[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
                     NEW WORLD MINE PROPOSED BUYOUT

=======================================================================

                                HEARING

                               before the

                         SUBCOMMITTEE ON ENERGY
                         AND MINERAL RESOURCES

                                 of the

                         COMMITTEE ON RESOURCES
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                             FIRST SESSION

                               __________

                   MAY 20, 1997, WASHINGTON, DC, 1997

                               __________

                           Serial No. 105-40

                               __________

           Printed for the use of the Committee on Resources



                                


                      U.S. GOVERNMENT PRINTING OFFICE
 44-977 CC                   WASHINGTON : 1997
------------------------------------------------------------------------------
                   For sale by the U.S. Government Printing Office
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                         COMMITTEE ON RESOURCES

                      DON YOUNG, Alaska, Chairman
W.J. (BILLY) TAUZIN, Louisiana       GEORGE MILLER, California
JAMES V. HANSEN, Utah                EDWARD J. MARKEY, Massachusetts
JIM SAXTON, New Jersey               NICK J. RAHALL II, West Virginia
ELTON GALLEGLY, California           BRUCE F. VENTO, Minnesota
JOHN J. DUNCAN, Jr., Tennessee       DALE E. KILDEE, Michigan
JOEL HEFLEY, Colorado                PETER A. DeFAZIO, Oregon
JOHN T. DOOLITTLE, California        ENI F.H. FALEOMAVAEGA, American 
WAYNE T. GILCHREST, Maryland             Samoa
KEN CALVERT, California              NEIL ABERCROMBIE, Hawaii
RICHARD W. POMBO, California         SOLOMON P. ORTIZ, Texas
BARBARA CUBIN, Wyoming               OWEN B. PICKETT, Virginia
HELEN CHENOWETH, Idaho               FRANK PALLONE, Jr., New Jersey
LINDA SMITH, Washington              CALVIN M. DOOLEY, California
GEORGE P. RADANOVICH, California     CARLOS A. ROMERO-BARCELO, Puerto 
WALTER B. JONES, Jr., North              Rico
    Carolina                         MAURICE D. HINCHEY, New York
WILLIAM M. (MAC) THORNBERRY, Texas   ROBERT A. UNDERWOOD, Guam
JOHN SHADEGG, Arizona                SAM FARR, California
JOHN E. ENSIGN, Nevada               PATRICK J. KENNEDY, Rhode Island
ROBERT F. SMITH, Oregon              ADAM SMITH, Washington
CHRIS CANNON, Utah                   WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas                   CHRIS JOHN, Louisiana
JOHN PETERSON, Pennsylvania          DONNA CHRISTIAN-GREEN, Virgin 
RICK HILL, Montana                       Islands
BOB SCHAFFER, Colorado               RON KIND, Wisconsin
JIM GIBBONS, Nevada                  LLOYD DOGGETT, Texas
MICHAEL D. CRAPO, Idaho

                     Lloyd A. Jones, Chief of Staff
                   Elizabeth Megginson, Chief Counsel
              Christine Kennedy, Chief Clerk/Administrator
                John Lawrence, Democratic Staff Director
                                 ------                                

              Subcommittee on Energy and Mineral Resources

                    BARBARA CUBIN, Wyoming, Chairman
W.J. (BILLY) TAUZIN, Louisiana       CARLOS ROMERO-BARCELO, Puerto Rica
JOHN L. DUNCAN, Jr., Tennessee       NICK J. RAHALL II, West Virginia
KEN CALVERT, California              SOLOMON P. ORTIZ, Texas
WILLIAM M. (MAC) THORNBERRY, Texas   CALVIN M. DOOLEY, California
CHRIS CANNON, Utah                   CHRIS JOHN, Louisiana
KEVIN BRADY, Texas                   DONNA CHRISTIAN-GREEN, Virgin 
JIM GIBBONS, Nevada                      Islands
                                     ------ ------
                    Bill Condit, Professional Staff
                   Sharla Bickley, Professional Staff
                    Liz Birnbaum, Democratic Counsel



                            C O N T E N T S

                              ----------                              
                                                                   Page

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

Statements of Members:
    Cubin, Hon. Barbara, a Representative in Congress from the 
      State of Wyoming; and Chairman, Subcommittee on Water and 
      Power Resources............................................     1
        Prepared statement of....................................     2
    Hill, Hon. Rick, a Representative in Congress from the State 
      of Montana.................................................    18
        Prepared statement of....................................    18
    Romero-Barcelo, Hon. Carlos, Resident Commissioner from 
      Puerto Rico................................................     3
        Prepared statement of....................................     4

Statements of witnesses:
    Clark, Michael, Executive Director, Greater Yellowstone 
      Coalition..................................................    10
        Prepared statement of....................................    39
    Elers, Karl E., Chairman, Crown Butte Mines, Inc.............     8
        Prepared statement of....................................    34
    McGinty, Kathleen, Chair, Council on Environmental Quality, 
      Executive Office of the President..........................     4
        Prepared statement of....................................    31

Additional material supplied:
    Combest, Hon. Larry, a Representative in Congress from the 
      State of Texas, prepared statement of......................    58
    Memorandum to Subcommittee members...........................    44
    Newspaper article............................................    55



                     NEW WORLD MINE PROPOSED BUYOUT

                              ----------                                



                         TUESDAY, MAY 20, 1997

                  House of Representatives,
        Subcommittee on Energy & Mineral Resources,
                                    Committee on Resources,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 1:30 a.m., 
Room 1324, Longworth House Office Building, Hon. Barbara Cubin 
(Chairman of the Subcommittee) presiding.

 STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS 
FROM THE STATE OF WYOMING; AND CHAIRMAN, SUBCOMMITTEE ON WATER 
                      AND POWER RESOURCES

    Mrs. Cubin. Come to order. The Subcommittee is meeting 
today to hear the testimony on the agreement reached by the 
United States, the environmental community, and the mining 
industry in the New World Mine proposed buyout.
    Under Rule 4[g] of the committee rules, any oral opening 
statements at hearings are limited to the Chairman and the 
Ranking Minority Member. This will allow us to hear from our 
witnesses sooner and help members to keep their schedules, so I 
won't talk to the other members.
    Today the Subcommittee meets in its oversight capacity to 
review the agreement reached among the Clinton Administration, 
Crown Butte Mines Incorporated and the Greater Yellowstone 
Coalition to buy out the proposed New World mining project near 
Cooke City, Montana. Until late last week, we had intended to 
discuss the methodology proposed to buy out the old private 
old-growth timber lands in the Headwaters Grove of Humboldt 
County, California, as well. But this was because the 
Administration had proposed to fund both of these deals via 
schemes involving Mineral Leasing Act receipts. All that 
changed when the White House and the Congressional negotiators 
decided to add $700 million to fund priority land acquisitions 
and exchanges to the 5-year budget agreement. Therefore, if the 
budget resolution on the floor later today is adopted, the 
funding for these two acquisitions would likely be through the 
usual mechanism of an appropriation from the Land and Water 
Conservation Fund and not the original plan to divert mineral 
lease receipts. That is certainly something that I had 
questioned earlier on.
    So why are we here today? Because I believe that the 
authorizing committee with jurisdiction over mining interests 
generally has an obligation to hear this issue. Was a 
legitimate property right of Crown Butte Mines, Incorporated, 
threatened in a governmental taking by the endless delays in 
the environmental documentation and permitting? Would 
Yellowstone National Park likely have been imperiled by the 
building of this proposed New World Mine? In sum, when the 
facts are this case are brought to light, do they support this 
buyout agreement?
    Let me say at the outset that I am not urging the 
permitting of a gold mine next door to a place that I cherish, 
that I have gone to since I was a child. That is Yellowstone 
National Park. But that doesn't mean that I am ready to 
recommend to the Appropriations Committee to write a $65 
million check to Crown Butte Mines. And, yes, I realize that 
unless and until the owner of the private lands and the mineral 
rights buys into the agreement, there really is no deal. But, 
in my opinion, it is time to ask the parties to the agreement 
to state for the record why they believe it to be in the best 
public interest to do this deal.
    Remember, just saying it is in the public interest to do 
the deal doesn't make it so. That is why an environmental 
impact statement was in the works, so that permitting decisions 
would be made on a scientifically sound basis. Perhaps more 
than anything else in the New World deal, the termination of 
the EIS process bothers me greatly. Will ratification of this 
deal by Congress in the context of a check made out to Crown 
Butte Mines and drawn on the United States Treasury establish a 
precedent for short circuiting the environmental process when 
people become fearful that a permit might be imminent, whether 
it is for a mine or trees of whatever?
    Understanding the background leading up to the August 1996 
agreement, I assure you, is critical to forging a willingness 
to pay attitude here in Congress. It is time to stop doing this 
deal behind our backs and then announcing a done deal. We are 
fully capable of deciding whether or not to spend $65 million 
of taxpayers' money to protect Yellowstone National Park, but 
don't expect us to write a check on the basis of a handshake 
between President Clinton, Director Clark and Chairman Elers.
    [The prepared statement of Hon. Barbara Cubin follows:]

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

    Today the Subcommittee meets in its oversight capacity to 
review the agreement reached among the Clinton Administration, 
Crown Butte Mines, Inc., and the Greater Yellowstone Coalition 
to buy-out the proposed New World mining project near Cooke 
City, Montana. Until late last week we had intended to discuss 
the methodology proposed to buy out private old-growth timber 
lands in the Headwaters Grove of Humboldt County, California, 
as well. This was because the Administration had proposed to 
fund both these deals via schemes involving Mineral Leasing Act 
receipts. All that changed when White House and Congressional 
budget negotiators decided to add $700 million to fund 
``priority land acquisitions and exchanges'' to the five-year 
budget agreement. Therefore, if the budget resolution on the 
floor later today is adopted, the funding for these two 
acquisitions would likely be through the usual mechanism of an 
appropriation from the Land and Water Conservation Fund, and 
not the original plan to divert mineral lease receipts.
    So why are we here today? Because, I believe the 
authorizing committee with jurisdiction over ``mining interests 
generally has an obligation to hear this issue. Was a 
legitimate property right of Crown Butte Mines, Inc. threatened 
with a governmental taking by the endless delays in 
environmental documentation and permitting? Would Yellowstone 
National Park likely have been imperiled by the building of the 
proposed New World mine? In sum, when the facts of this case 
are brought to light, do they support this agreement?
    Let me say at the outset that I am not urging the 
permitting of a gold mine next door to a place I do indeed 
cherish, Yellowstone National Park, but that doesn't mean I am 
ready to recommend the appropriations committee write a $65 
million check tomorrow to Crown Butte Mines. And, yes, I 
realize that unless and until the owner of the private lands 
and mineral rights buys into the agreement there really is no 
deal. But, in my opinion, it is time to ask the parties to the 
agreement to say for the record why they believe it to be in 
the public interest to do this deal.
    Remember, just saying its in the public interest to do this 
deal, doesn't make it so. That's why an environmental impact 
statement was in the works--so permitting decisions would be 
made on a scientifically sound basis. Perhaps more than 
anything else in the New World deal, the termination of the EIS 
process bothers me greatly. Will ratification of this deal by 
Congress--in the context of a check made out to Crown Butte 
Mines and drawn on the United States Treasury--establish a 
precedent for short-circuiting the environmental process when 
people become fearful a decision to permit a mine (or log 
trees, for that matter) appears imminent?
    Understanding the background leading up to the August 1996 
agreement, I assure you, is critical to forging a ``willingness 
to pay'' attitude here in Congress. Its time to stop doing this 
deal behind our backs and then announcing a done deal. We're 
fully capable of deciding whether or not to spend $65 million 
of taxpayers' money to protect Yellowstone Park, but don't 
expect us to write the check on the basis of a handshake 
between President Clinton, Director Clark and Chairman Elers.

    Mrs. Cubin. I turn now to Subcommittee Ranking Member, Mr. 
Romero-Barcelo, for any opening statement he might have.

STATEMENT OF HON. CARLOS ROMERO-BARCELO, RESIDENT COMMISSIONER 
                        FROM PUERTO RICO

    Mr. Romero-Barcelo. Thank you, Madam Chair. Madam Chair, we 
appreciate the opportunity to hear from the Clinton 
Administration, the Greater Yellowstone Coalition and the Crown 
Butte Mine Corporation today on the proposal to protect 
Yellowstone National Park from the adverse effects of the 
proposed New World Mine. And we understand that this hearing 
will not address the Headwaters proposal since the recent 
budget negotiations have rendered our jurisdictional interest 
moot.
    Before I mention anything, I just want to bring forward 
just a memory that I have. Whenever I think of the Yellowstone 
National Park, I remember when I went there with my family and 
our children were small. And we wanted to see--above all we 
wanted to see Old Faithful. One of the children decided that 
they had to go to the boy's room, and so we figured we had 
enough time. So we went to take my son to the boy's room. We 
came back out. Old Faithful had already steamed out and we were 
so disappointed. Anyway, it was a wonderful experience to visit 
Yellowstone National Park. It is a wonderful park.
    We are pleased that the President and Republican leadership 
chose to include the provision in the recently agreed to budget 
for acquisition of the New World Mine's mining claim and also 
to acquire the Headwaters Redwoods Forest through the Land and 
Water Conservation Fund Act. Yellowstone is our nation's first 
national park. The Headwaters Forest in California is the 
largest unprotected stand of ancient old-growth redwood trees 
in the world. Extreme and serious pressures that would have 
severely affected these areas prompted, indeed even forced, the 
Administration to step in and try to save them.
    According to the Minerals Management Service, the revenues 
generated by the Outer Continental Shelf Leasing program are 
rising, up to nearly $6 billion this year, with anticipated 
revenues more than $10 billion by the year 2000. One of the 
more recent OCS lease sales brought in some 826 million to the 
Federal Treasury in 1 day.
    Since this is a primary source of funding for the Land and 
Water Conservation Fund, it is indeed appropriate that the 
Federal Government buy the New World and the Headwater 
properties outright rather than resort to complicated land 
exchanges.
    Thank you, Madam Chair.
    [The prepared statement of Hon. Carlos Romero-Barcelo 
follows:]

Statement of Hon. Carlos A. Romero-Barcelo, a Resident Commissioner in 
                 Congress from the State of Puerto Rico

    Madame Chair, we appreciate the opportunity to hear from 
the Clinton Administration, the Greater Yellowstone Coalition 
and the Crown Butte Mine Corporation today on the proposal to 
protect Yellowstone National Park from the adverse effects of 
the proposed New World Mine. We understand that this hearing 
will not address the Headwaters proposal since the recent 
budget negotiations have rendered our jurisdictional interest 
moot.
    We are pleased that the President and the Republican 
leadership chose to include provision in the recently agreed to 
budget for acquisition of New World Mine's mining claims and 
also to acquire the Headwaters Redwoods Forest through the Land 
& Water Conservation Fund Act. Yellowstone is our nation's 
first national park. The Headwaters Forest in California, is 
the largest unprotected stand of ancient old-growth redwood 
trees in the world. Extreme and serious pressures that would 
have severely affected these areas prompted--indeed even 
forced--the Administration to step in and save them.
    According to the Minerals Management Service, the revenues 
generated by the Outer Continental Shelf Leasing program are 
rising, up to nearly $6 billion this year, with anticipated 
revenues more than $10 billion by the year 2000. One of the 
more recent OCS lease sales brought in $826 million to the 
Federal treasury in 1 day!
    Since this is the primary source of funding for the Land 
and Water Conservation Fund, it is indeed appropriate that the 
Federal Government buys the New World and Headwaters properties 
outright rather than resort to complicated land exchanges.

    Mrs. Cubin. Thank you, Mr. Barcelo. Now I will introduce 
our panel of witnesses. We have Ms. Kathleen McGinty, Chair, 
Council of Environmental Quality for the Executive Office of 
the President; Mr. Karl Elers, Chairman, Crown Butte Mines, 
Incorporated; and Mr. Mike Clark, Executive Director of the 
Greater Yellowstone Coalition. And before we start, I would 
like to swear in the witnesses. I believe that you were 
notified that you would be sworn in. And I hope that is OK with 
you. So would you mind standing and I will administer the oath.
    [Witnesses sworn.]
    Mrs. Cubin. Thank you. We do that for all witnesses in this 
Subcommittee, so don't make any inference from it at all.
    Let me remind the witnesses that under our committee rules 
they must limit their oral statements to 5 minutes, but that 
their entire statement will appear in the record. And that way 
we can move along with our questioning more quickly.
    The Chair now recognizes Ms. McGinty to testify.

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

    Ms. McGinty. Thank you, Madam Chair and members of the 
Subcommittee, for the opportunity to testify before you 
regarding the President's effort to protect Yellowstone 
National Park. The Yellowstone agreement was borne of and 
reflects this Administration's commitment to preserve and 
protect for future generations of Americans the world's first 
national park and indeed the crown jewel of our national park 
system. This agreement is reflective also of our commitment, 
wherever possible, to work in partnership with industry and 
other interest groups to achieve our environmental goals.
    Let me express at the outset, Madam Chair, the President's 
deep gratitude to the Congressional leadership who have now 
joined us in this effort to protect Yellowstone by securing in 
the budget agreement the funds necessary to get this job done. 
Let me also, if I might, at the outset just recognize and 
commend those whom I share the podium with here, Crown Butte, 
now Battle Mountain, and the environmental groups represented 
by the Greater Yellowstone Coalition. In every instance and at 
every moment they have acted in absolute good faith and have 
worked honorably to keep the best interests of Yellowstone and 
the economy paramount.
    As mandated by NEPA, my role is to advise the President on 
environmental policy matters and coordinate activities of 
Federal agencies and departments with regard to matters across 
agency jurisdictional lines. Accordingly, I do chair the 
Executive Committee and oversee the interagency team that is 
assembled to ensure implementation of the Yellowstone National 
Park agreement.
    Madam Chair, to turn to some history here, in 1989 Crown 
Butte Mines, Incorporated, a subsidiary of a Canadian mining 
company, proposed a gold, copper and silver mining complex 
located less than three miles from the northeast border of 
Yellowstone National Park. The rights to minerals at the New 
World Mine sight had been obtained under the 1872 Mining Act. 
Under Federal law, therefore, the U.S. Government had no 
choice. We were obligated to process the company's proposal to 
mine these minerals and use Federal lands for a large tailings 
impoundment.
    Crown Butte submitted a plan for review that called for 15 
years of operation, six major facilities, a 70 to 100 acre 
tailings impoundment behind a proposed 90-foot tall dam. The 
tailings impoundment would have been expected to contain the 
highly acidic waste rock and metals in perpetuity.
    The EIS process began in April 1993. The EIS was originally 
expected to be issued as a draft in April 1994, however work 
slowed when the preliminary findings began clearly to show that 
major adverse impacts on Yellowstone were threatened, 
specifically, significant environmental damage to the Clark's 
Fork of the Yellowstone River, a federally designated wild and 
scenic river, where identified risks to critical grizzly bear 
habitat and to Yellowstone Park itself were highlighted.
    Interagency review of the preliminary drafts of the EIS 
also showed the need for new studies, and in particular to 
examine groundwater flows. The preliminary draft EIS was made 
widely available and reviewed not only in Montana but 
throughout the United States. This occasioned the 
identification of still more concerns. For example, many 
analysts, including mining engineers, were critical of the 
proposed submerged tailings system. Concerns were raised, among 
other things, about seismological risks in the area. It was 
highlighted, for example, that this area had experi-

enced more than 4000 earthquakes within a 180-mile radius. The 
need for more analysis concerning containment of the 5.5 
million tons of highly acidic waste rock that would be 
generated by the mine was also raised as, again, were risks 
associated with the tailings impoundment.
    In March 1995, Wyoming Governor Geringer wrote to Montana 
Governor Racicot to say that the alternative preferred by the 
company could have a significant adverse impact on Wyoming 
water resources and suggested that the tailings impoundment be 
subjected to a wholly separate review. Moreover, again because 
of the highly acidic nature of the ore body, Governor Geringer 
called for a 75 to 100 million dollar bond to be posted to 
cover any potential liabilities from damages.
    As concerns about the EIS grew, court battles were also 
beginning. Crown Butte was embroiled in a citizen's suit 
brought under the Clean Water Act by a coalition of 14 
environmental groups. In October 1995, the company was found 
liable by a Federal District Court. Simultaneously, legislation 
was introduced in both the House and the Senate to interfere 
with or block the mine. With concern therefore growing all 
around and from all fronts, it became abundantly clear that 
there would be years of contentious litigation over the mine 
regardless of whether the Federal Government approved or denied 
the company's application.
    Faced with this potential for costly and resource intensive 
litigation, the environmental groups and the company entered 
into discussions in an effort to identify creative options to 
address their differences. In February 1996, Crown Butte, their 
parent Hemlo Gold, and the Greater Yellowstone Coalition came 
to Washington, approached CEQ together to explore whether the 
Administration would be willing to consider a novel approach to 
the problem. And that is exchanging Federal assets in exchange 
for the company's agreement to cease and desist further pursuit 
of the mine.
    At that point, my staff formed a small interagency working 
group to assess implications and possible elements of such an 
approach. They concluded that there were enough common 
interests among the parties that we should pursue more detailed 
discussions. All parties agreed that confidentiality was 
necessary and appropriate because the discussions would involve 
issues regarding ongoing and potential future litigation and 
because premature release of information could adversely affect 
the company's stock.
    In April 1996, the Administration appointed Mr. John 
Schmidt, who was then the Associate Attorney General of the 
United States, and Mr. Jim Pipkin, Counselor to the Secretary 
of Interior, to further the discussions with the environmental 
group and the company. Regular discussions were held focusing 
primarily on, first, the value of the mine, second, the cleanup 
and restoration of environmental impacts associated with many 
years of small scale mining in the area, resolving protracted 
legal proceedings, and finally, resolving potential Federal 
enforcement actions.
    In August 1996, the discussions came to fruition. At that 
time President Clinton, Crown Butte Mines and a coalition of 
environmental groups announced that the parties had reached an 
agreement in principle to protect Yellowstone and the 
surrounding area. Moreover, the agreement would ensure that 
environmental impact of historic mining in the area would be 
remediated and that years of costly and contentious litigation 
would be avoided. The August 12 agreement, therefore, 
represented a major milestone in the effort to protect 
Yellowstone. However, the agreement did not complete the job. 
Rather, as an agreement in principle it laid out a plan of 
action, actions when completed would protect the park.
    Two of the most significant action items included, first, 
the undertaking of the Federal Government to identify $65 
million of Federal assets to be exchanged to Crown Butte, and 
second, Crown Butte's undertaking to acquire the property it 
currently leases from Ms. Margaret Reeb, a Montana resident and 
the other major landowner in addition to Crown Butte in the 
area.
    To turn briefly to the Federal Government's undertaking, 
immediately upon conclusion of the agreement in principle, the 
Federal agencies began the work of identifying the necessary 
assets. In the course of this effort, we reviewed surplus 
military installations, General Services Administration surplus 
property, National Forest timber lands, leased and unleased 
coal lands and other Federal lands. We actively participated in 
and supported Governor Racicot's Montana Initiative to explore 
a mix of timber and coal lands in Montana.
    For various reasons, each of these properties ultimately 
proved unsuitable for the exchange. Some properties were 
contaminated, for example. Others had previously been committed 
to other uses, while still others were opposed by various 
interest groups.
    After this exhaustive search and rigorous effort, we 
therefore proposed to divert mineral royalties from existing 
mines in Montana. While diversion of royalties was generally 
favorably received, the required offset we chose, the 
Conservation Reserve Program, proved to be controversial. It 
was in this context that the President and Congressional 
leadership took the issue up in the balanced budget 
negotiation. To reiterate what I expressed at the outset, the 
President is extremely appreciative of the leadership support 
in securing the funds now necessary to protect Yellowstone for 
future generations.
    To summarize that budget provision relevant to this matter, 
an additional $700 million is proposed to be reserved from the 
Land and Water Conservation Fund on top of the President's 
request for the fund for this year. Of that amount, $315 
million is reserved for priority Federal land exchanges, namely 
$65 million for the completion of this agreement to protect 
Yellowstone and $250 million to secure the Headwaters Forest in 
Northern California. The budget agreement is, therefore, a 
major milestone in the effort to protect Yellowstone. These are 
new and additional funds so other priorities will be protected. 
And indeed, the remaining $385 million can be put to priorities 
agreed by the Congress and the Administration.
    However, several more steps need to be completed before the 
Yellowstone agreement can be implemented. First, Crown Butte 
must fulfill its obligation to acquire the property it leases 
from Ms. Reeb. Second, evaluation of the property must be 
completed. And finally, the budget resolution must be passed 
and then acted upon by the Appropriations Committee.
    Madam Chair, I am confident that this is a fair way to 
resolve a potentially long, bitter and expensive battle to save 
Yellowstone. We in the Administration have been proud to work 
with the environmental groups represented here and with the 
Crown Butte Company, all who have acted honorably, in good 
faith and with the best interests of Yellowstone and the 
economy in mind. Madam Chair, saving Yellowstone does require 
that many people come together to find common ground on behalf 
of this truly national treasure. You have spoken eloquently 
about Yellowstone and indeed, the need to find bipartisan 
solutions. I hope that we can work closely with you and other 
Members of Congress now to finish this important job.
    Thank you for the opportunity to speak to this important 
initiative, and I am certainly available to take whatever 
questions you might have.
    [The prepared statement of Kathleen McGinty may be found at 
end of hearing.]
    Mrs. Cubin. Thank you very much. Mr. Elers.

 STATEMENT OF KARL E. ELERS, CHAIRMAN, CROWN BUTTE MINES, INC.

    Mr. Elers. Thank you, Madam Chair and the members of the 
Subcommittee. My name is Karl Elers, and I am Chairman of the 
Board of Directors of Crown Butte Mines, Inc, a Montana 
corporation. I assumed that position in March of this year. 
This is my first appearance before a Congressional committee, 
and I appreciate the invitation to be here.
    The letter of invitation to testify indicated the 
committee's interest in the agreement reached between Crown 
Butte, the Administration and certain environmental interest 
groups in August 1996. Crown Butte found the decision to enter 
into the August exchange agreement a difficult one. A brief 
chronology of the events leading up to our decision to execute 
the agreement will shed some light on why Crown Butte decided 
on this course of action. And toward this end, I think I will 
be giving a lot of the same chronology as Ms. McGinty, but from 
the perspective of Crown Butte, obviously.
    The area in dispute, known as the New World Mining 
District, is a historic district dating back to 1869. In 1978, 
the U.S. Congress specifically considered and excluded the New 
World District from the Absaroka-Beartooth Wilderness due to 
past mining activity and the present mineral potential. 
Proposing a state-of-the-art mine with a strong reclamation 
plan to remediate historic mining disturbances made sense, yet 
Crown Butte became the focus of a national and international 
debate.
    The permitting process for the New World property began 
formally over 6 years ago in November 1990 when Crown Butte 
submitted its operating permit application. The permitting 
process for the New World property proved to be complex and 
time consuming and was met with unusually high opposition. In 
all, more than 25 separate state, Federal and county permits 
would be required prior to approval of the project. A revised 
operating permit application was resubmitted to the lead 
agencies in 1992 following extensive changes resulting from the 
decision by Crown Butte not to use cyanide in the processing.
    Crown Butte responded to a total of six reviews of the 
operating permit application before it was declared complete in 
1993 and the EIS process began. Crown Butte was initially 
informed that the draft EIS would be available in late 1994. 
This date was not met. In 1994, Crown Butte was advised by the 
agencies that a draft of the EIS would be issued by the end of 
the second quarter of 1995. This date was not met and Crown 
Butte was subsequently advised by the State of Montana that the 
draft EIS would be released in the fall of 1995. This date was 
also not met. In March 1996, Crown Butte was advised by the 
lead agencies that the draft EIS would be released by late 
spring or early summer of 1996. The draft EIS had not been 
released by August 12, 1996, when Crown Butte executed the 
exchange agreement. The EIS process has been suspended pursuant 
to the terms of the exchange agreement.
    As I mentioned earlier, the Crown Butte District is in a 
historic mining area. Crown Butte's activities at the site have 
included reclamation of historic mining activities. And in 
December 1992, the company received an excellence award for 
outstanding commitment to environmental protection from the 
U.S. Forest Service. This award recognized the company's 
innovative and successful efforts to mitigate historic adverse 
environmental impacts.
    In 1994, following a complaint by special interest 
environmental groups, the Corps of Engineers alleged that some 
of the company's reclamation activities had been in violation 
of the Clean Water Act. Crown Butte responded that it did not 
believe these allegations were accurate, and in September 1995 
the Corps issued Crown Butte a Section 404 permit authorizing 
future reclamation activities.
    Under the Comprehensive Environmental Response and 
Liability Act, or CERCLA, the EPA initiated an investigation of 
continuing environmental impacts from previous activities in 
the Henderson Mountain vicinity.
    In January 1995 interest groups filed a complaint against 
the company with the Department of the Interior contesting 
Crown Butte's mineral patent applications, which effectively 
asked that the patents not be issued.
    In February 1995 the groups requested the U.N. World 
Heritage Committee to investigate whether Yellowstone qualified 
for inclusion on the list of world heritage sites in danger. 
Such determination would require the U.S. to take unspecified 
steps to protect Yellowstone.
    In June of that year, a senior Interior Department official 
stated that Yellowstone was in danger. The U.N. committee 
visited Yellowstone in September 1995, and the National Park 
Service, a cooperating agency in the New World EIS, hosted the 
event. In December 1995, the committee declared Yellowstone a 
world heritage site in danger.
    By June 1995, Crown Butte had exhausted its cash resources 
and has since been forced to rely on loans totaling 
approximately $5 million to date to sustain day-to-day 
operations.
    In August of that year the President took an aerial tour of 
the mine site. The tour was followed by the Secretary of the 
Interior withdrawing an area of approximately 19,000 acres, 
including the New World property, from location under the 
Mining Law.
    In October 1995, the District Court ruled on a complaint 
filed by the interest groups, finding that Crown Butte was in 
violation of the Clean Water Act for not yet having obtained an 
NPDES permit for water coming from historic mine workings. A 
trial was set but has been stayed in light of the exchange 
agreement.
    Madam Chair and members of the Subcommittee, I am sure you 
can readily see that what began as an attempt to build a 
modern, state-of-the-art mine in an area where historic mining 
has occurred for over a century and which was specifically 
excluded from wilderness designation by the Congress, quickly 
became a battle of national and international proportions.
    By mid-year 1996, Crown Butte had already been in the 
permitting process for almost 6 years and promised dates for 
the release of the DEIS had consistently not been met. Crown 
Butte had run out of cash and the whole process had become 
fraught with delays and uncertainty. The company found the 
decision to enter into the exchange agreement a difficult one. 
Crown Butte has always believed its proposal to build and 
operate safely and responsibly a small state-of-the-art 
underground gold mine at New World was not only environmentally 
sound of itself, but also represented the best way to remediate 
historic mining activities which date back more than 100 years.
    In the end, the exchange agreement provided a practical 
solution to a unique set of circumstances. The protracted 
permitting delays, legal challenges facing ongoing development 
and potential liabilities related to historic mining caused the 
economics of the project to deteriorate. Crown Butte's 
management ultimately decided the agreement was in the best 
interests of the shareholders and would compensate them, in 
some measure, for the amount they have spent to date in 
acquiring, exploring and attempting to permit the property.
    Madam Chair and members of the committee, that concludes my 
statement and I, too, would be pleased to respond to questions.
    [The prepared statement of Karl Elers may be found at end 
of hearing.]
    [Supplemental information of Karl Elers may be found at end 
of hearing.]
    Mrs. Cubin. Thank you, Mr. Elers. The Chair now recognizes 
Mike Clark.

    STATEMENT OF MICHAEL CLARK, EXECUTIVE DIRECTOR, GREATER 
                     YELLOWSTONE COALITION

    Mr. Clark. Thank you, Madam Chair and members of the 
Subcommittee. My name is Michael Clark. I am the Executive 
Director of the Greater Yellowstone Coalition, a Bozeman, 
Montana-based group with field offices in Cody, Wyoming, and 
Idaho Falls, Idaho. We are 14 years old. We have a membership 
of 7400 members, 119 corporate members and 120 organizational 
members. Our mission is to preserve and protect the Greater 
Yellowstone ecosystem and the communities it sustains.
    Today I also represent the Beartooth Alliance, the Gallatin 
Wildlife Association, Montana Wildlife Federation, the Wyoming 
Wildlife Federation and the Wyoming Outdoor Council. Each of 
these groups has worked closely with us on the New World Mine.
    Thank you for the invitation to testify on the agreement 
negotiated in 1996 between the Clinton Administration, Crown 
Butte companies and the conservation community. Congress now 
has the key role in creating and approving legislation that 
will resolve this issue permanently. We welcome your 
leadership. We look forward to working with you in completing 
the agreement.
    We continue to believe that the New World agreement is a 
good deal for the American people. We also acknowledge that it 
has been far more difficult to achieve than we had originally 
thought, but it is still a valid way of resolving this 
situation. Without the agreement, the mining companies and the 
conservation community would still be locked in a major 
confrontation over the threat of a gold mine outside 
Yellowstone. The agreement provides a method for ending this 
battle and for allowing each of us to move on to other issues.
    The agreement provides the company with a fair exchange for 
its assets. It creates a $22.5 million reclamation fund to 
clean up and restore the polluted lands on Henderson Mountain. 
It provides research funds to study the situation, offering the 
possibility that the cleanup could benefit other polluted 
mining sites in the interior west. And it ensures that the wild 
character of the lands adjacent to Yellowstone and the 
Absaroka-Beartooth Wilderness will be protected from industrial 
development for the region's wildlife and for the benefit of 
future generations.
    We are supportive of the efforts recently to use the Land 
and Water Conservation Fund to complete this agreement. We now 
look to the leadership of Congress to conclude the deal by 
passing new legislation that will resolve this situation.
    I would like to ask that you add to my written testimony 
recognition of two groups that worked with us that were not 
included in that testimony. These are the Mineral Policy Center 
and the National Parks and Conservation Association, which 
worked with us very closely on this situation.
    Thank you. I will be glad to answer any questions.
    [The prepared statement of Michael Clark may be found at 
end of hearing.]
    Mrs. Cubin. Thank you. Thank all of you very much. I think 
I will start the questioning. Let us go ahead and put the light 
back on so that we will limit our questions to 5 minutes each.
    I would first of all like to ask unanimous consent to allow 
Rick Hill, Representative from Montana, to sit with us and to 
question the witnesses. OK, hearing no objection.
    OK, I will start out. Ms. McGinty, I applaud your efforts 
for working with all the parties involved and in reaching an 
agreement. I think it helps everyone when that can happen. I do 
have some concerns and questions. I do indeed recognize that 
the budget negotiators have agreed to $700 million of 
additional funds available through the LWCF for priority land 
acquisition. My math, and yours too, says that this deal costs 
$315 million, and yet the price tag is 700 million. I would 
like to know what other things you plan to spend it on, 
particularly if part of the buyout will be private oil and gas 
rights that are adjacent to the Everglades, and also if part of 
the money is intended to go to Escalante to buy out the school 
sections and the lands that are not Federal lands there.
    Ms. McGinty. Yes, thank you. There are several parts to 
this aspect of the budget agreement. As the committee is aware, 
the Land and Water Conservation Fund itself is a fund with a 
balance on the order of, I think as the Ranking Member noted in 
his opening remarks, on the order of $11 billion. What this 
budget agreement says is that of that $11 billion balance $700 
million will be reserved in 1998 in addition to the President's 
request for fiscal year 1998 for two things. One is 315 million 
of that 700 million will go to the priority land exchanges, 65 
million for New World Mine and 250 million for Headwaters.
    The balance, Madam Chair, to get more specifically to your 
question, will--is available for unidentified purposes, but for 
purposes that the Congress in consultation with the 
Administration may identify other priorities. It will just go 
through the normal process that the Congress in consultation 
with the Administration follows every year in allocating the 
Land and Water Conservation Fund.
    Mrs. Cubin. It just seems so extravagant based on our 
current financial situation. It stymies me. While I might agree 
that--and do agree that if the buyout takes place it ought to 
come from the Land and Water Conservation Fund, but then I am 
asked to put in an additional $315 million for something I 
don't even know what it is. That is troublesome to me, but I 
applaud you. You have done a good job based on your priorities 
and your job is. I think it is the budgeters and the 
negotiators, maybe, that I need to take this up with.
    Ms. McGinty. It will come back, just to be clear. That 
money will be--the remainder, the 385 million of the 700----
    Mrs. Cubin. Right.
    Ms. McGinty [continuing] as opposed to the two things for 
Yellowstone and Headwaters. That will be up to the Congress in 
the normal course to decide how those moneys should be 
appropriated in consultation----
    Mrs. Cubin. Sure.
    Ms. McGinty [continuing] with the agencies.
    Mrs. Cubin. I realize that. However, I still think it goes 
a little bit farther than I would like to see it go.
    I recognize that this deal and Headwaters both involve 
corporate interests being bought out of their permitting 
dilemmas, and I believe at this stage that Crown Butte may have 
been unfairly treated during the process in terms of delays and 
all of the problems that they run into. But my question is 
this. Would an individual miner or small landowner have 
received compensation as Crown Butte appears to be going to?
    My Chairman Don Young, for example, has small miners in 
Denali Park in Alaska and in another area that have wrestled 
with the Federal Government for over 15 years trying to get 
their just compensation. And I just wonder why Battle Mountain 
Gold's interests are to be bought out and John Q. Public 
appears to be sent packing in this area.
    Ms. McGinty. Well, I will take the first part of the 
question, Madam Chair. The imperative here was to protect 
Yellowstone National Park, and what we attempted to do, again 
in partnership with the company and the environmental groups 
that were involved was to say is there a way to resolve what 
has at this point become quite a heated battle over this issue, 
resolve it in an amicable way that both protects the 
environment, Yellowstone Park, and is respectful of the 
company's legitimate property interests. And that is why we 
were--we came together to forge this agreement.
    Mrs. Cubin. Mr. Elers, let me say up front that I realize 
you were not in your current position when this agreement was 
brokered, when it was proposed. Therefore when I say you, I am 
not talking about you. I am talking about the collective you, 
which would be your company.
    I believe that too much misinformation and manipulation 
relating to the development of this mine has occurred. I 
believed, as did a vast majority of my constituents, that the 
Administration in an attempt to stop development of this mine 
intervened in the established EIS process and stopped it by 
offering a deal to Crown Butte. It is commonly believed in my 
state that the EIS was coming out to be favorable for the 
development of the mine and that the President would go to any 
legal means to prevent that from happening, therefore, if not 
violating the process at the very least compromising it.
    It is also very commonly believed that the CEQ held a 
metaphorical gun to your head by telling you that the mine 
would never be developed and so your only alternative was to 
take the deal. Then 1 day some representatives from the 
Administration came to my office and I learned from them that 
in fact Crown Butte approached CEQ with the brokering and 
assistance, admirably so, of the Greater Yellowstone Coalition. 
Therefore, for virtually months I had been relating 
misinformation to my constituents and to the press and never 
once did anyone from Crown Butte bother to come forward and 
say, no, the Administration didn't step in and stop this, we 
made the first move.
    I am sure that the truth lies somewhere between Crown 
Butte's out of the clear blue coming in and saying I want to 
make a deal and ``that you will never get your mining permits 
so you better deal.'' I am sure that the truth lies somewhere 
in between there. I suppose we will never know exactly what it 
is.
    I understand that the Department of Interior provided this 
Subcommittee with a box of documents, mostly related to how the 
deal to divert oil, gas and coal leases, coal lease revenues 
from the U.S. Treasury to the mining company to pay for the 
deal. The Forest Service also sent up a huge box of things. And 
I--because they didn't come until late Friday night, I haven't 
had the opportunity to go through them and I don't know when I 
will, but what I do know is that before this Subcommittee makes 
any recommendations on this buyout I will personally go through 
every single document that is furnished to us, and that could 
take a very, very long time.
    Having said that, I would like to ask you the question. In 
your statement, and this is a quote, it says the draft EIS had 
not been released by August 12, 1996, when Crown Butte 
executed--oh, excuse me, that is not the one I wanted to ask.
    When you say that the Park Service hosted the U.N. 
committee on the world heritage at Yellowstone National Park in 
1995, does that mean that they paid for the heritage committee 
to come over here? Do you know the answer to that?
    Mr. Elers. I don't know the answer to that, Madam Chair.
    Mrs. Cubin. Do you know the answer to that, Ms. McGinty?
    Ms. McGinty. No, I don't, Madam Chair.
    Mrs. Cubin. While I am concerned that Crown Butte has been 
less than forthcoming in this matter, I am also concerned that 
Crown Butte wasn't exactly getting the fair deal that they are 
guaranteed under the Constitution. The Administration appears 
to have been dealing with a stacked deck. It appears that all 
of the resources of the Department of Interior and CEQ were 
ready to be used if necessary against the mining company, the 
State of Montana or any other citizen who was against 
development of the mine. The President even interrupted his own 
vacation to take an aerial tour of the site, so there is little 
doubt in my mind that the EIS was not going to be published by 
a Federal agency with a preferred alternative to allow the mine 
to be developed.
    So let me ask you, Mr. Elers, and then I better give up my 
time. Is your parent company's gold mine in South America 
subject to this same kind of treatment by the Bolivian 
Federales?
    Mr. Elers. No, Madam Chair, they are certainly not. The 
Bolivian government, with whom we have had a relationship now 
for about 10 years--about 9 years--has been very supportive of 
our mining activity and anxious to see it through to 
development. I might also point out that we were subject to the 
covenants of international lending agencies, the Bolivian 
government's environmental standards, as well as our own 
corporate standards of environmental protection in developing 
that mine. But that mine was developed very expeditiously.
    Mrs. Cubin. So is it fair for me to say that the New World 
Mine is just another example of why so much investment capital 
is moving out of the United States into other countries?
    Mr. Elers. That is a fair assessment. Certainly speaking 
for our own parent company organization, we have moved most of 
our exploration activities outside of the United States.
    Mrs. Cubin. Thank you very much. Mr. Barcelo.
    Mr. Romero-Barcelo. Thank you, Madam Chair.
    Ms. McGinty.
    Ms. McGinty. Yes.
    Mr. Romero-Barcelo. I enjoyed your testimony.
    Ms. McGinty. Thank you, sir.
    Mr. Romero-Barcelo. I would like to ask a question. I 
realize that you are not the Administration's expert witness on 
the Mining Law of 1872, so I ask that you refer this question 
to the Department of Interior.
    Ms. McGinty. Yes.
    Mr. Romero-Barcelo. For a written response.
    Ms. McGinty. I would be happy to.
    Mr. Romero-Barcelo. My question is as follows. Is Mr. Elers 
correct in his assertion that application of the comparative 
value test would be contrary to the longstanding practice of 
the Department of the Interior?
    Ms. McGinty. Well, sir, you have guessed right. I am not 
the expert on that, but I would be happy to have the Department 
respond to you in writing immediately.
    Mr. Romero-Barcelo. And more to the point, is imposition of 
this test consistent with law and legal precedent?
    Ms. McGinty. I will also have to have the Department 
respond.
    Mr. Romero-Barcelo. And finally, the other question is 
also, can Crown Butte's patent applications be approved under 
the patent moratorium put in place by Congress?
    Ms. McGinty. Similarly, I will need to provide a written 
response from the Department.
    Mr. Romero-Barcelo. I would appreciate that. And now, Mr. 
Elers, this question relates to the Crown Butte's patent 
applications under the 1872 Mining Law. Why do you say in your 
testimony that the imposition of the comparative value test 
would be contrary to the longstanding practice of the 
Department of the Interior in determining whether or not to 
grant Crown Butte's application to patent or to acquire the 
mining claims in question?
    Mr. Elers. The patent applications, we believe, were 
subjected to a lot more challenge than a normal patent 
application would be subjected to due to their proximity to 
Yellowstone.
    Mr. Romero-Barcelo. That is the reason why you make that 
statement, in other words?
    Mr. Elers. I believe that is the primary reason.
    Mr. Romero-Barcelo. And also in your testimony you state 
that Crown Butte's proposal for the New World Mine would have 
represented the best way to remediate the effects of hundreds 
of years of mining disturbances. How would Crown Butte have 
accomplished this?
    Mr. Elers. Through water treatment, through remediation of 
the longstanding leakage of acid mine drainage from existing 
historic mines, and also in surface disturbances through 
continuing to reclaim areas that were surface mined, 
particularly, I believe, during World War II for copper. A lot 
of that work has been done. A lot of work yet remains to be 
done.
    Mr. Romero-Barcelo. Thank you very much, Mr. Elers.
    Mr. Elers. Thank you, sir.
    Mr. Romero-Barcelo. And, Mr. Clark, I would like to ask 
you--Ms. McGinty and Mr. Clark, would you care to respond to 
Mr. Elers' explanation of the remediation and how it would work 
on the New World site? First of all Mr. Clark.
    Mr. Clark. I am sorry, sir. I couldn't hear everything you 
asked.
    Mr. Romero-Barcelo. I said would you care to respond to Mr. 
Elers' explanation of the remediation and how it would work at 
the New World site, what he just said.
    Mr. Clark. Well, the company proposed to use its milling 
operations to clean up that site if it were in full operation. 
Obviously with the mine not going ahead, that will not occur, 
but the reclamation agreements that we negotiated allows for 
$2\1/2\ million to be spent on the site. That is a huge amount 
of money for our region, and we think that that amount of money 
will go a long way toward cleaning up the existing pollution on 
that site. So we think that when this is over that site will be 
much better than it was and we will be able to walk away with 
it, all of us, with our heads held high.
    I am also hopeful that research activities that are 
proposed to be conducted there will have application in other 
parts of the interior west where historic mining sites also 
occur.
    Mr. Romero-Barcelo. Thank you very much. And, Ms. McGinty, 
you agree with Mr. Clark's statement?
    Ms. McGinty. Yes, absolutely, sir. In fact, I think one of 
the most important parts of this agreement is that that money 
that Crown Butte has put on the table will be available 
immediately to begin the cleanup job that even today is 
affecting water quality in the area. It will create jobs in 
terms of getting the cleanup job underway and I think it will 
be a very important step forward for the area.
    Mr. Romero-Barcelo. Thank you, Ms. McGinty. And finally, 
Mr. Clark, for the record, why did the Greater Yellowstone 
Coalition and other environmental groups consider the New World 
Mine unacceptable?
    Mr. Clark. I have only been at the Greater Yellowstone 
Coalition for 3 years. The decision to fight the mine that was 
made by the Greater Yellowstone Coalition was made before I was 
there, but I believe that decision was made in 1993 or 1994. So 
it was well underway by the time I arrived. The early 
determination was that a mine of that size poised on the 
mountains above Yellowstone and above the Clarks Fork River was 
an unacceptable risk because it would create irreversible 
impacts in the region.
    And I think that is an important distinction for us, 
because, for example, we do think that logging should go on. We 
think that grazing in the public lands should go on. We think 
that activities like that, as long as they are not 
irreversible, are ones that could occur on the public lands if 
these are not major environmental consequences. But in that 
site, at that location, we thought that a mine of that size 
operating the way it was proposed was an unacceptable risk to 
Yellowstone. And we concluded that no risk was acceptable to 
the Yellowstone Park, so we made a determination that is quite 
different from the way we ordinarily look at industrial 
proposals in our region.
    Mr. Romero-Barcelo. In other words, there is no way, in 
your opinion, that a gold mine could be created and operated 
safely at the New World site?
    Mr. Clark. We would be against an industrial scale gold 
mine operating at that site, sir.
    Mr. Romero-Barcelo. Thank you very much.
    Mrs. Cubin. Thank you. Mr. Duncan.
    Mr. Duncan. Ms. Cubin, I am going to yield my time back to 
Mr. Hill, because he is--this is involving his state. But I do 
want to say that I continue to be concerned about the secrecy 
that is involved in some of these situations. Just a few days 
ago we held a hearing in another Subcommittee of this committee 
about the Utah land grab of the Grand Staircase Escalante, the 
property that you mentioned earlier. And that went on for 
months and there was intentional efforts made in that case to 
keep that hidden from the public and keep that secret.
    And now I read that there was the same type of secrecy in 
the Headwaters situation in California. And I don't know 
anything about that situation out there, whether it would have 
been good or bad, but I can tell you that we are told that some 
of these laws like the antiquities law and others have been 
used for many years but they have not been used with the 
secrecy that is going on at this time. We have never had things 
like this happen in this country before. And apparently there 
are too many people at high levels in this government who are 
so arrogant and so elitist that they think they should be 
allowed to run this country with no input from the Congress or 
from the people. And I think it is a very sad situation, a very 
sad day in this country.
    And with that, I yield my time to Mr. Hill.
    Mrs. Cubin. I think Mr. Hill wants the time altogether, so 
I ask unanimous consent----
    Mr. Duncan. He can have my time.
    Mrs. Cubin [continuing] to recognize Mr. Dooley and then 
put yours altogether.
    Mr. Dooley. Thank you, Mrs. Cubin. And I apologize for 
being delayed as I had a conflict. And I really don't have any 
questions at this time, so I will be brief. I would say, 
though, that I really, you know, want to commend Ms. McGinty 
and the Administration for the work that they have done in 
specific reference to the Headwaters. This is an issue that I 
have been involved in in a legislative capacity for the last, 
oh, I guess it was almost 6 years where we have tried to find a 
way that we can ensure that we provide an adequate level of 
protection for what is a fairly unique natural resource.
    And the reason I am commending the Administration is that I 
think in this case that they approached this with the 
objectives of trying to ensure that we would respect the 
private property rights of an individual and at the same time 
achieve the objective of what I think that most of us would 
agree would be embraced by the majority of the American people 
in preserving the Headwaters Forest. And I am very pleased that 
in the process of negotiating the budget agreement that they 
were able to secure the potential that this can be purchased.
    I had some concerns about the original plan in terms of the 
sale of some Federal assets, even oil and gas leases, which 
while in itself might not have been impossible to orchestrate 
and to achieve, though certainly would have added an additional 
degree of complexity to consummating this Headwaters purchase. 
I would hope that the Administration, though, would be very 
diligent in ensuring that we reach an agreement on the HCP for 
the Headwaters as well as the sustained yield, which are also 
integral components of bringing this Headwaters issue to 
conclusion.
    But I think it is, you know, with Mr. Duncan's concern 
certainly we can't have--we need to have openness in this 
process. I felt pretty, you know, kept apprised of this and 
certainly I appreciate the Department of Interior's interest in 
working with a lot of the local oil producers in my district. I 
just hope that come October that we have finished this and it 
is off the table and out of the political arena.
    And I think we could probably--I could certainly say the 
same with the Crown Butte Mines issue, that hopefully we can 
resolves that and achieve, I think, the objective, which will 
be reflecting the values of the American people, and at the 
same time demonstrating our commitment to respect the private 
property rights of individuals. So thank you.
    Mrs. Cubin. Thank you, Mr. Dooley. I ask unanimous consent 
for Mr. Hill to be able to give an opening statement.
    Mr. Hill. Thank you, Madam Chairman.
    Mrs. Cubin. No objection.

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

    Mr. Hill. I want to thank you, Madam Chairman, for holding 
the hearing today and for allowing me to take part as an ex 
officio member of the Subcommittee. The people of Montana have 
not been given very much information on the substance of the 
proposed New World Mine buyout, and I am hoping today that we 
can get to the bottom of some of the issues and questions that 
I have received on this.
    Most of the discussions and negotiations have taken place 
behind closed doors, so today maybe we will have the 
opportunity to be privileged to what some of those discussions 
were.
    The opinion of Montanans is mixed about whether the 
proposed buyout is good or bad for Montana. Much of the 
confusion over this buyout can be attributed to the lack of 
knowledge. And given the latest development, Montanans remain 
puzzled. It is my hope today that our witnesses will shed some 
light on whether the proposal the President signed is still in 
play or whether they are now considering other options. I hope 
also that they will shed some light on how we got to this 
point, how were the interests of Montana and taxpayers and the 
environment weighed in the negotiations.
    I remain optimistic that we can see a way clear to resolve 
the issue. And I believe an important first step is the 
completion of an environmental impact statement. I have asked 
in a letter to the President, which I ask unanimous consent to 
have inserted in the record, that the environmental impact 
statement on the New World Mine be completed. Before we ask the 
taxpayers to pay for a property, it only seems right that the 
taxpayers know what they are buying.
    I have not yet received a response to my request, and I 
hope today that Ms. McGinty can shed some light on the 
President's views on the importance of completing an 
environmental analysis on this proposal. The people appearing 
in front of us today have worked long and hard on the effort. 
No one wants to see that effort wasted, including this member. 
Through the conversations we have today I would hope--it would 
be nice if we can discern a path toward a common goal of doing 
what is good for the people of Montana and Yellowstone Park.
    [The prepared statement of Mr. Hill follows:]

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

    I want to thank Chairman Cubin for holding this hearing 
today and for allowing me to take part as an exofficio member 
of this subcommittee. The people of Montana have not been given 
much information on the substance of the proposed New World 
Mine buy-out and I hope that through this hearing today we can 
get some important questions answered.
    Most of the discussions and negotiations have taken place 
behind closed doors, so I am interested in hearing from those 
who have been privy to the discussions. The opinion of 
Montanans seems to be mixed as to whether the proposed buy-out 
is good or bad for our state. Much of the confusion over the 
buy-out can be attributed to a lack of knowledge. Given the 
latest developments, Montanans are all a little puzzled.
    It is my hope that our witnesses today can shed some light 
on whether the proposal the President signed is still in play 
or if they are now considering other options. I also hope we 
can shed some light on how we have come to this point. How were 
the interests of Montana the U.S. taxpayers and the environment 
weighed in the negotiations?
    I remain optimistic that we can see a way clear to resolve 
this issue. I believe an important first step is the completion 
of the environmental impact statement. I have asked in a letter 
to the President, which I ask unanimous consent to have 
inserted in the record, that the environmental impact statement 
on the New World Mine project be completed. Before we ask the 
taxpayers to pay for a property, it only seems right that the 
taxpayers know what they are buying. I have yet to receive a 
response to my request and hope that Ms. McGinty can shed some 
light on the President's views on the importance of completing 
the environmental analysis.
    The people appearing in front of this committee today have 
worked long and hard on this effort. No one wants to see that 
effort wasted. Through the conversation we have today it would 
be nice if we can discern a path toward our common goal of 
doing what's best for the people of Montana and Yellowstone 
Park.

    Mr. Hill. As this process has gone forward, I have actually 
tried to help make this agreement complete. I believe that the 
agreement is incomplete. The President's political priorities 
have been addressed in this agreement. The Greater Yellowstone 
Coalition's narrow priorities have been represented in this 
agreement. Crown Butte's economic priorities have been 
represented in this agreement, but the people of Montana have 
not been represented in this agreement or even had the 
opportunity to be represented in any capacity in any stage of 
the negotiations.
    The concerns with the people of Montana and the concerns of 
the State of Montana and the communities who have been impacted 
or will be impacted are very important to me. I have 
participated and tried to develop the Montana Initiative that 
Ms. McGinty referred to, yet nothing in this proposal, nothing 
in this proposal at this stage reflects any of the values that 
were part of that negotiation.
    We have had one proposal that involved the trading of 
public lands in Montana, which has now been jettisoned. We had 
another proposal that involved using the CRP, the Conservation 
Reserve Program, as a mechanism for this. That has now been 
jettisoned. I have to tell you frankly, although I have tried 
to be helpful in this process, it seems like this is a moving 
dynamic situation. And not one single instance has anybody from 
the White House or any of the parties involved tried to consult 
with me in the process.
    So anyway, I would ask that that statement be inserted in 
the record, and I do have some questions. Starting with you, 
Ms. McGinty, let me understand this. Is the purpose of this 
buyout to avoid legal liability on the part of the government? 
Is that part of the motivation here?
    Ms. McGinty. Sir, I am not aware of any legal liability on 
the part of the government. The motivation is to protect 
Yellowstone, but to do it in a way that is respectful of 
private property rights.
    Mr. Hill. So it is your view, then, that the U.S. 
Government does not have any liability or any potential 
liability as a consequence of the activities that occurred here 
with regard to the New World Mine, either on the part of Crown 
Butte or on the part of Greater Yellowstone Coalition.
    Ms. McGinty. I am not aware of any legal liabilities that 
the Federal Government would have in this case, no, sir.
    Mr. Hill. OK, so then the purpose of the buyout is to 
protect Yellowstone Park from environmental damage, is that 
correct?
    Ms. McGinty. Yes, sir, and in a way that is respectful of 
the company's rights.
    Mr Hill. But one of the objectives is to protect 
Yellowstone Park from potential harm?
    Ms. McGinty. I would say a paramount objective, certainly.
    Mr. Hill. And so could you tell me on what objective 
criteria the assessment was made that there was potential 
environmental damage to Yellowstone Park?
    Ms. McGinty. Certainly. The work that had been done 
pursuant to the environmental impact statement had produced a 
significant amount of commentary that, for example, expressed 
concern about the seismological risks in the area, 4000 
earthquakes had occurred in this area. The ore body is highly 
acidic. Those earthquakes combined with acidic ore body posed a 
grave threat to, for example, the Clark's Fork of the 
Yellowstone River, a wild and scenic river. Critical grizzly 
bear habitat concerns were raised about that habitat being 
adversely impacted. The record is replete with concerns raised 
by many, including Governor Geringer of Wyoming, very concerned 
that Wyoming's water resources would be severely damaged if the 
mine were sited in, for example, some of these other things 
like an earthquake would have or could have happened at the 
site.
    Mr. Hill. And the purpose of the environmental impact 
statement was to make--to raise those environmental risks and 
require Crown Butte to propose how it would mitigate those 
risks, is that correct?
    Ms. McGinty. In the face of Crown Butte's proposal to the 
government to assess what the environmental impacts of that 
proposal might be, yes, to itemize them clearly, to see if they 
could or could not be mitigated. Some of these concerns, for 
example seismological risk, there is not a way necessarily to 
stop mother nature from having earthquakes. So some could be 
mitigated, some could not, but that certainly is the work that 
was underway, yes.
    Mr. Hill. Obviously Crown Butte does not have the power to 
stop earthquakes, but certainly they would have within their 
power to develop the mine in a fashion that would mitigate the 
potential environmental risks associated with an earthquake. 
Wouldn't that be part of what they would be required to address 
in their environmental impact statement?
    Ms. McGinty. Part of the process is to see if such a result 
could be achieved, yes.
    Mr. Hill. And so all of the risks that you just described, 
which may or may not be valid risks, but they are risks that 
were raised in the scoping process and the environmental 
assessment----
    Ms. McGinty. Yes.
    Mr. Hill [continuing] were part of the responsibility of 
Crown Butte as we go through the environmental impact process 
to address in some fashion. Would that not have been part of 
that process or the expectation of that process?
    Ms. McGinty. Well, it would be part of Crown Butte's 
responsibility, but also other parties to the EIS process. For 
example, the Park Service certainly would have a responsibility 
to ensure that Yellowstone Park was not threatened. The Forest 
Service similarly that Gallatin National Forest was not 
threatened.
    Mr. Hill. And all those agencies were invited to be 
participants in this process, is that not correct?
    Ms. McGinty. Yes, and they were participating.
    Mr. Hill. I think the superintendent of Yellowstone Park 
kind of withdrew from that process toward the end because of 
his opposition, but aside from that--so in the end, at the time 
the environmental impact statement would be completed, we would 
then have a complete picture of what those environmental risks 
are and what efforts were possible to deal with those risks, is 
that correct? Is that what the expectation of that would have 
been?
    Ms. McGinty. That would have been the effort, yes. I think 
it would have been a very significant undertaking yet to put 
that picture together.
    Mr. Hill. And at that point in time when that would have 
been completed, had Crown Butte not been able to address those 
environmental hazards that you have described as the 
President's concern, this mine wouldn't have gone forward, 
would it?
    Ms. McGinty. I suppose if the risks could not be mitigated, 
that various parts of the permitting process--the EIS itself 
would not necessarily have said yes or no to the mine. What 
would follow from the analysis there were various permitting 
activities, whether, for example, the Corps of Engineers would 
be able to issue a wetlands permit.
    Mr. Hill. So what you are saying is that the various 
permits, probably a dozen or more permits, the decision on 
those permits would have been based upon whether or not the 
environmental risks could or could not have been mitigated. My 
question to you, then, is that if in fact this mine poses all 
the risks that cannot be mitigated that you have identified as 
the reason for the President taking this action, why in the 
world should the taxpayers pay anything for this?
    Ms. McGinty. Well, I wouldn't assume, sir, that actions 
couldn't be taken somehow to minimize some of those risks. That 
is the calculation that we all were faced with. The issue was 
there is a chance that a mine could be sited in this area. 
There is a chance that it might not. Balancing those risks, we 
thought that this agreement that both ensured the protection of 
Yellowstone Park, ensured the protection of the economies 
around Yellowstone Park that have been built up over the last 
century and a quarter, and ensured the company's rights, was 
the best balance of interests that could be achieved.
    Mr. Hill. So you--if I might have one last question on this 
line. So the White House is in possession, then, of documents, 
material, the environmental impact statement at this stage. I 
believe maybe other agencies have done assessments of their 
involvement in this process and evaluation of these hazards. If 
I might--this is just a yes or no question. Will you make and 
will you instruct all those agencies to make that information 
available to this committee, any information that is in the 
possession of any of the agencies that deals with these 
environmental evaluations that you examined objectively, so 
that this committee could also do that objective analysis?
    Ms. McGinty. Yes, and I would remind you, sir, that the EIS 
is, and all of these assessments are fully public and have been 
throughout the process.
    Mr. Hill. In any agency, any other agency that has done any 
internal evaluations of this both--I mean, involving this 
particular project?
    Ms. McGinty. Yes, any analysis that was done to comment on 
the proposal being made----
    Mr. Hill. No.
    Ms. McGinty [continuing] to assess the----
    Mr. Hill. I want any subsequent analysis as well. I mean, 
any analysis of this whole thing that has been done by various 
government agencies. Is there any reason this committee can't 
have--be in possession of that?
    Ms. McGinty. I can't imagine a reason. And in fact, as the 
Chairman pointed out at the opening, we have already produced, 
I think, a significant amount of documents from various 
agencies on this matter.
    Mr. Hill. And if there are others that we can identify----
    Ms. McGinty. We would be happy to work with you on that, 
certainly.
    Mr. Hill. Thank you. Thank you, Madam Chair.
    Mrs. Cubin. Yes, and I would ask also that you would work 
with the committee staff to identify documents we have and what 
you don't. So thank you for that.
    Mr. Cannon.
    Mr. Cannon. Thank you, Madam Chair. If my colleague from 
Montana would like to continue asking questions, I would be 
happy to yield my time to him.
    Mr. Hill. Thank you. Thank you very much. Going on, Katie, 
I don't mean to be--I am not picking on you here. I just want 
to get this thing all fleshed out here.
    Ms. McGinty. That is fine. That is fine.
    Mr. Hill. Because I seriously do want to be part of the 
solution, but I can tell you that I don't believe that the 
people of Montana have been considered in this solution at this 
point. And I am not convinced yet that the people in those 
communities have. I am not arguing here to try to make this 
project a reality. I am trying to find a way for the people of 
Montana to be treated fairly in the process. Now I know that 
you and I might disagree about whether that has occurred or 
not, but that is what I am after here. And I am also trying to 
flesh this out.
    In your testimony you list conditions for a fair and 
equitable deal. Let me read to you what they were. That there 
be a reliable long-term protection of Yellowstone Park. And I 
think that is a value that we all share. That Crown Butte 
receive reasonable value for its investment with Federal assets 
of sufficient liquidity to meet the company's needs. Reasonable 
value, I think we may have some disagreement about. That the 
company should pay for the cleanup of contamination, past 
contamination. That the company get reposed on the pending 
litigation and that the plan recognize the uniqueness of 
Yellowstone and the importance of mining to the economy.
    And it is that question that I want to just talk about a 
little bit in that last point, and that is the uniqueness of 
Yellowstone and the importance of mining to the economy. It is 
my understanding that the use of the Land and Conservation Fund 
does have, at least historically, provisions for the completion 
of some economic assessment, how is the local economy going to 
be impacted, that it has of course an evaluation of the 
environmental risks and that there be a determination of 
recreational value if that is its historical purpose.
    And so do I have your assurances that if in fact--and 
incidentally, the budgeteers are not quite of the mind set you 
are that the intention of this money that is being put into the 
Land and Conservation Fund was for this purpose. But presuming 
that you intend to use it for that purpose, which you have been 
clear here, are we going to see the Administration require the 
completion of those steps before this deal would be 
consummated?
    Ms. McGinty. Two things. First of all, the President has 
the commitment of the Congressional leadership on this matter. 
Second, absolutely, and the agreement itself is expressly 
conditioned on the completion of the kind of analyses that you 
highlight. A full assessment will be done so that pursuant to 
law we can make the determination that this exchange is in the 
best interests of the American people.
    Mr. Hill. So if Congress made some attachment to this 
proposition that clarified that, at least in principle the 
Administration would not have any objection to that?
    Ms. McGinty. Well, I would be interested to discuss it with 
you.
    Mr. Hill. OK.
    Ms. McGinty. I would just remind----
    Mr. Hill. I am just talking in general terms at this point, 
obviously. So are you suggesting that there is an agreement 
with the leadership in the negotiations with the President that 
is different from the agreement that is represented in the 
budget agreement that we are about to vote on today? Because 
the budget agreement is not specific with regard to this. Is 
there some written agreement between the President and the 
leaders in Congress with regard to specifically that that $700 
million provision, part of that is to be earmarked for this 
transaction?
    Ms. McGinty. In fact, the budget resolutions now passed by 
the committee, the budget committees in the House and Senate, 
specifically earmark $315 million for priority land exchanges. 
That $315 million figure is derived from $65 million for the--
in order to protect Yellowstone and the balance, 250 million--
--
    Mr. Hill. Is there some written communication that confirms 
that between the White House and Congressional leadership?
    Ms. McGinty. As part of the overall budget agreement, yes.
    Mr. Hill. No, I mean independently. The agreement doesn't 
specify this transaction. You are saying it is your 
understanding that that is what it means, but there is nothing 
that is specific to this transaction in the budget resolution.
    Ms. McGinty. This is part of the agreement that the 
Congressional leadership reached with the President of the 
United States.
    Mr. Hill. Is that agreement in writing independent of the 
budget?
    Ms. McGinty. The budget agreement is indeed in writing, 
yes, sir.
    Mr. Hill. I mean independent of the budget resolution.
    Ms. McGinty. Whatever documents have been produced, the 
agreements reached between the President and the Congressional 
leadership has been part and parcel of all of that effort, yes, 
sir.
    Mr. Hill. As you know, I wrote to the President. I made 
reference to it, that I believe the environmental impact 
statement should be completed for the reasons that I have 
described. You just recently indicated that you would agree 
that economic assessment and some environmental assessment is 
required under the Land and Conservation Fund. Will the EIS be 
completed or not or will some alternative environmental 
assessment be completed prior to the consummation of this deal 
if it is consummated?
    Ms. McGinty. Because there is no proposal, we do not 
intend, no, sir, to complete the EIS that was pending at the 
time the agreement was reached in August 1996. Now, there is an 
EIS underway that analyzes the impacts of the withdrawal of 
some lands in this area that Mr. Elers referred to from mining 
activity. That is underway, but the EIS relevant to the former 
proposal to site a mine is not underway pursuant to our 
agreement with the company. And we do not have the intention to 
bring that back up.
    Mr. Hill. OK.
    Ms. McGinty. Thank you.
    Mr. Hill. Thank you very much. As you know, Margaret Reeb 
was not included as a party to the agreement, and she is 
actually the owner substantially of this property and of the 
mineral deposit, is that correct? I am a little concerned that 
in the conversation that has occurred here there has been some 
suggestion that this project was allowed to go forward because 
of Crown Butte's ability to patent mining claims under the 1872 
Mining Act. It is true that Margaret Reeb's claims are patented 
claims, but these are claims that were made substantially in 
the past that she has acquired over some several years. I think 
decades, is that correct?.
    So it is not really the application of the 1872 Mining Law 
that is dealing with those mineral deposits, is that correct?
    Ms. McGinty. The original claims derived from the 1872 
mining law----
    Mr. Hill. Right. I mean, there are property all over the 
West that people own homes on and everything that are old 
patented mining claims.
    Ms. McGinty. Sure. Many, many people have secured interests 
pursuant to the 1872 Mining Law.
    Mr. Hill. Right, but this isn't something that is current. 
This isn't a current--this is not an effort to in the current 
state to try to add some patented mining claims. In fact, what 
we are looking----
    Ms. McGinty. Oh, no, there are no new proposals. No.
    Mr. Hill. I just wanted to clarify that just, you know, for 
the record.
    Can you give us some suggestion of the timing of the 
announcement of this?
    I am sorry, Madam Chairman. I will----
    Mrs. Cubin. We will do a second round, Rick.
    I asked the question earlier and I think you answered it, 
but I didn't get the answer well enough to write it down here. 
Do you plan in the future, Katie, to buy out those oil and gas 
rights that are adjacent to the Everglades? Is that part of the 
priority list with the extra $385 million?
    Ms. McGinty. We have no proposal currently in mind to that 
end, no.
    Mrs. Cubin. And what about the oil and gas, what about the 
interest in the Escalante Grand Staircase? Is that to be--I am 
just trying to get an idea of what--$385 million is a whole 
bunch of money and I am just trying to get an idea of what sort 
of things that extra money is for besides the Headwaters and 
the Crown Butte.
    Ms. McGinty. Yes. We have specifically in mind only the 
Yellowstone agreement and the Headwaters agreement. The balance 
of the $385 million would be subject to discussions between the 
various committees and the agencies to identify priorities that 
would be of mutual agreement.
    Mrs. Cubin. But as of this time there has been no 
discussion at all about what that money will be spent for?
    Mrs. McGinty. No, ma'am.
    Mrs. Cubin. Well, then I have to congratulate you on the 
job you did all the more, because you beat the guys, I will 
tell you. Let us go to--it is true. I am impressed.
    Let us go back to the World Heritage Committee of the 
United Nations that came into Yellowstone Park, if you can 
answer this question. Do you know if a cooperating agency has 
ever before hosted an international committee to come here and 
make judgment about a site outside the normal process like they 
did this time? Has that ever happened before?
    Ms. McGinty. It may. I am not personally aware of an 
instance.
    Mrs. Cubin. Did anyone in the Administration believe that 
the U.N. committee and their decision was of--I mean, I don't 
know exactly how to say this. I guess the point I am going to 
make is for 6 years professionals from agencies from the two 
prime agencies that were doing the study, cooperating agencies, 
for 6 years a decision was not able to be made as to whether or 
not the development of the mine would jeopardize Yellowstone. 
And, you know, I think we are all singing out of the same book 
on saving Yellowstone, but then in 3 days the U.N. committee 
came in and determined that it was going to be a threat. Now 
did anybody in the Administration really think that signified 
anything more than political maneuvering? I mean, how much 
substance, how much weight did that carry?
    Ms. McGinty. I have to say, Chairman, I can't speak to it 
in detail because I actually was unaware of it and didn't learn 
about it until after the committee had come and gone and issued 
its recommendation.
    Mrs. Cubin. Mike, do you know any--what is your feeling on 
that? Do you think that that is a real substantive decision 
made after 3 days when, as I said, for 6 years professionals 
couldn't decide and thousands and hundreds of thousands of 
dollars had been spent? Was that a political thing or was there 
any substance to it, do you think?
    Mr. Clark. Well, the committee made a decision based not 
simply on the threat of the mine but its perception that there 
were many activities occurring around the edge of the park that 
would affect the long-term viability of the park. And that 
included not just mining but private land development, logging, 
issues like that that could affect the habitat. The commission 
is empowered to carry out a treaty----
    Mrs. Cubin. Right.
    Mr. Clark [continuing] which is largely symbolic. Other 
sites include the pyramids of Egypt and the Galapagos Islands, 
the Eiffel Tower. It is largely a symbolic situation, I think, 
but it does direct attention. It has the power to say to the 
public there is something wrong here or there is something that 
needs to be considered carefully.
    Mrs. Cubin. So, but, in my opinion, it is just sort of 
grand-standing. The timing and everything was--this is why I 
feel that Crown Butte, you know, maybe wasn't treated quite 
fairly, because of this kind of grand-standing and any amount 
of money and any amount of resources that the government might 
have, since we paid for those people to come here, I think, was 
being used against Crown Butte. And I don't exactly think that 
is fair. While, you know, I don't necessarily disagree with the 
agreement that was made, I wouldn't like those things to 
continue on. We have to open up clear open and honest channels 
for communication and I don't think that this demonstrated that 
very well.
    Mr. Hill.
    Mr. Hill. Thank you, Madam Chair. Mike, your interest in 
this and your concern with regard to this proposition, 
obviously there is the threat to the value of the park, but 
also contamination at the site and existing contamination of 
water, surface water and groundwater, and also potential risks 
to the Clark Fork from the mine waste site. Is that a fair 
characterization of----
    Mr. Clark. Those are certainly some of our concerns, sir.
    Mr. Hill. And would you identify this site as a site 
involving some serious environmental problems, existing 
problems?
    Mr. Clark. The historic mining pollution which exists there 
is significant for the area around the mine and has been for 
many years.
    Mr. Hill. And part of the reason that you were part of this 
transaction and your insistence was that part of Crown Butte's 
responsibility here would be to clean up that site.
    Mr. Clark. That is correct, sir.
    Mr. Hill. Mr. Elers, as you went through the process of 
trying to obtain--complete the EIS for the purpose of moving 
toward permitting, were there suggestions made to you that this 
could be listed as a Super Fund site or that EPA could be 
brought in to magnify your liabilities as some sort of a 
leverage to try to bring you to the table?
    Mr. Elers. Congressman, I am not sure if that occurred 
during the permitting process or if it were brought up during 
the early stages of trying to hammer out an agreement as 
ultimately occurred, but certainly there was a fear that Super 
Fund designation could be applied to the site with or without 
our mine ever being developed.
    Mr. Hill. And, I mean, I get a sense sort of by hook or by 
crook they were going to stop this mine. And eventually that--
you became--you realized that, that that is what brought you to 
the table.
    Mr. Elers. Well, I don't think it would be argued by anyone 
that the Administration was very concerned about there being a 
mine developed and they were open and clear in their discussing 
with us their opposition to it.
    Mr. Hill. And if this was listed as a Super Fund site, the 
liabilities could have been immense, is that correct?
    Mr. Elers. Super Funds are not minor affairs, that is 
correct, sir.
    Mr. Hill. Katie, I would ask you, do you know of a single 
instance where the Land and Water Conservation Fund has been 
used for the purchase of a toxic waste site?
    Ms. McGinty. Well, sir, this site will not be a toxic waste 
site.
    Mr. Hill. No, I am asking you the question. Do you know of 
an instance where the Land and Water Conservation Fund was used 
for the purpose of purchasing a toxic waste site?
    Ms. McGinty. I am not an expert on the usages.
    Mr. Hill. You are not aware----
    Ms. McGinty. I am not personally----
    Mr. Hill. The answer is that you are not aware of any?
    Ms. McGinty [continuing] aware, not off the top of my head, 
no.
    Mr. Hill. I guess, you know, maybe there is something 
unique about government. In business you use money to buy 
assets, not liabilities. And one of the concerns that I have, 
and I have expressed it repeatedly here, is the Federal 
Government buying a liability, not an asset. I mean if in fact 
this site and the development of this site poses all the risks 
and hazard that you have described, then it seems to me that 
the taxpayers should have no liability whatsoever.
    Katie, I----
    Ms. McGinty. Well, sir, most of those--excuse me. Most of 
those risks and hazards were potential and would have been 
eventuated if the mine were sited.
    Mr. Hill. But some of them would have been managed, as Mr. 
Clark pointed out.
    Ms. McGinty. Sure.
    Mr. Hill. The development of the site was also going to 
manage some of those risks. IN fact, one of the reasons that 
the provisions of the agreement are the way they are is because 
mining wasn't going to take place and so some alternative 
method of mitigating the current existing hazards had to be 
dealt with. But, Katie----
    Ms. McGinty. That is why----
    Mr. Hill [continuing] let me ask you a question then. There 
is an article--I guess this is in Time magazine May 12, dealing 
with Margaret Reeb, who is the owner of the property. And 
incidentally, she is not a party to this agreement, is she? Was 
Margaret Reeb a party to the agreement between the President, 
Greater Yellowstone Coalition and Crown Butte?
    Ms. McGinty. No, she is not a party to the agreement.
    Mr. Hill. But she does own--substantially, she owns the 
mineral interest here, is that correct?
    Ms. McGinty. I believe she has both land and mineral 
interests in the area, yes.
    Mr. Hill. And she has expressed, I know, to me and to my 
staff, concern and opposition to this agreement going forward. 
Have you ever had any conversations with her?
    Ms. McGinty. I have not spoken with her personally, no, 
sir.
    Mr. Hill. Mike, have you ever had a conversation with her?
    Mr. Clark. I have tried to, sir. Two days after the 
announcement, she approached two of my staff in the parking lot 
in Livingston and asked why we had not talked to her prior to 
the announcement. I called her up the next day and asked for a 
luncheon and she agreed to that. On the day of the luncheon she 
called and left word that on advice of her attorneys she could 
not talk to me because she was carrying on confidential 
negotiations with Crown Butte.
    Mr. Hill. You have never suggested to her that she should 
get on board?
    Mr. Clark. She has thus far been unwilling to meet with me, 
sir.
    Mr. Hill. But, I mean, you have never communicated to her 
that kind of an expression that states basically you should get 
on board?
    Mr. Clark. I have tried to meet with her, but she has on 
advice of her attorneys been unwilling to do so.
    Mr. Hill. OK, Katie, I would just ask--there is a quote in 
here. I will first ask if it is accurate. It says that Katie 
McGinty, the Chairman--Mrs. Reeb is saying that she doesn't 
want to be part of this agreement and she is concerned about 
it. In fact, she says she went into shock when she read about 
it. But let me quote from this. It says it may be that all she 
will end up with title to her property and no opportunity to 
mine. Katie McGinty, the Chairwoman of the White House Council 
on Environmental Quality says ominously there are other ways 
for us to arrange this agreement. What did you mean by there 
are other ways? Are you suggesting that you will just leave her 
out of the transaction, that she will be left without any value 
left in her asset?
    Ms. McGinty. Not at all. And in fact, this agreement is 
expressly conditioned at our insistence as well as the 
insistence of the parties to the agreement that Ms. Reeb's 
interest will be respected. It is expressly a part of this 
agreement. And the agreement is conditioned on that principle.
    Mr. Hill. I would like to ask some more questions later 
about that, if I could, Madam Chairman.
    Mrs. Cubin. I just have one last question for Mr. Clark. 
Our Subcommittee oversees most of the actions of the USGS, as 
you know. And one of their strong suits now, we are told, are 
the scientists that they have and their ability to predict acid 
mine drainage potential and to suggest remediation strategies. 
I wonder why doesn't the GYC trust the USGS to make judgment 
about the reclamation potential for Henderson Mountain in the 
context of permitting the New World Mine?
    Mr. Clark. Well, we would welcome any agency that has the 
capacity to take a look at that situation. And we were glad to 
see USGS and other scientists looking at that situation. In 
addition, we hired our own consultants to look at it to give us 
an independent analysis of what might occur there. And when we 
looked at the mine, we looked at all those factors. We looked 
at all the information we could obtain, but we also used our 
own consultants. And incidentally, we looked at reclamation 
activities there in terms of the actual cost and the methods of 
doing it. Our estimates by our consultants were very much 
similar to that of the company's as we entered into the final 
round of negotiations. So we were in agreement with the company 
on how the cleanup could occur and roughly how much it would 
cost.
    Mrs. Cubin. The reason I asked the question is because GYC 
didn't like the results of the USGS study on the thermal--the 
geothermal features of, you know, pumping the water out of 
there. And so I just wondered if you were just going to choose 
in the future to not regard USGS's opinions and their science 
opinions and just get your own or whatever.
    Mr. Clark. Well, in regard to the geothermal situation, 
which is a proposal by a landowner to drill a deep well and use 
the hot water near Mammoth, there were a number of conflicting 
opinions about that. We used a number of senior scientists who 
had spent their whole careers looking at the geothermal fields 
around Mammoth, and their conclusion was that there was some 
risk if that well was developed commercially it might well 
affect the Mammoth Hot Springs area. I think in all these 
situations there is a range of opinion amongst the scientists, 
and we just believe that you should always take the most 
conservative perspective and minimize the risk to the park.
    Mrs. Cubin. So you are not saying if you give us the answer 
we want, then that is the one we will take and if you don't 
give us the answer we want, we won't take it, we will keep 
looking until we find someone that will give us what we want? 
That is what that sounds like to me.
    We do have a vote. Rick, if you have just a question or 
more, I would like to adjourn the meeting before we go to vote, 
and then we will submit any questions in writing that we 
weren't able to ask today if that is OK.
    Mr. Hill. If I might, Madam Chairman, three short 
questions. Mike, I would just ask you is your organization 
opposed to mining on public land?
    Mr. Clark. Mining on?
    Mr. Hill. Public lands.
    Mr. Clark. No, sir, we are not.
    Mr. Hill. So it is not the goal of your organization to 
prevent mining in Montana?
    Mr. Clark. This is the only mine that we have ever opposed.
    Mr. Hill. What is the appropriate buffer for non-mining 
activities surrounding Yellowstone Park?
    Mr. Clark. I am sorry, sir, what?
    Mr. Hill. What is the appropriate buffer for non-mining 
activities surrounding Yellowstone Park.
    Mr. Clark. We have never said there should be a buffer 
around the park. We have said that we should look at each 
proposal that potentially could have an impact on our region 
and assess that proposal itself.
    Mr. Hill. OK, so you don't have any specific, I mean, two 
miles, three miles, five miles, ten miles? You just--you look 
at it site by site?
    Mr. Clark. The only buffer that I am aware of that we have 
ever supported is a band of land around the geothermal fields.
    Mr. Hill. OK.
    Mr. Clark. But that is dealing with a specific piece of 
legislation.
    Mr. Hill. I would ask you, Katie, Mrs. Reeb seems pretty 
insistent that she is not going to be party to this deal. What 
happens if she doesn't come to terms with the agreement? Does 
that vacate the whole agreement, in your view?
    Ms. McGinty. Well, sir, as part of the agreement the Crown 
Butte Company is in regular contact with her. I know----
    Mr. Hill. But if they can't deliver on that provision of 
the agreement, you said it is a requirement of the agreement, 
does that vacate the whole deal?
    Ms. McGinty. Well, I wouldn't want to speculate on it. I 
have full confidence that the company will fulfill its 
obligations under the agreement. The company has worked in good 
faith and I have confidence that they will produce this part of 
their obligation as well.
    Mr. Hill. So can I be assured at this point there are no 
discussions going on in any capacity that indicate that there 
might--in the event that she doesn't reach agreement, that 
there will be some alternative? Those discussions are not going 
on right now?
    Ms. McGinty. Well, we will continue to have as a top 
priority the protection of Yellowstone. Right now we are----
    Mr. Hill. No, but I am just asking about the contingency in 
the event that she doesn't agree. Is there discussions going on 
right now with regard to a contingency if that would occur?
    Ms. McGinty. There are not.
    Mr. Hill. OK, thank you very much, Madam Chairman.
    Mrs. Cubin. I thank the witnesses for their valuable 
testimony. I thank you for coming up here today. As I said 
earlier, the members of the Subcommittee will present 
additional questions in writing and the hearing record will be 
kept open for that purpose.
    If there is no further business, then this meeting is 
adjourned.
    Ms. McGinty. Thank you, Madam Chair, Mr. Hill.
    Mr. Elers. Thank you.
    Mrs. Cubin. Thank you.
    [Whereupon, at 3:05 p.m., the Subcommittee was adjourned; 
and the following was submitted for the record:]
   Statement of Kathleen A. McGinty, Chair, Council on Environmental 
               Quality, Executive Office of the President

    Madame Chair, members of the Subcommittee, thank you for 
the opportunity to testify before you regarding the role of the 
Council on Environmental Quality (CEQ) in the Administration's 
proposal for the protection of Yellowstone National Park. The 
Yellowstone agreement was borne of and reflects this 
Administration's commitment to preserve and protect for future 
generations of Americans the world's first national park and 
the crown jewel of our national park system. And, the agreement 
is reflective of our commitment, wherever possible, to work 
with industry and other interest groups in partnership to that 
end.
    As mandated by the National Environmental Policy Act 
(NEPA), my role is to advise the President on environmental 
policy matters and coordinate activities of the Federal 
agencies and departments with regard to environmental matters 
that cross agency jurisdictional lines. Accordingly, I chair 
the Executive Committee and oversee the interagency team 
assembled to ensure implementation of the Yellowstone National 
Park agreement.

YELLOWSTONE NATIONAL PARK

    In 1989 Crown Butte Mines, Inc., a subsidiary of a Canadian 
mining company, proposed a gold, copper and silver mining 
complex located partially on private property and partially on 
public lands managed by the Forest Service, less than three 
miles from the northeast border of Yellowstone National Park. 
The Forest Service and the State of Montana started preparing 
an environmental impact statement on the proposal to assess the 
environmental effects of Crown Butte's proposed plan of 
operations for the mine or another mine alternative. Crown 
Butte submitted a plan that called for 15 years of operation, 
with six major facilities, plus a 70-100 acre tailings 
impoundment behind a 90 foot tall dam. The tailings impoundment 
would have been expected to contain the highly acidic waste 
rock and metals in perpetuity. The Forest Service also faced a 
decision regarding whether to issue Pacific Power Company a 
Special Use permit to construct and operate a 69 KV power line 
on National Forest land.
    The rights to the minerals at New World Mine had been 
obtained under the 1872 Mining Act. Under Federal law, the U.S. 
Government was therefore obligated to process the company's 
proposal to mine these minerals using Federal lands for a large 
tailings impoundment and other ancillary facilities. As a 
necessary prerequisite to this decision process, the company 
was required to fund data gathering and analysis for the 
Environmental Impact Statement (EIS) under the provisions of 
NEPA.
    The EIS process began in April 1993. The EIS was originally 
expected to be issued as a draft in April 1994. However, 
because the preliminary findings showed that there could be 
major adverse impacts on the Clark's Fork of the Yellowstone 
River, a federally designated Wild and Scenic River, on grizzly 
bear habitat, and on Yellowstone National Park itself, work on 
the draft was extended. Interagency review of preliminary 
drafts of the EIS also showed a need for critical additional 
studies, including groundwater studies better to characterize 
the conditions at the proposed New World Mine site. These 
studies were needed to inform the Federal and state permitting 
agencies' analysis of the potential impacts of permitting the 
mine, and, if a mine were permitted, whether specific 
additional operating conditions were warranted. In addition, 
certain Federal agencies determined that additional information 
was needed for a risk assessment relating to the proposed 
tailings impoundment.
    The preliminary draft EIS was made widely available and 
reviewed, not only in Montana, but throughout the U.S. Many 
analysts, including mining engineers, were critical of the 
submerged tailings system (see the Engineering News-Record 
editorial of March 14, 1994). Comments were raised concerning, 
among other things, seismological risks in an area that had 
experienced more than 4000 earthquakes within a 180 mile 
radius; the need for more analysis concerning containment of 
the 5.5 million tons of highly acidic waste rock that would be 
generated by the mine; the risks associated with the tailings 
impoundment; and importantly, the lack of information necessary 
to assess the potential impact of the proposed mine on 
groundwater. In fact, in March 1995, Wyoming Governor Geringer 
wrote Montana Governor Racicot to say that the alternative 
preferred by the company could have Wyoming water resources and 
suggested that the tailings impoundment should be the subject 
of a separate review. By late 1995, it was clear to everyone 
that there were significant issues involved with the 
development of the proposed New World Mine.
    Because of the highly acidic nature of the ore body at the 
New World mine, for example, the Governor of Wyoming suggested 
that $75-$100 million was the appro-

priate bonding level. In addition, since the plan of operation 
called for ``dewatering'' a portion of Henderson Mountain, the 
Yellowstone Water Compact, a negotiated agreement between the 
State of Montana and the Department of the Interior regarding 
rights to water flowing into and out of Yellowstone National 
Park may have required Crown Butte to replace the diverted 
water. Moreover, Crown Butte was embroiled in a citizen's suit 
brought under the Clean Water Act by a coalition of 14 
environmental groups in a Federal District Court in Montana. In 
October 1995, the company was found liable by the Federal 
District Court, and it was therefore abundantly clear that 
there would be years of contentious litigation over the mine, 
regardless of whether the Federal Government approved or denied 
the company's application.
    Faced with this potential for costly and resource intensive 
litigation, the environmental groups and the company entered 
into confidential discussions in an effort to identify creative 
options to address their differences. In February 1996, Crown 
Butte, Hemlo Gold, and the Greater Yellowstone Coalition 
approached CEQ together to explore whether the Administration 
would be willing to consider a novel approach to the problem: 
exchanging Federal assets to Crown Butte in exchange for the 
company's agreement to cease and desist further pursuit of the 
mine. My staff formed a small interagency working group to 
discuss the implications and possible elements of such an 
approach. They concluded that the proposal could provide a 
solution to the New World Mine problem that was fair and 
equitable for all concerned if the following conditions were 
met: (1) there be reliable, long-term protection for 
Yellowstone Park; (2) Crown Butte receive reasonable value for 
its investment with Federal assets with sufficient liquidity to 
meet the company's needs; (3) the company should pay for the 
cleanup of contamination at the site, with appropriate 
oversight and participation by Federal and State agencies and 
public interest groups; (4) the company get repose on the 
pending litigation and potential Federal environmental claims; 
and (5) the plan recognize the uniqueness of Yellowstone and 
the importance of mining to the economy. Based on the work 
group's analysis and their discussions with the company 
throughout February 1996, we concluded there were enough common 
interests and that we should pursue more detailed discussions. 
Before entering into any detailed discussions, however, Crown 
Butte insisted, and the parties agreed, that the talks be 
strictly confidential. Confidentiality was necessary and 
appropriate because the discussion would involve issues 
regarding ongoing and potential future litigation and because 
premature release of information could adversely affect the 
value of the company's stock.
    New World Mine is located in an area approximately 19,000 
acres in size. Much of the area involves intermixed parcels of 
public and private lands patented under the 1872 Mining Law, 
and Federal lands subject to unpatented mining claims under 
that law. Most of the private lands at issue here are held by 
Crown Butte or Ms. Margaret Reeb, a Montana resident, who 
leased her lands to Crown Butte. Although there are other 
patented and unpatented claims in this general area that are 
owned by others, these claims are not critical to the 
development of the New World Mine or relevant to the goals of 
the Agreement.
    To followup on the overture of the company and the 
conservation organizations, in April 1996, we appointed Mr. 
John Schmidt, the Associate Attorney General, and Mr. Jim 
Pipkin, Counselor to the Secretary of the Interior, to open 
discussions with the President of Crown Butte and the Chairman 
of Hemlo Gold, the Crown Butte parent company. Over the next 
several months, they held regular discussions with Mr. Ian 
Bayer, Chairman of Hemlo Gold and Mr. Joe Baylis, President of 
Crown Butte. These discussions focused primarily on (1) the 
value of the mine; (2) the cleanup and restoration of the 
environmental impacts associated with many years of mining; (3) 
resolving the protracted lawsuit, referenced above, brought 
against the company by certain environmental organizations; and 
(4) resolving potential Federal enforcement actions.
    On August 12, 1996, President Clinton, Crown Butte Mines 
and a coalition of environmental groups announced that the 
parties had reached an agreement to protect Yellowstone and the 
surrounding area, to address the environmental impacts of 
historic mining in the New World Mine District, and to resolve 
pending or potential litigation and enforcement. The essential 
details of the Agreement are as follows: Crown Butte will forgo 
development of the New World Mine, the United States will 
transfer to Crown Butte $65 million in Federal assets in 
exchange for title to all of the lands essential to development 
of the mine, specifically including patented and unpatented 
mining claims held by Crown Butte and fee title to lands leased 
by Crown Butte from Margaret Reeb; the company will place $22.5 
million in a trust fund to remediate historic environmental 
contamination in the New World Mine District; and the parties 
will enter into a consent decree implementing the cleanup and 
restoration actions, and settling the existing litigation by 
the environmental groups and potential environmental claims by 
the Federal government. Although there are a number of 
conditions contained in the Agreement, the two major 
contingencies are (1) identification by the United States of 
$65 million of Federal assets that can be exchanged to Crown 
Butte, and (2) Crown Butte's acquisition of the property it 
leases from Margaret Reeb. The agreement also stipulates that 
the United States will also work with the State of Montana, the 
environmental groups and the public appropriately to address 
contamination in the New World Mine District; and will perform 
a title search. In addition, the United States will subject 
this exchange to a valuation to verify the value of the 
property offered by Crown Butte. The agreement expressly 
stipulates that ``consummation of the transfer of property is 
subject to confirmation by a valuation that the District 
property has a fair market value of at least $65 million.''
    As you know, the Administration proposed a diversion of 
Federal royalties from currently producing coal, oil and gas 
operations in Montana to fulfill the terms of the agreement. 
When we made this proposal to Crown Butte on March 11, 1997, we 
underscored that this type of asset required Congressional 
approval. We proposed this approach after a rigorous analysis 
of the alternatives. In the course of this effort we reviewed 
surplus military installations. General Services Administration 
surplus property, National Forest timber lands, leased and 
unleased coal lands, and other Federal lands. We also actively 
participated in and supported Governor Racicot's ``Montana 
Initiative'' (discussed further below) to explore a mix of 
timber and coal lands entirely in Montana. For various reasons, 
each of these properties ultimately proved unsuitable for the 
exchange. Some properties were contaminated, for example. 
Others had previously been committed to other uses, while still 
others were strenuously opposed by various interest groups. 
After an exhaustive search and rigorous effort, we proposed to 
divert mineral royalties from existing mines in Montana. While 
diversion of royalties generally was favorably received, the 
required budget offset we chose, the Conservation Reserve 
Program, proved to be controversial. After consultation with 
many Members of Congress, we reexamined the possibility of 
using the Land and Water Conservation Fund and have concluded 
this is an appropriate method.

Current Status

    Complete details of the agreement to protect Yellowstone 
were made fully and publicly available on August 12, 1996. In 
September 1996, Mr. Schmidt and Mr. Pipkin briefed 
Congressional staff on the terms ofthe agreement. In October 
1996, I traveled to Montana with Mr. Schmidt and other 
Administration officials personally to brief the Governors of 
Montana and Wyoming, as well as Senator Conrad Burns. Since 
that time we have apprised the Governors, Members of Congress 
and congressional staff, of all relevant developments. On March 
13, we provided the Interior Subcommittee of the House 
Appropriations Committee answers to questions they posed 
regarding the agreement.
    Immediately after the August 12, 1996 agreement was 
reached, a Federal interagency group worked to identify Federal 
assets to use in an exchange with Crown Butte. In late 
November, Governor Racicot asked the Federal Government to 
consider a ``Montana Initiative'' (noted above) to satisfy the 
terms of the agreement. Administration officials met with the 
Governor and encouraged the development of such an initiative. 
Moreover, noting the timeframes outlined in the Agreement, the 
Administration dedicated considerable resources to assist the 
Governor in the development of the initiative. Specifically, 
the Administration offered technical help through the Bureau of 
Land Management and the Forest Service to support the 
initiative. When it was clear that the Montana Initiative would 
not reach fruition in the necessary timeframe, the 
Administration agreed with Crown Butte's proposal that the 
United States extend the relevant deadline for 30 days.
    Despite these efforts, however, as details of the ``Montana 
initiative'' became public, every potential property discussed 
proved to be highly controversial with various Montana 
constituencies, including ranchers, Indian Tribes, small mill 
owners, conservationists, and some local governments. Because 
of the deadlines under the Agreement, it became apparent to 
Crown Butte and to the government that properties identified 
through the Montana Initiative could not properly be evaluated 
and delivered to Crown Butte within the time frames called for 
in the Agreement. Therefore, in order to meet our March 12 
obligation to identify exchange property to Crown Butte, the 
Administration determined the most appropriate asset to be the 
Federal share of royalties from federally owned mineral 
estates--coal, oil and gas--that are currently under lease and 
production in Montana. In proposing this asset to Crown Butte, 
the United States underscored that Congressional approval would 
be necessary if the agreement were to be concluded on these 
terms.
    As you know, Madame Chair, the Administration and 
congressional leaders have reached an agreement on a detailed 
budget agreement that establishes basic parameters for 
revenues, savings, and spending levels (both mandatory and 
discretionary) and will obviate our proposal to divert coal, 
oil and gas royalties. When the details of the agreement are 
final, there should be sufficient funds to acquire these high 
priority national resources without having to divert Federal 
coal, oil, and gas royalties or requiring any other offset. 
Within the discretionary levels, the agreement reserves $700 
million in fiscal year 1998 budget authority for priority 
Federal land acquisitions and exchanges. The Administration's 
top priorities are New World mine and Headwaters Forest 
proposals. Together with the Congressional leadership, we plan 
to work with the Budget and Appropriations Committees to 
achieve these goals.
    Several more steps need to be completed before this 
agreement can be implemented. First, Crown Butte must 
demonstrate that it can fulfill its obligation to acquire the 
property it leases from Ms. Reeb. Second, a valuation of the 
property must be completed. And, finally, the budget resolution 
must be passed and then acted upon by the Appropriations 
Committee. I am confident this is a fair way to resolve a 
potential long, bitter and expensive battle to save 
Yellowstone, and we in the Administration are very appreciative 
of the support of the Congressional leadership to see this 
effort through.
    Madame Chair, saving Yellowstone requires that many people 
come together to find common ground on behalf of this truly 
national treasure. You have spoken eloquently about Yellowstone 
and indeed, the need to find bipartisan solutions. I hope we 
can work closely with you and other Members of Congress in 
protecting Yellowstone, and address the many critical issues 
related to this challenge. Thank you for the opportunity to 
speak to this important initiative. I would be pleased to 
answer any questions you may have.

                                ------                                


 Statement of Karl E. Elers, Chairman of the Board, Crown Butte Mines, 
                                  Inc.

    Madam Chairwoman and the Members of the Subcommittee, my 
name is Karl Elers and I am Chairman of the Board of Directors 
of Crown Butte Mines, Inc., a Montana corporation. I assumed 
that position in March of this year. This is my first 
appearance before a congressional committee and I appreciate 
the invitation to be here.
    The letter of invitation to testify indicated the 
committees' interest in the agreement reached between Crown 
Butte, the Administration and certain special interest groups 
in August 1996. Crown Butte found the decision to enter into 
the August 12, 1996 Exchange Agreement a difficult one. By mid-
year 1996, Crown Butte had already been in the permitting 
process for almost 6 years, promised dates for the release of 
the Draft Environmental Impact Statement had consistently not 
been met and the whole process had become fraught with delays 
and uncertainty. The Exchange Agreement provided a practical 
resolution to a unique set of circumstances and Crown Butte's 
management decided that the Agreement was in the best interest 
of the shareholders of the Company.
    A brief chronology of the events leading up to our decision 
to execute the agreement will shed some light on why Crown 
Butte decided on this course of action. I hope it will assist 
the Committee in a better understanding of the current 
regulatory processes and the challenges they pose for those of 
us trying to operate in a responsible manner.
    The area in dispute, known as the New World District, is a 
historic mining district dating back to 1869. A number of small 
mines and a copper smelter operated in this area intermittently 
until 1951. Sporadic exploration and development continued from 
l955 until 1987 when the property was acquired and the issues 
now under review began.
    I think it is also worth noting at this point, that in 1978 
the Congress specifically considered and excluded the New World 
District from the Absaroka-Beartooth Wilderness due to past 
mining activity and mineral potential. Proposing a state-of-
the-art, underground gold mine with a strong reclamation plan 
to remediate historic mining disturbances made sense. Yet, 
Crown Butte became the focus of a national and international 
debate.
    To fully appreciate what has transpired during the process 
I would like to divide my remarks into two areas. First, the 
Permit & EIS Process which will highlight the events directly 
related to the permitting process, and second, Additional 
Concerns which will briefly describe a variety of other 
activities specifically designed to thwart the project. From 
this discussion, I hope you will be able to understand the 
circumstances that lead to Crown Butte's willingness to execute 
a settlement agreement in August 1996.

Permit & EIS Process

    The permitting process for the New World Property began 
formally over 6 years ago in November 1990 when Crown Butte 
submitted an eleven volume document as its Operating Permit 
Application. This permitting process and related environmental 
studies continued to be Crown Butte's main project activities 
up to August 1996. The permitting process for the New World 
Property proved to be complex and time consuming and it was met 
with unusually high opposition.
    Mining activities on Federal lands within the state of 
Montana fall under the jurisdiction of both Federal and state 
agencies. The Gallatin and Shoshone National Forests were 
designated as the lead for the Federal agencies and the Montana 
Department of Environmental Quality was designated as the lead 
state agency for review of the application and development of 
an EIS for the project.
    A number of other state and Federal agencies were 
designated as cooperating agencies. These include the U.S. 
Environmental Protection Agency (``EPA''), the U.S. Army Corps 
of Engineers (``the Corps''), the National Park Service, the 
U.S. Bureau of Land Management (BLM), the U.S Bureau of 
Reclamation, the Montana Department of Health and Environmental 
Sciences and the Wyoming Department of Environmental Quality. 
In all, more than 25 separate Federal, state and county permits 
would be required prior to approval of the project. The major 
permits cover site construction, power line construction, mine 
operation, reclamation, modification of wetlands, water 
discharge, stormwater run-off and erosion control, air quality, 
and occupational health and mine safety.
    As part of the Operating Permit Application, baseline 
studies was completed on a number of resource areas including 
aquatics, hydrology, wetlands, old growth, and wildlife. 
Geotechnical drilling and analyses were completed on both the 
proposed and alternative tailings disposal areas. Initial base-
line and geotechnical work was completed for each alternative 
to address both regulatory and public concerns regarding the 
location of the tailings impoundment. Proposed plant and road 
locations were similarly evaluated.
    During the very early stages of the permitting process 
opposition arose over the potential use of cyanide in Crown 
Butte's processing at the site. In 1992, Crown Butte's 
metallurgical testwork demonstrated that gold, copper and 
silver could be recovered without the use of cyanide. The 
revised process would use only gravity separation and froth 
flotation with gold recoveries indicated to be approximately 88 
percent to 92 percent. As a result, Crown Butte withdrew two 
low grade surface mineable deposits (Como and McLaren) and the 
Fisher Mountain deposit from the permit area.
    The Operating Permit Application was resubmitted to the 
Lead Agancies in November 1992 following extensive changes 
resulting from the decision to not use cyanide and to amend the 
Application to exclude the three deposits and to be responsive 
to agency review and comments upon the initial Application. The 
Lead Agencies completed, and Crown Butte responded to, a total 
of six reviews of the Operating Permit Application before the 
revised Operating Permit Application was declared complete on 
April 2, 1993.
    A determination of completeness of the Operating Permit 
Application allowed the EIS process to begin. The EIS is 
required by state and Federal law and involves an assessment of 
the project's proposed operating plan, a review of alternatives 
to this plan, potential impacts of the plan, and methods to 
mitigate significant impacts. Responsibility for conducting 
public scoping meetings, writing the EIS document and issuing a 
decision rested with the Lead Agencies. They retained an 
independent third party consultant, paid for by Crown Butte, to 
assist in the process.
    During 1993, a scoping document which determined what was 
going to be evaluated in the EIS process was prepared, and 
public comment was solicited. A number of potential 
environmental issues were identified for further study. The 
Lead Agencies then initiated the process of determining the 
impact of Crown Butte's proposed plan, identifying possible 
alternatives and comparing these alternatives. During the 
process, the Lead Agencies would select a preferred alternative 
and produce a draft of the EIS. The Draft EIS would include a 
biological assessment which evaluates potential impacts to 
threatened or endangered species.
    Crown Butte was initially informed that the Draft EIS would 
be available in late 1994. This date was not met. In 1994 Crown 
Butte was advised by the Lead Agencies that a draft of the EIS 
would be issued for public comment by the end of the second 
quarter of 1995. This date was not met and Crown Butte was 
subsequently advised by the State of Montana that the Draft EIS 
would be released in the Fall of 1995. This date was also not 
met.
    During the period from January to August 1996, Crown Butte 
continued its efforts in the permitting process. A study on 
endangered species was completed and additional studies of 
wetlands and water quality issues were conducted. All requested 
data was provided to the Lead Agencies and internal drafts of 
sections of the Draft EIS were circulated by the Lead Agencies 
to the cooperating agencies, Crown Butte and the public for 
review and comment. None of the drafts made available to Crown 
Butte or the public identified the Lead Agencies' preferred 
alternative. In March 1996, Crown Butte was advised by the Lead 
Agencies that the Draft EIS would be released for public 
comment by late spring or early summer of 1996. The Draft EIS 
had not been released by August 12, 1996 when Crown Butte 
executed the Exchange Agreement. The EIS process has been 
suspended pursuant to the terms of the Exchange Agreement.

Additional Concerns

    As I mentioned earlier, the New World District is a 
historic area. Crown Butte's activities at the site have 
included reclamation of historic mining activities and the 
Company's recent exploration activities. In December 1992 Crown 
Butte received an Excellence Award for Outstanding Commitment 
to Environmental Protection from the United States Forest 
Service. This award recognized the Company's innovative and 
successful efforts to mitigate adverse environmental impacts. 
In 1994, following a complaint by special interest groups, the 
Corps alleged that some of the Company's reclamation 
activities, conducted over the preceding 3 years, had been in 
violation of Section 404 of the U.S. Clean Water Act. Crown 
Butte responded that it did not believe these allegations were 
accurate. In September 1995, the Corps issued Crown Butte a 
Section 404 permit authorizing future reclamation activities.
    Under the Comprehensive Environmental Response and 
Liability Act (``CERCLA''), the EPA initiated an investigation 
of continuing environmental impacts from previous activities in 
the Henderson Mountain vicinity. The investigation covers 6,720 
acres of land, of which the New World Property is a part. Under 
CERCLA, certain sites are ``listed'' on the National Priorities 
List for cleanup under Superfund legislation. To determine 
whether a particular site is listed, EPA conducts a series of 
investigations and then using the results ranks the potential 
hazard of the property. The ranking determines the need for 
future action. A Preliminary Assessment was submitted to the 
EPA in August, 1994, a Field Sampling Plan for an Expanded Site 
Inspection was completed in July, 1995, and an Analytical 
Results Report was presented to the EPA in April, 1996. While 
the Henderson Mountain vicinity has been through preliminary 
investigations, it has not been completely evaluated or ranked 
based on potential hazard and is not currently listed on the 
National Priorities List for Superfund cleanup.
    On January 13, 1995, two special interest groups and an 
individual filed a complaint against the Company with the U.S. 
Department of the Interior in connection with Crown Butte's 
Mineral Patent Application. The complaint requests that the 
Secretary of the Interior take immediate jurisdiction over the 
Patent Application, that the Secretary take any other action 
necessary, including intervention in the proceeding, to protect 
the public interest by preventing the issuance of the patent, 
that the Secretary deny the Patent Application, or in the 
alternative, that the Secretary stay any action on the Patent 
Application until completion of the EIS then being prepared by 
the Lead Agencies. This complaint effectively asks that patents 
not be issued. Crown Butte has moved to have the complaint 
dismissed for numerous reasons. The complainants have claimed 
that the ``comparative value test'' should be applied in 
determining whether Crown Butte's claims are supported by a 
discovery, although imposition of the so-called ``comparative 
value test'' would be contrary to the long-standing practice of 
the Department of the Interior. There have been no actions or 
developments related to this matter since 1995 and the Company 
can not at this time predict the ultimate resolution of this 
matter.
    In February 1995, a number of special interest groups 
requested that the World Heritage Committee (the 
``Committee''), formed pursuant to the United Nations 1972 
Convention Concerning the Protection of World Cultural and 
Natural Heritage, investigate whether Yellowstone National Park 
qualified for inclusion on the ``List of World Heritage in 
Danger.'' Such a determination would require the U.S. 
Government, a signatory to the convention, to take unspecified 
steps to protect Yellowstone National Park. This request was 
followed in June 1995 by a letter from a senior official in the 
office of the United States Department of the Interior stating 
that Yellowstone National Park was in danger. The Committee 
visited Yellowstone National Park in September 1995. The 
National Park Service, a co-operating agency in the New World 
EIS, hosted the event. The Committee enumerated both 
``ascertained threats'' and ``potential threats'' to the Park. 
The ascertained threats included endemic Yellowstone cut-throat 
trout, sewage leakage and waste contamination, road 
construction and visitor pressures year-round. The potential 
threats included impacts on quantity and quality of surface and 
ground water and other past and proposed mine-related 
activities, and proposed control measures to eradicate 
brucellosis in the bison herds. In December 1995, the Committee 
decided that Yellowstone National Park should be placed on the 
List of World Heritage in Danger and asked for continuing 
reports on the progress of the New World EIS and mitigating 
actions being taken to ensure in due course the removal of the 
site from this list.
    By June 1995, Crown Butte had exhausted its cash resources 
and has been forced to rely on loans totaling approximately 
five million dollars to date to sustain day to day operations. 
Crown Butte intended to go to the equity markets upon release 
of the DEIS to raise the funds necessary to begin development 
of the site. The protracted delays placed Crown Butte in an 
unexpected cash bind.
    In August 1995, the President interrupted a holiday in 
Wyoming for an aerial tour of the mine site. The tour was 
followed on September 1, 1995, by the Secretary of the United 
States Department of the Interior publishing a Notice of 
Proposed Withdrawal in the Federal Register with respect to an 
area of approximately 19,100 acres including the New World 
Property in Park County, Montana. The Notice resulted in a two-
year moratorium on the location of new mining claims or 
millsite claims in such area. In September 1996, a notice of an 
amended withdrawal application was published. The amendment 
added an additional 2,960 acres of land and included a 
withdrawal of any private mineral interests that might be 
acquired by the United States pursuant to the Exchange 
Agreement. Pursuant to the requirements of the National 
Environmental Policy Act (``NEPA''), the Department of the 
Interior has prepared a Draft EIS to evaluate the potential 
impacts associated with the withdrawal. The Draft EIS was 
circulated for public comment and comments were accepted 
through April 28, 1997. After reviewing the comments, the 
Department of the Interior will publish a Final EIS and the 
Secretary of the Interior is expected to make a final decision 
on the proposed withdrawal no later than August 31, 1997. The 
Company has located millsites for necessary facilities as 
proposed in the Company's Application for a Hard Rock Operating 
Permit and Proposed Plan of Operations, but has not located 
millsites for all alternative facility locations that were 
being analyzed in the NEPA process. During the period of any 
moratorium or withdrawal, the Company could not locate 
additional millsites on withdrawn ground, whether in new areas 
or to replace millsites in the event they were found to be 
invalid.
    In September 1993, several special interest groups filed a 
complaint against Crown Butte and others in U.S. District 
Court, District of Montana, alleging that certain discharges 
from the New World Property were in violation of the U.S. Clean 
Water Act (CWA). On October 13, 1995, the District Court issued 
a Memorandum and Order ruling that Crown Butte and one other 
defendant were in violation of the CWA for not yet having 
obtained a CWA National Pollutant Discharge Elimination System 
permit for water coming from historic workings. The Company had 
applied for a CWA stormwater permit in October 1992. Crown 
Butte requested that the District Court allow an immediate 
appeal of the decision be taken to the Ninth Circuit Court of 
Appeals, which request was granted in January 1996, and the 
Company filed a petition with the Court of Appeals. On May, 
1996, the Court of Appeals denied the Company's petition for 
permission to appeal, and the District Court subsequently set 
the matter for trial on the issues relating to civil penalties.
    A trial was scheduled for November 1996, but the District 
Court has stayed all proceedings in this case in light of the 
Exchange Agreement.

Conclusion

    Madam Chairwoman and Members of the Subcommittee, I'm sure 
you can readily see that what began as an attempt to build a 
modern-day state-of-the-art mine, in an area where historic 
mining has occurred for over a century, and which was 
specifically excluded from wilderness designation by the 
Congress of the United States, quickly became a battle of 
national and international involvement.
    By mid-year 1996, Crown Butte had already been in the 
permitting process for almost 6 years, promised dates for the 
release of the Draft Environmental Impact Statement had 
consistently not been met and the whole process had become 
fraught with delays and uncertainty. Even if Crown Butte had 
received the Draft EIS, it would still have been a long way 
from the issuance of the requisite Final EIS. Uncertainties 
with respect to Crown Butte's ability to obtain the necessary 
permits would have continued and the effort to obtain such 
permits would probably have taken many years. The economic 
realities of continuing in the face of well organized, well 
funded opposition and international organizations necessitated 
tough decisions. Costs and delays associated with permitting, 
litigation with significant potential liabilities and appeals 
had become unduly burdensome given the project economics.
    Nevertheless, Crown Butte, as an environmentally 
responsible mine developer, found the decision to enter into 
the August 12, 1996 Exchange Agreement a difficult one. Crown 
Butte has always believed that its proposal to build and 
operate safely and responsibly a small state-of-the-art 
underground gold mine at New World was not only environmentally 
sound of itself, but also represented the best way to remediate 
the historic mining disturbances which date back more than 100 
years.
    In the end, the Exchange Agreement provided a practical 
resolution to a unique set of circumstances. The protracted 
permitting delays, legal challenges facing ongoing development, 
and potential liabilities related to historic mining in the New 
World District caused the economics of the project to 
deteriorate. Crown Butte's management decided that the 
Agreement was in the best interest of the shareholders because, 
if consummated, it would provide an end to the long permitting 
process which might otherwise continue for many more years with 
no guarantee of success or economic return to the shareholders 
and provide assets that could be liquidated relatively promptly 
and which would compensate the Company for the amount it has 
spent to date in acquiring, exploring and attempting to permit 
the property.

                                ------                                


                            CURRICULUM VITAE

KARL E. ELERS
Chairman of the Board of Directors
Crown Butte Mines, Inc.

    Karl E. Elers began his mining career in 1962 as a Mining 
Engineer at Duval Corporation's Carlsbad, NM, potash 
properties. He advanced through a series of management 
positions, including Resident Manager assignments for potash 
and sulphur properties, and Vice President of Project 
Development. He worked on numerous mineral programs in the Far 
East, Australia and Latin America in his development work for 
Duval, and later, as Vice President of Production, directed the 
company's copper, gold and industrial minerals operations. In 
1985, he served as Senior Vice President of Operations of 
Pennzoil Sulphur Company, and later that year became the 
initial Managing Director of Western Ag-Minerals Company, an 
industrial minerals mining and marketing firm.
    Elers joined Battle Mountain Gold Company in May, 1987 as 
Executive Vice President, and became President in May, 1988. He 
was named Chairman and Chief Executive Officer of Battle 
Mountain Gold in April 1990. In March, 1997 he retired from the 
CEO's office, but continues to serve as Chairman of the Board 
of Directors of Battle Mountain Gold. Also in March 1997, Elers 
was named Chairman of the Boards of Directors of Crown Butte 
Resources Ltd. and Crown Butte Mines, Inc.
    He earned bachelor's degrees in both geological engineering 
and mining engineering from the University of Arizona College 
of Mines, and completed the Program for Management Development 
at Harvard's Graduate School of Business Administration.
    Elers is on the Board of Directors of the National Mining 
Association and the SME Foundation of A.I.M.E and was formerly 
on the Board of Niugini Mining Ltd. He has previously served on 
the Board of Directors of the Fertilizer Institute, the 
Northwest Mining Association, was Chairman of the Western 
Governors' Mining Advisory Council, and was President of the 
New Mexico Mining Association. He currently serves on a number 
of international relations and Houston civic boards, and is a 
member of the American Institute of Mining, Metallurgical and 
Petroleum Engineers, and the Canadian Institute of Mining. He 
was awarded the Order of Simon Bolivar by the President of the 
Republic of Bolivia for services to that nation. He and his 
wife Sandy reside in Houston, Texas.

                                ------                                


                           Supplemental Sheet

               to the Written Testimony of Karl E. Elers

Name: Karl E. Elers, Chairman of the Board, Crown Butte Mines, 
Inc.
Address: 333 Clay Street, 42nd Floor, Houston, Texas 77002-4103
Telephone No.: (713) 653-7244
Summary of Comments:
    Crown Butte, the Administration and certain special 
interest groups entered into an Exchange Agreement on August 
12, 1996. Mr. Elers testimony recounts the chronology of events 
that occurred leading up to the agreement.

                                ------                                


Statement of Michael S. Clark, Executive Director, Greater Yellowstone 
                               Coalition
    Madam Chair and members of the Committee. Thank you for inviting me 
to testify today. My name is Michael Clark and I am the Executive 
Director of the Greater Yellowstone Coalition, a Bozeman, Montana-based 
organization with field offices in Cody, Wyoming and Idaho Falls, 
Idaho. Fourteen years old and with a membership of over 7400 
individuals, 119 corporate members and 120 organizational members, 
GYC's mission is to preserve and protect the Greater Yellowstone 
Ecosystem and the communities it sustains.
    The Greater Yellowstone Ecosystem consists of the two national 
parks, Yellowstone and Grand Teton, and seven national forests, and 
numerous thriving gateway communities. The area totals some 18 million 
acres of public and private land. It is the only largely intact 
ecosystem in the Lower 48 states.
    Today I also represent the Beartooth Alliance, Gallatin Wildlife 
Association, Montana Wildlife Federation and the Wyoming Outdoor 
Council. Each of these conservation groups has worked closely with us 
on the New World Mine situation.
    Thank you for the opportunity to testify today on the New World 
Mine Agreement negotiated in 1996 between the Clinton Administration, 
Crown Butte companies and the conservation community. Congress now has 
the key role in creating and approving legislation that will resolve 
this issue. We welcome your leadership and look forward to working with 
you in completing this Agreement.
    This is an agreement that lays to rest one of the most 
controversial and contentious public lands battles in the West in 
recent years. It does so by breaking new ground in resolving conflicts 
through forming a consensus solution with three very different partners 
that protects the interest of each party. It does so by removing the 
threat of a huge mine from the mountains above Yellowstone Park. It 
does so by providing a fair market value for the company's property. 
And it does so by providing funds for reclamation of the historic 
mining lands at the site.
    Eighteen months ago the idea that the mining companies and the 
conservation community would come to you with a common position and a 
common perspective would have been unthinkable.
    We believe this agreement is a fair deal for the company, for the 
public and for the ecosystem which the conservation Unity seeks to 
protect.
    It provides a useful example of how other environmental battles 
might be settled. To better understand how we came to this agreement, 
it may be useful to look at the actual proposal to create the gold mine 
at Henderson Mountain within the New World Mining District.
    First, let me say that neither GYC nor the conservation community 
are in the business of opposing mines. For GYC, this is the first one 
we have ever opposed. We did so because we thought the mine threatened 
to create irreversible direct and indirect impacts to Yellowstone Park. 
We chose to fight against these impacts just as we have opposed the 
potential irreversible impacts that could have been caused by proposals 
to develop geothermal acquirers near the Park's boundaries.
    The mine plans called for extracting $800 million in gold, silver 
and copper from Henderson Mountain, which lies at the head of three key 
drainages in Greater Yellowstone: Miller Creek, a tributary of the 
Lamar River which flows through Yellowstone Park and joins the 
Yellowstone River within the Park, Fisher Creek; which flows into the 
Wild and Scenic Clarks Fork of the Yellowstone; and Daisy Creek, which 
flows north into the Stillwater River. All of these rivers are 
tributaries of the Yellowstone River.
    The mine would carve deep tunnels under Henderson Mountain into an 
ore body containing very high concentrations of acid-producing 
materials. It would create a mill site and a year-round work camp for 
175 persons during the 15-18 year mine life. And it would build a 
tailings impoundment the size of 70 football fields, containing 5.5 
million tons of acidic mine wastes. It would do all of this in an 
earthquake-prone area, at altitudes above 8,000 feet, where snow often 
falls 10 months of the year. In addition, the presence of an 
industrial-scale mining operation on the edge of Yellowstone Park and 
adjacent to the Absaroka-Beartooth Wilderness would change the wild 
nature of the place forever.
    The mine proposal sparked almost universal opposition in local and 
regional communities and across the nation. Cooke City residents 
organized a local group, the Beartooth Alliance, which formed the early 
core of opposition to the mine. Regional and national groups such as 
GYC and American Rivers provided scientific and technical support in 
the permitting process and carried out a public education program aimed 
at the general public and the media. The Gallatin Wildlife Association, 
Montana Wildlife Federation, Sierra Club, Northern Plains Resource 
Council, Northwest Wyoming Resource Council, Wyoming Wildlife 
Federation and Wyoming Outdoor Council worked with their members to 
educate the public about the mine proposal. The Sierra Club Legal 
Defense Fund provided legal assistance. Many other conservation groups 
and community groups expressed concern about the proposal to mine gold 
near Yellowstone.
    Early on, Senator Max Baucus voiced his concerns and that of many 
constituents when, in 1993, he sent a letter to the mining companies 
which said, in part, ``I am not willing to gamble with a national 
treasure for short-term gain.'' The National Park Service came out 
against the mine, saying it feared the operations might harm 
Yellowstone National Park.
    A 1995 poll revealed that Montanans opposed the mine by a 2 to 1 
margin. Indeed, by 1995, practically every newspaper in Montana and 
Wyoming had editorialized against the mine. In Cody, Wyoming, 67 
percent of the members of the Chamber of Commerce said they opposed the 
mine.
    Leading national publications, including the NY Times and US News 
and World Report, editorialized against the mine and called for a trade 
or buy-out of the operation.
    Wyoming's Senator Craig Thomas announced his opposition to the mine 
in 1996, in a press release stating, ``There is only so long you can 
withhold your opinion when in fact you have a strong conviction that 
this might be the worst place to site a mine.'' His statement met with 
broad support in the region.
    These kinds of activities and statements led to the joint agreement 
in August of last year to halt the mine proposal and seek a new 
solution.
    The New World Mine Agreement, announced by the President in 
Yellowstone Park on August 12, 1996, calls for Crown Butte to cease its 
efforts to develop the New World mine and to transfer all of its 
holdings in the New World Mining District to the Federal Government.
    In return, the company was promised Federal assets worth $65 
million. Of this total, $22.5 million would be set aside in an escrowed 
account to underwrite reclamation of historic mining pollution at the 
New World mine site. In addition, plaintiffs in the Federal Clean Water 
Act lawsuit Beartooth et al. v. Crown Butte Mines et al. agreed to seek 
a quick and equitable settlement of their lawsuit consistent with the 
Agreement.
    On April 12, 1997, the Clinton Administration offered to the mining 
companies an exchange of Federal royalty payments from Montana coal, 
oil and gas operations equal to the $65 million value in the Agreement. 
One month later Crown Butte Mines said it would accept the offer if it 
could be assured that Congress would approve the overall deal.
    Under the agreement, Crown Butte's property has to be appraised 
under the National Standards Act which requires a fair market appraisal 
of property purchased or exchanged by the Federal Government. If the 
appraisal determines that the company's property is less in value than 
the $65 million, a new agreement may be called for. If the appraisal 
says the company's property is worth more on the market, the total 
amount to be paid by the Federal Government to Crown Butte cannot 
exceed $65 million, thus capping the amount for which the Federal 
Government is responsible.
    If the Federal Government transfers property to Crown Butte, these 
lands must also be appraised using standard Federal appraisal 
measurements. This approach assures all parties that a market-based 
assessment is utilized.
    To complete the deal, Crown Butte has to also provide to the 
Federal Government title to all of its holdings in the New World Mining 
District, including relevant leased assets owned by other parties. If 
this is not possible, the agreement calls for the three parties to seek 
a new understanding based upon the assets which each side can provide. 
Thus far, Crown Butte has not been able to reach an agreement with 
Margaret Reeb, a landowner who had previously signed a long-term mining 
lease with Crown Butte to develop her part of the New World ore body. 
If Crown Butte cannot reach an agreement with Ms. Reeb, the three 
parties to the Agreement will then determine how to conclude the 
original agreement.
    You have asked me to specifically explain how the agreement was 
negotiated.
    The roots of this unique understanding between the conservation 
community, the mining companies and the Administration lie in a complex 
chain of events which took place in the summer and fall of 1995.
    In September, 1993, nine groups, utilizing the Sierra Club Legal 
Defense Fund as counsel, filed suit against several Crown Butte and 
Noranda companies charging that they had violated the Clean Water Act 
in their operations at the mine site. The Plaintiff Group is composed 
of: Beartooth Alliance, Greater Yellowstone Coalition, Gallatin 
Wildlife Association, Montana Wildlife Federation, Northwest Wyoming 
Resource Council, Northern Plains Resource Council, Sierra Club, 
Wyoming Wildlife Federation, and the Wyoming Outdoor Council. The trial 
date was set for November, 1996.
    The Crown Butte EIS had been delayed for several years due to the 
complexity of the proposal and its possible impact on the area. Co-led 
by the U.S. Forest Service and the State of Montana and financed by 
Crown Butte mining companies, the EIS had attracted national attention 
due to concerns about the possible impact of the proposed mine on 
Yellowstone Park and the Clarks Fork of the Yellowstone, Wyoming's only 
Wild and Scenic River. As the EIS process continued, major concerns 
surfaced that had not been adequately addressed by the EIS drafts.
    Growing public concern about the mine's threatened impact upon 
Yellowstone National Park were expressed in thousands of letters, e-
mail and phone calls to the White House and Federal elected officials.
    In rapid succession, the following took place:

    On August 20, 1995, President Clinton flew over the site and then 
met with conservation community leaders. He expressed his own doubts 
about the wisdom of a mine next to Yellowstone and announced a two-year 
moratorium on mining claims in the New World Mining District.
    In October, 1995, Federal district court Judge Jack Shanstrom ruled 
that Crown Butte and its affiliated companies were violating the Clean 
Water Act for failing to obtain permits for ongoing water pollution at 
the New World Mining District. The companies faced a November, 1996 
trial date to assess civil penalties for those violations.
    The President's announcement and the events related above generated 
major new media attention on the mine, which resulted in numerous 
newspaper and TV features on the mine battle.
    As these events unfolded, the conservation community began to seek 
ways to communicate informally with top leadership at Noranda. We 
indicated that if they wished to withdraw from the operations, we would 
cooperate with them in seeking a consensus on halting the mine and 
stopping the lawsuit. Finally, we asked for a meeting with them. In 
November, 1995, officials at Crown Butte and Hemlo Gold agreed to a 
private meeting with representatives of the conservation community.
    On December 15, 1995, the meeting took place at Noranda 
headquarters in Toronto. GYC proposed to the company that it should 
withdraw from the mining venture and that, if it did so, there might be 
a way of exchanging company's assets at the mine site for Federal 
assets in other places.
    These discussions resulted in the following agreements:

         The company would continue the dialog as long as the 
        talks were kept confidential;
         The company would consider a GYC offer to initiate 
        conversations with the Clinton Administration to explore a 
        mutual interest in reaching an agreement to trade out company 
        assets for Federal assets:
         GYC asked for a written statement from the companies 
        authorizing GYC to make an approach to the Clinton 
        Administration about a possible halt to the mine and an 
        exchange of assets; and
         GYC and the mining companies mutually agreed that the 
        companies believed they could permit the mine and operate it 
        safely and that GYC believed that a safe mine was not possible; 
        therefore, each party would continue its respective efforts 
        until we could discover if an agreement was possible. The 
        company would do everything possible to get the mine permitted, 
        the conservation community would do everything in our power to 
        stop approval of the mine.
    On January 8, 1996, Crown Butte sent a letter to GYC authorizing an 
approach to the Clinton Administration about a possible exchange of 
assets if the New World mine was halted.
    We immediately asked the staff of the Council on Environmental 
Quality at the White House to meet with us and the companies to 
consider whether or not an exchange of assets was of mutual interest if 
the New World mine was halted.
    On February 1, 1996, representatives of Hemlo Gold and Crown Butte 
and representatives of the conservation group of plaintiffs met with 
CEQ staff in Washington DC to discuss a halt to the New World Mine and 
an exchange of assets. There was mutual agreement that talks should be 
pursued. All parties agreed to keep the talks confidential. The prior 
agreements between GYC and the company to continue their respective 
efforts to either permit or halt the mine remained in effect.
    In March, 1996, the Clinton Administration created a special task 
force on the New World Mine led by Associate Attorney General John 
Schmidt and Ambassador James Pipkin of the Interior Department. In the 
meetings which followed, Ian Byer, Chairman of Crown Butte and CEO of 
Hemlo Gold, and Joe Baylis, President of Crown Butte Mines, LTD, and 
General Counsel of Hemlo Gold, represented the company. Doug Honnold, 
Managing Attorney of the Northern Rockies office of the Sierra Club 
Legal Defense Fund and lead counsel for the plaintiffs in the Clean 
Water Act lawsuit, and I represented the conservation community and 
plaintiffs in our lawsuit.
    Discussions among the three parties began immediately and continued 
through the spring and early summer of 1996.
    In March, 1996, the Wyoming Legislature passed a law giving 
authority to the state to deal with out-of-state solid waste coming 
into Wyoming under its Industrial Siting Act. The law imposed a fee of 
$10 per ton on any waste created in another state that would be stored 
in Wyoming. It was described on the floor of the Wyoming Senate as a 
``rifle shot'' aimed at the proposed Noranda mine and the possibility 
of using Wyoming land as a storage facility for the mine's wastes.
    In June, 1997, Hemlo Gold announced that it was merging with Battle 
Mountain Gold Company of Houston, Texas and that its ownership in Crown 
Butte would transfer to Battle Mountain Gold. Talks continued during 
this period.
    The discussions reached a new intensity in late July since it 
seemed that an agreement was within reach. Face-to-face talks began in 
August and culminated on August 12, 1996 with President Clinton's 
announcement that an agreement had been reached to halt the mine, to 
trade assets, to settle the existing Clean Water Act lawsuit, and to 
clean-up the historic mining pollution at the site.
    Once the agreement was signed, the government began an immediate 
search for suitable properties to be used in the exchange. This special 
effort was led by the BLM. Our plaintiff groups were not intimately 
involved in that search although we did ask for periodic reports and we 
were given very generic descriptions of the progress. We developed a 
set of criteria to guide our response to any proposal. Key to this was 
the belief that we did not want to solve a problem on the edge of 
Yellowstone only to see it become a major environmental problem for 
some other community.
    In December, 1996, Montana Governor Marc Racicot opened discussions 
about a possible trade involving timber lands in western Montana and 
coal lands in eastern Montana. We met with Gov. Racicot, 
representatives of the mining companies and members of the Federal task 
force on the Crown Butte Agreement to learn of the proposals. The 
Montana Wildlife Federation, the Montana Wilderness Association and the 
Northern Plains Resource Council were the primary groups that evaluated 
these potential exchange lands for the conservation community. They 
examined the proposals in detail and concluded that neither proposal 
was acceptable. Simultaneously, the proposals created a major public 
outcry over the sale of public lands in Montana and the proposals were 
withdrawn.
    On April 12, 1997, after a one-month extension of the search, 
agreed to by all three parties to the Agreement, the Administration 
offered royalties from energy deposits in Montana as the method for 
exchanging $65 million in Federal assets for the mining companies' 
property. One month later Crown Butte said that it would accept this 
approach provided that the assets were approved by Congress. Which 
brings us to the present time.
    Some questions have been raised about why the Crown Butte EIS was 
halted by the Agreement. NEPA sets up a process for evaluating and 
assessing a specific proposal which might have an impact upon the 
environment. Once the companies decided to halt their proposed mine, 
there was nothing to do an EIS on. However, the BLM and the Forest 
Service are completing an EIS on the proposed withdrawal of public 
lands within the New World Mining District from further mining 
activity.
    We believe the approach incorporated in the New World Agreement is 
a valid one which has addressed a multitude of very complex concerns 
about a long-running and highly contentious public land dispute. This 
consensus approach, which protected the interests of the public and the 
mining companies, may have relevance in similar situations elsewhere.
    We continue to believe that the New World Agreement is a good deal 
for the American people. We also acknowledge that it has been far more 
difficult to achieve than we had originally anticipated, but it is 
still a valid way of resolving the New World Mine situation. Without 
it, the conservation community would still be involved in a highly 
confrontational and litiguous confrontation with the mining com-

panies and the battle would still be playing out in the front pages of 
newspapers and tying up untold hours of time for many Federal public 
servants.
    The Agreement provides a method of ending a long and difficult 
battle over the proposed gold mine that threatens Yellowstone Park and 
the Clarks Fork of the Yellowstone River.
    It provides the company with a fair exchange for its assets.
    It creates a $22.5 million reclamation fund to clean-up and restore 
the polluted lands on Henderson Mountain and it provides research funds 
to study the situation, offering the possibility that the clean-up 
could benefit other polluted mining sites in the interior West.
    And it ensures that the wild character of the lands adjacent to 
Yellowstone and the Absaroka-Beartooth Wilderness will be protected 
from industrial development for the region's wildlife and for the 
benefit of future generations.
    We now look to the leadership of the Congress to conclude the New 
World Agreement by creating and passing legislation which permanently 
resolves this situation.
    Thank you for the opportunity to testify. I will be glad to answer 
any questions.

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