivision 

25 thereof relating to the location and maintenance of mining 

•JIB SU m 
22 

21 

1 claims as provided for by this Act. The filing requirements 

2 of section 314 of the Federal Land Policy and Manage3 ment Act (43 U.S.C. 1744) shall not apply with respect 

4 to any mining claim located or converted under this Act. 

5 SEC. 107. LIMITATION ON PATENT ISSUANCE. 

6 (a) MINING CLAIMS.-After January 5, 1993, no pat7 ent shall be issued by the United States for any mining 

8 claim located under the general mining laws unless the 

9 Secretary of the Interior determines that, for the claim 

10 concerned11 (1) a patent application was filed with the Sec12 retary on or before January 5, 1993; and 

13 (2) all requirements established under sections 

14 2325 and 2326 of the Revised Statutes (30 U.S.C. 

15 29 and 30) for vein or lode claims and sections 

16 2329, 2330, 2331, and 2333 of the Revised Statutes 

17 (30 U.S.C. 35, 36, and 37) for placer claims were 

18 fully complied with by that date. 

19 If the Secretary makes the determinations referred to in 

20 paragraphs (1) and (2) for any mining claim, the holder 

21 of tt.e claim shall be entitled to the issuance of a patent 

22 in the same manner and degree to which such claim holder 

23 would have been entitled to prior to the enactment of this 

24 Act, unless and until such determinations are withdrawn 

•HR 32111H 
23 

22 

1 or invalidated by the Secretary or by a court of the United 

2 States. 

3 (b) MILL SITES.-After January 5, 1993, no patent 

4 shall be issued by the United States for any mill site claim 

5 located under the general mining laws unless the Secretary 

6 of the Interior determines that for the mill site 

7 concemed8 . (1) a patent application for such land was filed 

9 with the Secretary on or before January 5, 1993; 

10 and 

11 (2) all requirements applicable to such patent 

12 application were fully complied with by that date. 

13 If the Secretary makes the determinations referred to in 

14 paragraphs (1) and (2) for any mill site claim, the holder 

15 of the claim shall be entitled to the issuance of a patent 

16 in the same manner and degree to which such claim holder 

17 would have been entitled to prior to the enactment of this 

18 Act, unless and until such determinations are withdrawn 

19 or invalidated by the Secretary or by a court of the United 

20 States. 

21 SEC. 108. MULTIPLE MINERAL DEVELOPMENT AND SUR22 FACE RESOURCES. 

23 (a) IN GENERAL.-The provisions of sections 4 and 

24 6 of the Act of August 13, 1954 (30 U .S.C. 524 and 526), 

25 commonly known as the Multiple Minerals Development 

-eamm 
24 

23 

1 Act, and the provisions of section 4 of the Act of July 

2 23, 1955 (30 U.S.C. 612), shall apply to all mining claims 

3 located or converted under this Act. 

4 (b) ENFORCEMENT.-The Secretary of the Interior, 

5 or the Secretary of Agriculture, as the case may be, shall 

6 take such actions as may be necessary to ensure the com7 pliance by claim holders with section 4 of the Act of July 

8 23, 1955 (30 u.s.c. 612). 

9 SEC. 109. MINERAL MATERIALS. 

10 (a) DETERMINATIONS.-Section 3 of the Act of July 

11 23, 1955 (30 U.S.C. 611), is amended as foilows: 

12 (1) Insert "(a)" before the first sentence. 

13 (2) Strike "or cinders" and insert in lieu there14 of "cinders, or clay". 

15 (3) Add the following new subsection at the end 

16 thereof: 

17 "(b)(l) Subject to valid existing rights, after the date 

18 of enactment of the Mineral Exploration and Development 

19 Act of 1993, all deposits of mineral materials referred to 

20 in subsection (a), including the block pumice referred to 

21 in such subsection, shall only be subject to disposal under 

22 the terms and conditions of the Materials Act of 194 7. 

23 "(2) For purposes of paragraph (1), the term 'valid 

24 existing rights' means that a mining claim located for any 

25 such mineral material had some property giving it the dis-

•HR mm 
25 

24 

1 tinct and special value refen-ed to in subsection (a), or 

2 as the case may be, met the definition of block pumice 

3 refen-ed to in such subsection, was properly located and 

4 maintained under the general mining laws prior to the 

5 date of enactment of the Mineral Exploration and Devel6 opment Act of 1993, and was supported by a discovery 

7 of a valuable mineral deposit within the meaning of the 

8 general mining laws on the date of enactment of the Min9 eral Exploration and Development Act of 1993 and that 

10 such claim continues to be valid.". 

11 (b) MINERAL MATERIALS DISPOSAL CLARIFICA12 TION.-Section 4 of the Act of July 23, 1955 (30 U.S.C. 

13 612), is amended as follows: 

14 (1) In subsection (b) insert "and mineral mate15 rial" after "vegetative". 

16 (2) In subsection (c) insert "and mineral mate17 rial" after "vegetative". 

18 (c) CONFORMING AMENDMENT.-Section 1 of the 

19 Act of July 31, 1947, entitled "An Act to provide for the 

20 disposal of materials on the public lands of the United 

21 States" (30 U.S.C. 601 and following) is amended by 

22 striking "common varieties of'' in the first sentence. 

23 (d) SHORT TITLES.-

•BRmm 
26 

25 

1 (1) SURFACE RESOURCES.-The Act of' ,July 

2 23, 1955, is amended by inserting after seetion 7 

3 the following new section: 

4 "SEC. 8. This Act may be cited as the 'Surface Re5 sources Act of 1955'.". 

6 (2) MINERAL MATERIALS.-'l'he Act of .July 31, 

7 194 7, entitled "An Act to provide for the disposal of 

8 materials on the public lands of the United States" 

9 (30 U.S.C. 601 and following) is am~nded by insertIO ing after section 4 the following new section: 

11 "SEC. 5. This Act may be cited as the 'Materials Act 

12 of 1947'.". 

13 {e) REPEAL.-(1) The Act of August 4, 1892 (27 

14 Stat. 348) commonly known as the Building Stone Act 

15 is hereby repealed. 

16 (2) The Act of January 31, 1901 (30 0.8.C. 162) 

17 commonly known as the Saline Placer Act is hereby 

18 repealed. 

19 TITLE II-ENVIRONMENTAL 

20 CONSIDERATIONS OF MIN21 ERAL EXPLORATION AND DE22 VELOPMENT 

23 SEC. 201. SURFACE MANAGEMENT. 

24 (a) IN GE.NERAL.--Notwithstanding the last senten.ce 

25 of section 302(b) of the Federal Land Policy and Manage-

•HR sn m 
27 

26 

1 ment Act of 1976, and in accordance with this title and 

2 other applicable law, the Secretary shall require that min3 eral activities and reclamation be conducted so as to mini4 mize adverse impacts to the environment. 

5 (b) PLANS OF OPERATION.-(1) Except as provided 

6 under paragraph (2), no person may engage in mineral 

7 activities that may cause a disturbance of surface re8 sources unless such person has filed a plan of operations 

9 with, and received approval of such plan of operations, 

10 from the Secretary. 

11 (2)(A) A plan of operations may not be required for 

12 mineral activities related to exploration that cause a neg13 ligible disturbance of surface resources not involving the 

14 use of mechanized earth moving equipment, suction dredg15 ing, explosives, the use of motor vehicles in areas closed 

16 to off-road vehicles, the construction of roads, drill pads, 

17 or the use of toxic or hazardous materials. 

18 (B) A plan of operations may not be required for min19 eral activities related to exploration that, after notice to 

20 the Secretary, involve only a minimal and readily reclaim21 able disturbance of surface resources related to and in22 eluding initial test drilling not involving the construction 

23 of access roads, except activities under notice shall not 

24 commence until an adequate financial guarantee is estab25 lished for such activities pursuant to subsection (1). 

•BRID 1B 
28 

27 

1 (c) CONTENTS OF PLANs.-Each proposed plan of 

2 operations shall include a mining permit application and 

3 a reclamation plan together with such documentation as 

4 necessary to ensure compliance with applicable Federal 

5 and State environmental laws and regulations. 

6 (d) MINING PERMIT .APPLICATION REQUIRE7 MENTS.-The mining permit referred to in subsection (c) 

8 shall include such terms and conditions as prescribed by 

9 the Secretary, and each of the following: 

10 (1) The name and mailing address of11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

(A) the applicant for the mining permit; 

(B) the operator if different than the applicant; 

(C) each claim holder of the lands subject 

to the plan of operations if different than the 

applicant; 

(D) any subsidiary, 1,tffiliate or person controlled by or under common control with the applicant, or the operator or each claim holder, if 

different than the applicant; and 

(E) the owner or owners of any land, or interests in any such land, not subject to this Act, 

within or adjacent to the proposed mineral activities. 

•BRSU m 
29 

28 

1 (2) A stat.ement of any plans of operation held 

2 by the applicant, operator or each claim holder if 

3 different than the applicant, or any subsidiary, affili4 at.e, or person controlled by · or under common con5 trol with the applicant, operator or each claim holder 

6 if different than the applicant. 

7 · (3) A statement of whether the applicant, oper8 ator or each claim holder if different than the appli9 cant, and any ·subsidiary, affiliat.e, or person con10 trolled by or under common control with the appli11 cant, operator or each claim holder if different than 

12 the applicant has an outstanding violation of this 

13 Act, any surface management requirements, or ap14 plicable air and wat.er quality laws and regulations 

15 and if so, a brief explanation of the facts involved, 

16 including identification of the sit.e and the nature of 

17 the violation. 

18 ( 4) A description of the type and method of 

19 mineral activities proposed, the engineering tech20 niques proposed to be used and the equipment pro21 posed to be used. 

22 ' (5) The anticipated starting and termination 

23 dates of each phase of the mineral activities pro24 posed. 

•BB mm 
30 

29 

1 (6) A map, t.o an appropriate scale, clearly 

2 showing the land t.o be affected by the proposed min3 eral activities. 

4 (7) A description of the quantity and quality of 

5 surface and ground water resources within and 

6 along the boundaries of, and adjacent t.o, the area 

7 subject to mineral activities based on 12 months of 

8 pre-disturbance monit.oring. 

9 (8) A description of the biological resources 

10 found in or adjacent t.o the · area subject t.o mineral 

11 activities, including vegetation, fish and wildlife, ri12 parian and wetland habitats. 

13 (9) A description of the monit.oring systems to 

14 be used to detect and determine whether compliance 

15 has and is occurring consistent with the surface 

16 management requirements and t.o regulate the ef17 fects of mineral activities and reclamation on the 

18 site and surrounding environment, including but not 

19 limited to, groundwater, surface water, air and soils. 

20 (10) Accident contingency plans that include, 

21 but are not limited· t.o, immediate response strate22 gies, corrective measures t.o mitigate impacts t.o fish 

23 and wildlife, ground and surface waters, notification 

24 procedures and waste handling and t.oxic material 

25 neutralization. 

•BRIii 1B 
31 

30 

1 (11) Any measures to comply with any condi2 tions on minerals activities and reclamation that 

3 may be required in the applicable land use plan, in4 eluding any condition stipulated pursuant to section 

5 204(d)(l)(B). 

6 (12) A description of measures planned to ex7 elude fish and wildlife resources from the area sub8 ject to mineral activities by covering, containment, 

9 or fencing of open waters, beneficiation, and process10 ing materials; or maintenance of all facilities . in a 

11 condition that is not harmful to fish and wildlife. 

12 (13) Such environmental baseline data as the 

13 Secretary, by rule, shall require. sufficient to validate 

14 the determinations required for plan approval under 

15 this Act. 

16 (e) RECLAMATION PLAN APPLICATION REQUffiE17 MENTS.-The reclamation plan referred to in subsection 

18 (c) shall include such terms and conditions as prescribed 

19 by the Secretary, and each of the following: 

20 ( 1) A description of. the condition of the land 

21 subject to the mining permit prior to the commence22 ment of any mineral activities. 

23 (2) A description of reclamation measures pro24 posed pursuant to the requirements of subsections 

25 (m) and (n). 

•Bil an m 
32 

31 

1 (3) The engineering techniques to be used in 

2 reclamation and the equipment proposed to be used. 

3 ( 4) The anticipat.ed starting and termination 

4 dates of each phase-of the reclamation proposed. 

5 ( 5) A description of the proposed condition of 

6 the land following the completion of reclamation. 

7 (6) A description of the maintenance measures 

8 that will be necessary to meet the surface manage9 ment requirements of this Act, such as, but not lim10 ited to, drainage water treatment facilities, or liner 

11 maintenance and control. 

12 (7) The consideration which has been given to 

13 making the condition of the land after the comple14 tion of mineral activities and final reclamation oon15 sistent with the applicable land use plan. 

16 (f) PuBLIC PARTICIPATION.-(1) Concurrent with 

17 submittal of a plan of operations, or a renewal application 

18 for a plan of operations, the applicant shall publish a no19 tice in a newspaper of local circulation for 4 consecutive 

20 weeks that shall include: the name of the applicant, the 

21 location of the proposed mineral activities, the type and 

22 expected duration of the proposed mineral activities, and 

23 the intended use of the land after the completion of min24 eral activities and reclamation. The Secretary shall also 

25 notify in writing other Federal, State and local govern-

•BRIIIIB 
33 

32 

1 ment agencies that regulate mineral activities or land 

2 planning decisions in the area subject to mineral activitie8. 

3 (2) Copies of the complete proposed plan of oper4 ations shall be made available for public review for 30 days 

5 at the office of the responsible Federal surface manage6 ment agency located nearest to the location of the pro-

. 7 posed mineral activities, and at the county courthouse of 

8 the county in which the mineral activities are proposed 

9 to be located, prior to final decision by the Secretary. Dnr10 · ing this period, any person arid the authorized representa11 tive of a Federal, State or local governmental agency shall 

12 have the right to tile written comments relating to the ap13 proval or disapproval of the plan of operations. The Sec14 retary shall immediately make such comments available to 

15 the applicant. 

16 (3) Any person that is or niay be adversely atTect.ed 

17 by the proposed mineral activities may request, after filing 

18 written comments pursuant to paragraph (2), a public 

19 hearing to be held in the county in which the mineral ac20 . tivities arc proposed. If a hearing is requested, the · Sec21 retary shall conduct a hearing. When a hearing is to be 

22 held, notice of such hearing shall be published in a news~ 

23 paper of local circulation for 2 weeks prior t.o the hearing 

24 date. 

•BlllD m 
34 

33 

1 (g) PLAN .APPROVAL.-(1) After providing notice and 

2 opportunity for public comment and hearing, the Sec3 retary may approve, require modifications to, or deny a 

4 proposed plan of operations, except as provided in section 

5 405. To approve a plan of operations, the Secretary shall 

6 make each of the following determinations: 

7 (A) The mining permit application and reclama8 tion plan are complete and accurate. 

9 (B) The applicant has demonstrated that rec10 lamation as required by this Act· can be acoom11 plished under the reclamation plan and would have 

12 a high probability of success based on an analysis of 

13 such reclamation measures in areas of similar geo14 chemistry, topography and hydrology. 

15 (C) The proposed mineral activities, reclama16 tion and condition of the land after the completion 

17 of mineral activities and final reclamation would be 

18 consistent with the land use plan applicable to the 

19 area subject to mineral activities. 

20 (D) The area subject to the proposed plan of 

21 operations is not included within an area designated 

22 unsuitable under section 204 for the types of min23 eral activities proposed. 

24 (E) The applicant has demonstrated that the 

25 plan of operations will be in compliance with the reH.R. 322 IHR - 3 (J. 69-080) 
35 

34 

1 quirements of all other applicable Federal require2 ments, and any State requirements agreed to by the 

3 Secretary pursuant to subsection 203(c). 

4 (2) Final approval of a plan of operations under this 

5 subsection shall be conditioned upon compliance with sub6 section (1) and, based on information supplied by the ap7 plicant, a determination of the probable hydrologic con-. 

8 sequences of the proposed mineral activities and reclama9 tion. 

10 (3)(A) A plan of operations under this section shall 

11 not be approved if the applicant, operator, or any claim 

12 holder if different than the applicant, or any subsidiary, 

13 affiliate, or person controlled by or under common control 

14 with the applicant, operator or each claim holder if dif15 ferent than the applicant, is currently in violation of this 

16 Act, any surface management requirement or of any appli17 cable air and water quality laws and regulations at any 

18 site where mineral activities have occurred or are occur19 ring. 

20 (B) The Secretary shall suspend an approved plan 

21 of operations if the Secretary determines that any of the 

22 entities described in section 201(d)(l) were in violation of 

23 the surface management requirements at the time the plan 

24 of operations was approved. 

•BRlalB 
36 

35 

1 (C) A plan of operations referred t;o in this subsection 

2 shall not be approved or reinstated, as the case may be, 

3 until the applicant submit.s proof that the violation has 

4 been corrected or is in the process of being corrected t:o 

5 the satisfaction of the Secretary; except that no proposed 

6 plan of operations, after opportunity for a hearing, shall 

7 be approved for any applicant, operat:or-e or each claim 

8 holder if different than the applicant with a demonstrated 

9 pattern of willful violations of the surface management re10 quirement.s of such nature and duration and with such re11 suiting irreparable damage t;o the environment as t;o clear12 ly indicate an intent not t;o comply with the surface man13 agement requirement.s. 

14 (h) TERM OF PERMIT; RENEWAL.-(1) The approval 

15 of a plan of operations shall be for a stated term. The 

16 term shall be no greater than that necessary t:o accomplish 

17 the proposed operations, and in no case for more than 10 

18 years, unless the applicant demonstrates that a specified 

19 longer term is reasonably needed t:o obtain financing for 

20 equipment and the opening of the operation. 

21 (2) Failure by the operat:or t:o commence mineral ac22 tivities within one year of the date scheduled in an ap23 proved plan of operations shall be deemed t:o require a 

24 modification of the plan. 

•DaaJB 
37 

36 

1 (3) A plan of operations shall carry with it the right 

2 of successive renewal upon expiration only with respect to 

3 operations on aN'..as within the boundaries of the existing 

4 plan of operations, as approved. An application for re5 newal of such plan of operations shall be approved unless 

6 the Secretary determines, in writing, any of the following: 

7 (A) The terms and conditions df the existing 

8 plan of operations are not being met. 

9 (B) Mineral activities and reclamation activities 

10 a.c; approved under the plan of operations are not in 

11 compliance with the surface management require12 ments of this Act. 

13 ( C) The operator has not demonstrated that the 

14 financial guarantee would continue to apply in full 

15 force and effect for the renewal term. 

16 (D) Any additional revised or updated informa17 tion reqlti:red by the Secretary has not been pro18 vided. 

19 (E) The applicant has not demonstrated that 

20 the plan of operations will be in compliance with the 

21 requirements of all other applicable Federal require22 ments, and any State requirements agreed to by the 

23 Secretary pursuant to subsection 203(c). 

24 ( 4) A renewal of a plan ·of· operations shall be for a 

25 term not to exceed the period of the original plan as pro-

•BRIii m 
38 

37 

1 vided in paragraph (1). Application for plan renewal shall 

2 be made at least 120 days prior to the expiration of an 

3 approved plan. 

4 (5) Any person that is, or may be, adversely affected 

5 by the proposed mineral activities may request. a public 

6 hearing to be held in the county in which the mineral ac7 tivities are proposed. If a hearing is requested, the Sec8 retary shall conduct a hearing. When a hearing is held, 

9 notice of such hearing shall be published in a newspaper 

10 of local circulation for 2 weeks prior to the hearing date. 

11 (i) PLAN MODIFICATION.-(1) Except as provided 

12 under section 405, during the term of a plan of operations 

13 the operator may submit an application to modify the 

14 plan. To approve a proposed modification to a plan of op15 erations the Secretary shall make the determinations set 

16 forth under subsection (g)(l). The Secretary shall estab17 lish guidelines regarding the extent to which requirements 

18 for plans of operations under this section shall apply to 

19 applications to modify a plan of operations based on 

20 whether such modifications are deemed· significant or 

21 minor; except that: (A) any significant modifications shall 

22 at a minimum be subject to subsection (f), and (B) any 

23 modification proposing to extend the area covered by the 

24 plan of operations ( except for incidental boundary reviellll-lB 
39 

38 

1 sions) must be made by application for a new plan of oper2 ations. 

3 (2) The Secretary may, upon a review of a plan of 

4 · operations or a renewal application, require reasonable 

5 modification to such plan upon a determination that the 

6 requirements of this Act cannot be met if the plan is fol7 lowed as approved. Such . determination shall be based on 

8 a written finding and subject to notice and hearing re9 quirements established by the Secretary. 

10 (j) TEMPORARY CESSATION OF OPERATIONS.-(l) 

11 Before temporarily ceasing mineral activities or reclama12 tion for a period of 180 days or more under an approved 

13 plan of operations or portions thereof, an operator shall 

14 first submit a complete application for temporary ces15 sation of operations to the Secretary for approval. 

16 (2) The application for approval of temporary ces17 sation of operations shall include such terms and condi18 tions as prescribed by the Secretary, including but not lim19 ited to the steps that shall be taken during the cessation 

20 of operations period to minimize impacts on the environ21 ment. After receipt of a complete application for tem22 porary cessation of operations the Secretary shall conduct 

23 an inspection of the area for which temporary cessation 

24 of operations has been requested. 

•BlllD m 
40 

39 

1 (3) To approve an application for t.emporary ces2 sation of operations, the Secretary shall make each of the 

3 following det.erminations: 

4 (A) The methods for securing surface facilities 

S and restricting access to the permit area, or relevant 

6 portions thereof, shall effectively ensure against haz-

. 7 ards to the health and safety of the public and fish 

8 and wildlife. 

9 (B) Reclamation is cont.emporaneous with min10 eral activities as required under the approved reel I lamation plan, except in those areas specifically des12 ignated in the application for t.emporary cessation of 

13 operations for which a delay in meeting such stand14 ards is necessary to facilitat.e the resumption of op15 erations. 

16 (C) The amount of financial assurance filed 

17 with the plan of operations is sufficient to assure 

18 completion of the reclamation plan in the event of 

19 forfeiture. 

20 (D) Any outstanding notices of violation and 

21 cessation orders incurred in connection with the plan 

22 of operations for which t.emporary cessation is being 

23 requested are either stayed pursuant to an adminis24 trative or judicial appeal proceeding or are in the 

.aamm 
41 

40 

1 process of being abated to the satisfaction of the 

2 Secretary. 

3 (k) REvIEw.-Any decision made by the Secretary 

4 under subsections (g), (h), (i), (j) or (I) shall be subject 

5 to review under section 202(f). 

6 (I) BoNDS.-(1) Before any plan of operations is ap7 proved pursuant to this Act, or any mineral activities are 

8 conducted pursuant to subsection (b)(2), the operator 

9 shall file with the Secretary financial assurance payable 

10 to the United States and conditional' upon faithful per11 formance of all requirements of this Act. The financial as12 surance shall be provided in the form of a surety bond, 

13 trust fund, cash or equivalent. The amount of the financial 

14 assurance shall be sufficient to assure the completion of 

15 reclamation satisfying the requirements of this Act if the 

16 work had to be performed by the Secretary in the event 

17 of forfeiture, and the calculation shall take ·into account 

18 the maximum level of financial exposure which shall arise 

19 during the mineral activity including, but not limited to, 

20 provision for accident contingencies. 

21 (2) The financial assurance shall be held for the du22 ration of the mineral activities and for an additional period 

23 to cover the operator's responsibility for revegetation 

24 under subsection (n)(6)(B). 

•llllmlB 
42 

41 

1 (3) The amount of the financial assurance and the 

2 terms of the acceptance of the assurance shall be adjusted 

3 by the Secretary from time to time as the area n1quiring 

4 coverage is increased or decreased, or where the costs of 

5 reclamation or treatment change, but the financial as~r6 ance must otherwise be in compliance with this section. 

7 The Secretary shall specify periodic times, or set a sched8 ule, for reevaluating or adjusting the amount of financial 

9 assurance. 

10 ( 4) Upon request, and after notice and opportunity 

11 for public comment, the Secretary may release in whole 

12 or in part the financial assurance if the Secretary dcter13 mines each of the following: 

14 (A) Reclamation covered by the financial assur15 ance has been accomplished as required by this Act. 

16 (B) The operator has declared that the terms 

17 and conditions of any other applicable Fed.era! re18 quirements, and State requirements pursuant to 

19 subsection 203(b), have been fulfilled. 

20 (5) The release referred to in paragraph (4) shall be 

21 according to the following schedule: -

22 (A) After the operator has completed the back23 filling, regrading and drainage control. of an area 

24 subject to mineral activities and covered by the fi25 nancial assurance, and has commenced revegetation 

•BRIii m 
43 

42 

1 on the 1'egl'aded areas subject to mineral activities in 

2 accordance with the approved plan of operations, 50 

3 percent of the total financial assurance secured tor 

4 the area subject to mineral activities may be res leased. 

6 (B) .After the operator has completed success7 fully all mineral activities and reclamation activities 

8 and .all requirements of the plan of operations and 

9 the reclamation plan and all the requirements of this 

10 Act have in fact been fully met, the remaining por11 tion of the financial assurance ·may be released. 

12 (6) During the period following release of the finan13 cial assurance as specified in paragraph (5)(A), until the 

14 remaining portion of the financial assurance is released 

15 as provided in paragraph (5)(B), the operator shall be re16 quired to meet all applicable standards of this Act and 

17 the plan of operations and the reclamation plan. 

18 (7) Where any discharge from the area subject to 

19 mineral activities requires treatment in order to meet the 

20 applicable effluent limitations, the treatment shall be mon21 itored during the conduct of mineral activities and rec22 lamation and shall be fully covered by financial assurance 

23 and no financial assurance or portion thereof for the plan 

24 of operations shall be released until the operator has met 

.eamm 
44 

43 

1 all applicable effluent limitations and water quality stand2 ards for one full year without treatment. 

3 (8) Jurisdiction under this Act shall terminate upon 

4 release of the final bond. If the Secretary determines, after 

5 final bond release, that an environmental hazard resulting 

6 from the mineral activities exists, or the terms and condi7 tions of the plan of operations or the surface management 

8 requirements· of this Act were not fulfilled in fact at the 

9 time of release, the Secretary shall reassert jurisdiction 

10 and all applicable surface management and enforcement 

11 provisions shall apply for correction of the condition. 

12 (m) RECLAMATION.-(1) Except as provided under 

13 paragraphs (5) and (7) of subsection (n), lands subject 

14 to mineral activities shall be restored to a condition capa15 hie of supporting the uses to which such lands were capa16 ble of supporting prior to surface clisturbance, or other 

17 beneficial uses, provided such other uses are not inconsist18 ent with applicable land use plans. 

19 (2) All required reclamation shall proceed as contem20 poraneously as practicable with the conduct of mineral ac21 tivities and shall use the best technology cu~ntly avail22 able. 

23 (n) RECLAMATION STANDARDS.-The Secretary shall 

24 ' establish reclamation standards which shall include, but 

•BRIii m 
45 

44 

1 not necessarily be limited to, · provisions to require each 

2 of the following: 

3 (1) SoILS.-(A) Topsoil removed from land<i 

4 subject to mineral activities shall be segregatoo from 

5 other spoil material and protected for later use in 

6 reclamation. If such topsoil is not replaced on a 

7 backfill area within a time-frame short enough to 

8 avoid deterioration of the topsoil, vegetative cover or 

9 other means shall. be used so that the topsoil is pre10 served from wind and water erosion, remains free of 

11 any contamination by acid or other toxic material, 

12 and is in a useable condition for sustaining vegeta13 tion when restored during reclamation. 

14 (B) In the event the topsoil from lands subject 

15 to mineral activities is of insufficient quantity or of 

16 inferior quality for sustaining vegetation, and other 

17 suitable growth media removed from the lands sub18 ject to the mineral activities are available that shall 

19 · support vegetation, the best available growth me20 dium shall be removed, segregated and preserved in 

21 a like manner as under subparagraph (A) for sus22 taining vegetation when restored during reclamation. 

23 (C) Mineral activities shall be conducted to pre24 vent any contamination or toxification of soils. If 

25 any contamination or toxification occurs in violation 
46 

45 

1 of this subparagraph, the operator shall neutralize 

2 the toxic material, decontaminate the soil, and dis3 pose of any toxic or acid materials in a manner 

4 which complies with this section and any other 

5 applical Federal or State law. 

6 (2) STABILIZATION.-Al! surface areas subject 

7 to mineral activities, including spoil material piles, 

8 waste material piles, ore piles, subgrade ore piles, 

9 and open or partially backfilled mine pits which 

10 meet the requirements of paragraph ( 5) shall be stal l bilized and protected during mineral activities and 

12 reclamation so as to effectively control erosion and 

13 minimize attendant air and water pollution. 

14 (3) ER0SI0N.-Facilities such as but not lim15 ited to basins, ditches, streambank stabilization, di16 versions or other measures, shall be designed, con17 structed and maintained where necessary to control 

18 erosion and drainage of the area subject to mineral 

19 activities, including spoil material piles and waste 

20 material piles prior to the use of such material to 

21 comply with the requirements of paragraph (5) and 

22 for the purposes of paragraph (7), and including ore 

23 piles and subgrade ore piles. 

24 ( 4) HYDROLOGIC BALANCE.-(A) Mineral ac25 tivities shall be conducted to minimize disturbances 

•BR 121 IH 
47 

46 

1 t.o the prevailing hydrologic balance of the area sub2 ject t.o mineral activities and adjacent areas and t.o 

3 the quality and quantity of water in surface and 

4 ground water systems, including streamflow, in the 

5 area subject t.o mineral activities and adjacent areas, 

6 and in all cases the operat.or shall comply with appli7 cable Federal or St.ate effluent limitations and water 

8 quality standards. 

9 (B) Mineral · activities shall prevent the general O tion of acid or t.oxic drainage during the mineral ac11 tivities and reclamation, to the extent possible using 

12 the best available demonstrated control technology; 

13 and the operat.or shall prevent any contamination of 

14 surface and ground water with acid or other t.oxic t 

15 mine drainage and shall prevent or remove water 

16 from contact with acid or toxic producing deposits. 

17 (C) Reclamation shall, t.o the extent possible, 

18 also include rest.oration of the recharge capacity of 

19 the area subject to mineral activities to approximate 

20 premining condition. 

21 (D) Where surface or underground water 

22 sources used for domestic or agricultural use have 

23 been diminished, contaminated or interrupted as a 

24 proximate result of mineral activities,· such water re25 source shall be rest.ored or replaced. 

•BR Ill m 
48 

47 

1 (5) GRADING.-(A) Except as provided under 

2 this paragraph (7), the surface area disturbed by 

3 mineral activities shall be backfilled, graded and 

4 contoured to its natural topography. 

5 (B) The requirement of subparagraph (A) shall 

6 not apply with respect to an open mine pit if the 

7 ~cretary finds that such open pit or partially 

8 backfilled pit would not pose a threat to the public 

9 health or safety or have an adverse effect on the en10 vironment in terms of surface or groundwater pollu11 tion. 

12 (C) In instances where complete backfilling of 

13 an open pit is not required, the pit shall be graded 

14 to blend with the -surrounding topography as much 

15 as practicable and revegetated in accordance with 

16 paragraph (6). 

17 (6) REVEGETATION.-(A) Except in such in18 stances where the complete backfill of an open mine 

19 pit is not required under paragraph ( 5), the area 

20 subject to mineral activities, including any excess 

21 . spoil material pile and excess waste pile, shall be 

22 revegetated in order to establish a diverse, effective 

23 and permanent vegetative cover of the same .seasonal 

24 variety native to the area subject to mineral activi25 ties, capable of self-regeneration and plant succes-

•BRUI IB 
49 

48 

1 sion and at least equal in extent of cover to the nat2 ural re'vegetation of the surrounding area. 

3 (B) In order to irumre compliance with subpara4 graph (A), the period for determining successful 

5 revegetation shall be for a period of 5 full years 

6 after the last year of augmented seeding, fertilizing, 

7 irrigation or other work, except that such period 

8 shall be 10 full years where the annual average pre9 cipitation is 26 inches or less. 

10 (7) EXCESS SPOIL AND WASTE.-(A) Spoil ma11 t.crial and waste material in excess of that required 

12 to comply with paragraph (5) shall be transported 

13 and · placed in approved areas, in a controlled man14 ner in such a way so as to assure long-term mass 

15 stability and to prevent mass movement. In addition 

16 to the measures described under paragraph (3), in17 temal drainage systems shall be employed, as may 

18 be required, to control erosion and drainage. The de19 sign of such excess spoil material piles and excess 

20 waste material piles shall be certified by a qualified 

21 professional engineer. 

22 (B) Excess spoil material piles and excess waste 

23 material piles shall be graded and contoured to 

24 blend with the surrounding topography as much as 

-eamm 
50 

49 

1 practicable and revegetated in accordance with para2 graph (6). 

3 (8) SEALING.-All drill holes, and openings on 

4 the surface associated with underground mineral ac5 tivities, shall be sealed when no longer needed for 

6 the conduct of mineral activities to ensure protection 

7 of the public, fish and wildlife and the environment. 

8 (9) STRUCTURES.-All buildings, structures or 

9 equipment constructed, used or improved during 

10 mineral activities shall be removed, unless the Sec11 retary determines that the buildings, structures or 

12 equipment shall be of beneficial use in accomplishing 

13 the post-mjning uses or for environmental monitor14 ing. 

15 (10) FISH AND WILDLIFE.-All fish and wildlife 

16 habitat in areas subject to mineral activities shall be 

17 restored in a manner commensurate with or superior 

18 to habitat conditions which existed prior to the min19 eral activities, including such conditions as may be 

20 prescribed by the Director, Fish and Wildlife 

21 Service. 

22 (o) ADDITIONAL STANDARDS.-The Secretary may, 

23 by regulation, establish additional standards to address 

24 the specific environmental impacts of selected methods of 

H.R. 322 IHR - 4 (J. 69-080) 
51 

50 

1. mineral activities, such as, but not limited to, cyanide 

2 leach mining. 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

(n): 

(p) DEFINITIONS.-As used in subsections (m) and 

(1) The t.erm ''best technology currently available" means equipment, devices, systems, methods, 

or techniques which are currently available anywhere 

even if not in routine use in mineral activities. The 

term includes, but is not limited to, construction 

practices, siting· requirements, vegetative selection 

and planting requirements, scheduling of activities 

and design of sedimentation ponds. Within the constraints of the surface management requirements of 

this Act, the Secretary shall have the discretion to 

determine the best technology currently available on 

a case-by-case basis. 

(2) The term "best available demonstrated control technology'' means equipment, devices, systems, 

methods, or techniques which have demonstrated engineering and economic feasibility and practicality in 

preventing disturbances to hydrologic balance during 

mineral activities and reclamation. Such techniques 

will have shown to be effective and practical methods 

of acid and other mine water pollution elimination or 

control, and other pollution affecting water quality. 

.eamm 
52 

51 

1 The "best available demonstrated control tech2 nology'' will not generally be in routine use in min3 eral activities. Within the constraints of the surface 

4 management requirements of this Act, the Secretary 

5 shall have the discretion to determine the best avail6 able demonstrated control technology on a case-by7 case basis. 

8 (3) The term "spoil material" means the over9 burden, or non-mineralized material of any nature, 

10 consolidated or unconsolidated, that overlies a de11 posit of any locatable mineral that is removed in 

12 gaining access to, and extracting, any locatable min13 eral, or any such material disturbed during the con14 duct of mineral activities. 

15 (4) The term "waste material" means the mate16 rial resulting from mineral activities involving 

17 beneficiation, including but not . limited to tailings, 

18 and such material · resulting from mineral activities 

19 involving processing, to the extent such material is 

20 not subject to subtitle C of the &source Conserva21 tion and Recovery Act of 1976 or the Uranium Mill 

22 Tailings Radiation Control Act. 

23 (5) The term "ore piles" means ore stockpiled 

24 for beneficiation prior to the completion of mineral 

25 activities and reclamation. 

•lllllll m 
53 

52 

1 (6) The term "subgrade ore" means ore that is 

2 too low in grade to be of economic value at the time 

3 of extraction but which could reasonably be economi4 cal in the foreseeable future. 

5 (7) The term "excess spoil" means that spoil 

6 material that may be excess of the amount necessary 

7 to comply with the requirement.a of . subsection 

8 (m)(3). 

9 (8) The term "excess waste" means that waste 

10 material that may be excess of the amount necessary 

11 to comply with the requirement.a of subsection 

12 (m)(3). 

13 SEC. IOI. INSPECDON AND BNPOBCBIIENT. 

14 (a) INSPECTIONS AND MONITORING.-(1) The Sec15 ret;ary shall make such inspections of mineral activities so 

16 as t.o ensure compliance with the surface management re17 quirement.s. The Secret;ary shall establish a frequency of 

18 inspections for mineral activities conduct.ed under an ap19 proved plan of operations, but in no event shall such in20 spection frequency be less than one complete inspection 

21 per calendar quarter or two complete inspections annually 

22 for a · plan of operations for which the Secret;ary approves 

"' 

23 an application under section 201(j). ., I 

24 (2)(A) Any person who has reason to believe they'are 

25 or may be adversely affected by mineral activities due to 

•BR III IB 
53 

1 any violation of the surface management requirements 

2 may request an inspection. The Secretary shall determine 

3 within 10 days of receipt of the request whether the re4 quest states a reason to believe that a violation exists, ex5 cept ~ the event the pel'80n alleges and provides reason 

6 to believe that an imminent danger as provided by sub7 section (b)(2) exists the 10 day period shall be waived and 

8 the inspection conducted immediately. When an inspection 

9 is conducted ·under this paragraph, the ·Secretary shall no10 tify the person filing the complaint and such person shall 

11 be allowed to accompany the inspector during the inspec12 tion. The identity of the person supplying information to 

13 the Secretary relating to a possible violation or imminent 

14 danger or harm shall remain confidential with the Sec15 retary if so requested by that person, unless that person 

16 elects to accompany an inspector on the inspection. 

17 (B) The Secretary shall, by regulation, establish pro18 cedures for the review of any decision by his authorized 

19 representative not to inspect or by a refusal by such rep20 resentative to ensure remedial actions are taken with re21 spect to any alleged violation: The Secretary shall furnish 

22 such persons requesting the review a written sta.tement of 

23 the reasons for the Secretary's final disposition of the 

24, case. 

•Ramm 
55 

54 

1 (3)(A) The Secretary shall require all operators to de2 velop and maint.ain a monitoring and evaluation syst.em 

3 which shall be capable of identifying compliance with all 

4 surface management requirements. 

5 (B) Monitoring shall be conduct.ed as close as tech6 nically feasible to the mineral activity or reclamation in7 volved, and in all cases the monitoring shall be conducted 

8 within the area affected by mineral activities and reclama9 tion. 

10 (C) The point of compliance shall be as close to the 

11 mineral activity involved as is technically feasible, but in 

12 any event shall be located to comply with applicable Stat.e 

13 and Federal standards. In no event shall the point of com14 pliance be outside the area aft'ect.ed by mineral activities 

15 and reclamation. 

16 (D) The operator shall file reports with the Secretary 

17 on a quarterly basis on the results of the monitoring and 

18 evaluation process except that if the monitoring and eval19 uation show a violation of the surface management re20 quirements, it shall be reported immediat.ely to the Sec21 retary. 

22 (E) The Secretary shall det.ermine what information 

23 must be reported by the operator pursuant t.o subpara24 graph (B). A failure to report as required by the Secretary 

e1111miB 
56 

55 

1 shall constitute a violation of this Act and subject the op2 erator to enforcement·action pursuant to this section. 

3 (F) The Secretary shall evaluate the reports submit4 ted pursuant to this paragraph, and based on those re5 ports and any necessary inspection shall take enforcement 

6 action pursuant to this section. 

7 (b) ENFORCEMENT.-(!) If the Secretary or author8 ized representative determines, on the basis of an inspec9 tion that an operator, or any person conducting mineral 

10 activities under section 201(b)(2), is in violation of any 

11 surface management requirement, the Secretary or au12 thorized representative shall issue a notice of violation to 

13 the operator or person describing the violation and the cor14 rective measures to be taken. The Secretary or authorized 

15 representative shall provide such operator or person with 

16 a reasonable period of time to abate the violation. If, upon 

17 the expiration of time provided for such abatement, the 

18 Secretary or authorized representative finds that the viola19 tion has not been abated he shall immediately order aces20 sation of all mineral activities or the portion thereof rel21 evant to the violation. 

22 (2) If the Secretary or authorized representative de23 termines, on the basis of an inspection, that any condition 

24 or practice exists, or that an operator, or any person con25 ducting mineral activities under section 201(b)(2), is in 

•DIDIB 
57 

56 

l violation of the surface management requirement.a, and 

2 such condition, practice or violation is causing, or can rea3 sonably be expected to cauae4 (A) an· immine11t danger to the health or safety 

S of the public; or 

6 (B) significant, imminent environmental harm 

7 to land, air or water resources; 

8 the Secretary or authorized representative shall imme9 diately order a cessation of mineral activities or the por10 tion thereof relevant to the condition, practice or violation. 

11 (3)(A) A cessation order by the Sec~tary or author12 ized representative pursuant to paragraphs (1) or (2) shall 

13 remain in effect until the Secretary or authorized rep14 resentative determines that the condition, practice or vio1S lation has been abated, or until modified, vacated or termi16 nat.ed by the Secretary or authorized representative. In 

17 any such order, the Secretary or authorized representative 

18 shall determine the steps necessary to abate the violation 

19 in the most expeditious manner possible, and shall include 

20 the necessary measures in the order. -The Secretary shall 

21 require appropriate financial assurances to insure that the 

22 abatement obligations are met. 

23 (B) Any notice or order issued pursuant to para24 graphs (1) or (2) may be modified, vacated or terminated 

2S by the _Secretary or authorized representative. An opera-

•DmJB 
58 

57 

1 tor, or person conducting mineral activities under section 

2 201(b)(2), issued any such notice or order shall be entitled 

3 to a hearing on the record pursuant to subsection (f). 

4 ( 4) H, after 30 days of ihe date of the order referred 

5 t.o in paragraph (3)(A) the required abatement has not 

6 occurred the Secretary shall take such alternative enforce7 ment action against the responsible parties as will most. 

8 likely bring about abatement in the most expeditious man9 ner possible. Such alternative enforcement action shall in10 elude, but is not necessarily limited to, seeking appropriate 

11 injunctive relief to bring about abatement. 

12 (5) In the event an operator, or person conducting 

13 mineral activities under section 201(b)(2), is unable t.o 

14 abate a violation or defaults on the terms of the plan of 

15 operation the Secretary shall forfeit the financial assur16 ance for the plan of operations if necessary to ensure 

17 abatement and reclamation under this Act. 

18 (6) The Secretary shall not forfeit the financial assur19 ance while a review is pending pursuant to subsections (f) 

20 and (g). 

21 (c) CoMPLIANCE.-(1) The Secretary may request 

22 the Att.omey General to institute a civil action for relief, 

23 including a permanent or temporary injunction or re24 straining order, in the district court of the United States 

25 for the district in which the mineral activities are located 

•BRm JB 
59 

58 

l whenever an operat.or, or person conducting mineral activi2 ties under section 201(b)(2): 

3 (A) violat.es, fails or refuses to comply with any 

4 order issued by the Secretary under subsection (b ); 

S or 

6 (B) interferes with, hinders or delays the Sec7 ret.ary in carrying out an inspection under sub8 section (a). 

9 Such court shall have jurisdiction to provide such relief 

10 as may be appropriate. Any relief granted by the court 

11 to enforce an order under clause (A) shall continue in ef12 feet until the completion or final termination of all pro13 ceedings for review of such order under subsections (f) and 

14 (g), unless the district court granting such relief sets it 

15 aside or modifies it. 

16 (2) Notwithstanding any other provision of law, the 

17 Secret.ary shall utilize enforcement personnel from the Of18 fice of Surface Mining :&clamation and Enforcement to 

19 augment personnel of the Bureau of Land Management 

20 and the Forest Service to ensure compliance with the sur21 face management requirements, and inspection require22 ments of subsection (a). The Bureau of Land Management 

23 and the Forest Service shall each enter into a memoran24 dum of understanding with the Office of Surface Mining 

25 :&clamation and Enforcement for this purpose . 

....... 
60 

59 

1 (d) PENALTIES.-(!) Any operator, or person con2 ducting mineral activities under section 201(b)(2), who 

3 fails to comply with the surface management requirements 

4 shall be liable for a penalty of not more than $5,000 per 

5 violation. Each day of continuing violation may be deemed 

6 a separate violation for purposes of penalty assessments. 

7 No civil penalty under this subsection spall be assessed 

8 until the operator charged with the violation has been 

9 given the opportunity for a hearing under subsection (f). 

10 (2) An operator, or person conducting mineral activi11 ties under section 201(b)(2), who fails to correct a viola12 tion for which a cessation order lias been issued under 

13 subsection (b) within the period permitted for its correc14 tion shall be assessed a civil penalty of not less than 

15 $1,000 per violation for each day during which such fail16 ure continues, but in no event shall such assessment ex17 ceed a 30-day period. 

18 (3) Whenever a corporation is in violation of the sur19 face management requirements or fails or refuses to com20 ply with an order issued under subsection (b), any diree21 tor, officer or agent of such corporation who knowingly 

22 authorized, ordered, or carried out such violation, failure 

23 or refusal shall be subject to the same penalties that may 

24 be imposed upon an operator under paragraph (1 ) . 

. •DallB 
61 

60 

1 (e) CrrlzEN SUITs.-(1) Except as provided under 

2 paragraph (2), any person having an interest which is or 

3 may be adversely affected may commence a civil action 

4 on his or her own behalf t.o compel complianoo5 (A) against the · Secretary·where there is alleged 

6 a violation of any of the provisions of this Act or any 

f 

7 regulation promulgated pursuant to this Act or 

8 terms and conditions of any plan of operations ap• 

9 proved pursuant to this Act; 

10 (B)- against any other person alleged to be in 

11 violation of any of the. provisions of this Act or any 

12 regulation promulgated pursuant to this Act or 

13 terms and conditions of any plan of operations ap14 proved pursuant to this Act; 

15 (C) against the Secretary where there is alleged 

16 a failure of the Secretary to perform any act or duty 

17 under this Act or any regulation promulgated pursu• 

18 ant to this Act which is not within the discretion of 

19 the Secretary; or 

20 (D) against the Secretary where it is alleged 

21 that the Secretary acts arbitrarily or capriciously or 

22 in a manner inconsistent with this Act or any regu• 

23 lation. promulgated pursuant to this Act. The United 

24 States district courts shall have jurisdiction, without 
62 

61 

1 regard to the amount in controversy or the citizen-

~ ship of the parties. 

3 (2) No action may be commenced except as follows: 

4 (A) Under paragraph (l)(A) prior to 60 days 

5 after the plaintiff has given notice in writing of such 

6 alleged violation to the Secretary, or to the person 

7 alleged to be in violation; except no action may be 

8 commenced against any person alleged to be in viola9 tion if the Secretary has commenced and is dili10 gently prosecuting a civil action in a court of the 

11 United States to require compliance with the provi12 sions of this title (but in any such action in a court 

13 of the United States the person making the allega14 tion may intervene as a matter of right). 

15 (B) Under paragraph (l)(B) prior to 60 days 

16 after the plaintiff has given notice in writing of such 

17 action to the Secretary, in such manner as the Sec18 retary shall by regulation prescribe, except that such 

19 action may be brought immediately after such notifi20 cation in the case where the violation or order com21 plained of constitutes an imminent threat to the en22 vironment or to the health or safety of the public or 

23 would immediately affect a legal interest of the 

24 plaintiff. 

•DUIIR 
63 

62 

1 (3) Venue of all actions brought under this subsection 

2 shall be determined in accordance with title 28 U .S.C. 

3 1391(a), 

4 (4) The court, in issuing.any final order in any action 

5 brought pursuant to paragraph ( 1) may award costs of 

6 litigation (including attorney and expert witness fees) to 

7 any party whenever the court determines such award is 

8 appropriate. The court may, if a temporary restraining 

9 order or preliminary injunction is sought, require the filing 

10 of a bond or equivalent security in accordance with the 

l1 Federal Rules of Civil Procedure. 

12 (5) Nothing in this subsection shall restrict any right 

13 which any person (or class of persons) may have under 

14 any statute or common law to seek enforcement of any 

15 of the provisions of this Act and the regulations there16 under, or to seek any other relief, including relief against 

· 17 the Secretary. 

18 (f) REVIEW BY SECRETARY.----:-(l)(A) Any operator, 

19 or person conducting mineral activities under section 

20 20l(b)(2), issued a notice of violation or cessation order 

21 under subsection (b), or any person having an interest 

22 which is or may be adversely affected by such decisions, 

23 notice or order, may apply to the Secretary for review of 

24 the notice or order within 30 days of receipt thereof, or 

•BR an m 
63 

1 as the case may be, within 30 days of such notice or order 

2 being modified, vacated or terminated. 

3 (B) Any operator, or person conducting mineral ac4 tivities under section 201(b)(2), who is subject to a pens alty under subsection (d) or section 105 may apply to the 

6 Secretary for review of the assessment within 30 days of 

7 notification of such penalty. 

8 (C) Any person having an interest which is or may 

9 be adversely affected by a decision made by the Secretary 

10 under subsections (g), (h), (i), (j) and (l) of section 201, 

11 or subsection 202(a)(2), or subsection 204(g), may apply 

12 to the Secretary for review of the decision within 30 days 

13 after it is made. 

14 (2) The Secretary shall provide an opportunity for 

15 a public hearing at the request of any party. Any hearing 

16 conducted pursuant to this subsection shall be on record 

17 and shall be subject to section 554 of title 5 of the United 

18 States Code. The filing of an application for review under 

19 this subsection shall not operate as a stay of any order 

20 or notice issued under subsection (b). 

21 (3) Following the hearing referred to in paragraph 

22 (2), if requested, but in any event the Secretary shall make 

23 findings of fact and shall issue a written decision incor24 porating therein an order vacating, affirming, modifying 

25 or terminating the notice, order or decision, or with re-

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64 

l spoot to an assessment, the amount of penalty that is war2 ranted. Where the application for review concerns a ces3 sation order issued under subsection (b), the Secretary 

4 shall issue the written decision within 30 days of the re5 {!eipt of the application for review, unless temporary relief 

6 has been granted by the Secretary under paragraph (4). 

7 (4) Pending completion of any proceedings Uil(ier this 

8 snbseetion, the appli<'..ant may file with the Secretary a 

9 written request that the Secretary grant temporary relief 

10 from any order issued under subsection (b) together with 

11 a detailed statement giving reasons for such relief. The 

12 Secretary shall e:\."Peditiously issue an order or decision 

13 granting or denying such relief. The Secretary may grant 

14 such relief under such conditions as he may prescribe only 

15 if such relief shall not adversely affect the health or safety 

16 of the public or cause significant, imminent environmental 

17 harm to land, air or water resources. 

18 ( 5) The availability of review under this subsection 

l 9 shall not be construed to limit the operation of rights es20 tab]ished under subsection (e). 

21 (g) JUDICIAL REYIEW.-(1) Any action by the Seen retary in promulgating regulations to implement this Act, 

23 or any other actions constituting rulemaking by the Sec24 retary to implement this Act, shall be subject to Judicial 

25 review in the United States District Court for the Distriet 

•HR 322 JH 
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65 

1 of Columbia. Any action subject to judicial review under 

2 this subsection shall be affirmed unless the court con-, 

3 eludes that such action is arbitrary, capricious, or other4 wise inconsist.ent with law. A petition for review of any 

5 action subject to judicial review under this subsection shall 

6 be filed in the Unit.ed States District Court for the District 

7 of Columbia within 60 days from the dat.e of such action, 

8 or after such dat.e if the petition is based solely on grounds 

9 arising after the sixtieth day. Any such petition may be 

10 made by any person who comment.ed or otherwise partici11 pat.ed in the rulemaking or who may be adversely affect.ed 

12 by the action of the Secretary. 

13 (2) Final agency action under this Act, including 

14 such final action on those matt.ers described under sub15 section (f), shall be subject to judicial review in accordance 

16 with paragraph (4) and pursuant to 28 U.S.C. 1391(a) 

17 of the U nit.ed Stat.es Code on or before 60 days from the 

18 dat.e of such final action. 

19 (3) The availability of judicial review established in 

20 this subsection shall not be construed to limit the oper21 ations of rights established under subsection ( e). 

22 ( 4) The court shall hear any petition or complaint 

23 filed under this subsection solely on the record made be24 fore the Secretary. The court may affirm, vacate, or modH.R. 322 IHR - 5 (J. 69--080) 
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66 

l ify any order or decision or may remand the proc~ 

2 to the Secretary for such further action as it may direct. 

3: ( 5) The commencement of a proceeding under this 

4 section shall not, unless specifically ordered by the court, 

5 operate as a stay of the action, order or decision of the 

6 Secretary. 

7 (h) PRocEEDINGS.-Whenever a proceeding occurs 

8 under subsection (a), (f), or (g), or under section 201, or 

9 under section 204(g), at the request of any person, a sum 

10 equal to the aggregate amount of all costs and expenses 

11 (including attorney fees) as determined by the Secretary 

12 or the court to have been reasonably incurred by such per13 son for or in connection with participation in such pro14 ceedings, including any judicial review of the proceeding, 

15 may be assessed against either party as the court, result16 ing from judicial review or the Secretary, resulting from 

17 administrative proceedings, deems proper. 

18 SEC. 203. STATE LAW AND REGULATION. 

19 (a) STATE LAw.-(1) Any reclamation standard or 

20 requirement in State law or regulation that meets or ex21 ceeds the requirements of subsections (m) and (n) of sec22 tion 201 shall not be construed to be inconsistent with 

23 any such standard. 

24 (2) Any bonding standard or requirement in State 

25 law or regulation that meets or exceeds the requirements 

•BBIIIIB 
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67 

1 of section 201(1) shall not be construed to be inconsistent 

2 with such requirements. 

3 (3) Any inspection standard or requirement in State 

4 law or regulation that meets or exceeds the requirements 

5 of section 202 shall not be construed to be inconsistent 

6 with such requirements. 

7 (b) APPLICABILITY OF OTHER STATE REQUIRES MENTS.-(1) Nothing in this Act shall be construed as af9 fecting any air or water quality standard-or -requirement 

10 of any State law or regulation which may be applicable 

11 to mineral activities on lands subject to this Act. 

12 (2) Nothing in this Act shall be construed as affecting 

13 in any way the right of any person to enforce or protect, 

14 under applicable law, such person's interest in water re15 sources affected by mineral activities on lands subject to 

16 this Act. 

17 (c) COOPERATIVE AGREEMENTS.-(1) Any State may 

18 enter into a cooperative agreement with the Secretary for 

19 the purposes of the Secretary applying such standards and 

20 requirements referred to in subsection (a) and subsection 

21 (b) to mineral activities or reclamation on lands subject 

22 to this Act. 

23 (2) In such instances where the proposed mineral ac24 tivities would affect lands not subject to this Act in addi25 tion to lands subject to this Act, in order to approve a 

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1 plan of operations the Secretary shall enter' into a coopera2 tive agreement with. the State that sets forth ·a common 

· 3 regulatory framework consistent with the surface manage4 ment requirements ·. of this Act for the purposes of such 

5 plan of operations. 

6 (3) The Secretary shall not enter into a cooperative 

7 agreement with any State ·under this section until after 

8 notice in the' Federai Register and opportunity for public 

9 comment. 

10 , (d) PRIOR AGREE:t.-1ENTS:-Any cooperative agree11 ment or such other understanding between the Secretary 

12 and any State, or political subdivision thereof, relating to 

13 the surface management of mineral activities on lands 

14 subject to .this Act that was in existence on the date of 

15 enactment of this Act may only continue in force until the 

16 effective date of this Act, after which time the terms and 

17 conditions of any such agreement or understanding shall 

18 only be' applicable to plans of operations approved by the 

19 Secretary prior to the effective date of this Act except as 

20 provided under section 405. 

21 (e) DELEGATION.-The Secretary shall not delegate 

22 to any State, or political subdivision thereof, the Sec23 retary's authorities, duties and obligations under this Act, 

24 including with respect to any cooperative agreements en25 tered into under this section. 

•IIRSD m 
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69 

1 SBC. IN. ONBUrrABILITY BBVIEW. 

2 (a) IN GENERAL.-The Secretary of the Interior in 

3 preparing land use plans under the Federal Land Policy 

4 and Management Act of 1976, and the Secretary of Agri5 culture in preparing land use plans under the Forest and 

6 Rangeland Renewable Resources Planning Act of 1974, as 

7 amended by the National Forest Management Act of · 

8 1976, shall each conduct a review of lands that are subject 

9 to this Act in order to determine whether there are any 

10 areas which are unsuitable for all or certain types of min11 eral activities pursuant to the standards set forth under 

12 subsection (e). In the event such a determination is made, 

13 the review shall be included in the applicable land use 

14 plan. 

15 (b) SPECIFIC AREAs.-Not later than 90 days after 

16 the date of enactment of this Act, the Secretary of the 

17 Interior and the Secretary of Agriculture, on the basis of 

18 any information available, shall each publish a notice in 

19 the Federal Register identifying and listing the lands sub20 ject to this Act which are or may be determined to be 

21 unsuitable for all or certain types of mineral activities ac22 cording to the standards set forth in subsection (e). After 

23 opportunity for public comment and proposals for. modi24 fications to such listing, but not later than the effective 

25 date of this Act, each Secretary shall begin to review the 

26 lands identified pursuant to this subsection to determine 

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70 

1 whether such lands are unsuitable for all or certain types 

2 of mineral activities according to the standards set forth 

3 in subsection (e). 

4 (c) LAND USE PLANs.-(1) At such time as the Sec5 retary revises or amends a land use plan pursuant to pro6 visions of law other than this Act, the Secretary shall iden-

.7 tify lands determined to be unsuitable for all or certain 

,..8 types of mineral activities according to the standards set 

9 forth in subsection ( e). The Secretary shall incorporate 

10 such determinations in the applicable land use plans. 

11 (2) If lands covered by a proposed plan of operations 

12 · have not been reviewed pursuant to this section at the time 

13 of submission of a plan of operations, the Secretary shall, 

14 prior to the consideration of the proposed plan of oper15 ations, review the areas that would be affected by the pro16 posed mineral activities to determine whether the area is 

17. unsuitable for all or certain types of mineral activities ac18 cording to the standards set forth in subsection (e). The 

19 Secretary shall use such review in the next revision or 

20 amendment to the applicable land use plan to the extent 

21 necessary to reflect the unsuitability of such lands for all 

22 or certain types of mineral activities according to the 

23 standards set forth in subsection ( e). 

24 (3) This section does not require land use plans to 

25 be amended until such plans are adopted, revised, . or 

•BRIDm 
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71 

I amended pursuant t.o provisions of law other than this 

2 Act. 

3 (d) EFFECT OF DETERMINATION.-(1) If the Sec4 retary det.ermines an area t.o be unsuitable under this secs tion for all or certain types of mineral activities, he shall 

6 do one of the following: 

7 (A) In any instance where a determination is 

8 made that an area is unsuitable for all types of min9 eral activities, the Secretary of the Interior, with the 

10 consent of the Secretary of Agriculture .for lands 

11 under the jurisdiction of the Secretary of Agri12 culture, shall withdraw such area pursuant t.o sec13 · tion 204 of the Federal Land Policy and Manage14 ment Act of 1976 (43 U.S.C. 1714). 

15 (B) In any instance where a determination is 

16 made that an area is unsuitable for certain types of 

17 mineral activities, the Secretary shall t.ake appro18 priate steps t.o limit or prohibit such types of 

19 mineral activities. 

20 (2) Nothing in this section may be construed as af21 fecting lands where mineral activities under approved 

22 plans of operations or under notice (as provided for in the 

23 regulations of the Secretary of the Interior in effect prior 

24 t.o the effective date of this Act relating t.o operations that 

25 cause a cumulative disturbance of 5 acres or less) were 

...... 
73 

72 

1 being conducted on the effective date of this Act, except 

2 as provided under subsection (g). 

3 (3) Nothing in. this section may be construed as pro4 hibiting mineral activities not subject to paragraph (2) 

5 where substantial legal and financial commitments in such 

6 mineral activities were in existence on the effective date 

7 of this Act, but nothing in this section may be construed 

8 as·limiting any.existing authority of the Secretary to regu9 late such activities. 

10 ( 4) An unsuitability determin.ation under this section 

11 shall not prevent the types of ~neral activities referred 

12 to in section 201(b)(2)(A), but nothing in this section shall 

13 be construed as authorizing such activities in areas with14 drawn pursuant to section 204 of the Federal Land Policy 

15 and Management Act of 1976 (43 U.S.C. 1714). 

16 (e) REvIEw STANDARDS.-(!) An area containing 

17 lands that are subject to this Act shall be determined to 

18 be unsuitable for all or certain types of mineral activities 

19 if the Secretary determines, after notice and opportunity 

20 for public comment, that reclamation pursuant to the 

21 standards set forth in subsections (m) and (n) of section 

22 201 would not be technologically and economically feasible 

23 for any such mineral activities in such area and where24 (A) such mineral activities would substantially 

25 impair water quality or supplies within the area sub-

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73 

1 jeet t.o the mining plan or adjacent lands, such as 

2 impact.a on aquifers and aquifer recharge areas; 

3 (B) such mineral activities would occur on 

4 . areas of unst.able geology that could if undertaken 

5 substantially endanger life and property; 

6 (C) such mineral activities would adversely af7 feet publicly-owned places which are listed on or are 

8 eligible for listing on the National Register of His9 t.oric Places, unless the Secretary and the State ap10 prove all or certain mineral activities, in which case 

11 the area shall not be determined t.o be unsuitable for 

12 such approved mineral activities; 

13 (D) such mineral activities would cause loss of 

14 or damage t.o riparian areas; 

15 (E) such mineral activities would impair the 

16 productivity of the land subject t.o such mineral ac17 tivities; 

18 (F) such mineral activities would adversely af19 feet candidate species for threatened and endangered 

20 species status; or 

21 (G) such mineral activities would adversely af22 feet lands designated as National Wildlife Refuges. 

23 (2) An area may be determined t.o be unsuitable for 

24 all or certain mineral activities if the Secretary, after no25 tice. and opportunity for public comment, determines that 

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74 

1 reclamation pmsuant to the standards set forth in sub2 sections (m) and (n) of section 201 would not be techno3 logically and economically feasible for any such mineral 

4 activities in such area and wheres (A) such mineral activities could result in sig6 nificant damage to important historic, cultural, sci7 entific and aesthetic values or to natural systems; 

8 (B)- such mineral activities could adversely af9 feet lands of outstanding aesthetic qualities and sce10 nic Federal lands designated as Class I under sec11 tion 162 of the Clean Air Act (42 U.S.C. 7401 and 

12 following); 

13 (C) such mineral activities could adversely af14 feet lands which are high priority habitat for migra15 tory bird species or other important fish and wildlife 

16 species as determined by the Secretary in consulta17 tion with the Director of the Fish and Wildlife Serv18 ice and the appropriate agency head for the State in 

19 which the lands are located; 

20 (D) such mineral activities could adversely af21 feet lands which include wetlands if mineral activi22 ties would result in bss of wetland values; 

23 (E) such mineral activities could adversely af24 feet National Conservatjon System units; or 

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2 

3 

4 

76 

75 

(F) such mineral activities could adversely af- I 

feet lands containing other resource values as the ' 

Secretary may consider. 

(f) WITHDRAWAL RBvIEw.-In conjunction with con5 ducting an unsuitability review under this section, the Sec6 retary shall review all administrative withdrawals of land 

7 from the location of mining claims t.o determine whether 

8 the revocation or modification of such withdrawal for the 

9 purpose of allowing such lands t.o be opened t.o the location 

10 of mining claims under this Act would be appropriate as 

11 a result of any of the following: 

12 (1) The imposition of any conditions refeITed t.o 

13 in subsection (d)(l)(B). 

14 (2) The surface management requirements of 

15 section 201. 

16 (3) The limitation of section 107. 

17 (g) CrrlzEN PETITION.-(1) In any instance where 

18 a land use plan has not been amended or completed t.o 

19 reflect the review refeITed t.o in subsection (a), any person 

20 having an interest that may be adversely affected by po21 tential mineral activities on lands subject t.o this Act cov22 ered by such plan shall have the right t.o petition the Sec23 retary t.o determine such lands t.o be unsuitable for all or 

24 certain types of mineral activities. Such petition shall con25 tain allegations of fact with respect t.o potential mineral 

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76 

1 activities and with respect t,o the unsnit.ability of such 

2 lands for all or certain mineral activities according t,o the 

3 standards set forth in subsection (e) with supporting evi4 dence that would tend t,o establish the allegations. 

5 (2) Petitions received prior t,o the date of the submis6 sion of a proposed plan of operations under this Act, shall 

7 st.ay consideration of the proposed plan of operations 

8 pending review of the petition. 

9 (3) Within 4 months after receipt of a petition t,o de10 termine lands t,o be unsuitable for all or certain types of 

11 mining in · areas where a· land use plan has not been 

12 amended or completed t,o reflect the review referred t,o in 

13 subsection (a), the Secretary shall hold a public hearing 

14 on the petition in the locality of the area in question. After 

15 a petition has been filed and prior t,o the public hearing, 

16 any person may support or oppose the determination 

17 sought by the petition by filing written allegations of facts 

18 and supporting evidence. 

19 (4) Within 60 days after a public hearing held pursu20 ant t,o paragraph (3), the Secretary shall is.ffle a written 

21 decision regarding the petition which shall state the rea22 sons for granting or denying the requested determination. 

23 ( 5) Reviews conducted pursuant t,o this subsection 

24 shall be consistent with paragraphs (3) and (4) of sub25 section (d) arid with subsection (e). 

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77 

1 SBC. IOI. LANDS NOT OPBN TO LOCATION. 

2 (a) LANDs.-Subjeet t.o valid existing rights, each of 

3 the following shall not be open t.o the location of mining 

4 claims under this Act. on the date of enactment of this 

5 Act: 

6 (1) Lands recommended for wilderness designa7 tion by the agency managing the surface, pending a 

8 final determination by the Congress of the status of 

9 such lands. 

10 (2) Lands being managed by the Bureau of 

11 Land Management as wilderness· study areas on the 

12 date of enactment of this Act except where the loca13 tion of mining claims is specifically allowed t.o con14 tinue by the statute designating the study area, 

15 pending a final determination by the Congress of the 

16 status of such lands. 

17 (3) Lands within Wild and Scenic River System 

18 and lands under study for inclusion in such system, 

19 pending a final determination by the Congress of the 

20 status of such lands. 

21 (4) Lands iden~tied by the Bureau of Land 

22 Management as Areas of Critical Environmental 

23 Concern. 

24 ( 5) Lands identified by the Secretary of Agri25 culture as Research Natural Areas. 

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78 

1 (6) Lands designated by the Fish and Wildlife 

2 Service as critical habitat for threatened or endan3 gered species. 

4 (7) Lands administ.P.red by the Fish and Wilds life Service. 

6 (8) Lands which the Secretary shall designate 

7 for withdrawal under authority of other law, includ8 ing lands which the Secretary of Agriculture may 

9 propose for withdrawal by the Secretary of the Inte10 rior under authority of other law. 

11 (b) DEFINITION.-As used in this section, the term 

12 ''valid existing rights" means that a mining claim located 

13 on lands referred t.o in subsection (a) was properly located 

14 and maintained under the general mining laws prior t.o 

15 the date of enactment of this Act, and was supported by 

16 a discovery of a valuable mineral deposit within the mean17 ing of the general mining laws on the date of enactment 

18 of this Act, and that such claim continues t.o be valid . 

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79 

1 TITLE ID-ABANDONED MIN2 ERALS MINE RECLAMATION 

3 FUND 

4 SBC. 801. ABANDONED MINERALS MINE RECLAMATION 

5 FUND. 

6 (a) NEW SUBTITLE.-Title IV of the Surface Mining 

7 Control and Reclamation Act of 1977 (30 U.S.C. 1231) 

8 is amended by inserting: 

9 "Subtitle A-Abandoned Coal Mine Reclamation Fund" 

10 immediately before section 401 and by adding the follow11 ing new subtitle at the end thereof: 

12 "Subtitle B-Abandoned Minerals Mine Reclamation 

13 Fund 

14 "SBC. 421. ABANDONED MINERALS MINE RECLAMATION. 

15 "(a) ESTABLISHMENT.-(!) There is established on 

16 the books of the Treasury of the United States a trust 

17 fund to be known as the Abandoned Minerals Mine Rec18 lamation Fund (hereinafter in this subtitle referred to as 

19 the 'Fund'). The Fund shall be administered by the Sec20 retary of the Interior acting through the Director, Office 

21 of Surface Mining Reclamation and Enforcement. 

22 "(2) The Secretary of the Interior shall notify the 

23 Secretary of the Treasury as to what portion of the Fund 

24 is not, in his judgment, required to meet current with25 drawals. The Secretary of the Treasury shall invest such 

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1 drawals. The Secretary of the Treasury shall invest such 

2 portion of the Fund in public debt securities with matu3 rities suitable for the needs of such Fund and bearing in4 terest at rates determined by the Secretary of the Treas5 ury, taking into consideration current market yields on 

6 outstanding marketplace obligations of the United States 

7 of comparable maturities. The income on such investments 

8 shall be credited to, and form a part of, the Fund. 

9 "(b) AMouNTs.-The following amounts shall be 

10 credited to the Fund for the purposes of this Act: 

11 "(1) All moneys received from the collection of 

12 rental fees under section 104 of the Mineral Explo13 ration and Development Act of 1991. 

14 "(2) Amounts collected pursuant to sections 

15 105 and 202(d) of the Mineral Exploration and De16 velopment Act 'of 1991. 

17 "(3) All moneys received from the disposal of 

18 mineral materials pursuant to section 3 of the Mate19 rials Act of 1947 (30 U.S.C. 603) to the extent such 

20 moneys are not specifically dedicated to other pur21 poses under other authority of law. 

22 "( 4) Donations by persons, corporations, asso23 ciations, and foundations for the purposes of this 

24 subtitle. 

25 "(5) Amounts referred to in section 410(e)(l). 

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1 "SEC. 4U. 1J8B AND OBJBCTJVES OF THE FUND. 

2 "(a) IN GENERAL.-The Secretary is authorized to 

3 use moneys in the Fund for the reclamation and restora4 tion of land and water resources adversely affected by past 

5 mineral (other than coal and fluid minerals) and mineral 

6 material mining, including but not limited to, any of the 

· 7 following: 

8 "(1) Reclamation and restoration of abandoned 

9 surface mined areas. 

10 "(2) Reclamation and restoration of abandoned 

11 milling and processing areas. 

12 "(3) Sealing, filling, and grading abandoned 

13 deep mine entries. 

14 "(4) Planting of land adversely affected by past 

15 mining to prevent erosion and sedimentation. 

16 "(5) Prevention, abatement, treatment and con17 trol of water pollution created by abandoned mine 

18 drainage. 

19 "(6) Control of surface subsidence due to aban20 doned deep mines. 

21 "(7) Such expenses as may be necessary to ac22 complish the purposes of this subtitle. 

23 "(b) PRIORITIES.-Expenditure of moneys from the 

24 Fund shall reflect the following priorities in the order stat25 ed: 

H.R. 322 IHR - 6 (J. 69-080) 
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1 "(l) The protection of public health, safety, 

2 general welfare and property from extreme danger 

3 from the adverse effects of past minerals and min4 eral materials mining practices. 

5 "(2) The protection of-public health, safety, and 

6 general welfare from the adverse effects of past min7 erals and mineral materials mining practices. 

8 "(3) The restoration of land and water re9 sources previously d~ed by the adverse effects of 

10 past minerals and mineral materials mining prac11 tices. 

12 -OC. 418. ELIGmU: AREAS. 

13 "(a) ELIGmILITY.-Lands and waters eligible for 

14 reclamation expenditures under this Act shall be those 

15 within the boundaries of States that have lands subject 

16 to the Mineral Exploration and Development Act of 1992 

17 ·and the Materials Act of 1947-

18 "(1) which were mined or processed for min19 erals and mineral materials or which were affected 

20 by such mining or processing, and abandoned or left 

21 in an inadequate reclamation status prior t.o the date 

22 of enactment of this subtitle; and 

23 "(2) for which the Secretary makes a deter24 mination that there is no continuing reclamation re25 sponsibility under State or Federal laws; and 

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83 

1 "(3) for which it can be established that such 

2 lands do not contain minerals which could economi3 cally be extracted through the reprocessing or 

4 remining of such lands, unless such consideration 

5 are in conflict with the priorities set forth under 

6 paragraphs (1) and (2) of section 422(b). 

7 In determining the eligibility under this subsection of Fed8 eral lands and waters under the jurisdiction of the Forest 

9 Service or Bureau of Land Management in lieu of the date 

10 referred to in paragraph ( 1), the applicable date shall be 

11 August 28, 1974, and November 26, 1980, respectively. 

12 "(b) SPECIFIC SITES AND AREAS NOT ELIOIBLE.-

13 The provisions of section 411(d)·. of the ·surface Mining 

14 Control and Reclamation Act of 1977 shall apply to ex15 penditures made from the Fund established under this 

16 subtitle in the same manner and to the same extent as 

17 such provisions apply to expenditures made under 

18 subtitle A. 

19 "SEC. 424. FUND ALLOCATION AND EXPENDITURES. 

20 "(a) ALLocATIONS.-(1) Moneys available for ex21 penditure from the Fund shall be allocated on an annual 

22 basis by the Secretary in the form of grants to eligible 

23 States, or in the form of expenditures under subsection 

24 (b), to accomplish the purposes of this subtitle. 

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1 "(2) The Secretary shall distribute moneys from the 

2 Fund based on the greatest need for such moneys pursu3 ant to the priorities stated in section 422(b). In determin4 ing the greatest need for the distribution of• moneys from 

5 the Fund to eligible States, the Secretary shall give prior6 ity to those eligible States which do not receive grants 

7 under subtitle A. 

8 "(b) DIRECT FEDERAL ExPENDITURES.---:-Where a 

9 State is not eligible, or in instances where the Secretary 

10 determines that the purposes of this subtitle may best be 

11 accomplished otherwise, moneys available from the Fund 

12 may be expended directly by the Director, Office of Sur13 face Mining Reclamation and Enforcement. The director 

14 may also make such money available through grants made 

15 to the Director of the Bureau of Land Management, the 

16 Chief of the United States Forest Service, the Director 

17 of the National Park Service, and any public entity that 

18 volunteers to develop and implement, and that has the 

19 ability to carry out, all or a significant portion of a rec20 lamation program, or through cooperative agreements be21 tween eligible States and the entities referred to in this 

22 subsection. 

23 "SEC. '25. STATE RECLAMATION PROGRAMS. 

24 "(a) ELIGIBLE STATES.-For the purpose of section 

25 424(a), 'eligible States' are those States for which the Sec-

•BRIii m 
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85 

1 retary determines meets each of the following require2 ments: 

3 "(1) Within the State there are mined lands, 

4 waters, and facilities eligible for reclamation pursu5 ant to section 423. 

6 "(2) The State has developed an inventory of 

7 such areas following the priorities established under 

8 section 422(b). 

9 "(3} The State has established, and the Seel O retary has approved, a State abandoned minerals 

11 and mineral materials mine reclamation program for 

12 the purpose of receiving and administering grants 

13 under this subtitle. Any State with an approved 

14 abandoned mine reclamation program pursuant to 

15 section 405 shall be deemed to have met the require16 ments of this paragraph. 

17 "(b} MONITORING.-The Secretary shall monitor the 

18 expenditure of State grants to ensure they are being uti19 lized to accomplish the purposes of this subtitle. 

20 "(c) SUPPLEMENTAL GRANTS.-ln the case of any 

21 State with an approved abandoned mine reclamation pro22 gram pursuant to section 405, grants to such State made 

23 pursuant to this subtitle may be made as a supplement 

24 to grants received by such State pursuant to section 

25 402(g)(l). 

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86 

1 "(d) STATE PRooRAMS.-(1) The Secretary shall ap2 prove any State abandoned minerals mine reclamation 

3 program submitted to the Secretary by a State under this 

4 subtitle if the Secretary finds that the State has the ability 

5 and necessary State legislation to implement such pro6 gram and that the program complies with the provisions 

7 of this subtitle and the regulations of the Secretary under 

8 this subtitle. 

9 "(2) No State, or a contractor for such State engaged 

10 in approved reclamation work under this subtitle, or a 

11 public entity referred to in section 424(b), shall be liable 

12 under any provision of Federal law for any costs or dam13 ages as a result of action taken or omitted in the course 

14 of carrying out an approved State abandoned minerals 

15 mine reclamation program under this section. This para16 graph shall not preclude liability for cost or damages as 

17 a result of gross negligence or intentional misconduct by 

18 the State. For purposes of the preceding sentence, reck19 less, willful, or wanton misconduct shall constitute gross 

20 negligence. 

21 "SEC. 428. AUTHORIZATION OF APPROPRIATIONS. 

22 "Amounts credited to the Fund are authorized to be 

23 appropriated for the purpose of this subtitle without fiscal 

24 year limitation.". 

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l SEC. SOI. CONFORMING AMENDMENTS. 

2 (a) CONFORMING CHANGE.-All references to "this 

3 title" in sections 401 through 414 of the Surface Mining 

4 Control and Reclamation Act of 1977 (30 U.S.C. 1231 

5 and following) are amended to read "this subtitle". 

6 (b) TABLE OF CONTENTS.-The table of contents for 

7 title IV of the Surface Mining Control and Reclamation 

8 Act of 1977 (30 U.S.C. 1231 and following) is amended 

9 as follows: 

10 ( 1) Insert the following immediately before the 

11 item relating to section 401: 

12 

"Subtitle A-Abandoned Coal l\line Reelamation Fund". 

(2) Add the following at the end thereof: 

"Subtitle B-Abandoned Minerals llline Reelamation Fund 

"Sec. 421. Abandoned minerals mine reclamation. 

"Sec. 422. Use and objectives of the fund. 

"Sec. 423. Eligible areas. 

"Sec. 424. Fund allocation and expenditures. 

"Sec. 425. State reclamation programs. 

"Sec. 426. Authorization of appropriations.". 

13 TITLE IV-ADMINISTRATIVE AND 

14 MISCELLANEOUS PROVISIONS 

15 SEC. 401. POLICY FUNCTIONS. 

16 (a) MINERALS POLICY.-T' .. e Mining and Minerals 

17 Policy Act of 1970 (30 U.S.C. 21a) is amended by adding 

18 at the end thereof the following: "It shall also be the re19 sponsibility of the Secretary of Agriculture . to carry out 

20 the policy provisions of paragraphs (1) and (2) of this 

21 Act.". 

•BR mm 
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1 (b) MINERAL DATA.-Section 5(e)(3) of the National 

2 Materials and Minerals Policy, Research and Development 

3 Act of 1980 (30 U.S.C. 1604) is amended by inserting 

4 before the period the following: ", except that for National 

5 Forest System lands the Secretary of Agriculture shall 

6 promptly initiate actions to improve the availability and 

7 analysis of mineral data in Federal land use decision 

8 making''. 

9 SBC. 40J. U8Bll FEB8. 

10 The Secretaries of Interior and Agriculture are au11 thorir.ed to establish and collect from persons subject to 

12 the requirements of this Act such user fees as may be nec13 essary to reimburse the United States for a portion of the 

14 expenses incurred in administering such requirements. 

15 Fees may be assessed and collected under this section only 

16 in such manner as may reasonably be expected to result 

17 in an aggregate amount of the fees collected during any 

18 fiscal year which does not exceed the aggregate amount 

19 of administrative expenses referred to in this section. 

20 SEC. 408. REGULATIONS; Bl'FEC'nVB DATES. 

21 (a) EFFECTIVE DATE.-This Act shall take effect 1 

22 year after the date of enactment of this Act, except as 

23 otherwise provided in this Act. 

24 (b) REGULATIONS.-(!) The Secretary of the Interior 

25 shall issue final regulations to implement title I, such re-

•BR III IB 
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89 

1 quirements of section 402 and 409. as may be applicable 

. 2.. to such title, title m and sections 404, 406 and 407 not 

3 later. than the effective date of this Act specified in sub4 section (a). 

5 (2) The Secretary of the Interior and the Secretary 

6 of Agriculture shall each issue final regulations . to imple7 ment their respective responsibilities under title TI, such 

8 requirements of section 402 as may be applicable to such 

9 title, and sections 405 and 409 not later than the effective 

10 date of this Act referred to in subsection (a). The Sec11 retary of the Interior and the Secretary of Agriculture 

12 shall coordinate the promulgation of such regulations. 

13 (3) Failure to promulgate the regulations specified in 

14 this subsection by the effective date of this Act by reason 

15 of any appeal or judicial review shall not delay the effec16 tive date of this Act as specified in subsection (a). 

17 (b) NOTICE.-Within 60 days after the publication 

18 of regulations referred to in subsection (b)(l), the Sec19 retary of the Interior shall give notice to holders of mining 

20 claims and mill sites maintained under the general mining 

21 laws as to the requirements of section 404. Procedures 

22 for providing such notice shall be established as part of 

2,3 the regulations. 

24 (c) NEW MINING CLArns.-Notwithstanding any 

25 other provision of law, after the effective date of this Act, 

•&alllm 
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90 

1 a mining claim for a locat.able mineral on lands subject 

2 to this Act3 (1) may be locat.ed only in accordance with this 

4 Act, 

5 (2) may be maintained only as provided in this 

6 Act, and 

7 (3) shall be subject to the requirements of this 

8 Act. 

9 SEC. 4N. TRAN81TIONAL RULES; MINING CLAIMS AND MILL 

10 8ITBS. 

11 (a) CLAIMS UNDER THE GENERAL MINING LAws.-

12 (1) CoNVERTED MINING CLAIMS.-Notwith13 standing any other provision of law, within the 3-

14 year period after the effective date of this Act, the 

15 holder of any unpatented mining claim which was lo16 cated under the general mining laws before the ef17 · fective date of this Act may elect to convert the 

18 claim under this paragraph by filing an election to 

19 do so with the Secretary of the Interior that ref20 erences the Bureau of Land Management serial 

21 number of that claim in the office designated by 

22 such Secretary. The provisions of title I (other than 

23 subsections (a), (b), (c), (d)(l), (f), and (h) of sec24 tion 103) shall apply t.o any such claim, effective 

25 · upon the making of such election, and the filing of 

-nmm 
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91 

1 such election shall constitute notice to the Secretary 

2 for purposes of section 103(d)(2). Once a mining 

3 claim has been converted, there shall be no distinc4 tion made as to whether such claim was originally 

5 located as a lode or placer claim. 

6 (2) UNCONVERTED MINING CLAIMS.-Notwith7 standing any other provision of law, any claim reg ferred to in paragraph (1) that has not converted 

9 within the 3-year period referred to in such para10 graph shall be deemed forfeited and declared null 

11 and void. 

12 (3) CoNVERTED MILL SITE CLAIMS.-Notwith13 standing any other provision of law, within the 3-

14 year period after the effective date of this Act, the 

15 holder of any unpatented mill site which was located 

16 under the general mining laws before the effective 

17 date of this Act may elect to convert the site under 

18 this paragraph by filing an election to do so with the 

19 Secretary of the Interior that references the Bureau 

20 of Land Management serial number of that mill site 

21 in the office designated by such Secretary. The pro22 visions of title I (other than subsections (a), (b), (c), 

23 (d)(l), and (f) of section 103) shall apply to any 

Z4 such claim, effective upon the making of such elec25 tion, and the filing of such election shall constitute 

•DmlB 
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92 

1 notice to the Secretary for purposes of section 

2 103(d)(2). A mill site converted under this para3 graph shall be deemed a mining claim under this 

4 Act. 

5 (4) UNCONVERTED MILL SITE CLAIMS.-Not6 withstanding any other provision. of law, any mill 

7 site referred to in paragraph (3) that has not con8 verted within the 3-year period referred to in such 

9 paragraph shall be deemed forfeited and declared 

10 null and void. 

11 (5) TuNNEL SITES.-Any tunnel site located 

12 under the general mining laws on or before the ·ef13 fective date of this Act shall not be recognized as 

14 · valid unless converted pursuant to paragraph (1). 

15 No tunnel sites may be located under the general 

16 mining laws after the effective date of this Act. 

17 (b) SPECIAL APPLICATION OF REQUIREMENTS.-For 

18 mining claims and mill sites converted under this section 

19 each of the following shall apply: 

20 ( 1) For the purposes of complying with the re21 quirements of section 103(d)(2), whenever the Sec22 retary receives an election under paragraphs ( 1) or 

23 (3) of subsection (a), as the case may be, he shall 

24 provide the certificate referenced in section 
94 

93 

1 103(d)(2) to the holder of the mining claim or mill 

2 site. 

3 (2) The first diligence year applfoable to mining 

4 claims and mill sites converted under this section 

5 shall commence on the first day of the first month 

6 following the date the holder of such claim or mill 

7 site files an election to convert with the Secretary 

8 under paragraphs (1) or (3) of subsection (a), as the 

9 case may be, and subsequent diligence years shall 

10 commence on the first day of that month each year 

L 1 thereafter. 

12 (3) For the purposes of determining the bound13 aries of a mining claim to which the rental require14 ments of section 104 apply for a mining claim or 

15 mill site converted under this section, the rental fee 

16 shall be paid on the basis of land within the bound17 aries of the converted mining claim or mill site as 

18 described in the notice of location or certificate of lo19 cation filed under section 314 of the Federal Land 

20 Policy and Management Act of 1976. 

21 (c) PRECONVERSION.-Any unpatented mining claim 

22 or mill site located under the general mining laws shall 

23 be deemed to be a prior claim for the purposes of section 

24 103(e) during the 3-year period referred to in subsections 

25 (a)(l) or (a)(3). 

H.R. 322 IHR - 7 (J. 69-080) 
95 

94 

1 (d) POSTCONVERSION.-Any unpatented mining 

2 claim or mill site located under the general mining laws 

3 shall be deemed to be a prior claim for the purposes of 

4 section 103(e) if converted pursuant to subsections (a)(l) 

5 or (a)(3). 

6 (e) DISPOSITION OF LAND.-In the event a mining 

7 claim is located under this Act for lands encumbered by 

8 a prior mining claim or mill site located under the general 

9 mining laws, such lands shall become part of the claim 

10 located under this Act if the claim or mill site located 

11 under the general mining laws is declared null and void 

12 under this section or otherwise becomes null and void 

13 thereafter. 

14 (f) PREACT CONFLICTS.-(!) Any conflicts in exist15 ence on or before the date of enactment of this Act be16 tween holders of mining claims located under the general 

17 mining laws may be resolved in accordance with applicable 

18 laws governing such conflicts in effect on the date of en19 actment of this Act in a court with proper jurisdiction. 

20 (2) Any conflicts not relating to matters provided for 

21 under section 103(g) between the holders of a mining 

22 claim located under this Act and a mining claim or mill 

23 located under the general mining laws arising either before 

24 or after the conversion of any such claim or site under 

•BR Ulm 
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95 

1 this section shall be resolved in a court with proper juris2 diction. 

3 SEC. 4815. TRANSfflONAL RULES; SURPACE MANAGEMENT 

4 REQUIRBIIBNT8. 

5 (a) NEW CLAIMs.-Notwithstanding any other provi6 sion of law, any mining claim for a locatable mineral on 

7 lands subject to this Act locat.ed after the date of enacts ment of this Act, but prior to the effective date of this 

9 Act, shall be subject to such surface management require10 ments as may be applicable to the mining claim in effect 

11 prior to the date of enactment of this Act until the effec12 tive date of this Act, at which time such claim shall be 

13 subject to the requirements of title II. 

14 (b) PREEXISTING CLAIMS.-Notwithstanding arty 

15 other provision of law, any unpatent.ed mining claim or 

16 mill site locat.ed under the general mining laws shall be 

17 subject to the requirements of title II as follows: 

18 (1) In the event a plan of operations had not 

19 been approved for mineral activities on any such 

20 claim or site prior to the effective date of this Act, 

21 the claim or site shall be subject to the requirements 

22 of title II upon the effective date of this Act. 

23 (2) In the event a plan of operations had been 

24 approved for mineral activities on any such claim or 

25 site prior to the effective date of this Act, such plan 

•Diil lB 
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96 

1 of operations shall continue in force for a period of 

2 5 years after the effective date of this Act, after 

3 which time the requirements of title II shall apply, 

4 except as provided under subsection ( c), subject to 

5 the limitations of section 204(d)(2). In order to meet 

6 the requirements of section 201, the person conduct7 ing mineral activities under such plan of operations 

8 shall apply for a modification under section 201(i). 

9 During such 5-year period the provisions of section 

10 202 shall apply on the basis of the surface manage11 ment requirements applicable to such plans of oper12 ations prior to the effective date of this Act. 

13 (3) In the event a notice had been filed with the 

14 authorized officer in the applicable district office of 

15 the Bureau of Land Management (as provided for in 

16 the regulations of the Secretary of the Interior in ef17 feet prior to the date of enactment of this Act relat18 ing to operations that cause a cumulative disturb19 ance of 5 acres or less) prior to the date of enact20 ment of this Act, mineral activities may continue 

21 under such notice for a period of 2 years after the 

22 effective date of this Act, after which time the re23 quirements of title II shall apply, e.xcept as provided 

24 under subsection (c), subject to the limitations of 

25 section 204(d)(2). In order to meet the requirements 

•BRmm 
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97 

1 of section 201, the person conducting mineral activi2 ties under such notice must apply for a modification 

3 under section 201(i) unless such mineral activities 

4 are conducted pursuant to section 201(b)(2). During 

5 such 2-year period the . provisions of section 202 

6 shall apply on the basis of the surface management 

7 requirements applicable to such notices prior to the 

8 effective date of this Act. 

9 (4f In the event a notice (as described in para10 graph (3)) had not been filed with the authorized of11 fleer in the applicable district office of the Bureau 

12 of Land Management prior to the date of enactment 

13 of this Act, the claim or site shall be subject to the 

14 surface management requirements in effect prior to 

15 the effective date of this Act at which time such 

16 claims shall be subject to the requirements of title 

17 II. 

18 SEC. 408. BASIS FOR CONTEST. 

19 (a) D1scoVERY.-(l) After the effective date of this 

20 Act, a mining claim may not be contested or challenged 

21 on the basis of discovery under the general mining laws, 

22 except as follows: 

23 (A) Any elaim located on or before the effective 

24 date of this Act may be contested by the United 

25 States on the basis of discovery under the general 

•BR an 1B 
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98 

1 mining laws as in effect prior to the effective date 

2 · of this Act if such claim is located within units of 

3 the National Park System, National Wildlife Refuge 

4 System, National Wilderness Preservation System, 

5 Wild and Scenic Rivers System, National Trails Sys6 tern, or National Recreation Areas designated by an 

7 Act of Congress, or within an area referred to in 

8 section 205 pending a final determination referenced 

9 in such section. 

10 (B) Any mining claim located on or before the 

11 effective date of this Act may be contested by the 

12 United States on the basis of discovery under the 

13 general mining laws as in effect prior to the effective 

14 date of this Act if such claim was located for a min15 eral material that purportedly has a property giving 

16 it distinct and special value within the meaning of 

17 section 3(a) of the Act of July 23, 1955, or if such 

18 claim was located for a mineral that was not 

19 locatable under the general mining laws on or before 

20 the effective date of this Act. 

21 (2) The Secretary of the Interior or the Secretary of 

22 Agriculture, as the case may be, may initiate contest pro23 ceedings against those mining claims referred to in para24 graph ( 1) at any time, except that nothing in this sub25 section may be construed as requiring the Secretary to in-

•BBmm 
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99 

1 quire into or contest the validity of a mining claim for 

2 the purpose of the conversion referred to in section 404. 

3 (3) Nothing in this subsection may be constmed as 

4 limiting any contest proceedings initiated by the United 

5 States under this subsection on issues other than 

6 discovery. 

7 SEC. WI. SAVINGS CLAUD CLAIMS. 

8 (a) Notwithstanding any other provision of law, ex9 cept as provided under subsection (b), an unpatented min10 ing claim referred to in section 37 of the Mineral Leasing 

11 Act (30 U.S.C. 193) may not be converted under section 

12 404 until the Secretary of the Interior determines the 

13 claim was valid on the date of enactment of the Mineral 

14 Leasing Act and has been maintained in compliance with 

15 the general mining laws. 

16 (b) Immediately after the date of enactment of this 

17 Act, the Secretary of the Interior slμill initiate contest pro18 ceedings challenging 'the validity of all unpatented claims 

19 referred to in subsection (a), including those claims for 

20 which a patent application has not been filed. If a claim 

21 is determined to be invalid, the Secretary shall promptly 

22 declare the claim to be null and void. 

23 (c) No claim referred to in subsection (a) shall be 

24 declared null and void under section 404 during the period 

25 such claim is subject to a proceeding under subsection (b). 

•BBlalB 
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100 

1 If, as a result of such proceeding, a claim is determined 

2 valid, the holder of such claim may comply with the re3 quirements of section 404(a)(l), except that the 3-year pe4 riod referred to in such section shall commence with the 

5 date of the completion of the contest proceeding. 

6 SEC. 408. SEVER.ABILITY'. 

7 If any provision of this Act or the applicability there8 of to any person or circumstances is held invalid, the re9 mainder of this Act and the application of such provision 

10 to other persons or circumstances shall not be affected 

11 thereby. 

12 SEC. 409. PURCHASING POWER ADJUSTMENT. 

13 The Secretary shall adjust all rental rates, penalty 

14 amounts, and other dollar amounts established in this Act 

15 for changes in the purchasing power of the dollar every 

16 10 years following the date of enactment of this Act, em17 ploying the Consumer Price Index for all.:urban consumers 

18 published by the Department of Labor as the basis for 

19 adjustment, and rounding according to the adjustment 

20 process of conditions of the Federal Civil Penalties Infla21 tion Adjustment Act of 1990 (104 Stat. 890). 

22 SEC. 410. ROYALTY. 

23 (a) RESERVATION OF RoYALTY.-Production of 

24 locatable minerals (including associated minerals) from 

25 any mining claim located or converted under this Act, or 

•BR an m 
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101 

1 mineral concentrat.es derived from locatable minerals pro2 duced from any mining claim located or converted under 

3 this Act, as the case may be, shall be subject to a royalty 

4 of ~ot less than 8 percent of the gross income from th~ 

5 production of such locatable minerals or concentrates, as 

6 the case may be. 

7 (b) RoYALTY PAYMENTS.-Royalty payments shall 

8 be made to the United Stat.es not later than 30 days after 

9 the end of the month in which the product is produced 

10 and placed in its first marketable condition, consistent 

11 with prevailing practices in the industry. 

12 (c) REPORTING REQUffiEMENTS.-All persons hold13 ing claims under this Act shall be required to provide such 

14 information as determined necessary by the Secretary to 

15 ensure compliance with this section, including, but not 

16 limited to, quarterly reports, records, documents, and 

17 other data. Such reports may also include, but not be lim18 ited to, pertinent technical and financial data relating to 

19 the quantity, quality, and amount of all minerals extracted 

20 from the mining claim. 

21 (d) AUDITS.-The Secretary is authorized to conduct 

22 such audits of all persons holding claims under this Act 

23 as he deems necessary for the purposes of ensuring com• 

24 pliance with the requirements of this section. 

•HRUI 1B 
103 

102 

1 (e) DISPOSITION OF RECEIPTS.-All receipts from 

2 royalties collected pursuant to this section shall be distrib3 uted as follows4 (1) 50 percent shall be deposited into the Fund 

5 refeITed to in title ill; 

6 (2) 25 percent collected in any State shall be 

7 paid to the State in the same manner as are pay8 ments to States under section 35 of the Mineral 

9 Leasing Act; and 

10 (3) 25 percent shall be deposited into the 

11 Treasury of the United States. 

12 (f) COMPLIANCE.-Any person holding claims under 

13 this Act who knowingly or willfully prepares, maintains, 

14 or submits false, inaccurate, or misleading information re15 quired by this section, or fails or refuses to submit such 

16 information, shall be subject to the enforcement provisions 

17 of section 202 of this Act and forfeiture of the claim. 

18 (g) REGULATIONS.-The Secretary shall promulgate 

19 regulations to establish gross income for royalty purposes 

20 under subsection (a) and to ensure compliance with this 

21 section. 

22 (h) REPORT.-The Secretary shall submit to the Con23 gress an annual report on the implementation of this sec24 tion. The information to be included in the report shall 

25 include, but not be limited to, aggregate and State-by-

•BR mm 
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103 

1 St.ate production data, and projections of mid-term and 

2 long-term hard rock mineral production and trends on 

3 public lands. 

4 SBC. 411. SAVINGS CLAUSB. 

5 (a) SPECIAL APPLICATION OF MINING LAWS.-Noth6 ing in this Act shall be construed as repealing or modify7 ing any Federal law, regulation, order or land use plan, 

8 in effect prior to the effective date of this Act that pro9 hibits or restricts the application of the general mining 

10 laws, including such laws that provide for special manage11 ment criteria for operations under the general mining laws 

12 as in effect prior to the effective date of this Act, to the 

13 · extent such laws provide environmental protection greater 

14 than required under this title. 

15 (b) OTHER FEDERAL LAws.-Nothing in this Act 

16 shall be construed as superseding, modifying, amending 

17 or repealing any provision of Federal law not expressly 

18 superseded, modified, amended or repealed by this Act, in19 eluding but not necessarily limited to, all of the following 

20 laws21 (1) the Clean Water Act (33 U.S.C. 1251 and 

22 following); 

23 (2) the Clean Air Act (42 U.S.C. 7401 and fol24 lowing); 

•BRIDm 
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104 

1 (3) title IX of the Public Health Service Act 

2 (the Safe Drinking Water Act (42 U.S.C. 300f and 

3 following)); 

4 (4) the Endangered Species Act of 1973 {16 

5 U.S.C. 1531 and following); 

6 (5) the National Environmental Policy Act of 

7 1969 (42 U.S.C. 4321 and following); 

8 (6) the Atomic Energy Act of 1954 (42 U.S.C. 

9 2011 and following); 

10 (7) the Uranium Mill Tailings Radiation Coull trol Act {42 U.S.C. 7901 to 7942); 

12 (8) the Federal Mine Safety and Health Act of 

13 1977 (30 U.S.C. 801 and following); 

14 (9) the Solid Waste Disposal Act (42 U.S.C. 

15 6901 and following); 

16 (10) the Comprehensive Environmental Re17 spouse, Compensation, and Liability Act of 1980 (42 

18 U.S.C. 9601 and following); 

19 ( 11) the Act commonly known as the False 

20 Claims Act (31 U.S.C. 3729 to 3731); 

21 (12) the National Historic Preservation Act (16 

22 U.S.C. 470 and following); 

23 (13) the Migratory Bird Treaty Act (16 U.S.C. 

24 706 and following); and 

•HR an IH 
106 

105 

1 (14) the Forest and Rangeland Renewable Re2 sources Planning Act of 1974, as amended by the 

3 National Forest Management Act of 1976. 

4 (c) PRoTECTION OF CONSERVATION AREAs.-In 

5 order to protect the resources and values of Denali Na6 tional Park and Preserve, and all other National Con7 servation System units, the Secretary of the Interior or 

8 other appropriate Secretary shall utilize authority under 

9 this Act and other applicable law to the fullest extent nec10 essary to prevent mineral activities within the boundaries 

11 of such units that could have an adverse impact on the 

12 resources or values of such units. 

13 SEC. 412. AVAILABILITY OF PUBUC RECORDS. 

14 Copies of records, reports, inspection materiaJs or in15 formation obtained by the Secretary under this Act shall 

16 be made immediately available to the public, consistent 

17 with section 552 of title 5 of the United States Code, in 

18 central and sufficient locations in the county, multicounty, 

19 and State area of mineral activity or reclamation so that 

20 such items are conveniently available to residents in the 

21 area proposed or approved for mineral activities or rec22 lamation. 

0 

•IDlUI ffl 
107 

Mr. LEHMAN. At the outset this morning, I would like to commend my colleague, who just came through the door, and note for 

the record the leadership and perseverance that Congressman Rahall has shown over the last several years in bringing Mining Law 

reform to our attention. Nick began looking into the question of reform shortly after he assumed the chairmanship of the Mining and 

Natural Resources Subcommittee in 1985. He has stuck with the 

issue in the face of tremendous resistance and at times outright 

hostility from many in the industry. Coming from probably the coal 

mining district in America, Nick certainly cannot be accused of not 

caring about mining, but being a fair-minded person, he recognized 

that the current system no longer serves either the public or the 

industry well. 

H.R. 322 offers this Congress the opportunity to act clearly and 

decisively in the national interest. Our position on this bill will be 

understood by taxpaying Americans for what it is, common-sense 

caretaking that requires a fair return for the extraction of minerals 

which belong to all Americans. Further, H.R. 322 will be understood as providing much needed environmental safeguards. 

I look forward to a lively debate today which takes into account 

fiscal realities and mining practices as we consider rewriting a century-old law to conform with modem-day needs and values. I want 

all parties to know from the outset that the subcommittee is eager for constructive input and possible suggestions for change in the 

legislation. We want to make sure it is both workable and reasonable. In that regard, my door is open and our staff is always available. 

Those who have legitimate problems and concerns can only be effective it they attempt to be part of the process in this House. 

Doing nothing about Mining Law reform, however, is not an option. 

Developing a comprehensive revision that takes into account current values, technologies, and physical realities is the path we will 

take. We are at the point where decisions made are going to be reflected in Federal law, and I believe the presence of the Secretary, Mr. Babbitt, here this morning underscores that fact. 

So, again, the process is open now. We look forward to input 

from everyone who has a concern. We are going to try to do what 

we can to be as fair as possible. 

[Prepared statement of Mr. Lehman follows:] 
108 

OPENING STATEMENT OF RICHARD H. LEHMAN, Chairman 

Subcommittee on Energy and Mineral Resources Subcommittee 

Hearing on H. R. 322 

"The Mineral Exploration and Development Act of 1993" 

Thursday, March 11, 1993 

The Subcommittee on Energy and Mineral Resources will come to order. Today we will begin consideration of H.R. 322, "The 

Mineral Exploration and Development Act of 199311 introduced by our colleague, Nick Rahall. 

H.R. 322 would replace certain anachronistic provisions of 

the Mining Law of 1872 and provide a more suitable regime to 

govern mining on public lands for "hardrock" minerals such as gold, silver, copper and platinum. 

The major issues involved in the reform effort are receipt 

of a fair return to the federal treasury for valuable public 

mineral resources, environmental protection, elimination of 

archaic requirements and reclamation of abandoned hardrock mines 

in the west. 

Legislation to reform the 121-year law was introduced in the 

101st and 102nd Congresses by our colleague Nick Rahall of West 

Virginia. Early in the 101st Congress, Nick Rahall introduced 

H.R. 918, the predecessor to H.R. 32 and six hearings were conducted on the bill. It was reported favorably by the 

Committee and referred to the Agriculture and Merchant Marine 

Committees. The House began floor consideration of the bill, but 

did not complete action on the measure prior to adjournment last 

fall. 

At the outset, I would like to note for the record, the 

leadership and perseverance Nick has shown over the last several 

years in bringing mining law reform to our attention. Nick began looking into the question of reform shortly after he assumed the 

chairmanship of the Mining and Natural Resources Subcommittee in 

1987. And he has stuck with the issue in the face of tremendous 

resistance and, at times, outright hostility from tlle hard rock 

mining industry. Coming from THE coal mining district, Nick 

cannot be accused of not caring about mining. But, being a fairminded man, he has recognized the truth in what Lewis Mumford 

said in his book, Technics and civilization: "One must admit the 

devastation of mining even if one is prepared to justify the 

end." 

H.R. 322 offers this Congress the opportunity to act clearly 

and decisively in the national interest. Our positive action on H.R. 322 will be understood by tax paying Americans for what it 

is---honest stewardship of the public lands. Common sense stewardship that requires a fair return from the extraction for 

sale of minerals which, in the words of a witness from the 

American Mining Congress, "belong to all Americans." 
109 

Further, H.R. 322 will be understood as providing needed 

environmental safeguards, which under the current regime are woefully lacking. 

Today, modern machinery can do in hours what it took men and 

draft animals years to do in the past. Gold mining requires the 

processing of large amounts of material since the metal occurs in 

concentrations best measured in parts per million. An estimated 

620 million tons of waste are produced in gold mining each year. 

The Goldstrike mine in Nevada, moves 325,00 tons of ore and waste 

to produce 50 kilograms of gold each day. Yet, most mining 

wastes are not covered by the hazardous waste provisions of RCRA. 

And, the Clean Water Act does not provide protections against 

groundwater contamination from mining. 

Nor was the Mining Law of 1872 intended to address these 

kinds of concerns that many people today have about the wisdom of 

mining. The Mining Law was not intended to ask the question -- "Should mining occur in this location?" and because of the so- called "right-to-mine" which industry enthusiasts champion, 

mining can occur in an environmentally sensitive or archaeologically significant locale without the most fundamental 

question being asked -- "What is the highest and best use of this 

land?" 

H. R. 322 seeks to address these and other concerns. I look 

forward to hearing the testimony of our witnesses today. 
110 

Mr. LEHMAN. At this time I would like to recognize for an open- ing statement the distinguished ranking member of this committee, 

the gentlelady from Nevada, Mrs. Vucanovich. 

STATEMENT OF HON. BARBARA F. VUCANOVICH 

Mrs. VUCANOVICH. Thank rou very much, and I appreciate your 

scheduling a hearing on an issue of such importance to my home 

State and my district, and that is whether or not there ought to 

be hard-rock mining allowed on the public lands. 

As you know, I have been fighting this battle with the former 

subcommittee chairman for several Congresses. Thus, it won't come 

as a shock that I firmly believe the bill before us would eliminate 

a significant portion of the rural West's economy. 

It may surprise you to hear me say, however, that the time has 

come for addressing meaningful reform of the Mining Law so that 

we can move beyond the uncertainty brought about by the never 

ending rhetoric of "fair return to the public" and "lack of environmental standards" under current law. 

Am I abandoning my constituents? No. I simply believe the time 

has come to force oneself to the table and put these ghosts to rest. 

If we do it right, we can have a viable mining industry and answer 

legitimate fiscal and environmental concerns. 

Is H.R. 322 such a bill? I don't think so. Its short title is "The 

Mineral Exploration and Development Act of 1993," but I can't 

stress too much what a misnomer that is unless, of course, we are 

talking about some other nation's mineral development. I think 

that we all know that investors in search of hard-rock mining opportunities have a worldwide market in which to seek the best return on their money. This Congress, try though we may, cannot repeal laws of supply 

and demand. Society is not ready to give up its use of metals and 

nonmetallic minerals. If public lands of the western United States 

are made uneconomic to prospect, the smart money will go elsewhere-and take tens of thousands of the best-paying jobs in my 

State and many others with it. 

The flight of domestic e:ig>loration dollars to Latin America, the 

C.I.S. nations, the Pacific Rim, and elsewhere has already be2UI1. 

Are the Rahall and Bumpers bills the sole cause of this exodus? Of 

course not. There are many reasons for not investing in our Nation's natural resource industries, but H.R. 322 and S. 257 would 

be the last straw for public land prospecting. 

Now I know the sponsors of this bill plead good intentions to promote "responsible mineral development," as one of today's witnesses chooses to subtitle his publication, but, as they say, "the 

devil is in the details," and my friends this bill is one heck of a disincentive to mining in Nevada. . If it is "responsible" public policy to say, "Thou shalt not explore, 

develop, or produce hard-rock minerals from public lands and adjacent private lands," regardless of compliance with existing Federal 

and State environmental laws, then I guess H.R. 322 is indeed a 

good bill. But if you believe, as I do, that mining is a legitimate 

use of our public resources and that it is i"esponsible to chase off 

the environmentally sound producers to get at a few bad actors, 

then you will agree that H.R. 322 is a bad bill. 
111 

Allow me just a few moments more, Mr. Chairman, to elaboratf: 

on this theme. Our President ran on a platform that was anchorec 

by the slogan, "It's the economy, stupid." The voters a~eed, bu1 

now we just wonder who got the message. Mining jobs m NevadE 

directly employ some 14,000 people in m1 district and indirectl3 

another 40,000 or more. Nevada labor statistics show mining is thE 

highest paid job sector in our economy. These are real jobs, no1 

Government "make-work" jobs needing our economic stimulw 

package to hap~n. Mining Jobs are real jobs that will flow to Mex, 1co, Chile, and Bolivia, where mining investment is welcomed witl 

open arms. 

Oh, sure, a few of my constituents, the Spanish-speaking geolo 

gist or the mining engineer, will find work in these nations anc 

send home a paycheck to Winnemucca, Elko, or Reno to feed thE 

family she left behind, but the vast majority of miners will simpl3 

be out of work. 

That leads me to comment upon the advance testimony of two o: 

today's witnesses. They would have us believe that something i1 

~eatly amiss in the action of American Barrick Resources attempt 

mg to patent its Goldstrike mine on the Carlin Trend in Nevada 

Mr. Chairman, may I relate the true story of this mine? 

The good citizens of Elko and vicinity are very happy to havE 

Barrick as a neighbor. This is a deposit that another major company took a pass on. It was Barrick that risked a billion dollars ir 

an unproven technology to recover gold from sulfide-bearing rod 

that was formerly worthless. In the process, Barrick has createc 

1,300 high-tech jobs of twice the average wage in Nevada, under• 

written construction of houses and apartments, contributed mil 

lions of dollars to schools and environmental projects, providec 

comprehensive health care coverage, and has even guaranteed college tuition costs to the children of its full-time employees! 

This sounds like the very programs that the President is at 

tempting to establish nationwide, yet Barrick is being held up a1 

an example of lost revenues to the Treasury because of delayec 

Mining Law reform. Can anyone truly blame them for seeking patent in the face of bills that would bar mining on unpatentec ground? 

I have invited President Clinton to come to Elko and visit witl: 

my constituents, as he did with Boeing workers in Seattle facin~ 

lay-offs. If and when he does-and my understanding is that thE 

White House scheduling people have called to decline my invitation-the President will hear it from us: "Mining, It Works for Nevada." Don't send our jobs to Latin America. It doesn't have to happen. It is not foreign competition driving a noncompetitive industi, 

out of business. 

Our domestic mining industry is the envy of the world. Our exploration people skillfully emplor the latest scientific gadgets and 

theories to find ore, and our engineers and miners extract it in thE 

most environmentally conscious manner possible and reclaim thE 

lands to higher standards than are required anywhere else, Yet, despite this record, there are many who would rather see minini! 

occur in less regulated places than our public lands. 

The old saw "the public isn't getting its share of the resource'· will be trotted out again today for sure. How does $130 million an-
112 

nually in Federal taxes for just the gold mining industry alone 

sound? 

Mr. Chairman, I am not going to take the time now to expound 

upon gross royalties; we have a distinguished witness to tell us 

those facts. But I must say, the President's proposal to take 12.5 

percent of one's production right off the top without respect to 

r

rofit margins is a formula to lose jobs for sure. I never thought 

would say this, but it makes this bill's 8 percent royalty look moderate! 

But, believe me, it is not moderate enough, and taken with the 

"Just Say No" provision of Title II of H.R. 322, a gross royalty of 

anything like that magnitude is a recipe for flight of capital to 

safer havens. 

Perhaps I sound too much like an apologist for the miners, but 

in large measure Nevada is where the action is todal. My aim is 

to keep those jobs and grow some more. However, having said that, 

I do recognize there are areas of mutual concern to the environmental community and industry. My understanding is, the mining industry, from small miners and prospectors through large international companies, have largely agreed on reforms that would provide a rental and net proceeds royalty stream to the Treasury, provide for reclamation standards and application of all environmental 

laws, require full permitting and bonding of all operators, and establish an abandoned mine land program to reclaim past abandoned hard-rock and placer mines on public lands similar to the 

fund for coal lands. 

Further, the proposal would bar new claims for certain low-valued commodities such as sand, gravel, pumice, and building stone. 

Lastly, patent would issue only upon payment of fair market value 

for the surface estate, and the U.S. Government would retain a net 

proceeds royalty interest in production in perpetuity. These are reforms I can and will support. They are fair, but not a confiscation 

of rights that would kill our domestic industry. What is lacking in that proposed bill, of course, is the absolute 

discretion granted to the government land manager in H.R. 322 to 

deny any and all permits. I recognize the need to enforce existing laws, but I still do not agree with the notion that someone's perception of ugliness is reason enough to deny mining. Unless and until 

we pass the Federal Viewshed Protection Act, we ought not to hand 

over this authority to our BLM and Forest Service managers. Congress has shown more than enough willingness to tackle withdrawals on its own; let's leave it that way. 

With that, Mr. Chairman, I would like to welcome all of our witnesses today, especial_!y Dr. John Dobra of the University of Nevada, Department of Economics and the Natural Resources Institute. John is our lecturer today on this "dismal science." I suggest 

we take notes. There may be a quiz at markup time. 

I would like also to welcome Mr. Russ Fields of the Nevada Department of Minerals speaking on behalf of our Governor Bob Miller, who is unable to be here with us today. Welcome, also to Secretary Babbitt, former geologist and Governor of the largest copperproducing State in the Nation. 

Thank you, Mr. Chairman. 

Mr. LEHMAN. Thank you. 
113 

At this time I will recognize the chairman of the full committee, 

Mr. Miller. 

STATEMENT OF HON. GEORGE MILLER 

Mr. MILLER. Thank you, Mr. Chairman. 

I have no opening statement. I Just want to commend Congressman Rahall for all the work on this legislation over the last several 

years and to the subcommittee members for all of the work that 

they have put in, and to you, Mr. Chairman, for bringing this bill 

right to the forefront, and to welcome the Secretary and other witnesses. 

Mr. LEHMAN. Thank you. 

Mr. Thomas. 

STATEMENT OF HON. CRAIG THOMAS 

Mr. THOMAS. Thank you, Mr. Chairman. 

I, first of all, need to discuss with you a little bit about "the coalproducing district in this Nation." Wyoming, I think you will find, 

1s the greatest producer. 

Mr. LEHMAN. You mean what Nick told me wasn't true? 

Mr. THOMAS. I can't imagine such a thing. [Laughter.] 

In any event, welcome, Mr. Secretary. 

I am pleased that we are having this hearing. We have been 

down this road before, of course, and we will hear many of the 

same thin'9, 

Let me Just depart a bit to remind you all that those of us from 

the West and the public land States will be looking at this in the 

context of several other things: grazing fee increases, timber sale 

cost increases, mineral royalty changes, reclamation water increases, wool program reduction's, Btu taxes, recreational fee increases. There is a whole series of things that all impact on public 

land States. Certainly people in Wyoming take a look at that whole 

package of things and how they are affected. 

In any event, the Mining Law has been talked about and needs 

to be talked about. There are some who will say it has been the 

thing that has brought about develoement in the West, and certainly it has. There are others who will say that it has been a disaster in some environmental aspects, and that too is probably 

somewhat true. So there is great merit on both sides of this, and 

there do need to be some changes. The notion that it is an antiquated law that has never been 

touched since 1872, of course, simply isn't the case. Nevertheless, 

we do need to look at it. 

I hope we can look at it in terms of what our goals are, what is 

it we want to have had accomplished once having made changes. 

The goal of some, of course, is to keep feople off public lands with 

commodity uses; I suppose that is a goa for someone. Certainly the 

major goal will be to best use these public resources in a way that 

is environmentally sound. 

Too often, I am afraid, Government decisions, congressional decisions, rest on more immediate concerns rather than accomplishing 

an overall goal, which most of us would agree to in the broad sense. 

So I hope that that purpose is before us, and Mr. Secretary, I ap- preciate your being here, along with the other witnesses, and I 
114 

hope that all of us can try to come together to come up with something that is good for the States, good for the people who live there, 

and good for the land and the country. 

Thank you, Mr. Chairman. . Mr. LEHMAN. Thank you. 

Mr. Rahall. 

STATEMENT OF HON. NICK J. RAHALL, U 

Mr. RAHALL. Thank you, Mr. Chairman . . I first want to thank you for the kind words in your opening 

statement as well as thank our full committee chairman, Mr. Miller, for his kind words, and commend you for proceeding so quickly 

in having these hearings on Mining Law reform. And, yes, I even 

want to thank the gentlelady from Nevada for her kind words as 

well because I have enjoyed working with her over the years and 

it has been years and years-that we have done extensive work on 

this issue. 

I also want to welcome Secretary Babbitt once again to this 

forum, or at least for the first time to this subcommittee, and tell 

him how refreshing it is in these days in Washington to feel a fresh 

wind blowing across the Mining Law reform landscape. 

We have heard from this administration a clear statement of 

support for comprehensive Mining Law reform. We, who have labored so long in the trenches, are finding ourselves rubbing our 

eyes, Mr. Secretary; in astonishment, we are rubbing our eyes. We 

almost cannot believe our ears because for so long we have been 

subjected to the utterings of luminaries of the nature of Watt and 

Hodel, and I guess we could go on and list several others. 

But the wind brings a message of hope, brings a message of compassion, for those who live in communities that are suffering from 

the past ravages of hard-rock mining whose landscapes are 

maimed, whose streams run shades of red and orange. Blown along by this wind is a message to the American people that we, who 

serve as the stewards of the land in which they hold title, will not 

condone its abuse, nor will we fail to ensure that they are given 

a fair return for its use. That is what this debate is about. 

As you listen closely, I am sure, Mr. Secretary, you will hear carried along by this wind a recognition by a progressive element of 

the mining industry that the time for comprehensive Mining Law 

reform has finally come. There are now those who will dare to 

speak out, and many others who would if it were not for fear of 

retaliation or other actions from others in the industry. 

But I believe that now they realize, those in the industry, that 

they can benefit from bringing this law up to date with modem 

business practices. So this year I would expect the wind to gust, 

even to gale force. 

In 1987, we first started planting the seeds of this the most current round of the Mining Law reform movement. I recall very well 

the efforts made by our former chairman of the full committee, Mo 

Udall, when I first came to the Congress in 1976. I even discussed 

this effort with him on the anniversary of the Surface Mining Law. 

So we have nurtured those seeds. We have nurtured them very carefully, very patiently, with investigations, hearings, legislative 

proposals, field hearings out in the States. Those seeds have 
115 

sprouted. It is now time for the harvest. We have heard from the 

people, and the people demand change, a change in the way that 

we do business in this country. That includes the way that we 

manage the American landscape and that we undertake our fiduciary responsibilities t.o them. 

So I look forward t.o hearing from today's witnesses-as I have 

done with over 222 witnesses-who have testified on Mininf Law 

reform legislation during the last Congress. Mr. Chairman, commend you for moving so quickly in this session and having this 

hearing today. 

Thank you very much. 

Mr. LEHMAN. Thank you, Mr. Rahall. 

Mr. Allard. 

STATEMENT OF HON. WAYNE ALLARD 

Mr. ALLARD. Thank you very much, Mr. Chairman. 

I would like to associate myself with the comments of both Congresswoman Vucanovich and Con~essman Thomas and just add 

my little footnote. I believe that m a lot of these issues we can 

reach a balance with economic · reasonableness and environmental 

goals. I think it takes a common-sense approach, and that is what 

we need to work on bringing forth in these deliberations. 

I look forward to continuing to work on this particular issue. The 

State that I am from is a State that has a rich heritage in mining, 

and it has been an important part of our economy. You know, I see 

somewhat of a contradiction when we say, "Oh, we are going to do 

everything we can t.o encourage rural economic development," and 

then we tum around and smack them right across the cheek, you 

know. 

So I think we need t.o encourage individual initiative and individual savings and individual productivity, and I think sometimes we 

forget that we can reach a balance between economic reasonableness and environmental concerns. 

Thank you, Mr. Chairman. 

Mr. LEHMAN. Thank you. Mr. DeFazio. 

STATEMENT OF HON. PETER DeFAZIO 

Mr. DEFAZIO. Mr. Secretary, it is great to have you before us 

today. 

Some would have us believe that the question is, "To mine or not 

to mine," and that is not the question. The question is, Where can 

we mine in an environmentally responsible manner, and how can 

we better protect environmental values while we extract minerals 

that are economic to extract, and how can we get a fair return for 

the U.S. taxpayer. I don't need to lecture you on that, Mr. Secretary; you are well aware of those issues. 

Let me just relate one quick anecdote because I have another 

hearing I may have t.o go to on fisheries in my other subcommittee. 

I had some mining folks in recently, and I was discussing the issue 

of royalties with them. As the Secretary knows, it was my amendment that was adopted in subcommittee which inserted royalties 

into the bill in the last Congress. 
116 

In the discussion of royalties, they said to me, "Well, that mi~ht 

make some of these-particularly these • heat leach mining activities-uneconomic because we have to extract tons, or tens of tons, 

of minerals and displace huge volumes of land in order to get an 

ounce of gold, and if you were to begin to assess royalties against 

those activities it might be uneconomic." And I said to them, "Well, 

you know, I've never had the timber industry come in to me and 

say, 'Congressman, selling .us the timber at a competitively bid 

pnce makes a lot of sales uneconomic; now if you would only give 

us that timber, it would be economic to harvest timber everywhere.'" 

The point is, economics are part of the consideration here. If you 

have to move extraordinary volumes of lands and not restore that 

land and the activity is only economic because of that and there is 

no return to the U.S. taxpayer, particularly in the case of foreignowned corporations. Those dodge not only royalties in this country 

because we don't assess them, but they don't pay any taxes to this 

country for the most part because of the loopholes and the transfer 

of their profits to other nations; there is no fair return. 

I think assessing a fair royalty and other fees for environmental 

restoration would make some reasonable market decisions about 

where we should be mining and where we shouldn't be mining in 

addition to doing other assessments under your leadership in the 

Department of the Interior and elsewhere in the administration on 

where and how we should best conduct mining activities in the future. 

I look forward to your comments, Mr. Secretary. Thank you for 

your patience. 

Thank you, Mr. Chairman. 

Mr. LEHMAN. Thank you. And now Mr. Young has had his coffee, 

and we are ready to hear from him. 

STATEMENT OF HON. DON YOUNG 

Mr. YOUNG. Thank you, Mr. Chairman. 

You know, I am the longest serving member on this committee, 

and I could have rehearsed every one of these speeches, so it is always interesting to hear what is being said that is new. 

Mr. Chairman, I just welcome the Secretary. I get a big kick out 

of m~ friend from West Virginia talking about a new breeze blowing. That is about the same breeze I used to have when I plowed 

the field with my mules. There isn't much difference. It's a lot of 

you-know-what. Mr. Chairman, let's not kid ourselves. This is between not to mine and to mine, to employ people and not to employ 

people. 

I look out in this audience-I know most everybody out in this 

audience-and we hear these great horror stories about the mining 

industry and how it has been terrible to the public lands. There is 

a statement in the Post today, "BLM stripped of .authority over 

mining land sales." I don't know if many of you know, but since 

1872 there have only been 3 million acres out of .2.1 billion acres 

that have ever been transferred to private ownership, less than the 

size of Connecticut. 

We hear these horror stories about Watt and about Hodel and 

the rest of these, I think, honorable gentlemen, about how they 
117 

have raped the land. In the last 12 years there have been only 

120,000 acres transferred. This is all a charade. 

I look to the Secretary, and you know, I look at his appointees 

and appointees of this President, and I am not overly optimistic. 

I don't think there is an objective individual in the whole group 

that really looks upon this ability to have us use our natural resources, to mine the minerals we are importing today, to employ 

Americans. 

We all know that Mexico has changed its system completely to 

try to encourage-in fact, has worked dramatically to bring the 

mining industry to the nation of Mexico. 

Now those in the audience who don't want mining, you are probably going to win this bill, and you are going to come back later 

on, next year probably, and you will say, "Gee, look at how successful we are; we don't have anybody working; there's no minerals 

being developed in this country." 

Mr. Secretary, you know, I went through the luxury tax. Everybody on that side voted for the luxury tax. We were going to raise 

a lot of money by getting those guys to buy their Mercedes and the 

boats. We never raised a nickel; we lost $36 million in income, and 

we put 7,000 people out of work and broke an industry. People 

don't have to buy boats, people don't have to buy a Mercedes, and 

people don't have to mine. They can leave this country, and they 

are going to do it by the droves. 

You have the reins now; you are in the saddle; you bet. If you 

can go through your program to employ Americans without using 

our natural resources, more power to you; you can borrow more 

money to do it. The basis of our economy in this Nation has been 

on natural resources: timber-yes, a renewable resource; miningyes, nonrenewable; oil and gas; hydro-power; agriculture. I have 

seen nothing on that side of the aisle that convinces me that they 

have ever, ever supported the real jobs that the Nation must have. 

I think it is a sad day. 

I hope you have a better approach, Mr. Secretary. I hear what 

is coming out of this committee, and I hear from some of your appointees. I really believe it is slanted totally one-sided, to the side 

that is not American, not for the working man, but for that one 

special group, the so-called environmental community. 

I want to be the first one to say it has to be done safe by and 

it has to be done right, but it has to be done, and this bill penal- izes, stops, exports American jobs. 

Thank you, Mr. Chairman. 

Mr. LEHMAN. Thank you. 

The gentleman from Idaho. 

STATEMENT OF HON. LARRY LaROCCO 

Mr. LARocco. Thank you, Mr. Chairman. I appreciate this opportunity to address very briefly the issue of Mining Law reform. 

AB you well know, there has been entirely too much rhetoric and 

too little factual information on this issue. Therefore, I am pleased 

to have Secretary Babbitt here today. For the first time in 12 

years, in my opinion, this country has a Secretary of the Interior 

who is willing to roll up his sleeves and get down to work with 
118 

Congress to resolve complex natural resource issues. The Secretary 

has set the tone, which is welcome and refreshing. 

Mr. Secretary, you will find many of us in Congress who are also 

willing to go to work. The end of divided government has brought 

an end to gridlock and an end to the "Hell, no" approach to prob- lem solving. 

Is mining reform necessary? Common sense tells us that after 

120 years it is. There are past abuses that need to be corrected and 

future abuses that need to be prevented. The question before all of 

us is how far do we go to accomplish this much needed reform 

without destroying the mining industry in this country, and I'm 

committed to striking a reasonable balance. I'm committed to a 

workable solution, because I have seen firsthand what happens 

when a mining-dependent community is hit with massive layoffs. 

The Silver Valley of Shoshone County, Idaho, had more than 

8,000 well-paying mining jobs in the early 1980s and fewer than 

500 today, and that number continues to shrink. Today Shoshone 

County has a 22 percent unemployment rate. 

Even with the mine closures, the mining industry in Idaho still 

employs about 5,000 people. The average salary is approximately $30,000 per year for a total $150,000,000 in annual wages in my 

State. The total value of mined froducts in Idaho, including processing is about three-quarters o a billion dollars a year. It is an 

industry worth saving, an industry vital to the security of the United States. 

Much of the remaining mining in my State is conducted with environmentally sound practices. For example, the Coeur d'Alene 

Mines recently won the Du Pont-Conoco Environmental Leadership 

Award for its Thunder Mountain Project, which is surrounded by the Frank Church River Of No Return Wilderness. This is the type of stewardship of the land which needs to be recognized, and it was 

done without reform. 

Mr. Secretary, I appreciate your willingness to set aside the rhetoric and move ahead with common-sense solutions, and I look forward to hearing from you and working with you to bring about true 

Mining Law reform. 

Mr. Chairman, I commend you for calling this hearing so early in the 103d Congress. This committee, our committee, is the proper 

forum to discuss the impact reforms would have on the mineral extraction industry, whether they are small or large miners. We 

should move ahead, to be sure, but we should move deliberately 

and thoughtfully. We have the responsibility to separate fact from 

fiction, myth from reality, before we move a bill to the full committee, and today is the beginning of that process. 

Thank you, Mr. Chairman. 

Mr. LEHMAN. Thank you. Yesterday afternoon, Ms. English called me and expressed her 

keen interest in this legislation and some concerns, and I suggested 

that she join the subcommittee this morning since she is a member 

of the full committee. 

We are happy to have you here, and I would recognize you at 

this time for a statement. 

Ms. ENGLISH. I don't have a statement, but I do thank you for 

the opportunity to sit in and listen and participate. 
119 

Mr. LEHMAN. Thank you. 

At this time, we will begin with our distinguished witness. 

Mr. Secretary, again, we are all very :pleased to have you here. 

It underscores the importance of this le~slation and the prospects 

for its passage. Without objection, we will put the full text of your 

statement in the record and recognize you, and at the conclusion 

of your statement I will recognize every member of the subcommittee for five minutes since we know your time is crushed this morning. 

So, with that, welcome, Mr. Secretary, and you are recognized. 

STATEMENT OF HON. BRUCE BABBITT, SECRETARY, 

DEPARTMENT OF THE INTERIOR 

Secretary BABBITI'. Mr. Chairman, committee members, it is a 

great pleasure to be back before this subcommittee. 

I must say that as I entered this committee room this morning 

I sensed that this is indeed an historic moment, that with this 

hearing today we begin a progression toward an inevitable conclusion in this calendar year which will be comprehensive Mining Law 

reform. This surely is-this year, 1993-the year of decision, 127 

years after enactment of the original Mining Law commencing in 

1866. 

By way of introduction, I would like to depart just for a moment 

from my text and say to all of you that these are very familiar issues to me. During my 3 years as attorney general and 9 years as 

governor of Arizona, we debated all of these issues endlessly-reclamation, land use planning, whether or not fees should be based 

on net receipts, upon gross receipts, whether we should have severance taxes, and what the impact would be, if any, on incentives to 

mine, levels of employments-and these issues have, for some reason, held a magnetic attraction to me, partially because of my background in education and certainly because of the State that I came 

to govern. 

In the course of that, I developed a love/hate relationship with 

this industry. It was never distant, it was always up close, and I 

found myself in alternate months and years advocating right up 

front for the industry and then in the next year in a knock-down, 

drag-out quarrel over some particular feature. 

I can tell you, out of that experience, as sustained and intense 

as it was, I have relentlessly and always been an advocate of the 

importance of the role of hard-rock mining in the American West 

and in the American economy, the economy of my State, of Nevada, 

and all of the other public land States. 

Now it is against that background that I come here I think mellowed by all of those wars, and I believe as a hopefully informed 

and dispassionate advocate and Secretary of the Interior. I come 

here in a spirit of workmanlike attention to this bill. We have got 

to get it passed this year. 

I understand that there are many unresolved questions. I understand the concerns of the mining industry with economics. I understand there are many issues raised in the extensive provision of 

Title II. I have already been in a sustained discussion with the 

American Mining Congress, Phelps Dodge, and others. I intend to 

continue that process. 
120 

I offer the resources of the Department to all. _parties as a purveyor of facts and objective analysis, and I will do my best to 

achieve two simple goals: one, comprehensive mining reform in the 

calendar year 1993; and, second, a bill which strikes a solid and 

thoughtful balance between all of the various concerns in which the 

American mining industry can look to the public lands for a pro- ductive mineral extraction process. 

I am certain that the bill will pass this year really for two reasons. One, even in the West the majority of our constituents are 

ready for that reform. I think out West there is an increasing ap- preciation of an historic process that now culminates. We have 

been through these issues, and if you go back and read the debates 

you will find that this very debate is played out again and again 

and again over the last 100 years. We did it in the early twentieth 

century with timber and, as has already been mentioned, arrived 

at market pricing concepts which have not driven the timber industry off American shores. It was done in the 1920s with oil and gas and hydrocarbon resources in the form of a mineral leasing and 

royalty provision which has worked very, very well across the 

years. 

We even faced up to the issue of grazing, the Taylor Grazing Act, 

in 1934. That controversy continues, but the underlying principle has been quite soundly established, and now, in this historic year, 

we at last reach the hard-rock mineral industry. The other force that I would like to refer to is the President's economic plan. The President has, in my judgment, quite forcefully 

and courageously gone to the American people and said we have 

to address the economic issues that have been delayed far too long and presented a comprehensive series of proposals; an -important 

part of which is an appeal to every American to recognize the common good · and to be prepared, in a variety of ways, to make some 

sacrifice, some economic sacrifice, for the common good. Against that background it is simply inconceivable that this administration 

can say to the American people, "Well, that applies to everybody 

except the mining industry," and it is for those reasons that I come 

here eager to participate in this process. I would like to read several sections of my statement very briefly just to outline some of the issues. The President's economic plan 

presented on February 17 included a proposal for a permanent hard-rock mining holding fee, which would be enacted in lieu of annual assessment work, and a hard-rock mining royalty program on 

minerals taken from fUblic lands. These proposals are included as 

part of the Presidents fiscal year 1994 budget, and it is for that 

larger reason as well that I urge your careful support for his initiatives as a way to show the American people that this administration and Congress understand the comprehensive and interrelated 

nature of those proposals. 

Mr. Chairman, I know that you and Mr. Rahall and your staffs 

have worked long and hard across many years to bring this mining 

reform to its present state. I salute you for that effort. I am, in particular, pleased to see that H.R. 322 addresses comprehensively all 

of the major issues in the existing Mining Law, which include, for 

example, the lack of fair return to the taxpayer in developing the 

public's resources, the lack of environmental protection standards 
121 

which have created problems that we are all increasingly aware of, 

the archaic provisions that provoke disabling litigation, hinder legitimate exploration, and thwart responsible mineral development, and the fact that mining claims are too cheap and too easy to hold, 

which creates many well known opportunities and examples of peo- ple tying up Federal land for purposes that have nothing to do with 

mining and, in fact, interfere seriously with other legitimate uses 

of the public lands as well as the patenting provision that allows 

the unnecessary conveyance out of public ownership of mineral 

lands. 

We support the process that has resulted in H.R. 322, and we 

support the broad thrust, if not all the details, of this bill. Most important, as I have stressed, we believe that Congress should, this 

year, enact comprehensive legislation. We want to be supportive. 

I have instructed my staff, including the professionals who will 

be charged with implementation of many of the features of this leg- islation, to work with you, with other affected agencies, with all of 

the parties, to suggest ways in which the bill might be improved 

as it makes its way through the process. At the same time, we are 

aware that you have worked on this proposal for several years. Reform is long overdue, and it is time to_ set on with that process. Let me explain briefly several specific provisions that raise ques- tions. I come not with specific language or answers-I will certainly be prepared to produce that-but now, just several thoughts. Throughout the bill I think there is a potential problem with the 

statutory bifurcation of responsibilities within my Department. As 

I read through the bill, my mind's eye crosses "Office of Surface 

Mining regulatory functions, Bureau of Land Management regu- latory functions, and general responsibilities cast upon the Secretary." I would like to work with you to clarify how the regulatory 

system is goinf to work and to make certain that the assignment of responsibilities is not so rigid that I wind up with more jurisdictional warfare in my own Department. I would urge you to revisit the timetables in the bill to make certain that we are on a track of regulatory development that we can 

actually meet. I think some of the deadlines in the existing draft 

are not realistic. 

Let me also note the importance in providing a fair return to the 

Federal Treasury of the considerable experience that the western 

States, including Arizona and Nevada, already have in setting and 

collecting rentals and royalties from hard-rock mines. I don't think 

there are any exact patterns, but I think there are some useful 

precedents. 

I am also interested in exploring whether or not small-scale operators can be treated somewhat differently on the issue of royalty, and again, I understand that that is an issue which has been addressed and can be seen in the legislation, at least in several western States. 

H.R. 322 has PAYGO implications. Now our preliminary PAYGO 

estimates will be provided to the Congress in the very near future 

because, obviously, my Department is charged with both a revenue 

and an outgo budget, and the assumptions that the Office of Management and Budfet has put into the budget are of enormous sig- nificance not only m the overall budget but to my Department. 
122 

Finally, let me bring to your attention an important matter that 

has recently come before us that has been referred to by Representative Vucanovich and othen. This example illustrates in the most 

vivid terms why Mining Law reform is so urgently needed. 

Let me say at the outset that the American Barrick Company, 

a wholly-owned subsidiary of a Canadian corporation, is viewed in 

Nevada as an efficient, responsible exeIIlplar of the mining industry, and I don't raise this example, Mrs. Vucanovich, to impugn the 

company or its management. I share your view that they have done 

a very adequate job in the Elko area, and incidentally, whether or 

not you can lure the President to Elko, were you to see fit to go 

so far down in the bureaucracy as to invite a mere Secretary of the 

Interior to Elko, Nevada, I would gladly accept. 

Now, here is the issue. American Barrick last year applied for 

patents which lead to the conveyance of fee simple title to about 

1,800 acres of land on this Carlin Trend in northern Nevada. The 

BLM estimates that this Federal land, which is the subject of the 

patent application, is near and around the second largest gold minmg site in the United States-this application is for land which 

contains 30 million ounces of gold. 

Now, at a market price of $320 an ounce, that gold has a gross 

value of $10 billion. Yet if American Barrick's application is 

deemed to meet the standards of current law, and I am obligated 

then to give that property in the form of a patent to American 

Barrick, they will receive $10 billion worth of gold for a payment 

of $5 an acre, which is less than $10,000; that's it, a one-time payment of less than $10,000 for $10 billion worth of mineral resource 

currently owned by the American public. 

Now I bring that to your attention because I think it is a vivid 

illustration of what is at stake here. If this land is patented, its 

mineral becomes wholly private. Under current law it is then beyond the reach of any rental or royalty payment to the Federal 

Treasury. If the land remained in Federal ownership, a Federal 

roialty could, over the mine's lifetime, produce several hundred 

million dollars for the Federal Treasury. 

For some time Congress has deliberated about repealing the Mining Law's overly generous offer of public resources. This application 

and several others now pending show what is at stake. It seems 

to me that Congress might consider enacting promptly in advance 

of full-scale reform of the Mining Law a provision that prevents the 

loss of this revenue potential. 

This Congress could consider, for example, whether or not any 

patent henceforth issued under the existing Mining Law should reserve a royalty interest in the United States in any production that 

occurs. Another approach which you might consider, which would 

not require emergency action, would be a severance tax on production from any mineral deposit that has been patented out of Federal ownership in recent years. Those are alternatives which I share for your consideration. I 

would be pleased to work with this committee and the Congress in 

any event to see that the general public is treated fairly when its 

resources are disposed of through this patenting process. 

In the meantime, with regard to American Barrick's application, 

obviously a decision which is of extraordinary fiscal consequences 
123 

must be carefully made. The particular applications were filed only last March and April. Now, patent applications normally take, on 

an average, about three years to process. Given this relatively swift 

processing, perhaps you can understand, I believe that it is my obligation to review that process with the greatest care in order to 

make certain that it is appropriate to issue those patents. If, in 

fact, the process is correct, the i's have been dotted and the t's have 

been crossed, I understand, as I have told some of the committee 

members previously, that it is my duty, under existing law, absent 

direction from this Congress, to let that $10 billion worth of resources go for about $9,000. 

In conclusion, we stand ready to work with you and your staffs 

on H.R. 322 and on the related legislation. This is a year of decision, and I stand ready to work with you. 

Thank you. [Prepared statement of Secretary Babbitt follows:] 
124 

STATEMENT OF BRUCE BABBITT, SECRETARY OF THE INTERIOR, BEFORE THE 

SUBCOMMITTEE OH BHBRGY llD MIIITERAL RESOURCES, COMMITTEE OH NATURAL 

RESOURCES, UNITED STATES HOUSE OF REPRESENTATIVES, OH H.R. 322, A 

BILL TO MODIFY THE REQUIREMBJITS APPLICABLE TO LOCATABLE MINERALS OH 

PUBLIC DOMAIN LllDS, CONSISTENT WITH THE PRINCIPLES OF SELFINITIATION OF MINING CLAIMS, llD FOR OTHER PURPOSES. 

One hundred twenty seven years ago, congress enacted the first 

law to govern mining on federal lands in the West. The basic 

principles and framework.of that 1866 law, as refined in 1870 and 

1872, have remained largely intact, and still govern hard rock 

mining on several hundred million acres of federal land. 

It has been apparent for some time that this law no longer serves 

the public interest. In 1969, Stewart Udall called its reform 

the most important piece of unfinished business on the public 

lands agenda. As I have said a number of times in recent weeks, 

now is the time to move forward with comprehensive reform. For 

that reason, I appreciate the opportunity to appear here today. 

In the President's February 17 Economic Plan, "A Vision of Change 

for America" the President included a proposal for a permanent 

hard rock mining holding fee in lieu of annual assessment work, 

and a new hard rock mining royalty program on minerals removed 

from Federal lands. These proposals will be included as part of 

the President's Fiscal Year 1994 Budget. I urge your careful 

consideration and support for these initiatives as a way to show 

the American people that this administration and this congress 

are fully committed to purposeful reforms. 
125 

Mr. Chairman, I know you and Mr. Rahall and your staffs have 

worked hard and brought Mining Law reform a long way in the past 

few years, and I salute you for it. In particular, I am pleased 

to see that H.R. 322 addresses all of the major defects in the 

existing mining law: 

--the lack of fair return to the taxpayer in developing the 

public's minerals; 

2 

--the lack of environmental protection standards, which has 

created serious problems that are difficult and expensive to 

resolve; 

--archaic provisions that provoke disabling litigation, 

hinder legitimate exploration, and thwart responsible 

mineral development; 

--the fact that mining claims are too easy to locate and 

cheap to hold, which creates many opportunities for persons 

to tie up federal land for purposes that have nothing to do 

with mining, yet seriously interfere with other legitimate 

uses of the public lands; and 

--the patenting provision that allows the unnecessary 

privatization of federal lands and other resources. 
126 

We support the process that has resulted in H.R. 322, and we 

support the broad thrust, if not all the details, of this bill. 

Most important, we believe the Congress should, this year, enact 

comprehensive refora. Unlike the Reagan-Bush Administration, 

which opposed • eaningful reform, we want to be supportive and 

constructive players in this process. I have instructed my 

staff, including the professionals who will be key to proper 

implementation of any reform legislation, to work with your 

3 

staff and with other affected agencies to suggest ways in which 

the bill before you might be improved, to make its implementation 

easier and more efficient, without compromising on its 

fundamental objectives. 

At the same time, we are keenly aware that you have worked on 

this proposal for several years. Reform is long overdue. We 

will work to provide the Committee with further suggestions for 

refinement of H.R. 322. We will do this as soon as possible to 

avoid any delay in your consideration of the bill. 

Within that context, let me briefly mention some of the specific 

provisions in H.R. 322 that we believe may cause problems in 

administration. 
0 

127 

This bill, as drafted, assumes that there is a sound 

technical base for meeting the active mining and 

reclamation requirements of the legislation. This may 

not be the case. We may have some suggestions for 

providing the necessary sound science to ensure 

environmental protection. 

o Another problem is the bifurcation and duplication of 

responsibilities within the Department. An example is 

that the Bureau of Land Management, and the Office of 

Surface Mining Reclamation and Enforcement would be 

responsible for enforcement and inspection activities. 

No one agency would be solely responsible and 

accountable for the implementation of each 

responsibility. 

4 

o Some of the timetables in the bill should be reexamined 

to assure that they are realistic or that deadlines 

will not have passed by the time the bill is enacted. 

For example, completing well thought out rulemaking in 

a year, as would be required by H.R. 322, would be 

extremely difficult. 

Frankly, what we want and would hope to achieve in a reform bill, 

besides comprehensiveness and a fair return to the taxpayers, is 
128 

efficiency with a •ini•um of confusion and under a process that 

is as simple, predictable and cost efficient as possible. 

Let me also note the importance, in providing a fair return to 

the Federal Treasury, of the considerable experience of western 

states in setting and collecting rentals and royalties from hard 

It aight be useful to examine that experience for 

5 

rock mines. 

guidance. I am also particularly interested in exploring whether 

small-scale operators can be treated somewhat differently on 

royalties, which I understand is the practice in some States. 

H.R. 322 has PAY-GO implications. our preliminary PAYGO 

estimates will be provided to the Congress as soon as 

practicable. 

Finally, let me bring to your attention an important matter 

that has recently come before me . This example illustrates 

in the most vivid terms why Mining Law reform is so urgently 

needed. American Barrick Goldstrike last year applied for 

patents (fee simple title) to a few thousand acres of Federal 

land in Nevada under the Mining Law. The BLM says that the 

company may qualify for patents to about 1,800 acres. 

The BLM estimates that this federal land, already the site of 

the second largest gold mine in the United states, contains about 

30 million ounces of gold. At a market price of $320 per ounce, 
129 

6 

30 million ounces of gold. At a market price of $320 per ounce, 

that gold has a gross value in place of ten billion dollars. Yet 

if American Barrick'a application is deemed to meet the standards 

of current law, I am obligated to give it this property for about 

ten thousand dollars (at $5.00 per acre). And that's it - a onetime payment. To say that is not good public policy is putting 

it mildly. It is ludicrous. 

If this land is patented, it and its minerals become wholly 

private. Under current law, it is then beyond the reach of any 

rental or royalty payment to the Federal Treasury. If the 

land remained in Federal ownership, a Federal royalty of 

12 1/2 percent as proposed by the Administration, or of 8 percent 

as endorsed by this Committee last year, could, over the mine's 

lifetime, produce up to $1.25 billion or $800 million, 

respectively, for the Federal Treasury. 

For some time Congress has deliberated about repealing the Mining 

Law's overly generous offer of public resources. Barrick's 

application (along with several dozen others now pending) shows 

in dramatic fashion the revenue potential being lost under 

current law. It seems to me that the Congress ought to consider 

enacting, promptly and in advance of full-scale reform of the 

Mining Law, a provision that prevents the loss of this revenue 
130 

7 

potential. Congress could require, for example, that any patent 

henceforth issued under the Mining Law reserve a royalty interest 

in the United States in any production that occurs. 

Another approach worth considering, which would not require 

emergency action, is a severance tax on production from any 

mineral deposit that has been patented out of Federal ownership 

in recent years. 

I would be pleased to work with the Committee and the Congress to 

see that the general public is treated fairly when its resources 

are disposed of into the private sector. 

In the meantime, with regard to the American Barrick 

applications, obviously a decision with such large fiscal 

consequences must be carefully made. These particular patent 

applications were filed only last March and April. I understand 

that patent applications normally take, on average, some three 

years to process. Given this relatively swift processing, I 

intend to review any proposed patents to American Barrick to be 

certain that all the ni•sn have been dotted and the "t's" 

crossed, before I hand over $10 billion in public property for a 

pittance. 
131 

We stand ready to work with you and your staffs on H.R. 322 and 

related legislation aimed at reducing revenue loss from 

patenting. 

This concludes my prepared statement. I will be pleased to 

answer questions. 

8 
132 

Mr. LEHMAN. Thank you, Mr. Secretary. We appreciatelour testimony and especially your offer of your cooperation an the cooperation of your staff here as we move forward, and we certainl1 

will attempt to work on the areas that you have identified-the bifurcation of powers within your Department and also possibly coming up with some differential component here for small-scale operators versus large operators in terms of how the royalties are assessed. 

Obviously, the word is out that you have revoked the BLM authority here to issue patents, and, based on what I know, I am very 

pleased that you took that action. I think it was a wise and prudent thing to do given the facts at your disposal as you have just 

outlined them. 

I was wondering-we single out American Barrick here-do you 

have any idea how many other patents are currently pending before the Department and possibly how many acres are involved in 

those? 

Secretary BABBIT!'. Mr. Chairman, my staff informs me that the 

count is about 450 applications and that we are looking, I think, 

at something over 100,000 acres of land. About 150,000 acres potentially are patentable. 

Mr. LEHMAN. And was American Barrick singled out here as opposed to other applications that have been pending, some for as 

long as 4 or 5 years? 

Secretary BABBIT!'. Well, that obviously is the issue. Now the position of American Barrick-which I cannot tell you at this time to 

be incorrect-is that under the procedures then in effect at the Bureau of Land Management that that company, recognizing the 

stakes, simply did an extraordinarily good job of preconferencing, of preparing applications, of marshaling the information, of using 

a BLM procedure then in existence to contract out to the private 

sector some of the studies of mineral potential which are required 

before a patent is approved up, and that that accounts for the acceleration. If that is, in fact, the case, I believe that it will be my 

obligation to issue the patent. Obviously, in light of the allegations that somehow the short 

time period is a reflection of some kind of impropriety, I will pursue it very carefully, and I will follow the law. 

Mr. LEHMAN. As I understand it, the BLM set up a fast-track 

process recently to speed up the granting of these patents, and that 

is what the American Barrick proposal is coming under here. I 

would just like to know a little more about that. Was it in the best 

interest of the public for them to set up that process? I mean, what 

were the motives here? 

Secretary BABBIT!'. Mr. Chairman, obviously the speeding up of 

the patenting process was an experimental l;lrogram put in place 

some time prior to the events were are talking about in the last 

several years. I suppose that, to answer your question, it really relates back to 

a philosophical question, and that is the role of the Bureau of Land 

Management: Are we facilitating, that is, establishing, a fast conveyor belt to get lands into patented private ownership, or should 

you look at a regulatory process which is very deliberate, particularly considering that the economic consequences of getting the pat-
133 

ents as it affects the mining process are nil. I mean you can get 

the mine going and mine to your heart's content without a patent. 

So, you know, it may be that there is simply an issue of regulatory philosophy. I think I can tell you where I come out; that is, 

that we ought to look at these matters carefully. 

Mr. LEHMAN. I think the obvious concern people sittinJ up here 

have is that we see this all of a sudden taking place at a time when 

it is generally acknowledged out there in the world that we are 

going · to have Mining Law reform, and lo and behold, there is a 

fast-track process to put all these patents through . prior to our 

being able to act on 1t. Justified or not, it is hard to resist the 

temptation to think that is the case. 

Do you intend to halt the pilot project? 

Secret~ BABBITT. Mr. Chairman, what I have done is revoke 

the administrative authority in the Bureau to si~ off patents. Now 

that is not meant to be a statement of policy, 1t is a reflection of 

the fact that my nominees for the director of the Bureau of Land 

Management, have not yet been confirmed. They have both been 

submitted but not confirmed, and it seems to me that across that 

gap it is quite important for me to look carefully. 

Now, should I change the experimental fast-track process? I will 

look carefully at that. My guess is, it doesn't have any (ractical 

consequences at this point if we assume that a mining bil will become effective by year end, but I understand the thrust of your 

question and will certainly look at it. 

Mr. LEHMAN. Thank you. 

Finally, the President has proposed a 12.5 percent royalty. I 

think this bill has an 8 percent figure in it; and also the President 

is recommending extension of the $100 holding fee. I would like 

you to comment on that. How do you see that interfacing with the 

legislation before us? 

Secretary BABBITT. Mr. Chairman, committee members, it seems 

to me that in a way it kind of brackets the economic discussion. 

We now have a range of possibilities. I'm sure that the industry will weigh in, and at some point is suspect that it is very likely. 

If the past is any indication, they will relatively quickly abandon 

the notion of a patent for the value of the surface land as a measure of any economic significance and that they will move into the 

range of discussion. 

What is the appropriate fee? I think I can say the Department 

is willing to listen to the economic testimony. I am mindful of the 

fact that the President's budget from 0MB makes some important 

revenue assumptions with respect to the mining industry and that 

I can't depart from those revenue assumptions without hearing 

some alternatives. Otherwise, the whole thing starts to unravel. 

Mr. LEHMAN. Thank you very much. 

Mrs. Vucanovich. 

Mrs. VUCAN0VICH. Thank you, Mr. Chairman. 

Mr. Secretary, less than a month ago you said to me in this very hearing room, "Congresswoman, I'm not as scary as you might 

have been led to believe," and I want to believe you, but the actions 

of the last few days have been very unsettling to me. 

On March 2, you issued a Secretarial Order that revoked the delegation of authority of the Bureau of Land Management to issue 
134 

mineral patents, and that is what you have been talking about 

with our chairman. Mr. Secretary, the Department and this committee both have consistently taken the position that upon the issuance of a first-half fmal certificate a claimant acquires equitable 

title to a mining claim subject only to confirmation by the Department of the existence of a discovery of valuable minerals, and the 

sponsor of this bill, Congressman Rahall, has stated, "Based on established precedent, the issue of the first half of the patent certificate indicates that all requirements for a patent have been fully 

complied with, including the payment of the purchasing price and 

property rights," with the only proviso being that the claim is 

valid-that is, that there is, in fact, a discovery of valuable mineral 

deposit. His views have been confirmed by the Federal courts in 

the recent Marathon Oil v. Lujan litigation. 

H.R. 322, as well as the Bumpers bill in the Senate, both acknowledge these vested rights of claimants that hold first-half certificates and have completed all steps necessary to qualify for the 

issuance of a patent by January 5, 1993. The patent prohibitions 

of the bills would not apply to such claims. May we assume that 

you will comply with the law and expeditiously proceed with the 

processing of applications and issuance of patents where the claimants has obtained first-half certificates and otherwise met the requirements of the law? 

Secretary BABBITT. Mrs. Vucanovich, the answer is, yes, I will. 

I recognize those legal responsibilities, and as I have previously indicated to you and to the Senate Natural Resources Committee, I 

believe it is my responsibility under existing law to process the second half of patent applications to completion without either accelerating them out the window or simply leaving them in my desk 

drawer. I again affirm to you that that is my intention. 

Now I hope that makes me sufficiently unscary that I will eventually get that invitation to Elko. 

Mrs. VUCAN0VICH. Well, would you bring Congressman Rahall 

when you come? We would be happy to invite you. Also in your testimony, and it was also in this morning's Washington Post that legislation be enacted immediately to reserve to 

the U.S. a royalty interest in all mineral patents. Are you suggest- ing retroactive application of this principle, or would it apply only 

to newly issued patents? And what about the constitutionality of 

denying the property right that is clearly vested to those with the 

first-half certificates in hand? 

And I'm sure you know from our dissenting views on this bill last 

year, I believe a strong argument exists for grandfathering at least 

all of those claimants who filed for a mineral survey or a patent 

application with the BLM. Others suggest even that it is too restrictive, and that is that all claimants of record with discovery 

demonstrated on their claims have a vested right. 

Obviously, this is a very touchy subject from a property rights 

standpoint, and I am concerned about your statement. I assume 

that this was just an attitude that was implied, and I don't think 

the courts would have that attitude. So I just am curious to know 

what would be done about the retroactiveness on these patents. 

Secretary BABBITT. Mrs. Vucanovich, it is the opinion of my counsel that this committee and the Congress do have the power to im-
135 

pose royalties on patents in process. Up to the point of final issuance there is still a sufficient public nexus that it would be constitutionally appropriate to do so. 

I put that forward for your consideration, and I recognize that 

the decision is made by _Congress on that issue and not by me. 

Mrs. VUCANOVICH. Well, you suggest that Congress could enact 

a Federal severance tax on production from mineral deposits recently patented out of Fedt!ral ownership. I am sure that Congress 

could do that, as you suggest, but what is the issue here? Recent 

versus not recent? Or patented and how they patented? You know, 

I wonder if we ought to include railroad grants and State. school 

sections, and what about the "equal footing" doctrine upon which 

western States rely? You know, why shouldn't gold producers in 

South Carolina pay a Federal severance tax if the mines on private lands in my district would be required to do so? I mean, what is 

the difference? 

Secretary BABBI1T. Well, I agree there are many, many different 

permutations and combinations. I think the legal requirement is 

greatly simplified that there be a rational base for the point at 

which the Imes are drawn, that there be rational distinctions, and 

I suggest in my testimony that the recent issuance of patents on 

Federal lands is that kind of distinction. Admittedly, the exact 

drawing of any line in any fiscal type issue is, to some degree, arbitrary. 

Mrs. VUCANOVICH. I Just have one more perhaps question or 

statement, and I'm talkmg particularly about Barnck. You know, 

you are talking about $5,000,000 of gold for $10,000, and I'm not 

sure that your numbers are quite correct. You know, the in place value of those 25 or 30 million ounces of gold at the Goldstrike 

mine is really a lot less than $10 billion, and unless and until it 

is blasted and mucked and hauled and crushed and autoclaved and 

then extracted from the ore, the gold is worth only the finding cost, 

which these days is about $20 to $25 per ounce. So I think it is 

okay to say that this $5 billion is there, but, you know, that isn't 

just sitting there waiting to be taxed. 

Secretary BABBI1T. I understand that. The issue of a gross receipts tax is, again, one that has been confronted before by this 

Congress in the form of the oil and gas leasing legislation. The oil 

and gas royalty is a gross receipts tax. It has, across the years, been modified, in my understanding, with moving it slightly toward 

the net receipts concept. But the basic concept has endured for 70 

years with respect to hydrocarbons. 

Mrs. VUCANOVICH. Well, I realize that my time is up. Thank you 

very much, Mr. Secretary. . . Mr. LEHMAN. Thank you. 

Mr. Miller. 

Mr. MILLER. Thank you, Mr. Chairman. Mr. Secretary, welcome 

to the committee, and I think once again we see the wisdom pf the 

President's choice in appointing you Secretary of the Interior. In 

these issues that confront so many of us in the West in terms of 

the outcomes, but nevertheless clearly national issues with respect 

to the concerns of the people of this country, I think we will benefit 

by your tenure, given the fact that you have spilt both political 

blood and capital on these issues in your past positions. I want to 
136 

reinforce what you have said about your own office and what the 

chairman has said about this subcommittee, and that is that this 

is an open process. I believe we will have a result this session, and 

this is going to become the law of the land, and we welcome those 

who want to make constructive suggestions for changes. 

You and I have talked about how your administration and this 

committee can work together as we receive input from different 

sources about changes that should be made in the legislation. We 

are prepared for that. Very often, however, we find that people who 

don't get the result they want suggest that the process is closed. 

There will be many who won't get the result they want throughout this process, but we have tried to continue to make sure that 

we are working off the best evidence and the best information that 

can be provided to us, and I want to reinforce that understanding 

among all of the various constituencies. 

Let me, if I might, just ask you a couple of questions that relate 

both to our obligations with respect to the decisions around royalties, the President's economic plan, and our committee obligations 

with respect to the budget proceedings. What is the real basket of 

Federal 'benefits here that this mining industry benefits from specifically within the Tax Code. If you can either tell us this morning 

or provide for us the cumulative effect of the tax provisions in the 

current Code with respect to expensing and accelerated depreciation and depletion provisions and allowances within the Code, I 

think that will be very helpful for us to understand. 

Many have said here that obviously there are additional benefits 

beyond royalties that this industry pays in terms of taxes and 

what-have-you, but I think it is very important that we understand 

the interplay between the Tax Code and our concerns with royal- ties. 

I would also be interested if you could talk to others in the administration about what they expect the benefits of the proposed 

investment tax credit in the President's economic plan might be for 

this mining industry, and questions of how that plays off. You mentioned looking at small miners somewhat differently than large operators, the distinctions that might be drawn there. 

Secretary BABBI1T. Mr. Chairman, this is not an area where I 

claim much expertise, but I think it is an important issue, and I 

would be very happy to go to the Secretary of the Treasury and the 

director of 0MB and see if we can put together some analysis of 

this. 

I might also add that there are a lot of areas where we don't 

have good facts. I was really astonished when I tried to order up 

from my own Department some figures regarding the volume and 

value of mineral production from public lands. There is, as you 

have noticed, something of a divergence between the 0MB estimate 

of the gross value of minerals produced and the CBO estimate. 

As I went to call up some figures, the answer I got was, "We 

don't have any." There is no reporting of any kind either initiated 

by my Department or brought up from the industry as to what we 

are talking about here, and again it seems to me that we ought to 

try as best we can to get the correct figures on the table in order 

to do the economic analysis of employment, the effects on the in-
137 

dustry, the amount of revenue generated, and the trade-off between 

the holding fee royalties, whether it ought to be gross or net. 

Mr. MILLER. If you can provide that, please do because I think 

there is an interplay there that is very important in terms of the 

impacts of our decisions on the industry that we need to know. 

Finally, this legislation is going to require additional duties, as 

you have already {>Ointed out, within your Department. Clearly the 

direction that mimng is takin' in some cases with the leaching system and others requires additional monitoring and an awareness of 

what is taking place throughout that process both before in design and during in monitoring and afterwards in reclamation and monitoring of that process. 

As you mentioned, we have some PAYGO problems, as we refer 

to them around here, in terms of the cost of those balancinf out 

with revenues to be generated within the budget process, and just wondered if you had given some consideration to looking at processes by which the Department can be reimbursed for those activities. You know, if a home builder today wants to build a house and 

generate economic activity, he is charged, at least in our State, for 

the full cost of issuing those permits, for the inspections during constructions, and sign-offs after every time the person comes from 

the county or the city to sign off on progress reports, and compliances with permits; that individual is cb.9.rged for that activity. 

Again, we are going to spend an awful lot of time with the increased environmental concerns around this industry in long-term monitoring because of, again, the change in the direction of the industry. I just have got to raise that issue with respect to financing 

those activities. We just assume they come out of the general fund, 

and I don't know that we can continue to do that. 

I don't expect you to have an answer for that, but I think it is 

important that we start looking at how we are going to get reimbursed for some of those activities. I'm sure most States do and 

most local jurisdictions of government now do, and I think we have 

got to ask that question about the Federal Government. 

Secretary BABBITT. Mr. Chairman, I think the trend is absolutely clear. I was reading yesterday some of your handiwork from several years ago called the Indian Gaming Regulatory Act, and there 

is in fact a surtax. 

Mr. MILLER. I don't lay claim to that exactly. I forget who we are 

blaming. [Laughter.] 

Secretary BABBITT. That was just by way of saying yes, the concept is clearly on the table, in a manner of speaking. 

Mr. MILLER. Thank you very much, Mr. Secretary. Mr. LEHMAN. Mr. Young. 

Mr. YOUNG. Mr. Secretary, if H.R. 322 is enacted, do you believe 

it will result in more jobs or less jobs in the mining industry? Secretary BABBITT. Mr. Congressman, there would clearly be an 

increase in jobs generated by the reclamation process. There is a 

large piece of the royalty provisions-the percentage, I think, is different in the 0MB proposal and in this bill-earmarked for reclamation activity, and that will be, I believe, a significant generator of substantial jobs. 

Now, is there some economic disincentive on the margin? Well, 

that is an argument that is made against the gross receipts royalty 
138 

approach. If you do a gross receipts thing on the margin, you will 

get a shift toward high-grading because you have, in fact, increased 

on the margin the costs. That is an economic principle that applies 

to virtually any kind oflevy, fee, or tax. It is an argument that is 

made for shifting to the net proceeds approach. 

We have had a lot of experience with that in Arizona, and I can 

tell you, it opens up a basket of snakes all of its own in trying to 

figure out what net proceeds are. 

So the answer is yes, economic theory says that on the margin 

an increased cost is some disincentive. The reclamation proposals 

clearly generate a fair amount of additional employment. 

Mr. YOUNG. Well, what you are saying, reclamation, aren't really mining jobs, they are recovery jobs; they don't produce any new 

real dollars. Is that correct? 

Secretary BABBIT!'. Well, that leads us into another philosophical 

swamp, and I would argue to you that good reclamation does generate additional economic returns for two reasons: one, if the reclamation is done properly, it avoids these extraordinary Superfund 

problems that we now see around the West where it was not done 

and where we are now redeploying vast amounts of money which 

might go to other, more productive purposes to clean up after the 

fact. That is, of course, the general sustainable resource use argument which I happen to think is correct. 

Mr. YOUNG. Well, again, I hope you are correct, Mr. Secretary, 

because we are going to review this again after this administration 

and see whether we have had a decrease of jobs. I heard the same 

argument from Russell Train, how the EPA creates jobs, but none 

of them are real jobs, they are jobs that produce no new wealth. 

One of the problems we have in our economics for this country is 

that there is no new wealth being developed. We just redistribute 

the dollars, and you know, the mining industry is not a healthy industry in this country even right now under the present 1872 Mining Law. 

I think the gentleman from Idaho put it very clearly. We have 

lost tremendous jobs across this country because of the prices of 

minerals, and we know that, and I am just very, very concerned. 

I, frankly, have more faith in yourself than I do this committee, 

right up front. I have said this before because I have watched this 

committee work, and they have never passed any legislation in 20 

years that produced any new wealth. They have locked up our 

lands, took away access to those lands, discouraged investment, 

made this, in fact, the committee of parks, no natural resource use, 

and like I say, I have a little more faith in you. If we come back, 

you know, 2 years or 4 years from now and find out we have a totally crippled mining industry, I hope we have the ability and the 

courage to review this issue because I don't think you are going to 

see an increase in jobs-reclamation jobs yes, but they are temporary, they are not permanent, and they are not jobs that create 

new wealth. 

Thank you, Mr. Chairman. 

Secretary BABBIT!'. Mr. Congressman, if I may, very briefly, I 

again emphasize that there is, I think, an important ground for arguing, not about whether there should be a royalty but about the 

marginal trade-offs that different levels of royalty entail. Second, I 
139 

a~ain say to you, I understand and believe that the provisions in 

Title II that relate to reclamation and to land use process are worthy of a thoroughgoing discussion about their actual, on-the-ground effects in Clark County, Nevada, or Pima County, Arizona. What 

I will be back to do is to try to avoid the philosophical debate in 

favor of sort of duking it out line by line about what it will do to 

an open-pit copper operation in Arizona or a heat bleaching oper- ation for gold on the Carlin Trend, . and how it is this bill will interact with that issue, with enough guidance so that we don't simply 

leave to the Secretary of the Interior a vast general mandate to do 

good. Now I know that under my stewardship that would be a good 

way to do it, but maybe not in the future. 

Mr. YOUNG. One last thing on the bill itself. You know, we had 

hearings in Fairbanks, and I went back to the bill and I didn't see 

any of the hearings' testimony reflect what this committee was sup- posed to be listening to. The biggest concern we have out there--

because most of our miners, believe it or not, are smaller miners--

we have, of course, the Greens Creek Mine, which is a large mine, 

and the Red Dog Mine, which is a large mine. You know, we have 

some large mines, but most of them are small miners, and their 

biggest interest is the finders' rights: If I go out and find a fmd, 

do I have a right to it if it is on public land? What are your feelings 

on that? 

Secretary BABBITT. Well, it is kind of a tough question. It is hard 

to define a finder's right until you have staked a claim. 

Mr. YOUNG. Well, I'm saying I have staked the claim under the 

present law. If I find the claim and prove the claim up, I have a 

right to that claim. 

Secretary BABBITT. Right. 

Mr. YOUNG. Under the original proposal that came out of Mr. Rahall's committee--and whether it is still in· there I don't knowwas, in fact, I would have to come back to you, and you would have 

to put it to the highest bidder, and whoever bid the highest would 

get it, and that was their biggest concern because it eliminates the 

little miner. There is no way he can do it; he can't bid against Ohio 

or Anaconda or any of these other people; he can't do it if it is on 

public land. Is there a way to protect that small miner? 

Secretary BABBITT. Here I would defer to the author of the bill. 

I read the Rahall bill as continuing in concept the present location 

concept, and I read it as saying that the finder would have the 

right to benefit from his superior sense of geology and to sell it for 

a windfall. Whoever is in the process would be subject to the diligence, financial mining plan reclamation provisions. . But I read it as saying that: if you discover a two-foot vein of 

gold in a quartz outcrof, stake a claim, get into the process, you 

can tum around and sel it for $20,million to Mr. Rahall. 

Mr. YOUNG. What you are saying is, as this bill progresses, if you 

see that deter ·from that concept, that you would not support the 

legislation, that you would encourage us to keep the finders' rights. Secretary BABBITT. Yes, l think it is a fair concept. 

Mr. YOUNG. Okay. Thank you. Mr. LEHMAN. Mr. Rahall. 

Mr. RAHALL. I would say to the gentleman from Alaska that 

under the legislation I have introduced we have no discovery re-
140 

quirements. You stake it, you comply with your diligence requirements, you mine it. That is the only requirement. There are no discovery requirements in the pending legislation. 

Let me say further to the gentleman, when we brought this bill 

before the committee in the last session, he was quoting from the 

Communist Manifesto, and he insinuated or alleged on occasion 

that I was taking this bill in directions directly from the Communist Manifesto; So what we have decided to do is take the compilation of mining laws and the changes we made last year, and we 

put it in a Communist Manifesto red-bound volume just for the 

gentleman from Alaska. 

Mr. YOUNG. You picked the right color. I'm glad to see that. Now 

we are exposing it to reality. [Laughter.] 

Mr. RAHALL. Let me say in addition to the gentleman from Alaska in regard to the question he asked about jobs, we heard the 

same questions raised and the same charges by industry leveled 

prior to the enactment of the Surface Mining Control and Reclamation Act of 1977, that it would cause a loss of coal being mined and 

a loss of jobs in the mining field. The year prior to enactment of 

SMCRA, we were mining about 500 or 600 million tons of coal a 

year. Last year's figures were up to 1.1 billion tons of coal mined 

some-what-15 years after enactment of the Surface Mining Law. 

So I think those concerns, once we have gotten into the true facts 

of the legislation, are pretty much negated, once the facts are revealed. 

Let me say also to the gentlelady from Nevada in regard to the 

notion that I first advanced that a right to a patent vests once the 

first half of the final certificate is issued provided that the ensuing 

mineral examination supports a discovery of valuable minerals, I 

was attacked at that time when I was advancing that notion by 

your side as saying, "takings, takings, takings," et cetera, et cetera; 

that chant rose continually. So today I'm glad to see that you are now agreeing with me and 

that we have discarded the notion that the mere act of applying for 

a patent brings about a property right. I appreciate that. 

I'm not going to spend much time asking questions because I perfectly agree with just about everything the Secretary has said in 

his statement. I think once one agrees and there is that type of 

agreement reached, you should not be questioning. 

But, Mr. Secretary, very quickly, just one suggestion in regard to 

a question that was asked by our chairman, Mr. Lehman, just a 

minute ago. That was in regard to the fact that the administration 

proposal does call for both a 12.5 percent royalty and making the 

$100 hol~ng fee permanent that was imposed on a temporary basis 

in last year's-fiscal year 1993-appropriation bill. The administration is now proposing to make that holding fee permanent. I would 

suggest that you consider modifr· ng this proposal from a per-claim 

basis to an acreage basis, and do this for the following reasons. 

As you know, mining claims are not consistent in their acreage. The vast majority of them do average about 20 acres per claim. 

Under my bill, existing claims would be maintained at their current acreage; new claims, however, would · average about 40 acres 

per claim. This is because we require that they be staked on a 

quarter-quarter section basis where a public land survey exists. So, 
141 

as such, if this holds and if we adopt the $100-per-claim holding fee proposal, there would not be payment equity between existing 

claims and new claims. That is the reason for this suggestion, to 

try to achieve that ~ayment equity. 

To address this situation, I think it would be preferable to follow 

the rental fee that was set up in my bill. I not only think that we 

could more equitably meet whatever budget target the administration is seeking, but it maintains the type of arrangement we have 

for other minerals, such as in the oil, coal, and gas regimes on public lands. 

I make that in the form of a suggestion, and if you have any 

comment I would welcome it, or if you would rather study it---

Secretary BABBITT. Mr. Rahall, I think there is a great deal of 

logic in the proposal laid out in your bill. I, frankly, hadn't really 

focused on that until I was doing my homework, reading through 

the elegant prose of your bill last night page by page, and I must 

say, it is a very neat proposal to have it on a per-acre basis. To 

have it escalate with time, which is, I think, a nice trade-off in saying to people, "You are not going to be burdened on the front end 

of the system." 

But there is a pattern of abuse-I am personally familiar with 

it-from people not in the mining business in the West who go out 

and stake claims just as you are getting ready to build a highway 

or convey land for some other purpose, and it is a form of legalized 

extortion. You see it all over the West. This sort of escalating thing, 

it seems to me, is a nice way of separating the sheep from the 

goats. 

I also like the notion that you can credit some development costs 

against some of those fees. So I will offer this up to Mr. Panetta 

for his analysis with my recommendation that you have got some 

interesting approaches. 

Mr. RAHALL. I appreciate it. 

Finally, I would ask if there is any time frame for your fine-tuning or recommendations that you mentioned in your testimony that 

you would be submitting to us, and by way of guidance, I would 

just remind you that May 10 is the 121st anniversary of the law, 

and if we could possibly get a bill before or by that date it would 

be nice. 

Secretary BABBITT. Mr. Rahall, we have a great deal to do over 

there. I will respond to your needs. You tell me that May 10 is 

when you want it; you will get it before then. 

Mr. RAHALL. Thank you. 

Thank you, Mr. Chairman. 

Mr. LEHMAN. Thank you very much. 

We have a vote. 

Mr. DEFAZIO. Very quickly, Mr. Chairman. 

Mr. LEHMAN. We will let Mr. DeFazio go ahead, and we will see 

where we are then, and if we have to go vote we will come right 

back to make sure the Secretary can get out of here by noon. 

Mr. DeFazio. 

Mr. DEFAZIO. Mr. Secretary, in looking at royalties, we developed 

in Mr. Rahall's version of the bill a division of the revenues, and 

we established a reclamation fund, a State · share to reimburse 

States for the additional costs incurred with large-scale mining de-
142 

velopments in locales, and obviously a share directly to the Federal 

Treasury. Would you support a similar division of funds? Have you 

looked at the division of royalties in that level of detail yet, or does 

the President's budget require that you assume all funds be made 

available to the general fund of the Treasury that accrue from roy- alties? 

Secretary BABBITT. Mr. Congressman, the President's proposal 

does have the 25 percent revenue share for the Stat.es which is 

identical to yours. It gets a little fuzzier after that in t.erms of what 

our expectations are on reclamation, and I think that is something 

we would be very willing to defer to your judgment or offer some 

suggestions. 

I guess what comes to mind is, I am not clear about the underlying analysis of reclamation needs to be serviced out of that setaside, and I'll try and see if I can find some data on that. 

Mr. DEFAZIO. I appreciat.e that, Mr. Secretary, and look forward 

to your further analysis, and particularly appreciat.e that you have 

prot.ected the Stat.e's share. That is very vital to counties and 

Stat.es in the West, as you know, when a majority of our lands are 

owned by the Federal Government. 

Second, on the issue of some sliding scale or other royalty development in terms of looking at the smaller claims and smaller mining operations, I would encourage the Secretary. I attempted to 

offer ideas in that vein as we were developing the bill in the last 

Congress but wasn't entirely successful but would look forward to 

working with your staff on development of that. I would go further 

to say that in terms of the general burden that would be imposed 

by this legislation, if we were to look at, for instance, PURPA as 

a model, in PURPA there is a break point at which you have sort 

of a short-form application for projects of less than a certain number of megawatts and a much more elaborate long-form ap_plication 

process for projects over a certain number of megawatts. They are 

both subject to the same burdens in terms of meeting fisheries and 

other environmental standards and other concerns. 

But there is just a much higher burden placed on those larger 

projects because it is assumed that with the larger projects-and, 

you know, I think we could make the same assumption with mining-the big firms have the lawyers and the accountants and all 

the professionals on staff to handle that hi~her burden. With the 

smaller mining operations we require compliance, but less burdensome documentation. And I would hope, again, that the Secretary 

might look along those lines for the smaller operations. 

Secretary BABBITT. Mr. DeFazio, I obviously am very receptive to 

that idea, and the President has indicated his interest in making 

that distinction in the western resource issues. 

I don't have, again, good data on who mines what in the West. 

My own experience is that mining on public lands is, for the most 

part, now a corporate operation because it simply is no longer economically possible for the small guy to reallr produce minerals. 

The role of the small guy in the West is the kmd of thing referred 

to by Congressman Young. That is a function which is deeply ingrained in the mythology of the West, in the culture of the rural 

landscape, in the literature, and in people's expectations. I guess 

I would like to come out the other side of this, able to say to any-
143 

body who wants to find a pick and buy a mule that there's room 

for you in the mining industry in the West. 

Mr. DEFAZIO. Thank you, Mr. Secretary. I share that view and 

would hope that we can lay aside the mythology that Congressman 

Young is attempting to create, because I'm very familiar with Mr. 

Rahall's bill and I'm not familiar with any provisions that would 

have had that impact on attempts by small miners to have claims. 

Mr. LEHMAN. Thank you. 

Mr. LaRocco. 

Mr. LARocco. Thank you, Mr. Chairman. 

I will be very quick. I think it is important that the Secretary 

be able to move on to other things, and we have to move on to a 

vote. 

Mr. Secretary, you don't even have to answer this now, but I was 

concerned about any information you might have on what the cost 

would be for the Department to perform the suitability review outlined in title II of the bill. And also there has been some discussion 

of including much of H.R. 322, including nonfiscal reforms-that is 

my concern-in the budget reconciliation package. I would like to 

know if the administration supports broad inclusion of nonfiscal reforms under the President's budget package. 

You had mentioned earlier that ;vou didn't have good data. I 

know there are revenue projections m the Vision document, and I 

guess they had to come from somewhere, and perhaps ;vou are 

going to have to reconcile those with 0MB. Without gomg into 

great detail here, at some point either in writing or now, I would 

like to know whether the Department makes any distinction between companies, mining companies, domiciled in America or 

American corporations and foreign corporations as we move down 

this road to royalties. 

Those are a couple of my concerns, and I think I will be able to 

make the vote, but I am concerned about also making sure you 

make your next appointment. Secretary BABBITr. Congressman, I appreciate that. I will follow 

up on those. 

Let me say just briefly my cut on this suitability issue, because 

I think it is going to be an important debate. There are a couple of unique things about mining on public land. The first one, from 

the industry perspective, is, you can't just go out and locate a mining industry; you go where the minerals are, and the minerals 

don't move about for the convenience of the miner. 

But the fact remains that in the traditional legal framework that 

we have operated, dominated by the concept of multiple use, is that 

mining really has an absolute preference on the general public 

lands. It is the first claim; it is not a multiple-use decision at all. 

You have got priority; they are there; you are on it. The question 

becomes, is there a way of moderating that kind of wide open process without lapsing into some kind of endless land use process 

planning kind of thing with which we have not had very positive 

experiences in many areas. I don't know the answer to that. I just 

raise it as something I think we need to really have a good debate 

about. 

I will follow up on your other questions. 

[EDITOR'S NOTE.--See appendix for post-hearing responses.] 
144 

Mr. LEHMAN. Thank you very much. 

And thank you very much, Mr. Secretary. We appreciate all your 

time this morning, and I certainly look forward to working closely with you in the days and weeks ahead as we move this legislation forward. 

Secretary BABBrrr. Mr. Chairman, thank you very much. 

Mr. LEHMAN. Thank you. [Recess.] 

Mr. LEHMAN. The hearing will reconvene. I would like to call our 

first panel to the front table: Mr. Hocker, Ms. Hohmann, Ms. 

Hieber, and Mr. Parks. 

Without objection, we will put each of your statements in the 

record and ask you to summanze them for us, and we will take the 

witnesses in the order that we have them listed. We will start with 

Mr. Phil Hocker, the president of the Mineral Policy Center. 

Mr. Hocker. 

Mr. HOCKER. Mr. Chairman, we would pleased to proceed in 

whatever order you prefer, but if it is agreeable, we would like to 

go in the order of Ms. Hohmann, Mr. Parks, Ms. Hieber, and my- self. 

Mr. LEHMAN. I have no objection to that and, hearing none, we 

will proceed in that order. 

Mr. HOCKER. Thank you very much. 

Mr. LEHMAN. Ms. Hohmann. 

PANEL CONSISTING OF KATHRYN HOHMANN, WASHINGTON 

DIRECTOR, PUBLIC LANDS PROGRAM. SIERRA CLUB; RICHARD PARKS, NORTHERN PLAINS RESOURCE COUNCIL, BILLINGS, MONTANA; JANET E. HIEBER, CONSULTANT ON ENVIRONMENTALLY ABUSIVE FEDERAL SUBSIDIES, NATIONAL 

TAXPAYERS UNION; AND PHILIP M. HOCKER, PRESIDENT, 

MINERAL POLICY CENTER, ALSO ON BEHALF OF ALASKA 

CENTER FOR THE ENVIRONMENT, AMERICAN FISHERIES SOCIETY, GREATER YELLOWSTONE COALITION, IDAHO CONSERVATION LEAGUE, IZAAK WALTON LEAGUE OF AMERICA, 

OREGON NATURAL RESOURCES COUNCIL, NATIONAL PARKS 

AND CONSERVATION ASSOCIATION, AND WASHINGTON WILDERNESS COALfflON 

STATEMENT OF KATHRYN HOHMANN 

Ms. HOHMANN. Mr. Chairman and members of the committee, 

my name is Kathryn Hohmann. I'm the Washington director of the 

Sierra Club's Public Lands Program here in Washington. Thank 

you very much for allowing me to testify today before you and 

other members of the subcommittee on Congressman Rahall's bill, 

H.R. 322. 

Complete replacement of the 1872 Mining Law has long been a 

goal of the Sierra Club. In fact, I believe our members may have 

been working on it in 1892 when the organization was established. 

Rapid disposal of the Federal domain was the national goal at that 

time. Minerals, timber, water, and range, and other resources were 

being given away at a rapid clip, and this suited the national goals. 

But that bonanza is now over. Today, these laws designed to disperse the vast domain have been ushered into legislative history. 
145 

The sinJle, glaring exception to that trend is the retention of the 

1872 Mining Law. Over the last 120 years, more substances have 

been taken out of the purview of the 1872 Mining Law in more locations, but the result is a crazy quilt patchwork of litigation and 

legislation that only a student of public lands history could fathom. 

Consider the incongruities. Federal hard-rock minerals under acquired lands in eastern States are leased, but Federal hard-rock 

minerals in public lands in the West are still subject to claims 

staking and also patenting. A private party can pay the Government to extract sand from public lands, but gold and silver still go 

without a royalty to the Federal TreasW'f, 

Elaborate plans are now used to consider putting a mineral like 

phosphate up for leasing, yet looking at the compatibility of development with other multiple uses is not done with hard-rock mining. Today, hard-rock mining is always considered the highest and 

the best use of the Federal domain. In the eyes of the Sierra Club 

member, it is this provision that is perhaps the most loathsome aspect of the 1872 Mining Law. 

Our members, seeking conservation of public lands, come face to 

face again and again with a law that simply declares that all valuable minerals belonging to the United States are hereby declared 

to be free and open to exploration and purchase. This is a law with 

an on/on switch when it comes to mineral development. 

On a variety of other issues our activists work on, including timber cut levels and range management, wildlife management, even 

the management of off-road vehicles on public lands, our members 

are closely involved with the land use planning process. Not so 

with mining. 

So a key element of the bill we are considering today is Section 

204. It will begin to bring minin~ into the existing land-use planning process. We think this is a s1~ificant step forward. It will establish for the first time a system m which mining no longer takes 

precedence over other uses of the Federal domain but is, instead, 

considered alongside them as part of the multiple-use concept. After 120 years of mandating "yes," the Secretary would have the 

discretion to sal "yes" but with these safeguards, with these caveats, or even "no in some cases. Several members of the subcommittee have represented these as the "just say no" provisions; but they 

could indeed be called, just as fairly, the "could say yes" or "could 

say yes with these safeguards". This is significant. We believe Section 204(c)3 can be strengthened, however, and it could assure that land-use plans be amended 

when an area is deemed unsuitable. We think this would get at 

some of the cumulative impacts that would start to happen on certain land areas if these plans are not repeatedly amended. This 

will more firmly link the comprehensive regime this bill will put 

forward with the existing land-use planning process. 

We also have to say today that we are making a considerable 

concession in moving that from a position where the Sierra Club 

has traditionally been behind a leasing system. It is a considerable 

concession in what our position has been in the past. 

During the 95th Congress, this subcommittee considered a bill 

put forward by Congressman Phil Burton, H.R. 9292. That bill was 

for a mineral lease system. Mineral leasing systems are used wide-
146 

ly on State as well as Federal lands. They vary widely. Some are 

good, some are bad. We think it would be misguided to stand behind a leasing system only. 

We feel real creativity was adopted when this legislation was 

written last Congress. We have reviewed man_y leasing systems and 

came to the conclusion that meanin~ reform can indeed take 

place and leave the concept of self-initiation. 

You should know this bill includes a claim-staking system. This 

would protect claimants from claim jumping and mean when they take a claim on Federal lands, they have done the prospecting and 

would be able to protect that land from other miners. So we believe 

this is a meaninP-11 reform within the current claim location system. That is significant. H.R. 322 also establishes Federal reclamation standards, something the States are crying out for. There is a recent example with 

the Summitville mine in Colorado where, if sound reclamation as 

well as operating standards had been in place, perhaps we would 

not have had this disaster. 

This leads me to the other key section of this bill, water protec- tion. The framers or the drafters of this legislation deserve _special thanks for water protection. Had the authors of the 1872 Mining 

Law taken such care with our precious resource of water, perhaps 

an estimated 12,000 miles of western rivers would not be permanently impaired. . We would like to especially thank Congressman Rahall for his 

work on water protection. He has seen what the legacy of water impairment has done in his own district. 

H.R. 322 would establish a royalty on mineral production, a sensible, long-overdue, badly needed reform. However, the Sierra Club 

believes the levels should be raised to 12.5 percent as the Clinton 

budget package recommends. This seems sensible in light of the 

fact oil and gas leasing on Federal domains is under a similar regime. The concept of due diligence, like the patent provision, we believe 

should be ushered into the past. This retains a vestige of the due 

diligence requirement requiring miners to take or deduct part of 

the diligence payment from the rental. We believe there are other 

ways perhaps to deal with the idea of smaller miners, but we think 

they need to proceed with real caution when we make concessions 

to small miners. 

I would remind you of the abuse and collusion that has resulted 

from other laws that sensibly, and I think with good meaning, 

sought to address the smaH operator considerations. Some of those 

provisions are already backfiring. Water law is one example in 

which large companies become many, many small companies on 

paper in order to avoid provisions in the law that sought to protect 

small farmers and small operators on Federal lands. 

Finally, one other suggestion I might make for H.R. 322 involves 

the Abandoned Mine Reclamation Fund. AB the law is written now, 

State eligibility is not contingent upon the States having a program 

to deal with mining on non-Federal lands. We believe the way the 

bill is written now, we would be throwing good money after bad to 

States that currently do not have their own statute to govern mining on non-Federal lands. So I would make that one other change. 
147 

Overall, the Sierra Club is fairly strong and really makes a good 

endorsement for H.R. 322. We urge its swift adoption through Congress and ask that we stop the leakage of the Federal domain into 

private hands and curtail the further abuse under the 1872 Mining 

Law. 

Thank you very_ much. 

Mr. LEHMAN. Thank you very much. 

STATEMENT OF RICHARD PARKS 

Mr. PARKS. Mr. Chairman, for the record, my name is Richard 

Parks. I own a sporting goods store in Gardiner, Montana. I appear 

as chairman of the Northern Plains Resource Council, a grass-roots 

organization of farmers, ranchers, small business people, and other 

citizens concerned with protecting clean water and clean air. 

We have a direct self-interest in the issue before us today. Many 

of our members live in hard-rock mining communities and are living and will have to live in the future with the consequences of 

hard-rock mining. 

The examples I cite to support our belief that this is a good bill 

come from Montana, but you could draw similar examples from virtually any other State that has had substantial mining. 

As an organization, we have been on record for 15 years supporting reform, and we have got a number of key issues we are very 

pleased to see are, in fact, encompassed within this bill. We need 

some national reclamation standards and strong water protection 

provisions. We need the replacement of the patenting system with 

a leasing system. We need some sort of development provisions 

that discourage speculation. We need a fair royalty, in particular, 

to help fund an abandoned mine lands program. We need strong 

public review and citizen enforcement provisions; and we need the 

unsuitability criteria that makes it possible to say no when circumstances warrant. 

Some examples: The Golden Sunlight mine near Whitehall, Montana, was opened in 1982. By 1983, a construction error had resulted in a spill of approximately 9 million gallons of water from 

the tailings which contaminated nearby domestic wells. 

This spill is not an example of ancient history. This is an alleg- edly modem mining operation. Yet this operation applied for a permit to expand. The agency reviewed it and granted that permit despite advice from Dr. Eugene Farmer in a letter of June 28, 1990, 

saying the reclamation plan was likely to fail. The permit was 

granted. 

There is a large bond proposed that is supposed to cover perpetual treatment of acid mine discharge from the open pit, but it does 

not address the acid-producin~ rock in the waste rock piles. This 

acid discharge problem's magnitude, I think, can be assessed. 

P.S. Kujawa, for the Mine Waste Power Project in Butte, did sort 

of an initial back-of-the-envelope kind of projection stating that 

waste rock mat contain 3 percent pyrite. That pyrite may generate 

1.63 pounds o sulfuric acid per pound of pyrite. In Montana, we 

are generating right now about 200 million tons of waste rock annually. We are looking, therefore, at the potential production of 9.8 

million tons of sulfuric acid. We believe the Golden Sunlight mine 

is a Superfund site in the making. 
148 

Strong water protection provisions are required for these reasons 

and for a number of others, some of which are cited in my written 

testimony. I would like to add one that is not in my written testimony. 

We have known for a number of years that the Zortman and 

Landusky gold mine in north-central Montana was contaminated 

with ground water but couldn't fmd anyone willing to test it or to 

admit to it. They finally ran tests. Lo and behold, as we expected, 

the streams around the area are, in fact, contaminated with acid 

discharge and heavy metals. 

These kinds of results should become much less common if we 

can enact a responsible Mining Law reform. This bill seems likely 

to go there. 

The Abandoned Mine Lands Program is particularly important to 

us, and just to put some kind of framework on it, the Butte Toxic 

Cleanup District has a responsible party identified. The price tag 

looks like it may be $1 billion. That is going to be a lot of money 

paid out just for one district. It is widely considered to be the nation's most complex and largest toxic cleanup site. 

But, around the West generally, there are thousands of abandoned mine sites for which there are no responsible parties identifiable, at least 4,000 of those in Montana; and initial assessment is 

that the cleanup on those could run about $20 billion. 

One of the interesting facts the Bureau of Labor statistics put 

out for us is that 25 jobs will be created for every million dollars 

spent. Consequently, over the time involved, that $20 billion could 

generate 500,000 jobs. We think this is a substantial repudiation 

of the claim that this is going to put people out of work. 

A further observation on that relative to reclamation of the coal 

fields: Again, it was claimed these are non-jobs. But, somehow or 

other, the folks that we know in agriculture in Montana that have 

managed to substantially augment their income growing seed to 

provide native grasses and other items that are required in order 

to do the reclamation don't really see those as non-jobs. They get paid pretty well. The guy who drives the truck that puts the mountain back together gets paid the same as the guy who took it apart 

in the first place. 

So we are inclined to think that these really are real jobs. 

I would like to second the concern we heard earlier about the 

need to tie the AML program to a State program of permitting and 

regulation for State-owned and private lands that are comparable-at least equal-to the program for Federal lands envisioned by the law. That is a substantial hook that will be required 

to prevent us from having our regulatory programs just bid down 

to the lowest common denominator which happens on a fairly regular basis. 

Strong public enforcement provisions are also something that we 

are very pleased to see in the bill. The Golden Sunlight mine I just referred to was done by an Environmental Assessment rather than 

an Environmental Impact Statement, in spite of the fact that it 

multiplied the size of the pit by 6 times and created a whole new 

tailings impoundment with the observation that the reclamation 

plan was going to fail. 
149 

That plan was appealed to the Interior Board of Land Appeals 

which sat on it for 3 years or thereabouts with the imminent prospect damage was going to occur. Suits were brought in State court, 

and the industry response has been to introduce legislation at the 

State level that would restrict our access to the process at the 

State level and make it financially impossible for citizens to attempt to enter the legal process to enforce our constitutional laws. 

And Golden Sunlight mine, it might be of interest to you to 

know, is an unit of Placer Dome, a Canadian mining company. 

The unsuitability criteria are also important to us. 

Not too far from my home in Cooke City, Montana, there is a 

proposed project that sits on top of 3 watersheds. The Stillwater 

River runs into the Absaroke-Beartooth Wilderness, the Clark's 

Fork of the Yellowstone which is a designated unit of the Wild and 

Scenic River System. Soda Butte Creek runs into Yellowstone National Park. 

The area has been historically devastated by mining. Clearly, 

here is a case where discretion should be employed. We need to be 

able to ask and answer the question as to whether or not mining 

under any given set of circumstances can be conducted safely in 

this area. There is no way to answer that question except to go 

ahead and mine. 

H.R. 322, fortunately, will correct that. 

Industry spokesmen will tell you and have told you that to impose these requirements will put miners out of work. They will tell 

you the jobs justify the cost to the environment. They even tell you 

they will mine somewhere in the Third World where the countries 

lack a regulatory system that can balance environmental protection and worker safety with responsible mineral development. 

I have one observation to make about that: That is moral bankruptcy. 

The General Minin~ Law of 1872 contributed to the development 

of the West and the nse of this country as a world power. It is now 

contributing to our decline through unsustainable environmental 

degradation. The Mineral Exploration and Development Act of 

1993 will contribute to the development of the technologies and the 

protection of the resources which will help put us back in the lead. 

I want to thank you. 

Mr. LEHMAN. Thank you. [Prepared statement of Mr. Parks follows:] 
150 

Northern Plains Resource Council 

TESTIMONY OF RICHARD PARKS 

IN SUPPORT OF H.R.322 

BEFORE THE U.S. HOUSE OF REPRESENTATIVES 

SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES 

OF THE COMMITTEE ON NATURAL RESOURCES 

MARCH 11, 1993 

419 Stapleton Building Billings, MT 59101 ( 406) 248-1154 
151 

N orthem Plains Resource Council 

Mr. Chairman, members of the committee, for the record, my name is Richard Parks. I own 

and operate a sporting goods store and fly fishing outfitting service in Gardiner, MT, the 

north· entrance to Yellowstone National Park. I appear today in my capacity as Chairman 

of the Northern Plains Resource Council, a grass roots organization of ranchers, farmers, 

small business folks such as myself and other citizens of Montana who are concerned with 

maintaining our clean water, clean air, responsible land stewardship, community 

self-determination and sustainable economies. NPRC has a direct self-interest in mining 

law reform because a significant portion of our membership lives in hard rock mining 

communities and have had to or potentially will have to live with the impacts. I appreciate 

the opportunity to support the passage of HR 322. 

Throughout my testimony I will employ examples of mining in Montana to illustrate the 

need for mining law reform. Similar examples can be provided from most other states that 

have experienced substantial mining activity. 

As an organization, we have been on record favoring an update of our general m1n1ng law 

for 15 years. The key issues we identified then remain the basis for the necessary overhaul. 

We are pleased to find that HR 322 addresses those issues in a generally satisfactory way. 

We believe that any update must contain the following crucial elements: 

l. National uniform reclamation standard; 

2. Strong water protection provisions; 

3. Replacement of the patenting system with a leasing system; 

4. Diligent development provisions to discourage speculation; 

5. A fair royalty to help fund an abandoned mine lands program; 

6. Strong public review and citizen enforcement provisions; Jnd 

7. Unsuitability criteria. 

National Uniform Reclamation Standards 

The Golden Sunlight Mine near Whitehall, Montana has been open since 1982. By 1983, a 

construction error had resulted in a spill of cyanide contaminated tailings water in excess 

of 9 million gallons. This spill infiltrated nearby domestic water wells. This spill is not an 

example of "ancient history" but rather a modern mine operation. Now, this same mine is 

proposing a major expansion which includes a reclamation plan that is unlikely to succeed. 

Dr, Eugene Farmer, a west-wide reclamation specialist for the U.S. Forest Service, in a 

letter, dated June 28, 1990, to the chief of the Montana Hard Rock Bureau provides 

compelling evidence that Golden Sunlight's proposed reclamation plan would fail. Despite 

that advice, the BLM and Montana's Department of State Lands, the permitting agencies, 

granted the expansion permit. The bond proposed is expected to guarantee perpetual 

treatment of acid mine discharge from the open pit, but it does not even address the acid 

producing waste rock piles. 

The general magnitude of the acid mine discharge problem is described in a white paper 

prepared by P.S. Kujawa for the Mine Waste Pilot Project in Butte, Montana earlier this 

year. It is not unusual for waste rock to contain 3 percent pyrite and each pound of pyrite 

may generate 1.63 pounds of sulfuric acid. The currently operating mines in Montana alone 

produce over ZOO-million tons of waste rock annually that may, therefore, contain in excess 

of 6-million tons of pyrite capable of producing over 9.8-million tons of sulfuric acid. I 

believe the Golden Sunlight Mine is a superfund site in the making. 

419 Stapleton Building Billings, MT 59101 (406) 248-1154 
152 

Strong Water Protection Provisions 

Noranda, a Canadian company, is proposing a project that further illustrates the need for 

HR 322. Their Montanore Project, a prospective silver and copper mine, near Libby, MT, is 

still in the permitting process. An "exploration" adit was drilled into the mountain and 

since it was "exploration", the agencies treated most of the details as confidential. 

Information leaked from the agencies enabled the Montana Environmental Information 

Center and other groups to bring a successful suit to open the state's records in late 1991. 

Those records revealed that for the entire 18 months of operation in that tunnel Noranda 

had been in violation of its water quality permit. The facts had been reported but nothing 

done about them until the public disclosure forced the Department of State Lands to act. 

The strong water protection language in this bill is needed to reduce the likelihood of this 

kind of situation occurring. 

A further example of the same need is found in the application of the Stillwater Mining 

Company, a platinum/palladium operation, to expand its Stillwater Mine, near Nye, MT, 

and to open a new mine on the East Boulder River, south of Big Timber, MT. In both cases, 

the company proposes to discharge nitrates and other contaminates into the rivers. 

Extensive research indicates that the technology exists and the company has the financial 

resources to reduce or eliminate this type of pollution by installing water treatment 

facilities. However, without the water protection provisions this bill offers, the company is 

free to take the cheapest route. By the way, the Boulder River is one of the streams used in 

the filming of "A River Runs Through It". The story the film is based on is about the 

Blackfoot River which is now seriously contaminated from hard rock mining. 

Replacement of the Patenting System With a Leasing System 

One of the most glaring and notorious abuses of the 1872 Mining Law has been the "patent" 

system by which miners have acquired deed and title to minerals and the lands beneath 

which they lie. In the 121 years since 1872, the U.S. bas granted 65,000 patents to 3.2-

million acres of public land, an area approximately the size of Connecticut. Fair monetary 

return to the public should be guaranteed for the extraction of publicly-owned mineral 

resources. Patenting of public lands for mineral speculation should be eliminated. A 

lease-type system needs to be developed, in which the federal government retains control 

over public mineral resources, rather than allowing private interests to take title to minerals 

and surface areas without compensation to the public. 

DIiigent Development Provisions to Discourage Speculatlon 

One of the reasons that flagrant speculation can take place under the patenting system is 

that there is no meaningful requirement for diligent development of the mineral resources. 

Under 1872 law, all one must do to maintain a claim is file and affidavit with the BLM that 

$100 worth of work had been performed each year. This would have represented a 

significant amount of activity in the 19th century, but today amounts to little more than 

paying someone to remove litter from the site or do some fence repair. 

Any reform of the General Mining Law of 1872 should require diligent development 

provisions similar to those in the Federal Coal Leasing Amendments Act which require 

minimum production levels within ten years. 

A Fair Royalty to Help Fund an Abandoned Mine Lands Program 
153 

Tbe abandoned mined lands (AML) program proposed by HR 322 is excellent and is a 

substantial refutation of the theory that this will put people out of work. The equipment 

operator who puts the mountain back gels paid the same as the guy who took il apart in the 

first place. Resources, particularly water, that are critical lo the maintenance of 

sustainable economies are protected by this work. The clean up of the Clark Fork complex, 

tbe largest and most complex superfund site in the U.S. is currently estimated to cost into 

the billions of dollars. The West generally is estimated to have $20 billion in work to do on 

thousands of abandoned mine sites, over 4000 of tbem in Montana alone . The tecbitologies 

developed for doing this work will be marketable on a world-wide basis. Using an 

interpretation of data from the Bureau of Labor Statistics, Office of Employment 

Projections, 25 jobs will be created for every I million dollars spent. Consequently, the 

royalty requirement of this bill should be viewed as a jobs creation provision. 

So where is the pit in this peach? 

The AML program can and should be strengthened. First, we recommend that the royalty 

should be raised to 12.5%. According to the Office of Management and Budget document "A 

Vision of Change for America', dated 2/17/93, a 12.5% royalty would generate $471,000,000 

just in the period of 1994-97. This cannot help but look good in this frenzy of budget 

deficit reduction efforts. Second, I think states will want lo get in on the AML program so 

there should be a hook in it - it should only be available lo those stales which demonstrate 

that they have a regulatory program for private and stale lands that is as good as or better 

than that proposed here for federal lands. 

Strong Public Review and Citizen Enforcement Provisions 

Golden Sunlight Mine is an example of why we need the public participation and citizen 

enforcement sections of HR 322. The expansion plan was reviewed by an Environmental 

Assessment (EA) rather than an Environmental Impact Statement (EIS) even though it 

involved a whole new tailings pond and a six-fold increase in the size of the open pit. 

The EA process minimized public input. The decision to grant the expansion permit has 

been appealed to the Interior Board of Land Appeals (IBLA) which has not acted on the 

appeal for nearly 3 years. Because of the IBLA's failure to act within a reasonable amount 

of time, citizen's groups ~ere forced to challenge this dangerously inadequate expansion 

proposal in slate court. It seems probable that the court case will be decided in the citizens' 

favor. As a consequence, the industry has sponsored state legislation lo further restrict 

public access lo the process and make it financially impossible for citizens to bring suit to 

enforce our constitution and laws. It is important for you to know that the Golden Sunlight 

Mine is a unit of Placer Dome, a Canadian mining company. 

Unsultablllty Criteria 

Another Noranda project, The New World Project, near Cooke City Montana, is an example 

of why permitting agencies need uniform statutory guidance. In this case, the project sits at 

the top of three watersheds; tbe Stillwater River which then flows into the Absaroka -

Bearloolb Wilderness; the Clark's Fork of the Yellowstone which is a designated unit of tbe 

Wild and Scenic River System; and, Soda Bulle Creek which flows into Yellowstone 

National Park. This area is a most fragile, high-altitude ecosystem. Tbe area bas been 

subjected lo sporadic mining for more than a century. The land exhibits many scars from 

that mining and many old portals are discharging acid drainage. A new mine raises the 

specter of ecological devastation which would be either impossible or extremely difficult 

and horrendously expensive to reclaim. It is a perfect example of an area which should 
154 

never be mined. Criteria that require the land management agencies to evaluate a site for 

suitability • and grants authority to deny a permit when conditions of the site or the 

proposed methodology justify doing so are necessary and a welcome part of HR 322. 

Industry spokesmen will tell you that to impose these requirements will put miners out of 

work. They will tell you that jobs justify the cost to the environment. They will even tell 

you that they will mine somewhere in the third world where the countries lack a regulatory 

system that can balance environmental protection and worker safety with responsible 

mineral development. 

The General Mining Law of 1872 contributed to the development of the west and the rise of 

this country as a world power. It is now contributing to our decline through unsustainable 

environmental degradation. The "Mineral Exploration and Development Act of 1993" will 

contribute to the development of the technologies and the protection of the resources which 

will help put us back in the lead. 

I stand ready to respond to any questions you may have • thank you. 
155 

Mr. LEHMAN. Ms. Hieber. 

STATEMENT OF JANET E. HIEBER 

Ms. HIEBER. On behalf of the National Taxpayers Union's 

200,000 members, I appreciate the opportunity to appear before 

you to present our views regarding the 1872 Mining Law and H.R. 

322, the Mineral Exploration and Development of 1993. 

The desperately outdated 1872 Mining Law has become counterproductive to the interests of the American public who indeed own 

the mineral-rich lands that are governed by a law that was enacted 

more than a century ago. We view H.R. 322 as a major step toward 

bringing our nation's hard-rock mineral policies of the nineteenth 

century into this twentieth century even as we enter the gateway 

to the twenty-first century. 

Once upon a time, droves of Americans headed West after hearing stories about motherlodes of gold in them thar hills. Yet, in 

1993, the richest motherlode is located on this hill, this Capitol 

Hill, where lawmakers have been hamstrung by a handful of their 

own colleagues, as well as by past presidents, from stopping the legally mandated plunder of our Federal Treasury by mming companies, both domestic and foreign. This is a story about plunder, about rape of the land, about fiscal 

abuse and about financial gore inflicted upon the taxpayer. Most 

important, in order to have a voice in changing this situation, it is 

a story the American voter must hear. 

Armed with a Federal surplus of $96 million, in 1872 the Congress passed a Mining Law in order to spur rapid development of 

the American frontier. The law created a Westward Ho program that allowed miners to buy-or "patent"-public lands at $2.50 to 

$5 an acre. Since then, although saddled with a Federal deficit now 

estimated at $327.3 billion, the Congress has turned this western 

program into a welfare program by allowing land-patent fees to remain frozen at the fire-sale price set in 1872. 

According to the Conwessional Research Service, in 1872 a dollar 

was worth almost $12 m 1993 dollars. Thus, in today's dollars, the 

1872 price is e~ual to almost $30 to $60 an acre. This price, however, merely adJusts for the difference between the Consumer Price 

Index of today and the CPI of 121 years ago. It does not take into 

account the leap in land values, owing to a population explosion 

that has skyrocketed the demands for both the land itself and the 

precious metals it holds, over the same 121 years. 

For example, the Mineral Policy Center estimates the Treasury 

has lost $91.3 billion in public lands from only 13 land-patent requests applied for cmd pending since 1987; whereas an equitable 

land-patent fee could actually generate $800 million in revenues 

each year. 

Nonetheless, governmental gridlock has prevented even the CPIadjusted price from becoming a reality. More important, the U.S. 

Senate has quashed attempts to stop this internal, financial hemorrhaging. 

For example, 21⁄2 years ago, the Senate contentiously blocked a 

proposal to put a moratorium on the issuance of patents. Only 4 

days later, the Stillwater Mining Company began the process of filing for patents on more than 2,000 acres of national forest land in 
156 

Montana. By making a token payment of $10,180 to the government, Stillwater-which is jointly owned by Chevron Resources and 

the Manville Corporation-will receive ~atents on ~ayer-owned land containing, by Stillwater's own estunate, $32 billion worth of 

platinum and palladium. 

The 1872 welfare program plunders taxpayers twice-over: First, 

it virtually gives away valuable Federal land at rock-bottom prices, 

and then it completely gives away what is a veritable treasure 

chest of gold, silver, copper, platinum, uranium, palladium and 

other precious metals which-unlike coal, oil or gas-are taken 

from public property free of any royalty charge. 

A 12.5 percent royalty on the strip-mining of coal has been mandated for years. A similar 12.5 percent royalty on the $4 billion 

worth of hard-rock minerals extracted from public lands each year would generate $500 million a year in revenues. Instead of coming 

out ahead, however, the Treasury has actually lost $3 billion in the 

past 5 years alone because no royalties were charged. And although 

hard-rock companies claim that royalties could put them out of 

business, in fact, they already pay royalties of up to 24 percent for 

their operations on privately held land. 

In what is perhaps the cruelest plunder of all, the taxpayer now 

is stuck with a staggering tab to clean up the environmental deg- radation created by old, abandoned mine sites that no longer are 

of use to anyone. 

For example, an abandoned mine site in Montana has created 

the nation's largest Superfund hazardous waste site. The Environmental Protection Agency estimates it will cost $1.5 billion to clean 

up this site alone. Unfortunately, however, this site is not alone. 

Lurking behind it on the Superfund's National Priority List are 

more than 70 additional mine sites waiting to be cleaned up. The 

total clean-up cost to taxpayers has been estimated at anywhere from $11 bilhon to more than $50 billion. 

The good news is that one end-of-the-twentieth-century method 

of extracting the hard-rock minerals does not even involve mining. The bad news is that this state-of-the-art technology employs a "cy- anide heap-leach" process wherein a so-called mining company just 

goes in, blows up a mountainside and pulverizes it into a heap. Indeed, under the 1872 welfare program it is profitable to pulverize 

4 tons of earth in order to obtain 1 single ounce of gold. 

To leach out the precious metals, the pulverized heap is saturated with a cyanide solution in an elaborate sprinkler/pond system 

that has been known to contaminate ground water. Ground water, 

of course,is a major source of our drinking water. 

AB we sit here this morning, the EPA is paying $38,000 a day, 

every day, to 55 employees who are attempting to clean up a cya- nide heap-leach mine in Colorado that is threatening the water 

supply of ranchers and farmers in the San Luis Valley. Only 3 

months ago, after extracting 280,000 troy ounces of taxpayer-owned gold, the Canadian parent company of the mine pulled up stakes, 

leaving behind a $4. 7 million bond to clean up a toxic disaster estimated to cost U.S. taxpayers up to $60 million. 

Amending the bonding regulations now to require mine operators 

to actually post financial guaranties commensurate with clean-up 

costs would cut the future Federal tab. 
157 

The budget impact of amendinf the 1872 Mining Law is clear: 

Immediate new revenues plus mining welfare cuts equals immediate deficit reduction. It is that simple. And that immediate. 

Thank you. 

Mr. LEHMAN. Thank you very much. 

Mr. Hocker. 

STATEMENT OP PHILIP M. HOCKER 

Mr. HOCKER. It is a pleasure to appear before you today in your 

new role as chairman of the subcommittee with jurisdiction. You 

are moving into a role where you will have to fill some very large 

boots. 

The reputation set out for this committee by former Chairman 

Rahall is an imposing one. He has launched it upon a task which 

I am very pleased to see you now ready to step in and undertake. 

They are big boots. They are miner's boots. They are not tasseled 

loafers. I am sure the subcommittee will continue that tradition in 

a way that will do credit to us all. 

I am pleased here to speak on behalf of the Mineral Policy Center. The Chairman of our Board of Directors is former Secretary of 

the Interior Stewart Udall. And when he completed his tenure as 

Secretary, in a statement whtch now-Secretary Babbitt alluded to 

this morning, he reflected in a letter to the Public Land Law Review Commission: "After eight years in this office, I ~ve come to 

the conclusion that the most important single item of unfinished 

business on the Nation's natural resource agenda is the complete 

replacement of the General Mining Law of 1872." 

That was in January of 1969. As we. know today, the job is still 

unfinished .. Unfortunately, the price for the delay in completing 

that task has been very large, and it is rapidly mounting today. Urgent action is needed. Therefore, I commend the subcommittee for 

taking up this bill quickly and-I infer from what was said earlier 

this morning-for planning to move it quickly to conclusion 

through the House of Representatives. 

I am pleased today to speak not only on behalf of the Mineral 

Policy Center but a number of other citizens and conservation organizations from around the country who all unite in pressing the 

committee for rapid action on the 1872 Mining Law reform. I think 

that that body of organizations listed on my testimony and the diversity you see at the table today is representative of the broad 

kind of concern from not only environmental organizations but also 

fiscally conservative organizations that this job be undertaken rapidly and pushed to completion. It need not be a job that is punitive 

to the mining industry, but it needs to be a job which is done in 

a thorough and comprehensive way. 

Mr. LaRocco referred earlier this morning to his experience and 

to the wealth the Silver Valley mine brought to Idaho, which is 

well known to me. But he did not mention-I am · sure only by 

omission-the hazardous waste legacy which has also been left. behind in the Silver Valley, the Superfund sites which are there 

downstream of that, some of which will not be paid by the mining 

companies in many cases who executed the damage in the first 

place. 
158 

It is a job that can be done with balance because I was also on 

the committee that made the award to Coeur d'Alene Mines which 

Mr. LaRocco mentioned. Coeur d'Alene did a responsible job as a 

progressive mining "-Ompany. We felt they needed to be recognized in accommodation for that. I was proud to be part of that process 

to give them the leadership award. 

Sound mining can be done. Clean mining can be done. It can be 

done in the United States, and it can be done properly. Mining Law reform must be comprehensive. I am very pleased 

to hear Secretary Babbitt use that word repeatedly in his testimony. In my testimony, I give a list of 6 major points which we 

believe comprehensive Mining Law reform must address. 

First, discretion that land managers have the ability to weigh non-mineral values, that we not simply leave the decision to mine 

or not mine to accidents of geology. 

Second, environmental standards for mining operations so the 

landscape, the environment and the public at large is protected 

from sloppy or maldesigned operations. 

Next, reclamation standards when mining is completed. It is important that that not be confused with the point just before it. Both 

are necessary. 

Of course, a fair financial return to the Treasury and to the pub- lic. As Ms. Hieber alluded to earlier, it is not correct to say no royalty is paid on Federal Mining Law claims today. A royalty is paid 

on virtually every claim which has been mined. It simply is not 

being paid to the public that owns the land. That needs to stop. 

Next a Hard-rock Abandoned Mine Reclamation Program-going 

by the acronym of HAMR-is a program to go after the sites left 

around the country causing continuing and growin~, spreading environmental damage and bring those under control in a comprehen- sive way. It will not be done immediately. It will not be done at 

no cost. It can be a jobs creation program. It can be a pro~am to 

ease the transition from active mining to a post-mining situation 

in the community. 

Finally, but no less important than the others, an enforcement 

program that includes both enforcement actions by the agencies but also citizen access to the information, citizen oversight, and citizen supervisions. · Two incidents cited in my testimony, I think, dramatically illustrate the two sides of why it is urgent we move forward with this. 

First, let me speak to the Barrick patent situation. Secretary 

Babbitt made comment to this this morning. It has been mentioned 

in press stories this morning, in both the Washington Post and U.S. 

News and World Report. I think that it is a sad example of mismanagement of the public domain. I don't mean that as a reflection 

upon Barrick. They are simply doing what the law allows them to 

do. 

I have had the privilege of touring the Goldstrike mine. I was 

treated hospitably there. I was impressed with the competence of 

the people managing it. 

I am not impressed with the confidence with which BLM has 

managed the :patenting application. Regarding the fast-track process BLM has instituted and which was first brought to its conclusion at the Barrick site, I would say if we are going to experiment 
159 

with new and innovative ways to accelerate the giveaway of public 

lands, we might like to experiment at something less than the largest, most productive gold mine in the country. It seems like a foolish way to test out a new process. This was mentioned earlier. It seems like an inappropriate time 

-to experiment with a fast-track process when it is well known by the public and the mining community that reform of the Mining 

Law is imminent and an end to the opportunity to make these 

rafid profits from public minerals is at hand. 

believe that the process which BLM put in place of allowing the 

mining company itself to contract for and pay for the valuation of 

important aspects of its entitlement to exploit the law is inappro- priate-at least a conflict of interes~and that it should be terminated immediately. I urge Secretary Babbitt to take that action. 

Also, that the work that has been done on the Barrick claim not 

be accepted, that· Barrick claims be reviewed ab initio, once again. 

No one is attempting to deny Barrick the claims which, unfortunately, the law allows them. However, there is no need to rush 

them through the process to enjoy the fruits of this stupid law. 

Also, BLM should be instructed to review the entire process that 

led it to this ill-advised decision to put this pilot program in place. 

In addition, speaking of BLM, we are well aware of the difficulty of getting adequate data which Secretary Babbitt faces. Much of 

the information we were able to present is due to the diligent work 

of a very hard-working member of my staff, Tom Hilliard, who has 

only been able to do this through, frankly, very hard, persistent, 

patient, accumulation of data which BLM ought to have available 

m a readily accessible, central location, both for the information of 

the public at large and for the information of the Congress and perhaps even the Secretary. Barrick patents are only a part of the total picture of patenting 

nationwide. We don't have a total tabulation of all of the claims 

currently in the patent process, but we have attempted to-locate 

those of significant value. Every time this total is run, for one reason or the other the number shifts slightly. The total, which we believe is accurate according to the best information available today, is $86 billion worth of precious metals and ores subject to the 1872 

Mining Law which is currently in the patenting pipeline. The figures which Secretary Babbitt used this morning for the 

value at Barrick actually would lead to a larger total than the $86 

billion. I think it is foolish to try to worry about whether it is $91 

billion or $86 billion. The point is clear: It is a large amount of pub- lic wealth. 

While these are gross value numbers, not net, as I am sure will 

be pointed out by other witnesses and questioning today, the royalty that would be collected if the President's proposed 12.5 percent royalty were to be collected over the lifetime of those ore bodies 

and the values we are using are the company's own values for recoverable reserve amounts. We are not talking total metal in the 

ground. These are ore reserves. So we are talking a total of 

$10,750,000,000 of eventual Federal income. 

Second, I would like to tum briefly to the Summitville mine in 

Colorado. I will be touring that site tomorrow. It has been widely reported in, particularly, the Colorado press. And, of course, Mr. 
160 

Lehman, you and your folks at Bodie must be thinking that they had a narrow escape because, as you know, the same company that 

is responsible for Summitville was also proposing to open an operation similar in many ways right next to the State park at Bodie. 

The BLM's ability to constrain that under the 1872 Mining Law 

was veey uncertain at best. Most of the Summitville mine is on pat- ented land, although there is still public land involved, both within 

the mine area, slivers of land that were not patented because of the 

accidents laid out. And there is substantial national forest land 

near and around the mine which will be affected. 

I believe, again, that the administration and also, frankly, the 

State program in Colorado, the program which is generally reputed 

to be one of the better ones, have fallen veey short of filling their 

public responsibilities at Summitville. 

And I think Summitville demonstrates why both the points which are covered in H.R. 322; that is, the establishment of adequate environmental programs for mines on public land under the 

jurisdiction of the Federal agencies, but also the point that was 

mentioned by several witnesses on this panel a few minutes ago, the need that States that participate in the HAMR program, the 

Hardrock Abandoned Mine Reclamation Program, be required as a 

condition of participation to have State reclamation programs for 

non-public land that are comparable in their effects. Otherwise we 

may find the hard-rock cleanup program being compelled to pay for 

the laxity of regulation on private land. 

In the end, the responsibility for this lies with Congress. AB I 

say, I am ve7 pleased with the rapid action the subcommittee is 

undertaking. am dismayed that the patenting issue still lies before us. 

Three times the U.S. Senate has been given the opportunity to 

put a moratorium in place while the issues of mining were debated 

at length. Three times the U.S. Senate has turned down that opportunity. Had they accepted that opportunity at any of those three 

intervals, the problem we are confronted with today at the 

Goldstrike mine would not be as much of an emergency situation 

as it is. 

The Economist magazine, in its recent editorial in the March 6 

issue titled "Cowboy Socialists," speaks of the world image of rugged independence, of individualism, of strong moving forth against 

an adverse nature and succeeding that the American West has 

built up. But then they rebut that by saying that the West, far 

from being the home of the free, is a place as centrally cosseted and 

subsidized as pre-Deng China. 

They go through figures for mining and for the other federally 

subsidized resource industries in the West, and then they issue a 

challenge, because-as they point out-hidden in President Clinton's deficit-cutting plan are policies that would start to sweep 

much of this network of subsidies away. Royalties would be 

charged on hard-rock minerals; grazing and timber fees will go up. 

Big farmers will pay surcharges for water. Even hunters and bikers 

may have to pay for their fun. 

Mr. Clinton could have gone a lot further, says the editorial. His 

proposals would net around $1 billion in over 5 years. He has 

taken a giant and, in the West, an outrageous step. Western politi-
161 

clans trot out a standard argument. They go through some of the 

traditions. The euence of individualism according to the standard 

arguments is a miner staking a cheap claim only to hit gold. Miners profiting these days from government subsidies are often corporate and millionaire ranchers, not Clementine's father with pick 

ax and pail but soft-handed men in Lear jets who do most of their 

work %n':mputer. Pad · of this sort is the antithesis of what the West is meant 

to be about. Mr. Clinton's favorite moment in cinema is said to be 

the scene in High Noon where Gary Cooper, playing the sheriff, 

throws down his badge challenging his critics to run the town be~ 

ter. 

The ranchers, loggers and miners of the American West are now 

being challenged not only to run things· better but to be the hardnosed entrepreneurs the world already thinks they are. Will they rise to the challenge or cling to the Federal skirts? Tension is 

mounting. · · · 

Thank you. 

Mr. LEHMAN. Thank you veey_ much. 

[Prepared statement of Mr. Hocker follows:] 
162 

Statement of 

Alaska Center. for the Environment, 

American Fisheries _Society, 

Greater Yellowstone Coalition, 

Idaho Conservation League, 

Izaak Walton League of America, _ 

Oregon Natural Resources Coundl, 

National Parks and Consenation Association, 

Washington Wilderness Coalition, 

and 

Mineral Policy Center 

Presented by 

Philip M. Hocker 

President, Mineral Policy Center 

to the 

Subcommittee On Energy and Mineral Resources 

· ofthc 

Committee on Natural Resources 

Honorable Richard R. Lehman, Chairman 

Regarding 

H.R.3,22, the 

"Mineral Exploration and Development Act of 1993" 

11 ~arch 1993 

Washington, D.C. 

• BOARD OP DIRECTORS• • - i. Udall. C2lalrnW\ • ftllli> N. Hodlcr•-n.x- L. Klfrtiall•J. Mlchlld MCOoskey•Thomas /\. T,_ • 

-°'"'" -- ·-- a.._ - ·- ............ ,._,Qlnlor ..... -..~ llellac:M, Md°')'ldlle 
163 

MINERAL POUCY CENTER, BT AL. 

STATBMBNT: 11MARCH93, 1 

Chairman Lehman, Co111res.,anan Rahall, members of the Subcommittee: 

My name is Philip M. Hocker; I am President of Mineral Policy Center. My 

testimony today is presented on be.half of the Alaska Center for the Environment, 

American Fisheries Society, Greater Yellowstone Coalition, Idaho Conservation 

League, Izaak w.J.ton League of America, Oregon Natural Resow:ccs Council, 

National Parks and Conservation Association, 'Washington Wildomess·Coalition, 

and M'mml Policy Center. On be.half of all of these organimions, I thank you for 

the opportunity to testify before the Subcommittee today. 

Reform of the 1872 Mining Law is· an urgent national priority, The organizations I represent today symbolize the breadth of citizen concern around the country for swift adoption of comprehensive reform. Alaska Center for the Environment is an Alaska-based grassroots environmental advocacy and education organization with approximately 750 members. 1)le American Fisheries Society is an 

international organization of more than 9,200 fisheries and aquatic acicncc professionals and students. The Greater Yellowstone Coalition is a Montana-based group 

committed to protecting the health and integrity of the Greater Yellowstone Ecosystem. Idaho Conservation League is a 2,S00-membcr environmental advocacy 

organization in that atate. Izaak V<on League of America is a national conserva- . 

tion organization with 54,000 members. Oregon Natural Resources Council is a 

6,~mcmbcr group dedicated to protecting Oregon's lands, waters, and natural 

resources. National Parks and Conservation Association is a 350,000 member citizens organization dedicated to the protection and enhancement of the National Parle 

System. 'Washington Wilderness Coalition is a conservation organization based in 

Washington State, with 1,000 members. Mineral Policy Center is a national citizen organization dedicated to cleaning up the environmental damage which the 

hardrock mining industry has caused in America, and to preventing its r'cpctition. · 

Thcac groups are only a sample of the scores of local, regional, and national citizen bodies who unite in support of 1872 Mining Law reform. The Mining 

Law as it stands today thrcatena fisheries, threatens sportsmen's interests, threatms 

water quality and natural ecosystems. It's time for it to go. 

Comprehensive Reform; Support of H.R.322 

Congress must enact QOQIJ)J'dt~iye reform of the 1872 Mining Law. As 

Secretary Babbitt told the American ing Congress last month, the different 

aspects of Mining Law reform arc •mcxtricably tied together.• · 1b enact changes 

which addressed only the royalty and rental aspects of the Mining Law would be to 

adopt Sham Reform. 
164 

MINERAL POUCY CENTER, ET AL. 

STATEMENT: 11MARCH93, 2 

Any legislation to reform the 1872 Mining Law must include the following 

six major elements, to be comprehensive and serve the public interest: 

Discretion 

USFS & BLM managen must have the ability to weigh non-mineral values, 

and approve or deny permission to mine u appropriate. 

Environmental Standards for Operations 

The conduct of mining must be subject to established standards to prevent 

environmental damage or huard from faulty operation or design. · 

Reclamation Standards Upon Completion of Mining 

Lands affected by mining must be reclaimed to defined standards when the 

enterprise is completed. 

Fair Financial Return 

The-0wners of the public mineral estate must be given a fair return for Its 

use, including: An end to Patenting, Rentals for locking up public mineral property 

in claims, Royalty on produced value, and Fees for ~ministrative expenses. 

Hardrock Abandoned Mine Reclamation ("HAMR") 

A national program should be created to clean up the environmental damage 

caused by past metals mining: receipts from federal disposal of hardrock mineral 

property should fund this effort. 

Enforcement 

. Firm provisions must be included to ensure that the standards established by 

Mining Law reform are enforced. This includes financial usurance standards, 

inspection n,quirements, and rights of citizens to full notice, participation, and 

access to courts. 

Our organir.alions generally support H.R.322, "The Mineral Bxploration 

and Development Act of 1993, • and urge its swift enactment. H.R.322 is a comprehensive reform bill. It contains many important improvements over its predecessor, H.R.918, as it was originally introduced in 1991. H.R.322 demonatratea 

the hard work of Con&rcssman Rahall and his indefaligablc staff, who through an 

Odyssey of hearinp arul field trips studied the 1872 Mining Law to draft this bill, 

and the attmtion of the Interior Committee and oth~ bodies of the 10'2nd C.ongress 

who marked up this text. 

There have been many hearings, many witnesses, over the years concerning 

the need for reform of the Mining Law. A Chronology of recent Congmsional 

attenti.011 to the 1872 Mining Law and related issues is attached to my testimony. It 

is a long list, though even it is not all-encompassing. Can more be said, after all 

these hours and pages? 
165 

MINERAL POLICY CENTER, ET AL. 

STATEMENT: 11MARCH93, 3 

Unfortunately, yes. The mischief of the 1872 Mining Law is alive and 

strong, and I have fresh evidence of the urgent need for reform to submit to the 

Subcommittee today: 

Patent Plunder 

The mining induslI')' is plundering the American people• s mineral treasure 

house while Congress debates refonn of the 1872 Mining Law. Using the 121-

year-old •patenting• process in the Mining Law, gold mining firms and other 

companies - many foreign-owned -· are rushing to convert public mineral lands to 

private property for a pittance. 

'fragically, Mineral Policy Center research has found that the U.S. Bureau 

of Land Management, which should be the guardian of the public's mineral interests, has become an active co-<:onspirator with the mining companies. The BLM is 

not merely doing what it legally must under the 1872 Mining Law. BLM is turning control of the patenting process over to the companies who stand to profit from 

it, BLM is accelerating its handling of patenting to help companies acquire valuable 

ores before Congress can change the law, and BLM is bloclcing public access to 

information about what is going on. 

The Goldstrike Giveaway: A Proftle in Plunder: 

The Goldstrike Mine, in Nevada's Carlin Trend, is now the highestproducing gold mine in the United States. Its 1992 output was 1,100,000 ounces of 

gold, and the mine is being enlarged toward an even greater annual production 

target in the future. The Gold~ke-rnine is on public land, owned and managed by 

the BLM. The mine is operated by American Barrick Resources, a Canadian 

company (•·Barrick•). 1btatl ore reserves at Ooldstrike are estimated by the company to be 20,100,000 ounces. Barrick lll8lbted its OUtput for $422 per ounce in 

1992, according to the company. 

. Congress has been debating reform of the 1872 Mining Law for several 

years. Reform would mean that the Canadian Barric1c company would pay the 

American people a fraction of the gold wealth it is taking from American aoil - a •royalty.• Yet, if Barrick can complete the •patenting• process in time, it will 

escape having to pay a royalty because its mine will become private land, for the 

price of $5.00 per acre. 

In March and April, 1992, Barrick filed a series of applications for patents 

to 1144 acres of its mine areas around the Goldstrike site. In October and November, 1992, the company received the •first half of certificate for patent• to 1038 

acres, The final patent certificates now await signature and issuance by the Department of the Interior. If these patents are issued, Barrick will pay $5,190.00 to 
166 

MINERALPOUCY.CENTER, ET AL. 

STATEMENT: 11MARCH93, 4 

the Treasury for a resource with a gross value of $8,482,000,000 at Darrick's 1992 

reali7.ed prices. 

Minenl Policy Center has discovered that the Bureau of Land Manqement employed a DeW and Improper procedure to nJ.Sh these patents 

throa&h the process faster than would have otherwise been poalble, in an attempt to complete the pveaway before Conp-ea can act. 

'lb acquire mining claims by patenting, a claimholder must prove that a 

•valuable mineral deposit" has beeo "discoven,d" on the claims, and that his claims 

had priority ~ all othm. The Bureau of I.and Management employs specialists 

known as "mineral euminets" to evaluate whether claims satisfy the "discovery• 

test - that is, whether the claimed mineral can be mined and marketed at a profit. 

This is a complex evaluation. In addition to the costs of mining, the costs of closing down a mine and restoring the landscape must be weighed to determine whether a mine is truly "valuable.• At modem open-pit gold mines, where as much as 

sixty tons of rock may be mined for·a single ounce of gold, the cleanup costs a."C --

or should be - substantial. 

The total sequence of processing a patent application usually tam about 

two -years. Often, more time is required. Howeva-, Barrick managed to complete 

the entire procedure in a few months. 'Ibis was possible because tbe BIM allowed Barrick to evaluate Its own claims. 

Under a DeW and unpubUcbecl •Pilot Project,• the DIM allowed BSl'-

rick to hire outside mlaenl eilamlnen to perform the evaluation of •c1ncov- · 

ecy• on Barrick'• m1niq dalms. 1be t!pN'Y!lists who cletermlned whether 

these dalms should be patented for $5.00 per acre received payment for their 

work directly 1nm the c.npany wbldl wanted a •yes• answer. 1bls IS"& flagrant conflld of iatenlt, wbldl BLM Is not Just allowing, but encouraging. 

Banick Is the only campaliy to c:emplete this process so far, but· If this abusive 

"Pilot Project• ls allowed to continue, the nJSh to patent will ~~te. 

Not only does BJ.,M now allow companies to hire their own claim evaluaton, the Bureau allo holds the mlnenJ eurnlnatlon reports in conftclence, 

and will not permit pablle rmew. 11aese reporti wblch are paid for by the 

claim bolder are IUled by BLM to Justify patmtin& Yaluable lands for a nominal fee, while the reports themselves remain a secret between BIM and .the 

mlnen. 

The Bureau and tbe Bulldozen: 

Thus the Bureau of Land Management is improperly bulldor.ing miniqg 

patents forward, with its new process of inviting miners to pay for their ·own paten1 

evaluation. Furthennom, the Bureau is obstructing public intmcst groups' itivesti• 

gations to find out what is happening with patenting of mining claims. 
167 

MINERAL POLICY CENTER, ET AL •. 

STATEMENT: 11MARCH93, S 

BLM does not have adequate central, current, data on the status of patent 

applications for mining claims. Public interest groups must contact a number of 

decentrali7.cd locations to get information whlch is not months out-of-date. Nonetheless, in June, 1992, the Director of the BLM issued Instruction Memorandum 

No. 92-245 which directed all field offices to refer all inquiries about the Mining 

Law program to the W.Uhington Office. A copy of this Instruction Memorandum 

is attached to my Statement. The local offices where current information on claims can be found were told not to divulge that information. This is a serious attempt to 

impede access to claims information, and a renewed demonstration of BLM's unwillingness to protect the public's interest in sound minerals management. 

The Rest of the Giveaway 

The Barrick claims are only a fraction of the total amount of public wealth 

at bawd to min~• patents. · Many valuable mining properties are currently being 

pressed to patent by companies cager to avoid paying royalties or to avoid meeting 

new environmental standards. 

Because BLM does not make the information available, Mineral Policy 

Center {las canvassed to determine the amount of precious metals now in the patenting pipeline. Our latest survey has identified twenty-five major mines which are 

being patented, with a total &JOSS mineral value of more than $86,000,000,000. 

These range from the ACC bentonite mines in Wyoming, estimated at $6,000,000, 

to the Stillwater Platinum/Palladium mine in Montana which has total mineral re--

serves with a gross value over $38,000,000,000. 

These are gross, not net, values. If a 12.5% royalty is adopted, as Mineral 

Policy Center has recommended for several years, these mines would represent an 

eventual revenue of $10,750,000,000 to the Tteasury. 

Plugging the Patenting 

I request that the Subcommittee call on the new Director of the Bureau of 

Land Management to rescind the 1992 direction to local offices to deny information 

requests. The Bureau should be directed to assemble and publici7.e complete and 

timely information on the amount and value of mining being conducted for free 

under the Mining Law, not to delay and impede public scrutiny. Further, I request 

that all mineral examinations be made public information prior to issuance of a patent. If a patent is to be issued, the public must have an opportunity to review 

the basis for that decision. 

The evaluation of the Barrick patents through the improper "Pilot Project• 

should be discarded. The consideration of Barriclc's patent applications should be 

re-started from scratch. Barrick cannot be allowed to acquire any vested rights by 
168 

MINERAL POLICY CENTER, ET AL. 

STATEMENT: 1 IMARCH93, 6 

having hired its own mineral examiners, and the entire evaluation of these patent 

applications must be recoosidetcd. 'The Secretary's past delegation of patenting 

authority did not include the authority to place crucial power over the patent review 

process in the hands of its beneficiaries, and BLM's staff-level actions were improper and invalid. . 

But the final responsibility for the Barrick incident and the other patenting 

giveaways rests at the feet of Congress, and specifically the United States Senate. 

Three times, in 1990, '91, and '92, the House has adopted a moratorium on patenting u part of the appropriatioo1 bills for the Interior Department. Three times, the 

U.S. Senate has rejected the moratorium. Four days after the first rejection, the 

Stillwater Mine patent applications cited above were filed. 

This Subcommittee, in addition to taking swift action on H.R.322, should 

pass a temporary emergency moratorium bill to prevent the issuance of any more 

patents under the 1872 Mining Law while comprehensive reform is deliberated. 

Lessons for H.R.322 from the Suminit(viUe) 

. At Summitville, Colorado, a cyanide heap-leach gold mine abandoned in 

1992 by another Canadian firm, Galactic Resources Limited, is leaking acid, cyanide, and heavy-metals contamination into the Alamosa River. While only a small 

part of the Summitville site lies on public land (the rest has been •patented• under 

the 1872 Mining Law in the past), the Summitville site demonstrates the immediacy · and scale of environmental problems from modern mining, and the need for 1872 

Mining Law reform. 

Mineral Policy Center is cooperating with three major gold-mining firms to 

conduct a professional engineering review of the Summitville site. Final results of 

that study are not available yet. However, some facts are clear: 

• Most mining at the site is recent, having begun in 1986, though there was 

historic activity there. The problems are new, not historic. 

• The site is leaking acid mine drainage, cyanide, and heavy-metals far in 

excess of BPA water quality standards. 

* The company and its subsidiaries have declared bankruptcy in the U.S. 

and Canada. 

• EPA is using Superfund emergency authority to try to prevent greatly 

increased toxic runoff wjth Spring snowmelt. EPA activities are 

currently costing $33,000 per day. 

• Cleanup is estimated to cost between $20,000,000 and $70,000,000. 

• Total bond on hand is $4,700,000, held by the State of Colorado; 

• The U.S. Forest Service relied on the State of Colorado to hold -financial 

security, and does not hold any separate bond, though National 

Forest lands are affected by the Summitville mine and associated 
169 

MINERAL POLICY CENTER, ET AL. 

STATEMENT: 11MARCH93, 7 

exploration activity. 

• State of Colorado did not take adequate timely preventive measures to 

protect the public interest. 

While we strongly support the general principles of H.R.322, we believe 

the Summitville example shows that additional measures are needed beyond the 

language now in the bill. These should include at least the following requirements: 

• Insurance against extraordinary environmental failures such as appear to 

exist at Summitville should be a condition of Plan of Operations 

approval. The State of Colorado only required that financial security address projected •n,cwnation• costs which did not include major 

water-quality repairs. Bonding for •rec1amation• only will not protect the public. 

• To qualify for participation in the new Hardrock Abandoned Mine Reclamation (•HAMR•) program in Title III, states must adopt regulatory programs for all hardrock mining operations within their boundaries. These programs must match or exceed the stringency of the 

Federal program mandated by H.R.322. 

• Approval of plans of operations must be for a limited time period, to 

allow for plan review and modification when now circumstances are . discovered. Co1otado is encountering serious obstacles to effective 

regulation of mines because its programs have historically approved 

•tife-of-mine• permits. The provision in §201(h)(l) of H.R.322 that 

allows extended-term approvals sh0uld be deleted. 

In addition, the language at §203(e) regarding limits on delegation of authority by tho Seeretaly should be amended to make clear that any required financial security must be held by, and in the name of, the responsible Federal agency. 

As Summitville graphically demonstrates, reliance by Federal authorities on State--

held bonds is not acceptable procedure. 

The Zortman and Landusky heap-leach gold mines,· located on BLM land in 

Montana, further demonstrate the environmental problems which the 1872 Mining 

Law invites; a recent Billings Gautu article about that site is attached to this 

Statement. 

Additional Improvements 

Beyond the points noted above, additional improvements should be made to 

H.R.322 as introduced by: . 
170 

MINERAL POLICY CENTER, ET AL. 

STATEMENT: 1 IMARCH93, 8 

• Revising the "Coverage• clause at §lOl(c) to encompass the full scope of 

activities necessary. As introduced, this clause contradicts the intent 

of the Bill to address reclamation and mineral activities on some 

areas which will not remain open to location under this Act. 

• Eliminating the claim rental mluction for •Diligent Development Expenditures• provision at §104(b). 

• Revising the transition procedures in §405 to bring all plans of operation 

into compliance whenever they are modified, or within three years, 

whichever is shorter. 

• Requiring all •notice• operations under current BLM regulations to comply with the new Act immedwdy, through revision of §40S(b)(3) • . 

"Notice" activities have no statutory mcognition prior to the passage 

of H.R.322, and they should not be granted any special status. 

• Setting the royalty rate in §410 at 12.5" of the value of production, as recommended by President Clinton in his budget message; 

• Incorporating a requirement for re-authorization of the Mineral Exploration and Development Act at periodic intervals. Much of the mischief of the 1872 Mining Law arises from the absence of any such 

requirement. Wise as we now have become, our new replacement 

for the 1872 Mining Law may, in time, acquire its own ignominy if 

. no re-authorization requirement is included. 

These notes identify some specific improvements which are necessary if 

H.R.322 is to fully protect the public inteiest. We have additional recommendations which we would be.pleased to discuss with Subcommittee staff as the legislative PIOCe:55 continues. 

Conduslon 

Chairman Lehman, CongteSSman Rahall, Jdorm of the 1872 Mining Law is 

urgently needed to protect the Treasury from further plunder, the environment 

from further pollution, the public domain from further destruction. 

The ~0111 on whose behalf I appear today applaud the progress 

which Congressman Rahall and the Interior Committee has made in the past, and 

which this Subcommittee is resuming, toward final completion of this landmark 

task. We urge you to continue, with all possible speed. 

Time is not on our side. One \tlncbd twenty-one years of special privilege 

has not been enough to satisfy the mining industry. While Congress deliberates, 

the mine.rs are rushing to pafent and complete thdr talceover of America's mineral 

inheritance. The six years which reform of the 1872 Mining Law has already 

consumed, since Chairman Rahall's first Oversight Hearing in 1987, have been 

years in which millions of ounoes of gold and other precious metals have been 

taken for free, years in which billions of tons of solid waste have accumulated 
171 

MINERAL POUCY CENTER, ET AL. 

STATEMENT: 11MARCH93, 9 

without responsible cleanup plans; and have been years in which the mining industry has accelerated its patenting of valuable ores to remove them from public 

ownership and federal management. 

A number of individuals have assisted in the research for this testimony; I 

would like to specifically commend Thomas Hilliard, of Mineral Policy Center's 

staff; whose diligence uncove.red much of the information herein. ~ are grateful 

that the kind of "discovery test• at which Tum excels is not subject to patenting. 

Thank you for this opportunity to testify. I would be pleased to answer any 

questions you may have. 

• • • 

Attachments to Statement of Mineral Policy Center, et al.: 

• A Chronology of Votes and Other Key Dates ••. • Instruction Memorandum No.92-245, Bureau of Land Management, 4 June 1992. 

Press Clippings: 

"Mi.ric disaster worsens to tune of $33,000 a day,• The Denver Post, 21 February 

1993. 

"Mine'a toxic leaks render river lifeless,• The Denver Post, 11 November 1991. • Acid, metals found in mine discharge,• Billings Gautte, 23 February 1993. 

TBSTPYl 1.MR3 
172 

MINERAL POLICY CENTER, ET AL. 

STATEMENT: l1MARCH93, 10 

Chronology of Votes 

and Other Key elates in 

1872 Mining Law Reform in the U.S. Congress: 

11 March 1993 

** 1993: ** 

16 Mar 93: Hearing, Senate Subcomm. on Mineral Resources Development 

& Production (Akaka, Chair)(scheduled). 

11 Mar 93: Hearing, House Subcomm. on Energy & Mineral Resources 

(Lehman, Chair). 

28 Jan 93: S.257, "Mineral Exploration & Development Act of 1993, • 

introduced (Bumpers + 12). 

5 Jan 93: H.R.322, "Mineral Exploration & Development Act of 1993," 

introduced (Rahall +3). 

** 1992: ** 

4 Oct 92: House debates, votes on amendments to H.R.918; no vote on final passage. 

23 Sep 92: - Hou~te conference drops both Reid mining package and 

House claims moratorium from FY'93 Interior 

Appropriations bill; rclains $100/claim holding fee. 

S Aug 92: Senate adopts Reid •compromise" mining amendments (American · Mining Congress policy) to FY'93 Interior Appropriations 

bill, rejects patenting moratorium, 52-44. 

24 Jun 92: House Interior Committee marks up and passes H.R.918, 26-19. 

10 Jun 92: Rahall Substitute to H.R.918 released. 

** 1991 ** 

18 Dec 91: 

13 Sep 91: 

18&20Jun: 

11 Jun 91: 

Senate Mining Subcomm: Field hearing on S.433, Salt Lake City, 

Utah. 

Senate floor vote defeats patenting moratorium on FY'92 Interior 

Appropriations blll, 47-46 (House later recedes in 

confecencc). 

House Mining Subcomm: hearings on H.R.918. 

H.R.2614, "Mining Law Reform Act of 1991, • introduced 

(deFazio)(similar to S.433). 
11 Jun 91: 

25 May 91: 

3May91: 

13 Apr 91: 

12 Apr 91: 

9 Apr 91: 

20 Feb 91: 

6Feb 91: 

** 1990 ** 

22 Oct 90: 

16 Oct 90: 

13 Sep 90: 

6Sep90: 

24 Jul 90: 

23 Jan 90: 

6 Jun 89: 

18 Oct 88: 

22 Dec 87: 

23 Jun 87: 

1986: 

173 

MINERAL POLICY CENTER, Er AL. 

STATEMENT: 11MARCH93, 11 

Salatc Mining Subcomm: Hearing on S.433 and S.785. 

House Mining Subcomm: Field hearing on H.R.918, Fairbanks, 

Alaska, 

House Mining Subcomm: Field hearing on H.R.918, Santa Fe, 

New Mexico. 

House Mining Subcomm: Field hearing on H.R.918, 

Reno, Nevada. 

House Mining Subcomm: Field hearing on H.R.918, Denver, 

Colorado. 

S.785, •Minerals-Policy Review Commission Act of 1991" 

introduced (Bums + 8)(drafted by Northwest Mining 

Association). 

S.433, •Mining Law Reform Act of 1991," introduced 

(Bumpers +6). 

H.R.918, •Mineral Exploration and Development Act of 1991 ", 

introduced (Rahall +2). 

Senate floor vote defeats patenting moratorium, 50-48, on 

ge.nnaneness challenge (House later recedes in conference). 

Salate·Appropriations Comm votes 17-10 to add moratorium on 

patenting of claims to Chairman's mark. 

Sellatc Mining Subcomm: hearing on royalties. 

House Mining Subcomm: hearing on H.R.3866. 

Regula Rider for m()l'atorium on patenting of claims included in 

H.R.5769, Interior Appropriations. 

H.R.3866, •Mineral Exploration and Development Act of 1990, • introduced (Rahall + ). 

S. 1126, •Mining Law of 1989, • introduced (Bumpers + ). 

Bumpers places 1872 Reform statement in Cong. Record. 

Federal Onshore Oil and Gas Leasing Reform Act of 1987 

enacted in Omnibus Budget Reconciliation Act. 

House Mining Subcomm. holds oversight hearing on 1872. 

Reagan Administrati~ patents 82,000 acres of oil shale claims 

for $2.50 per acre. 

* • • 

CHRONOLO,MR3 

Tl!STl'Yl l .MRJ 
174 

UNITED STATES DEPARTMENT OF 'I·HE INTERIOR 

BUREAU OF LAND MANAGEMENT 

WASHINGTON, O,C. 20240 

June 4, 1992 

Cnstruction Memorandum No. 92-J~{;; 

Expires: 9/30/92 

ro: All Field Offices 

~rom: Director 

In Reply Refer To: 

3800 (660) 

RECEIVE[) 0 9 MAR t993 

,ubject: Requests for Minerals Statistical Information 

t"ROGRAM AREA : Mining Law Administration 

ISSUE: Numerous requests for statistical information in the · 1ining Law Administration program are proving to be burdensome 

!nd duplicative to the field office. 

3ACKGROUND: Field offices are required from time-to-time to 

;ubmit statistical . and other inf.ormation in tile Mining Law 

\dministration program to the Washington Office (WO). This 

information covers mining claims, mineral patent applications, 

>atents, acreage, etc. Frequently, the field offices are · ~equested to provide the very same information to a variety of 

::-equesters, both within and out of the Government. ·-·-

?OLICY: Effective i111111ediately, requests for information related 

;o the Mining Law Administration program that have previously ~een provided or are routinely provided to the WO should now be 

caferred to the WO for action. Thia will allow for responses to :>e made on a national level and will ensure completeness of ~esponse. For -example, requests for information from the semisnnual mineral patent -application status reports should be 

~eferred to the WO for response. 

rIMEFRAMES: This policy takes effect immediately upon receipt of 

c:he instruction. 

3UDGET IMPLICATIONS: None. 

o.NUAL/HANDBOOK SECTIONS: None, 

~OORDINATION: Usual contacts. 

EDUCATIONAL MATERIAl FROM 

MINERAL POLICY CENTER 

1325 MASSACHUSETTS AYE. NW, 11550 . WASHINGTON, D.C. 20005 
175 

CONTACTS: Paul Politzer W0-660 (FTS 202-208-7722) or Bill Lee 

W0-660 (FTS 202-208-4147). 

tl-1'·~· 

Adam A. Sokoloski 

2 

Acting Assistant Director 

Energy and Miner~l Resources 

EDUCATIONAL MATERIAL FROM 

MINERAL POLICY CENTER 

1325 MASSACHUsms AVE. NW, #550 

WASHINGTON, D.C. 20005 
176 

Mr. LEHMAN. Let me, without getting into cinematography here-I will explain cinematography to you later, Nick-he is wearing shoes. 

Let me, just before I get to some general questions, get into some 

of the things you brought up, Phil. 

With respect to the process that was set up at BLM to fast track 

these patents, was there public input into that decision? 

Mr. HOCKER. To the best we have been able to discover, we have 

no record of it having been approved by the Director. It certainly 

was not known or approved by the Secretary so far as we know. 

There was no knowledge of it. 

In fact, many people in the mining industry said, well, how did 

Barrick manage to do this so quickly when it became known 

around the community that these patents were about to be eligible 

to be signed? You know, I have been waiting for my patents to go 

through for 2 or 3 years, they said. What did Barrick do right? 

So it is not only not widely known to the public. It is not even 

widely known in this room. 

Mr. LEHMAN. Was it noticed in the Federal Register as a change in the procedures? 

Mr. HOCKER. Categorically, we are not aware of it having been. 

We have asked questions like that of people who would have pointed it out to us had it been, I believe. I cannot say it has not. 

Mr. LEHMAN. Why do you think the Goldstrike mine was picked 

as a test here? 

Mr. HOCKER. I don't know that it was specifically picked as a 

test. The opportunity was available, and they availed themselves of 

it. I don't have specific information on that. I believe there may be 

people in the room who have. 

Mr. LEHMAN. So then you are quite satisfied with Secretary 

Babbitt's rescinding of the authority of BLM to issue patents at the 

present time? 

Mr. HOCKER. I believe it is the best he can do under the circumstances. Obviously, the Secretary can't burden himself with reviewing each patent application indefmitely. I hope what he intends to do is both put in place a review of the patenting process but also to require BLM to assemble better information on what is 

going on. 

The data that we have, we believe, are the best that anyone has 

as to the value of public property that is currently at stake in this 

process. Yet, I say that knowing that these are not terribly good 

data on which to base a decision. 

Mr. LEHMAN. Probably the main thrust of the argument against 

moving forward with this legislation is the economic impact of it. 

I am sure that is what we are going to hear in a few minutes and 

what several Members have talked about earlier. That impact coming down, basically, to potential loss of jobs in the industry which 

is very sensitive to all of us here and to a lack of competitive ability 

as far as this nation is concerned in this field as well. I would like 

to open it up, give you an opportunity to respond to that central 

argument. 

Mr. HOCKER. Why don't I speak for a moment? Perhaps others 

on the panel will have something they would like to offer. 
177 

I think Mrs. Vucanovich said it well a few minutes ago. She said 

metals are important to society. And it is my belief that metals are, 

in general, underpriced right now and that the costs of extracting 

metals in a way that is sustainable-which may be the best way in which to think about this-are costs that can easily be borne by the users of those materials. 

Right now, we have an example. It is not the only one in the 

country, by any means. We have a situation where only a fraction 

of the total cost of an industry is being borne by the industry itself. 

A large part of that cost is not lost, doesn't go away. It is just being 

shifted to other P.arties. 

The Summitville mine is an example. The company made substantial profits for a short term or at least they took a lot of cash 

out. Right now, the EPA is being forced to step in under 

Superfund. The company has gone bankrupt. We are paying about 

$33,000 a day simply to hold the status quo at that site, to operate 

facilities-by the way, hiring the same people who were running 

the mine a few months ago but now their paychecks come from 

Uncle Sam-in order to control and prevent the further catastrophic spread of the problem which they created. 

Those are costs which the whole public is bearing. Galactic is not 

bearing those costs. Our. goal is not to impose an unfair burden on 

the industry but to make sure the costs of extracting these materials are borne by the companies that extract them and, ultimately, 

their users. 

Mr. LEHMAN. Anyone else care to comment? 

Ms. HOHMANN. I would add to that. 

Again, our reading of the land-use planning and unsuitability 

provisions of this bill may not mean that mines are not permitted 

m every case. It may mean that they are permitted with additional 

environmental safeguards. The industry is moving forward and developing technology that, for instance, deals better with accident 

contingency, better liners, better leak detection technology. We 

think, as we move the industry in that direction, additional jobs 

are going to be created. 

I would also concur with Secretary Babbitt's notion that reclamation jobs are indeed high-paying, real jobs. And I would disagree with Congressman Young on that. 

Mr. PARKS. Mr. Chairman, you know, I would like to respond to 

it, too, with an example from the mine in my backyard, the Mineral 

Hill mine in Cherry, Montana, about five miles from where I live. 

It is located on private land and has had relatively little involvement with the Federal permitting process. 

When it was initially permitted, there was a little slop-over onto 

Federal land for some of the tailings operation. The Forest Service 

was involved in the permitting process. But the ore body itself is 

all on long-since-impacted land. 

It is a ~ood. operation. It is one that, in fact, meets, I think, all 

the critena that would be imposed upon any operation in this country under H.R. 322. And it is in business. 

The question I have is, how fair is it of the investors in the Mineral Hill mine to compel them to meet these standards and put 

them at a competitive disadvantage effectively against a mine operating under a Federal subsidy? We don't think it is particularly 
178 

fair, and I would hope that the owners of that property would also 

think about that. 

Mr. LEHMAN. Thank you. 

Let me move on to one other area here before I surrender the 

time. 

I have a concern about the citizen suit provisions in the bill, and 

based on my own experience where, not in the mining area but 

other environmental areas, I have been party to negotiating agreements, if you will, among different entities. One comes to mind 

where we had 17 environmental organizations that agreed to a pol- icy. We got the Forest Service aboard, the timber industries aboard 

and thought we had a real good deal until we found out we had 

to have all 20 environmental organizations because 3 went out and 

sued us and stopped the whole thing. 

I get real concerned that we will make a lot of work for lawyers 

here and make it possible to stop anything that could possibly happen because of the extension of standing. 

I would like to get things solved and like to have people get on 

with their lives, not have this expensive morass of litigation that 

I don't think does anybody any good. I would like to hear your response to that. 

Mr. HOCKER. I am not familiar with the negotiation which you 

are speaking to. I am not sure it was citizens that was actually the 

vehicle involved or in EPA litigation or some other form of law. 

But I think that the problem of what is known in the sort of 

science of regulatory affairs as captive regulators is one which has 

been with us as long as there has been government regulation. 

The reason the citizens' suit was invented in 1970 and the reason 

it has become basically a standard fixture of virtually every comprehensive piece of environmental legislation since is the concern 

that regulatory bureaucracies tend over time to get very cozy with 

the regulated industry. Mining industry is a very close example of 

that. In fact, the breakdown of the Colorado regulatory program in 

Summitville, unfortunately, gives us an example of a program which had much to be said for it but where, frankly, a lack of vigi- lance led to lack of action. 

I think that we have to accept some inefficiencies in litigation as 

a price of having some scrutiny to keep the regulators honest, to 

be quite honest. 

Mr. LEHMAN. I guess my concern is that saying that the regulators were too cozy with the regulated is another way of saying I 

didn't get my way; therefore, that is the reason. 

Mr. HOCKER. Well, when you look at the result which has come 

out there, I don't think that it is a question of one party saying 

they didn't get their way unless their way was to have clearer violations of Clean Water Act standards because the operation was allowed to go ahead without adequate scrutiny. 

I am not sure whether there is a simple answer to this. I do 

think that eliminating citizen suit provisions will lead to, frankly, 

over time, abuses which will be worse than the problems that 

might arise with citizens' suits. 

Mr. LEHMAN. Thank you very much. 

Mrs. Vucanovich. 
179 

Mrs. VUCANOVICH. I ask unanimous consent to include the report from the Colorado School of Mines on dealing with the issues of 

economic analyses of the Mineral Exploration and Development Act 

of 1993. Mr. LEHMAN. Without 

8

~blection. 

Mrs. VUCANOVICH. Th you. [The information follows:] 
180 

All ECONOMIC UIALYSIS OF TJIB 

MINERAL B.ZPLORATIOll AND DBVBLOPNBNT ACT OF 1993 

prepared for: 

Emil Romagnoli, Director 

Governmental Affairs 

ASARCO, Inc . 

1600 M Street NW 

Washington, DC 20036 

prepared by: 

Wade E. Martin, Ph.D. 

Environmental Policy Center 

Mineral Economics Department 

Colorado School of Mines 

Golden, Colorado 80401-1887 

I would like to thank Lisa McDonald, Rod Eggert, Gail Vallance and 

Allan Casey for their assistance in preparing this report. 
181 

J:HTRODUCTJ:011 

The General Mining Law of 1872 evokes much emotional and 

substantive debate regarding its effectiveness in regulating the 

mining activities of the domestic mining industry. There are 

numerous stories told regarding the abuse of the Mining Law, 

particularly the patenting provisions of the law. Over the years 

there have been several bills presented in Congress to revise 

and/or replace the law with a more restrictive alternative. 

During the opening session of the 103rd Congress the "Mineral 

Exploration and Development Act of 1993" (HR 322) was introduced 

in the House by Representative Nick Joe Rahall (D-WV). Senator 

Dale Bumpers (D-AR) also introduced an alternative to the General 

Mining Law entitled "Mineral Exploration and Development Act of 

1993 11 (S 257) to the Senate. 

At the request of ASARCO, Inc. the Environmental Policy 

Center at the Colorado School of Mines was asked to perform an 

independent economic analysis of the proposals. The analysis 

performed by the Center is divided into two phases. The first 

phase focuses on a qualitative assessment of the impacts of the 

proposals. This will then be followed by a quantitative analysis 

of the issues identified in the qualitative phase. Due to the 

time constraints on the project, phase two has yet to be 

completed. The focus of this analysis is H.R. 322, the bill 

introduced by Congressman Rahall. 1 

As part of his introductory remarks, Congressman Rahall 

1

A similar analysis of s. 257 is being prepared and is 

available from the author. 
182 

stressed eight points that are the focus of H.R. 322 . These 

eight points are: 

maintain the right of self-initiation, 

guarantee secure tenure for claims, 

eliminate different treatment for different types of 

claims and the rule of discovery, 

eliminate the patenting provision, 

impose "reasonable" diligence requirements, 

introduce surface rental fees and production royalties, . specify reclamation requirements, and 

integrate mining activities into the multiple use framework for land use planning. 

Each of these points generates economic costs and benefits, as 

well as noneconomic impacts. It is important to specifically 

identify these impacts to determine the desirability of mining 

law reform. The qualitative assessment of H.R. 322 will be based 

on the relevant natural resources and environmental economics 

theory and applied studies. 

ECONOKXC XKPACTS OP B.R. 322 

The debate regarding the reform of the mining law has taken 

many forms over the years, however, some consistent themes have 

arisen. Michael Mccloskey of the Sierra Club summarized2 the 

prevailing themes as: lack of adequate return to the us 

Treasury; fraudulent acquisition of mineral lands; loss of public 

control of patented lands; and role of mining as the "highest use 

of the land". H.R. 322 addresses each of these issues, as well 

as several others, to varying degrees. This analysis of H.R. 322 

will first address specific issues in the order that they are 

2

see Mccloskey, Michael, 1989, "The Mining Law of 1872" in The 

Mining Law of 1872; A Legal and Historical Analysis, National 

Legal Center for the Public Interest, Washington DC. 
183 

presented in the bill. This will be followed by an overall 

assessment of the general impacts of the bill. 

J:•• ue 11 

section 103(h) states that "the boundaries of a mining claim 

located under this Act shall extend vertically downward." 

Although the surface area that a mining claim covers is larger 

under H.R. 322 than under the General Mining Law, extralateral 

claims are no longer covered. Due to the proposed change, a 

mining firm no longer has rights to follow a vein, thereby, 

possibly reducing the ability to mine a substantial portion of 

the discovery making the mine less economic. 

J:•• ue 12 

Section 104 of H.R. 322 proposes a "rental fee" on mining 

claims. Such a rental fee would increase the marginal cost of 

production, thereby, shifting the supply curve resulting in a 

higher price and a lower quantity for the final good. Also, the 

rental fees defined in section 104(a)(1) of the Act provide lower 

bound values for the fees. It is unclear whether or not the fees 

will be substantially higher, under what conditions would the 

fees be set, would the fees vary by location depending on the 

alternative uses of the land. The uncertainty regarding the 

rental fees makes it difficult to determine the economic value of 

the property. 

J:• sue 13 

The next issue that affects the economic viability of a 

mining project regards the payment of the minimum rental under 

3 
184 

section 104(c). This section of the Act states that when the 

"claim holder is prevented from making diligent development 

expenditures under subsection (b) by reason of - (i) any judicial 

proceeding or administrative action .•. ". It is unclear whether 

or not "administrative action" includes activities such as 

preparing an Environmental Impact Statement under the 

requirements of the National Environmental Policy Act of 1969 or 

preparing a Plan of Operations in compliance with the Federal 

Land Policy and Management Act of 1976. During the permitting 

phase of a project the firm is spending a significant amount of 

money without any income from the project. 

:Issue #4 

Under section 20l(b)(2)(B) the Act states that the firm will 

~ be allowed to conduct mineral activities related to 

exploration until an "adequate financial guarantee isestablished". This bond is required even though the firm is not 

required to submit a plan of operations for the exploration 

activity in this section due to the "minimal and readily 

reclaimable disturbance". 

:Issue ts 

The mining permit application requirements outlined in 

section 20l(d) includes the requirement that the firm submit a 

complete history of all plans of operations held by the claim 

holder and all project partners. This requirement is then used 

to determine whether or not the applicant has any outstanding 

violations which could then result in a denial of the application 

4 
185 

under section 20l(g). The uncertainty involved regarding the 

magnitude of the violation required to cause an application to be 

denied adds to the risk associated with developing the property. 

It is also unclear at what level the decision will be made. A 

possible scenario could be a firm that has acquired a property 

that turns out to be in violation of the Comprehensive 

Environmental Response, Compensation, and Liability Act or its 

amendments. Under CERCLA's joint and several liability 

requirements, the firm would be in violation of an applicable 

regulation at the site without ever having operated the property. 

The question then is, would this be grounds for denying an 

application at another site? 

Issue f6 

One of the more important issues regarding the economic 

impacts of the proposed Act relates to the requirements under 

section 20l(h) (2). This section requires that the firm commence 

operations with~ year of the time the plan of operations is 

approved. Due to the cyclical nature of the resource industry it 

is often economically desirable to delay production until market 

conditions are more conducive to economic success. For example, 

the Greens Creek mine in southeast Alaska completed the 

permi~ting requirements based upon an EIS in 1983, however, the 

mineral prices did not recover to the point of making the 

property economically viable until 1989. Had there been a 

requirement to modify the plan of operations production could 

have been delayed to the point that the property would not have 

5 
been developed. 3 

:Issue f7 

186 

The bond requirements under section 201(1) (1) imply that 

the amount of the bond be based upon the "worst case scenario" 

regardless of the probability of occurrence. once the value of 

the bond is determined, the review process provides an 

opportunity to modify the amount of the bond. This results in an 

increased level of uncertainty in planning the mining project, 

thereby, increasing the riskiness of the project. Also, the 

requirement that the release of the bond be delayed until the 

public has had an opportunity to comment will impact other 

projects that the firm could be pursuing once the bond is 

released. 

subsection (1) (5) (A) states that "After the operator has 

completed the backfilling ... ". Does this imply that all mines 

will be backfilled? Elsewhere in the Act it states that under 

certain reclamation plans backfilling will not be required. What 

is the impact of this on releasing the financial assurance? 

:Issue #8 

The reclamation requirements under section 20l(m) specify 

that the lands be restored to a "condition capable of supporting 

the use to which such lands were capable of supporting prior to 

surface disturbance, or other beneficial uses, provided such 

other uses are not inconsistent with applicable land use plans". 

3Development of the Greens Creek mine was delayed for other 

reasons as well, however, the low metals price was one of the most 

important reasons given for the delay. 

6 
187 

This leads to two important questions. First, who determines 

what is a beneficial use? Second, if an area does not have a 

land use plan, is the firm required to delay application until 

such a plan is developed to determine what is a beneficial use? 

The time delays associated with each of these issues are by no 

means trivial. 

Issue f9 

Section 201(n)(l) (D) states that "where surface of 

underground water sources for domestic or agricultural use have 

been diminished, ••• , such water resource shall be restored or 

replaced." Under the prior appropriations doctrine if the mine 

has the senior rights must the operator still restore or replace 

the water sources? 

Issue f10 

Does the reference to "practicable" in section 201(n) (5) (C) 

refer to economically or technically practicable? Would the firm 

or authorized agent be able to evaluate the tradeoff between the 

cost of performing the reclamation and the technical feasibility 

of the process? 

Issue f11 

The reclamation requirements specified under section 

201(n) (10) may possibly result in a moving target for the firm. 

Since the requirements specified by the Director of the Fish and 

Wildlife Service will need to be site specific it is important 

that a methodology for determining the requirements be consistent 

from site to site so as to minimize the cost of achieving the 

7 
188 

desired level of fish and wildlife habitat. 

Issue 112 

The additional standards that the Secretary may establish by 

regulation under section 201(0) may be inefficient if they are 

generic to the entire lands open to development. The absorptive 

capacity of the environment needs to be considered. For example, 

cyanide leach mining may be appropriate in very dry climates, 

whereas, it's use would be more restricted in a humid climate. 

The cost of meeting generic rules that may not be relevant to the 

proposed project increases the economic burden on the firm. 

Issue 113 

If a violation occurs section 202(b) (3) (A) states that the 

Secretary "shall determine the steps necessary to abate the 

violation in the expeditious manner possible, and shall include 

the necessary measures in the order. The Secretary shall require 

appropriate financial assurances to insure that the abatement 

obligations are met." Due to the remote location of many of the 

mine sites it is likely that the authorized agent of the 

Secretary will not have the expertise to determine the necessary 

steps to be taken, thereby, possibly delaying action that may 

make matters worse. Due to the penalties associated with the 

violation the operator has an incentive to act as expeditiously 

and effectively as possible. With the operator able to take 

action immediately it is often possible to minimize the impact of 

the violation and to do so at a minimum cost. 

8 
189 

Xssua #14 

The role of the public is prevalent throughout the Act. One 

of the areas that may result in significant uncertainty to the 

operator during the project planning phase is the citizen suit 

provisions in section 202(e). This section states that"··· any 

person having an interest which is or may be adversely affected 

may commence a civil action on his or her own behalf to compel 

compliance ... ". The court has recognized the validity of nonuse 

values from natural assets in natural resource damage assessment 

cases under CERCLA liability. 4 The court ruling in this case 

has opened the possibility that a citizen may sue based upon 

damages to their perceived option value or existence value5 and 

if not halt the proposed project at least significantly delay the 

process at substantial costs. 

Xssua #15 

The user fees specified in section 402 provide another 

source of uncertainty as well as an additional cost. This 

section states that the Secretaries of Interior and Agriculture 

are authorized to "establish and collect from persons subject to 

the requirements of this Act such user fees as may be necessary 

to reimburse the United States for a portion of the expenses 

4

Ohio v. The United States Department of the Interior, 880 F. 

2nd 432 (D.C. Cir. 1989) 

5

option value is the value an individual places on preserving 

the opportunity to use the resource at some time in the future. 

Existence value is the value individuals place on the knowledge 

that a given resource exists even if they have no intention of ever using that resource. 

9 
190 

incurred in administering such requirements." Are these fees to 

be set nationally or will they be based upon the estimates of the 

local authorizing agent? Who will determine what portion of the 

expenses will be billed to the operator? If the operator is to 

pay the salary of individuals involved in the regulatory process, 

does this include the inspectors and enforcement officials as 

well? Once again, this results in a great deal of uncertainty in 

the planning process which increases the cost of a given project. 

Issue #16 

If the regulations stipulated in section 403 are not 

promulgated in one year and the rest of the Act becomes effective 

how will this affect the approval of plans of operations? Since 

the plans of operation must be compatible with the land use plans 

and other regulations under title II of the Act any delay in 

promulgating the regulations may have a significant impact on the 

cost of permitting a project. 

Issue #17 

The requirement of section 405(b) (2) that a plan of 

operation for a project in existence prior to the effective date 

of this Act shall be valid for five years after which it will 

need to meet the requirements of title II implies that the 

operation may need to retrofit the production process at 

significant cost. Changing the design after the mine has been 

constructed and operating for a number of years would impose 

added costs that would not have been anticipated during the 

project evaluation phase, thereby, affecting the profitability of 

10 
191 

the project. These arguments also apply to the requirements to 

modify a notice after two years. 

Issue t1a 

Perhaps the most controversial issue affecting the economic 

viability of the hardrock mining sector is the implementation of 

a royalty as proposed in section 410. A quantitative assessment 

of the impacts of various royalty levels has been conducted 

elsewhere. 6 Qualitatively, economic theory clearly states that 

a royalty imposed on gross income will affect the optimal level 

of production. Not only will the royalty affect the quantity 

produced in each time period it will also change the time path of 

production, in effect tilting production toward the present. 7 

The impact of this may be that the firm will overinvest in 

capital equipment and increase production costs. 

There are also four issues of a general nature that will 

have a significant impact on the cost of doing business in the 

mining industry that are evident throughout the Act. These 

issues are: 

6

See for example Dobra, John L. and Paul R. Thomas, The U.S. 

Gold Industry. University or Nevada, Reno, 1991 and Davis, Graham 

& Stubbs and Coopers & Lybrand, Economic Impact of Mining Law ~. Denver, Colorado, January 28, 1992. 

7

The literature in this area is quite extensive. 

Representative of this literature is Garnaut, Ross and A.C. Ross, 

Taxation of Mineral Rents, Clarendon Press, 1983; Kumar, Raj, 

"Taxation for a Cyclical Industry", Resources Policy. June 1991; 

and Burness, H.s., "On the Taxation of Nonreplenishable Natural 

Resources", Journal of Enyironmental Economics and Management. vol 

3, 1976. 

11 
192 

relationship between the various agencies and their 

responsibilities under various legislative acts, 

the limits on the lands open to location, 

the impact on the timing of a project, and 

the technology requirements in the reclamation section. 

The cost not only to the firm but also to society associated with 

each of these issues needs to be considered in order to develop 

an efficient and effective Act. 

The firm is often placed in the position of needing to 

coordinate the various agencies involved in the permitting 

process, particularly when an Environmental Impact Statement 

needs to be prepared. An example of possible conflict is 

highlighted in section 204(e) (2) (D) where the Act states that an 

area shall be determined to be unsuitable for mineral development 

when "such mineral activities could adversely affect lands which 

include wetlands if mineral activities would result in loss of 

wetland values". Would it be the responsibility of the U.S. 

Corps of Engineers to determine that wetlands would be affected 

as it is now under a 404 permit or would the operator be able to 

secure a 404 permit but still not be able to develop the property 

because the BLM or Forest service determines the "wetlands 

values" would be affected? Once again, this provides an added 

dimension of uncertainty and the associated cost to the firm. 

The economic impact of the second point regarding the limits 

on the lands open to location has obvious results. It is 

important to determine exactly how much land will be set aside 

due to the various wilderness designations and other aspects of 

the Act. 

12 
193 

Under the current regulatory system it is not uncommon for a 

mining project to take two years to receive a permit to operate. 

The environmental requirements of NEPA, the Clean Water Act, 

Clean Air Act, etc. along with the increasing requirements 

associated with state and local legislation result in significant 

time delays in developing a project but address the environmental 

concerns of society. 8 The Act is unclear as to whether or not 

these environmental reports will be sufficient for the purposes 

of the new legislation. If not, will the added cost result in an 

increased level of environmental protection? 

The final issue of concern is the requirement to use the 

"best technology currently available" or the "best available 

demonstrated control technology". The requirement that an 

operator use a certain technology often does not result in an 

efficient solution as is proven in the environmental economics 

literature. Forcing a given technology removes the incentive for 

innovation in the treatment of waste or the methods used for 

remediation and reclamation . Once a technology is chosen as 

"best" it becomes very difficult to adopt new technologies as the 

dynamics of the market provide new and better solutions for 

environmental protection. 

It is important that the economic tradeoffs be examined in 

determining the desirability of replacing an existing regulatory 

8Two examples of state and local legislation are: the 

Environmental Impact Report required under the California 

Environmental Quality Act and the Large Mine Permit required by the 

City and Borough of Juneau, Alaska. 

13 
194 

system with an alternative system. We must be relatively certain 

that we are curing the problems that were perceived to exist in 

the first place. The issues raised by Mccloskey and the points 

made by Congressman Rahall when introducing the Act were 

interesting and thought-provoking, however, we must consider all 

dimensions of the issues and not react based upon problems that 

have been resolved elsewhere. 

14 
195 

Mrs. VucANOVICH. I wanted to ask Mr. Hocker a couple of questions. 

We keep referring to the Summitville issue. Isn't the real story the breakdown of enforcement by the Colorado Mine Land Reclamation Board and the U.S. Forest Service? 

The State's program is generally regarded as one of the best in 

the West or tlie nation. I would say not as good as Nevada's, but 

it is very good. 

But you have to give the board funding to do the job. And miners 

pay into the revolving account to pay for the Department of Environmental Protection inspection and enforcement. 

Now, our Nevada Department of Environmental Protection 

doesn't need an appropriation from the legislature. Isn't that one 

of the big problems, that it was entirely up to the Colorado Mine 

Land Reclamation Board and the Forest Service to be enforcing the 

requirements? 

Mr. HOCKER. That is certainly part of the problem, but I think 

we need to generalize for that specific case. The problem of State 

regulatory bodies being pressured and influenceed by concentrated 

economic forces is one long known in the mining industry and others. 

In the coal industry that same problem existed. There were State 

regulatory programs in place before the act was passed, but it was 

the ability of the companies to whipsaw States against each other. 

There was the ability of companies to bring heavy pressure to · bear 

to reduce the level of regulation and inspection and enforcement 

that was· employed, and the States were less well equipped to resist 

those very powerful forces. 

Mrs. VucANOVICH. Do you feel that is the case in Summitville? 

Is that your analysis of what happened there or what is happening there? 

Mr. HOCKER. I don't have the final word on Summitville, and we 

are cooeerating, the Mineral Policy Center, with several other companies m a very well-intended effort to try and get the better final 

word. 

But taking your premise that the problem was primarily one of 

a breakdown of enforcement, my point is that if that is the case, 

then we have to recognize that this is not a new problem, and that 

the only way to really cure that problem is to put baseline requirements for State programs in place so that those strong economic 

and political forces that companies can bring to bear have something in place to offset them, so that the State regulators can say, 

Well, it is true that this mine is going to bring a great deal of impact, favorable, for a while, to this community, but we must keep 

a certain level scrutiny on it. 

Mrs. VUCANOVICH. I think you need to back up those facts. I 

think that is an assumption that maybe isn't accurate. But in any 

event, I think that you need to point out that they are responsible for doing the job, and didn't. 

To change the subject a little bit, you brought up the issue of the 

fast-tracking mineral patents, but the only part, when we are talking about the Barrick: issue, is that the only thing that was fast 

tracked, was the mineral exam on the ground, certainly not the pa- perwork exercise. The first have final certificate issues before the 
196 

mineral exam is even prepared. I think implying that it fast 

tracked everything just isn't so. 

Mr. HOCKER. If I may, I am not sure that is entirely correct. We 

do not have any knowledge of a fast-track process for the first half, 

comparableMrs. VucANOVICH. But you are making the assumption right 

away that it was fast tracked. You are not giving any benefit of the 

doubt. 

Mr. HOCKER. I don't believe I ever made any such statement. But 

if I may, just for the record, the total time elapsed between 

Barrick's initial filing of their applications and their current status 

of being, they believe, to the best of my knowledge, eligible for issuance, is--

Mrs. VucANOVICH. It is my understanding they filed for a mineral survey 2 years ago. 

Mr. HOCKER. I am sorry. I don't seem to be able to put my fingers on a calendar. But I believe that the initial applications for 

patent were nowhere near that long ago. Excuse me one moment. 

Excuse me for the delay. It is our information that the applications for patent were initially filed in March and April of 1992 for 

these claims. That is what we have been told by the Bureau of 

Land Management. 

Mrs. VUCANOVICH. We are going to have a couple of votes here, 

so I am not going to question that. We will hear from our industry 

people who will be testifying. There are just a couple of things that 

I am concerned about. 

For one thing, we are changing the subject a little bit and talking 

about the bill, Section 202. Doesn't the grading standard in Section 

202 virtually preclude open-pit mining and absolutely preclude 

mining methods which will cause the formation of a glory hole by 

not granting a recognizable property right, by imposing rentals and 

a high open-ended royalty, by imposing expensive environmental 

studies on exploration and by conditioning mining on land-use 

plans, unsuitability studies, and an expensive applicant violator 

system? Isn't this bill really looking to remove the public lands 

from the mineral base? 

That is the conclusion that I draw from this bill. Is that not a 

correct assumption? 

Mr. HOCKER. I am very glad that you asked the question about 

the grading standards, because I think that demonstrates the care 

and the flexibility that has gone into drafting this bill by Chairman 

Rahall, former Chairman Rahall and his staff. 

There are waivers provided under appropriate circumstances. I 

frankly think that the waivers are more liberal than is appropriate. 

And I would prefer to see them narrowed down. But there is provision made for responding to specific circumstances and to allow 

flexibility in the application of the standards. 

Mrs. VUCANOVICH. You didn't answer my question, though. Don't 

you believe all of these requirements are really looking to remove 

the public lands from the Nation's mineral base? 

Mr. HOCKER. Mrs. Vucanovich, I think Secretary Babbitt put it 

well this morning, and that is why I responded the way I did. I 

think if we look line by line at what this bill does and look at the 

actual way the bill will work as opposed to dealing in ideological 
197 

positions, that we will find that the industry cannot only survive 

and prosper but in fact that it will be better equipped to compete 

in an international sphere. I think if we can sit down and look at 

the bill line by line that way, we will all be the better for it. 

I would say, to directly answer rour question, no. But of course 

it is hard for that answer to be satisfactory to you, and it is frankly hard for your view to be satisfactory to me. I think that we may both do better if we look at it line by line and look at the actual 

impact and application of the provisions. Mrs. VucANOVICH. Well, I hope that we have an opportunity to 

do just that. I think we need to do that. 

I am going to yield back the balance of my time. I think there 

are a few others who have some questions, and we do have a vote. 

Mr. LEHMAN. Thank you very much. 

Mr. Rahall. 

Mr. RAHALL. Thank you, Mr. Chairman. 

Let me respond to the gentlelady from Nevada. ''The requirement of subparagraph (a) shall not apply with respect to an open-pit 

mine if the Secretary finds such open-pit or partially backfilled pit would not pose a threat to the public health or safety or have an 

adverse effect on the environment in terms of surface or groundwater pollution." 

So I think Phil answered that rather correctly. We are pretty liberal with our requirements in this reiard. 

Let me ask the panel a question wtth regard to the variance provision in the bill. In last year's bill we had variancelrovisions ap- plicable to existing operations once they are require to come into 

compliance with requirements of Title II. The purpose of this variance was to recognize, for example, that nobody expects to require 

the complete backfilling of the Bingham pit. 

However, there was a concern that the variance could become the 

rule rather than the exception to the rule. That was the reason we 

did not include it in this year's bill and chose to leave it out, in 

recognition of the continued need for some type of tightly drafted 

variance provision. What would your recommendations be in this regard? Mr. HOCKER. If I may lead off, others may have sug~estions they would like to make. It is my understanding that the distinction between different technology standards that is applied to different 

levels of operations provides substantial flexibility toward addressinf the problem of existing operations. don't have a final answer on that, but I think that is an oppor- tunity to recognize the needs of ongoing operations without opening 

up, frankly, a bag of worms at that we might not be able to close 

again. 

Mr. RAHALL. Let me tum then to one other area. Diligent development seems to be a major point of difference between this panel 

and what is in the bill. What are your concerns in regard to diligence development? Are you favoring a flat-out fee in lieu of allowing for any type of diligence credits as are proposed in H.R. 322? 

Ms. HOHMANN. The Sierra Club favors an outright fee. I think 

what you have done with escalating the fee over time is an adequate discouragement towards speculating. In other words, that increase of fee ought to get folks producing or get out. And part of 
198 

the purpose of this bill is to expedite swift, responsible mineral development. 

I don't think that we are in an era any longer where we need 

to have diligence on the land. What that creates is a situation 

where there is a lot of small destruction on the Federal lands, and 

it is just a small scarring that a cumulative impact is beginning to 

really, I think, get at us. 

So I would favor just complete deletion of any due diligence in 

this bill. 

Mr. HoCimR. Mr. Rahall, throughout the philosophy of H.R. 322 

I think there is evidence that in some ways some of the lessons of 

the Reaganomics are still being built into what we are thinking, the good lessons, because throughout the philosophy the bill is taking the approach of involving the government in mining operations 

on public lands only to the extent that it must be to protect the 

public interest. 

So the elimination of the discovery test, which involves the government in making a fact finding of marketability, which really in 

many ways has no bearing on the government's responsibilities, I 

think is a very important progressive step in H.R. 322 and in H.R. 

918 over current law. 

I think that then saying that the government has an interest in 

how a miner operates on a claimed piece of property, and that the 

government in effect will subsidize a miner who goes out and excavates as opposed to one who simply goes to the Vancouver Stock 

Exchange, is involving the government in business and marketing 

decisions in a way that is a conflict with the very progressive market philosophy of other parts of the bill. 

So I would argue that the rental or claim holding, depending on 

which term you want to use, provisions simply be set to compensate the government for the opportunity cost, if you will, of allowing that mineral property to be tied up over time by a miner. 

I agree with what Ms. Hohmann said about the very attractive 

feature of these progressively escalatin~ rates. But I think once the 

public has been compensated for lettmg miner X as opposed to 

miner Y control that mineral property for a period of time, what 

he or she with that property beyond that point is not our business. 

And the diligent development subsidy in effect puts the government in the position of saying how it prefers the miner to use his 

resource once a claim has been located. 

Mr. RAHALL. Thank you. 

I am through with my questions, Mr. Chairman. I just want to 

compliment the whole panel for their testimonies and add one word 

in addition to the chronology of votes that were part of the Mineral 

Policy Center is testimony. It is a very good chronology, except I 

don't think it is quite as exhaustive as it could have been or as we 

actually conducted it. 

I did have some hearings that were omitted from this chronology, 

some field hearings, oversight hearings, further investigations conducted by the subcommittee under my regime that are not completely listed in this chronology, and I would ask that that be made 

part of this record as well. 

Mr. LEHMAN. There certainly will be no objection to that. 

[The information follows:] 
199 

SUBCOIIMITTBB OH KIHIHG llD IIATUllAL RBSOURCBS 

Bearings Relating to Bar4rock Mining under the Mining Law of 1872 

During the 100th through 101st Congresses 

100th congress 

June 23, 1987 Hearing - oversight 

Mining Law of 1872 

101st congress 

Karch 7, 1989 Hearing - Oversight 

Mine Reclamation & Bonding Requirements 

April 18, 1989 Hearing - oversight 

Kay 16, 1989 Hearing - Legislative 

Abandoned Mine Lands 

June 9, 1989 Field Hearing - Legislative 

H.R. 737, to amend the Stock Raising Homestead Act, in Fresno, 

California 

July 1, 1989 Field Hearing - Oversight (Colorado) 

Legislative hearing on H.R. 2604, "Abandoned Minerals and Materials 

Mine Reclamation Fund" and Part II, field hearing, oversight on mine reclamation and bonding in Grand Junction, Colorado. 

Oct. 7, 1989 Field Hearing - Oversight Proposed Mining In Oregon Dunes 

Eugene, Oregon 

June 19, 1990 Oversight Hearing 

Regulation of non-coal mining wastes. 

septemller 6, 1990 Legislative Hearing 

H.R. 3866, "Mineral Exploration and Development Act of 1990." 
200 

U.S. General Accounting Office Investigation• Requested by Rep. Rahall Involving 

matters relating to the Mining l.ltw of 1872 

1. Abandoned Hardrock Mine Lands 

2. Non-Mining Use of Patented Claims 

3. Non-Mining Use of Unpatented Claims 

4. Cyanide Leaching 

5. Oregon Dunes 
201 

Mr. LEHMAN. I, t.oo, want to thank the panel for very good testimony today, and I will dismiss you now and let everybody know 

we have this vote, then 4 five-minute votes, then it will take us a 

few minutes to get back here. So we will reconvene the hearing at 

exactly 2:00 o'clock and hear from the next panel. Mr. HOCKER. Thank you, Mr. Chairman. We appreciate the opportunity. [Whereupon, at 1:15 p.m., the subcommittee was recessed, to reconvene at 2:00 p.m., this same day.] 

PANEL CONSISTING OF RUSSELL FIELDS, DIRECTOR, NEVADA 

DEPARTMENT OF MINERALS, ON BEHALF OF HON. BOB MILLER, GOVERNOR OF NEVADA; DOUGLAS C. YEARLEY, CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, PHELPS 

DODGE CORPORATION, ON BEHALF OF THE AMERICAN MINING CONGRESS; DR. RICHARD H. DeVOTO, PRESIDENT, CANYON RESOURCES CORPORATION; JOHN L DOBB.A, PH.D., DIRECTOR, NATIONAL RESOURCES INDUSTRY INSTITUTE, AND 

ASSOCIATE PROFESSOR OF ECONOMICS, UNIVERSITY OF 

NEVADA; AND TERRY N. FISKE, VICE PRESIDENT AND GENERAL COUNSEL, USA, ECHO BAY MINES, ALSO ON BEHALF 

OF THE PRECIOUS METAL PRODUCERS 

Mr. LEHMAN. We are probably going to have another vote but I 

think we should go ahead and get what we can get done now. We 

don't want to keep your guests waiting any longer. 

We will hear from the next panel of witnesses. Mr. Russell 

Fields, Mr. Douglas Yearley, Mr. Richard DeVoto, Dr. John Dobra, 

and Mr. Terry Fiske. We will begin with the Director of the Nevada Department of 

Minerals, Mr. Fields. We understand you are here at the request 

of the Governor. We appreciate that, and we look forward to your 

testimony. We will put everyone's entire statements and other materials 

they have in the record, without objection. I ask you to summarize, 

and we will proceed. 

Mr. Fields. 

STATEMENT OF RUSSELL FIELDS 

Mr. FIELDS. Thank you very much, Mr. Chairman, Members of 

the committee. 

I am Russ Fields. I am the Director of the Nevada Department of Minerals. My testimony today, as the Chairman mentioned, is on 

behalf· of Governor Bob Miller. Governor Miller is very concerned 

about the Mining Law issue. It is a very important issue for our 

State. 

With the discovery and development of silver mines in Nevada 

in 1859, Nevada stepped to the forefront of hard-rock mining in 

this Nation, and it has through the years pretty much remained in 

that position. Today we lead the Nation in the production of gold 

and silver, and also some other minerals such as barite and gypsum and lithium carbonate. 

In 1872, William Stewart, Senator from the State of Nevada was 

instrumental in getting the 1872 Mining Law passed. So we have 

a long history that covers this 1872 law. 
202 

Our position and production here in Nevada is number one in the 

Nation, as I said. In terms of gold, that is our most important commodity, and that industry employs some 13,000 people directly, 

with another 40,000 in direct jobs related to the industry. And as 

has been mentioned before, they are high-paying jobs, about 

$37,000 per year. 

I would like to call your attention to how im_portant these jobs 

are to some of our rural communities such as Elko, Nevada. Elko 

was recently named the best little city in America in Norman 

Clampton's book, The 100 Best Small Towns in America. Truly this 

is partly because of mining in the area. Of the 16,580 population 

of Elko, about 5,400 of those people are directly in the mining business; that is, 33 percent. 

We appreciate very much Chairman Rahall's efforts to bring this 

subcommittee in east_ years out to the communities that would be 

affected by the bill. He and Mrs. Vucanovich came to Reno, Nevada, in 1991 and conducted a field hearing there. 

In fact, I would like to tell the committee that both Mrs. Vucanovich and Chairman Rahall at that time, together with their staffs 

and myself and a small miner, went down a small mine, approximately 100 feet, down a vertical ladder and looked at the working 

of a very, very small mine. And indeed, as was stated earlier, Mr. 

Rahall does wear miner's boots, not tassled shoes. 

Mr. LEHMAN. Was he in the dark? 

Mr. FIELDS. We had a head lamp for him on that particular occasion. 

In fact, Governor Miller testified at that hearing in Reno and 

pointed out his opposition to various aspects of one of the predecessor bills to H.R. 322. 

We have some continuing concerns in the State of Nevada because so much of our production is coming from public lands. We 

estimate-and this is based on a recent, as early as two week ago, 

survey of all of our mining operators-we estimate that 58 percent of the hard-rock mineral production in the State is coming from 

public lands. 

So you can see how important that is to us. It is particularly important for the future of our industry and our State because 87 percent of the lands in the State are managed in one form or the other 

by the Federal Government. 

In that same survey that I mentioned that was conducted by our 

department, the department of minerals, we looked at what the industry thought the effect of an 8 percent gross value of production 

royalty would be on their future operations. And the response back 

to us-and it has been provided to the Governor-is that immediately the expectation would be a reduction in work force of 16 

percent on all mines, and about 19 percent if you just look at the 

mines with 50 percent or more production from public lands. So I 

think the concern about potential lost direct mining jobs is something that the committee needs to be very, very aware of. 

The Governor thinks that each of these lost jobs, of course, is a 

job that represents the primary source of income for a family, and 

I am sure the committee understands that as well. 

Another immediate impact of the royalty that we believe would 

occur as a result of our survey of these operating mines is the near-
203 

immediate neiative response that exploration would have. Explo- ration on public lands, according to this survey, would fall by about 

60 percent. In Nevada, that is a difference between $100 million 

expenditure and $40 million expenditure. That, of course, leads one to the conclusion that the future of the 

industry would be gravely impacted by the loss of this exploration 

as a result of the higher costs brought on by the royalty. 

Now, we as a State do not intend to enter the discussion or the 

argument, if you will, between industry and the proponents of high 

royalties. But I would like to offer to the committee the experience 

of Nevada. Nevada has had a net proceeds of mines tax since its 

constitution was first drafted in 1865. It has been changed and varied from time to time. In fact, most recently in 1989, a 5 percent 

capping on the net proceeds of mines tax was put into our constitution. 

But we would be happy to work with the committee and any of 

its staff to look at how our net proceeds of mines tax is worked. 

It is fairly straightforward in that it starts with a gross value, 

there are allowal:ile deductions in statute, arrive at a net, and then 

a percentage is applied to that net. 

I realize we are not talking about a royalty in our net proceeds 

of mines. It is a tax. But I think the same concepts could apply. 

I am sure that our defartment of taxation would be available to 

your committee as wel that could get into the real detail of how 

net proceeds work. 

In addition to royalty, the Governor has specific comments on 

Title II of the bill. This is the section which addresses the environmental issues and the public's opportunity to have input during the 

operations of mining on public lands. 

Both environmental protection and public involvement in the 

process are very valued and important parts of what should be the 

laws that govern mining. They are certainly in Nevada, and we 

support that wholeheartedly. However, the approach in H.R. 322 is overly restrictive and unduly raises uncertainty in the business of mining. And I am wanting to stress very much this concern about uncertainty. If mines or 

mining exploration cannot have some assurance that what it finds 

to be able to mine under all the rules and conditions that exist at 

the time, then no one will invest the millions of dollars that are 

required to discover hard-rock mineral deposits. The two things that raise the uncertainty, we think, are the current language regarding unsuitable reviews and the current language involving the opportunity for citizens' suits. As Chairman 

Lehman mentioned dunng the morning session, I think there are 

some very valid concerns about the citizens' suit provision which 

would provide the opportunity for citizen against citizen. 

I don't think that is good policy in Federal law. I think that 

raises so much uncertainty, if that were a part of Federal law, that 

it would be very difficult to finance exploration and mining operations. And that is a concern of the governors, again looking at the 

future of this industry. 

In Governor Miller's four years as Governor he has overseen the 

adoption of a reclamation law in Nevada and also some very strong 

tightening of the water pollution control regulations that govern 
204 

mining in our State. They are working well, and the reason they 

are working well is because they were put together by industry 

working in cooperation with the environmental community and 

State regulators. It was a collective effort, a lot of agreement in 

process, a lot of absolute fighting in the process, but now we think 

we have some very, very strong laws that ~vem mining, and we 

would hate to see a Federal bill set those aside in favor of new, untried regulations that are coming from the Federal level. 

Mr. DeFazio mentioned this morning his desire to arrive at some 

threshold, if you will, for smaller miners. And I would like to extend that to explorationists, who should not be faced with the same 

degree of rigor in their permitting process. I am not saying they 

shouldn't have the same requirements for environmental protection, but perhaps an easier process that would short.en the amount 

of time required to get approval to go ahead and explore or to go 

ahead and mine a small mining operation that posed no chemical 

toxicity problem. We have those types of rules of Nevada and they 

seem to work very well. 

Very quickly, a couple of other issues in Title II that the Governor is concerned with is the bonding for accident contingencies. 

We have reclamation performance bonding requirements in our 

State. In the three years that it has been in effect, we find that 

bonding is something that is difficult to obtain by even the strongest economies. 

Commercial surety is difficult to obtain for mining reclamation. 

The thing you have to have to get bonding is very clear; what is 

called release criteria from the Federal Government, or the State 

government, in our case. What will it take in order to get the company off the hook, when is reclamation complete? So the accident 

contingency provision needs to be looked at very carefully. 

Also, backfilling of pits is an area that we have some concerns 

with. We know that pits need to be left in a stable and safe condition, but in Nevada our backfilling requirement is there. But if an 

operator can demonstrate that it is not economically feasible to 

backfill a pit, it is not required. It is not a matter of waiver; it is 

just simply not required. 

However, where it can be done, for example, adjacent pits, then 

it is required, but it has to be economically demonstrated one way 

or other. 

In conclusion, Governor Miller suggests that H.R. 322 needs to 

be better modified to better recognize that properly regulated hardrock mining on the public lands can be of great benefit to both the 

State and the nation. We know that there are aspects of the 1872 

Mining Law that need to be reformed. 

In fact, reformation, when it is complete, will be welcome, because the uncertainty that has been created during this process 

over the last several years we think has led to the loss of a lot of 

exploration in our State. But we hope that whatever comes out of 

this reformation process is something that is reasonable and fair to 

all sides. 

And again, I offer our assistance in any way possible to the committee, to its staff, to discuss things that have worked in our State, 

which I think can be held out as a reasonable model for the Nation. 

Thank you. 
205 

[Prepared statement of Hon. Bob Miller, Governor of Nevada, follows:] 
206 

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2 
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TDD YOU 
211 

Mr. LEHMAN. Thank you very much. 

Mr. Yearley. 

STATEMENT OF DOUGLAS C. YEAKLEY 

Mr. YEARLEY. Thank you, Mr. Chairman and members of the 

committee. My name is Douglas C. Yearley. I am the President and 

CEO of Phelps Dodge Corporation, the second largest copper producer in the world, 6ehind the Chilean-owned government corporation of Codelco. 

I might ad lib by saying this is my first congressional hearing, 

and I found it educational. It also has been 41⁄2 hours and we are 

hearing from the first industry representative. I hope you saved the 

best for last. 

My company employs about 8,700 people in the United States, 

14,500 worldwide. We operate in 24 countries, so we are a global 

mining company and can put some perspective on the U.S. as it relates to other parts of the world. 

We did go through some very difficult times in the middle of the 

last decade. We did what we had to in terms of restructuring. We 

are now internationally competitive and we hope to remain that 

way, and hope to work with you on this bill so that it does not impact the competitiveness of ourselves in the United States. 

I am also here speaking as a vice chairman of the American Mining Congress. I think that group is well known to you. With me is 

Dave Delcour, who is a technical expert, to assist me, if I have 

questions I can't handle. 

I don't think I need to describe the Mining Con~ess other than 

to say to you, as you know, it is the trade association representing 

the mining industry here in the United States, and I think you 

have had many experiences with them. 

I would like to begin by makin~ the point that this bill, as we 

see it, has the potential for staggenng economic consequences. 

I would also comment that we have heard several times today that there is a lack of good economic data. Reference has never 

been made to a study that was done last year by an independent 

accounting firm, Coopers & Lybrand, and the law firm of Davis, 

Gramm & Stubbs, who did a study on last year's mining bill that 

was very similar to this year's. Except for the royalty provision, 

that study had 10,000 pages of data. It touched on 75 different 

mining operations and 35 mining companies. And it did use a modeling system from the Department of Commerce to evaluate the 

economic impact of the bill. 

I will give you the conclusions of the study, but I would strongly 

recommend it be included in your deliberations as you look at the 

economic impact here. The study concluded that over time there 

would be loss of 30,000jobs, up to 30,000 jobs as a result of it, and 

that net it would actually cost the Federal Treasury money as a result of unemployment payments, reduced taxes, and new overhead 

costs. 

Finally, it also concluded that in the western states, namely the 

14 mining western states, there would be a dramatic impact on the 

revenues and on the economies of those particular States. 

I know in my own State of Arizona, where mining has a very important role, the impacts would be on the order of 7--8 percent of 
212 

the GNP of that State. Similarly, there are problems in the State 

of Nevada and elsewhere. 

I think it is instructive to look at the Arizona experience as it 

relates to the 1989 Arizona Hard Rock Mineral Development Act. 

Many of the speakers today have talked about the risks involved 

in mining, and we are in a risky business. And if we are to continue to grow as mining companies or even maintain our position, 

we have to be able to discover new bodies with exploration. 

Exploration is like R&D for manufacturing. It is our future. 

There are provisions in the new law that are based on the fact that 

we would be able to gain access to public lands in the future. 

The current Arizona system, which I mentioned went in in 1989, 

does not provide that access or security of tenure that I mentioned. 

It was put in after nearly a decade of debate in our State as a result of court ruling on the constitutionality of the old rules concerning exploration and access, and since it has been put in-and there 

is a 2 percent gross royalty with that-the results have been rather 

dramatic. 

Exploration, as I say, is the future of our business. It is a leading 

indicator of where we are going. And the number of exploration 

permits have steadily declined. We had in 1989, 120,000 acres that 

were under permit for exploration. That has declined to a current 

level of 49,000 acres and is on the way to zero at the present trend. 

The reason? People do not believe they can go onto this land and 

have a surety that if they can discover something they will be able 

to develop it. Similarly, the lease income to the State has declined 

from almost $1 million to $80,000, and is falling away to zero. 

So this is an example, at least in my opinion, of a similar system 

to what we have with H.R. 322 that has led to a total decline in 

exploration, and with it the prospects of mining development on 

State lands in Arizona. 

The central issue in the elections-it was talked about earlierwas jobs. I notice that we didn't hear very much about jobs from 

either the Secretary of the Interior, Bruce Babbitt, from our State, 

or from our environmental friends, but clearly that is what our 

country needs. And I don't mean jobs reclaiming mines, where no 

value is being added, simply moving one sand pile from here to 

there, but rather jobs that will create value, which is what we are 

all in business for. 

The New York Times has reported that the highest wages of any 

industrial sector is in the mining sector, although we have had a 

fairly significant loss in numbers of jobs. And I am afraid that this 

particular law would tend to drive jobs offshore. That is not a 

threat, because as a businessman we make decisions on where we 

can best explore for and develop their own prospects. We would 

prefer to be in this country but we have to do it in a way that is 

economically sound. 

I think the value of minerals sometimes gets lost in the rarefied 

atmosphere of Washington, with due respect. And let me just comment on that. Everything in this room that is lead has come from 

copper. The wires that feed these light bulbs are copper. Every 

home that is built in the United States uses 430 pounds of copper. 

A commercial airliner uses 10,000 pounds of copper. And every 
213 

child who is born in this country will in her or his lifetime use 

1,500 pounds of copper. It is a critical material for our economy. I am concerned we will be forcing the mining of that offshore, if 

there are not some moderations to this law. 

I think on balance, certainly from the industry pt?rspective, per- haps not from the perspective of this room, we think this General 

Mining Law in places worked well. But we do know there have 

been abuses. And we are here to tell you that we are prepared to 

work toward fmding reasonable compromises as we go forward. 

Last year the industry did sponsor a number of what we thought 

were constructive changes to the law. That failed to pass in conference, as you well know. We have submitted to the record the 

AMC position on these amendments. But we would welcome the opportunity to discuss them. 

I must stress a number of important factors for us, from the industry side, as it relates to any chan~es that are put forth. It is 

critical that we have the right of self-mitiation, we have the right 

of access to public lands, we have the right to secure tenure. 

I think the litmus test for me is, will a bank lend money against 

a prospect that has been developed, and the only way a bank will 

lend money is if there is a surety of title. Without that, you have 

an unknown commercial enterprise. And there is the vehicle in the 

laws now that suggests to me that it is entirely possible a considerable amount of money could be spent and you would not have that 

security of tenure. 

My company spends $45 million a year on exploration. Today, 

about two-thirds of that is in the United States, and I would hope that it would stay there, but only if we feel that when we find 

something we will have a right to it and not a long and protracted negotiation with government as to whether it is appropnate to develop it. 

Those are large pieces of money that are being spent. I think we 

also have to strongly oppose the current royalty and reclamation 

regulations as they are in H.R. 322. The royalty provision at 8 or 

12-1⁄2 percent to me is something I can't even fathom. 

As a businessman, to take 8 or 12 percent off the top of a project 

on a gross basis virtually eliminates anything that I have in my sights today, no matter where it is in the world. And therefore it 

is so onerous as to take off the board most anything I know of in 

the United States. 

The reclamation standard, I know there is a waiver on the open 

pit, but there are a lot of qualifications on it. Armorense mine is 

the third largest copper mme in the world, a man-made Grand 

Canyon. To me it is a beautiful site where it is and as it is. It 

would cost us $2 billion to refill that pit. There are 3 billion tons 

of material that have been removed from it. And it is just out of 

the realm of possibility that we would make work to move that dirt 

back into the mine pit and accomplish nothing except create some 

short-term jobs. 

I don't think an entirely new system of laws are necessary. I 

don't think it is necessary to repeal totally what we have here. But 

we are certainly willing, as I have said before, to work with you 

on the abuses and find a way that we can satisfy all those who 

have criticisms as well as keep the mining business viable. 
214 

The United States cannot afford to make a mistake here. Mining is an $86 billion a year industry directly employing 500,000 Americans. We cannot afford to lose that many good-paying American 

jobs or even a portion of them. And I am concerned that this law 

in its present form will cause a significant loss in that employment. 

Mr. Chairman, let me reiterate our interest in working with you and the Members of the subcommittee to find an appropriate and 

productive solution to the challenges we face. I thank you for providing us a chance to testify here today. [Prepared statement of Mr. Yearley and attachment follow:] 
#.~ 

AMERICAN 

MINING 

CONGRESS 

1920 N Straet NW, Suite 300 

WCllhington, DC 20036-1662 

202/ 161·2800 Faa:: 202/ t6l•15l5 

John A , Knebel 

-n• 

215 

STATEMENT OF 

DOUGLAS C. YEARLEY 

CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER 

PHELPS DODGE CORPORATION 

on 

HR 322, The Mineral Exploration and Development Act of 1993 

before the 

Subco-ittee on Energy and Mineral Resources 

of the 

C011111ittee on Natural Resources 

United States House of Representatives 

March 11, 1993 
216 

STATEMENT OF 

DOUGLAS C. YEARLEY 

CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE .OFFICER 

PHELPS DODGE CORPORATION 

on 

HR 322, The Mineral Exploration and Development Act of 1993 

before the 

Subcommittee on Energy and Mineral Resources 

of the 

committee on Natural Resources 

United States House of Representatives 

March 11, 1993 

Good morning Mr. Chairman and Members of the Energy and 

Mineral Resources Subcommittee. I am Douglas c. Yearley, Chairman, 

President and CEO of Phelps Dodge Corporation, the world's second 

largest producer of copper. 

Phelps Dodge employs more than 8,700 people in the United 

States. Phelps Dodge is an example of a company that has been 

fighting to reml[lin internationally competitive, without the help of 

the Federal government. In the mid-1980s, Phelps Dodge suffered 

such serious losses that it was questionable whether we would 

survive. The company underwent a massive restructuring and 

invested in new technologies to reduce production costs. Today we are healthy, but our future in the United States remains uncertain 

because of the threat of legislation, such as HR 322. 

Given my concern, I am pleased to be here today to testify as a Vice Chairman of the American Mining Congress. Accompanying me is David W. Delcour, President of AMAX Resource conservation 

Company and Chairman of the AMC Public Lands Committee. 

The American Mining Congress (AMC) is the principal trade 

association of the U.S. mining industry. Its member companies mine 

and process most of the domestically produced metals, industrial 

minerals and energy minerals--other than oil and gas--utilized in 

the American economy. A large portion of the minerals produced in 

this country are from public lands. The American Mining congress, therefore, is vitally concerned about legislation governing the 

acquisition of mining rights on such lands. I have an oral 

statement and will submit several supporting documents for the 

Record, including a section by section analysis of HR 322 and a statement of the AMC position on Mining Law reform. 

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Mr. Chairman, the eeonoaic consequences of HR 322 would be 

staggering. Last year AMC released the results o.f an independent study conducted by the accounting fira of Coopers , Lybrand and the 

law fi:t'll of Davis, Grah-, Stubbs. That study analyzed HR 918, 

last y-r•• Ninin11 Law bill. The study used real company data and 

showed that HR 918, if enacted, would have radically chan11ed minin11 as we know it in the United States. Because this year's bill 

i11p0ses additional costs beyond last year's bill, with a proposed 8 percent royalty, the results of ~e Coopers, Lybrand study only underasti,aata the illpact of the bill we are discussing today. Based on aore than 10,000 pages of data concerning 75 mining 

projects of 35 U.S. • ining co• panies, the study -• ployed a modeling 

syst- developed by the U.S. Depart• ent of co•• erc• to evaluate econo• ic iapact on a regional basis, using actual experiences in 

the • ining industry and current eeono• ic conditions. 

The botto• line is clear: 

With the rental fees and the addition of royalty provisions in 

HR 322, so• e • in•• that are operating today would never have 

been built and other expenditures would not have occurred. 

This would have meant 10,000 to 30,000 fewer jobs in mining 

related activities. 

There would be no relief for the Federal budget because HR 322 

would actually cost the Federal Treasury through increased 

governaent spending for ad• inistrative overhead and une• ployaent payaents, and reduced taxes. 

Repeal of the Mining Law would hurt at every level--Federal, 

state and local. HR 322 would result in the eli• ination of 

jobs and econo• ic activity, and reduced inco-s by business 

and working people. That translat- into reduced income, taxes. For •x-ple, I would like to share with you the 

results of a study prepared by the Western Econo• ic Analysis 

center on the copper industry's iapact on the economy in 1991 

in the State of Arizona, where Phelps Dodge is based. That 

study showed that in 1991, when • ore than 58,000 Arizonans were eaployed as a result of the copper industry, Arizona's eeono• y gained $5. 6 billion through co• bined direct and 

indirect contributions of the copper industry to personal 

business and government inco-. Alaost $295 • illion in revenu- to state and local govern• ent• were generated directly or indirectly by the industry, representing s. 2 

percent of the total Arizona econo• y. A1• 011t 7,100 state 

govern• ent -• ploy- receive · -laries because of taxes paid directly or indirectly by the induatry--1,500 of those state e• ployees are school t-chers. Given the re• ote location of 

-t • in-, the i• portance of this contribution to the local 

econ011y cannot be overstated. 

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Economic activity would be adversely impacted in the 12 

Western states where •oat of the mining on pul,:>lic lands occur. 

State treasuries, · which depend on the mining industry for 

income taxes, property taxes and mine production taxes, would 

be faced with trying to find some way to replace what has been a dependable source of revenue supporting schools, hospitals, 

and highways. I believe it would be instructive ,to look at 

what has happened in the State of Arizona since passage of the 

1989 Arizona Hardrock Mineral Development Act. 

Mineral exploration and production is an inherently uncertain 

and risky business. The current Arizona syst- does not provide 

reliable access and secure tenure because it creates uncertainty 

through discretionary, and therefore unpredictable, lease terms 

including a royalty based on the gross value of metals produced. 

The Arizona experience provides a clear illustration of the effec_t 

this type of system can have on exploration. New mineral 

exploration on state lands has virtually disappeared as d-onstrated by the progressive decrease of both the land held 

under prospecting permits and the corresponding rental income to 

the state of Arizona. 

Since passage of the 1989 Arizona Hardrock Development Act, 

the number of acres held under exploration permits has steadily 

declined from 121,000 acres in 1989 to 49,000 acres last year. 

This compares to a high of 550,000 acres in 1981. Annual rental 

inco- fro• exploration has declined fro11. $959,000 in 1981 to 

$80,000 in 1992. Since 1989, there have been only seven mineral 

leases applied for based on mining claims or mineral exploration 

permits, and no •ineral leases have been issued. Only seven mining 

clai- have been located since 1989, and there have been no public 

auctiona of 11.ineral leases under the new public auction system. A 

similar Federal sy•t- such as that proposed by HR 322 is likely to 

have similar results. 

Under HR 322 th• costs of production for metals mining would 

greatly increase, making U.S. minerals less competitive when 

compared with deposits in Mexico, South America and the 

C0111111onwealth of Independent States. At a time when our economy is 

becoming more global, this legislation would severely diminish the 

competitiveness of U.S. mining products in the world marketplace. 

The central issue of last year's election was jobs and the 

economy. The American people made it clear that they wanted a healthier econ011y !ti.th the creation of good jobs. On January 31, 

1993, the New York Times ran an article that showed that the mining industry in this country pays the highest w-kly wages of any other 

industrial -ctor. It also revealed that th• mining industry has 

experienced the sharpest loss of jobs since 1979. 

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HR 322 would continue the elimination of these good jobs, not 

accomplish what the American people are claaoring for, the creation 

of gc;>od, well-paying jobs. 

other -witnesses will focus on specific el-ants of HR 322, but 

I want to aake the general observation that the cumulative effect 

of the different provisions in this bill would be devastating to 

the mining industry, and therefore to the entire U.S. economy. 

The majority of ainerals and aetals are priced on a globally competitive basis. Increasing costs in the United States or eliminating access to Federal lands will lead to less U.S. 

production, • ore imports, fewer jobs and an increased trade 

deficit. Metals produced in the United States under this system would simply be unable to compete in the international market. 

And this is not just a Western issue. The majority of 

manufacturing facilities, which process minerals ained in the West, are located east of the Mississippi. This bill affects the entire 

economy of the united States. Long-term strategic defense 

planning would dictate that we be as self-sustaining as possible in 

mineral and metal production. However, we are becoming more dependent on foreign sources of supply. we import 22 percent of 

iron ore requir-ents, 73 percent of tin, 70 percent of. zinc, 75 

percent of nickel and virtually all of our aluminum ore, manganese, 

chromium, graphite and cobalt. 

The value of ainerals to our econoay cannot be overstated. 

a-ember, virtually everything you see around you was either grown or mined. Three examples will put this in perspective: each new home in the United States uses 430 pounds of copper, and the 

average commercial airliner uses 10,000 pounds of copper. Every 

person born this year in the united States will, in his or her 

lifett.e, use 1,500 pounds of copper. The point is this--any revenue raising aeasure or chang- to our costs or our ability to 

mine on public lands must be carefully weighed against the 

potential negative impacts to the economy of this country. 

on balance, the General Mining Law we have today works well. 

However, we know there have been abuses. But reputable mining 

companies are not the abusers.· Most importantly, we do not insist 

that the law be left totally unchanged. Last year the industry supported a nuaber of changes that were designed to address the 

real offenders, and to address legitimate concerns being raised 

about the law--including 1) payment of fair market value for the 

surface estate, 2) elimination of illegal occupancy of mining claims, 3) payment of an annual holding fee, and 4) compliance with a Federal reclamation standard, if no state standard exists. These 

changes were included as an amendment to the senate fiscal year 1993 Interior Appropriations bill, but were deleted during the 

House-Senate Conference. 

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I have submitted for the Record a copy of AMC's position on proposed uaendmenta. we want you to know that the industry would 

welcoae an opportunity to work with you on these and other issues. 

I must stress, however, that there are a nUJllber of provisions 

of the General Mining Law that are absolutely critical to the 

future of mining and mineral development. These provisions must be 

preserved in any consideration of changing the Mining Law. 

These areas include access to the public lands, the right of 

self-initiation and the right to earn secure tenure by discovery of a co-ercial orebody, all of which are presently embodied in the 

existing law. Any modifications affecting these basic principles will threaten the industry's ability to explore for minerals and 

develop new mining properties. 

We also strongly oppose the royalty and reclamation 

requir-•nts of HR 322. The excessive royalty provision would cause the immediate closure of some mines and would discourage any future development. The reclamation standards are totally 

impractical. We have estimated that it would cost Phelps Dodge $2 

billion (1992 dollars) to backfill our Morenci mine in Arizona. 

Some argue this would create jobs, but I submit to you that this 

would not create gg2Sl jobs, and such an expenditure would not 

produce anything of any value to our society. Most states already 

have strong reclamation standards and are in a better position to 

understand and address site specific enviromDental issues. At 

Phelps Dodge we support reasonable reclamation standards and have 

been actively involved in the development of a Mining Act, which 

includes reclamation provisions, that should pass the New Mexico 

legislature this year. 

Finally, an entirely new system of laws and regulations is not 

necessary. To repeal the established, successful body of law 

embodied in the General Mining Law and replace it with a new system that requires extensive regulatory implementation, would halt new mining activity for a number of years, even if judicial challenge 

could be avoided. 

HR 322 completely changes the syst- under which mining is 

initiated and conducted on public lands, and substantially 

increases the costs. 

When we look at the record over the past 121 years, we see the 

Mining Law system has fostered the responsible development of an industry and, indeed, serves the public interest well. As I stated 

earlier, we recognize there have been abuses particularly by non- mining interests, and we would like to address those abuses as much as each of you. 

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Proponents of Mining Law repeal have misled the public into 

believing the goverrment is giving away vast acres of Federal land. 

The fact is, since 1872, only 3 million acres of public land--or 

less than one-half of one percent of all Federal land--have gone into private ownership under the Mining Law. This is in sharp 

contrast to other Federal land programs, including the 288 million acres converted to farming by homesteaders and the 94 million acres transferred to the railroads through land grants. 

The United States cannot afford to make a mistake here. 

Mining is an $86 billion a year industry directly employing soo,ooo 

Americans. We cannot afford to lose more good paying American 

jobs. If the Mining Law is replaced by HR 322, any new mining exploration would be driven offshore, and existing projects would 

be forced to mine only high-grade material or shut down because 

they simply would not be able to compete. 

Mr. Chairman, let me reiterate our interest in working with 

you and the other Mellbers of the Subcomaittee to find an appropriate and productive solution to the challenge we face. 

Thank you for providing us with the opportunity to testify. 

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UPDDJ:ll: J: 

American Mining congress Position on the General Mining Law 

• Pat;ept;igq 

In addition to requir-ents already found in the General 

Mining Law, the mining industry does not object to paying 

fair market value for the surface estate of a mining claim 

at the time the patent is issued, provided there are prompt and fair procedures for determining such value, and the 

process of aine development is not unreasonably delayed. 

Such surface estate value should be the highest of the 

nolllllining c011111ercial, residential or agricultural use of the 

clai• surface at the time the patent issues. 

While most people familiar with the mining industry understand that it costs hundreds of thousands and sometimes 

millions of dollars to develop a claim to the point of 

seeking patent, industry is prepared to pay the fair market 

value of the land to correct this perceived abuse. 

• upauthori••« V•• 

• 

The use of unpatented mining claims for residential, recre- ational or other purposes not related to mineral development activities is prohibited and regulations should be promulgated by land manag-ent agencies detailing •ore effective 

methods of enforcement. 

Patents should include restrictions prohibiting nonmining uses such as commercial development and real estate speculation. While legitimate miners have not used the Mining Law 

for such noJ1J11ining purposes, restrictions on patents issued 

would make it impossible for patented land to be used for 

purposes other than mining. 

Reclqatiop 

The Secretaries of the Interior and Agriculture should 

exercise existing authorities to amend surface management regulations to •ore specifically and clearly set forth their 

authorization to require environmental regulation of activities on unpatented mining claias. If probl ... exist that 

cannot be addressed adainistratively, Congress should con- sider appropriate a.enaents to the Federal Land Policy and 

Manage.ent Act. 

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223 

With only two exceptions, states have stringent reclamation 

standards for mining operations. To insure that all states 

require reclamation, exi1:1ting feder.al reclalliation standards 

should be imposed where a state has failed to require reclamation. 

Prior to any mineral activity causing more than minimal 

disturbance to the environment, the claimant should furnish a reasonable surety bond or other financial guarantee in an amount sufficient to complete reclamation. 

rive-acre ezgptiop 

The Secretary of the Interior has adequate authority to 

modify or delete the provision in the Bureau of Land Management surface management regulations exempting mining operations occupying five acres or less from the requir-ent of 

filing a plan of operations. The Secretary should undertake a review to determine whether and how such authority should 

be exercised. one option would be to adopt the Forest 

Service approach, which bases the need to prepare a plan of 

operations on the degree of surface disturbance rather than 

the acreage disturbed, in an effort to assure the most 

appropriate level of land manager oversight. 

• IADY•l holding fee 

AMC has no objection to claimants being given the option in some years of paying an annual holding fee or performing 

annual assessment work. This will assure that works on the 

ground are pursuant to an orderly exploration program and 

not merely to meet an arbitrary requirement to hold an interest in mineralized land. Requiring work on the ground in some years will ensure that claims are not held for 

speculative purposes. 

• Royalty 

soma opponents ot the Mining Law suggest that a royalty 

should be imposed on mineral production, even though Congress has already imposed a claim rental fee for two years that is estimated to raise $40-55 million annually. 

However, an economic analysis of proposed royalties shows a large net revenue loss to the federal treasury. This does 

not reflect the impact on state and local treasuries. 

2 
Hardrock aining returns aillions of dollars annually to 

federal and state governaents in the fora of severance and 

other taxes specific to mining, corporate taxes, property 

taxes, sales taxes and income taxes. 

A royalty would dra-tically increase the cost of mining and 

reduce the nation's mineral base. 

A royalty also raises the cut-off grade of ore being mined 

resulting in lower grade ores r-aining in the ground. 

Thus, • o- ore containing valuable ainerals will be left in 

the ground - a poor way to conserve natural resources. 

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UPIIJIDIX II 

American Mining congress Analysis of specific Provisions of 

H,R, 322 

1IT9 Grant of Mineral Bi@t• 

The apparent purpose of H.R. 322 is to set forth the rules 

by which minerals found on public lands will be conveyed to those 

locating the minerals. Nowhere in the bill, however, has 

language been found that constitutes a grant of mineral rights. 

Inasmuch as the minerals in the ground are part of the real 

estate, which no longer will be available to private appropriation following enactment, the lack of a grant of minerals leaves 

the would-be developer of the mineral estate with no interest in 

the subject of his development. This deficiency could be cor- rected by the addition of suitable language in Section 102(b). 

Diligence 

current mining law requires prospectors to work their claims 

continually until they encounter a discovery of valuable minerals. This has proven to be an exceptionally fine way of assuring 

that only good faith operators are entitled to initiate a property right against the United States. H.R. 322, by contrast, 

eliminates the role of discovery in initiating a claim to minerals found on public lands and replaces that concept with a requirement that large sums of money be expended on a claim 

annually with no assurance of progress toward a discovery. 

H.R. 322 provides for escalating rental fees, which may be 

largely offset by diligent development expenditures. Generally 

speaking, such a system will be workable and will not impose 

undue hardship in the early years of exploration. Since 

exploration should be encouraged and not speculation, it is 

entirely appropriate that, though not as effective as the current 

discovery provision, development work be allowed as an off-set to 

all but $2.50 per acre ot the rental charge. Expanding the types 

of work counted as diligence beyond that allowed for assessment 

work under the current law and recognition of diligence for the 

benefit of contiguous claims are positive changes from earlier 

versions of this legislation. 

The main concerns with the fee provisions are the apparent 

open-ended authority given the Secretary to increase fees and the 

imposition of user fees found in Section 402. While the purchasing power adjustment found in Section 409 may be justifiable, 

section 104(a) appears to give the Secretary unrestrained discre1 
226 

tion by requiring establishment of rates •of not less" than the 

amounts that follow. Moreover, the user fee provision is limited 

only by the Secretary's spending to administer the Act. No 

constraints are iaposed ·on the Secretary's spending practices, nor does the • iner have any recourse to challenge the Secretary's calculations or assertions as to the appropriateness of administrative costs. Inasmuch as H.R. 322 would impose enormous new administrative responsibilities on the Secretary, there is con- cern that this charge would place exploration and development on public lands at a severe competitive disadvantage with activity on state and private lands. 

Other Clai• Qipt•papc• Proyi•iopa 

Subsection 104 (d)(2) contains the phrase •in any diligence year." The phrase should be "for any diligence year" since the 

instrument is not filed in the year in which the work is 

performed. 

Royalty 

The American Mining Congress remains opposed to the 

imposition of a royalty on hardrock mining activities on public 

lands. The public interest is better served by maintaining the 

increased level of production and exploration activity that would 

be lost with the imposition of a royalty. 

One of the key determinants in establishing a royalty in 

arms-length negotiations among private parties is the degree of 

knowledge available at the time the royalty is neg~tiated and the 

amount of investment already undertaken by the party reserving 

the royalty interest. In a situation such as found with gran 

roots exploration on public land, virtually no information has 

been developed by the federal government and no investment in the 

mineral estate has been • ade by the federal government. That 

situation suggests that ,any royalty should be nominal in nature. 

It should also be noted that a large federal royalty will serve to discourage or preclude retention of royalties by prospectors and junior COllpanies. There is simply not enough pie 

left to cut up. Thus, the mine finders, i.e., prospectors and 

small mining companies, will be discouraged from going out and 

finding the new ore deposits that will replace those being depleted. 

To the extent congress nevertheless chooses to impose a royalty on public lands mineral production, it is imperative that 

there be equitable treatment among commodities and among producers. The fairest royalty basis would be net the value of ore at a mine mouth. There are several reasons why this is the 

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case. First, a royalty is a reserved interest in the mineral 

estate and historically it is a share of the mineral, mined and 

brought to the ground, that belongs to the royalty holder. 

Second, once ore leaves the mine mouth, value is added in 

different ways for different commodities. Third, some producers sell their products at different stages of refin-ent, ranging from ore to engineered finished products, and every point in 

between. In other words, the royalty owner should have a share 

of the copper ore, not the copper wire. Unless Congress is 

prepared to allow federal land managers the discretion to negotiate royalties on a case-by-case basis, equity among commodities 

and among producers demands the type of royalty just outlined. 

The royalty rate is preceded by the words "not less than." 

Presumably this language allows the Secretary unfettered 

discretion to raise the rate, but not to lower it. If the goal 

is to enable the Secretary to adjust the rate to maximize federal 

revenue, he must be given the authority to lower the rate, since 

studies have shown the rate in the bill will lead to lower 

production and become a drain on government revenue. If, on the 

other hand, Congress does not want the royalty rate controlled by 

the market, it ought to set a firm, certain rate that will enable 

mining companies to decide whether to seek and develop deposits on public lands in the United states or elsewhere. 

Li•itation on Patents and other Transition 1ssu1s 

The limitation on patenting found in Section 107 and the 

transition provisions found in Section 405 require considerable 

additional attention. As written, these Sections raise serious 

questions dealing with fundamental fairness and, in all 

probability, authorize unconstitutional takings. 

Once a discovery has been made under the existing Mining 

Law, rights valid against the United States vest in the discover- er. While these rights can be subject to abandonment for failure 

to comply with various legal strictures, they may not be taken 

without due process. It is practically inconceivable that the 

courts would find due process in a provision that retroactively 

repeals an existing statutory right to a patent. 

At the very least, the effective date of repeal of the 

patent right must be the date of enactment of new legislation. 

Moreover, the date selected must set a deadline for the further 

vesting of rights and not merely arbitrarily cut off fully vested 

rights awaiting recognition by the Secretary. As written, H.R. 

322 not only requires application for patent to have been made 

months before any possible enactment of the bill, it also 

requires a number of other procedural steps controlled by the 

Secretary to have been completed. 

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Th••• problems are easily avoided by providing a reasonable 

transition period for those who are entitled to patents under 

existing law. It is suggested that existing claim holders be 

given up to three years from the date of enactment to submit a completed application for a patent. The transition provisions in 

Section 405 should be Utended to provide that claims must be 

converted or be the subject of a patent application within three 

years. Where patent application is made, but denied, claims 

should be converted as a matter of law. 

IDYiromtfptal Con•i4aratiODI 

• aeol--tioD 

Title II of H,R. 322 reflects no practical understanding of 

mining, the mining industry, or the affected environment. 

The reclamation and operational performance standards set 

forth in Title II are not supported .by any studies on the 

standards' technical or econoaic feasibility. The requir-ent 

that affected land be • ••• backfilled, graded and contoured to its 

natural topography• at the conclusion of mining is an obvious 

effort to impose the Surface Mining Control and Reclamation Act's 

approximate original contour standard. 

The American Mining Congress is supportive of sound reclamation of mined land and is amenable to the notion that any prob- lems encountered with the existing regulatory regime should be 

addressed. Tbe Federal Land Policy and Management Act is the more appropriate statutory framework for considering this issue. 

H.R. 322 should incorporate a recognition of feasibility 

based upon such factors as terrain, cliaate and mining methods. 

Section 709 of the Surface Mining Control and Reclamation Act 

mandated a study of the applicability of coal reclamation re- quirements to harclrock aining. That study, undertaken at the 

direction of the National Academy of Sciences, concluded that 

hardrock reclamation needed to be addressed on a mine-by-mine basis and that harclrock mining did not lend itself to rigid 

unifora national standards. CUrrent practice of the federal land 

managing agencies recognizes these inherent differences and 

requires reclmtion to be performed in accordance with the 

approved specifications defined in each plan of operations. 

While it may be appropriate for Congress to mandate certain 

guidelines to be considered by land managers in approving plans of operations, it is imperative that these officials be left with 

adequate discretion to consider the unique circUJ1Stances of each 

mining operation. 

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There is particular concern that Section 20l(b) fails to 

recognize the difference between advanced exploration and mining. While a special provision is made for preliminary reconnaissance 

work, detailed exploration involving access roads, bulk sampling and trenching cannot proceed without triggering costly, 1

timeconsuming permitting processes, including baseline studies and 

extensive public participation. Advanced exploration may justify more detailed oversight by the federal land manager, but it 

cannot bear the costs associated with permitting actual. mining 

operations. 

Section 20l(e) (7) and the last phrase in Section 20l(g)(l)-

(c) should be deleted. An operator has no control over the 

provisions in the applicable land use plan, which often will have 

been prepared with no knowledge of the mineral potential of the 

parcel in question. Final reclamation frequently will be inconsistent with an applicable land use plan and it is unreasonable 

to delay permitting while the cumbersome process of amending a land use plan proceeds. 

Section 20l(n) (4) (B) is too absolute. Controls on discharg- es to surface and groundwater should be tied to limits established in discharge permits. 

Section 20l(n)(5), pertaining to grading, poses major 

problems for mine operators. This section should be amended to 

reflect project economics. In most cases it will be uneconomic 

to backfill an open pit, yet the bill presumes that will be the norm. No reference at all is made to the creation of glory holes, which often are the result of underground mining practic- es. By definition, glory holes cannot be recontoured to anything approaching original topography. we believe the entire grading 

section needs to be rethought in light ·of both the economic and 

physical realities of hardrock mining methods. 

Section 20l(n) (6) would effectively cause the retention of 

50 percent of reclamation bonds for 10 years for most public 

lands mines. A d-onstration of successful revegetation for five 

years should be sUfficient to end the high cost of bonding. 

Section 20l(n) (10) gives plenary authority to the Fish and 

Wildlife Service to impose any conditions it chooses on mineral 

activities. Its role should be advisory only. 

• Peraittinq Application Proo••• 

H.R. 322 would establish a new application process to permit 

exploration or mining. The requirements for a "complete application" are such that an application will take at least two years 

to develop. For every mine plan received by the administrator, a notice must be published and a hearing held, if requested by a 

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concerned citizen. If a citizen contends that an application is 

incomplete, the process is extended until resolved. The mine 

p•rmitt~ng process -is then extended further and the NEPA review 

does no't start until the application is complete. I 

• Applicant Violator ay• tThe applicant violator system established in Section 20l(g)-

(3) of the bill is far too rigid. The references to "any claim 

holder" should be deleted. The enforcement record of a non- operating claia holder should not be a bar to permit approval . In addition, by providing that any current violation precludes 

permit approval, the bill fails to distinguish trivial violations 

from significant violations. Moreover, it is unclear as to 

whether or not alleged violations or violations actively being 

corrected pursuant to a compliance schedule or consent order 

would mandate permit denial. 

• Citizen suits 

H.R. 322 would take various concepts of citizen enforcement 

well beyond limits established by congress in other environmental 

laws. The effect is to shift the principal role of enforcement 

to "interested citizens." For example, the citizen suit provisions permit a broader range of actions against the administrators of the law than any other environmental law. They also 

contemplate citizen suits against any claim holder, applicant or operator alleged to be in violation of any provision of the Act. 

The broad bas- for suits against the Secretary in section 

202(e)(l)(A), (C), and (D) should be adequate to protect any legitimate citizen interest. Subsection (B) would only afford an additional opportunity to harass mine operators and drive up 

nonproductive legal expenses. We would ask that Subsection (B) 

be deleted. 

• 111lauitability Proa••• 

H.R. 322 would establish a program that requires a review of 

"all lands subject to this Act" for their unsuitability for 

mining. This would be akin to the massive wilderness review 

programs that have stymied the Bureau of Land Management and 

Forest service during the past 24 years. It would apply to 

approximately 400 million acres. The unsuitability determination 

is very broad. It requires that lands be declared unsuitable for 

mining if it appears that mining could not occur in a manner that 

would satisfy a long list of reclamation or other aesthetic 

considerations. The criteria for unsuitability are precisely the same as for permit issuance. Accordingly, the unsuitability 

process represents an abstract determination of factors best 

considered in the context of a permit application. 

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The bill also permits citizens to petition to have lands 

declared unsuitable. This would automatically halt consideration 

of any mining plan so long as the petition process continues. 

There is no limit on the number of petitions that may be filed or the time by which they must be acted upon. There should be 

constraints on the ability to use this process frivolously. Also, there should be a reciprocal petitioning procedure to allow 

removal of lands from an unsuitable designation. Changing technology and new information might well lead to a finding that 

lands previously thought unsuitable for mining are now suitable. 

• Right to Kin• 

H.R. 322 gives the Bureau of Land Management and Forest 

service the right to deny a plan of operations even if it com- plies with the vastly expanded regulatory process, all environmental laws and standards, and survives the "unsuitability" review. Essentially it eliminates the "right to mine." Obviously, there are taking concerns, but beyond that, this effectively makes each proposed mining project a political decision and 

eliminates the measure of certainty required to attract or commit 

capital to a project. The vast sums required to define the 

existence of an economic deposit cannot be justified if there is 

not at least a presumption that the discovery can be mined. 

• Lands Bot open to Location 

With all of the opportunities to deny mining found throughout H.R. 322, Section 205 at first seems to be merely redundant. 

By including areas of critical environmental concern and critical 

habitat within its purview, however, Section 205 has the effect 

of arbitrarily closing vast tracts of public land from mineral 

development. These types of management classifications should 

not automatically preclude mining. Often mining can be compatible with the environmental concern or critical habitat needing 

protection. 

Sayings ClaμH 

Section 4ll(b) (9) provides that nothing in H.R. 322 shall be 

construed as superseding, modifying, amending or repealing the 

Solid Waste Disposal Act. Under the part of that Act known as the Resource Conservation and Recovery Act, the Environmental 

Protection Agency (EPA) has been considering so-called mine waste 

regulations. Many provisions being considered by EPA deal 

directly with the matters regulated in Section 20l(n). This 

potential for overlap and inconsistency must be addressed in 

order to avoid an untenable situation for public lands mining activity. 

7 
232 

Mr. LEHMAN. Thank you very much, Mr. Yearley. We know you have to leave early but hopefully we will be able to get to the ques- tions. If you have to go, that would be fine. 

Dr. Devoto. 

STATEMENT OF DR. RICHABD H. DeVOTO 

Dr. DEVOTO. Thank you, Chairman Lehman, and Members of the 

subcommittee. I appreciate the opportunity to speak to you today 

on a matter of utmost importance to me and my company and to 

the economy of this nation. 

I am Richard DeVoto, President and founder of Canyon Resources Corporation, an international mining company headquartered in Golden, Colorado. My side of the story will be the 

small side of the story compared to Mr. Yearley's side. I would like 

to make mine a personal testimony today as to how this bill as 

written would impact my company as I founded it 14 years ago. Speaking today for my company as well as Independence Mining Company with whom we have been working on this bill, and we 

have provided some constructive testimony today for improvement of the bill as written, Canyon has been and will continue to be an 

advocate of Mining Law reform. We are here to help work with 

you, with the committee, to try and address some problems that we 

see in the bill as written today to make it a constructive improvement and something that will stabilize the uncertain framework in 

which we are operating today in this country in the pending legis- lation. 

The bill as written has some excellent points in it. We believe, 

however, there are some imbalanced areas that need to be adjusted, and we are going to be making specific recommendations for 

changes. These recommendations we think will make this bill 

workable, fair, and progressive. By way of background I should tell you I am both a civil engineer and a geologist. After receiving mr doctorate from the Colorado 

School of Mines in 1961, I worked m the petroleum business, and 

then joined, as a professor of geology, and taught for 21 years at 

the Colorado School of Mines. It was during my career in teaching there that I formed with two other associates, the company, Canyon Resources, that I am now speaking for. That was in 1979. 

During our private year as a company, we organized risk capital 

and explored for valuable mineral deposits throughout the Western 

United States, the South Pacific Basin and the Caribbean Basin. 

Today we are a publicly owned, NASDAQ-listed company, with direct shareholders, most of them American, who own an economic 

stake in our small entrepreneurial company. 

During this time period, since 1979, we have raised $100 million, 

which has gone to create jobs and explore for mineral wealth mainly in this count17.. We have grown to the point of having 115 employees today with ambitions to employ as many as a thousand 

people in the next several years as several new mines come on 

stream. 

Most of our employees are occupied and working in rural communities scattered throughout the Western United States. I must 

stress the economic value in these communities of our small company's operations, places like Lewistown, Montana, Lincoln, Montana, 
233 

Ridgecrest, California, and other locations. And I really want to 

emphasize the economic importance to these communities of our 

small company's efforts. 

We started our first mine in Lewistown, Montana, in 1987, and 

today the Kendall gold mine is the second largest taxpayer in rural 

Fergus County, Montana. The 75 employees at that mine are enjoyin~ wages two to three times the wages they earned prior to the 

mme's opening, wages they earned in the local community. And 

they are sharing in an aggressive productivity gains-sharing plan, 

every single person at the mine. 

Two other locations of ours where we have projects in the development stage are mentioned in detail in the testimony. I won't read 

everything here that is in that testimony, but I could say that a 

project that we have joint ventured with, Phelps Dodge here in Lincoln, Montana, is a very aggressive program of employing 65 workers during the exploration stage, and the workers are involved to 

a high degree in community involvement, project managers on the 

local school board, the bench here has contributed to the X-ray machine in the local health clinic, computers to all the schools, classes 

in the local schools, and the like. 

The proJect in the desert of California is near and dear to our 

heart. It 1s our next development project-the Briggs project, we 

call it. We have invested $10 million to date. We plan to invest another $30 million, and ultimately as the mine comes on stream, we 

will be employing 150 people and generating money in payroll, 

local taxes and goods and services. 

I have got to mention that the royalty as proposed in this bill, 

8 percent gross royalty, would not allow that proJect to go forward. 

There is no question about it. You put a pencil on that rroject, with 

the royalty provision in this bill, and that project wil not go forward. This 1s a very specific project-and you are talking to the 

President-there is very much concern about the viability of that 

project, to accomplish all of these activities that made these economic and social contributions, while adhering to the most vigorous environmental standards, both self-imposed and as required by 

law. 

We are particularly p_roud of Canyon's record. It has been recog- nized by both the U.S. Forest Service and the Bureau of Land Management for our reclamation performance in the past 10 years on 

our projects. 

I can assure you that Canyon plans and desires to maintain its 

existence as a domestic minini company. Our future is in your 

hands. It is in the hands of this committee and the Congress regarding this legislation. There is no question that should this legislation pass as it is written today, that many of our projects will not 

get off the drawing boards. 

I can state unequivocally that had this bill been in place as it 

is written today when I formed the compan>' in 1979, I would not 

be here speakins to you today. Had it been m place when we went 

public as a pubhc company in 1986, I would not be able to be here 

to be speaking to you today. 

There are some economic terms in this bill which do not allow 

small entrepreneurial businesses to start and thrive on mining in 

the United States. 
234 

And I should hasten to add that we haven't paid a penny of dividends to our shareholders over this time period. Our shareholders 

have not gotten rich at the public trough for lack of royalty on pub- lic land. Something that is near and dear to my heart also is that since 

the threat and uncertainty of this legislation has been posed since 

January of this year, the analytical community has commented on 

companies such as Canyon ana others and the threats this legisla- tion poses economically to our companies. 

I can tell you today I have written in m1. testimony that our 

stock prices declined 20 percent since this bill was proposed, and 

I can now tell you it has been 35 percent. I wrote this four days 

ago. 

This bill has a very strong immediate economic impact on mining enterprises in the United States. 

Now, all of this can be changed, the political uncertainty and discouraging political climate, by the adoption of reasonable, rational 

and workable amendments to this bill. And I have written concerning four such proposed amendments in my written testimony. I 

would like to just touch on two here. 

One clearly is the royalty provision. AB some of you know, Canyon and Independence Mining Company hav~_previously expressed sentiment for royalty in a limited context. We continue to make 

that statement. We think, however, the 8 percent gross royalty is 

punitive and destructive and in fact will yield a net loss in revenues to the Federal Government. 

And clearly the example of the Briggs project that I mentioned 

earlier, if this law passes and the 8 percent royalty would prevail, 

not only would that royalty not be generated by that project, but 

the project as we would plan to place it in production now would 

generate taxes, revenues, wages and local advantages to the community, and all of those things would be lost. So this royalty would 

create a net loBB on that project. The fees as proposed, there is one thing I like a lot about the fee 

structure as proposed, and I would, in contrast to the last panel, that is the credit for real work, bona fide exploration and development work on projects to the minimum of $2.50 per acre. For a 

small company such as mine, that is a very, very important aspect 

of this bill. 

I should tell you that when the appropriation process last year 

introduced and passed $100 per claim fee, which amounts to $5 per 

acre, to be paid in August of this year for each of the current year and the following assessment year, that that payment as contemplated will require 100 percent of my company's exploration 

budgets. So 100 ~rcent of my company's exploration budget is now to be 

expended m cash payments to the government as holding fees, and 

zero dollars are left to be available for real work, on the ground, 

to hire drillers and many workers on the ground to assess mineral 

value on the claims. 

To me there is a counterproductive aspect of the polling fees, 

technically, when they escalate as rapidly as is proposed in the current bill. I would testify and argue for a decrease m the rate of increase of that rising polling fee as currently contained in the bill. 
235 

Once again, and in conclusion, I would like to reiterate, Can_yon 

appears liefore you because we really do want to work towards a 

constructive bill which will accomplish the objectives of this committee and take the bill out of the area of uncertainty into something that is certainly. If I haven't conveyed it yet, I want to tell you, I am speaking about my life and my livelihood. This is very important to me and 

my company. I sincerely hope our faith in the legislative process is 

not misguided. 

I volunteer myself and my staff to work further and work and 

work and work on getting amendments to this bill. We will make 

it constructive, responsible, and work for all of us. 

Thank you. [Prepared statement of Dr. DeVoto follows:] 
236 

TESTIMONY OP 

DR. RICHARD H. DE VOTO 

President 

CANYON RESOURCES CORPORATION 

ON 

H.R. 322 

A bill to modify the requirements applicable 

to locatable mineral• on public domain lands, 

consistent with the principle• of 

self-initiation Qf mining claim•, and 

for other purposes 

BEFORE '1'BB 

SUBCOMKI'l"l'EB ON BNBRGY AND KIMBRAL RESOURCES 

OF '1'BB 

COMKI'l"l'EB ON NATURAL RESOURCES 

U.S. BOUSE OP REPRESENTATIVES 

KARCH 11, 1993 
237 

Mr. Chairman and members of the Subcommittee, I appreciate 

the opportunity to apeak to you today on a matter of utmost 

urgency to - and ay company and, without doubt, of similar · 

importance to our economy and our nation. 

I am Richard H. De Voto, President, Chairman, and founder of 

Canyon Resources Corporation, an international • ining company, 

baaed in Golden, Colorado. Canyon's buaineaa ia the exploration 

for, and acquisition, production, and sale of, precious metals and 

industrial minerals, primarily in the -•tern States and the 

Dominican Republic. Fo~ 14 years ago, Canyon was selected in 

1991 aa one of the top 100 fastest growing public companies in 

America. 

I am speaking primarily for my company today. H~ver, we 

have been working closely with Independence Mining Company and a 

number of other like-ainded mining companies in addressing H.R. 

322 and other legislative proposal• governing aineral activities 

on federal lands. Portions of ay teatU10ny reflect the views 

developed in this working relationship. 

Canyon has been and will continue to be an advocate of 

responsible mining law rafoni. We are hara to work with you in 

developing legislation ambodying that refoni. Our support of 

legislation ia grounded on two fundamental preaiaaa. First, we 

believe the law warrants modernization. Our industry operates in 

a far JDOre complicated economic and political setting today than 
238 

it did 12 decades ago when the basic statute -- the Mining Law --

was written. The Mining Law has served our industry -11 and -

are understandably attached to it -- indeed, reliant upon it. 

Yet, as realists, we know the call for reform ultimately will be 

answered and the challenge for us is to seek amicable, not hostile 

change. 

Second, our industry requires a stable legal structure in 

which to operate -- a structure that will not exist until this 

legislative activity ia completed and behind ua. 

While - remain vocal proponent• of mining legialation, -

believe the final product muat reflect a thorough understanding of 

and aenaitivity to the condition• and conatrainta which companie• 

such a• our• face in our daily operations. The legialation we 

could • upport would achieve thr- primary objective• -- objective• 

which au.at be co-equal and which can and should be c0111plamentllr)'. 

The legislation would --

encourage the domestic mining induatry to continue to 

invest doae• tically on the federal land&, and provide jobs, 

taxes, wealth, and product for the econoai.c well-being and 

• ecurity of this Nation and the local ~itie• in which we 

live and works 
239 

provide the federal government, which affords WI the 

opportunity to conduct vital activities on the federal lands, 

with a fair return from those activitie• J and 

embrace a distinct recognition of the importance of the 

111Any, diverse resource• and value• contained on the federal 

lands and ensure that thoae resources and values are 

protected or reclaimed during and after our presence there. 

we commend the Coamitt-•• intention to •-k early ena.ctment 

of legislation addressing federal land mineral activitiea. 

Unfortunately, H.R. 322, as written, should not be that 

legislation. It will not achieve all three of the overarching 

legislative objectives which I have stated. Canyon believe• that 

a number of the bill'• provision• go well beyond what is necessary 

to achieve the environmental protection and fair return 

objective•, and, by doing so, make achievement of the economic 

well-being and security objective iapoHible. Indeed, we cannot 

find anything in the bill•• provision• which i• intended to 

achieve that eco~~ well-being arnl .. security objective. 

Therefore, we will suggest generally here today, and more 

specifically during the subsequent deliberations of thi• 

Ccaaittee, iap~nts to R.R. 322 which - believe to be crucial 

to it• ultilllAte effectiveness. 

By -y of background, I should tell you that I am both a 

civil engin-r and a geologist. After receiving my doctorate at 

- 3 -
240 

the Colorado School of Mines, I firat worked in the petroleWR 

business and then became a professor of geology for 21 years at my 

alma mater. While teaching there, in 1979 I and two associates 

started Canyon Resources Corporation -- on a shoestring I might 

add -- as a private mineral exploration company. 

For seven years thereafter, we organized risk capital 

financing and explored throughout the western United States, 

Australia and the South Pacific, and the Caribbean basin. Canyon 

became a public, NASDAQ-listed company in 1986, and today has more 

than 80,000 direct and indirect shareholders, 110stly American, who 

hold an economic stake in our small but ambitious enterprise. 

Since 1979, we have raised more than $100 million. We have 

built Canyon into a company that today enjoys $22 million in 

annual revenue• and -ploys directly 115 people, and that intends 

to push its revenues to $70 million and its payroll to 1,000 

employees in the next several years. 

Our employees are located in diverse and largely rural 

locations at mine sites in Lewistown, Montana, and Fernley, 

Nevada1 developnent sites in Ridgecrest, California, and Lincoln, 

llontana1 exploration sites in Reno, Nevada, and the Doainican 

Republic; and corporation headquarters in Golden, Colorado. 

Our company's importance to these comunities should not be 

underestimated. We started our first mine in Lewistown, Montana, 

- 4 -
241 

in 1987. Today, the Kendall gold aine ie the second largeat 

taxpayer in rural Fergaa County, Montana, The aine'e 75 eaployee• 

enjoy aalariea 2 to 3 tiaea the wag•• they earned prior to the 

ai.ne'• opening -- aalarie• that are enhanced by an aggreaaive 

productivity gain-aharing plan. 

A joint venture of Canyon and Phelp• Dodge Mining Coapany 

recently discovered a new world-claaa gold depoait in -•tern 

Montana, near Lincoln. The venture hae -ployed 65 worker• during 

ezploration and will grow to 350 aaployeea during production. 

More than $20 lli.llion baa already !>een apent on thi• project, 

generating job• and creating tax revenue• at the local, atate, and 

federal level, The anticipated total inveat:ment in thia project 

will exceed $150 aillion. At Lincoln, the venture haa1 

ataff ~ •erving on the local School Board and 

other c~ty go,,a~ntal entitie•1 

purchaaed ccaputera for every cla••rooa in the local 

School DiatrictJ 

contributed - x-ray -chine to the local clinic1 and 

a••i•ted the u.s. Foreat service in ~king and 

-intaining local croH country aki trail•. 

- 5 -
242 

Canyon is currently seeking to pennit and develop a new gold 

mine -- the Briggs project -- in the desert of southeastern 

California. We are particularly grateful to the Chairmen of this 

Subconanittee and the full Committee for their willingness last 

Congress to amend the California Desert legislation to facilitate 

the project. We have already invested $10 million in the Briggs 

project. We plan, upon completion of a full-scale Environmental 

Impact Statement now being prepared by the Bureau of Land 

Management, to invest an additional $30 million. That investment 

wills 

provide employment for 150 workers in three counties of 

rural southeastern CaliforniaJ 

sustain a $4,5 million annual payrollJ 

occasion annual purchases of goods and services worth 

$15 millionJ 

generate the payment of $3 Jlillion per year in local, 

state, and federal taxesi and 

support the same enviro111Nntally sensitive, employeeempowered strategy we have foll0119d in previoua projects. 

I must say now, but will speak 110re of this later, that the 

Briggs project, and this Committee'• legislative efforts to 

- 6 -
243 

facilitate it, are placed at grave risk by the royalty provision 

in H,R, 322, as written. Put simply, at 81 gross, - would owe 

the federal gove~nt auch aor• than the total - anticipate on 

our bott0111 line frca the project. 

We have accoapliahed these activities and -de the• e economic 

and social contribution•, while adherinq to the aoat riqorous 

environmental standards, both required by law and self-imposed. 

we are particularly proud of Canyon'• environmental record -- a 

record that has been recoqnized by ccaaendationa frca the U.S. 

Forest Service and tha Bureau of Land Kanaq-nt for our 

reclamation performance over the paat 10 years. 

I hope I have left you with little doubt that Canyon intends 

to continue its qrowth with responaible exploration and 

development of mineral reaourcea in the United States. We do not 

aasUD&, however, that thia growth will occur by our efforts alone. 

0ur expectation•, lib those of aany other aining ccapaniea, are 

truly dependent on tlla outccae of thia C~ttee•a and the 

Conqreaa'a deliberation• on llining law leqialation. As you have 

been told, llllllY lliniDg companiea which have honored place• in our 

econoaic history and are household names in our ecODCaic lives are 

1111Vin9 their peraonnel, their inveataenta, and, aost illportantly, 

their plan• to foreip locales, where the legal baaea are more 

atahl• and the policiea are aore hoapitable. Jlalte 110 aiatake 

about thia, in our dealinqa with other llining co.pu.iea, 

- 7 -
244 

particularly in the last year, - have been repeatedly told "don't 

bring us projects on federal lands ••• -•re going offshore.• 

I can state unequivocally that had H.R. 322, •• currently 

written, been before the Congress in 1979 when Canyon was formed, 

- would have been unable to grow and succ-d as - have. In 

other words, H.R. 322, as composed, would not have pe:cnitted the 

$100 million to have been expended in job creation, wages, and 

generation of public wealth. No law has given us a fr- ridei we 

have yet to pay a dividend to any of our shareholders. Had the 

law been H.R. 322, however, we would have had DO history to boast 

about or shareholders to speak of. As proof positive that our 

fears about H.R. 322 are not idle, I can report that last -k, in 

response to a N- York analyst•• ezpression of concern over the 

royalty provisions of H.R. 322, the stock price of Canyon 

Resources dropped 201. 

A dramatic improvament in this uncertain and discouraging 

political climate can occur with the adoption of reasonable, 

respon•ible, and workable IIOdificationa to H.R. 322. 

I will -ntion four of the areas in which aodifications are 

110at necesaary1 

1. RQIALTJ, 

We understand, even if we do not share enthuaia11111 for, the 

perceived need for a royalty. As acme of you uy know, both 

- 8 -
canyon and Independence ll1niJMJ Coapany have spoken for a royalty 

in limited contexts. As a ccapany that baa grown on the strength 

of its investment in ezploration, Canyon has • aid that fees before 

production are more punitive to us than payment from net revenues 

after production begin•• Our position, qualified a• it i •, is 

clearly not the industry••· I can tell you, however, that our 

concerns about the effacta and foDI of any royalty are identical 

to those generally sbaEacl by all eegaant• of the industry. 

Put simply, an iaproperly-struc::tured royalty can be eelfdefeating. Mining i • a capital and coat intensive industry which 

i • particularly sensitive to payaent• from gro•• revenues. We are 

different from the coal, and oil and gas indu•trie• in our ability 

to be responsive to royalties. With the price of our product set 

in world market•, with DO ability to paH our additional coats on 

to the cuetaaars, and with alMlt of the value of our product 

accruing upon production and not added downetra-, the imposition 

of the gross royalty contained iD R.R. 322 would be counterproductive. The industry will be unable to cmait to the nproduction from vbJ.ch the EOyaltiu would be paid. 

I -ntioned oar Brigga pn,ject in California. An 81 qroH 

royalty at today•• gold pric .. -ld be approziaately $30 an 

ounce. Our plan of operation DOif beiDcJ proceHed . by the. BLK will 

produce leH than that total on oar bottca line. :lf that royalty 

is iapoeed, lost will be not only the hypothetical royalty 

payment• that would be generated by the project, bat al• o the 

- ' -
246 

pablic economic benefits of local, State and federal taxes, jobs, 

and purchases of goods and services. Our company, I suppose, hall 

the option to go elsewhere even after all we have invested there, 

bat those local communities which are counting on and are 

encouraging our project cannot follow. 

In other circumstances, however, this industry is no more 

.:>bile than those communities. Companies contemplating new 

activities may have the freedom to consider the effect of any 

royalty before they make an investment, but those committed to 

mciating operations do not. Existing operations are "sitting 

chicks" for any royalty because the investments have already been 

and on the basis of, and in reliance on, the economic 

gn,und rules set by the existing body of mining law. 

2. UNSUITABILITY. 

Frankly, I am quite surprised at the perceived need for an 

11DSuitability process. We do recognize that some federal lands 

po11aeaa extraordinary non-mineral resources or values which must 

not be disturbed by mineral activities, and that the law should 

say aa 11111ch. We believe, however, that Congress has already 

-cted the necessary statutes. Large areas have been declared 

off-limits to mining already in national park, wilderness, and 

other federal land legislation. Bach Congress, additional bill• 

are introduced and enacted to protect additional areas of the 

federal lands. Other legislation -- such as the Endangered 

Species Act, the Wild and Scenic Rivera .Act, and the withdrawal 

- 10 -
247 

and Areas of Critical Bnviro-ntal Concern pz:ovisions of the 

Federal Land Policy and Manag-nt Act -- pX'OW'ide authority to the 

land management agencies to take discretionary actions to bar 

future mineral activities on affected federal lands. Finally, the 

reclamation requir-nts of R.R. 322 will assuredly place 

additional federal lands beyond the reach of Jll.i.ning activities. 

Furthermore, the unsuitability process ignores entirely the 

ability of technology to change and to provide us with continually 

improving capacity to conduct aineral activities that avoid 

environmental haz:m. There will be no opportunity to apply those 

technologies on land declared 1UU1uitable under assumptions about 

past technologies. Even existing technologies -y protect the 

environmental values for which an unsuitability determination 

aight be made. Yet, - cannot know that until the extensive sitespecific data collection, plan of operation pniparation, and 

environmental illlpact stat-nt writing for a aineral activity are 

completed. • tasks that cannot occur if the land has already 

been determined to be 1UU1uitable in prior large-scale, broad-baaed 

land use planning. 

Perhaps legislating an 1UU1uitability process for hard rock 

af.nerals appears attractive because Congress baa already enacted 

such a process for coal. '1'be analogy does not 110rk, however. 

First, there -y have been relatively f- complaints about the 

functioning of the coal unsuitability process, but it aim.ply has 

not been adequately tested because there has been so little 

- 11 -
248 

additional demand for federal coal since the process's adoption. 

There are more fundamental reasons, however, why the existing 

unsuitability process for coal is not automatically transferable 

to hard rock minerals. Coal is a more ubiquitous resource capable 

of development "elsewhere• whenever particular coal lands are 

designated unsuitable, and the presence of coal on affected lands 

is known at the time unsuitability is considered. Hard rock 

minerals, however, occur in far fewer and more discrete locations 

that are usually unknown to the land managers. Finally, the coal 

unsuitability process concentrated on a single mineral and a very 

few mining methods, whereas this legislation and any unsuitability 

process it would embrace would have to apply to many more, and 

more diverse, minerals and mining technologies. 

At the very real risk of being misunderstood and somehow 

being perceived as endorsing an unsuitability process despite what 

I have just said, I will state that, if any unsuitability process 

were to be imposed upon this industry, its 

should be narrowly focussed on lands that host 

critically sensitive and unique resources and only when 

enough info:r::mation is obtainable to be certain that mineral 

activities could not avoid any damage to or reclaim those 

resources, 

should not usurp existing authority that allows such 

protection and reclamation to be offered to, and required by, 

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249 

the agenciea aa a prerequiaite for engaging in • ineral 

activitiea; 

abould clearly exe• pt land• on which exiating operation• 

are underway, and adjacent lands to which operation• can 

reasonably be expected to extend, at the tiae the 

unauitability review occurs1 

abould be applied only during the agencies• normal 

planning cycles when plans are reviaed or significantly 

-nded; 

should not contain inflexible statutory standards, 

especially where such standarda apply to land• for which the 

agencies already have discretion by law to constrain or 

eliJllinate • ineral activiti .. , 

should encourage the establishment of unsuitability 

atandarda under a foDl&l field-testing and rul..aking process 

at leaat u rigoroaa u that undertaken to develop coal 

unsuitability criteria by Interior Secretary Andrus in 1979; 

and 

should not serva u a aacbaniaa for delaying 

consideration of sumitted plans of operation for exploration 

or llining. 

- 13 -
250 

3. UIL. 

The provisions for royalties, holding fees, and user fees 

simply do not work together, except to extract cumulatively 

excessive payments from operators. For example, the holding fees 

in H.R. 322 escalate rapidly, presumably as an incentive for 

diligent development. Yet, under H.R. 322, these fees continue to 

escalate and the operator must continue to pay them even after the 

goal of diligence is met even after the mine is developed and 

the operator is required to pay royalties. That simply does not 

aake sense. 

Additionally, the levels of the fees were set in prior 

legislation before the royalty provision was added. If a royalty 

is imposed, the fees are no longer the sole revenue source and 

should be diminished so as not to discourage exploration. I say 

this with real conviction because just the $100 per claim annual 

fee enacted in the FY1993 Interior and related agencies 

appropriation act could consume 1001 of Canyon•• exploration 

budget over the next 2 years. 

Finally, with the two revenue sources you have proposed --

the royalty and the holding fees -- no user fee can be justified. 

User fees are more typically imposed on federal land activities 

that do not return revenues. Given the revenues to be generated 

in this legislation, user fees are patently unfair, particularly 

when our industry has no way to audit or control the agencies' 

administrative expenditures which the fees are expected to defray. 

- 14 -
251 

4 • RECLAMATIQll STANDARD$, 

Finally, I would like to addres• the matter of statutory 

reclamation standarda. I personally have a hard time 

understanding the need for such •tandard•• I say this because -.y 

company already provides the environmental safeguards and performs 

the reclamation task• that are addre•• ed in H.R. 322'• reclamation 

standards. Existing law and regulations the National 

Environmental Policy .A.ct, Federal Land Policy and Manag8118nt, 

National Forest Manageaent Act, Clean Water Act, etc. -- assure 

our compliance so long as those laws and regulations are properly 

administered. Obviously, I cannot object on substantive grounds 

to those specific statutory •tandarda which Canyon is already 

-ting in its existing operations. Tho•• particular standards 

would -t the teats we would set for statutory reclamation 

standard• if they are iapoaed on u• a they ma• t be achievable, 

recognise the diver•• physical settings and mining -thod• to 

whJ.ch the legislation applie•, be capable of application by the 

land management agency without a•• igning land aanag-nt 

daci•ionaaking to official• of other agencies, and not be applied 

retroactively to exi•ting operation•• 

Under the•• teat•, at 1 .. • t 3 of the standard• proposed in 

R.R. 322 -- hydrologic balance, grading, ·and wildlife -- 1111:St be 

• ab•tantially Z'9WOrllad. Siaply aa an eu.pl.e, I refer you to the · 

fish and wildlife proyision. It~• unrealistic to ezpect that 

diaturbed habitat can be restored to equal or superior habitat 

- 15 -
252 

condition11 which exi11ted prior to mineral .activitie11, as R.R. 322 

would require. The provision would not allow off-site llitigation, 

even if it would provide more acreage of habitat than that 

disturbed. It ill even less rea11onable to tran11fer re11ponsibility 

for thi11 provision to the Director of the Pi11h and Wildlife 

Service: the 11taff biologist11 of the Pore11t Service or Bureau of 

Land Management are fully capable of reviewing and deciding upon 

the wildlife components of plan11 of operation on federal lands. 

The Fish and Wildlife Service has not even been given this 

independent condition-setting power on federal land for endangered 

or threatened specie11 under the Endangered Species Act; the 

Service simply advises the BLM and Forest Service on their actions 

affecting such species through consultation and the preparation of 

recovery plans. The Pi• h and Wildlife Service • ust not be given 

more direct control of federal land management activities for any 

and all wildlife than it has for endangend and threatened 

• pecies. 

• • • • 

Once again, Canyon appears before you today advocatinlJ 

enactment of mining law rafora legislation. Without such 

legislation, our future ia cloudy. Yet, the stand - are taking 

is precariou•, for, if tha legislation pas••• without tbe vital 

IIOdifications I have given as examples and others - hope to 

present to you as your C~tt-•• deliberations ensue, oar future 

will be all too clear -- - will not be able to grow as a dcmeatic 

- 16 -
253 

company or contribute to the economic well-being of this Nation, 

indeed our very existence will be imperilled. I sincerely hope 

that our faith in the legislative process is not misguided. 

Thank you for the opportunity to talk with you today. I 

volunteer myself and my staff for any further discussions you 

might wish on this legislation. 
254 

Mr. LEHMAN. Thank you very much. Mr. DeVoto, we apprt. that. 

Dr. Dobra. 

STATEMENT OF DR. JOHN L DOBRA 

Dr. D0BRA. Thank you, Mr. Chairman, very much for the oppor- tunity to come and the invitation. 

My name is John Dobra. I am Director of the Natural Resource 

Industry Institute and Associate Professor of Economics at the University of Nevada, Reno. 

My testimony is primarily restricted to the impact of Section 410 

of H.R. 322 which calls for gross royalty of no less than 8 percent 

on gross income from production of locatable minerals. Because recent attention has focused on a proposal for 121⁄2 percent, the figures and numbers I will go through are based on that percentage. 

However, a stud;r which I will hold up and which you have been 

given contains a similar analysis for an 8 percent royalty. So both 

of those analyses are available to the committee and the staff. 

This study is titled, U.S. Gold Industry, 1992, it was conducted 

in a joint project by the Economics Institute at the University of 

Colorado, Boulder, and by the University of Nevada, Reno. 

The data that we are going to go through here is basically designed to answer a question that is commonly brought: What does 

it really cost to produce gold, how much money are they making? 

And the data that we are going to talk about covers 90 percent of 

the primary gold production in the U.S. So it is not 100 percent, 

but it is very close to a picture of the whole industry. 

The first objective is to show the immediate impact of the proposed royalty on the industry's cost structure and rmancial viability. The second objective, which I will spend a little more time on, 

as I will go over the first one quickly, 1s, what will the impact of 

this be on the industry a few years down the road? 

You heard Mr. Fields talk about the immediate impact. But you 

keep hearing things about the long-term impact. Well, what we 

have done is used our database to get a snapshot of what this. industry could and probably will look like if prices remain where they 

are in the year 2000. 

And then fmally we will add a few comments on the issues related to tax equity and efficiency considerations that are raised by the 

gross royalty. 

I would just point out that throughout this analysis we have 

used a spot price of gold at current levels to make the research current. We have not used hedging gains. I won't really comment on 

that. If you have questions, I would be happy to take them later 

too. 

Look at the short-term impacts. We have a couple of charts here. 

The first one is to look at the cash cost to the industry. We want 

to take one brief minute to point out that this is a phrase, cash cost 

is a phrase you frequently hear in this industry, and it is a concept 

that is frequently misunderstood. So I want to take just a minute 

to explain what that is, and to help explain chart 1, which shows 

the curve for the industry with and without 12 percent royalty. 

Just to explain that curve, what we have done is created a step 

function where the graph rises to the right, as you can see, and 
255 

each horizontal segment of that represents the production of 1 

mine in 1 year. And the height of it represents the cost. So why 

do segments of that curve represent big mines, short segments represent little mines. 

The dotted line represents cash cost without royalty. The solid 

line with. If you draw in the $330/oz. price of gold which we have 

done on the graph, you can see that without a royalty, there are 

a number of mines, the ones to the right or the far right, which 

are already operating at a negative cash cost. That means not only 

are they not making a profit, they are not even generating enough cash to pay their payroll, their power bill, and for their supplies. 

By all rights these mines should be out of business right now. 

They stay open for a variety of reasons. When we shift the cost 

curve up because of the royalty, you can see that additional mines 

come into that category. There are approximately 4 or 5 mines that 

are currently in that condition, with a royalty that would triple. So 

there is an immediate impact on these very high-cost properties. 

But it is important to point out, this does not reflect profitability. This simply reflects the ability to meet your current obligations 

with your cash flow. Many of these mines, even though their cost 

may be below the current price of gold, or cash cost, still may not 

be making a profit. 

To look at profitability, look at graph 2. There are two important 

differences here. One is that we are including the cost of capital recovery here, and a modest 9 percent profit. The second point, 

though, if you go back to the cash cost curve, we are talking about 

8.3 million ounces of 1992 production. We are now with this cost 

curve looking at the future of America's gold mining industry because we are talking about 65 million ounces of production that 

will be produced or could be produced between now and the year 

2000, by 38 mines in our sample. 

As you can see from the graph without a royalty, approximately 4 7 million ounces of gold worth $15.5 billion can be produced at a 

profit. When we shift up the curve with the royalty, that number 

reduces down to about 19 million ounces that can be produced at 

a profit. 

Table 1 should be of some interest to the committee as it considers alternate royalty schemes. What we do is show gross royaltl impacts for no royalty, 2, 4, 6, 8, 10, and 12 percent rates. I wont 

spend a lot of time on it. The information is there for your staff 

to use or for you to look at, but I would point out that that group of high-cost mines is going to have the minimum required sales 

price to break even, go up for the average of that group to over 

$542 an ounce. For all intents and purposes, this will shut them 

down. Again, that is not a big number, but that high-cost group is 

very vulnerable. 

It is important to point out, I am not trying to suggest there will 

be immediate mass closures of mines. I don't think that is the case 

at all. But there is that high-cost group that is clearly in danger, and they are likely to read the passage of this bill as a death notice. 

I want to go quickly to the long-term impacts. We have tried to 

take these mines and look at three factors: the current production 

costs, the reserves, and the land status. What we have tried to do 
256 

is sort of get a picture of where this industry will be in the year 2000. ' 

Land status, that is, being on public versus private land, being 

on public land doee not automatically mean they will shut. But if 

they are on public land and have high coats or don't have sufficient 

reserves, the likelihood of their being shut is very high. 

So we have gone through this group of mines that you see on this 

curve. And the group of 38 falls to 20 that will be operating in the 

year 2000. 

We then go and look at some of the levels of production on table 

2. What we are finding is that we are expecting gold production nationwide on both types of land to fall 23 percent; silver production, 

88 perceniJ,1employment to fall 26 percent; payrolls to fall, again, about ro y 26 percent. 

The impact on public lands is higher, 32 percent loss of production of gold; employment and payroll falling -approximately 47 percent. 

In Nevada, you get similar numbers in total, and on public lands 

as well. In terms of job losses, we are t.alking between 40 and 50 

percent in terms of job losses. 

So, final point, the royalty is in essence a tax. And as any tax, 

rou have to consider equity issues and efficiency i88ues. Efficiency issues relate to whether or not it affects producers' decisions. This 

analysis clearly shows that in the long run, it will affect producers' 

decisions. It is inefficient. 

Second, it is inequitable. It is not based on ability to pay; it is 

simply based on production. It ignores profitability. 

It should also be pointed out that if we were t,alking about a net 

tax or a net royalty, these sorts of inefficiencies and inequities 

would not be as severe. But, of course, we have to deal with the 

law or the act as its written. 

Final point. If you take these lo88es of production and employment and build them into an estimate of how much money this revenue would generate, numbers like $400 million a year, at least a 

few years down the line seem very improbable. · The National Wildlife Federation did a study that came up with 

that. Based on comparative numbers, we have overestimated gold 

revenues by a factor of 2; silver revenues by a factor of 36; copper 

revenues by at least a factor of 5. We find it even hard to believe 

that the budgeted number of $277 million a year is reachable. 

I have attached a number of Wall Street type publications; one 

from Donaldson, Lufkin, Jeanrette; one from Leanne Baker of 

Salomon Brothers. I encourage you to look at the Salomon Brothers' independent estimate. They say they do not believe that revenues would be u high as $100 million. So you have a range there 

that is pretty wide. But I think you need to consider that the impact on production is much greater than what is being counted on 

m other places. 
257 

Finally, I guess, the point is that from the standpoint of resource 

policy, natural resource policy, this gross royalty will result in the 

wasting of significant mineral resources. And for that reason, it 

will result in lost jobs and the wealth of Americans will decrease. 

Thank you, Mr. Chairman. If we can be of any further assistance, we will be happy to be. 

[Prepared statement of Dr. Dobra and attachments follow:] 
258 

Testirrwny 

of 

John L. Dobra, l'h. D. 

DincllJr, Nalural Reso11n:• Industry lnstiJ11t, 

Anociat, l'rvf•11or of Economies 

UniHnilJ of N,,oda, R,no 

and 

/'all/ R. ThofllllS 

Vic• l'nsid•nl, Economies /nstibtl, 

Uni..,r,ity ofCollH'ado, B011/d,r 

on 

H.R. 322, 

Ocpar1mt'nl of l:cnoom ics/ 11.10 

Culk);l' t•f l~us1m-..~ A, lmi11i, tr.1ti,111 

lknu,\il•,·,11l,1:,i'):;::,;-.111.n1, 

(70~l 784-6,-.::;o 

THE MINERAL EXPWRATION AND DEVEWPMENT ACT OF 1993 

March 11, 1993 

before 

The House Committee on Natural Resources 
259 

This testimony is primarily concerned with the impacts of section 410 of H.R. 322 which calls for a 

gross royalty of no. less than eight percent of the gross income from the production of locatable minerals. 

Because recent attention has focused on a proposed 12.5 percent gross royalty, the following analysis of 

the gross royalty proposal uses that percentage. An 8 percent gross royalty is analyzed in a recently 

completed study with my co-author, Paul Thomas, Vice President of the Economics Institute at the 

University of Colorado, Boulder. The study, entitled The U.S. Gold Industry, /992, was conducted by 

the Economics Institute, University of Colorado, Boulder and the University of Nevada, Reno. It should 

be added that although he is not here, Paul Thomas has assisted in the preparation of this testimony. 

The data used in this testimony came from a 1992 survey of U.S. gold producers conducted with the 

cooperation of The Gold Institute and covers approximately 90 percent of primary U.S. gold production. 

The major points of this testimony are covered in the three sections: 

I. The first objective is to show the immediate impact of the proposed gross royalty on 

the U.S. precious metals industry's cost structure and financial viability. 

2. The second objective is to show the longer term impact of the proposed gross royalty. 

This analysis uses data on reserves, production costs and land status to determine 

which mines are likely to be operating in 2000. 

3. Finally, the last section offers some concluding comments on tax equity and 

efficiency considerations and the implications of the gross royalty provisions of H.R. 

322 for U.S. natural resource policy. 

It should be pointed out that throughout these analyses we have used the current spot price of gold 

because my professors taught me, and I teach my students, that today's price is the best predictor of 

future prices. Any other assumed price would be speculative. In addition, we have not considered 

hedging gains because these gains (or losses) are not from the production of minerals which is the basis 

for the gross royalty described in setion 410 of the Act Hedging is a financial transaction engaged in to 

reduce investors' downside risks. Generally, these financial transactions are not even conducted by the 

same companies involved in mineral production. 

1. SHORT TERM IMPACTS OF THE PROPOSED 12.5 PERCENT GROSS ROYALTY 

In the analysis of shon term impacts, we have included all mines for which we have data regardless of 

whether or not they operate on patented or unpatented mining claims. There are several reasons for this 

decision: First, although most analysts that we have talked to believe that the gross royalty proposed in 

pending legislation would only affect mines on unpatented claims, there are contrary views. In addition, 

the problem of determining how much production comes from patented and unpatented claims is fairly 

complex. Although some mines are I 00 percent patented or unpatented, many have a mix of claims. 

Consequently, as a first approximation of the impacts of the gross royalty, we are looking at how a cost 

increase of the magnitude of the proposed gross royalty would affect the economic viability of the 

industry. In later sections we look at differentials in impacts related to land status. 

To show the impacts of the proposed 12.5 percent gross royalty, the first thing to consider is the shon 

term impact on operators' cash costs. Cash costs do not reflect profitability because they do not include 

. I • 
260 

the cost of recovering capital investments. Cash costs simply reflect current obligations like labor, 

materials, energy, etc. 

The U.S. precious metals industry cash cost curve is shown on Graph 1 titled, Effect of 12.5 Percent 

Gross Royalty on 1992 Cash Costs. The curve is a step function in which the width of each horizontal 

segment represents the planned 1992 production of one mine. Toe height of each segment represents the 

level of cash costs for that mine. The lower, dashed curve represents these producers' cash costs without 

a gross royalty. The higher, solid curve represents theses producers' cash costs with a 12;5 percent gross 

royalty. 

At the current price of $330 per ounce, represented by the horizontal line drawn onto the graph, mines to 

the right of point A are currcntly operating with a negative cash flow and, according to some analysts, 

should already be closed. Toe increased losses resulting from the gross royalty are likely 10 hasten that 

decision. 

Mines on the curve between points A and Bare currently operating on a breakeven (or better) cash flow 

basis, although ii is important to recognize thal none of the mines in this range of the curve are 

profitable in the sense of ienerating even a modest return on invesuunt in the long run at current 

prices. With the proposed 12.5 percent gross royalty, these mines will be pushed into a negative cash 

flow situation like those to the right of point A and are in imminent danger of closure. 

GRAPH 1: EFFECT OF 12.S PERCENT GROSS ROYALTY ON 1992 CASH COSTS 

600.,....--------------------------, ~_......., ____ .... _..,.... __ 500 ~-.......,.--.-, .. _, __ -only. ~bul••----•12.5%n,yolly 

400 

•Goldmnwnllymlnedona~cuh--lh•_....-,. lo-• .,.._ cuh --a 12.5 % royally 

& 300!-==:e.•Gold=,_,Pllct='----~---_-_-_-:_-:_-_-_-.,-_-_-~~;:===J::;:F'~ij~f-i ! ,,. ................... :-'•""'"' ........................ .,. .... ..:····· 

200 

.. ! ...... ., .... , ..... ..,. 

r.,,-··" 

.. , 

~W/0~ 

100 )"" 

Annual Gold Production (Millions of Troy Ounces) 

- 2 • 
261 

Graph 2, titled U.S. Gold Reserves Recoverable ar a Projir: Base Case and With a 12.5 Percent Gross 

Royalty, shows the impacts of the proposed gross royalty 011 industry profitability. Like the cash cost 

curve, the width of each segment of the step function represents the production of one mine. and the 

height reflects that mine's coStS. 

There are, however, two important differences between the cash cost curve and Graph ·2. First. the cost 

levels on Graph 2 are long run average total costs and include recovery of capital investment in the mine 

and a modest, 9 percent rate of return on investment to reflect the opponunity cost of capital. For this 

reason, the curve represents the minimum price required for each mine to break even on a long term 

basis. The second important difference between the two curves is that the cash cost curve represents 8.3 

million ounces of gold produced in 1992 while the total cost curve represents 65.3 million ounces of 

cumulative production form 1992 to 2000 by the 38 mines included in the analysis. Hence, Graph 2 

represents future production from proven U.S. reserves. 

At a gold price of $330 per ounce and without a gross royalty, the graph shows that approximately 47 

million ounces of gold, wonh over $15.5 billion can be produced at a profit When the cost curve shifts 

up as a result of the gross royalty, however, the quantity of gold that can be produced at a profit falls to 

approximately I 9 million ounces. 

-0 

0 

(!) 

N 

~ 

GRAPH 2: 

U.S. GoLD RESERVES RECOVERABLE AT A PRonT: 

BASE CASE AND WITH A 12.5 PERCENT GROSS ROYALTY 

600,--------------------------

500 

400 

300 

200 

100 

~GaldCUITonllymlnedala17,?,7,l Geld a,IT9nlly mined at a p-olll that wit be mined at ~alooawtth a 12.5% royaftj, 

D Gokl that w1n continue to be mln«t at • protn wtth • 12.5 % royalty 

40 50 

Cumulative Recoverable Gold (Millions of Troy Ounces) 

. 3. 

60 
262 

These results arc reinforced by an analysis of Table I, which breaks the industry into three costs groups: 

High-cost producers with long run average total costs (LRA TC) over $400 per ounce; mid-cost producers with LRA TCs between $301 and $400; and low-cost producers with LRA TCs of $300 or less. The 

table shows the increases in the LRA TC of these groups with royalties of 2, 4, 6, 8, 10 and 12.5 percent 

Again, the LRA TC represents the minimum required sales price of gold for the operation to break even. 

r 'I 

TABLE 1: 

INCREASE IN WEIGHTED AVERAGE LoNG RUN AVERAGE TOTAL COSTS (LRATC) 

FOR 1HE U.S. GOLD INDUSTllY FROM A GROSS PltocEEDS ROYALTY 

DISAGGREGATED BY COST CATEGORY 

Cumulativ• Marginal 

No. Production Inc~ lncre&R 

or 1992 • 2000 LRATC inLRATC in LRATC 

Mines (MiLOzs.) ($.'02.) ($.'02.) ($.'02.) 

INDUSTRY TOTAL 38 65.3 331 

Low-COST MINES 

I.RA TC < $300/oz. 12 19.1 

Gross Procuds Royalty (%) 

Without Royalty 257 

2 262 +5 

4 267 +10 +5 

6 273 +16 +6 

8 279 +22 +6 

10 285 +28 +6 

12.S 294 +37 +9 

Mm-COST MINES 

LRATC $301-$400/oz. 16 38.6 

Gross Procuds Royalty (%) 

Without Royalty 340 

2 347 +7 +7 

4 354 +14 +7 

6 361 +21 +7 

8 369 +29 +8 

10 377 +37 +8 

12.S 388 +48 +11 

Hmn-Cosr MINES 

LRA TC >$400/oz. 10 7.4 

Gross Procuds Royalty (%) 

Without Royalty 479 

2 483 +10 +JO 

4 498 +20 +10 

6 504 +27 +11 

8 516 +42 +11 

10 527 +54 +12 

12.S S42 +69 +IS 

- 4 -
263 

In the high-cost category arc 10 mines accounting for 7 .5 million ounces of cumulative production 

between 1992 and 2000. These arc also the same mines that find themselves in a negative cash flow 

situation described above. While we cannot predict what the operators of these mines will do in the face 

of a 12.5 percent gross royalty, it is hard to believe that they will stay open. Their group average minimum required sales prices will rise from $473 per ounce to $542, making the chances of their recovering 

their capital investments fairly remote. 

At the other extreme, the 12 low-cost mines, accounting for 19.1 million ounces of cumulative production, will see their minimum required sales prices rise from $257 to $294 per ounce. While these mines 

will continue to make a profit with the proposed gross royalty, they arc getting close to a notoriously 

volatile gold price. 

Perhaps the key point, however, is that the mid-cost mines, which includes 16 mines, expected to produce 38.8 million ounces, or over one-half of national production form 1992 to 2000, are put into jeopardy by this gross royalty proposal. This group's minimum required sales prices is currently $340 per 

ounce without gross royalty which, with the benefit of forward sales, allows them to break even or do so 

slightly better at current prices. _Fith the gross royalty, this group's minimum required sales price rises 

$48 to $388 per ounce. 

It is important to note that this does not imply that there will be immediate mass closures of mines if this 

proposal is adopted. Clearly, however, mines which are currently experiencing negative cash flow at 

current prices are likely to read this as a death notice. While only five or six of the mines in our database arc currently in that situation, the proposed 12.5 percent gross royalty will, at a minimum, triple 

that number. 

More significantly, however, the proposed 12.5 percent gross royalty will have a significant adverse 

impact orl'the major base properties of the U.S. gold industry. 

2. LONG TERM IMPACTS OF THE PROPOSED GROSS ROYALTY 

The objectives of this section are to focus on the long term impacts of the gross royalty proposal on 

production, employment, and payrolls nationwide and in Nevada. 

In projecting the impact of the proposed gross royalty, we have focused on what the U.S. gold industry 

will look like in the year 2000 if this gross royalty is passed. To determine which mines are likely to 

still be operating in 2000 a three step filtering process was employed. The criteria used were: 

a. Production Costs 

Mines with production costs over $450 after the imposition of the gross royalty were 

assumed to close unless continued operations appear likely based on the two following 

criteria, i.e., unless they have large reserves and are on private land. 

b. Reserves 

Mines without sufficient reserves to maintain current levels of production through 2000 

were assumed to close. Experience has shown that reported reserves can be misleading 

since many mines operating today repon as many or more reserves than when they 

- 5 -
264 

opened. However, the assumption employed is that unless the mine has extremely low 

production costs or is on private land, the gross royalty will make it unlikely that new 

reserves will be developed because higher returns will generally be available from 

developing reserves on private lands or in foreign countries. The combination of low 

gold prices, the unsecured nature of property rights in mineral resources on public 

lands resulting from mining law reform, and. finally. the inequitable gross royalty 

proposed by H.R. 322, will make development of new reserveson U.S. public lands 

impractical. 

c. Land Starus 

In general, if mines are known to be operating on private land it was assumed that they 

will continue operating through 2000 unless they have reported insufficient reserves or 

extremely high costs. In cases where the land status of a mine was unknown, it was 

assumed that the mine would pay a gross royalty. As it turned out, no mines were 

projected to close purely on the basis of land status, however, land status combined with 

!!igh costs and low reserves did lead us to project the closure of numerous properties. 

Using these criteria, the list of 38 operating mines in the U.S.for which we have long run operating data 

was reduced to a list of 20 mines expected to still be in operation in 2000. Table 2, below, provides 

summary data for these mines in 1992 and projected data for 2000. Note that in making these projections we have assumed that these mines will not cut back on their rates of production, employment and 

payrolls. This assumption is almost certainly incorrect, making this an "optimistic" projection. 

Table 2 shows precious metals production, employment and payrolls (for mine and mill workers only) 

broken down four ways: Total U.S.; U.S. Public Lands; Total Nevada; and Nevada Public Lands. We 

point out that we have only included mine and mill workers employment and payrolls to make an important point about the impact of the proposed gross royalty: This legislation will have its greatest impact 

on American working people who drive trucks, operate shovels and maintain equipment. The professional staffs of these companies will be less affected since they will be developing, designing and 

overseeing operations in other parts of the world. Hence, it will be the blue<ollar worker, often a union 

member, who will bear the burden of this legislation. 

As would be expected, the impacts on mines on public lands is greater than the total. Total U.S. gold 

output is expected to decline by 23.5 percent and a similar decline is expected in Nevada. A somewhat 

higher decline in production from public lands is expected: 32.3 percent nationally, and 29.5 percent in 

Nevada. 

Differentials in the impact on private versus public lands for employment and payrolls are significantly 

greater because of the expected closure of numerous small, high cost, low reserve properties on public 

lands. U.S. public land mine and mill employment and payrolls are expected to decline by approximately 47 percent Expected declines in Nevada public land employment and payrolls are expected to 

be around 44 percent 

. 6. 
265 

F 

TABLE 2: 

U.S. PRECIOUS METALS INDUSTRY, 1992 AND 2000 

WITH A 12.5 PERCENT GROSS ROYALTY 

Percent 

1992 2000 Change 

U.S. TOTALS 

Gold Production ( 1.000 ozs.) 7,686 5,882 -23.5 

Silver Production ( I ,000 ozs.) 13.917 1.688 -87.9 

Employmenl 11.679 8,611 -26.3 

Payrolls ($1,000) S519.1)40 S384.380 -25.9 

U.S. l'uluc LAND TOTALS 

Gold Production (1.000 ozs.) 5.391 3,650 -323 

Silver Production (1,000 ozs.) 13.570 1,341 -90.1 

Employmcnl 6.224 3.287 -47.2 

Payrolls ($1,000) $268,059 $140.459 -47.6 

NEVADA TOTALS 

Gold Production (l,OOOozs.) 5,738 4,461 -223 

Silver Production ( 1.000 ozs.) 12.527 426 -96.6 

Employmcnl 7,845 5.995 -23.6 

Payrolls ($1,000) S365.800 $283,807 -22.4 

NEVADA PuBuc LANDS TOTAL 

Gold Production (1.000 ozs.) 4337 3,059 -29.5 

Silver Production (1,000 ozs.) 12.508 408 -96.7 

Employmcnl 4.562 2.550 -44.1 

Payrolls ($1.000) $199.479 $112,028 -43.8 

The large impact on U.S. silver production in all categories rcsuhs from the fact that all silver production accounted for here is by-product production and, by coincidence, happens to be produced by the 

higher costs mines with lower levels of reserves. Low prices, combined low cost foreign production, 

have closed U.S. primary silver producers. 

3. CONCLUDING COMMENTS 

Generally accepted principles of taxation hold that taxes, or in this case a gross royalty, should promote 

allocative efficiency and achieve horizontal and vertical tax equity. The promotion of allocative efficiency involves not distorting producers' decisions which, in many cases refers to reductions in output 

- 7. 
266 

and employment that result from taxation. Principles of horizontal and vertical tax equity arc related 10 

ability to pay: Those with equal ability to pay should pay the same and those with greater ability to pay 

should pay more. 

Holding the proposed gross royalty up to these standards yields fairly disappointing results. From an 

equity standpoint. equally profitable mines producing different levels of production will pay different 

royalties. Hence, the proposal is not horizontally equitable. In addition, larger unprofitable mines will 

pay higher royalties than small. highly profitable mines. Hence, the proposal is also vertically inequitable, and fails both tests of tax equity. 

With respect to the implications of the gross royalty for allocative efficiency, the analysis of the long 

term impacts in section 2, suggests that the proposed gross royalty will generate significant inefficiencies. Job losses and payroll reductions between 40 and 50 percent at operations on public lands by the 

turn of the century is a very significant burden for the economies of producing states like Nevada to 

bear. Also recall that this is a fairly optimistic projection because we have assumed that operations on 

public lands will continue their current levels of staffing and production with the gross royalty. It is not 

unlikely that with this gross royalty and current prices. U.S. production from public lands could fall to 

one third of its current level by the end of this decade, eliminating a similar proportion of the jobs now 

created. 

It should also be pointed out that a modest royalty or net income wuld not have the serious tax equity 

and allocative efficiency problems associated with the proposed gross royalty. 

As a result of the large cutback in gold production from public lands that we foresee as a consequence of 

the proposed gross royalty, estimates of the revenue that the gross royalty would raise arc highly suspect. For example, estimates by the National Wildlife Federation (NWF) which estimate close to $400 

million (The Last Free Lunch on the Old Frontier: Hardrock Mining and the Reform of the 1872 Mining Law) is a case in point. We suspect that the NWF has over estimated gross royalty revenues from 

gold by a factor of 2 and revenues from silver by a factor of 36. 

In the case of copper production. the NWF estimates assume that 25.5 percent of U.S. copper production 

comes from public lands, an estimate that differs substantially from what we have been told by copper 

producers. Copper producers and industry analysts that we have contacted have consistently maintained that the percentage of copper from public lands is small. We believe that the NWF has over 

stated revenues from copper royalties by at least a factor of 5, and probably more. Since copper and 

gold arc the two biggest revenue producers (silver is the fourth largest) we think that the NWF estimate 

is grossly overstated. Even more modest revenue estimates, like the $277 million administration estimate, arc difficult to substantiate.· One Wall Street analyst (Leanne Baker, Salomon Brothers, U.S. 

Minitig Law of 1871 • (Costly) Change Comitig , March 8, 1993) projects revenues of "no more than 

$100 million·, an estimate which we would give more credence. 

From the standpoint of natural resource policy, which is the both the purview of this Committee and the 

interest of the scholars associated with the Natural Resource Industry Institute at the University of 

Nevada, Reno, the gross royalty provisions in section 410 of H.R. 322 represents a serious threat to U.S. 

mineral production capabilities. The gross royalty will result in the "wasting" of significant proportion 

of U.S. precious metals resources. This "wasting" will occur because in the face of higher production 

costs resulting from the gross royalty, producers will raise their cut-off grades, leaving millions of 

ounces of lower grade materials in the ground. Hence, jobs are lost, and the wealth of the American 

people is reduced. 

- 8 -
Leanne M. Baker 

Janet L. Cochofl 

(212) 783-6839 

267 

UNITED STJ\TES MAIICN •• t••.:t 

EQUITY 

RESEARCH 

Metals and Mining 

Salomon ·Brothers 

U.S. Mining Law of 1872 -

(Costly) Changes Coming 

A Premium for lntemational DiversHlcatlon? 

• We believe that changes will be made to the Mining 

Law of 1872 this year. Hearings begin on March 11 and 

March 16 in the U.S. House and Senate, respectively, 

on bills that would introduce an 8% gross proceeds 

royalty on hard-rock minerals extracted from Federal 

land. The Clinton budget proposes a 12.5% royalty. 

• Other proposed changes in the law would make it 

increasingly expensive and cumbersome for mining 

companies to explore for and develop minerals on 

Federal land. We believe that the passage of these 

provisions would accelerate and intensify the 

companies' shift toward exploring and developing 

projects elsewhere - a trend that already is well under 

way. Over time, we believe that the investment 

community will reward, rather than penalize, the shares 

of mining companies that are diversified internationally. 

• The proposed changes would exert only a modest 

effect on mining companies' earnings in the 1994-95 

period, in our view. With only a few exceptions, the 

major U.S. gold and copper mines operate on land that 

is patented - or otherwise non-Federal. Beyond 1995, 

however, the impact of a royalty and other provisions 

would be more severe. 
268 

MINING LAW OF 1872 - THI IATTL • LINII AIII DIIAWN 

March 8, 1993 . 

The U.S. Government this year ·appeat's prepared to make sweeping 

changes in the Mining Law of 1872 - a statute that has encouraged 

prospecting, development and extraction of minerals _ in the public 

domain for more than 120 years. Virtually all of the proposed changes 

would hurt the U.S.-based mining industry- but this does not imply 

that it would hurt all U.S.-based mining operations or companies. 

Indeed, all of the gold. companies that we follow are insulated to some degree against changes in the Mining Law, at least over the next 

several years (see Figure 1). 

The most onerous proposal would apply a gross proceeds royalty on 

hard-rock minerals extracted from Federal land. Bills introduced this 

year by Senator Dale Bumpers CD-Arkansas) and Representative Nick 

Rahall (D-West Virginia) would phase in an 8%, royalty on th'e value of 

minerals extracted. The Clinton Administration's proposed budget 

includes a 12.5% royalty. The two legislative proposals also would 

make permanent a new law that requires a $100 annual payment for 

each mining claim. 

It is too early to measure the precise impact of these proposals on mining companies and their U.S.-based mining operations, for several 

reasons: 

• The U.S. Government measures mineral production, but neither the 

U.S. Bureau of Mines nor the Bureau of Land Management measures the portion of mining that occurs on Federal land. The General 

Accounting Office (GAO) estimated that in 1990, about one third of 

U.S. gold production and one quarter of U.S. silver production 

occurred on Federal land. The GAO valued the minerals produced on 

Federal lands at about $1.2 billion and the value of total hard-rock 

mineral production at $8.6 billion. 

• Individual mining operations may occur on land that is a patchwork 

of private and Federal land. In theory, the Mining Law of 1872 enables 

miners to file mining claims and to explore, develop, mine, and sell 

minerals from those claims; furthermore, a claim holder can obtain a patent - or fee simple title - after proving that an economically 

minable discovery exists. In actuality, a mine may exist on pa.tented 

land, while the support facilities, waste dumps, roads, and tailings 

ponds exist on unpatented claims. 

• Mining companies will attempt to anticipate adverse changes in the 

law. For example, companies with current operations or new discoveries on Federal land are applying for patents, with the 

expectation - or the hope - that they will be "grandfathered" into the 

legislation and not have to pay a royalty. Some are far along~ the 

process, while others are not. American Barrick Resources and Amax 

Gold Inc. have received "first-half certificates" for the Goldstrike Meikle 

and Sleeper Mines, respectively - and likely would be excluded from a royalty provision. 

• We believe that most Government estimates overstate the potential 

revenues that the proposed royalties would generate. For example, the 

Clinton budget assumes that a 12.5% royalty would bring $277 million 

in revenues by fiscal year 1997. We believe that it would be no more 

than $100 million. Moreover, the Clinton estimates do not account for 

the fact that the royalties would be tax-deductible and would reduce 

taxable income to the companies. The new $100 annual fee on mining 

claims already is prompting companies to drop all but their most 

prospective claims, which also will reduce actual Government receipts 

relative to current projections. 

There is no question, however, that the proposed royalties would have 

an adverse impact on mining operations where it would apply. Our 

preliminary research and discussions with companies suggest the 

following general conclusions: 

Salomon Brothers 
269 

• In general, 'the companies with long-lived deposits and that have 

longevity in the U.S. mining industry have patented the mining claims 

that they use in actual mining operations. Through the patenting 

process, the land has moved from the public to the private domain. 

• The proposed changes likely will have a greater effect on gold 

operations than on copper, molybdenum or other hard-rock minerals. 

U.S. gold mines tend .to be newer - and shorter-lived - than most of 

the major base metals operations. Over the years, the patenting process 

has become more and more costly and cumbersome, and some mining 

companies chose to develop mines without applying for patents. (Opponents of the Mining Law cite the low $2.50-$5.00 per claim 

patenting fee as a justification for a Federal royally; the Bureau of Land 

Management estimates that it costs a minimum of $38,000 per claim to 

obtain a patent. Moreover, miners have patented only about 3.2 million acres of land out of a total of 727 million acres, while the Federal 

Government itself has withdrawn about 135 million acres from mining 

use.) 

• · Changes to the Mining Law would influence the future viability of 

the U.S. mining industry more than it would affect current operations. 

Many of the new - and, as yet, unpermined - U.S. gold discoveries are on unpatented Federal land. These include Battle Mountain/Crown 

Resources's Crown Jewel deposit, Placer Dome's Pipeline (and South 

Pipeline) deposits, Phelps Dodge/Canyon Resources Seven Up Pete 

deposit, and Newmont Mining's Grassy: Mountain deposit. 

• -- Some of the mining projects now in development are on patented 

land by virtue of their location in historic mining districts - for 

example, Magma Copper's Robinson Mine in Nevada, Echo Bay Mines's 

Alaska-Juneau Mine and Hecla Mining's Grouse Creek project in Idaho. 

In Figure 1, we list the U.S. mining operations and prospective deposits 

of the gold companies that we follow. We estimate that these 

companies will produce 5.3 million ounces in 1993, including about 

525,000 ounces from mines operating on unpatented Federal lands 

(about 10% of the total). 

Flt•re 1. U.S. llel4I Ill- NII llajlr oe,elils - Pralltlctlon IINI Royalty lmplCI, 11113E·l5E 

Amax Gold 

Battle Mountain 

Echo Bay 

Homestake 

Lac Minerals 

Newmont Gold 

Placer Dome 

!.leeper ;ti 145 150 ttay<1en Hil ✓ 100 145 Fort Knox ✓ 

~~ ✓ 

Batt!, Mounlail jl! San Luis Crown Jewel ✓ 

d 

Bullfrog ✓ 

✓ 

✓ 

✓ 

✓ 

1.325 

110 

92 

70 

300 

160 

65 

410 

270 

290 

~~Quarry ,,,, ✓ 1,700 

Deep S1ar ' ✓ 

1,546 

110 

52 

69 

300 

160 

70 

410 

265 

275 

1,700 

140 Chile 145 

325 

1,781 Nolhing to date; offices in Mexico 110 and Cllie 

121 Major entrant in Bolivia. Through 69 Nu,guini Mining: Chilo, Australia, Lihir 70 

300 

160 

70 

Lupin Mint in Canada 

m Canadian operatioos, Australia, Chi~ 

275 Canada, Chile 

1,500 None 

Gaden ~ ✓ 105 105 100 Canada, Cllile, Papua New Guinea, and Bald llouran ✓ 85 85 80 elsewhert Cortez/Pipeline ✓ 50 45 45 3 Ounces in thousands. 6 Rrst~ c:ertifk:m. c 95% of Battle Mountain CompteX is on patented Federal iand. d Under patent application. • 88% ot KetUe 

Rlwr is on patented Federal land. 9". Ill Newmont's cum,nt total reserves Is on patented Federal land or state/private land. Source: Salomon Brothm Inc. 

S.lomonllro<hcn March 8, 199) 
270 

ROYALTIES - A HIT TO GOLD IIININQ COMPANIES 

The proposed Federal royalty comes at an inopportune time for the 

North American gold mining industry. At close to $330 per ounce, the 

price of gold is at a seven-year low, and many of the companies that 

we follow already are losing money or are near break-even. A 12.5% 

gross proceeds royalty would add $41 per ounce to the cost of 

producing gold, while an 8% royalty would add $26. Figures 2, 3 and 4 

show our 1993 estimates of cash and operating costs for the major 

North American producers. Our operating margins include cash 

production costs (excluding deferred mining costs), exploration, 

general and administration, and depreciation, but not taxes, interest or 

provisions for return on capital. 

Figure 2. North American Gold Companies - Cash Margins. 1993£ (Dollars Per Ounce) 

$500 

400 

300 

200 

100 

0 

-100 

- Cash-Realized Price 

11111!!1111 Exploration 

~ General and Administration IZZZ2I By-Product Credits 

E Salomon Brothers Inc estimate. 

Source: Salomon Brothers Inc. 

S"c~ Iyo,,_ 1⁄2 'I-., 'I-., ,,,.___ ,,, 0 11. ··,e C' Go/'»• 3⁄4,,,3⁄40 Go,.,,.,_.v 0o;;'.'6r t1J.- ;s,~.fe O' ·'a,.,, '/'Jg '/Jt 'O' ;,s, -,,e 

~ Deferred Mining Costs 

c:::::::::J Royalties & Taxes 

$500 

400 

300 

200 

100 

0 

-100 

lil!ll!ml Direct Production Costs Less By-Product Credits 

Figure 3, North American Gold Companies - Operating Margins, 1993£ (Dollars Per Ounce) 

$500 

400 

300 

200 

100 

0 

-100 

t:,_0,.'!D,, 3⁄4e,,,,,., 

"'"+ ,,, °""'<1,;, - Realized Price 

-

~ 

Depreciation 

Exploration 

IZZZ2I General and Administration 

E Salomon Brothers Inc estimate. 

Source: Salomon Brothers Inc. 

March 8, 1993 

'I-., 'I-.,...._ ,,,.__ ,,~ Go1,~ 3⁄4,,.-,,,0 %)"<1"v 4-""''er '<l~,~~'l'J10'"'""1Js 

By-Product Credits 

Royalties & Taxes 

$500 

400 

300 

200 

100 

0 

Direct Production Costs Less By-Product Credits 

Salomon Brcthers 
271 

Fl11111 4. Nortll American a11, c..,anla - Cost and Praftt 111111111 Per Ounca, 111NE 

-- - Eal Lie 

- - ""= ,_ 11111 

- - .., - - 11111 1111111 Direct Production Costs $235 $160 $225 $268 $254 $258 $182 $180 $288 $205 - ~r~r:~~• 2 14 13 8 0 0 34 33 4 0 0 38 0 14 0 0 0 0 0 0 By-Product Credits (3) 0 (16) (54) 0 (64) 0 0 (77) 0 

Cash Production Costs $233 $212 $221 $236 $254 $194 $216 $213 $215 $205 

General and Administration 24 10 ~ 14 14 16 9 16 24 22 Exploration Costs 29 3 8 14 19 8 16 24 36 

TIIII Call Call 

- $224 $ffl $Z5I $212 $221 $231 $245 $293 $284 

Depreciation/Amortization 96 44 71 138 62 103 65 65 77 73 

TIIII Colll $111 $218 $144 $IN $144 $132 $217 $310 $340 $338 

Realized Price 400 417 366 365 357 358 355 369 373 363 Realized Price Less Noncash 

Gains 400 413 366 355 355 355 355 353 373 363 

Ope111ti1111 Margin $17 $186 $22 s1ip $14 $27 $58 $59 $33 $27 

Cash Operati1111 Margin 114 189 94 75 126 122 108 110 100 

E Salomon Brolhers Inc estimall. Source: Salomon Bralhets Inc. 

NEAR 0 TERII • ATTLES - AND A LONQER-TERII WAR 

Salomon Brothers 

The U.S. mining industry is mounting a campaign to fight the more burdensome provisions of the Clinton budget proposal and the 

proposed changes to the Mining Law of 1872. The near-term focus 

likety will be a fight against the proposals for a gross proceeds royalty on hard,rock minerals extracted from Federal land. The mining industry 

is more unified than it has been in previous years, when its forces were divided: Some in the industry had fought any effort to change the 

law, while others argued that the industry should support changes that 

would reduce the emotional pitch of the debate - such as mining 

companies' paying the market value of land to be patented or letting 

patented land revert back to the Federal Government once mining was completed. During the Bush years, proposed changes to the Mining 

Law never passed the committee stage, and if they·had, the mining 

industry was confident that the President would have vetoed any -onerous changes. 

This year, the tables have turned - President Clinton has included in 

his budget a royalty more onerous than any previously proposed in 

Congress. In any case, the debate remains in the early stages. We . 

expect the mining industry to press the following points: 

• A gross proceeds royalty will cost jobs. The mining industry offers 

high-paying jobs, a cause that the President has endorsed. 

• The United States is a net exporter of gold and copper, the two 

minerals that would be affected most dramatically by a royalty. 

• The mining industry is international in scope. Companies have 

choices about where to spend exploration dollars and where to 

develop mines. Mineral companies tend to move, over time, toward 

those countries that support mineral development and minimize 

regulatory delays. The royalty and other proposals now before 

Congress - those requiring that reclamation plans be filed before 

exploration begins, for example - will exacerbate the trend of mineral 

companies to move exploration dollars away from the United States 

and toward more favorable environments. 

• Investors likely will reconsider the concept of "political risk" as it 

applies to the United States. In general, many U.S. investors have 

tended to favor mining companies with operations in the "stable" 

United States and not in countries or parts of the world where political 

risks were perceived to be higher. The successful international 

diversification of such companies as Placer Dome and Lac Minerals - with others, like Battle Mountain Gold and Newmont Mining 

Corporation, bringing new offshore gold production into production 

this year - should shift the nature of investor perceptions. 

March 8, 1993 
272 

lllflllmtnl Code (for a six- to 12-month time horizon) 

U.S. equities are coded against the S&P 500; Japanese equities are coded against the Tokyo Stock Price Index (TOPIX); equities from other 

countries are coded against the appropriate local index. 

Buy: Expected to outpertorm the market. Hold: Expected to match the market. Undarperlorm: Expected to underpertorm the market. 

Liquidity Code (based on 20 prior trading days) 

U.S. stocks are coded based on a descending scale of 1-5, wrth 1 representing the most liquid quintile of the S&P 500 based on the dollar value of 

shares traded. The quintile ranges are printed each week in the Equity Research Weekly. 

Salomon Brothers Inc actively trades in the securities of Amax Gold, American Barrick, Battle Mountain, Echo Bay, Homestake, Lac Minerals 

Newmont Gold Newmont Mining Pegasus Gold and Placer Dome for rts own accounts and those of rts customers. Accordingly, we may have a long 

or short position in these securities at any time. As of March 4, 1993, we had long posrtions in the common shares of Echo Bay Mines, Homestake 

Mining, Newmont Mining, and Placer Dome. As of the same date, we had short positions in the common shares of Homestake Mining and 

Newmont Mining. 

Although the information in this report has been obtained from sources that Salomon Brothers Inc believes to be reliable, we do not guarantee rts accuracy, and such information may be incomplete or condensed. All opinions and estimates included in this report constiMe our judgment as of 

this date and are subject to change without notice. This report is for information purposes only and is not intended as an offer or solicitation with 

respect to the purchase or sale of any securrty. This publication has been approved for distribution in the UK by Salomon Brothers International 

Limited, a member of the SFA. 

© Salomon Brothers Inc 1993 

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Permit No 8155 
March 11, 1993 

The Honorable George Miller, Chairman 

Committee on Natural Resources 

U.S. House of Representatives 

273 

Room 2205 Rayburn House Office Building 

Washington, D.C. 20515 

Dear Mr. Chairman: 

John C. Tumuos 

25 Holland Road 

Middletown, NJ 07748 

At a $330 per ounce gold price an 8% royalty on gold output would levy a $26.40 and 

a 12.5% royalty a $41.25 per ounce burden on u:s. gold production from federal 

lands. We estimate the pretax costs of the 15 largest North American gold producers at 

$304 and 18 smaller producers at $326 per ounce. 

This suggests that the larger producers would fall to breakeven under an 8 % and lose 

$15 per ounce under a 12.5% royalty and that the smaller companies, which do not 

enjoy economies of scale in production, exploration or administration, would lose $22 

per ounce under an 8% and $37 under a 12.5% regime. 

The financial results of some companies would be hurt very badly, since some 

companies have very low and others very high pretax costs. Franco-Nevada, EuroNevada, Freeport-McMoRan Copper and Gold, Hemlo Gold, American Barrick, Teck 

Corp. and Newmont Gold are examples of companies having pretax costs at or below 

$275. However, five of those seven companies operate no mines in the U.S. 

Crown Resources, Nerco, and Coeur d'Alene Mines have current pretax costs above 

$400. FMC Gold, Battle Mountain, LAC Minerals, Amax Gold, Echo Bay Mines, 

Atlas Corp., and Hecla Mining have costs between $350 and $400. USMX Inc., 

Rayrock Yellowknife, Homestake Mining and Dickenson Mines all have costs between 

$330 and $350. Newmont Mining, TVX Gold, FirstMiss Gold, Royal Oak, Pegasus 

Gold, Cambior and Canyon Resources have costs between $300 and $330. Roughly 

80% or 17 of the 21 higher cost companies with pretax breakevens above $300 operate 

primarily in the U.S. Thus, the several lower cost companies operating outside the 
274 

U.S. or as royalty holders skew the average costs structures, which appear very adverse 

to U.S. producers. 

We have long argued that the "cash costs" that some gold mining companies calculate 

understate true costs, since they exclude exploration costs averaging $30 per ounce, 

royalties, the Nevada net proceeds tax, reclamation expense, interest expense, 

corporate administration and depreciation. Moreover, some gold mining companies 

include short-life truck fleets, shovels, tailing pond extensions or capitaliz.ed stripping 

in their depreciation that is excluded from cash costs, and we believe those items truly 

are variable costs. 

We believe that pretax costs truly are larger than we have estimated. Most companies 

have postponed necessary exploration programs due to the six year decline in gold 

prices since 1987. Many companies have delayed necessary infrastructure development 

programs as well. The infrastructure of underground mines, for example, resembles 

that of an office building turned upside down. Typically the preparation of mining· 

zones for production two or three years ahead represents 25 % of the costs of 

underground gold mines. 

We believe that many companies have delayed necessary mine development costs 

simply to survive. For example, the 1991 Homestake Mining annual report 

acknowledged that mine output fell in 1991 at its South Dakota mine because of a 

shortage of developed mining "stopes, • or working places. The Coeur and Galena 

underground silver mines in Idaho shut down after extended periods of operation with 

$4.50 per ounce direct mine production costs, and we believe they deferred $1.50 per 

ounces of costs by delaying development, curtailing exploration, avoiding narrow veins 

and focusing on richer veins. Thus, we believe costs truly are higher than our own 

calculations indicate. 

We estimate that the proposed federal royalties would generate perhaps $50 million of 

initial revenue initially. However, they would probably reduce total revenues by their 

third to fifth years because they would encourage the shutdown of existing mines, 

discourage the development of new reserves near existing mines, discourage the 

construction of new mines, and discourage exploration for new mines. 

In fact, mining companies began to redirect their exploration dollars to Latin America, 

the Southwest Pacific and CIS in 1989 following the Valdez oil disaster in Alaska, 

which heralded a period of intense environmental scrutiny. The initial debate of the 

Bumpers legislation calling for an 8% federal royalty on mining from federal lands also 

has encouraged exploration abroad. In fact, these proposals probably have decreased 

federal tax revenues before they have been implemented. 
275 

In many western· states mining provides one of the few forms of high wage employment 

available. Mining towns often arc isolated communities with little diversity to their 

economies. · A large social cost will be felt in these small communities as the mining 

companies withdraw. 

Thus, some form of federal disaster relief should be provided for mining communities 

to accompany the proposed feda:al royalty, in my opinion. For example, the loss of 

25,000 mining jobs and 50,000 satellite jobs might require $75 million in annual 

federal relief if as little as $10,000 per person in welfare benefits were provided. Of 

course, some losses to the balance of trade and real GNP would be felt as well as losses 

to tax revenue and increases in relief expen<!itures •. 

Some recent analyses of ours including a discussion of gold industry accounting 

practices (dated 2/8/93), gold industry pretax full costs (ln/93 pages 8 rightmost 

column and 16) and (2/2/93 page 14 rightmost column) and a letter of instructions to 

participants in our annual gold conference to please correctly describe all of their costs 

(12/10/92 paragraphs six and seven) are included as exhibits. 

Faithfully yours, 

cc: Members, House Committee on Natural Resources 
276 

Donaldson, Lufkin A Jmntte 

JOHN C. TUMAZOS 5044233 

GOLD MINING INDUSTRY 

Gold Mining Companies Must Prepare 

for Another Tough Year To Insure Survival 

January 7, 1993 

1993-112 

These remarks were prepared in advance by John C. Tumazos for presentation as moderator's 

comments at the 1993 DLJ Gold Exploration Seminar in New York on January 12-13. 

LONG-TERM REASONS TO FAVOR GOLD 

We do not expect today's gold prices to last, and believe that longer-term gold prices need to be 

roughly $100 per ounce above current levels to sustain gold output in the five largest gold producing nations around the world. At present the global gold mining industry is not replacing reserves 

nor maintaining underground mine development schedules. 

Jewelry consumption, which has exceeded mine output each year since 1989, is a particular favorable underpinning to gold prices. Although jewelry demand growth has approached 9% in 1992, we 

have simulated gold markets in 1993-1996 based on a 4% demand growth rate that is more consistent with global population and GNP growth rates. Our estimate of 2% decay rate in global gold 

mine output suggests that the annual supply shortfall in the gold market will increase by more than 

6% of consumption or over 125 metric tonnes annually. We estimate that the disinvestment necessary to balance the market will rise from 130 metric tonnes in 1991 and 292 in 1992 to 387 in 1993 

and 815 by 1996 (Table 1), which represents 33% of prospective gold supply by 1996. We do not 

believe that central banks, mining company forward sales, European institutions, Middle Eastern 

sheiks or individual investors are likely to dishoard on that scale. Several prominent North American gold mining companies no longer hedge, for example. 

C Donaldson, Lufkin & Jenrette Securttl.s Corporallon, 1993 

Additional Information Is available upon request. 

ntS REPORT HAS BEEN PREPAFl::D FROM ORIGINAL SOURCES ~ DATA WE BEl..l&VE TO BE REI..IABI..E BUT WE MAKE NO REPRESENTATIONS AS TO ITS ACCURACY OR 

COMPI..FrEN&:SS. ntS REPORT IS PUBLISHED SOLELY FOR INFOf'MATlON PUFPOSES ANO IS NOT TO BE CONl1T'RI.EO MAN OFFER TO SEU. OR 1HE sa.tclTAlla.1 a= AN OFFER 

TO BUY /IH1 SECUFVTY INAtN STATitWt£AE SUCHAN OFFER OR SOLICITATION WOULD flE ILLEGAL. 00NM.Dlil0N, WFKINAJEPft:TTE S£CUflTIEBC~TlOH, ITSAFFIUATES 

M05UBSDINYESANJ/ORTttEIROFFICERSN«JEMPLOYEESMAYFFIOUT1METOTMEACWRE.tt:Jt.DOFISELLAPOSITIONINTIESECURITIE8MENTIONEOI-EREN.UPON~ 

WE Will BE pt_g.si;;QTO FURNISH SPleC1AC INFORMATION IN THS RmARD. I~ OONAI.DSON, LLRON & JE:JICTTE SECI.RTlES COfJ'ORAllON IS USED N ~renoN YKTH THI. 

PI.ACHAS&OA$AU;ot=JN'IS£ClJ:IITYOl&CUSSEOINMSREPORT,DOtW..DSON,U.S:l(IN&~§Cl..lf:lffSC0APORATIONMAYACrASAPt:INCPALF0RrT'SOWMACCOIMT 

OR M AN AGENf FOR 90TH THE BUYER NfD THE SELLER. OPINIONS EXPRESSED !-£RE._. MAY OIF'FEFI Fl'IOM 'THE OPNIONS EXPRESSED BY cm-EA OM810NS OF OW. 
Global Gold Supply and Demand (metric toMes) 

1980 1911 1912 1913 1984 1985 1986 1917 1918 1919 19

Global Mine Ouq,ut 1271 .8 1303.0 1366.0 1452.l 1506.S 1578.8 1649.0 1743.6 1919.0 2063.8 213

Western Scrap 493.0 244.1 243.3 294.1 291.4 317.4 490.2 431.8 350.8 359.8 49

Total New Sapply 1764.8 1547.1 1609.3 1746.3 1797.9 1896.2 2139.2 2175.4 2269.8 2423.6 262

Westen Jewelry 513.2 798.2 935.6 842.4 1092.9 1187.1 1167.B 1214.5 1531.B 1907.0 203

Westen Electronics 95.2 92.8 88.8 106.4 130.4 114.4 123.0 124.0 132.7 136.S 14

Westen Deati,cry 64.3 65.2 60.6 51.3 52.4 53.3 51.1 47.7 50.S 50.9 5

SO"A, cl W. Official Coinap 122.5 113.5 81.7 88.0 62.6 61.6 169.2 103.2 70.8 65.9 5

W. Indus., Dec:onlive, Medals 102.8 91.l 93.9 86.7 88.2 68.0 67.4 71.6 11:2 82.3 8

Fanner CommllllUI Use ll0.0 120.0 130.0 140.0 150.0 160.0 170.0 180.0 190.0 200.0 21

Total Demand 1008.0 1280.8 1390.6 1314.B 1576.5 1644.4 1748.5 1741.0 2054.0 2442.6 259

t,o 

llllpled lnfflllllmt 756.8 266.4 218.7 431.6 221.S 251.8 390.7 -434.5 215.8 -18.9 3

Cllaulltive Inveaunent 756.8 1023.2 12-41.9 1673.4 1894.9 21-46.7 2537.4 2971.B 3187.6 3168.7 319

Source: Gold Fields Services foe historical data; DU Estimate.s for Forecasts and Fonner Communist Demand Histocy 
278 

Clearly, the twin U.S. deficits, low interest rates in the United States, a gradual end to the credit 

crunches in America, Japan and Europe, and the expansionary policies of the new Administration 

may benefit gold. It is no accident that the dollar weakened 2% following the announcement of 

Senator Lloyd Bentsen as the Treasury Secretary nominee. Traditionally, gold and other commodity prices rebound as the global economy grows. 

Most important, current gold prices are too low to sustain the gold mining industry. Our estimate of 

2% annualized mine output decay from 1993 to 1996 may prove generous if gold prices continue to 

drop. Most new gold mine projects around the world do not offer 10% pretax returns below a $400 

per ounce gold price. It is a given that all commodity markets eventually recover after a sustained 

period of low prices force participants to exit, and gold's demand growth profile provides some 

added comfort. 

NEAR-TERM IMPEDIMENTS TO A GOLD PRICE RALLY 

The gold market has several hurdles to overcome before it can rally: 1) the tendency of the U.S. 

dollar to appreciate in the second half of 1992, 2) stubborn Bundesbank tight monetary policy with 

8% German long-term interest rates, 3) gradual 2% M2 money supply growth rates in the United 

States, 4) generally tight bank credit conditions globally, 5) investor fears of central bank bullion reserve liquidations, 6) investor fears of gold mining company forward sales, 7) continued private disinvestment and 8) general investor disinterest. 

None of these problems is insurmountable. Gold prices now have fallen in nominal terms for five 

straight years, however, since peaking near $500 an ounce in mid-December 1987 and averaging 

$486 for that month. Average prices have dropped from $446 in 1987 to $437 in 1988 to $381 in 

1989 to $384 in 1990 to $362 in 1991 to roughly $344 an ounce in 1992, This is the longest period 

of sustained gold price decline since gold price decontrols from the $35 per ounce level began to 

be implemented in 1968. Gold price volatility has contracted along with the gold price, which has 

added to investor disinterest. 

Twenty-six months have passed since the Federal Reserve began to attempt to ease monetary policy in November 1990 in the midst of the Persian Gulf Crisis. Commodity price deflation has continued despite bond and stock market rallies, lower U.S. interest rates and six straight quarters of 

U.S. real GNP growth. Now that an "end of recession" rally seems tardy in the United States, the 

next hopes will be center on either an "end of German or Japanese recession" or else simply waiting for a traditional cyclical peak in commodity pricing several years from now. 

REVISED GOLD PRICE FORECASTS 

We have reduced our gold price forecast to $345_per ounce from $370 for 1993 and to $360 from 

$400 for 1994. We have remained at $400 for 1995 and 1996 and $425 for 1997-2000. We have reduced our earnings estimates for most of the gold mining companies for 1993 and 1994 accordingly (see Table 3). Our reduced gold price forecasts are not consistent with economics necessary 

to sustain output in the five principal gold producing regions: South Africa, the United States, the 

Commonwealth of Independent States (CIS), Australia and Canada. The arithmetic involved in 

reaching gold prices of $370 per ounce for 1993 requires nearly a $400 fourth quarter average to 

offset recent prices near $335, which seems farfetched al the moment in view of near-term monetary, exchange rate and inflation trends. Oil prices have not been sufficient to encourage North 

American reserve replacement for two decades, and the temptation to expect a $100 price rally 

3 
279 

simply because gold mining economics require ii ma)'be cauH for lolly. Only three of the 35 major South African gold mines-Kloof at $247, Driefontein Consolidated at $205 and Elandsrand at 

$248-had working costs at competitive levels in the September quarter. Twenty of South Africa's 

major mines had costs over $300 an ounce. 

OUR INVESTMENT RATINGS REFLECT A FAVORABLE BIAS 

TOWARD WELL FINANCED GOLD COMPANIES 

Our emphasis of gold shares continues to center on the better financed firms that may be able to 

seize opportunities in the current tough market environment. We are also attracted to the major 

Carlin Trend companies, whose long-term exploration prospects may benefit from the fertility of 

their landholdings. Concentration on the better financed companies will be the best strategy until a 

robust gold price rally to well over $360 develops. 

We currently include American Bllmclc and Newmont Mining on our Recommended List due to 

their superior finances, superior cost positions and mine development efforts. We rate Coeur 

d'Alene Mines vel)' attractive owing to the company's cash balances of more than half its stock 

market value and the potential !If silver prices to rebound as well as gold. We recently reduced our 

investment rating for Canyon Re.au-to neutral from an Analyst's Buy because the continued 

poor gold price environment has made it tougher for Canyon to raise the capital necessary to maintain its ownership stakes and develop its properties. We rate Battle Mountain, Crown Resourcas, FMC Gold, LAC Mlnenls, ,.._,,, Gold, Pegasus Gold and Placer Dome 

moderately attractive as well, which connotes a 5-20% expected return in DLJ's rating criteria. We 

rate Echo Bay Mines, Teele Corp., Homntab Mining and Freeport-McMoRan Copper and 

Gold neutral, and Amax Gold and Freeport-llclloRlln Inc. unattractive. 

LACK OF ACCESS TO CAPITAL FOR GOLD MINING FIRMS 

North American gold mining firms face the most hostUe business climate imaginable today. Most 

companies cannot afford exploration programs, those lucky enough to have discovered new deposits often cannot finance or oblaln environmental permits to extract their resources, the North American environmental atmosphere is hostile, the $8.90 one-year COMEX gold price contango provides 

a mere 2. 7% one-year return for hedging activities, commercial banks are reluctant to lend for development of gold deposits having more than $200 per ounce in direct mining costs as today's gold 

prices provide little margin for a desirable threefold interest coverage ratio on a long-life property, 

the SEC may someday ask gold mining companies to apply current prices to their annual reserve 

disclosures, common equity offerings are not available to many firms and even a stronger concern 

like Newmont Mining had to resort to a relatively expensive 5.5% convertible preferred to raise 

capital. Echo Bay Min- and FMC Gold ha- had their joint venture partners abdicate mining 

properties to them, which may be an increasing trend. 

Gone are the days of $450 per ounce spot prices; 10% one-year contangoes in excess of spot 

prices, gold bullion loans at 2% annual costs, easy common stock offerings at 35 times earnings, 

Canadian flow-through exploration shares or European investor interest. There are no longer: 1) a 

tent city along the Humboldt River on the east side of the Carlin Tunnel, 2) a 90-day waiting list for 

reputable hotels in Battle Mountain, 3) a need for analysts to phone mining companies to borrow a 

bed in their geologists' traHer apartments in Battle Mountain, 4) fully booked flights to Elko or Ely or 

5) reasons to make a reservation for a rental car in Elko. 

4 
280 

Doe• ...... tafldaAlanlle 

STRATEGIES TO INSURE SURVIVAL FOR ANOTHER YEAR 

OR TWO AT ANOTHER 5% GOLD PRICE DECLINE 

Past speakers at our annual seminar Included Galactic Resources, Northgate Exp/oration, and 

International Corona, which have not survived after implementing financial strategies requiring 

gold prices nearer to $400 an ounce. FrHport-McMoRan Gold Co. has chosen to sell out, winning better returns for its shareholders in a falling gold market. Homestake Mining, Amax Gold, 

LAC Minerals, FMC Gold, Placer Dome, Battle Mountain, Pegasus and others have made acquisitions in the 1989-1992 time frame that could have been made less expensively if the buyers 

had waited. 

Clearly a prudent manager must have a realistic contingency plan for another 5% decline in gold 

prices to perhaps $310 per ounce that extends for another year or two. One unpleasant scenario involves a "saucer-shaped" bottom in which prices simply stay near current levels. Gold mining companies that are producing less than 400,000 ounces annually or have less than a $400 million 

stock market capitalization appear more vulnerable since they have least access to equity markets 

or lenders. A prudent investor must consider the same contingencies in order to measure risk and 

returns. 

In our view, only five companies in the smaller iiize class under 400,000 ounces of future gold output or $400 million in stock market value are completely secure financially. Franco-tt.vada and 

Euro-Nevada have cash balances and virtually no operating expenses or capital Investment requirements. Tack Corporation has a strong balance sheet, low costs at its Hemlo units and substantial nongold assets. FMC Gold and Coeur d'Alene Mines each have cash balances of more 

than $150 million even if their reduced mine operations do not generate much new cash next year. 

The remaining companies in the smaller size class below the top 14-sized producers must 1) take 

measures to avert a liquidity crisis in the next two years and 2) preserve the upside potential for 

their shareholders' values to recover In the future. Simple cost controls applied to operations, exploration or administration cannot generate enough cash for some companies. 

Some organizations face capital commitments to continue existing operations, develop new mines, 

repay debts or fund losses. None of the means to raise external capital today is attractive. The public equity market, debt markets, bank loans, joint venture opportunities or outright asset sales are 

all depressed. We do not expect bank lenders to renew credits in view of the anemic interest coverage ratios or relatively short reserve lives that the typical gold property offers today. We do not expect outside auditors, common stock underwriters or the SEC to strictly police the use of the word 

"reserve." although clearly "reserves" that do not offer a 5% return on capital at current gold prices 

have limited resale value. 

The shareholders of a public company do not benefit when it issues stock at low prices in desperation to bridge a short-term funding need. It would be better to sell the entire concern at the market 

price or perhaps a modest premium rather than drive the stock price down by issuing shares into a 

depressed market. 

MERGERS AND CONSOLIDATIONS EMINENTLY LOGICAL 

Buyers remain available when entire companies are put up for sale. The underlinanced companies, 

whether larger or smaller sized, have their best opportunity to preserve shareholder value in merg-
281 

ing with stronger companies in common stock exchanges, which offer upside recovery potential to 

the shareholders of both firms. 

The larger-sized firms ought to save at least $10 million in annual administrative and exploration 

expenses and the smaller companies at least $4 million annually via mergers. Homestake Mining 

estimates that it will save $25 million annually simply from cutting 180 administrative and explora• 

tion personnel before considering other merger savings. 

Assuming reasonable exchange ratios can be agreed upon, the losers in a merger are the shareholders of illiquid concerns or the redundant employees. The reluctance of large shareholders to 

recognize lost value or the anxieties of potentially redundant senior managers may delay the occurrence of some obvious mergers. 

Notwithstanding, it appears that perhaps one-third of the North American gold mining companies 

under 400,000 ounces in size or $400 million in market value and perhaps several of the larger concerns will merge into larger concerns in 1993 or 1994. We applaud this trend because it will create 

larger, better capitalized investment vehicles with reduced aggregate administrative expenses. We 

do not expect the creative activity of unemployed exploration personnel to be lost inasmuch as 

such individuals usually resurface at smaller, emerging firms. 

APPROPRIATE ROLE OF WELL-CAPITALIZED FIRMS 

IS TO SEIZE OPPORTUNITY 

We cannot stress enough that the appropriate role of the well-capitalized or cash-rich firms is to 

seize opportunities. American Ba"k:k, Newmont lllnlng, Placer Dome, RTZ, Mlnorco, Teck 

Corp., LAC Minerals, FMC Gold, Coeur d'Alene 11/nes, Franco-Nevada and Euro-Nevada are 

the best positioned companies to make acquisitions from the standpoint of liquidity. As the most 

probable cash buyers on the market they can choose among the potential sellers. Of course, numerous other players may enter the fray in common stock-based acquisitions. 

Several of these fine firms decline to acquire gold properties, however, owing to the poor financial 

returns that acquisition candidates offer. For these reasons Placer Dome, Teck Corporation, 

Camblor, LAC Minerals, 11/norco, Ang•Amerlcan and RTZ recently have bought into copper or 

zinc properties. The redeployment of capital or development expertise into base metals poses a 

threat to the underfinanced gold producers that wait until it is too late to decide to sell out. Clearly 

the companies unable to find mating partners face unpleasant financial realities until gold prices rebound markedly. 

UPDATED GOLD MINE VALUATION MODELS 

At present the market values the top 15 North American gold producers at roughly $1,525 per 

ounce of estimated 1996 output, $128 per ounce of recoverable reserves as defined to exclude 

higher cost "reserves," roughly 12 times estimated 1993 cash flow and roughly 25 times estimated 

1993 earnings (Table 2). Average valuations have been relatively stable considering the erosion in 

gold prices and unfulfilled investor expectations of recent months. 

The usefulness of the price/earnings ratios as analytic tools is debatable today. At least one-third 

of the top 15 gold producers ar>d at least half of the smaller companies are not likely to report prof6 
T.W.2 

NORTII AMERICAN GOLD VALUATIO

°"""' Toul 

..... 1996ENet C.,,.Pu 

p,;., By Gold-Equiv Oz. I996E PrlcetoCIIIIIFlow PIE PIE P

Company 1/4193 

"'" Torus.Oz ClulpUt l992E 1993E J996E 1992E 1993E I 9

PlaccrDomehK:t 11.25 I 1956 1133 8.7 8.7 8.7 26.8 29.6 

Newmont MiD.inaf 40.50 2 1720 1772 21.3 225 12.5 29.6 36.8 

Newmcmt Gold Cot 31.25 3 1700 1811 20.8 18.4 13.0 39.l 34.7 

American Barrick# 30.38 4 1668 2783 17.4 13.2 10.5 24.3 17.4 

Homestake MiniDSI l0.63 

' 1400 Ill! 12.5 11.2 11.8 NM NM 

Frecpat-M CU+Au 22.13 6 1093 2023 19.J 20.9 11.3 33.0 40.2 

LACMilla'IU# ,.oo 7 917 783 5.6 6.3 ,.6 NM NM 

&:ho Bay Mines# 4.75 8 730 945 7.3 7.9 5.9 NM NM 

Banlc Mountain# ,.oo 9 

'" 1075 12.2 8.3 ,., NM NM 

Cambior 9.34 10 "o 643 6.5 ,.3 4.4 29.2 25.2 

Pe1asusGold 14.00 II 

"' 923 8.8 8., 7.0 NM 41.2 

Santa Fe Pacific# 13.00 12 475 NM NM NM 10.8 16.3 13.0 

HemloGold 6.00 13 460 1099 10.9 10.9 10.0 17.6 17.6 

Amu.Goldlllc 8.50 14 403 1810 17.6 15.5 10.0 35.4 NM 

TVXGold 1.97 IS 401 1083 5.6 6.0 3.9 24.6 32.8 

Teck.Corp 13.27 16 3'0 384 13.3 12.6 7.6 29.5 29.5 

Roya]OuMine.s 1.,0 17 340 321 7.5 ,.4 4.3 9.4 1.5 

FimMissOold 5.63 18 225 581 4.8 ,.s 4.7 23.4 18.8 

... N=<>II 12.00 19 219 NM NM NM NM NM 12.6 

HedaMillinst 7.50 20 194 1454 15.0 14.7 10.7 NM NM 

Coe\rd'Alene 10.50 21 188 408 NM NM 8.4 NM NM 

AJnicoEqle 4.25 22 178 810 7.1 7.7 7.1 NM 21.3 

FMC Gold Co@ 4.38 23 175 952 6.7 10.9 15.6 19.0 NM 

BemaOold 0.62 24 116 209 NM NM 1.6 NM NM 

Glami.sGold 4.06 25 115 742 ,.6 ,., 4.1 50.8 29.0 

Crown Ruources• 6.75 26 100 

'" NM NM 6.1 NM NM 

Franco-Nevada 20.65 27 100 2726 25.8 19.7 11.8 25.8 19.7 

Dickenson Mines 3.00 28 

" 96, 10.0 10.0 5.0 42.9 55.6 

Rayrock 8.06 29 90 849 7.3 6.0 5.4 NM NM 

Atla.sCorp. 4.88 30 80 386 6.7· 7.5 4.9 NM NM 

Canyon Re.sources* 1.75 31 80 727 6.3 17.5 8.8 NM NM 

Euro-Nevada 12.58 32 75 2397 44.9 36.0 15.7 44.9 36.0 

USMXINC. 2.63 33 60 523 13.1 12.2 5.8 NM NM 

Ava Vahutlon of top 15 Producers 1357 12.4 11.7 .. , 27.6 28.9 23

Avv:VaJuaidon~SmallaProducers 900 12.4 12.1 1.5 27.9 28.8 22

Comments: (1) to calculate "total Cap. pee ounce of production" we added the stock market capitalization to debt-equivalent

output into gold at the current ratio of 90 to one. 

(2) In our earnings sensitivity to metal.I; price dlanges we assumed a 50% musinal tax rate fm Quebec, Ontario and Papua N

(3) Some valuation ratios 11t lower because their mines have short lives or do not gencn1e free cash flows. Thus, intcrpretal

(4) "Ow, I" reserves are located in the U.S., Canada and Australia, while "global" reserves include all pr~es worldwide

(S) We have excluded negative or extreme outlying data points in our calculations of industry average valuations above. ~;fl

Source : Donaldson Lufkin &. Jenrette 
Tablo3 

TRADmONAL VALUATION MEAS

IJIS .. GeWPrtee 

$312 S3'4 S362 $344 $345 $400 C. Flow Pu-Sun 

c_., , ... 1990 1991 l992E 1"3E 1996£ 1919 1990 1991 l992E J

PlacerDcaelaaf 0.•.5 0.11 ..... 0.42 1.31 0.4!1 .... 1.29 1.25 1.30 

New,mc-Miaiql 1.17 , ... 1.39 1.37 J.lt l.00 ,.,. t.75 1.70 1.90 

NI-WIDcalOoWCol 1.13 1,3.5 1.20 O.IO .... 1.50 1.1!1 l.14 1.1, 1.50 

Amlticua.idll O.JO ... , .... 1.25 L75 l.20 0.77 . ... I.U 1.75 

---- . .., o.ll· 0 1.lO -t.1O ... O.lS l.o5 o.54 0.%7 ..., 

ANplll-M o, + Aa 0.51 0.56 0.51 

''" UI l.l3 .... 0,96 .... 1.16 

uc ..... , 0.31 .0.53 0.12 .... - 0.1.s o.60 0.96 1.04 0.90 

_ .. ,_ 0,16 .0,60 0,01 -0.09 -t.15 0.22 0.97 0.91 0,17 0.65 

BlaleMGlllai .. .... .O.l4 -0.cn -0,60 

-.. ,, . ... 0,17 0.61 0.41 

ea-- •~2 OM 0.31 0,32 u, 0-47 0.99 1.44 1.33 Ul 

-- .... ,1.55 0.37 -0.24 U4 0.60 1.62 1.22 1.47· t.6O 

-""- 0.09 .OA9 0.S4 0.10 , ... , ... NM NM 0.15 0,25 

H,aloO,W G.31 0.23 0,13 0.36 t.M O.21 0.57 .. ,, 0.63 0.55 

--tao o.s, 0-47 0.35 0.14 ..., 0.1' O.IO 1.23 0.12 .... 

TVXOoW --0.03 0.10 G.05 .... .... 0.1' O.ol 0.19 G.J6 . CJ.3.5 

T ... C,,, 1,15 O.IS 0.39 ... , Ml 1.20 I.SO '·" 1.31 1.00 

Ill a.,.IDollMlaN NM --0.90 O.ll 0.16 UI o.,o NM 0.01 0.30 O.lO 

-- 0.'1 0.01 0.00 0.14 UI 0.25 0.50 0.13 0.67 1,16 

N- 1,90 2.0S 1.12 .5.50 ..,. J.tll) O.IO 0.12 0,$4 0,00 

11,d&Ml,iq,I .0.13 0,19 -0.51 ..0.40 -t.25 0.20 0.17 , ... 0,40 0.,0 

C-d'Alno --0.29 .0.30 -0.94 -0.25 ...... 0.20 1.19 0.39 -0.0! 0.11 

...,. .. _ .0.57 -1.60 .2.49 0.14 UI 0.25 0-09 0.20 G.26 0.60 

PMCOoWCoe 0.75 0.56 Q.10 0.23 .._.. om UM) 0.11 0.53 . .., 

-- ..... --0.03 -0.09 .0.10 .u, 0.30 0.02 0,09 .0.<11 -0.0, 

0.-0old --0.26 O.l7 0.25 0.01 1.14 0.1! 0.10 0.40 o.61 0.72 

0.-- -0.12 0.09 --0.09 .a.so .._,. 0.90 .O.lJ o.os -0.22 -0.15 

..,_N,_ . .,, 0.34 0...50 0.IO ,.., 1.75 0.25 0.34 O..SO O.IO 

~Miaea .... -1.93 0.37 0.07 1.15 0.25 0.49 0.23 o.so 0.30 

.. ,.... 0.34 0.30 0.20 0.00 

- 0.30 . 1.31 1.50 l.<O 1.10 

Aduc..p. ..... 0.11 -1.25 -1.18 ..... O.l5 1.17 1.63 o.u 0.73 

C.Oycn JlaolRe,• -0.33 .0.21 0.10 -0.54 ... ,. 0.05 -0.05 0.01 0.31 0.21 

Eao-N.- 0.01 0.15 O.l3 O.ll .... 0.80 0.01 0.15 O.l3 O.ll 

USMXINC. 0.11 0.21 0.14 0.01 0.12 0.20 0.40 0.31 0.29 0..20 

A-tenpV..._T.,U:GeW~ 

A.,....V..._,6-..., Pniilaaln 

So.rce:DauW-.Llitd~Jeareuc 
Table4 

SUMMARY STOCK INFORMATIO

..... FD Marltt All De.bu Noaa:old E.,timaaed Cumnt 

(US$) Share.s Cap les$C&Sh AsselS S-Year Ticker Yield Sl-week 

Company 1/4/93 Out.sld ($Mil) (SMil) (S Mil.) Cap. fap. Symbol Divd (%) ..... 

............. ........ -------- ....... ····-····· ·······--- ---- 

PIACet Dome lac# 11.25 236.9 2665.l ·"0.0 200.0 750.0 POO 0.25 2.2 12-9 

Newmoat Mia.iqf 40.50 7•.5 3017.3 30.0 o.o 700.0 NEM 0.60 1.5 54-36 

NeWlDOl.1 Gold Col 31.25 104.9 3271.1 -200.0 0.0 600.0 NGC 0.05 0.2 52-30 

Amaic&A Barrictf 30.31 l•S.9 4431,7 210.0 0.0 350.0 ABX 0.13 0.4 33-22 

Homell&U Mioia,f 10.63 136-' 1450.3 280.0 175.0 •50,0 HM 0.20 1.9 17-10 

fle,epon-M CU +Au ll.13 215.1 •759.1 -46.9 2500.0 800.0 FCX 0.60 2.7 24-16 

U.CMiaenlsl 5.00 147.1 735.5 32.0 50.0 275.0 [AC 0.11 2.2 8-5 

EcboBay MiDC.91 us 122.3 580.9 108.9 o.o 600.0 ECO 0.07 ..., 11-4 

BaakMouDIAial ,.oo 14.7 421..5 175.0 0.0 300.0 BMO 0.05 1.0 9-6 

c.mo.o, 9.34 36.8 343.7 60.0 50.0 300.0 CBJ.TO 0.12 1.3 10-6 

haumGold 14.00 31.4 4]1.9 20.0 o.o 150.0 POU 0.10 0.7 19-11 

SulaFeP.lcifid 13.00 JI0.9 2351.7 )80.0 1919.9 115.0 SFX 0.10 0.8 14-11 

""""'Oold 6.00 96.8 500..5 -75.0 0.0 15.0 HEM 0.16 2.7 10-6 

Amu.Gold'IBc: ,..,., 74.4 6]2.1 97.7 o.o 450.0 AU 0.08 0.9 13-8 

TVXOold 1.97 136.6 268.9 165.5 o.o 60.0 TVXTF 0.00 0.0 4-2 

co Teck Corp 13.27 81.7 10&4.] -350.0 600.0 400.0 TEKB.TO 0.17 1.3 19-13 

Roya)Ol.k.Miaet I.SO 76.0 11 4.0 -5.0 o.o 25.0 RYO 0.00 0.0 2-1 

F'mtMis1 Oold 5.63 18.0 101.] ,..., o.o 30.0 FRMG 0.00 0.0 6-3 

N"""" 12.00 39.2 470.4 745.0 400.0 200.0 NEJ. 0.00 0.0 16-11 

HedaMiaiqf 7.50 3-4.7 260.3 70.0 47.5 130.0 IIL 0.00 0.0 12-7 

Coeur d'AJeae 10.50 22.1 231.6 - 125.0 30.0 150.0 COE 0.15 1.4 18-11 

AJaicoEqk 4.2' 31.0 Ill.I 12.0 0.0 30.0 AEAGF 0.08 2.5 6-3 

f'MCOoldCoe 4.38 73.5 321.6 -155.0 0.0 75.0 POL 0.05 I.I 6-4 

BemaGold 0.62 39.0 24.2 o.o 0.0 70.0 BOO.TO 0.00 0.0 2-1 

OlamilGold 4.06 21.0 85.3 o.o o.o 22.0 OLOVF 0.05 1.2 4-3 

Oow..Rawrces• 6.75 13.7 92.5 -5.0 0.0 0.0 CRJt.S 0.00 0.0 9-5 

ffuco-Nevada 20.65 JU 30>.6 -3].0 0.0 0.0 FN.TO 0.24 1.2 26-16 

Dicke111011Miau 3.00 20.6 61.7 30.0 0.0 21.0 OMIA 0.00 0.0 4-3 

.. ,...,. 1.06 16.J 131.4 20.0 75.0 90.0 RAY.TO 0.00 0.0 8-4 

Adu""'t> 4.88 6.3 30.9 0.0 o.o 40.0 AZ 0.00 0.0 7-4 

CU.y<m.lacucu' 1.75 29.7 52.0 6.2 0.0 '7.0 CYNR 0.00 0.0 3-1 

Ewo-Ne\'lda 12.58 17.) llU -35.0 0.0 0.0 EN.10 0.03 0.2 16-11 

USMXINC. 2.63 15.0 JU .,.o 0.0 10.0 USMX 0.00 0.0 3- 1 

Toc,t, ffllO 230 '111 ,.,. ... 

We dcfiK aa11 dcbu leu c.u.h~ lo a.dude coa.vertible k<Urities .t.ru.dy couMed ia •tuUy diluted ..-U <USC&-~ k> avoid d

We defiae araerve,~ to esdode. auorsy iakRIU, oWDCtsbip _., wichoul acce,s lo cuh Rows, ftCDYel'}' louu or miae

Wedilu .. tuilh becwem •cluJosraerve," io lbe U.S., c.u.ada ud A\ldnliaud.Ulole ia all Olba- llllioubaviaa pwap
285 

its In 1993, and some others may register meager earnings too slender to permit meaningful 

price/earnings calculations. 

The valuations ol the smaller producers tend to be different from those ol the larger 15 firms. The 

smaller deposits do not enjoy economies of scale, and the smaller companies sometimes have 

higher fixed administrative or exploration overheads per ounce produced. Consequently, the 

smaller companies are less profitable per ounce produced on average. The stock market values 

the smaller firms at roughly $920 per ounce of estimated 1996 production and $90 per ounce of recoverable reserves as defined, which is a 30-40% discount to those of the top 15 firms (Table 2). 

The market values the smaller firms at roughly 22 times their typically more slender earnings and 

7.6 times cash flow margins, although the analysis of price to cash flow or price/earnings ratios for 

the smaller firms does not appear meaningful owing to their current collective earnings status. 

We have graphically presented eight important data series in bar charts (1-8) to simplify the visual 

presentation of our valuation database. 

PROSPECTIVE VALUATIONS WHEN GOLD PRICES RECOVER 

The potential profile of the major No11h American companies in 1996 will be different. Today's 33 

major firms with a nearly $29 billion aggregate market value (Table 4) probably will have merged 

into 20-25 concerns to save $100-200 million in collective administrative and exploration expenses, 

which translates Into a minimum savings of $6-12 per ounce over the 15 million ounces of gold that 

we expect these firms to produce worldwide. 

We look for the average reserve life of the North American-based firms to shrink toward 8.5 years 

from the recent ten-year level (Table 4) and roughly 12-year level seen five years ago. Moreover, 

we expect the North American-based gold producers to increase the fraction ol their reserves held 

in LDCs or nations other than the United States, Canada or Australia to rise from 24% at present toward 35%. The combination of production increases, reduced levels of exploration activity, redirection of exploration efforts abroad to avoid North American environmental complications and 

declassification of higher cost reserves all have served to delay reserve replacement and reduce 

reserve lives. Property write-offs will continue and mine idlings increase as long as gold prices decline. 

During the 1980s we looked to the 24% annualized growth rate of North American gold output to 

justify premium valuations that typically were twice the level of the overall stock market. Sixfold production growth over the course of a decade and fertile exploration potential commanded Investor interest. 

Contemporary environmental trends, reduced exploration activity, reduced access to capital and 

the sustained period of low gold prices all threaten to reduce North American gold output between 

the years 2000 and 2005. Common stocks tend to become sensitive to reserve llves when they 

range from five to eight years, such as those now approached by Placer Do-, LAC 11/ntHals, 

Pegasus Gold, C.mblor, Royal Oak 11/nes, F/rstlllss Gold or Agnico-Eagle. Valuations become quite depressed after the most profitable zones fall within a four-year remaining life as the 

performance of Battle llountaln, FIIC Gold or Amax Gold demonstrated 'in 1990-1992. 

We look for the relative valuation of gold shares to suffer if current trends continue and reserve 

lives dwindle. We estimate that a gold price of $400 will be necessary In 1996 to Justify the present 

10 
286 

D-srt,., ...... ......._ 

$29 billion market capitalization of the 33 companies that we monitor. The valuation of reserves 

and production will be about the same as seen today, but the valuation of earnings and cash flow 

probably will be at a 30-40% discount to today's levels owing to the shortening of reserve lives. 

Higher gold prices are necessary to generate the Increased earnings and cash flows needed to sup• 

port current valuations. 

Pl_, Dome and Newmont lllnlng are the only North American companies that have maintained 

very large scale gold elCploration programs of roughly $50 million annually despite the recent gold 

price declines. Teele Corporation, t.wmont Gold, Ho,,,.mk• 11/nlng, FrHport-llclloRan 

Copper and Gold, LAC 11/nen,la. Hemlo Gold, S.ntll Fe Gold and Amax Gold each maintain 

exploration efforts amounting to $12•17 mMHon annually. The exploration programs of Battle llountaln, FIIC Gold or perhaps a few others may be scaled back sNghtly from the lower end of that 

range. Expending money sometimes facilitates exploration success. 

We believe that plenty of gold remains to be found both in North America and around the wortd. 

Man doesn't understand many of the ways that gold occurs in nature. The odds weigh against the 

delineation of large amounts of gold in 1993-1995, however, owing to contemporary environmental, 

exploration activity and economic trends and the lead times inherent in the exploration process. 

Clearly those firms that have laid off most of their geologists have lower odds of discoveries. 

Whie global gold mining costs weigh against too much more erosion in the gold prices, time will 

run out for some of the unden:apitalized firms in 1993 or 1994 unless gold prices rally robustly in 

the coming year. Investors should be attentive to the financial wherewithal of gold companies In 

choosing their investmenl4 In the coming year. 

John C. Tumams, CFA 

(212) 504-4233 

Ncle: Prices are as cl the dose, January 4, 1992. 

Anglo-American Gold (MGIY): 23⁄4 

Equinox Reeources (EQX.To): C$1.87 

Freeport-McMoRan Inc. (FTX)O: 171⁄4 

Galactic R .. ources (GLC): 3⁄4o 

Granges (GXL.To)#: •~,. 

Northgate Exploration (NGX)#: 1⁄2 

RTZ (RTZ): 411⁄2 

• DONAL.DaON, LUFICIN A JENRETTE SECURITIES <X>filflOltATION HAS FROM TIIE 10 1Wi1E Pft0Y1DED INVISTMEfrff IIANCM SERVICES TO 

Tl4E OOW'Mlt NIO HM IEEN COW'EIU,\TED fOA Tl408E IERVICO. 

I DONALDSON, U.FION & JEMIETTE $ECUN11ES COAPORATIOH IMICES A IMRICET N THS SECURITY, HAS PEAIOOIC POSITIONS IN THS 

SECl.l'IITY N COMECTION WITH 1la AC1MTY AND IMV • ON THE 0H'OSITE SIDE OF P\a.lC OffDEAS EXECUTED ON A fllEOIONAL 

STOCK EXCHANCIE MERE WE ACT Al A SPECWJST. 

11 
l!emaGold 

Teck Corp, 

Canyon Resources• 

Coeur d'Alene 

USMXINC. 

Royal Oak Mines 

Echo Bay Mines# 

TVX.Gold 

HemloGold 

Freeport-M Cu+Au 

Adas Corp. 

Dickenson Mines 

LAC Minerals # 

GlamisGold 

Homestake Mining# 

FU'StMiss Gold 

FMC Gold Co@ 

Crown Resources• 

Agnico Eagle 

Battle Mountain# 

Euro-Nevada 

Cambior 

Rayrock 

Pegasus Gold 

Newmont Mining# 

Franco-Nevada 

Newmont Gold Co# 

American Barrick# 

Placer Dome Inc# 

Hecla Mining# 

Amax Gold Inc 

287 

Chart 1 

Capitalization per Ounce of Global Reserves 

-$16 

-$29 

$36 

$39 

$42 

$5S 

$S9 

$71 

$72 

$74 

$75 

$78 

$92 

$95 

$102 

$104 

$104 

$109 

$111 

$114 

$120 

$128 

$130 

$133 

$139 

$ISi 

$154 

$172 

$179 

$189 

$209 

7 I 

so $100 $200 $300 

Sources: DLJ estimates; Company reports 

12 
BemaGold 

Royal Oak .Mines 

Teck Corp 

AtlasCorp. 

Coeur d'Alene 

USMXINC. 

FustMiss Gold 

Cambior 

Canyon Resources* 

GlamisGold 

LAC Minerals # 

Agnico Eagle 

Rayrock 

Crown Resources• 

Pegasus Gold 

Echo Bay Mines# 

FMC Gold Co@ 

Dickenson Mines 

Battle Mountain# 

lVXGold 

HemloGold 

Homestake Mining# 

Placer Dome Inc# 

Hecla Mining# 

Newmont Mining# 

Amax Gold Inc 

Newmont Gold Co# 

Frcepon-M Cu+Au 

Euro-Nevada 

Franco-Nevada 

American Barrick# 

so 

288 

Chartl. Dnslt ,., .............. 

Total Capitalization per Ounce of 1996 Estimated Output 

$581 

$643 

$727 

$742 

$783 

$810 

$849 

$815 

$923 

$945 

$952 

$965 

$1,075 

$1,083 

$1,099 

$1,111 

$1,133 

$1,454 

s1,n2 

$1,810 

$1,811 

$2,023 

$1,000 $2,000 

$2,397 

$2,726 

$2,783 

$3,000 

Soun:es: DU estimafes; Company reports 

13 

$4,000 $5,000 
FirstMiss Gold 

GlamisGold 

Cambior 

Royal Oak Mines 

TVXGold 

Rayrock 

LAC Minerals # 

Alias Corp. 

Agnico Eagle 

Echo Bay Mines# 

Battle Mountain# 

Pegasus Gold 

Placer Dome Inc# 

Dickenson Mines 

HemloGold 

FMC Gold Co@ 

Homestake Mining# 

USMXINC. 

Teck Corp 

American Barrick# 

Hecla Mining# 

Amax Gold Inc 

Canyon Resources• 

Newmont Gold Co# 

Franco-Nevada 

Frecpon-M Cu+Au 

Newmont Mining# 

Euro-Nevada 

0.0 

289 

Chart3 

1993 &timated Price to Cash Flow 

5.1 

5.3 

5.4 

6.0 

6.0 

6.3 

7.5 

7.7 

7.9 

8.3 

8.5 

8.7 

10.0 

10.9 

10.9 

11.2 

12.2 

10.0 

12.6 

13.2 

14.7 

15.5 

17.5 

18.4 

19.7 

20.9 

22.5 

20.0 

Sources: DU estimates; Company repons 

14 

30.0 

36.0 

40.0 
Royal Oak Mines 

Ncn:o# 

Santa Fe Pacific# 

American Barrick# 

HemloGold 

FirstMiss Gold 

Franco-Nevada 

Agnico Eagle 

Cambior 

GlainisGold 

Teck Corp 

Placer Dome Inc# 

1VXGold 

Newmont Gold C-OII 

Euro-Nevada 

Newmont Mining# 

Freepon-M Cu+Au 

Pegasus Gold 

Dickenson Mines 

0.0 

290 

Chart 4 Pone ...... laflda A ...... 

1993 F.stimated Price to Earnings 

SS.6 

20.0 40.0 60.0 

Sources: DU estimalcs; Company repons 

15 
Franco-Nevada 

Euro-Nevada 

Fn::eport-M Cu + Au 

HemloGold 

American Barrick# 

Teck Corp 

Newmont Gold Co# 

Agnico Eagle 

Placer Dome Inc# 

Glamis Gold 

Santa Fe Pacific# 

Newmont Mining# 

TVXGold 

F,rstMiss Gold 

Royal Oak Mines 

Pegasus Gold 

Cambior 

USMXJNC. 

Rayrock 

Homestake Mining# 

Dickenson Mines 

FMC Gold Co@ 

Battle Mountain# 

LAC Minerals# 

Amax Gold Inc 

Echo Bay Mines# 

Atlas Corp. 

Hecla Mining# ' 

Canyon Resources• 

Coeur d'Alene 

Nerco# 

Crown Resources• 

-$SO 

$0 

291 

Chart 5 

Pretax Break.even Gold Price 

$100 

$200 

$225 

$250 

$275 

$275 

$290 

$290 

$300 

$300 

$305 

$317 

$320 

$320 

$325 

$325 

$330 

$345 

$345 

$350 

$355 

$355 

$355 

$375 

$375 

$380 

$390 

$400 

$400 ... 

$410 ., 

$500 I I I 

$100 $200 $300 $400 $500 $6()() 

Sources: DU estimates; Company repons 

16 
Cambior 

A-lm-Corit. 

FrrstMiss Gold 

Royal Oak: Mines 

Rayrock 

Placer Dome Inc# 

Pegasus Gold 

Agnico Eagle 

GlamisGold 

Crown Resources• 

LAC Minerals # 

Amax Gold Inc 

FMC Gold Co@ 

Battle Mountain# 

Nerco# 

Hecla Mining# 

Homestake Mining# 

Santa Fe Pacific# 

Newmont Gold Co# 

Dickenson Mines 

USMXJNC. 

Newmont Mining# 

BemaGold 

Teck Corp 

HemloGold 

Echo Bay Mines# 

American Barrick# 

Coeur d'Alene 

Franco-Nevada 

Euro-Nevada 

Canyon Resources• 

TVXGold 

Freepon-M Cu+ Au 

0.0 

292 

Chart 6 ........... Lafldn A lmNlte 

Estimated Reserve Life in Years 

5.0 

5.1 

5.6 

5.9 

6.5 

6.9 

7.3 

7.4 

7.8 

8.0 

8.7 

8.8 

9.1 

9.4 

9.9 

10.0 

10.9 

11.6 

11.8 

12.4 

12.5 

12.8 

12.9 

13.3 

15.3 

16.0 

16.2 

18.0 

18.0 

20.0 

20.3 

20.5 

34.7 

I I 

10.0 20.0 30.0 40.0 

Sources: DLJ estimates; Company rcpons 

17 
FMC Gold Co@ 

Euro-Nevada 

Franco-Nevada 

Crown Resources• 

HemloGold 

Teck Corp 

USMXINC. 

Coeur d'Alene 

Newmont Gold Co# 

American Barrick# 

Santa Fe Pacific# 

Frccpon-M Cu+Au 

Royal Oak Mines 

Placer Dome Inc# 

Newmont Mining# 

GlamisGold 

Agnico Eagle 

LAC Minerals # 

Homestake Mining# 

FirstMiss Gold 

Pegasus Gold 

Hecla Mining# 

Rayrock 

TVXGold 

Dickenson Mines 

Amax Gold Inc 

Cambior 

Battle Mountain# 

Canyon Resources• 

Echo Bay Mines# 

Atlas Corp. 

Nerco# 

BemaGold 

25% 

-50% 0% 

293 

Cbart7 

Net Debt and Estimated Capital Spendini: Budi:et 

as a Percentage of Market Capitalization 

42% 

50% 

59% 

62% 

77% 

84% 

84% 

84% 

87% 

105% 

112% 

122% 

122% 

130% 

50% 100% 150% 

201% 

200% 

Sources: DU estimates; Company rcpons 

18 

250% 

289% 

300% 350% 
BanaGold so.o 

Euro-Nevada S0.2 

Franco-Nevada $0.2 

Glami5Gokl S0.3 

Canyon Resourcts• $0.3 

Royal Oak Mines $0.S 

DiCU0$00 Mines 

USMXINC. 

Crown Resources• 

Coeur (f AJeoe 

Atlas Corp. 

FirscMissGokl 

lVXGold 

Rayroct 

Agnico Eagle 

Nacol 

Cambilll' 

American Blffickjt 

Edlo Bay Miaesl 

Hecla Mining# 

Pegasus Gold 

Fteeport-M Cu.., Au 

AmuGoldlDc 

FMCGoldCo<it 

Baule Mounainl 

TecltCorp 

HemloGokl 

LACMi-.lsl 

Newmont Gold Col 

Homeslakc Mining# 

Sanra Fe Plcificl 

~ Miningl 

Placer Dome IDcl 

so.o 

294 

Chart8 D-c:« In,...._ ......... 

Fstimated Exploration Budgets 

($ In millions) 

$10.0 

SILO 

S11.S 

S12.0 

S13.0 

S13.0 

S14.0 

S14.S 

SIS.O 

S17.0 

S10.0 $20.0 S30.0 S40.0 sso.o 

19 

sss.o 

S60.0 

S60.0 $70.0 
295 

'~ tit Van Eck Global ,_,.,.,Sure,19:S:S 

The Honorable George Miller, Chairman 

Collllliittee on Natural Resources 

U.S. House of Representatives 

Room 2205 Rayburn House Office Building 

Washington, D.C. 20515 

Dear Mr. Chairman: 

Van Eck Associates Corporation 

122 East 42nd Street 

New York, NY 10168 

212-687;5200 800-221-2220 

Fax 212-687-5248 

March 11, 1993 

As shown in the accompanying table, the U.S. gold-mining 

industry produced poor profits in 1992, when, we would point out, 

the gold price averaged $15-an-ounce higher than it is today. 

Aggregating the results and excluding hedging gains, we estimate 

the eight companies in our survey, among the largest and bestmanaged in the industry, eked out a paltry $24/oz. in net income 

(before extra-ordinaries), representing a 7% return on sales using 

the $345-an-ounce average price for 1992. At today's $330-an-ounce 

price, I believe it is safe to say the industry would earn little over $10-an-ounce. In fact, despite significant cost-cutting 

programs at all companies, production costs will rise somewhat for 

most of these companies and so the profit would likely be cut still 

further today. 

Translating these profits into returns for shareholders paints an even more dismal picture - according to my estimate, these eight 

companies generated approximately 7% return on equity (R-0-E) in 

1992, compared with an estimated R-0-E for the S&P 500 of 12%. 

Moreover, the gold-mining return is artificially high because of 

the very significant writedowns and write-offs incurred by the 

industry in recent years, which reduced shareholder equity 

significantly at some companies. Those write-offs reflect the very 

risky nature of the mining business, a riskiness that should 

require the prospect of above-average returns to compensate for the 

above-average level of risk inherent in the business. 

Furthermore, the North American gold mining industry is 

selling at about 45 times 1992 earnings and about 13 times cash 

flow. compare that with a price-to-earnings ratio of 24 times and a price-to-cash-flow ratio of 10 times for the S&P 500. Clearly, 

the fundamentals are not attractive to the general investor who can buy companies making cereal or widgets and earning far greater 

returns without the operating and price risk attendant with gold 

mining. The imposition of a 1.-oyalty burden on these alreadysqueezed companies would clearly serve to make them even less 

attractive as investments. 

Bear in mind also that mining is a truly global business -
296 

investaent dollars have always flowed where the geology was favorable and where the relative econoaics were attractive, more so today than ever before. When I becaae an analyst 10 yea,rs ago, the 

stoclcs of c011panies with aining operations outside North America 

sold at discounts to those of "all-American" companies like 

Homestake and Battle Mountain. Today, in the U.S. the difficulties 

and significant delays experienced by aost companies trying to 

permit properti- and the threat of a 12 l/2t royalty on revenues right off the top contrast sharply with the relaxation of fiscal 

burdens and foreign ownership restrictions in countries such as Mexico, Chile, Venezuela, et al. Most of the North American 

company manag-ents to whom we speak would prefer to concentrate 

their exploration and development efforts at home, but are being 

driven to foreign shores by the relatively unfavorable economics 

here in the States. Just a few years ago, I would have viewed such 

geographical diversification negatively; today, as an investor, I 

applaud aanage• ents who are taking the steps necessary to enhance 

shareholder returns. Today, the shares of companies with properties abroad often sell at premiums to the group - not in spite of 

the foreign accent, but rather, in my opinion, because of it. 

Let us take the investment choice a step further - to foreign 

companies. According to statistics from Deacon Barclays de Zoete 

Wedd, an international brokerage concern, the Australian goldmining industry is selling at about 15 times earnings and less than 

7 times cash flow, while the North American industry sells at 

nearly 45 times· earnings and 13 times cash flow - that is, North 

American gold shares are three times as expensive as their 

Australian counterparts on an earnings basis and twice as expensive on a cash flow basis. Clearly, there is great incentive for 

investors to "buy Australian,• where mining has a long history and 

where the legal and political framework is as developed as that of 

North America. A royalty burden on U.S. companies would only serve to make the Australians relatively even more attractive to us as investors. 

Finally, South African gold shares, while presenting political and/or social risks that may be unacceptable to some, currently 

yield about 9t in annual dividends, versus yields of between lt and 

2t for North American gold shares, and sell at a price-to-earnings 

ratio of less than 14, similar to that of the Australians. On 

economics alone, the South Africans clearly offer superior value to 

that of U.S. companies. 

Respectfully s~mitted, 

~,~M_, Cf/~ 

Lucille Palermo, C.F.A. 

Associate Director - Mining Research 

and Portfolio Manager 

cc: The Mellbers of the House Co-ittee on Natural Resources 

2 
LUCILLt: PAUIMD, PCIHfCI

VAN ECK ASSOCIATES CCIRP

lt:UCTD DTI ANt:ltW ID.D NIIUIQ c:i::MPANIEI ACTUAL COITI Of PICIDUCTIClll IN 1992 

- OOU IIC. MER. IUIICI: IESCdCH 

1992 1992 

i of I of 

I Illa I/OZ. hlff ..... I/OZ. hlH 

CU.CN IOld ,:m--- -- -,:,sr-- -- 

lolN "9.7 

- 1'41).4 1422 

loyaltf• o.o 0 o.os o.o 0 O.OI 

btrectfGfl Colts 52.1 2tJ 5J.Ol 231.4 tat 42.ll 

---u:J'",W 47.0l 7llr.5""--m 57.21 

- 21.a • 69.1 54 

Groa1 Oplratf,. Prof It -z:T""""7'Gl' 25.21 --m:r-ir, 44.41 

Other Operatl,_ lnaaa o.o 0 o.o 0 

-z:T""""7'Gl' --m:r-ir, 

- 1.5 J4 14.4 11 

-,...-.., 16.6X --m:r-m 41.71 

~i~:r;!~:-;:=,.. 6.7 27 4.2 J 

o.o 0 o.o 0 

Operating Earnf,.. ~----m -m:r-in 

lnttrat lni:aa t . 6 6 tJ.0 to 

HIT -.r.r~ 11.51 ---m:r-m 43.41 

lntereat Expenae 2.4 10 9.4 7 

Prt•tlX Eamfngs ~~ 9.11 --m:-i·-m 41.6X 

Nlnorfty lnt,reat 0 0 

~~ ---mT -m 

lncat & other TUN/ (lenlflt) 5.0 20 50.0 J9 

lncoae lefore lxtr•· ----- ----- 

ordfnerf• 4.1 17 4.11 174.9 tJ7 32.41 

EatreordhwrlH 7.4 0.0 

--,r.r-- --in:J'" -- 

'41ltyE.,,,f ... o.o O.D 

liet lnccat -ir.r --m:r 

Pref • ....,._ Dlvldardl o.o o.o 

Ntt lnccat Avaf lablt --- __ ,_ 

To ca.on lhertholdera 111., 46 11.51 1174.9 1J7 32.41 

ll>TE: MIX lold adt S,7/oz. NOTE: lerrfct adt S77/ot. fn fn 1992 on IU tMdalna 1992 on tu htdllrw actt- actlvftlff. Without tMM vftlft. Without tMM Pted

hedat galrw, we fftl•t• gelna, we Htf•ta lerrfck MU wuld have LOil would haw urned S60/oz.

MO/oz. (bafor• extra• or only 17.:SX on Hlff. ordlnarfH). 
LUCILLE PALHMD, POl:TfCl

VAN EIX AUOCIATE.S CCIIPC

111.fcttD IDlfl NRICM IOU IIHNI CCIINIIIH AC1IMI. COITI 0# ,-,ctlCII II 19'2 

l'NC 111.D IIONIITAICI! •l•IIQ CO. 

1991 19'2 

I of I of 

... I/OZ. hlN .... 1/0l • .. , .. 

-told ""T.ffl" -- -- ""T.ffl"-- -- 

.. , .. 11,0.0 1141 

--· GI! 

l~ltlN o.o 0 O,OI o.o 0 O.OI 

htrtetlon CO.ti 120,0 273 IO,OI 4111 .4 146 71,JI 

""""'!a"'---U 20.0I ,r.r--,, Zl.71 

DOLi 0,0 0 117.S 61 

Grou Oplratlfll Profit -,t----u 20.0I -,r.r~ 10.91 

Other Oper1tlf11 lnccae 0.0 0 11.S 6 

--Y---U 20.0I ----.r:r-.. 12.61 

""" 7.7 11 41.S 2S 

--,a- --n 14. 91 ~-.. 5.D 

EJll>(oratloo/1- 12.2 ZI 27.1 15 

Other Clperatll"II 1..,_e o.o 0 5. 7 3 

Operating 1,rn1,... -w.r----n 6, 71 ---,:r--y o.n 

lnter•t lnccaa 6.0 14 9.9 5 

EIIT --,..,--...,., 10.71 -ir.r----. 1.71 

lnttr•t !xpenae o.o 0 13. 4 7 

Pre·to bmll"llt ,...,...,., 10.71 -:rr--:r ·O.D 

Minority lnttrfft 0.0 0 0,2 0 

,..,...,., -c,:r--:r 

Inc- & Other Ton/ (ltnefft) 1.7 4 · 2.9 ·2 

lnc:0111 lefore lxtre· ----- ----- 

ordfnerf" 14.4 n 9.6X 0.4 0 0.1X 

Extraordtl"lllrlH o.o ·1711.7 

-,...-- ---=m:r-- 

Equity E:ernlna• o.o 2.5 

Net lnccae -,...- n 9.6X "":'ffl:r · 92 •26,71 

Prd. Share Dlvtdanda 0.0 0,.0 

Net lncc:ae Aw.Hable --- --- 

To taai:,n "'erlholdera 114.4 n 9.61 (1175.1) · 92 ·26.71 
299 

Donaldson LuOdn & Jenrette 

0or-.,...-&--:t=•MOa,._--,NY1CIJ05•1212)l04-3000 

-c.-

------

Debbie Mino 

Vice Prelidmt or Public Relaliam 

0vwna2900 Nordl. Loop W. Saile12'0 

~TX 77092 

December 10, 1992 

We have attached the initial RSVP list for our approaching January 12-13, 1992 program. Our past 

anendance bas nnged from 43 institutional investors in 1989 to 65 for our two4ay 1992 program. Our 

second invitation to clients will be mailed December 14, 1992. 

Please reconfirm your attendance and names of speaken with Sharon Small at (212-504-4259). 

Polential securities offering or mergen may require minor agenda adjustments. 

Our policy of publication of transcripts or slides that you provide places an administrative burden on 

our office. Please provide your remarks on bard copy, and if possible, provide a 3 1/2 inch disk on Microsoft 

Word for Windows or compatible format like Word Perfect or Multimate to help us out. Also, please indicate 

IO Sharon Small (212-504-4259) whether or not you will have a transcript. 

Failures to complete the attached orgolUZlltional /om, may result in confusion in our effort to provide 

audio visual aids, etc. 

As in the past six years, the theme of our program is "United Growth Through Exploration and 

Acquisition.• Gold investing has attracted us in the past decade due to exploration potential upsides more than 

commodity price fluctuation. 

In addition, we want all of the speakers to focus on some pnctlcal issues related to the present gold 

price environment. Pretax full cost breakeven points, your rates of return criteria, sensitivity of SEC reserve 

calculations to $300 gold prices, underground mine development footage over the past four years, the number 

of full-time exploration geologiests today venus five years ago, near term capital needs, and the willingness of 

tbe management IO sell their companies are several topics we've asked the speakers IO address in their 

remarks. 

We prefer that you not discuss cash production costs in isolation, wbicb is misleading to the audience. 

We will interrupt and ask for more explanation If speaken provide partial or incomplete cost data. 

We're looking forward to an interestinc program oriented to contemporary investment issues. 

Faithfully yours, 
300 

Mr. LEHMAN. Thank you very much. 

Mr. Fiske. 

STATEMENT OF TERRY N. FISKE 

Mr. FISKE. Thank you, Mr. Chairman, Members of the committee. I appreciate being back again and appreciate your endurance 

in a session like today. 

I am here toda1 on behalf of the Precious Metal Producers, a 

group of five m&Jor producers of gold and silver in the United 

States. My own particular company is Echo Bay Mines, a member 

of that group, with offices in Reno and Denver, corporate and managements headquarters are in Denver with active mining operations and development operations in Alaska, the State of Washington, and exploration properties in several others, including California. 

We have submitted a position paper or comments prepared by and on behalf of the Precious Metal Producers, which I will not 

read, on the assumption that they are available for your consideration. They focus on matters of particular concern by the PMP arising from Title II of H.R. 322, particularly the mine waste regula- tion provisions. 

Very briefly, the position of the PMP is that we now have in 

place an o~going and quite satisfactory statutory regulatory procedure under RCRA, and with the statutory and regulatory operations of the EP~rovide for management of all wastes in the 

United States, ous, toxic, solid wastes, including mining 

wastes. 

The technical and scientific strength of the United States, the 

United States Government, in dealing with waste is concentrated 

in that program, and it utilizes not only that strength but calls 

upon other organizations through its policy committee and utilization of programs to gather further information and material. 

We view Title II as carving out or redirecting the attention from 

that program and putting it into the Department of Interior, perhaps the Forest Service, perhaps some planting, overlapping, and 

ongoing and proper programming. It would appear to us to create 

duplication, inconsistency, and inefficiency in this program. 

If there should be perceived to be a need to augment the ongoing 

program for management of waste, then it should be as augmentation under RCRA and through the EPA rather than creating a new 

program to be administered by an agency which does not have the 

experience, the personnel, or the budgetary ability at this point to 

undertake that very demanding task. 

Furthermore, we see Title II inflexible program for managing the 

mining activities that we are involved in now. It largely eliminates, 

certainly seriously erodes, the role of the States, who have various 

experiences. They can serve as laboratories for various P.rograms. 

They have different circumstances, they need the flexibility, they 

can provide the flexibility. The program as we see it, as we would 

interpret it under H.R. 322, would deprive us of that. 

Furthermore, with regard to the waste management aspects of 

Title II, our technical people tell us that the technical scientific 

standards and provisions of that are not sound and create some serious problems in themselves. 
301 

H.R. 322 ia a very lengthy, complex, comprehensive bill, as it ia 

intended to be. Whether it is in this form or in some amended 

form, it will result, ladies and gentlemen, in massive changes to a 

fundamental industry of th4.' United States and the role of that industry in the public's life, for ,ood or ill. As it is, as it is now drafted, and based upon the expenence that we have in the mining industry, and as undoubtedly it will be interpreted and applied by 

agencies, courts, private citizen impact, we see it to be basically destructive of that fundamental industry, and perhaps even disastrous. 

We do not in the time we have been allotted have the opportunity to go into the specifics or details that we may see concerning that, so I would like to just speak very briefly of concepts, although 

we certainly are prepared, as all of the other speakers have emphasized, to work in a cooperative and sincerely productive manner to 

try to formulate a program, formulate a mining revision which we 

indeed do favor, and find many of the aspects favorable, to work 

with the committee and others in order to develop a program that 

we think will not have these disastrous consequences, but can meet 

the legitimate concerns that have been raised about the Mining 

Law as it exists now. 

Mining, ladies and gentlemen, is indispensable for life in the 

United States, if we are not to return to the Stone Age, which obviously we are not going to. It must cause some disruptions. They are 

unavoidable. There are some consequences that some people may 

prefer that we not have, such as changes in use of land. 

Our knowledge is complete, as knowledge is completed by human 

beings in all fields of endeavor, and we get better as we go along, 

and even mishaps occur, but we must strive for a balance, and ladies and gentlemen, we would like to work together to achieve that 

balance. 

What I meant, as I know many others in the industry do, what 

has come to be an adversarial, antagonistic approach to revision, 

reformation, improvement of Mining Law, particularly in environmental matters in the United States. 

There have been those in our industry who have taken a position that they would resist to the death any change in the law. We 

think we have long passed that, and the intelligent views in the 

mining industry today soundly reject that idea. 

But on the other hand, we find views which perhaps are not admitted, but nonetheless have the consequence of desiring to stop 

mining, to prevent it in the United States, or perhaps with a lack 

of knowledge or understanding of the scientific, technical and economic aspects of it, would have that effect, an actual prevention of 

mining in the United States. It could happen with bills such as 

H.R. 322, or approximating a happening of that. 

Unfortunately, some of the aspects that I have mentioned are reflected in H.R. 322, and we would like the opportunity, again, to 

work to see if we cannot develop a program and a plan and a bill 

that would not have these undesirable effects. 

The General Mining Law can be changed. It can be reformed. It 

can be improved. And it can be made a good, viable working program in a beneficial, nondestructive way, if we can work together. 
302 

Unfortunately, within the industry, the people who are knowledgeable about the economics 88 well 88 the technology of it, and 

in their private conversations, not just for public purposes, not just 

for political purposes, but in the private discussions among people 

in the industry, it is uniformly viewed as hostile to the mere existence of a mining industry. 

That undoubtedly is not intended by its draftsmen, but that is 

how it is perceived after very detailed, careful study of it. It is 

viewed as antagonistic to an entire industry, an essential industry 

to the United States. 

Mining deals with a public asset, and I am afraid that sometimes 

gets lost in these discussions. Those minerals in the ground, in the 

public domain, belong to the public. It is a national resource, an 

essential national resource. 

It must be produced. They must be produced for the benefit of 

the public. And yet, so much of the bill seems to suggest that mining will be permitted only if some reason can't be found to prevent 

it. It appears to be a disfavored, inferior use. All others seem to be 

preferred, even to the exclusion of mining operations. That is done 

expressly in the provisions for unsuitability, the provisions, for 

even before there has been exploration, even before the geologists 

know what may be there, it is determined to be unsuitable for mining, which forecloses the opportunity to determine whether there is 

a deposit of valuable minerals belonging to the people of the United 

States even there. 

Who will speak for the potential development of mining property 

if the minerals have not yet been discovered? There will be no 

miner, no mining company who will say, Wait a minute, we better 

keep it at least open. If we declare it unsuitable, we foreclose it 

from any further consideration. It is done not only expressly by the 

unsuitability provisions, but in the criteria section, 204(e), for unsuitable determinations. 

One of them is determining that the land has no productive use. 

By definition, it appears mining is not considered to be a produc- tive use. The other provisions, the other uses of the land, are pro- ductive, but mining is not. 

We would be looking at extraordinarily expensive, time-consuming producers which we, in serious good faith, do not believe really 

enhance the environmental reclamation concerns. Many of them 

are unrealistic, scientifically unnecessary burdens. 

The major concerns we have are the uncertainties of outcome in 

the development of interest and title, the security of title. We are 

concerned about illusory rights. As has been stated in one of the 

papers, the bill does not provide now for a right to mine. Even with 

discovery or even with location of a claim, it would provide for the 

right to apply to the government for discretionary permission. 

These are concerns. As has been mentioned to this panel, the 

banks won't lend money on those. We must have assurance that 

once the initial work has been done, the money has been sent, we 

can proceed forward with safety. It is the cumulative effect of these 

matters, ladies and gentlemen. Any one on any project may not be 

deadly, but the accumulation of them begin to tip the balance so 

it is no longer viable economically. 
303 

As Dr. DeVoto has pointed out, as the other members of the 

panel have pointed out, there comes a point when economically the 

project just cannot bear those burdens. 

In conclusion, I have got a list of about 10 or 11 or 12 items that 

we would like to have the opportunity to talk about specifically, but 

I know in the interests of time that that is not going to be permis- sible or possible. 

The message that I would like to leave is that we are absolutely 

committed, the res~nsible members of the mining industry, to a 

sound environmental, reclamation-oriented industry for this country. We are absolutely convinced that it can be achieved. There will 

be disturbances that must be accepted and acknowledged, but fundamental environmental reclamation matters can be obtained and 

lived with, and we take a back seat to nobody in our enthusiasm 

for that. What we are concerned about in large measure in H.R. 322 is 

what appears to be administrative, economic, time-consuming uncertain burdens that do not actually enhance those objectives, but 

nevertheless burden projects which may very well make them uneconomic and prevent the extraction of the minerals for the benefit 

of the United States and the people of the United States who own 

those minerals. 

Thank you, Mr. Chairman. 

[Prepared statements of Mr. Fiske and the Precious Metal Producers follow:] 
304 

TESTIMONY OF 

Terry N. Fiske 

Vice President and General Counsel 

Echo Bay Mines 

ON BEHALF OF 'IHE 

PRECIOUS METALS PRODUCERS 

Hearin& Before tlae House 

Energy and Mineral Resources Subcommittee 

Natural Resources Committee 

OD 

H.R. 322, the Mineral Exploration and Development Act or 1993 

March 11, 1993 

On behalf of the Precious Metals Producers ("PMP"), I 

appreciate the opportunity to testify on Title II of H. R. 322, 

the Mineral Exploration and Development Act of 1993. I have 

provided the Subcommittee with a copy of my remarks, and will 

submit more detailed written testimony for the record within the 

time allotted. 

The Precious Metals Producers is a group of five major gold 

and silver mining companies. The members -- American Barrick 

Resources Corporation, Battle Mountain Gold Company, Echo Bay 

Mines, FMC Gold Company and Independence Mining Company --

organized in 1986 to participate in the anticipated development 

by EPA of regulations under the Resource Conservation and 

Recovery Act ("RCRA") governing mining wastes. PMP continues to 

be active in that effort. We participate as a member in EPA's 

policy dialogue committee, formed to reach consensus on mine 

waste. We also took part in negotiations during the last 
305 

Congress, sponsored by Chairman Swift of the Transportation and 

Hazardous Material• Subca.aitt••• to reach agr•-•nt on RCRA 

legi• lation governing aining wast••· state and environaental 

group representatives also participated in both these policy 

discussion•, and consensus was reached by the parties involved on 

so- issues. 

Ny testiaony today will focus only on Title II of H.R. 322, 

which would add reclamation standards and environmental 

requir-ents to the Mining Law. In ay testiaony I will address 

briefly the status of efforts to develop aine waste requir-ents 

under RCRA and then will co1111ent on -jor provisions of Title II 

of R.R. 322. 

Mine Waste Regulation Under RCRA 

congress exeapted aining wastes from regulation as 

"hazardous wastes" in 1980 and directed EPA to study the wastes 

and determine the best regulatory treatment for them. In 1986 

EPA concluded that regulation under Subtitle C of RCRA -- the 

hazardous waste title -- was not warranted, and resolved instead 

to develop a program under Subtitle D, governing nonhazardous 

solid wastes. EPA gave several reasons for its decision: 

First, Mining wastes are generated in extremely 

large volumes, and typically are low in 

toxicity compared to other wastes managed 

under Subtitle c. Therefore, managing thea 

Page 2 
Second, 

Third, 

306 

under the strict requirements of Subtitle c 

would be unnecessary -and economically 

impracticable; 

Subtitle C's stringent requirements are too 

inflexible to resolve the uniquely site-specific 

issues raised by mine waste management; and 

States already have significant expertise in 

developing and imposing mine waste requirements, 

and imposing Subtitle c requirements would not 

leave room for states to take responsible charge 

with existing and developing programs. 

Since it made this determination, EPA has been busy 

developing a mine waste program under Subtitle D of RCRA. EPA 

drafted two "conceptual" regulatory approaches and solicited 

informal comments on them. These were called the "Strawman" 

documents. More recently EPA has undertaken a great deal of 

data-gathering on mine waste issues, and has sponsored the mine 

waste policy, dialogue committee, which I already mentioned. 

PMP supports the devel opment of mine waste rules under 

Subtitle D of RCRA. We believe that a federal mine waste program 

is needed under RCRA to provide minimum requirements for s.tate 

programs, and to make sure states meet the minimum requirements 

necessary to protect public health and the environment. 

*** 

Page 3 
307 

Provisions of D.R. 322, Title Il 

The professed purpose of Title II is to add surface 

-nag-ent and reclaaation standards to the Mining Law. In fact, 

if Title II were enacted as written now it would have many more 

consequenc- than that, likely including the transfer of 

responsibility for aine waste -nageaent fro• EPA to the 

Departaent of Interior. Although PMP believes the mining 

industry should be responsible both for good surface aanag-ent 

and reclaaation, we oppose Title II of the Bill, on the following 

grounds: 

L RA, Net lptajgr. Should Dcmm Miac Waste Ramimneats, 

Title II as written would cover waste aanag-ent during mine 

operations and would render superfluous the considerable aaount 

of work that EPA, States and others have done to develop mine 

waste requireaents under RCRA. EPA bas been charged by Congress 

with extensive responsibility for development of waste management 

policy, and has developed technical expertise in the area of mine 

waste aanag-nt. EPA is a long way down the road toward 

developing aine waste requireaents. Interior, in contras~, has 

limited experience or technical expertise with the regulatory 

aspects of -ste -nag-ent. Shifting this responsibility to 

Interior now would represent a -jor change in federal 

environaental policy, and in my opinion an ill-considered one. 

Page 4 
308 

2. lltle II Would love States {)gt of Minin1 BmJation, 

The way I read it, Title II is a rejection of the idea that 

states have anything important to say about mining or its 

regulation. Section 203 would preempt many current and effective 

state progra111S, including solid waste management programs, if 

they are deemed not to "meet or exceed" requirements promulgated 

by Interior under Title II. Preempting workable state programs 

is poor federal policy and should not be adopted. Underlying our 

mine waste discussions in the policy dialogue committee have been 

two important ideas: 

First, 

Second, 

States have and should have a lot to say about 

requirements developed for mining. Many states 

have developed comprehensive programs, which vary 

widely in approach but which have basic scientific 

and environmental goals in common. 

States have had much more "on-the-ground" 

experience with hard-rock mining reguJation than 

has EPA, Interior or anyone else, and accordingly 

can operate as laboratories for the development of 

federal policy and requirements. 

Section 203 rejects these ideas. Far from giving states a 

significant voice in the process, Title II would impose 

requirements on them from the top down, and these requirements 

would be developed by Interior, an agency with limited prior 

Page 5 
309 

experience in the area. Even the surface Mining, Reclamation and 

Control Act (SMCRA), upon which certain provisions of this Title 

are modeled, allows states to administer coal mining programs; 

Title II in contrast would not allow its programs to be delegated 

to states. There is not even a require-nt for the Secretary to 

consult with EPA, or with states. 

3. litle n Would Impose Duplicati:Ye Reqpirements on the Minini: 

Industa, 

Federal and state laws already impose numerous environmental 

protection requirements on mining operations. Prominent among 

those are the requirements of the Clean Water Act and the Clean 

Air Act. I will not take the time here to go into detail, but I 

am submitting for the record today a summary of the federal and 

state requirements that already apply to gold and silver mining 

operations in 14 states with active mining operations. Title II 

takes no account of the existence of these requirements, and 

would duplicate many of them to the extent it does not preempt 

them. 

For instance, Section 201(n) ((4) (B) would require miners to 

"prevent any contamination of surface or ground water" with acid 

or toxic drainage. This requirement would duplicate and might be 

in substantial conflict with the Clean Water Act, and with state 

ground water protection programs, under which effluent limits and 

control requirements already have been established. 

Page 6 
310 

I urge the Subcommittee to reconsider this approach. 

Environmental protection is both important and expensive, and has 

a very real impact on the bottom line for companies like mine. 

It does not make sense to impose conflicting and duplicative 

requirements, among other reasons, because it reduces the ability 

of responsible companies to pay for new environmental 

requirements that are deemed to be necessary in the future . 

4. The Minina~ Permit Requirement and Reclamation Standards Are Not 

Workable. 

Many of the requirements of Title II would make it difficult 

or impossible to find and develop ore bodies in the future. 

Because of time constraints, I address only a few problems here, 

and ask you to consider my written testimony, which will address 

the problems in detail. 

section 20l(b) of the Bill would require a full-blown plan 

of operations, including at least a year of baseline monitoring, 

for all but the most inconsequential exploration activities. The 

requirement would wreak havoc on exploration efforts, and is not 

necessary to protect the environment. Substantial exploration 

should be subject to more streamlined requirements, as it is 

currently, that are tailored to address the temporary and limited 

nature of its impacts. 

Another example of unworkability is section 201(m) (1) (C), 

which concerns reclamation standards for soils. The section 

would require a miner to prevent any contamination or 

Page 7 
311 

togification of soils. The word "toxification" is not defined 

and does not exist elsewhere in federal environmental law. 

Assuming that it refers to phenomena such as acid generation, the 

standard is simply impossible to meet as a practical matter. No 

miner could prevent all generation of acidic drainage from a mine 

site 1,000's of acres in size. 

The standard is so broad that presumably it would prohibit 

the entry of any mining waste liquid into soils underneath a 

tailings impoundment or a waste rock disposal site. It simply 

would be impossible to prevent all such impacts on soils during 

operations, 

More importantly, it is not necessary to impose these 

onerous and impossibly costly standards on the mining industry. 

Miners cannot always stop the generation of acids during 

operations but can take measures to insure that discharges of 

acid water meet federal and state surface and ground water 

quality standards. Similarly, soil impacts can be addressed to 

protect ground water and to sustain post-mining land uses. 

5. Title Il's Reuimnents Would Seriooslt and Unnecessarily Frustrate 

the Abililt to Start Any New Minig Queration. 

Finally, PMP opposes the provisions governing unsuitability 

determinations under Section 204. Because the review called for 

under the statute has to be conducted before any plan of 

operations can be approved, all exploration and mining would stop 

while the review is ongoing. Further, the criteria used for 

Page 8 
312 

determining unsuitability are extremely broad. For instance, 

Interior apparently would be required to designate lands as 

unsuitable if mineral activities would adversely affect a 

candidate species for threatened or endangered status, regardless 

of whether the species is ultimately listed. Compounding that 

concern, there is no provision that would allow miners or other 

citizens to petition the Secretary to reverse or modify such a 

determination. 

*** 

In summary Mr. Chairman, we believe Title II deserves 

fundamental reconsideration. Congress should consider carefully 

how mining regulations can best be designed and implemented and 

by which agency, what the appropriate role of states is, and what 

kinds of requirements are necessary to address the environmental 

risks posed by mining. 

Page 9 
SlS 

WROTEN TESTIMONY OF 

'l1IE 

PRECIOUS MET.AU PRODUCERS 

Heuiq Bdbre tile lloue 

Eaerz, ud Mlaenl Reloan:a SucommlUee 

Natani aao.- 0-wlffee 

OIi 

11.R. 322, die Mlaenl Eq,lon&ioll ud ~ Act of 1"3 

Maida 11, 1"3 

We appreciate the opportunity to aubait testiaony to the 

Subco-ittee on Title II of H.R. 322, the Mineral Exploration and 

Developaent Act of 1993. 

D• 1r1oioua Mta111roc1uo1r1 

The Precious Metals Producers are a group of five major 

mining coapaniea which produce gold and silver throughout the 

western United States. The aeabers of the PMP -- American 

Barrick Resources Corporation, Battle Mountain Gold Company, Echo 

Bay Mines, FMC Gold coapany and Independence Mining company --

organized in 1986 to participate in the anticipated development 

by EPA of regulations under the Resource Conservation and 

Recovery Act (•RCRA•) governing mining wastes. 

PMP supports EPA'• developaent ot well-conceived aining 

waste regulations under Subtitle D. PMP believes that a federal 

aine waste program under RCRA is necessary to provide mini•um 

require-nts for state prograaa, and to ensure that states aeet 

the ainiaua requirements necessary to protect public health and 

the environaent. 
314 

PMP participates in the Policy ~ialogue committee -- a 

committee organized by EPA to seek consensus where possible on 

mine waste issues -- and took part as well in negotiations during 

the last Congress, sponsored by Chairman swift of the 

Transportation and Hazardous Materials Subcommittee, to reach 

agreement on RCRA legislation governing mining wastes. State and 

environmental group representatives also have participated in 

both these policy discussions, and consensus was reached by the 

parties involved on several important issues. 

Kin• wast• Be<n1lation under RCRA 

In 1976, Congress temporarily exempted mining wastes from 

regulation as "hazardous wastes" and directed EPA to study the 

wastes and determine the best regulatory treatment for them. 

After extensively studying mining wastes, EPA concluded that 

regulation under Subtitle C of RCRA -- the hazardous waste title 

-- was not warranted, and resolved instead to develop a program 

under Subtitle D, governing nonhazardous solid wastes. 51 Fed. 

Reg. 24496 (July 3, 1986). EPA gave several reasons for its 

decision: 

First, Mining wastes are generated in extremely 

large volumes, and typically are low in 

toxicity compared to other wastes managed 

under Subtitle c. Therefore, managing them 

under the strict requirements of Subtitle C 

would be unnecessary and economically 

impracticable; 

Page 2 
Second, 

Third, 

316 

Subtitle C'• • tringent raquireaenta are too 

inflexible to re• olve th• uniquely • ite-• pecific 

i• •u•• raiaed by • in• -•t• • anage• ent; and 

State• alr-dy have aignificant experti•• in 

developing and i• poaing • in• -ste requireaents, 

and i• po• ing Subtitle C raquire• ent• would not 

leave roo• for • tat•• to take rasponaibla charge 

with existing and developing progra• a. 

After deter• ining that • ining vast•• ware unsuitable for 

regulation under Subtitle c, EPA initiated the development of a 

mining waste progra• under Subtitle D of RCRA. In coMection 

with thi• effort, EPA drafted two •conceptual• regulatory 

approach•• for • ining va•t•• and solicited infor• al co•• ant• on 

th-. Th-• were the ao called •strav• an• docu• ents. The 

Straw• an docu• enta represented an enor• ou• effort by govern• ent, 

environ• ental group•, state• and industry to develop workable 

• ining regulation• under Subtitle D of RCRA by using a nontraditional proceaa. Nore recently, EPA ha• undertaken a great 

deal of data-gathering on • ine waste issue•, and has sponsored 

the aforeaentioned • in• waste policy dialogue co-ittee. 

,.,,, COllaerp• will •••peat; to 7itl• xx to l,R, S22 

Although PMP believe• the • ining industry should be 

reapon• ible both for good aurface • anageaent and recla• ation, we 

believe that Title II'• requir_,.ta are duplicative, excessive 

and UMeceaaary. The professed ~••.of Title II is to add 

• urface -nage• ent and recla• ation •tandard• to the Mining Lav. 

Page 3 
316 

rn fact, aa it ia currently drafted, Title rr would impose -ny 

new environmental requirement• that would overlap or conflict 

with existing federal and state regulations. Moreover, we think 

Title rI would effect a transfer of responsibility for mine waste 

management from EPA to the Department of Interior. The following 

discussion provides an overview of the reasons underlying PMP's 

opposition to Title II of H.R. 322. We are anxious not just to 

oppose but to make constructive suggestions to improve the Bill. 

We would be happy to work with the committee, to offer technical 

assistance, and otherwise to work to come up with appropriate 

legislation. 

1. IPA. Mot Inttrior. 8houl4 PIYtlOD Kint D•t• Requir ... ptf, 

The EPA, States and others have invested considerable effort 

in developing mine waste requirements under RCRA. Indeed, since 

the enactment of RCRA, EPA has developed substantial technical 

expertise in the area of mine waste management, and has 

experience regulating the environmental impacts of other kinds of 

wastes. Interior, by contrast, has limited experience -- either 

technical or otherwise -- with the regulatory aspects of hard 

rock mine waste management. 

2. Titl• II wou10 Leave the state• out or Kininq Regulation, 

As it is currently drafted, Title rI is a rejection of the 

idea that states have anything important to say about mining or 

its regulation. section 203 provides that state reclamation, 

bonding and inspection requirements that "meet or exceed" 

Interior's surface management requirements would not be preempted 

Page 4 
817 

by the Bill. By implication, section 203 would preempt many 

current and effective state programs which do not to "meet or 

exceed" the requirements promulgated by Interior under Title rr. 

Additionally, section 203 provides that the Bill would not 

affect the applicability of any state water quality or air 

quality requirements. By limiting its "preemption protection" to 

state water or air quality requirements, this language suggests 

that other state environmental requir-ents, such as solid waste 

and water quality requirements, would be preempted. 1 

Significantly, the Bill's preemption of .inconsistent state 

laws would apply not only on federal lands, but on adjacent nonfederal lands as well. The Bill requires the Secretary and the 

states to enter into cooperative agreements when proposed mineral 

activities would affect both federal and adjacent private lands. 

The cooperative agreement would set forth a common regulatory 

framework consistent with the requirements of Title rr. rn this 

1 The provision of the Bill relating to water rights may be 

another example of Title Ir's preemption of state law. Section 

203 would preserve the rights of all parties to "enforce or protect, under applicable law" their interests in water resources affected by mineral activities authorized under the Bill. The 

effect on state water laws is unclear; but the provision suggests 

by implication that Title IX otherwise would preempt state water 

laws. The Bill should be clear about such a fundamental impact on state laws. PMP is opposed to the preemption of state water 

laws, especially without a careful consideration of the iapacts 

of such and the disruption and confusion that would result from 

the displacement of these laws. 

PMP encourages the co-ittee to look carefully at whether 

state water laws, in concert with other existing state and 

federal laws, can adequately address concerns about water quality and hydrologic imbalance. The state laws of Nevada would provide a useful illustration of how state and federal water laws combine 

to address problems of water quality and hydrologic balance. 

Page 5 
318 

manner, the Bill's requir-ents -- including Title rr•s 

preemption of inconsistent state • ining regulations -- would 

apply to both federal and private lands. 

Preempting workable and effective state programs is poor 

federal policy and should not be adopted. Underlying EPA'• 

approach to • ine waste policy have been two important ideas: 

First, States should be integrally involved in the 

develop• ent of • ining waste requir-ents. Many 

states have developed co• prehensive programs, 

which have received the support of government, 

industry and environ• ental groups. Although these 

state progra• s vary in approach, they share the 

SUie basic scientific and environmental goals. 

Second, States have had much • ore •on-the-ground• 

experience with hard-rock • ining regulation than 

has EPA, Interior or anyone else, and accordingly 

can operate as laboratories for the development of 

federal policy and requir-ents. 

Section 203 rejects this co-on-sense notion of federalism. 

Rather than viewing the states as a useful partner in the 

develop• ent of • ining regulations, the Bill would impose 

requir~t• on the states fro• the top down. The wisdo• of such 

an approach is particularly questionable in light of the states' 

substantial experience in the develop• ent of • ine waste 

requir-.nts. Even the Surface Mining, Reclmtion and Control 

Act (SMCRA), upon which certain provisions of this Title are 

Page 6 
U9 

modeled, allow• state• to adminiater coal mining program•; Title 

II in contrast would not allow its programs to be delegated to 

States. At a ainiaU11, the Secretary should be allowed to consult 

with EPA and the states in developing and iapl-enting the Bill's 

surface :manageaent requir-ents. 

This is not to say that Interior should not have a federally 

operated surface :manag-ent program to protect federal lands and 

resources. It should. PMP believes however that it is an 

overreaction to shift all responsibility for regulation of mining 

to the federal government and away from states, and PMP believes 

this Bill would have that result. In all but a few cases, like 

perhaps California, states will not care to maintain programs 

that are required by law to be just like the non-delegable 

federal progi:-am. We urge the Committee to rethink fundamentally 

the wisdom of moving responsibility for :making site-specific and 

resource-specific regulatory decisions from states, who have been 

regulating a long time, to a new federal bureaucracy with leas 

experience in the area. The need to re-examine this fundamental 

shift in authority is heightened by the severe manpower 

constraints which such a shift would impose upon Interior. 

3. Title II wou14 I•po•• Dupliqatiy• Requirgent• OD the 

Minina inouatrv, 

Federal and state laws already impose numerous environmental 

requirements on mining operations. Prominent among those are the 

requirements of the Clean Water Act and the Clean Air Act. Title 

II takes little account of the existence of these other 

Page 7 
320 

requireaenta, and would duplicate -ny of th- to the extent it 

doe• not preeapt th- altogether. 

For instance, section 201(n)(4)(B) would require miner• to 

•prevent any contaaination of surface or ground water• with acid 

or toxic drainage. Thi• requir-ent would duplicate and might be 

in substantial conflict with the Clean Water Act, and with state 

ground water protection progr_., under which effluent li• its, 

control requir-t• and ground water protection standard• 

already have been established. In addition, Section 201(n)(3) 

requires operators to design basins, ditches, atrea• bank 

stabilizer• and diversion• to control erosion and drainage from 

the area of • ineral activities. However, a number of these 

requir-.nt• have already been addressed in EPA'a storm water 

rul- promulgated under the authority of Section 402 of the Clean 

Water Act. 

The Subco-ittee should reconsider this approach. We urge a 

look beyond the rhetoric on this issue, and an evaluation of the' 

existing web of environmental requir-ents before imposing new 

one•• PNP believe• strongly that n- l99ialation or regulations 

covering ·area• of environ• ental protection that are the subject 

of existing federal and state require• ents should be enacted only 

after compelling evidence d-onstrates its necessity. The 

i• position of conflicting and duplicative requirements does not 

make sense because it would reduce the ability of responsible 

co• panies to pay for new environmental requir-ents that are 

deemed to be necessary in the future. 

Page 8 
321 

•· D• Mining l•nit lnuir ... nt YA 19a1aaation atanA•rA• Ar• 

Jlot JfOrkple, 

Many of the requirements of Title II are unworkable and some 

are technically impossible. Taken together, they would make it 

difficult or impossible to find and develop ore bodies in the 

future. 

Prior to the commencement of any mineral activity which may 

cause a disturbance of surface resources, the miner must submit a 

plan of operations to the secretary for approval. The plan of 

operations must contain a reclamation plan and a mining permit 

application. Although a plan of operations would not be required 

for exploration activities that cause a negligible disturbance, 

the exemption would apply only if the exploration activities: 

1. use no mechanized earth moving equipment, suction 

dredging or explosives; · 

2. use no motorized vehicles in areas closed to off-road 

vehicles; 

3. do not require the construction of roads or drill pads; 

and 

4. do not employ "toxic and hazardous materials". 

Alternatively, exploration activities would not be covered if 

they involve only a minimum and readily reclaimable disturbance· 

caused by initial test drilling. This exemption would 

specifically forbid the construction of roads and would require 

the operator to give notice and obtain financial assurance. 

As a practical matter, exploration activities would rarely, 

if ever, qualify for either of these exemptions. Thus, the Bill 

would require a 'full-blown· plan of operations, including at least 

Page 9 
322 

a Y84lr of baseline monitoring, for all but the most 

inconseque~tial exploration activities. This requir-ent would 

wreak havoc on exploration effort• and it ia not necessary to 

protect the envirollllent. Substantial exploration should be 

subject to more streamlined requir-ents, as it is currently, 

that are tailored to address the t-porary and limited nature of 

its impacts. 

A. Mipipq Perait &ppliqatiop. 

Far fro• providing a streamlined process, the mining permit 

application would require the applicant to submit a volWDinous 

amount of information about the applicant and the expected 

environmental effects of the proposed mineral activities. Before 

commencing mining operations, the applicant would be required to 

disclose all related co• panies and organizations, all claim 

holders, all other plans of operation held by the applicant or 

related entities, and all •outstanding violations• of federal and 

state environmental requir-ents. 

While PMP believes that the • ining industry should be 

accountable for environmental violations, we oppose Title II'a 

applicant violator syst- on the following grounds: 

First, As it is currently drafted, the Bill suggests that 

a company could not get a plan of operation• 

approved if it were accused of a violation at any 

other site operated by it or a related entity. 

The Bill does not take into account the 

poaaibility that the alleged violation did not 

Page 10 
second, 

323 

occur and that the operator could be vindicated 

ultimately. 

The Bill fails to take into account the 

significance of the violation. Thus, a company 

could be denied a plan of operations on the basis 

of a purely technical, unintentional , and 

insignificant violation at an unrelated facility. 

This syst- could be abused by parties 

philosophically opposed to mining, or opposed to a 

particular operation for reasons other than its 

environmental/land use impacts. Further, the 

potential for delay because of an insignificant 

violation at another facility is particularly 

probl-atic in light of the fact (discussed above) 

that a ·plan of operations is required for 

virtually every step in the development of a mine, 

including almost all exploration. 

Moreover, the amount of environmental information which the 

applicant must submit in the mining permit application would 

substantially impede the initiation of mining operations. The 

environmental information which the applicant must submit for 

virtually all operations, including almost all exploration, would 

include: 

1. A description of the quantity and quality of surface 

and ground water resources in the area affected based 

on at least 12 months of pre-disturbance monitoring. 

Page 11 
324 

However, it is unclear how the applicant could pertora 

12 months ot pre-disturbance monitoring in an area 

where historical operations have impacted surface or 

ground water. It also is unclear why the requirement 

is necessary for early exploration activities that 

th-selves have little potential to affect water 

quality. In many cases, the early exploration will not 

lead to mineral development. 

2. A description of •biological resources• in or adjacent 

to the area to be disturbed by mining operations. 

J. A description ot the monitoring syst_. to be used to 

determine compliance with the standards of Title II, 

including, but not limited to, monitoring for ground 

water, surface water, air and soils. Because the 

relevant standards include the requir-ent to •prevent• 

contamination ot soils (see page 14), the 110nitoring 

requirement would amount to leak detection and the 

substantive requir-ent would be •zero discharge.• 

4. Accident contingency plans covering: corrective 

measures to mitigate impacts on fish and wildlife, 

ground and surface waters; neutralization of toxic 

materials; notification procedures and waste handling 

procedures. The language of this requirement is 

imprecise, and accordingly the scope ot the requirement 

is unclear. 

Page 12 
325 

s. A description of measures to be talten to comply with 

applicable land use plans or restrictions based on a 

finding of "unsuitability" under Section 204. 

6. A description of -••urea planned to exclude fish and 

wildlife from the disturbed area or to :maintain 

facilities in a condition that is not "harmful" to fish 

or wildlife. 

7. All environmental baseline data required by the 

Secretary to validate the determinations required for 

the approval of the plan of operations. 

Significantly, the Bill does not place any limitation on the 

applicant's obligation to gather environmental baseline data. 

Thus, the Secretary conceivably could require years of baseline 

data gathering before allowing projects to proceed. 

As these requirements plainly indicate, the applicant would 

be required to submit a voluminous amount of information 111'.m to 

the initiation of all but the most inconsequential exploration 

operations. Given the speculative nature of mineral exploration, 

it is likely that the onerous requirements of the mining permit 

application would deter a substantial amount of exploration. 

B. B•oimtion stan«ar«•· 

1. ISlillSection 20l(n) (l)(C), which concerns recluaation standards 

for soils, provides- an excellent example of the unworkability of 

Title II. Thia section would require operator• to prevent~ 

soil contuaination or toxification. contaminated or "toxified" 

Page 13 
326 

soil• - • t be decontaainated or •neutralized• and properly 

disposed. IllpOrtantly, th• vord •toxification• is not defined. 

and does not exist elsewhere in federal environaantal law. 

As• Ulling that it refers to ph- such as acid generation, the 

standard is sblply illpo .. ibla to -t as a practical 11&tter. 

Regulating the acidification of soils is fundaaentally different 

than regulating the blpact of acid generation on surface and 

ground water, or on soils. Indeed, such a standard presU11Ably 

would prohibit the entry of AD]! aining -ste liquid into soils 

underneath a tailings illpoundaent or a waste rock disposal site. 

It i• siaply iapossible to prevent all generation of acidic 

drainage froa a aine site 1,000'• of acres in size. 

Nore iaportantly, it is not necessary to iaposa these 

onerous and iapossibly costly standards on the aining industry. 

While ainers cannot prevent tha generation of acids during 

operations, they can take - • ur- to insure that discharges of 

acid water are tr-ted to -t federal and state surface and 

ground water quality standards. Siailarly, soil iapacts can be 

addressed to protect ground -tar and to sustain post-aining land 

uses. 

2. •ta1p1111atioa ID4 araow 

The Bill requir- all surface ar-s subject to aineral 

activities -- including spoil and - • te piles, ore piles, 

subgrada ore pil- and open or partially backfilled. • ine pits 

to be stabilized and protected during aineral activities to 

control erosion and to ainiaiza attendant air and water 

Paga 14 
327 

pollution. In addition, surface areas must be backfilled, graded 

and contoured to the natural topography. However, with respect 

to an open pit mine, the, operator would be required to .grade "to 

the extent practicable" where the Secretary determines that the 

open or partially backfilled pit would not pose a threat to the 

public health or safety or "have an adverse effect" on surface .or 

ground water quality. Significantly, the •adverse effect• 

standard is not defined by reference to any established measure 

of water quality, such as Clean Water Act effluent limits, ·state 

ground water protection standards or other water-quality-based 

standards. As a result, Am adverse impact, no -tter how 

negligible, could block an applicant from gaining the regrading 

and contouring exeaption. Therefore, while the open pit ainer is 

theoretically ex-pt from section 201(n)(5)(A)'s more onerous 

grading requirement, the realities of open pit aining suggest 

that the exemption will rarely be applicable. 

Whether pits can or should be backfilled is a complex 

question that involves the topography, econoaics and 

environmental questions. Indeed, where the backfill aaterial 

contains sulfides that have weathered (increasing their acid 

potential), the adverse iapacts on ground water could be vastly 

increased by backfilling. The current language in the Bill does 

not begin to acco-odate the complexity of the decision whether 

to backfill. 

,. Bydroloqio 1111nc1 

Page 15 
328 

Tb• Bill'• reclaaation standard d-ling with hydrologic 

balance i• a •ource of potential confusion. Pur•uant to Section 

201(n)(')(B), the operator IIWlt use th• beat aTailaJ»l• 

4--t1atell -•trol t:eallaol097 (•BOCT•) to prevent ~ 

generation and toxic drainage. •a.st available d-onstrated 

control technology• aeans equipaent, devices systems aethods, or 

techniques which have deaonstrated engineering and econoaic 

feasibility and practicality in preventing disturbances to 

hydroloqic balance during aineral activities and reclamation. 

The definition equates hydrologic balance with acid generation. 

While hydrologic balance and acid generation aight be 

interrelated probl-•, that is not al-ya the case . The 

definition require• rethinking. 

Section 20l(n)(')(B) itself i• confusing and in need of 

redrafting. This Section r-ds: •11ineral activities shall 

prevent the generation of acid and toxic drainage during the 

mineral activities and reclaaation, to the extent possible using 

the beat available deaonstrated control technology. • The 

source of confusion •t-• froa the placeaent of the comma in the 

sentence and the use of the words •to the extent possible.• It 

is unclear whether acid generation IIWlt be prevented •to the 

extent possible,• or whether it IIWlt be prevented absolutely 

using BOCT •to the extent possible.• While the placeaent of the 

comma suggests the latter interpretation, coaaon sense indicates 

that the former is correct. 

5 • D• ••arttaa LUU Di•ar,tiop to Ptt;vaiu D•t;b.tr A 

qaripq op"' froRo•et Jlap o( Operatiopf it lfOffllD• 

Page 16 
329 

As it is currently drafted, Section 202(f) requires the 

Secretary to hold a public hearing if requested to do ao by 

persona adversely affected by the proposed mineral operations who 

filed comments on the plan of operations, While increasing 

public participation in the permitting procesa i• a laudable 

goal, PMP believes that the Secretary should be allowed to 

determine whether a hearing on the proposed plan of operations is 

necessary. Unless the Secretary ia provided with discretion as 

to whether to hold a hearing, a party opposed to mining 

operations could delay the plan of operations by filing a 

baseless request for a hearing, PMP believes that providing the 

Secretary with discretion is necessary to eliminate the potential 

for abuse of the hearing process. 

,. Title II'• Jinanoial a11urano• Reauiru1nt1 Would Impo11 an Unfair Burdin on Kin1r1, 

The Bill's financial assurance provision imposes uncertain 

and potentially long lasting financial liability on mining 

companies. Under Title II, the Secretary may not approve a plan 

of operations until the applicant provides an acceptable form of 

financial assurance "payable to the United States and conditional 

upon faithful performance of all the requirements" of the Bill. 

The amount of the financial assurance must be sufficient to 

assure the completion of reclamation as required by Title II 

taking into account the maximum level of financial exposure which 

may arise in connection with all "accident contingencies." 

Importantly, the phrase "accident contingencies" is not defined 

by the Bill, Assuming that it refers to the concept of the 

Page 17 
330 

•credible accident,• the &J10unt of financial assurance necessary 

to satisfy this requir-t is virtually illpOaaible to quantify. 

Indeed, the Secretary'• •gu-•• would invariably be questioned by 

opponents of the aining operation. Nore illpOrtantly, the concept 

of aaking a coapany bond for every conceivable problea it aight 

face in the future ia new both in federal and in • oat state laws. 

The requir-• ent would be expensive to coaply with. EPA looked at 

the idea in its solid -•te disposal facility criteria·and 

rejected it. 56 Fed. Reg. 50978 (Oct. 9, 1991). 

Moreover, aa it ia currently drafted, the Bill's financial 

assurance provision would illpOae perpetual liability on the 

operator. In general, the Secretary -y release SOI of the total 

financial assurance when the operator haa coapleted backfilling, 

regrading, and drainage.control and haa co-enced revegetation. 

However, where surface -t•r discharge requires treatment to meet 

effluent li• itationa and water quality standards, the Secretary 

may not rel-•• Am! portion of the financial assurance until 

applicable effluent liaitations and -t•r quality standards are 

met for a period of one year yithout treat;went. While this 

requir-ent assuaes that tr-taent will not be necessary to bring 

surface water into coapliance with the applicable effluent 

limitations and water quality standards, it is possible in soae 

caaea that perunent tr-taent would be necessary for compliance. 

Therefore, where coapliance with the water quality standards and 

effluent li• itations requires perwanent treat• ent, the operator•• 

financial assurance bond would never be released. 

Page 18 
331 

Another example ot the potentially infinite duration ot 

liability is provided by the Bill'• jurisdictional requir-•nt. 

The Bill currently provides that jurisdiction would terminate 

upon the release ot the tull amount of financial assurance. 

However, the Secretary may reassert jurisdiction it he determines 

that an environmental hazard .fro• the mineral activities exists, 

or that the term• and conditions ot the plan ot operations or 

surface manag-ent requir-ents·were not fulfilled. In effect, 

this provision would impose perpetual liability on operators with 

no corresponding accountability on the Secretary. Thus, even 

where all parties agreed that reclamation was complete and 

effective, the operator would continue to face the specter ot 

environmental liability. By denying aining companies the ability 

to permanently settle their financial obligations, the Bill'• 

reclamation provisions would foster uncertainty and unnecessarily 

impede the ability of mining companies to compete in the future. 

7. Titl• 11'• aequirgent• :,ou10 seriou•ly •PO VPP•a•11•ri1y 

rru•trat• th• N!ility to start &u..,, Mining 0p1ration. 

Finally, PMP opposes the provisions governing unsuitability 

determinations under Section 204, The Secretary of the Interior, 

in preparing land use plans under the Federal Land Policy 

Management Act, and the Secretary of Agriculture, in preparing 

land use plans under the Forest and Rangeland Renewable Resources 

Planning Act, aust review federal lands to determine whether they 

are unsuitable tor mineral activities ("unsuitability review"), 

Because the review called for under the Bill has to be conducted 

before any plan of operations can be approved, all exploration 

Page 19 
332 

and approval of new operations would c-se while the review is 

ongoing. FUrther, the criteria used for determining 

unsuitability are extr-ely broad. For instance, Interior 

apparently would be required to designate lands as unsuitable if 

mineral activities would adversely affect a candidate species for 

threatened or endangered status, regardless of whether the 

species is ultiaately listed. C011p0unding that concern, there is 

no provision that would allow •iners or other citizens to 

petition the Secretary to reverse or •odify such a determination. 

*** 

we believe Title II deserves fundamental reconsideration. 

Congress should consider carefully how •ining regulations can 

best be designed and illpleaented and by which agency, what the 

appropriate role of states is, and what kinds of requirements are 

necessary to address the environaental risks posed by mining. 

PMP values the chance to co.aent, and is willing to work to make 

the Bill aore r-aonable. 

Page 20 
333 

Mr. LEHMAN. Thank you very much. 

I want to thank this panel as well. We are going to have to go 

and cast the last vote of the day and then come back. 

I know Mr. Yearley has to leave, so I wanted to make a couple of comments before he does, and maybe take Mr. Fiske up here on 

his offer. 

I said at the beginning of the hearing that my door is open. We 

intend to write a law tlus year. This is not an academic exercise, 

and we understand that that is a special resf.C?nsibility, to do it 

right, because we are all going to have to live with it. 

So the suggestions, comments you have, we will certainly work 

on. Where we can resolve problems, we will try to do that, and we 

will try to work together in that regard. When we have disagreements, we will just have to go through the motions and see where 

the votes are, but the process is here for you to use in an open 

fashion. We want a bill that works. 

Let me also briefly say that I have been on your side of the equation, I think, as I listen to you, a few times here, particularly with 

respect to fights we have had around here with Federal water and 

subsidies to people in that regard, and with the grazing on Federal 

lands as well. I can tell you, having fought those out and looked 

at them, that in the Congress as a whole, the movement is toward 

getting more money out of those who use Federal resources. 

The Rahall bill has an 8 percent amount in it. The President, I 

guess, has come out with 12-1⁄2 percent in his budget projections. You say that is too much and not calculated on an equitable basis 

anyway. The point is, we are going to come out with something. I 

don't think nothing is any longer an alternative, to have this one 

aspect of Federal land use be exempt from any royalties or fees, 

unlike timber or cattle or water, et cetera. 

So there is going to be a royalty or a fee, whatever you want to 

call it, and we want to do it right. We want to make sure it doesn't 

cause the kind of damages that some of you think that it might. 

We want to be careful. I listened to the testimony of Mr. Fields 

here. We have to be careful on this committee that we do a royalty and not do something that the Ways and Means Committee will 

see as a tax, and then we can send you over there where they have 

been told to come up with $300 billion, and don't quite have the 

sensitivity that we have with the mining industry, having to work 

with you every day. So things like that have to be thought out considerably. We will certainly do that as this process goes forward. 

We will break now. Just as quickly as the Members and I can 

get back here, we will, and we will go ahead with the remainder 

of the questions. 

Thank you. 

[Recess.] 

Mr. LEHMAN. Will the witnesses please take their positions. 

Thank you very much, and thank you for being so patient today. 

This hearing has been contentious and has obviously taken a long time, and you have had to sit through it all. It is no consolation, 

but I appreciate it. 

Let me get right to the bone here on a couple of issues. I had 

a lot of questions but I think I will reserve the right for myself and 
334 

other Members of the committee to submit them in writing to you and give rou an opportunity to give a more in-depth response. 

But let s cut right to the bone on the royalty issue. Last year Mr. 

Rahall put the figure of 8 percent gross into this bill. I guess subsequent to that then we have had the development where the administration wants to continue on the $100 location fee, I guess we will 

call it, and in the budget proposal that we have all heard · about, 

the figure we have been given to meet the President's numbers is, 

I believe, 121⁄2 percent. So not only are the numbers goin, up, but they are coming, instead of from Mr. Rahall, from President Clinton. And so I meant 

when I said a few minutes ago, that it is clear to me there is going 

to be a royalty here. 

Now, what we heard was that 8 percent was completely unsatisfactory, not workable. So we don't have to talk too much about 12 

percent; you have drawn the line already at 8. 

I have noticed today a little more willingness to try to work 

something out with you, at least in your public statements, and Dr. 

DeVoto, you were very forthcoming in saying you thought some 

royalty could be negotiated. I would like to probe that a little more 

and in broad outlines here if there are any ideas, or is there a 

number out there we have to meet, or are there some other propos- als we haven't thought about? Can anybody talk beyond that? I 

guess not. 

Mr. FisKE. We are thinking first. Mr. LEHMAN. I hear everybody saying, we think there is a need 

for reform and we can go ahead with changes, but I don't hear any of those ideas coming forward. And maybe this is not the proper 

moment for it, but we are going to have to come up with a number 

and put it in the bill, and that is going to have to stand, and the 

number here, there is going to be other committees around here, 

the Budget Committee, looking at resources that we have to come 

up with, and sooner or later we are going to have to do that hard 

and fast. 

There is already a number in the bill that is 50 percent lower 

than what the President is proposing. Dr. DoBRA. I can't throw out a number that would be acceptable because I am in no position to bargain for anybody, but I think I 

can lay out the issue. The issue is that it has to be tied to profit- ability. Russ Fields mentioned that Nevaia has a net proceeds tax. We 

don't want to use the word "tax," 9ut the key is that at a 5 percent 

net proceeds tax, rou have to earn a dollar to owe a nickel. And 

from that standpomt you get s¢ie equity in there in that you are 

not taxing people who are losing money, or are not taking royalties 

from feoJ:?le who a~e losing ll)?ney. The s~~e pri~ciple applies . . . So thmk that 1s the key issue, that 1f 1t 1s tied to some notion 

of ability to pay and that is the principle of royalties and taxation 

that we use generally in this country, with other forms of taxation. 

Mr. LEHMAN. Maybe some type of progressivity, to use a democratic word here, in the way it is Oferated? 

Dr. DOBRA. Progressivity doesn t necessarily even have to come 

in it. It can be a flat rate, like in Nevada, 5 percent. But we come 

back to the point that you have to earn a dollar before you can owe 
335 

a nickel. If you have the 121⁄2 percent rate, you have to earn a dollar before you can owe 121/2 cents. 

As you saw from these cash curves, we are talking about people who already can't meet the obligations in some cases. That 11 why it is so devastating. Mr. LEHMAN. Does Canada have a fee or royalty? Dr. DoBRA. I can't answer that. I don't know. 

Mr. LEHMAN. No one knows? Mr. Fields, how much does Nevada 

get as a State off of that? 

Mr. FIELDS. It has been running in recent years at about $30 

million per year net proceeds in tax. 

Mr. LEHMAN. That is how much the tax is generating, determined off of net? 

Mr. FIELDS. Yes. 

Mr. LEHMAN. Maybe you will make available to the committee a 

little more information on how you go about doing that so we could 

have it for the record. 

[The information follows:] 
• . 

. . 

IOB _., MILLIII 

336 

STATE OF NEVADA· 

DEPARTMENT OF MINERALS 400 W. Kl119 Sll'NI. Sub 108 

Cll'IOn City, Nevada 88710 

,1021 ee1-aoso ~•• (702) M7-31157 

March is, 1993 

Th• Honorable Richard Lehlllan, Chairm~n 

Subcommittee on Energy and Natural Resources 

819 O'Neill House Office Building Waahington, D,C. 20515 

Dear Chairman Lehman: 

'MVotult-• 

- ·-.."= ,11wy. 1.eov.ou.- •• 11111 ·:1G2J •H-721(1 ,ti! C702J -7212 

IIUMILL A. l'leLOI ,-.,b,_00.C,., 

On behalf of Governor Bob Millar, I appreciate very auch the 

opportunity you and th• SubCol!ll1littee • taff provided ma to te•tify last weel: on H.R. 322, Th• Mineral Exploration and oavelopmant Act 

of 1993. 

During the hearing, you requested information on Nevada I e approach to calculating the State'• Net Proceed• of Minas Tax. 

As our testimony indicated, we think the approach can provide a rational, tasted model for the calculation of a net value on which 

to base a royalty for the production of hardrock mineral a from 

Publi::: Lands. 

Enclosed la a copy of the State Statute, Nevada Revised 

Statute Chapter 3 62, Taxes on Patented Minas and Proceeds of 

Minerals, and the related regulations, Nevada Administrative Code, 

Chapter 362, Al• o enclosed is an excerpt from a 1989 report by a 

private consultant, Whitney & Whitner, Inc., which BWlllllarize• on pagea 110 and 111 the Nevada Net Proceeds of Mines Tax. Finally, I am enclosing a copy of the foreward and •ummary section of the 

State Department of Taxation's report on the 1992-93 Nat Proceeds 

of Minerals. 

Thia approach to a•• essing the tax on the net value ha• worked 

in Hevada since Statehood in 1865. A• I testified to the Subcommittee, in the early years of a min•'• development there will ba 

little or no net proceeds becauaa of mine startup coat•, However, 

when the mine reaches steady-state production, a net proceeds i• 

produced and the tax is generated for the atate and local qovernments. Mineral co111111odity price also "impact• the amount of net 

proceeds. When mineral prices are low, ao too are net proceeds. However, when prices are higher, th• taxes qenerated by the net 
337 

proceed• i• hiib•r a• well, Thi• approach ot 9overnaent aharinq in both the qood tillea and th• bad time• ot mininq ••-• tair and 

hH, we Nlieve, bad th• effect ot keepinq ainH in bualneH, Thie 

allowa the State and local comauniti•• to continue to derive th• 

benefit of the economic activity, that ia, job•, created by th• 

ain••· 

Again, we appreciate th• opportunity to comment. It 1, or any other agency in Nevada can be of further •••i•tance, pl•••• call 

on-• 

RAF:ltl 

Bnclo•ure• 

Sincerely, 

Rua•all A, Field• 

Executive Dir•otor 

cc1 Conqre••-n Barbara Vucan~vich 

Governor Bob Miller 
338 

DIVISION OF ASSESSMEm' STANDARDS 

CENl'lW.LY ASSESSED PBOPERTIES 

CAPrrot ClM'LEX 

~ crIY, NEVADA. 89710 

TELEPIOIE NtJomER - 702-885-4840 

NEVADA REVISED STA1Vl'ES 

OW'I'ER362 

TAXES ON PJ\TEl-i'l'm MINES .AND PRX:EEOS OF MINES 

AND 

RF.GllIATIOOS AOOPl'ED BY 'nlE NEWWA TAX CXM!ISSION 

FOR THE DETE!lMINJ\TICN OF NET PRX:EEDS OF MINES 

(CXDIFIED - NE:VMlA ACMINISTRATIVE COOE) 

AND 

ElOIMPLFS OF REroRl"ING FOitfo 
339 

TIME LINE 

NET PRXE!DS OF MDUAIS 

Pebruiu:y 15 Amal !let PEoceeds of Minerals reports for the prior cal.eldar year are due to the llepllrtDWlt frail all operators and royalty recipients; NRS 

362.110(11 (al. 

Mazch 15 'fturty day extensions (IIIJJlt be in writing) may be granted for filing the 

above lll1IUll report for all cperat.ors and royalty recipients; NRS 

362.110(1) (bl. 

April 30 

at or before First quarter report ai current year prcductial proceecls may be filed with 

the ~. ()Aarterly report pro,,idea updated pn,ce,,ds i.nfom,a.ti<X1 and 

avoids an underest:JD.tion penalty. D<,par1:n'el1t will bill any und.or estimatiai, m:n,y due within 30 days; NRS 362.115(2) and NRS 362.130(3). 

June 15 

on or before 

June 10 

r.ot later 

than 

July 15 

June 30 

July 

July 31 

on or before 

August l 

August 

October 31 

All operators and royalty recipients must file with the Department an estimate of gross and net proceecls for the current calendar year; NRS 362.115(1). 

Department certified net proceecls assessments and tax.,s due on the adjusted 

actual IIIJSt be mailed; NRS 362.130, 

Tues due on the estimated net proc:t,ecls fran all operators and royalty recipients are payable to the Department; NRS 362.115(1). 

Tues due ai adjusted actual net proceeds !ran all operators and royalty ~ 

cipients are payable to the Department; NRS 362.130. 

State Board of Qjualizatia, appeals nust be filed within 30 days after the 

certification is sent to the taxpayer. The person assessed aust pay the tax 

w1der protest in a tilrely IMMl!r (date duel. NRS 362.135. 

Seccnd quarter report <X1 current year produc:ti.ai proceecls may be filed with 

the Department. ()>arterly report provides updated proceecls infomation and 

avoids an Wldexestimation p,nalty. Department will bill any wlderestimati<X1, 1ftX1eY due within 30 days; NRS 362.115(2) and NRS 362.130(3). 

DE,parment to n,port to the State controll..r on Net Proceeds of Minerals tax distril:uti<Xl; NRS 362. 170. 

Taxes are delinquent within 30 days after it is cb!; NRS 362.160. 

on or befora "ftuxd quarter a,p:,rt en current Y""C ~ion ~ -y be filed "it.h 

the Departaent. ()larterly report provides updated pmoeeds infomation and 

avoids an underestimation pi,nalty. llep,artn!nt will bill artf Wlderestimation, IIJlJley due within 30 days; NRS 362.115(21 and NRS 362.130(31. 

04/21/92 
January 31 

en or before 

340 

Fourth quarter report ai current year product.ion proceeds may be filed 

with the Department. Quarterly report provides updated proceeds informati.ai and avoids an underesti.mati.on penalty. Departnent will bill any 

unden!Sti.mati.ai, ncney due within 30 days: NRS 362.115 (2) and NRS 362 .130 (3) • 

NO'm: 1. The fiscal year tax rate applied to the adjusted actual 1991 

net proceeds will be the 1991-92 tax rates certified by the 

Nevada ilepartnEnt of Taxation ai July 16, 1991. 

2. The fiscal year tax rate applied to the estimated 1992 net 

proceeds will be the 1992-93 tax rates certified by the Nevada 

Tax carmi.ssion on June 25, 1992. 

04/21/92 
341 

CHAPTER 362 

TAXES ON PATENTED MINES AND 

PROCEEDS OF MINERALS 

GENERAL PROVISIONS 

362.010 Definitions. 

362.030 

362.040 

362.050 

362.060 

362.070 

362.080 

362.090 

362.095 

362.100 

362.105 

362.110 

362.115 

362.120 

362.130 

362.135 

362.140 

362.IS0 

362.160 

362.170 

(19'11) 

ASSESSMENT OF PATENTED MINES 

AND MINING CLAIMS 

County assessor to assess surface or patented mines and mininc claims; 

exceptions. 

Exclusion or assessment from roll. 

Affidavit of labor: Requirement ror exemplion of surface or patented mine or 

mining claim from taxation; ronn and contents. 

Who may make affidavit. 

Contiguous patented mines or mining claims: Performance of work on one mine. 

Affidavits to be recorded in office or county recorder. (Repealed.) 

One affidavit may be recorded for labor on several patented mines or mininc 

claims. 

Method or taxation of patented mine or mining daim used for purpose other 

than mining or agriculture. 

ASSESSMENT AND TAXATION OF NET PROCEEDS 

OF MINERALS 

Duties or department. 

.. Royalty" defined. 

Annual statement; annual list. 

Statement or estimated gross yield and net proceeds for current calendar year; 

payment or estimated tax; credit against final certification or refund; 

quarterly report of actual amounts. 

Computation or gross yield and net proceeds. 

Preparation and mailing or certificate or amount of net proceeds and lax due; 

penalty for underpayment; date tax and penalty due. 

Appeal of certification lo state board of equalization; payment of lax pending 

determination of appeal. 

Rate or tax upon net proceeds. 

Liens for taxes on proceeds or minerals. 

When In or estimated payment becomes delinquent: collection of delinquencies. 

Appropriation to county of amount of tax attributable to extractive operations in 

c:011n1y; apportionment by county treasurer; department to report amount 

received as tax upon net proceeds of geothermal resources. 

9495 
CH. 362 

362.172 

362.175 

362.180 

362.200 

362.230 

362.240 

(1991) 

342 

TAXES ON MINES AND MINERALS 

Pemauent net proceeds fund: Creation; sources of nnnae. 

Procedure for nmo•al of amount of tu and name from records of department 

when tu impossible or impnctical to collect. 

Barden of proof on tupayer to sbow certification by department to be altjast, 

improper or inYalld. 

Powen of department: Examination or records; hearinp. 

Penalty for failure to file statements. 

Penalty for false statements. 

9496 
343 

CHAPTER 362 

TAXES ON PATENTED MINES AND 

PROCEEDS OF MINERALS 

CROSS REFERENCES 

Administnliw Procedure Act, NRS 2338.010 et seq. Board or county commissioners defined, NRS 0.035 

Pa1en1ed minesAnnual labor required or asswment made, Consc. Ari. 10 § 1 

Refund of lax money paid under pl'Olesl, NRS 354.220 

Proceeds of mines- · 

(19'11) 

Assessmenl and apponionment, Consc. Ari. 10 f 5 

Net proceeds escaping taxation, investigation, NRS 360.230 

Sales and use taxes, proceeds of mines exempt from, NRS 372.270, 374.275 

Towns, county commissioners to levy tax on, NRS 269.115 

Unpatented mines, proceeds alone to be assessed and laXed, Const. An. 10 § 1 

9497 
344 

TAXES ON MINES AND MINERALS 362.010 

-ANNOTATIONSAttorney General's Opinions. 

Oil wells to be treated as mines for purposes or chapter. For purposes of NRS ch. 

362, relating 10 taxes on patented mines and 

mine proceeds, oil wells should be treated u mines and Nevada lax commission must determine gross yield and net proceeds of oil wells 

on semiannual basis as provided in NRS 

362.120. AGO 405 (5-9-1967) 

Nonconllicting penalty provisions 10nm 

In absence or provision in chapter. Where 

net proceeds of mines arc taxed at same ad 

valorcm rate as other property, penalties 

referred 10 in NRS 362.160 in connection with 

collection of dclinqucnl taxes arc penalties 

imposed by NRS 361.483 for collection of 

delinquent property laxes generally, because 

former NRS 362.220 provides 1ba1 all nonconfticting laws relating to collection, enforce• 

men! and penalties for nonpayment of taxes 

shall apply, impliedly in absence of any specific penalty provision in NRS cb. 362. AGO 

508 (5-8-1968) 

GENERAL PROVISIONS 

362.010 Definitions. As used in this chapter, unless the context otherwise requires: 

1. "Mine" means an excavation in the earth from which ores, coal or 

other mineral substances arc extracted, or a subterranean natural deposit of 

minerals located and identified as such by the staking of a claim or other 

method recognized by law. The term includes a well drilled to extract 

minerals. 

2. "Mineral" includes oil, gas and other hydrocarbons, but docs not 

include sand, gravel or water, except hot water or steam in an operation 

extracting geothermal resources for profit. 

3. "Patented mine or mining claim" means each separate, whole or 

fractional patented mining location, whether such whole or fractional mining 

location is covered by an independent patent or is included under a single 

patent with other mining locations. 

(1:206:1915; 1919 RL p. 3009; NCL § 6592]-(NRS A 1975, 317; 1989, 

33) 

-ANNOTATiONSAttom,y GHcral's Opinions. 

Alsessment or fractional mining claim. 

FractionJI mining claim should be assessed al 

not less than SS when no development work 

done. AGO 151 (12-2-1914) 

(1991) 9499 

Mineral suney plat as proof or patent,d 

mining location. Mineral survey plat, without 

further evidence of ownership, is insufficient 

proof to warrant placing alleged patented mine 

on tax roll or to constitute person named on 

plat as owner. AGO 370 (12-21-1966) 
362.030 TAXES ON MINES AND MINERALS 

ASSESSMENT OF PATENTED MINES 

AND MINING CLAIMS 

362.030 County assessor to assess surface of patented mines and min• 

ing claims; exceptions. The county assessor shall assess the surface of each 

patented mine and mining claim in his county for which an affidavit was not 

filed pursuant to NRS 362.0S0. 362.070 and 362.090 and return the assessment as required by law. 

(3:206:191S; 1919 RL p. 3009; NCL § 6S94)-(NRS A 1989. 33) 

-ANNOTATIONSAdmiaistntive Replatlons. 

Patcarcd Mines, NAC 362.410 

Rniser's Note. 

"Return the uscssmenl as required by 

law." n:pllccd "n:tum the said uscssment as is now n:quircd by law." 

362.040 Exclusion of assessment from roll. Upon receipt of an affidavit 

from the county clerk pursuant to NRS 362.0S0 stating that at least $100 in 

development work has been actually performed upon the patented mine or 

mining claim during the federal mining assessment work period ending within 

the year before the fiscal year for which the assessment has been levied, the 

assessor shall exclude from the roll the assessment against the patented mine 

or mining claim named in the affidavit. 

(4:206:1915; A 1933, 233; 1931 NCL § 659S]-(NRS A 1989, 33. 1831; 

1991, 210S) 

-ANNOTATIONSFedenl and Other Cases. 

Labor performed by stockholder or mininc corporation as development work. 

S1ockholdc:r of mining corporation has such 

beneficial interest in corporate mining property that labor performed by him will qualify u annual isscssmenl labor. Wailes v. Davies, 

164 Fc:d. 397 (9th Cir. 1908) 

Attomey General's Opinions. 

Contirnu or affidavit. Before assessment 

agains1 patented mine: may be stricken from 

rolls allid.l~·,1 musl show: That amount equal 10 S100 had been expended on each claim; ii wu done during calendar yur in quc51ion; 

dc:scrip11on ol work performed. when work 

done:, by whom work done:. AGO 88 (9-6-

1917) 

Affid;uit lo be filed wilhitt talendar year ror which eumption claimed. Alfidav11 con• 

9S00 

templated for c:xemplion from taxation of pal• 

enled mines in ch. 206, Stats. 191S (cf. NRS 

362.040), requires filing of such affidavit 

within calendar year for which such exemp• 

lion is claimed. AGO l4S (1-18-1918) 

Work may be done at any time durinc 

year. If work upon p:11en1ed claim is done: at 

any time within year, usessment should be 

stricken, nolWithstandinc assessment marked 

delinquent. AGO 1S2 (12-4-1922) 

Timely affidavit requlnd. Tax usc:ssment 

imposed on patc:ntcd mine under NRS 36:?.020 

may not be 51ric:kea from tax roll unless there 

is titndy presentation of affidavit of work provided for ia NRS 362.040. AGO 39 (4•21-

1959) 

Proor or -rk performed durinc previ• ous fiscal year should be allowed. !'JRS 
346 

TAXES ON MINES.AND MINERALS 362.050 

362.040 should be constnied to allow owner performed thereon during prior ftsc:al year. 

of pa1en1ed mine to present proof to board of AGO 39 (4-21-1959) 

equaliulion during <:urrent fiscal year of labor 

362.050 Affidavit or .labor: Requirement for exemption or surface or 

patented mine or mining claim Crom taxation; Corm and contents. 

1. To obtain the exemption of the surface of a patented mine or mining 

claim from taxation ad valorem, pursuant to section S of article 10 of the 

constitution of this state, the owner must submit an affidavit to the county 

clerk for the county in which the mine is located on or before December 30 

covering work done during the 12 months next preceding 12 a.m. on September 1 of that year, The exemption then applies to the taxes for the fiscal year 

beginning on July 1 following the filing of the affidavit. Upon receipt of such 

an affidavit, the county clerk shall cause it to be recorded in the office of the 

county recorder and transmit it to the county assessor. 

2. The affidavit of labor must describe particularly the work performed, 

upon what portion of the mine or claim, and when and by whom done, and 

may be substantially in the following form: 

State of Nevada lss. 

County of ............................... } 

.. .............................. , being first duly sworn, deposes and says: That 

development work worth at least $100 was performed upon the 

... . . .. . ........... .. . .. . . .. . . . patented mine or mining claim, situated in the 

.................. ...................... Mining District, County of , ........ . 

. . . . . .. . . . .. . . .. . . .. . .. . . .. . . . .. , State of Nevada, during the federal mining 

assessment work period ~nding within the year 19 ..... The work was done at 

the expense of .............................. , the owner (or one of the owners) of 

the patented mine or mining claim, for the purpose of relieving it from the tax 

assessment. rt was performed by ................................ , at about 

........... ..... feet in a ................ direction from the monument of location, 

and was done between the .......... day of .......... , 19 ..... , and the ......... . 

day of .......... , 19 ..... , and consisted of the following work: 

······························································································ ................................................................... ~ ......................... . 

·················································· (Signature) 

9S01 
· 347 

362.060 TAXES ON MINES AND MINERALS 

Subscn1>ed and swom to before me 

this •••••••••••••••• day of .•.•.••••••••••• , 19 ••••• 

Notary Public ( or other person 

authorized to administer oaths) 

[7:206:1915; A 1933, 233; 1931 NCL§ 6598]-(NRS A1975, 317; 1985, 

1221, 1503; 1989, 33; 1991, 2105) 

-ANNOTATIONSA&toney Gaieral's Opilliou. 

CoatalS or allldaYit. BcfOR ISSCSSIIICIII 

111i11Sl palenled m.irac may be Slricken from 

rolls affidavic muse show: Thal amounc equal to S100 had been expended on each claim; ii was done during alendar. )Ur in question; 

dcsaip1ion of work performed, when work 

done, by whom work done. AGO 88 {9-6-

1917) 

Statement that mines were ,._rked as a anlt" aot sufficient. Affidavic required by 

NO. f 6598 {cf. NRS 362.050) r:lating 10 

11l111111 devdopmenc work on mines must stale 

cbac mines are "contiguous" racher Chan 

"worked as a unit" before tax exemption provided by NO. § 6600 {cf. NRS 362.070) will 

aetach. AGO 155 {8-2·1944) 

362.060 Who may make affidavit. The affidavit may be made by the 

owner or agent of the owner, or the person performing the labor, or by any 

person familiar with the facts, on behalf of the owner. 

(8:206:1915; 1919 RL p. 3010; NCL § 6599] 

362.070 Contiguous patented mines or mining claims: Performance of 

work on one mine. The owner of two or more contiguous patented mines or 

mining claims may perform all the work required by section 5 of article 10 of 

the constitution of this state upon one mine or claim only; but the aggregate 

amount of such work must be equal to $100 for each of the contiguous 

patented mines or claims. 

(9:206:1915; 1919 RL p. 3010; NCL § 6600]-(NRS A 1989, 34) 

-ANNOTATIONSAllomey Ccnenl's Opiaiou. 

Statement that mines wa-e ''worked u a 

unit" not sufficieat. Affidavit required by 

NCL § 659S (cf. NRS 362.050) rc:latin& 10 

annual dcvclopmcn1 work on mines must stale 

that mines are "conticuous" rather than 

''worked as a unit" before tu exemption provided by NCL § 6600 (cf. NRS 362.070) will 

attach. AGO 155 {8-2·1944) 

362.080 Affidavit to be recorded in office of county recorder. 

Repealed. (See chapter 638, Statutes of Nevada 1991, at page 2107.) 

362.090 One affidavit may be recorded for labor oa several patented 

mines or mining ~laims. A single affidavit may be recorded for the labor on 

~veral patented mines or minint: claims belonging to the same person or held 

an common ownership, provided all are located in the same county. 

(11:206:1915; 1919 RL p. 3011; NCL § 6602]-(NRS A 1989, 34, 1832) 

""'l 9502 
348 

TAXES ON MINES AND MINERALS · 362.100 

362.09S Method of taxation or patented mine or mining claim used for 

purpose other than mining or agriculture. 

1. Whenever any portion of a patented mine or mining claim is used by 

the patentee or a successor in interest for a purpose unrelated to mining or 

agriculture, the portion of such patented mine or mining claim so used shall 

cease to be a patented mine or mining claim or part thereof and shall be taxed 

as other real property is taxed. 

2. For the purpose of this section, a dwelling placed upon a patented mine 

or mining claim to be occupied by the operator of such patented mine or 

mining claim or his agent is not a use unrelated to mining. 

3. Whenever any patented mine or mining claim is taxed as real property, 

such taxation shall not affect the status of contiguous patented mines or 

mining claims. 

(Added to NRS by 1967, 839; A 1989, 34) 

-ANNOTATIONSAdministrative Regulations. 

Pa1cn1ed Mines, NAC 362.410 

ASSESSMENT AND TAXATION OF NET PROCEEDS 

OF MINERALS 

362.100 Duties of department. 

1. The department shall: 

(a) Investigate and determine the net proceeds of all minerals extracted and 

certify them as provided in NRS 362.100 to 362.240, inclusive. 

(b) Appraise and assess all reduction, smelting and ntilling works, plants 

and facilities, whether or not associated with a mine, all drilling rigs, and all 

supplies, machinery, equipment, apparatus, facilities, buildings, structures 

and other improvements used in connection with any mining, drilling, reduction, smelting or milling operation as provided in chapter_ 361 of NRS. 

2. As used in this section, "net proceeds of all minerals extracted" 

includes the proceeds of all: 

(a) Operating mines; 

(b) Operating oil and gas wells; 

(c) Operations extracting geothermal resources for profit, except an operation which uses natural hot water to enhance the growth of animal or plant 

life; and 

( d) Operations extracting minerals from natural solutions. 

[Part 13:177:1917; 1919 RL p. 3202; NCL § 6554] + [1:77:1927; NCL § 

6578]-(NRS A 1975, 1675; 1983, 2088; 1985, 1305; 1989, 34) 

(19911 9S03 
349 

362.105 TAXES ON MINES AND MINERALS 

-ANNOTATIONSNevada Casa. 

Only net prvcnds subject to taxation. 

Legislature, in NCL § 6578 (cf. NRS 

362.100), bas provided that only the net Pl'07 

cecds of mines, as distinguished from gross 

yield, is to be taxed. Goldfield C.Onsol. Mines 

Co. v. State, 60 Nev. 241, 106 P.2d 613 

(1940), cited, Koycn v. Lincoln Mines, Inc., 

63 Nev. 325, at 328, 171 P.2d 364 (1946) 

Calculation or net proceeds. Under NCL 

§ 6578 (cf. NRS 362.100), NCL § 6579 (cf. 

NRS 362.110), and NCL § 6580, as amended 

by ch. 68, Stats. 1937 (cf. NRS 362.120), net 

proceeds of mines, for purpose of taxation, · 

arc to be determined by ascertaining gross 

yield and deducting therefrom deductions 

authorized by statute. Goldfield Consol. Mines 

Co. v. State, 60 Nev 241, 106 P.2d 613 

(1940), cited, Koycn v. Lincoln Mines, Inc., 

63 Nev. 325, at 328, 171 P.2d 364 (1946) 

Attorney General's Opinions. 

Richt to m:eive royalty to be assessed as 

penonal property. Right of owner of mining 

claim 10 receive royalty from lessee should be 

assessed as personal property and tax collected 

thereon as for other personal property. AGO 

(12-24-1901) 

Classification or proceeds as mineral or 

nonmineral not significant. Whether or not 

gypsum is classified as mineral, ii is proceeds 

of mine and taxable as such. AGO (9-27-1909) 

"Cleanup" as proceeds. "Cleanup" of 

abandoned mine is subject 10 tax as proceeds. 

AGO (12-31-1910) 

Costs or Industrial Insurance properly 

included in calculatin1 expenses. Industrial 

insurance costs may be legally included in 

operating expenses in arriving at net proceeds 

of mines. AGO 77 (7-21-1919) 

lase and each sublease to be treated as· separate minin1 units for purposes or tax. 

Where lessee of mining ground subleases, 

original lcuc and each sublease thereunder 

should be treated as separate mining unit for 

net proceeds tax, and lessee and each sublessec is required to file statement provided for 

under RL § 3690 (cf. NRS 362.110) and pay 

tax provided for under RL § 3687 (cf. NRS 

362.140). AGO 83 (8-21-1923) 

"Miae" and "minlnc claim" include 

"tailings.,, Words "mine" and "mining 

claim," as used in revenue laws of Nevada, 

arc broad enough :o include word "tailings" 

without express mention thereof. AGO 178 (6· 

25-1935) 

Net proceeds arc penonal property; taxation or federal instrumentality. Net proceeds of mines arc considered personal 

property, whereby they arc exempt under Act 

of C.Ongrcss givin, state authority to tax real 

property. of instrumenrality of Federal Government, but not personal property. AGO 9 (2-

16-1943) 

Net proceeds or oil wells taxable. Net proceeds of oil wells arc taxabl: under NCL §§ 

6578-6591 (cf. NRS : '.:: : . 100-362. 130, 

362.160 and 362.180 cl seq.), which provide 

. for taxarion of net proceeds of mines. AGO 

8939 (7-20-1950) 

Commission not empowered to establish 

minimum amount or net proceeds subject to 

taxation. Tax commission may not omit tax 

assessmcnr on mines with net proceeds of less 

than SlOO, although collection costs exceed 

amount of revenue collccred, because NRS 

362.100 ct seq. do not empower commission 

10 lb: minimum for asscssmcnr. AGO 335 (S· 

10-1966) 

362.10S "Royalty" defined. As used in NRS 362.100 to 362.240 

inclusive. unless the context otherwise requires: . • 

I. , "Royalty" means a portion of the proceeds from extraction of a mineral which is paid for the privilege of extracting the mineral. 

2. "Rovalties" do not include: · 

(a) Renis or other compensatory payments which arc fixed and certain in 

amount and payable periodically over the duration of the lease regardless of 

the extent ofe:ctractions; or · 

9S04 
350 

TAXES ON MINES AND MINERALS 362.110 

(b) Minimum royalties covering periods when no mineral is extracted if 

the payments are fixed and certain in amount and payable on a regular 

periodic basis. 

(Added to NRS by 1975, 135; A 19~9, 35) 

362.110 Annual statement; annual list. 

1. Every person extracting any mineral in this state or receiving any 

royalty: 

(a) Shall, on or before February 15 of each year, except as otherwise 

provided in paragraph (b), file with the department a statement showing the 

gross yield and claimed net proceeds from each geographically separate 

operation where a mineral is extracted by that person during the calendar year 

immediately preceding the year in which the statement is filed. 

(b) May have up to 30 additional days to file the statement, if beforehand 

he makes written application to the department and the department finds good 

cause for the extension. 

2. The statement must: 

(a) Show the claimed deductions from the gross yield in the detail set forth 

in NRS 362.120. The deductions arc limited to the costs incurred during the 

period covered by the statement. 

(b) Be in the form prescribed by the department. 

(c) Be verified by the manager, superintendent, secretary or treasurer of 

the corporation, or by the owner of the operation, or, if the owner is a natural 

person, by someone authorized in his behalf. 

3. Each recipient of a royalty as described in subsection 1 shall annually 

file with the department a list showing each of the lessees responsible for 

taxes due in connection with the operation or operations included in the 

statement filed pursuant to subsections 1 and 2. . 

[2:77:1927; A 1929, 120; NCL § 6579)-(NRS A 1971, 562; 1973, 1293; 

1975, 1675; 1979, 819; 1983, 878; 1989, 35) 

-A.'lNOT ATIONSAdministr:ative RCKVlations. 

Proceeds or ~hnc:s, NAC 362.010 ct sc:q. 

:i.evada Cases. 

C:ilcul.ation or net proctcds. Under NCL 

§ 6Si8 ed. SRS 362.1001, :-.CL§ 6Si9 (cf. 

!I.RS J<,2.110), ;ind !IICL § 6580. as ;imended 

by ch. i-s. Sms. 1937 (cf. NRS 362.120), net 

proceed~ nf mines. for purpose of t:umion, 

;ire to re dctermmcd by asccrt;iining gross 

yield .tnJ dcductmg thc:rcrrom deductions 

authoriud bv Sl3tutc. Goldfield Consol. Mines 

Co. Y. S:atc, 60 Nev. 241, 106 P.2d 613 

(1940). cued, Koycn v. Lincoln ~finc:s, Inc., 

63 :-:c~·. 3:S, ac 328. 171 r.2d 364 (1946) 

Cl'9U 9505 

Attorney General's Opinions, 

Gypsum mines subjttt to taxation. Gyp· 

sum mines arc subject to taxation under statute 

relating 10 taxation of proceeds of mines, gypsum being mineral. AGO (4-12-1912) 

Statement required by section to be filed 

by lessee and each sublessn or mining 

i:round. Where lessee of mining ground subleases, original lease and each sublease thereunder should be treated as separace mining 

unit for net proceeds cax, and lessee and c:;ir:h 

sublc:ssce is required to file statement provided 

for under RL § 3690 {r:f. NRS 362.110) and 

pay tax provided for under RL § 3687 (r:f. 

NRS 362.140). AOO 83 (8-21-1923) 
351 

362.115 TAXES ON MINES AND MINERALS 

On ml• ed I• exceS1 or quota fixed by 

contnct pan or p,,as yield or mine. Ore 

mined in excess of quota set by Federal Govemment contract and for which operator 

receives amount over pric:c set under quota is 

taxable as gross yield of mine and is not classi• 

lied as bouncy or gift. AGO 69 (8-23-1943) 

Calculation or gross yield not limited to 

market value or extracted ore. Under NCI. § 

6S79 (c:f. NRS 362.110), which provides for 

1axa1ion of proceeds of mines, gross yield ton• 

1c:mpla1cs c:ompu1a1ion of proceeds of 

extracted ore in dollars and cents, and is -nol 

limi1cd 10 market value of such ore but contemplates c:ompulation of proceeds derived by 

mine owner or operator of all moneys rec:eived 

upon and from actual amount of ore miried and 

disposed of. AGO 69 (8-23-1943) 

Contractor who mines ore ror owner or mine not lessee for purposes or sectio11. Con• 

tractor who mines and stockpiles ore: for 

mine's owner under c:on1rac:1 obligating owner 

10 pay specific: amount for each 1011 of ore s10.:kpiled is n01 lessee of mine: and is not 

required to comply with NRS 362.110, relal• 

ing to statements 10 be filed with Nevada tax 

commission by mine operators. AGO 147 (3-

22-1960) 

Records or penon who contracts with 

mine owner may be examined to verify costs 

Mt fortb in statement filed by owner. Under 

provisions of NRS 362.200, relatins to pow• crs of Nevada tax commission, commission 

may examine records of contractor who mines 

and srodcpiles ore for mine owner to verify 

alleaations of operating costs contained in 

mine owner's statement filed under NRS 

362.110, relating 10 statements 10 be filed with 

Nevada _ lax commission by mine operators. 

AGO 147 (3-22-1960) 

Arbitrary assessment may be rescinded 

after filing or proper statement. Where, 

owing to failure of mine operator 10 file proper 

gross yield and net proceeds statement under 

NRS 362.110, Nevada lax commission levied 

arbitrary assessment under NRS 362.230, and 

where amended statement for period revealed 

net loss, commission had authority to rescind 

such assessment. AGO 465 (11·28·1967) 

Penalty imposed after failure to Ille state• 

ment not penalty for nonpayment or taxes. 

Where taxpayer does nor file reports required 

by NRS 362.110 and penalty is imposed there• 

under pursuant 10 NRS 362.230, such penalty 

is paid 10 state because ii is intended to defray 

cost of obtaining informa1ion required in 

reports and is not penalty for nonpayment of 

taxes, which would be additional tax, distributable to county and stale. AGO 495 (3-13· 

1968) 

362.115 Statement or estimated gross yield and net proceeds for current calendar year; payment or estimated tax; credit against final certification or refund; quarterly report or actual amounts. In addit: .- :: to the 

statement required by subsection 1 of NRS 362.110, each perso:- .vho is 

required to file that statement: 

1. Shall, on or before June 15 of each year, file with the department a 

statemen1 sho'¥ing _ the estimated gross yield and estimated net proceeds from 

each such operation for the entire current calendar year, and shall pay the tax 

upon the net proceeds so estimated to the department on or before July 15 of 

that year. If an estimate is filed, the amount due under the final cenification 

pursuant to NRS 362.130 is the difference between the total tax established 

upon the certification and the sum of the estimated payments made or 

credited. if any. for that calendar year. If the sum of the estimated payments 

exceeds the total tax, the ta.,cpayer is entitled to credit the excess against the 

ensuing estimates or final taxes due until it is exhausted, or,. i_f the taxpayer 

~Jes_~ statement with ·he d~panment which i~dica~es that he wtll have no tax 

habahty for the next -:Jlcndar year, upon venficauon by the depanment, the 

taxpayer is entitled to receive a refund. 

9506 
352 

TAXES ON MINES AND MINERALS 362.11S 

2. May file with the department a quarterly report stating an estimate for 

the year and the actual quarterly amounts of production, gross yield and net 

proceeds as of March 31, June 30, September 30 and December 31, to 

establish whether liability for a penalty exists. If the person chooses to submit 

such reports, the reports must be submitted on a form prescribed by the 

department no later than the last day of the month following the end of the 

calendar quarter. 

(Added to NRS by 1987, 2141; A 1989, 36, 1536) 

-ANNOTATIONSReviser's Note. 

Ch. 8i2, Stats. 1987, the source of this 

section, contains a preamble not included in 

NRS, which reads IS follows: 

"WHEREAS, This 64th session of the leg• 

islature has extensively considered amending 

the constitution of the State of N cvada to per• 

mit taxation of the net proceeds of mines sepa• 

rately from the taxation ad v:alorem of other 

property, but any increase of the taxes from 

this source would IIOl occur during the coming 

biennium when the need for revenue will be 

pressing;" 

Ch. sn also contains rhe following provisions not included in NRS: 

"Sec. 3. Each county treasurer who 

receives an estimated payment for the calendar 

year 1987 shall remit to the stare controller for 

deposit in the stare general fund the entire 

amount o( the estimated payments made for 

that year. Sec. 4. To provide additional revenue for 

the state before the process of amending the 

constitution of the State o( Nevada as it con• c:erns the taxation of mines can be accom- plished, the depanment o( taxation is 

authorized 10 accepc from any person, in addi• 

lion to the payment actually due the appropri• 

ate countv under the scatutes in effect at the 

rime of payment, one or more payments on account of the tu the payer estimates will be 

due the slate if the conrcmplarcd ;imcndment 10 

the c:ons1i1u1ion is adopted. Any payment so 

made and accepted must be deposited in the 

state treasury 10 the credit of the s1:11c general 

fund . 

Sec. S. The amount o( uch payment so 

made must be rc:c:ordcd separately by the 

department, bur the taxpayer is entitled 10 

credit for 1ha1 amount only: 

1. In the li~c:al year 1992-1993 or thereafrer: 

9S07 

2. lf lhc total revenue accepted by the 

department of t:ixation pursuant 10 section 4 of 

this act IS payments on account of the la."IC the 

payer estimates will be due the state if the 

contemplated amendment to the constitution is 

adopted is $10,500,000 or more for the fiscal 

year 1988-1989; 

3. If the total revenue from the tax on the 

net proceeds of mines in the year when the 

credit is claimed exceeds SS0,000,000; and 

4. To the extent in any one fiscal year of 10 

percent of the credit available on July 1, 1992. 

Sec. 6. If the proposed constitutional 

amendment is not agreed 10 by the 65th ses• sion of the legislature or is nor approved by a vote of the people, any amount paid pursuant 

10 section 4 of this act and all accrued interest 

and income earned on that money shall be 

deemed a gift to the state and is thereafter not 

refundable and must not be credited against 

any tax liability of the person making rhe 

payment. 

Sec. 7. 1. This section and sections 1, 2 

and 3 of this acl become effective on July 1, 

1987. 

2. Sections 4, S and 6 of this act become 

effective on July 1, 1987, if and only if this 

legislature has proposed an amendment 10 the 

constitution of the State of !llevada which 

would permit a 1:ix limited to the nel proceeds 

of mines but at a rare different Crom other 

taxes ad valorem. Sec:rions 4, 5 and 6 of this 

act expire by limitation: 

(a) On July 1, 1992, for the purpose of 

authorizing the acceptance of payments in 

addition 10 those legally due; :ind 

(b) For all other purposes, upon the 

exhaustion or the Im of any credits due 10 any 

taxpayer under this act." 
353 

162.120 TAXES ON MINES AND MINERALS 

362.120 Computation of gross yield and net proceeds. 

1. The department shall, from the statement and from all obtainable data, 

evidence and reports, compute in dollars and cents the gross yield and net 

proceeds of the period covered by the statement. 

2. The gross yield must include the value of any mineral extracted which 

was: 

(a) Sold; 

(b) Exchanged for any thing or service; 

(c) Removed from the state in a form ready for use or sale; or 

(d) Used in a manufacturing process or in providing a service, 

during the period covered by the statement. 

3. The net proceeds are ascertained and determined by subtracting from 

the gross yield the following deductions for costs incurred during that period, 

and none other: 

(a) The actual cost of extracting the mineral. 

(b) The actual cost of transporting the mineral to the place or places of 

reduction, refining and sale. 

(c) The actual cost of reduction, refining and sale. 

(d) The actual cost of marketing and delivering the mineral and the conversion of the mineral into money. 

(e) The actual cost of maintenance and repairs of: 

(1) All machinery, equipment, apparatus and facilities used in the mine. 

(2) All milling, refining, smelting and reduction works, plants and 

facilities. 

(3) All facilities and equipment for transportation except those that are 

under the jurisdiction of the public service commission of Nevada as public 

utilities. 

(t) The actual cost of fire insurance on the machinery, equipment, apparatus, works, plants and facilities mentioned in paragraph (e). · (g) Depreciation of the original capitalized cost of the machinery, equipment, apparatus, works, plants and facilities mentioned in paragraph (e). The 

annual depreciation charge consists of amortization of the original cost in a 

manner prescribed by regulation of the Nevada tax commission. The probable 

life of the property represented by the original cost must be considered in 

computing the depreciation charge. 

(h) All money expended for premiums for industrial insurance, and the 

actual cost of hospital and medical attention and accident benefits and group 

insurance for all employees. 

(i) All money paid as contributions or payments under the unemployment 

compensation law of the State of Nevada, as contained in chapter 612 of 

NRS, all money paid as contributions under the Social Security Act of the 

Federal Government, and all money paid to either the State of Nevada or the 

Federal Government under any ame~dment to either or both of the statutes 

mentioned in this paragraph. 

(1991) 9508 
354 

TAXES ON MINES AND MINERALS 362.120 

(j) The actual cost of developmental work in or about the mine or upon a 

group of mines when operated as a unit. 

(k) All money paid as royalties by a lessee or sublessee of a mine or well, 

or by both, in determining the net proceeds of the lessee or sublessee or both. 

4. Royalties deducted by a lessee or sublessee constitute part of the net 

proceeds of the minerals extracted, upon which a tax must be levied against 

the person to whom the royalty has been paid. 

5. Every person acquiring property in the State of Nevada to engage in the 

extraction of minerals and who incurs any of the expenses mentioned in 

subsection 3 shall report those expenses and the recipient of any royalty to the 

department on forms provided by the department. 

6. The several deductions mentioned in subsection 3 do not include any 

expenditures for salaries, or any portion of salaries, of any person not actually engaged in: 

(a) The working of the mine; 

(b) The operating of the mill, smelter or reduction works; 

(c) The operating of the facilities or equipment for transportation; 

( d) Superintending the management of any of those operations; or 

(e) The State of Nevada, in office, clerical or engineering work necessary 

or proper in connection with any of those operations. 

[3:77:1927; A 1937, 139; 1939, 256; 1931 NCL § 6580]-(NRS A 1971, 

926; 1973, 1294; 1975, 1676; 1979, 820; 1983, 254; 1989, 36, 1533; 1991, 

146) 

-ANNOTATIONSAdministrative Regulations. 

Proceeds of Mines, NAC 362.010 ct seq. 

Sevada Cases. 

Calculation or net proceeds. Under NCL 

§ 6578 (cf. NRS 362.100), NCL § 6579 (cf. 

NRS 362.110), and NCL § 65S0, 3S amended 

by ch. 68, Stats. 1937 (cf. NRS 362.120), net 

proceeds of mines. for purpose of taxation, arc 10 be detennined by ascertaining gross 

yield and deducting therefrom deductions 

authorized bv statute. Goldfield Consol. Mines 

Co. v. State, 60 Nev. 241, 106 P.:?d 613 

( I 940), cited, Koycn v. Lincoln !I.tines, Inc .• 

63 Nev. 3::S, at 328, 171 P.::d 364 (1946) 

Vnder terms or contract. lax imposed on royalties or lessor or mine were payable by 

lessee. Where lease of mine provided that 

lessee would pay all stale and county ta.,ces on 

net proceeds or mines resulting fr<'m production by lessee. tax imposed on · ,yalties of 

lessor by ch. 174, Stats. 1939 (cf. NRS 

362.1 ::01 was payable by lessee. Koyen v. Lincoln !\.lin(s, Inc., 63 Nev. 325, 171 P.2d 

364 (1946) 

(19911 9509 

Royalties subject 10 taxation on basis or 

net proceeds. Under provisions of NCL § 

6580 (cf. NRS 362.l:?0), which provides that 

royalties paid by lessee of mine shall be 

deductible in computing net proceeds ta.,cable 

to lessee, but .shall constitute part of gross 

yield to lessor for purposes of computing net 

proceeds ta.,cable to lessor. ii was plainly intent 

of legislature to bring royJlties within sphere 

of property taxable on basis of net proceeds. 

Kovcn v. Lincoln Mines, Inc., 63 Nev. 325. 

17i P.2d 364 (1946) 

Royalty to be taxed on basis or cash value 

whetc recipient has no operating cost. 

Because ch. 174, Sms. 1939 (cf. NRS 

362.120), imposing tax on royalties received 

by lesser of mine, provides no method of 

determining "net proceeds" in situation 

where lessor has no operating cost, royalty 

must be taxed on basis of its cJsh nluc. 

Koyen v. Lincoln Mines. Inc., 63 Nev. 325, 

171 P.:?d 364 (1946) 
355 

362.120 TAXES ON MINES AND MINERALS 

Fedenl and Other Ca1a. ·. Severed ore u penonal property. Sec. 6, 

ch. 35, Stats. 1871 (cf. NRS 362.150), creat• 

ins lien on mines or minins claims for t~s 

upon their net proceeds, is not invalid as lax 

upon, or lien against, properry of United 

Slates because ii distinguishes between patented and unpatented claims, lien attaching in 

the first case to mine itself, in the second only 

to possessory right of miner which may be 

transferred in any manner wi1hou1 infringing 

the title of United States. Tax upon net proceeds itself, imposed by sec. 2, ch. 35, Slats. 

1871 (cf. NRS 362.120), is tax upon ore as personal properry of miner, not real properry 

of United S1a1es. Forbes v. Gracey, 94 U.S. 

762, 24 L. Ed. 313 (1877) 

Attorney Genenl's Opinion•. 

Meaning or "actual co•t or eii:tncting." 

Term "actual cost of extracting," as used in 

statute relating to taxation of nel proceeds of 

mines, means cost of breakiDg or removing ore from vein, lode or deposit. AGO (4-24-

1911) 

Deductions limited to those provided by 

section; redenl tasa not to be deducted in 

calculatini net proceeds. No reduction from 

gross proceeds of mines in order to arrive at 

net proceeds for purpose of taxation may be 

made esecpt those provided for by RL § 3687 

(cf. :-;Rs 362. 120), and federal taxes arc no1 

within deductions of such statute and may nol 

be deducted in arriving at net proceeds. AGO 

147 (1·25-1918) 

Constitutional definition or "net proceeds" compared. Term ••net proceeds" in 

mining. as used in !',;ev. Art. 10, § 1, is identi• 

c3l with that defined by RL § 3687 (cf. NRS 

362.140). AGO 147 (1-25-1918) 

Costs or industrial insurance may be 

included in opcr:llin,: expenns. Industrial 

insurance costs may be legally included in 

operating expenses in arriving al ncl proceeds 

of mines. AGO 77 (7•21-1919) 

Cost or constniction and equipment or 

mine not 10 be deducted. In computing net 

proceeds of mines under RL § 3687 (d. NRS 

362.1 :0) deductions do no1 include cost of 

c:ons1ruc1ion and equipment of mine. AGO 80 

(8-2-1919) 

Lessee and each sublessee or mining 

1round 10 be treated as separate minin11 

units; each liable for lax. Where lessee of 

(1991) 9510 

mining ground subleases, original lease and 

each sublease thereunder should be treated as separate mining unit for net proceeds tax, and 

lessee and each sublessce is required to file 

statement provided for under RL § 3690 (cf. 

NRS 362.110) and pay tu provided for under 

RL § 3687 (cf. NRS 362.140). AGO 83 (8-21-

1923) 

Ore mined la excess or amount established by contnct tasable as part or yield or mine. Ore mined in excess of quota set by 

Federal Government contract and for which 

operator rc.:eivcs amount over price set under 

quota is taxable as gross yield of 1he mine and 

is not classified as bounry or gift. AGO 69 (8-

23-1943) 

Gron yield not limited to market value or eii:tncted ore. Under NCL § 6579 (cf. 

NRS 362.110), which provides for taxation of 

proceeds of mines, gross yield contemplates 

computation of proceeds of extracted ore in 

dollars and cents, and is not limited 10 market 

value of such ore but con1empla1es complita• 

lion of proceeds derived by mine owner or opentor of all moneys received upon and 

from actual amount or ore mined and disposed 

of. AGO 69 (8-23-1943) 

Cancellation payment made under mining contnct not taxable as net proceeds. 

Canc:clla1ion payment. for 101al unfilled production, made by Federal Government under 

mining contract, does not represent return for ore produced from · the mine, ncl proceeds of 

mines, or production from mine as defined 

under Nevada law, and is, therefore, not taxable as net proceeds. AGO 173 (11-4-1944) 

No deduction for payments made into 

fund under company retirement plan. 

Under 1931 NCL § 6580 (cf. NRS 362.120), 

which provides for certain deductions from 

gross yield of mine 10 arrive al net proceeds 

for lax purposes, moneys paid into private 

fund under company re1iremcn1 plan for its 

employees cannot be deducted. AGO 438 (4-

1-1947) 

Where initial sale or ore made to wholly 

owned subsidiary, price obtained on subsequent sale may be used as basis for determining net proceeds. In determining ne1 

proceeds of mine, lax commission is not 

bound by pric~ al which producing corpora• 

tion sold ore to wholly owned subsidiary bu1 

may ignore corporate entities and base assess-
356 

TAXES ON MINES AND MINERALS 362.130 

mcnl on price :it which subsidiary sold ores. AGO 738 (4-14-1949) 

No deduction for cost of constructin1 

road to mine. Because road cons1ruc1cd 10 

mine is considered capital inves1mcn1, aad 

because it is not cnumenled in deductions provided in ascertaining nel proceeds (sec 1931 

NCL § 6580. cf. NRS 362.120), ii may nol be 

deducted u business expense for lax purposes. 

AGO 757 (5-16-1949) 

Losses sustained in certain areas of mining operation not deductible. Deficil in 

boardinghouse operations and commissaries 

c:annol be charged as deductible items, as provided in 1931 NCL § 6580 (cf. NRS 

362.120), to determine net proceeds. AGO 

780 (7-21-1949) 

Deduction allowed for cost of maintaining boardinghouse; no deduction for loss 

incurred through operation or bo• rdin1-

house. Cost of maintenance and repair of 

boardinghouse kept for mining employees may 

be deducted from gross yield in order 10 obtain 

net proceeds of mines subject 10 tax. However, loss incurred through operation of such 

boardinghouse cannot be deducted. AGO 330 

(12-5-1957) 

Deduction allowed for maintenance of 

roads and walks and or water and power 

facilities. Costs of maintenance and repair of 

roads and walks in mining housing area and of 

water and power facilities may be deducted 

from gross yield in determining net proceeds 

of mines tJ.."<. AGO 330 (12-5-1957) 

Oil wells 10 be treated as mines for pur• 

poses or section. For purposes of NRS ch. 

362, relating 10 laxes on pa1en1ed mines and 

mine proceeds, oil wells should be treated as mines and Nevada tax commission must determine gross yield and net proceeds of oil wells on semiannual basis as provided in NRS 

362.120. AGO 40S (5-9-1967) 

Deduction allowed for industrial Insurance premiums. In delermining net proceeds 

of mine upon which lax is assessed, industrial 

insurance premiums arising by reason of participation in insurance required by Nevada 

industrial commission arc deductible from 

gross proceeds of mine pursuan1 to subscc1ion 

Z(h) of NRS 362.120. AGO 498 (3-27-1968) 

Actual sale required to determine cross 

yield; no assessment of tax where sale not 

possible due to strike. Where conccn1ra1es 

could nol be sold because of s1rike, lax on nel 

proceeds of mines could nol be assessed or paid on estimaled value oi stockpiled ore and 

concentrates, because gross yield for purposes 

of NRS 362.120 can be de1ermined only from 

actual sales. AGO 532 (8-30-1968) Modified, 

AGO 559 (2-5-1969) 

Value or stockpiled material may be considered in determinin1 gross yield and net 

proceeds, if material stockpiled because of 

emergency. Under NRS 362.120, which provides that Nevada tax commission shall, from 

all obtainable da1a, evidence and rcporls com• pute gross yield and net proceeds oC mine, 

commission may consider value of stockpiled 

material if such material was stockpiled 

because of emergency conditions. AGO 559 

(2-5-1969) 

362.130 Preparation and mailing of certificate of amount of net proceeds and tax due; penalty for underpayment; date tax and penalty due. 

I. When the department determines from the annual statement the net 

proceeds of any minerals extracted, it shall prepare its certificate of the 

amount of the net proceeds and the tax due and shall send a copy to the owner 

of the mine. operator of the mine, or recipient of the royalty, as the case may 

be . 

2. The certificate mus~ be prepared and mai_lcd no~ later than June 10 

immediately following the month of February during which the statement was 

filed. 

3. If the amount paid pursuant to NRS 362.115 is less than 90 percent of 

the amount certified pursuant to this section, the amount due must include a 

penalty of 10 percent of the underpayment unless: 

11991) 9S11 
357 

362.135 TAXES ON MINES AND MINERALS 

(a) The amount paid pursuant to NRS 362.115 is equal to or greater than 

the total tax liability of the operation for the immediately preceding calendar 

year; or 

(b) The person files quarterly reports pursuant to subsection 2 of NRS 

362.115 in a timely manner for that year and pays the additional amount due 

within 30 days after the quarterly report that indicates the additional estimated 

tax liability is filed with the department. The additional estimated tax liability 

must be calculated by determining the difference between the revised estimates of net proceeds based on the recent production figures as indicated by · 

the quarterly reports and the original estimate supplied on June 15 of that 

year. 

4. The taxes and any penalty arc due on June 30 of that year. 

(4:77:1927; NCL § 6581]-(NRS A 1969, 561; 1973, 1295; 197S, 1677; 

1979, 822; 1981, 809; 1987, 168, 2141; 1989, 38, 1537; 1991, 653) 

362.135 Appeal of certification to state board of equalization; payment of tax pending determination of appeal. 

1. Any person dissatisfied by any certification of the department may 

appeal from that determination to the state board of equalization. The appeal 

must be filed within 30 days after the certification is sent to the taxpayer. 

2. Pending determination of the appeal, the person certified as owing the 

tax shall pay it on or before the date due, and the tax is considered to be paid 

under protest 

(Added to NRS by 1977, 1052; A 1987, 169; 1989, 38) 

362.140 Rate of tax upon net proceeds. 

1. E:<ccpt as otherwise provided in this section, the rate of tax upon the 

net proceeds of each geographically separate extractive operation depends 

upon the ratio of the net proceeds to the gross proceeds of that operation as a 

whole, according to the following table: 

Net Proceeds as Percentage 

of Gross Proceeds 

Less than 10 

10 or more but less than 18 

18 or more but less than 26 

26 or more but less than 34 

34 or more but less than 42 

42 or more but less than SO 

50 or more 

Rate of Tax as Percentage 

of Net Proceeds 

2.00 

2.50 

3.00 

3.50 

4.00 

4.50 

5.00 

Z. If the combined rate of tax ad valorem which would be assessed but for 

the provisions of section 5 of article 10 of the constitution of this state, 

including any rate levied by the State of Nevada, upon property at the situs of 

9S12 
358 

TAXES ON MINES AND MINERALS 362.150 

the operation is more than 2 percent, the minimum rate of tax under this 

section equals that rate of tax ad valorem. 

3. The rate of tax upon royalties is 5 percent. 

4. The rate of tax upon the net proceeds of i. geothermal operation taxable 

pursuant to NRS 362.100 is the combined rate of tax ad valorem applicable to 

the property at the situs of the operation. 

S. The rate of tax upon an operation for which the net proceeds in a 

calendar year exceed $4,000,000 is 5 percent. 

[Part 75:99:1891; C § 1147; RL § 3687; NCL § 6481]-(NRS A 1989, 

38, 1537) 

-ANNOTATIONSReviser's Note. 

The revised section comes from a ponion 

of sec. 75, ch. 99, Stats. 1891 (NCL § 6481). 

With the enactment of ch. 77, Stats. 1927, the 

old 1891 statutory provisions were not 

expressly repealed. In 194S, the attorney gen• 

cral rendered AGO 238 (11·1·194S) that NCL 

§ 6481 had been repealed except for the decla• 

ration that the net proceeds of mines arc sub• 

ject 10 ad valorcm taxation at the same rate as 

other property is taxed. 

Nevada Cases. 

Taxes levied under section must be 

included in assessment roll. Where sta1ulc 

provided that county assessor of each county 

should include in his assessment roll "all taxes 

levied by authority of law for county pur• 

poses.·• taxes levied on proceeds of mines 

were required to be included in assessment 

roll under Nev. An. 10, § l. which provides 

for uniform rates of assessment and ta.-<ation. 

and under RL § 3687 (cf. NRS 362.140), 

which provides that net proceeds of any mine 

shall be taxed at same rate ad valorem as other 

property is ta."ted. Esmeralda County v. Min• 

eral County. 37 Nev. 180. 141 Pac. 73 (1914) 

Attorney General's Opinions. 

Constitutional definition of "net pro• 

cecds" compared. Term "net proceeds" in 

mining, as used in Nev. Art. 10, § l. is identi• 

cal wuh that defined by RL § 3687 (cf. NRS 

36:.1401. ,\GO IJ7 (l-:S-1918) 

:'lio deduction for fcdual taxes permitted 

in calculating net proceeds. No reduction 

from gross proceeds of mines in order 10 

arrive at net proceeds for purpose of taxation 

may be made except those provided for by RL 

§ 3687 (cf. NRS 362.120), and federal taxes 

arc not within deductions of such statute and 

may not be deducted in arriving at net proceeds. AGO 147 (1·25·1918) 

Lessee and each sublessee of mining 

ground each required lo pay tu. Where 

lessee of mining ground subleases, original 

lease and each sublease thereunder should be 

treated as separate mining unit for net proceeds lax, and lessee and each sublessee is 

required to file statement provided for under 

RL § 3690 (cf. NRS 362.110) and pay tax 

provided for under RL § 3687 (cf. NRS 

362.140). AGO 83 (8-21-1923) 

"Mine" and "mining claim" include 0 tailings." Words .. mine" and "mining 

claim," as used in revenue laws of Nevada, 

arc broad enough 10 include word "tailings" 

without express mention thereof. AGO 178 (6-

25-1935) 

Cancellation payment made under min• 

ing contract not taxable as net proceeds. 

Cancellation payment, for total unlilled production, made by Federal Government under 

mining contract, docs not represent return for 

ore produced from the mine, net proceeds of 

mines, or production from mine as defined 

under Nevada law, and is. 1hcrcforc. not taxable as net proceeds. AGO 173 (11-4-1944) 

362.150 Liens for t:ixes on proceeds of miner:ils. Every tax levied 

under the authority or provisions of NRS 362.100 to 362.240, inclusive, on 

the proceeds of minerals extracted is hereby made a lien on the mines from 

9S13 
359 

362.160 TAXES ON MINES AND MINERALS 

which minerals are extracted for sale or reduction, and also on all machinery, 

fixtures, equipment and stockpiles of the taxpayer located at the mine site or 

elsewhere in the state. The lien attaches on the 1st day of January of each 

year, for the calendar year commencing e>n that day and may not be removed 

or satisfied until the taxes are all paid, or the title to those mines has vested 

absolutely in a purchaser under a sale for those taxes. 

[76:99:1891; C § 1148; RL § 3688; NCL § 6482)-(NRS A 1979, 822; 

1989, 39) 

-ANNOTATIONSReviser's Note. 

This section was completely revised. The source section (NCL § 6482) was declared by 

the attorney general to be effective as a decla• 

ration of lien. Sec AGO 238 (11+194S). 

However, the attorney general did not state the 

time when the lien attaches. The reviser 

inserted "January" and "July" as the months 

in which the lien attaches. This conforms to 

the assessment periods. Sec NRS 362.110. 

Nevada Cases. 

Statute or limitations. Former statutes, cf. 

NRS 362.150, which provided that every tax 

levied upon proceeds of mine was lien upon 

mine until paid neither excepted action to collect tax from operation of statute of limitations nor extended time for bringing such action 

beyond period of statute, whether action was against defendant as individual or against his 

property. State v. Yellow Jacket Silver Mining 

Co., 14 Nev. 220 (1879) 

Federal and Other Cases. 

Section not invalid as cnating lien upon, 

or imposing taxapinst, property orUnited 

States. Sec. 6, ch. '.:5 . Stats. 1871 (cf. NRS 

362.150), creating lier. on mines or mining 

claims for taxes, is not invalid as tax upon, or lien against, property of United States because 

it distinguishes between patented and unpatented claims, lien attaching in first case to 

mine itself, in second only to posscssory right 

of miner which may be transferred in any manner without infringing title of Uni1ed 

States. Tax upon nel proceeds itself, imposed 

by sec. 2, ch. 35, Stats. 1871 (cf. NRS 

362.120), is tax upon ore as personal property 

of miner, not real property of United Slates. 

Forbes v. Gracey, 94 U.S. 762, 24 L. Ed. 313 

(1877) 

362.160 When tax or estimated payment becomes delinquent; collection of delinquencies. If the amount of any tax or estimated payment 

required by NRS 362.100 to 362.240, inclusive, is not paid within 30 days 

after it is due, it is delinquent and must be collected as other delinquent taxes 

are collected by law, together with the penalties provided for the collectioo of 

delinquent truces. 

[5:77:1927; NCL § 6582]-(NRS A 1975, 1678; 1987, 169; 1989, 39) 

-ANNOTATIONSNevada Cases. 

Only district attorney is authorized to commence action _ror delinquent tans. 

Where dis1ric1 attorney and counsel associated 

with hiin in action for delinquent property 

laxes an_d penalties consented to judgment for 

taxes wnhout penalties, consent or associated 

c~unscl could add nothing 10 consent of dis• 

tnct auorncy, because under B §§ 3153 and 

3231 (cf. NRS 361.650 and 362.160), district 

(1991) 95U 

attorneys alone are au1horized to commence actions for delinquent laxes. State •: _ Califor. 

nia Mining Co., 15 Nev. 234 (l· .- .. . cited. 

State v. California Mining Co., 15 .,cv. 259 

(1880), State v. California Mining Co., 15 

Nev. 308, at 310 (1880) 

Attorney Genenl's Opinions. 

Penalties refernd 10 in section are those 

provided for collection · or delinquent prop-
360 

TAXES ON MINES AND MINERALS 362.170 

erty taxa pnenlly. When net proceeds of 

mines an: lued 11 same ad valorem rate as ocher property. penallics referred to in NRS 

362.160 in connection with collection of delinquent taxes an penalties imposed by NRS 

361.483 for collection of delinquent property 

llRS generally, because: former NRS 362.210 

provides lhal all nonconftic:ting laws relating 

lo collcdion, enforcement and penalties for 

nonpayment of llRS shall apply, impliedly in 

absence of any specific penalty provision in 

NRS ch. 362. AGO S08 (S-8-1968) 

362.170 Appropriation to county of amount of tax attributable to 

extractive operations in county; apportionment by county treasurer; 

department to report amount received as tax upon net proceeds of geothermal resources. 

1. There is hereby appropriated to each county the total of the amounts 

obtained by multiplying, for each extractive operation situated within the 

county, the net proceeds of that operation by the combined rate of tax ad 

valorem, excluding any rate levied by the State of Nevada, for property at 

that site. The department shall report to the state controller for distribution on 

August 1 of each year the amount appropriated to each county, as calculated 

for each operation from the final statement made in February of that year for 

the preceding calendar year. 

2. The county treasurer shall apportion to each local government or other 

local entity, the total of the amounts obtained by multiplying, for each 

extractive operation situated within its jurisdiction, the net proceeds of that 

operation, including royalty payments, by the rate levied on behalf of that 

local government or other local entity, less a percentage commission of 3 

percent which must be deposited in the county general fund. The amounts 

apportioned pursuant to this subsection, including the amount retained by the 

county and excluding the percentage commission, must be applied to the uses 

for which each levy was authorized in the same proportion as the rate of each 

levy bears to the total rate. 

3. The department shall report to the state controller on August 1 of each 

year the amount received as tax upon the net proceeds of geothermal 

resources which equals the product of those net proceeds multiplied by the 

rate of tax levied ad valorem by the State of Nevada. 

[Part 1:57:1885; BH § 2386; C § 1241; RL § 1581; NCL § 2062)-(NRS 

A 1959, 761; 1989, 39, 1538) 

-ANNOTATIONSAttorney General's Opinions. 

!llo commission for collection or certain 

special lo·ies or license rces. Commissions 

allowed 10 coun1ics for collcc1ion or 1axcs pur• 

suanl 10 RL § 1S81 (cf. !IIRS 361.S30 and 

362.1 iO) arc no1 authorized for collcc1ion or special levies imposed by rc:gulatory or i11;;;,cc11on measures or license rec collec1ions. 

AGO 269 (6-23-1927) 

Section not in conftict wilh prohibition 

against 1111 collector or county treasurer 

119911 9515 

receiving ree ror collecting money or public 

schools. NRS 361.S30, which requires couniy 

assessor lo reserve and pay 10 county 1rcasury 

perccn1agc commission on taxes collected on personal property, and NRS 362.170, which 

requires assessor 10 reserve and pay such com• mission on taxes collected on net proceeds or mines, arc not in conflict wi1h NRS 387.225, 

which prohibits lax collcc1or or couniy 1rc:1-

surcr Crom receiving recs for collec1ing, 
361 

362.172 TAXES ON MINES AND MINERALS 

rcccivins or keeping public: schools' money, by adding to rcplar compensation. AGO 409 

because collection of commission is for benefit (5-23-1967) 

of general fund and docs not reward collector 

362.172 Permanent net proceeds fund: Creation; sources of revenue. 

1. The permanent net proceeds fund is hereby created as a trust fund. No 

portion of the principal of the fund may be removed except by direct legislative appropriation. Any such appropriation must receive the votes of a twothirds majority of each house of the legislature. 

2. On or before August 15 of each year, the state controller shall deposit 

in the fund S percent of the portion of the revenue from the tax on the net 

proceeds of minerals that is remaining after the appropriation made by NRS 

362.170. · 

3. On or before August 15 of each odd-numbered year, the state controller 

shall transfer to the fund any revenue from the tax on the net proceeds of 

minerals received during the 2 previous fiscal years which, after subtracting 

the amount deposited pursuant to subsection 2 and the amount appropriated 

pursuant to NRS 362.170 for both fiscal years, exceeds $55,000,000. 

(Added to NRS by 1989, 1536) 

362.175 Procedure for removal of amount of tax and name from 

records of department when tax impossible or impractical to collect. 

1. If at any time, in the opinion of the executive director, it becomes 

impossible or impractical to collect any tax certified on the proceeds of 

minerals extracted, the executive director may apply to the Nevada tax commission to have the amount of the tax and the name of the person against 

whom the tax is certified removed from the tax records of the department. 

2. If the Nevada tax commission approves the application, the department 

may remove the name and amount from its tax records. 

(Added to NRS by 1960, 84; A 1975, 1678; 1989, 40) 

362.180 Burden of proof on taxpayer to show certification by department to be unjust, improper or invalid. In any suit arising concerning the 

certification and ta.,cation of the net proceeds of minerals extracted, the burden 

of proof is upon the taxpayer to show if he so alleges or contends that the 

certification by the department is unjust, improper or otherwise invalid. 

(Part 13:177:1917; 1919 RL p. 3202; NCL § 6554] + [6:77:1927; NCL § 

6583}-(NRS A 1975, 1678; 1977, 1052; 1989, 40) 

362.200 Powers of department: Examination of records; hearings. 

1. The department may examine the records of any person operating or 

receiving royalties from any extractive operation in this state. The records arc 

subject to examination at all times by the department or its authorized agents 

and must remain available for examination for a period of 4 years from the 

date of any entry therein. 

(IWII 9516 
362 

TAXES ON MINES AND MINERALS 362.230 

2. If any person whose gross yield from an extractive operation as 

reported to the department for any annual reporting period during the 4 years 

immediately preceding the examination was S100,000 or more keeps his 

books and records pertaining to that operation or royalties outside this state, 

the person shall pay an amount per day equal to the amount set by law for outof-state travel for each day or fraction thereof during which an examiner is 

actually engaged in examining the books, plus the actual expenses of that 

examiner during the time he is absent from Carson City, Nevada, for the 

purpose of making the examination, but the time must not exceed 1 day going 

to and 1 day coming from the place of examination. No more than one 

examination may be charged against a person in any 1 fiscal year. 

3. The department may hold hearings and summon and subpena witnesses 

to appear and testify upon any subject material to the determination of the net 

proceeds of minerals extracted. The hearings may be held at any place the 

department designates, after not less than 10 days' notice of the time and 

place of the hearing given in writing to the owner or operator of the mine. 

The owner or operator is entitled, on request made to the executive director, 

to the issuance of the department's subpena requiring witnesses in behalf of 

the owner or operator to appear and testify at such hearing . 

. 4. The failure of a witness to obey the subpena of the department subjects 

the witness to the same penalties prescribed by law for failure to obey a 

subpena of a district court. 

[9:77:1927; NCL § 6586]-(NRS A 1975, 318, 1679; 1977, 1052; 1985, 

1438; 1989, 40) 

-ANNOTATIONSAllomty Gtntral's Opinions. 

Rtasstssmtnl limiltd lo period or J 

ytan. Although ru commission, under ll:CL 

§ 6586 (cf. :-iRS 362.200), may examine 

records of mining companies ar any lime, any 

reasscssmenl 1hcrcundcr is limited 10 period of 

3 ycm under :-.CL§ 852-' (cf. :-;RS 11.190) 

and NCL § 85:!S (cf. NRS 11 .255). AGO 115 

(3-1-19-'-') 

Records or ptnon .. -ho conlraclS "ilh 

mine owner may bt rumintd lo vrriry 

accuracy or slaltmtnl filtd by owner. Under 

provisions of NRS 362.200, relaring to powers of Nevada tax commission, commission 

may examine records of conrractor who mines 

and srockpiles ore for mine owner 10 verify 

allegarions of operating costs contained in 

mine owner's statement filed under NRS 

362.110, relating 10 statements 10 be filed with 

Nevada tax commission by mine opcrarors. 

AGO 147 (3-22-1960) 

362.230 Penalt\' for failure to file statements. 

l. Every person extracting any mineral in this state, or receiving a royalty 

in connection therewith. who fails to file with the department the statements 

provided for in NRS 362.100 to 362.240, inclusive, during the time and in 

the manner provided for in NRS 362.100 to 362.240, inclusive, shall pay a 

penalty of not rrtorc than IO percent of the amount of the tax due or S5,000, 

whichever is less. If any such person fails to file the statement, the department may asccnain and certify the net proceeds of the minerals extracted or 

the value oi the royalty from all data and information obtainable, and the 

(19'111 9517 
363 

362.240 TAXES ON MINES AND MINERALS 

amount of the tax due must be computed on the basis of the amount due so 

ascertained and certified. 

2. The executive director shall detennine the amount of the penalty. This 

penalty becomes a debt due the State of Nevada and, upon collection, must be 

deposited in the state treasury to the credit of the state general fund. 

3. Any person extracting any mineral or receiving a royalty may appeal 

from the imposition of penalty and interest to the Nevada tax commission by 

filing a notice of appeal within 30 days after the decision of the executive 

director. 

(7:77:1927; NCL § 6584)-(NRS A 1971, 563; 1973, 1296; 1975, 135, 

1679; 1989, 41) 

-Ai~NOTATIONSAttorney Genenl's Opinions. 

Assessment made after r•ilure to Ille 

proper statement may be ·rescinded. Where, 

owing to failure of mine operator to file proper 

gross yield and net proceeds statement under 

NRS 362.110, Nevada lax commission levied 

arbitrary assessment under NRS 362.230, and 

where amended statement for period revealed 

net loss, commission had authority 10 rescind 

such assessment. AGO 46S (11-:8-1967) 

Natun or penalty provided by section. 

Where taxpayer docs nol file reports required 

by NRS 362.110 and penalty is imposed there• 

under pursuant to NRS 362.230, such penalty 

is paid 10 state because it is intended to defray 

cost of obtaining information required in . reportS and is not penalty for nonpayment of 

tucs, which would be additional tax, distrib• 

u1able 10 county and stale. AGO 49S (3-13· 

1968) 

362.240 Penalty for false statements. Any person who verifies under 

oath to the truthfulness of a statement required by NRS 362.100 to 362.:!40, 

inclusive, rhat is false in any material respect shall be liable to a penalty ct :101 

more than 15 percent of the tax as determined by the executive director after 

reasonable notice and hearing. 

(8:77: I :>::?.7; NCL § 6585)-(NRS A 1975, 1680) 

119'11) 9S18 
J,2.010 

J,2.015 

3'2.020 

3'2.030 

3'2.840 

3'2.050 

Ju.o,o 

J,2.0,0 

J,2.100 

J,2.uo 

3'2.120 

3'2.130 

J,2.140 

J,2.150 

3'2.1'0 

364 

NEVADA ADMINISTRATIVE CODE 

CHAPTER 362 

TAXES ON PATENTED MINES AND 

PROCEEDS OF MINERALS 

PROCEEDS OF ~IL"IERALS 

General Provisions 

Metbod ror determining gross value or mineral products. 

Metbod ror determining gross value or geothermal resources. 

Separate repon or royalties. 

Dedlldions: Capitalized costs. 

Dedac:dons: Depreciation of capitalized cosu. 

Deductions: Operating costs. 

Dedactions: Electric power. 

Deductions: Loadl111 and transportadon costs. 

Accelerated Depreciadon or Capitalized Costs 

Ellalbility or mhtln1 operator ror accelerated depreciation. 

Fillna of petition and accompanyina documents. 

Temporary closure not acceptable justification for allowance or petition. 

Permission to depreciate useu granted to specific company only. 

~laaner of depreciation. 

Annual audits by depamnent: requirement ofsurety. 

Duties of operator who fails to cease or reopens operation. 

PATENTED MINES 

J,2.410 Assessment; removal rrom secured roll for miscellaneous property. 

362-l 
365 

PROCEEDS OF MINERALS 

General Provisions 

362.010 Method for detenninin1 IJ'OSS ftlue of mineral products. 

l. For the purposes of assessment ar:a taxation of the net proceeds of mines 

under chapter 362 of NRS. the gross value of mineral products must be 

determined in accordance with the provisions of this section. 

2. [n those cases where a mineral product is sold by the producer in an 

arms-length transaction in free market competition, the gross value of 1he 

product is an amount equal to the proceeds of the sale of the product. This 

subsection applies to sales realized on all minerals produced from mining, 

includinc without limitation. reduction. beneficiation or any treatment used by 

the producer within or outside this state to obtain a mineral P.roduct which is 

commercially marketable. 

3. ln those cases where a product is exchanged for any thing or service or 

removed from the state in a form ready for use or sale. but not used or sold 

durin& the period covered by the statement. the gross value of the product is: 

(a) The price stated in the contract or other document of sale if one is in 

existence; or (b) An amount determined by the department by using a recognized 

national or international publication of prices. · · 

4. [n those cases where the mineral product is used by the producer or 

disposed of by him in any kind of tramaction which is not at arms-length, 

including without limitation such tramactions with associated or affiliated 

companies. the gross value of the mineral product so used or disposed of will 

be determined by the dcpanment by utilizing information supplied by 1he 

producer under this subsection and Crom such other appropriate sources as the 

department deems necessary. The mineral producer shall supply 1he 

department with the following informatiqn for each reporting period: 

(a) The producer's profit and loss statements; 

(b) The proportionate profit reports and the calculations used to prepare 

them: 

(c) The allocation of income by states; 

(d) The amount used to calculate the percentage of depletion allowances:. or (e) The monthly average price of the product for the months in which it was 

. used in a manufacturin& process or to provide a service. 

5. Any information submitted pursuant to paragraphs (a) to (d), inclusive, 

of subsection 4 mUSl be the same as submitted to the Internal Revenue Service. 

6. The producer has the burden of proof in any determination under this 

section of the gross value of mineral products used or disposed of by him. 

[Tax Comm'n, Mine Proceeds Reg. No. 26, eff. 1-24-78; renumbered as Reg. 

No. l, 1-22-79)-(NAC A S-3-84) 

362.015 Method for determining p-oa •alue or geothennal resources. 

1. As used in this section "transaction" means a bona fide transaction 

conducted at arms length involving geothermal resources at the wellhead. 

2. To assess and tax the net proceeds of an operating mine which extracts 

geothermal resources for a profit. the gross value of the geothermal resources 

must be determined pursuant to this section. 

362-1 !-42 
366 

3. To determine the gross value of geothermal resources. the transaction 

must first be identified. 

4. If the transaction involves the sale of the geotherm:ll resource. the gross 

value of the geothermal resource equals the proceeds of the sale. 

S. If the transaction involves the sale· of electricity. the gross value of the 

reothermal resource used to produce the electricity is determined by one ot 

the following methods: 

(a) lf the transaction consists of an agreement between the developer of the 

field and the developer of the generating plant. the gross value of the 

geothermal resource is the negotiated share of the gross value of the electrical 

energy sold less the negotiated costs for the operation, maintenance and 

replacement of the generating plant which are paid by the developer of the 

field plus any negotiated costs for the operation. maintenance and replacement 

of the field which are paid by the developer of the generating plant. These 

costs include. but are not limited to: 

(1) A negotiated sharing by percentage of the operating and maintenance 

costs of the field and the generating plant. 

(2) A negotiated agreement that the developer of the field will pay for 

necessary improvement to the generating plant. 

(b) If there is not a transaction establishing the value of the geothermal 

resource, the gross value of the geothermal resource is determined by 

deducting a transportation allowance and a generating allowance. For the 

purposes of this paragraph: 

(1) The transponation allowance is allowed if the developer of the field 

must install or pay, in part or in total, for a transmission line to deliver 

electricity to the utility, and includes: 

(I) The annual total cost of operating and maintaining the transmission 

line including direct wages, benefits, supplies. materials and charges for 

overhead; 

(H) Except as otherwise provided by NAC 362.100 to 362.160. inclusive. 

the depreciation of the capital investment in the transmission line using the 

straight-line method; and 

(Ill) An allowance for return on the investment in the transmission line. 

calculated by multiplying the. undeprcciated investment in the transmission line 

by the overall rate of return on capital which is authorized by the public 

service commission of Nevada at the time of investment. 

If a developer of a generating plant is involved in the transmission or sale of 

electricity, wheeling charges and losses of energy along the transmission line arc legitimate deductions from the gross sales of electrical energy. 

(2) The generating allowance is the cost of converting the geothermal 

resource into electricity and includes but is not limited to: 

(I) The annual total cost of operating and maintaining the generating 

plant including wages. benefits. repairs. supplies, materials and charges for 

overhead; 

(II) Except as otherwise provided by NAC 362.100 to 362.160, inclusive. 

the depreciation of the capital investment in the generating plant using the 

straight-line method; and 

.362-2 
367 

(Ill) An allowance for return on the investment in the generating plant. 

calculated by multiplying the undepreciated investment in the generating plant 

by the overall rate of return on capital which is authorized by the public 

service commission of Nevada at the time· of investment. 

To determine the generating allowance. the investment in the generating plant 

must generally include all facilities from production at the wellhead to the 

disposal of the spent brine. 

(Added to NAC by Tax Comm·n. eff. l0-9-87: A 9-13-91) 

362.020 Separate report of ro:,aldes. All royalties received by a lessor must 

be reported separately from other receipts. 

[Tax Comm'n. Mine Proceeds Reg. No. 21, eff. 6-28-65; A and renumbered 

as Reg. No. 6, 1-22-79) 

362.030 Deductions: Capitalized costs. 

1. All information in the statement which is required by NRS 362.110 to be 

filed must be submitted on forms supplied by the department or in a manner 

which is acceptable to the department. 

2. The following property must be reported: 

(a) Leasehold improvements and buildings; 

(b) Fixed machinery and equipment; 

(c) Mobile machinery and equipment: and 

(d) Automobiles and light service vehicles such as pickups and panel trucks. 

3. Each cost submitted for depreciation must be the complete cost to the 

taxpayer, including all delivery and installation charges. 

4. Each asset must be listed on a table which sets forth: 

(a) A clear identification of the asset; 

(b) The cost of its construction or acquisition and the date: 

(c) The depreciation class, such as buildings, fixed equipment, mobile 

machinery and equipment or automobile_ and light service vehicles: 

(d) The total amount of depreciation granted; and 

(e) The amount claimed for the present tax period. An integrated processing 

assembly which consists of components of individual manufacture. and which 

is installed as a unit, may be reported as a unit. The report must describe the 

function of the unit and list its principal. components in detail. 

[Tax Comm'n, Mfoe Proceeds Reg. No. 3 § l, eff. 8-6-801 

362.040 Deductions: Depreciation of capitalized costs. 

1. Except as otherwise provided by NAC 362.100 to 362.160. inclusive. 

leasehold improvements and buildings must be depreciated over a 20-year 

period using the straight-line method. 

2. E:ccept as otherwise provided by NAC 362.100 to 362.160. inclusive. 

fixed machinery and equipment must be depreciated over a 20-year period 

using the straight-line method. 

3. Mobile machinery and equipment must be depreciated over a l0•year 

period using the straight-line method. 

4. Automobiles and light service vehicles must be depreciated over a S-year 

period using the straight-line method. 

S. Except as otherwise provided by NAC 362.100 to 362.160. inclusive, an integrated processing assembly must be depreciated over a 20-year period using 

362-J 
368 

the straight-line method. Subsequent additions to the unit must also be 

reported and be depreciated over a 20-ycar period using the straight-line 

method. 

6. Depreciation of assets on hand as of January I. 1980. must be calculated 

at the rate of 2.1 percent per ye3r for the years ending before January 1.1975. 

plus the depreciation allowance granted by the department for the period 

between January 1. 1975. and January I. I 980. The total depreciation thus 

calculaced must be deducted from the acquisition cost and is the basis for 

continuing depreciation according to the classification of the asset. 

7. If any property is disposed of before the end of the depreciation period. 

the remaining amount of allowable depreciation, if the property had remained 

in use, may be reported in total as an additional expense of depreciation for 

the reporting period. The amount of depreciation must be reduced by the 

amount of any consideration received for the property from sale, insurance 

recovery, trade-in. or any other reimbursement, but not below zero. 

8. A mining operator may petition the Nevada tax commission for 

reconsideration of the allowable depreciation of property. The commission 

may adjust the allowable depreciation if the petitioner presents satisfactory 

evidence that the expected life of the property is longer than that which is 

provided for in this section. If the commission finds that the petitioner has 

presented satisfactory evidence that the expected life of the property is shorter 

than that which is provided for in this section. the petitioner must comply with 

the provisions of NAC 362.100 to 362.160. inclusive, to apply for permission 10 

depreciate the property in the accelerated manner prescribed by NAC 362.140. 

(Tax Comm'n, Mine Proceeds Reg. No. 3 § 2, cff. 8-6-80)-(NAC A 9-13-91) 

362.0SO Deductions: Operating costs. 

l. In computing the costs enumerated in subsection 3 of NRS 362.120, the 

following specific items arc deductible except as limited by subsection 5 of 

NRS 362.120: 

(a) The cost of renting equipment if the amount paid as rental is 

commercially reasonable in the circumstances: 

(b) The cost of contracting for all or part of the mine's operations, if the 

contract price is commercially reasonable in the circumstances: 

(c) The cost of services which a Nevada mine receives under contract from 

its corporate office or the office of a related corporation, if: 

(1) The cost is commercially reasonable in the circumstances: and 

(2) The cost is separately stated in a manner consistent with good 

accounting practices; and 

(d) The reasonable cost of management provided to a joint venture by a 

member. if the £ees relate directly to operation of the mine. 

2. In computing the costs enumerated in subsection 3 of NRS 362.120, the 

following specific items are not deductible: 

(a) Cost or expenses which are capitalized; 

(b) Gifts, grants and donations: 

(c) Costs of public relations and influencing or seeking to influence 

governmental activities; 

(d) Costs of exploration :ind development related to ore bodies outside the 

geographic area which can economically provide a source of raw materials to 

the plant located at the mine: and 

361-4 
369 

(e) Federal income taxes. all propeny taxes and the tax on net proceeds of 

mines. 

3. (f a cost is panially deductible and panially nondeductible. the 

deductible ponion must be allowed. In determining the portion of such costs 

which is allowable as a deduction. a reasonable alloc:1tion must be made based 

upon available information. 

[Tax Comm·n. Mine Proceeds Reg. Nos. 1-7. 9-14. 19. :?O & 25. eff. 6-28-65: 

A and renumbered as Reg. No. 2. 1-22-79)--(NAC A 5-3-84) 

362.060 Deductions: ElfCtric power. 

1. The installation of power and light lines is a capital charge, while the 

upkeep and purchase costs of electric power is an operating cost. 

2. When electric power is generated and distributed to various departments. 

the upkeep of the power plant must be written off, and the distribution of the 

power is an operating cost. New engines. boilers and similar equipment are chargeable to a capital account. 

(Tax Comm'n, Mine Proceeds Reg. No. 8, eff. 6-8-65; A and renumbered as Reg. No. 4, 1-22-79) 

362.070 Deductions: Loading and transportation costs. The actual cost of 

transporting the product of the mine to the place of reduction. refining and 

sale. -is affected directly by both demurrage charged and dispatch earned 

credits. These charges and credits become a part of the cost of loading and 

unloading ore. Additional assessments for demurrage penalties incurred for any 

cause increases the cost of loading and transportation: dispatch earned credit 

paid for efficiency in loading or unloading vessels or other transport equipment 

directly reduces the cost of transportation. The actual cost of loading is the 

gross cost less any dispatch earned credits plus any demurrage. 

(Tax Comm·n, Mine Proceeds Reg. No. 26. eff. 4-24-69; renumbered as Reg. 

No. 15, 11-9-78: A and renumbered as Rc;g. No. 5, 1-22-79) 

Accelerated Depreciation of Capitalized Costs 

362.100 ElipbilltJ of mining operator for accelerated depreciation. 

1. A mining operator may petition the Nevada tax commission for 

permission to depreciate leasehold improvements, buildings, fi.,:ed machinery 

and fixed equipment in the accelerated manner prescribed in NAC 362.140 if 

the mining operator has: 

(a) Compiied with all applicable provisions of chapter 5 I 9A of NRS and the 

regulations adopted pursuant thereto; 

(b) Agreed in writing to extend the time allowed for the department to file a certific:1te of delinquency pursuant to NRS 360.420 to the date on which the 

department completes a final audit: and 

(c) Given public notice that the mining operation will close within 36 

months after the date on which the petition is filed with the commission. 

2. The public notice must set forth one or more reasons for the closure and 

the date on which the closure is expected. The notice must be delivered 

personally or sent by certified mail to the county commissioners of the county 

362-5 
370 

in which the mining operation is located and to the budget division of the 

depanment of administration and: 

(a) lf the mining company is publicly. held, appear in the annual repor_ts 

which the company is required to pro~de to the Securities and Exchange 

Commission and which it provides to its stockholders: or 

(b) ff the mining company is not publicly held. be sent to all creditors whose 

money financed the assets for which the company is seeking permission to use the accelerated depreciation method. 

(Added to NAC by Tax Comm'n, cff. 9-13-91) 

362.110 Filing of petition and accompanyin1 documents. A pcuuon to 

depreciate leasehold improvements, buildings, fixed machinery and fixed 

equipment in the accelerated manner prescribed in NAC 362.140 must: 

1. Be filed with and approved by the Nevada tax commission before the 

date on which the mining operator is required to file the annual statement 

required by NRS 362.110. 

2. Be accompanied by a copy of each public notice which was sent 

pursuant to NAC 362.100. 

3. Be accompanied by a copy of the plan for reclamation filed with the 

division of environmental protection of the state department of conservation 

and natural resources. 

4. If the mining operator filed a plan of operation with the division of 

environmental protection of the state department of conservation and natural 

resources, be accompanied by the plan. 

5. Be accompanied by: 

(a) A notarized statement which is signed by an officer of the company: or 

(b) A copy of the plan for productive use of the land after the mining has 

stopped, 

setting forth the proposed disposition of the leasehold improvements, buildings, 

fixed machinery and fixed equipment. 

(Added to NAC by Tax Comm'n, eff. 9-13-91) 

362.120 Temporary closure not acceptable justification for allowance of 

petition. The Nevada tax commission will not accept closure of a mining 

operation because of a temporary change in economic conditions or any other 

closure of a mining operation which the commission determines to be 

temporary as the justification for allowing a petition to depreciate leasehold 

improvements, buildings, fixed machinery and fixed equipment in the 

accelerated manner prescribed in NAC 362.140. 

(Added to NAC by Tax Comm'n, eff. 9-13-91) 

362.130 Permlllion to depreciate assets granted to specific company only. 

Permission to depreciate assets in the accelerated manner prescribed in NAC 

362.140 must be granted to a specific mining company and does not follow any 

transfer of the assets. For the purposes of this section, a subsidiary or affiliate 

of a mining company is a separate company. 

(Added to NAC by Tax Comm'n, eff. 9-13-91) 

362-6 
371 

J62.140 Manner of depreciation. 

1. lf the Nevada tu commission grants a petition, the leasehold 

improvements, buildings. fixed machinery and fixed equipment must be 

depreciated at the following rates: · 

~ Percentage 1 ............................................................................................... 10 

2 .............................................................................................. 20 

3 ............................................................................................... 30 

4 ............................................................................................... 40 

2. The amount of the remaining depreciation allowed for the asset. less any 

salvage value not previously subtracted, must be multiplied annually by the 

allowed percentage beginning on the date on which the first annual statement 

required by NRS 362.110 is filed after the date on which the petition is 

granted. The percentage which must be used for the first year of accelerated 

depreciation is 10 percent whether or not the remaining useful life of the asset 

is 36 months. If the mining operator acquires leasehold improvements. 

buildings. fixed machinery or fixed equipment after the petition is granted, 

such assets must be depreciated in the same manner as the existing assets using 

10 percent for the first year of depreciation.· 

3. -The salvage value of an asset must be calculated on the basis of the 

projected value of the asset at the time of the anticipated disposition. If excess depreciation is taken because a mining operator underestimated the salvage 

value of an asset, penalties and interest pursuant to NRS 360.417 must be 

applied to any underpayment of tu: resulting therefrom. 

4. The mining operator shall credit the decrease in tax liability resulting 

from the accelerated depreciation against the estimates or final taxes due 

pursuant to NRS 362.115. 

(Added to NAC by Tax Comm'n, eff .. 9-13-91) 

J62.150 Annual audits by departments; requirement of surety. 

l. The depanment may conduct annual audits of any mining operation that 

is allowed to depreciate its assets in the accelerated manner prescribed in NAC 

362.140. 

2. If the depanment determines that it is possible that the mining operator 

will continue to process, sell or stockpile the m:ned product for longer than 

the agreed time, the department shall require the. mining operator to file a surety with the department. The surety must be: 

(a) Executed by the mining operator as principal and by a corporation 

qualified under the laws of this state as surety; 

(b) Payable to the State of Nevada: 

(c) A bond, letter of credit or any other form of security authorized by NRS 

100.065: and 

(d) Conditioned upon the punctual payment of all taxes on the net proceeds 

of mines, including all penalties and interest. 

362-7 
372 

lUHlNC P•OPIRTY AND NIT P1lOCEIPS or HIN!$ QUESTIONHAIRI 

'"\C, 1• requ••t•d that you aaever all queetion• lhted belov in order for ua to deter• lne 

hether or not you ar• liable for fllina the net proceed, of alne1 reports and/or the 

affidavit for reportina • intn1 and 11lllln1 propeny ln N•••da. 

1. Nine operator. (Na• e and addreaa) ______________________ _ 

(A) Data acquired : ______ _ (b) Prevloua aine owner : 

2. Mine owner . (Na•• and addreu) _______________________ _ 

3. N••• of • lne : _________________ Count71 

Section: _______ _ Township: _______ _ Ran1e: ________ _ 

4. (A) Ru• ber of t• prove• entl at the 1ite : 

(I) latlaated coat of equipment owned and leased: Fixed equlp•ent : $ _______ _ 

Ho bile equlp• ent : Other : _______ _ 

S. (A) Products that are or vlll be produced : __________________ _ 

(I) Nu• bcl' o f e• ployees : 

6. Present ttatua of operation• (please uu !!l.!! of • tart or 1uspenslon.) 

Producln1 : ____________ _ Exploration: 

Developln1: Idle t 

7. If deTeloptn1 or expl0rln1, when do you eapect to 1tart production: 

8. Were tbere any ••h• of the mine product by the above oper,torl 

When I 

9. Are you • 1ktn1 or recelvin1 royalty or other_ type pay• ent,I ( · Yea 

If r••• atv• rt••• and addre•• · (Us• separate schedule tf nece11ary.) 

10 . Location of records for net proceed• of • lne, tax 1udlt purpo•••· 

11. Sub•itted by ~ 

Na • c and Title 

s11nature Date 

Addreu tr dlfhrent fro• well operator ·c1.) 

MOU : 

MMC 18 

) Ko 

Telephone 

04/24/87 
Decmber27, 

--- 1991 

l~l 

INN£1 

l~l 

tcmt, ISTM'El IZIPI 

Ra: ICXXJ!mel 

IMIN!2WIEI 

Dear Ta,cpayu: 

373 

-

STATE • OF NEVADA 

DEPARTMENT OF TAXATION 

Capllol~ 

ca,- CltJ, - N71CMXI03 

T.....,_ (702) N7-

- Toi F1M IOCMll24IOO Fu (71)2) A7-1 

009.RRR 

2 Clu:GDN.S 

2 Sf:1'S Of! LA8l![S 

A. Mail..iniJ Label · l\ddmss only 

B. llddxess Label 

with Re line 

JOHN P. COMEAUX ,~o.-w 

Enclosed is the fcma for reporting gross producticn and allowable dl!duc:tials to detemline 

-the net~ of your ca,pny for the calendar year ended DecElliler 31, 1991. llnless an JXtension of time, in writing, is reqmsted and gran'<ed, please 0C1a1>lete the form in detail 

and mturn it to this office on or before February 15, 1992. 

Pl..eue note that on the tam, the line itan "other ooet:s• will not be 00Mide%ed a deduction 

t:ta,, gross unless it is i1-ized in detail. rurther, in filling out the line itam; in each 

category 1 through s, attach a detailed accainting for each e,q,ense in each category. The 

Depart:nelt ,-!a a detailed acx:omting of all expenses to be able to neke a det:ennination of 

what eicpen-. ff¥'/ be allaable or di.sal.~le. 

If the enclosed fom is not cxnpleted in detail as~ or in the format thereoo, the 

Departmmt will !!!:!!!!! ,!! to ~ ~ ~ ~ clarificaticn. 

If you will be n,porting any new royalty recipients that the Deparbnent may not be aware of, 

please inf= than of their responsibility under NRS 362. 

Should you have any questions concerning the forlll please contact Jaclc Raible at 702-687-6609 or David Adams at 702-687-6608. · 

Sincerely, 

Dino Oi.Cianno, 5upervisor 

Centrally Aa&essed Properties 

·-.x::JR/law 

Enc:loaure 
374 

~E~ur-~ :·:T OF TAY.ATTON - CAPITOL COMPLEX - CARSON CITY, NF.VADA 89-:'1 (l•C,00) 

NET PROCUDS OF HIN'F.RALS 

STATOW.~T OF CROSS l'JtODUCTION'. l.Avnrt. DEDUctIONS Ah1) CUJ11£D NET PROCEEDS 

Calendar Ye,,r Ended : r>ece•ber 31, 11191 

Hust be f1hd by February 15, 1992 

?le1tH correct above infora.tion where nccH• ary 

Crou value of • lned product: 

_______ ounces, pounds or tons sold 

_______ ounces, pounds or ton, sold 

_______ ounces, pounds or tona aold 

_______ ounc:u, pound• or ton1 sold 

Allov,ablc dectuctions 

• · Ex.~nsu frca l - 6 belov 

b. Allowable depnci,1tion (Dttall on reverH) 

torAL ClOSS YAU:E 

:--------- TOTAL ALLCMAILE DEDUCTIONS 

HF.T PROCEEDS OR !toss) 

_______ ounces, pound or tons produced but not sold s ________ _ 

t henby ccrtlfy that this U a full and true atatcNnt of the aaount of value of ore utractcd by Hld coapany for 

the period above indicated; that the dcdl)e.tions fr011 Hld arou yield · are tM actual coats incurred durlna that 

perto4, and none other. 

ri.ace : =============--~~ ==================:; Oetall o( upenses (rleduct.1.ons ) Ht forth ln NltS 161 , 120. Attach sctwedule U necessary , 

son: All t.XPE!iStS CLAJM!.:0 !1\JST rw. 10£HT[FIAILE lfrf COKPAHY BOOKS Oil RECORDS . Nits )62 . 120 REFERS TO DEDUCTIONS 

IS 'ttll'1S OF •

1

ACIUAL COSTS ." Ir YOU ARE HOT REPORTIHC AC'nJAL COSTS, SPECIFY F'ORt1UU OR HEl'HOD IN USE • 

.:£Qm fil!:: ~ !! ~ ~ !m!!!!B• 

r.OSI OF c-:nucrt ~lC ORE OR DEPOStT: 

(a) dlnct l.abor • ..• 

(b) supplies, •ateriah. 

(c) fuel , power, 111ht • 

(d) rep.air and maintenance • 

• (e) other costs Clte• lu). 

TOTA!. Er.TkActrnc. • • • • • 

2. COST or ;1tANSPOR!I~:C CRUDF. Ok.£ TO HILL: 

fa) cHrect hbor .• • . 

( b ) supplies , ••1t er!o1 ls . 

re) fuel , powr , l l&ht , 

~ ( d ) othe :- costs lite11lze ). 

TlhA!. TR.ASS!'OP.!'i~C ••••• 

,:a ) : relahc .:nrt nprus. 

lb) cor=ls~lons. 

COST ()f ?.f:>t C!'JO'! J.~~ ?H!XlSC: 

.- . , cHr•ct labor .. .• 

(b) 1uppl1H, iutulah . 

Cc) !uel, l)O"Cr, 11&ht • 

1 ..S) npa,:- and !'\.l.lnt,.nanc• • 

H •) o:har co.ts l!te~lze ) 

:rr:A!. RECfCTJO~; A,:,-.1) ,r,::itsc. 

'~C :u 

,. 

.. 

COST or INSUKAN'C:E: 

!a) rtre lnsurance only 

(b) Nevada lnduttrlal. 

(cl Nevada \olnap loy.ent. 

!d) sod al HC\lr1ty . s (e) penaion, retlrt1Nnt . . s (f) 1roup health and 

accident ln1P.1r-,nce • 

• Ca } other ( 1 te,d ze L 

TOTAL 1 NSURA!'fCE • 

P'1«101!CTTON ROYALTIES TNCl..'RR£D : 

Na.e •nd Address 

TOTAL R0\0.tln . ...• 

TOTAL LtHt~ 1 TI~OUCH 6 

Aaount 
375 

7. DEPREr.ano~ 

A. LEASE!l>LD IlffllOV'EMENTS 01 IUlLDINCS • "'J \'EAi Lin; 

I. FIXED HACHlKERY AND IQUIPHEfff - 20 TEAR LIFE; 

C. ~Ill N.CHIIIEIY All> EQUIPMENT • 10 YEAR LIF!; 

D, AU'I'OHOIILES A."ID LICH? SERVICE VEHICLES - 5 YEAR LIFE. 

1991 AIIDmONs 

~I I I ·•· IDE?lrlFlCATIOII f OUGIIIAL COST IIIS?ALLED 

'·-----------------'--------------- ~----------------'--------------- ---'----------------·'--------------- ---'------------------'---------------- ---'-------------------------------- ---'---------------------------------- ---'------------------·---------------- ---'------------------'---------------- ---'---------------------------------- ---'------------------ ___ , _________________ , 

---------------- _______________ _ ---'-----------------'---------------- ---'-----------------·--------------- ---'-----------------'--------------- 1991 DELETIONS 

I (I) I (C) 

I I 

I I 

I TEAil I DEPIIE• 

I OltIC· I ADJUSTED I cunON 

I I IIIALLY I ACQUISmON I ALLOlll!D 

.£hill..! IDENTIFICATION ,~, COST I FROf'I 1980 

--' __ I 

--' --' __ I __ I 

--' __ I 

--' __ I 

--' --' --' --' --' --' __ I 

--' __ I 

--' __ I 

--' 

-~ "A" 

· 1,. "S" 

, ___ ts , ___ ts , ___ ($ 

l ___ fs 

I ___ IS 

I ___ IS , ___ rs 

, ___ ts 

'---' '---' '---' 

, '---' ___ , '---' '---' '---' I I 

'---' I I 

I I 

I I 

'---' TOTAL AnJUSTED 

ACQUJST:'tON COST 

FRON PREVIOUS 

P.£T PROC£ED~ OF 

!'tUIES k£POJtT 

his S 

plus S 

plus S 

plus S 

ADDinONs 

Fll0H COLUMN 

(A) ABOVE 

lttl Deprect.•c1on 

• tnu• s • lnuo $ 

• tnu• $ 

• I.nus 

• lnu• 

• tnua 

• tnus 

• tnus 

• tnua I s •inua I s • lnus I s • tnu• I s • lnus I s • tnus I s • lnus I • lnus I • lnus I • tnus I • tnus I • tnUs I • lnus I • tnus I 

D~IONS 

FR0f1 COLIHC 

fl) ABOVE 

• lnu1 S 

• lnus S 

• lnu1 S 

• lnus S 

• s 

• $ 

• $ 

• s 

P!us :-e:2i1intn1 va&u• of deleted ltna (toe.al froa Col..a1 tE> •aaove) 

~'!'A!. !lf91 al towabl• Mprec:latt.Oft (to Line I on reverse) 

----------------

I (D) I (E) 

I COIi• I 

I SIDl!IIATION I 

I FOIi SALE I lEHAININC 

I TIADE•IN I VALUE TO 

I INSUit· I BE Cl.AIMED 

I AMC!, m: I I IN 1991 

I.,.,_ $ I • I I • tnua $ I • I 

I • tau. $ I • I s I .,.,,.. I • I s ,.1 .... I • I s I • tnua I • I s I • tnua I • I s ,.1 .... I • I s I • lnus I • I s 

I •'- I • I s I • tna I • I s I • lnus I • I s I • tnu• I • I s I • lnu• I • I s I • lnua $ I • I s I • lnua I • I s I • lnus I • I s I • lnus I • I s I • trms I • I s I • lnu• I • I s I • lffld I • I s I • t.... I • I s 

PEIICENT 

AOjUISITION D£PllE· ALLOIIAILE 

(X)ST cunoN DEPRECIATION 

JI .0'5 - $ 

x .O!: • S 

,r. .10 • S 

1t .10 • S 

12-06-9\ 
Decenber 27, 1991 

IDOR!XJFJ 

INIIMEI 

lllDDRESSI 

!CITY!, !STATE! IZIPI 

Re: ! CXXJNn' I 

IMI!EW!EI 

Dear Taxpayer: 

376 

STATE OF NEVADA 

DEPARTMENT OF TAXATION 

~Complex 

ear-, Ctty, - 111710-0003 

T-(702) 111..-

fn..State Toft Fl'ff IOO-tt2-0900 

Fu (702) 187-6181 

A:005.RRR 

2 ORIGINMS 

JOHN f'. COMEAUX f..alDWDnclo, 

-1'.nclosed is the form for reporting productial royal.ties received by yau. for the calendar 

,-r ended Decemer 31, 1991. Report only the paynents actually received, by lfflllth, in 1991 

and indicate fran whau the royal.ties are received. 

Unless an extension of time, in writing, is requested and granted, this form 1111St be filed 

prior to February 15, 1992. Should you. have any questions c:aicerning the form please 

cx,ntact Jaclc Raible at 702-687-6609, or David l\doms at 702-687-6608. 

Sincerely, 

Dino DiCianno, SUpervisor 

centrally ASsessed Prq,erties 

DDC:JR/law 

Enclosure 
Re: 

377 

llEPARINEN'l' 

~ 

OF 'D\XATICII 

CCMPLEX 

CMSC11 CITlr, ~ 89710-0003 

NET~ or MDaAUI, ~ RD:EIVED 

Cl\LDDll Yl!'JIR 1991 

PURSUMrr TO !RI 362.110: S'IMDll!ffl' IClST BE Fllm PRIOR TO PEIIRllilR! 15, 1992 

(A eaparat:e npcxt .,.-: be filed far each mine, oil well, or g,,othel:mal project) 

01-91 

02-91 

03-91 

04-91 

05-91 

06-91 

07-91 

08-91 

09-91 

10-91 

11-91 

12-91 

$ _____ _ 

$ _____ _ 

$'-------

$ _____ _ 

$ _____ _ 

$ ______ _ 

$ _____ _ 

$ ______ _ 

_s _____ _ 

$ ______ _ 

$ ______ _ 

$ _____ _ 

TC7l'l\L •••••••••••••••••••• • ••••••••••••••••••••••••••••••••• $ ______ _ 

I hereby certify to the best of my knowledqe and belief that the foregoing is a full and 

true statement of total z:oy<ies received for the calendar year 1991 for the above-named 

mine. 

>ate Signature 
9011 MIU.IO 

Dea!ntlar - 10, 1990 

IINCARE:>Fl 

INl\MEI 

IAOORESSI 

ICITYI, !STATE! IZIP! 

Dear Taxpayer: 

378 

~ 

V 

STATE OF NEVADA 

DEPARTMENT OF TAXATION 

Capitol Complex 

Caraon Cily, Nevada 19710-0003 

Tolephono (702) 1187-4892 

l~Slaa. Toi F,ff 80().992-0900 

Fax (702) 1187-5991 

A:0l0;RRR 

2 ORIGINALS 

This letter is sent to you to clarify any possible misunderstanding about reporting royalty 

payments received in connection with mining. 

ms 362 .010 states in part: 

l. "Hine" means an excavation in the earth fran "'1.i.ch ores, coal or other mineral 

substances are extracted, or a subterranean natural deposit of minerals located 

and identified as such by the staking of a claim or other n-ethod recognized by 

law. The t.enn includes a ..,n drilled to extract minerals. 

2. "Mineral" includes oil, gas and other hydrocarbons, but does not include sand, 

gravel or water, except hot water or steam in an operation extracting geothennal 

resources for profit. 

ms 362 .105 states in part: 

1. "Royalty" n-eans a portion of the proceeds fran extraction of a mineral "'1.i.ch is 

paid for the privilege of extracting the mineral. 

2. "Royalties" do not include: 

(al Rents or other ~nsatory payn-ents "'1.i.ch are fixed and certain in amount 

and payable periodically over duration of the lease regardless of the extent of extractions; or 

(bl Mininun royalties covering periods when no mineral is extracted if the 

payn-ent• are fixed and certain in ,urount and payable on a regular period basis. 

"'lRS 362 .110 also states in part: 

l. Every person extracting any mineral in this state or receiving any royalty: 
379 

. 010-ll..RRR 

.IW!EI 

Dec:alt,er 10, 1990 

Page 2 

(al Shall, an or before Fabruary 15 of each year, except u othezwise provided in 

pangn(lb (bl , file with the dapart,nent a statement allowing the gross yield 

and claiam net ~ frca each geographically separate operation where a 

aineral 1a extractac1 by that persan mring the calendar year imiedi.ately 

pncedinq the year in ..tw::h the stataalt ill filed. . 

(bl May haft ~ to 30 alitional days to file the statement, if beforehand he 

IBkes written application to the department and the department finds good 

cause for the extension. 

'nle reporting tom_,. designed to rafl.act royalty pa}'ffll!!nts received each ncnth during the 

calendar year preceding the report. ---

Shculd you have any quest.ians regarding this report, please contact the Depart,,ent' s Mining 

Secticn at 702-687-4840. 

Sincerely, 

Oino Di.Ciamo, SUpexviaar 

Centrally .P.ll1lellsai Pmperties 

ax:,i.., 
11011 MILLEA 

Decarber - 10, 1990 

IIIQREI)!'l 

INI\MEI 

!ADDRESS! 

380 

STATE OF NEVADA 

DEPARTMENT OF TAXATION 

CapilOtComplex 

C.rton Cjty, Nevada 89710-0003 

Telephone (702) 187-2 

In-State Toll FrN 800-N2-0900 

Fax (702) 187-6981 

A:004.RRR 

LABELS 

J0MN 

~~ 

P. COMEAI.JX 

!CITY!, I STATE I IZIPI 

Dear Taxpayer: 

The DepartJ,ent is charged with investigating and detennining the net proceeds of all 

operating mines and to assess than as provided in NPS 362.100 to 362.240, inclusive. 

NRS 362.110 specifies that: 

1. The annual stat:Sll!nt nust sh<:M the gross yield and claimed net proceeds fran each 

geographically separate operation where a mineral is e:<1:racted. 

2. The statanent must shaw the claimed deductions fran the gross yield in the detail 

set forth in NRS 362 • 120 • 

3. Be in the fonn prescribed by the Departnent. 

NRS 362 .120 specifies that the net proceeds are detei:rnined by subtracting fran the gross 

yield the following categories of deductions for costs incurred during the reporting period: 

category 1. 

category 2. 

category 3. 

category 4. 

category s. 

category 6. 

category 7. 

Cost of extracting the mineral - including cost of repairs and 

maintenance. 

Cost of transporting the mineral to mill - including cost of repairs and 

maintenance. 

Cost of marketing. 

Cost of reduction and refining - including cost of repairs and 

maintenance . 

Cost of insurance. 

Production royal ties . Allowable depreciation per regulation of the Nevada Tax Commission. 

In addition, other costs will not be considered unless itemized. 
_ , 

February 14, 1990 

Page 2 

381 

004-A.RRR 

Raf_,.,. is ...a. to reporting letter dated Dec:almr 21, 1990 in which it states that if the 

Net Proceeds of Minerals fCIDD _. not carpl.eted in detail aa required or in the format 

thereon, it """1d bit retum-1 to ycu. 'l'he l>epartllant has ~ ycur report and has found 

it to bit incmplete tm: the following reaaon(al: 

!'cm not filled out. Expenses cad>ined, not segregated. 

Baclcup data not indexed ll0r explained. 

Expenees not detailed. Equip,ent additions or deletions not identified. 

other costll not itanized. 

Not in the form prescribed by the Department. 

EYen thcQgh ycu may have reported total expenses against ycur gn,sa in the past in a fo:cm 

ccnp,tible to ycur general lmger accounting aystem, that method of reporting needs to be 

nm, detailed to enable thl! Depart,nent's mining appraisers to audit ycur return. 

Please CX111>lete the attached CCf1'I of ycur report aa required abcMI and sul:mi.t it to the 

Depllrtllent within two ~ of receipt. If the revised report fem, is not carpleted 

properly or not ret:urtm within the. spec:ifiad time period, ycur ~ will be subject to ~ penalty pzoviaicns of NPS 362.230. 

!IRS 362.230 apeclfiea that a 0C111pU1y lffiCI fail• to file with tha Department the statements 

pr:ovi.ded for in NPS 362.100 to !IRS 362.240, incluaive, during the time and in the manner 

providad for in NPS 362.100 to 362.240, incluaive, shall pay a penalty of not ncre than 10 

percent of the IIICUllt of tax due or $5 , 000, whichever is less. 

If ycu should have mry questicns ccncerning the aixMt, please call the Department' • Mining 

Sectia, at 702-687-4840. 

Sincerely, 

Dino DiCianno, SUpervisor 

Centrally Assessed Properties 

DDC:law 

Attachnent 
~ --•• 1992 

I I!CARl!DFI 

INNEI 

IAOORl!SSI 

IC1'1YI, IS'l'M'EI IZIPI 

Ae: 1aumr1 

IMIIENAHEI 

382 

~ 

V 

STATE Of' NEVADA 

DEPARTMENT OF TAXATION 

Canon CMy, - 8971-

T-(1'02) 11117- 111-s-TOI FtM I00-182-0IOO 

Fu(1'02)M7--1 

Taxing District - IDISTRICl'I 

Dear TaXpayer: 

A:003.RRR 

2 ORIGDII\LS 

JOHN '°· COMIAUX 

·--

The Deputm!nt of TaJratim Viahes to infom ycu of your report.inq responsibilities in z:egard 

.to 

~ 

estimated payments of the net proce,,da tax. All roy-.uty recipients an:l operator,, who are 

by MRS 362 .110 to file an -1 net pccceed& ,:eport are also requlll!d to file an 

eatiate for the c:un:ent ealend&r year. 'Die fftimate -t bt! filed with 1:11'! Depar12uent 011 

or before Jur>e 15 of each year. 'l'be taxes clue 011 the estimate -.t be paid to the 

Depar12uent 011 or befme July 15 of each year. 

At:tachm is a fOCD for reporting your estimated nl!'t proceeds or royalties for cal.A!ndar Year 

1992. Pl.MR n,tum this !am to the Depilrtllent prior to Jur>e 15, 1992. '1'he llep&rtnent 

will thPn calculate your estilllllted taxes due an:l send ycu a bill. 

If ya, fail to file the required st:ataDent with the Cll!partmOJ!t by Jw,e 15, 1992, thP 

Depar1ment will - .,,_ -tialate based upon &lJ. •va.i.lable inf<ll:Jllllt.i.on. Failure to file the 

est.imllte timely will nml.t in a penalty of 10 percfflt of the taiws clue or $5,000, 1'hicho,wr 

is less. Should ycu hdw any QUPSti.ons, p!NR contact the lleplrtment's Mining Section; either Jack Raible at 702-687-6609 or David Adams at 702-687-6608. 

SincPrely, 

Dino DiCanno, SUpttvisor 

Centrally Assessed Pr0pertia 

OOC:JR/1.aw 

Encloomre 
.,.......,. 

April -14, 1992 

IIlORB:lFI 

IIWEI 

IJIOORESSI 

ICI'lYI, ISTATEI IZIPI 

Re r ICXUITYI 

IMINDII\MEI 

383 

~ V 

STATE 0. NEVADA 

DEPARTMENT OF TAXATION 

C.,..Compox 

CarNn City. - 1171CMJ003 

T....,._ (702) 117""92 

i/l--Tol ,---G900 , .. (7112) 117-1 

Taxing District - !DISTRICT! 

Operator Report: 

bate 

1992 Estimated Gress Yield 

1992 Estimated No!t Proceeda 

Signatur<', Title 

018.RRR 

2 CIIIGINI\LS 

NRS 362. 115 Stateient of est.imat.Pd gross yield and net prcceeds for current calt'ndar 

y,ear1 payment of estimat.d box; credit against final certification or refwld1 quarterly 

~ of actual amounts. In addition· to the stat.ment required by a~on l of NRS 

362,110, each person who is requiRd to file that statenent: 

l. Shall, on or before June 15 of each year, file with the ~•t a statemPnt 

ab:Jwing the estimd.ted gross yu,ld and eatimatl!d net p:coceeds frail eac:h such oper-dtion for 

the entire current calendar year, and shall pay the tax upon the on pxoceed,o .., ntimated 

to the dl,partment on or before July 15 of that year. 
~ ---[4, 1992 

I IICARl!llPI 

IIWl!:I 

I.NDa!SSI 

ICITrl, IS'IMEI IZIPI 

Re: ICJ:Omrl 

IKDIDWIEI 

384 

• 

DEPARTMENT 

STAnOf'NEVA0,11 • OF TAXATION 

~~ 

car- Clly, - ar,_ T-(71121N7-4892 ..,__T .. __ _ 

Fu (102) 197-5911 

Taxing District - IDIS'l'RICTI 

it,yalty Report: 

1992 Eatiaated Rayal.ties 

Date 

015.RRR 

JOHN P. COMIAUX 

·--

NRS 362.115 Sta_,t of e.t.imab!d - yield and net~ for cura-.nt ca.le.mar :,,ear, payment of est.imatied tax; cr.dit against final certification or refund; quarterly 

report of actual -,unt:a. In addition to the statenent r,oquir,,d by subsection l of NRS 

362.110, e.:11 person ,n, is ffqUi.red to fit., that atatioment: 

l. Shall, on = before June 15 of e.:11 yw,ar, file with the dl!!partment • statenent 

ahawinq the f'lltimated grass yield and Htilwt.ted net pa,ceeda from NCI\ such operatiou for 

the entin! cuaent CiW!fdar YN1", and llhdll p.sy the tax upon the net pro::eeds so estimlted 

to the depilrtmt-nt on = ~ July 1S of that )"Nlr. 
IOIMII.UA 

February - 18, 1992 

ll!OREIJFI 

INN4EI 

I.NlDRESSI 

!CITY!, ISTM"EI IZIPI 

Re: lcnJNn' ! 

IMINENI\ME I 

385 

-

V 

STATE OF NEVADA 

DEPARTMENT OF TAXATION 

Canon City, -- 89710,0003 

T~ (702) 1117.._ 

In-Slate Tai F- I00-992-0900 

Fax (702) 117-5111 

Taxing District - IDISTRicr ! 

Dear Taxpayer: 

029.RRR 

2 ORIGIN!\IS 

JOHN f'. COMEAUX 

--

~osed is a fom for ~ your 1992 actual quarterly aniunts of produc:tiai, gn,as 

,ield and net prooeeda aa of March 31, June JO, Septeni,er JO and Decadoer 31. It you decide 

to file this n!p()rt, pleue return it to the Department no later than the last day of the 

month foll.owing the end of the calendar quarter. 'l1le Departxrent will review such reports to 

detemdne "'1ether there exi•ts an additional estimated net proceeds of minerals tax liabili- ty for Fiscal Tax Year 1992-93. 

'l1le p,rpoae of filing the quarterly report ia twofold. First, it affords each taxpayer an 

opportunity to amend their report of estimated gross yield and estimated net prccaeds to 

avoid a penalty. secaidly, it provides the .Department with productia, data a, a quarterly 

basis. It is the taxpayer's responsibility to provide the Department with the infmmatiai 

requested. 

Shoold you have any questions, please contact the Department• s Mining Section by calling either Jack Raible at 702-687-6609 or Dave Adams at 702-687-6608. 

Sincerely, 

Dino DiCianno, SUpervisor 

Centrally Assessed Properties 

DDC:law 
I AS OF I CATtOORY I HARCII 31 I Production I I (Ouncl!:a, pound•, I I tona etc.) I I 

I I 

I I c:rou E!rnce1•1l1 I I 

I I 

I I ""t (!:rOCHda I I 

1NmRHATlnNAI, !:!Qll! 

CAU:NDAR YF.AR 1 'J92 

NF.T PROCF.F.DS OF MINERALS 

QUARTERI.Y RF.PORT FORM 

ACTW,1~ 11_ll~R_TF.Rl.Y AMOUtn'S 

AS OF I AS OF I AS OF 

.mm:: JO I SF.PTF.HRF.R JO I DF.'CF.MRER 31 

I I 

I I 

I I 

I I 

I I 

I I 

I I 

I I 

I I 

1, Operators are requtrud to flll tn all cate1orlaa lltted. 

2, Royalty raclplent1 need only Hit ln the cate1ory • arked "NET PROCEEDS." 

I 

I 

I 

I 

I 

I 

I 

I 

I 

I 

I 

J, flut quarterly report due Aprll J0 1 1992; 1econd quarterly report due July 31, 1992; 

quarterly r~port due January 31, 199], 

4. Return thla forlD tn the time rr.:ime 1tated above •~ the Depart• ent can 1enerate a tax bill 

S. n1e addltlonal taxea are due JO day1 after the quarterly report ta flied, 

6. tr your tax llnblllty fnr the 199,t. esth1ate ls equal to or greate_r than your total 1991 ta

avoided, 

Hall to the Coltowlna address: 

Nevada Dopart• ent of Taxation 

Centrally Aueaud Properties 

Capitol Coap1ex 

Canon City, NV 89710-000J 

Slgn.tture 

Subscribed and sworn to b

Notary Publlc or-~ Wttn
387 

NET PROCEEDS OF MINERALS TAXES 

QUARTERLY REPORT FORMS 

NRS 362.115 states in part: 

Each person who ls required to file an actual annual net proceeds or. minerals report with the department: 

1, Shall, on or before June 15 or each year, file with the 

department a statement showing the estimated gross yield and estimated net proceeds from each such operation for the entire current calendar 

year, and shall pay the tax upon the net proceeds so estimated to the 

department on or before July 15 of that year. 

2. May file with the department a quarterly report stating an estimate tor the year and the actual quarterly amounts or produ~tion, 

gross yield and net proceeds as of March 31, June 30, September 30 and 

December 31, to establish whether liability for a penalty exists. Ir 

the person chooses to submit such reports, the reports must be submitted on a form prescribed by the department no later than the last day of 

the month following the end of the calendar quarter. 

NRS 362.130 states in part: 

3. Ir the amount paid pursuant to NRS 362. 115 is less than 90 

percent of the actual net proceeds or minerals tax ct·rtified, the amount due must include a penalty or 10 percent or the underpayment unless: 

(a) The amount paid pursuant to NRS 362. 115 is equal to or greater 

than the total tax liability or the operation ror the immediately 

preceding calendar year; or (b) The person files quarterly reports persuant to subsection 2 or NRS 362.115 in a timely manner tor that year and pays the additional amount due within 30 days after the quarterly report that indicates 

the additional estimated tax liability is riled with the department. . The additional estimated tax liability must be calculated by determining 

the difference between the revised estimates of net proceeds based on the recent production figures as indicated by the quarterly reports and the original estimate supplied on June 15 of that year. 

4. The taxes and any penalty are due on June 3<) of that. year. 
388 

1991 NET PROCEEDS OF MINERALS 

ADJUSTED ANNUAL TAXES DUE OR CREDIT 

NRS 362.130 states in part: 

Preparation and mailin• or certificate or amount ot net proceeds, tax 

due and date tax due. 

1. When the·departaent determines rrom the annual statement the net proceed• or any • ineral• extracted, it shall prepare its certificate or the amount or the net proceeds and the tax due and shall send a copy to the owner or the mine, operator or the • ine, or recipient or the royalty, as the case may be. 

2. The certiricete • ust be prepared and mailed not later than June 10 

immediately following the month or February during which the statement was filed. 

3. The taxes are due on June 30 or that year. 

NRS 362.135 states: 

Appeal or certification to state board of equalization and payment of tax pending d~termination or appeal. 

1. Any person dissatisfied by any certification of the department may appeal from that determination to the state board or equalization. The appeal must be tiled within 30 days after the certification is sent to the taxpayer. 

2. Pending determination of the appeal, the person certified as owing 

the tax shall pay it on or before the date due, and the tax is considered to be paid under protest. 

NRS 362.150 states in part: 

Liens for taxes on proceeds or minerals. 

1. Every tax levied under the authority or provisions or NRS 362.130, on the proceeds or minerals extracted is hereby made a lien on the mines from 

which minerals are extracted for sale or reduction, and also on all machinery 

fixtures, equipment and stockpiles or the taxpayer located at the mine site or elsewhere in the state. The lien attaches on the 1st day of January or each 

year, ror the calendar year commencing on that day and may not be removed or satisfied until the taxes are paid, or the title to those mines has vested 

absolutely under a sale tor those taxes. 

NRS 362.160 states in part: 

When tax payment becomes delinquent and collection or delinquencies. 1. If the amount or any tax payment required by NRS 362.130 is not paid within 30 days after it is due. it ia delinquent and must be collected as other 

delinquent taxes are collected by law, together with the penalties provided 

for the collection or delinquent taxes. 
389 

1992 NET PROCEEDS 

ESTIMATED ANNUAL TAXES 

NRS 362.115 states in part: 

OF MINERALS 

DUE OR CREDIT 

Each person who is required to tile an actual annual net proceeds or minerals report with the department: 

1. Shall, on or before June 15 ot'each year, file with the department a 

statement showing the estimated gross yield and estimated net proceeds from 

each such operation tor the en.ire current calendar year, and shall pay the tax upon the net proceeds so estimated to the department on or before July 15 or that year. It an estimate form is tiled, the amount due under the final 

certification pursuant to NRS 362.130 is the difference between the total tax established upon the certification and the sum or the estimated payments made or credited, it any tor that calendar year. It the sum of the estimated 

payments exceeds the total tax, the taxpayer is entitled to credit the excess against the ensuing estimates or final taxes due until it is exhausted, or, it the taxpayer tiles a statement with the department which indicates that he 

will have no tax liability for the next calendar year, upon verification by 

the department, the taxpayer is entitled to receive a refund. 

NRS 362.135 states: 

Appeal of certification to state board or equalization and payment or tax pending determination or appeal. 

1. Any person dissatisfied by any certification of the department may 

appeal from that determination to the state board or equalization. The appeal must be tiled within 30 days after the certification is sent to the taxpayer. 

2. Pending determination or the appeal, the person certified as owing 

the tax shall pay it on or before the date due, and the tax is considered to be paid under protest. 

NRS 362.150 states in part: 

Liens for taxes on proceeds or minerals. 

1. Every tax levied under the authority or provisions of NRS 362. 115, on the proceeds of minerals extracted is hereby made a lien on the mines from 

which minerals are extracted ror sale or reduction, and also on all machinery 

fixtures, equipment and stockpiles or the taxpayer located at the mine site or elsewhere in the state. The lien attaches on the 1st day or January or each 

year, for the calendar year commencing on that da>· and may not be removed or satisfied until the taxes are paid, or the title to those mines has vested 

absolutely under a sale for those taxes. 

NRS 362.160 states in part: 

When tax payment becomes delinquent and collection of delinquencieft. 

1. If the amount or any tax payment required by NRS 362. 115 is not paid 

within 30'days after it is due, it 18 delinquf!nt and must be collP-cted as other 

delinquent taxes are collected by law, together wilh the penalties provided 

for the collection of delinquent taxes. 
390 

STATE OF NEVADA 

DEPARTMENT OF TAXATION 

1992-93 

NET PROCEEDS OF MINERALS 

BASED ON 1992 CALENDAR YEAR ESTIMATE 

PREPARED BY THE 

DIVISION OF ASSESSMENT STANDARDS 

FOR CERTIFICATION BY THE DEPARTMENT OF TAXATION 

July I, 1992 
391 

NEVADA TAX COMMISSION 

Honorable Bob Miller 

Governor, E)( Officio Member 

Keith Ashworth 

Norman D. Glaser 

Chairman 

Members 

Barbara Smith Campbel I 

Candace E. Fox 

John E. Marvel 

W.R. McGrew 

Henry 8. Sprenger, Sr. 

Harley E. Harmon 

STATE BOARD OF EQUALIZATION 

Richard Davis 

Lawrence W. Bennett 

Chairman 

Members 

Rose M. K. Dominguez 

Rodney Larva 

Reese Perkins 

DEPARTMENT OF TAXATION 

John P. Comeaux 

E)(ecutive Director 

DIVISION OF ASSESSMENT STANDARDS 

Lila Clark 

Supervisor 

David P. Pursell 

Chief 

Dino DiCianno 

Supervisor 

Locally Assessed Properties Centrally Assessed Properties 

Joseph S. Mc earthy 

Coordinator 
392 

FOREWORD 

The Division of Asses.,..nt Standards developed this 

bulletin to outline the assessment and taxation statistics 

resulting from the 1992 estimated gross and net proceeds of 

minerals reports. Nevada Revised Statute 362.115 requires 

every mining taxpayer to file this report with tne 

Depar~nt of Taxation by June 15, 1992. The taxes 

associated wttn this assessment is due and payable by July 

15, 1992. The statistics in this bulletin include both the 

asses-nt amounts and the actual tax revenues generated by 

these reports. 

Page 1. Estimated net proceeds of minerals totals, by 

county, for botn operators and royalty 

recipients. 

1987 tnru 1992 comparison, by county, of total 

estimated net proceeds of minerals. 

Page 3. Estimated gross proceeds of minerals totals, by 

county. 

1987 and 1992 comparison, by county, of the 

total estimated gross proceeds of minerals. 

Page 6. Six-year summary of _the actual taxes generated 

by tne estimated net proceeds of minerals for 

botn tne counties ond tne state ond their 

averaga annual toK rote. 

Page 8. 

thru 

Page 14. 

List of every mining operator, by county, 

showing: 

Tne 1992 estimated gross and net proceeds, tne 

1992 estimated toxes due to tne county, tne 

1992 estimoted toxes due to tne state, and 

the total estimated taxes due. 

Page 15. List of every mining royolty recipient, by 

tnru county snowing: 

Page 23. 

The 1992 estimated royalties. the 1992 

estimated taxes due to the county, the 1992 

estimated taxes due to the state and, the total 

estimated taxes due. 

Page 24. Statewide total of the preceding categories by 

operators and royalty recipients. 

Illustrotive graphs amplifying the significance 

of the doto are included throughout the 

bulletin. 
393 

Recent legislation hos been enacted that affects the 

assessment and taxation of net proceeds. This legislation 

required the Division to amend and expand its procedures in 

order to implement then- legislation. The following is a 

summary of those procedures and a brief history of the 

legiSlotion. 

The Division of Assessment Standards calculates the 

annual net proceeds of minerals assessment for each 

producing mine in Nevada by desk auditing on annual report 

of actual mining production for the preceding calendar year. 

These actual amounts ore used to make a final adjustment of 

the tax liability. The tax liability was originally 

determined from the estimate mode during the year of 

production. Prior to the 1987 passage of Assembly B111 No. 

872, mining taxpayers were not required to file on estimate. 

All of the net proceeds of minerals assessments were 

calculated using the actual gross a_nd net proceeds of 

minerals amounts. 

When computing the actual net proceeds of minerals tax, 

the Division deducts allowable mining expenses from the 

gross proceeds of mining operations t~ arrive ot the 

assessable net proceeds. The tax rote of the district where 

the mining operation is located determines the tax 

liability. The tax rote for the year corresponds to the net 

proceeds' calendar year report. 

For example, this bulletin represents the estimated 

1992 net proceeds for which the 1992-93 tax rote was used. 

When the actual production reports ore submitted in February 

of 1993, the Division will calculate the total tax liability 

using the 1992-93 tax rotes, adjust the final taxes due and 

distribute this additional revenue to the proper taxing 

jurisdictions. This bulletin only reflects the calculated 

estimated taxes to the county and the state based on the 

reported 1992 estimates filed on June 15, 1992 with the 

Department. 

In 1987, the Legislature enacted Assembly Bill No. 872 

which amended the net proceeds statutes in NRS Chapters 

362 . 115 and 562.130 . The amendment authorized the 

Department to require mining companies. with a 25f net to 

gross proceeds ratio to estimate the current year's gross 

proceeds and net proceeds, and pay in advance all taxes on 

the estimate. In addition, all royalty recipients 

associated with these mining operations were required to 

file on estimate of the current year"s total royalties 

received, and pay the estimated tax . The act also mandated 

that the Deportment reconcile each taxpayer's actual tax 

liability with the taxes paid on the estimate, · b1ll the 

taxpayer for the adjusted taxes due or give the taxpayer a 

credit if necessary. 
394 

Assembly 8111 No. 872 also required that the m1n1ng 

industry voluntarily prepay $1 •. 5 million dollars 1n 1988-

89. This payment was mode to offset the anticipated higher 

taxes that the mining industry will pay ofter the 

constitutional amendment passed in 1989. The taxpayers 

making the prepayment ore entitled to credit the prepaid 

amount against their net proceeds' tax liability beginning 

in 1992. The credit is triggered if the 1992 total net 

proceeds revenues exceed $51 million dollars and 1s limited 

to 1•f per year. 

In 1987, the counties received the taxes based on the 

mining industry's calendar year 1986 net proceeds of 

minerals. This was the first year that the mining taxpayers 

filed their estimate of the current year's gross proceeds, 

net proceeds, and anticipated taxes due. The estimated 

taxes were deposited in the state's general fund. These 

1987 estimated taxes were simply on accelerated payment. 

As a result of the passage of Senate 8111 No. 61 by the 

1989 Legislature, NRS 361.115 indicates that all mining 

taxpayers must file on estimate of the current year's gross 

proceeds and net proceeds by June 15th. This requirement 

applies to every taxpayer who, by low, already must file on 

annual net proceeds statement reporting the preceding year's 

actual mining activity. Senate Bill No. 61 is the enabling 

legislation that implemented Senate Joint Resolution No. 22, 

o constitutional amendment approved by Nevada's electorate 

on Moy 2, 1989. SJR 22 increased the tax rate limit to a 

maximum of Sf for calculating the tax on the net proceeds of 

minerals. The additional revenue produced by this 

constitutional amendment will be placed in the state general 

fund. Senate 8111 No. 61 also provided the authority for 

the Deportment to certify the assessments. bill and collect 

the estimated taxes, and adjust the prior year's estimated 

taxes. 

Assembly Bill No. 771, which also passed during the 

1989 legislative session, added changes to NRS 362 

pertaining to the taxation of net proceeds of minerals. All 

mining operator's whose net proceeds exceed $4 million 

dollars in a calendar year must pay the net proceeds tax at 

the maximum Sf rote. Senate Bill No . 61 indicates that all 

royalty recipients must pay the net proceeds tax at the 

maximum Sf rote. Assembly Bill No. 771 indicates that a 11~ 

penalty will be assessed if estimates ore understated. The 

penalty 1s waived if the taxes in the current year ore equal 

to or greater than the taxes paid in the previous year, or 

if the estimated payment is within 91~ of the amount 

certified. Mining taxpayers may file quarterly statements 

reporting gross yield and net proceeds. These statements 

provide the mining taxpayer with the opportunity to revise 

the original estimated net proceeds and pay the additional 

tax before a penalty for underestimation is assessed. 
395 

CA1.EN1AR VEAR 1992 ESTil!ATED NET PROCEEDS Cl' PlltERALS 

CERTIFIED av THE OEPARTl'ENT Cl' TAXATICJII 

STATEWIDE 

OPERATORS ROYALTIES TOTAL 

CARSCJIICllY se se se 

OUIOIILL 34,368,185 4"1,885 34, 8IJ9 ,271 

CLARK 4,884,844 231,lllll 5,134,844 

IXlJGlAS 23,111 • 23,188 

ELKO 38,596,529 2,823,745 48,621,274 

ESl'ERALOA 7,874,681 289,797 1,164,lln 

EUIEKA 244,922;632 52,251,1171 297,174,183 

IUIICI.DT 81,728,572 1,395,661 - 82,116,233 

I.NllER 45,878,228 1,737,469 47,615,697 

LINCCI.N 28,W 99,574 119,574 

LVOI 281,5811 • 281,511 

PIINERAL 14,739,437 1,316,966 16,156;483 

NYE 129,581,777 ·11,s1e, 198 148,196,975 

PERSHING 6,886,981 1,339,136 8,226,116 

STOREY 1,581,111 91,823 1,598,823 

WASHOE 8111,1188 1,686,572 2,526,572 

ll!ITE PINE 8,786,514 1,215,8511 11,882,364 

TOTAL $619,823,178 S74,634,347 $694,457,425 

·······-··························-····-····· 

COPIPARATIVE ESTIIIATED NET PROCEEDS 

STATEWIDE 

1987 1988 1989 1991 1991 

CARSCJIICllY SIi S7,771 SS,111111 S&,588 $3,81111 

OUICHILL I 287,253 12,111,957 18,151,828 25,483,167 

CLARK 3,749,5811 4,468,875 6,377,2111 5,337,747 5,261,977 

DOUGLAS 12,9211 9,992 25,258 26,8118 24,5811 

ELKO 79,787,923 76,981,815 68,514,975 47,163,918 43,967,111 

ESl'ERALOA 6,811,189 8,1148,453 8,962,736 1,995,621 7,783,6411 

EI.REKA 186,669,963 223, 1128, 618 258,618,327 249,859,518 253,999,545 

IU18CI.OT 66,133,899 81,318,566 161,875,871 136,555,864 123,738,451 

LAl'O:R 63,513,388 76,427,711 59,754,419 65,713,742 58,743,934 

LINCOLN • 11,888 258,388 88,181 89,163 

LYCJII 2,181 1,835 188,718 131,9118 986,591 

PIINERAL 1,319,116 16,453,594 22,587,337 15,211,6211 13,134,1155 

NYE 183,698,478 113,398,953 125, 166,9711 165,425,765 97,718,287 

PERSHING 6,817,239 22,292,539 37,136,575 211,788,457 14,583,424 

STOREY 3,272,343 1,777,881 2,683,633 2,883,233 3,3911, 189 

WASHOE 9,859,5118 9,611,817 643,464 7,846,423 17,711,574 

IIIITE PINE 18,313,818 24,687,668 39,158,275 18,339,869 11,1189,478 

TOTAL 5549,968,448 $658,788,121 S812,789, 199 S755,445,897 S677 ,448,886 

···········-········--··········-···-·····-····································· 

- 1 -
en 

0 

w 

w 

0 

0 

a: 

a. 

~ 

w 

z 

'iii' 

C 

.Q 

396 

CERTIFIED NET PROCEEDS OF MINERALS 

COMPARATIVE ESTIMATE 1987-92 

900 

800 

700 

600 

500 

= 400 ~ 

300 

200 

100 

0 

1987 1988 1989 1990 1991 1992 

CALENDAR YEAR ESTIMATED NET REPORTED 

I~ PAOCEEt;S I 

- 2 -
397 

CALENlAR VEAR 1912 ESTlllATED GROSS PROCEEDS t6' MINERALS 

STATBIIDE 

CARSIJI CllV 

auatlLL 

CLARK 

OCUIUS 

EU(0 

ESl'IERALIIA 

EUIEICA 

Hllllll.DT 

LANlER 

LlNCIJ.N 

LVOII 

MINERAL 

NYE 

PERSHING 

STOREY 

WASHOE 

lolllTE PINE 

TOTAL 

STATBIIDE 

CARS<JICilV 

OUOIILL 

CLARK 

DOUGLAS 

EU<0 

ESl'IERALDA 

ELIIEKA 

HllllOLDT 

LANlER 

LINCOLN 

LVOII 

MINERAL 

NYE 

PERSHING 

STOREY 

WASHOE 

IIIITE PINE 

TOTAL 

1992 

Ol'EIIATOIS 

SIi 

65,214,767 

18,818,626 

28,111 

211,387,622 

17,444,728 

871,662, 771 

413,756,768 

246,664,991 

648,119 

11,328,186 

71,762,135 

356,592, 766 

83,6111,827 

4,146, ... 

38,383,572 

59,4911, 162 

SZ,461,ffl,913 

1987 

se 

• 8,617,861 

14,1111 

154,672,917 

15,745,138 

317,774,314 

111,484,812 

114,112,221 

I 

15,111 

211,322,196 

199,688,433 

12,349,779 

4,414,411 

21,263,111 

44,114,151 

$1,813,487,312 

CCJ1PARATIVE ESTIMATED GROSS PROCEEDS 

1988 1989 1991 

S13,"8 Sl,511 518,8811 

446,656 58,8211,413 55,611,975 

11,111,111 21,598,168 21,295,426 

11,322 35,1181i 35,8111 

144,396,8118 287,1149,214 184,413,861 

17,141,758 28,144,988 21,833,144 

417, 172,479 686,991,835 723,382,181 

135,653, SIi 386,856,992 314,722,342 

141,184,351 251,436, 124 265,611,769 

2111,118 511,118 841,8811 

4,811 2,475,152 3,775,444 

31,546,211 88,327,669 98,217,863 

245,548,776 282. 117 .229 465,138,212 

75,615,854 118,871,511 95,591,586 

11,251,111111 11,532,552 12,3111,1811 

23,411,1111 211. 872. 181 48,518,188 

61,511,111 112,863,116 116,131,644 

St ,298, 176,146 S2, 899,688.272 SZ,488, 198,367 

- 3 -

1991 

$11,118 

55,246,166 

18,822,949 

31,1188 

251,843,887 

26,922,928 

735,569,983 

385,859, 186 

253,755, 794 

584,472 

11,617,585 

77,216,112 

339,414,149 

91,811,948 

12,839.111 

51,353,294 

66,111,144 

SZ,375, 197,219 
398 

CERTIFIED GROSS PROCEEDS OF MINERALS 

COMPARATIVE ESTIMATE 1987-92 

3.0 

00 5 2.5 

3 

(Q. 2.0 

en 

0 

UJ w 1.5 

0 

0 

![ 1.0 

en 

en 

0 0.5 

a: 

e, 

1987 1988 1989 1990 1991 1992 

CALENDAR YEAR ESTIMATED GROSS REPORTED 

, ~ PROCEEDS I 

- 4 -
399 

GROSS VERSUS NET PROCEEDS OF MINERALS 

COMPARATIVE ESTIMATE 1987-92 

3.0 

1987 1988 1989 1990 1991 1992 

CALENDAR YEAR ESTIMATE REPORTED 

1 ~ GROSS PROCEEDS C3 NET PROCEEDS 

- 5 -
400 

CO'PARATIVE SUIVEV OF ESTIIIATED f€T PROCEEDS OF PIINERALS 

ANlJAL TAX REVEtUS 

BASED IN CALENlAR VEAR 1992 ESTIIIATED REPORTS 

ANlJAL NftJAL NftJAL AVERAGE AVERAGE AVERAGE 

CALENlAR ESTIIIATED C0lM'Y STATE C0lM'Y STATE COIIINED 

VEAR f€T PROCEEDS REVEME REVEME TAX RATE TAX RATE TAX RATE 

1987 5549, 968,448 S18,552,Sff • 1.92 

1988 658,788,121 12,349,739 1.87 

1989 882,789,199 14,742,188 523,325,713 ** 1.84 2.91 4.75 

1991 755,445,897 16,798,789 19,884,861 2.22 2.62 4.84 

1991 677,448,1186 14,485,794 17,763,1156 2.13 2.62 4.75 

1992 694,457,425 14,738,868 18,397,883 2.12. 2.65 4.n 

• THE REVEIU FRDPI THE FIRST ESTIIIATE (1987) MAS SENT TO THE IEVADA STATE CINTROLLER PURSUANT 

TO AB 872. 

REVEIUS TO THE C0lM'Y FOR 1987 WERE ESTABLISHED av CIJ18INING THE ADJUSTED N'l"I 

FOR CALENlAR VEAR 1987 PLIS THE ESTIIIATE FOR 1988. 

" REVEIUS TO THE STATE BEGINNING IN 1989 loERE ESTABLISHED av THE CINSTITUTIDNAL Al£tO£NT 

SJR 22 ALCM WITH ENABLING LEGISI.ATIIN THR\J SB 61, IEVADA REVISED STATUTE CHAPTER 362 REFLECTS 

THESE CHANGES. 

- 6 -
401 

TAX RATE 

COMPARATIVE RATE 1987-92 

$5.00 t'g- f ~ ~ $4.50 

$4.00 

w 

~ $3.50 

w $3.00 ~ ·~ 

a: 

w $2.50 

~ ~ 

$2.00 _/ : ':' 

T ' ~ 

r. T $1.50 

$1.00 

1987 1988 1989 1990 1991 1992 

CALENDAR YEAR 

l*COUNTY ....... STA'IE -e-COMBtED I 

- 7 -
402 

IMPACT OF STATE TAXATION ON THE MINING INDUSTRY 

• A STUDY OF EIGHTEEN STATES· 

SEPTEMBER 1989 

WHITNEY & WHITNEY, INC. 

35 N, EDISON WAY, #6 

P.O. BOX 10725 

RENO, NEVADA 89510 

(702) 323-3050 
403 

NEVADA 

Tax Information for Nevada is bastd on a revitw of pertinent sections of the 

N•yada B•Yllfld Statyt91 (NB$) 11nd supplement, through 1988. 

Mining companies In Nevada are subject to the following taxts: a property tax, 

the net proceeds of mines tax, and sales/UH taxea. There Is no corporate Income tax. 

PmPloYTIX 

All real and personal property is taxed in Nevada unless specifically exempted 

by law w.e..s. §361.045}. Both unpatenttd mints and mining claims are exempt from 

this type of property taxation w.e..s. §361.075}. 

"Real property" lncludea general ownership or posseasory Interests In lands in 

the state (except federal land upon which the ~deral government pays taxes to the state 

or moneys in Heu of taxes), buildings, fences, ditches, structures, roads and Improvements U:LB.S.. §361.035]. 

"Personal property" Includes machinery and equipment, furniture, inventories, 

libraries, livestock, Improvements, and vehlclesunleu exempt. Gold and sliver-bearing 

ores and quartz or minerals from which gold or sliver la extracted are exempt from 

personal property tax when In the hands of the producers w.a.s., §361.030). 

All property· Is subject to assessment at 35% of Its taxable value IN,.B..S. 

§361.225]. The following factors are considered by the State Department of Taxation 

In determining the taxable value of real property: 

- the estimated value of vacant land and improvements less depreciation; 

- the market value; and 

• the value of the property estimated by capltalizatlon of the fair economic 

income [W!.S. §361.227]. 

The minimum assessment for patented mints Is $500, except where $100 

development work is performed during the tax period (Nevada CpostfMiPD Article 10.1 ). 

109 
404 

Ntt Pmcaad• of Minta 

Net praceedl ,.priNnt the aecond par1 of the total aueued valuation related 

to mining which forma the bat for the tax revenutt collected from mining operatlona. 

Every peraon, corporation or auoc:tatlon operating a mine containing gold, allver, 

copper, zinc, lead or other valuable mlnerata, metallc or nonmetalllc, la required to file 

with the county uaeaaor an annual rtport ahowlng g,011 yield and net proceeds from 

each mine for the pl'ICtdlng calendar year. The report must be flied on or before 

February 15 of each year w..BA §362.11 OJ. Every operator and royalty recipient must 

estimate ntt proceeds for the current calendar year and pNpay the estimated net 

proceeds tax by July 15 WAS. §362.116, fS82.130 I §381 .483]. 

Net proceeds are calculated by subtracting from gro81 yield the following direct 

coats WAS. §382.120): 

• Coat of extracting the ore; 

• Coat of tranaportatlon of the ore from the mine to the place of reduction, 

ratlnlng and aale; 

• Coat of reduction, r1flnlng and aale; 

• Colt of marketing and delivering the product and of the conversion of the 

product into money; 

• Coat of maintenance and repair& of machinery, equipment, plants arid 

facllititl; 

• Cost of Insurance and social security, accident benefits, hospital and medical 

attention; 

• Otpreclation; 

• Development work; and 

• Royalties. 

Interest expenaa, federal and state taxes, and corporate overhead are not 

deductible for net proceed& tax purposes. Depreciation la atraight•lint, with Hves of 20 

yea,., 1 o years and 5 years for buildings and fixed machinery, mobile machinery, and 

vehlcltl respectively. 

110 
405 

The net proceeds tax rate Is a furiction of the ratio of net procffdS to groas yield 

aafollows: 

Nftl PCPClt<IS t Grpy Yltld 

Leeathan.1O 

At. least .1 o but less than . 18 

At least .18 but lua than .28 

At ltast .26 but 1 ... than .34 

At least .34 but leH than .42 

At least .42 but len than .50 

.50 or greater 

2% 

2.5% 

3% 

3.5% 

4% 

4.5% 

6% 

Any company with net proceeds In IX.'.:8111 of $4 mlWon In the state la taxed at the 5% 

of net proceeds rate. 

Salte and YII Tax,s 

Retail sales are taxed at the rate of 6 314%. Retailers collect the tax from 

purchasers and report these amounts to the · Nevada Department of Taxation. The 

5 3/4% tax rate Includes the 2% state rate, a 1 1/2% local school ltvy, and a 2 1/4% 

county levy [tL.B.S. §372.105]. ~ jurisdictions may add a 1/4% transpottatlon 

component to the statewide tax levy. 

In Nevada, U8e tax Is imposed on the ustr of tangible peraonal property 

purchased from retailers outside the state. The tax rate Is 5 3/4%, 8110 subject to the 

1/4% local add-on. 

Exemptions from the sales and uae taxee Include groea recelpta from the sale, 

storage or UH of the proceed& of mines [tL.B.S. §372.270] and the ule, storage or uae 

of gas, electrlclty, and water when delivered to consumers through mains, Unea, or pipes 

[ti.BA §372.295]. Property subject to the sales tax is not subject to the use tax W.S. 

§372.345]. 

111 
406 

Mr. LEHMAN. Obviously we are not going to negotiate this here, 

and that is not my intention, but it is an issue we are going to have 

to resolve, and we have eressures on us around here, other than 

your indust17 pulling in different directions. 

We are gomg to have to be very careful. And I think you should 

be mindful of that, that the way things happen around here in the 

process of coming up with budget numbers, it may come from 

somewhere unknown, and may be far less favorable than this is, 

if you think that is possible, and unless we reach some agreement 

on it and can stick with it, we are not going to have control over 

that as it goes on. 

The second issue I want to try to get a little more meat on is reclamation. .Anin, based on my own experience-and I could cite a 

number of Western issues here to prove i~but I don't believe we 

are going to continue a system where the States make up the reclamation requirements for Federal land and then enforce them. In 

some instances, I am told some States don't have any requirements; some States do. 

I think you are wide open on that, and again, I'm not trying to 

beat you over the head with the merits, I am not an expert, but 

there are going to be some Federal standards. And again, the key is trying to create them so that they make sense, so that they are 

not unduly restrictive and unnecessarily punitive, and it helps to 

have your cooperation in attempting to do that. 

I understand it is difficult, but maybe one of you could briefly identify here for the record those elements of the reclamation process in Mr. Rahall's bill that you find most objectionable. Do you have to pay for it? I understand that. 

Dr. DEVOTO. I will comment. In my written testimony I mentioned three specific items that I think need some modification in 

the bill. First of all, let me state that I believe that my company and most of the industry is actually now conducting all of its new 

operations under EPA standards, guidelines, normal environmental 

impact statement procedures, whether the projects be on Federal 

lands or State lands. And so much of the objective and the imple- mentation that are in this bill are constant with what we are already doing. The specific points that I see in the reclamation language which 

offer discretionary authority to the regulators that we are concerned about, one is the backfilling of open pits and open-pit mining operations, and in most locales now backfilling is not automatically required. It may be required in certain instances, but this bill 

can be interpreted to require that. And that is a concern. 

Second, certainly when )'OU open up a surface mine, there will be 

some displacement of wildlife at that immediate acreage. The provisions in the law now provide for mitigation off-site, possibly with 

two to three times the acreage, mitigating wildlife enVIronment offsite as making up for the lost environment at the site that is generated. 

I read the bill that unless you can get those particular worms or 

grasses to grow in that open pit, you can't generate it. And those 

are two of the concerns. 

Mr. LEHMAN. Mr. Fields, in looking at your written testimony, I 

believe you said that in Nevada, you require reclamation, but you 
407 

give exemptions where the company shows it is too costly; is that 

correct? 

Mr. FIELDS. That is only with regard to backfillinJ of pits. Reclamation as defmed in our statute is contounng, shaping, revegetating, and returning the land to a post-mine beneficial use 

in a stable condition. 

My comments were only with regard to the backfilling of the pits. 

Mr. LEHMAN. We will get into both of those. On backfilling, then, 

it is only required when, what? 

Mr. FIELDS. It would only be required when you are mining in 

an adjacent pit, for example, and the material from the one pit could be placed into an adjacent pit, and that could be economically accomplished. If that were the case, then backfilling would be required under our State law. 

Mr. LEHMAN. It seems to me you get into a situation here where 

the ones that might need it the most are the ones least likely to 

benefit from it, because you are only going to require it where it 

is adjacent to where it will be done, so that cost has to be incurred. 

So the company is better off digging a hole someplace else. 

Mr. FIELDS. Well, as was mentioned earlier, the company would 

only dig the hole where there is a viable mineral deposit. 

Mr. LEHMAN. And getting back to the other area, the reclamation 

requirements in your State then differ from the reclamation requirements in this bill in that you require a post-mining use of the 

land, and as Dr. DeVoto interprets the bill, this would require it 

to be returned to pre-mining conditions. Is that fair? 

Mr. FIELDS. That is right. In Nevada, the requirement to accomplish a post-mine beneficial use is something that is agreed on 

prior to actual mining beginning, agreed on between the land 

owner, or in the case of Federal land, the Bureau of Land Management, U.S. Forest Service, and the operator. In the case of our private lands in the State, it would be the owner of the private lands 

determination of what that post-mine beneficial use was. 

But in any case, the stability, the contouring, the shaping and 

the revegetation and the providing for public safety are required. And that is true on both private land and public land. 

Mr. LEHMAN. Mrs. Vucanovich. 

Mrs. VUCANOVICH. Thank you, Mr. Chairman. Mr. Fields, you administer the Abandoned Mines Program for our State, the State 

of Nevada. How is that funded? 

Mr. FIELDS. That program is entirely funded by fees and assessments that the mining industry pays. We have a fee every time a 

claimant files a claim in one of the county seats; it comes to the 

Department of Minerals for that program. 

We have another fee every time a Federal plan of operations is 

approved. The State takes $20 per acre and applies that to the 

Abandoned Mine Lands Program. Total generated money is around 

$240,000 a year. And we apply that to identifying and ranking the 

degree of hazard out at old open shafts and attics. These are mines 

that were dug long before there were any requirements to make 

those safe. 

We build fences around them; we contract with others to build 

fences around them. Where there are responsible parties, we have 

a procedure which causes the responsible parties to go ahead and 
408 

take care of them, to prevent people from falling into these old 

shafts. 

Mrs. VUCANOVICH. You know I know that our Governor isn't 

speaking of royalty provision on Federal lands, but it looks as if he 

may be considering a net proceeds tax here, and I think that that 

is what we are going to be looking at, I hope, if we look at any tax. 

But wouldn't Governor Miller seek to have half of the revenues returned to the State in the same manner as coal royalties and oil 

and gas revenues and other Mineral Leasing Act commodities? You 

know, the State now gets only 25 percent back. Is there some reason that distribution of coal revenues should be treated differently? 

Mr. FIELDS. I haven't talked personally with the Governor about 

that, although I will say that the 50 percent that does come back 

from Minerals Management Service on our oil and gas production 

and other saleable minerals is an important thing to the State. It 

goes into the School Distributative Fund, and I believe that if a 

royalty were placed on hard rock minerals, I think it would be fair 

to send 50 percent back to the States. 

Mrs. VUCANOVICH. And that would then be less going to the Federal Government, obviously? 

Mr. FIELDS. Yes. 

Mrs. VUCANOVICH. Than the revenue? 

Mr. FIELDS. Yes. 

Mrs. VUCANOVICH. What effect did the $100 per claim holding fee 

that would pass this year have upon the revenues provided the 

State of Nevada? 

Mr. FIELDS. We haven't seen the full effect of that yet, Mrs. 

Vucanovich. The fee is not due and payable until August 31, 1993. 

However, claimants have the--

Mrs. VUCANOVICH. He said--

Mr. FIELDS. Next August. That is when a two $100 payments are 

due. But, I can tell you that just because that fee is out there, we 

think we have lost about 19 percent of the claims by virtue of not 

filing the required December 30 filing with the Bureau of Land 

Management. Our expectation is more than 50 percent of the 

claims will be dropped as a result of that fee. 

Mrs. VUCANOVICH. Are there any major mining operations in the 

State which have failed to pay the net proceeds tax? 

Mr. FIELDS. Well, a company that has gained some notoriety in 

today's hearings is the American Barrick operation, the Barrick 

Goldstrike mine. And that has been held out as perhaps an example of why net proceeds might not be a good approach. 

But I want to tell the committee that in 1992, final payment is 

due April 15 to our State. They will pay some $3 million in net proceeds. This will be the first year that they pay. 

In the meantime they have invested over a billion dollars, as we 

have heard; they have generated revenues of about a half-a-billion 

dollars, something like that. The net proceeds concept allows companies to deduct the costs that they put into developing these 

mines, and the capital costs are put in the year that they are 

spent. 

They are not amortized over a long period of time. So in development stages the State doesn't expect to receive a net proceeds tax. 
409 

But when a mine reaches steady state, then the State benefits from 

the _profits just u the company does. 

Mrs. VUCANOVICH. As you pointed out, aJ>promnately 85 percent of our land area is mana,red Df the Federal Government. A_pproxi- mately how much of this land 11 not open to mining, and what are 

the reasons? 

Mr. FIELDS. Okay. There are about 57 million acres in Nevada 

that are federally managed land. As you say, 85, 87 percent. Of 

that, approximately between 14 and 15 million, I believe it is, are 

not available to mineral entry, mining under the mining laws. That 

is, 25 percent of the Federal land is not available. 

The reason for that is military withdraws, the test site which includes Yucca Mountain, the various wilderness areas that we have 

in our State, and the wilderness study areas, which u rou know, 

are managed u de facto wilderness until Congress decides on it. 

There are National Recreation Areas, National Conservation Areas. 

There are various Indian lands that are unavailable to explo- ration under the Mining Laws. Those are examples of the kind of 

lands withdrawn and not available. 

Mrs. VUCANOVICH. Approximately what percentage of the land is 

available then, of the federally owned land, federally managed 

land? 

Mr. FIELDS. Okay. Then it would be 75 percent of 87 percent. 

About 60-plus percent. 

Mrs. VUCANOVICH. Oklly. Dr. Dobra, I have a couple of questions 

I was going to ask you. The royalty proposed by H.R. 322 is a gross royalty, and what is the difference between what is proposed by 

H.R. 322 and the net proceeds tax that we have in Nevada? 

Dr. DoBRA. Okay. The net proceeds tax starts with the same 

base, gross receipts, gross incomes it is called in the act, and then 

allows deduction of about 7 different categories of costs. The primary ones, though, which make up about 80 percent of the deductions are extraction cost, that is the actual mining, and then the 

processing costs. And then there is a number of other smaller deduction categories. Mines are allowed to deduct certain marketing expenses, and 

these are specified in the statutes and regulations so that it is not 

wide open. Certain insurance expenses, I can't tell you, but there 

is differential treatment between fire insurance and say health insurance for workers. Royalties are allowed to be detected, but the 

royalty recipient is the private individual, then pays the tax on 

that royalty, so the royalty really doesn't escape taxation, but it is 

one of the deduction categories. There are several others. 

Which ones have I left out? They are pretty minor ones. As I 

said, extraction and processing make up 80 percent of the deductions. So what you are left with is a figure that is not net income; 

it is actually substantially larger than net income the way an accountant would define net income, but it represents on-site direct 

production costs; it doesn't include corporate overhead, it doesn't 

mclude legal fees, it doesn't include interest on borrowed capital 

and so forth. It is really direct, and by design, it is direct produc- tion costs. 

Mrs. VUCANOVICH. How does .the gross royalty proposed by H.R. 

322 compare with private royalties that companies already pay? 
410 

Dr. DoBRA. Well, the key to understanding private royalties is 

that any time you have one, they are a negotiated royalty. They are 

the result of tht: claim holder and the ultimate producer getting together .and coming to an agreement as to what is reasonable. And 

so it is a market transaction. · And you see, if you look at royalties, they range fairly widely, depending upon the barfi!'

1

i!ing power of the claim holder. And in 

cases where we are ta . · g about small fractions of ~r blocks, 

a royalty or a claim holder may have very little bargain~ power. 

The royalty rates tend to be low, or where the claim holder has a 

substantial interest, those royalties tend to be more. 

Mrs. VUCANOVICH. You submitted some materials from the Wall 

Street investment analysts concerning the gross royalty proposed 

by this bill. Could you summarize those for me? In other words, 

how will Wall Street's view of these companies change as a result 

of the royalty? · Dr. DoBRA. Well, Wall Street, of course, tends to view the behavior of mining companies from the standpoint of their fiduciary interests or the interests of the shareholders, because that is who 

they are writing for. And as a consequence, they are going to take 

a dim view of companies or, you know, tend to give them lower ratings, if not buy ratinJs, maybe even sell ratings which are going 

to hurt these companies. If they are on public lands and in their 

operations, they are going to be significantly affected. 

The companies need capital raised in these equity markets to go 

out and expand, and that creates additional pressure on these companies and their obligation to provide a return to their stockholders 

to seek investments in places where they can get the highest return. And with this royalty, given two equal properties, one in the 

United States, and one where there is no royalty, they will go elsewhere. So in a sense, Wall Street is going to reward the people that 

flee. 

Mrs. VucANOVICH. Sure, sure. Mr. Fiske, do you think that Title 

II or something like it would prevent the recurrence of . a 

Summitville. We have been hearing about Summitville from some 

of the other panels. Do you think that Title II would make any 

changes on that, or would have prevented anything happening there'? 

Mr. FISKE. There would have been perhaps some things done differently, but I would think more of a minor nature. In the view of 

most of us in Colorado who are observing it, and many of us are 

observing it without really being involved in it, but certainly have 

an interest in it in talking with the technical people, Summitville 

is not a failure of law, it is not a failure of regulations, it is not 

attributable to a lack of adequate laws and regulations; it has been 

described as a people failure. The permit was violated, the technical engineering mining people that I talk with are deeply troubled by the nature of the mining activities. 

For whatever motives, for whatever purposes, it was a bad minini operation. And whatever amount of laws we may have, you are 

gomg to find people who are not going to comply with them for 

whatever reasons, whether it is deliberate or through incompetence 

or whatever. Adding a lot more laws is not necessarily going to prevent that. But in answer specifically to your question, we do not 
411 

think so, because the laws were adequate; it is that the people 

didn't comply with them. 

Mrs. VUCANOVICH. What do you think is the responsibility of the 

mining industry to protect the environment and reclaim lands that 

it effects? We are dealing with Title II. That is our big concern. 

Mr. FisKE. Mrs. Vucanovich, again, I am speaking a little bit as 

a lawyer, I think it almost rises to a fiduciary duty. I think the 

mining industry has a great, great responsibility in mining upon 

the public lands, particularly, but just as much on private or other 

lands. It is our responsibility to operate on those lands and then 

to leave those lands in a way that is good for society. 

Mrs. VUCANOVICH. Well, I think that is what we hope to have 

happen here in this bill in the negotiating. I don't have any specific 

questions for Dr. DeVoto, but I certainly sense that you and your 

company are anxious to try to work with the proposals of both this 

bill and perhaps Senator Bumpers to try to find answers, because 

we don't want to put people out of business. That certainly isn't 

what we should be doing here in Congress, and I hope that we can 

work with 1ou and we can fmd some solutions. 

Mr. Chamnan, I have no other questions, except I am a little bit 

concerned that some of our earlier panelists spoke about American 

Barrick's P.atenting process, and no one on this panel was particu- larly qualified to set that record straight. And there is a gentleman 

here, if he is still here, Patrick Garvin, who could maybe just 

quickly tell you. 

Mr. LEHMAN. Mrs. Vucanovich, Mr. Rahall made me aware of 

that. I would be happy to give the gentleman a choice. I think it 

might be fairer to him rather than just call him on the spur of the 

moment to give him the opportunity to put a written statement in 

the record. 

Mrs. VUCANOVICH. That would be fme. 

Mr. LEHMAN. And he certainly should have the opportunity to respond, since his company's name was brought up here, I agree. 

Mrs. VuCANOVICH. Could we just have unanimous consent then 

to keep the record open for say 10 days to allow that? 

Mr. LEHMAN. Certainly. Certainly. I think that would be appro- priate. And without objection. 

[The information follows:] 
412 

PARSONS BEHLE &: LATIMER 

March 24, 1993 

Richard H. Lehman, Chairman 

Subcommittee - Energy and Natural Resources 

818 O'Neill Office Building 

Washington, D.C. 20515 

Re: H.R. 322 

Dear Chairman Lehman: 

At the hearing on H. R. 322 before your Subcommittee on March 11 , 1993, 

much of the oral and written testimony related to mineral patent applications made by 

Barrick Goldstrike Mines Inc. The testimony contained numerous errors and 

misrepresentations. At the conclusion of the hearing you invited Barrick to.submit 

material for the record that would clarify the facts concerning such applications. This 

letter responds to that request. 

The principal errors and misrepresentations made to the Subcommittee 

concerning Barrick's patent applications were contained in the oral and written 

testimony of Mr. Phillip Hocker, who testified on behalf of the Mineral Policy Center 

("MPC"), Alaska Center for the Environment, American Fisheries Society, Greater 

Yellowstone Coalition, Idaho Conservation League, Izaak Walton League of America, · 

Oregon Natural Resources Council, National Parks and Conservation Association, 

and Washington Wilderness Coalition. 

Mr. Hocker's testimony, which focused more on Barrick's applications than on 

H.R.322, contended that Barrick and BLM were •co-conspirators• in an "improper 

procedure• to •giveaway" .billions of dollars in federal resources pursuant to a secret 

BLM program. Mr. Hocker told your Subcommittee that, "tragically," this "abusive• 

secret program permitted Barrick rather than BLM to determine whether Barrick was 

entitled to mineral patents. As a result, testified Mr. Hocker, "Barrick managed to 

complete the entire [patent] procedure In a few months" rather than the two years 

that is usual. This testimony paints an intriguing picture, which no doubt sells well in 

the press. However, it has no relationship to the truth. 

First, Barrick did not •complete the entire [patent] procedure in a few months.• 

Barrick initiated the patent procedure in June of 1991, two years ago, and patents still 

haye not been signed. Apart from the misrepresentations concerning the length of 

45021 
Richard H. Lehman 

March 24, 1993 

Page 2 

413 

Barrick's patent process, it is ironic that the Mineral Policy Center, which has for 

several years been trying to convince the public that anyone can simply walk in off 

the street and buy public land over the counter for $2.50 an acre, now claims the 

patent process is being abused if it can be completed in less than two years. 

Second, contrary to Mr. Hocker's testimony, BLM did not 'allow Barrick to 

evaluate its own claims.• BLM, not Barrick, evaluated Barrick's claims. · The mineral 

report that confirms the obvious - that Barrick's claims contain discoveries - was 

prepared by BLM. ·BLM was assisted in the preparation of that report by a third party 

contract mineral examiner, Mr. Richard Harty, U.S. Forest Service Certified Mineral 

Examiner No. 002. This is a process that, while new to BLM, apparently has been 

common in the Forest Service and National Park Service for years. In any event, 

BLM did not delegate any of the decision making functions of the mineral report 

process and directly participated in every element of its preparation. Indeed, the 

mineral report was ultimately approved at four different levels within the BLM. 

The implication of MPC's allegations is, of course, that the "flagrant conflict of 

interest" inherent in having a contract mineral examiner assist BLM, taints the results 

of the mineral report, as if a •more objective• report would have reached a contrary 

conclusion. This is ludicrous. The purpose of the mineral report is to determine one 

thing - whether there is sufficient mineralization within a claim to constitute a mineral 

"discovery.• The Goidstrike mine is one of the richest mines in North America, with 

published reserves, audited annually by Pincock Allen and Holt, in excess of 

25,000,000 ounces of gold. Barrick produced in excess of one million ounces of gold 

from its claims last year. Its deposit is defined by some 5,500 drill holes. Jhere 

cannot be any serious questions as to whether a 'discovery• exists. Indeed, to us it 

seems odd that MPC contends on one hand that the claims in question are worth 

$8,482,000,000 but on the other hand suggests to Congress that there is a 

•conspiracy• between BLM and Barrick to improperly permit Barrick to get a "yes 

answer" as to the existence of a discovery. 

Basically, the MPC developed a sensational story, apparently for the 

consumption of the press, and presented it to your Subcommittee as factual 

information. But the facts are otherwise - Barrick's patent process was not 

completed in •a few months.• Nearly two years later Barrick still does not have 

patents. Barrick did not examine its own claims. BLM and a BLM and Forest Service 

certified outside contractor examined the claims and reached a result that could have 

been safely predicted by anyone remotely familiar with the Goldstrike Mine. The 

45028 
Richard H. Lehman 

March 24, 1993 

Page3 

414 

misrepresentations and misleading innuendo of the MPC testimony are, unfortunately, 

all too representative of much of the information that Congress is receiving from 

some advocates of Mining Law reform. We are hopeful that your Subcommittee will 

begin to insist that you receive credible information and data before responding to 

contrived •conspiracies" such as the one created by MPC. 

Finally, as you may recall, some issues raised by the MPC testimony were also 

mentioned in the prefiled testimony of Secretary Babbit Following the hearing, 

Barrick promptly advised Secretary Babbit of the facts concerning its patent 

applications. A copy of its letter to the Secretary is also included for your 

information. 

Thank you very much for the opportunity to clarify the record. 

v{'~ 

Patrick J. Garver 

PARSONS BEHLE & LA TIMER 

Counsel for Barrick Goldstrike Mines Inc. 

asb 

f.5021 
415 

Mr. LEHMAN. And I also have two things I will insert in the 

record at this point: from Mr. Rahall, a statement from the Public 

Resource Associates, and from Mr. LaRocco, a statement from the 

National Association of Mining Districts. 

[The documents follow:] 
416 

PUBLIC RESOURCE ASSOCIATES 

1815 HStreet. NW,Su11efi00. ~DCZ0006 

(201) 46J.'/456 

J7S5 E. Pluml,Lano.Slll• 170 ~. NV 89502 (7011716-9955 

4l4~S-.S.U.80Z 

San mnclal. CA 94101 (415) 392·2818 

STATEMENT OF ELVIS J, STAHR, JR. 

ON H.R. 322 

TO THE SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES 

OF THE HOUSE COMMITTEE ON NATURAL RESOURCES 

OF THE U.S. HOUSE OF REPRESENTATIVES 

MARCH 11, 1993 

~_ ... ____ _,_., __ 
417 

PUBLIC RESOURCE ASSOCIATES 

Mr. Chairman, Members of the Committee: 

My name is Elvis J. Stahr. I am Vice President of Public 

Resource Associates, a non-profit group interested in the 

conservation, wise use and renewal of natural resources, including 

legislative issues revolving around the mining of hardrock minerals 

on the public lands. I am not appearing in person at this hearing 

because Public Resource Associates would not fit properly into 

either of the two panels of today's witnesses, · as I will explain in 

a moment. We want, however, to be of maximum possible assistance 

to this Committee, and our testimony on H.R. 322 is presented in 

two parts: 

1. This statement, setting forth principles and themes that 

should guide Congressional action in reforming the Mining Law of 

1872. 

- 2. Attachments A through E, consisting of drafts of 

amendments, legislative provisions and report language that would 

effect the principles and recommendations in our testimony. 

Specifically, this part contains: 

Findings that should be the first section of any bill. 

(ATTACHMENT A) 

Legislative language to effect a workable relationship 

between land use planning and hardrock mining . (ATTACHMENT B) 

Language to .include acquired i,ederal lands i.n this location 

system. (ATTACHMENT C) 

Legislative or report language to clarify the land 

2 
418 

PUBLIC RESOURCE ASSOCIATES 

management standard governing approval of . plans of operation. 

(ATTACHMENT D) 

Language clarifying and assuring the rights of miners in 

their claims. (ATTACHMENT E) 

Mr. Chairman, we have long advocated the modernizing of the 

Mining Law of 1872. We testified on that subject at the oversight 

hearing called by Congressman Rahall in June of 1987, and one or 

another of my colleagues, John and Putnam Livermore, testified at 

the hearings held in 1989 and 1991 on follow-up bills. Our 

collective experience covers just about every aspect of the Mining 

Law. John Livermore of Nevada is an internationally known and 

respected exploration geologist; Putnam Livermore of California has 

more than thirty years' experience as an attorney in the field of 

natural resources, and I am a long-time conservationist and 

attorney. I served as president of the National Audubon Society 

for more than ten years, and I was Secretary of the Army in the 

Kennedy Administration. 

We represent neither the mining community nor the 

environmental community. As Congressman Rahall knows, we are a 

small group that for some ten years has been doing and 

commissioning research, and exchanging views with miners, 

environmentalists, Federal and State government officials and 

academics, all with the objective of developing legislative 

recommendations for modernizing the Mining Law of 1872 in ways best 

calculated to create a win-win situation for both sides and also 

for the Government and the public. 

3 
419 

PUBLIC RESOURCE ASSOCIATES 

Our approach, and we hope yours, is based on the belief that 

true reform consists of retaining or strengthening what is good, 

eliminating or changing what is bad, and avoiding moves that make 

things worse. 

In this statement, I will first stress six key propositions as 

succinctly as possible and then support them and explain at greater 

length why they are so very important in your crafting of a new 

Mining Law: 

1. A Federal gross royalty on hardrock minerals mined 

from unpatented claims on the public lands would be a serious, 

even counterproductive, economic mistake. It would severely 

cripple and could even halt such mining, and it would not and 

could not produce significant net revenue to the Government. 

Destruction of incentive to explore, complexity in 

administration, and costs of collection, all argue against any 

royalty. If a royalty must be considered, however, a better, 

choice would be a Federal net royalty, although it shares with 

gross royalty the handicaps of extreme complexity and high 

collection costs. Therefore, the. unclear "gross income" 

language in Section 410(a) 0£ H.R. 322 must be replaced by one 

of two alternatives: either a specific reference to a tax rate 

(say, 2 to 5%) on "gross income for tax purposes under Section 

613 of the Internal Revenue Code," (subject, importantly, to 

a rate .£ru1. of, say, 5 to 10% of "taxable income" under said 

Code)--or a "net proceeds" royalty calculated like the 

production tax under Nevada Revised Statutes 362 .120. The 

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failure of H.R. 322 to identify clearly -the intended type of 

royalty could leave Interior free to recreate the same 

problems it has created with •gross proceeds• valuation of 

Federal mineral lease production . 

2. The land use planning scheme created by H.R. 322 is 

environmentally unsound. A far better choice would be to 

bring the Mining Law under the existing Federal Land Policy 

and Management Act (FLPMA). For hardrock mining purposes, you 

should apply FLPMA's scheme of ACEC's (Areas of Critical 

Environmental Concern) to u.s~ Forest Service lands as well. 

Our assertion of the unsoundness of H.R. 322's scheme needs to 

be explained at considerable length and later will be, but it 

must be stated up front that its provision to withdraw 

outright all ACEC's from mining compounds the unsoundness. 

3. The legislation needs to clarify and make explicit 

the claim holder's •right to mine" when the claim holder can 

design an approvable plan of operations, and it needs to avoid 

the implication in H.R. 322 that a land manager can "j_!lst say 

no" at virtually any time. More on these points later, too. 

4. Singling out hardrock prospectors and miners as the 

only users of public lands to be subject to citizen suits is 

unfair and seems to them vindictive. A better choice would be 

to apply it to all, including timbering, grazing, recreation 

and power line rights of way, or to none. 

doesn't belong in a mining Bill. 

In any case, it 

5. Creating and imposing a uniform set of Federal 

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reclamation standards in the face of existing State standards, 

most of which are high and strict, would be costly, confusing 

and wasteful. Since the terrain and other ecological factors 

vary greatly from state to state, a better choice would be to 

set an early deadline for the two states (Arizona and New 

Mexico) not yet having reclamation standards to enact ones as 

strict as, say, Montana's. 

6. There are some fifteen excellent provisions in H.R. 

322, ones that would reform and modernize the Mining Law in 

very desirable ways, and we hope you will retain them. I 

shall specify them in the concluding pages of this statement. 

Let me turn now to two particularly critical problem areas, 

that is, two features of H.R. 322 that in our view very definitely 

need revision: first, the unclear provision for a gross income 

royalty, and second, the handling of the land use planning problem. 

The first is really an economic, not an environmental, issue; the 

second is an environmental issue with major economic implications. 

First, then, fill. to royalty: There is widespread sentiment that 

the public should obtain an economic return from hardrock minerals 

extracted from public lands by private miners, and there is a 

growing feeling that there should be an economic return over and 

above the existing federal, state and local taxes paid by mining 

companies and their employees, and over and above hard rock mining's 

other economic returns to the public in the form of direct jobs and 

the making of domestically produced, vitally necessary minerals 

available to metal fabricators and many other civilian industries 

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and hence to every consumer--and to our defense industries. 

Proponents of a Federal royalty argue that under the Mining 

Law of 1872 these minerals are taken •free• from public lands and 

that it is only •fair" for the public to receive an additional 

return, off the top, by exacting a Federal gross royalty. On the 

surface, this can seem appealing. After much study, however, we 

are convinced that looking to hardrock royalties as the primary 

return to the public would be counterproductive, indeed would be a 

serious economic and strategic mistake, and that ··gross royalties 

would even result in diminished net revenues to the Government, as 

well as substantial (and needless) harm to the nation's economy. 

Let us initially examine the question whether it is true that 

these minerals are being taken •free.• The bonanza mining era is 

long gone. Unlike oil, gas and coal, precious metals are widely 

disseminated and only found in scattered deposits, often in 

microscopic particles, usually requiring many~ of ore to be 

processed to extract a single ounce of metal. Unlike much Federal 

coal, sodium and phosphate, where many of the deposits have long 

been known, the private exploration effort and expense are 

essential to learn of the existence of hardrock deposits. All of 

the risks of exploration, and all of the enormous costs of mining 

and processing, are privately borne. In truth, not one ounce of 

metal is taken •free· from the public lands. 

BLM Director-Designate Baca has complained that the lack of a 

Federal royalty is a disincentive for hardrock exploration on 

private and State lands [Sen. Hrg. 102-253, on S.433 and S.785, 

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June 11, 1991, at 121]. This cannot be an arg.wnent for destroying 

the incentive that promotes exploration on Federal lands. 

"Leveling the playing field" by imposing the royalty on Federal 

lands, too, will not spread the exploration more evenly. It will 

kill the incentive, the reward for discovery, that drives 

exploration on Federal lands. 

Let me be clear on why a gross Federal royalty would be 

counterproductive. Hardrock mines today run on efficiency; their 

profit margins are small at best and always at the mercy of 

fluctuating world markets, and cost increases cannot be just passed 

through to the purchaser. Most U.S. mineral deposits have marginal 

ores. In fact, profitability is so closely dependent on costs that 

any increase would cause many marginal operations to close 

immediately and others to close sooner than otherwise. This kind 

of cost increase would shrink the recoverable ore body in every 

mine that stays open or is planned. The assessment of a high gross 

royalty, such as the 8% in the Bill or the 12~% in the 

Administration's budget proposal, would force a major part of the 

mining on Federal lands simply to shut down--or not to open. There 

would be no way to mine a large part of the marginal ores 

profitably, and a valuable resource would be wasted. 

I scarcely need add that serious curtailing of domestic 

hardrock mining would reduce the wealth produced in the United 

States, reduce jobs (in a time of still-high unemployment), weaken 

the general economy (and potentially devastate local economies in 

rural areas where the mines exist), and, of course, increase 

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dependence on foreign supplies of minerals and worsen our balance 

of payments and competitiveness as a nation. Moreover, as an 

environmentalist who shares Vice President Gore's perspective on 

the global environment, I would deplore our shipping abroad 

environmental problems associated with mining to nations less able 

or willing than we to employ environmental safeguards. 

All in all, the crippling of a vital domestic industry is too 

high a price to pay for a mistaken interpretation of what would be 

"fair" and for a delusory dream of what revenue might be generated. 

For an irony of the whole thing is that a gross Federal royalty 

would not even achieve the aim of its proponents to produce 

significant revenues. In fact, it would produce very little, if 

any, net revenue to compensate for its dangers--even if very much 

exploration and mining on the public lands somehow continued after 

its imposition. 

One reason is that collecting it would be very costly, would 

necessitate an expanded bureaucracy, and would be extremely 

complicated. Congressman Rahall, in introducing his proposed 

"Minerals Exploration and Development Act of 1990" made this point 

very clearly. He said, "I believe that the federal government 

would spend more money than it would net in attempting to devise 

valuation guidelines, collect and audit royalty payments of the 

almost countless types of minerals, from the widespread to the 

extremely rare, subject to the mining law of 1872 .... • 

Mr. Rahall continued, "Further, as a witness to the years-old 

struggles · to devise federal valuation standards for royalty 

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purposes for what would appear to be a relatively simple commodity 

such as coal, I tremble to think of the dilemma in which Interior 

Department bureaucrats would find themselves in attempting to set 

forth valuation regulations, audit and collect royalties for 

minerals such as yttrium, let alone tungsten or zinc.• 

Mr. Rahall was absolutely right. The Government would be 

faced with the daunting and incredibly expensive task of 

determining how to apply a flat royalty in the face of the fact 

that the 1872 Mining Law exists for at least 80 economically 

significant minerals tracked (more or less) by the Bureau of Mines, 

with tremendous variations among them. Most hardrock minerals 

require, after mining and beneficiation, a lot of processing and 

even manufacturing to establish value. And no two may be alike in 

this regard. The processing-allowance issues in oil, gas and coal 

valuation pale in comparison to the complexity of the "allowance" 

problems there could be with hardrock ores. 

There would be yet another problem, that of developing a 

bureaucracy to undertake the task of sorting out ownerships. The 

120-year history of claim s~aking, with placer claims, lode claims, 

mill site claims and tunnel claims, each located as an independent 

unit, with differing sizes and orientations, has left the hardrock 

mineral estate a nightmare. 

Sorting out ownerships has largely been left to the courts. 

Royalties could plunge the Government into sorting out thousands of 

ownerships at what could be an enormous expense. The attached 

claim map (ATTACHMENT F) is an example of the nightmare presented 

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PUBLIC RESOURCE ASSOCIATES 

by imposing a royalty on Federal lands in a mixed property 

involving extralateral rights. The ore body may be beneath 

unpatented ground, but mined as part of the extralateral rights 

pertaining to patented ground. This ownership complexity does not 

exist with respect to royalties or Federal coal, phosphate and 

potash. Adding burdens such as these would create not only a 

nightmare for the Government but serious uncertainties for industry 

and financing agencies and would even affect adversely MMS • s 

already dubious royalty collection capacity for coal, oil, and gas. 

Yet another consideration is that many royalty proponents have 

illusory notions of the amount of minerals--and hence potential 

revenues--involved. Federal royalties could be levied only on asyet-unpatented producing claims and on as-yet-undiscovered 

minerals. The former are but a fraction of current national 

production and largely in a single State currently, and the latter 

are of course unknown, with gross royalty making them less likely 

to be explored for. 

Considering all this, quite aside from the unfavorable general 

economic impacts identified earlier, a Federal gross royalty 

clearly could not be a significant new source of~ revenue. 

Recognizing the powerful, though we believe erroneous, urge to 

enact a royalty, we turn our focus to the kind of royalty that will 

do the least damage to existing mines and the exploration that 

would find new ones. 

Many of you will recall that in the full Committee markup of 

H.R. 918 last summer, an amendment was narrowly (23-21) adopted 

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PUBLIC RESOURCE ASSOCIATES 

(over Mr. Rahall's objection) that would have imposed an 81 gross 

royalty and that when the Bill was debated on the House floor 

toward the end of the last Congress, an amendment calling for a 

12~% gross royalty was put forward--and soundly defeated. (In each 

case, the royalty would have been added on !QI!. of the land rental 

that was in the Rahall Bill--and still is in H.R. 322.) During the 

debate, in urging defeat of that amendment, Mr. Rahall indicated 

that he and others intended to propose an amendment calling for a 

net royalty of some 5%. They never got ~he chance, because debate 

was cut off at that point owing to adjournment pressures. 

We urge Congress to consider the counsel it has previously 

received. In 1991, Interior Solicitor Designate Leshy testified 

that •a modest royalty• would not "have any effect in hardrock 

mining in this country" (our emphasis). Sen. Hrg. 102.253 on S.433 

and S.785, June 11, 1991, at 231. We .believe that H.R. 322 and the 

Administration's budget proposal are clearly nQ!. modest; we believe 

such royalties would have a seriously adverse effect. The current 

bill is rigid and simplistic in borrowing high rate, gross royalty 

concepts. Other methods of "fair return" to the public are much 

more appealing: for example, Nevada's system of net income taxation 

of minerals extracted in the State. 

Let me stress again that what is desirable is net return, 

above collection costs and other losses. 

Should any royalty be adopted, however, three provisions are 

essential to make it workable: 

authority to reduce the royalty rate in order to conserve 

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PUBLIC RESOURCE ASSOCIATES 

the resource, by enabling recovery from low grade ores of minerals 

that would otherwise be lost. 

provision for royalties paid to be credited against rentals 

owed. 

an exemption for •mom and pop" operations (those involving 

less than 800,000 in gross revenues per year, as was adopted in the 

FY93 Interior Appropriations Act) from royalty. 

Now to ~ second major concern about H.R. 322. As an 

environmentalist, I have been surprised and puzzled by the Bill's 

approach to land Y.!!§. planning. No matter how well intentioned it 

may be, it understandably raises the hackles of prospectors and 

miners, large and small, while actually going at the environmental 

problem the wrong_ lfAY· Te right lfAY we have set out in ATTACHMENT 

B, "ACEC IN, UNSUITABILITY OUT." 

This subject is complex and important. Before going further, 

however, let me make two bottom-line points: identifying, 9£ front, 

areas with environmental values deserving of special protection is 

both wiser and more possible than trying to identify mineralized 

areas prior to exploration. Moreover, creating a whole new system 

of public land management, just for mining, in addition to FLPMA 

for BLM and FRRPA for the Forest Services, is illogical, 

impractical and incredibly wasteful, and the "unsuitability review• 

in Section 204 is the wrong approach. 

Therefore, we recommend that you bring hardrock mining under 

FLPMA. This can produce a win-win balance for the nation• s 

environment and the nation's need for minerals, because the use of 

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PUBLIC RESOURCE ASSOCIATES 

the environmental, ACEC approach of FLPMA can _get us away from the 

all-or-nothing, all-closed or all-open, management of mining on the 

public lands. Access, which is vital in a self-initiation system, 

would be improved, while the protection of es~cially sensitive 

environmental values would be assured. 

The Bill's handling of the admittedly difficult but very 

important problem of reconciling land use planning and surface 

management with the right to mine is just unsatisfactory. We are 

dealing here with a mining law, while a number of other statutes 

deal with environmental protection. 

This Committee over the years has heard from the mining 

community on the need to improve access to public lands for mining. 

The Committee has also heard from the environmental community on 

the inadequacy of Federal land management to protect 

environmentally sensitive areas. In many ways this is the debate 

that led to FLPMA in 1976. Our own research and discussions have 

explored this debate in the context of land use planning, looking 

for a win-win situation where access to mining can be increased, 

while at the same time affording additional protections to certain 

sensitive areas. There are several principles that we think !!!!!il 

be considered. 

First, trying to plan directly for or against mining on all 

multiple use lands is a futile exercise, since the location of the 

hardrock mineral resource, unlike forage, wildlife, water and 

recreation resources--and even unlike coal--is unknown while one is 

planning. Section 204(b) of the Bill, for instance, demands an 

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PUBLIC RESOURCE ASSOCIATES 

impossible instant identification of mineral lands. Rather, the 

approach should be to identify surface resources that are sensitive 

enough in that planning district that the agency plans to protect 

them from conflicting land uses, including mining. This is why 

"areas of critical environmental concern" (ACEC's) are a preferable 

planning designation, or tool: designation is case-specific; the 

areas are controlled but not closed to multiple uses; and the 

restrictions can and should be applied to other commercial or 

impacting land uses, not just mining. 

The second key principle is certainty. If the explorationist 

or developer knows the restrictions !ill front, when going into a 

planned area, the risks of the agency's new "right to say no" are 

known and can be dealt with. What is unacceptable is introducing 

the "right to say no" at the time of approval of the plan of 

operations, after investment in exploration, ore-body delineation 

and mine design. Section 204(c)(2) of the Bill is unacceptable for 

this reason. If the "right to say no" is not in the land use plan, 

adopted in a public process with respect to resources in certain 

areas in the planning unit, it should not be introduced at the time 

of approval of the plan of operations. The only way such a 

provision would be acceptable is if it clearly provided for 

compensation to the miner for the value of the property on which 

mining is now going to be denied for a reason not known up front in 

the land use plan. 

Third, the land use planning "right to say no " cannot just be 

an expansion of the withdrawal system. If a mining use 

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PUBLIC RESOURCE ASSOCIATES 

(exploration, even development) can be undertaken consistent with 

the management restrictions applicable to the ACEC, it must be 

allowed. The "right to say no" that would exist on these 

designated •sensitive lands" should not be a "compulsion to say 

no•, if development could occur consistent with the land use plan 

and the constraints necessary to manage the ACEC lands. Further, 

if exploration could be undertaken consistent withACEC management, 

the results of that exploration could be taken into account in a 

land use plan amendment. Both of these types of flexibility would 

be preferable to the current withdrawal system. 

Fourth, the Bill must recognize that maximum access is 

essential to the health of the industry. If the lands· are not 

sensitive, mining frequently is the highest and best use of tha~ 

very small amount of land that contains a commercial ore body. 

Thus, authorization to "say no" to mining on sensitive lands must 

not be seen as a restructuring of public land uses to "ratchet" 

whole new categories of land into designation as sensitive areas. 

Especially in light of other provisions of the Bill, an aggressive 

review of administrative withdrawals should open lands that are now 

withdrawn for fear of surface patenting or for lack of the right to 

"say no" to mining on "sensitive" lands. When these processes 

(planning restrictions and withdrawal review) are complete, it 

should be possible to have greater access for responsible mineral 

exploration and also broader protection of specific nonmineral 

resources--a win-win situation. 

Fifth, the transition to such a system must be fair . New 

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restrictions should not be imposed without lifting old unnecessary 

restrictions. We suggest the Bill provide that, in any planning 

unit, the new sensitive lands or ACEC designations not be effective 

to change locators' rights unless the administrative withdrawal 

review is completed and effective at the same time. After all, 

under existing law all lands that Congress and the land managers 

currently believe should not be subject to the "right to mine" 

under current law are either withdrawn or under a protective 

management standard (such as "nonimpairment" in Wilderness Study 

Areas) . In addition, resources of special value (e.g., endangered 

and threatened species) are protected under separate legislation of 

general applicability. 

Land use planning should be used to introduce flexibility into 

the hardrock situation--so all lands are not simply totally 

withdrawn or totally open. At the same time, planning must be fair 

and provide certainty, so that a plan of operations is not subject 

to denial, or attempts to reject it, for land management reasons 

that were not stated as an existing basis for rejection when the 

investment in discovering and developing the ore body was made . 

Now let us examine other problems in H.R. l_ll. 

The Bill leaves uncertainty regarding the nature of a 

claimant's rights and property interest; for instance, ownership of 

the mineral is not clearly set forth ( is there a compensable 

property interest?); the right to mine is not clearly expressed; 

and access rights are not expressly stated. PRA ATTACHMENT E fixes 

this. 

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The Bill adds a level of bureaucracy,_ namely, Interior's 

Office of Surface Mining, to be involved in administering hardrock 

mine reclamation, and this is just not desirable, in our view, 

because it would better be left to the States and the Federal land 

management agencies as already explained. 

While the Bill's provisions on reclamation and bonding are in 

line with the current practice of many companies, what are needed 

are streamlined procedures. This includes specific time periods 

for agency action on permits. 

Next, the Bill would withdraw from mining, without traditional 

mineral studies, BLM Wilderness Study Areas and other Study Areas. 

This would create an unwise legislative policy, not of opening or 

closing lands through proper land use planning or Congressional 

action on the specific land, but of simply closing them as a 

general class even though the •nonimpairment• provision of FLPMA 

has protected Wilderness Study Areas adequately since 1976. 

H.R. 322 also appears to change the fundamental BLM land 

management standard from the current •unnecessary and undue 

degradation" standard to "minimize adverse environmental impacts." 

No one is sure what is intended. The deletion of the "unnecessary 

and undue degradation • BLM standard entirely is read by some to 

imply that the land manager can prevent any degradation, i.e., 

minim_ize impacts by prohibiting mining. Such a provision is of 

course a fundamental threat to mining; FLPMA expressly recognized 

that there may be necessary, or due, degradation in mining, and, 

for that matter, in all other multiple uses of public land. The 

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PUBLIC RESOURCE ASSOCIATES 

only way this change is benign is if Section [20l(a)J of this Bill 

were intended simply to make the current Forest Service standard 

for action on plans of operations applicable both to Forest and 

public multiple use lands. This Forest Service standard recognizes 

the right to mine, and observes the distinction between minimizing 

and prohibiting adverse impacts. In other words, under the Forest 

Service standard one cannot minimize impacts by prohibiting mining. 

Some miners and environmentalists agree that an appropriate 

standard could be, "prevent unnecessary degradation and minimize 

adverse environmental impacts." The important thing is to 

distinguish between minimizing and prohibiting impacts. This 

formulation is what appeared in Subcommittee Chairman Vento's H.R. 

1096 in the 102nd Congress and is acceptable as long as the 

Committee Report explains its derivation and meaning consistent 

with this understanding. Our ATTACHMENT D resolves this point. 

At this point, may we suggest that you include two new 

provisions that will improve the Bill significantly: 

( 1) a provision applying the revised Mining Law to 

"acquired lands"--see ATTACHMENT C--so that there will 

one system for hardrock mining nationwide; and 

(2) A set of "Findings" that could serve two .important 

purposes: it could state Congress's recognition that this 

is a mining bill, intended to establish a system that not 

only authorizes but encourages mining, and it could state 

the Committee's goals, against which other provisions of 

the bill can be measured. From a mining point of view, 

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such a set of Findings would include recognition of 

certain facts and principles which are included in 

ATTACHMENT A to this testimony. 

In conclusion, I want to set out in s\lllllUary fashion 

fifteen excellent provisions in H.R. 322, provisions that would 

reform the old Mining Law in ways we, and many others, think highly 

desirable. 

These are: 

(1) Retention of the principle of self-initiation, 

and rejection of a leasing system, to govern exploration 

and claim-staking. This is of fundamental importance to 

a viable hardrock mining industry for this country. 

(2) Elimination of the surface patent, so that the 

surface would remain in public ownership after mining. 

This is of great importance to the environmental 

co11D11unity. We recommend a provision for a patent, based 

on a discovery, limited to minerals only. 

(3) Creation of a single~ of claim, of forty 

acres, tied to land surveys, in place of the old lode and 

placer claims and tunnel and mill sites, and elimination 

of extralateral rights and "uncow.mon varieties" claims--

while, in fairness, preserving the original configuration 

and rights of existing claims. This will help simplify 

both the Mining Law and its administration. 

(4) Inclusion of Section 106 making for further 

simplicity on the ground by having the new law supersede 

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PUBLIC RESOURCE ASSOCIATES 

State laws (though we continue to urge that State 

reclamation laws not be superseded). 

(5) Elimination of the confusing concepts of "pedis 

possessio" and "discovery• as requirements to hold a 

claim during the exploration period, and the substitution 

of a secure type of tenure for claim holders. Although 

many in the mining community have opposed this change, we 

believe this is because their spokesmen had generally 

chosen to oppose any change in the Law and failed to 

concede the advantages of particular changes such as 

this. 

( 6) Very importantly, the provision in Section 

20l(b)(2)(B) for a notice approach for initial test 

drilling, rather than requiring an approved plan of 

operations · at that stage. After all, the essence of 

self-initiation is more than simply being allowed to put 

stakes in the ground. 

(7) Creation of an Abandoned (hardrock) Minerals 

Mine Reclamation Fund. 

(8) Strengthening, as environmentalists have urged, 

the amounts of assessment work required to hold a claim, 

i.e. , requiring increased diligence to reflect a bona 

fide exploration effort, rather than virtually condoning 

the practice of just sitting on a claim indefinitely. 

However, with great respect, we must tell you that the 

dollar amounts in H.R. 322 are unrealistically high. It 

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PUBLIC RESOURCE ASSOCIATES 

would be far better to amend Section 104 to stop the 

escalation at $15 per acre, beginning the eleventh 

diligence year. 

(9) Imposition of a land rental, and optional cash 

payments, in lieu of land-disturbing assessment work, but 

only after an initial exploration period of, say, three 

years in order to discourage pure speculation. Rental of 

the surface is superior as a revenue-producer to 

imposition of a royalty (which there are sound reasons 

for omitting, as has been seenj. However, rent plus 

royalty, as provided in H.R. 322, is bad policy indeed. 

And adding the holding fee of $100 per claim currently 

provided in Interior's Appropriations Act makes it that 

much worse. 

(10) Inclusion of exploration, reclamation and 

environmental studies in an expanded definition of 

assessment work. This has advantages to all. Among 

other things, it will help reclaim and improve previously 

mined areas and encourage direct environmental 

improvement by exploration and mining companies. 

( 11) Provision of a liberalized group assessment 

work feature for contiguous claims. This would be 

welcomed by explorationists. However, the group should 

have some limit, say, 1000 acres of reasonably compact 

size that would include all claims, contiguous or not, 

that benefit the exploration effort. This would prevent 

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PUBLIC RESOURCE ASSOCIATES 

an existing producer from spreading _assessment work over 

an entire mineral trend. Excess expenditures in one year 

might be carried forward for a period of time, say three 

years. 

( 12) Imposition of penal ties for knowingly and 

willfully filing false diligence statements. 

(13) Replacement of the arbitrary "five-acre rule" 

on BLM land with the more general provision of allowing 

initial test drilling under a notice, cited in (6) above. 

(14) Provision for review of lands administratively 

withdrawn from mining exploration. This withdrawal 

review will be welcomed by the mining industry and is 

also in the national interest. Future complete 

withdrawals would become unnecessary and unwise except in 

very special situations. 

(15) Provision for each Federal land agency to take 

minerals management responsibility for its own lands. 

I believe that most of these fifteen points are either selfexplanatory or have been discussed at sufficient length in earlier 

hearings, so I shall not elaborate on them further. 

Thank you. 

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ATTACHMENT A 

AMENDMENT TO H.R. 322 

"Findings" 

Amendment • Section 101 of the Mineral Exploration and Development 

Act of 1993ul amended by inserting a new subsection (a) and renumbering 

t~e subsections accordingly, with the new subsection _(on page 2, line 4) 

to read as follows: 

"(a) congress finds: 

"(l) Hardrock aining aakes a substantial contribution to the nation's 

tax and eaployaent base, especially in rural counties and in the 

western states wh_ere the United States is the principal landowner; 

"(2) the hardrock aining industry and its domestic operations make a significant contribution to ·our standard of living and ' to the 

United States balance of payaents; 

"(3) hardrock m1.n1.ng _ has an essential siting requirement that 

distinguishes it from other industrial activity--it must be sited 

where the ore is; 

"(4) real access and self-initiation, and reward for discovery of 

commercial minerals, are necessary incentives to maintaining a healthy hardrock mining industry; 

"(5) mining requires adverse environmental impact, and mine regulation 

cannot prevent or prohibit all adverse impacts, but should control 

and mitigat_e impacts; 

"(6) federal land use planning should be employed to protect significant resources that deserve protection from all public land uses, and 

should not be eaployed to discriminate against mining as a public 

land use; and 

"(7) regulation of mining must be cost beneficial, both on the local and 

the national level; recognizing that (A) on the local level, on public, multiple use lands mining is often the highest and best use of the land; and (BJ on the national level, regulation under the 

bill should not adversely affect the competitive position of the 

hardrock mining in the United States, or otherwise encourage the 

mining industry to move offshore." 
440 

ATTACHMENT B 

AMENDMENT TO H.R. 322 

"ACEC's In, Unsuitability out" 

Amendment (a) Subparagraph 201(g) (1) (D) of the Mineral 

Exploration and Development Act of 1993 is amended by adding before the 

period (on page 33, line 23) the following, ", or, if the area is so designated, the right to mine is protected under section ·204(d) of this 

Act". 

(b) Section 204 of the Mineral Exploration and 

Development Act of 1993 is amending by deleting the entire text and 

substituting the following: 

"SEC. 204. LAND USE PLANNING; AREAS OF CRITICAL ENVIRONMENTAL CONCERN 

"(a) PLAN AMENDMENTS. -- The Secretary shall amend each land use 

plan under his or her jurisdiction to implement the provisions of this 

section, consistent with the provisions of Section 202 of the Federal 

Land Policy and Management Act of 1976 or the Forest and Rangeland 

Renewable Resources Planning Act of 1974, as amended, as appropriate. 

This land use plan amendment should occur in the existing planning cycle 

in planning units where there is little or no exploration or mining 

under this Act, and should occur as an amendment to implement this 

section in planning units where there is significant exploration or 

mining under this Act. The Secretary shall, after notice and comment, 

publish a tentative schedule and a classification of planning units for 

purposes of these amendments, taking into account the policy of this 

subsection. 

"(b) (1) PLAN DECISIONS GENERALLY. -- Each land use plan amendment 

under this section shall examine the possible designation of Areas of 

Critical Environmental Concern in which the provisions of this section 

would apply because of a planning decision to protect ~ specific 

resource by such designation. Each such amendment shall also examine 

any such Areas already designated. 

"(2) The resource values that may support such a designation 

include those that have supported such designations made prior to 

enactment, those listed iri section 522 (a) (3) of the Surface Mining 

Control and Reclamation Act (30 u.s.c. 1272(a) (3)), and other 

significant resource values identified in the land use plan as supporting such a designation. 

"(3) The Secretary may by rule establish a list of resource 

values that land managers may consider as supporting the designation of 

such an Area; Provided, however, that in no such rule may the Secretary 

compel land managers to make such a designation in all cases, unless 

required by other federal law; and provided, that land managers must 

have discretion to determine that a given resource, because of 

conditions of climate, abundance, replaceability, or otherwise, does not 

support such designation in any specific case in that planning unit. 
441 

"(4) In designating any such Area, the 

establish the conditions for • itigation, or 

prohibition, of otherwise lawful multiple uses of 

impacts on the identified resource . 

plan a• endllent shall 

the conditions for 

public lands based on 

"(5) Any such designation, and any conditions for .use of such 

Area, shall be subject to modification or termination in any subsequent 

revision of the land use plan, and any land use plan revision may 

include new designations of such Areas or conditions for use of existing 

Areas. 

"(c) EFFECT -OF DESIGNATION GENEJlALLY . -- (1) The Secretary may not, 

subject to valid existing rights, approve any use of federal land that 

would violate the conditions adopted in the land use plan for any 

designated Area of critical EnvirollJlental Concern. 

"(2) The secretary shall not, because of such designation, 

disapprove any use of federal land that may affect the designated Area 

so long as that use is consistent with the conditions of replacement, 

mitigation, or allowable impacts adopted for such Area in the land use 

plan. 

"(d) EFFECT OF DESIGNATION ON MINING. (1) On federal land 

subject to this Act and not designated an Area of Critical Environmental 

Concern, the right to mine in section 102(b) of this Act, and to have 

the Secretary approve the plan of operations, is not limited by this 

section. 

"(2)(A) On federal land designated an Area of Critical 

Environmental concern, the holder of a claim located after such planning 

decision, and the holder of a claim located prior to such designation 

but for which no plan of operations under section 20l(c) has been 

submitted, shall be subject to the conditions prescribed in the plan 

with respect to such .Area. 

(B) On federal land designated an Area of Critical 

Environmental concern after location of the claim(s) and submission of 

a plan of operations under section 20l(c), the claimant shall be subject 

to mitigation conditions adopted in the land use plan; proyided, 

~. that a condition resulting in prohibition of mining shall not 

be imposed on the claimant in such circumstances unless the Secretary 

compensates the claimant from the Fund established and maintained under 

section 301 of this •Act for the value of the property taken by such 

prohibition." 

"(e) RELATION TO WITHDRAWAL REVIEW. -- (1) As part of the first 

land use plan a• end• ent or revision under this section, the Secretary 

shall review all adJlinistrative withdrawals of land from location of 

mining claims to determine whether revocation or modification of such 

withdrawal to allow the location of claims under this Act would be 

appropriate in light of: · 
442 

"(A) the existence of the authority under this section to 

protect, or mitigate impacts to, a resource from other multiple uses including mining; 

"(B) the land management requirements of section .201 of this 

Act; or 

"(C) the limitation of section 107 of this Act. 

"(2) The decision to revoke or modify any withdrawal reviewed 

under this section shall be made in the same land use plan amendment as 

designates, or sets conditions for managing, any such Area under this 

section. The Secretary of the Interior shall complete the ministerial 

withdrawal action under section 204 of the Federal Land Policy and 

Management Act of 1976 to implement revocation or modification decisions 

made under this subsection at the same time as, or as closely in 

conjunction as possible with, the adoption of the land use plan 

amendment." 

(c) Section 205 of the Mineral Exploration and 

Development Act of 1993 is amended (on page 77, lines 21-23) by deleting 

paragraph 205(a) (4) and renumbering the succeeding paragraphs 

accordingly. 

(d) Subsection 301(a) of the Mineral Exploration and 

Development Act of 1993 is amended (on page 81, line 23) by adding a 

paragraph (8) to the new subsection 422(a) of the Surface Mining Control 

and Reclamation Act of 1977, to read: 

"(8) As provided in section 204(d) (2) (B) of the Mineral 

Exploration and Development Act of 1993, payments to compensate a 

claimowner whose plan of operations is disapproved because of a 

prohibition in a land use plan not in effect at the time of submission 

of a plan of operations for the claim(s) under section 201(c) of that 

Act. 11 

EXPLANATION. The Committee must provide a relatively neutral land use 

planning provision that is prospective, that is, it must not be designed to prohibit the development of minerals discovered prior to enactment, 

or discovered before the protective land use planning decision is made. 

A neutral and prospective system can be designed using the current FLPMA 

concept of the "Area of Critical Environmental Concern" (ACEC). Using 

this provision the amendment provides for a land use planning decision 

that: 

o is prospective, recognizing variances for already-discovered 

deposits where regulation, not prohibition, should be the rule 

o plans to protect the identified resource value from 

destruction or harm from fil!Y multiple use activity otherwise lawful on 

public lands--powerlines, grazing, recreation, other mineral 

development, etc. This way planning protects significant resources, and 
443 

sets conditions for. potentially conflicting use, rather than simply 

trying to preclude • ining. 

o allows flexibility, i.e., it promotes an outcome somewhere on the spectrum other than the extreme of no consideration of mining or the 

extreme of destruction of the other resource. ACEC management can condition destruction of the resource .(wildlife habitat, recreation 

site) on a replacement project yielding net benefits (more habitat 1 

elsewhere Al}g mining jobs and revenues) in permitting. "Unsuitability" 

perpetuates a 1970's "I win-you lose" mentality beyond both industry and 

the Congress • ust • ove. 

o allows withdrawal review to consider opening lands under this 

new, flexible land management possibility of allowing some kinds of 

mining, or mining with mitigation, on land that now is totally closed to 

prospecting and consideration for mining by withdrawal. 

o if and when the new "right to say no" is exercised, there is 

compensation for those who have discovered a mineable ore body and 

initiated the steps to do so prior to the designation of the land as an ACEC. 
444 

ATTACHMENT C 

AMENDMENT TO H.R. 322 

"Acquired Lands and Eastern Public Domaip Lands" 

Amendment • Section 102 of the Mineral Exploration and Development 

Act of 19931s amended by adding a new subsection (c) (page 8, line 15 

and following) to read as follows: 

"(a) Subject to valid existing rights (including mineral prospecting 

permits and leases) , the provisions of this Act shall apply to all 

acquired lands of the United States that are managed by the Bureau of 

Land Management or the Forest Service for multiple use, to the same 

extent as those lands would be subject to the operation of this Act if 

those lands were public domain lands. 

"(b) Subject to valid existing rights, the provisions of this Act shall 

apply to all public domain lands managed by the Bureau of Land 

Management and the Forest Service, that have not been subject to the 

operation of such law for whatever reason (including but not limited the 

fact that such lands are located in a state east of the 100th Meridian 

to which the Mining Law of 1872 has not previously applied), to the same 

extent as those lands would be subject to this Act if those lands had 

previously been subject to the operation of the Mining Law of 1872. 

"(c) Subsections (a) and (b) of this section shall take effect on the 

first day of the first month that begins after two years from the 

enactment of this Act. The Bureau of Land Management and the Forest 

Service shall review all such lands within this two-year period and the 

Secretary of the Interior shall, under section 204 of the Federal Land 

Policy and Management Act of 1976, 43 u.s.c. 1714, make, modify or 

revoke withdrawals affecting such lands as may be appropriate to open, 

or to close, such lands to the operation of this Act." 

EXPLANATION: This section puts exploration and development ~f hardrock 

mineral resources on the millions of acres of acquired lands managed by 

the Forest Service and BLM for multiple use purposes on the same footing as public domain lands, with the same incentives for self-initiation and 

rewards for discovery and development applicable on public domain lands. 

It also opens to the operation of the new law those several areas, 

chiefly in the upper Midwest, where public domain land with some 

hardrock mineral potential has not been subject to any viable 

disposition regime. These openings of land would not open land 

withdrawn by Congress as wilderness, for example, or designated for 

exclusive use or management by any Order or statute that precludes 

mining or hardrock mineral leasing. Finally, this section has a delayed 

effective date that will allow the two land management agencies time to assure that these newly available lands are properly classified and 

either protected or opened when the section becomes effective . 
445 

ATTACHMENT D 

AMENDMENT TO H.R. 322 

"'Unnecessary degradation' Land Management Standard" 

Amendment Section · 201(a) of the Mineral Exploration and 

Development Act of 1993 is amended by inserting (in page 26, line 3) the 

words "prevent unnecessary degradation," after "conducted so as to" and 

before "minimize adverse enviro1111ental impacts". 

EXPLANATION: The bill as introduced omits any use of the BLM land 

management standard in section 302(b) of the Federal Land Policy and 

Management Act (FLPMA), 43 u.s.c. 1732(b), that the secretary act "to 

prevent unnecessary and undue degradation" of public lands, and the 

amendment continues the standard. Without this amendment, there is an 

implication that the "unnecessary and undue degradation" standard would 

continue to apply to all other public land uses, but not hardrock 

mining. There should not be different land management standards 

governing different activities on the same multiple use BLM lands. And 

there should not be different management standards applying to the same activity on BLM and Forest Service lands. Having both standards in the 

bill continues the usage and meaning of the phrases applicable to BLM 

lands under FLPMA, and national forest lands under Forest Service 

authority, and recognizes their equivalence. The standard in the 

amendment uses Chairman Vento's language from H.R. 1096 in the 102d 

Congress. 

If this amendment is not made, then the committee report should 

establish that this section 201(a) does not change the standard 

applicable on either class of lands; rather, it recognizes that the two 

separate phrases the two agencies had used are effectively one and 

consistent, and the bill simply uses one phrase so that consistency will 

be maintained. This language should be in the report: 

"The bill as introduced omits any use of the BLM land .J!lanagement 

standard in section 302(b) of FLPMA, that the Secretary act •to prevent 

unnecessary and undue degradation' of public lands. The Committee was asked to reinsert this standard in section 201, and did not do so because it was not necessary to do so. That is, the Forest service's 

existing regulatory standard, used in the bill, and the BLM's FLPMA 

standard mean the same thing and have been consistently applied by the two agencies~ Both agencies recognize that adverse impacts to surface 

resources occur both while exploration and mining are being conducted, 

and in final reclamation, where not all impacts can or should be 

reclaimed to prior condition. Both agencies recognize, and this bill 

continues the law, that "minimize" does not mean "prohibit," and that 

management means preventing adverse impacts that are not necessary to a 

properly conducted exploration or mining operation given the type of 

ore, topography and circumstances. If prohibition of mining is 

necessary by reason of conflicts with other resources, section 204 of 

the bill is the section under which prohibition of mining is to be 

effected, not under the section 201 land management standard." 
446 

ATTACHMENT E 

AMENDMENT TO H. R. 3 2 2 

"Improved Definition of Locator's Rights" 

Amendment Section 102(b) 

Development~t of 1993 (page 8, 

follows: 

of the Mineral Exploration and 

lines 8-14) is amended to read as 

"The holder of a aining claia located or converted under this Act 

and aaintained in compliance with this Act shall have the exclusive 

right to explore for, develop, aine, produce, and dispose of all 

ainerals subject to location within the boundaries of the claim, the 

right of access to the clai•, and the right of possession and use of the 

claimed land for • ineral activities, and the right of ingress and egress to such lands for such activities, subject to the rights of the United 

States under section 108 and Title II." 
447 

A1TAaDmNTP 

0 200 400 600 

Mining claims in a pan of 1hc East Tintic dis1::-:1. Utah. 

.. " ' ' '- ' ' 

-----.71 

~ / I 

'-"' / I 

/ I 

/ I 

I 

I 

The :apca 1·ulc-cJllr:1l;11c1al 1i1:l11s. I he.: t\Jci d.1111 : 11t ludc.·:'\ tlu· 111:hl '" 1111m· 

1hc vein beneath the Tuna claim. 

from bploralion and /tCuiing Geology 

by William C. Peters 
~ational J\ssociation of ~itiing ~istrids 

Teatiaony ot: 

Robert A, Sanreo,ret, A,B,, 11,B,A,, J.D, 

Executive Director ot '!.'be lfATIOIIAL ASSOCIATIOII OP ICDfDrG DISTRICTS, 

In Opposition To BR,322 

(•Th• Mineral Exploration and DeYelopaent Act ot 1993•) 

a.tore The 

U.S. ROUH OP REPRBSBIITATIVBS 

Subocmaitt•• on Energy and Mineral Re• ource• 

ot the 

eo.aittee on llatural Resource• Ron. Ricbard R. IAtman, Subocmaitt- Chairaan 

at 

1324 LoftCJVOrtb IIOllH Ottice Building Wa•billlJton, D,C. llarcb 11, 1993 at 9:45 A.IC. 

Kr. Cbainaan and Kaber• ot the S~itt-: 

Thank you tor allowing tbe llational A•• ociation ot Mining Diatricta 

("NAIID•) to preaent it• vieva in oppoaition to RR,322 (•Tb• Mineral 

Exploration and Develoiment Act ot 1993•). KAICD ia joined by the Pacific 

Mining A• aociation, the wutern Mining council, and aany other• in tbeir 

oppo• ition to RR.322, and in as,po• ition to otber •fforte to repeal th• 

current U.S. Mining Lav'• etticiently-operating incentive ayat- ot aineral 

exploration and d• velopaent. RR,322 vould repeal the Mining Lav and would 

replace it with a burden• .,.. acreage-baaed •1u-1t- •ya~• con• iating ot 

ra• trictiv• tw and ragulation• tantaaount to the nationaliaation oi the 

u.s. aineral exploration and developa• nt industry in the Weat• rn united 

State•• 
449 

I. IHTRQQUCTIQN 

The National Asaociation of Mininl, Districts ("NAMD") ie an 

association of Mining Districts ae authorized under the enabling clause of 

the United states 1872 Mining Law (30 United states Code, sections 21 et 

seq.), as follows: 

"Jlin.i.ng District Btgulation Ill llinn:a: .•. The •inere of each 

district aay aake regulations not in conflict with the laws of 

the u.s., or with the laws of the stata or territory in which the 

district is situated, governing the location, aanner of 

recording, llJIOunt of work necessary to hold poeeeeeion of a mining claim ••• [markings on the ground, records, information 

needed on location notices], etc." 30 u.s.c., • action 28. 

The NAMD represents the thousands of mineral prospectors 

("explorationists") and •ineral developers, active today throughout the 

United States, inciuding on the public land in the Western United States. 

For purposes of identifying the NAMD and its progrps, a copy of the "NAMD 

1992 Report on Progr ... and Activities• is attached ,to this statement. 

Most major mines end •oat ••jor •inerel deposits in the United states 

have bean discovered by independent individual •inarel prospectors under 

the u.s. Mining Law. 

The U.S. Mining Law consists of hundreds of statutes, regulations and 

court decisions dating from 1807 to the present time. The 1872 General 

Mining Act is one of about 65 separate •ining statutes, and is an important 

part of the u.s. Mining Law; but it ia erroneous to refer to the current 

composite U.S. Mining Law as •an old outdated statute,• because there are 

hundreds of interrelated •Mining Lava• (atstutaa, regulations and court 

decisions) which have bean continuously amandad and updated, resulting 

today in the present clearly-defined and pred~ctable set of groundrules for 

efficient private mineral exploration and development on public land. 

The u.s. Mining Law operates today to efficiently locate, identify and 

2 
450 

develop aineral• on public l • nda, snd -ha• been aptly referred to a• •the 

world's praaiere r911llining exaapl• of sn incentive-based free enterprise 

system at work.• The united Stat•• nei.da aineral exploration and 

developaent under the Mining Law today aore than ever before. For example, 

the foraer Soviet Union lost the •cold war• largely becau• e we were lll!!n 

productive, particularly including our efficient aineral exploration and 

developaent under our Mining Law. The U.S. ~in• •trong today, deapite 

the fact that the foraer soviet Union, Ruaaia, Mainland China, and other 

countrie• have very aubatantially • ore aineral potential and aineral 

reserves than the united State•• 

Russia, Mexico and China have • any tiae• the aineral potential of the 

United State•• These foreign power• are • lowly but • urely figuring out the 

free enterpri•• • y•tea and our incentive-baaed Mining Law; snd when they 

do, they will be in a position to "bury ua• econoaically, aa they have been 

unable to do ailitarily. Dia Jd.ll tlAPPml, unl••• n keep our own mineral 

eXPloration snd developaent induatry alive and well under the pre• ent 

Mining Law. HR,322 would deva• tate the incentive-baaed aineral exploration 

and development in the United Stet••• 

The efficient development of ainerals under the U.S. Mining Law has 

been a direct and significant rea• on that the United States has remained 

economically and militarily strong froa the days of the Civil war, through 

both World War•, to today; and the U,S, Mining Law ahould not be repealed 

by HR.322. 

Kr. John A. Knebel, pr••ident of the Allerican Mining Congresa, • tatad 

on ABC's "Priae Tim• Live• that th• united State• would be a third-rate 

power today if it were not for the effective mineral eXPloration and 

development under our incentive-baaed U.S. Mining Law. 

Today the United state•, and ao• t of the world, are abaolutely 

3 
451 

subservient to Russia and south Africa tor virtually allot our chrmiiWD, 

rhodium, platin11111, and other essential ainerals. It is a distinct 

possibility, if not a probability, that the United States and aany other 

countries will be subject to political and financial extortion by 

unfriendly foreign mineral cartels, which would be auch •ore serious and 

damaging to our productivity and to our national security than were the 

envisioned oil criaea ot the 1970'• and ot 1991, 

In fact, to aore fully develop our own liaited aineral potential, the 

NAMD joins with the Western Mining council, the Pacific Mining Asaociation, 

and many others in atrongly recoaaending that the incentive-baaed U.S. 

Mining Law not be destroyed by HR,322, but, rather, that the u.s. Mining 

Law be expanded to llipecifically include the following: 

(a)~ acquired l.llml. in all states and territories; and 

(b) ~ ~ l.llml. to the 200-aile Hait, 

Our valuable national raaource of efficiently utilizing the saltinitiation and incentive ot private citizens under the Mining Law to 

explore for ainerala and to develop ainea lit, 112 ~ ;tsi j;la lllll!lli should 

not be destroyed, as it would be under IIR,322, 

II, ml EBIDlr.C IWWfri .LU .1111! IWlll!AL PATJRITXHG "1LL 

Almnm DU ml 11..,,L_ BM l lG!1l!I .1111! IDILI DQQSTIC 

~ ~ IIARDR0Clt KDQSRAUI. 

The incentive ay• t- of our present Mining Law encourages citizens to 

conduct aineral exploration and developaent on the u.s. public lands. Thia 

ayatea operates to effectively locate aineral deposits, and our Mining Law 

' 
452 

penait• and encourage• the locator to either develop a ain• or to identify 

and "inventory• the aineral• for future extraction. 

In 1955 one of the aany aaendaent• to the Mining Lav initiated the 

concept of "Multiple U••" of public land•• The Multiple U•• concept has 

operated efficiently on public land• in the Weetern U.S. over the last 27 

years. Today a aineral pro• pector or ainer doe• not have the exclu• ive 

possession and use of hi• aining claia until the claiaholder ha• patented 

the land by proving the preeence of a eub• tantial aineral diecovery and a 

developaent plan that i• feaeibl• and rea• onable. 

Mineral patent• have been the • ubject of substantial recent 

discussion, and patenting • eeaa to be widely aisunderstood. Mineral 

patenting is the incentive and protection provided to good faith aining 

claim locators. This protection i• the exclu• ive right to minerals given 

to the U.S. citizen who di• cover• a aineral deposit, and the citizen's 

right to acquire title by a patent. The aineral pro• pector•• incentive and 

reward for aalcing a valuable aineral di• covery i• the pro• pector•s 

aeaurance under the Mining Lav that he aay develop the aineral deposit, and 

get a mineral patent. Under the preeent sy• t- there i• no up-front 

subsidy by tha federal govarnaent, no "•ub•idy payaant• for not 

prospecting, and thara i• no payaent for not producing. Only a vary small 

percentage of aineral exploration pro• pect• result in profitable aines. 

During the •ineral pro• pector•• exploration and developaent activities, the 

prospector is specifically prohibited fro• unduly degrading the land or tha 

environment, and the land mu• t be •reclaiaed" after the aineral• have been 

mined. 

Th• NAMD, and all reeponaible aining a•• ociationa, • trongly oppose the 

illegal u• e of aining claia• and fraud in patent application•• The u.s. 

Mining Lav and ainaral patent • y• t- ahould not be faulted and deetroyed 

5 
453 

just because of the bad faith or fraud by an occasional di• honest patent 

applicant (which is almost invariably exposed, and no patent issued). such 

hasty action would be like closing dowh all of the Interstate Freeways 

because they are occasionally wrongfully used by drunk drivers or bank 

robbers. 

The unrestricted mining methods of the 19th Century are a thing of the 

past. Today U.S. mining is already subject to more federal and state 

regulations and environmental controls than anywhere else in the world. 

Without the incentive, access and security of the U.S. Mining Law we 

would not have our present mineral exploration and developaent system 

operating efficiently in the United States today. The existing incentivebased system of mineral exploration and development under the existing 

Mining Law will con'tinue to effectively locate, identify and secure a 

stable domestic supply of minerals, as it has for ~he past 150 years. 

III. IDmlB HlL.1li '.r.111 l1HlllJ2 a:u.Dll. 1f2llU! )!Qi'. BAYI A 

YmLI ~INDUSTRY.IN ffll DAB .a.l!.QQ Allll J!llQHl2. 

Despite the title of HR.322, the "Mineral Exploration and Development 

Act of 199311 would stop and destroy most United states mineral exploration 

and development by its heavy-handed acreage-based "lease/fee system," 

tantamount to nationalization. An oppreaive royalty of SI to 12.51 would 

make mine operation impossible for moat of the present already overregulated U.S. mining operation• The bland analogy to oil and coal 

royalties i• inaccurate and mi• leading, •iaPlY becaua• the mineral 

occurrancea and mining operations are vastly different, in that oil and 

coal occur in relatively large pool• or beds, with the coat and percentage 

6 
454 

of •waate• a •iniaull. 

Under HR.322, or under any aubatantial •royalty ayatea,• a aubatantial 

amount of our preaent incentive-baaed o.s. aineral exploration and 

development would 6ml, becau•• aoat individual• and exploration companies 

would be put out of buain••• by the reatrictive additional fee•, royalties 

and regulation• under HR.322. Today•• aineral exploration and development 

by thousand• of individual• and firms would be difficult or impoaaible 

under HR. 322. 

If u.s. mineral proapectore are prevented froa diacovering and 

developing new •inea under HR.322, the direct reault would be that when the 

present •inea are exhauated, only a few of the financially strongest aining 

companiaa would be able to develop new location• under HR.322'• the array 

of eiciating and nwHR.322 •anti-•ining• la- and regulations. The result 

would be the 1XP9rtinq of auch • ore ot our aineral, __exploration and 

development, the exporting (l-•l ot thouaanda of u'.s. jobe, and 

buain•••••• an increased u.s. trade deficit reaulting troa the purchaae of 

foreign •inerala (while our• 11• •tall-• and undeveloped), and 

aubaervience to foreign •ineral aourcea. Th• several u.s. oil •crunch••• 

or th• laat 25 year• draaatically d..onatrata the obvioua detriment to the 

United state• being dependent upon and aubaervient to unreliable foreign 

cartel• and foreign aourcea tor oil, 2X w aineral•. 

HR.322 1• an anti-.ining law thinly di• guiaed •• a •revenue-raiaing• 

and •environmental• law. IIR.322 ahould not be anacted without full 

Bnvironaental and Bconoaical IJt1N1ct Mporta, or at laaat with a detailed 

analy• ia and conaidaration by the Conqre• a of the billion• ot dollar• of 

negative econowJ,c effect•, including the dutruction ot -•tot the 

eici•ting u .s . public land aining operation. A rupon• ible American 

accounting firm, cooper• and Lybrand, utimeted that the co•t ot the 

7 
455 

re• triction• equivalent to thoH in BR.322, would be fr- $2-billion to $4-

billion aMually in lost r• v• nua and lo•t econ011ic activity, Ami a lo•• of 

fro• 10,000 to 30,000 job•• 

HR.322 ia propo• ed a• a •revenue raiaing" bill, 12Jtt HR(322 will not 

raia• • ubatantial ·rev• nu•, and will coet IIUch mor• ·than any r• v• nue raia•d. 

Th• real frightening and • pecific agenda of many· d•voted proponent• of 

anti-mining legi• lation • uch a• BR.322 under the gui•- of •revenue rai• ing• 

or environmental law•, i • to nd, ~ :IID1tad IYtAa gt lliniDsl, of all 

mineral exploration and ·dev• lopaent, and of' All deyalPPMl)t. 

Bven now, the continuing detrimental "chilling• effect of many of our 

existing law• and regulation• • hould be fully examined. Of • pecific 

critical conc• rn are th• many thou• and• of job• and billion• of dollar• 

lo• t or endangered 'by erroneou• and pr•-ture conclu• ion• and regulations 

under certain •environa• ntal law•,• under the Bnd~ared Specie• Act and 

under •wetland• • law• • Th••• • nvironmental l • w• , and particularly th• 

Endangered Specie• Act, heve already d•• troyed thouaanda of u.s. job•, have 

•exported• many bu• in••••• to for• ign countri••, and have cr• at•d 

CUJlber•o- new layer• of bureaucracy, •purr9d on by th• private well-fund•d 

environmental activi• t group• pu• bing their not-• o-hidd• n agenda of "lls! 

Deyelom,9nt. ·lls! lli.l1ing and lls! QU• in the We•tern United stat••• 

Be• idea being • ubject to the ·• tricte•t •nviro-tal regulation• in 

the world, American miner• and pro• pector• today • re very 11Uch 

•• nvironm• ntali• t •,• and do 11Uch :aor• for the 'pra• ervation of wildlife and 

the environment than do :ao• t of thi• oountry•• •trident environmental 

activi• t •• U.S. •ining today doe• not hurt or d•• troy th• enviro,...nt. 

Miner• do not kill aniaal• I and in fact, aining activity he• • ub• tantially 

increa• ed the number• and well-being of IIUch wildlife, • pecifically 

including th• De• ert Tortoi••, ·Bighorn Shffp ~ other wildlife. 

8 
456 

The United stat•• aineral exploration and developaent induatry today 

i• operating efficiently and in coapliance with the currant •trict 

environaental control•: lallt, Hlt.322 could well be th• s.m&R a SKAa to end 

our efficient incentiv•-ba•ed •Y•ta of aineral exploration and 

developaant, which would •ubetantially decreaM the future productivity and 

th• future ailitary and induatrial •trenlJth of the '!Jnited statu. 

Tb• United statu will mg bave a viable aininrJ induatry in the year 

2000 and beyond, under Hlt.322, becaue the preaent incentive-baMd aineral 

exploration and developaent •infrutructure• would be devHtated by th• 

re•trictive acreage-baMd •leaM/fM •yeta• and by the~-

nonproductive, or anti-productiye, reetrictiOM of Hlt.322. 

IV• ml mDll IDDI Jmllllll lJl!:111 ~ IWlll!6,t. PRQSPICTQRS 

m ~ IPPTJn AG •1•YVJOBX• iwfmL PIPQSJ:TS 

Ko•t of the aineral diecoveri .. in the ... tern united Stat•• have been 

aade by independent private citisene under the u.s. Nining Lav. Many of 

th••• aineral di•coveri•• bave reeult• d in aajor aine•, with eaeh aine 

coaplying with •trinrJant environaental control• and reclaaation 

raquireaent•• The incentive for -- citi• an-pro• pector• ia th• Kinin<J 

Lav which provid .. an opportunity for u.s. oiti• ene to proepect for 

ainaral• on public cloaain land, without dulaqing or degrading the land. 

Tb• aajor U.S. aininrJ coapani .. a.,ree that approxillataly 70-801 of their 

ainea have coaa frca diacoveri .. by individual citisene pro•pectin<J for 

ainerala under the current U.S. Kining Lav. 'l'lle. califomia c::haaber of 

Coaaerce hH atated • pecifically that: •Kininq corporation• -uld be 

, 
457 

crippled without th• aid of the individual proapectora to help in th• 

location and identification of future •ineral depoaita.• 

Today the ·Mining Law is efficientiy maintaining an efficient and 

productive ayat .. of locating, identifying and "inventorying• •inerala for 

future develop .. nt and use, at D2 ~ ~ 1;bA ~. 

The thousand• of private citizen• who regularly explore for •inerals 

in the united state• do not degrade the environ.ant; the• e u.s. citizens 

are fully subject to atrict environ.ental control•; and all u.s. •ineral 

developers must •reclai•• the land after their work i • cOIIJ)leted. 

Mineral exploration and development equipment today ie vaetly superior 

to that of 10 to 50 years ago, Today•• efficient exploration methods and. 

equipment enable mineral proapectora to locate previously hidden or unknown 

mineral depoa!ta. 'Modern efficient proceeaing and development .. thods •ake 

many previously uneconomic low-grade depoaita c~ially feasible today. 

The mineral diacoveriea by citizen-prospector• today provide an 

efficient low-cost syate• of finding previously unknown •ineral deposits on 

the public lands of the United Statea. For example, it has been recently 

reported that private citizen-prospectors have discovered cOllllercial 

deposits of cbromiUlll, manganese and platinUlll in California, which if true, 

would help to eliminate our dependancy upon foreign sources for these 

essential minerals. Such •inerai deposits cannot be identified and 

"inventoried" without theae citizen• exploring for •inerala under the u.s. 

Mining Law. 

There are .any vorld-claaa •inea •in the Western United statea which 

were diacoyart4 m! individual~ pro1P9Qtora, looking in areaa not 

previoualy known to contain c-rcially valuable ·•ineral depoaita. Thea• 

.. jor mine• include Molycorp'a •11ountain Paaa Kine• ( .. jor world aource of 

rare earths), Gold Fields Kining Corp.·• "Mesquite Kine• (over $80-•illion 

10 
458 

annual gold prod.uction), and u.s. Borax Corp.•• •aoron llin•• (601 at the 

free world's borate•), Th••• aajor aine• in California, and aany others 

elsewhere throughout the we•tern United state• would never have been 

developed without the incentive• under the llining Law, There are thousands 

of persons~. and • everal in thi• rooa, vho regularly go out 

prospecting tor aineral• on u.s. public lan.S., 

The U.S. Mining Law provide• aineral proapector• with incentive• in 

that it a citizen-pro• pector finds a aineral deposit, then that person 1aay 

develop a aine, g 112 ~ ~ tll9 ~-

HR'.322 and patenting are not •environaental ie• ue•• • u.s. aining and 

mineral exploration ie the aoet heavily reguleted in the world, and aineral 

patenting today i• very clo• ely aonitored and controlled. The organized 

groups of environaental •activiet• eupporter• of HR,322 aust be recognized 

for their unreaaonable anti-aining agenda of •Mo Mining, Mo Oil and Mo 

Developaent,• anywhere in th• United State•, 

Th• American Mining Congre• e ha• •tated that: •The contribution of 

the e1aall ainer to the •• arch for n- aineral wealth i• aub• tantial, 

[and],,, both the executive and legielative branche• of governaent aust 

assure the s1aall ainers• continued access to public lands to search tor, 

develop and produce new aineral wealth without the fear that he will be 

unable to enjoy the fruits of his labor•.• 

V, IIL.ll.a. JfmlLll !KCBII&! ~. JJIIIIPIQYJQHT aHE! lf!2ll1.D IllCRJASI 

2.d... 1'lWm rn U ACS'!IIB!Tl:JJG DI UQll!m Ql IWlll!AL 

PRQDQCTJQH CQMPMJU l&2II DI IIJlllG .llTAfH.. 

One ot the aost • igniticant peraanent econoaic effects of HR.322 would 

11 
459 

be the increase in the U.S. trade deficit caused by our i,wporting more 

foreign minerals rather than eXPQrtinq th .. fro• the United States. 

Particularly in the present economic r~ceaeion, our nation needs to 

sti1DUlata the creation of new jobs, to iaprova the U.S. trade deficit and 

to strengthen ·the econoay. HR.322 would operate directly counter to moat 

of this country's current specific econoaic goals; and IIR,322 would 

aggravate the preeent recession by increasing joblessness and decreasing 

the gross national product, 

we must atop exporting jobs, and we auat stop relying upon iaported 

minerals (and oil) which we have reasonably and readily available for 

production and developaent in the United States. The araed forces and 

private industry of the United states run on ainerala. which should be 

~ ~ ain1ra11, 

The costs of closing U.S. ainee or not allowing new aines to open 

would be tr .. endoue. Today we are ov1rpayinq for foreign ainerals because 

of previous closings of United Statu aines and aineral exploration 

operations, while the ainerale lie. available on our public land. 

VI. EXAMPLES Ql .1'B1 ~ IXQWi Ql IW!IW, DEVELOPMENT 

.llBm lB.QII .1'BI mtlllD lllllll, 

Plaaea consider the recant~ of aines froa the Western United 

State•, and the loss of jobs, due to the chilling effect of the recent 

coabination ot envirom1ental and econOlllic pre•• ure• (obviously, even before 

IIR,322), resulting in businesses and jobs being "thrown out" of this 

country, Examples of this "forced exodus" of aineral job• and developaent 

from the United State• are: 

12 
460 

(l) ~- Today we are overpaying for Japan••• • teal, proceaaed from 

Brazilian iron ore. When the Eagle Mountain Iron Mine and the Fontana 

steel Plant (in Riverside county, Calirornia) closed in 1983 due to 

environmental pressures and niaer•a economic probleas, the Japan••• 

i-ediately • topped duaping • teal in the U.S. and raised their steel prices 

substantially. Moat West Coaat •teal today is purchased fro• Japan, and 

Japan purchases auch of its iron ore fro• Brazil. The tragedy of the Eagle 

Mountain Iron Mine ia that hundred• of ailliona of tons of uaable iron ore 

are lying fallow and readily available in the u.s., while we buy Japanese 

steel at inflated prices. Brazil ha• cheap labor and miniaal environmental 

controls; ailliona of tons are shipped fro• Brazil to Japan, and from Japan 

to the U.S., in diesel-powered freighters; and the world environment is 

more polluted. Kai••r created an eatiaated $1-billion annually in total 

iron, steel and related econoaic activity before E~gle Mountain and Fontana 

were cloaed down. The 1983 Jtaiaer cloaure de•troye4 and •exported• 20,000 

jobs. Efforts to reopen the Eagle Mountain Iron Mine have been 

unsuccessful becauae of the unrelenting preaaure fro• the radical 

environmentalists who continue to a ggresaively fight any development or 

mining anywhere in the United States. 

(2) Bh941Ym. The price of rhodium soared fro• $1,300/ounce in 1989 up 

to about $5,000/ounce, dropping back today due to the current protracted 

·recession, with industry prediction• of h~gher rhodiua prices in the near 

future. Rhodiua is a platinua-group aetal uaed in catalytic converters, 

and is imported priaarily froa south Africa. Rhodiua is known to exist in 

small quantitiea on u.s. public lands; but exploration for rhodium will 

stop under HR.322. 

(3) ~- We are now overpaying for Chin••• talc. In 1987 a large 

U.S. talc mine waa cloaed because of environmental preaaurea, the equipment 

13 
461 

was loaded into containers and shipped to Mainland China1 and today wa are 

no longer exporting talc, but are now iaporting processed talc mined and 

processed in China with cheap or reportedly virtual • lave labor, and with 

no environmental controls--all to the detriaent of our trade balance, local 

jobs and our standard of living. 

(4) Fiberglo••· currently wa are overpaying for TUrkillh coleaanita, a 

major component of fiberglass. Coleaanita was ained in the U.S. until a 

few years ago when the aina closed; and our aajor supplier is now TUrltey. 

Hopes of reopening and developing the U.S. coleaanite ainea, or of 

discovering new sources, would virtually disappear under HR.322. 

(5) ~. We are overpaying for aercury. By .-ans of a false 

environmental scare, the aajor U.S. aercury aine at Hew Idria, California, 

was closed, dismantled and the hoae• and jobs of several hundred workers 

were literally destroyed. ~ the d-olition of,_the hous•s and closing 

of the operation, it was learned that there was no •environaental hazard" 

at all, because the gravel and tailing• upon which the town had been built 

ware completely safe and free fro• aercury and other hazards, and the 

readings on mercury were le•• than even the stringent •sate• and •nontal" 

background standards. 

(6) WOllastonite. Wollastonite is a non-aetallic aineral which plays 

a critical role in energy conservation by utilization in high-teaperatura 

ceramics, paints and plastics. Wollastonite is increasingly iaportant in 

the development of energy-saving autoaobile• and other products. The major 

producer of wollastonite is Finland. Today, the world'• largest known 

wollastonite deposit lies undeveloped on our public land; and the 

development of this prospective world-class u.s. wolla• tonite aine would ba 

curtailed or stopped under the restriction• of HR.322 and related 

regulations and laws. 

14 
462 

If •ore U.S. mines are restricted or closed under HR.322 or similar 

laws, the present U.S. •ineral production would have ·to co- from elsewhere 

-- colemanite and boron fro• Turkey, talc and rare earths from China, and 

steel from Japan •ade fro• iron ore shipped from Brazil. our strict U.S. 

environmental controls do not exist in Brazil, Turkey or China. by 

•exporting• u.s. mining overseas, the result would be a d9cr9aaed u.s. 

gross national product, a d9cr1aa1d u.s. standard of living, an increased 

u.s. trade deficit, and incr111•d world pollution. The •revenue• raised by 

HR.322 would be •ini.Jlal, compared to its tr .. endous costs. Under HR.322 

the u.s. public would "lose•; the U.S. •ineral exploration and development 

industry would be devastated; the world environ-nt would suffer; and the 

u.s. would till pay •ore, poseibly lll,ICll •ore, for th• very e1111e •inerals 

which would lie untouched on public lands in the United States. 

The recent exa•ple of the extr .. e •eaeures, including w.ar, that the 

United states has utilized in the Middle Bast to protect sources of oil, 

could well be repeated if the Untied states becomes subservient to 

unr,liabl• ~ GYrCH 21111,ntial •iural•• 

The danger flag is up; and Jll8! is the ti.lie for this Subcommittee to 

fully investigate and determine the short and long term detri•ental effects 

of the destruction of the incentive-based Mining Law and the a~ 

nationalization of ths u.s. •ineral exploration and development industry 

under HR. 322. 

VII. HB...lli :tm1Z1.D .~ DI ll....lL.. ~ .um DI :U...S. 

~ IWII. IXWQBS QI:~-

Please consider the following tr .. endous costs to the u.s., and to the 

U.S. citizens, which would result if HR.322, or a si•ilar law, were to be · 

15 
enacted: 

Cl) Incr•a•ed, ~ g/. Nin•ral•. The co• t of aany •••ential • inerals 

and rare earth• would ri• e becau• e of the disappearance of th• supplies and 

identified future • ource• of th••• ainerals froa united States public 

lands. The u.s. would be sw,ject to the unc• rtainti•• of unreliable 

foreign sources and cartel• for aany ••••ntial, critical and •trategic 

ainerals, just as we were in the oil •abortage• of the 1970'•• and in other 

envisioned oil •cri•••·• •• are already paying •xcesaiv• price• for 

foreign steel, cbroaite, -rcury and talcua powder. Pl-•• do not aake it 

:tmllll by enacting BR.322. 

(l) ~ Aaeudaont •:c.l,inga.• Billions of dollar• of -inent domain 

awards would be due to the pr•••nt owner• of aining cla!.a and businesses 

destroyed or impaired becauae of BR.322 and the •regulation•• which would 

impl•-nt the law. Th• u.s. govern• ent would be liable for these inverse 

condemnation taking• under the Fifth Alnndaant, aa reaffirlled in recent 

u.s. Supre• e court deciaiona. Such taking•, and apecifically including 

•regulatory taking•,• are capenaable, aa Mt out in Executive Order 12630 

of March 15, 1988. For exaaple, in 1980 a federal 1-- which had been 

reatricted by wildern••• regulationa vaa bald to be a -re •mall• leaae, 

and a compensable taking, Existing • ining claias and busineases which are 

subjected to new !• pairing reatrictiona under BR.322 would also be 

•takings• of property requiring coapenaation under the Fifth Aaendment. 

(l) Hon-Companaabl• .LllllUa ADIi Hqgl•HDIH• Thou• anda of U.S. jobs 

have already been loat and peraona -d• hoael••• by unvi•• and unthinking 

legislation and regulation•, and aany -re would ruult froa BR.322 and the 

regulations and aiailar lava which would follow. Particularly bard hit 

would be independent faaily aining buainuMs, private exploration and 

•ining developaent coapani .. , relatad Mrvice and support bu• ine••••• 

16 
464 

equipaent eales and eervice, and, ot couree, the thoueand• ot MJlll 

prospective aineral exploration and developaent buain••••• and individuals. 

Moat ot th••• private future lo•••• ot'' buein•••••• incoae and property 

would be non-coapeneable under the Fifth Allendaent. 

(!) Dependence Yll2J:l unreliable .l2W!Jn ~ lJlJC Mineral•. The moat 

serious "cost" .of HR.322 and the aoet aerioue ettect ot the devaetation of 

the U.S. aineral exploration and developaent induetry, would be the 

increased dependence of the United States upon foreign sources for 

essential minerals and rare earth• which are indiapeneable to aaintaining 

our dominant position in the critical areas of ailitary hardware, apace 

technology, nuclear fusion and super-conductivity. We would be unable to 

keep our "edge" if a foreign nation or cartel chose to not eat ua their 

particular essential ainerals. Mo dollar value can be placed upon the u.s. 

retaining its position aa the world leader in high., technology research, 

security and national defense. The list of affected ainerala i• long and 

varied, including: Iron ore, rare earths, rhodiua, palladiua, other 

platinua group ••tale, precious -tale, talc, titaniua, chroaiua ate. 

Soae ot the Western U.S. undeveloped aineral potential is aptly 

discussed in the Kay 1992 U.S. Bureau of Kines publication OFR-62-92, 

entitled "Mineral Diversity in the California Desert Conservation Area." 

VIII. CQJICLUSIQH 

The present u.s. incentive-baaed aineral exploration and devalopaent 

systaa worlca efficiently under the present U.S. Mining Law (including the 

"1872 General Mining Act," and the hundreds of aaendaanta, regulations and 

court decisions). Thia efficiently-operating ainaral exploration ayat•-

17 
locat••• identifiH and •inventoriH• ·u.s. aineral depoaita and r...rv•• 

for future u-, at no coat to the public. Ttlouaand8 of individual• and 

aineral exploration coapani•• vould be' deva•tated by th• excea•ive 

regulation•, re•trictiona and f- under the U..322 •1-/fN• •Y•tea. 

IIR,322 would reault in increaaed aineral pricea, and VOllld have a 

detriaental effect of the U.S. trade balanc» and the groaa national product 

by the •exporti119• of thouaanda of job• and buainea-, and by 

n•c•••itatinq increaaed iaporti119 of H •-tial ainerala. 

Today, wen the citi&ena of uny nationa are Uberatint,J th-lVH 

fro• year• of exce••ive and inefficient nationalisation and gov•~nt 

regulation., the u.s. congre•• llhollld 9DGOHAS9 and SIIIIDII the effici_ently 

operating incentive •v-tea of aineral exploration, identification and 

developaent whicb {. working -11. The u.s. aini119 induatry 18 already one 

of the ao•t enviro-tally r.gul.ated in the vorl4,- Bll.322 .VOUld hurt the 

U.S. aineral exploration and clevelopllllllt ind11atry, with no •ub•tantial 

•revenue• or ~ta benefit to the United 8tatea. 

Thi• ~tte. llhollld fully ~ wh81:Mr or not than vould be 

•ub•tantial detr1-ntal and devutatinq C08te and effecta of Bll.322, 

without any benefit.. In the event that tba facta and concluaiona herein · 

are llla, than it i• polutaly critical~ BLm not a~- The 

incantiva-ba•ed U.S. llining Lav aboul.d be 9YPIDl1e4, not dHtroyed. We do 

not need and cannot afford the ~ ~ and the lie .ram;o 

•nationalization• of u.s. aineral exploration and develos-ent under aa.322, 

and Bll. 322 8bould not be enacted. 

•• will be happy to pro¥ide thia ,.__itte., or individual __,.re, 

With •ub•tantial additional inforaation and data on the facta and 

•ta~ta 8et -t in thi• t.att-v, ~ of llllicb are nedily available 

in induatry and public ~rd8. 

ll 
466 

Thank you for allowing the National Aaaociation of Mining Diatricta 

.(MAMO) and the Pacific Mining Aaaociation to praaant their viawa in 

opposition to HR.322. 

ROBERT A. SANRBGRET, Executive Director 

MATIOIIAL ASSOCIATIO• 01' JII1IDIG DIS'l'IIICTS ( •DIii)•) 

17461 Irvine Blvd., Suite A 

Tuatin, California 92680•3034 

(714) 731-1335 

19 
467 

1992 MPORT 011 'ftll PPOGPIJII MP ACTXYITIBI OP THE 

l(ATIONAL ASBOCllTIOlf or IIIlfIHG DISTRICTS (NAXDI •. 

TUSTIN, CALIFORNIA. MAND BXeCUtiva Director Robert A. Sanregret haa 

reported that the MAND aeaber Mining Di• tricta are active and vital, 

and that the NANI> activitiaa are incraaaibg, under th• • pacific U.S. 

congreaaional ~nu,ling legislation, the U.S. Mining Law (30 u.s.c., 

Section 28, et aeq.). 

The NANI> reports that the following pu!>lic service and autual benefit 

prograaa and activitiaa are beinq coordinated with.the HAND aeaber 

Mining Diatricta, and aaaiated by tbe HAND: . 

1. organization of xininq District•• Th• HAND aaai• t • aeabar Mining Districts in their orqanizational and adJliniatrativa plan•, paperwork, 

charters, regulations, by-la-, etc. 

2. Jttcordation and Filing IQcAtion• and M•esnent Work. Th• NAND 

provides intoraation and fora• to aaaiat in tiling required papers (Location Noticea1 Aaendaant•: Aa-•-t Work: ate.), and the HAND 

assists member Mining Di• tricta in aaintaining register• of aining 

claiaa and operations in their District•• 

3. lfNIIl Hi•tor14 sit• Raqi•tar. Th• HAND will coordinate the Mining Diatricta• identification, photographing and regi• tration of "NAND 

Historic Sita•,• includinq hiatorical building•, ,~oada, ruin•, 

ainaaitaa, duapa, Indian artifact•, archaoloqical_aitea, ate. These 

aitaa will be regiatarad in the official ••NP> Hi•toric Sit• Btgi•ter.• a aign will be erected, the • it• will be fenced or protected if 

appropriate, and tba aita will be praaarvad for ita hiatorical value. our •HNIJl Hiatoric site Raqi•tar• will be • hared and coordinated with 

County, State and National Riatorical Regiatration Prograaa, and with 

research and atudiaa by College•, Univaraitiaa, Historical Societies 

and other group•, 

4. Hazard Report•. Th• MAND ..abar Diatricta will encourage and 

aaaiat aeabera in watching for and reporting phyaical and environmental 

hazard• obaarvad in the field. Pe~t hazard• (e.g., open abandoned 

aina pita, ahatta, old chaaical duapa, etc.) will be identified, aarkad 

and reported in writinq on MAND fora• to th• appropriate County, state and Federal authoritiaa (BPAI County Shariff I BUii USPSJ USGS1 etc.) I 

and an open aaater rafaranca index ot the lcnown phyaical and 

anvironaantal haaarda will be aaintained by the NAKI>. 

s. Fireyatcb. MAND ~ vill be educated on procedure• and 

ooaaunicationa (CB1 haa radio1 cellular, telephone) for 1-ediate 

reporting ot fir• haaarda and fire• observed in the field, Individuals are encouraged to participate in local volunteer tire protection and 

tire-fighting prograaa. 

6. Enyirogantal Protection. The NAKI> ancouragea and aducataa -r• to obey anvironaantal and raclaaation lava and regulation•, and to conduct their proapacting and aining activiti•• to prevent •nvironaantal daaaga and totacilitata the raclaaation of aitea after 

coaplation ot the aining or proapacting. 
468 

7, USGS Map Reports, NAMD members will report on standard "NAMD Map 

Report Forms" changes and discrepancies on the USGS quad maJ?s, to assist the USGS and other agencies in their periodic map updates. "Map report" examples include: Damaged, missing or misplaced U.S. survey Markers or other benchmarks; changed or missing landmarks, such as 

water towers, roads, prospect holes; geology; etc. 

8. Mining District Histories. The NAMD is working on compilation of 

comprehensive written histories of the m~mper Mining Districts and of 

other significant old and current "mining camps" and mines in the 

Western u.s.,. in conjunction with local colleges, and with historical 

and geological societies. 

9. Education. NAMD will sponsor and coordinate educational programs and seminars by NAMD and in conjunction with other groups, on matters of current concern, including: Mineral exploration and development 

techniques; geology; equipment operation ana maintenance; U.S. minerals 

and mining; U.S. mining history; governmental regulations and forms; etc. 

10. Legislative Watch. NAMD-will monitor pending and prospective 

legislation, and will offer views and testimony to government agencies 

and legislators. The national legislative program will be run through the NAMD Legislative Office in Washington, D.C. 

11.. Ethics Code. The NAMD has a code of ethical behavior to which all 

Mining District members agree to comply, relative to field activities, 

claim location, field courtesy, field assistance, etc. 

12. Dispute Resolution. The NAMD will provide facilities· for the 

settlement or arbitration of disputes between members of the Mining 

Districts; and the NAMD or the Mining District will, under certain 

circumstances, act as an "Ombudsman" in disputes between claiDholders 

and goverllllent agencies (e.g., BLM or USFS citations, contests, 

reclamation disputes, plan of operation disputes, evictions, etc.). 

13. Public Relations. The NAMD and the member Mining Districts are expanding their programs and educating the public on the value and 

contributions to the U.S. of minerals, mineral prospectors and mining under the U.S. Mining Law. 

The NAMD solicits your ideas and assistance on these and other NAMD 

projects .and activities. If you have not registered your Mining 

District on the NAMD Roster, send your information today to: 

THE NATIONAL ASSOCIATION OP MINING DISTRICTS (NAMD) 

Robert A. sanregret, Executive Director 

17461 Irvine. Blvd., suite A 

Tustin, CA 92680 

(714) 731-1335 (PAX 714) 544-8406 
469 

NATIONAL ASSOCIATION OF MINING DISTRICTS 

P.O .. Box 1054, Tustin, CA 92681 . 

I 

I 

! -~, To: All .Miners, Prospectors and all Mining Districts. I ;· From: Robert A. Sanregrel, National Association of Mining Districts (NAMD) i : Re: Roster of Mining Districts for NAMD ' 

: :. . . ;' . . . . . 

i · This Is a call for all Mining Districts in the Western U.S. to join the NAMD In our 

' ;,_current efforts to further U.S. mining causes. · · 

· ·: Each· mining clalmholder Is In a Mining District (e.g., "Quartz Peak Mining Dis-

. lrlct", ."Blackhawk Mining Dlslrlcl", etc.), and each prospector is, of course, · 

· prospecting In a Mining Dlstrlcl We want lo ldenlily all Mining Districts; and . 

':• your Mining District should be on our roster. · 

:. The Mining District activity will be coordinated through lhe NAMD (assisted by · 

: the National lnholders Association [NIA) and Western Mining Council (WMCD, . 

Please send us the identification and documents of your Mining District for our 

· · NAMD rosier. You need not be a claimholder lo enroll yourself or a Mining District with the NAMD. 

The federal statute (;30 U.S.-Code, Section 28), part of lhe 1872 Mining Law, 

direcUy authorizes Mining_Olslricls lo regulate themselves (similar lo Stale "Irrigation Districts". and uSchool Dlslricls'1, as follows: 

" Mining District Regulation by Miners: . .. The miners of 

each district may make regulations l)Ot In conlllct with 

the laws.of the.l).S., or with the laws of the slate or lerrl• 

tory in'which. th13 district is situated, governing the localion/mantitlr o)1 recording, amount ol work necessary to 

hold possesslqn ot a mining claim . . . [markings on 1he 

.grounc(recor.ds, Information needed on location notl•. 

cesJ, eic.'' • 30 U.S.C., Section 28. · 

Please send the.roster information (no charge), so that lhe NAMD wlll know the 

.. · Identity of lhe Mining Ols.trict in which you are prospecting or own a claim. You 

, · should also get copies of the by-laws, minutes and all other past rec-ords of the .. 

. . Mining District existence and acUvily. Those records are available· from ·the ·: 

· County l;lecorder, your County or local Hlstorlcal Society, old newspapers, and . 

· are frequenUy contained as a part of the old Patent Applications for any pat-

... anted mines In the Dlslrlcl Please get these. And, please send us a clear copy 

:,:•of all such records. For reference, see "Gold Districts of Cai/torn/a", sold by the . 

. ·· California Division of Mines & Geology, for about $0.00; and other references.' . 

: . .W.e ".'eed your help. ·Please reply today: · ·:· Your name (prinl): _________________ _ 

··, Address/City/Zip: _________________ _ 

: _Telephone:( · >----------------- .: Name of Mining District-,---------------- ... ; _Slale & County of Mining Oislricl: ____________ _ 

.. Send lo: Nallonal AssoclaUon of Mining Oislricls (NAMO) 

P.O. Box 1054. Tuslln, CA 92601 

(714) 731-1335 , FAX (714) 544-8406 
470 

Mr. LEHMAN. I notice Mr. Doolittle is here. Mr. Doolittle, do you have anything to add? 

Mr. DooLITI'LE. Mr. Chairman, we had another hearing going on 

at the same time. I have a statement that I would like to put in 

the record. 

Mr. LEHMAN. Without objection, we will put your statement in 

the record as well. 

Mr. DooLITl'LE. Thank you. [Prepared statement of Mr. Doolittle follows:] 
471 

... CDDIIIII'. I anucIAft !OUR . 8CIIBIJULDQ 'fBI8 mRim ON 

TBB MI1'BRAL BXPLORATION AllD DBVBLOllllBlft' ACr OP 1993. IP PASSBD, 

TRIS LBGISLATION COULD RAW SONB VBRY SBRIOUS COHSBQOBRCBS. TRIS 

JIBAllING IS TBB. PIRST_STBP. Df A ·PROCBSS TIIAT I ROPB WILL BRING 

B0TII SIDBS CLOSBR TOG"'1'8BR ON TRIS ISSUB. Ill ITS CtJRltBN'1' FORM, I 

. AM ONABLB · TO SUPPORT TRIS LBGISLATIOlf. 

LAST YBAR, CALIPORKIA LBD TBB RATION Ilf MON-POBL MI1'BRAL 

PRODUCTION TOTALLING 0VBR $2.4 BILLION. CURRBNTLY, TBB nmtJSTRY 

BMPLOYS 36,000 · PULL TIMB 1IORDRS AND B~ Df $80 MILLION Ill 

S'l'ATB .AND LOCAL TAX RBVBNUBS ANNUALLY. PRANltLY, MY DISTRICT, 

IIRICH HAS ALRBADY BBBN DBVASTATBD BY NILL AIID_MILITARY BABB 

CLOStJRBS, CANNOT APPORD ARY l«>RB DRAIN ON. ITS BCO?OIY. BBSIDBS 

THB FINANCIAL DIPtl'ICOLTIBS CRBATBD BY TBB RBCBSSION, BUSINBSS 

0IINBRS Ilf MY DISTRICT ARB ALRBADY BOGGBD DONN BY AN OVBRLY 

BURDBNSOMB RBGULATORY AND. PJmMITTING PROCBSS. H.R. 322 SIMPLY 

ADDS TO THIS RBGULATION . .AND PBRMITTI?C PROCBSS, PORCI?C 1CRB 

BUSINBSSBS O'IJT OP MDIIllG. 

I BBLIBVB ~ - STATOTORY ~BS ARB NBBDBD BBCJWSB 

AI:MINISTRA.TIVB RULB CBAmBS CAN SBRVB TO CORRECT MIUIY OP THB 

ABUSBS OP TBB LA1f 'l'IIAT · ARB WIDBLY PUBLISHBD IN THB NBDIA TODAY. 

ALSO; TBB NINilG LAW BAS BBBN "AMBNDBD" IN PRACTICAL BPPBCT 

BY ALL THB SUBSTAIITIVB BRVIROlalBNTAL STA'lVl'BS OP TBB LAST SBVBRAL 

DBCADBS, INCLUDING CLBM AIR, CLBM WATBR, THRBATBNBD AND 
472 

THE HONORABLE JOHN T. DOOLITTLE ' 

PAGE 'IWO . 

ENDANGERED SPECIES, ARCHAEOLOGICAL RESOURCES PROTECTION, ETC. 

THE STAKING OF MINING CLAIMS UNDER THE CURRENT MINING LAW 

DOES NOT SHIELD CLAIMANTS FROM THE NEED TO COMPLY WITH THESE 

LAWS. ALTHOUGH MINING IMPACTS ARE NOT ACCEPTABLE EVERYWHERE ON 

PUBLIC LANDS, THE DECISION WHETHER OR NOT. TO MINE, HARVEST I 

TIMBER, OR GRAZE THE LAND SHOULD BB LEFT TO ELECTED 

REPRESENTATIVES. THE CURRENT MINING PROPOSAL wquLD TURN THESE 

DECISIONS OVER TO BUREAUCRATS. FURTHERMORE, THE CURRENT PROPOSAL 

INCORPORATES "CITIZEN SUITS• WHICH ARE LAWSUITS WHICH COULD BE 

USED AS WEAPONS TO SHUTDOWN LEGITIMATE OPERATORS WHILE THE CASE 

MAKES ITS WAY THROUGH THE COURTS. 

OUTRIGHT REPEAL IS UNWARRANTED, BUT SOMB AMENDMENTS TO THE 

CURRENT LAW ARE NOT OUT OF THE QUESTION. SUCH AMENDMENTS COULD 

INCLUDE CHANGES IN. THE MANNER OF PATENTING MINING CLAIMS (PAYMENT 

OF FAIR MARKET VALUE FOR THE SURFACE ESTATE), REVERSION OF THE 

PATENT IF THE LAND IS PUT TO A NON-MINING USE, AND PAYMENT OF AN 

ANNUAL RENTAL IN LIEU OF PERFORMING ASSESSMENT WORK (AT THE 

OPTION OF THE MINING CLAIMANT). 

INCREASES IN ROYALTY COSTS / WOULD, IN FACT, ONLY RESULT IN A 

NET LOSS TO THE TREASURY. BY INCREASING THE AMOUNT OF ROYALTIES 

PAID BY A COMPANY, YOU DECREASE .THE AMOUNT OF INCOME TAXES PAID. 

THE PROPOSED ROYALTY OF 8\ WOULD BE COMPARABLE TO $30 MILLION 

DECLINE IN THE PRICE OF GOLD. CONSEQUENTLY, THIS RESULTS IN A 

20\ LOSS OF EMPLOYMENT TO THE INDUSTRY. 

THE MINING INDUSTRY IS WILLING TO WORK TO ADDRESS SOME OF 

THE PROBLEMS IN THE MINING LAW, BUT THIS BILL IS SIMPLY A 

· ONEsIDED ATTACK ON THE INDUSTRY. 
,1a 

Mr. LEHMAN. We want to thank you for being ao patient, for giving such good testimony. and we look forward to working with you 

in the future. Thank you very much. That will adjourn tlie hearing for now. 

[Whereupon. at ,:oo p.m .• the subcommittee was adjourned.] 

APPENDIX 

MARcH 11, 1993 

ADDITIONAL MATERIAL SUBMITTED FOR THE HEARING RECORD 

GlONK ..._Ull CALIFOftNIA. OWM&AN 

,... __ ___ .....,....,_,.._._..m -~J.--~.- ____ ._WIST...,._ 

._,__...___.... 

H,f-.lJIIIML __ .....,,,__... _ 

---- ........ ~C:0..--. 

-------------- ..,.. ... .......,_ .,..,,......,....,._..,_........_ 

,. ....... ..,,..,._. 

--- --- UIL-M.NCIU\'~ Clrllla--...-... ....... 

-------- ---- ---·~-...,. ---- ...,..,.__,..,.. 

Mts'l'1"-,.,.... ----L-~ 

II.it. J,out of Btpr~tntatibe1 

<omnrittee on 

Jlahlral llffourcts 

lllqiqua. lK 2051H201 

Karch 15, 

--- -·- -- --- ,..... 

-•.....-n .......... .--

_,_ --- ----- The Honorable Bruce Babbitt, Secretary u. s. Departaent of the Interior 

Washington, o.c. 20240 

Dear Secretary Babbitt: 

We are writing to follow up on several aatters relating to H.R. 322, •the llineral E><ploration and Developaent Act of 1993• 

on which you testified last week before the Subcoaaittee on Energy and llinaral Reaourcea. 

We applaud your action revoking BUI'• authority to sign 

firat-balf final and final certificates. Rovaver, - continue to have quutiona regarding BUI'• adlliniatration of th• patent 

prograa and vould appreciate your vi-• on the following points: 

1. Under vhoae authority vaa the •Pilot Prograa• 

initiated? 

2. Waa public input sought prior to iapleaanting this 

change in procedure? If ao, how and when? 

3. Pl- explain how the BUI provided notice to the 

public of a change in procedure. For instance, vaa the 

Pilot Prograa announced in the f114•ral Jtwistar? 

, • Were the Aaerican Barrick Goldatrilte application• Mlected by BUI to be 'Used aa a tut caae, and if ao, 

vhy? 

5. 9bat other patent application• bava been procaaMd under the •Pilot Prograa•? Rav -re th ... application•, if any, Mlected? In other vorda, what 

ia the criteria BUI uMd to decide to •fast track• a patent application? 

6. Do you intend to halt the project? If not, pl .... explain why it vould be in-the pul)lic interest to expedite the proceuing of patent application• at this 

tiaa. 

(475) 
476 

The Honorable Brue• Babbitt, secretary 

March 15, 1993 - page 2 

rand ownership Patterns 

How many operations on pul>lic lands also encompass private 

and state lands? Please be as specific as possible. 

User fees 

BLM currently charges $15.00 to file a clai• notice. Is 

this an accurate reflection of the cost to BLM for this service? 

What would be a reasonable charge for processing a plan of 

operations as proposed under H. R. 322? For what other services 

would BLM expect to recoup the costs of adllinistering the mining 

law program once H.R. 322 is enacted? Please provide the 

estimated revenues BLM would anticipate recouping if so authorized. 

Income Tax Deductions 

Does the tax code as currently written provide significant 

benefits to the hard rock mining industry? Specifically, can you 

quantify the effects of the provisions for expensing, accelerated 

depreciation and depletion allowances? 

What are the tax credit in the 

mining -industry? 

benefit fro• this 

projected benefits of the proposed investment 

President's econo•ic plan for the hard rock And specifically, how would the IOlall •iner 

proposal? 

The information we are requesting will assist the Committee as we consider reporting H.R. 322 to the House. Therefore, -we would greatly appreciate a response no later than March 22, 1993. 

Thank you for your consideration of this i•portant matter . 

RICHARD H. LEHMAN 

Chairllllll, Subco-ittee 

.,_,.,,.~(.hGBORGE ILLER 

on Energy and Mineral Resources 

CC: Honorable Nick J. Rahall 

Chairman, Comaittee on Natural Resources 
477 

• 

United States Department of the Interior ·• 

OFFlCE OF THE SECRETARY • 

Wahington, D.C. 20240 a 

Honorable Richard H. Lehman 

Chairman, Subcommittee on Energy 

and Mineral Resources 

Committee on Natural Resources 

House of Representatives 

Washington, D.C. 20515-6201 

Dear Mr. Chairman: 

We are pleased to enclose responses to questions submitted to Secrelary Babbitt as followup 

to the March 11, 1993, hearing on H.R. 322, the Mineral Exploration and Development Act 

of 1993. 

Thank you for the opportunity to provide this material to the Subcommittee. If you have any 

further questions or need additonal information, please Jet us know. An identical lettu has 

been sent to Chairman Miller. 

Sincerely, 

RLj_jJ;, 9, 

Ralph.G. Hill, Jr. 

Assistant Legislative Counsel 

F.nclosure 

cc: Honorable Nick J. Rahall 
478 

RESPONSES TO QUESTIONS OF THB COJIKITTBB OB NATUlUU, RESOURCES 

PBRTAIBING TO BR 322 BBARIRG OR KARCH 11, 1993 

PATENTS 

1. Under whose authority was the "Pilot Program" initiated? 

Answer: The Assistant Director for Energy and Mineral Resources 

of the Bureau of Land Management (BLM) authorized the Pilot 

Program. In 1991, the Bureau discussed various ways and means of 

reducing the backlog of mineral patent applications in cases where first half of the mineral entry final certificate (FC) had 

been issued, but the mineral examination had not been initiated. The Deputy State Directors for Mineral Resources met and determined that con~racting of the mineral examination, under Bureau 

control and superyision, was a potential option. 

The States of Nevada and California (which have the largest 

backlogs) were directed in the Bureau's 1993 Annual Work Plan to 

propose a process and develop guidelines for implementing such an option, which was done. On July 24, 1992, the Assistant Director 

for Energy and Mineral Resources approved the California proposals and guidelines for its "Pilot Project." on December 7, 1992, 

the Assistant Director for Energy and Mineral Resources approved the Nevada proposals and guidelines for its "Pilot Project". The 

"Pilot Project" has been implemented in those two states only, on a two-year trial basis. I evaluated the "Pilot Program" and 

decided to terminate it. I have issued an order directing its 

termination (attached). 
479 

THE SECRETARY OF THE INTERIOR 

WASHINGTON 

April 26, 1993 

Memorandum 

Acting Director, BLM 

Secretary~ff~ 

Terminating BLM •Pilot Program" for Expediting the 

To: 

From: 

Re: 

Processing of Mining Patent Applications · 

I understand that last fall BLM initiated a "pilot program" to 

expedite the processing of Mining Law patent applications. The 

program basically allows the applicant to contract for preparation 

of the mineral examination, an essential step to securing a patent. 

Given the serious consideration being given to Mining Law reform, 

the Administration's support for that reform, and the substantial 

congressional and public attention being focused on the patent 

feature of current law (under which publicly-owned resources of 

great value are privatized for $2.50 or $5.00 per acre), I do not 

believe it is in the public interest to continue any program that 

accelerates the patenting process. Therefore, I direct you to take 

the necessary steps to discontinue the program immediately. 
480 

U8POB8U 'l'O QOU~IO•• 01' HK COlDIIft'D OIi D'rOllU, RBSOIJJtCU ... nDIIN 'l'O D ua BDJtDrG OIi DllCII 11, HU 

a. wa• publlo input • 0U9bt prior to lapl-•atla9 tbl• obaa9e la 

prooe4ure7 If • o, bow &114 wbea7 

Answer: Public notice in • uch • attar• (publication in the 

Federal Register) i• not required, as the Department was not 

amending or· chan9in9 it• r9CJUlation• and the action wa• directed 

at specific partie• (• inaral patent applicant•) who are seeking title to public land• eabracin9 their clai-, and not at the 

public in general. 

However, in October of 1992, the BUI State Office in Nevada 

sent a latter of inquiry to all • ineral patent applicant• in that State, a• kin9 for an expression of interest in 

participation in the •Pilot Progra• •. Copies of the latter were provided to interested outside parties as well (the Sierra 

Club and State agencies). Th• BLM State Office in California 

issued an Instruction Me• orandua to its District Offices in 

January, 1993 which announced the availability of the •Pilot 

Program• and requested the Districts to inquire locally with 

their applicants for an expression of interest. Copies of the 

California memorandum were provided to the California Mining Association and -Western Mining council at the same ti• e. 

The use of third party contractors and conaultanta, at the 

expense of an applicant but under th• juriadiction and control of 

the Department, is authorized under section 307 of the Federal 

Land Policy and Management Act of 1976, as aaended. 

2 
481 

RESPONSES TO QUESTIONS OP THE COHKITTEE ON NATURAL RESOURCES 

PERTAINING TO BR 322 REARIHG OH MARCH 11, 1993 

3. Please explain how the BLM provided notice to the public of a change in procedure. Por instance, was the Pilot Program 

announced in the Federal Register? 

Answer: The "Pilot Project" was not announced in the Federal 

Register. (See our response to question #2 above). 

The "Pilot Project" did not involve a change of procedure but 

merely permitted third party contractors to do the same mineral 

examination and mineral report work as would BLM employees, 

utilizing the exact same standards and guidelines that the BLM 

mineral examiners must use. The BLM retained all decision making 

and approval authority throughout the entire process. 

3 
482 

aBBPOHBBS 'fO QUBSTIOJIS OP TRB COID(ITTBB OJI D'l'UDL RBSOURCBS 

PD'l'ADIDIG 'fO BR 322 BDRIJIG OK DllCII 11, 1H3 

,. ••r• Aaericaa Barrick Gol4atrike application• ••lecte4 by BLM 

to be uae4 aa a teat ca••• an4 if ao, why? 

Answer: Barrick Goldstrike Mines, Inc., was the first to sign up 

for the "Pilot Program• on its own initiative. The "Pilot 

Prograa• operated on a "first come - first served" basis. 

4 
483 

5. What other patent application• have l>een proc••••4 un4er 

the "Pilot Proqraa"'l Bow are application• , if any, ••l•cte4'l 

In other wor4s, what is th• criteria BLK u• e4 to 4eci4• to 

"fa• t traclt" a patent application? 

Answer: At the time I terminated the "Pilot Program" there was one mineral examination in progress in California pursuant to a Memorandum of Understanding (MOU), The claim is for a mill site. 

The mining company has committed $25,000 to the contractor on this effort, and the report is about two-thirds done. There is a 30-day notice of revocation clause in the MOU and it will be 

terminated. 

In Nevada there were three MOUs. The work on one application had 

been completed before I terminated the program. I a• now considering the application. The other two MOUs had a 30-day notice of revocation clause and they will be terminated. 

On termination, all of these applications for patent will be 

processed in the usual fashion as are all such applications. 

As stated in question 4, applicants were asked to come forward on their own initiative to participate in the "Pilot Program". They were taken on a "first come - first served" basis. 

There were no criteria and no Bureau initiative to "fast track" 

any mineral patent application in this process. The mineral 

patent adjudication cannot be finished until the mineral report 

is received and approved by the BLM. If an applicant elected to 

participate in the "Pilot Program" and provided a qualified 

mineral examiner to do the mineral examination, the adjudication 

could be completed in a shorter time frame than if the applicant 

had to wait for a Bureau mineral examiner to be available to 

perform the mineral examination. The results of the mineral 

examination by the private mineral examiner would then have to be 

reviewed and approved by the BLM. 

5 
484 

,. Do you intend to halt the project? Xf not, pl•••• ezplain 

why it would be in th• public interest to ezpedit• the processing 

of patent applications at this ti••• 

Answer: As noted, I examined the "Pilot Project" and then issued an order directing that it be terminated. 

6 
485 

RBSPONSBS TO QVBSTIOHS o• '1'BB COIIXITTBB o• DTVRAL llUOURCBS 

PDTAIHI•G TO mt 322 BBARIHG o• JCUCB 11, 1993 

I.Alm OWNBRSBIP PATTBRHS 

Bow many operations on pul>lio lan4• also encoap••• private an4 

State lan4a7 Pl•••• be•• specific•• po•• ible. 

Answer: The Bureau does not at present have a complete inventory for all States as to how auch .land at each mine site ia Federal 

and how much is in State ·or private ownership. However, using Nevada as an example; the State Departaent of Minerals inventory shows that 49 aines produce 85 percent of the total production value of hardrock ainerals in Nevada. 

Of the 49 aines, 13 are producing entirely froa private lands, 

15 are producing from a mixture of Federal and private lands, 

and the remaining 21 are producing entirely from Federal lands. 

The State Department of Minerals advises us that 58 percent of 

the gross production value is produced from Federal lands in 

Nevada. 

7 
486 

RESPONSES '1'0 QUESTIONS OF THE COMNITTBE ON NATURAL RESOURCES 

PERTAINING '1'0 HR 322 HEARING ON MARCH 11, 1993 

USER FEES 

Q. The BLN currently charges $15.00 to file a claim notice. 

Is this an accurate reflection of the cost to BLN for this 

service? 

Answer: The BLM.currently charges $10 for the filing of a mining claim location notice. However the BLM is planning to 

propose rulemaking raising this fee to $15 as the result of a cost recovery study mandated by the Department Office of 

Inspector General (OIG). This $15 figure was based on a cost 

survey conducted at all BLM State Offices. The BLM considers 

that $15 is an accurate reflection of the cost to the BLM for 

this service. 

Q. What would be a reasonable charge for processing a 

plan of operations as proposed under H.R. 322? For 

what other services would the BLN expect to recoup 

costs of adllinistering the mining law program once H.R. 322 is enacted? Please provide estimated revenues the BLN would anticipate recouping if so authorized. 

Answer: Following the requirements of the Independent Offices 

Appropriation Act of 1952 (31 u.s.c. 9701) relating to cost 

recovery, an analysis conducted by the BLM in June 1992, relative 

to mining plans of operations under the current Mining Law 

indicated that such plans should be exempted from cost recovery 

because they provide an overriding benefit to the government, 

rather than the applicant. A similar analysis would need to be 

conducted for the requirements proposed in H.R. 322 before it 

could be determined whether there should be a charge and the 

amount of any such charge. 

We would continue to collect fees for filings that would still 

exist under H.R. 322: location notices, location notice amendments, and transfers of interest. Other user fees added for any new types of filings under H.R. 322 would have to be analyzed and 

approved under the above statutory authority as is now the case under the current mining law. Because it is not known at this 

time what additional user fees might be collected and because the 

number of active claims r-aining after passage of H.R. 322 would 

be very difficult to estimate, we cannot provide any reliable revenue estimates at this time. 

8 
487 

Responses to Questions of th• co-ittee on Natural 

Resources Pertaining to H.R. 322 Hearing on March 11,1993 

Income Tax Deductions 

Question 

1. Does the tax code as currently written provide significant 

benefits to the hardrock mining industry? Specifically, can you 

quantify the effects of the provisions for expensing, accelerated 

depreciation and depletion allowances? 

Answer 

The hardrock mineral industry is generally subject to the same tax provisions facing other industries. These provisions include an income tax and accelerated depreciation. However, the 

hardrock mineral industry also benefits from special tax 

treatments intended to stimulate the exploration and production 

of hardrock minerals. These treatments include expensing 

exploration and development costs, the mine depletion allowance, 

and the deduction for mine closing and reclamation. 

Expensing allows hardrock mining operations to take a current deduction for exploration and development costs rather 

than amortize these costs over a longer period (usually 10 

years). There are some important limitations, however. First, 

exploration costs must be recaptured when production begins or when the mine is sold. Recapture is achieved by either including 

the expensed costs as ordinary income or by subtracting these 

costs from the mine . depletion allowance. Second, corporations 

may expense only 70 percent of their exploration and development 

costs. Finally, exploration and development costs associated 

with foreign owned properties may not be expensed. A tabulation 

conducted by the u.s. Treasury indicates that the amount by which 

the deductions based on expensing exceed the deductions based on usual accounting methods totaled $145 million in 1990. 

The mine depletion allowance allows hardrock mining 

operations to deduct a certain percentage of gross revenue. This 

deduction is intended to account for the depreciation of the 

mineral deposit due to extraction. It is analogous to the 

allowance for capital depreciation that is available to all 

industries. However, capital depreciation is based on actual 

investment costs whereas the mine depletion allowance is based on a percentage of gross revenue. The mine depletion allowance for 

most hardrock minerals is 22 percent of gross revenue and is 

limited to 50 percent of taxable revenue. The U.S. Treasury tabulation indicates that the amount by which the deductions 

based on the mine depletion allowance exceed the deductions based on usual accounting methods totaled $435 million 1990. 
488 

The Deficit Reduction Act of 1984 allows hardrock mineral 

operations to deduct the costs of mine closing and reclamation 

before they are incurred. Usual accounting methods do not allow 

deductions prior to the occurrence of costs. The U.S. Treasury did not estimate the extent of this special tax treatment. 

Some of these special tax treatments are subject to the 

alternative minimum tax (AMT). This is an additional tax based on items of tax preference. Items of tax preference are tax 

provisions that significantly reduce a taxpayer's income tax 

liability. For the hardrock mineral industry, these provisions 

include expensing exploration and development costs and the mine 

depletion allowance. The deduction for mine closing and 

reclamation is not an item of tax preference. The AMT is 

intended to limit the tax savings associated with items of tax 

preference in order to ensure that all taxpayers pay some tax. 

The U.S. Treasury tabulation indicates that hardrock mineral 

industry AMT payments totaled $105 million in 1990. 

Timing is an important factor of the AMT. Taxpayers who 

currently pay no AMT may credit any past AMT payments to their 

income tax. Therefore, hardrock mining operations may be able to recover their past AMT payments as exploration and development 

ends and production begins. 

The value of the special tax treatments to the hardrock 

mineral industry depends on the amount of the deduction taken, 

the effective marginal tax rate, and the AMT. The U.S. Treasury tabulation indicates that the amount by which the deductions 

based on items of tax preference exceed the deductions based on usual accounting methods totaled $580 million in 1990. The 

effective marginal tax rate for the hardrock mineral industry is 

approximately 30 percent. Therefore, income taxes were reduced 

by $174 million. However, the AMT on these items of tax 

preference was $105 million. Hence, the net tax savings due to 

the special tax treatments was approximately $69 million in 1990. 

This figure understates the value of the special tax treatments 

for two reasons. First, hardrock mining operations may be able 

to recover their past AMT payments at a later date. And second, no estimate of the deduction for mine closing and reclamation was available. · 

Question 

2 . What are the projected benefits of the proposed investment 

tax credit in the President's economic plan for the hardrock 

mining industry? And specifically, how would the small miner 

benefit from this proposal? 

Answer 

The Clinton Administration's proposed economic stimulus 

package would have provided a wide range of economic measures. Consideration of individual components of it by the congress is 

currently under discussion. The package contained a proposed 

investment tax credit which would have benefitted the hardrock 
489 

mineral industry which is highly capital intensive. The effects 

of the other economic measures cannot be adequately discussed or estimated without a detailed industry analysis. 

Under the Administration's proposal, the proposed investment 

tax credit would be permanent for small businesses and temporary 

for larger businesses. A sma,11 business is defined as one with an average annual gross revenue less than $5 million. The tax 

credit for small business would be 7 percent of investments in 

the short term, between 12/3/92 and 1/1/95, and 5 percent of 

investments in the long term. The tax credit for larger 

businesses would be 7 percent in the short term and apply only to 

investments in excess of a qualifying amount. A tabulation 

conducted by the U.S. Treasury indicates that the proposed 

investment tax credit would total approximately $55 million per 

year in the short term and $1 million per year in the long term 

for the hardrock mineral industry, based on 1989 tax returns. 
490 

CBO 

TESTIMONY 

Statement of 

Jan Paul Acton 

Assistant Director 

Natural Resources and Commerce Division 

Congressional Budget Office 

before the 

Subcommittee on Mineral Resources 

Development and Production 

Committee on Energy and Natural Resources 

United States Senate 

May4, 1993 

NOTICE 

1bis statement is not available for 

public release until it is delivered 

at 2:30 p.m. (EDT). Tuesday, May 

4, 1993. 

0 

CONGRESSIONAL BUDGET OFFICE 

SECOND AND D STREETS. s.,·. , .ASHINGTON. D.C. 20515 
491 

Mr. Oiairman and Members of the Subcommittee, I appreciate the 

opportunity to disc:iJss changes to the mining law of 1872--specifically the 

proposals that would impme royalties on the extraction of minerals from 

public lands and impose fees on the holders · of claims. My testimony 

today will focus on three issues: 

o The direct effects on federal receipts and the assumptions 

used to estimate those effects for three proposals to charge 

royalties and holding fees. 

o ~timates of the transitional effects of royalties and holding 

fees on jobs, concentrating on the effects in the mining 

industty and in mining regions. 

o Some of the advantages and disadvantages of appl~ 

royalties to different bases, ranging from gross sales of 

refined minerals to net proceeds from selected mining 

activities. Toe base for the royalty is one of several 

important differences between the proposals being 

considered. 
492 

The official estimates of costs of legislation prepared by the 

Congressional Budget Office (CBO) arc limited to the direct effects on 

the federal budget of costs and receipts resulting from the legislation. 

Imposing a tax or fee on an activity-such as the royalties on mining 

considered here-would tend to discourage that activity. CBO's official 

cost estimates therefore take into account the extent to which imposing 

royalties would lead to a reduction in the production of minerals. The 

official cost estimates do not include, however, the budgetary implications 

of any secondary effects on economic activity that might be caused by the 

legislation. 

The proposals to charge royalties and fees must be viewed as part 

of a larger effort by the Congress to reduce the budget deficiL In the 

short run, any spending reduction or tax increase that the Congress adopts 

will impose costs on the economy. But any one legislative package that 

meets the deficit targets specified in the Congressional budget resolution 

will have much the same macroeconomic effects as any other such 

package. Therefore, CBO analyzes the economic effects of deficit 

reduction plans on an overall basis and not bill by bill. Moreover, 

secondary economic effects and their implications for federal spending 

and revenues arc difficult to measure, and factoring them into estimates 

2 
493 

for individual bills would not increase the reliability of the estimates, 

despite the apparent additional precision. 

Accordingly, we have not estimated the budgetaiy impacts of the 

secondary economic effects of mining royalties or holding fees. Other 

analysts have tried to estimate these secondary effects and have concluded 

that the overall effect of increasing royalties and fees would be to raise 

the federal budget deficit. Judging from the evidence we have seen to 

date, however, the overall effect of imposing. royalties or holding fees on 

bardrock mining would be to reduce the federal budget deficit. 

Although measures that reduce the deficit would have short-run 

economic costs, deficit reduction will provide real economic benefits in 

the longer run. By stimulating private investment and reducing debt to 

other countries, reducing the deficit could boost the productivity of 

workers, raise their real wages, and contribute to higher standards of 

living for all Americans in the future. 

Members of this Subcommittee have expressed concern about the 

federal budget deficit, but also about the effects of royalties and fees on 

the mining industty and, in particular, on jobs in mining regions. We 

3 
494 

conclude from our analysis that the effects of these proposals would be 

relatively small, though certainly some miners would lose their jobs and 

some communities would be affected. 

In the proposals now being considered, a large part of royalties and 

fees collected can be returned to the states. In S. '257, the Mineral 

Development and Exploration Act of 1993, for example, '25 percent of the 

royalties go directly to the states, and an additional SO percent of the 

royalties and all of the holding fees could be spent on reclamation 

activities in the states. S. 775, the Hardroclc Mining Reform Act of 1993, 

directs or authorizes all of the receipts it generates to be returned to the 

states. The greater the proportion of gross receipts that are paid to the 

states or spent on reclamation activities, the less are the deficit-reducing 

effects of mining law changes, and the smaller the future benefits 

stemming from deficit reduction. Additionally, the greater the amount of 

money paid to the states or spent on reclamation, the smaller would be 

the adverse effects of collecting royalties and fees on employment or 

incomes in the mining regions. 

The proposals being considered today are the following: 

4 
495 

o S. 2S1, the Mlll6tll ~ andEzplo,r,don.Act of 1993. 

This bill would impose a royalty of 8 percent mi the gross 

income from mineral production from public lands 

beginmng in fiscal year 1997. The bill also would establish 

an escalating annual rental payment for all bardrock mining 

claims. The rental payment ( or holding fee) would total $S 

per acre for each of the first five years following the 

location of a claim and would escalate in S5 increments 

every five years thereafter until it reached $25 per acre in 

the twenty-first year following location. Holders of new 

claims located after the bill's effective date (October 1, 

1994) would begin paying the fee in fiscal year 199S. 

Existing claims would have three years to convert to the new 

system and would thus be subject to the royalty and rental 

fee provisions beginning in 1997. Twenty-five percent of 

royalties would be paid to the states. The bill authorizes SO 

percent of gross royalties collected and all of the rental 

payments to be used to reclaim abandoned mines. 

o The Prtsidml's Proposal, Contained in Hu l'J94 Budget. The 

President proposes a 12.S percent royalty on the value of 
496 

production to be phased in gradually over the three-year 

period beginning in 1995. Twenty-five percent of royalties 

would be paid to the states. His proposal would also make 

permanent the temporary $100 per claim holding fee that 

was imposed on all existing bardrock mining claims in the 

1993 Interior appropriation bill (Public Law 102-381). The 

President would commit some of these •funds-about $17 

million annually-to cover the administrative costs of the 

mining program. 

o S. 775, the Hardrock Mining Reform Act of 1993. This bill 

would impose a royalty on production from claims located 

after the bill's enactment; the royalty would be 2 percent of 

the net proceeds from bardrock mining. The bill would also 

establish a $25 location fee for all new claims staked after 

the bill is enacted, and would require all large-sit.ed claimholders ( defined as. those claimants holding more than 50 

claims) to pay $100 annually per claim to maintain their 

claims. Medium-sized claimholders-those holding between 

11 and 50 claims-would have to pay $25. annually per claim, 

and small-sized claimholders-those holding 10 or fewer 

6 
497 

daims-would be exempt from the amwal mamtenance fee. 

The bill would also require certain fees to be paid when 

land is patented. One-third of all receipts (location fees, 

maintenance fees, royalties, and patent fees) generated as a 

result of the bill's enactment would be distn'buted to the 

states. Toe bill authorizes appropriations of up to the 

rernaioing two-thirds of gross receipts to be used for grants 

DIRECT BUDGETARY EFFECTS OF MINING IAW REFORM 

Over the 1994-1998 period, CBO estimates that the royalties imposed by 

S. 2.57 would generate gross offsetting receipts to the Treasury of $164 

million, of which $41 million would be paid to states (see Table 1). The 

royalties in the President's proposal would generate gross receipts of S380 

million over the same period, with $87 million being paid to states. The 

royalty provisions of S. 77S would generate no receipts. Receipts from the 

President's proposal exceed those under S. 2.57 both because the royalty 

rate is highcr-12.S percent under the President's proposal, compared with 

8 percent in S. 2.57-and because the royalties under the President's 

proposal would become effective earlier than in S. 2.57. 

7 
498 

TABJ.BL ESTIMATED BUDGETARY EFfECl'S OPROYAI,.11ES AND HOLDING FEES 

(ha miDioas o( doUan, by fiscal :,ar) 

1994-

1994 1995 1996 1997 1998. 1998 

S.257 

Receipts 

Royalties 0 0 0 -82 -82 -164 

Holcliag fees 0 -10 ·10 -8S -8S -190 

Direct Spending &om 

Receipts 

Payments to states 0 0 0 21 21 41 

Alltliormd Spending &om 

Rcceipts 

Reclamation spending 0 10 10 126 m 

Presldeat's Proposal 

Receipts 

Royalties 0 -35 ~ -138 -138 -380 

Holcliag fees" -57 -57 .57 -57 -57 -285 

Direct Spending from 

Receipts 

Payments to states 0 8 16 32 32 

s. 775 

Receipts 

Royalties 0 0 0 0 0 0 

Holding fees -30 -30 -30 -30 -30 -150 

Direct Spending from 

Receipts 

Payments to states 10 10 10 10 10 50 

Authorized Spending from 

Receipts 

Reclamation spending 20 20 20 20 100 

SOUllCI!: Coepalioul Budpt Olf"ICC. 

NOTE: &limallea do-illchode additloul CDllectioa ud admilliltnlM- dlal-W lault flCe tllca ioyalticaud 

fca. Additiaaal .-ipla ud dir.u lpaldill& ia cadl ,....i ~be...., aaribulable to Ille •utliarimtc 

leplatiaD. Redamatioe lpClldill& ~ be IUbjcct to futun appn,prialiam adloa. 

.. 'Ille l'laideat pr0pOICC to ~ abo9c $17 million uaually ol lllea lloldia& fea to - cataiD collediao ud 

admiaillnlM -. 

8 
499 

S. 775 generates no receipts from royalties during this period 

because the bill's royalty provisions only apply to newly located claims, 

and CBO expects that new claims would yield virtually no production 

before the end of fiscal year 1998. Even if applied to existing mines, 

royalties from S. 775 would be substantially smaller than from the other 

proposals-generating receipts of less than $5 million annually-because 

the royalty rate is lower and the base to which the royalty is applied is 

significantly smaller than in the other proposals. Furthermore, states 

would receive a larger share of the total receipts from royalties than in 

the other proposals ( one-third under S. 775, compared with one-quarter 

in the other proposals). 

Over the 1994-1998 period, receipts from holding fees under S. '257 

would total an estimated $190 million. Holding fees in the President's 

proposal would generate receipts estimated to be $285 million. Assuming 

the bill is effective by fiscal year 1994, federal receipts from holding fees 

in S. 775 would total an estimated $150 million over the same period, and 

from this amount states would receive $50 million. Estimates of the 

receipts from holding fees resulting from S. 775 are particularly uncertain 

because of poor information about how many claims are currently held by 

small clairnant"i who would be exempt from the fees. 

9 
500 

Assumptiom and Methods 

Undecbin& &,timate., of Royalties and Holdin& fees 

Estimating the effect of mining law reform is difficult principally because 

no comprehensive data exist on hardrock mining on public lands. The 

Department of the Interior (DOI) is now working on, but bas yet to 

provide CBO with, an estimate of the value of bardrock minerals 

produced on public lands. Furthermore, the lack of data makes it bard 

to predict bow many claimboldcrs would choose to maintain their claims 

when faced with paying an annual rental or holding fee. Better 

information from the agencies responsible for overseeing activities on 

public lands would provide a more reliable basis for estimating budgetary 

effects and making policy judgments in this area. 

Three key assumptions underlie our estimates of receipts from 

royalties. They arc the value of minerals extracted from public lands~ the 

effect of royalties on production and prices, and the base to which the 

royalty rate is applied. 

The critical assumption in estimating receipts from rental rates or 

holding fees is bow claimholdcrs would respond to such fees. The 

10 
501 

estimates of royalties and holding fees follow fairly directly from the 

assumptions made about the factors that affect them. 

The Value of Minerals Extracted from Public ymds. CB0 assumes that 

the value of annual production from public lands subject to royalties 

under S. '1.57 and the President's proposal would total about $1.2 billion. 

This estimate is based on a General Accounting Office (GAO) study that 

surveyed Westem mining operations involving the production of eight 

minerals.1 The study did not cover all mining operations or all mineralswhich suggests the GAO figure may be conservative-but it did include 

copper and gold production, which accounts for a large percentage of the 

value of hardrock minerals produced on public lands. 

Furthermore, the large number of patent applications recently filed 

and pending approval at the DOI (450 applications 'covering about 

150,000 acres) suggests that a significant amount of federal land now 

producing hardrock minerals may move into private hands before any of 

the proposals could become law. If so, the value of production ultimately 

L ac-l~Office, V.,_oflMWDCl,MiMnllrbftt:#4,,_ _,......,.,,F-.1'--ls, 

RCEl).U.t9J (Aapa 19'2). 

11 
502 

subject to a royalty could· be significantly lower than many expect, at least 

over the next five years. 

How Royalties Would Affect Minerals Production and Prices. CBO 

assumes that an 8 percent royalty on gross income would result in a 5 

percent drop in production in the short run from federal lands. This 

response is based in part on data reported in a University of Nevada study 

on average operating costs for gold mines and in part on an analysis of 

production and price data for other important hardrock minerals.2 We 

further assume that mineral prices will remain generally stable between 

1994 and 1998. 

A 12.S percent royalty on gross sales, as proposed in the President's 

budget, would result in a drop in production of less than 8 percent For 

a 2 percent royalty on net value at the minemouth, as proposed under S. 

775, CBO assumes there would be no effect on current mining output 

2. Jolla Daffl _. 1'11111 nc.., "nc U.S. <laid M-. ..._, 1"1" (Uaiwalit)' cl,.__ llao, 

May Sdioal of N--.....,. ..... al MN_. Geolao. Specill Nllimlioa 14, 1992). 

12 
503 

The Bas Used to O!ledate Jwa)ties. The proposals we reviewed differ 

significantly in the bases to which the royalties would be applied. To 

prepare our estimates, we proceeded as follows: 

o For the President's propo.w. the base for estimating 

royalties is the gross sales of minerals produced on federal 

lands, assumed to be Sl.2 billion annually; 

o For S. '257, the base for calculating royalties-referred to as 

•gross income• in the bill-is assumed by CBO to be gross 

sales less costs of smelting. refining. and transportation. For 

these estimates, we assumed that gross income is 90 percent 

of the gross sales from federal lands. 

o For S. 775, the base for royalties is net proceeds from 

mining activities prior to smelting and refining-referred to 

as •minemouth value• in the bill. This base approximates 

gross income, as estimated for S. '157, less the costs of 

mining activities. Using data from the Bureau of Mines, we 

assumed this royalty base would be about 20 percent of 

gross sales from federal lands. 

13 
504 

How Current OairnboJdea Would React to New Wdiu1 or Rental Fees,. 

CBO assumes that in the short run about 60 percent of the existing claims 

of record at the end of fiscal year 1992 would be relinquished when 

claimants are faced with paying the annual holding fees proposed in S. 

257 and the President's budget. We believe that a significant number of 

claims are being held for speculative purposes and that many current 

claimholders are likely to drop marginal claims rather than pay to hold 

them. Some of these claims are likely to be located and staked again in 

later years. We assume that fewer claims would be relinquished under S. 

775 because small claimholders are exempt from fees and medium-sized 

claimholders would pay a considerably smaller fee than in S. 257. 

EFFECl'S ON JOBS IN MINING REGIONS 

Paying royalties would reduce returns to mining operations. Depending 

on the royalty rate and the base to which it is applied, this reduction 

could discourage the development of new mines and could reduce the rate 

of production in existing mines and hasten their abandonment. Less 

mining would lower employment in areas in the West where such mining 

takes place. Effects would be direct-from less mining activity-and 

14 
505 

indirect-from lower demand in the mining regions for the goods and 

services provided to mining firms and their employees. 

Holding fees would have little or no direct effect on production or 

employment in mining. However, both holding fees.and royalties would . 

reduce the profits of mining firms and, consequently, the incomes of their 

shareholders. Also, holding fees would reduce the net incomes of 

individual claiJDholclers. Reduced spending by the shareholders and 

individual claimholders could cause an additional secondary reduction in 

employment. Much of this reduction would probably occur outside of the 

mining regions,_ however, because many of the shareholders of mining 

firms do not live in mining areas. 

These negative effects of mining reform on employment in the 

mining regions are only part of the story. In the proposals being 

considered, some of the gross receipts the federal government receives arc 

returned directly to the states. S. 257 and S. 775 also authorize additional 

spending for reclamation of abandoned mines from the remainder of gross 

receipts. Both of these transfers to the states could increase employment, 

offsetting part or all of the dedinc in employment attnlnatable to the 

royalties or fees. But even if the net effect of these proposals were to 

15 
506 

cause no change in employment in the mining regions, individual miners 

and communities could be adversely affected. 

CBO has no~ estimated the nationwide effect on employment of 

these proposals to reform the mining law. As mentioned earlier, the 

effect on the entire economy would probably not differ greatly from the 

effect of any other deficit reduction measure, and CBO's practice is to 

analyze the economic effects of a deficit reduction plan, such as reflected 

in the Congressional budget resolution, only on an aggregate basis. 

CBO has estimated the direct and indirect effect of a reduction in 

mining activity caused by the reform proposals on employment in the 

mining regions. We have also prepared estimates of increases in 

employment in the mining regions that could result if states spent their 

share of new receipts and if the amounts in the proposals authorized for 

reclamation activities were to be appropriated. We do not have enough 

information to estimate the employment losses in the mining regions 

caused by the drop in incomes of shareholders of mining firms and of 

individual claimholders. Lacking this information means we have no firm 

conclusion about the effect of these proposals on regional employment. 

16 
507 

Emmated Effects on Bc&ianaI EmplQYJDCIU of Reduc;ed Miuior Actiyjn, 

CBO estimates that the losses in regional employment related to reduced 

mining activity under S. 257 would be between 800 and 2,000 jobs. 

(These estimates include information we recently received from the 

Bureau of Economic Analysis and indicate a greater range of uncertainty 

than we presented in testimony last month before this Subcommittee.) 

Toe direct lOMCS of-employment in mining would be between 400 and 800 

people. In addition, indirect effects on regional employment would come 

in the industries that provide goods or services to the mining firms and to 

the employees of those firms. 

Toe job losses associated with the President's proposal would be 

larger-between 1,300 and 3,200 jobs-because the larger royalty rate 

would cause a greater reduction in mining activity. S. 775 would have 

little or no noticeable effect on employment in mining because, as a 

royalty on profits, it would have little effect on production from mines. 

Although these effects on regional employment are small from the 

perspective of the entire economy, the affected communities may consider 

them large. 

17 
508 

To obtain those estimates, we assumed that the direct and indirect 

job losses in Western states from reduced activity in hardrock mining 

would be between 14 and 33 workers for each $1 million drop in mining 

output. 

The range of losses in employment associated with lower mining 

output reflects the general range for total employment multipliers 

estimated for 12 Western states by the Bureau of Economic Analysis. 

These estimates represent updates from the values assumed in our March 

16 testimony before this Subcommittee. Those earlier values, ranging 

between 15 and 25 workers, bad been reported by the Bureau of 

Economic Analysis in May 1986. 

&tirnated Effects on Re&ionaI Employment 

of Increased fu>endin& by States and Sl)endin& on Reclamation Activities 

Significantly, some or all of the adverse effects of royalties on jobs could 

be offset by jobs created by the uses to which states put their share of 

royalties and the use of funds authorized for reclaiming ~bandoned mines. 

Each of the three proposals for mining reform contains some provision 

for such disbursements. 

18 
509 

Under S. 2.57, between $20 million and $150 million per year could 

be spent in mining states, depending on how much of the amounts 

authorized for reclamation activities is appropriated. These outlays could 

add between 300 and 4,900 jobs in the mining states. The upper range for 

spending reflects an update to the estimate we provided to this 

Subcommittee in earlier testimony. That earlier estimate omitted the $85 

million in revenues from holding fees, all of which would go to the 

abandoned mines fund. The upper range for job gains is larger because 

of the higher spending figure and the use of a revised and higher 

employment· multiplier. 

Thus, under S. 2.57, the potential gains in regional employment 

from increased spending may be larger than potential losses from lower 

mining output. This result is an outcome of our basic assumption that 

hardrock mineral production would not change very much with an 8 

percent royalty on gross income and not at all from holding fees, even 

though the royalty and holding fee would generate a significant amount 

of money. 

1be President's proposal contains no provisions for spending for 

reclaiming mines. Hence, the direct stimulus it provides to mining states 

19 
510 

would come only from the 2S percent of royalties shared with the states, 

which, according to our estimates, could be between 450 and 1,100 jobs. 

Under S. TTS, an estimated $30 million per year could be spent in 

the states-if the maximum amount authorized is made available. This 

spending could create between 400 and 1,000 jobs. 

To make these estimates, CBO assumed that the same multipliers 

used for assessing the adverse impacts on regional employment of lower 

mining activity from royalty reform are useful for assessing the positive 

impacts of higher reclamation and other state spending. The estimates 

also assume that the states spend these funds. 

& stated previously, this is not the complete story about effects of 

these mining reform proposals on jobs in mining regions. We have not 

estimated the effect within the mining areas of reduced incomes of 

shareholders of mining firms and individual claimholders. 

20 
511 

CHOOSING 1HE BASE FOR ROYALTIES 

Royalty proposals differ both in the percentage rates and in the bases to 

which they are applied. The choice of the base is important both for 

reasons of efficiency and for the cost of administering and assuring 

compliance with the royalty. One method of computing royalties would 

be more efficient than another if it would cause fewer changes in 

production levels and ,fewer changes in mining practices or the 

organi7.ation of mining firms than otherwise. Administrative costs can 

differ greatly-generally the simpler the base, the easier and cheaper it 

would be to administer. 

Among the bases that could be used for assessing royalties on 

bardroclc mining are first, gross sales by the mining firm; second, gross 

income of the firm attnoutable ~o specific mining operations of the . firm; 

and third, net proceeds from mining operations of the firm. 

21 
512 

Grog Sales of Refined MiQerals 

In this case, the royalty would be applied to the gross sales of the firmmeasured as the market value of a refined product. These sales receipts 

· include returns to mining and noomining activities of the firm. 

A division of functions of mining firms between these activities is 

specified in Department of Treaswy regulations implementing the tax 

code. Mining activities include in-mine operations, crushing, grinding, and 

beneficiation processes such as cyanide leaching Smelting and refining 

operations and transportation to market are defined as nnomioing 

operations. 

A royalty based on gross sales would be the easiest to administer 

of the three approaches considered here because market prices and sales 

volumes are easily validated. Such a royalty would not affect the 

production practices of mine operators, but would affect the profitability 

of mines. Some mines with high combined costs for mining and 

ponmioing activities might become unprofitable if this type of royalty were 

imposed, depending on the royalty rate. Such. mines might shut down 

earlier than they would otherwise, or might not be developed in the first 

22 
513 

place. CBO asmmed that the royalty in the President's proposal would 

be applied to gross sales. 

Gross Income Attnbutable 

to S,pecific Miuin& OJ>erations of the Mioin& Firm 

S. 257 identifies gross income as the basis for royalties. Using the 

definition of gross income in the tax code, gross income from mining 

would be smaller than gross sales. For. purposes of determining the 

percentage depletion credit, mine owners calculate gross income as the 

product of gross sales and the ratio of mining costs to total mining and 

nonmining costs. We assume that mining and nonmining costs are only 

those associated with the specific activities descnl>ed above. This 

calculation allocates total returns, including profits, between the two 

categories of activities. 

Royalties based on gross income may be easy to administer if the 

royalty base adheres to the definitions in the tax code-the Internal 

Revenue Service already validates these numbers in confirming claims for 

the depletion allowance. 

23 
514 

A royalty based on gross income would affect firms differently than 

a royalty based on gross sales. Among firms mining the same mineral, 

this royalty would aeate a greater burden for those with a greater 

proportion of total costs stemming from mining activities. Among 

minerals, those with relatively high mining costs, such as gold, would pay 

a greater share of the total royalty than would firms with high nonroining 

costs, compared with a royalty on gross sales. 1bere is no apparent 

economic rationale for such differences. 

Moreover, a lilcely result of a gross income royalty would be to 

raise incentives, to the extent it is technically feasible, for mine operators 

to perform less crushing and mineral concentration work-the income 

from which would be subject to royalties-and perform more smelting and 

refining work. This type of change in production operations would raise 

costs unn~y. 

Net Proceeds from Miuiue <>Jzeratiogs 

The term net proceeds is defined in many ways. In S. 775, the royalty 

would be applied to the difference between gross income and mining costs 

24 
515 

(presumably as defined in the tax code). That calculation of net proceeds 

yields a value that comes closer to approximating the profits from mining 

activities than either the gross sales or the gross income basis. In theory, 

such a royalty base would not make any existing mines unprofitable. 

Taxing only the profits from mining would allow all existing mines to 

continue to cover their operating costs, so none would lower its output or 

close prematurely. 

In practice, however, the definition of net proceeds in S. ns is 

sufficiently ambiguous that actual gross income and calculations of mining 

costs by mine owners will be unlikely to yield a value that even closely 

approximates their actual profits .from mining. One reason is the gross 

income value that is part of the S. 775 formula for net proceeds may 

improperly allocate some fixed and variable costs to mining activities 

along with profits. Also, the arbitrary distinction between mining and 

nonmining activities presents mine operators with an incentive to alter 

their choices of processing technologies in an inefficient manner. 

( Generally accepted accounting principles do not rigorously define mining 

and nonmining technologies.) 

25 
516 

CBO 

TESTIMONY 

Statement of 

Jan Paul Acton 

Assistant Director 

Natural Resources and Commerce Division 

Congressional Budget Office 

before the 

Subcommittee on Mineral Resources 

Development and Production 

Committee on Energy and Natural Resources 

United States Senate 

March 16, 1993 

NOTICE 

This statement is not available for 

public release until it is delivered 

at 9:30 a.m. (EST), Tuesday, 

March 16, 1993. 

0 

CONGRESSIONAL BUDGET OFFICE 

SECO~D A!\D D STREETS. S. W. 

U"ASHl~GTO~. D.C. 20515 
517 

Mr. Chairman and Members of the Subcommittee, I appreciate the 

opportunity to discuss reforms of the Mining Law of 1872. My testimony 

today will focus on proposals to impose royalties on hardrock minerals 

extracted from public lands and to charge holding fees or rents on claims 

that are not yet producing minerals. 

The Congressional Budget Office (CBO) has prepared estimates of 

the effects on the federal budget of royalties and fees included in the 

President's budget and in S. 257, the Mineral Development and 

Exploration Act of 1993. In my testimony, I will describe these estimates. 

Poor data about mining on public lands and the characteristics of 

current claimholders make it hard to estimate the effects of these 

proposals. I will explain the assumptions that we made about the value 

of minerals now taken from public lands, about how production would 

change if royalties were introduced, and about how current holders of 

undeveloped claims would respond to new holding fees. Our assumptions 

lead to estimates of the federal receipts stemming from royalties and 

holding fees that are lower than those prepared by the Administration for 

its proposal. 
518 

WHAT IS TIIE RATIONALE 

FOR ROYALTIES AND HOIDING FEES? 

The argument most often heard supporting the collection of royalties for 

minerals extracted from public lands and charging holding fees is that they 

would· help ensure that the public would receive "fair-market" 

compensation for the use of public resources. Current law gives 

precedence to mining over other uses on a large portion of federally 

owned lands, and nothing is charged for extracting hardrock minerals. 

Many people consider the current practice to be an unneeded and 

unfair subsidy to the mining industty in the United States. Removing this 

subsidy by charging for the resources and the use of the land would be 

fair, in their view, because it would provide a return to the public. This 

return would come directly through receipts to the Treasury and indirectly 

through reducing the advantage that mining has over other uses of federal 

lands. 

A second rationale for imposing royalties or fees is that they would 

help reduce the federal budget deficiL Because it would increase the 

nation's rate of saving and promote long-term improvements in the 

2 
519 

standard of living of U.S. citizens, reducing the deficit is an important 

national objective. Royalties and fees could contribute to this objective. 

In · S. 257 and in the President's proposal, 25 percent of the gross 

receipts from royalties would be shared with the states. S. 257 also would 

authorize 50 percent of the gross receipts to be spent for reclamation of 

abandoned mines. The effect of S. 257 on the deficit would be reduced 

if the amounts authorized are appropriated; 

Arguments in favor of royalties or holding fees go beyond 

generating revenues or prohibiting · private firms from selling public 

resources without charge. Royalties or fees are prices, which in our 

economic system help allocate resources among various uses, improving 

the efficiency of their use in producing national output or promoting 

social welfare. There are • a number of efficiencies that stem from 

royalties and holding fees. 

Proper Pricin& Would Help Allocate 

Public J aorts to Their Most Desirable Uses 

Holding fees would create an incentive for present holders of claims to 

develop them, make them available for someone else who would develop 

3 
520 

them, or relinquish them. We believe that the incentive created by 

holding fees to develop the claims would have minimal effect on 

production. In preparing our estimates of receipts from holding fees, we 

have assumed that many aurent claims would be relinquished. 

1be ease with which holders can keep claims, even with no 

intention of developing them, has caused problems both for mining 

companies that want to develop resources and for government Causing 

claims to be abandoned would release these public lands for other uses, 

which might include other mining activities, recreation, or conservation of 

this land as undeveloped wilderness. 

When the Mining Law was passed in 1872, it contained a provision 

for diligent development of the resources once minerals were discovered. 

Oaimants were required to perform at least $100 of work a year per 

claim. In those days, that amount corresponded to about seven weeks' 

effort at mining and-considering the short period available for activity at 

many mining sites-represented a substantial level of effort. Today, the 

requirement is still set at $100 for development These charges at today's 

prices now represent a rnere token effort. 

4 
521 

The original intent of the requirement for diligent development was 

to discourage claimants from holding undeveloped property. The 

proposed holding fees differ in many respects from the requirements for 

diligent development, but would similarly encourage claimholders to 

release claims on which they have no intention of mining. 

Royalties could have a similar effect. Mining activities that are 

near the margin of profitability might be abandoned or remain 

·undeveloped. If the royalties or fees were set to reflect accurately the 

alternative public value of the land, then abandoning some mining 

activities would probably add to social welfare. 

Currently, regulation .heavily affects land use. For example, some 

areas arc closed to prospecting and mining activities. Moreover, federal 

and state environmental regulations affect how . land is developed. 

Royalties may not be a substitute for planning the uses of public lands, 

but they would reduce mining on some lands that would not be mined if 

mine operators had to pay fair-market rates for the resources extracted. 

5 
522 

Pro.per Pritjor Would Reduce the Rate at Which 

Mineral Resources Are Exploited 

Royalties would tend to slow down the rate of development and 

extraction of minerals from federal lands. Because no royalties are 

charged, mining companies have a greater incentive to develop and 

extract minerals from federal lands than on private or state lands where 

royalties typically apply. Moreover, charging nothing for the minerals may 

cause them to be extracted now, rather than later, when they might be 

more valuable to our economy. How fast our mineral or other resources 

should be used up is a very complex subject. But faster is not always 

better. 

Proper Pritjnr Would Charre Miners for Some of the 

External Effects on the Enyiropment 

Mining and exploration have done substantial damage to public lands and 

the ground- and surface-waters on those lands. Current mining activities 

on public and private lands are subject to a number of federal 

environmental regulations introduced in the past several decades. Federal 

laws that apply to mining activities and that affect the costs of operating 

6 
523 

mines include the Safe Drinking Water Act, the aean Water Act, and the 

Clean Air Act. Some of the wastes associated with mining are subject to 

regulations stemming from the Resource Conservation and Recovery Act. 

State regulations also apply. 

Environmental hazards created by past mining activities-mostly 

ground and surface water pollution-are subject to regulation under· the 

Comprehensive Environmental Response, Compensation, and Liability 

Act (CERCLA, or Superfund). This law gives the Environmental 

Protection Agency the right to locate parties who are responsible for the 

hazard and requires them to pay for cleanup. It is now difficult to 

identify private parties responsible for environmental hazards at 

abandoned mining sites on public lands-especially those private parties 

in a position to pay for cleanup. The federal agencies that manage the 

lands-ultimately meaning the federal taxpayer-may end up paying for 

cleanup at many abandoned mining sites. 

Beyond the issue of hazardous wastes, reclamation of mined sites 

is an issue important to proponents of the reform of mining law. 

Reclamation requirements and authorization of funds to help pay for 

reclaiming abandoned sites is, for example, contained in S. 257. The 

7 
524 

authorized funds would come from the new royalties introduced by the 

bill. 

Aside from being a potential source of funds for cleanup, royalties 

or other fees would have few beneficial effects on the environmental 

damage caused by mining activities, since a re~~ely small reduction in 

mining activity is expected to result from royalties. _ The environmental 

effects of royalties might be positive, but royalties of this magnitude 

should not be seen as an effective policy tool to achieve environmental 

goals. 

Pticiu& of Hardroc;k Mine@ls Would Make the Treatment Amoa& 

Federally Owned Resources More Consistent 

Hardrock minerals on public lands are treated differently from other 

minerals. The Mining Law that now applies to bardrock minerals 

originally applied to all minerals on lands in the public domain. However, 

subsequent legislation bas changed the conditions of access to other 

mineral resources. 

8 
525 

Most important, the Mineral Leasing Act of 1920 distinguished 

locatable from leasable minerals. Locatable minerals are the hardrock 

minerals that are the focus of the Senate and Administration proposals. 

Leasable minerals include coal, oil, and gas. For these fossil fuels, 

subsequent legislation has defined competitive processes for obtaining 

leases, established diligence requirements for developing the leases, and 

required the payment of royalties. The rate of royalties for federal coal 

is 8 percent; for onshore oil and gas, 125 percent; and for offshore oil 

and gas, 16.7 percent. Although the most common process for obtaining 

oil and gas leases is the competitive bonus bid with a fixed royalty, other 

competitive and noncompetitive processes are allowed under the law. 

Hardrock minerals are not the only public resource for which there 

is interest in capturing some of their economic value on behalf of the 

taxpayer. For example, both the current and previous Administrations 

have called for auctioning parts of the electromagnetic spectrum for 

private use-rather than continuing to give it away through a lottery. The 

winners of these lotteries frequently turn around to sell the rights at 

considerable profit. The Congress is presently considering legislation that 

would permit such auctions. 

9 
526 

In the same manner, a federal royalty scheme for extracting 

minerals would permit the taxpayer to share in these gains, rather than 

having the benefits accrue to a speculator who filed a claim in 

anticipation of being bought out. In fact, the major developers of 

minerals often pay a substantial amount to acquire mineral rights from 

current claimholders, or they pay royalties to these claim.holders when 

they undertake development. 

EFFECTS OF ROYALTIES AND HOIDING FEES 

ON U.S. MINING FIRMS AND EMPLOYMENT IN 1HE INDUSTRY 

Imposing royalties on minerals extracted from public lands would reduce 

returns to mining operations. In turn, this reduction would discourage the 

development of new mines and could reduce the rate of production in 

existing mines and hasten their abandonment. Less activity in mining 

could reduce employment and hurt the economies of areas in the West 

where such mining taJces place. ll~lding fees woul~ have little or no 

direct effect on production or employment in minillg. Use by the states 

of their share of the royalties collected and new reclamation activities, if 

any, could offset a large part of the economic effect of reduced mining 

activity. 

10 
527 

Unfortunately, the information required to analyze these effects 

fully is poor or lacking entirely. I will briefly review, however, some of 

the expected economic effects of royalties and holding fees and comment 

on an economic study that looks specifically at some of these issues in 

gold mining. 

Toe Effects of Rqyalties on the Decision to 

Mine on Federal Lands and on the Production of Existine Mines 

Royalties can affect development of potential mines, the rate of 

production at existing mines, and the decision about when to abandon an 

existing mine. The decision to establish a new mine on federal lands is 

based largely on its expected profitability. Royalties would reduce 

expected profits in a way similar to a drop in the expected market price 

for the mineral and may make some new projects unprofitable. 

For existing mines, introducing royalties would have different 

qualitative effects: subsequent production levels would tend to be lower 

in all periods, mines might be abandoned sooner than otherwise, and as 

a result more resources would be left in the ground. Higher-cost mines 

would scale back their operations the most. For most mines, this step 

11 
528 

would not mean abandoning them immediately, but rather closing them 

earlier-say, 10 years in the future rather than 15 years. 

CBO has not conducted its own analysis of the effects of royalties 

on mining activity in federal lands. Compounding the problem of poor 

data has been the tremendous impact of recent technological changes, 

which have led to rising production of gold, for example, even in the face 

of static or falling prices. To understand how a royalty could affect 

hardroclc mining, we reviewed several studies of mining costs in the 

United States. These studies covered mining on both public and private 

land, not just mining on federal lands. 

One particularly useful report by the University of Nevada 

summarized data on average operating costs for 51 mines accounting for · ' '1'1:• 

about 90 percent of total U.S. capacity for primary gold production. 

Using data from this study on average operating costs of mines in 1990, 

we conclude that an 8 percent drop in gold prices would probably have 

a small effect on production. The 8 percent price drop means that mines 

accounting for 1 percent to 2 percent of total production that year would 

not cover their reported average operating costs. An 8 percent drop in 

gold prices would be equivalent to an 8 percent royalty if the market price 

12 
529 

of gold were left unchanged by the resulting drop in production. U.S. 

prices of gold and most other minerals extracted from federal Jaruis are 

determined on world markets and would not be affected by relatively 

small a1ts in U.S. production. 

The implication to be drawn from this exercise is that the effects 

of an 8 percent royalty on production from these mines could be small.· 

How this implication might apply to gold mines on federal lands or even 

more broadly to all mines on federal lands is bard to determine. We 

know little about differences in costs between mines on federal and 

private Jaruis. 

On the one hand, these values could overs~te the actual response 

of supplies to a royalty. One reason is that some elements of a mine's 

operating costs (for example, corporate tax payments) would drop along 

with net proceeds. Another is that varying production costs would 

themselves fall as mines lowered their output, thereby offsetting the cut 

into average profits. 

On the other hand, the total response of mineral supplies from 

federal lands may be greater than indicated by the example of gold since 

13 
530 

the production of other important minerals (such as copper, silver, and 

lead) is likely to respond more to a price change than would gold. 

For our estimate of receipts from royalties, CBO has assumed that 

the drop in production from mines on fed~ral lands would be several 

times greater than inferred from the data on gold mines in the study 

mentioned We have assumed that an 8 percent royalty would cause a 5 

percent reduction in the value of production of mines on federal lands. 

The Effects of Boldin& Fees on Production and Abandoniae Qaims 

• The effect on the industry of introducing holding fees would be different 

from that of royalties. Three things could happen, depending on the level 

of the fee. First, such fees could encourage the claimholder to begin 

development because the fees would impose a cost of delay not now 

present. Of the possible reactions of claimholders to the new fees, this 

possibility-immediate development-is probably the least likely for the 

simple reason that the benefits of avoiding payment of the proposed 

holding fee would be small relative to the costs of initiating production 

prematurely. 

14 
531 

Second, the claimholder could continue holding the land without 

developing it. By so doing, the claimholder would indicate that he or she 

believes that the prospects for future profit from developing ( or selling) 

the claim exceed the newly imposed cost of holding it. For many, holding 

a claim is an inveRtment with an uncertain future payoff. The investment 

now has small canying costs. 

The third alternative for the current claimholder is to avoid paying 

the holding fee by releasing the claim. It would then be available for 

competing businesses or for different uses altogether-again, to be 

developed immediately or held. 

The most likely immediate result of introducing holding fees would 

be that small claimholders would release or immediately sell many claims, 

with some of those released claims ending up in · the bands of larger 

mining interests. This outcome would take place if small holders of 

claims find that the cost of the proposed holding fees exceeds the value 

they placed on those claims-on the basis of expcctcd returns from either 

mineral or nonmineral uses (for example, recreational). Even larger firms 

could find it in their interest to give up some marginal claims. 

15 
532 

CBO has not conducted a quantitative analysis of the effects of 

holding fees on the mining industry. To estimate receipts from holding 

fees, we have assumed that a substantial proportion of claims would be 

abandoned. This is a conservative assumption of its effect on federal 

revenues. Regardless of the number of claims that would actually be 

returned to the government as a result of this policy change, however, it 

is hard to see how production of minerals or employment in the industry 

could be adversely affected. 

The Effect of Royalties on Re&ional Economics and Employment 

Any reduction in mining activity that resulted from newly imposed 

royalties would reduce employment and incomes in the affected areas. 

The direct effect of royalties could be mitigated by the states' use of their 

share of the receipts-in S. 257, 25 percent of the royalties.collected are 

remitted to the states; a similar portion is shared with the states in the 

President's proposal. 

S. 257 also authorizes spending 50 percent of the total royalties 

collected for certain reclamation activities. Spending for reclamation is 

16 
533 

subject to annual appropriations, but if these funds are made available, 

a large share of the detrimental effect of royalties on employment and 

incomes could be offset. Some portion of the expected increase in federal 

costs of administering the royalties and holding fees would also accrue to 

the affected areas. 

CBO has prepared an illustrative analysis of the effects that 

royalties might have on incomes and employment in the affected areas. 

For purposes of this illustration, CBO assumed that imposing an 8 percent 

royalty would cause a 5 percent reduction in the value of production from 

mines on federal lands. This loss would amount to about $60 million 

annually, based on an assumed level of total annual production on federal 

lands of $1.2 billion-the value of production assumed in the CBO 

estimate of receipts that would be generated from a royalty. 

Such a loss in direct output would have subsequent effects on other 

economic activities in the affected states. Department of Commerce 

estimates of regional economic multipliers for "miscellaneous" mining 

(which excludes oil, gas, and coal) give an idea of how the region might 

be affected. These multipliers indicate the relationship between a change 

in the value of output from mining and the total direct and indirect 

17 
534 

change in value of local output and employment by industries providing 

intermediate goods and services to the mining industry. The values are 

imprecise for the purpose of this analysis, since statistics for minerals of 

greatest economic interest on federal lands are combined with those for 

iron and aluminum. 

The overall multipliers suggest that a $1 million reduction in the 

value of miscellaneous mining in the major hardrock mineral-producing 

states could lead to a total loss in output of $1.5 million to $2 million 

(including the direct $1 million in mining). The associated losses in 

employment would be 15 to 25 jobs. These values do not include losses 

for businesses or local governments that do not provide goods or services 

directly or indirectly to mining but that, nevertheless, depend on the 

incomes of mine owners and their employees. 

Applying these multipliers to the assumed $60 million direct loss 

in mining output that results from imposing royalties indicates a total loss 

(direct and indirect) of between 900 and 1,500 jobs and a total loss of 

economic output of between $90 million and $120 million. 

18 
535 

These estimates do not include the compensating effects of 

increased spending from the royalty proceeds, with their multiplier effects. 

Of the $90 million gross royalty receipts that we estimate the Senate 

proposal would generate each year, 25 percent would be returned to the 

states. Another 50 percent would be designated for the abandoned 

mineral mine reclamation fund, although spending from that fund would 

be subject to annual appropriations. 

Thus, depending on actual spending on abandoned mines, between 

$20 million and nearly $70 million could return to be spent in mining 

states. This money could add between 300 and 1,700 jobs, and 

compensate regional economies with added economic output of between 

$30 million and $140 million. 

The preceding estimates suggest the net result of direct and 

indirect effects of royalties on economic activity and employment may be 

relatively small. As indicated earlier, these estimates are far from firm. 

Moreover, even if the net economic effects in the region were to be small, 

individual workers, some mining support industries, and particular 

communities might still undergo painful adjustments. 

19 
536 

ESTIMATES OF TIIE BUDGETARY 

EFFECTS OF ROYALTIES AND HOLDING FEES 

The Congressional Budget Office has prepared preliminary estimates of 

the effects on the federal budget of the royalty and fee proposals 

contained in S. 257. The bill would establish an escalating a1mual rental 

payment for all hardrock mining claims and would impose a royalty 

totaling 8 percent of the gross income from production on public lands. 

The President proposes to make permanent the temporary $100 per 

claim annual holding fee now in force. The President also proposes a 

12.5 percent royalty on the value of production to be phased in gradually 

over the three-year period beginning in 1995 (see Table 1 for CBO's 

estimates of these proposals and the Administration's estimate of receipts 

from its proposal). 

CBO estimates that over the five-year period beginning in 1994 the 

royalty provisions contained in S. 257 would increase federal receipts, net 

after payments to states, by about $140 million. This estimate does not 

reflect the costs of any new reclamation activities authorized in the bill. 

The holding fees established by the bill would produce net receipts 

totaling an estimated $190 million over the same period. 

20 
537 

TABLE L ESTIMATED NET FEDERAL RECEIPTS FROM ROYALTIES AND HOLDING 

FEES (la ailiom of dolan by fiscal )'IW) 

0 

0 

0 

S7 

0 

97 

1995 

0 

10 

28 

S7 

63 

97 

1996 

0 

10 

131 

97 

1997 

'lO 

8S 

106 

S7 

rn 

97 

SOUllCES: 0..mioul Badpt Office; Office f16 Ne FnnC 11111 Bllllgd. 

1998 

'lO 

8S 

lOS 

S7 

rrr 

97 

1994-

1998 

140 

190 

748 

485 

NOTB: Emaata llo aot iDdude addilioaal collcdioa -r ~ am tliat would result 

froa diclc royallies ud fees. 

L Royalty amOUllll lboMa repraad die federal sliare of reeeipts aftu mamg reqaired paymcats 

tolblta. 

b. TIie Praideat propolCI to commit about $17 millioa uaaally of dlcse lloldiac fees to aMr 

certaia a>llcdioll 11111 ~ collS. 

c. Pre-filed -..... of dais tatimoay incorrccdy rq,ortcd dais Yahie a 471. 

21 
538 

We estimate that royalties in the President's proposal would 

increase federal receipts, net after payments to states, by $292 million 

through 1998. Over the same period, we estimate that the holding fees 

in the proposal would yield receipts of $285 million. 

Assumptions Underlyin& the Estimates 

As discussed earlier, estimating the effect of mining law reform is difficult 

principally because no comprehensive data exist on hardrock mining on 

public lands. The Department of the Interior (DOI) has been unable to 

provide an estimate of the value of production of hardrock minerals on 

public lands. Furthermore, the lack of data makes it hard to predict how 

many claimholders would choose to maintain their claims when faced with 

paying an annual rental or holding fee. Better data from the agencies 

responsible for overseeing activities on public lands would provide a more 

reliable basis for estimating budgetary effects and making policy 

judgments in this area. 

Three key assumptions underlie our estimates. They involve the 

value of minerals extracted from public lands, the effect of royalties on 

22 
539 

production and prices, and the response of claimholders to new holding 

or rental fees. 

The Value of Minerals Extracted from Public Lands. CBO assumes that 

the current value of annual production from public lands totals about $1.2 

billion. This estimate is based on a General Accounting Office {GAO) 

study that surveyed Western mining operations involving the production 

of eight minerals. 1 The study did not cover all mining operations or all 

minerals-which suggests the GAO figure may be conservative-but it did 

include copper and gold production, which accounts for a large percentage 

of the value of bardrock minerals produced on public lands. 

Furthermore, the large number of patent applications recently filed 

and pending approval at the DOI (450 applications covering about 

150,000 acres) suggests that a significant amount of current production on 

federal lands may move into private bands before S. '157 or the 

President's proposal could become law. If so, production of bardrock 

minerals ultimately subject to a royalty could be lower than many expect. 

L Geaenl Acxovnring QOicc, V.r.e a/Hlll'dlodc 11iMT11U Exlrlu:tedtr-· lllfd Remaitlit11 °" y_,. 1-b, RCEI>-92-192 (August 1992). 

23 
540 

How Royalties Would Affect Minerals Production and Prices. CBO 

estimates that an 8 percent royalty would result in a 5 percent drop in 

production in the short run from federal lands. This response is based in 

part on data reported in a University of Nevada study on average 

operating costs for gold mines and in part on an analysis· of production 

and price data for other important hardrock minerals.2 We further 

assume that mineral prices will remain generally stable between 1994 and 

1998. 

How Current Qaimholders Would React to New Boldin& or Rental Fees. 

CBO assumes that in the short run about 60 percent of the existing claims . ~ . 

of record would be relinquished when claimants are faced with paying an 

annual rental or holding fee. We believe that a significant number of 

claims are being held for speculative purposes and that many current 

claimbolders are likely to drop marginal claims rather than pay to hold 

them. Some of these claims are likely to be located and staked again in 

later years. 

2. John Dobra ud Paul Thomas, "The U.S. Gold Mining Industry 1992" (Univer-5ity of 

Nevada Reno, Makay School of Mines, Nevada Bureau of Mines and Geology, 

Special Publkatioa 14, 1992). 

24 
541 

Differences Between S. 257 and the President's Proposals 

The estimated budgetary effects of the two proposals differ primarily 

because of differences in the royalty rate, the holding fees, and the 

effective dates of the provisions. 

The royalty rate in S. 257 is 8 percent of gross income and would 

not become effective until fiscal year 1997. The President proposes a 

royalty rate of 12.5 percent that is phased in over three years beginning 

in 1995. CBO estimates that receipts from the President's proposal would 

exceed those from S. 257 by about $150 million over the five-year period 

for this reason. 

The holding fee ( or rental rate) in S. 257 would total $5 per acre 

for each of the first five years following location of a claim and would 

escalate in $5 increments every five years until it reached $25 per acre in 

the 21st year following location. Holders of new claims located after the 

bill's effective date (October 1, 1994) would begin paying the fee in fiscal 

year 1995. Existing claims would have three years to convert and would 

thus be subject to the rental fee provisions beginning in 1997. 

25 
542 

The fee proposed in the President's budget is quite different. It 

would be an extension of the $100-per-claim holding fee that was imposed 

on all existing bardrock mining claims in the 1993 Interior appropriation 

bill (Public Law 102-381). The President would commit some of these 

funds-about $17 million annually-to cover the administrative costs of the 

mining program. Annual receipts from these fees in 1998 are estimated 

to be about $30 million lower than receipts from holding fees in S. 257. 

Differences Between CBO and Administration 

&tiroa•cs of the President's ProposaJs 

CBO's estimates of the receipts generated by the royalty and holding fee 

proposals induded in the President's budget are lower than those 

prepared by the Administration. The major sources of the differences in 

the estimated royalties arc the following: 

o The Office of Management and Budget (0MB) assumed 

that the current value of bardroclc mining production on 

public lands totals about $3 billion annually. As explained 

above, CBO assumed an annual value of production of $1.2 

26 
543 

billion. This difference is the principal reason why CBO's 

estimates are lower. 

o 0MB held production constant as royalties increased over 

time. CBO assumed that production wou!d decline (about 

8 percent for a 12.5 percent royalty) as royalties increase. 

This assumed decline also has the effect of lowering the 

estimate of receipts. 

The major sources of differences in the estimated receipts from 

holding fees are the following: 

o CBO assumes that more of the existing mining claims (up 

to 60 percent rather than 25 percent as estimated by the 

Administration) will be relinquished when claimants are 

faced with paying annual holding or rental fees. 

o In its calculation of the number of mining claims that would 

be subject to annual fees, CBO accounts for the fact that 

some claims are administratively closed each year. This 

27 
544 

assumption has the effect of further lowering the number of 

claims subject to the fee. 

CONCLUSIONS 

The proposed mining law reforms contained in S. 257 and the President's 

budget have a number of likely effects: 

o They generate receipts to the Treasury that can be used for 

deficit reduction or other purposes, although CBO's 

estimates of receipts yields are smaller than the 

Administration's; 

o They increase the efficiency and fairness of the way in which 

public resources are used; and 

o They provide modest support to environmental objectives. 

At the same time, they lead to economic costs and disruption: 

28 
545 

o They will cause some loss of profits and drop in production--although the magnitude ofloss appears to be relatively 

moderate. We estimate that output would drop about 5 

percent with an 8 percent royalty (and 8 percent with a 12.5 

percent royalty). 

o The displacement of employees will generally be modest 

overall, although the local effects may be significant. Such 

local effects, if they occur, could be partly or fully offset, 

depending on the manner in which receipts from royalties 

are shared with states and the amount of employment that 

might accompany the provisions on abandoned mines of S. 

257. 

29 
546 

~ EH oil/If L I, f 

MOURYNE B. LANDING 

CHIEF CLEM OF 1"E --.v . 

-- . 

&tatr of Nruaba 

Assrmblv 

March 15, 1993 

The Honorable Thomas S. Foley 

Speaker of the House 

U.S. House of Representatives 

Washington, D.C. 20515-4705 

Dear Mr. Speaker: 

. CEGISL4TIVE BUILDING: 

401 S. Carson Street 

Carson City. Nevada 89710 

(702) 687-5739 

Fax: (702) 687-5962 

HOME: 

P.O. Box 138 

Carson City, Nevada 89702 

Telephone (702) 882-"381 

Pursuant to legislali"YC direction, I enclose a copy of Assembly Joint Resolution No. 22, 

regularly passed by the 67th session of the Nevada legislature and approved by the 

Governor of the State of Nevada. 

s~-: -~7 

M ding 

Ch e o the Assembly 

MBL:cm 

Enclosure 
547 

Assembly Joint Resolution No. 22-Committee on 

Elections and Prooedurea 

FILB NUMB'.ER~M •• 

ASSBMBLY JOINT RESOLUTION-Ufllna Con,rm IO reject cenaln ltalllatloti nlalld IO 

mlniq. ' ' 

WHSUAS, The Nevada Legislature puscd Senate Jofnt Resolution No. 18 

during the 1991 leplative ICUion, uratna Conpaa to reject leaialation 

which would have repealed and reformed the aeneral minina law u •mended 

to the extreme diladvlntqc of many bualnaw and communitie, hi the 

we.tern states; and 

WHEREAS, 1be 103rd Coqreu bu 10eD. the reintroduction of two bills. 

one in tbt HoUN of Representative&, H.R. 322. and one In the Seoate. S. 

257, which would aaain attempt to repeal and reform the acamJ minina Jaw 

u amendedi and · WHBRBAS, H.R. 322 and S. 257 are in direct contradiction with tbo buic 

tenants of the.;neral minf.na law which ue euendal to . a viable minlna 

Industry, 1pccifically arantfns freedom of &CCOA and thuauranc:e chat devcf. 

opmem ana minina of mineral depoeita can ~ aceordina co all appUca. ble lawa and regufationa wltho\&t undue intervention; aod 

WHERBAS. Both bills provide for a royalty on the arou UlQOllle from 

mJnoral ~ of not leu than 8 pcn:cnt. an otreme level which would 

result iD tho cbun of mlnea and a lfpffieant reduction in exploration for 

new mfne1; and 

WHDBAS, In 1992, approximately 58 percent of Nevada'• toca1 bardrock 

mineral production wu produced on public lands and would bo subject to the 

propollla currently beinf considmd in Conarea: and 

WHEIU!AS, The State o Nevada estimate1, 6ued on a surwy of tho vroducen of 98 percent of Nevada', nation-leadJng production of Sold and' 1flvor, 

that an 8 percent royalt)'. in the aross value of production would result ln the 

following decrease& ln the fint year from current levels: 

Direct Mine Bmployment: 

Production iD Ounce& of 

Gold: 

Minoablc Reservea in 

Ouncea: 

Number of Minina Oaims 

Hold: 

Net Proceeds of Mine Tax 

Paid: 

Sales and Use Tax Paid: 

E!xploration Bxpcnset: 

From 

8,930 

6,541,000 

81,961,000 

40,362 

$26.639,000 

$44,617,000 

$88,884,000 

$620,064.000 

To 

7,480 

6,091,000 

72,0151,000 

23,856 

$23,140,000 

$41.435.000 

$62,245,000 

Capital BxpcndttUltl: $582,868,000 

~cUturea on Ooodl 

and Services: Sl,046,3.51.000 $950,357,000 

and Iona-term dedlnea are antimpattd to bt more aewre; and 

Percent 

Dedine 

169' 

- 7% 

12'JI 

419' 

13% 

79' 

309J, 

69' 

~ 
548 

-2-

WHBllEAS, Other hardrock minerals produced in the atate, includ~ copper, lead, zin~. gypsum, barite and diatomite, together with substantfal 

resources of tuna,ten, antimony, molybdenum and mcrcuty would be ••~i• 

larly affected; and . WHBUAS, Any higher royal~ on the gross value of production, such u tho 

12.5 percent royalty pr()l)()ICd m the Administration's budget, woμld result in 

even higher decreuea fn employment, economic 1etivity1 revenues to the 

State of Nevada, Ion of exploration and the shortening of mine lives; now, 

therefore, be it · RESOLVED BY nm ASSBMBLY AND SENATE OF THE STATB OP NSVADA, 

JOllffl.Y, That the Nevada Leaialature continues its rigorous objection to the 

proposed refonnadon of the ,cneral mining law and hereby urges Congress 

to rcicct the concept of a arou Ylluo royalty which ia proposed in H.R, 322 

and s. 257. and work toward a reasonable compromi10 with the minina 

industcy; and be it further . USOLVBD, That the Qief Coric of the Assembly prepare and transmit a 

COP)' of this resolution to tho Vico President u presidia& officer of the Senate, 

the Spcebr of the House of ReP.reaentatiws, and each member of the Nevada 

Coapssional Delepdon; and be it further 

RBSOLVBD, Tbat this resolution becomes effective upon paasaae and 

approval. . 

....... 
549 

STATE OF ARIZONA 

DEPARTMENT OF MINES AND MINERAL RESOURCES----

ARIZONA MINING AND MINERAL MUSEUM 

Phone (602) 255-3791 1-800-446-4259 "'"""""" OOLYI 

FAX (602) 255-3m 

March 11, 1993 

The Hon. Richard H. Lehman, Chairman IIAR 1711S 

Subcommittee on Energy and Mineral Resources 

Committee on Natural Resources 

United States House of Representatives 

Washington, DC 20515 

Dear Mr. Chairman: 

As Director of the Arizona Department of Mines and Mineral 

Resources, I believe it is my responsibility to transmit our viewpoint regarding legislation again introduced by Congressman 

Rahall that would drastically alter the General Mining Law of 

1872. Since our agency has the responsibility to promote the 

development of mineral resources in Arizona, it should not come 

as any surprise that we are opposed to the radical revision 

proposed by H.R. 322, and, I might add, Senator Bumper's new bill 

s. 257. 

I hope you will understand that our position is not simply one of arbitrary opposition because we like the way it has been 

done in the past. Quite to the contrary, our concern is not materially different than that expressed in the political world 

inside the beltway. It is a matter of serious concern that the 

economy of Arizona be allowed to continue to grow and provide 

good paying jobs for people, just as all of us want that to happen all over the United States. I am sure you share that 

concern. 

The mining industry of Arizona provides directly 

approximately 19,000 jobs with above average pay. While much of 

the mining of the state is conducted on privately owned or patented land, a significant number of those jobs are at mines 

that are on lands administered by the U.S. Bureau of Land 

Management or the Forest Service. 

It has been proposed by both Rahall and Bumpers that a 

minimum 8% to 12 1/2% royalty be attached to the gross value of all minerals that are produced on the public lands. It is fairly 

simple arithmetic to show that in most projects that are profitable, that royalty is equivalent to at least 16% of net. There are very few mining projects in Arizona that have a 16% 

margin on net earnings. 

The end result of the imposition of this tax on the industry 

will be the cessation of mining on public lands. While it is 

difficult to determine a specific number, our Department 

1502 WEST WASHINGTON STREET, PHOENIX. ARIZONA 85007-3210 
550 

estimates that there will be a loss of over 2,000 jobs. A 

proportional loss in revenue to both State and Federal 

Government, and the losses to supporting suppliers will also occur. In fact, if the result of the institution of a $100 

rental fee on all mining claims is any example, the imposition of a punitive royalty on minerals will create a loss of revenue to the Federal Treasury. By way of explanation, the rental fee 

caused a reduction in the number of claims held over on public 

lands in the fall of 1992 in Arizona. The impact felt was that 

the BLM received approximately $57,000 in fees in Arizona in 1992 

compared to $167,000 in 1991. This is not good policy for 

anyone. 

There are .areas of interest in the General Mining Law that 

needs attention. In particular, the laws that already exist need 

enforcement. By that action, most of the land-use abuses could 

be stopped. The mining industry is open to significant revision 

of the law in the cost of acquiring a patent on the surface and 

mineral rights. They have proposed that the patent "purchase" 

price be based on real value of the land in question. It is also 

possible that the industry would work with the Congress to establish a reasonably royalty rate, particularly if it could 

have some flexibility that would allow room for the marginal 

projects. Laws governing environmental degradation and 

mitigation, especially in regards to water and air quality 

already apply to the industry. The industry has in fact· been 

able to successfully clean up the water and air around currently 

operating projects. More than a billion dollars have been spent 

in Arizona alone during the last 20 years for that purpose. The 

industry has been working with the Environmental Protection 

Agency and the Western Governors• Association Mine waste Task 

Force for about 5 years to develop a comprehensive mine waste management system that could be codified into rules and 

regulations by the various states and the EPA. Because each state has unique conditions, any such system should be originated 

and 11anaged by the states within a basic framework of standards set by the cooperative effort of the Task Force and the EPA. 

To impose the radical changes on the Western Mining States 

that are contained in both the Rahall and Bumpers offerings would cause serious damage to the economies· and way of life of those 

states. It will also fail in the attempt to solve the federal 

budget problem by milking the mining industry. That cow of 

plenty will move to greener pastures outside of the United 

States. The greater good for the United states as a whole will 

be ill-served if either of the proposed bills pass Congress and are signed into law. 

Your support for meaningful reforms to the existing law 

which will address some of the perceived concerns of members of 

congress will be greatly appreciated. Reasonable reforms could 
551 

include: the payment of fair market value for mining claim 

patents; the establishment of an Abandoned Mined Lands fund from 

the revenues generated by a reasonable royalty based on net 

profits; implementation of federal reclamation and bonding 

requirements when there are no state requirements; and, a small 

miner exemption for miners who have less than 50 claims. 

I urge you and your colleagues to consider this reasoned 

approach. Please don't kill a system that has served the 

industry and the country at large extremely well for over one hundred years because of the misinformation that has been 

promoted by a loud and mistaken minority, who want all mining to stop on the public lands. 

Yours 

'§:~~~~~~·\ Leroy E. K · 

Director' 

cc: Bruce Babbit, Secretary of Interio 

J. Bennett Johnston, United States Senate 

Daniel Akaka, United states senate Governor Fife Symington 

The Arizona Congressional Delegation 
552 

TESTIMONY ON HR 322 

C. C. HAWLEY, PH. D., INDEPENDENT MINING GEOLOGIST 

Suite 300--941 E Dowling, Anchorage, Ak 99518 

Phone 907-562-4673; Fax -907-7284 

This testimony focuses on three areas where HR 322 is seriously 

flawed economicallt. or scientifically: These areas are, first, 

the royalty and rental schedules; second, the adoption of a 

SMCRA type approach for the regulation of mine planning and 

reclamation, and third, assumptions that appear to drive 

unsuitability determinations with regard to riparian areas. The 

comments are from the standpoint of a geologist with extensive 

scientific and mining background. Since 1966, most of this 

experience is related to Alaska. 

1.0 ROYALTY AND RENTAL ISSUES. HR 322 appears driven to a large 

extent by revenue needs of the federal government; it assumes 

that significant revenues can be gained by the imposition of 

rental fees and a gross-type royalty on minerals locatable under 

the General Mining Law. 

In any analysis of potential revenues, most fees would be paid by 

large mining companies. However H R 322, with its emphasis on 

self-initiation, appears to assume that a future mining industry 

will be widely based similar to that of existing law where 

individual prospectors, small miners, explorers and large mining 

corporations have ro_les. 

To a large extent, the revenue aims of the bill cannot and will 

not be met. Many others have testified on the loss of reserves 

and shrinkage of production that will occur nationally at 8% 

gross royalty. I would like to add to this testimony in one 

specific area, namely its effect on Alaska. Because Alaskan 

costs are appreciably higher than those of the contiguous states, a gross type royalty at any level will hurt Alaska more than the 

rest of the states. I am not aware of any Alaska hard rock or lode mine, either mined in the•past or projected, that coul"d pay 

an 8% royalty and produce ore at a profit. Conceivably ~ome of 

t)le placer mines that operated in gold rush days were rich enough 

to, but no currently operating placer mine could pay an 8 percent 

royalty to the federal government and meet any other contractual 

obfigations. 

The main general point of testimony is that the royalty schedule 

knocks out prospectors and smaller mining companies that, 

apparently, the self-initiation features of the bill were 

designed to protect. At present, a prospector or junior mining 

company could obtain a net-smelter royalty in the range of 2-4% 

or a net carried interest of about 15% when a discovered valuable 

property is turned over to a major mining developer. There is 

nothing left at 8% gross; therefore the prospector will not 

1 
553 

search. It is already difficult enough to find deposits trrat are economically viable.· If the new royalty rates are added--the 

probability class for new economic deposits will move welL past 

the 99th percentile. It has long been a rule of thumb that only 

one prospect out of a hundred is significant; under new rules, 

the ratio is changed to one in a thousand or perhaps one in ten 

thousand. It should be obvious that most of the high-grade and 

easy to find deposits in the _United States have been discovered 

and most have been mined. · A modern mining law should focus on 

discovery of even rarer deposits, not move in the opposite 

direction. 

The holding fees also work against the prospector and small 

miner. It takes many years to quantify the reserve to the point 

that a prospect has value. Even though, under existing law, at 

least a prudent person discovery is necessary to hold a property, 

a new discovery does not have reserves attached. Th~se are the 

product of years of detailed exploration and development. Until 

these reserves are quantified, the property has no real value. 

Under existing law, the prospector has the time to do the 

necessary work. Section 104 of H R 322 does recognize in 

principle that diligent development should be rewarded, but the 

rate of increase in fees means that only a small part of the fee 

structure goes into the ground. Until a claim is perfected and 

has value, payments of fees to the government would not be 

considered a prudent expenditure. The smaller miner will be able 

to prospect only a very few claims. 

2. 0 MINE AND RECLAMATION PLANNING ( SMCRA-type approach) One 

element of the legislation that established the Surface Mining 

Control and Reclamation Act of 1977 was a study of non-coal 

surface mining. This study was carried out under provisions of 

Sec. 709 of SMCRA, with the intent to see whether SMCRA approach 

to mine planning and reclamation would be appropriate to non-coal 

mining. 

This study was carried out under the auspices -of the National 

Academy of Sciences by the Committee on Surface Mining and 

Reclamation (COSMAR) and published in 1979 as "Surface Mining of 

Non-Coal Minerals". · 

The study found that some non-coal mining, especially . of bedded 

type sedimentary deposits, resembled coal mining and could be , 

regulated by the Act. But a general conclusion was: 

" •.. most non-coal mineral mines, despite their obvious 

diversity, can be considered in two major groups: the numerous, 

mostly small units mining construction materials in all of the 

States; and the few gigantic metal mines and other deposits 

confined to limited regions. With few exceptions neither of the 

two groups is amenable to the coal mining practices addressed by 

the Act". Specific areas where there were difficulties in 

2 
554 

application of SMCRA were in: l) Return to original cont9ur; 2) 

exploration practice, 3) control of waste and 4) revegetation •• 

Besides the operational difficulties, there is a fundamental 

difference in the geochemistry of coal-type and non-coal deposits 

that makes several of the provisions of HR 322 absurd. 

Briefly all metallic_ deposits are, by the very fact of their 

existence, strongly enriched in metallic elements relative to an 

otherwise equivalent part of the earth's crust. The amount of 

enrichment varies with the type of deposit, its size and its 

enclosing wall rocks, but the rocks, ground waters in equilibrium 

with the rocks, surface waters and soils derived from 

metalliferous rocks are enriched in metals relative to nonmineralized materials. 

A soil overlying coal overburden rocks could be expected to have 

an approximately average trace element chemistry. A natural 

residual soil overlying a virgin metalliferous deposit would have 

elevated metal contents--and indeed prospecting by soil and 

vegetation sampling is a major part of modern prospecting for 

metal deposits. 

A map given with this testimony should make this clear. The 

region is in northwest Alaska; it is an upland tundra area with 

no hardrock mining. Each + on the map shows the location and 

arsenic concentration in a soil sample collected with a 3-foot 

long hand-held soil auger. Arsenic was determined analytically 

because gold, the sought after element in the venture, is 

accompanied in many cases by arsenic. 

In a unmineralized region, the amounts of arsenic expected would 

most likely fall in the 1-10 ppm range, the common range of all 

rocks in the earth's crust. In the search program, only soils 

with more than 20 ppm are plotted. More than 90 percent of the 

soils sampled in an area Smiles long contained more than 20 ppm 

arsenic; many contained more than 320 ppm, and a few contained 

more than 1/2\ arsenic (>5000 ppm). 

The most strongly .arsenic-enriched areas are also the richest in 

gold, and fur~her · testing can be expected to find hard-rock gold 

deposits ·underneath the areas of anomalous concentrations of gold 

and arsenic. ·· 

Section 201 (n) (l) (A, B, C) of H R 322 requires the removal, 

segregation and protection from contamination of top soils 

overlying surface mined metal deposits. These top soils will be 

placed back over the deposits after mining. Are we to protect 

these soils from further additions of arsenic before we place 

them back? Are we to remove the arsenic from the soils? 

If we now begin to follow the hydrologic studies called for in H 

3 
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Each number represents one soi1 analysis. Scale: 1 inch = 10

outlined area has more than 320 ppn arsenic 
556 

R 322 and begin to test the ground waters for metals, we are almost certain to find strongly metal enriched ground waters 

within this entire region. Will the existence of these waters--

natural, not contaminated--be sufficient to deny a mining plan. 

The facts presented and questions asked are not to indicate that 

metalliferous waters and soils may not be problems, or that such 

waters may - noe need treatment if used in some post-mining uses. 

But they appear to indicate that the drafters of HR 322 have no real knowledge of the natural world--or the mining industry. 

3.0 UNSUITABILITY AND RECLAMATION -- RIPARIAN AREAS. As in coal 

mining, where riparian areas--alluvial valleys--can be declared 

unsuitable for coal mining, there is at least a strong 

implication in Section 204. (e) that riparian areas may be placed 

off limits to mining of locatable minerals by unsuitability 

standards. 

Riparian areas are also, by geologic fact, the habitat for 

alluvial type placer deposits. In terms of numbers of 

operations, most Alaska mining operations especially by smaller 

operators take place in a riparian environment. 

It is known that some placer mining had a severe environmental 

effect on downstream users, but the fact is that placer mining is 

no longer uncontrolled. Further placer mines are exceptionally 

easy to reclaim, rarely have the trace metal problems that 

characterize hard rock operations, and in many cases--without the 

benefit of the reclamation called for by current State law--

furnish adequate to very good wildlife habitat. The effects of 

placer - mining in Alaska are complex and still often poorly 

understood. 

The table shown as the next display may give some idea of the 

complexity of the system. It uses one biologic group--birds--to 

examine the effects of mining in a large alluvial valley in 

soutAwestern Interior ~laska. 

The pre-mine valley wa.s largely spruce-birch forest. The valley 

was mined almost continuously by sma11 ·· scale methods from 1912 

and by small to medium sized bucket line dredges from 1928 until 

1990, except for the years from 1965 to 1972. 

The data show that avian species characteristic of the mature 

riparian forest diminished as did some raptors (3d columndecreased); other species increased in mining-disturbed ground 

(2nd column) The abundance of some other species (column 4) is 

essentially unchanged. There probably was a small overall 

decrease in species in the disturbed riparian zone. But in 

consideration of the valley as a whole, a net increase in total 

diversity likely occurred, as only a part of the valley was 

disturbed and some new species favored the disturbed ground. 

5 
557 

TABLE 5, 1 

Probable Status Changes or Bird:s Breeding in Tuluk3a k floodplain 

or at Floodplain Edge 

(from this study and Petersen et al, in preparation) 

Foraging Guild/ Sub-Guild 

! In~~~~:ed : Decr eased ! Unchanged or 

f Temporarily CT) I I : Uncertain 

-Aq_u_a_t_i_c_f_i-•h_e_a_t_e_r_·:-H-e.,-G-u_l_l_(T-l----: R- b Merganser ! Cosrro. Merganser 

lArctic Tern (Tl I , 

Aquatic 

Aquatic/ 

Ground-brush 

Ground-brush/ 

Browser 

Ground-brush 

Ground-brush/ · 

foliage searcher 

Foliage searcher 

foliage searcher/ Browser 

Timber-driller 

Flycatcher 

Hultiple Forager 

Raptor 

:e. Kingfisher I I 

I I I I Pintail :Harlequin Duck I Cana da Goose IC-w. Teal !Sol. ·sandpiper IHallard lSemiJ). Plover (T) IN. Phalarope !Am. Wigeon 

:t. Yellowlegs (T) IComm. Snipe IComm. Goldeneye 

!Spot. Sandpiper ILease Sandpiper :c. Yellowlegs 

:w. Tattler I I I Dipper I I 

!N. Waterthrush I ! 

:R, Blackbird (Tl I l , I I 

I I I 

I I I I Ruffed Grouse I Spruce Grouse I Willow Ptannigan 

I I I 

lAm, Robin :varied Thrush !Hermit Thrush 

;c-c. Thrush :swainson' s Thrush :c- c. Sparrow 

lTree Sparrow :o-e. Junco !,Lincoln's Sparrow 

:sav. Sparrow : 

:w-c. Sparrow (T) I I i Fox Sparrow i i 

; ; t i Comm. Redpoll i i lArctic Warbler- IBor. Chickadee IB-c. Chickadee 

10-c. Warbler I R-c. Kinglet lBohemian Waxwing 

lYellow Warbler IY-r. Warbler ·- -I 

IBlackpoll Warbler I I :wns. Warbler I l 

I I 

I I Pine Grosbeak 

I tW-w. Cro ssbill 

I I 

JN.3-t. Woodpecker !Downy Woodpecker 

l I .. I !Alder ... Flycatcher IO-s. Flycatcher ISay's Phoebe ITree Swallow ; IV-g. Swallow 

1 I :c11ff Swallow 

I I lBank Swallow 

!,Gray Jay ! iRaven I I 

rn~:~:w~- Owl i l~:~=~ ~:~~ Owl 

i i j~~~~a~"~wl I I : Am . Kestrel 

I I I 

Raptor (bre eding :xerlin 10: Peregrine !,GGyolrdfeanlcEoangle elsewhere, much I 

foraging floodplain!, _________ , I _________ ; I_______ _ Table from: Environmental Assessment of the Tuluksak River Drainage 

as related .to the Northland Gold Dredging Operation •. Hawley, editor: Table 5-1 from Douglas N. Weir, Consultant, 

Aviemore, Scotland 

5 
558 

Examination of other types of animals indicates complex but not 

necessarily negative effects of mining. All browsers tended to 

increase in mining-disturbed ground, as did certain fish. Salmon 

are possibly down, although after 70 years of intense mining, the 

valley still maintained runs of 4 species of salmon, and salmon 

spawned in both disturbed and virgin gravel. 

Modern placer mining with controls on effluents and reclamation 

is not an environmental disaster and can be used to enhance 

wildlife species. 

Experience with reclamation in the last few years in Alaska tends 

to show that SMCRA type procedures are not-appropriate and can 

be counterproductive. In the flood plain environment, 

additional ponding that results from mining is perhaps 

universally beneficial. Introduction of fine-soils during 

reclamation of flood plain would not be productive, rather 

armoring by coarse materials should be used to stabilize surface 

materials on the flood plain and when actually put into the 

streams can provide resting and rearing habitat for fish. 

Each geographic region has appropriate technology that can best 

be approached from local control of the detailed reclamation 

standards--not by the SMCRA-type approach called for by HR 322. 

In summary, the revenue approaches adopted by HR 322 will not be 

effective for the federal government. They will almost certainly 

lead to mine closure and export of exploration. No economic 

incentive exists in H R 322 to allow prospectors to continue 

their traditional role in discovery. SMCRA-type procedures and 

unsuitability called for in HR 322, do not recognize the natural 

complexity of non-coal mining. Rigid type reclamation structures 

are also inappropriate and can be expected to worsen rather than 

enhance species diversification. Meaningful improvements on the 

Federal Mining Law can be best carried out by amendments in 

existing law. 

7 
~EC 

OFFICERS ANO DIRECTORS 

SlanleyK . .._ 

l'Y.-andChoinnan 

/>MAJ(Golcf. lnc. 

C. StewartWP-Elod 

G--Corp ~ed-. 

LCMtJ. Brookl --ry LAC Minerals (USA), Inc. 

RlchordE. ~ 

Adas Corpo,allon 

G. NellHoll 

Newmont Expi<nllon Ltd. 

~w.- J-&Leo 

JamesM. Ke41y 

FMC Gold Company 

At1hur J. Pansze. Jr. 

Crut0n and Pansz.e 

AllanM. Park ,,__ 

Corporation 

David L SteYena 

Independence Mining 

Company 

Charles E. Stott Jr. 

HOOzon Resources 

Corporation 

TedWIHon 

Independence Mloog 

Company 

TREASURER 

Charles Bur1on 

Burton Bookkeoping 

MINERALS 

EXPLORATION 

COALITION 

559 

Stalement ol 

A-: 

21oov,,._-

Sultol!OO 

L-..oct, ~80215-7056 

-:(303/232-4310 

FAX: (303//133-3341 

W-M.S- E•- 0/rwclor 

MINERALS EXPLORATION COALITION 

on 

H.R. 322 •Mineral Exploration and Development Act ol 1993• 

for the record ol the 

Subcommillee 

on 

Energy and Mineral Resources 

ollhe 

Natural Resources Committee 

United Stares House of Representatives 

Hearing Held March 11, 1993 
560 

Mr. Chairman, Members of the Subcommittee: 

INrRODUCTION 

This statement is submitted by the Minerals Exploration Coalition (MEC) to _the House 

Energy and Mineral Resources Subcommittee with respect to H.R. 322, the Mineral 

Exploration and Development Act of 1993, which has been introduced by the 

Honorable Mr. Rahall with the Honorable Mr. Miller, Mr. Vento and Mr. Lehman as cosponsors. MEC requests that this statement be included in the record of the 

Subcommittee hearing held in Washington, D.C. on March 11, 1993. 

The Minerals Exploration Coalition (MEC) is a professional association comprised of 

exploration, mining and service companies and individual explorationists located mainly 

in the western United States. MEC has participated for many years in the public 

discussions concerning proposed changes to the General Mining Law. Our position 

papers have been widely circulated, and our statements before Congress are a matter of 

public record. All of these position papers and statements have been directed toward 

assuring access to the public lands for the purposes of mineral exploration and 

development. MEC members represent large and small exploration and mining 

companies and individuals who conduct mineral exploration on the public lands of the 

United States. MEC believes that H.R. 322 is detrimental to the best interests of 

explorationists and would serve to severely restrict, if not eliminate, exploration efforts 

and subsequent mining on the public lands of this country. The consequent loss of 

mineral production and good jobs would be detrimental to the country. 

GENERAL 

H.R. 322 is designed to replace the General Mining Law, not reform it. The General 

Mining Law has been amended many times since its passage in 1872 in order to up-date 

and fine tune it as times have changed. MEC supports amendments to the existing 

statute to fine tune it again in order to make it work better and to help in providing 

good jobs and raising additional revenues to reduce the deficit. We believe that some of 

the advocates of H.R. 322 are not interested in improving the mining law and making it 

work better but in eliminating exploration and mining on the public lands of the United 

States. 

TII'LE II PROVISIONS 

We are particularly concerned about the provisions of H.R. 322 contained in Title II -

Environmental Considerations of Mineral Exploration and Development. Provisions 

such as those contained in 202 (e) Citizen Suits and 204 Unsuitability Review, together 

with a number of other provisions including the ability to halt projects at several stages 

will effectively eliminate any future exploration on the public lands. The public lands 

have not been thoroughly explored for hardrock minerals, and adequate information for 

land use planning, as to where mineral deposits are located, is not available. Hardrock 

mineral deposits are rare natural phenomena that are hidden beneath the earth's smface. 

They are very small in comparison to the permissive environments in which they can 

occur, and unlike surface resources such as grazing lands and trees, cannot be readily 

counted. A mineral exploration industry exists in the U.S. because there are opportunities to discover new deposits, even though new discoveries are becoming 

more difficult, time consuming and expensive to make. Mineral deposits are where they 

-1-
561 

!a. and cannot be moved to more environmentally acceplable locations for mining. 

Because deposits are so rare and are fixed in thcir location, mining of them with 

reasonable environmental controls and restrictions in many cases is, and must remain, the 

highest and best use of thc public lands. Such controls and restrictions arc already in 

place, such as those cited in section 411 (b). These may result in costs so high that the 

deposits cannot be mined, but thc decision whether to mine should be made ·by the 

miner after the restrictions arc defined, not by government agencies in land use planning 

done prior to the initiation of mineral activity. 

Access to large amis of the public lands which arc pcnnissive for the occurrcncc of 

hardroclc mineral deposits must be available for mineral exroration. The principle of sf.If. 

initiation, which guarantees the rifht of access to the pubbc domain for prospecting and 

claim location, must be preserved if mineral exploration is to be effcclive. Even though 

large areas must be available for exploration, only a very small portion of these areas arc being or ever will be mined. 

Many of the terms and conditions of TI de II of H.R. 322 are totally unworkable in a realworld exploration situation. The requirement to include a mining permit application and 

reclamation plans in a plan of operations for ex{lloration, which may be concerned only 

with the OOlllltruclion of exploration drill roads, 1s ludicrous. Mining Permit applications 

and reclamation plans can be prep8ffll only after extensive geologic, engineering, 

economic and environmental analyses have been undertaken and finalized by the 

company, which typically requires many years of work and investment Therefore, it is 

both impossible to provide anything of value of this nature to the administrative land 

agency at the early stage of exploration, and it is illQ&igl as a requirement The 

Unsuitability Review process will effcclivcly end exploration on the public lands of the 

United States because of the time required for it to be accomplished and the ability to 

exclude large areas from access for exploration when there is little or no information on the mineral values present Also, the process gives the land manager the right to say 

"no" to exploration and mining many times. In addition it would be a terrible waste of 

government rcsourccs (time and money) to do unsuitability reviews for mining on lands 

where a mining operation will never be proposed. In Nevada, only 0.1 % of the total 

land base of the state has been disturbed by mining activity since 1860. Evenjf an equal amount were disturbed in the future, why should all of the public lands open to 

location be reviewed for unsuitability for mining? . These examples arc presented to 

illustrate the fact ·that the content of Tide II will make exploration, which is the research 

and development of the mining industry, virtually impossible. 

ROY~ AND EC~OMI~AC[S The roy ty provisiooH..R.3 been the subject of the majority of the discussion on this proposed le&islation for very obvious reasons. Reliable and independent 

economic analyses of the impact of federal gross royalties on production project the 

death of U.S. hardrock mining. The Davis, Graham & Stubbs-Coopers & Lybrand Study 

(2-28-92), the John L Dobra Study (2-24-9'3) and the Michael K. Evans Study 

(3-16-9'3) reveal that a 12.5% gross royalty as proposed in President Clinton's report. "A 

Vision of Change For America", or of 8% as contained in H.R. 322 would effcclively remove all incentive for industry to pursue new mineral development and would render 

many existing mineral deposits partially or wholly uneconomic. The downstream 

negative economic impacts on society and federal lax revenues are also addressed in 

-2-
562 

these studies. The industry can absorb some type of royalty based on net value of the 

minerals produced, but an ill-defined royalty or tax on gross receipts for a mineral 

product will bankrupt the industry and result in a net loss of revenue to the Federal 

Government. If the industry cannot make a profit, there will certainly be no funds 

available for exploration to find new deposits and thereby create new wealth. 

It is alleged that the public gets no financial return from the mining of minerals 

discovered by private exploration efforts on the public land and subsequently 

developed, mined and sold, and that no private land owner would allow such things to 

happen on his land. But private land owners do not have the power to tax and do not 

have a direct interest in creating new jobs. Data relating to sales and use and income, 

real estate, severance and net or gross proceeds taxes paid by mining companies 

demonstrate that there is a substantial financial return to the public from mining 

operations. To claim that governments do not and should not provide incentives of 

various kinds to private industry to promote investment and economic development, 

does not conform to the facts. Without privately funded mineral exploration on the 

public lands by individuals and companies, the deposits would not be discovered and 

new wealth would not be created. 

CREATING WEALTH 

Minerals are one of the few sources of new wealth. As the slogan says, "If It Can't be 

Grown, It Has to be Mined." When minerals are mined and sold, they are not simply 

transformed into cash which goes into the pocket of an individual or a company. 

Minerals are used as one of the bases for our industrial economy which supports our 

standard of living and provides additional jobs. We cannot maintain a healthy economy 

without production. Destruction of the domestic minerals industry will make us totally 

dependent on foreign sources of metals thereby adding significantly to the cost of many 

of the products we use as well as add to our negative balance of payments. The dollars 

earned from the sale of the minerals that are mined are used primarily to pay operating 

expenses, recover capital invested, pay taxes and to fund exploration for and 

development of new deposits, thus maintaining the cycle of creating new wealth and 

new well-paying jobs. 

MEC RECOMMENDATIONS 

MEC would support a number of provisions in the proposed legislation which would 

serve to answer the criticisms of those who would make wholesale changes in the 

General Mining Law, but only if the issues discussed above are addressed to industry's 

satisfaction. MEC would support: 

1) an amendment to the current law dealing with changes in the location 

procedures, 

2) a claim rental fee which could be partially offset by diligent development 

expenditures, 

3) an equitable royalty on net value of minerals produced, 

4) a provision for income from H.R. 322 to go directly into a mineral land 

reclamation fund for abandoned hardrock mines to be partially administered by 

the states. 

-3-
563 

ftONCLUSION . t is popular belief that the principles of access to the public ·1ands for exploration and 

mining, self-initiation and security of tenure contained in the General Mining Law are outmoded, and that there are large acreages of mining claims which are not being 

diligently explored and developed and which are being used for non-minin; purposes. These beliefs are not true. The General Mining Law is not just a law for the Old West" 

of the 1800's. It has been, in fact, most effective in the years since World War Das the 

demand for metals has increased and the metals demanded have changed. The fact that 

there have been significant increases in the production of a variety of metals from the 

public lands since World War II demonstrates that the exploration and tnining industry 

has great flexibility under the General Mining Law to respond to the raw material needs 

of the United States and the world, and that the public lands have been and are being 

diligently explored and the mineral deposits found there developed. For example, from 

1980 through 1990, U.S. gold production increased almost I0fold, and the U.S. has 

gained the position d. second largest gold producer in the world behind South Africa. 

Much of this increased production has come from the public lands, and is a factor in the 

balance of payments. 

MEC has supported and continues to support the concepts of multiple use, access to the 

public lands, self-initiation and security of tenure on these lands continuing to make 

them available for diligent exploration efforts. Under the General Mining Law, the 

exploration and mining industry in the United States continues to be a vital and dynatnic 

part of our economy. We believe that H.R. 322 will substantially restrict, and very likely 

eliminate, effective hardrock mineral exploration activities on the public lands of the 

United States. Without mineral exploration and the resulting discoveries, there will be 

no mining industry on the public lands in this country's future. 

We appreciate the opportunity to present this statement to the Subcommittee. 

-4-
564 

The Honorable Richard H. Lehman, Chairman 

Energy and Mineral Resources Subcommittee 

United States House of Representatives 

818 O'Neil House Office Building 

Washington, D.C. 20515 

Dear Congressman Lehman: 

M.C. Newton, ill 

P.O. Box 1656 

Sparks, Nevada 

March 10, 1993 

I am an exploration geologist in the mining industry. I am writing to express my concerns 

about the proposed changes in the mining laws, and I would like to have this letter entered 

into the record for the March 11th hearings on H.R. 322. I am going to concentrate on 

royalty, patenting, and the provisions of Title II, which will create an unacceptable business 

environment necessarily sending American jobs abroad. 

The mining law changes proposed in H.R. 322 impact a major industry, which produces the 

raw materials, such as copper, iron, sand and gravel, limestone, etc. necessary to supply the 

industrial base of this nation. Perhaps Congress is accustomed to hearing industry lobbyists 

extol the dangers of parti~ar legislation on their business, and the tendency is to brush 

aside such admonitions. I am not a professional lobbyist. I am a field geologist with years 

of experience in mineral exploration, and I~ that the mineral industry in this country 

cannot survive the provisions of Title II and the high gross royalties proposed. 

There are two environments which H.R. 322 impacts - the natural environment and the 

business environment. In real life, these two environments mesh well because of environmentally responsible modem mining practices and the environmental protection laws 

already in place in America. In the world that would be created by H.R. 322, there would 

be no balance between these two environments and the business risks and costs engendered would simply mean that small mining companies will go out of business and large 

companies will explore in other countries and stop investing in America. 

Economic impact 

In my state of Nevada, 65% of mining properties, most of which are for gold, are on public 

land, and more than 50% of production is from public land that would be affected by a 

royalty. The general profit margin now for mining these low-grade ore bodies is 6-12% and 

is tied to the international price of metal over which neither the industry or the U.S. 

government has any control. In general, the profit margin for all mining is less than 10%, 

and if mining companies were insured of even an 8% return they would be happy. The 
565 

2 

effect of an 8% gross royalty on existing mine properties, many of which have underlying 

obligations to claim owners, will be near-term closure of most of them. And there will be 

few mines opening up in the future. There will be no incentive for future CJq>loration and 

development, not only for ~nuc reasons, but because of the restrictions and risk to 

investment in the provisions of Titlc Il. 

As with so many policies aimed at restricting development on public land. the hardest hit 

will be rural America. The boon to the economy in rural western U.S. communities from 

gold mining in the last twenty years has been coormous. In Nevada alone, there arc 44,000 

people employed in primary and secondary jobs related to the mining industry. The 

average income in the mining industry in Nevada in 1991 was $37,000, compared to an 

average of $22,000 for the rest of the state. These arc high paying jobs producing a 

profitable commodity for America; they canoot be replaced by government supported jobsproject type employment in reclamation. If this bill becomes law with the provisions of 

Title Il, CJq>loration on public land will cease, and tens of thousands of jobs will be lost. 

Published estimates of 10.000-30,000 jobs total being lost in the western states arc too low. 

At least 30,000 jobs will eventually be lost in Nevada alone. 

Because metal prices arc set by the international market, increasing the cost of mining in 

America will make this country less competitive for mining investment dollars. Mining is 

truly an international industry because its members operate in geologic provinces on a 

global scale, which arc not demarcated by national boundaries. Western America is 

blessed with occurrences of gold deposits, and, as Forbes magazine recently published, 

Asian countries will buy all the gold America can produce. But, if this bill becomes law, 

mining companies will not be exploring in this country. Unlike the coal industry, for which 

economics require that the bulk of its market be reasonably close to the source of production, metals can economically be sold anywhere in the world. The bottom line Ii tbat metal 

11U1UJ11 compuies clo•'t laaft to operate bere, and 11,oa create u ufa'¥0l'able bubaesl 

climate, Oley woa't operate ltere. Congress and the administration will be sending American jobs overseas. 

The days of getting rich from bonanza high-grade gold in veins are over. Modem technology enables the production of gold from very low grade bulk-minablc deposits. Gold is a 

commodity like soy beans; it is worthless lying in the ground. But it can be extracted. 

refined, and sold to other oountries by Americans. The argument that America gets 

nothing in return for mining is untrue. In addition to the property taxes, sales taxes, income 

taxes, etc. that all companies pay, mining companies in most states pay "net proceeds" or 

"severance" taxes, that nootbcr industry has to pay. Foreign-controlled companies 

commonly reinvest in this country rather than pay the exorbitant 30% federal witholding 
566 

3 

tax for repatriation of profits. Since when was it considered bad to encourage foreign 

investment in this country? 

The imposition of a comprehensive royalty by the federal government, applicable to all 

commodities in all situations, makes it difficult to arrive at a single fair royalty rate. Some 

commodities, because of the expense of mining and processing involved can economically 

only handle a royalty rate lower than other commodities. For example, some underground 

copper mines, requiring expensive deep exploration drilling and expensive mining techniques and processing procedures for a commodity of relatively low unit value can only 

handle a 3% net royalty on a profit versus risk basis. To allow for some royalty to be 

available for claim holders from whom mining companies will lease properties, a net 

federal royalty of 2% net may be all the industry can handle. 

When a company enters into an agreement involving royalty with private parties or other 

companies, the company has already assessed the geology and mineral potential of the 

property, has a realistic idea of the costs of exploration, development, and mining, and has 

arrived at an acceptable royalty figure for that particular property. A blind comprehensive 

royalty which does not allow for variation from property to property and commodity to 

commodity must necessarily be low, or some commodities will not be profitable. 

In addition, H.R. 322 makes no allowance for existing underlying agreements with claim 

owners, which may already involve a relatively high royalty. With no such grandfather 

clause or without stipulations that the federal royalty should only apply to claims staked 

after the enactment date, companies will either have to pay the new royalty on top of their 

underlying obligations, renegotiate the underlying agreements, or walk away from their 

mines. 

When mines experience reduced profitability due to decreased metal prices or increased 

costs such as royalty, they have few alternatives other than to reduce exploration expenditures for new reserves, raise cut-off grade, and/or Jay off workers. Reducing exploration 

and raising cut-off grade mean that potential ore will be left in the ground, shortening mine 

lives and actually causing new mining disturbance elsewhere more frequently than would 

otherwise be the case. 

Patentine 

Rare instances where unscrupulous small operators reaped a profit from patented ground 

used for purposes other than mining have been ridiculously overpublicized, which has 

contributed to the inappropriately bad image of the industry as a whole. Only 0.3% of 

patenting cases have been abuses of the system for purposes other than mining. In over 

99% of cases, mineral patenting has worked as was intended, to promote the legitimate 

development of America's mineral resources. 
567 

4 

Probably the most important reason for patenting is to obtain "Security of Tenure•. 1bis 

security of tide enables a company to obtain bank loans for mining. Banks require 

assurance of security for their investment, and without the security of •discovery' by legal 

precedence, stripped away in 1ide IV, and with the ability under 1ide n of the administering federal agency to capriciously stop mining or c:baDge requirements at any time 

impacting the economics of a project. patenting bea>mes even more important for financial 

assurance. 

Patenting merely indicates that the property bas been set aside solely for the purposes of 

mining. It allows companies to develop a mine without some of the restrictions that would 

apply to casual use. such as not being able to construct permanent buildings on the site and 

constantly having to seek approval from the government for every detail of operation, for 

example, for every drill road or pad. And it allows companies control over access to the 

property, necessary under the strict safety and health regulations under which every 

industry operates. All laws pertaining to environmental protection and reclamation and 

royalties can still apply to the patented ground. and after mining is over, reversionary 

clauses can return the land to the government. 

The federal government commonly sells land for purposes such as residential expansion, 

and there is no move to stop that practice. Mineral patenting bas been singled out for 

repeal because of the cries of abuse and the token patenting fees. 

The patenting fees of $250-S.OO an acre have been overemphasized, when the BLM bas 

demonstrated that over the last ten years the average cost of proving a valuable mineral 

deposit and carrying out the other necessary requirements for patenting such as mineral 

swvey, was a minimum of S37,900 per claim ( > $1800 per acre). As an example, to say 

that it would only cost American Barrick Resources $10,000 to patent its Goldstnke Mine 

in Nevada is to misinform; that company bas spent a .bilJign dollars in developing new 

technology enabling mining. in proving a valuable deposit by drilling and assaying. and in 

feasibility studies, environmental impact studies, etc. that are part of the application 

process. No one is saying the patenting fees should not be amended to reOec:t fair market 

value, but to scrap mineral patenting altogether because of the above two uguments is 

misguided. 

Tide II contains the most restrictive regulations on mining that have ever been proposed. 

It reOec:ts a philosophy that mining should be curbed and restricted wherever pos51"ble. 

nt1e II will take 11W11J die "right to mille", It is the intent of the general mining laws and 

the Federal Land and Policy Management Act of 1976 that mining shall be allowed on 

public lands within the guidelines-of the Secretary's authority to take any action necessary 
568 

5 

to prevent unnecessary or undue degradation of the lands. Under litle II, with the 

unsuitability review and the unprecedented discretionary powers of the Bl.M and USFS 

under duress from special-interest citizens' groups, decisions concerning on what public 

land mining will be allowed, whether a mine will be permitted at all, and whether to stop 

operations at any stage of development, will be made solely at the discretion of individual 

government workers. The guidelines and philosophy under which these workers operate 

will be dictated by their superiors, and those positions in the Interior Department arc presently being filled with members of special-interest groups such as the Wilderness Society 

and the Sierra Cub, whose special interest is removing public land from multiple use. In 

the effort to reform an old law, the chance of creating a new system capable of even greater 

abuse is evident. 

])tie II would create an unacceptable business environment 

Even basic exploration which may require rudimentary access road excavation will fall 

under the same severe regulations as mining, requiring a full-blown plan of operations with 

a 12-month waiting period for water quality monitoring, 4-week publication notice in a 

newspaper during which time any citizen or agency may file comments and then request a 

pubilc hearing, which if requested, will be held within no specified time frame. The agency 

then may either.approve or deny the plan, again within no stated time frame. If a plan of 

operations is approved, complete inspections for compliance are mandatory at least every 

quarter. The operator must institute an unspecified monitoring and evaluation system and 

submit quarterly reports on the results of the monitoring and evaluation process. Any 

person may request an inspection at any time. 

For any perceived violations of a plan of operations, any provisions of the Act, or any 

regulations promulgated pursuant to the Act, any citizen may file complaints ana after 60 

days commence a civil lawsuit in U.S. district courts against the operator or the Secretary, 

all potentially at the cost of the operator. 

For any decision made by the Secretary concerning any step in a plan of operations or for 

any perceived violation of the plan of operations or any provision of law, any citizen may 

request review and a public hearing. Just to get a simple plan of operations approved 

could take years. Title II codifies the ability of individual citizens to delay and thwart 

mineral development projects until the economics become unviable. This has been the 

successful practice of environmental activists for decades, and it was for this purpose that 

the citizen intervention and suit clauses were written into litle D. 

litle II would create a completely unfavorable business en\'lronmenL Regardless of what 

rental fees and royalties may or may not come ont of Congress, if litle II passes, mining 

compaaies will Immediately begin to moff out of America. Companies will aot be wllllq 

to baftlt the enormous sums required to explore and develop nor will banks make loans 
569 

6 

for alalq proJedl la a .uiqwbere np)atiou cu uaqe capridouly ud oa a cue by 

cue ud replator by replator bull, ud uy dtba cu Uff them Ill.at dowa after uy 

stqe of laftltaeat. 11leir aoaey will be illftlted la otlter countries instead or America. 

UnmltabilitJ: mtc:w 

The unsuitability review and land use policy provisions of Title II will enable any area of 

any citiz.en's choice to be withdrawn from mineral entry forever, without even having 

mineral potential assessed. The criteria for withdrawal are extensive and nebulous, 

including such things as perceived damage to "aesthetic values•. 

Ostensibly, exploration requiring no road excavation, can still proceed on lands declared to 

be unsuitable. and if a plan of operatiom is submitted the unsuitability status will be reviewed. But companies will not invest exploration dollars on these lands with so little 

assurance of fruition. In reality, once these lands are designated as unsuitable, they will be 

closed to mineral exploration for ever. And, in the future. they will not have the benefit of 

being reviewed in light of technological advances in reclamation and environmental 

protection. 

Ore deposits are where they exist, not where we want them to be. Even we specialists in 

the mineral industry would be bard pressed to designate areas that have no potential for 

mineral development in the present or in the future. The BLM and USFS cannot make 

realistic assessments of what lands would be endangered by mining or could not be 

successfully reclaimed with advanced or future technology. When exploration for mining 

purposes is arbitrarily restricted, the nation that depends on that mining suffers. 

federal Rd•• edoa and environmental orotectio• standards 

It was just thirty years ago that this nation became aware of littering. water pollution, and 

air pollution, and today there are 35 statutes under which mining is regulated, including the 

aean Water Act, the aean Air Act, and the Endangered Species Act. The mining 

industry does work against the backdrop of the past hundred years of poor environmental 

protection and reclamation practices. But, in the last decade. the American mining 

industry has led the world in establishing practices that enable the development of our 

natural resources in an environmentally responsible manner. This is a record of which we 

in the industry are proud, and it has been done within the framework of the "archaic" 

mining laws, because the standards are there in other laws. 

The Mining Law of 1872 has been modified over the years by 37 statutes, and a host of 

federal and state environmental laws have been passed which apply to mining activities 

under the existing mining laws. Additional federal standards in the mining laws are 

unnecessary, and the ugument that they will prevent future catastrophes requiring tax-
570 

7 

payer clean-up is indefensible. For example, in the case of Summitville, Colorado, existing 

statutes were stringent enough to have prevented the damage. In this case_there appears to 

have been a combination of operator negligence and ineffective application of the existing 

laws. Human beings make mistakes. The answer is education, not additional regulation. 

Title II calls for comprehensive federal standard,; applying to every locale and every mining 

situation. Some of the provisions, such as topsoil storage, are not applicable in some 

terrains, such as in desert alluvial basins. It is better to allow states to develop their own 

standards and enforce those regional laws. In the only two states where there is public land 

with mining activity and inadequate state requirements, there are moves to correct this at 

the state level. In addition, the proposed federal standards are patterned after coal mining 

regulations, and allow regulator discretion in reclamation requirements, which could mean 

a regulator could require back-filling a hardrock open pit, which is economically impossible, as indicated by the National Academy of Sciences 1977 Cosmar report. 

The detailed environmental protection and reclamation provisions in Title ll are a 

staggering example of federal overregulation. ntle II represents a gross extension or 

federal micromanagement, and it will necessarily increase the size of the government 

bureaucracies and government spending required to implement its provisions. The 

argument that increased federal revenues from rental fees and royalty will cover these 

expenses should be viewed skeptically as the the size of the industry contnbuting the 

revenue will be dramatically reduced. Even this year, it will be shown that the expected 

burgeoning of the federal coffers from the claim rental fees in the Interior Appropriations 

Act will not materialize. Industry surveys indicate that 50-85% of existing claims will be 

dropped before August 31. The risk of losing valuable land position is evident, but for a 

large company to spend $31⁄2 million dollars on claim holding costs in addition to the tens of 

millions of dollars it spends anually in the normal course of exploration, will nofhappen. 

Small miners with more than ten claims cannot afford the rental fees and may be out of 

business this year. 

Conclusion 

Recycling is an important source. of metal, and it will become increasingly important in the 

future. But it cannot supply all the raw metal used in industry. As an example, 51 % of the 

steel presently used in manufacturing an automobile is recycled, and this includes reusing 

shavings and cuttings from the automobile manufacturing itself. The other 49% has to 

come from newly mined metal. Until we can mine asteroids, centuries away, new metal 

must come from the earth, and this necessarily means digging boles and extracting rock. 

H.R. 322 would jeopardize the very existence of the industry that provides copper, zinc, 

iron, chromium, nickel, and the multitude of other elements and minerals essential to 

maintain the manufacturing prowess and high standard of living of this nation. The U.S. 
571 

8 

Bureau of Mines projects that 1993 U.S. consumption of copper will exceed 2.2 million tons 

and that U.S. mine production of copper will approach 1.8 million tons. We should be 

striving to maintain our virtual self-sufficiency in copper rather than implementing policies 

that will cause inaeased dependence on foreign sources. 

Title II is the legacy of a time when congressmen could indulge in sponsoring legislation to 

increase the si7.c of government bureaucracies such as the BLM and increase government 

spending and overrcgulation. But with the ever expanding budget deficit, we all know this 

has to cease. 

This really is a situation where cutting. off the hand to save the arm could result in the 

death of the body. In passing unduely stringent provisions to protect the natural environment and to raise federal revenues, the business environment for mining will become so unfavorable that future mineral exploration and development on public land in this country 

will end. To me pel'NUlly, it will mean losin& my job and my family's financial security. 

The mainstream of Americans are interested in jobs and the economy as well as protecting 

the environment. The complex issue of coupled resource development and environmental 

protection truely requires objective and rational treatment. 

R.R. 322 is not the proper vehicle for this rational treatment. Title II is so intricately laced 

with wording to thwart business activity, it cannot be fixed by simply making technical 

amendments or even removing whole sections. Another bill with a less restrictive framework is necessary. 

cc: Congressman Philip R. Sharp 

Congressman Austin J. Murphy 

Congressman Edward J. Martey 

Congressman Nick J. Rahall, D 

Congressman lany LaRocco 

Congressman Nathan Deal 

Congressman Peter A DeFazio 

Sincerely yours, 

Maury Oaibome Newton, III, PhD 

Consulting Geologist 

Congressman Tom Barlow 

Congressman Barbara F. Vucanovich 

Coagressman Craig Thomas 

Coagressman John T. Doolittle 

Congressman Wayne Allard 

Congressman Scott Mcinnis 

Congressman Richard W. Pombo 
572 

GOLDSTRIKE ~ffi\"ES ~C. 

P.O. Bo., 29 • F.llco. Xft'llda 81l803 • TelcphOIIC (701) 738-804-, 

March 12, 1993 

Honorable Bruce Babbitt, Secretary 

United States Department of the Interior 

Washington, D.C. 

Dear Mr. Secretary: 

Re; ffQUIC md 5matc Iatim901 AA MiAJna Law Rtfo,m 

Let me introduce myself. My name is Robert M. Smith and I am President ol Barrick 

Goldstrike Mines Inc. ("Barrick"). I have reviewed the written testimony prepared and 

submitted by you on March 11, 1993 to the Subcommittee on Energy and Mineral 

Resources of the Houae as well u the written testimony prepilted and submitted by Mr. 

Phil Hocker on behalf of the Mineral Polley Center. I understand that you (and perhaps 

Mr, Hocker) also intend to testify before the Mineral Resourcet Development and 

Production Subcommittee of the Senate ne,ct Tuesday. Both written testimOniea 00ntain, 

in my judgment, a number ct errors that should be called to your attentioo before you 

testify on Tuesday. I realize that the facts neceNIU'y to support your le$1imony had to 

be gathered in a hurry. Neverthelae, because 10 much ol your testimony and Mr. 

Hodcer'a teatbnony foaaaed on Barrick and its patent appliations, I feel oompelled to 

a,mict and 1uppkment the iNonnation you have avallable to you. Mo.t ct what l will 

say in the puagraphs that follow can be confirmed directly by contact with the Bureau 

of Land Management ("BLM"> in Nevada who worked on Barrlck's patent applications. 

At the outset I would like t.o introduce you to Barrick. In early 1987, Barrick purchased 

the Goldatrllce Mine in Central Nevada. Fer approximately ten years prior to our 

purchase, the Goldstrike Mine had bem a marginal producer, yielding little gold and 

creating few jobs. Since that time however, Barrick has Invested over one billion dollars 

in the mine. It directly employs aome 1,350 people and Indirectly employs anoti5,000 people in central Nevada. 
Honorable Bruce Babbitt, Secretary 

United States Departmmt of the Interior 

PageNo.2 

573 

With respect to the patenting process, the data presented to you for use in your 

testimony in not complete. First, Barrick war. not even in a position to consider 

patenting until it had spent nearly $500 million on the properties. This money was 

necessary to prove up the full mineral potential of the property and to refine the 

information necessary to demonstrate our ability to commercially process the ore at 

Goldstrilce that Barrick felt was necessary to support its patents. This investment and 

the generation of data took nearly four years. In 1991, having made a huge investment 

in the mine, Barrick felt that it was appropriate to obtain the security of title offered by 

the patenting process of the General Mining Law. Following that decision, in February 

1991 Barrick engaged an engineering and turveying company to review all of its claims, 

identify •~y monuments and claim boundaries and otherwise perfonn the types of 

pre-applicatiOI\ homework recommended by the BLM in its patenting ltWluals and 

materials. This process involved several surveyors and engineers full time over an 

approximately three-month period. 

After rompleting our "homework", in June of 1991 Barrick filed an application with the 

BLM for mineral survey, the first formal step in the patenting process. The BLM 

approved the request and appointed a certified Mineral Surveyor to Barridt's project. 

The surveyor and his field crew spent nearly five months preparing the mineral 

surveys. The BLM Cadutral Survey Group then spent the next four months reviewing 

the Mineral Surveys-before the surveys were Approved. While the mineral survey 

review process was ongoing, Barrick began preparing mineral patent applications. As 

recommended by the BLM patenting manual, Barrick held a pre-application meeting 

with BLM employNS in order to learn how to prepare the best possible applications. 

Barrick spent over two months preparing draft Applications while the mineral surveys 

were being reviewed. 

The first mineral survey was approved on February 20, 1992, almost nine months after 

Barrick had formally started the patenting process. Shortly after the approval of the 

fll'$t survey, Barrick submitted its first patent application. As each subsequent mineral 

survey was approved over the next seven weeks, DiUTick &ubmltted an add1tiooal patent 

application. At this point, the patent application process becomes entirely internal to 

the BLM. The length of time for this part of the process, called the "ln•house 

adjudiation", depends on ~eral facton. Probably the most significant factor la how 

IIIMIY patent applications were waiting in line ahead of Barrldc's appliation because the 

BLM processes patent applications in the order in which they are filed, .The other 

critical factor in the speed of adjudication Is the quallty of the applicaUon, Burick 

understood from its pre-application meeting with BLM the sensitivity of the 

adjudicators to a>mpleteJ\ess and precision. Because of the sensitivity, Barrick was able 

to prepare application, that required only minor amendments during the adjudication 

process. In each case where a revision Wa5 required, Barrick responded promptly. 
Honorable Bruce Babbitt. Secretary 

Unit~ States Department of the Interior 

PageNo.3 

574 

Although we do not have hard data, we understand that errors md omissions in 

preparation of applications cal\ lengthen the adjudication process by seven! months. 

On September 9, 1992, the adjudication process was completed This portion of the 

process took approximately six months. It could have been longer or shorter. We 

understand that Darrick's applications were processed in the ordiury course of 

bU&iness and the applicatiOI\S required far less amendment or correction than is typical. 

Following issuance of the first half lnineral certificates, Banick became aware of the new 

mJnerll ex.imination "'pilot program" that BLM had been working on for over a year. 

The pilot pro)ect would permit 81..M to utiliz.e certain qualified mineral eiwni1'lers that 

are not directly employed by BLM to usist in the mineral ex&mination. We understmd 

that this Is essentially the same process employl!d for mineral examination by the 

National Park Service and the National Forest Service for years. By letter dated October 

16, 1992, BLM invited all patent applic.ants in Nevada and California to partidpate In 

the pilot project. Burick was the first to respond. While the guidelines for the prOOlSS were being developed, Burick undertook a ~ for the fflO!lt qualified private 

mineral examiners available that would assure acceptability by BLM and the success of 

the pilot program. Burick contacted Mr. Richard Harty, United States Forest Service 

Certified Mineral Examiner No. 002, ,and got his agreement to act u the third party 

mineral examiner under die BLM program lf the 8LM program was formally 

authoriz.ed. Not only is Mr. Huty a Certified Mineral Examiner and R~ Mineral 

Examiner for the Fore5t Service, he ls Abo a member of the Forest Service Certification 

Board for Mineral Examiners and was the lead mineral instructor In the Phoenix 

Training Center of the BLM for se\'Wal )'fttt- · In antidpation of the pilot program, 

Barrick's staff worked diligently over the next two months to organize the muses of 

geologie.. engineering and other data that would be necessary for the mineral 

examination. In December, the pilot program wa given formal approval and Barrick 

immediately executed a Memorandum of Understanding involving the BL\d, Barrick 

and the third party mineral examiner. 

Mr. Harty worked closely with the BLM Certified Mineral Examiner and Certified 

Mineral Review Examiner appointed to the project to assure the highest level of 

accuracy and a,mpleteness in the mineral report. Although there cowd be no eerio\16 

ronllention that the dahna at Gold.utke do not meet the "dilc:overy" tcet, BLM - not Mr. 

Huty - made all final evaluations and detennil\&tiOII&. U you will ievww the mineral 

nipmt you will (Olldwle that lt ltandl l«Ol\d to none. The miN!l'al report wu Connally 

approved by the BLM on February 12. 1993, nl!llrly two years, thousands ol man-hours 

and three quarters of a million dollars afiier Barrick started the process. 
Honorable Brace Babbitt, Scttetary 

United States Deputment of the Interior 

PapNo.t 

575 

In summary, the speed with which Barriclc has 8<>ffll through the proces& has been 

partly the result of hard work, diligence and careful compliance with BLM guidelines 

and partly the fact that thAtN! were few applications ahead of Burick's In the 

adjudication process. Our view, which corresponds with the testimony you delivered 

to the House Committee on Thursday, Is that we haw a legal right to bsuance of our 

patents If we have met the applicable legal requlrement5- We are further of the view 

that we have dearly met those requirements. 

Mr. Secretary, I hope that this information help; to set the record str&ight and will be 

useful to you In your future testimony. 1 would be happy to provide more detailed 

Information If you would Uke. 

Yours truly, 

Robert M. Smith 

President. 
576 

~ AssoCIATION OF AMERICAN STATE GEOWGISTS 

~---------------------

·-=:r-~gicll&ney 

121 Nani AllacucM Bldg. 

115E.~Dr. 

~.L8tl20 

f'hlltlt: 217-DS-Stn FAX: 217·244-7004 

PASTPREmDENT"' 

AcmrtH. Flikul'dni .... vn~ sww, 31310AnEcb:alblC..-, 

A._,,, NY tZZIO Phone: 511-474-6118 

FAX: StMn.&419 

PRESIDENT-ELICT"" 

Donald A.tt.,I 

Oe91.dO..,,and ......,,.._ 

........ 

IOOHEO..,SWNl121 

-.011117232 

Phom: 503-731-4100 FAX: 503-731-taN 

VICEPIIEIIDINT' 

IJonoldllBurea,ot TopovnilPhlc ... .,_......., P .0 . Box 2357 • 11h Floor Harrilbu'Q, PA 17106-2357 

Phone: 717-717.ZteG 

FAX: 717·772-2291 

SECRETAIIY w--•TREASURER" 

--- tMW.T.,,,....sc. T~. FL 32304-7700 F't-GM: 904-4U-4191 

FAX: Q04...481-eoM 

"EXECUTlVE COllllfTTEE IEIIIERS 

STATISTOAN 

HaigF. K.....::h 

New .JlirNy Geologieal Surwy 

P.0 . 8o1 CN-OZV 

TNll'lllln, NJ Ol&25 

Phone: 1DD,.2VZ-tta5 FAX: eoe«l3--10CM 

IOSTOAIAH 

Oonad l . KOdl 

kww•Geologlcal~ 

t23N.Capil:IIISl. 

b#&Cify, &A 522•2 Phonrt: 319-335-1575 

FAX: 319,,335-2754 

Jtnt23, 1993 

The Honorable George Miller 

House Natural Resourcee Committee 

1324 Longworth House Offloe Building 

Washington, DC 20515 

Dear Representative Miller: 

On behalf of the Association of American State Geologists (AASG}, I am 

pleased to provide you with the attached copy of a resolution relating to 

mining law reform leglslation. This resolution was adopted at the 85th Annual 

Meeting of the AASG held in Coeur d'Alene, Idaho on June 6-9, 1993. 

Sincerely, 

~?:~ 

Morris W. Leighton 

President, AASG 

MWL:dms 
577 

~.___ ~ ___________________ AsSOCIATION OF AMERICAN STATE GEOLOGISTS _ 

PRESIDENT• 

Morris W. Leigtuon 

Unois State Geolooical Survey 

121 Narural Rasourc:os Bldg. 

6t5E. Peabody Dr. Champaign, IL 81820 

Phone: 217-333-5111 

FAX: 217-2-44-70(M 

PAST PRESIOEHT• ~IH.Fakundiny 

New York Geological Survey 

3136 Cul1Ural Educalion Center 

Albany, NV 12230 

Phone: 518-474-5816 

FAX: 518-473-8489 

PRESIDENT ·ELECT" 

DonaldA. Hui 

Oep1. of GIIOlogy and 

Mineral Industries 

Suii.965 

800 NE Oregon SlrNt 126 

POtdand, OR 97232 

Phone: 503-731-4100 

FAX: 503-731-4066 

VICE PRESIDENT• 

Donald M. Hoskins 

Bureau of Topographic 

and G.alogic Surwy 

P.O. Box 2357 • 91h Floor Harrisburg, PA 17105-2357 

Phone: 717-787-2169 

FAX: 717-772-2291 

SECAETARV-TAEASUAEA· 

Walter Schmidt 

FloriiSI. Geological Surwy 

903 w. Tennessee St. 

T allahassff. FL 32304-7700 

Phone: 90<4-488--4191 

FAX: 9CM-•88-8086 

"EXECUTIVE COMMITTEE MEMBERS 

STATISTICIAN 

Haig F. Kuabach 

New Jel'sey Geological Survey 

P.O. Box CN-029 

TrenlOl'l. NJ 08625 

Pt10ne: 609-292-1185 

FAX: 609-633-1004 

EDITOR 

ThomasM.Be,g 

Ohio Geological Survey 

•383 Founlain Square Drive 

BuildingB 

Colimbua, OH 43224 

Phone: 814-265--6576 FAX: 614-•• 7-1918 

HtsTOR1AN 

Donaldl.Koch 

Iowa Geological 5urYey 

123 N. capilol SI. 

lowaCily. IA 52242 

Pt-ion.: 319-335-1575 

FAX: 319-335-2754 

WHEREAS, 

WHEREAS, 

NOW THEREFORE, 

TO THE UNITED STATES CONGRESS 

the individual states represent 

diversity in their natural resources; great 

and, 

the states have in place various environmeQtal 

protection programs; 

BE IT RESOLVED, that the individual states should receive primacy under current mining 

law reform before Congress. Further, be it 

resolved that discretionary powers of the 

Secretary be subject to oversight through a MSG-Federal Advisory Committee. And, be it 

further resolved that the state's share of 

royalties, generated as a result of mining law 

reform not be subject to Federal overhead 

deductions. 

~~_/, llMorris W. Le~ident 
ENGINEERED MATERIALS 

Hugh D. Hanes 

Vlco - Environmental and Oowmment Affairs 

March 18, 1993 

The Honorable Richard H. Lehman 

Chairman 

578 

Subcommittee on Energy and Mineral Resources 

Committee on Natural Resources 

United States House of Representatives 

Washington, DC 20515 

Dear Congressman Lehman: 

Re: HR 322 •• Mineral Exploration and Development Act of 1933 

Brush Wellman Inc. 

17878 St. Clair Avenue 

Cleveland, Ohio 44110 

21~200 

I listened with great interest to Secretary of the Interior Babbitt's testimony at the hearing 

on the subject Bill on March 11, 1993, especially his comments regarding the patenting 

process. Throughout the Mining Law debate, including the Secretary's testimony, the 

patenting process has been depicted as a "land-grab" by industry to convert public lands to 

private ownership at little expense. Nothing could be further from the truth as the Brush 

Wellman experience demonstrates. Please make this letter, including the attached testimony 

given at the Senate hearings in December, 1991, a part of the hearing record. 

Brush Wellman is a publicly-held, domestic corporation which is a producer of beryllium, 

its alloys, and compounds. We are the only fully-integrated producer of these strategic and 

critical alloys outside the former Soviet Union. With our holdings in Utah, we are 

essentially independent of foreign raw materials to support this production. 

Currently, we have on file with the BLM in Salt Lake City 8 patent applications which cover 

103 lode claims, 85 surveyed mill sites, and 87 aliquot part mill sites. These claims and mill 

sites include 2,027.5 total acres of public land located in the western Utah desert more than 

30 miles from the nearest permanent inhabitant. 

Secretary Babbitt chose American Barrick as an example to advocate against the so-called 

"fast track" patenting process even though he admitted in his testimony that nothing 

improper was done. However, we believe that the Brush Wellman experience more typically 

reflects how the Mining Law was intended to work in the discovery, development, 

commercialization, and securing of tenure on claims, as well as the time schedule of the 

patenting process. 
579 

The Honorable Richard H. Lehman Page 2 

In the early 1960's Dr. Norman Williams and his geology class from The University of Utah 

discovered the presence of low-grade beryllium ore while on a field trip. This discovery 

caused a flurry of prospecting and staking of claims by local prospectors over a 300 square 

mile area of the west-central Utah Desert. 

As described in the attached Senate testimony, beryllium is located in thin veins or lodes 

extending from the surface to over 600 feet deep and is covered by rhyolite, a hard granitic 

rock layer. To locate these minerals, hardrock drills are used and assay.; taken of the drill 

cuttings. Since Brush Wellman started their exploration and development program, we have 

drilled and assayed over 1.5 million feet at today's cost of over $8.00/ft. of drill hole. 

In parallel with the exploration program, it was necessary to develop a new technique to 

extract beryllium from the low-grade Utah ores. Once sufficient reserves were discovered, 

Brush Wellman made the capital commitment, and, based on the new extraction technology, 

started operating in 1969. In the intervening years, we exceeded the $100/claim minimum 

requirements by opening new pits as needed, and adding to our proven and probable 

reserves. 

When the debate over the Mining Law was renewed in 1988, our focus changed to the 

patenting process. The next two years were spent in perfecting our claims by better defining 

our proven and probable reserves, and in 1991 we filed our first applications for mineral 

survey. Once the legal work was completed, nearly a year was spent by a BLM-appointed, 

Brush Wellman financed (as required by law) cadastral (land) surveyor. Having satisfied 

all the requirements under the law we were allowed by BLM to file our patent applications 

in the period from June to October, 1992. Just last week the first public notification of our 

patent applications was given and we are told the applications are currently in the 

adjudication process. Once this is completed, the first-half final certificates should be issued, 

if not stopped by executive fiat or a change in the law. 

Mr. Chairman, we've been on the "fast track" for nearly 3 years filtfil. spending over 20 years 

in exploring and developing our claims. Of course we tried to expedite the process since 

the proposed changes in the law threatened to eliminate our right to secure tenure. To do 

otherwise would be irresponsible to our employees, our shareholders, and the public. To 

date, we have spent over $10,000,000 to develop and patent these claims which is equivalent 

to nearly $50,000/claim for the mineral estate contained in our patent applications. In 

terms of the surface estate, we've spent nearly $2,500/acre for the lode and mill site claims. 

To deny us and others in similar circumstances the right to secure tenure on these lands 

after such a long, expensive procedure would be a serious taking of rights under existing law. 

We have argued long and hard in favor of patenting and feel strongly that this principle 

should be retained in any revision of the General Mining Law. At a minimum, if the law 

with respect to patenting is changed, existing applicants should be "grandfathered" at the 
580 

The Honorable Richard H. Lehman Page 3 

point of Application for Mineral Survey since that is the point at which the company loses 

control and the process is turned over to the Government. 

As stated in previous testimony, we stand ready to work with the Congress to assure fair and 

equitable treatment for all parties involved. 

Sincerely, 

,~it~ 

HDH/clh 

Enclosure 
581 

TESTIMONY OF HUGH D. HANES 

VICE PRESIDENT FOR ENVIRONMENTAL AND LEGISLATIVE AFFAIRS 

BROSH WELLMAN, INC. . 

Before the Subcommittee on Mineral Resource Development and 

Production of the Senate Energy and Natural Resources Committee 

December 18, 1991 

Mr. Chairman, I am Hugh Hanes, Vice President of Environmental 

and Legislative Affairs for Brush Wellman, Inc. Until recently, I was General Manager of the Beryllium and Mining Division and had 

responsibility for our mining and extraction operation located near Delta, Utah. Brush Wellman is the Free World's only integrated 

supplier of the metal beryllium, beryllium copper alloys, and 

beryllium oxide ceramics. Brush Wellman's mine in Utah is the only 

operating beryllium mine in the world. 

The highly unique properties of these beryllium materials make 

them critical to some of the country's most sophisticated defense 

and aerospace systems. Every strategic missile system in the U.S. 

Defense arsenal contains beryllium cqmponents which are critical to 

its performance. For example, the land based Minute Man III & MX, 

the sea based Trident and the. airborne S.A.C. systems all depend on beryllium for guidance and nuclear weapons components. Many of the 

sophisticated smart weapons employed in the recent action in the 

Persian Gulf (Desert Storm) used beryllium in critical structural, 

optical, and electronic applications. The "Smart Bombs" were guided to their targets by optical and laser systems which depend on beryllium components for their performance. Beryllium copper 

alloys are used commercially in the most advanced auto electronics, 

computers, integrated circuits, telecommunication, and oil 

exploration systems. Because of its importance in Defense Systems 

and in critical civilian applications, beryllium is one of the 

materials stockpiled in the National Defense Strategic Materials 

Stockpile. 

Prior to 1969, the domestic beryllium industry was totally 

dependent on beryl ore from foreign countries such as Brazil, 

Zimbabwe, People's Republic of China, and India. In the middle 

60's, Brush developed the technology to extract beryllium from lowgrade Utah ores and, as a result, we made one of those "bet your 

company" decisions and built an extraction plant in Delta, Utah 

which integrated us backward into the mining business. This move was of great strategic importance ~o both Brush Wellman A!lsl the 

Country, since it meant we were no longer dependent on foreign 

supply of ore for this critical material from politically unstable 

countries. · 

First, let me quantify the magnitude of the technical problem 

which we face in mining Utah beryllium ore . This ore, which 

contains only 1/4 of 1% beryllium, lies in thin layers extending 

from near the surface of the earth, down to over 600 feet in depth. 
582 

At ground level, the ore bodies are covered by rhyolite, a hard, 

granite-like volcanic rock, which must be removed by drilling and 

blasting. For every 4 pounds of beryllium extracted, we haul 1-ton 

of ore over 45 miles from the mine to the mill. To access the ore, we remove 20 tons of overburden for every ton of ore mined. 

Opponents of the Mining Law portray us as randomly disturbing 

the landscape in search of minerals. Actually, our mining crews operate with surgical precision. In order to locate our current 

reserves, we have done over 1. 4-million feet of exploratory 

drilling. This exploration program, conducted over more than 25 

years, if allowed to be completed, will allow us to potentially 

reduce the nearly 1,000 claims which we have staked to focus on less than 100 patented claims. To date, we have spent over $8.0 

million to locate these claims and have committed another $2. o million to complete the patenting process. This is hardly the 

$2.50/acre land giveaway portrayed by opponents of the current 

mining law. 

Public concerns are often expressed about the impact of mining on the environment. We have on file with the Utah Division of Oil, 

Gas and Mining a JO-year mine reclamation plan which includes 

appropriate financial assurances. This reclamation plan was filed over a decade ago and is periodically reviewed and updated. We 

believe that this authority should properly reside with the state as it currently does. 

Although opponents of the Mining Law portray it as a giveaway 

to industry, the public benefits in many ways. First, we have 

consistently provided quality employment, even during the mining 

depression of the early 1980's, resulting in tax revenues. The 

company itself, along with the many suppliers of goods and services 

which we support, also provide substantial tax revenues at the 

federal, state and local levels. The benefit to the public should 

be obvious to the most casual observer. 

The current Mining Law allows the establishment o"f tenure 

through patenting where commercial quantities of minerals are discovered. This is a feature of the law that must remain 

unchanged because it fixes one of the major variables in mining, ore supply, and allows for long-term planning. While threatened 

changes in the law have caused us a certain sense of urgency in 

proceeding to patent our unpatented claims, the long, complex, and 

expensive process precludes a "head long rush" to patent. When our patents are issued, we will have spent well over $50,000/claim; 

again, hardly a giveaway program. · 

Mr. Chairman, I have attempted to describe in this short 

presentation a mining and extraction process which is very cost 

sensitive and an exploration process which is precise, ~ut costly, as well. While we, like most profitable industries, can absorb 

minor increases in cost, significant changes in the cost picture 

Page 2 
583 

could force us to leave lower grades of ore in the ground, thus 

decreasing our reserves. Ultimately, we could .be forced to turn once more to foreign beryl ore or to take our mining and extraction 

process off-shore, closer to the supply .of beryl ore. 

We, like our responsible colleagues in the mining industry, abhor the illegal practices of a few unscrupulous operators, which 

have been highlighted by opponents of the mining law. However, 

these cases are few and far between and can be handled under 

existing law. In order for the minerals industry to stay strong, 

the basic right to patent our raw material supply must remain. On 

the other hand, Brush Wellman could support the principles of 

either reversionary rights or payment of fair market value for 

these patents. 

Mr. Chairman, Brush Wellman is proud of the role that we have 

played in supplying the unique material beryllium for the strategic 

defense systems of our country. But going beyond the defense 

issue, beryllium materials are one of the enabling features that 

make possible some of the sophisticated technological dreams of the 

future. 

Thank you for the opportunity to appear here today. I would like 

to submit for the record a copy of a letter we submitted to this 

subcommittee last year •. This letter is a critique of S.1126 but 

many of our concerns apply to S.433. 

Page 3 
584 

'~ 

GOLDEN SUNLIGHT MINES, INC. 

The Honorable Richard H. Lehman, Chairman 

Energy and Mineral Resources Subcommittee 

House Natural Resources ·committee 

1319 Longwonh House Office Building 

Washingt0n, D.C. 20510 

March 15, 1993 

Via Federal Express 

Testimooy ID be F..ak:ml Re: H.R. 322 

Dear Congressman Lehman: 

I respectfully request that this letter and the enclosed information refuting portions of Mr. 

Richard Parks testimony before the Committee 011 March 11, 1993, be placed in the Committee 

record of that hearing. 

The purpose of the enclosure is to correct misrepresentations and half truths that have cast 

wrong impressions in the minds of the public and the members of your Committee. These 

methods arc used consistently by opponents of mining and just as consistently we put the record 

straight. 

It is becoming an increasingly simple matter to differentiate the radical preservationists • 

who would shut down all mining; from the conccmed environmentalists • who seek a balanced 

and productive development of our mineral resources. 

We have pledged our efforts to work with the latter group. 

CEM:rld 

Enclosure 

Sincerely, 

e~.~_g__ 

C. E. McFarland 

President 

cc: Members of the House Energy & Commerce Committee 

Members of the U.S. Senate Committee on Energy and Natural Resources 

\pdua\123S 
585 

Gok1m Smaligbt Mmes, me. Re5ponses to 

lloase Namral Resoarc,- Cammittee ,:emmany ot 

llfdm:dPu:ks/NP.RC 

Comment: GoJdea Suolight Mme 11ear Whili:hall, Moatma, bas been open since 1982. 

8-,pgpp; Galdel1 Sualight :Mmes. 1'Dc. (GSM) bcgaD opmti011 in Febmary 1983. 

ComrnruC:: By 1983 a. comtructioa error had lCSllbm ill. a spill of c:y3Dide COO!mrinalrd 

taillag vaier in a.c:ess of 9 miDbi gaDaas. This spJ11 inffltramd aearby 

domestic waler we1J:s. This 3Pill is DCt Ill c:gmplc of "am:imt history•, bat 

:mtber' a modem miue opemion. 

Respome: 'Ibcrc was a loss of 1ailing solution n::sn1ting from a constmctioa error iD 1983 

tbat affecied two nari>y domestic wa=- wells. Tbe solution was dcU:md iJ7. 

p,unciwatt:r J'DOl'ri1nrinc wells inslaDcd by Golden S\Dlliiht pciar ID tbe ~ 

dam eoasuuaion.. 1be problem was pmmpdy repom1 to appiopmm 

~agenc:ia and local residaits. 

An altemaiive 1U3b!r supply WU provided for the two residents whose wells 

wae invcl.ved, and quick aaion WU tam '':y Golda SmiJicbt ID $IDp die leak 

and recm:u. the mnlazTrinalPd 'SOimian 1D !be tailfn& pood by meam of a ~ 

of pampback wells. Al llO time did thie 04il3iiiilld4t levels in the :iesidems' 

wdls taeh or c:xcc:cd safe driDkiDg waa:r SlaDdmds. Since that time, 

cnnC?rniaant levels have decteased to or below deteaicm limiis. 

W"lth Il!g3lU ID l.ld'r. Pam' SIZllli'!lllm about mcimt histmy vs. a modem mining 

opa:ation, this is a good example of bow~ ased by modem miaiDg 

can ddA:et a problems, it can be promptly carm:red. 

C+owevt: Now, this same mine is proposmg a major eip;msinn, 'Wieh in.dudes a 

fl!clarn:ariOl'I pbm that is lllllilmy to silcceed. Dr. Eugcac Famict', a west-wide 

m:Jarnariou specia&t for tha U.S. Foiest SeMce in a lea=-, cl:aD:d June 28, 

evidence 

1990 10 the 

tbat 

Chief 

Galdezi 

of tlle 

Slllllipt'.s 

.Ma:d:ana 

propoa 

Haid :Rocle 

1"PQVTPtjon 

Burem,providcs 

plan woald 

~ 

fail Despirc 

mat ad.vice, the Bumu1 of I.and Maaagellll!lit (BU() and Moatma Dept. of 

Stale Lams. the pemiitliDg agCIICi= gDDll:d tha expansion permiL 

1 
f [ 

'!

1

1

! 1~ 111 ill! l'Jll;1

~ 

llls !I lrl J;ll !111•(. 

B ~ ti' SI ' f l [ t I I r er' o lf ~tf ll !t~ it!} •i1

l'i! ht I !• tl~r ttl 2 

hr 

111, ~ 11 .~1: ·rtl,~iJ 

f I a. e- i- ~ u-j, i l,, '1 I~ r 

8 if~ I s a I i ·1 ; I·; ff If i I 

B'ft If ! ~ ft" 1J1e~"l!i:~ 

ij' I i ! 11 u t · i , ~l ~ 

1

, r i i 

.. & _ft"~---~ llg_•e:11 

--· fi f(jJl 

~111 [ Ii ll 1l l ·~~ ii 
587 

c-11wmt: I belie¥e that Go1dm Sauli&ht is a super!tmd sue m die maldDJ. 

R,:spops; Mr. Pam may be a111mlptinc 10 equalB Goldcll Sunligfat Mine ID ltle Butrc 

&Jpcdlmd Sire. this is aa llZQUStimb]e compmisoa of. two totally dit1'ercat 

sires tbat dftrer vastly pologiaily and~- Goldm Slmlilfit will be 

wmitored and n:.claimed wuh modem ta:c:lmoJocy. The Bul:II: m D!:Slllllecl 

mm 100 :,em of .mimag w11m tbele wue no ccuaols 10 pmcec::i: die 

sam:nmdiDg mvi!omae:m, and DO rec:Jarnarion WIS required. 

As owner of a 4y fismng shop in Gardi:ller, Montana, it is dolibtful that Mr. 

Parks has the tecbmcal undcntancfinc to make such 37' intlarnmanvy smrmmr 

CJmrnent: Gold= SuJlli&bt Mine is an example of why we Jllll!d die public parti.cipation 

and 

by an 

c:itm!n 

EA r.uber 

enfort:emeat 

Ihm m 

sectioas

EIS cvai 

, of 

lhOOlb 

BR 322. 

it in.'Volwd 

The apaasion 

a whole 

plm 

new 

was 

tails 

~ 

pond 

and six-fold incicase in the size at !be open pit, 

Btsms:; Gold= Stmlicbt was aacinallY pcmitt,:d in 1982 by an ES, and subsequent 

clrmges and expamkms wer:e pemm:11::d by au EA. Smee lhe·la11est expmsion 

m quesaoa was mai:e mi:nsive lbaD pm-ious c;q,amsiOD;'I, an e=:mm 

:miriptcd 'EA. was used, IIIXjust 3D EA. The cxpartsiOll iDaeasc:d die opel1 pit 

by a factor of two not an aaggmlled "six•fold• as smed by Mr. Parks. 

Onrnent: The EA proc:e» 111i11i111itoi public iupQt. The decision 10 P3J1.t tbe e:qmmon 

pezmit 1w been appealed to tbe fnlletior Board oftaiid Appc:als (IBLA) which 

has aot acted 011 die appeal far nearly 3 yem. Because of the IBLA's faili= 

to act widlin a zeascmablc alll0Ullt of time, ciml:n's groups were foiced 10 

dJallea&e this danp:rousty in2dcq_ualie eiq,ansim pEOpOSll in S1311: c:ourt. It 

so:ms probable that the COUit Cl.$8 will be decided in the cicizem' favor. A.s a 

oomequm:c, !be induszry has sponsoted swe legislalion 1D fmtbec restrict 

public ac:::ess to the process mi mm it fmancially impossible tor ci:tizi::DS to 

miDc ,uit to c:nforce our c:onwnJtim "lid laws. 

v......,,... The miripml EA pmc=s did act minimize public iJrpat. GoJdm Sunli&bt 

~Y a&=d 110 two public lle:mDgs aud public comm=t periods <luz:ing 

tbc pe11 niltio.g process. 

The IBLA has not yet ruled 011 the appeal, and the lawsuit in ,tatc court has 

aot bee:11 decided but t1iete is ao tca30D 10 believe me case will ~ derrrrninm 

oae way or aDOtbcr ac this point:. Mr. Pms' m=imt that it looks probable 

tile case will be dec:ided in !he •~ f.Mr, seems to be ~ookinc the 

pomt dm in my event, we m: all U.S. cilimls. 

3 
588 

'l'he fact of 1b: mm= is that II) IIIIDIIDt ~ public iapac wmld smsfy lbe 

p,:esmvalicaist.paaps flnoolved ill lbc qpeal mcl lawsuit. '11m objecme 

wms ID be ID as, an milliDc a::ciritia, 110t ea im:l" a balm:ed. appoadl. ~ 

zaaan:ccbdapmmt. 

'l'he ..,_ Jqislarion =med 10 does Dat Iesa:i&:t pab6c mpat. but simply 

esabti1brs "mlsd.c rinf •mes uler a pmnit is maed to ma a cbeDenp, as 

1'eD. as clmifyiac wbm m EA. mitiplr:d EA. er EIS sbaald. be aed m m 

pc:uai11iDc psvcil:SS. J'ndnslries, SID IPp!IOtS, al responsible 

euviu+•• + •aBm 111 Dlld dds cm:ified. · 

C Ht: It .is impomm for yw ID Im.ow t&at Goldel1 Sunligllt Mme is a 1IDit of PJacer 

Dome, a Caaadian miDiDg co. 

Bnmz: Ga1dal ScmJicbt Mm: is a. 1lllit of Placc:r Dome U.S. Jnc., a Califl>mfa 

c:oq,cmtiml and an Amedc:m miDiDg company. PJaca- Dome U.S. Jnc.. is a 

wbolly-owned 1111it o{Placc:r Dome Im;., a. Vm:outa'-baed wodd-wide 

miniuc c:ompmy. Placer Dome U.S. m:l il:s prwle essoc .:ompanies have been 

esr:ablisl»1 ia tllis Uaited Stllles siace 1929. AD. bat a few of tho 600 Plac=' 

Dome U.S. IDc. cmplayccs am U.S. c:imms. 

4 
om::,.., 

-

w-...J. Mann 

V,P.r:tl~ 

----

Brubaker-Mann, ,Ne. NA'NRM. COLORED CNatEO N)CK 

589 

MtNED NfO MILLED IN MRSTOW, CALIF. 

LAAGE SB.ECT10N OF NATURAL OOl.OAS 

- 80AP IIINE ROAD • IIAIISTOW CALIFORNIA 112311 • (111) 21111-21211 (911) 21&1117 

March -l. 1993 

To: Members of House Natural Resour<:99 Committee 

R•: Nlclt Jo. Rahall's anti-min!Dg bill HR 322 

Position: Oppoeed 

Requ.st: lint« In Otrlcial Hftfing Records 

Tbls bill~ 121• ••ct opposti. of wllat an ailing ~omy needs. It 

r.strtcts growth and production and •llmlnat.s jobs. AmM'ica nM<Ss 

Incentives. W• don't n..CS HR 322. 

Slnc«•ly, 

£:..t:~-e /Jlaa -, ,._../ 

Jllli•Mann 

President 

JM/cc 

A small mining company 17U!Mll8 society's 11eeds 
The Honorable Rick Lehman 

U.S. House of Representatives 

Washington, D.c. 20515 

Dear Representative Lehman, 

590 

David B. Whitcomb 

6320 Jerseydale Rd_. . ... . ----~· Mariposa; CA 95338 

, (,,..1.,-</}3. DOC# ............. -

\!DE: Gs.. 

~.:\TS:·f :~Efti#J'-=· 

The General Mining Law of 1872 was enacted during Ulysses s. Grant's administration as a means of settling the West, 

encouraging hardrock mining over all other public land uses. More than one hundred years later, this antiquated.law continues 

to allow unchecked mineral development for private profit at the 

cost of massive damage to our environment. 

H.R.322, the Mining Law Reform Act, would take steps to reform our mining laws by requiring that other values, such as wildlife 

habitat and recreational opportunities, be considered before a mine is automatically permitted in sensitive areas. This 

legislation would prohibit mining in certain ecologically 

sensitive areas and would contain strong standards for ecological 

reclamation after mines are closed. The bill also establishes a system whereby a portion of the government's royalties from 

mineral production would go toward a fund to clean up abandoned 

mine sites. 

Companion legislation to H.R.322 has been introduced in the 

Senate. as S.257. However, another bill being touted as mining 

reform, S.775, is a sham bill, supported by the mining industry, 

which would do almost nothing to change the industry's ongoing 

rip-off of American taxpayers and our environment. 

I strongly urge you to co-sponsor H.R.322 and work to ensure its 

passage. Should S.775 pass the Senate, I also urge you to 

utilize all of your influence to ensure that the final mining 

bill sent to the President contains the strong and effective 

provisions of H.R.322. 

Most sincerely, 

David 

B 0c,0:Q~ 

B. Whitcomb 

. ~ 
The Honorable Rick Lehman u.s. House of Representatives 

Washington, D.C. 20515 

Dear Representative Lehaan, 

691 

Susanne Whitcomb 

6320 Jerseydale Rd. 

Mlariposa 1 CA 95:,flllU •-t,r .. .. DATE:·······-····-······· ~· 

1 A\[)E· ·······-···· REC# ............... -.. . 

c!'TS: ···········-··········· .. ····........... ............ \ 

,,A::A· ··· ····· ............... - -- · ' 

The General Mining Law of 1872 was enacted--during7Jlysses s. 

Grant's adllinistration as a means of settling the West, 

encouraging hardrock aining over all other public land uses. More than one hundred years later, this ant~~e-;ed law continues 

to allow ~eral development for pf te profit at the 

cost of mass ve g to our envlrdlunent. 

H.R.322, the Mining Law Refora Act, would take steps to reform our mining laws by requiring that other values, such as wildlife 

habitat and recreational opportunities, be considered before a mine is automatically permitted in sensitive areas. This 

legislation would prohibit mining in certain ecologically 

sensitive areas and would contain strong standards for ecological reclamation after mines are closed. The bill also establishes a system whereby a portion of the government's royalties from 

mineral production would go toward a fund to clean up abandoned 

mine sites. 

Companion legislation to H.R.322 has been introduced in the 

Senate as S.257. However, ~bill being touted as mining 

reform, S.775, is as~, supported by the mining__ind~, which would do alaost o in to change the industry's ongoing 

rip-off of AIRerican taxpayers and our environment. 

I s~l_y urge you to co-sponsor H.R.322 and work to ensure its 

pas ge. Should S.775 pass the Senate, I also urge you to 

utilize all of your influence to ensure that the ti.!laJ_ mining 

bill sent to the President contains the strong andeffective 

provisions of H.R.322. 

Most sincerely, 

Susanne Whitcomb 
March 2, 1993 

Mr. Richard M, Lehman 

Chainnan 

592 

Co,bondolo, CO 81623 

Tcl,phnno: (303) 963-2344 

Fu: (303) 96.,-IM7 

Subcanmittee on Ener1y and Natural Resouroes 

818 0000 

US House of Representatives 

Waahirutton, D,C, 20515 

Reference: Testimony for the 3/11/93 Hearing Regarding H,R, 322 , 

Dear Mr, Lehman; 

Thank you for the opportunity to provide the followin1 comnents on the Mineral 

Exploration and Developnent Act of 1993, I_ will attempt to express m;y views on 

the Ac t on a section by section basia usirut the January 5, 1993, draft of H,R, 

322 , 

Before I 11et to specifics, the followirut wi.11 provide you with some info:nnation 

about my background. My education includes a B.S. in Minina Engineerinit and a Master's in Business Adlllinistration, both from the University of Washinaton i 

Seattle. I have 18 years experience in the developaent and financing of new 

mining ope1·ations with work at AMAX, Union Pacific Corporation, Smith . Barney, 

Colorado Yule Marble Company, and my own mining finance consulting company, I 

have been involved in the evaluation or developnent of close to a hundred hard 

rook or coal properties, some of whic.h have received a.wards for environmental 

excellence. I currently work as a consultant to companies and individuals 

helpirut thern find investment money for their mineral projecte world wide. I deal 

on a daily hfasis with all of the junior and major mininll comPQnies' exploration 

departmente to bring them hopefully attractive mineral properties. I hold a Professional Engineerint Ucense in th,;, State of Colorado, The basic theme of 

niy work hBB been to develop mineral properties in an environmentally eol.Dld 

w.r111er, no matter what the reaulations nay require. Thie theme is a result of 

a love for the wilderness of the Western· US, combined -with the knowledae that a 

strong and growing mi neral industry is not only necessary, but ori tical for the 

maintenance of and improvement in our quality of life, I continue to believe 

that new mines can be opened in the Western US without sillnificant environmental 

impaots, 

Whi,le my cOIIlllE!llts below may reflect the mining industry's position on many 

issues, l em an independent mininll finance co~ultant without allegianre to any 

partioulo.r faction. I hope my C011111ent• reflect an underlying desire to judge the 

new legislation based on a concern for the econ0111ic welfare of our country as 

well as for the global envirorunent. 

Pqe 1 
593 

SECt.ion 104: CLAIM MAINl'BNANCB ~IRl!Ml!NTS 

(al IN GENERAL,- I think thia is well conceived and will work 

effoctively to aooaaplish the ,oa.1 of preventing the holding of clai.11& without 

any intention on the part of the OH11er to develop a mine on the property, 

llowever, I don't believe it will raise IIIUOb money for the treasur:,. My- business 

puts me in contact with a broad range of =rent clai11 holders, fraa individuals 

'4\o hold Just a few claims to the ltiants of the industry who hold thousands of 

olaiDIB, Everyone I talked to about this issue has indicated they will drop fran 

between 60 Md 95 percent of their unpatented clai1118, So I believe an estimated revenue which millbt be generated is probably too huh, 

I like the concept of. the rental fee because it will keep surface 

disturbance to a ainiaa and the slidim scale will encoUl'811ie a "develop it or 

drop i.t" l'IIOde of operation, 1 believe that the increases should come at ten ;year 

intervals inatetld of five year lnter,,ale, just based on IIO' experieooes ooncemil'llf 

the time it takes to develop a mininc operation, I suggest that if a mine is p.rt. 

into product.ion, then is placed on standby, the claim rental fee tohould drop to 

the $6 level.· The price fluctuatione of mineral 001111110ditiea "°'°8times require 

canponics to plaoe llines on st.ancfb7 for long and IWltiple periods of time, It 

isn't quite fair to expect a nuniIII& OaJIP8ll7 to pay the fee duril'llr tough tilne8 

after they have invested ao much in the propercy, If the oaapany ha$ to ~ the 

fee 118 well as pay a aaintenance orew to keep the mine available, it my choose 

to let the propcrcy irc oanpletely, I think the $2,50 minillll.lD rental fee is 

unnecessary and will probably be 1110re trouble to administer than it is worth, 

Section 201: SURFACE Ht\NAmMli1llr 

(a) IN GBNBRAL, - l don't. see aaoh in these requirements for a plan of 

opc,rat.ioo that. ien't alreed7 required by either Cowty Land U$e Cheinlte prooeasea 

or St.ate Mine Land Reol-tion requ11'811181lts, However, there are some cowties 

and 8Qllle states which do not. require the sutmitt.al of e. plen of operation, MyC'.onOf!m is that there should be one prooeBB which oontrola, NEPA, 1108t et.ates, 

IIIBllY oomtioe, and now the Federal Govemllll!l'lt, 'WOUld re,quire a process through 

which a rnininl( ~ -t. work in order to develop a mine, It lllll3' -

l'eQSOl'lllblc to provide the Seoretary with a plan of operations ~iich ie al~ 

roquircd by other s,cenoiea, but the practical affect is an overloedinJt of the 

pel'lllittirut process and \.DUl808811111'7 delays, All of these it=mmental aa:encies 

have similar goals - the need to assure an environmentally sOIDi minil'llf operation 

on the land, Why can't a lead agency be appointed on a oese by case basis which 

would have overall Jurisdiction? Is the lellislation int.ended to make the prooess 

1110re C0111plloated, thUB dillOO\n'IUlina mining, or is it. intended to IMke the prooess 

more efficient, thus -ving our~ the expense of interminable reitulatory 

review prooeasee? 

(b) (2) (A) Definition of "Negligible Disturbance" -- This eeotion 

implies that a plan of operations will be required. ..tlenever a drill ril( is 

broUllht onto the claima or a cat track is out to aooee• the drill sites. 'lbe 

idea of requirina e. Ml plan of operat.i00B in order to Just put a few drill 

holes on the propert.7 offends ay sense of what is appropriate. I sul(llest that 

"mlnlilal activities" be expanded to inolude minor road building, construction of 

drill pads, and BlllBll oollt 8!U9Ple programs, Because such activities ~ have 

Page 2 
594 

mor-,, of an impnct on the environment than just walking' on the property, I suggest n two level syst= of operations plans reviei, be com,idered. One process wouJ.d 

apply_ t? exploration act~vities, and one process would apply for developnent 

act.tvities, The exploration phase would require, at most, a five page document 

uhioh describes the contemplated activity on the property, The Secretary should 

be required to reviaw and approve the plan within two weeks of subnittal mless 

there is a findin2 that the plan b in violation of any regulation and that such 

violation will cause significant haxm to the public or the environment, The 

development pbase 'lo/Ollld require the more lengthy and thorough review. 

(d) MINING PF.RMIT APPLICATION ~IREMINI'S, -- This is where a two level 

system of approval makes more sense {see (a) (2) (A) above), An example ie the 

requirement for nound water monitot"ing for 12 months before a drill rig is put 

on the property (subsection 7). Thie is silly and inappropriate. However, for 

anydrilliOlt notivity there should be a requirement that drill holes are either 

capped or filled with cement after drillina is canplete (I think this is already 

required under state or local Health Department :tel(Ulations reaarding grourrl 

watm·), For any bulk sample proaram, a reclamation bond should be required, 

(h) TERM OF PERMIT: RIDIBWAL, -- (1) 10 Year Term -- A tenn of 10 years 

is not long enough for the financinit of most minlnll projeots, While most of the 

gold mines recently opened in the West have operatina lives of leas than 10 

years, most of the projects I have evaluated have operatina lives running into 

decades. There should be no limit to the operatina life, exoept that it should 

be defined ln the plan of operatiomi by the applicant. An example of this is the 

Henderson Mine in Colorado. The ore deposit was disoovered in 1966, construction 

bciC8ll in 1968, first ore production bellan in 1976, and full production m.a 

rcnched in 1980. Ovt!rall it took 14 yeare from disoovery to full production, 

With M investment requirement of over $480 million, it was quite a risk for any 

company and a 10 year pennit would not have even aotten it to full production. 

If there 111\lst be a time limit, 20 years after production oomienoes is more 

appropriate, 

(h) (2) O'le Year Tenn for Plan of Operations -- In most cases a mininll 

project cannot be financed unless it has mining pemits in place, Having been 

intimately involved in numerous at~te to finanoe new minina operations, I can saw with some authority U...t one year is no where neat' enouah time. The owner 

should be !liven three years at a mininun to bellin lllineral activities on the 

property after the mine operations permit is issued, 

(h) (3) Plan of Operations Renewal (See (h) (1) ebove) -- Most mining 

operations are constantly in technical violation of some rcaulation throughout 

their operating lives. I would aueae that leas than one percent are intentional 

violations or are violations whioh millht oause some environment.al or safety 

problan. It is just the nature of the business that unforeeeen problems ooour, 

and because there ere now so l1llll'IY re111,1latione re11ardina mining activities, there 

is bound to be one or two which are not bein& complied with at any tivcntime, 

So the effect of these strict requirements for oanpliance is to make the mine 

owner subject to the peraonality and political persuasion of the administrator 

which 11'-lst review the operation. If the operator 11ets s stickler for detail, 

life can be miserable, If it was my money to be invested in the operation, I 

would haven reo.1. difficult time advancina funds under suoh cil'CUIIStances, 

Page 3 
595 

The followina: COl!lnent.s 11,pply to both the initi"1 mine permit and the 10 

year renewo.l process, I suggest that the Sec,:-etary should be required to awrove 

or renew the permit unleae there is a violation of any regulation and such 

violation would cause a significant. threat to the public or to the environment. 

In other words, if the operator is in substantial compliance with the 

rel(ulations, and there is not a findina: by the Secretary of wilful or neitliirent 

disregard for the welf111.re of the public or the environment, the operator should 

be reasonably assured of pennit approval or renewal, 

(n) (5) GRADING. -- This seotion seems quite veaue. The whole ,.ection 

see.ma to rely on the subjective juc\cement of the Secretary. Certainly sane work 

to blend an open pit into eurroundinJt topoirrsphy would be desirable t'rc.n an 

aesthetic viewpoint, rut there o.re no objective stand8rds in the legislation that 

will allow a mine developer to estimate it's reclamation oblitation, While 

blending with the s\UTOUrlding topography mil&ht improve the view for a few seasons 

after mining is oomplete, natural prooesses will, in most oases, eooomplish the 

same result. Why burden the mine operator (and our econany) with the expense 

when nature will do the work? When God is on .l'QUI" side, why do His work for Him? 

(n) (6) REVEGETATia-1. -- I am not a soils or plant life specialist, but 

it seems to me the requirements under this section are so stringent that no revegetstion effort could ever succeed, It would seem to me that there needs to 

be a little more flexibility in this, 

(n) ( 10) FISH AND WIIDLIFE, -- 'lbere needs to be more flexibility in this 

as well, The stringent standards set by this subsection should be applied only 

if there is a findinit by the Secretary that the lolls of the land would have a 

siinificant adverse impact on fish and wildlife. 

(p) DEFINlTIOOS, -- (1) 'We have all seen the problems associated with the 

application of the tc1111 "be•t technology currently available," While the term 

!Mkes drafting legislation more simple, it does not eocoW>.t for the economics of 

the po.rticulor situation to which it is applied. Allowing the Secretary 

dtsc,:-etion to determine the beat technoloty curr-ently available on a case by case 

basis plnccs o lot of uncertainty in the pl'OOElss and subjeots the mining company 

to one more ~atocy decision which -Y be based more on politics than 

eoonomics. I'm not es knowledgeable as I would like to be on thb iaaue and as 

a result, I can't provide a reasonable alternative to accomplish the desired 

result (I irucss I don't really understand what the desired reeult is!) . 

Section 202 -- INSPllCTIOO AND ~ 

(cl CITIZBN SUITS, - I am opposed to this subsection, The practical 

effect will be tllllt, where there are diaoretionary dcteminations by the 

Secretary, he or she will be forced to rule 8'ainat the mine developer for fear 

of beint aued, 1be Secretary will be subject to political and l:,udaetsry 

pressures not relating to the merits of the mine developer's 'position. In any 

C118e, the loser of any suit should pe.y- attorneys• feee. 

Paire 4 
596 

Section 202 -- STATE LAW AND REGULATION 

In general I believe that, due to the differencee in the conditions in the 

various sw.tcs 1 !lltate mine recl811lation laws should be applied. If there are no 

state rccl!lllllltion requirements, then the federal requirements should be applied. 

In other words, let the states administer their own :reclamation standards, even 

if they are less stringent than federal standards, but if a state has no 

standards or there is a finding that a state's mine recl811lation program has not 

b<ien effectively enforced, then the federal standards should kick in, 

Section 204 -- UNSUITABILITY REVEIW 

( c) LAND USE PLANS ( 1) & ( 2) -- The ability of the Secretary to remove 

lands from location for 1nineral activities after a prospector has made a 

discovery on what was originally open ground is unreasonable. The unsuitability 

review standards and the political pressures on the Secretary virtually assure 

that whenevel' a promising mineral deposit is discovered, the land will be 

determined to be unsuitable for mining. The review standards listed in 

subsection (e) are broad enough that most nny land could be declared unsuitable, 

I em reminded of o. similar provision in Australian land use policy, The native 

population of Australia has asserted that mining is inappropriate for their 

"sacred sights." However, the natives do not identify the sights for fear of 

tourist encroachment. It has been quite amazing to see how many sacred sights 

are identified on newly discovered mineral sights only after the minerals are 

discovered. 

If there is a need to identify land unsuitable for mineral developnent, the 

land should be identified before a prospector is led to believe it is open to 

minernl nctivi ties, This has already been accomplished through the wilderness 

system and the other land reservation programs defined in Section 205, so I do 

not sea the need for any process of unsuitability review. 

What happens if future physics research discovers that some obscure 

clement, let's say bismuth, has unique properties which will provide us with 

cleaner air or water, or provide much cheaper and more environmentally acceptable 

sources of energy? Who will take the time and risk to go out and find sources 

of bismuth? I certainly would not .i&.nt to risk my own funds for such a venture 

if I miitht lose it all in an unsuitability withdrawal.. 

Section 410 -- ROYALTY 

This is an additional incOllle tax on comJ)8nies operating on federal lands, 

While I understand that the trot intended to ~ for the use of the land, the 

person or company which made the original discovery and developed the reserve 

cerlainly had a hand in generating the 'Wealth. The land wasn't worth much before 

the mineral discovery and the prospector created the wealth through his labor, 

so the prospector should benefit, The general thrust of our economic system has 

been that the persons or companies who invest the dollars, take the risks, and 

crca.te the wenlth should be rewaxuecl. The concept of the royalty is rooted in 

feudal times when the "royalty" of the nation owned all property and g1•anted 

concessions to only a favored few. Only when common citizens were allowoo to own 

property and "free mining" was adopted in England in the 16th century, did the 

Page 5 
597 

quality of life for the coanan. people be&in t.o improve. With the illpOSition or 

a royalty and the p.nitive resulations envisioned by this legislation, it seems that cOIU(ress will be movina us back to a system that never uorkcd very well, 

If oonitress believes that the mining industry does not pa;y its fair share, 

or that other mineral produoina countries around the world tax their mining 

operati.ons at similar rates (so that companies operating in the ~ are not at a 

c-..01npctitive disadvantaite), then an additional. tax might be justified. However, 

plen.se understand the.t when 'We tax somethina, we "et less of it, So it means some mines will close and 'We will lose the jobs associated with those operations. 

It also means the mining oompanies required to pe.y the royalty will have leas 

money to invest in exploration activities which means the loss of Jobe on that 

end of the business aa well as the loss of the weal.th created when the 

exploration activities llllke a mineral discovery. The royalty is a bed idea, Just 

as the 81\1 wx is a bad idea, because it places US industry at a ooapetitive 

disadvantage relative to the rest of the world. I am sure that the economic 

policy makers in Japan, Gennany, and Russia are oh.uoklinir with glee at the 

prospect of the US ilapoeing such taxes on ita industry, 

WlCUJ8ION 

I have recently heard many well respected and knowledaeable peeple express 

the view that mlninir ie no lol!Jler a necessary activity for the health of our 

economy and that it should be discouraged because of the environmental clamaae 

that it causes. I think former Senator Tim. Wirth said, '"lbe West should be 

attractive, not extractive," Lectures reoently sponsored by environmental groups 

as .. er-t t.hlf.t our eoon0IQY is past the stage where resource develop11Bnt is 

illl()Ortant, We oan all live off tourists and sell eaoh other OOGlputen, cellular 

telephones, and fast food. In IIIY view this is a siren song that is doomed 

failure because it is not baaed on 11omd economic theory, But it doe8 allow s0111e 

of the 1110re irreBJ)OllSible elements of the environmental movement to justify their 

positions on the issues. I am afraid thie ie another version of voodoo econanics 

~ich I call "voodoo enviroraental eoon0111ics," At best it ie an untested 

ec-.. on0111ic theory that deserves a lot more etudy before it is applied. 

After a thorouiih review of the proposed legislation, it is clear to me it 

is intended to stop Dll7 new mine developnent on federal lands. If the Congress 

bcl ieves the US can survive without a atro!lfl minerals industry, then God help us 

and God help the Delllooratlo Party in the next few elections. People only have 

to look nround their home or work place to see that everythi!lfl they use oomes 

from a mine, an oil well, a forest, or a farm. If the proposed legislation is 

J)QSscd ,.,, dt"B.ft.ed, it will mean higher prioes for virtually every mineral 

coonodity. It will -. the~ will beoooie 1110re and more dependent on foreign 

sources for mincrols, Finally it will lll8an the net effect on the pllllll"t will be 

an ovet-all deterioration in envir~ntal quality as mines are shifted to 

countries with le8S stringent environnental standards, So if it b the "oel of 

the environmental IIIOVClllalt to iiaprove world-wide environmental quality, this 

lflilslation will not aooomplish the ioal, Not only is the proposed le,islation 

bad for the US economy, it is bad for the plmiet. 

Paae 6 
598 

Tb11-nk you lll!o.in for the opportunit,· to subnit these c011111ents. Please let me know 

if I DIii needed for testimony before the Coomi ttee on March 11. 

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