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                                  [LETTERHEAD]

Greg Etter, Esq.
Vice President and General Counsel
Battle Mountain Gold Company
333 Clay Street
Suite 4200
Houston TX 77002-4103

     RE:  CROWN JEWEL MINE, OKANOGAN COUNTY, WASHINGTON

Dear Mr. Etter:

We are writing to advise you that the United States Bureau of Land Management 
(BLM) and the United States Forest Service (USFS) are unable to approve the 
proposed Plan of Operations (Plan) for the Crown Jewel Mine, in Okanogan 
County, Washington, because the Plan does not comply with the requirements of 
the Mining Law of 1872, 30 U.S.C. sections 22 ET SEQ. (the Mining Law).

Battle Mountain Gold Company (BMG) proposes to develop fifteen lode mining 
claims, four patented and eleven unpatented.(1) Under the Plan, BMG proposes 
to use 117 unpatented mill sites, covering approximately 565 acres, for 
ancillary facilities such as buildings, tailings piles, waste rock dumps, 
soil and ore stockpiles, and sediment traps. Forty-six of these mill sites 
are on public lands administered by BLM, and 71 mill sites are on lands 
administered by USFS.

The Mining Law allows claimants to locate up to five acres of nonmineral land 
for mill site use in association with each valid mining claim.(2) Any mill 
site acreage in excess of five acres per valid mining claim is not valid. No 
rights of any kind attach to invalid mining claims or mill



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     (1) The patented claims are the A&R, Umatilla, Panhandle, and Van Dyke 
claims; the unpatented claims are the MAG 30, MAG 31, MAG 32, MAG 33, MAG 34, 
MAG 39, MAG 40, MAG 41, MAG 42, MAG 47, and MAG 53.

     (2) SEE LIMITATIONS ON PATENTING MILLSITES UNDER THE MINING LAW OF 1872, 
M-36988 (Nov. 7, 1997) [hereinafter Solicitor's Opinion].

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sites.(3) Under the Mining Law, BMG may locate a maximum of 75 mill site 
acres, depending on whether all of the fifteen lode claims in the Plan are 
valid.(4) Based on the information in the Plan, the Crown Jewel Mine exceeds 
the allowable amount of mill sites by at least 490 acres.

BMG also proposes to site some surface facilities, including waste rock 
dumps, soil stockpiles, and sediment traps, on 22 unpatented lode claims that 
it does not intend to mine.(5) While the Mining Law does permit the use of a 
valid lode claim for facilities that are ancillary to mining on that claim, 
it does not permit use of a lode claim for facilities to support mining 
solely on OTHER lode claims.(6) For this reason, the lode claims BMG has 
identified for mill site use likely are 


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     (3) CAMERON V. UNITED STATES, 252 U.S. 450, 460 (1920).

     (4) BLM and USFS have not determined the validity of any of BMG's lode 
claims or mill sites. However, only valid mining claims being developed may 
be used to calculate the allowable mill site acreage under the Mining Law. 
SEE PINE VALLEY BUILDERS, INC., 103 IBLA 384, 390 (1988) ("[I]f none of the 
associated mining claims are being operated, the appellant cannot be using 
the millsites for mining purposes."); UNITED STATES V. WEDERTZ, 71 Pub. Lands 
Dec. 368, 373 (1964) (millsite claimed in connection with previously patented 
lode claims invalid where exploration was only activity conducted on lode 
claims); ALASKA COPPER CO., 32 Pub. Lands Dec. 128, 131 (1903) ("A mill site 
is required to be used or occupied distinctly and explicitly for mining or 
milling purposes in connection with the lode claim with which it is 
associated."). BMG's lode claims outside the Plan area thus cannot be used to 
calculate the Crown Jewel mill site acreage.

     One mining claimant has sought to avoid the five mill site acres per 
mining claim limitation by relocating numerous small lode claims over its 
existing 20-acre claims, arguing that the Mining Law requires no minimum size 
for lode claims. However, the Department of the Interior currently is 
reviewing whether any attempted relocation for the purpose of avoiding the 
mill site limit might be invalid. UNITED STATES V. CITY AND COUNTY OF SAN 
FRANCISCO, 310 U.S. 16, 28 (1940) ("ingenuity of contractual expression" will 
not be permitted to thwart Congress's intent to restrict federal land grant); 
LEAVENWORTH, LAWRENCE & GALVESTON R.R. V. UNITED STATES, 92 U.S. 733, 740 
(1876) (federal land grants should not be "enlarged by ingenious reasoning"); 
BOISE CASCADE CORP. V. ENVIRONMENTAL PROTECTION AGENCY, 942 F.2d 1427, 1432 
(9th Cir. 1991) (statutes should be interpreted in a manner that avoids 
rendering any provision of the statute meaningless).

     (5) Five of the unpatented lode claims proposed for mill site use are on 
BLM-administered land: JR 8, JR 9, JR 10, JR 11, and JR 12. The other 17 lode 
claims are on USFS-administered land: JR 13, JR 17, JR 18, MAG 35, MAG 36, 
MAG 37, MAG 38, MAG 48, MAG 49, BM 20, BM 21, BM 22, BM 23, BM 24, BM 25, JR 3, 
and JR 4.

     (6) SEE TELLER V. UNITED STATES, 113 F. 273 (8th Cir. 1901).


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invalid.(7) Moreover, BMG may not relocate these lode claims as mill sites 
since the Crown Jewel Mine has already exceeded the allowable acreage of mill 
sites.

We emphasize that there are ways for BMG to still proceed with developing the 
Crown Jewel Mine consistent with the mill site limitation. On both National 
Forest and BLM-administered lands, BMG could seek a land exchange, provided 
the federal agencies determine that an exchange would be in the public 
interest. BLM has also indicated that use of excess mill site acreage on BLM 
land could be authorized through approval of a plan of operations under 43 
C.F.R. Section 3809.1-6, if the lands are still open to the location under the 
Mining Law.(8) Alternatively, BLM is examining the extent to which it may 
authorize such use through a lease under Section 302(b) of FLPMA and BLM's 
implementing regulations at 43 C.F.R. Section 2920.(9) Because BLM is 
currently revisiting the surface use authorization issue, if BMG wishes to 
seek surface use authorization, BMG should consult with BLM for a final 
determination of the proper authority under which to seek such authorization.

On National Forest System lands, use of lands in excess of what the Mining 
Law provides may not be authorized by means of a plan of operations issued 
pursuant to 36 C.F.R. Part 228, Subpart A. Those regulations govern only 
operations authorized by the United States mining laws, which confer a 
statutory right to enter upon the public lands to search for minerals. Such 
use may be authorized by a special use authorization under 36 C.F.R. Part 
251, Subpart B and the authorities cited therein. However, recent amendments 
to those regulations prohibit the issuance of a special use authorization for 
certain uses of National Forest System lands. 63 Fed. Reg. 65,950-69 (1998). 
In particular, issuance of a special use authorization for disposal of solid 
wastes or hazardous substances is barred. 36 C.F.R. Sections 251.54(e)(1)(ix) 
and 251.54(e)(2).

When our attorneys met with you and other BMG representatives on March 3, BMG 
stated that, for equitable reasons, the Department of the Interior should not 
require the Plan to comply with the mill site requirements of the Mining Law 
as explained in that the Solicitor's November, 1997, opinion. In particular, 
BMG argued against enforcement of the Mining Law on projects, such as the 
Crown Jewel Mine, for which a Record of Decision (ROD) had been prepared at 
the time that 


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     (7) The validity of these lode claims is also questionable because 
permanent deposit of waste rock indicates BMG's own belief that the lode 
claims do not contain a valuable mineral deposit, one of the fundamental 
requirements for a valid mining claim.

     (8) BLM Instruction Memorandum No. 98-154; 64 Fed. Reg. 6422, 6426-27 
(1999).

     (9) SEE ALANCO ENVTL. RESOURCES CORP., 145 IBLA 289, 298 (1998) 
(applicability of Section 3809 regulations, rather than Section 2920, rested 
on assumption that claimant was occupying valid mill sites); UNITED STATES V. 
ROCKY CONNER, 139 IBLA 361 (1997) (affirming trespass decision under Section 
2920.1-2 for occupancy on invalid placer claim); WILLIAM H. SNAVELY, 136 IBLA 
350 (1996) (affirming trespass decision under Section 2920.1-2 for occupancy 
on invalid mining claims and mill sites).

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opinion was signed. BMG restated this position in its March 9, 1999, letter 
to the BLM State Director and the USFS Forest Supervisor, including its 
contention that application of the mill site limitation to the Crown Jewel 
Mine would not be in "keeping with the Interior Department's practice of 
providing for a reasonable transition in situations where principles of 
fairness and reliance are involved."

After careful and thorough consideration of your arguments, we believe that 
it is appropriate to apply the mill site limitation to this project for two 
reasons. First, we have no authority to enlarge the rights granted under the 
Mining Law; that power is reserved to Congress.(10) Second, the mill site 
limitation is not, as BMG's March 9 letter argues, comparable to the proposed 
part 3809 regulations, which contain substantive changes in the requirements 
for mining operations that would justify a transition period. As the 
Solicitor's Opinion notes, the limitations on mill sites in the Mining Law 
have been widely appreciated by mining industry lawyers for decades. 
Adherence to the Mining Law's limitation on allowable mill site acreage by 
all mining claimants thus should not thwart any legitimately-held 
expectations.(11)

BMG also stated that, because BLM and USFS have signed the ROD for the Crown 
Jewel Mine, the agencies are barred from applying the mill site limitation. 
We disagree. Nothing in the ROD vests any right in BMG. The ROD did not 
purport to make any determination as to whether BMG has established valid 
rights under the Mining Law; it simply selected a preferred alternative. The 
ROD stated at page 11:

     Approval of the Selected Alternative will not now, nor in the future, 
     serve as a determination of ownership or validity of any mining claim to 
     which it may relate, and this Record of Decision does not give the claim 
     owner or operator any rights they are not otherwise entitled to by law.


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     (10) WILDERNESS SOCIETY V. MORTON, 479 F.2d 842, 891 (D.C. Cir.) (en 
banc), CERT. DENIED, 411 U.S. 917 (1973). Approving the Plan in contravention 
of the Mining Law may also be inconsistent with our responsibility to the 
Confederated Tribes of the Colville Reservation (CCT). As you are aware, the 
CCT recently sued USFS on the basis that the Final Environmental Impact 
Statement (FEIS) for the Crown Jewel Mine did not sufficiently examine the 
available alternatives. While compliance with applicable laws not 
specifically aimed at protecting Indian tribes has been held to satisfy the 
trust responsibility, MORONGO BAND OF MISSION INDIANS V. FAA, 161 F.3d 569 
(9th Cir. 1998), such compliance would not be present if the agencies approve 
the Plan, knowing that it does not comply with the requirements of the Mining 
Law.

     (11) Solicitor's Opinion, at 12-14, 15; SEE ALSO 4 AMERICAN LAW OF 
MINING Section 110.03[1] (2d ed. 1987) ("Because of the relatively uncertain 
tenure of mill site claims, few miners choose mill sites as a location for 
permanent mining support facilities.").

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Selection of the preferred alternative in the Crown Jewel Mine environmental 
analysis rested on the premise that BMG had unpatented mining claims and mill 
sites that the government could later challenge. The ROD by its very terms 
addressed only the selection of an alternative for National Environmental 
Policy Act purposes. The ROD is clear that its selection of an alternative is 
valid only insofar as the unpatented mining claims and mill sites are valid. 
To the extent that BMG has not established rights under the Mining Law, the 
ROD did not create such rights or exempt BMG from complying with the law. The 
recent court decision rejecting the challenge to the adequacy of the Crown 
Jewel Mine's final EIS does not change this result.

We understand your concern that these issues are being raised relatively late 
in the process of considering your plan of operations. Nevertheless, the 
limitations the Mining Law places on mining claims and mill sites have long 
been understood. In these circumstances we have no choice but to enforce the 
law. Therefore, we hereby vacate the Crown Jewel Mine Record of Decision and 
cannot approve your proposed plan of operations at this time. This decision 
constitutes a final agency decision not subject to further administrative 
review.



/s/ James R. Lyons                          /s/ Sylvia Baca
----------------------------------          -----------------------------------
James R. Lyons                              Sylvia Baca
Under Secretary                             Acting Assistant Secretary
Natural Resources and Environment           Land and Minerals Management
Department of Agriculture                   Department of the Interior



/s/ Charles R. Rawls                        /s/ John D. Leshy
----------------------------------          -----------------------------------
Charles R. Rawls                            John D. Leshy
General Counsel                             Solicitor
Department of Agriculture                   Department of the Interior


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