[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]




 
    OVERSIGHT HEARING ON MINING, THE AMERICAN ECONOMY AND NATIONAL 
   SECURITY--THE ROLE OF PUBLIC LANDS IN MAINTAINING A NATIONAL ASSET

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

                           OVERSIGHT HEARING

                               before the

                         SUBCOMMITTEE ON ENERGY
                         AND MINERAL RESOURCES

                                 of the

                         COMMITTEE ON RESOURCES
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                   FEBRUARY 23, 1999, WASHINGTON, DC

                               __________

                           Serial No. 106-10

                               __________

           Printed for the use of the Committee on Resources


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house
                                   or
           Committee address: http://www.house.gov/resources

55-675    U.S. GOVERNMENT PRINTING OFFICE
                             WASHINGTON : 1999





                         COMMITTEE ON RESOURCES

                      DON YOUNG, Alaska, Chairman
W.J. (BILLY) TAUZIN, Louisiana       GEORGE MILLER, California
JAMES V. HANSEN, Utah                NICK J. RAHALL II, West Virginia
JIM SAXTON, New Jersey               BRUCE F. VENTO, Minnesota
ELTON GALLEGLY, California           DALE E. KILDEE, Michigan
JOHN J. DUNCAN, Jr., Tennessee       PETER A. DeFAZIO, Oregon
JOEL HEFLEY, Colorado                ENI F.H. FALEOMAVAEGA, American 
JOHN T. DOOLITTLE, California            Samoa
WAYNE T. GILCHREST, Maryland         NEIL ABERCROMBIE, Hawaii
KEN CALVERT, California              SOLOMON P. ORTIZ, Texas
RICHARD W. POMBO, California         OWEN B. PICKETT, Virginia
BARBARA CUBIN, Wyoming               FRANK PALLONE, Jr., New Jersey
HELEN CHENOWETH, Idaho               CALVIN M. DOOLEY, California
GEORGE P. RADANOVICH, California     CARLOS A. ROMERO-BARCELO, Puerto 
WALTER B. JONES, Jr., North              Rico
    Carolina                         ROBERT A. UNDERWOOD, Guam
WILLIAM M. (MAC) THORNBERRY, Texas   PATRICK J. KENNEDY, Rhode Island
CHRIS CANNON, Utah                   ADAM SMITH, Washington
KEVIN BRADY, Texas                   WILLIAM D. DELAHUNT, Massachusetts
JOHN PETERSON, Pennsylvania          CHRIS JOHN, Louisiana
RICK HILL, Montana                   DONNA CHRISTIAN-CHRISTENSEN, 
BOB SCHAFFER, Colorado                   Virgin Islands
JIM GIBBONS, Nevada                  RON KIND, Wisconsin
MARK E. SOUDER, Indiana              JAY INSLEE, Washington
GREG WALDEN, Oregon                  GRACE F. NAPOLITANO, California
DON SHERWOOD, Pennsylvania           TOM UDALL, New Mexico
ROBIN HAYES, North Carolina          MARK UDALL, Colorado
MIKE SIMPSON, Idaho                  JOSEPH CROWLEY, New York
THOMAS G. TANCREDO, Colorado

                     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       ROBERT A. UNDERWOOD, Guam
WILLIAM M. (MAC) THORNBERRY, Texas   NICK J. RAHALL II, West Virginia
CHRIS CANNON, Utah                   ENI F.H. FALEOMAVAEGA, American 
KEVIN BRADY, Texas                       Samoa
BOB SCHAFFER, Colorado               SOLOMON P. ORTIZ, Texas
JIM GIBBONS, Nevada                  CALVIN M. DOOLEY, California
GREG WALDEN, Oregon                  PATRICK J. KENNEDY, Rhode Island
THOMAS G. TANCREDO, Colorado         CHRIS JOHN, Louisiana
                                     JAY INSLEE, Washington
                                     ------ ------
                    Bill Condit, Professional Staff
                     Mike Henry, Professional Staff
                  Deborah Lanzone, Professional Staff
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held February 23, 1999...................................     1

Statements of Members:
    Cubin, Hon. Barbara, a Representative in Congress from the 
      State of Wyoming...........................................     1
        Prepared statement of....................................     3
    Gibbons, Hon. Jim, a Representative in Congress from the 
      State of Nevada............................................     6
    Rahall, Hon. Nick, a Representative in Congress from the 
      State of West Virginia, prepared statement of..............    24
    Underwood, Hon. Robert A., a Delegate in Congress from Guam..     4
        Prepared statement of....................................     5

Statements of witnesses:
    Brobst, Dr. Donald, Society of Economic Geologists...........    25
        Prepared statement of....................................    33
    d'Esposito, Stephen, President, Mineral Policy Center........    11
        Prepared statement of....................................    58
    Lawson, Richard L., President, National Mining Association...     7
        Prepared statement of....................................    46
        Additional material submitted by.........................    38
        Additional material submitted by.........................    40
    McKinley, Michael J., Minerals Information Team, U.S. 
      Geological Survey..........................................     9
        Prepared statement of....................................    32
    Menzie, Dr. David W., Minerals Information Team, U.S. 
      Geological Survey..........................................    22
        Prepared statement of....................................    80
    Silver, Douglas, Balfour Holdings, Inc.......................    21
        Prepared statement of....................................    71

Additional material supplied:
    Dobra, John L., PhD., Director, Natural Resource Industry 
      Institute, prepared statement of...........................   106
    Drozdoff, Leo M., Division of Environmental Protection, 
      additional comments of.....................................   102
    Evans, Michael K., President, Evans Group, material submitted 
      by.........................................................   138
    Freeport-McMoRan Copper & Gold Inc., Washington, DC, Excerpt 
      from 1998 Annual Report....................................    95
    King, W. Russell, Senior Vice President, Freeport-McMoRan 
      Copper & Gold Inc., Washington, DC, prepared statement of..    40
    Lutley, John, President, The Gold Institute, material 
      submitted by...............................................   148
    Menzie, Dr. W. David, USGS, additional material submitted by.   112
    Milling-Stanley, George, World Gold Council, prepared 
      statement of...............................................   104
    Silver, Douglas, President, Balfour Holdings, Inc., material 
      submitted by...............................................   125


    OVERSIGHT HEARING ON MINING, THE AMERICAN ECONOMY AND NATIONAL 
   SECURITY--THE ROLE OF PUBLIC LANDS IN MAINTAINING A NATIONAL ASSET



                       TUESDAY, FEBRUARY 23, 1999

              House of Representatives,    
                     Subcommittee on Energy and    
                                     Mineral Resources,    
                                    Committee on Resources,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2 p.m., in 
Room 1324, Longworth Office Building, Hon. Barbara Cubin 
[chairwoman of the Subcommittee] presiding.

 STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF WYOMING

    Mrs. Cubin.  I want to welcome all of you to the 
Subcommittee hearing, and certainly, the new Ranking Member, 
Mr. Underwood. I am delighted to have you in this position, and 
I know we will have a lot of issues that we will be working on 
together.
    We don't have votes until 5 p.m., and that is one of the 
reasons that we don't have more members here for the 
Subcommittee hearing. I think that this is important that we go 
ahead and get everything accomplished that we can for the 
record.
    So, I do want to welcome the witnesses and members of the 
public to this inaugural hearing of the Subcommittee on Energy 
and Mineral Resources, of the 106th Congress. Before we get 
down to today's hearing, though, we do have some new members on 
the Subcommittee and I was going to introduce them, but since 
they are not here, I will just tell you about them. We have Bob 
Schaffer from the fourth district of Colorado, who was a member 
of the Resources Committee last year, but not of this 
Subcommittee; Congressman Greg Walden of the second district of 
Oregon, and Tom Tancredo, of the sixth district of Colorado. On 
the other side of the aisle, Mr. Underwood, the Delegate from 
Guam, as I already mentioned, is our Ranking Member for the 
106th Congress. We have already discussed some things that we 
will be working on, and I don't know if you wanted to talk 
about your new members or if you want me to mention them. There 
they are.
    [Laughter.]
    We have Delegate Faleomavaega from American Samoa, and 
Congressman Patrick Kennedy from the first district of Rhode 
Island is a new member on the Subcommittee, and Congressman Jay 
Inslee from the first district of Washington. I am looking 
forward to working with all the new members.
    Today's hearing will address concerns the Subcommittee has 
regarding the domestic hardrock mining industry and the role of 
public lands in providing an exploration base for the discovery 
of new metal mines to replace dwindling reserves. Last 
Congress, the Subcommittee dedicated a lot of time and energy 
to problems of the oil and gas producers on public lands, 
including the Outer Continental Shelf. There remains serious 
concerns and serious problems about the continuing viability of 
independent oil and gas producers in this country within the 
dismal price environment for both crude oil and natural gas 
over the last year and one-half or so. So there are things that 
we have yet to try to resolve to help gain access to public 
lands for purposes of exploration and production, but not just 
in oil and gas, in mining as well.
    Metal prices are similarly depressed, perhaps not as much 
as in the petroleum industry, but they are depressed, as are 
many basic commodity prices, as a result of the slowdown in the 
global economy, for one thing. Yet, society continues to demand 
goods fabricated with metals and non-metallic minerals which we 
may import in the raw or finished state. Furthermore, the U.S. 
became the world's second largest producer of gold about a 
decade ago, a net exporter of the metal, which improves our 
balance-of-trade picture. So it is important that we help 
bolster that industry.
    Just last week, the Commerce Department announced that the 
1998 trade deficit was the largest ever in terms of actual 
dollars. It would have been even worse if we had not had the 
contribution of our domestic mining industry and the energy 
industries, too.
    The Subcommittee will return to important business left 
unfinished last year with regard to valuing oil and gas for 
royalty purposes, and getting the Federal Government to aid, 
not hinder, companies seeking to develop all manner of energy 
and mineral deposits on the public lands and the OCS, and, of 
course, we want this to be done in an environmentally-sound 
fashion.
    But coming from the West, coming from Wyoming, seeing the 
reclamation in Wyoming, where you cannot tell where the virgin 
land begins and the reclaimed land ends, I know that we can 
develop these resources in an environmentally-sound manner and 
still be good stewards to the land. Educating other members on 
this Committee is something that I very much want to do. When 
we took the leadership to the West, and we took some members 
from the eastern States to the West the summer before last, and 
they saw what we actually have in the West, how we have taken 
good care of the public lands, how we've been able to produce 
the resources, and save the environment at the same time, for 
our children, and our children's children, it made a big 
difference. So educating the members of the Subcommittee that 
maybe have never seen what good mining practices are, is 
something that we will be able to get to this year.
    We have invited our witnesses today to give us an 
``update'' on the role of public lands and hardrock mining in 
the American economy and mining's overall contribution to the 
national economy and to our military security.
    Now that we are back from the President's Day recess, it 
seems fitting to note that Abraham Lincoln recognized the 
importance of a strong mining industry in a letter that he 
wrote to the Speaker of the House of Representatives on the 
afternoon of the date of his ``date with destiny''--you might 
say, April 14, 1865. It was just before he went to Ford's 
Theater. President Lincoln wrote, and this is a quote: ``I have 
very large ideas of the mineral wealth of our Nation. I believe 
it practically inexhaustible. It abounds all over the western 
country, from the Rocky Mountains to the Pacific, and its 
development has scarcely commenced. Tell the miners from me, 
that I shall promote their interests to the utmost of my 
ability; because their prosperity is the prosperity of the 
Nation, and we shall prove in a very few years that we are, 
indeed, the treasury of the world.''
    Now, for a third or fourth consecutive year, the Clinton 
Administration's budget request includes provisions which, if 
enacted, would only harm, not help, our domestic miners in the 
fight to stay competitive globally. Some of these are tax law 
changes which are not the Committee's charge, they are not 
under this jurisdiction, while others, such as royalties and 
reclamation fees, do fall within our jurisdiction. We are not 
looking at the details of such proposals today, however. We are 
taking the long view to determine the role of public land, and 
what role those lands should play in maintaining a key domestic 
industry.
    This administration has made it a mission to change the 
manner in which hardrock minerals are disposed of on public 
lands. That is to radically reform the Mining Law of 1872 
through regulation, by statute, and huge land withdrawals, is 
the way it appears to me. I think it is time to find out the 
consequences that such attitudes have had, and will have, on 
those who would invest their capital toward finding mineral 
deposits and then developing mines. My hope is that, as with 
the proposals to aid our domestic oil and gas producers, we can 
find bipartisan solutions to the problems of our public lands 
miners as well.
    I now recognize our Ranking Member, Mr. Underwood, for any 
opening statement that he might have.
    [The prepared statement of Mrs. Cubin follows:]

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

    Today's hearing will address concerns the Subcommittee has 
regarding the domestic hardrock mining industry and the role of 
public lands in providing an exploration base for the discovery 
of new metal mines to replace dwindling reserves. Last Congress 
the Subcommittee dedicated much of its time to problems of our 
oil and gas producers on public lands, including the outer 
continental shelf--and there remain serious concerns about the 
continuing viability of independent oil and gas operators in 
the dismal price environment for both crude oil and natural gas 
over the last year and one-half or so.
    But, metal prices are similarly depressed (perhaps not as 
much as for the petroleum business) as are many basic commodity 
prices as a result of the slowdown of the global economy. Yet, 
society continues to demand goods fabricated with metals and 
non-metallic minerals which we may import in the raw or 
finished state. Furthermore, the U.S. became the world's second 
largest producer of gold about a decade ago, a net exporter of 
the metal, which improves our balance of trade picture. Just 
last week the Commerce Department announced that the 1998 trade 
deficit was the largest ever in terms of actual dollars. It 
would have been worse without the contribution of our domestic 
mining industry--and energy industries, too.
    The Subcommittee will return to important business left 
unfinished last year with regard to valuing oil and gas for 
royalty purposes, and getting the Federal Government to aid, 
not hinder, companies seeking to develop all manner of energy 
and mineral deposits on the public lands and the OCS, in an 
environmentally sound fashion. However, our witnesses today 
have been invited to ``update'' the Subcommittee on the role of 
public lands hardrock mining in the American economy, and 
mining's overall contribution to our national economy and 
military security.
    Now that Congress is back from the President's Day recess 
it seems appropriate to note that Abraham Lincoln recognized 
the importance of a strong mining industry in a letter he wrote 
to the Speaker of the House of Representatives on the afternoon 
of his date with destiny, April 14, 1865 before going to Ford's 
Theater. President Lincoln wrote:
        I have very large ideas of the mineral wealth of our Nation. I 
        believe it practically inexhaustible. It abounds all over the 
        western country, from the Rocky Mountains to the Pacific, and 
        its development has scarcely commenced. Tell the miners from 
        me, that I shall promote their interests to the utmost of my 
        ability; because their prosperity is the prosperity of the 
        Nation, and we shall prove in a very few years that we are 
        indeed the treasury of the world.''
    Now, for the third or fourth consecutive year the Clinton 
Administration's budget request includes provisions which if enacted 
could only harm--not help--our domestic miners in the fight to stay 
competitive globally. Some of these are tax law changes which are not 
this Committee's charge, while others, such as royalties and 
reclamation fees, do fall within our jurisdiction. We are not looking 
at the details of such proposals today, however. Rather we are taking 
the long view to determine the role public lands should play in 
maintaining a key domestic industry.
    This Administration has made it a mission to change the 
manner in which hardrock minerals on public lands are disposed, 
i.e., to radically reform the 1872 Mining Law, by statute or by 
regulation changes and huge land withdrawals it would appear. 
Its time to find out the consequences such attitudes have had, 
and will have, upon those who would invest their capital toward 
finding mineral deposits and then developing mines. My hope is 
that as with the proposals to aid our domestic oil and gas 
producers we can find bipartisan solutions to the problems of 
our public lands miners.
    I now recognize our Ranking Member, Mr. Underwood, for any 
opening statement he may have.

 STATEMENT OF HON. ROBERT A. UNDERWOOD, A DELEGATE IN CONGRESS 
                           FROM GUAM

    Mr. Underwood. Thank you, Madam Chairwoman. As the 
Representative of Guam, I am always pleased to hear about the 
Representatives from the West. I guess I am the furthest west. 
I am so far west, I may be a little bit east of Washington.
    [Laughter.]
    But we certainly appreciate the opportunity to receive a 
primer on the domestic hardrock mineral industry as our first 
Subcommittee meeting during the 106th Congress. Hardrock 
mineral production in this country occurs mainly in the West on 
what is--or once was--public land under the 1872 Mining Law. 
Many in the Congress, the media, and the public believe the 
1872 law is antiquated and should be changed, while, overall, 
the mining industry opposes reform.
    On February 10, 1999, USA Today editorialized, ``Sure, 
mining creates jobs and taxes, but the industry doesn't need 
Federal subsidies to do that. Indeed, given the industry's 
economic strength, the least it could do is pay a royalty on 
the resources it extracts. The gas and oil industry creates 
jobs and generates tax revenue, and invests in exploration and 
pays royalties and still makes a bundle. More to the point, the 
land-grabs authorized by the anachronistic 1872 Mining Law are 
so outlandish that jobs and taxes are beside the point: 
Taxpayers are getting snookered.''
    Certainly, mining is a basic economic activity that 
supplies the strategic metals and minerals that are essential 
for agriculture, construction and manufacturing in the United 
States. The U.S. Geological Survey has estimated the value of 
U.S. raw nonfuel minerals production in 1998 at more than $40 
billion, which was a slight decrease from 1997. The USGS said 
the decrease occurred ``mostly because of falling metal 
prices.'' They predict continued growth in the U.S. economy in 
1999, but as a slower rate, providing a mild stimulus to the 
Nation's mineral-consuming industries. USGS also notes that, 
for the first time, the U.S. is now a net exporter of gold and 
silver. They believe that there is as much gold and silver and 
other hardrock minerals undiscovered as already extracted.
    So, it is of concern to learn, as those new to this issue 
do, that the individuals and corporations producing hardrock 
minerals, located on and extracted from public lands, do not 
pay a production fee or royalty to the United States. This is 
unlike all other resources taken from public lands. For 
example, oil, gas, and coal industries operating on public 
lands pay a 12.5 percent royalty on gross income of the 
operation. In addition, Indian tribes charge a royalty on all 
types of mining, including hardrock mining. In 1990, the 
average royalty paid to Indian tribes by copper mines was 13 
percent. In the private sector, gold royalties range from 5 to 
18 percent.
    A number of colleagues, including Representative George 
Miller and Nick Rahall, have advocated changing this situation 
for many years. Again this year, with the support of many 
Members of the House, they have introduced legislation to 
reform the archaic 1872 mining law. We respectfully request, on 
their behalf, that beyond this oversight hearing, the Chair 
schedule at least one legislative hearing this year to take 
testimony on these bills. I look forward to the testimony and 
to learning more about hardrock mining. Thank you.
    [The prepared statement of Mr. Underwood follows:]

  Statement of Hon. Robert Underwood, a Delegate in Congress from Guam

    We appreciate the opportunity to receive a primer on the 
domestic hard rock mineral industry as our first Subcommittee 
meeting during the 106th Congress. Hard rock mineral production 
in this country occurs mainly in the West on what is--or once 
was--public land under the 1872 Mining Law. Many in the 
Congress, the media and the public believe the 1872 law is 
antiquated and should be changed. While overall, the mining 
industry opposes reform.
    On February 10, 1999, USA Today editorialized, ``Sure, 
mining creates jobs and taxes. But the industry doesn't need 
Federal subsidies to do that. Indeed, given the industry's 
economic strength, the least it could do is pay a royalty on 
the resources it extracts. The gas and oil industry creates 
jobs and generates tax revenue, and invests in exploration and 
pays royalties and still makes a bundle. More to the point, the 
land-grabs authorized by the anachronistic 1872 Mining Law are 
so outlandish that jobs and taxes are beside the point: 
Taxpayers are getting snookered.''
    Certainly, mining is a basic economic activity that 
supplies the strategic metals and minerals that are essential 
for agriculture, construction and manufacturing in the United 
States. The U.S. Geological Survey has estimated the value of 
U.S. raw nonfuel minerals production in 1998 at more than $40 
billion, which was a slight decrease from 1997. The USGS said 
the decrease occurred ``mostly because of falling metal 
prices.' And, they predict continued growth in the U.S. economy 
in 1999, but at a slower rate, providing a mild stimulus to the 
nation's mineral consuming industries. USGS also notes that for 
the first time, the U.S. is now a net exporter of gold and 
silver. They believe that there is as much gold and silver, and 
other hard rock minerals undiscovered as already extracted.
    So it is of concern to learn, as those new to this issue 
do, that the individuals and corporations producing hard rock 
minerals located on and extracted from public lands do not pay 
a production fee or royalty to the United States. This is 
unlike all other resources taken from public lands. For 
example, oil, gas, and coal industries operating on public 
lands pay a 12.5 percent royalty on gross income of the 
operation. In addition, Indian tribes charge a royalty on all 
types of mining, including hardrock mining. In 1990, the 
average royalty paid to Indian tribes by copper mines was 13 
percent. In the private sector, gold royalties range from five 
to 18 percent.
    A number of colleagues, including Rep. George Miller and 
Rep. Nick Rahall, have advocated changing this situation for 
many years. Again this year, with the support of many Members 
of the House, they have introduced legislation to reform the 
archaic 1872 Mining Law. We respectfully request, on their 
behalf, that beyond this oversight hearing, the Chair schedule 
at least one legislative hearing this year to take testimony on 
these bills.

    Mrs. Cubin. Thank you, Mr. Underwood. I have a couple of 
things I have to say. First of all, Bill told me that I said 
President Clinton made that statement about mining. Forgive me. 
I'm sure you can tell by the time it was over, it was President 
Lincoln who made that remark, and it's not funny.
    Mr. Underwood. They are often confused.
    [Laughter.]
    Mrs. Cubin. Not easily. Another thing that I'd like to say 
is that in the 104th Congress, we did pass mining law reform--
the mining law of 1872--and it did include a 5 percent net 
royalty payment. The President did veto that--President 
Clinton, not President Abraham Lincoln, but President Clinton 
vetoed that. So, I think it's only fair to say that there is 
bipartisan desire to reform the law, but not in a way that 
makes it more difficult for an already struggling industry to 
try to make a living for all of the miners.
    And now, I would like to welcome Congressman Walden from 
Oregon to his first Subcommittee hearing, and Congressman 
Gibbons, who I say has lived the life of every boy's dream. The 
only thing he hasn't been is a fireman--and he's going to do 
that next he says--he's been a fighter pilot, a lawyer, a 
geologist, now a Congressman, and pretty soon, a fireman. So 
welcome.
    Do either of you have any opening statements? Congressman 
Gibbons.

  STATEMENT OF HON. JIM GIBBONS, A REPRESENTATIVE IN CONGRESS 
                    FROM THE STATE OF NEVADA

    Mr. Gibbons. Thank you, Madam Chairman, and I want to take 
just a brief moment to applaud you on your leadership on the 
issue of holding these oversight hearings to hear about the 
state of mining in our country today. I believe that mining is 
one of those industries which we have to protect, not 
devastate. It's not an industry that we can control the 
commodity price of the market materials that they produce, and 
as a result, for those who believe that we should bury the 
industry with enormous burdens of new taxes--they do pay taxes 
already on a number of things--we have to be very cautious on 
our approach to the industry, how it is looked after and 
preserved. After all, it is the only industry that allows us to 
have the quality of life that we have enjoyed through these 
many years.
    Madam Chairman, we've seen an exodus of mining companies 
from my State. We've seen an exodus of mining jobs--high-
paying, high-quality mining jobs--that provide men and women in 
the State of Nevada a wonderful living--allowing them not just 
to have a home, but to provide for their children; to provide 
for an education and a college education for their children.
    I am one of those who has had the experience of being from 
the mining industry. I can tell you that there are a number of 
challenges before us. The mining industry has stepped to the 
plate many, many times in an effort to address these issues, 
and will continue to do so.
    In my State, the mining industry is what we would like to 
call ``a good neighbor.'' It allows, not just for the 
development of the resource, but for communities of families to 
have a job and to live in a community in a better state of life 
than they ever had a chance or ever thought possible before.
    I am interested to hear from our witnesses today, Madam 
Chairman, about the state of the mining industry in our Nation; 
and I look forward to your leadership in this role. Thank you 
very much.
    Mrs. Cubin. Thank you Mr. Gibbons.
    I'd like to welcome Congressman Inslee to the hearing as 
well. Again, it is his first Subcommittee hearing and you're 
welcome to give any opening remarks, if you care to.
    Mr. Inslee. I will do some powerful listening, Madam Chair. 
Thank you.
    Mrs. Cubin. That is always good. I need to do it more often 
myself.
    Well, now I will introduce our first panel of witnesses: 
General Richard L. Lawson, president of the National Mining 
Association; Mr. Michael J. McKinley, Minerals Information 
Team, U.S. Geological Survey; and Steve d'Esposito, president 
of the Mineral Policy Center. If you would come to the table, 
and we look forward to hearing your testimony.
    Thank you very much. First, I would like the Committee to 
hear from General Lawson.

  STATEMENT OF RICHARD L. LAWSON, PRESIDENT, NATIONAL MINING 
                          ASSOCIATION

    Mr. Lawson. Chairperson Cubin, members of the Committee, I 
am Richard L. Lawson, the president of the National Mining 
Association. Our members are the enterprises that deliver to 
public use most of the basic material resources required to 
uphold and strengthen America in daily life--the miners and 
producers of coal, metals, and useful minerals; and the 
manufacturers of their equipment, and the suppliers of goods 
and services. Your oversight is timely and welcome.
    Our Nation has the world's largest and most useful 
combination of metal ores, minerals, and energy. We rank first 
or second in the world production of about 20 essential 
resources, and high in many more. We hold significant shares of 
world reserves, and in world markets our presence ensures free 
competition, imparts stability, and deters attempted 
cartelization for either economic extortion or political 
coercion.
    Many resources in the West are on the Federal land 
customarily called ``public land,'' a term that emerging 
practices belie. Public land alone contains more resources in 
variety and volume than major groupings of other nations; that 
is, the European Union and Japan. Our resources give us 
flexibility of national policy--national economic policy and 
national security policy.
    Yet the administration is in multiple ways, in multiple 
venues, locking these public resources away from public use--
doing so by direct action and by indirect action. It is doing 
all things possible to discourage exploration and to prevent 
development. Many acts are unauthorized by current law or 
unjustified by the facts. The proximity of Federal holdings has 
been used to quash by intimidation private activity on private 
property as well.
    This month, the administration put off-limits a big block 
of so-called ``public land'' in Montana. It is the most recent 
of almost half a dozen executive or regulatory confiscations.
    Also this month, another major metals company closed its 
last U.S. exploration office. Exploration budgets are down 50 
percent across the industry. No exploration now means no 
production in the future. Mining companies must have something 
to mine. Arbitrary delays and related risk hamper financing. 
They must go where they are allowed to produce minerals.
    This pattern of action is forcing America's mining industry 
overseas to volatile regions and countries that have yet to 
evolve stable political and economic institutions; that are not 
necessarily devoted to free market economics and trade, and 
that may harbor or discover, economic and political ambitions.
    These acts are also forcing U.S. dependence for essential 
resources on these places as well.
    Some say they don't care if mining leaves the United 
States, that it doesn't matter in this new age. They think that 
a future can be secured without basic material resources. They 
think that if they produce words and ideas in this information 
age, then nothing else is necessary.
    I know otherwise--that essential remains essential. I know 
that when anything threatens to destabilize the world 
economically or politically, America's young soldiers, sailors, 
and aircrews will be sent into harm's way to make it secure. I 
had to issue such orders as the Commander of U.S. Forces in 
Europe, and you know it, too.
    I care that the United States remains a major mining 
Nation, and it has nothing to do with my present employment. I 
care because my pilot son in the Air Force will be one of those 
first called upon to secure the source of something essential. 
If we withdraw from world markets, then he, and many thousands 
of our sons and daughters who will go with him will be at risk.
    U.S. mining is an element of national security. And the 
policy questions are these: Do we produce these resources, 
which we have at home, and keep our sons and daughters at home 
as well? Or do we send the activity, and our sons and daughters 
overseas?
    To envision the importance of mining to America, do just 
four things whenever you ride the subway to and from the 
Capitol:

        Never forget that the rails, the wheels, the cars, the 
        electric power that turns the wheels, that moves the 
        cars on the rails, and the control system that 
        coordinates everything--all of it began in a mine;
        Remember that every American in the year 1998 required 
        almost 47,000 pounds of new mined material that year;
        Remember that almost every material thing you use at 
        work and at leisure began in a mine, or required 
        something from a mine to make it, or grow it, or 
        process it;
        Remember that the Federal taxes due directly and 
        indirectly to mining typically equal now more than 3 
        percent of all revenue--all Federal revenue--greater 
        than the sum of taxes on alcohol, tobacco, and other 
        excise items put together.
    And always look up at the walls around the Rayburn boarding 
platform--look whether coming or going. Recall that on those 
walls are representations of history's foremost exponents of 
wisdom and law; and that Moses, the lawgiver, is one of those 
that has a central place. When he spoke to the people of the 
Promised Land, the scriptures say he told of, and I quote: ``. 
. . a land whose stones are iron, and out of whose hills, thou 
may dig brass. A land wherein thou shalt not lack anything.''
    America is such a land. Let us determine to keep it so. 
Thank you.
    [The prepared statement of Mr. Lawson may be found at the 
end of the hearing.]
    Mrs. Cubin. Thank you, General Lawson.
    I'd also like to welcome Delegate Eni Faleomavaega to his 
first Subcommittee hearing as well.
    Now, I'd like to recognize Mr. Michael J. McKinley, 
Minerals Information Team of the U.S. Geological Survey. I just 
have to say something first. My grandfather's brother was 
Oliver Otis Howard, who was one of the people who was 
instrumental in starting the USGS. There's a book written about 
him, and I'm going to have to get it, to find out for sure, 
because people have been arguing with me whether or not he was 
really one of the main guys, and I think he was.
    Anyway, so, I'd like to recognize then, Mr. McKinley.

 STATEMENT OF MICHAEL J. McKINLEY, MINERALS INFORMATION TEAM, 
                     U.S. GEOLOGICAL SURVEY

    Mr. McKinley. Thank you, Ma'am. Madam Chairman and members, 
I am Michael J. McKinley, a physical scientist with the U.S. 
Geological Survey, currently serving as the Chief of the Metals 
Section in the Minerals Information Team. I appreciate the 
opportunity to appear before you to discuss the role of 
metallic minerals in our national security and comment briefly 
on the availability of metallic minerals on public lands.
    Metallic minerals are a key component of the supply of 
materials essential to our national security. These minerals 
are considered to be strategic and critical when the Nation 
must rely on importing them. Few countries produce them, and 
their use is critical to military and industrial applications. 
Despite the dramatic changes in military readiness strategies 
in present years, the uses of these metallic minerals are still 
critical and most sources of supply are unchanged.
    For example, chromium is a metal that is used in stainless 
steel and in alloys in high performance aircraft. There is no 
substitute for chromium in either of these applications. 
However, 95 percent of the world's identified resources of 
chromium, which is extracted from chromite ore, are located in 
South Africa. The United States has no chromite ore reserves 
and only limited occurrences of chromite ore at all. As a 
Nation, we import 80 percent of the chromium we use; the 
remaining 20 percent is acquired through recycling. Although 
uses of chromium have changed over time, the supply of chromium 
has been a major concern since World War I.
    For many years, the U.S. Government has maintained 
stockpiles of strategic and critical minerals. However, as the 
Department of Defense has changed its primary war planning 
scenarios; strategies for maintaining an adequate supply of 
minerals have also changed. There were more than 80 materials 
identified in the Strategic and Critical Minerals Stock Piling 
Act of 1939, half of which are metals. Congress has authorized 
the sale of many of these stockpiled materials in response to 
changing strategies.
    Only three commodities have been designated by the 
Department of Defense to be stockpiled for future use: 
beryllium, a very light metal used in aircraft alloys; mica, an 
excellent insulator used in radar applications with extreme 
high voltage, and quartz crystals, used as a filter in 
electronics devices. Whether or not they are stockpiled, most 
of these materials are still strategic and critical, because 
they are still necessary for the equipment with which we defend 
ourselves in wartime and other emergencies. For example, of the 
more than 12 strategic and critical minerals used in modern 
fighter aircraft jet engines, only four are commercially 
recoverable via domestic sources.
    At present, there are 141 active metal mines, not including 
placer mines, in 16 States. Also, current U.S. laws permit 
location of mining claims on Federal lands in 19 States.
    The USGS has a long history of assessing the potential for 
undiscovered mineral resources. Modern systematic efforts to 
determine the potential for undiscovered resources, especially 
metallic mineral deposits, began in the early 1960's. In the 
early years of this effort, the products were qualitative, 
describing high, moderate, or low potential for occurrence of 
undiscovered mineral resources. More recently, probablistic 
quantitative assessments have been developed, resulting in 
reports that describe the probability of occurrence of 
identified quantities of specific mineral commodities.
    Mineral resource assessments have expanded over time to 
address the needs of numerous Federal land and resource 
planning efforts. The USGS, in coordination with the Bureau of 
Land Management and the Forest Service, under a Memorandum of 
Agreement, is conducting mineral resource assessments on 
individual land units, managed by the BLM and the Forest 
Service. Also, USGS is just completing a nationwide assessment 
of potential for undiscovered occurrences of gold, silver, 
copper, lead, and zinc. This national assessment estimates that 
about as much of these metals remains to be discovered as has 
already been discovered.
    Although many local-scale mineral resource assessments have 
been completed, or are in progress for BLM and the Forest 
Service, there is no national systematic assessment of the 
potential for metallic mineral resources on all Federal lands. 
Some of the factors that make such an estimate difficult 
include the dynamic nature of land status, with lands passing 
from public to private ownership, and vice versa; 
methodological difficulties that arise from the relatively 
small areas included in individual tracts of public land; the 
inadequacy of scientific data for making predictions in those 
small areas, and the inherent uncertainties in making 
probablistic assessments.
    The public lands may contain undiscovered deposits of 
mineral commodities that could be used to ensure the national 
security. However, ultimately, geologic factors, rather than 
land ownership, are the most effective predictors of potential 
for undiscovered mineral resources. For some commodities, such 
as chromite or bauxite ore, there is very little likelihood of 
ever identifying commercially significant resources in the 
United States.
    Thank you, Madam Chairman. I will be pleased to respond to 
any questions you may have.
    [The prepared statement of Mr. McKinley may be found at the 
end of the hearing.]
    Mrs. Cubin. Thank you, Mr. McKinley.
    Next, I would like to recognize Mr. Stephen d'Esposito, 
president of the Mineral Policy Center.

  STATEMENT OF STEPHEN d'ESPOSITO, PRESIDENT, MINERAL POLICY 
                             CENTER

    Mr. d'Esposito. Thank you, Chairman Cubin. Members of the 
Subcommittee, good afternoon. I am the president of Mineral 
Policy Center. I come here on behalf of our members and 
citizens all across the country, concerned about the 
environmental, social, and economic impacts of mining.
    Let me summarize some of the key economic facts related to 
mining as far as we see it. First, the United States is among 
the world's leading producers of many metals, including gold, 
copper, and silver. It has substantial domestic reserves.
    Second, changes in mineral exploration and development 
trends have causes that are multiple and complex. They include 
ore grade metal prices, government's stability, access to land, 
and available infrastructure.
    Third, while mineral development is flat or down in some 
parts of the U.S., this is not necessarily due to shortage of 
supply or environmental protection measures. Changes in metal 
prices are the most important factor.
    Fourth, unstable and depressed mineral and commodity 
prices, as well as increased mechanization, are reducing 
employment in mining.
    And, sixth, changes in the prices of metals will have 
vastly different impacts on each metal-producing country, 
region, and company. Some companies with low-cost operations, 
may benefit during this period. Some may pursue a strategy of 
buying other companies and projects rather than investing money 
in exploration.
    We should also not consider that drops in metal prices, and 
decreases in metals exploration, are not inherently bad for the 
United States or bad for the economy. For example, more 
recycling of metals would be good news for the environment, 
good news for the recycling industry, and good news in terms of 
preserving public lands.
    We do not believe that, when it comes to our public lands, 
the best economic option is extraction first. There is a strong 
and growing volume of evidence that the development of non-
extractive industries is in our national interest, particularly 
on public lands.
    Consider some of the following expert conclusions: Intact 
natural resources are increasingly coming to be seen as an 
economic asset. Counties with open space now rank among the 
fastest growing. It is no longer accepted as obvious, the 
widespread assumption that mining can be expected to lead to 
economic improvement for rural communities.
    Today's public lands policies run contrary to good 
economics, environmental protection, and common sense. We have 
singled out mining companies operating on public lands for what 
amount to multi-million dollar corporate welfare payments. 
Hardrock mineral producers claim that paying for Federal 
minerals would force a significant portion of them out of 
business. It won't. They pay royalties on State and private 
lands and on other Federal lands.
    Hardrock miners claim that they are somehow fundamentally 
different than other sectors of the industry. They are not, 
according to the U.S. Office of Technology Assessment. Hardrock 
mining interests argue they should not pay royalties on public 
lands because they already pay Federal taxes. This is a 
misleading argument. Most businesses pay taxes. Paying taxes is 
not an argument for getting free raw materials.
    Inaction is also creating a sizable taxpayer and 
environmental dent in our public lands. At some points, this 
bill will come due from yesterday's, today's and tomorrow's 
abandoned mines. Our estimate is that the cleanup cost could be 
as much as $72 billion.
    We should remember that cleaning up abandoned mines will 
create jobs. In our view, sound economics and sound economic 
policy dictates change. First, it is in our interest to take 
action that will stimulate other commercial and non-commercial 
uses of public lands.
    Although mining will continue to be an important element of 
our economy, there are clearly economic, environmental, and 
social benefits derived from other industries and other uses of 
our public lands, some of which outweigh the benefits of 
mining. The time is now for Congress to change current U.S. 
policies that favor mining on public lands.
    Second, a mining industry that is rewarded for its 
environmental performance, and penalized for its environmental 
mistakes, will be a healthier industry, both in the U.S. and 
around the world. It is in the interest of Congress to create 
incentives for better environmental performance in our public 
lands.
    Third, more and more experts are concluding that our 
environmental economic health and our security will improve if 
we use Federal raw materials more wisely. We should use fewer 
resources, use them differently, generate less waste, recycle, 
and re-use more. Policies that benefit extraction should be 
turned on their head.
    Fourth, there is no justification, economic or otherwise, 
for policies that provide public subsidies to mining companies, 
creating an incentive for inefficient mine operations on public 
lands.
    Fifth, as a matter of good economics and environmental 
protection, and in order to build stronger local economies and 
create jobs, we should begin today to address the liability 
time-bomb that is ticking away at our public, State, and public 
lands. We should begin a national cleanup program for the 
hundreds of thousands of abandoned mines.
    We believe good environmental policy also makes good 
economic policy. Profitable mining and environmental protection 
are compatible. We recommend the following: Permanently end 
public land giveaways to mining companies; impose a fair 
royalty for mining on public lands; create an abandoned mine 
cleanup program, and end the policy of giving mining companies 
first use of our public lands.
    These steps make economic sense. They will lead to 
healthier community use and healthier ecosystems. Jobs will be 
created, and we believe will lead to a healthier mining 
industry.
    I would like to close with a quote from the CEO of Placer 
Dome, John Willson. He said: ``We at Placer Dome have concluded 
that, if a mine cannot afford the full cost of the state-of-
the-art systems, then it should not be developed. There is no 
tradeoff. No mine developer has the right to impose on an 
ecosystem damage from acid rock drainage, just for the sake of 
economic activity, returns to investors, jobs, and other 
benefits. The key message here is that there is no room for 
compromise in environmental protection.''
    My prediction, that if Placer Dome lives by these rules, 
they will in fact become the world's gold leader, and remain so 
for a long time. Thank you.
    [The prepared statement of Mr. d'Esposito may be found at 
the end of the hearing.]
    Mrs. Cubin. Thank you, Mr. d'Esposito. I will begin the 
questioning. As we have five minutes to question you. Our 
questions and answers have to be in five minutes, so we will 
both try to make them as brief as we can, I hope.
    I want to ask, first of all, Mr. McKinley, am I mistaken, 
it was my understanding, or it is my understanding, that there 
were potential chromite resources in Montana, but that there 
are certain technological advances that need to be overcome--
some metallurgical problems, and reduction in production costs. 
But, that is not necessarily a great impediment, if other 
costs, like access to the land, and so on, were available, too. 
Is that correct, or am I mistaken in that? Because I know that 
your testimony said the only chromite was in South Africa.
    Mr. McKinley. Right. What we're talking about for bauxite 
and chromite is that the resources are not economically 
recoverable in the United States, and the grades of chromite 
and bauxite ores in the United States are of such low quality 
that we can probably continue to import them economically for 
the foreseeable future rather than to mine them domestically. 
In the case of chromite, we are talking about the deposit in 
Montana, at the Stillwater Complex. We just don't have the 
facilities, in the United States, to mine that, and beneficiate 
it, and smelt it and refine it effectively, without a concerted 
program, which would probably take several years, according to 
our specialist.
    Mrs. Cubin. Right. Might be like foreign countries 
developing sodium bicarbonate synthetically as opposed to the 
cheap trona in southwestern Wyoming. General Lawson, did you 
have----
    Mr. Lawson. We have been working with the Department of 
Energy for the past two years on an issue called ``Industry of 
the Future.'' And this particular issue is one of the areas 
that we have identified. What we are doing is laying out a 
roadmap of required technologies to enhance the safety, the 
environmental capability of recovery, along with the recovery 
of minerals from substandard ores, in an economic fashion.
    Mrs. Cubin. Thank you. Would any of you disagree with me 
when I say that mining creates wealth in the economy, and jobs 
in the service sector--and I want to clean up the abandoned 
mines--the $72 billion, I think that number is in question. 
But, those jobs do not create wealth, and in order to create 
wealth, we need to have production of our natural resources. 
Would anybody disagree with that? Economically?
    Then, there was one thing that I wanted to point out, that 
the mining law provisions that were passed by the 104th 
Congress, that were vetoed by President Clinton, did provide 
for, as I said, a 5 percent net royalty, and that money was to 
be dedicated to abandoned mines reclamation. I would like your 
opinion, General Lawson, and Mr. d'Esposito, on the effect that 
that veto has had on the environment, and on the industry.
    Mr. Lawson. Well, the veto simply delayed responsible 
activity on the part of many. In the interim time, in order to 
be ready, the National Mining Association and the Western 
Governors have sat down and developed an extensive program on, 
first, the identification and the compilation of abandoned 
mines, of the appropriate technologies that are going to be 
necessary to accommodate that. We have identified and worked on 
three mines to date in the recovery process. We believe now, 
from these first stages of our efforts with the governors, that 
the numbers have been overstated, and perhaps, with new 
technologies, the fiscal requirements have as well. But, 
certainly, all of the things that could have been accomplished 
during the past two years with an effective reform of the 1872 
law have been delayed.
    Mr. d'Esposito. Yes, a few points to the answer: The first 
is that our estimate of $72 billion, which is a range of 32 to 
72, is an estimate, that hopefully will prove wrong. We think 
what is critical is that we start the cleanup process, most 
importantly, putting resources into that process. I think 
voluntary efforts are wonderful. I think the efforts of the 
National Mining Association and the Western Governors 
Association are steps in the right direction, but the bottom 
line is, there needs to be funding to make it happen.
    I think that the issue in terms of the 104th Congress 
wasn't so much one of the mine cleanup, but what a fair royalty 
return was. I think that is where things fell apart, as far as 
I understand it. But, I do think that the sooner we get funded 
cleanups, the better.
    Mrs. Cubin. One last very quick question: What are--all 
three of you--what are your feelings about having the Federal 
Government establish the standards and levels for cleanup and 
then allowing the States to accomplish those goals in the most 
economically-efficient and in the least amount of time? Just 
down the line, if you all three would do that.
    Mr. Lawson. I think it is absolutely critical that the 
States and the local areas have the maximum authority to 
develop the processes, procedures, and practices, because all 
these are different.
    Mr. McKinley. Ma'am, I don't know that I am in a good 
position to say what I think about the policy of this country. 
I would have to defer to the Office of the Secretary or the 
EPA.
    Mrs. Cubin. I understand.
    Mr. d'Esposito. We believe that the standard should be set 
federally. Monies should be collected federally, deposited into 
a Federal fund for cleanup, and then the monies should be 
allocated to the States. So, in principle, I agree in what you 
are saying. Of course, as always, the devil is in the details. 
But, I think, in principle, that would work as a Federal 
program carried out State by State.
    Mrs. Cubin. Thank you very much, and now I would like to 
yield to our Ranking Member, Mr. Underwood.
    Mr. Underwood. Thank you very much, Madam Chairwoman.
    Mr. d'Esposito, going back to the 5 percent royalty that 
was raised in the 104th Congress, was that satisfactory to your 
organization? Was that something that was consistent with your 
thinking?
    Mr. d'Esposito. I believe that the royalty that is being 
discussed was what is called a ``5 percent net proceeds 
royalty.'' That means that not only does the process of 
developing the ore into a bar of gold get deducted before the 
royalty is applied, but many other costs as well, and our 
concern is that as you add up those costs, the royalty starts 
to disappear, No. 1. And, No. 2, it is really difficult to 
track all those calculations and deductions. So, that was our 
concern with what was called the ``5 percent net proceeds 
royalty.'' We have always pushed for a gross or what is called 
a ``net smelter,'' because it is easier to calculate, it is 
more transparent, and you can know what you are going to get.
    Mr. Underwood. Do you have an estimate as to how much the 5 
percent net royalty would have raised?
    Mr. d'Esposito. I don't off the top of my head, but I can 
very quickly get that number for you and compare the two. I 
just don't have it at my fingertips. It was a difference in 
hundreds of millions of dollars between the two types of 
calculation.
    Mr. Underwood. I think CBO estimated it at $11 million.
    [Laughter.]
    Mr. d'Esposito. For the 5 percent net proceeds.
    Mr. Underwood. I am very interested in both the 
presentations made by Mr. Lawson and Mr. McKinley on the issue 
of strategic minerals, so that I understand its relationship to 
national security. Perhaps, Mr. Lawson, you can tell us, I 
understand the concept that certain minerals are important to 
national security. Is there any sense on your part that current 
mining policy of the United States threatens in any way our 
national security?
    Mr. Lawson. I think it is quite clear when you have 50 
percent of the industry that no longer explores in the United 
States, and a major company such as Asarco shuts its final 
exploration doors in the United States, the mining industry 
will be moving offshore because of the varied problems that are 
associated with developing a mine in the United States. As that 
industry moves offshore, the strategic minerals are going to 
have to come from someplace else and that will, I assure you, 
directly influence military activities in the years to come. I 
spent six months a year for five years on your island and 
national security was involved. Some of the national security 
in that area had to do with the requirement of strategic 
minerals and energy.
    Mr. Faleomavaega. Mr. McKinley, in your testimony, you 
stated that the Department of Defense has changed its policy 
over the years and has designated some elements or some 
minerals as not quite being necessary for strategic 
stockpiling. Is that correct? Are all these minerals necessary? 
I noticed that in General Lawson's testimony there were a 
number of minerals that were stated as important for national 
security. Would you care to comment on that Mr. McKinley?
    Mr. McKinley. Yes, sir. As I mentioned, in the 1939 Stock 
Piling Act, which has essentially remained the same for the 
type of materials that are in the stockpile, there are about 80 
of these materials that were designated as strategic and 
critical. As of right now, the Department of Defense has said 
that we only need to stockpile three materials. It does not 
necessarily mean that the rest of the materials are not 
strategic and critical.
    For example, manganese is listed as one of the materials in 
there. We have 100 percent import reliance on manganese. There 
is no substitute for manganese and we absolutely need it for 
steel. The same could be said for cobalt. We have almost 100 
percent import reliance on cobalt. It comes from countries that 
have geopolitical problems. Cobalt is needed for superalloys 
and for high velocity armor piercing projectiles.
    What I am trying to say is even though the Department of 
Defense has only designated three materials to be stockpiled, 
the other materials, for the most part, are still strategic and 
critical.
    Mr. Faleomavaega. Thank you very much for that 
clarification.
    General Lawson, in your testimony, you referred to the 
concept of so-called public lands. Perhaps you can explain to 
me what is the difference between real public land and so-
called public land.
    Mr. Lawson. What I thought a real public land meant was 
that it is available for multiple use in the various ways that 
the original laws and descriptions of public lands were 
intended. In the past six months, we have lost almost 2 million 
acres to various executive orders which had nothing to do with 
any action on the part of the legislature, which didn't have 
any scientific justification that we were aware of, and which 
were withdrawn from total public use. These lands have been 
completely withdrawn from any use, not just mining: no timber, 
no grazing, no snowmobiling, no anything; and so I just suggest 
to all of you that we need to think: Are public lands really 
public anymore? Is there a move afoot to totally remove and 
fence up public lands and not make them available for any 
activity?
    Mr. Faleomavaega. Thank you very much.
    Mrs. Cubin. Mr. Gibbons.
    Mr. Gibbons. Thank you very much, Madam Chairman.
    Just briefly, General Lawson, could you give us a thumbnail 
sketch of the economic study that the mining association did on 
the contributions of mining to the United States.
    Mr. Lawson. Yes, let me just give you a summary of the 
activity. We had total, direct, and combined economic activity 
in the U.S. economy of $523 billion. We had direct and indirect 
Federal revenues of $56 billion. We had direct or indirect 
State and local revenue of $27 billion. So, it was a combined 
business income over that time frame, one year of $295 billion, 
which was derived from the mining industry during that year. 
This particular year happened to be 1995.
    If I may, let me add one thing. There has been a lot of 
discussion here about greedy mining companies receiving 
corporate welfare. In the year 1997 and this comes from the 
World Almanac of this year, 1999, the mining industry's total 
profits from the primary metals industries were $5.6 billion. 
The communications industry had a profit of $31 billion, and 
the electronic equipment industry had a profit of $25 billion. 
One questions: how did we get to be called the rich greedy 
industry with that set of numbers?
    Mr. Gibbons. Thank you very much.
    Mr. d'Esposito, I have read your testimony. In fact, as I 
read most of it, I thought it was deja vu 1950 because as you 
heard the General talk about the mining requirements of every 
individual in this country requiring 44 thousand pounds of new 
material mined every year, I am caught by your statement that 
all materials should be recycled and reprocessed. I think it is 
evident from my knowledge that mining in this country only has 
disturbed one quarter of 1 percent of the land in this nation. 
In fact, that is less land than is disturbed by paved parking 
lots in Safeway stores.
    I want to turn to your testimony here and, of course, I 
want to talk about the ticking liability time bomb that you 
talk about here and you quoted or referenced Leo Drozdoff of 
the Nevada Bureau of Mining Reclamation. He says that at least 
13 major mines in Nevada are currently in bankruptcy. Is that 
an accurate statement of Leo Drozdoff?
    Mr. d'Esposito. That statement was conveyed to me by 
somebody who spoke directly with----
    Mr. Gibbons. Is it accurate because you are representing it 
as accurate here? That's my question.
    Mr. d'Esposito. The statement is accurate as it was 
conveyed at a meeting about three weeks ago.
    Mr. Gibbons. Well, my understanding is that these 
operations are not major, but that really doesn't matter but 
would you just tell us the hazards to the environment or public 
health and safety that bankruptcy per se causes?
    Mr. d'Esposito. Bankruptcy, if there is not adequate 
bonding and reclamation as we have seen in places like Zortman-
Landusky, potentially places like Summitville mean that 
adequate cleanup is not done.
    Mr.Gibbons. Is there adequate bonding in the State of 
Nevada?
    Mr. d'Esposito. Is there adequate bonding in the State of 
Nevada?
    Mr. Gibbons. Yes.
    Mr. d'Esposito. Nevada has bonding regulations.
    Mr. Gibbons. Is it true that every one of those mines that 
you describe here is bonded under reclamation?
    Mr. d'Esposito. I would expect that's the case but the 
point of including them isn't to say each mine will in fact end 
up being a taxpayer problem or an environmental problem. The 
point is to say quite a few are in the situation.
    Mr. Gibbons. We are talking about Nevada because that is 
your statement to this Committee which theoretically is under 
oath and you are representing that these mines in the State of 
Nevada represent a ticking public liability time bomb and each 
one of these mines is covered by bonding in the State of 
Nevada. Now are you saying the State of Nevada has inadequate 
revenues to cover the bonding of these mines?
    Mr. d'Espositio. I am saying that a ticking time bomb 
exists when you have things like Summitville, followed by 
Zortman-Landvsky, followed by other mines on public lands that 
don't have adequate bonding.
    Mr. Gibbons. Well, $67 million for Zortman-Landvsky is not 
inadequate bonding. Is it not?
    Mr. d'Esposito. State regulators in Montana have said that 
the bonds may be short as much as $8 million. We estimate it 
could be higher. Time will tell. That is a significant amount 
of money to taxpayers in Montana.
    Mr. Gibbons. Madam Chairman, my time is about up and I will 
yield back to you for later questioning
    Mrs. Cubin. Thank you, Mr. Gibbons.
    I want to make a point before I yield to Mr. Faleomavaega. 
I brought up earlier the issue of mining, creating, and 
developing the resources actually creating wealth. I think the 
point that I failed to make was that we can't protect the 
environment if we don't adequately develop and we don't have 
wealth. So, I think the two things have to go hand in hand. The 
other thing we talked about is the 5 percent net proceeds and 
the $11 million that the CBO estimated would be generated by a 
5 percent net proceeds in the bill that the President vetoed.
    Nevada has done a very good job of calculating 5 percent 
net proceeds levy on mines for about a century, and the State 
collected $48 million in 1994 alone. So I think that is what 
happened to these figures, and I think projections can be 
questioned and I think somehow we have to all come to an 
agreement on how we are going to do this because I know we all 
want the same thing.
    Mr. Faleomavaega.
    Mr. Faleomavaega. Thank you Madam Chairman. Just a couple 
of questions.
    To the members of the panel: Do we currently have an 
accurate assessment from the U.S. Geological Survey and from 
the mining industry in terms of the total value of the metals 
that we currently have in the United States? Not what is 
already been harvested or mined, but do we have an accurate 
assessment both from the U.S. Geological Survey and the mining 
industry of the dollar value of the mines or the metals that 
are currently in the United States?
    Mr. Lawson. The U.S. Geological Survey does have a pretty 
good handle on the value of how much was produced. Now you said 
you were not interested in that, but we do not have, I would 
say, a good handle on what has yet to be produced.
    Mr. Faleomavaega. I believe there is a statement in your 
written testimony, General Lawson, you state that the value of 
the coal that is currently in the United States was more than 
all of the oil that Saudi Arabia, Iraq, and Kuwait have in 
their possession. Now how did we come about with that 
assessment?
    Mr. Lawson Well, that assessment is based upon coal that 
has already been researched out, found and explored. We know 
precisely what the reserves consist of in terms of both 
quantity and quality, and we know for a fact that they 
represent both an energy context and total value and that was 
just a comparison with oil and gas in the area, sir.
    Mr. Faleomavaega. So, that is an accurate statement?
    Mr. Lawson. Yes, but as to the metals, precious metals or 
strategic metals, we have not made an accurate assessment. 
Except of those reserves that have been found and located to 
date.
    Our real concern, and a concern that I think the Committee 
needs to come to grips with, is because of a various number of 
factors. More and more of our companies are having to give up 
their exploration in this country. The costs of exploration are 
not insignificant. The fact is they are part of the most 
expensive aspect of the mining process and for various reasons 
both in terms of cost and in terms of delays associated with 
the time between the finding of the mineral and the actual 
ability to begin to mine a mineral, companies are electing to 
go offshore.
    Mr. Faleomavaega. Do you think that might be to our 
advantage in the long run? Let's extract the mineral contents 
of other countries before coming back to our own. Why don't we 
extract the others first before hitting up on our own 
resources?
    Mr. Lawson. I think from a security standpoint that has 
some significant problems to say nothing of the economic 
aspects of it. We have the greatest storehouse of minerals in 
the world and the opportunity to effectively use those is one 
of the things that has made our economy number one in the 
world. We have low cost basic resources to fuel this economy of 
ours; that is why it is demanding. 47 thousand pounds per 
person.
    Mr. Faleomavaega. My time is running short. One of the 
reasons why we have not approved the United Nations Convention 
of the Law of the Sea was because of these strategic metals. As 
far as our policy is concerned, the treaty did not give enough 
to the mining industry if we are to harvest, for example, 
cobalt and manganese that is contained in these nodules that 
are found in seabed mines and seabeds of many of the island 
nations in the Pacific as well as the Atlantic.
    Mr. Lawson. Well, the Seabed Treaty itself has several 
problems but that is one of the problems that has not been 
effectively resolved between the nations who are negotiating 
that Treaty.
    Mr. Faleomavaega. Do you think our policy is accurate that 
we should not sign into the United Nations Law of the Sea 
Convention?
    Mr. Lawson. At this time, I think for a whole series of 
reasons, we should not.
    Mr. Faleomavaega. Very interesting.
    One more question, Madam Chairman, if it is all right. I 
think it seems that the mining industry really has had a very 
bad reputation. Is it because of the media hype or is it 
because of the environmental concerns and the history, strip 
mining, causing a lot of pollution, and things of that sort? Is 
this an accurate statement of the history of the mining 
industry?
    Mr. Lawson. Well, I think its 50 years old the assessment 
that you made. I think we're making dramatic progress in 
several ways. I like to think that Mr. d'Esposito and his group 
do an enormous service to the country by being environmental 
activists, by making us all take a look carefully at everything 
we are doing. However, I would like to suggest that we the 
people who put the blood, sweat, and tears and basic resources 
into cleaning up the environment are the active 
environmentalists. We are actively engaged in environmentalism.
    Mr. Faleomavaega. One of the biggest problems, sir, that we 
are having now is that we have a lot of our conglomerate big 
mining companies doing operations in foreign countries that do 
not necessarily have high standards as far as emissions and 
environmental requirements as we have in our own nation, and 
now some of these tribes I think from Latin America are coming 
to sue some of these mining companies for some of these 
environmental things they have caused in these third world 
countries. Is that a fair way to do business to go and extract 
the mines and minerals from these countries that have lower 
standards?
    Mr. Lawson. Sir, I would not accept any of the statements 
you have made. Wherever we go around the world, we take with us 
the same kind of laws that we have here in this country. We 
help those rulers of those countries impose those laws because 
we in the United States know how to comply with those laws. 
It's the one way that gives us an edge on mining in other 
countries around the world to differentiate us from mining 
companies who come from places that haven't had to create 
environmental renovation. I think we are doing it.
    Mr. Faleomavaega. I submit to you, sir, that is not what is 
coming forth right now General Lawson. I would like to see the 
specific incident; because frankly I've been all around this 
world.
    There is a U.S. mining company doing business right now in 
West Papua, New Guinea that has caused a lot of pollution and 
all they had to do was to conform to Indonesian environmental 
standards. It was not U.S. standards and there were some very 
serious questions raised on that as an example. I only cite 
that as an example, sir.
    Mr. Lawson. I would like to see that.
    Mr. Faleomavaega. I will definitely show you because it 
made the first page of The Wall Street Journal and I'll share 
that you with you, surely.
    Mrs. Cubin. I'd like to thank our panel for their testimony 
and for their candid answers to our questions.
    Now I'd like to introduce the second panel. Mr. Doug Silver 
of Balfour Holdings, Inc.; Dr. David W. Menzie, Minerals 
Information Team of the U.S. Geological Survey, and Dr. Donald 
Brobst, Society of Economic Geologists.
    I would like to remind the witnesses that under our 
Committee rules, we would like you to limit your testimony to 
five minutes but your entire written testimony will be 
submitted into the record.
    The Chair now recognizes Mr. Doug Silver.

      STATEMENT OF DOUGLAS SILVER, BALFOUR HOLDINGS, INC.

    Mr. Silver. Thank you. My name is Doug Silver. I am a 
research scientist and owner of Balfour Holdings. We serve as a 
corporate planning organization for many of the mining 
companies around the world. I was asked to speak today about 
exploration issues as they relate to the U.S. mining industry 
and I'm just going to read my comments.
    There has been a dramatic decline in exploration activity 
in the United States over the past five years for two principal 
reasons. The depressed metal prices are responsible for general 
worldwide contraction in exploration expenditures. For 
instance, U.S. companies have reduced their worldwide 
exploration by 40 to 50 percent just in the last year and based 
on where the metal prices are today, we see that as being 
further cut during the year. The inefficiencies of the United 
States Federal and State governments in issuing permits 
compounds the difficulties companies are experiencing when 
trying to operate in the United States. The United States is no 
longer considered competitive for mineral exploration despite 
its strong geological potential for mineral discoveries.
    Interviews with many exploration companies for this 
testimony reflect the consensus of opinion that the Federal and 
most State governments are trying to phase out the mining 
industry by catering to the whims of small groups such as the 
Mineral Policy Center whose deft manipulation of the legal 
system allow them to indefinitely delay the permitting process 
by financially breaking the companies. The single largest 
concern is the regulatory bodies directly or indirectly 
mismanaging the permitting process. The delays and substantial 
cost overruns, which are now commonplace, create undue 
financial hardship on mining companies and extort their legal 
rights. Companies cannot operate in such a hostile climate so 
they are taking their capital, ideas and U.S. environmental 
practices to other pro-mining countries. The possible 
exceptions to this opinion, of course, would be Nevada and 
Alaska where the State governments have been very proactive in 
both developing mining and in protecting their rights.
    Only a handful of U.S. base and precious metal projects are 
currently undergoing the need for the required EIS or EA 
process. Mr. Faleomavaega, in response to your question, there 
are about 650 gold deposits in the United States and probably 
several dozen base metal deposits, most of which are either 
inactive due to low metal prices or the inability of companies 
to financially survive the permitting process. As Mr. Babbitt 
continues his successful circumvention on the legislative 
branch, some of these deposits will never be developed while 
others will never be discovered. The permitting process was 
never intended to be an adversarial process but that's what it 
has become and it really needs to return to its original roots 
as a cooperative effort between industry and government. A more 
streamlined system should be created which should study 
contents, establish time frames and define how costs are 
established and maintained.
    I have heard countless horror stories of companies who hire 
the best consultants and work with the government to establish 
what it would cost in terms of time and money to complete the 
regulatory requirements and now the government has spent two to 
three times that amount and the process still has not been 
completed. Accountability is the biggest shortcoming of the 
process right now. We are finding that individuals within 
government bodies appear to be able to interject their personal 
agendas into the process. We see no oversight, we see no sense 
of urgency by the regulatory groups to do a certain number of 
studies. It is an endless process of draining the cash out of 
companies and preventing mining. Finally, the Record of 
Decision which is supposed to be the culmination of all the 
science and ideas brought together is now being deferred to the 
non-governmental groups who seem to be able to delay, appeal, 
and do whatever they want at the companies expenses. You are 
supposedly meeting to talk about proposed changes to the Mining 
Law of 1872. However, this debate, in my opinion, is becoming 
moot because of all these other problems. The mining industry 
would like to contribute to the U.S. economy but without a 
sincere effort to create a level playing field, companies can 
no longer justify spending money in this country.
    There is an important ramification, simply the management 
problems of the regulatory process. We're not talking about 
discontinuing the EIS's. We're talking about having a system 
that is organized and works in a set time frame. Fifteen years 
ago you could permit a mine in two years. Now it is somewhere 
on the order of 10 years. A lot of the gold mines don't even 
have mine lives of 10 years and so you've created a huge 
problem for industry and it's one of the reasons that people 
are moving offshore. A return to higher metal prices will 
provide companies with financial breathing room but it will not 
do anything to alleviate the difficulties in operating in the 
United States.
    The government should be very concerned about the mass 
exodus of U.S. mining companies because once a company spends 
tens or hundreds of millions of dollars on a foreign project it 
can neither move the project back to the United States nor 
return the funds it spent. Instead, these companies tend to 
make additional investments in the host countries. Therefore, 
shifting exploration activity back to the United States would 
become progressively more difficult as companies are 
established elsewhere. And, working on an international level, 
my clients are all sorts of companies, the United States is 
basically joining the ranks of certain persona non grata in the 
exploration world and it is terribly unfortunate that the legal 
rights of the miners are no longer honored. Thank you.
    [The prepared statement of Mr. Silver may be found at the 
end of the hearing.]
    Mrs. Cubin. Thank you, Mr. Silver.

 STATEMENT OF DR. DAVID W. MENZIE, MINERALS INFORMATION TEAM, 
                     U.S. GEOLOGICAL SURVEY

    Dr. Menzie. Madam Chairman and members, thank you for the 
opportunity to speak with you today. My name is David Menzie. I 
am a geologist with the U.S. Geological Survey. I currently 
serve as the Chief of the International Mineral Section of the 
Mineral Information Team. In this testimony I will discuss 
changes in the import and export of metallic mineral resources 
from 1975 to present.
    The United States plays many roles in global mineral 
markets for metallic mineral commodities. USGS has analyzed the 
consumption production, imports and exports over the last two 
decades for 49 commodities to describe changes in imports and 
exports of metallic minerals. Seven different types of changes 
were identified and all commodities were grouped into one of 
these seven types. The major factors that influenced these 
changes are better understanding of geology, technological 
change, economics, and political factors.
    I refer you to Table 1 of my statement, which presents the 
percent net import reliance for metallic mineral commodities 
during the period of 1975 to the present and estimates U.S. 
consumption for each of the commodities in 1998.
    Percent net import reliance is calculated by determining 
the percent of apparent consumption that is met by net imports. 
It is one of the ways of examining a country's vulnerability to 
supply disruptions. Time does not permit me to describe the 
changes in consumption, production imports and exports for each 
commodity. Instead, I will identify the seven groups of 
commodities that exhibit similar patterns of imports and 
exports. Details for the specific commodities are an attached 
item.
    Group 1 commodities show continued net exports and these 
include beryllium, lithium, and molybdenum.
    Group 2 commodities show changes from net imports to 
exports and these are gold and silver.
    Group 3 commodities show decreased import reliance. These 
are cadmium, iron ore, and selenium.
    Group 4 commodities show changes from net exports to 
imports. These include aluminum, copper, lead, magnesium metal, 
rare earths and titanium metal.
    Group 5 show continued import reliance of less than 50 
percent, iron and steel, mercury and vanadium fall into this 
class.
    Group 6 commodities show increased levels of import 
reliance. Commodities in this group include antimony, silicon, 
tungsten, and zinc.
    Group 7 commodities show continued import reliance of 
greater than 50 percent and include arsenic, bauxite, and 
alumina, bismuth, cesium, chromium, cobalt, niobium, manganese, 
nickel, platinum-group metals, rubidium, scandium, tantalum, 
thallium, thorium, tin and yttrium.
    Another useful way of examining vulnerability of our 
economy to disruptions in the supply of mineral commodities is 
to examine where the imports of these commodities come from and 
what percentage of total imports come from those sources. Table 
2 of my testimony shows the countries of origin and percent 
reliance on the two largest suppliers of each of the 
commodities. Some of the major changes in the geologic, 
technological, economic and political factors that have 
influenced the pattern shown in Table 1 include an increased 
understanding of the geographical factors that control the 
formation of mineral deposits. Gold is a useful example.
    Since the late 1970's gold has been the primary commodity 
of interest for much of the exploration community. Because much 
of the research that formed the basis for the new understanding 
was conducted in the western United States, the United States 
has benefited more from these advances than have countries that 
have different geological conditions than the U.S.
    Another major change has been the development of new 
technologies for exploration, mining and processing of ore. 
These include but are not limited to new mining technologies 
and the development of hydrometallurgical techniques for 
processing gold and copper which have been extremely important.
    A technological area of growing importance is industrial 
ecology, the study of the flow of minerals and materials from 
the source to ultimate disposal. It encompasses recycling of 
materials and the reuse of product. It extends to the design of 
new products in ways that will reduce the need for raw 
materials or the cost of recycling. Recycling is already an 
important factor for materials such as aluminum and steel. 
Recycling, remanufacturing and redesign are likely to have an 
increasing impact on many materials in the future.
    Global, political, and economic changes have an increasing 
effect on the patterns of mineral production, imports and 
exports. The adoption of democratic governments and market 
oriented economies throughout Southeast Asia and Latin America 
has greatly changed global patterns of investment in mineral 
projects. The result has been a major change in the willingness 
of companies to invest in exploration and production in these 
areas.
    In addition, political reform and transition of the 
centrally planned economies of the former Soviet Union and 
Eastern Europe and China toward more market oriented economies 
were also affecting patterns of mineral production, imports and 
exports. The transition has resulted in decreased domestic 
consumption of mineral resources in those countries and 
increased exports of mineral commodities. Examples of this 
include aluminum and copper from Russia.
    Several changes will affect the pattern of mineral 
production in the future. In the short term, the recession in 
Southeast Asia has caused decreases in mineral consumption that 
has depressed prices of many commodities. In the longer term, 
continued development of Southeast Asia and China could 
significantly increase the consumption of minerals over the 
next 10 to 20 years. Thank you very much.
    Mrs. Cubin. Mr. Faleomavaega.
    Mr. Faleomavaega. Madam Chairman, I would like to ask 
unanimous consent that these remarks and the written statement 
by the gentlemen from West Virginia be made a part of the 
record.
    Mrs. Cubin. Without objection, so ordered.
    [The prepared statement of Mr. Rahall follows:]

 Statement of Hon. Nick Rahall, a Representative in Congress from the 
                         State of West Virginia

    Many years ago we had a chairman of this Subcommittee who 
held hearing after hearing on the importance of minerals to the 
national economy, and to the nation's security.
    Some of you may remember Jim Santini and his love affair 
with strategic and critical mineral issues.
    So it was from that time, during my early years in the 
Congress, that I began to learn about the subject matter of 
today's hearing, not just from Jim, but also from our late, 
great former chairman Mo Udall.
    After a time, when I was chairman, it is an established 
fact that this Subcommittee again held countless hearings on 
hardrock mining issues, and not just in Washington, DC, but in 
several locations in the West as well.
    With this background, I have no doubt that hardrock mining 
is an appropriate use of lands in the public domain.
    I have never questioned the concept of multiple use of 
those Federal lands not reserved or withdrawn for specific 
purposes.
    But what I have questioned is the appropriateness of a 
regime in which hardrock mining is conducted on public domain 
lands with virtually no return to the American public for the 
use of those lands.
    This practice simply defies logic, especially as we 
approach the new millennium.
    No company, no private individual, would allow mining on 
lands they hold title to without requiring financial 
compensation. And I fail to see why the Federal Government 
should be the exception.
    I have also questioned the appropriateness of a regime in 
which the mining and reclamation aspects of hardrock mining on 
Federal lands is largely regulated under a patchwork of state 
environmental laws and regulations.
    Even where there are Federal laws specifically for this 
purpose, such as SMCRA for coal, problems arise as we have seen 
in southern West Virginia with mountaintop removal mining.
    One does not have to imagine, then, what types of problems 
are occurring under a loosely woven quilt of state law and BLM 
policy.
    When all is said and done, yes, hardrock mining is 
important. But so, to, is our responsibility to be good 
stewards of the public domain. And so, to, is our 
responsibility to those citizens who must contend with the 
environmental ramifications of these operations.
    I hold no pretenses that H.R. 410, my mining law reform 
bill, will ever see the light of day in this Committee. Nor do 
I believe it is a perfect bill. But I do believe that resisting 
reform is bad business for the mining industry.
    Thank you

    Mrs. Cubin. I wanted to announce to the Committee that a 
vote is going on--a 1-minute vote on H.R. 171, then a 5-minute 
vote immediately following on H.R. 193. I think we really don't 
have time to give Dr. Brobst adequate time for his testimony 
before the vote so we will go vote and then we will return as 
quickly as we can after that and then we will proceed with 
questioning of the witnesses. I apologize for the delay.
    [Recess.]
    Mrs. Cubin. I may go ahead and call the Subcommittee back 
to order, and recognize Dr. Brobst for his testimony.

 STATEMENT OF DR. DONALD BROBST, SOCIETY OF ECONOMIC GEOLOGISTS

    Dr. Brobst. Good afternoon, Madam Chairman and members of 
the Subcommittee on Energy and Minerals. I am pleased to be 
here to speak to you on behalf of the Society of Economic 
Geologists, a 79-year-old society that now includes about 3,000 
geologists who work in academia, government, and industry, but 
have no formal ties to any one of these parts.
    We are greatly concerned about the future availability of 
the minerals and fuels that are the lifeblood of our 
civilization, the basis of our economy, and our personally 
comfortable lives. We look around this room and consider the 
origin of the materials. We either mine them or we grow them. 
Remember that it takes mineral fertilizers and soil 
conditioners, as well as fuels, to grow things.
    Land issues are fundamental aspects of mineral exploration 
and mining. We must examine large areas of land to find new 
mineral and fossil fuel deposits. Land policy opens or closes 
land to exploration and mining. Land policy--that is mining 
law. The Mining Act of 1872 and the Leasing Acts of 1920 and 
later recognized the need for access to public lands for 
exploration and mining. Since the enactment of the Wilderness 
Act in 1964, land policy seems to be traveling a new path 
toward tighter restriction on exploration and mining.
    If closure to these activities is the wave of the future, 
we must ask, why is this so? Perhaps this is an early 
manifestation of anxiety about how the resources are used and 
how the planet is degrading. But we must come to the 
realization that through understanding and desire for change, 
these things evolve. The facts must be faced realistically. We 
need these resources to live on. Earth's resources are finite 
and aren't evenly distributed. A minable deposit of anything is 
a rare and beautiful thing.
    Most of these rare and beautiful deposits will be needed--I 
should say, more of them will be needed as the population grows 
in the 21st century. Compound growth is a real killer for 
resource consumption and population growth. Mineral deposits 
are sought and mined at great risk and high cost in time and 
money. We need accessible land to carry out this effort. Work 
on a promising prospect may take 10 to 20 years to bring into 
production, and whose life might last 10 to 20 years. 
Therefore, deposits that we hope to be mining in 2010 to 2020 
must be identified very soon.
    A nation that cannot provide its own minerals and fuels 
must buy them abroad, if it can. Problems may be created in 
foreign relations. Cartels may try to limit prices, production 
and distribution. Many a war has been fought over the access 
and possession of resources.
    Being without these commodities leads to a degradation of 
the standard of living, and that may be followed by civil 
unrest. We need a balanced view of the need for these 
nonrenewable resources and a need for a safe, healthy 
environment.
    Better technology for exploration and mining is developed 
constantly. This allows environmentally-safe operations and 
leads to the use of formerly uneconomic materials. These 
technical developments also extend the use of our finite 
resources, but generally require more energy to produce.
    The development of new ideas and technologies suggest that 
multiple mineral assessments of land are certainly needed, as 
stipulated in the wilderness legislation. As designated 
assessor of these lands, the U.S. Geological Survey should be 
supported in the multiple assessments of those withdrawn lands, 
and the assessments should include drilling for information 
about the third dimension: depth.
    Mineral assessments without subsurface information are much 
less valuable and reliable. By 1996, wilderness areas already 
included more than 100 million acres, in 11 States of the Far 
West and Alaska and mostly on the public lands under 
discussion. This region has a geologic history through which 
conditions were favorable for the formation of many known large 
mineral and fuel deposits, and probably many more undiscovered 
ones.
    Would it not be a good idea to allow for future access to 
these lands? Would it not be wise to get a better idea of the 
mineral wealth on and under our Federal public lands before 
putting them all out of commercial reach? The Nation needs land 
accessible to mineral entry.
    In the few minutes that I have, I have tried to highlight 
some major points that I made in the statement that I submitted 
to you. My written statement also contains a bibliography that 
includes references cited in the statement, and also lists some 
other works that focus on our mineral resource problem.
    Thank you.
    [The prepared statement of Mr. Brobst may be found at the 
end of the hearing.]
    Mrs. Cubin. I would like to thank the entire panel for 
their testimony. I will begin the questioning.
    First, I would like to ask Dr. Menzie, and then followed by 
Dr. Brobst, if he wishes: One of the witnesses on the first 
panel testified--and this is a quote from his testimony--
``Recycling should be thought of as a source of minerals.'' I 
would like to ask you both, what are the recycling rates for 
some of the metals that you discussed, and realistically, how 
much can the recycling rate for these metals be increased?
    Dr. Menzie. Madam Chairman, I don't have the recycling 
rates at my fingertips, but they generally are less than 50 
percent for any given metal. It varies quite considerably, 
depending on the particular metal. But, in general, recycling 
has increased over time, and it is largely in companies' 
interests to recycle. They, therefore, do so. So the rates have 
increased over time, but they don't provide more than--well, 
they are all less than 50 percent of the supply.
    Mrs. Cubin. Realistically, do you think that this recycling 
rate could be increased by any significant level in the short 
term?
    Dr. Menzie. That would be beyond my expertise. You would 
have to get into metallurgy and recovery. So I think you need 
to talk to someone else about that.
    Mrs. Cubin. Dr. Brobst, did you want to respond?
    Dr. Brobst. Well, I might stick my neck out a little bit on 
that. I think that one of the interesting things about 
recycling is we can, undoubtedly, do more in a lot of areas. 
Some years ago, I visited the Reynolds aluminum facility down 
in Richmond, Virginia, and they were talking about the 
recycling of beverage cans, the aluminum ones. They were saying 
that they believed at that time that very close to 70 percent 
of the beverage cans were being recycled, which I think sounds 
phenomenally high. But you can recycle those cans, those 
aluminum cans, with about 5 percent of the energy that it takes 
to smelt virgin aluminum bauxite.
    So there are certain things that could be done, such as a 
lot of recycling education--getting people to do it. You can 
tell I am old enough to have been around during World War II, 
and I recall my mother recycling unused aluminum cans and that 
sort of thing. So after the war, we stopped all that, but it 
could really be started again.
    Mrs. Cubin. Dr. Menzie, I am wondering if we could trouble 
you to furnish the Committee with those recycling rates, if you 
wouldn't mind?
    Dr. Menzie. I would be glad to provide the recycling rates.
    Mrs. Cubin. Thank you very much.
    [The information may be found at the end of the hearing.]
    Mrs. Cubin. This question is for Mr. Silver. I am concerned 
about the trends in domestic mineral exploration spending. I 
understand that U.S. exploration expenditures have been 
declining steadily since 1992, whereas worldwide exploration 
expenditures were increasing prior to the onset of the economic 
problems in Asia. Could you elaborate for me a little on the 
exploration trend since 1992?
    Mr. Silver. Whenever metal prices go up, you always get an 
increase in exploration expenditures because the companies can 
afford it. Exploration is considered a discretionary 
expenditure by most companies, or, in our language, many mining 
companies view exploration as a necessary evil. Lately, with 
metal prices being low, they are forgetting the word 
``necessary.'' It is expensive to explore. It is very, very 
high risk. It can take a very long time to do, which is very 
hard for a commercial enterprise.
    It has been decreasing--gold prices, in particular, have 
been dropping. The other commodities are now dropping. So 
people are cutting way back. In the United States, though, they 
are having cutbacks because of metal prices, and since 1992, it 
has dropped off considerably. This year it is down 
substantially, with many companies cancelling, what we call, 
generative or grassroots. That is the exploration process where 
you discover new gold areas or new copper areas. You try new 
technologies, new research, to find brand-new deposit types and 
new areas. Most companies cannot afford to do that under 
today's metal prices. So, instead, they are only exploring, 
what we call, headframe exploration, which is exploration 
around the existing mines. When I asked the companies why they 
were focusing on that, their comment was, those lands are 
already permitted, and therefore, we can justify spending the 
money there.
    Mrs. Cubin. I think at some point we do have to be 
concerned whether sufficient expenditures for exploration are 
being made to replace the mineral reserves and maintain our 
Nation's domestic mineral resource base. Otherwise, our 
domestic mining industry I think will slowly slip into 
oblivion.
    Do you think that current exploration expenditures are 
adequate to replace domestic reserves at normal mining rates?
    Mr. Silver. Absolutely not. As you know, the United States 
has become the second largest gold producer in the world. They 
are mining about 10 million ounces of gold a year. The average 
gold deposit is measured on the order of several hundred 
thousand ounces. So you need multiple discoveries to replace 
any of the U.S. production. So not only do you have an 
accelerated depletion of the existing reserves, but you are not 
finding enough new deposits to replace the gold reserves being 
mined. We are already in a negative curve. If you look at 
exploration expenditures, you will see they have leveled out, 
and what the projections are for 1999 forward, they are 
definitely going to drop off, and so are the discoveries.
    Mrs. Cubin. I recognize that my time has run out. Mr. 
Tancredo, if you don't mind, since the dais isn't teaming with 
members to ask questions, I would like to ask one more question 
of Mr. Silver.
    I understand that several years ago you compiled an 
analysis of the effect of royalties on mining operations. Could 
you summarize that for me? And would you mind submitting a copy 
of that for inclusion in the record?
    Mr. Silver. By all means.
    [The information may be found at the end of the hearing.]
    Mr. Silver. I was asked last year by the Minerals 
Exploration Coalition to analyze the new proposed royalty 
schemes on U.S. mines. I was really fortunate in getting one of 
the mining companies to actually provide me with their actual 
financial data for their three U.S. gold mines, and then we 
modeled the different royalty provisions.
    Mrs. Cubin. What mines were those?
    Mr. Silver. It was Golden Sunlight, which is in Montana--it 
is a gold mine--Cortez, which is in Nevada, and the third one 
was--what is the third gold mine? There is a third one; it will 
come to me. Bald Mountain, Nevada.
    Mrs. Cubin. What State is that one in? If you can't 
remember, it is all right.
    Mr. Silver. I am drawing a blank. It was the three gold 
mines that Placer Dome has in the United States.
    Mrs. Cubin. Okay.
    Mr. Silver. We modeled these and tested them in different 
provisions. When we did this, because we looked at all the 
different governmental entities and their different fees they 
extract from mining operation, we lumped them together on a 
dollar-per-ounce basis. Because we mine ounces, we look at our 
cash costs on a per-ounce basis. We, basically, found that this 
8 percent provision that was being proposed would, in fact, 
increase the governmental extraction fees by 50 percent, which 
we were amazed that that would be acceptable to any American, 
to have their taxes raised 50 percent, but that is the way it 
came out with computer modeling.
    Mrs. Cubin. Thank you very much.
    Mr. Tancredo, do you have questions for the panel?
    Mr. Tancredo. Thank you, Madam Chairman. I do.
    My attention was drawn to the same set of figures that 
Madam Chairman's references were made to just a minute ago, and 
only to the extent that I sometimes think that providing the 
Congress with this kind of information is dangerous. As you 
probably know, there are a lot of people here who would look at 
this decline and take it as a very positive statistic, and 
especially mineral exploration expenditures in the United 
States. There are people who would certainly want to see it 
decrease. I know they are in this Congress. You know that they 
exist. To them, as they look at this and say, ``Boy, isn't that 
great, how far we are going down,'' maybe pretty soon it will 
be zero, and we won't be disturbing the environment in the 
United States anymore.
    At any rate, I was wondering, Mr. Silver, if you could 
also--you, obviously, feel strongly about the current open-
ended EIS process. You believe it is detrimental. I certainly 
agree with you.
    The question is: What do you envision as an alternative to 
it? Could the EPA, in your estimation, undertake something 
like, what sometimes has been referred to as, the ``rocket-
docket'' process--you know, to expedite project approvals. Are 
we kind of running down a slippery slope there by handing 
anything over to them for that purpose?
    Mr. Silver. I wouldn't pretend for a minute to be a lawyer, 
even at Halloween.
    [Laughter.]
    When we work with companies and they have a management 
problem, we can find solutions to the management problem and 
let the company move ahead with a more efficient structure that 
benefits the shareholders and the employees. I don't see why we 
can't do that with the U.S. Government.
    Having said that, I realize that anybody can sue you any 
time they want, and they can appeal anything they want, but it 
strikes me very odd that we spend millions of dollars and 
several years conducting studies that are deemed important, and 
then at the end of it, anybody who wants to appeal or obfuscate 
the process is allowed to get away with it.
    Mr. Tancredo. Yes.
    Mr. Silver. I think that the government should set a 
certain number of studies that are agreed upon with expert 
consultants and with the company and the government. Those 
studies should have a budget. The budget should be adhered to, 
and when it is done, a record of decision should be put out, 
and that should become the final say. If other groups want to 
come in and appeal it after that, I think it should be the 
government's responsibility to pay for that, rather than 
financially bankrupting the companies.
    One mining company that is extremely successful in 
discovering deposits in the United States no longer explores 
here. When I asked their president why, he said, ``Why would I 
want to discover another deposit in this country and go 
bankrupt getting a permit.''
    In Bolivia, the permitting process is set up with 
timeframes. You are required to submit the information in a 
timely manner. They are required to review it and make 
decisions. If the government does not adhere to that timeframe, 
the permit is automatically issued.
    This is the thing: We are taking U.S. environmental 
practices all over the world, because most of these companies 
are public companies. Their shareholders demand it. Their 
management and their employees demand it. But in other 
countries they help you through the process, and they try to 
make it efficient. They set deadlines, budgets, and they keep 
to it. We seem to have an open checkbook policy here, which is 
just destroying us. It is very frustrating.
    Mr. Tancredo. It certainly is frustrating. I am sure you 
recognize, and certainly I believe that the reason why we face 
this kind of a situation has little to do with the actual cost 
that either the government incurs or you incur in the process. 
I agree with you; I think there are ulterior--I think there are 
other motives for the people who are involved to force you and 
the companies that you are talking about, into the kind of 
process that you have described.
    The last thing I wonder is, you also mentioned that Alaska 
and Nevada's policies were progressive, proactive. I guess I am 
wondering, do you know, what has the EPA done about that? Have 
they found out yet?
    Mr. Silver. I don't think it is just the EPA. I mean, I 
think it is the State governments as well and a number of other 
groups. The State of Alaska understands the value of natural 
resources to its economy. It is a very big part of Alaska. The 
same thing with Nevada. They appreciate the role minerals play 
in their economies, creating jobs, opportunities, and 
everything else. Therefore, I think they stand up a little bit 
more to the people with special agendas. They don't allow the 
process to just sort of go on infinitum. They keep people's 
feet to the fire, and that is what we expect out of our 
legislators. We have legal rights, too, and right now defending 
yourself in litigation is far more expensive than filing 
litigation. We wish there was a little bit of parity, so that 
we could get the process done correctly, rather than the way it 
is right now.
    Mr. Tancredo. As do I.
    Thank you very much. I have no other questions.
    Mrs. Cubin. Well, I thank the panel for their valuable 
testimony, and Mr. Tancredo for his good questions.
    If there is no other business before the Committee, we 
stand adjourned. Thank you very much.
    [Whereupon, at 4:22 p.m., the Subcommittee was adjourned.]
    [Additional material submitted for the record follows.]
 Statement of Michael J. McKinley, Physical Scientist, U.S. Geological 
                                 Survey

Madam Chairman and Members:
    I am Michael J. McKinley, a Physical Scientist with the 
U.S. Geological Survey (USGS), currently serving as the Chief 
of the Metals Section in the Minerals Information Team. I 
appreciate the opportunity to appear before you to discuss the 
role of metallic minerals in our national security and comment 
briefly on the availability of metallic minerals on public 
lands.

The Contribution of Metallic Minerals to National Security

    Metallic minerals are a key component of the supply of 
materials essential to our national security. These minerals 
are considered to be strategic and critical when the Nation 
must rely on importing them, few countries produce them, and 
their use is critical to military and industrial applications. 
Despite the dramatic changes in military readiness strategies 
in present years, the uses of these metallic minerals are still 
critical and most sources of supply are unchanged.
    For example, chromium is a metal that is used in stainless 
steel and in alloys in high performance aircraft. There is no 
substitute for chromium in either of these applications. 
However, 95 percent of the world's identified resources of 
chromium, which is extracted from chromite ore, are located in 
South Africa. The United States has no chromite ore reserves 
and only limited occurrences of chromite ore at all. As a 
nation, we import 80 percent of the chromium we use; the 
remaining 20 percent is acquired through recycling. Although 
uses of chromium have changed over time, the supply of chromium 
has been a major concern since World War I.
    For many years, the U.S. Government has maintained 
stockpiles of strategic and critical minerals. However, as the 
Department of Defense (DOD) has changed its primary war 
planning scenarios, strategies for maintaining an adequate 
supply of minerals have also changed. Currently there are more 
than 80 materials identified in the Strategic and Critical 
Minerals Stock Piling Act of 1939, half of which are metals. 
Congress has authorized the sale of many of these stockpiled 
materials in response to changing strategies. Only three 
commodities have been designated by DOD to be stockpiled for 
future use: beryllium (a very light metal used in aircraft 
alloys), mica (an excellent insulator used in radar 
applications with extreme high voltage), and quartz crystals 
(used as a filter in electronics devices.) Whether or not they 
are stockpiled, all of these materials are still strategic and 
critical, because they are still necessary for the equipment 
with which we defend ourselves in wartime and other 
emergencies. For example, of the more than 12 strategic and 
critical minerals used in modem fighter aircraft jet engines, 
only 4 are commercially recoverable via domestic sources.

Availability of Metallic Minerals on Public Lands

    At present, there are 141 active metal mines, not including 
placer mines, in 16 States. Commodities produced as a principal 
product or major byproduct are: antimony, beryllium, cadmium, 
copper, gold, iron ore, lead, molybdenum, palladium, platinum, 
rhenium, silver, and zinc. Current U.S. laws permit location of 
mining claims on Federal lands in 19 States (Alaska, Arizona, 
Arkansas, California, Colorado, Florida, Idaho, Louisiana, 
Mississippi, Montana, Nebraska, Nevada, New Mexico, North 
Dakota, Oregon, South Dakota, Utah, Washington, and Wyoming).
    USGS has a long history of assessing the potential for 
undiscovered mineral resources. Modern systematic efforts to 
determine the potential for undiscovered resources, especially 
metallic mineral deposits, began in the early 1960's, in 
response to the Wilderness Act of 1964, which required mineral 
assessments of public lands prior to withdrawal as wilderness 
areas. In the early years of this effort, the products were 
qualitative, describing high, moderate, or low potential for 
occurrence of undiscovered mineral resources. More recently, 
probabilistic quantitative assessments have been developed, 
resulting in reports that describe the probability of 
occurrence of identified quantities of specific mineral 
commodities. The first of these assessments was published in 
1976.
    Mineral resource assessments have expanded over time to 
address the needs of numerous Federal land and resource 
planning efforts, including those of the Forest and Rangeland 
Renewable Resources Planning Act of 1976, which applies to 
National Forest lands; the Federal Land Policy and Management 
Act of 1976, which applies to BLM lands; and the Alaska 
National Interest Lands Conservation Act of 1980. The USGS, in 
coordination with the BLM and the Forest Service under a 
Memorandum of Agreement, is conducting mineral resource 
assessments on individual land units managed by BLM and the 
Forest Service, including BLM districts and resource areas and 
National Forests. Other assessments are conducted on Alaska 
National Interest Lands and lands designated for various types 
of withdrawal. Also, USGS is just completing a Nationwide 
assessment of potential for undiscovered occurrences of gold, 
silver, copper, lead, and zinc. This National Assessment 
estimates that about as much of these metals remains to be 
discovered as has already been discovered.
    Although many local-scale mineral resource assessments have 
been completed or are in progress for BLM and Forest Service, 
there is no national systematic assessment of the potential for 
metallic mineral resources on all Federal lands. Some of the 
factors that make such an estimate difficult include the 
dynamic nature of land status, with lands passing from public 
to private ownership, and vice versa; methodological 
difficulties that arise from the relatively small areas 
included in individual tracts of public land and the inadequacy 
of scientific data for making predictions in those small areas; 
and the inherent uncertainties in making probabilistic 
assessments.
    The public lands may contain undiscovered deposits of 
mineral commodities that could be used to ensuring the national 
security. However, ultimately geologic factors, rather than 
land ownership, are the most effective predictors of potential 
for undiscovered mineral resources. For some commodities, such 
as chromite or bauxite ore, there is very little likelihood of 
ever identifying significant resources in the United States.
    Thank you, Madam Chairman. I will be pleased to respond to 
any questions you may have.
                                ------                                


     Statement of Dr. Donald A. Brobst for the Society of Economic 
                               Geologists

    Good afternoon, Chairman Cubin and members of the 
Subcommittee on Energy and Minerals. I am Dr. Donald A. Brobst 
and I am pleased to be here today representing the Society of 
Economic Geologists to speak on the future importance of 
Federal lands to the mineral and energy economy. Our society 
was founded in 1920 and has a membership of more than 3,000 
professional geologists deeply involved with the study of and 
exploration for mineral deposits of all kinds. We are an 
organization that is independent of formal ties to government, 
industry and academia, although we may work individually in 
research or exploration for a wide variety of employers. The 
goal of our organization is to foster research and 
dissemination of geologic information for application to the 
continuing search for new mineral deposits. Because we deal 
constantly with the uneven distribution of mineral resources 
within the accessible portion of the earth's crust, the 
difficulties in locating them and bringing them to production, 
we economic geologists believe that we can offer some useful 
insights into resource problems that might not be as evident to 
others.
    Minerals and fossil fuels are the life blood of our 
civilization and its economy. They are the foundation of 
society and our personally comfortable lives. Let's face it, no 
ancient emperor ever lived better than most of us do now in 
what we call the developed nations. These minerals are not just 
some abstract things that support the economy. Look around the 
room right here. There is stone, cement and steel for the 
building skeleton, copper in the pipes and wiring, chemicals of 
mineral origin in the paint. Don't forget the materials that 
made the tools and other machines that were used to build the 
building and the energy that made all of these steps possible. 
In the last few years, 1995 for example, domestic mine 
production yielded metallic minerals worth about $13 billion 
and noninetallic minerals worth about $25 billion. The raw 
minerals after further processing for commercial use had a 
value of $395 billion in a United States Gross Domestic Product 
(GPD) of $7 Trillion. The system of mineral supply that has 
allowed us to develop our high standard of living has worked 
well. How well will it do in the future is a question to 
ponder. How can we keep the mineral resource system functional?
    As geologists and citizens, we are greatly concerned about 
the future availability of the minerals and fuels needed to 
keep the economy of our nation sufficiently productive to 
support our population in the life style to which it has become 
accustomed, a style to which the more rapidly rising population 
of the less-developed world aspires.
    The minerals that we use are mined at the surface of the 
earth as well as to depths of thousands of feet beneath that 
surface. To find these deposits, we must examine large areas, 
often examining many prospects that do not turn out to be 
mineable. Thus, we are in need of land with which to work. Land 
issues, therefore, are fundamental aspects of mineral 
exploration and mining. Land policy opens or closes land to 
exploration for and production of minerals and fossils fuels. 
Land policy sets mining law. Since the early days of our nation 
mining law has made exploration and mining permissible on 
Federal land.
    As you well know, a major mining law that applies to 
Federal land was established in 1872. The notion at the time 
was to assist individual prospectors in the development of the 
West. This meant settlement and the establishment of a viable 
economy in that region. The law allows the claiming of lands to 
develop and mine minerals after discovery in hard rocks or 
those associated with stream gravels, notably gold placer 
deposits. Once the discovery was certified and well assessed, 
the claimed land could be patented, i.e. removed from public 
land to private ownership.
    The Mining Law of 1872 worked well for years but more 
recently has presented difficulties (Bailly, 1966). Mineral 
discovery must be certified on every claim at the time of 
staking. Currently discovery certification may require control 
of larger areas for commercial success when ``discovery'' may 
not be demonstrable on an individual claim, which encompasses 
about 20 acres. Discovery is generally now made by drilling 
and/or underground workings in areas larger than one claim. 
Other problems are seen in the approved legal status of claims 
for only two types of deposits, lodes and placers. There is no 
provision for staking claims on bedded or other types of 
deposits. The apex rule has been troublesome. Who really 
claimed the top of the deposit? For it is he who gets to mine 
downward. Many times the geology of the deposit does not offer 
a clear-cut case, which has opened many arguments. In recent 
years, the law has been the subject of considerable debate as 
efforts have been made to make it more applicable to present 
day mining problems and practice.
    From 1920 onward, new laws allowing the leasing of Federal 
lands with payments of royalties for production of minerals and 
fossil fuels were passed by the Congress. These laws have 
allowed continued access to public lands and generated much 
additional domestic mineral and fossil fuel production.
    It is clear now that U.S. mining law, despite its perceived 
flaws, has supported the idea that the nation needed to develop 
its mineral resources for the common good. The history of these 
mining laws and their problems have been well summarized in a 
readable style by E. N. Cameron (1986, p. 204-220).
    Although mining law has been altered since 1920 by the 
leasing laws, land policy seems to be traveling in the opposite 
direction, on a path toward tight restrictions that preclude 
mining. More and more public land is being withdrawn from 
mineral entry, particularly under the Wilderness Act of 1964. 
Under this Act, economic tests were set to make decisions about 
the comparative value of various uses of the parcels of public 
land being considered for inclusion into the wilderness system. 
The law also provided that the U.S. Geological Survey (USGS) 
and the now defunct U.S. Bureau of Mines (USBM) should survey 
the mineral potential of these designated areas on a regular 
and recurring schedule consistent with the ideals of wilderness 
preservation. It would now seem that the plan of recurring 
assessment has been abandoned. As time goes on, new ideas and 
technology appear, making most areas deserving of another look. 
It is interesting to note that, although the Wilderness Act 
does not allow mining in these areas, it will allow the 
gathering of information about mineral and other resources, and 
even prospecting, as long as the preservation of the wilderness 
environment is respected. The Departments of the Interior and 
Agriculture were also requested to review every roadless area 
of 500 acres or more of contiguous areas within units of the 
national park system, wildlife refuges and national forests to 
make recommendations for inclusion of such areas into the 
wilderness system. The Federal Land Management Act of 1976 and 
the Alaskan National Interests Land Act of 1980 also authorized 
wilderness areas but did not include economic tests for the 
withdrawals.
    The Office of Technical Assessment (1976) indicated that by 
1974 the location of minerals under the Mining Law of 1872 had 
been prohibited on almost 42 percent of public domain, severely 
restricted on about 16 percent and moderately restricted on 
about 11.5 percent. The total amount of land withdrawn was 500 
million acres. With respect to lands under the mineral leasing 
acts, such activity was prohibited on 36 percent of the public 
domain, severely restricted on about 23 percent, moderately 
restricted on about 6.5 percent. This involves 549 million 
acres. Doubtless, access must be even more restricted today. 
The affected lands are mostly in the 11 conterminous states of 
the Far West and Alaska. On a visually stunning map of the 
distribution and classification of ``Federal Land in the Fifty 
States,'' the National Geographic Society (1996) indicated that 
areas assigned to the wilderness system include 102 million 
acres in 360 areas administered by the Park Service (44 
percent), the Forest Service (33 percent), the Fish and Wild 
Life Service (20 percent), and the Bureau of Land Management (5 
percent).
    By 1983 the USGS and USBM each assessed 45 million acres of 
Forest Service lands in, or considered for, the wilderness 
areas. It took 1,000 man-years of effort (Marsh et al, 1983). 
That effort did not include any drilling. It appears, 
therefore, that lands will be assessed without any information 
in the third dimension--depth. Only Congress can release an 
area from the wilderness, a likely long procedure even if 
evidence of a good deposit is indicated. To demonstrate that 
might require information about rock and mineral 
characteristics at depth. Getting that information first as 
required is probably unlikely. We would hope that the now lone 
assessing agency, the USGS, will be financially supported in 
detailed recurring assessments that include drilling. Without 
information about rocks at depth, the resource assessments are 
much less valuable and reliable.
    If the Wilderness Act with its closure to mining is the 
wave of the future in public land policy, we must ask why this 
is so. We must consider the effects of such actions on our 
national ability to maintain a high degree of mineral and fuel 
independence that will support firmly our economy, our 
security, and our comfortable life style through the coming 
years. This call for a reduction in mining on more Federal 
public land is perhaps an early manifestation of anxiety about 
how the human race is using natural resources, how it is 
degrading its planetary habitat, and what it will leave for 
future generations. We must all come to realize that 
understanding and changes evolve, but that certain facts must 
be faced realistically.
    We need mineral resources to live. These mineral resources 
are finite and difficult to find. What we use we grow or mine. 
What we grow is renewable; and the minerals we mine are 
nonrenewable, although in some cases now recyclable to some 
degree. We geologists know that the mineral and fuel deposits 
we study and seek are rare and beautiful things. We need to 
communicate better that message, which I am trying to do today. 
To find a concentration of mineral or fuel material that we can 
produce at a profit under the economic conditions of the time 
is a real prize. Deposits are sought with great scientific and 
technologic effort at a high price. After discovery, they are 
developed with more great effort and more money. It is likely 
now that most of the easy to find deposits of most types that 
we now know about have been found in most areas of the world. 
Roscoe, (1971, p 134) noted that in 1951, one in 100 prospects 
in Canada that were examined during an exploration program lead 
to a mine development and by 1964 the ratio had been reduced to 
one in 1,000. This is certainly also true in the U.S. This 
means that we must continue to develop new and better ways to 
find more deposits in order to supply more people with their 
mineral needs. Finding and developing new deposits for 
production takes time. It may take 10 to 20 years to bring a 
promising show of minerals to successful production. This is a 
capital-intensive process. Many economic and legal changes may 
end a project and cause great losses before any product can be 
sold. It is a very exciting but risky business, this pursuit of 
mineral and fuel supplies to support the lives of the consumers 
(all of us!). We should keep the land access open because we 
might later want to return a once cancelled project.
    We must realize that the resources in sight now will not be 
sufficient to raise the living standard of the growing world 
population to that of the so-called developed nations. Mineral 
production is constantly rising with expanding economies. This 
says to us quite simply that if we boldly suppose that we now 
have a 1000 year supply of a mineral commodity in sight at 
present rates of production and plan to increase that 
production at a growing rate of 2 percent in each successive 
year, our 1000 year supply will be gone in 152 years. Compound 
growth is a real killer for resource consumption and population 
growth. Is this not a strong argument for continuing research 
for new deposits of minerals and fossil fuels and for adopting 
land-use policies that can evolve as the social, political and 
technologic climate changes?
    This line of reasoning implies exhaustion of commodity 
supplies. We can recognize geologic exhaustion of a mineral 
deposit when we can remove all of valuable ore material such as 
that found in a body with sharp walls between ore and adjacent 
non-mineralized rocks. Economic exhaustion is more common and 
occurs when some mineral material remains, but it is no longer 
mineable at a profit. Should some favorable changes occur in 
economics or technology, the deposit might again be profitably 
mined. This means that we need to permit continuing access to 
old mining areas in case they will be opened again as prices or 
conditions change.
    As we turn to lower grade ore, mineable material with a 
lower percentage of the desired material than is currently 
available, we will be required to process more tons of rock to 
obtain the same amount of that material, which will in turn 
require the use of more fuel. When fuel becomes scarcer and 
more expensive, the costs of mineral production will rise and 
those costs will be passed on to consumers.
    We should now look at some of these observations again and 
see what they mean to us now. Mining is done because we need 
minerals. We want them at the lowest price to sustain our lives 
at the highest levels possible. To do that for more people 
means that production must increase. The productive life of 
many deposits is only 10 to 20 years. If it takes 10 to 20 
years to find and bring deposits to production, the deposits we 
need in production between 2010 and 2020 must be identified 
soon. That means that we must constantly be looking for new 
deposits. The need for deposits requires access to land for the 
search. Accelerated rates of production at known deposits are 
not a satisfactory long-term solution to supply problems.
    A nation that cannot produce its own supplies of minerals 
must try to buy them abroad. Depending on where the supplies 
are located, special problems in foreign relations may be 
created. Cartels might seek to control production and 
distribution. History shows that many wars are fought over 
access to and possession of minerals and fossil fuel supplies 
(Youngquist, 1997). Even embarking on such wars requires the 
availability of mineral and energy commodities.
    The only other option is to do without these minerals and 
fuel supplies. Doing without them will lead to the degradation 
of living standards at any level. That condition will not be 
acceptable to many people. Political and civil unrest may 
follow.
    Everyone wants a clean healthy environment but everyone 
also wants to live comfortably and well. Accomplishing these 
two objectives will require the use of many resources, 
including those of minerals and energy, prudently and well in 
the future and at the least cost to the environment and the 
consumer. If there were no need or desire for these 
commodities, there would be no mineral and fuel industries. If 
there were no geology, there would be no environment.
    Much success in the location of new supplies of mineral 
resources, developing new technology to produce them in an 
environmentally sound fashion, finding substitutes for scarce, 
expensive ones, and recycling as much as possible will be 
required in the days ahead. Not everything is recyclable, 
fertilizer commodities, for example. Recycling, however, cannot 
retrieve enough material to supply increased growth. All of 
these operations will require the availability of energy 
supplies at reasonable cost. New sources of energy will have to 
be found and developed. New kinds of energy resources will be 
called for. Research and development on these topics needs to 
be given high priority.
    A closer look at oil suggests that by the middle of the 
21st century world oil production will peak. Following the time 
of peak production, prices will rise and at some point reach a 
level high enough to signal economic, if not geologic 
exhaustion. This scenario of peaking production and subsequent 
price rise will apply also to any mineral commodity when the 
search for new deposits fails to turn up additional deposits.
    We should certainly ask ourselves whether a fifty year 
supply of anything now is a great comfort to us. Even a 500 
year supply at anticipated increased rates of production is not 
a great one considering the generations of people marching 
through coming geologic time. We must note, however, that 
people will have used up the readily available supplies of oil 
in about 200 years since Col. Drake drilled the first oil well 
at Titusville PA in 1859. The world's petroleum supply took 
millions of years to mature: none is younger than 2 million 
years. The mineral and fossil fuel deposits that we seek and 
use have formed at various places and in times that span 
millions of years. This does not mean that we should not use 
these resources, but that we should be aware of their origin, 
the magnitude of their abundance, and their distribution 
because we need them. We must be ready to adjust to changes in 
their availability before supply problems cause economic and 
societal stress. We need access to land to find the new 
deposits.
    In conclusion, we are waking up to our environmental 
problems. Many people have not yet awakened to the resource 
problems. Both of these sets of problems must be examined with 
a balanced view. With the need for energy and minerals and the 
need for a safe and healthy environment, what balance we set 
will greatly affect what we do. Look again at that National 
Geographic map (1996). The 11 western States and Alaska have 
most of the public lands in question. This region of the U.S. 
has most of our large metal mines and some large nonmetallic 
deposits of relatively rare materials. This region has a 
geologic history through which conditions were very favorable 
for the formation of valuable deposits on and beneath the 
present surface. Would it not be a good idea to allow for 
future access? Would it not be wise to get a better idea of our 
mineral wealth on and under Federal public lands before putting 
it all out of commercial reach?

                              BIBLIOGRAPHY

    The bibliography that follows presents information on the 
publications cited in this text and some other works on mineral 
resources that might be of interest to readers of this paper.
    Bailly, P., 1966, Mineral exploration and mine developing 
problems related to use and management of other resources and 
to U.S. public land laws, especially the Mining Law of 1872. 
Statement to the Public Land Law Conference, University of 
Idaho. Oct. 10, 1966, 43pp.
    Brobst, D.A. in V.K. Smith, ed., 1979, Fundamental Concepts 
for the Analysis of Resource Availability, in Scarcity and 
Growth Reconsidered, The Johns Hopkins Press (for Resources for 
the Future) p 106-142.
    Cameron, E.N., 1986, At the Crossroads--The Mineral 
Problems of the United States: John Wiley and Sons, New York, 
320 pp.
    Eckes, A.E., 1979, The United States and the Global 
Struggle for Minerals: University of Texas Press, 353 pp.
    Marsh, S.P., Kropschot, S.J. and Dickinson R.G., eds., 
1984, Wilderness Mineral Potential Assessment of Mineral 
Resource Potential in U.S. Forest Service Lands Studied 1964-
1984: U.S. Geological Survey Professional Paper 1300, 2 vol. 
1183 pp.
    National Geographic Society, 1996, Federal Lands in the 
Fifty-States. A map issued with the Oct. 1996 issue of the 
National Geographic Magazine.
    Office of Technology Assessment Board of the U.S. Congress, 
1976, Mineral Accessibility on Federal Land, U.S. Government 
Printing Office, Washington, DC
    Park, C.F. Jr., 1975, Earthbound--Minerals, Energy, and 
Man's Future: Freeman, Cooper and Co., San Francisco, CA., 279 
pp.
    Roscoe, W.E., 1971, Probability of an Exploration Discovery 
in Canada: Canadian Mining and Metallurgical Bulletin v. 64, 
no.707, pp 134-137
    Youngquist, Walter, 1997, GeoDestinies: National Book Co., 
Portland, OR 499 pp.

                        SUPPLEMENTAL INFORMATION

SUMMARY
    The mining law of 1872 and the subsequent mineral leasing 
acts of 1920 and later recognized the need for access to public 
lands for mineral exploration and mining because the nation 
needed minerals and fossil fuels to support the economy, the 
national security, and the comfortable lifestyle of most of its 
citizens. With the advent of the Wilderness Act in 1964, lands 
began to be withdrawn from mineral entry. If the Wilderness Act 
with its closure to mining is the wave of the future in public 
land policy, we must ask why this is so. We must consider the 
effects of such actions on our national ability to maintain a 
high degree of mineral and fuel independence that will support 
firmly our economy, our security, and our comfortable lifestyle 
through the coming years. This call for a reduction in mining 
on more Federal public land is perhaps an early manifestation 
of anxiety about how the human race is using natural resources, 
how it is degrading its planetary habitat, and what it will 
leave for future generations. We must all come to realize that 
understanding and changes evolve, but that certain facts must 
be faced realistically. Mineral and fossil fuel resources are 
finite. We need mineral resources to live. These resources must 
be sought and mined at great cost in time and money. We need 
accessible land on which to carry out this work. Work on a 
promising prospect may take 10 to 20 years to bring into a 
production whose life might last 10 to 20 years. This means 
that deposits we hope to be mining in 2010 to 2020 must be 
identified soon. A nation that cannot produce its own minerals 
and fuels must try to buy them abroad. Problems in foreign 
relations may be created. Cartels may cause problems and many a 
war has been fought over access and possession of mineral and 
fuel resources. Doing without these commodities leads to 
degradation of living standards and that may be followed by 
civil unrest. We must have balance between the need for mineral 
resources and the need for a healthy environment. Look again at 
the National Geographic map. The 11 States of the Far West and 
Alaska have most of the public lands under discussion. This 
region has a geologic history through which conditions were 
favorable for the formation of many large deposits of metallic 
minerals, some of rare industrial minerals and probably more 
undiscovered deposits. Would it not be wise to get a better 
three-dimensional idea of our mineral wealth on Federal lands 
before putting them out of commercial reach?
                                ------                                


                             BRIEFING PAPER

    Subcommittee Oversight Hearing on ``Mining, the American 
Economy and National Security--The Role of Public Lands in 
Maintaining a National Asset'' February 23, 1999
    The Subcommittee on Energy and Mineral Resources is holding 
this oversight hearing to gather factual information on the 
state of domestic mining, including trends in domestic mineral 
exploration, production and reserves. Mining is a basic 
economic activity which supplies the strategic metals and 
minerals that are essential for agriculture, construction and 
manufacturing. A recent study by the National Research Council 
concluded that one of the primary advantages that the United 
States possesses over its strongest industrial competitors, 
Japan and Western Europe, is its domestic resource base. The 
domestic mining industry provides about 50 percent of the metal 
used by U.S. manufacturing companies.
    The United States is among the world's largest producers of 
many important metals and minerals, particularly copper, gold, 
lead, molybdenum, silver and zinc and still has substantial 
domestic reserves of these metals. Twelve western states 
containing more than 92 percent of U.S. public land account for 
nearly 75 percent of U.S. domestic metal production. Thus, much 
of the United States future mineral supplies will likely be 
found on public lands in the West.
    Evidence is mounting that while global mineral exploration 
trends are strongly positive, U.S. mineral exploration has 
entered a protracted downward spiral. Continuation of this 
trend in domestic mineral exploration raises serious concerns 
that as known reserves are exhausted, significant declines in 
domestic mineral production will occur. A long term decline in 
U.S. domestic mineral production could result in the loss of 
thousands of high-paying, skilled jobs in the domestic mining, 
mineral processing and manufacturing industries and increase 
reliance on foreign mineral supplies, increasing a worrisome 
national trade deficit.
    The Subcommittee will call witnesses from a national mining 
trade association, a consulting firm, the U.S. Geological 
Survey, a professional society and an environmental group to 
hear testimony on the following issues: (1) the domestic mining 
industry's contribution to U.S. economic strength and national 
security, (2) the current levels and trends in domestic mineral 
exploration efforts, (3) reliance on imported minerals, and (4) 
the role of mining on public lands in connection with the 
aforementioned issues.
    For further information, please contact Bill Condit at 
x59297 or John Rishel at x60242.
                                ------                                


Additional material submitted by Richard L. Lawson, President and Chief 
             Executive Officer, National Mining Association

Dear Chairman Cubin:
    Thank you for the opportunity to testify on the 
Subcommittee oversight hearing on February 23, 1999 on Mining, 
the American Economy, and National Security. I believe it gave 
the mining industry an excellent chance to show why the U.S. 
needs the ability to access public lands for domestic 
extraction activities which are essential for our continuing 
economic strength while maintaining the sensitivity we all want 
for our collective environment.
    During questioning of Mr. D'Esposito of the Mineral Policy 
Center by Rep. Gibbons of Nevada, several misleading comments 
were made about the adequacy of the bonding and reclamation at 
the Pegasus Gold Zortman Landusky complex in Montana. I'd like 
to correct those errors for the hearing record.
    In 1996, Pegasus Gold Corporation and Zortman Mining Inc. 
(ZMI) reached an agreement with the Environmental Protection 
Agency, and the Montana Department of Environmental Quality, 
the Assiniboine and Gros Ventre Tribes of the Fort Belknap 
Indian Reservation and the Island Mountain Protectors, which 
settled outstanding water quality issues. Without ascribing 
liability, the agreement resolved all pending claims against 
Pegasus and ZMI for alleged water noncompliance. The agreement 
was the result of approximately three years of technical 
studies and negotiations. The agreement outlined that Pegasus 
and ZMI pay a cash civil penalty of $2 million divided equally 
between the Federal Government and the State of Montana. The 
companies also agreed to create a $1 million trust fund for the 
Fort Belknap Tribes to finance projects identified by the Fort 
Belknap Community Council. In addition, the companies agreed to 
finance three supplemental environmental projects (`SEP's) for 
$1.5 million. The SEP's included improvements to the aging 
water supply and distribution systems for the Hays and 
Lodgepole communities on the Fort Belknap Indian Reservation, 
an independent community health study of residents on the 
Reservation and a detailed inventory of aquatic resources on 
the southern portion of the Reservation.
    In addition, ZMI had to post a compliance bond for the 
construction and operation of seepage capture systems and water 
treatment plants at both the Zortman and Landusky mine sites. 
The compliance bond basically serves as financial assurance for 
the state and Federal agencies that all corrective actions that 
were identified in the compliance plan will be completed. 
Furthermore, the bond had to include contingencies for what-if 
scenarios and had to be estimated as if the agencies were doing 
the work. It was also a requirement to post bond for treatment 
of water into perpetuity.
    The compliance bond consists of three parts identified as 
the capital bond, the operating and maintenance bond, and the 
perpetuity bond. The capital bond covered all compliance 
construction work to be completed by year-end 1997, along with 
a 10 percent of capital contingency for unforseen problems with 
water capture and treatment systems. The total came to 
$7,194,260. Furthermore, there was an additional $2,905,260 
bonded for five other what-ifs, bringing the total capital 
compliance bond to $10,099,894. All of this work was completed 
by ZMI within the allotted time frame and in accordance with 
all the terms of the consent decree. ZMI has asked the state 
for release of this bond.
    The operating and maintenance bond consists of operating 
labor, maintenance labor, direct and indirect costs and G&A 
costs to operate and maintain all water capture and treatment 
facilities until the year 2016. This segment of the bond is for 
the next 20 years and used a 3 percent inflation rate in the 
calculation. This bond also includes water monitoring and 
analysis, along with additional what-if contingencies. The 
total bond requirement for O&M segment was $14,626,422.
    The perpetuity of the long term bond is for replacement 
costs of the water treatment facilities every 30 years 
discounted into perpetuity, along with costs associated with 
the operation of the facility, monitoring, testing, etc. The 
total bond amount is $7,603,996. Hence, the total compliance 
bond that ZMI secured as part of the settlement totaled 
approximately $32 million. The bond was put into place before 
year-end 1996 and remains in place to this date.
    On January 16, 1998, Pegasus Gold Inc. and certain of its 
subsidiaries filed voluntarily to reorganize under Chapter 11 
of the Bankruptcy Code. Since that time, the Company's 
reorganization plan was confirmed of December 22, 1998 and 
confirmation of the plan occurred on February 5, 1999. During 
bankruptcy proceedings, all mine sites functioned in accordance 
with all state and Federal requirements and continue to do so.
    Finally, the MDEQ has determined that the reclamation bond 
of $30 million (this is in addition to the $32 million that is 
in place for compliance issues) is inadequate, and has asked 
the bankruptcy court for an additional $8.5 million. However, 
it is the position of ZMI that all necessary reclamation work 
can be done for less than the current $30 million and a 
detailed estimate of the work was completed by ZMI earlier this 
year. Pegasus Gold, ZMI and the state have been in close 
contact regarding bond requirements, and negotiations have 
progressed very well. ZMI and Pegasus Gold have always had good 
working relations with the regulators and, contrary to what 
environmental advocacy would like to have others believe, ZMI 
will continue to maintain our positive working relationship 
with state and Federal agencies in the future.
    In conclusion, Mr. D'Esposito's comments are nothing more 
than attempts to spread fear, while portraying the mining 
industry and in particular Zortman Mining, Inc, in a very bad 
light, when just the opposite is true. While having little or 
nor credibility regarding mining issues, as the staff of the 
Mineral Policy Center are not mining experts, and by not 
adequately explaining the facts of the Zortman/Landusky case, 
it seems MPC is trying to discredit an industry that has 
greatly supported the State of Montana both economically and 
environmentally. For over 18 years, ZMI supplied Phillips 
County with high paying mining jobs. Over the life of the mine, 
ZMI employed an average of approximately 210 people, with the 
highest employment rate reaching 300 people during 1994. ZMI 
employees consisted of people from all walks of life, including 
many members of the Fort Belknap Indian Reservation. All mining 
and associated disturbance has occurred within approximately 
1,200 acres of private and BLM land--this acreage includes both 
Zortman and Landusky mine sites. There are not many ranches or 
farms of this size, that I am aware of, that can directly 
provide jobs and income of this magnitude anywhere in the 
country, not to mention the indirect jobs that were created by 
the tremendous amount of goods and services that are required 
to operate and maintain a mine site.
    As I stated during the question and answer portion of our 
panel's presentation, in the vast majority of cases involving 
mining operations, the U.S. industry serves as ``active'' 
environmentalists creating new economic wealth for our nation, 
not environmental ``activists'' looking for problems on which 
they can litigate, but never arrive at a solution.
    If you would like further clarification on this issue, 
please contact me and I'll put you in touch with Mr. John P. 
Jones who provided NMA with this information. Mr. Jones is 
currently the General Manager of the Reclamation Services 
Corporation currently under contract to MDEQ for work relating 
to operation and maintenance of water capture and treatment 
facilities at the Zortman and Landusky mine sites. You may also 
contact Ms. Jill Andrews, Executive Director of the Montana 
Mining Association.

           Additional material submitted by Richard L. Lawson

Dear Delegate Faleomavaega:
    During questioning on my testimony before the House 
Resources Subcommittee on Energy and Mineral Resources 
oversight hearing on Mining, the American Economy and National 
Security, you asked me to respond to a Wall Street Journal 
article which you said alleged U.S.-based Freeport-McMoRan 
Copper & Gold Inc. was causing pollution and only had to comply 
with Indonesian environmental standards, not U.S. environmental 
standards.
    Although I have not yet received the article in question, I 
wanted to make sure I responded to you in a prompt manner. As 
promised, I checked the situation with Freeport and was 
surprised to learn you and your staff visited with company 
personnel and spoke with them several times on this issue. 
Perhaps Representative Miller's staff representative was 
unaware of the dialogue with Freeport when she gave you the 
question that you presented to me on the Irian Jaya, Indonesia 
situation. I believe your personal staff was checking on the 
House voting schedule during our exchange on this issue.
    At any rate, I'm enclosing a copy of the six-page letter 
sent to you in August of last year from Russell King, Freeport-
McMoRan's Senior Vice President here in Washington, DC. I 
believe his explanation of Freeport's environmental record in 
Indonesia on pages four and five of that letter is 
comprehensive. Further, the some 33 recommendations made by an 
independent environmental audit done by Dames & Moore which 
Freeport voluntarily commissioned on its tailing management 
program, are being fully implemented. I am told you also have 
copies of these audit reports. This letter also refers to the 
42 separate environmental studies done by Freeport as part of 
its AMDAL (comprehensive environmental assessment) which was 
approved in 1997. Mr. King also advises me that Freeport is 
preparing to undergo its second independent environmental audit 
in the second half of this year, which will also be made 
public, and I am sure they will provide you copies of that when 
it becomes available. Finally, I've enclosed Freeport's 1998 
Annual Report, which was just printed and includes a 12-page 
report on progress on social and environmental issues. I'm sure 
you'll find it of interest.
    I also wish to address the clear implication in your 
comments before the Subcommittee that Freeport and other U.S. 
mining companies deliberately choose to operate in foreign 
countries where, in your view, environmental regulations are 
not as strict. This is a common misconception. With all due 
respect, mining companies put their mines where the minerals 
are located. Also, contrary to your suggestion, the 
environmental laws of Indonesia are very thorough and modern 
having been patterned after those laws of Canada which are in 
turn comparable to the United States laws. For your 
information, I have enclosed a copy of a speech by Lou Clinton, 
former President and Chief Executive Officer of Freeport 
McMoran Pacific, detailing the development of environmental 
regulations in Indonesia. I think you will find this 
interesting and know you will find it enlightening.
    As I stated during the oversight hearing, I believe the 
companies making up the National Mining Association (NMA) set 
the world standard for all aspects of mining in production, 
health and safety, and in environmental remediation and 
reclamation. Please let me know if you would like to have me or 
a member of my staff visit with you further on this issue.

 Statement of W. Russell King, Senior Vice President, Freeport-McMoRan 
                   Copper & Gold Inc., Washington, DC

Dear Congressman Faleomavaega:
    Thank you for taking time out of your busy schedule to 
visit with me and my staff about Freeport-McMoRan Copper & Gold 
Inc. (FCX) and the operations of our Indonesian affiliate, PT 
Freeport Indonesia (PT-FI), in Irian Jaya. I wanted you to know 
the many positive things we are doing.
    Our actual operations in Irian Jaya, Indonesia's 
easternmost province, cover only a very small portion of the 
much larger area in which we are allowed to explore by our 
Contract of Work with the Government of Indonesia, In the area 
where we do operate, we strive to be a model of economic 
development that minimizes negative impacts, maximizes positive 
social impacts and respects the rights of local indigenous 
peoples.
    As I mentioned to you, to assist the local people in Irian 
Jaya, we have, in conjunction with the Government of Indonesia, 
built hospitals, schools, churches, housing and community 
facilities, and have instituted a comprehensive series of 
health and educational programs and training and small business 
development initiatives to involve the Irianese in the economic 
development taking place around them. PT-FI has spent some $120 
million on these programs since 1990. We have also sought to be 
sensitive to the need of Irian Jaya's unique peoples to 
preserve their cultures at the same time they are merging with 
modern development. For this reason, PT-FI has long supported 
the annual Asmat Art and Cultural Festival and this year 
sponsored the first Kamoro arts and cultural festival, which 
was highly successful. Catholic Bishop Alphonse Sowada has said 
Freeport's support has ``greatly enhanced'' the Asmat event, 
which he said ``. . . immensely bolsters both the feeling of 
pride and identity within them as being a people of value in 
the estimation outside their culture.''
    Since we began operations in the area, the average life 
span of the local indigenous people has increased and the 
infant mortality rate has decreased principally due to the 
efforts of PT-FI and the Government. Company public health 
initiatives have resulted in an approximate 70 percent decrease 
in the incidence of malaria over the past six years and 
dramatic reductions of other communicable diseases in the area 
inside and adjacent to our Contract of Work. PT-FI has also 
assisted the Government and the International Committee of the 
Red Cross (ICRC) in providing food and medical assistance to 
Irianese in remote areas affected in recent months by food 
shortages caused by drought as well as by outbreaks of 
communicable diseases. Henry Fournier of the ICRC recently 
thanked Freeport for its help in distributing emergency food 
and said Freeport's Malaria Control and Public Health Program 
have ``. . . been the cornerstone in treating and preventing 
the unexpected malaria epidemic in the highlands.'' In an 
independent audit of PT-FI's social programs, a highly 
respected LABAT-Anderson consulting team reported that these 
programs have ``improved people's lives'' and ``go beyond the 
usual role and responsibilities of a private company.''
    Over 20 years ago, we voluntarily entered into an agreement 
(the ``January Agreement'' of 1974) which recognized the 
traditional land rights of the indigenous Amungme tribe whose 
land was in the area of our operation. Under the Indonesian 
constitution, all mineral rights are reserved to the state. We 
believe the January Agreement was the first formal recognition 
of traditional land rights in Indonesia. Dr. Jacob Pattipi, 
then Governor of Irian Jaya, issued a report following a 
thorough review, concluding that we had met every legal and 
moral intent of the ``January Agreement.'' In addition, the 
Company has offered to negotiate with the Amungme and Kamoro 
people about ``additional voluntary recognition'' which takes 
into account both the greater value of the Company's activities 
in the area and the longer duration of those activities. The 
plan we have offered to the Amungme and Kamoro is based on cash 
generation from dividends and provides the two tribes with 
voting rights at PT-FI's shareholders meetings.
    PT-FI also recently reached agreement with the Kamoro 
tribal communities of Nawaripi and Tipuka and the Government of 
Indonesia for the release of traditional rights to additional 
lands for developmental programs, including the tailings 
deposition area, power transmission lines, additional roads and 
the expansion of port and other facilities. In an agreement 
facilitated by the Sejati Foundation, a noted Indonesian non-
governmental organization which works to protect the rights of 
indigenous people, PT-FI will build even more health clinics, 
educational facilities, housing, roads, bridges, village 
offices, churches and other community buildings and conduct 
economic feasibility studies, for the villages of Nawaripi 
Baru, Koperapoka, Nayaro, Tipuka and other areas.
    We are aware that the social needs surrounding our 
operation in Irian Jaya are ever-increasing. In an area where 
only 400 indigenous people lived when we began operations, more 
than 60,000 people now reside, including thousands from other 
Irianese tribes not native to the area who have moved there 
because of the economic growth and prosperity. To help 
accommodate these needs, we agreed in April, 1996, to commit at 
least one percent of our gross revenues (not net profits as 
many mistakenly assert) for the next ten years--an estimated 
$15 million a year currently--in support of the Government of 
Indonesia's Integrated Timika Development Plan (ITD), a 
comprehensive social development plan based upon the input of 
indigenous leaders during a year-long series of meetings. The 
ITD was launched in July, 1996, and is supported by other 
private sector companies doing business in Irian Jaya in 
addition to PT-FI.
    The LABAT-Anderson team supported the ITD concept in both 
its interim and final reports. However, the group cited 
problems in the implementation of ITD and made suggestions, for 
improvements. Moreover, local Irianese church leaders and some 
tribal leaders called for the suspension of ITD disbursements 
due to these problems and misunderstandings by the local people 
concerning the disbursement process. While PT-FI believed the 
ITD was a good plan when it was launched, the company agreed it 
was rushed into implementation and that serious flaws resulted. 
Accordingly, PT-FI agreed with the government, church and 
tribal leaders to suspend further disbursements from the fund 
in August 1997 other than for previously approved and essential 
programs with ongoing funding commitments, such as malaria 
control and public health, job training and scholarships for 
Irianese. PT-FI then entered a dialogue with local church and 
tribal leaders and government representatives on how best to 
restructure disbursements from the 1 percent fund to meet the 
LABAT-Anderson recommendations and local desires that the 
process be village-based, not tribal-based and that it be 
managed locally in Timika.
    From these discussions has emerged the Freeport Fund for 
Irian Jaya Development (FFIJD), a vehicle for future 
disbursements from the 1 percent fund within the guidelines of 
the overall government ITD plan. Representatives of PT-FI, 
local churches, foundations representing the local tribes--
including LEMASA, a key foundation of the Amungme people which 
had opposed the original ITD--are now meeting regularly to iron 
out details of the FFIJD funding mechanism in a manner 
acceptable to all. The funding of important new projects and 
programs to benefit the local people and their development are 
now under discussion.
    In addition to the important commitments outlined above and 
at the request of local leaders, PT-FI agreed in 1996 to 
implement training and educational programs sufficient to 
quadruple the number of Irianese in its work force over the 
next ten years and to greatly increase the number of Irianese 
in management and supervisory positions. Progress toward 
meeting this commitment has been significant and PT-FI now 
employs thousands of Irianese. To support these initiatives, 
PT-FI has undertaken a comprehensive employee and pre-
employment training program for the local people and has 
established a special section of the Human Resources 
Department--the Office of Irianese Education and Development--
to assure the proper hiring, training and evaluation of local 
employers and potential employees.
    Besides supporting the FFIJD and the payment of additional 
voluntary recognition for the Amungme and Kamoro, PT-FI pays 
hundreds of millions of dollars annually to the Government of 
Indonesia for taxes, royalties, fees and dividends and these 
funds support government services that benefit all lndonesians 
including the inhabitants of Irian Jaya. Under PT-FI's 1991 
Contract of Work, these direct benefits to Indonesia have 
totaled $1.1 billion. Moreover, during the same time period, 
1992-1998, Indonesia has realized another $5.3 billion in 
indirect benefits in the form of wages and benefits paid to 
workers, purchases of goods and services, charitable 
contributions and reinvestments in operations. In all, 94 
percent of PT-FI's total revenues have remained in and 
benefited Indonesia and in particular Irian Jaya.
    Concerning environmental protection, we constantly try to 
minimize our impacts, and are committed to the continuous 
improvement of our environmental management systems We are in 
compliance with the environmental regulations of the Government 
of Indonesia. To help us monitor the environment closely 
surrounding our operations, we utilize the services of some of 
the world's best environmental scientists and have built a 
world-class, modern environmental laboratory.
    Furthermore, as part of the Regional AMDAL (comprehensive 
environmental assessment, monitoring plan and management plans) 
we prepared for our current expansion, we commissioned 42 
separate studies assessing the impacts of the operation as well 
as the state of the environment in the area--from the nearby 
glaciers to the impact of our tailings on marine sediments in 
the Arafura Sea. These studies, including studies of social 
impacts, were performed by nearly 200 world class independent 
scientists who are acknowledged experts in their respective 
fields, and the major studies each underwent a ``peer review'' 
process conducted by panels of yet more independent experts to 
verify and validate the original findings. The results of these 
studies were presented in a series of academic and scientific 
workshops, and were included in the AMDAL documents for public 
scrutiny. Arguably, there is no place on the planet that has 
received as much intensive environmental and social scrutiny 
over the past two years as our project area. PT-FI's Regional 
AMDAL was submitted to BAPEDAL (the Environmental Assessment 
Agency) and the Regional AMDAL Commission. It was reviewed and 
revised and approved in December 1997 by the Minister of 
Environment. PT-FI's AMDAL was termed `. . . the most 
comprehensive (BAPEDAL) has ever seen,'' by AMDAL Commission 
Chairman Paul Coutrier, then-BAPEDAL Deputy Chairman for AMDAL 
and Technical Development.
    However, in both these areas--social and environmental--we 
recognize that we are developing in a complex arena and that we 
can always find ways to improve, For that reason, as mentioned 
before, PT-FI took the extraordinary steps of voluntarily 
submitting to thorough and independent social and environmental 
audits conducted under the auspices of BAPEDAL. The findings of 
the independent environmental audit and interim report of the 
social audit were made public in 1996 and the final social 
audit report was released in 1997. We know of no other company 
that has submitted itself to such intense, independent 
scrutiny, the results of which have been released to the 
general public.
    The LABAT-Anderson social-cultural audit team consisted of 
internationally recognized sociologists and anthropologists, 
environmental analysts, specialists in development and 
agriculture, educators and health experts and individuals with 
a long history of working in Irian Jaya. This helped assure an 
independent, balanced and thorough approach. The LABAT-Anderson 
team recognized the complexity of social development issues in 
Irian Jaya and we benefited from the ``fresh look'' their 
report provided, which is one of the advantages of the 
independent audits. The report found that much progress has 
been made, but that much remains to be done. Mistakes have been 
made due to the complexity of Irian Jaya's social landscape and 
the unprecedented challenges faced there, Nevertheless, we 
remain completely committed to this process. The LABAT-Anderson 
team made a number of suggestions for reevaluation of program 
elements and we completely agree and are implementing their 
recommendations. At the same time, the report also says PT-FI's 
efforts ``show good intentions'' and that the company 
``recognizes its social responsibility and that social 
development must keep pace with industrial and economic 
development.''
    The environmental audit by Dames & Moore, conducted by a 
team headed by the Hon. Ros Kelly, former Australian Minister 
for the Environment, endorsed our tailings management program. 
Dames & Moore found that PT-FI's tailings management program is 
``the most suitable option'' for the environment in which we 
operate and that the long-term risks associated with 
alternative tailings management options are ``unacceptable.'' 
Moreover, the report found that the tailings are non-toxic and 
that our mining operations do not pose any significant risk to 
Irian Jaya's biodiversity. Overall, the Dames & Moore team made 
33 recommendations, all of which were accepted and are being 
implemented.
    I left with you copies of both of these audit reports for 
your information. I realize I left you more information 
regarding these two areas than you anticipated, but I believe 
that to have a thorough understanding of our company and its 
motivations, you have to have at least an inkling of the great 
lengths to which we have gone and the dramatic steps we have 
been willing to undertake in order to insure that our operation 
is beneficial to our Irianese neighbors and our Indonesian 
hosts.
    On the subject of human rights, PT-FI's numerous social 
programs outlined above have done much to help secure basic 
human rights for our Irianese neighbors and employees. These 
include opportunities for employment and an adequate standard 
of living, access to heaIth care and other social services, 
educational opportunities and cultural preservation. PT-FI is 
also working with the Government of Indonesia in a variety of 
ways to help establish the civilized rule of law in this remote 
part of the nation, including grassroots education on the 
basics of law and support for the Government as it establishes 
a civil and criminal court system. This helps assure Irianese 
of the human rights protections provided by access to a civil 
and criminal legal system.
    There is a small separatist group operating in Irian Jaya 
known as the OPM (Organisasi Papua Merdeka) that, over the last 
several years, has engaged in a number of violent clashes with 
the armed forces of the Government of Indonesia and there have 
been allegations of human rights violations in connection with 
some of this activity. These have been investigated and the 
individuals in the military who were determined to be involved 
have been punished. The OPM has also been accused of engaging 
in human rights violations and terrorist acts, including the 
murder of one of our Irianese employees and the attempted 
murder of others and, in 1996, two protracted hostage-taking 
episodes which resulted in the deaths of four hostages. In one 
hostage situation, the victims were environmentalists and 
students affiliated with the World Wildlife Fund. FCX and PT-FI 
are on record strongly condemning all of these alleged human 
rights violations by either side in the conflict, as well as 
taking a strong position in defense of human rights in annual 
reports, press releases, correspondence and official 
interviews. FCX and PT-FI have also repeatedly and publicly 
stated their support of any legitimate investigation of alleged 
human rights violations. Furthermore, we have urged the ICRC 
(International Committee of the Red Cross) to establish a 
permanent presence in the Timika area. We are also working with 
UNDP and UNESCO to establish representation in the area.
    Congressman, once again thanks for taking the time to meet 
with me and I appreciate your forbearance in reading this 
lengthy letter. However, I felt that you would appreciate 
having on record many of the things which we talked about. 
Please do not hesitate to call upon me if I may be of further 
assistance.

     A PROSPECTIVE ON ENVIRONMENTAL REGULATORY ISSUES IN INDONESIA

Louis A. Clinton

    There is a myth that today most U.S. based multi-national 
companies seek to move their investments overseas to developing 
countries because those countries care less about the 
environment and/or do not propose to regulate in order to 
protect the environment. As a rule, I do not believe this is 
true for many developing countries, and certainly not for 
Indonesia. As I will illustrate later in my discussion, 
Indonesia has a major commitment to environmental conscious 
developmental policies and has the laws and regulations in 
place to implement this concern. I might also point out that 
Indonesia has a very active group of environmental NGO's which 
affect government policy both within and outside of the 
relevant Ministries.
    Indonesia has developed a broad, comprehensive and fair 
environmental regulatory system within their country. Permit me 
to illustrate some of the specific steps they have taken to 
assure that their environmental laws and policies have kept 
pace with the increasing interest and priorities in this area. 
First, the Government of Indonesia (GOI) passed a ``omnibus'' 
environment law in 1982 (entitled Act of the Republic of 
Indonesia No. 4 of 1982--Concerning Basic Provisions for the 
Management of the Living Environment). This landmark 
legislation provided for a comprehensive environmental 
assessment review to be completed for any major project prior 
to initiation of construction. This comprehensive legislation 
is quite comparable to the initial development of a similar 
type of legislation in the United States known as NEPA 
(National Environmental Protection Act) which began the 
requirements for Environmental Impact Statements in America for 
all major projects. Bear in mind that this landmark United 
States law was enacted in 1969, only 13 years prior to a 
similar law being passed in Indonesia. It was not until a year 
later that the U.S. EPA was established; and the specific 
framework for environmental standards only developed after 
enactment of U.S. legislation in the mid-1970's. Therefore, the 
GOI development of similar requirements is somewhat 
contemporaneous to that in the U.S.
    The development of the omnibus environmental law in 
Indonesia, and subsequent regulatory programs to be discussed 
later in this talk, was not done in a vacuum. Rather it was 
done with the assistance of international groups with expertise 
in the area of environmental management. Specifically, a 
program was developed in 1983, called the Environmental 
Management Development in Indonesia (EMDI) Project, which was a 
cooperative program between the governments of Indonesia and 
Canada to assist Indonesia with development of environmental 
regulations. Thus, many of the environmental rules in Indonesia 
have been patterned after those in Canada which, in turn, are 
quite similar to U.S. environmental legislation and 
regulations.
    In 1986, the GOI passed Government Regulation No. 29 
Regarding Environmental Impact Assessments. This law added form 
and specificity to the 1982 law and set up the formal 
Environmental Impact Assessment program (called AMDAL). The 
cornerstone of this process called for the preparation of an 
environmental impact statement type document known as an 
Environment Impact Assessment Document (ANDAL). The ANDAL 
requires an applicant for any major industrial facility to 
provide significant technical, environment and social/economic 
data on all aspects of the project. It also required a 
comprehensive Environmental Management Plan (RKL) and 
Environmental Monitoring Plan (RPL) which specifically detailed 
all of the monitoring and environmental management activities 
to be conducted over the life of the project. The law also 
established an Environment Impact Assessment Commission to 
review all ANDALs before a project can begin. The Commission is 
composed of numerous federal government Ministry and Department 
heads, as well as Provincial Government representatives, 
experts from relevant fields and non-government organizations 
(NGO's). Therefore, there is broad based review of all major 
projects in Indonesia from an environmental perspective by 
various federal and regional government agencies, and the 
general public.
    A special Ministry had been created for environmental 
policies known as the State Ministry of the Environment. It was 
headed until approximately four years ago by the 
internationally recognized environmental expert Bapak Emile 
Salim. In 1990, Indonesia expanded its environmental management 
capabilities by establishing a new agency within the State 
Ministry of the Environment known as BAPEDAL (Environmental 
Impact Management Agency). BAPEDAL's mission was formally 
established ``to execute the government functions to control 
environmental impacts using ecological principles and the 
utilization of natural resources such that negative impacts of 
development do not alter environmental functions.'' Since its 
establishment there has been significant growth and development 
of BAPEDAL. The agency now has a broad range of regulatory 
control. Regulations exist for water discharge limits, 
receiving stream water quality standards, air emission limits, 
ambient air quality standards, hazardous and toxic materials 
control, among many others.
    In approximately 1992, BAPEDAL developed an Environmental 
Audit Program and Environmental Performance Rating Program to 
assess industries compliance with GOI environmental 
regulations. This program called for major industries in the 
country to have third party environmental audits conducted at 
their facilities and the reports to be submitted to the 
government containing the findings of that company's compliance 
with GOI regulations and world-wide management practices. The 
government developed a publicly announced environmental score 
card or environmental rating system based on a color code given 
to various levels of compliance performance. The program has 
been quite effective in bringing public attention to these 
matters and has resulted in significant conformance with 
environmental rules in the country by industries.
    In addition to the environmental agency and environmental 
laws and regulations discussed above, the GOI also has 
environmental standards, controls and inspection rules within 
various Ministries and Departments of State. For example, the 
Department of Mines and Energy (DOME) has a special Bureau of 
Environment and Technology that closely regulates mining and 
energy projects. This includes routine inspections of 
operations, as well as requirements for operations to submit 
comprehensive quarterly information and data on environmental 
monitoring and management activities. Therefore, there is a 
double layer of environmental review of these industrial 
operations by the environmental agency (BAPEDAL) and the 
respective State Ministry under which that industry operates 
(DOME, Ministry of Industry, etc.).
    Finally, the Government of Indonesia passed in 1992 a 
national land use/planning law that required Spatial Land Use 
Plans (RDTR) that emphasized regional and area planning and 
coordination for all environmental impactive developments. This 
has enabled the government to study, on a regional basis, 
environmental impacts so that the most efficient use of 
resources can be made with the least potential environmental 
impact.
    So as we can see, the Government of Indonesia has for some 
time now had a very comprehensive environmental legislative and 
regulatory program that has established landmark ``omnibus'' 
type environmental requirements, such as environmental 
assessment studies prior to initiation of major projects, and; 
all of the various quality control standards that one can 
routinely find in developed nations around the world. Truly, 
the government has done its part in clearly delineating its 
concern for the environment.

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