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



 
  THE EFFECT OF FEDERAL MINING FEES AND PROPOSED FEDERAL ROYALTIES ON 
            STATE AND LOCAL REVENUES AND THE MINING INDUSTRY

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

                             FIELD HEARING

                               before the

                         SUBCOMMITTEE ON ENERGY
                         AND MINERAL RESOURCES

                                 of the

                         COMMITTEE ON RESOURCES
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                       MAY 15, 1999, RENO, NEVADA

                               __________

                           Serial No. 106-36

                               __________

           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

                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
58-947                      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         RUSH D. HUNT, New Jersey

                     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 May 15, 1999........................................     1

Statements of Members:
    Bryan, Hon. Richard, a Senator in Congress from the State of 
      Nevada, letter to Mr. Gibbons..............................     6
    Cubin, Hon. Barbara, a Representative in Congress from the 
      State of Wyoming, prepared statement of....................     5
    Gibbons, Hon. Jim, a Representative in Congress from the 
      State of Nevada............................................     1
        Additional material submitted by.........................   000
        Prepared statement of....................................     3

Statements of witnesses:
    Carpenter, Ann, Vice President, Exploration and Business 
      Development, Nevada Colca Gold, Inc., Reno, Nevada.........    81
        Prepared statement of....................................    82
    Coyner, Alan R., Administrator, Nevada Division of Minerals..    10
        Prepared statement of....................................    13
Additional material submitted by.................................    00
    Dempsey, Stan, Chairman, Royal Gold, Incorporated, Denver, 
      Colorado...................................................    70
        Prepared statement of....................................    72
        Additional material submitted by.........................    00
    Drozdoff, Leo M., Chief, Bureau of Mining Regulation and 
      Reclamation, Nevada Division of Environmental Protection, 
      Carson City, Nevada........................................    56
        Prepared statement of....................................    57
        Letter to Ms. Cherie Sexton..............................    65
        Letter to Ms. Cherie Sexton..............................   109
        Letter to Mr. Paul McNutt,...............................   125
        Letter to Mr. Dave Aberswerth and Bob Anderson,..........   129
        Letter to Mr. Bob Anderson,..............................   138
    Fields, Russell A., President, Nevada Mining Association.....     6
        Prepared statement of....................................     8
    Guinn, Hon. Kenny C., Governor, State of Nevada, prepared 
      statement of...............................................    35

Additional material submitted for the record by:
    Ingle, Hugh, President, Nevada Miners and Prospectors 
      Association, Yerington, Nevada.............................    83
        Prepared statement of....................................    84
    Kennedy, Larry, Exploration Manager, Battle Mountain Gold, 
      Reno, Nevada...............................................
    Lewis, F. W., F.W. Lewis, Incorporated, Reno, Nevada.........    86
        Prepared statement of....................................    87
    Miller, Glenn C., Cochair, Mining Committee, Toiyabe Chapter, 
      Sierra Club, Reno, Nevada..................................    41
        Prepared statement of....................................    43
    Myers, Tom, Director, Great Basin Mine Watch, Reno, Nevada...    44
        Prepared statement of....................................    47
    Parratt, Ronald L., Commissioner, Commission on Mineral 
      Resources, State of Nevada.................................    25
        Prepared statement of....................................    26
    Rhoads, Dean A., Chairman, Natural Resource Committee, Nevada 
      State Legislature..........................................    35
        Prepared statement of....................................    38
Snow, Charles D. Consulting Geologist, Exploration Mining, & 
  Environmental, Utah............................................    00
    Soberinsky, Victoria, Deputy Chief of Staff for Governor 
      Kenny Guinn, State of Nevada...............................    33

Additional material submitted:
    Backgound Memo from the Committee............................   104
    Federal Register, Notice of Intent and scoping...............   120
    Loptien, Greg D., Sparks, Nevada, prepared statement of......   105
    Western Governors' Association, letters and prepared 
      statement of...............................................   113
    Women's Mining Coalition, Reno, Nevada.......................   157
        Guinn, Hon. Kenny C., Governor, State of Nevada, prepared 
          statement of...........................................    35



  THE EFFECT OF FEDERAL MINING FEES AND PROPOSED FEDERAL ROYALTIES ON 
            STATE AND LOCAL REVENUES AND THE MINING INDUSTRY

                              ----------                              


                         SATURDAY, MAY 15, 1999

              House of Representatives,    
                         Subcommittee on Energy    
                                 and Mineral Resources,    
                                    Committee on Resources,
                                                      Reno, Nevada.
    The Subcommittee met, pursuant to call, at 2 p.m. at the 
Washoe County Commission Chambers, 1001 E. 9th Street, Building 
A, Reno, Nevada, Hon. Jim Gibbons presiding.

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

    Mr. Gibbons. Ladies and gentlemen, it's my honor to open 
this Subcommittee on Energy and Mineral Resources hearing here 
in Nevada. To begin with, I want to welcome all of you here. 
We're going to make a slight change in the format simply 
because some of the witnesses that were on the first panel have 
been unavoidably detained, so we will end up starting with the 
second panel.
    Let me also tell you that at the end of all of the hearing 
time for those people that are on scheduled panels, we're going 
to try to open it up, time permitting, for an open mike to let 
those public citizens out here that want to have a voice to be 
heard, we're going to offer them a minute or a minute and a 
half--I know that sounds like a short time, but when the TV 
cameras are on you, it's a long time.
    So figure out what you're going to want to say. We'll try 
to open it up so you will have an opportunity, if you weren't 
on one of the panels to begin with.
    Let me also say that this hearing today is to hear 
testimony on the effect of Federal mining fees and proposed 
Federal royalties on State and local revenues and the mining 
industry, so we want to somewhat focus it down a little so we 
don't get too far adrift and start dividing our attention and 
focus on areas that may not be applicable to today's hearing.
    Before I get to my remarks, I'm going to advise all of 
those panels that we have listed here that I will swear you in.
    This is an official congressional hearing and you will be 
testifying under oath, and so I just want to advise you of the 
procedure that before we start with each of you, we will ask 
you to take an oath, which I will have you stand and administer 
to you.
    Let me begin this morning by welcoming all of you here to 
this hearing, and we all know that Nevada is the largest gold 
producing State in the country and the third largest gold 
producer in the world. It's my honor and pleasure to welcome 
and thank you for taking time out of your busy schedules to 
share your thoughts on mining with this Committee. Today, we'll 
hear what I think is very important testimony on the effect of 
existing Federal fees such as the $100 per claim holding fee in 
addition to proposed Federal fees, such as royalties, on the 
mining industry, State and local economic activity and 
revenues.
    The Committee also wishes to gather information on the 
probable effects of various existing and proposed Federal fees 
on trends in our Nation's domestic mineral exploration, 
production, and reserves.
    Mining is a basic economic activity necessary to all 
mankind. The knowledge and use of metals is so important to 
human civilization that the progress of early man is marked by 
the advancement in his knowledge of metals. Man's most 
primitive period in tool making was known, of course, as the 
Stone Age. Man's subsequent technological advancements for the 
next 2,500 years is characterized by his increasing ability to 
work with metals, and the periods of this advancement are 
divided into the Copper Age, the Bronze Age, and the Iron Age.
    Now, as a former mining geologist, myself, and a cochairman 
of the Congressional Mining Caucus, let me say that I have a 
deep appreciation and understanding of Nevada's mining 
industry. Nevada, the Nation's leader in gold production, has 
30 operating gold producing companies that employ more than 
14,000 people; and these people mine more than $3 billion worth 
of metals annually, and Nevada alone provides an annual direct 
contribution to the Federal Government of more than $113 
million.
    As the second largest employer in the State, mining 
provides $1.5 billion in personal, business and State and local 
government revenues.
    These numbers make it easy to realize why mining is such an 
important part of Nevada. Around the globe mining continues to 
be a basic economic activity which supplies strategic metals 
and minerals that are essential for modern agriculture, 
construction, and manufacturing.
    A recent study by the National Research Council concluded 
that one of the primary advantages of the United States, that 
it possesses over it's strongest industrial competitors Japan 
and western Europe, is our 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.
    As I'm sure everyone here knows, the Second Congressional 
District, which I have the privilege of representing in 
Congress, encompasses some of the most important mining areas 
in the United States. Precious metal mining constitutes the 
majority of economic activity in the north central and 
northeastern parts of Nevada.
    One of the reasons why this Committee selected Reno for 
this hearing is not simply because I live here, but because 
Nevada is an important public lands mining State, with more 
than 87 percent of the Nevada lands managed by the Federal 
Government; and mining accounts for approximately 9 percent of 
our State's gross State product. Consequently, any detrimental 
effects of Federal mining policy are going to have a serious 
consequence to the mining industry and to the livelihoods of 
families across this State of Nevada.
    Some seem to believe that mining doesn't matter in this new 
age. They think that the future of mankind can be secured 
without basic material resources. They often think that if they 
produce words and ideas in the ``information age,'' then 
nothing else is necessary. Well, they're wrong.
    Mining matters to everyone. Mining makes our civilization 
and high living standards possible. Everything you will use 
today began in a mine. Everything you do today depends on 
mining. Today we'll examine the existing and proposed Federal 
policies, particularly those policies relating to royalties and 
fees toward mining on Federal lands.
    Hopefully, what we learn here today will help us find out 
the consequences that these policies have had or will have on 
those who would invest their capital toward finding mineral 
deposits and developing mines.
    There is an old adage out there. Many of you know it, and 
we're trying to spread it as far as we possibly can, and it 
goes: ``If it isn't grown, it has to be mined.'' And I think 
that is an important thought for all of us to maintain. With 
that, it's time for this hearing to begin.
    [The prepared statement of Mr. Gibbons follows:]

 Statement of Hon. Jim Gibbons, a Representative in Congress from the 
                            State of Nevada

    Welcome to Nevada, the largest gold producing state in the 
Country and the third largest gold producer in the world. It is 
my honor and pleasure to welcome and thank you for taking time 
out of your busy schedules to share your thoughts on mining 
with this Committee.
    Today we will hear important testimony on the effect of 
existing Federal fees, such as the $100 per claim holding fee. 
We will also hear testimony about the effect of proposed 
Federal fees, such as royalties on the mining industry, on 
state and local economic activity and revenues. The Committee 
also wishes to gather information on the probable effects of 
various existing and proposed Federal fees on trends in our 
nation's domestic mineral exploration, production and reserves.
    Mining is a basic economic activity necessary to mankind. 
The knowledge and use of metals is so important to human 
civilization that the progress of early man is marked by the 
advancement in his knowledge of metals. Man's most primitive 
period of tool-making is known as the Stone Age. Man's 
subsequent technological advancement for the next 2500 years is 
characterized by his increasing ability to work metals, and the 
periods of this advancement are divided into the Copper Age, 
Bronze Age and Iron Age.
    As a former mining geologist and Co-Chairman of the 
Congressional Mining Caucus, I have a deep appreciation and 
understanding of Nevada's mining industry. Nevada, the nation's 
leader in gold production, has 30 operating gold producing 
companies that employ more than 14,000 people. These people 
mine more than $3 billion worth of metals annually. Nevada 
alone provides an annual direct contribution to the Federal 
Government of more than $113 million. As the second largest 
employer in the State, mining provides $1.5 billion in 
personal, business, and state and local government revenues. 
These numbers make it easy to realize why mining is such an 
important part of Nevada.
    Around the globe, mining continues to be a basic economic 
activity which supplies strategic metals and minerals that are 
essential for modern 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.
    As I'm sure everyone here knows, this Congressional 
district which I represent in Congress, encompasses some of the 
most important mining areas in the United States. In addition, 
precious metals mining constitutes the majority of economic 
activity in the north central and northeastern parts of Nevada.
    One of the reasons why the Committee selected Reno for this 
hearing is because Nevada is an important public lands mining 
state, with 87 percent of Nevada's lands owned by the Federal 
Government and mining accounting for approximately 9 percent of 
the Gross State Product. Consequently, any detrimental effects 
of Federal mining policy are going to have serious consequences 
to the mining industry and to the livelihoods of families 
across this great State.
    Some seem to believe that mining doesn't matter in this new 
age. They think that the future of mankind can be secured 
without basic material resources. They think that if they 
produce words and ideas in the ``information age'' then nothing 
else is necessary. They are wrong.
    Mining matters to everyone. Mining makes our civilization 
and our high living standards possible. Everything you will use 
today began in a mine. Everything you do today depends on 
mining.
    Today we will examine existing and proposed Federal 
policies, particularly those policies relating to royalties and 
fees, towards mining on Federal lands. Hopefully, what we learn 
today will help us find out the consequences that these 
policies have had or will have on those who invest their 
capital toward finding mineral deposits and developing mines.
    Remember if it isn't grown, it has to be mined!
    With that it is time to begin. Will the first panel please 
be seated.

    [The information follows:]
Letter to Participants from Hon. Harry Reid, a Senator in Congress from 
                          the State of Nevada
                           The Hon. Harry Reid,    
                                       U.S. Senate,
                                            Washington, DC,
                                                      May 14, 1999.
Dear Hearing Participants:
    I want to first thank Congressman Gibbons for allowing a statement 
to be read on my behalf, and I would also like to thank him for 
arranging this hearing.
    The mining industry is an important part of Nevada's economy. 
Furthermore, our mining industry employs thousands of Nevadans who 
would otherwise be hard pressed to find employment in other areas.
    This past week, I was able, through my seat in the Appropriations 
Committee, to include some language that will ensure that the 
Department of Interior takes into account a study that was mandated by 
Congress last year. This study is being conducted by the National 
Academy of Sciences and will cost nearly $1 million. To ignore this 
study, as is Secretary Babbitt's intention, is a sheer waste of 
taxpayer monies.
    Again, I would like to thank Congressman Gibbons for his hard work 
on this issue, and I only wish that I could be there with you today.
    With all best wishes,
            Sincerely,
                                                Harry Reid,
                                             United States Senator.
                                 ______
                                 
Statement of Hon. Barbara Cubin, a Representative in Congress from the 
                            State of Wyoming
    Our domestic hard rock mining industry has long utilized the public 
lands of the Western United States and Alaska as its primary 
exploration base. Indeed, since 1866 approximately three million acres 
of mineral rights have been patented to discoverers of valuable 
deposits of gold, silver, copper, lead, zinc, and many other mineral 
commodities which fall within the purview of the general mining laws. 
Of course, this figure represents only a small fraction of the public 
domain of this Nation (my home state of Wyoming alone is twenty times 
larger) but it is critical to the health of our industry because as 
geologists like to say ``ore deposits are where you find them.''
    An early champion of these western miners was President Abraham 
Lincoln. Indeed, only a few hours before leaving for Ford's Theater on 
April 14, 1865, Mr. Lincoln wrote the following in a note to House 
Speaker Schulyer Colfax:

        ``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 . . . . Immigration, 
        which even the war has not stopped, will land upon our shores 
        hundred of thousands more per year from overcrowded Europe. I 
        intend to point them to the gold and silver that waits for them 
        in the West. Tell the miners from me, that I shall promote 
        their interests to the utmostof 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.''
    I would note that President Lincoln wasn't concerned with 
collecting fees from the western miners--President Polk had done away 
with attempting to collect mining royalties in 1848--rather, his focus 
was upon stimulating the economy of a still rather new nation. But, one 
hundred thirty years later this doesn't seem to be a concern of 
President Clinton one iota. In this Administration's zeal to protect 
the environment at all costs, and balance the budget on the backs of 
commodity producers, a flurry of user fees, tax changes and royalty 
proposals have found their way to Capitol Hill. Supplementing proposed 
law changes are rulemakings, Solicitor opinions and case adjudications 
which have not been subject to the legislative process to insure common 
sense prevails. And I, for one, believe that is what has been missing 
lately from Interior Department edicts.
    Our hearing today is intended to solicit views on this topic from 
those in the know--elected officials, state mining regulators, mining 
industry folks and concerned environmental advocates. I trust the 
record we are beginning to establish with this first of several planned 
field hearings in western venues will show there are negative impacts 
upon our local communities and state treasuries from poorly thought out 
policies advanced by the Clinton Administration. We are following in 
the wake of the National Academy of Sciences (NAS) panel who came to 
Reno recently to gather information on the mining regulatory 
environment. That panel was not charged with examining fee impacts, as 
we will do today, but we anxiously await its objective verdict on the 
necessity for the extraordinary changes in the surface management 
regulations proposed by Secretary Babbitt in February of this year.
    The loss of mineral exploration jobs in this country over the last 
several years is well documented. If we lay off the prospecting end of 
the business sooner or later there are no reserves to replace those 
mined and fashioned into the products society demands. Oh yes, we may 
be able to import gold the chip makers need for the tech revolution, or 
platinum for automobile catalytic converters, etc. but not without 
doing damage to our already outrageous balance of trade, and not 
without taking good jobs away from Americans. We must think through the 
consequences of any legislative ``fixes'' sought by special interest 
groups as well as administrative rulemaking proposals, before taking or 
allowing actions which have been deemed to be in the ``public 
interest'' simply because the advocates for the changes have said so 
over and over again without sufficient rebuttal by affected parties. Of 
course, these folks have been too busy trying to make a living from 
mining, or are elected officials thousands of miles from the beltway 
who must legislate in the wake of the fed's unintended (and intended?) 
consequences. So we have come to you. Let's hear what you have to say.
                                 ______
                                 
 Letter to Mr. Gibbons from Hon. Richard Bryan, a Senator in Congress 
                        from the State of Nevada
                              United States Senate,
                                            Washington, DC.
                                                       May 15, 1999
Congressman Jim Gibbons,
400 South Virginia Street
Reno, Nevada 89501
Dear Congressman Gibbons:
    Thank you for holding an oversight hearing in Reno today to discuss 
the effect of Federal mining fees and proposed Federal royalties on 
state and local revenues and the mining industry and its employees. As 
you know, mining is the second largest industry in the State of Nevada. 
In addition to direct employment in mining, there are also thousands of 
jobs in the State related to providing goods and services needed by the 
industry.
    I regret that previous commitments prevent me from attending this 
hearing and I appreciate your efforts in bringing these important 
issues to the attention of our constituents.
            Sincerely,
                                          Richard H. Bryan,
                                             United States Senator.

    Mr. Gibbons. I would ask the second panel to come up here 
and take a seat. And let me say that we're going to try to keep 
everybody to a certain time limit. You're welcome to summarize 
your statements. We will, of course, without objection, admit 
your written testimony for the record. It will be complete as 
it is submitted, and with that, I'd like to have the first 
panel stand, so I can administer the oath to them.
    [Witnesses sworn.]
    Mr. Gibbons. Let me take this moment to introduce our panel 
here. We have Russ Fields, President, Nevada Mining Association 
from Reno, Nevada; Alan Coyner, Administrator, Nevada Division 
of Minerals, Carson City; Ron Parratt, Commissioner, Commission 
on Mineral Resources for the State of Nevada from Reno.
    Gentlemen, welcome, and we'll start with Mr. Fields. It's 
all yours.

   STATEMENT OF RUSSELL A. FIELDS, PRESIDENT, NEVADA MINING 
                          ASSOCIATION

    Mr. Fields. Thank you, Congressman.
    I'm Russ Fields. I'm President of the Nevada Mining 
Association. We appreciate the Committee holding this field 
hearing in Reno.
    Mining has always played an important role in Nevada's 
economy since before statehood. In 1998, Nevada mines led the 
Nation in precious metals production, producing some 76 percent 
of domestic gold and 38 percent of the Nation's silver, among 
many other minerals.
    Any Federal action concerning hard rock mining has the 
potential to significantly impact Nevada and Nevada's mining 
industry. At the end of 1998, there were more than 13,200 men 
and women directly employed at the mines, and another estimated 
43,000 jobs involved with providing goods and services to the 
industry.
    The direct mining jobs are the highest paid sector in our 
State

economy. With an average annual salary of $50,000, this is well 
above the average salary in Nevada of less than $29,000. Direct 
mine annual payroll exceeds $650 million in Nevada.
    Mining contributed over $1.81 billion to Nevada's personal 
incomes each year over the last couple of years. Mining's tax 
payments to State and local government in the 1996-1997 tax 
year totalled approximately $125.5 million.
    These tax payments come in the forms of sales and use tax, 
property tax, and Net Proceeds of Mines Tax. A large portion of 
these taxes stay with the local government. Over $1 billion in 
State and local taxes have been paid by the Nevada mines from 
1987 through last year.
    Producers of metals such as gold and silver and copper are 
price takers. That is, the price of their product is set in the 
world market place that cannot be affected by any single 
producer or groups of producers. Given this fact, the only 
business variable that a mine can control in the long run is 
its cost of production.
    As an example: We're currently experiencing 20-year lows in 
the price of gold. In 1998, Nevada mines reduced their direct 
costs of production by an average of approximately $15 per 
ounce. This was done through gains in productivity brought 
about by improved efficiency and mining of higher grade 
material where possible.
    Certain capital expenditures and exploration activities are 
being delayed, as well, to conserve cash. Unfortunately 
approximately 1,550 direct mining jobs were lost during 1998 as 
a result of tightening expenses. There is obviously a limit to 
how far expenses can be reduced.
    As costs rise or prices fall, or both, what previously may 
have been counted on mining companies books as mineable 
reserves, may fall into an unmineable category. It's no longer 
ore because this material can no longer be mined at a profit.
    If a mine's ore reserves are reduced due to economics, the 
life of a mine is shortened and the economic benefit of mining 
comes to an earlier end. Increased fees, costs, and royalties 
imposed by the Federal Government result in reduced ore 
reserves and therefore reduced mine lives. The result is a loss 
of employment and positive economic benefits on counties and 
communities.
    A significant part of the discussion over the General 
Mining Law has surrounded the issue of royalty. Any royalty is 
an added expense and will have a negative impact on mining in 
communities in which mining takes place. However, if there is 
to be a royalty, a net proceeds type of royalty seems to fit 
hard rock mineral production the best, because it takes into 
account the cost of extracting the metal from the rock and the 
fact that producers have no opportunity to pass costs through 
to customers.
    When prices are low, as they are now for gold and copper, 
for example, the royalty amount will be lower; but under net 
proceeds, operations can stay in business and continue to 
employ people and make their contributions to the local 
economies.
    When prices are higher, certainly the royalty amount will 
be higher. This is fair and equitable to the public and to the 
industry as well.
    In summary, any increase in Federal fees reducing 
regulatory costs, or excuse me, including regulatory costs, 
fees and royalties, has the exact same impact on a mining 
company's bottom line as does the reduction in the price 
received from the mineral product.
    Currently mining is facing many increased costs in this 
low-priced environment. Together, these increases in costs and 
reduction in prices result in impacts on local and State 
government as a result of business impacts on the mining 
industry. Given this situation, Congress should take great care 
as it considers the imposition of new fees and costs on this 
industry.
    The specific impacts of any fee, royalty, or cost of 
compliance should be carefully evaluated.
    Thank you very much, and I would like to personally thank 
you again, Congressman Gibbons, for holding this hearing in 
Nevada.
    [The prepared statement of Mr. Fields follows:]

  Statement of Russell A. Fields, President, Nevada Mining Association

    I am Russ Fields, President of the Nevada Mining 
Association. We appreciate the Committee holding this field 
hearing in Reno. We are sitting only several hours away from 
the greatest gold producing region in North America. The Nevada 
Mining Association is the trade association for Nevada's mining 
industry. We have approximately 400 members ranging from 
several of the largest gold, silver and copper mining companies 
in the world to individuals who are interested in mining. Our 
members also include industrial minerals producers: miners of 
crushed stone, barite, limestone and gypsum, among others. 
Suppliers to the industry--those who provide the goods and 
services needed to conduct the business of mining--are also 
among our membership.

NEVADA'S HARD ROCK MINERAL INDUSTRY

    Mining has always played an important role in Nevada's 
economy. Indeed, it was the fabulously rich Comstock lode 
silver mines, just 17 miles from Reno that provided the 
economic engine and population that led to Nevada's becoming a 
state in 1864. Over the years, this state has had numerous 
episodes of mining for a wide variety of mineral products--
copper, tungsten, lead, zinc, silver, antimony, gypsum, barite 
and the list goes on. Today, gold is by far our most important 
mineral product. In 1998, Nevada mines led the nation in 
precious metals production, producing some 76 percent of the 
domestic gold and 38 percent of the nation's silver.
    Although Nevada's mining industry faces a number of 
important market, technical and regulatory challenges, the 
industry has developed a large, efficient and economically 
viable capital base that is fundamentally sound and sustainable 
well into the next century. This capital base has been built 
through investment of over $10 billion in expenditures in plant 
and equipment and exploration since 1980.
    Any Federal action concerning hard rock mining has the 
potential to significantly impact Nevada and Nevada's mining 
industry. This state is approximately 87 percent owned by the 
Federal Government. These lands are held in the form of 
military withdrawn lands, wilderness, a national park and 
public lands managed by the Department of Interior, Bureau of 
Land Management and the U.S. Forest Service. The military 
lands, wilderness and park are, of course, off limits to 
mining. It is the BLM and Forest Service managed lands where a 
miner operating under the General Mining Law of the United 
States and myriad other Federal and state laws and regulations 
has an opportunity to develop hard rock mineral resources.

ECONOMIC IMPACTS OF MINING IN NEVADA

    At the end of 1998, there were more than 13,200 men and 
women directly employed by the mines and another estimated 
43,000 jobs were involved in providing goods and services to 
the industry. The direct mining jobs are the highest paid 
sector in our state economy, with an average annual salary of 
$50,000. This is well above the average salary in Nevada of 
less than $29,000. Mining contributed over $1.81 billion to 
Nevadans' personal incomes in 1997.
    In addition to the significant employment in Nevada's rural 
counties, with direct mine annual payroll exceeding $650 
million, tax payments to state and local government in 1996-97 
totaled approximately $125.5 million. These tax payments come 
in the form of sales and use tax--modern mining is extremely 
capital intensive with some single pieces of equipment costing 
in the millions--property tax and net proceeds of mines tax. A 
large portion of these taxes stays with the local government 
due to state tax distribution formulae. Over $1 billion in 
state and local taxes have been paid by Nevada mining from 1987 
through last year.
    The key to sustaining tax revenues from Nevada's minerals 
industry is maintaining capital investment in the industry's 
production capacity and in mineral exploration. Nevada's unique 
geology is clearly the most important factor in attracting 
capital investments and exploration expenditures. However, 
Nevada's tax and regulatory structure also play a key role in 
industry investment decisions. A reasonable tax and regulatory 
environment are critical to maintaining a world class minerals 
industry capable of sustaining production here in our state. 
More importantly, a consistent, reasonable Federal mineral 
policy is essential for the future of mining, both here and 
throughout the U.S.

THE BUSINESS OF MINING

    There are some facts about modern hard rock mining that are 
relevant. First, for metals such as gold silver and copper, 
miners are price takers. That is, the price of their product is 
set in the world market place that cannot be effected by any 
single producer. The dynamics of the markets also preclude any 
group of producers from being able to have any significant 
effect on the price. Given these facts, the only business 
variables that a mine can control in the long run are its costs 
of production.
    As an example, we are currently experiencing 20-year lows 
in the price of gold. In 1998, Nevada mines reduced their 
direct cost of production by an average of approximately $15 
per ounce. This was done through gains in productivity brought 
about by improved efficiency and mining of higher-grade 
material where possible. Certain capital expenditures and 
exploration activities are being delayed as well to conserve 
cash. Unfortunately, approximately 1,550 direct mining jobs 
were lost during 1998 as a result of tightening down on 
expenses. Many others involved in providing goods and services 
have also struggled during this period. That situation 
continues today.
    Second, the regulatory climate for modern mining adds costs 
and time delays. The modern mining industry has largely agreed 
with the vast improvements in protection of land, water, air 
and wildlife over the past 15 to 20 years. These improvements, 
which absolutely distinguish modern mining's environmental 
practices from historic activities, do add significant costs to 
doing business. However, to the extent these changes are 
reasonable and actually benefit the environment and improve 
safety, mining has been supportive.
    Third, because metals and other valuable minerals are 
distributed unevenly in the earth's crust, geologists focus on 
identifying concentrations of metals or minerals that have the 
prospect of being mined and produced at a profit. 
Concentrations that have this property are called ore deposits. 
Because the term ore, by definition, implies that it can be 
developed and produced at a profit, what is ore and what is not 
changes routinely with changes in price and changes in costs. 
As costs rise, or prices fall or both, what previously may have 
been counted in a mining company's books as ore reserves, may 
fall into an unmineable category. It is no longer ore because 
it can't be mined at a profit. If a mine's ore reserves are 
reduced due to economics (or any other reason), the life of the 
mine is shortened and the economic benefit of mining comes to 
an earlier end.

EFFECTS OF FEDERAL FEES AND ROYALTY

    The foregoing facts about the business of mining are well-
recognized in our industry, but they bear repeating in some 
detail because increased fees, costs, royalties and so on 
imposed by the Federal Government result in reduced ore 
reserves and therefore, reduced mine lives. The obvious result 
is the loss of employment and the positive economic impacts on 
communities.
    Exploration is one of the first mining related activities 
to suffer the effects of higher costs brought on by fees, 
royalties and so on, or lower prices. Exploration is the effort 
mining companies make to discover new mineral deposits to take 
the place of ore that is mined. Nevada, and the United States, 
has seen significant decreases in exploration activities over 
the past several years. In Nevada, the state Division of 
Minerals reported a 32 percent decline in exploration 
expenditures for 1997.
    A significant part of the discussion over the General 
Mining Law has surrounded the issue of royalty. Any royalty is 
an added expense and will have a negative impact on mining and 
the communities in which mining takes place. However, if there 
is to be a royalty, a net proceeds type royalty seems to fit 
hard rock mineral production best because it takes into account 
the costs of extracting the metal from the rock and the fact 
that producers have no opportunity to pass royalty through to 
customers. When prices are low, as they are now for gold and 
copper, the royalty will be lower, but under net proceeds, 
operations can stay in business, jobs and contributions to 
local economies can be maintained. When prices are higher, the 
royalty will also be higher. This is fair and equitable to both 
the public and to the industry.
    As opportunities in the United States are made less 
attractive because of more regulation and higher costs, 
including the effect of fees and royalties, the mining 
companies will leave for foreign venues. Mining capital is 
highly mobile. In this regard, Nevada and the United States are 
competing for mining business with the likes of Chile, 
Australia, Indonesia, South Africa and many other places that 
host economically recoverable mineral deposits. This results in 
lost opportunity for domestic creation of wealth through mining 
and the positive economic impacts at all levels.

CONCLUSION

    In summary, any increase in Federal fees, including 
regulatory costs, maintenance fees, royalties or the removal of 
any benefit, such as percentage depletion, has the exact same 
impact on a mining company bottom line as does a reduction in 
the price received for the mineral product. Currently, modern 
mining is facing many increased costs in a low price 
environment. This exacerbates the problem and increases the 
impacts on local and state government as a result of business 
impacts on the mining industry. This suggests that Congress 
should take great care when considering the imposition of new 
costs on this industry. The specific impacts of any fee, 
royalty or cost of compliance should be carefully evaluated.
    We are particularly thankful for the Subcommittee's 
decision to come to Nevada to receive information to assist you 
in making good decisions.

    Mr. Gibbons. Thank you very much. Ladies and gentlemen, as 
you have noticed, there is a little light affair over here. 
This is the standard procedure. On the table up here, there is 
a green, a yellow and a red light. It's just like the stoplight 
you have in a traffic stop. When it's green, you can go and 
talk all you want; when it's yellow, you ought to be wrapping 
it up; and when it's red, remember, I possess the gavel, and 
the volume control on the microphone, in order for us to move 
along.
    Before I go to the next witness, I was reminded that I was 
remiss in my duties as the chairman to recognize two 
distinguished individuals in the audience, both of whom are 
very dear friends, one of whom is more of a dear friend than 
the other. Senator Dean Rhoads is here, and my wife, 
Assemblywoman Dawn Gibbons, is here. I would like to welcome 
them both.
    And as well, we have a wonderful group of people from I 
should say the ``People For the USA'' represented here as well, 
so welcome, everyone.
    Mr. Gibbons. Mr. Coyner, the mike is all yours.

STATEMENT OF ALAN R. COYNER, ADMINISTRATOR, NEVADA DIVISION OF 
                            MINERALS

    Mr. Coyner. Thank you, Mr. Chairman. I will ask you to have 
my testimony at hand because I will be referring to several 
charts. My name is Alan R. Coyner, and I'm the Administrator of 
the Division of Minerals for the State of Nevada.
    The mission of the Division, as promulgated by the 
legislature, is to promote, advance and protect mining and the 
development and production of petroleum and geothermal 
resources in Nevada. In light of that mission, the Division has 
an ongoing concern about the negative economic impacts to the 
economy of our State from Federal mining fees, regulatory 
changes, and proposed royalties.
    And certainly, as you know, hard rock mining is an integral 
part of Nevada history and the Nevada way of life. It is truly 
unique, paralleled but not equaled by any other State in the 
Union. And accordingly, Nevada has devoted a lot of time and 
energy and resources to maintain a healthy, viable, and above 
all, responsible mineral industry.
    An essential component of this has been the relationship 
between the Federal agencies and the State and has resulted in 
what we call the Nevada Model, and it's something with regard 
to that cooperative relationship we're rightly and justly proud 
of.
    This Committee is seeking to ascertain the effect of 
Federal mining fees and proposed royalties on State and local 
revenues, and with that in mind, I would like to supply you 
with data that provides evidence of the linkage between the 
regulatory environment and mineral exploration activity in our 
State, independent of the commodity price.
    The Division conducts an annual exploration survey to 
determine the level of mineral exploration activity in Nevada, 
and responses are generally received from approximately 50 
companies, all of which have exploration programs in the State.
    If you look at chart number 1, this is the active claims in 
Nevada, and you will see a curve described through the 1980s 
and early 1990s of increasing activity peaking in 1991, and 
then as rule making was promulgated with regards to the $100 
mining claim fee, you will see that that enactment in 1993 
resulted in the drop of claims from approximately 400,000 to 
150,000 claims.
    I've also put on there the price of gold. You can see that 
that drop is independent of that price. This drop in claims 
resulted in a loss of at least $25 million in annual assessment 
expenditures toward the discovery of new deposits and a 
redirection of $15 million annually from exploration to the 
Federal Treasury.
    If you look at chart number 2, this is exploration 
expenditures for companies active in Nevada and this looks at 
the time period from 1994 through 1998. And you can see that 
range for those companies active in the State ranged from $450 
million to $1.1 billion worldwide during a time of static or 
declining gold prices. But during that same period total 
dollars spent in Nevada declined from $154 to $120 million with 
a further decrease projected for 1998 of $94 million.
    This is somewhat more easily seen in chart number 3 which 
is essentially percentage of expenditures, and again for that 
time period we can see the rising curve upwards of the rest of 
the world and the lowering curve for Nevada from 35 percent 
down to about 12 percent projected in 1998. Again this reduces 
or eliminates the influence of price, and suggests mining fees, 
proposed royalties, and the cost of regulation have negatively 
impacted the economy of our State.
    Chart 4 I've borrowed from John Dobra, of the University of 
Nevada, Reno, and the Natural Resources Industry Institute, and 
it confirms the trend that the division has found, and extends 
it backward to about 1992, and you can see there, that under 
his data, firms active in North America were spending some 60 
percent of their budgets in the United States, and that 
percentage is now down around 25 percent.
    This demonstrates especially that exploration dollars are 
extremely liquid and flow internationally.
    And with that, I will also note that I've appended Dr. 
Dobra's remarks to my testimony. The Division has asked him to 
do a study in April of 1999 on the local impacts of this 
spending reduction. That report is due in early June, and we 
would appreciate the Committee allowing testimony to remain 
open to allow inclusion of that final report in June.
    In conclusion, there is no question that current Federal 
fees and regulations have negatively impacted mineral 
exploration activity in the State of Nevada. They have played a 
major role in the exodus of exploration dollars and geological 
talent from Nevada and the United States to foreign countries.
    Successful Federal mining policy must strike a reasonable 
balance among the need for regulation, environmental concern, 
and economic activity. The exploration surveys conducted by the 
Nevada Division of Minerals indicate recent Federal actions 
have upset that balance.
    Mining claim fees, changes in the 3809 regulations, the 
Crown Jewel decision, and the enactment of a Federal royalty 
will only serve to increase the uncertainty and hasten the 
exodus. Thank you, Mr. Chairman.
    Mr. Gibbons. Thank you for a very timely presentation of 
the testimony. We'll have it all submitted for the record.
    [The prepared statement of Mr. Coyner follows:]
    [GRAPHIC] [TIFF OMITTED] T8947.001
    
    [GRAPHIC] [TIFF OMITTED] T8947.002
    
    [GRAPHIC] [TIFF OMITTED] T8947.003
    
    [GRAPHIC] [TIFF OMITTED] T8947.004
    
    [GRAPHIC] [TIFF OMITTED] T8947.005
    
    [GRAPHIC] [TIFF OMITTED] T8947.006
    
    [GRAPHIC] [TIFF OMITTED] T8947.007
    
    [GRAPHIC] [TIFF OMITTED] T8947.008
    
    [GRAPHIC] [TIFF OMITTED] T8947.009
    
    [GRAPHIC] [TIFF OMITTED] T8947.010
    
    [GRAPHIC] [TIFF OMITTED] T8947.011
    
    [GRAPHIC] [TIFF OMITTED] T8947.012
    
    Mr. Gibbons. Mr. Parratt, the floor is yours.

  STATEMENT OF RONALD L. PARRATT, COMMISSIONER, COMMISSION ON 
               MINERAL RESOURCES, STATE OF NEVADA

    Mr. Parratt. Thank you, Mr. Chairman. My name is Ronald 
Parratt, and I am here today in my capacity as a commissioner 
on Nevada's Commission on Mineral Resources, a position I've 
held for the last 8 years.
    As background, I have been directly involved in private 
industry in mineral exploration in the western United States 
for almost 27 years, and I've lived here in Reno the last 20, 
working predominantly in Nevada and exploring for gold.
    In 1993 the Bureau of Land Management implemented a $100 
per mining claim fee, or about $5 per acre that was to be paid 
to the Federal Government in August of each year in lieu of the 
traditional assessment work or physical exploration that was 
previously required annually to keep a mining claim valid.
    In 1993, prior to the fee, there were approximately 330,000 
active mining claims in Nevada. Following the requirement of 
the fee in 1994, the number of active mining claims fell to 
around 140,000, or a reduction of almost 60 percent. Although I 
don't have comparable numbers for other states, I'm sure that 
similar reductions in the number of claims occurred as well.
    Certainly in Nevada, some of these claims might have 
dropped for normal business reasons, although in my view, the 
principle reason, without doubt, was the claim fee. In support, 
I'd offer that I was responsible for dropping several thousand 
mining claims that year for my employer who was one of Nevada's 
larger explorers.
    Filing fees paid for 1995, 1996, 1997 and 1998 in Nevada 
have generated a total of almost $60 million for the BLM, an 
average of almost $15 million a *year, and resulted directly in 
a corresponding reduction in exploration spending in Nevada 
during that time.
    The great majority of mining claims in Nevada, and 
certainly throughout the west, are held for exploration 
purposes, and only a relatively small percentage of claims are 
actually in use for active mining operations.
    This means only a small percent of the aggregate mining 
claim fees are paid for out of the budgets of individual mining 
operations, and that the bulk of these fees are paid for out of 
exploration budgets. Again, payment of the fees directly 
results in reductions in actual exploration activity and a 
reduction in the industry's ability to discover new resources 
to replace those that are being mined.
    This fee is another added cost for the business of 
exploration in Nevada and our country, and reduces the 
effectiveness of our precious exploration dollars. Not only 
does this hurt the exploration business per se, but also with 
the multiplier effect that translates into fewer jobs for those 
industries which service exploration groups such as drilling 
contractors, laboratories, restaurants and even motel owners.
    Much of this activity, of course, is in Nevada's rural 
communities.
    To put some perspective on the size of this burden to the 
exploration business, it's estimated that in 1998 between $90 
and $100 million were spent in Nevada on exploration. Mining 
claim fees paid to the BLM for that year were $13 million, 
which results in adding a budget burden of about 13 percent to 
the industry as a whole just to hold Federal land.
    For some added perspective, comparable costs for holding 
exploration rights on lands in countries who are competing to 
get these dollars and jobs are as follows--for comparison, keep 
in mind the United States fee is about $5 per acre:

    Canada has a variable structure but always less than a 
dollar per acre; Mexico again is variable, but always less than 
50 cents per acre; Chile, 48 cents per acre; Peru, 80 cents per 
acre; and Argentina, 11 cents per acre. New proposals, 
including royalties and new reclamation fees are being 
considered as well, which would further burden mining companies 
and exploration. The cumulative impact of these will be to 
further weaken and reduce the effectiveness of our exploration 
dollars and has weakened the competitiveness of our domestic 
mining industry.
    We must do everything possible to keep this from happening 
and seek to encourage a strong domestic industry. Thank you.
    [The prepared statement of Mr. Parratt follows:]

  Statement of Ronald L. Parratt, Commissioner, Commission on Mineral 
                       Resources, State of Nevada

    Mr. Chairman and Members of the Resources Committee, my 
name is Ronald L. Parratt and I am here today in my capacity as 
a Commissioner on Nevada's Commission on Mineral Resources--a 
position I've held for the past 8 years. As background, I've 
been directly involved in the private sector in mineral 
exploration in the western United States for almost 27 years 
and have lived here in Reno for the last 20 years working 
predominately in Nevada exploring for gold.
    In 1993, the Bureau of Land Management implemented a $100 
per mining claim fee ($5/acre) that was to be paid to the 
Federal Government in August of each year in lieu of the 
traditional assessment work or physical exploration that 
previously was required annually to keep a mining claim valid. 
In 1993, prior to the fee, there were approximately 330,000 
active mining claims in Nevada. Following the requirement of 
the fee in 1994, about 190,000 claims were dropped and the 
number of mining claims fell to about 140,000 or a reduction of 
almost 60 percent. Although I do not have comparable numbers 
for other states, I'm sure that similar reductions in the 
number of claims occurred as well. Certainly in Nevada some of 
these claims might have been dropped for normal business 
reasons. However in my view, the principle reason was the claim 
fee. In support I would offer that I was responsible for 
dropping several thousand mining claims that year for my 
employer who was one of Nevada's larger explorers. Filing fees 
paid for 1995 to 1998 have generated about $60mm for the BLM--
an average of almost $15mm per year and resulted directly in a 
corresponding reduction in exploration spending in Nevada 
during that time. The great majority of mining claims in 
Nevada--and certainly throughout the west--are held for 
exploration purposes and only a relatively small percentage of 
claims are actually in use for active mining operations. This 
means only a small percentage of the aggregate mining claim 
fees are paid for out of the budgets of actual mining 
operations and the bulk of these fees are paid for out of 
exploration budgets.
    Again, payment of the fee directly results in reductions in 
actual exploration activity and a reduction in the industry's 
ability to discover new resources to replace those being mined. 
This fee is another added cost for the business of exploration 
in Nevada and our country and reduces the effectiveness of our 
precious exploration dollars. Not only does this hurt the 
domestic exploration business per sec, but also with the 
multiplier effect, it translates into fewer jobs for those 
industries which service exploration groups such as drilling 
contractors assay laboratories and motel owners. Much of this 
is in Nevada's rural communities.
    To put some perspective on the size of this burden to the 
exploration business, it's estimated that in 1998 between $90mm 
and $100mm was spent on exploration in Nevada. Mining claim 
fees paid to the BLM were about $13mm which results in this fee 
adding a budget burden of about 13 percent to the industry as a 
whole just to hold Federal land.
    For some additional perspective, comparable costs for 
holding exploration rights on lands in countries who are 
competing to get these exploration dollars and jobs are as 
follows; (and for comparison keep in mind that the U.S. Federal 
fee is $5/acre) Canada less than $1/acre, Chile $0.48/acre, 
Peru $0.80/acre and Argentina $0.11/acre. Mexico is also low 
but I don't have an exact figure.
    There are of course additional fees paid to hold mining 
claims in the U.S. which total about $15/claim per year. New 
proposals including royalties and new reclamation fees are 
being considered as well which would further burden mining 
companies and exploration. The cumulative impact of these will 
be to further weaken and reduce the effectiveness of our 
exploration dollars and hence weaken the competitiveness of our 
domestic mining industry. We must do everything possible to 
prevent this from happening and seek to encourage a strong 
domestic industry. Thank you.
    I'd be pleased to answer any questions.

    Mr. Gibbons. Thank you, Mr. Parratt, and I want to 
congratulate the first panel here that's testified. Not one of 
you got to the red light. We appreciate that.
    Let me maybe throw a question out there. I don't know if 
Mr. Fields or Mr. Coyner or Mr. Parratt want to answer this, 
but my original question is for the audience and I think even 
for the record, we need to know a little bit about the 
different types of royalty proposals that are out there. I know 
that one we talked about already is a gross royalty, versus net 
proceeds, versus net smelter return. Maybe if somebody could 
just give us a very brief--it's a very technical question, but 
if somebody wants to give us just a thumbnail sketch so we can 
understand how each one of those impacts the bottom line, and 
what each one would produce, if you can.
    Mr. Fields. Okay, I will tackle that, Mr. Chairman. This is 
Russ Fields, for the record.
    Of the three types of royalties you mentioned, let me start 
with gross royalty. This is one that has been proposed in the 
last several Congresses, and in several bills.
    Gross royalty is a royalty that would be imposed on the 
gross sales price of the mineral commodity, whether it be gold 
or copper, et cetera. It would be applied directly to that 
price that is received.
    For example: Today the price of gold is about $276. An 8 
percent gross royalty, which has been proposed in the past, 
would amount to approximately $23 per ounce of gold. As my 
testimony indicated, this would be the same thing as a $23 fall 
in the price of gold.
    It would go right through to the bottom line, bringing the 
value received to the mining company then to something like 
$253, based on today's gold price.
    Now, the problem with that, from the mining company's 
standpoint, is that is very close to the cash cost of 
production, the direct cost in terms of dollars to produce an 
ounce of gold at many of our gold mines here in northern 
Nevada.
    That means that there is nothing left over to pay back the 
cost of capital. There is nothing left over to pay for 
administrative overhead and expenses, and, as Mr. Parratt will 
attest, there is nothing left to pay for exploration activity 
to find the next ore deposit.
    I think the result of a gross royalty along those lines 
would be a very rapid slowdown in the production of hard rock 
minerals here in the State.
    I think we would see high grading of ore deposits and 
shortening of lives, as I mentioned in my testimony, shortening 
of mine lives. And the impacts of such a royalty would be very, 
very substantial.
    Now, the second type of royalty that has been discussed in 
Congress is referred to as a net smelter royalty, and really, 
with net smelter and the other type that I will discuss, net 
proceeds, the devil is in the details, how you really define 
the royalty.
    But net smelter royalty for most purposes, would be defined 
as taking the gross value of the gross receipts, gross revenues 
produced by the minerals.
    Again let's use gold as an example. At $276 an ounce, you'd 
take that gross $276 and deduct from that the cost of final 
refining, producing refined metal out of the door, that is the 
gold and silver mix that we produce at our mines, and then 
apply the royalty to that, so it's very close to a gross 
royalty because the cost of refining as a percentage of the 
total cost, is very small.
    I have mentioned in my testimony that if there is to be a 
royalty, it should be based on a net proceeds type approach. 
That's what we do here in the State of Nevada for our taxation 
of minerals. It's called the Net Proceeds of Mines Tax.
    What that does, is it allows a miner to deduct the cost of 
producing the metal and turning the metal into money, so in 
other words, the cost of mining, the cost of milling, the cost 
of transportation, those costs are allowed to be deducted from 
the gross receipts, leaving a net profits number, and that is 
the point at which royalty would be affixed, at the net 
proceeds level.
    It makes more sense in many ways because when the markets 
fluctuate so much, when the price is high the royalty amount 
will be higher. When the price of the metal is low, the amount 
of Royalty will be lower, so it allows a mining company, then, 
to perhaps stay in business and then continue to operate even 
while it pays a royalty, which may not be the case in the case 
of a gross.
    That was longer than my testimony I apologize for that.
    Mr. Gibbons. You did very well. It was very enlightening to 
hear what you say.
    Let me turn to Mr. Coyner. Could you maybe explain or 
expand a little bit more on the Nevada Model that was in your 
testimony so that we can develop that a little further.
    Mr. Coyner. One of the largest--or a factor within that 
model, is the testimony that Russ just gave. It's a net 
proceeds approach on a royalty which, I think implies we're in 
this thing together, and that can be extrapolated to a national 
sense as well.
    These minerals and others in our State are necessary for 
our national security, as you well know, and there should be a 
participatory process of all the owners in that security.
    As we look at the mining companies that are active in the 
State, most are public stock companies. A lot of that stock is 
held by Americans. So it does imply that we're in this together 
and we need to make those decisions together.
    The Nevada Model is a subset on that. Essentially the State 
agencies, the Federal agencies, the environmental groups, all 
the stake holders come together and forge this process as we go 
forward in Nevada.
    We appreciate that, and that's a very good working 
relationship. It resolves differences early. It obviates the 
need for lawsuits. It makes for good working relationships and 
friendly working relationships.
    So that, in essence, is the Nevada Model. It's been copied 
by other States which gives testimony to its effectiveness.
    Mr. Gibbons. Mr. Coyner, on these charts that you have 
submitted to us, is there a point on there which you can 
identify for us the time in which the Nevada Model or the net 
proceeds implementation took effect in this chart, perhaps to 
show if there is a significant downward trend simply due to 
Nevada's implementation of a net proceeds royalty?
    Do you recall what year we implemented that?
    Mr. Fields. Mr. Chairman, this is Russ Fields, for the 
record. The Net Proceeds of Mines Tax has been a part of Nevada 
since the very early days. In fact, I think it is in the 
Constitution that mines shall be taxed on their net proceeds, 
so it's a very, very old tax that goes way back before any of, 
I think, Mr. Coyner's charts.
    I would say that I had the opportunity in 1989 to be very 
involved with the State government's efforts to adopt its 
reclamation program which--and also its water pollution control 
program for mines.
    Both of those things happened in 1989, and I think that was 
probably, in my recollection, realistically where we could say 
that the Nevada Model was born. It was a collective cooperative 
effort of State agencies, the Federal Government, the 
environmental community, and mining industry, so there, again, 
I think that probably predates everything on Mr. Coyner's 
charts.
    I'm looking at the Active Claims in Nevada chart over my 
neighbor's shoulder here, and what happened in 1993 to the 
mining claims had nothing to do with the State of Nevada and 
had everything to do with the imposition of a $100 per claim 
per year holding fee from the Federal Government, so that's 
probably the most remarkable thing that is affecting the charts 
that I'm looking at here.
    Mr. Coyner. Mr. Chairman, I would add that I think that if 
Dr. Dobra were here he would express that the 1990s and it's 
capital development and development expenditures and also our 
production have risen and that is sort of an inertia effect of 
all this exploration and activity that we saw in the 1980s and 
the early 1990s.
    The problem we see now is that that exploration activity 
has been curtailed, so the worry is for the future. Certainly, 
as we need to replace these reserves Mr. Parratt spoke of, we 
have a need to expend those exploration dollars, and they are 
not being spent in considerable amounts.
    I mean we're talking multi-hundreds of millions of dollars 
per year that are not being spent in Nevada, and that's 
significant.
    Mr. Gibbons. The point I want to make is that the 
imposition of Federal royalties, is it your opinion that it 
will have a dramatic lowering of the production from the mines 
of metals and minerals in this State?
    Mr. Coyner. Certainly if the royalty is in any way punitive 
or high relative to other countries in the world. Again, 
mineral production is a global business. Money flows to where 
it is welcome. If those royalties are excessive or judged to be 
excessive, production will go off shore.
    Mr. Fields. If I may Mr. Chairman, just to add a little bit 
to that: Yes, the impact would be immediate. I think the charts 
that you see here about what happened to the mining claims, 
this speaks to the fact that business will react immediately to 
its business conditions. It will not wait. It has other 
opportunities.
    We could definitely see an exodus certainly first of 
exploration, a slowdown of mining, and then decline and 
stoppage of mining if the royalty is onerous enough. It would 
be very simple to overturn this apple cart right now, 
especially with the low price environment that our mines are 
dealing with.
    Mr. Coyner's Division of Minerals has estimated that 
approximately 30 percent of Nevada's nation-leading gold 
production is derived from public lands, today. That 30 percent 
represents now approximately three million ounces of gold, 
which is more than any other State produces, coming right from 
Nevada.
    Now, that royalty, any Federal royalty would be applied to 
that 3 million ounces of gold if something were to happen 
today.
    I also submit, as you mentioned in your opening remarks, 
that the future of the mining industry in Nevada is on public 
lands; that 30 percent is going to increase over time if we can 
preserve the status quo, because 87 percent of our State is 
owned by the Federal Government.
    There is simply no other place to explore than on public 
lands, so if we were to have a Federal royalty, in the future, 
it will be imposed upon any new discoveries that are made on 
those Federal lands.
    The big IF, though, is will there be any exploration of 
those lands? I suspect that there will be much less if there is 
a gross royalty. So the imposition of any royalty will have an 
immediate negative impact on the State of Nevada, its State 
government, its local government, its communities and certainly 
the mining industry.
    Mr. Gibbons. Well, let me ask each of you to put on a hat 
that has a broader perspective and wider vision than just the 
State of Nevada. Do any of you have an opinion as to the effect 
of a reduction in our mining capability with regard to our 
national economy or our national defense, natural security? The 
role mining plays nationally would be affected in some way by 
this, and if any of you have any thoughts, I'd like to hear 
about that.
    Mr. Parratt. Well, there is no doubt that everything in our 
economy runs from mining because as you said earlier, if it 
can't be grown it has to be mined, everything from the 
computers we operate, to the building we're in, to the lights 
that are illuminating this room are coming from mining. We have 
to preserve a strong industry in this country. Mining is very, 
very important to our economy.
    Mr. Fields. The State of Nevada is blessed with, as you 
know, Mr. Chairman, the kind of geology that is conducive to 
lots of various types of minerals.
    In the past this State has produced tungsten; it's produced 
antimony; it's produced molybdenum; it's produced manganese. 
The list goes on and on.
    Today we're producing gold and silver and copper and a 
variety of industrial minerals, but all of these minerals are 
somehow used to make this Nation strong. For example, tungsten, 
is used in the hardening of steel which is used in weaponry.
    We need those, obviously we do. Gold, now, is so important 
in electronic components, computers. When this Nation does its 
work overseas in the war arena, which we do from time to time, 
we have to have gold to make those components work correctly 
the first time, every time.
    So that is just a small example, and certainly there are 
others who'll testify today who have lived the time when we 
were in major wars and we needed to have the mineral 
commodities that this State can produce, and this Nation can 
produce.
    Another thing that is important is our mineral production, 
especially for gold, is allowing the United States to be a net 
exporter of gold. It does contribute to the balance of trade 
for this United States, which, it's a contribution. It's 
certainly not enough to say that we're going to turn that 
balance of trade around, but it's a contribution. Nevada is 
doing its part for the balance of trade.
    Mr. Gibbons. I just have two final questions for this 
panel, and then we'll try to move on.
    Mr. Coyner maybe I can direct this to you. The Nevada 
Division of Minerals, has it made any estimates of remediation? 
I know in the past practice of mining, we have a lot of 
abandoned mines out there which no company today would tolerate 
or even be permitted to contribute to, but we have the 
remediation cost question, I'm sure.
    Have you tried to quantify the abandoned mine lands problem 
in Nevada in terms of dollars, and do you have any handle on 
what the eventual total cost would be to solve this problem?
    Mr. Coyner. The Nevada Division of Minerals is charged with 
the physical securing of hazardous mines in the State. With the 
abandoned mines programs we have, we estimate those numbers to 
be in the 50,000 to 100,000-type range in terms of hazardous 
openings.
    The cost of each of those to remediate is about $500 per 
site or so, so that would give you a fee or figure on the 
physical hazard side. Now, if we're going to talk about the 
environmental hazard side, it's a much larger issue and a much 
bigger number.
    I don't think anyone in this State has really put their 
mind to it yet in terms of what that total is, but let me say 
in that regard, that we have recently struck up an interagency 
task force of both the State agencies and the Federal agencies 
utilizing monies that are coming to us from the BLM to take a 
look at exactly that problem and try to get a handle on that.
    So in order to put a total number on that right now would 
be somewhat premature, and again, it depends on what you call 
satisfactory with regards to the remediation. How much, to what 
level must you remediate it.
    It's a national issue. It's being tackled actively in 
places like Colorado, Montana, and California as well, and 
we're doing the same here in Nevada, but I really can not put a 
number on it here for you today, Mr. Chairman.
    Mr. Gibbons. Finally, let me ask a question about 
educational outreach. I know all of you have been involved in 
that for some time, and maybe you can explain to us for the 
Committee and for the record, your educational outreach for 
Nevada students with regard to mining.
    Mr. Coyner. I will start with that. As you know, Russ 
Fields was my predecessor at the Division of Minerals, so we 
have both been very actively involved in our education program 
there, and we partner that program with the Nevada Mining 
Association and with members of the industry.
    There are many, many professionals involved in the business 
today in Nevada that feel quite strongly about mineral 
education of our people and of our school children.
    We sponsor in Nevada, teachers' workshops twice yearly, one 
in the spring in Las Vegas and one in the summer in northern 
Nevada. These are very well attended and very highly spoken of. 
Again those are partnered with industry and the Nevada Mining 
Association. We regularly go into the school classrooms. My 
division alone does over 200 presentations during the course of 
the school year, and everyone from our secretary/receptionist 
to the administrator participates in those duties.
    We feel very strongly about that mission and getting that 
word out to the Nevada schoolchildren. And finally I think we 
do need to realize that of the 1.8 million people in our State, 
1.3 million live in Las Vegas and that, again, is a very unique 
thing to Nevada. We do have a brand new growing population down 
there that needs to hear that message and needs to understand 
why mining is important to them, so we're very concerned about 
that.
    And we continue to push regularly and hard on that mineral 
educational issue.
    Mr. Gibbons. Finally, before I let you go--I know, I 
promised you just two questions, but I can't let you go without 
this one.
    Do you see an area, any of you see an area, knowing the 
present status of Nevada laws, where the Federal Government 
needs to enact stricter laws that have been overlooked on your 
behalf, or an area where you think the Federal Government 
should step in to enact stricter laws because the State for 
some reason may have failed or is unable to proceed in that 
area?
    Mr. Fields. No. I think the point that needs to be made to 
the Federal Government is that the production of hard rock 
minerals is an activity that requires closeness--I'm not sure 
that's the right term, but close oversight from local and State 
regulators, because of the unique character of different kinds 
of mines, and conditions.
    We have mines here in areas that produce 2 inches per year 
of rainfall. Montana has mines in areas that produce 50 inches 
of rainfall, and Alaska, much more. How can the Federal 
Government come up with a one-size-fits-all type of regulation 
to deal with the wide variety of mineral resources that we have 
and the wide variety of climatic, geographic and economic 
conditions that we have?
    I think the current debate over the 3809 regulations is a 
case in point. Nevada has developed a network, a system of 
regulations that work very well for Nevada. Other states have 
developed networks, systems of laws and regulations that work 
very well for their conditions.
    I think the role for Federal oversight is just that. It's 
an oversight to make sure that broad public policy guidelines 
are being met, but leave it to the local States actually to do 
the regulation on them.
    Mr. Gibbons. I'm not his straight man.
    Mr. Coyner?
    Mr. Coyner. Mr. Chairman, I would add something from one 
small perspective, which is the State bond pool. The Division 
of Minerals does administer that program for the State, which 
helps the smaller and moderate-sized mining companies meet 
their bonding obligations.
    The track record of that bond pool has been one of no 
forfeitures during the time of it's existence. So we have 
demonstrated the State can respond on that level and manage 
that actively and with satisfaction.
    Another point I will make is that we have had several 
companies in difficult times in the recent past year or two 
with regard to finances and bankruptcy. The system, because of 
the well-thought-out nature of it in Nevada, has responded to 
those timely and with decision, and it's being managed in a 
proper and appropriate way.
    So, again, I think the evidence is the Nevada Model, if you 
want to call it that, responds to various situations, is very 
well designed and suits our State very well and good.
    Thank you.
    Mr. Gibbons. Mr. Parratt.
    Mr. Parratt. I can only agree with what my counterparts at 
the table have said. I think things are going quite well in 
Nevada. I don't think we need any additional regulations on the 
Federal side.
    Mr. Gibbons. Well, gentlemen, thank you very much for your 
time and testimony here today. It's been very helpful, and we 
appreciate you being present today to help us better understand 
Nevada, its mining industry, and the future in hand for where 
we want to go.
    With that, I'll go ahead and release this panel and call 
the next panel up. I don't know if Assemblywoman Marcia de 
Braga has made it to the room, but it will consist of Victoria 
Soberinsky, the Deputy Chief of Staff for Governor Kenny Guinn; 
Senator Dean Rhoads, we have also mentioned here earlier, 
Chairman, Natural Resource Committee, Nevada State Legislature; 
and Assemblywoman Marcia de Braga, Chairman of the Natural 
Resources, Agriculture, and Mining Committee for the Assembly, 
Nevada State Legislature.
    Mr. Gibbons. Do we only have the two of you?
    [Witnesses sworn.]
    Mr. Gibbons. It's good to see you. Let me welcome both of 
you to the panel today. I apologize for the delay. We 
appreciate your time, your patience in waiting, and Mrs. 
Soberinsky, the floor is yours.

  STATEMENT OF VICTORIA SOBERINSKY, DEPUTY CHIEF OF STAFF FOR 
             GOVERNOR KENNY GUINN, STATE OF NEVADA

    Ms. Soberinsky. Thank you very much, Mr. Chairman, and for 
the record my name is Victoria Soberinsky, and I am the Deputy 
Chief of Staff for Kenny Guinn in Nevada.
    I appreciate the opportunity to testify today regarding the 
effects of Federal mining fees and proposed Federal royalties 
on State and local revenues and the mining industry.
    Mining is an integral part of Nevada history and the Nevada 
way of life. Nevada continues to be a world leader in gold 
production and produces the most silver, magnesite and barite 
in the Nation. Accordingly, Nevada has devoted a tremendous 
amount of time and resources over the years to create and 
maintain a strong and responsible mining industry.
    I believe that Nevada is one of the most environmentally 
responsible mining regions in the world; however, even with 
Nevada's successes and proven track record, I believe Congress 
and the State should continue to work with the industry and the 
environmental community to continue to minimize mining effects 
on the land and the other land users.
    To be clear, the issues of reasonable Federal mining fees 
and proposed Federal royalties are legitimate discussion 
points. However, the impact from these proposed fees, royalties 
and proposed Federal regulations on my State, our local 
communities and the mining industry are equally important.
    The industry is an important contributor to the Nation's 
economy and my State's economy in particular. Nevada's mining 
industry has created approximately 13,000 jobs directly related 
to mining with an additional 45,000 jobs indirectly related to 
the industry.
    Generally speaking, these are high paying jobs that average 
close to $50,000 per year. Rural Nevada communities, such as 
Elko, Carlin, Battle Mountain, Winnemucca, Ely, Eureka and 
Tonopah are all dependent on a vibrant mining industry.
    As you contemplate proposed Federal fees and royalties and 
have the opportunity to review proposed Federal regulations, I 
hope you will keep in mind those communities and those families 
who built a future around a responsible and environmentally 
sensitive mining industry.
    I'd like to make some brief remarks about the Department of 
Interior's initiative to amend its land management, or 3809 
regulations.
    Nevada has closely monitored this initiative since the 
Secretary of Interior directed the BLM to draft regulations in 
January of 1997. Since that time there has been no real 
justification offered by Interior regarding the need to make 
changes.
    Some people in groups have described our opposition to the 
3809 revision as anti-environmental. I can assure you that 
nothing can be further from the truth. Nevada has strong State 
laws and regulations requiring reclamation of land disturbed by 
mining.
    Today, Nevada holds over $500 million in reclamation 
sureties to ensure successful reclamation. My State has also 
developed comprehensive regulations governing water quality 
standards at mining operations. These requirements are working 
well because the environmental community, mining industry, and 
State and Federal regulators crafted them with a great deal of 
cooperative effort.
    Nevada's opposition to BLM's draft 3809 regulations is 
based on the fact that our comments and input regarding this 
action have largely been ignored.
    I believe the current draft regulations are onerous, 
unnecessarily burdensome and duplicative. In short, Interior is 
attempting to move the responsibility for environmental 
oversight of mining operations from Nevada and other western 
States to Washington, DC.
    Interior's efforts would clearly and significantly impact 
Nevada's mining industry; but they will also adversely impact 
Nevada's economy and our environment.
    Nevada is the most arid State in the Nation. The condition 
of public lands and the reliable quality and quantity of 
Nevada's water resources are vitally important to our State. 
Nevada has demonstrated it's eminently qualified to protect 
these resources. Another level of Federal bureaucracy is simply 
not necessary.
    I believe reasonable mining fees and Federal royalties 
would benefit all stake holders, including the States, Federal 
Government, and industry. Proposed changes in mining fees 
should end the $2.50 to $5 per acre patenting fee and replace 
it with provisions to sell the patent for the surface land's 
market value. This type of royalty would closely resemble the 
State of Nevada's net proceeds system.
    The administrative costs of our program are $250,000 
annually, but the system has historically generated millions of 
dollars on an annual basis.
    Nevada would support these types of fee and royalty 
proposals because they are fair. While these fees would clearly 
increase costs in these difficult economic times, industry 
could benefit because it would reduce some uncertainties and 
risks associated with mining in the United States today.
    The price of gold today is approximately $280 per ounce. 
This very large variable has been the main force behind the 
loss of nearly 1,000 jobs across Nevada in the last 2 years.
    While commodity prices cannot be controlled, the need to 
reduce other variables is evident. Nevada would support 
improvements in the status quo in the areas of fees, royalties 
and regulations, as long as they have a benefit and are 
consistent with our goals and objectives, most notably to have 
a strong, well-regulated, environmentally sound mining 
industry.
    Thank you very much, Mr. Chairman.
    Mr. Gibbons. Thank you very much, Ms. Soberinsky.
    [The prepared statement of Hon. Kenny C. Guinn follows:]

      Statement of Hon. Kenny C. Guinn, Governor, State of Nevada

    Mr. Chairman and members of the Subcommittee, I appreciate 
the opportunity to testify today regarding the effects of 
Federal mining fees and proposed Federal royalties on State and 
local revenues and the mining industry. Mining is an integral 
part of Nevada history and the Nevada way-of-life. Nevada 
continues to be a world leader in gold production and produces 
the most silver, magnesite and barite in the nation. 
Accordingly, Nevada has devoted a tremendous amount of time and 
resources over the years to create and maintain a strong and 
responsible mining industry. I believe that Nevada is one of 
the most environmentally responsible mining regions in the 
world. However, even with Nevada's success and proven track 
record, I believe Congress and the states should continue to 
work with the industry and the environmental community to 
continue to minimize mining effects on the land and the other 
land users.
    To be clear, the issues of reasonable Federal mining fees 
and proposed Federal royalties are legitimate discussion 
points. However, the impacts from these proposed fees, 
royalties and proposed Federal regulations on my state, our 
local communities and the mining industry are equally 
important. The industry is an important contributor to the 
nation's economy--and my state's economy in particular. 
Nevada's mining industry has created approximately 13,000 jobs 
directly related to mining, with an additional 45,000 jobs 
indirectly related to the industry. Generally speaking these 
are high paying jobs that average close to $50,000 per year. 
Rural Nevada communities such as Elko, Carlin, Battle Mountain, 
Winnemucca, Ely, Eureka and Tonopah are all dependent on a 
vibrant mining industry. As you contemplate proposed Federal 
fees and royalties and have the opportunity to review proposed 
Federal regulations, I hope you will keep in mind those 
communities and those families who built a future around a 
responsible, environmentally sensitive mining industry.
    I would like to make some brief remarks about the 
Department of Interior's initiative to amend its land 
management or 3809 regulations. Nevada has closely monitored 
this initiative since the Secretary of Interior directed the 
BLM to draft regulations in January 1997. Since that time, 
there has been no real justification offered by Interior 
regarding the need to make changes. Some people and groups have 
described our opposition to the 3809 revisions as anti-
environmental. I can assure you that nothing can be further 
from the truth. Nevada has strong state laws and regulations 
requiring reclamation of lands disturbed by mining. Today, 
Nevada holds over $500 million in reclamation sureties to 
ensure successful reclamation. My state has also developed 
comprehensive regulations governing water quality standards at 
mining operations. These requirements are working well because 
the environmental community, mining industry, and state and 
Federal regulators crafted them with a great deal of 
cooperative effort. Nevada's opposition to BLM's draft 3809 
regulations is based on the fact that our comments and input 
regarding this action have largely been ignored. I believe that 
the current draft regulations are onerous, unnecessarily 
burdensome and duplicative. In short, Interior is attempting to 
move the responsibility for environmental oversight of mining 
operations from Nevada and other Western states to Washington, 
D.C. Interior's efforts would clearly and significantly impact 
Nevada's mining industry, but they will also adversely impact 
Nevada's economy and our environment, Nevada is the most arid 
state in the Union. The condition of public lands and the 
reliable quality and quantity of Nevada's water resources are 
vitally important to our state. Nevada has demonstrated that it 
is eminently qualified to protect these resources. Another 
level of Federal bureaucracy is simply not necessary.
    I believe reasonable mining fees and Federal royalties 
would benefit all stakeholders including the states, Federal 
Government and industry. Proposed changes in mining fees should 
end the $2.50 to $5.00 per acre patenting fee and replace it 
with provisions to sell the patent for the surface land's fair 
market value. This type of royalty would closely resemble the 
State of Nevada's net proceeds system, which has proven to be 
highly effective. The administrative costs of our program are 
$250,000 annually, but the system has historically generated 
millions of dollars on an annual basis.
    Nevada would support these types of fee and royalty 
proposals, because they are fair. While these fees would 
clearly increase costs in these difficult economic times, 
industry could benefit because it would reduce some 
uncertainties and risks associated with mining in the United 
States today. The price of gold today is approximately $280 per 
ounce. This very large variable has been the main force behind 
the loss of nearly one thousand jobs across Nevada over the 
last two years. While commodity prices can not be controlled, 
the need to reduce other variables is evident. Nevada would 
support improvements to the status quo in areas such as fees, 
royalties and regulations as long as they have a benefit and 
are consistent with our goals and objectives, most notably to 
have a strong, well regulated, environmentally sound mining 
industry. Thank you.

    Mr. Gibbons. Senator Rhoads, welcome, and the floor is 
yours.

    STATEMENT OF DEAN A. RHOADS, CHAIRMAN, NATURAL RESOURCE 
              COMMITTEE, NEVADA STATE LEGISLATURE

    Mr. Rhoads. Thank you.
    Good afternoon, Mr. Chairman. I'm Dean Rhoads, Chairman of 
the Nevada Senate Natural Resources Committee. I wondered 
perhaps, when this hearing is over with, if you could do Dawn 
and I a favor and lend us your light there for the legislature.
    Mr. Gibbons. It is a wonderful thing.
    Mr. Rhoads. We have 16 days left, and I'm sure if we had 
that light there we could cut it down to 8.
    Mr. Gibbons. I will see if I can send you a copy of it.
    Mr. Rhoads. Mining is an industry, as you know, that I have 
spent many years hearing about from your side of the table. 
It's a pleasure to be here today, after four months of the 
legislative session, to sit on the witness side to share with 
you some of my observations I've collected for over the years.
    As a rancher from Tuscarora, in the morning I could look 
out and see the Independence Mine, and in the spring we'd drive 
the cattle down through Barrick, Rodeo, Meickle and Newmont's 
mine, and by the Digal mine and by Rossi Mine.
    I've spent almost all my entire professional career working 
near mining and learning about its effects on rural 
communities. In 1977, when I was elected to the Nevada Assembly 
I began considering mining from a policy perspective. My 
experiences as a legislator have brought to life the 
complexities of mining on a statewide level.
    In 1985, I was appointed to the interim Public Lands 
Committee, a committee which I've chaired since that time. I've 
also been Chairman of the Natural Resources Committee since 
1995.
    While mining exists throughout Nevada, it's my Senate 
District that is the most productive mining region in the 
State, and arguably, the third most productive region in the 
world. I represent Elko, Lander, Humboldt Counties and most of 
Eureka County. The effects that mining has had on my District 
over the years has been profoundly positive at times and very 
poor at others due primarily to market fluctuations.
    The simple fact is that the value of Nevada's primary 
ores--gold, silver, and copper, are established on the open 
market. Economic fluctuations, sometimes severe, are felt 
throughout the rural communities that I represent.
    These counties depend on tax revenues from the Net Proceeds 
of Mines. Even with the current depressed market, Net Proceeds 
of Mines constitutes between 20 percent to--in the case of 
Eureka County--50 percent--of the rural counties' assessed 
valuation. In contrast, net proceeds of Mines in Clark County 
is only $8 million of the county's total $26 billion in 
assessed valuation.
    Additionally, there have been roughly 1,500 layoffs over 
the past year, year and a half, throughout Nevada. Yet, these 
laid-off workers come primarily from rural Nevada, representing 
a rather significant percentage of the work force.
    The fate of rural Nevada is not dire, thankfully. There are 
signs of economic diversification, and ranching and tourism and 
farming continue to contribute to the economy. Moreover, 
Nevada's rural communities consist of survivors--people who 
always keep their chins up and endure the tough times. And 
there have been tough times.
    Nonetheless, it's my district that must be remembered when 
considering policies such as royalties and fees on mining. A 
lot can be learned from studying the effects on our communities 
by the recent drop in the price of gold--a factor that is out 
of our control.
    Parallels can certainly be drawn between the changing 
market and changes in royalties and fees. Additional reductions 
in mining revenue, even those that are seemingly small on 
paper, will have weighty repercussions on the local businesses, 
infrastructures, and families of rural Nevada.
    I appreciate the Subcommittee's attention to these details, 
and I thank you again for the opportunity to testify here today 
on this most important issue. We thank you.
    Mr. Gibbons. That light really works, doesn't it?
    Mr. Rhoads. It sure does. Senator O'Neil would really like 
that. I should grab it up for the last day of the session and 
give it to him.
    [The prepared statement of Mr. Rhoads follows:]

 Statement of Dean A. Rhoads, a State Senator from the State of Nevada

    Good afternoon Mr. Chairman and members of the 
Subcommittee. I'm Dean Rhoads, Chairman of the Nevada Senate 
Natural Resources Committee.
    Mining is an industry that I have spent many years hearing 
about from your side of the table. It is a pleasure to be here 
today on the witness side to share with you some of the 
observations I've collected over the years.
    As a rancher from Tuscarora, Nevada, which is in the 
northern-most part of the state, I have spent almost all of my 
entire professional career working near mining and learning 
about its effects on rural communities. In 1977, when I was 
elected to the Nevada Assembly, I began considering mining from 
a policy perspective. My experiences as a legislator have 
brought to light the complexities of mining on a state-wide 
level. In 1985, I was appointed to the interim Public Lands 
Committee, a committee which I have Chaired since that time. I 
have also been Chairman of the Senate Natural Resources 
Committee since 1995.
    While mining exists throughout Nevada, it is my Senate 
district that is the most productive mining region in the 
state, and arguably the third most productive region in the 
world. I represent Elko, Lander, Humboldt and Pershing 
Counties, and half of Eureka County.
    The effects that mining has had on my district over the 
years has been profoundly positive at times and very poor at 
others due primarily to market fluctuations. The simple fact 
that the value of Nevada's primary ores--gold, silver, and 
copper--are established on the open market, economic 
fluctuations--sometimes severe--are felt throughout the rural 
communities that I represent.
    These counties depend on tax revenues from the Net Proceeds 
of Mines. Even with the current depressed market, Net Proceeds 
of Mines constitutes between 20 percent to--in the case of 
Eureka County--50 percent of the rural counties assessed 
valuation. In contrast, Net Proceeds of Mines in Clark County 
is only $8 million of the county's total $26 billion in 
assessed valuation.
    Additionally, there have been roughly 1,500 lay-offs over 
the past year and a half throughout Nevada; yet, these laid-off 
workers come primarily from rural Nevada, representing a 
relatively significant percentage of the work force.
    The fate of rural Nevada is not dire, thankfully. There are 
signs of economic diversification, and ranching and farming 
continue to contribute to the economy. Moreover, Nevada's rural 
communities consist of survivors--people who always keep their 
chins up and endure the tough times. And there have been tough 
times.
    Nonetheless, it is my district that must be remembered when 
considering policies such as royalties and fees on mining. A 
lot can be learned from studying the effects on our communities 
by the recent drop in the price of gold--a factor that is out 
of our control. Parallels can certainly be drawn between the 
changing market and changes in royalties and fees. Additional 
reductions in mining revenue, even those that are seemingly 
small on paper, will have weighty repercussions on the local 
businesses, infrastructures, and families of rural Nevada. I 
appreciate the Subcommittee's attention to these details.
    Thank you, again, for the opportunity to testify here today 
on this important issue, which is critical to the livelihood of 
rural Nevada.

    Mr. Gibbons. Well, both of you, thank you for your time 
here today, and Senator Rhoads, let me just begin with you 
because you were mentioning about rural life, rural lifestyle 
and impact. And there are some, but particularly the opposition 
to the mining industry, who claim that the development of 
tourism can replace the loss of the jobs in mining industry and 
the economic base or other resource-dependent jobs in our rural 
communities.
    As a legislator from rural Nevada, can you comment on this 
idea of where you see tourism supplanting the loss of jobs and 
the quality of the lifestyle, where, as Ms. Soberinsky stated, 
the average salary is about $50,000 for someone in the mining 
industry?
    Can you just give us your opinion and your perspective.
    Mr. Rhoads. I think as a rural legislator, one of the big 
issues in this session of the legislature is how are these 
rural counties going to survive with their hospitals 
deteriorating, with their schools--they do not have enough tax 
base to generate any revenue. As far as any economic 
development that would create tourism, they don't have enough 
private land to put a decent tourism attraction on.
    We're working in these last 2 weeks, addressing the rural 
counties is going to be one of the major issues we come up 
with; and I think for the first time in Nevada history, or at 
least the first time since I have been in the Nevada 
legislature--and that's 22 years--you're going to see the State 
actually participate in some kind of funding mechanism to get 
these rural counties back into decent financial shape.
    And most of it has been caused, in a lot of the rural 
counties, because of the declining mining industry, thanks to 
the Federal Government. So that is a factor.
    Mr. Gibbons. Well, I know, Senator Rhoads, because of your 
action and your ideas, many of us in Congress, Senator Reid and 
myself, have instituted what we call the Northern Nevada Public 
Lands Bill, which we have introduced, which will sort of assist 
some of these poor counties, both in their need to grow, need 
to expand, in some of the communities, as well as a resource or 
revenue source for some of these very important needs, like 
education, health care and maintenance of highways, et cetera.
    So I applaud you for your efforts in looking for those 
solutions as well.
    Ms. Soberinsky, for the record I read along with you in 
your statement, and I do want to correct one thing: I believe 
you stated, and maybe it was a misstatement, that the bonds 
held by Nevada were $50 million. In your record of testimony 
you said $500 million.
    Which is correct? It's on page 2----
    Ms. Soberinsky. Five hundred million, from my information.
    Mr. Gibbons. Okay. And Ms. Soberinsky, the Department of 
the Interior has maintained that their Draft Proposal 3809 
regulations were developed in cooperation with the States. 
Since Nevada may well be one of the most important mining 
states in the Union, one would assume, of course, that they had 
solicited a great deal of input from the State of Nevada; but 
in your testimony, you have indicated otherwise.
    How would you characterize the Interior Department's 
efforts to seek the State of Nevada's input into their Draft 
3809 regulations?
    Ms. Soberinsky. Mr. Chairman, as you know, we're a new 
administration, however I've spoken to various State agencies, 
including Pete Morris at the Department of Conservation and 
Natural Resources, and have been told that there was relatively 
no solicitation from the Department of the Interior on our 
concerns, Nevada's concerns in particular, but on the draft 
regulations as a whole, and that our input was largely ignored 
and not taken into consideration at all.
    Mr. Gibbons. Now, would you mind submitting to the 
Committee for the record, a record of or description of any 
meetings, or your suggestions that came from the State of 
Nevada with regard to the proposed 3809 regulations so that we 
can incorporate that into this record?
    Ms. Soberinsky. Absolutely. We would be happy to do that.
    [The information follows:]
    Mr. Gibbons. Let me explain for those of you in the 
audience, the gentlemen that are sitting up here beside me are 
not Congressmen. They are staff. Jack Victory from Fallon over 
here is my legislative director and works with me in 
Washington, DC.
    John--I forgot your last name, I'm sorry----
    Mr. Rishel. Rishel.
    Mr. Gibbons. [continuing] Rishel, is the staff member from 
the Committee. And Doug Fuller is the staff legal counsel for 
the Resource Committee, and, of course, when I forget to do 
something, they'll hand me a note. Let me say that for both of 
you, maybe we can get one final question and then be pleased to 
let you resume your busy lives.
    If I were to go back to Congress and give them one 
statement or summary about Nevada mining, what should I tell 
them?
    Ms. Soberinsky. This is actually--I was going to add on to 
Senator Rhoads' comments earlier when you had asked about 
tourism replacing the mining industry. I'd say most 
importantly, I think sometimes what the Federal Government 
forgets is that the mining industry and the people that make up 
the mining industry are integral parts of the communities that 
they live in.
    They are the first ones there with scholarships when 
needed; they're the first ones there when there is a health 
care crises. They are the first ones there when there is a 
family in their community that needs something.
    They are not just this monolithic industry that mines gold 
out of the ground and takes all its profits and runs. They 
significantly contribute to the livelihood of each of those 
communities, and I think that that is something that the 
Federal Government needs to take into consideration in dealing 
with this issue.
    Mr. Gibbons. I'm not her straight man.
    Mr. Rhoads. I would say, Congressman, that we should tell 
them that the people that are the closest to the ground are the 
ones that can make the wisest decisions, and we live there and 
we're going to come back there. And we're going to take care of 
that ground much better than somebody from Maryland or 
Pennsylvania, or Arkansas. I have been telling them that for 25 
years back there, and sometimes we gain a little, and a lot of 
times we lose, but thanks to Congressmen like you and others, I 
think that there's a little bit of light at the end of the 
tunnel now and we might be getting our voices heard, so we 
appreciate that.
    Mr. Gibbons. Well, thank you. We're happy to have both of 
you here today. Thank you for your very helpful testimony.
    Again, we'll excuse you, and appreciate your follow-up with 
any additional testimony or documentation that you have.
    With that, let me call our third panel up, Glenn Miller, 
Cochair Mining Committee, Toiyabe Chapter, Sierra Club, Reno, 
Nevada; Tom Myers, Director, Great Basin Mine Watch, Reno, 
Nevada; Leo Drozdoff, Chief, Bureau of Mining Regulation and 
Reclamation, Nevada Division of Environmental Protection, 
Carson City, Nevada.
    Gentlemen.
    [Witnesses sworn.]
    Mr. Gibbons. Welcome to each of you. As you have heard, 
your full written testimony will be submitted for the record. 
You're free to paraphrase and summarize in any way you see fit.
    The lights will come on for you, each one, to give you a 
certain time frame within which to discuss your points.
    Mr. Gibbons. With that, Professor Miller, we'll turn to you 
first.

   STATEMENT OF GLENN C. MILLER, COCHAIR, MINING COMMITTEE, 
           TOIYABE CHAPTER, SIERRA CLUB, RENO, NEVADA

    Mr. Miller. Thank you. I appreciate the opportunity to make 
some brief comments, and I appreciate your willingness to hold 
this hearing.
    I think all the speakers before us have made the comment, 
which is very true that the industry is very much depressed 
right now because of a severe depression in gold prices.
    When gold was up at $400 an ounce, I think everybody was 
happier. It's a lot easier to talk to industry when they have a 
lot of money, about environmental issues, and it's more 
difficult when they don't have as much profit margin present.
    But the issues that I guess I'd like to make is that even 
though the depression is there in prices, and profitability is 
not there, the environmental, risk of the environmental costs 
remain about the same, and I am very concerned that the funds 
to insure that the mines are mining in an environmentally 
responsible manner be retained.
    There is an issue of bankruptcies in Nevada. Now, the 
numbers, I'm not completely sure about. They change on a fairly 
frequent basis, but there are over 13 mining sites that have 
gone into bankruptcy in recent years, and some of these 
operations are major ones.
    The Arimetco's Paradise Peak and the Yerington copper mine. 
Those are ones where the bonding was severely problematic. Part 
of it was a corporate bond that is no longer, at least, 
accessible at present. Pegasus' large mine, Florida Canyon; and 
Alta Gold is now in bankruptcy. They may come out of 
bankruptcy; but they have Olinghouse mine just above the 
Pyramid Lake reservation, plus two other mines in Nevada.
    While bonds are available for these mines under Nevada 
regulations--I was involved in establishing both the 
legislation that established reclamation law, which, although 
it was debated very highly in 1989--I remember having shouting 
matches in the legislature, during that time--whether that was 
a consensus process, I don't know, but the way legislation 
goes, it did move forward.
    That, we agreed would not bond for fluid costs. Now, 
probably I think one of the largest emerging problems from 
mining and environmental issues have to do with how to handle 
fluids that come out of the waste rock dumps, fluids that come 
out of heaps, and pit lakes.
    There is no authority, and in fact there is specifically an 
inability to bond for those specific units on major mines. And 
those are probably some of the largest environmental problems 
with largest costs that ultimately may be incurred.
    One of the mines, Paradise Peak, half of the bond was held 
as a corporate guarantee, may come back but it's problematic. 
We have to get in line with other of the debtors from that 
mine.
    This now has a tailings impoundment that you can see when 
it blows, like it has blown for the last few days, you can see 
it from 10 miles away, the tailings impoundment dust, or dust 
which causes--pretty reactive materials can be seen 10 miles 
away. It has a pit lake that the last time I saw any gauge on 
it, was going sour, going acidic, there was a tremendous amount 
of physical risk from that site also because of the very high 
instability in the wall rock.
    Who's going to pay for this? I mean, this is not a trickle 
cost. This will be many millions of dollars. And I guess that I 
would argue that a royalty fee, should it be established, 
should be dedicated to paying for those mines that go under 
that are not sufficiently bonded.
    Three quick points here: I want to provide a brief overview 
of three generic problems that are becoming increasingly 
prevalent in Nevada.
    Pit lakes: In the next 30 years, there will very likely be 
more water in pit lakes than all the other man made reservoirs 
in Nevada, excluding, of course, Lake Mead. And I don't think 
anyone argues that point at all.
    It's also my belief that the water quality in these pit 
lakes will not meet the majority of uses that include 
agricultural, either irrigation or stock watering, certainly 
not domestic water quality uses, so that water that will be in 
those pit lakes will largely be unavailable for ranching, for 
agriculture or for domestic use.
    At least one of the pit lakes in Nevada contains 
constituents that are really severely problematic to wildlife. 
The two largest man-made lakes in Nevada will be pit lakes and 
will contain a total of 1 million acre feet of water.
    It's a long term commitment that we are doing right now. 
We're committing long term resources for the future.
    The second one is discharge from precious metals heaps. 
This an issue I don't think anybody felt would be a major 
problem. It's now becoming apparent that a large number of 
heaps in Nevada will drain following snow and rain infiltration 
and this will be over many, many decades.
    Even if you get one furlong of water through a pit, through 
a heap, with the rainfall in it Nevada will require on the 
order of 20, 30, 40 and beyond decades. So it's a problem that 
is effectively permanent, and how we a handle that water is not 
clear at all.
    I think Leo Drozdoff may have some comments about that.
    Finally, discharge from waste rock dumps: As in other 
States, drainage from waste rock dumps is a problem. A 
problematic mine is the Big Springs Mine, which was a model 
mine. I appeared on a video in support that mine. Now it has 
sulfate concentrations coming up; some pH declines that are 
very slight, with some indication that may be becoming an acid 
site. At the very least, it's causing significant problems for 
the north fork of the Humboldt.
    Somebody is going to pay for this. Somebody is going to 
pay. Right now the BLM is getting funds out of appropriations 
to pay--for some of this, so it's either going to be the 
taxpayers, or I would argue that a good burden of that should 
be on the industry that has and will continue to gain a profit 
from those activities. Thank you.
    Mr. Gibbons. Thank you.
    [The prepared statement of Mr. Miller follows:]
 Statement of Glenn C. Miller, Co-Chair of the Mining Committee of the 
                   Toiyabe Chapter of the Sierra Club
    My name is Glenn C. Miller, and I reside at 581 Creighton Way, Reno 
NV. I have been active in the Toiyabe Chapter of the Sierra Club for 
over 20 years on the subject of mining on public lands. I have observed 
the mining industry in Nevada grow nearly ten-fold during that time, 
from less than $400 million per year in 1980 to over $3 billion in 
1997. This industry has undergone dramatic changes during that time, 
and I have followed the development of new state and Federal 
regulations, and observed changes in the mining industry in their 
response to regulations.
    In many ways, gold mining in Nevada is less expensive and offers 
better operational characteristics than are present in other states 
that have higher rainfall. These features, as well as a friendly 
regulatory attitude towards mining, have allowed Nevada to become the 
nation's largest producer of gold and silver. When gold was near $400 
per ounce, the industry was very profitable; at $280 per ounce, the 
industry is severely stressed, except perhaps for the very lowest cost 
producers. Even in these times of financial stress, the environment 
still requires just as much protection as when the mining industry was 
much more profitable. Protecting the environment requires sufficient 
funding to plan, permit, regulate and close these mines. To reduce 
funding now when mine closure is becoming an increasing concern is very 
short sighted.
    I wish to make four simple points regarding the fees charged for 
mining claims and a potential royalty, which would help to pay for some 
of the costs associated with mining.
    1. Even though the profitability of mining may have decreased, the 
costs for regulating mining remain, and may be increasing due to the 
increased need for careful regulation during closure of mines. The gold 
mining boom that began in the early 1980's utilized new techniques for 
mining. This very large-scale mining has created new environmental 
issues that have not previously been considered and closure problems 
are now becoming apparent. These issues are discussed below. At any 
rate, the need for increased funding for the Federal and state 
regulatory agencies is apparent. Unless this funding comes from the 
mining industry, it will probably need to come from the general fund. 
Thus, retention of Federal and state fees on claims is critically 
important to retain, as are the current permit fees required by the 
State of Nevada.
    2. Bankruptcies of mining companies are becoming a common 
occurrence in Nevada. Companies which operated or owned over 13 mining 
sites have gone into bankruptcy in recent years in Nevada. Some of 
those operations are major mines, including Arimetco (Paradise Peak and 
the Yerington copper mine), Pegasus (Florida Canyon) and Alta Gold 
(Olinghouse mine and two other mines in Nevada). While bonds are 
available for many of these mines, they are not generally bonded for 
management of fluids which are released following closure of heaps, or 
long-term management of pit lakes, when they occur. For one of the 
mines, (Paradise Peak) half of the bond was held as a corporate 
guarantee, which is problematic, to say the least when the net worth of 
the company is less than the debt. This mine now has a pit lake that 
may be turning acidic, a tailings impoundment that blows tailings dust 
miles away and heaps that are not closed properly. Who has the 
responsibility of protecting the public from long-term costs of 
remediation? Those costs are likely to range in the millions of 
dollars, or if left alone will provide long-term physical and chemical 
risks to the public and wildlife.
    3. If a royalty is established, I urge that those funds be used to 
partially offset the costs the public will incur for management and 
remediation of mines on public lands. I am convinced that those costs 
will be substantial and doubt that any royalty will be sufficient for 
the public costs that are being incurred with present mines today. 
However, it will help.
    4. Finally, I want to provide a brief overview of three generic 
problems that are becoming increasingly prevalent in Nevada:

         Creation of pit lakes: Within the next 30 years, there 
        is very likely to be more water in pit lakes than all the other 
        man-made lakes completely in Nevada. It is also my belief that 
        the water quality in the majority of those pit lakes will be 
        sufficiently poor that it will be degraded for domestic use, 
        irrigation, and stock watering. Some of the pit lakes presently 
        in Nevada exceed standards for protection of wildlife. The two 
        largest man-made lakes in Nevada will be pit lakes and contain 
        a total of over 1 million acre-feet of water. This is a 
        tremendous long-term commitment of the limiting resource in 
        Nevada.
         Discharge from precious metals heaps. It is now 
        becoming apparent that a large number of heaps in Nevada will 
        drain following snow and rain infiltration. Based on research 
        my laboratory has conducted at the University of Nevada, this 
        water will be contaminated for many decades. We do not have 
        firm plans for management of that water, other than to simply 
        allow it to drain into the subsurface environment. In fact, 
        this option is the regulatory fix which is being permitted by 
        the State of Nevada, even on federally managed public lands.
         Drainage from waste rock dumps. Just as in other 
        states, drainage from waste rock dumps is a problem. While 
        acidic drainage was not thought to be a substantial problem in 
        the current gold mining areas, we now have several sites where 
        acids are being generated. One of those sites, the Big Springs 
        Mine was considered a model mine in the early 1990's. By 1992, 
        the sulfate concentrations began to increase from drainage from 
        waste rock dumps, and a serious decrease in pH of the drainage 
        water is now an apparent trend. Waste rock dumps at other sites 
        are also releasing contaminants loads that did not exist prior 
        to mining.
    These problems are now occurring when the industry is very 
stressed. The problems will not simply go away, and many of them will 
continue to increase as the larger mines close. Rather than consider 
reducing fees, the Congress needs to recognize that someone has to pay 
the piper. Those costs will be paid either by the industry that gained 
the wealth from the activity, or it will be the public who will bear 
the cost in money or resource loss if they are not fixed.
    Thanks for the opportunity to provide these comments.

    Mr. Gibbons. Dr. Myers.

STATEMENT OF TOM MYERS, DIRECTOR, GREAT BASIN MINE WATCH, RENO, 
                             NEVADA

    Mr. Myers. Thank you. Mr. Chairman, my name is Tom Myers, I 
am a Director of the Nevada-based environmental advocacy group, 
Great Basin Mine Watch. Thank you for this opportunity to 
testify on the issue of immediate concern to members of our 
group and the State of Nevada, and thank you for holding this 
hearing.
    And the light is still red right now. I'd hate to be 
eliminated after my first paragraph.
    Mr. Gibbons. It'll just give you that much more time.
    Mr. Myers. Thank you. As requested, I will address two 
subjects: Federal holding fees such as the claim maintenance 
fee, and royalty payments.
    As part of the 1993 appropriations bill, Congress allowed 
the BLM to start collecting $100 year per claim fee on mining 
claims as part of their appropriations. This has been renewed 
twice with an additional $25 location fee added in 1995.
    Fees collected have ranged from $30- to $36 million dollars 
between 1995 and 1998 with the majority going to the BLM's 
Mining Law administration Budget. If this Committee proposes 
elimination of the fee, the administration of the program must 
financed from general revenues.
    Who could oppose this fee? The amount is a mere blip on the 
annual budget of large companies. For those holding a claim 
block until the market improves, the fee frees them from doing 
expensive and environmentally damaging maintenance work.
    The small miner exemption eliminates the fee as an issue 
for honest, small-scale miners and exploration companies.
    The only people really hurt by this holding fee are 
speculators. These are people who stake multiple claims in a 
minerals-rich area in hopes of mining the legitimate mining 
companies who would rather buy out a claim than challenge it's 
validity.
    You have received testimony today that these fees have 
decreased the exploration activity in Nevada. We respectfully 
disagree with the opinion that this is a problem. In 1993, the 
number of registered claims dropped from 258,000 to 126,000, 
while nationally, claims dropped from 760,000 to 294,000.
    Coincident, statistically insignificant drops in 
exploration are due to the price of gold. Any increase in 
exploration in foreign countries merely reflects the fact that 
Nevada has been explored for 125 years.
    The overseas areas, such as Russia, are virgin territory.
    Regarding royalties, Great Basin Mine Watch supports an 8 
percent net smelter royalty, which is in the low end of the 5 
to 15 percent range currently charged by states on their lands. 
My written testimony includes calculations that prove that at 
least 80 percent of operations will remain profitable with such 
a royalty even if gold prices drop to $250 per ounce.
    Based on an operating cost of $212 per ounce, the effective 
royalty rate after tax deductions and depletion allowances are 
considered, is only 5.48 percent.
    But a longer-term look reveals much more about the industry 
and production. Between 1987 and 1992 the real price of gold 
fell by $220 per ounce. During that time period of precipitous 
price declines, gold production boomed increasing 128 percent.
    An industry that can boom amidst price declines that are 15 
times the likely effective size of a Federal royalty is 
unlikely to be crippled by that royalty.
    More importantly, the industry has adjusted to changing 
prices by decreasing their costs substantially with time. The 
preferred method of decreasing costs is to discover and produce 
higher quality ore. Unfortunately for the worker and for 
Nevada's economy, production costs are often lowered by more 
efficient processing which usually means more mechanization and 
less labor.
    I expect that as the industry expands, more gold will be 
produced with less labor, just as in the timber industry.
    The impact of the Federal royalty will likely be about a 2 
percent reduction in total production and employment, which 
represents about a day's worth of not normal job growth in the 
West. Only 1 in 1,000 western jobs are in metal mining and only 
1 in 6 of those jobs rely on Federal land. Therefore, royalty 
payments have a potential to effect a tiny sliver, about 3 of 
every 10,000 of total western jobs in the mining industry.
    This is not to make light of the concern of local 
communities in eastern Nevada who do depend to a substantial 
degree on minerals production. However, the answer is not 
continued corporate welfare or subsidies. The answer is more 
diversification of the local economies.
    Great Basin Mining Watch recommends that royalties be used 
for abandoned mine reclamation. Production in Nevada alone, 143 
thousand--excuse me--$143 million per year. Nevada looses a 
huge economic opportunity because the Federal Government does 
not charge royalties that are applied to abandoned mine clean 
up.
    Federal royalties could also solve potential problems that 
Glenn referred to a minute ago with things like bankruptcies, 
corporate bonding, and a few other problems. In conclusion, I 
want to reiterate that the fastest growing rural western 
regions are places where people want to live because of their 
beauty, not because of what they extract from the earth. Thank 
you very much.
    [The prepared statement of Mr. Myers follows:]
    [GRAPHIC] [TIFF OMITTED] T8947.013
    
    [GRAPHIC] [TIFF OMITTED] T8947.014
    
    [GRAPHIC] [TIFF OMITTED] T8947.015
    
    [GRAPHIC] [TIFF OMITTED] T8947.016
    
    [GRAPHIC] [TIFF OMITTED] T8947.017
    
    [GRAPHIC] [TIFF OMITTED] T8947.018
    
    [GRAPHIC] [TIFF OMITTED] T8947.019
    
    [GRAPHIC] [TIFF OMITTED] T8947.020
    
    [GRAPHIC] [TIFF OMITTED] T8947.021
    
    Mr. Gibbons. Look at that. It's still green.
    Mr. Drozdoff.

     STATEMENT OF LEO M. DROZDOFF, CHIEF, BUREAU OF MINING 
 REGULATION AND RECLAMATION, NEVADA DIVISION OF ENVIRONMENTAL 
                PROTECTION, CARSON CITY, NEVADA

    Mr. Drozdoff. Thank you Mr. Chairman. My name is Leo 
Drozdoff and I'm the Mining Office Bureau Chief of the Nevada 
Division of Environmental Protection. The Nevada Division of 
Environmental Protection of the Nevada Department of 
Conservation and Natural Resources appreciates the opportunity 
to provide testimony to the Committee on Resources, 
Subcommittee on Energy and Mineral Resources.
    Since you have requested testimony on the effect of Federal 
mining fees and proposed Federal royalties on State and local 
revenues and the mining industry, we will provide the 
Subcommittee with some background pertaining to Nevada's well-
run mining regulatory programs.
    I will probably also touch on a couple of points Doctor 
Miller talked about as well. The NDEP is only one of several 
State agencies that regulate mining operations in Nevada. The 
Mining Bureau of NDEP is charged with ensuring that the quality 
of Nevada's water resources are not degraded as a result of 
mining operations and provide that the land is properly 
reclaimed and returned to a productive post mining land use.
    Other bureaus within NDEP are charged with protecting 
Nevada's air quality and insuring that solid waste at mining 
operations is handled appropriately.
    Generally speaking, the prevailing instrument that the NDEP 
uses to regulate activities on mine sites is the operating 
permit. The cost to obtain these permits, that is, air, water, 
reclamation, et cetera, may range from $100,000 for a mid-sized 
facility to several million dollars for a large operation with 
sensitive environmental issues.
    The annual cost associated with these permits, that is, the 
fees paid to support the State regulatory programs, can range 
from $20,000 to $70,000 a year, or probably more.
    For example, NDEP's entire Mining Bureau operating budget 
of $2 million is completely supported by fees paid by the 
industry. NDEP's Mining Bureau does not receive any State 
general fund or Federal monies. The monitoring costs that 
ensure that a mining facility remains in compliance with their 
operation permits routinely exceeds $100,000 per year.
    And lastly, the State of Nevada holds, or jointly holds 
with Federal land managers, over $500 million in reclamation 
sureties. These costs don't include construction costs 
necessary to meet environmental requirements. In addition, 
costs from other State and Federal programs, most notably, NEPA 
requirements, rival and can dwarf the costs associated with the 
NDEP's programs.
    Our reason for summarizing these programs is to neither 
boast nor apologize, but rather to underscore the states 
priorities. With these costs, this State realizes tangible 
benefits, most notably a well-regulated mining industry, and a 
protected environment.
    Currently there are literally dozens of new regulations on 
the horizon which can not only negatively impact the mining 
industry, but also Nevada's ability to regulate mining 
activity.
    It's our hope that when Congress has the opportunity to 
review new regulations or fees, it will ascertain whether these 
proposals add value and benefit like we believe Nevada's 
already do.
    I would like to just make you aware that some of the 
environmental issues raised by Dr. Miller, my fellow panel 
member, are certainly legitimate discussion points.
    I guess to stay on point I will summarize them generally 
and be glad to answer specific questions, but from my 
perspective the NDEP is equipped to address these issues, and 
more importantly, we are effectively addressing these issues. 
The State program is a dynamic program. We're clearly in a 
changing environment and we're contemplating some changes to 
our environmental programs, but that's the beauty of the State 
program, that it has the ability to do that.
    So with that, I would be happy to answer any questions that 
you have.
    Mr. Gibbons. Mr. Drozdoff, thank you very much for your 
very helpful testimony.
    [The prepared statement of Mr. Drozdoff follows:]

Statement of Leo M. Drozdoff, P.E., Bureau Chief, Mining Regulation and 
 Reclamation, State of Nevada, Department of Conservation and Natural 
         Resources, Nevada Division of Environmental Protection

    Mr. Chairman and members of the Subcommittee, the Nevada 
Division of Environmental Protection (NDEP) of the Nevada 
Department of Conservation and Natural Resources appreciates 
the opportunity to provide testimony to the Committee on 
Resources, Subcommittee on Energy and Mineral Resources. Since 
you have requested testimony on the ``effect of Federal mining 
fees and proposed Federal royalties on state and local revenues 
and the mining industry,'' we will provide the Subcommittee 
with some background pertaining to Nevada's well run mining 
regulatory programs. The NDEP is only one of several state 
agencies that regulate mining operations in Nevada. The Mining 
Bureau of NDEP is charged with ensuring that the quality of 
Nevada's water resources are not degraded as a result of mining 
operations and provide that the land is properly reclaimed and 
returned to a productive post mining land use. Other bureaus 
within NDEP are charged with protecting Nevada's air quality 
and ensuring that solid waste at mining operations is handled 
appropriately.
    Generally speaking, the prevailing instrument the NDEP uses 
to regulate activities on mine sites is the operating permit. 
The costs to obtain these permits (air, water, reclamation, 
etc.) may range from one hundred thousand dollars for a mid-
sized facility to several million dollars for a large operation 
with sensitive environmental issues. The annual costs 
associated with these permits, that is, the fees paid to 
support the state regulatory programs can range from $20,000-
$70,000 per year or more. For example, NDEP's entire Mining 
Bureau operating budget of $2 million is completely supported 
by fees. NDEP's Mining Bureau does not receive any state 
general fund or Federal monies. The monitoring costs that 
ensure that a mining facility remains in compliance with their 
operating permits routinely exceed $100,000 per year. Lastly, 
the State of Nevada holds or jointly holds with Federal land 
managers, over $500 million in reclamation sureties. These 
costs certainly don't include construction costs necessary to 
meet environmental requirements. Additionally, costs from other 
state and Federal programs, most notably NEPA requirments, 
rival and can dwarf the costs associated with the NDEP's 
programs.
    Our reason for summarizing these programs is to neither 
boast nor apologize, but rather to underscore the State's 
priorities. With these costs, the State realizes tangible 
benefits--most notably a well regulated mining industry and a 
protected environment. Currently, there are literally dozens of 
new regulations on the horizon, which can negatively impact not 
only the mining industry, but also Nevada's ability to regulate 
mining activities. It is our hope that when Congress has the 
opportunity to review new regulations or fees it will ascertain 
whether these proposals add value and benefit like Nevada's 
already do.
    I would be happy to answer any questions you may have. 
Thank you.

    Mr. Gibbons. Let me start with Dr. Miller, if I may.
    You talked about the need for a royalty to take care of the 
environmental problems that have been or are currently 
existing, or may exist in the future. Dr. Miller, is it your 
position that the Federal Government under a Federal royalty 
could do a better job than if we had a State royalty to take 
care of the very the same thing?
    Mr. Miller. Yes. Either way. I mean I have no--I think on 
publicly-owned land, there is a responsibility that those land 
management agencies, that they answer to the public. It is 
public lands. I think there needs to be a substantial 
involvement in that discussion, exactly how that reclamation or 
damage reduction occurs.
    But you know, I have no particular--you know, money is 
money. Whether--but I have yet to hear of the State of Nevada 
suggesting that there should be a royalty for reclamation. The 
money, the net proceeds, which has declined considerably in the 
last year, 1997-1998, I don't think there has ever been a 
discussion of utilizing that to reclaim lands that are damaged.
    I was out at Pyramid Lake yesterday and there is a site 
there that is from historic mining, I believe a copper site, 
tremendously acid generating, that is--on an ephemeral basis, 
during high runoff, does flow into Pyramid Lake. That's 
something that nobody has any money to pay for, certainly not--
it's on reservation property.
    It's one of the issues that the BLM in their abandoned 
mining lands program is looking at fixing, but that's the kind 
of issue that is an historic issue.
    Then I believe there is all these other things that are 
being created now that we don't know about that we'll know 
about 20 or 30 years from now. There should be some money 
somewhere to pay for those. And I believe that is an industry 
responsibility because it's the industry that created the 
wealth that went--you know, I am a great supporter of wealth 
creation. There is a lot of money that's made, profits made. 
And some of that needs to stay somewhere in order to correct 
those problems that are being created and have been created in 
the past years.
    Mr. Gibbons. Dr. Miller, We're all aware of the Superfund, 
a Federal program to clean up hazardous sites around this 
country.
    Mr. Miller. Yes.
    Mr. Gibbons. A very, very, lucrative fund which has gone 
almost totally unapplied to the things it was supposed to do. 
Instead it goes to court battles filling the pockets of lawyers 
rather than cleaning up sites.
    Mr. Miller. No argument there.
    Mr. Gibbons. So I guess my point is, would you believe that 
a one-size-fits-all Superfund type, that is paid mostly out of 
Nevada since we're the largest metal-producing State in the 
country, would be the way to do this, or should it be 
individualized, because problems, as you heard earlier, are 
local to Nevada that aren't local to Montana, that aren't local 
to Utah or Arizona?
    Mr. Miller. Congressman, you're in the Nevada Legislature. 
The chances of getting a royalty passed in Nevada on mining, I 
think you have a better idea of exactly what the chances of 
that would be.
    They are not very high, and I guess my suggestion is I 
don't care where the money comes from. But it should come from 
somewhere. I don't think Nevada politically would ever pass a 
royalty to fix abandoned mine damage in this State--and if you 
believe they would, I would appreciate you asking the 
legislature if they would, because you know, I think you have 
quite a bit of influence on that issue.
    Mr. Gibbons. Let me say that we heard, also, testimony--and 
not to argue with you, because I don't intend to do that, but 
we have 1.3 million people in Las Vegas, and I don't know of 
too many mines in Las Vegas, and the majority of the members of 
our legislature come from Las Vegas, who have a deep abiding 
interest in the welfare of not just Las Vegas, but all of 
Nevada.
    I would think as the face of Nevada changes, so might the 
political will of this State. I think it's very onerous to 
suggest that those people in Nevada should pay for damage that 
is done in Utah.
    Mr. Miller. Absolutely not. I agree with that. I agree with 
that.
    Mr. Gibbons.  Mr. Myers, I have looked at your testimony--
excuse me, Dr. Myers, if you prefer--I looked at your 
testimony, and your royalty analysis on page five, that's here, 
in your written testimony, is based on heap leach gold as I see 
it. Is that correct?
    Mr. Myers. Yes, it is. It's based--the calculations in 
there are based on a table from a Congressional Research 
Services paper of several years ago.
    Mr. Gibbons. So did you take into consideration other metal 
mining operations and milling costs, or copper and zinc in your 
calculations there?
    Mr. Myers. No, not at all. I mean, I could have hundreds of 
permutations of that calculation. What I tried to do is similar 
to what the author of that report did, for copper--I believe 
his example was copper--is I tried to come up with a variety of 
examples and using the 1997 average cost of production, or 212, 
which I think--$212.
    Mr. Gibbons. On page 8 of your testimony, you state that 
``production''--I presume gold, because it's not qualified in 
there--``will yield about $143 million per year.'' Presumably 
that's with an 8 percent net smelter royalty payments to the 
Federal Government?
    Mr. Myers. Correct.
    Mr. Gibbons. That's the basis of your statement?
    Mr. Myers. That's correct.
    Mr. Gibbons. I can't see how you derive that estimate of 
$143 million, because according to the information that I 
have--and maybe you can help us understand better--about 32 
percent or 2-\1/2\ million ounces of gold is produced from 
public lands----
    Mr. Myers. Do I have----
    Mr. Gibbons. [continuing] Each year, so if I may, going 
back to page 5 of your testimony, the 8 percent net smelter 
return on that ranges from 20 percent at $250 per ounce gold, 
to $28--excuse me that would be $20 per ounce for $250 gold; 
$28 per ounce for $350 per ounce gold. This equates, in my 
calculations, to a total royalty to the Federal Government of 
about $50.2 million at $250 per ounce and/or 70.4 million at 
the $350.00 level. I'm just curious: At what point did you 
assume the price of gold to get to $143 million?
    Mr. Myers. Well, the $143 million was not my calculation. 
It was a quote from another report, which I see I did not 
footnote, but it was from the draft report that came from--that 
is referenced in number 16.
    Mr. Gibbons. So would you submit a corrected version of 
your testimony based on those questions, so we don't have to 
put this misrepresentation into the record for us, Doctor?
    Mr. Myers. I'd disagree that there is a misrepresentation 
in the calculations that I provided you on page 5, but I can 
change $143 back to $143 million, if you'd like. Is that what 
you are asking me to change?
    Mr. Gibbons. Precisely, because you've submitted this 
document and your testimony as being the truth, and I want to 
be sure we have the facts, the truthful facts as they come out, 
and I don't want to associate you with a misstatement that 
might somehow become problematic or difficult later on, Doctor. 
So let's go back to your table on page 5.
    Mr. Myers. Okay.
    Mr. Gibbons. I don't see any provision in this table for 
capital costs in your table, and in 1997, according to my 
information, the average gold mining costs in the United States 
were $287 per ounce or about $75 higher than operation costs?
    Mr. Myers. I do have a line there for depreciation which is 
depreciation on capital. That number comes as sort of a 
guesstimate of the knowledge very similar to the table that was 
in the Congressional Research Service report where they----
    Mr. Gibbons. Your depreciation in that, though, is $10 per 
ounce.
    Mr. Myers. Depreciation is--okay. It was not based on a per 
ounce amount. It was based on, say, $100 million capital 
investment depreciated over a 10-year period, or something like 
that.
    I'm not an expert on depreciation. The number that was used 
there came from the Congressional Research Service report that 
I used.
    Mr. Gibbons. So what--Where do you get the other $65 that 
you assess in there?
    Mr. Myers. I'm sorry. Which other $65 are you referring to? 
We go from--we go from a gross revenue through smelting costs 
and transportation. The smelting costs are very minimal 
according to John Dobra, so I'm quoting from him in that 
particular number. Then it comes down to net smelter returns; 
then I applied an 8 percent royalty to that to come up with the 
gross mining income. Then operation costs were based on $212 
per ounce. I came up with net operating income. I subtracted a 
guessed-at amount for depreciation, just, as I say, for 
example, and we go down to a pre-depletion income; and I used 
the same depletion amount as used by the CRS report, and came 
up with pre-tax profit of a certain amount; and I applied taxes 
to it and came up with a net profit.
    Mr. Gibbons. Okay. Well, according to my mathematics--While 
I don't have a Ph.D in economics, accounting, or mathematics, 
and I know you can help me out, but when I look at this I see 
$287 is your total cost less operating costs of $212; $75 is 
assessed as other costs; and only $10 for depreciation in 
there. I just need you to tell me how you account for the 
additional cost of $65 per ounce in your testimony.
    Mr. Myers. I'm not sure where the $287 you just mentioned 
comes from. I'm sorry I don't see it in my table.
    Mr. Gibbons. Looking back through there, according to your 
reference here, Dobra, J.L. 1999, giving you $212 per ounce; 
there is also a reference in there for $287 per ounce for gold.
    Mr. Myers. For the operating cost?
    Mr. Gibbons. No, no, that's the total cost.
    Mr. Myers. In Dobra's----
    Mr. Gibbons. Dobra's, the document you referenced here as--
--
    Mr. Myers. Right.
    I've referenced the chart in Dobra's 1998 report, and he 
also predicts that in 1998 the price will be $190 per ounce.
    Mr. Gibbons. I just would ask you, for the record, if you 
would mind submitting a recalculated table and figures for us 
so that we have the correct information to go forward with, 
because it's a bit uncertain here, Doctor. That's all I'm 
trying to do is not put you on the spot, I'd just like to 
clarify some questions that I have.
    Mr. Myers. Well, I need to know which number you'd like me 
to change in the calculation, because every number in this 
table is correct.
    Mr. Gibbons. Well, yeah, well, just for the record, 
reconcile the total cost.
    Mr. Myers. It appears from the difference in the figures, 
because if you look on figure--if you look on figure 5, he 
talks about 1997 average total cash cost of $199. On figure 4 
he talks about an average total cash cost of $212 per ounce.
    I see an awful lot of different numbers that Dr. Dobra is 
using here. I believe the one in figure 6 that you're referring 
to, the 287, includes some capital costs that would not be a 
part of the net smelter returns calculation that I'm using, nor 
what the CRS report that I was using referred to.
    So I'm using the number--the 212 is as close to the number 
for the example that I was trying to use.
    Mr. Gibbons. Doctor, I'm not an economist, nor am I an 
accountant, and I know the original question started off with 
the provisions you may have submitted for capital costs in your 
testimony, and capital costs seem to be, overall, a part of 
operating costs of the mine.
    Mr. Myers. The only thing I submitted on capital costs is 
the depreciation value which is a really guessed-at number, 
because there is no average capital cost that I was able to 
obtain.
    Mr. Gibbons. Well, Mr. Drozdoff--Is that how I pronounce 
your name? Am I doing it correctly?
    Mr. Drozdoff. Yes, that's correct. Thank you.
    Mr. Gibbons. The witnesses on your panel have alluded to 13 
mine bankruptcies in Nevada that have caused reclamation 
problems. Are these mines major? And could you comment on the 
bankruptcy issue and try to quantify for the Committee, what, 
if any associated reclamation or other environmental problems 
exist due to that bankruptcy?
    Mr. Drozdoff. Yes, I would be glad to. For the record, the 
NDEP does not use the term ``major'' to classify a mine. So any 
answer I give you is sort of just a feel.
    I would probably agree with Dr. Miller in terms of the 
major mines that he mentioned, I'd say Florida Canyon, which 
was previously owned by Pegasus and is now owned by Apollo 
Gold, that would clearly constitute a major mine.
    I think any of the other ones after that can run in scale 
from small to moderate size. Now, in terms of the tangible 
issues associated with bankruptcy, I would like to take a 
couple moments to get into that.
    Currently, as we sit here today, there are two facilities 
that were in bankruptcy that are being actively reclaimed with 
either our oversight or in the case of one facility, simply a 
government contract.
    Mr. Gibbons. Which two are those?
    Mr. Drozdoff. That would be the Goldfield Mine south of 
Tonopah and the Mt. Hamilton Mine west of Ely. In the case of 
the Goldfield Mine, we began working with the bonding company 
and began reclamation work last year. I am happy to report that 
we're already working through some bond release for work 
completed at that facility.
    In the case of Mt. Hamilton, we worked with the United 
States Forest Service, and in that case the bonding company 
surrendered it's bond, and we negotiated a contract with a 
third-party contractor in April, and work is proceeding.
    So to characterize--the seminal issue with bankruptcies, 
is, as you know, they take a while. And that's unfortunate, but 
I can assure you that we're involved in that process, and if we 
need to do something over and above what we have in place, 
we're ready to do that.
    And I will make one last point: When this bankruptcy issue 
became an issue, we worked closely with the industry and were 
able to develop what we call an emergency management fund. 
Again, a State fund put in place; the Governor's office, 
Governor Guinn's office, reviewed the budget; the Nevada 
Legislature approved our budgets, so there is some willingness 
to work there.
    And what we have in place now is a moderate fund of 
approximately $300,000 per year that enables the State, if it 
needs to--if in fact some of these problems in terms of 
vacating a site occur, we would have the ability or have the 
ability now to have a contractor in place to simply go out and 
handle it while we transition to dealing with the bonding 
companies.
    So, I don't know that you can estimate or take that 
bankruptcies automatically are a cost to the taxpayer. Frankly, 
in this State that simply hasn't materialized, and I can only 
assure you that we won't let it materialize.
    Mr. Gibbons. Thank you.
    Dr. Miller, you're a renowned scientist, and a lot of us 
respect your opinions and the studies that you have done. When 
you talk about these ground waters in mines, do we have good 
data for pre-mining ground water studies that show the 
composition and the quality of the water before mining was 
there?
    Mr. Miller. Yes, I would indicate that there is at least 
one mine that I know of that went into bankruptcy where the 
bond was put back and it's cost much more. That's the Fury Mine 
in a national forest just south of Berlington. It was a 
$160,000 bond and it's cost in excess of $500,000, that the 
Forest Service has put in. That's one example. And that was an 
older mine from the early 1980's, that had no State involvement 
except from the regulatory perspective.
    There are several examples and I would be happy to provide 
those at the request of the Committee. There is an example 
where the ground water has been, I think, substantially 
impacted just because of reinfiltration of dewatering water, 
and that's a site north of Winnemucca where the total dissolved 
solids has gone from on the order of 100 milligrams per liter 
to over 1,000 milligrams per liter because of water that was a 
pretty good quality water, then it was infiltrated in ponds, 
it's settled and gone back to the ground water system and 
dragged a lot of salts with it.
    That's no longer being done. There is another example where 
we have data where the water has ponded and then daylighted out 
some distance away, in new springs where this occurred where 
the electrical conductivity has gone upwards of 8,000 micros 
per centimeter, which is a fairly saline water, so that's two 
examples of where water has reinfiltrated and daylights some 
other place or goes down in the ground water system.
    There is an example with very good data from the 
Independence Mining Company's Jerrit Canyon Mine, a very large 
tailings impoundment, 2- or 300--300 acres I believe is the 
size, where there is a very good marker in chloride, where 
there is water that is flowing down there in an ephemeral 
stream coming from where the chloride concentration is above 
that tailings impoundment, or nearly 14 milligrams per liter, 
and at least two majors that have made with over 700 milligrams 
per liter, which chloride is not a problem, but it indicates 
there is water that is migrating from that tailings impoundment 
underground and daylighting into an ephemeral stream that does 
drain into the water. There is another example where the 
sulfates concentration of three existing mines are less than 30 
milligrams per liter, that in one drainage below waste rock, go 
over 1,400 milligrams per liter.
    Clearly, indications I think that all is not perfect. I 
mean, I think the Division and I--I don't want to get into an 
argument with the Division. I think the Division does a good 
job, and the BLM and Forest Service does a good job, but there 
are problems that occur.
    Nobody lets problems happen when you know a problem is 
going to happen. If you know the problem is going to happen--
the Division of Environmental Protection and the agencies are 
very good about just not permitting it, if they know it's going 
to happen, but it gets in the gray area where we think it won't 
or it might, or there is a remote chance that it will, and that 
is where the issue comes up when you expect it won't happen. 
And I was one who never expected the Big Springs--I thought 
that was a model mine, and it was a model mine, great 
reclamation, a good example. Bad things happen even when you 
have a well-thought-out plan. Those are the problems. And who's 
going to pay for those?
    That's the biggest issue, all those inadvertent problems 
that are created. Nobody thought, I think that the Ketch-up 
Flat or Paradise Peak mine site would be as much of a problem 
as it is today, but who's going to pay for that? And that's the 
real question, I think, on fees, and that's where I think there 
needs to be some funding established to address these 
inadvertent problems when mining companies go under and when 
problems arise in the years ahead.
    Mr. Gibbons. Mr. Drozdoff, of course, you have just heard 
Dr. Miller. I don't want to pit Dr. Miller against you----
    Mr. Miller.  I don't either.
    Mr. Gibbons. [continuing] but could you give me your 
interpretation and your impression of what the testimony was 
you just heard?
    Mr. Drozdoff. Yes, I can, and I appreciate your sensitivity 
to that, because it's not my desire either.
    I guess there is a number of ways I can go. 
Philosophically, I don't know that you can call something of an 
issue a problem. And I guess, you know, if the standard of 
environmental protection statutes, be they Federal or State, is 
that you're never going to have issues to deal with, I think 
that's an impossible standard.
    I mean the fact is clean water--every Federal environmental 
standard that is out there, there are certainly issues and 
sites that come along with them. And that's part of what we do. 
I think, I think for there to be an effective environmental 
protection statute or regulation is when you're confronted with 
these issues what do you do, are you equipped to deal with 
them? I think that's the seminal point.
    You know, I don't want to get into--I would be glad to 
though, if you would like summaries of any of these issues 
discussed today, I will be glad to update you on what the State 
of Nevada Division of Environmental Protection has done in 
regards to these issues.
    Mr. Gibbons. For the record, would you submit them? We 
don't need to go into them in detail at this point, but we 
would like to have this information for the Committee at a time 
so that we can look at it.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T8947.031
    
    [GRAPHIC] [TIFF OMITTED] T8947.032
    
    [GRAPHIC] [TIFF OMITTED] T8947.033
    
    [GRAPHIC] [TIFF OMITTED] T8947.034
    
    Mr. Gibbons. Let me ask one final question, Mr. Drozdoff, 
and I certainly appreciate the patience all three of you have 
given to us today.
    Earlier--and you heard me ask the Governor's office this 
question--the Department of Interior has maintained that their 
draft 3809 regulations were developed in cooperation with the 
states, as the State agency with primary responsibility for 
regulating surface mining, has the Department of Interior 
solicited a lot of input, some input from your agency in 
writing their draft 3809 regulations on surface mining?
    Mr. Drozdoff. I would say that we have not been given--our 
wishes have simply not been heard in this process. It's true 
that the BLM met formally three times with the states via the 
western governors, but the fact is that, as the Governor's 
representative stated, we believe that our input has largely 
been ignored.
    I can refer you to a letter that the western Governors 
wrote back early in the process, March of 1997, where we asked 
for five basic points: to focus on outcomes; to examine the 
existing Federal regulatory tools; to recognize differences in 
climate and geology; to avoid extreme and outdated examples; 
and focus on intra-agency cooperation.
    I will tell you, that in the draft that is out today, none 
of these five principles that we have asked for were dealt 
with. So I'd characterize the meetings as yes, they were 
perfunctory, we had them, but I candidly do not believe that 
our interests or inputs or comments have been heard.
    Mr. Gibbons. Do you have that letter in front of you?
    Mr. Drozdoff. Yes.
    Mr. Gibbons. Would you submit a copy of that for the 
record?
    Mr. Drozdoff. Sure.
    Mr. Gibbons. Also, if there is a summary of any attempted 
meetings would you also submit that for the record?
    Mr. Drozdoff. I will.
    Mr. Gibbons. That goes for any of the witnesses here. They 
are certainly free at any time to make supplemental inputs to 
this process.
    Gentlemen, I appreciate your involvement.
    Mr. Myers. Would you mind if I add something. You 
questioned a number that I provided, and I can tell you exactly 
where the $143 million came from before. It's based upon 
numbers that I didn't do the calculation of, but what it was 
is, if you figure about a $300 price for gold, an 8 percent 
smelter royalty, just 8 percent on $300, that's about what a 
little over 7 million ounces production, which is the 1995 
value, you come up close to $143 million. That's about where 
that number comes from, so I'd like to--I'd like to--I mean you 
have managed to question numbers rather than the ideas that I 
presented here, and that, you know, I am sorry but that was----
    Mr. Gibbons. Well, I want you to understand that 32 
percent, as you heard testified by the State Division of 
Mineral Resources, is the amount of gold that is produced off 
of public lands, so in that case, you're only going to have 32 
percent of your $143 million; and that's where I was trying to 
get at your testimony, that we are, as a State, or whatever, 
missing $143 million. It isn't questioning your integrity. It's 
questioning the documentation and the information that you have 
presented.
    Gentlemen, thank you very much. We appreciate it greatly.
    I'd like to call our fourth panel: Mr. Stan Dempsey, the 
Chairman of Royal Gold, Incorporated, Denver, Colorado; Ann 
Carpenter, Vice President, Exploration and Business 
Development, Nevada Colca Gold, Inc., Reno; Hugh Ingle, 
President, Nevada Miners and Prospectors Association, 
Yerington, Nevada; and Mr. Frank Lewis, F.W. Lewis, 
Incorporated, Reno, Nevada.
    Before we hear your testimony, we have a process of 
swearing you in. Would you all raise your right hands?
    [Witnesses sworn.]
    Mr. Gibbons. You may be seated.
    Mr. Dempsey, the floor is yours.

STATEMENT OF STAN DEMPSEY, CHAIRMAN, ROYAL GOLD, INCORPORATED, 
                        DENVER, COLORADO

    Mr. Dempsey. Thank you, Mr. Chairman. I am Stanley Dempsey, 
Chairman of Royal Gold, Inc. Royal is a gold royalty company. 
It's a public company and its shares are listed on the NASDAQ 
national market system and the Toronto stock exchange.
    Our market capitalization is around $75 million. We have 
3,000 shareholders in this country and some institutional 
shareholders in places like France and Switzerland. We spend 
about $3\1/2\ million per year on exploration. About half of 
that is in the U.S. and about a half of it is overseas, mostly 
in Europe.
    We're also investing additional funds in projects operated 
by other mining firms. Our typical project involves the search 
for a deposit large enough to interest a major mining company. 
We then typically farm out the project, keeping a royalty.
    As a royalty company, we think we do have a pretty good 
understanding of the economics of mineral royalties, and one 
thing that we're very careful about is to never burden a mine 
with so much royalty burden that we injure the ability of the 
mine to produce.
    It would be a hollow triumph to own a royalty on a mine 
that is not operating. We have no debt, and we will be 
profitable next year, but we must live off what we have and 
what we will have coming in in the coming year. I say that 
because the capital markets for exploration dollars are as flat 
as I've ever seen them in my career.
    Just to give you an anecdote: We recently listed on the 
stock exchange in Toronto, and our listing ceremony is Monday. 
I'll go back to Toronto tomorrow to participate in that. The 
investment bank that is our sponsor on the Toronto exchange, 
three weeks ago said, ``We don't think we really need a party 
as a part of the listing ceremony because nobody is interested 
in gold stocks.''
    Two weeks ago they called back and said, ``Gosh, the 
markets are heating up; things are looking better. Maybe we 
ought to have a party.'' Thursday we got another call. 
Subsequent to the sell-off of gold by the British, no party.
    So in the industry, we used to look at windows opening for 
financing, and of course Canada is one of the principal places 
that people in the smaller companies go to get capital, both 
Canada and Europe. We used to have windows that would go for 6 
or 8 weeks, and people had prospectuses all canned up and ready 
to go.
    Today the windows are maybe a week long or less, so it's 
absolutely true that the exploration industry's source of 
capital has dried up. How long that will be, we don't know, but 
it's a difficulty for the industry and a difficulty for the 
folks that make their living in exploration in Nevada.
    To get right to the point, since most of my testimony has 
been given already by my predecessors and certainly the State 
folks who have done a good job, too, and I endorse the many 
things that my mining colleagues have said in their testimony.
    With regards to the claim fees, the Federal claim fees, our 
company supports claim fees. We think it was a useful change in 
the mining law because it cleared up the pedis possessio 
problem the explorers had. It's gotten rid of a lot of fraud.
    In saying that, those claim fees do need to be reasonable 
because they are a major issue in deciding how long to keep a 
set of mining claims. Obviously there was a big drop in claims 
in 1993 or 1994. In looking at the data that the BLM has 
collected in the last few years, it looked like the claim 
maintenance fees had sort of come into equilibrium, some claims 
being added, some going out.
    I think that we may see another serious drop in the number 
of claims because explorers like our company are looking at the 
situation and we're changing our targets a little bit to 
emphasize grade; and looking for large, low grade heap leaches 
at the moment is not particularly attractive.
    We're shifting our strategy to much higher grade material. 
Those are extensive programs that require lots of claims to be 
effective, and we're actively cutting back.
    I attached to your copy of my written submission, some 
charts of some of our projects around the State. They include 
some projects we have dropped, like Ferber. That's a project 
that started for gold. We think there is probably a copper 
project there that may be economic. We've dropped it. We just 
can't stand the land holding costs. We're just not getting 
money into the ground.
    You can see in those charts how the claim fees do affect 
it. You can also see my chart for Milos in Greece where I have 
the whole Island of Milos tied up under a mining license from 
the State of Greece and the Nation of Greece.
    You can see the relative claim fee costs there. So it's my 
testimony Congressman, that claim fees are extremely important. 
They are probably a little high. It might even be a time for 
the government to think about at least a temporary lowering of 
those fees to recognize the situation that we're in. Thank you.
    Mr. Gibbons. Thank you, very much, Mr. Dempsey.
    [The prepared statement of Mr. Dempsey follows:]
    [GRAPHIC] [TIFF OMITTED] T8947.022
    
    [GRAPHIC] [TIFF OMITTED] T8947.023
    
    [GRAPHIC] [TIFF OMITTED] T8947.024
    
    [GRAPHIC] [TIFF OMITTED] T8947.025
    
    [GRAPHIC] [TIFF OMITTED] T8947.026
    
    [GRAPHIC] [TIFF OMITTED] T8947.027
    
    [GRAPHIC] [TIFF OMITTED] T8947.028
    
    [GRAPHIC] [TIFF OMITTED] T8947.029
    
    [GRAPHIC] [TIFF OMITTED] T8947.030
    
    Mr. Gibbons. Ms. Carpenter, it's your turn.

  STATEMENT OF ANN CARPENTER, VICE PRESIDENT, EXPLORATION AND 
  BUSINESS DEVELOPMENT, NEVADA COLCA GOLD, INC., RENO, NEVADA

    Ms. Carpenter. My name is Ann Carpenter I am founder and 
director of Nevada Colca Gold, Inc., a small Nevada corporation 
which focuses on doing exploration and mining hopefully in the 
U.S. and in Mexico. The group is made up of four individuals 
with international and domestic experience in exploration and 
in mining.
    In addition, I'm here representing the Women's Mining 
Coalition. I'm the president of the Women's Mining Coalition 
and this coalition is a grass roots organization supporting 
environmentally responsible mining.
    As I said, NCGI is currently focused here in the U.S. As 
well as Mexico, but we've found that we need to start shifting 
our attention only to Mexico. We're diminishing our attention 
here in the United States because of the prohibitive state of 
business here in the U.S., if you will.
    Existing and proposed Federal and State fees, cumulatively 
these equate to a significant financial burden in both today's 
low metal prices as well as in times of strong metal prices.
    As well, current political and regulatory environments in 
the U.S. create a negative environment within which to develop 
a mining exploration related business.
    Our corporation is just starting up. As we all know, in 
business everything is timing, and maybe the timing just isn't 
correct now, but we're finding it very, very difficult to do 
any business here in the U.S. especially with the proposed 
fees, and with the proposed changes to regulations.
    Doing business in Mexico especially, it's quite a bit more 
friendly, as was previously intimated by the panel that first 
spoke. I believe it was Al Coyner, who indicated that--well, 
no, actually it was Mr. Parratt whose testimony illustrated 
that the cost per acre of doing business here in the U.S. was 
significantly higher than anywhere overseas; and certainly we 
see that in Mexico and other Latin American countries. I've 
done quite a bit of exploration in Latin American based 
countries as well as in Africa, and we have seen quite a bit of 
difference in those cost per acre bases.
    I have to indicate, too, that in Mexico, I would not 
consider Mexico virgin ground. Mexico has at least a 500-, 450-
year mining and/or exploration history. The reason that we want 
to do business there is that two of my partners or associates 
have experience doing operations in Mexico, for some of which 
they have received accolades and environmental awards.
    Business in Mexico is very similar to--especially 
regulations, reclamation regulations--are very similar to the 
U.S. Mexico has adopted lot of the EPA standards, and 
implemented them. And the responsible mining companies doing 
business in Mexico have implemented them as per choice.
    Some of the negative regulatory political changes at hand 
are also reasons for pushing exploration of mining focuses for 
our company off shore. The Leshy mill site opinion; clean air 
and clean water proposals; TRI; certainly the 3809 proposed 
revisions; diesel particulate rule making; MSHA; land disposal 
issues and others, that's just a partial list.
    As was previously talked about--again, I think this was Al 
Coyner that said this--we need a partnership in assessing 
proposed Federal fees, just like we have the partnership that 
has been developed here in the State between the NDEP and the 
Federal agencies.
    In my previous capacity with another company I was the 
exploration manager and I was in charge of trying to put--
permitting a large 1.5 million ounce deposit very close to 
Reno, and I had to work closely with both the State of Nevada 
Department of Environmental Protection as well as the BLM in 
trying to push this through, and I can tell you that those two 
agencies, they had adopted a memorandum of our understanding, 
and they implemented it very easily, and they worked well 
together, and they have evolved into what I can see is a decent 
working relationship between the two agencies They complement 
each other; they add a check and balance.
    This was not an easy project. It had pit lake issues, it 
was close to a rural town. It had a lot of the significant 
issues that you see with some of the larger sized mines, and 
they were dealt with, the mitigation measures that were 
recommended were agreed to, and both agencies came together and 
worked well on it.
    NCGI did try to fund three properties here in this State, 
and we were not able to get funding, and as Mr. Dempsey has 
indicated, you generally go to Canada, Europe, Japan, anywhere, 
for the funding, and it's become very, very difficult to get 
funding in today's market because of the low gold prices.
    Our company has tried to focus on production-oriented 
projects as a start up and not just exploration based, and it's 
still very difficult to find the funding. And with that I will 
close.
    Mr. Gibbons. Thank you very much, Ms. Carpenter. I 
appreciate that.
    [The prepared statement of Ms. Carpenter follows:]

Statement of Ann S. Carpenter, Vice President, Exploration and Business 
           Development, Nevada Colca Gold, Inc., Reno, Nevada

    Some of the negative regulatory and political concerns 
include the actions listed below:

         The Leshy millsite opinion (politically driven 
        ``takings'') affecting: Battle Mountains's Crown Jewel project, 
        Noranda's Montnare project in Montana; and Kinross' Delamar 
        mine in Idaho.
         Clean Air and Clean Water proposed rules;
         TRI;
         3809 proposed revisions;
         Diesel Particulate rulemaking;
         MSHA;
         Land disposal issues
         Others . . .
    All of the above (as well as other proposed rulemakings not listed) 
complicate the ability to do business here in the U.S. All are costing 
the industry on both an individual and on a cumulative level. The 
expense and time it takes to review the individual and cumulative 
effects of all of these actions is adding up, creating an economically 
negative business environment here in the U.S. With all of the proposed 
rulemakings and changes to existing legislation and regulations, there 
have been few to no resulting benefits illustrated. These actions are 
tantamount to a politically motivated anti-Mining (anti-resource) 
environment.
    NCGI has tried to fund three properties here in the state of 
Nevada, without success. Funding has been virtually impossible to 
secure to support exploration and development activities. Some funding 
institutions and individuals perceive doing business in the U.S. as a 
negative, due to existing and proposed Federal and state fees, as well 
as to all of the current political and regulatory activities. NCGI has 
therefore focussed most of its activities in Mexico, where funding has 
been easier to secure to advance projects.
    Thank you for allowing me to testify.

    Mr. Gibbons. Mr. Ingle, the floor is yours.

     STATEMENT OF HUGH INGLE, PRESIDENT, NEVADA MINERS AND 
           PROSPECTORS ASSOCIATION, YERINGTON, NEVADA

    Mr. Ingle. Mr. Chairman, I'm President of the Nevada Miners 
and Prospectors Association, and that's NMPA, and we agree that 
mining is in a graveyard spiral; that the Federal Government is 
at the controls; the government has ceased to scan the 
instrument panel and is focused on only one instrument, gold.
    Because there are still profitable gold mines, it seems 
like the Federal Government has decided to load them up with 
laws, rules, regulations, fees, fines and so forth in an effort 
to find the breaking point without considering that these same 
costs will be applied to the mining of the less noble metals 
and minerals which helped us win World War II and the Korean 
War.
    These rules, regulations, and so forth may preclude the 
mining of these other mineral assets quickly enough in 
emergencies similar to the Korean War. During World War II, 
mining was considered so critical to the war effort that miners 
were exempt from the draft.
    Nevada has significant deposits of tungsten, mercury, 
manganese, copper, iron, molybdenum, lead, antimony, beryllium 
and vanadium, with some ores containing combinations of these 
minerals. At various times Nevada has led the Nation in the 
production of many of these minerals.
    Many ore deposits are small by today's standards, less than 
100 tons per day production, and require the expertise of the 
small operators to be successful, an expertise that is rapidly 
disappearing from the western U.S.
    In contrast to the attitude of the Federal Government, the 
State of Nevada seeks to encourage exploration for and the 
opening of new mines. Nevada encourages the small operators as 
well as the large. Small operators are aided by the various 
Nevada agencies. These agencies actually serve in large part as 
a staff for the small operators if called upon.
    They also enforce regulations. The State of Nevada 
recognizes the vast difference between small and large 
operations, and in the past has tried to provide for the 
survival of the small operator.
    The effect of Federal mining fees and proposed Federal 
royalties on State and local revenues in the mining industry in 
general is to discourage exploration for new domestic mines, 
change some of our reserves to waste, and shorten mine life.
    There are many rules and regulations which are enforced by 
the State of Nevada but mandated by the Federal Government. 
There are at least 33 possible State and Federal permits that 
may be required, not all of which are required for each and 
every mining and milling operation.
    In addition, some local regulations may need to be met. 
Suffice it to say that every rule or regulation passed that 
adds to the cost of mining or processing turns some ore into 
waste. An example of this would be the proposed Federal 
royalties which would add costs to and probably come out of 
revenues now reserved for States and local government entities.
    The Nevada Miners and Prospectors Association believes that 
this revenue would only be a pittance to the Federal 
Government, but could be the life blood of rural Nevada.
    The NMPA believes that the most damaging rule for the small 
operator and prospector was the imposition of the $100 per 
claim annual fee in 1993. Active mining claims held in Nevada 
dropped from 334,558 to 143,805. That differs a little bit with 
other figures that you got, but not much.
    Most of the claims were dropped by small operators and 
prospectors. Many of those claims held strategic metals and 
minerals that are temporarily not in demand. Now, instead of 
developing new mines and prospects as the original rules 
intended, those who can afford to pay the fee pay the fee, and 
no prospect or mine is developed.
    An additional fallout from moving people off claims either 
by occupancy rules or by fees is the cost for abandoned mine 
lands which the surviving claim owners now pay.
    One of our greatest concerns is the timely availability of 
a reliable domestic supply of minerals and metals in times of 
national emergency. Many ships that were sunk and crews lost 
transporting ores and minerals in early World War II should be 
ample warning for the future.
    Perhaps the Federal Government is living proof of Thomas 
Sowell's observation, ``What we learn from history is that we 
never learn anything from history.''
    Thank you.
    [The prepared statement of Mr. Ingle follows:]

     Statement of Hugh C. Ingle, Jr., President, Nevada Miners and 
                        Prospectors Association

    The Nevada Miners and Prospectors Association (NMPA) 
believes that Nevada mining is in a graveyard spiral and that 
the Federal Government is at the controls. The government has 
ceased to scan the instrument panel and has focused on only one 
instrument--gold. Because there are still some profitable gold 
mines, it seems that the Federal Government has decided to load 
them up with all the laws, rules, regulations, fees, fines, 
etc. in an effort to find the breaking point without 
considering that these same costs will be applied to the mining 
of the less noble metals and minerals which helped us win WWII 
and the Korean War. These rules, regulations, etc. may preclude 
the mining of these other mineral assets quickly enough in 
emergencies similar to the Korean War.
    From Nevada Bureau of Mines and Geology Special Publication 
15, I quote: ``Responding to the extraordinary demand for base 
metals, expansion of open pit mining during 1951 resulted in a 
sizable increase in Nevada copper production. However, the 
output of lead and zinc, reflecting the dearth of ore that 
could be developed rapidly and economically fell considerably 
below 1950.'' Nevada has significant deposits of tungsten, 
mercury, manganese, copper, iron, molybdenum, lead, zinc, 
silver, placer gold, antimony, beryllium, and vanadium, with 
some ores containing combinations of these minerals. During 
1955 there were 222 individual tungsten operations in Nevada. 
At various times, Nevada has led the nation in production of 
many of these minerals. Many ore deposits are small by today's 
standards (less than 100 tons/day production) and require the 
expertise of the small operators to be successful, an expertise 
that is rapidly disappearing from the western U.S.
    In contrast to the attitude of the Federal Government, the 
State of Nevada seeks to encourage the exploration for and the 
opening of new mines. Nevada encourages the small operators as 
well as the large. Small operators are aided by the Nevada 
Division of Minerals, the Nevada Division of Environmental 
Protection, the Nevada Mine Inspector, and the Nevada Division 
of Wildlife. These agencies actually serve in large part as a 
``Staff'' for the small operators if called upon. They also 
enforce the regulations. Unfortunately there is no allowance 
made for the vast differences in operations between the small 
operators and the large ones under the latest BLM 3809 
proposal. The Notice level in the old 3809 Regulations provided 
for this difference; the State of Nevada recognizes this 
difference and in the past has tried to provide for the 
survival of the small operator. Another quote from Special 
Publication 15 is significant at this point, ``Many factors 
including low gold prices, an increase of state and Federal 
regulations affecting mining, and increased uncertainty 
concerning long term access to Federal lands for mineral 
development contributed to the decline in gold exploration from 
1989 to 1992.''
    The ``Effect of Federal Mining Fees and Proposed Federal 
Royalties on State and Local Revenues and the Mining Industry'' 
in general is to discourage exploration for new domestic mines, 
encourage exploration for foreign mines, change some ``ore 
reserves'' to ``waste,'' shorten mine life, strip some rural 
communities and counties of their tax base, economy, and much 
of their employment, and destroy the livelihood of small mine 
operators, small businesses that provide mine services, local 
independent geologists and prospectors, and destroy a ``way of 
life'' for those hardy souls who value their independence more 
than life. There are many rules and regulations which are 
enforced by the State of Nevada but mandated by the Federal 
Government, so that the ``State and Federal Permits Required in 
Nevada before Mining or Milling Can Begin'' is a hybrid and the 
blame hard to place correctly. There are at least thirty-three 
possible State and Federal permits that may be required, not 
all of which are required for each and every mining and milling 
operation. In addition some local regulations may need to be 
met. Suffice it to say that every rule or regulation passed 
that adds to the costs of mining or processing turns some 
``ore'' into ``waste'' and denies the people of the United 
States the value and use of an asset. I don't mean to imply 
that we don't need regulations, not at all, but only that we be 
judicious, and make sure that what we lose is worth the price 
we pay. An example of this would be the proposed Federal 
Royalties which would add to costs and probably come out of 
revenues now reserved for the states and local government 
entities. The Nevada Miners and Prospectors Association 
believes that this revenue would only be a pittance to the 
Federal Government but could be the lifeblood of rural Nevada. 
By the nonimplementation of Alternative 3 in the newly proposed 
BLM 3809 regulations, enough money may be saved to avoid the 
need for a Federal royalty.
    The NMPA believes that the most damaging rule for the small 
operator and prospector was the imposition of the $100 per 
claim annual fee in 1993. Active mining claims held in Nevada 
dropped from 334,558 to 143,805. Most of the claims were 
dropped by small operators and prospectors. Many of those 
claims held strategic metals or minerals that were temporarily 
not in demand. There still remain 138,000 active mining claims 
in Nevada, with a total of 7,333 claimants. Over 65 percent of 
all claimants hold less than ten claims and an additional 14 
percent hold eleven to twenty claims. This group is the nucleus 
of the small operators. Now, instead of developing new mines 
and prospects as the original rules intended, those who can 
afford it pay the fee and no prospect or mine is developed. An 
additional fallout from moving people off the claims, either by 
occupancy rules or by fees, is the cost for abandoned Mine 
Lands, for which the surviving claim holders now pay fees.
    One of our greatest concerns is the timely availability of 
a reliable domestic supply of minerals and metals in a time of 
national emergency. The many ships that were sunk and crews 
lost transporting ores and minerals early in WWII should be 
ample warning for the future. Perhaps the Federal Government is 
living proof of Thomas Sowell's observation--``What we learn 
from history is that we never learn anything from history.''

    Mr. Gibbons. Thank you, Mr. Ingle, and may I say there has 
been a great deal of change in the philosophy of this country 
since World War II. When I graduated with my first degree in 
mining geology in 1967, my first job wasn't in the industry. It 
was in the military. The day I walked home with my diploma, 
handed it to my mother she handed me my draft notice. So we 
have changed philosophies in this country about the importance 
of mining.
    Mr. Ingle. I didn't get a chance to graduate before they 
got me.
    Mr. Gibbons. Mr. Lewis, please.

   STATEMENT OF F. W. LEWIS, F.W. LEWIS, INCORPORATED, RENO, 
                             NEVADA

    Mr. Lewis. Congressman Gibbons, thank you very much for 
listening to me. I'm trying to give some specific examples of 
what's happened to me since I started mining in 1953 in Ely, 
Nevada.
    My company owns the Lewis Mine in Humboldt County Nevada. 
It's leased to a small Canadian company that has an adjacent 
mine. They have been working there for the last 15 years, and 
at the peak of their operation, which was a couple of years 
ago, they had 212 employees.
    They shut down mining last year and they have 50 men 
working on the shut down. It's very interesting to note that 
this year, they have purchased some mining properties and joint 
ventured with some companies working in South America.
    We're sending the jobs down there from here as we close 
down our mines due to I think very onerous and unnecessary 
regulations and fees. I had a lot of mining claims that I spent 
my life developing in different areas of Nevada.
    I made quite a little bit of money mining, and I've spent 
it all mining, too, and that has been a problem with my wife at 
times, but she's still with me, so she put up with me for a 
long time.
    I dropped 75 percent of the mining claims in whole 
districts that I had a lot of interest in, and I spent a lot of 
money on over the years trying to find ore, but if you give the 
money to the Federal Government, you can't put it in the 
ground, so those areas are abandoned of interest unless 
somebody else has them.
    I had a small operating mine in Churchill County. I bought 
that property first in 1962. I am happy to see one of your 
aides, John Rishel, sitting at your right hand, who worked on 
that property. I met him, he was sitting there in 1975, I had 
it leased to a small Canadian company, and they were trying to 
drill for some ore. I drilled later and found additional ore.
    I drilled a 1,000-foot decline there and put in many drill 
holes trying to set up a small mine. I had two working miners 
and a supervisor working for me in my little two-bit company. I 
also had, at that time, after these previous rules and 
regulations were put into effect, I had to have one man working 
on the permitting and the evaluation and all the things that 
the environmental people have put into the law.
    Well, one man doesn't sound like much, does it? It was 25 
percent of my payroll. That's a pretty big thing, and that's 
the reason that there are very few, if any, small miners 
working here in Nevada today.
    Hugh Ingle is still struggling; I gave up. I shut down the 
operation and spent $1 million of my own savings when I did so. 
Because of the increased fees, the $15,000 I was paying on the 
unpatented claims surrounding my mining claims, and the onerous 
regulations, I couldn't make any money. I couldn't stand it, so 
there is a mine that won't be mined unless something happens.
    It's interesting about the talk about the price of gold. 
The first mine I worked in was in Ely, Nevada. I worked with my 
father-in-law. It was a hand pick and shovel job. Gold was $35 
an ounce, silver was 90 cents. So I haven't seen it all, but I 
have seen a lot. I have seen it go up and I have seen it go 
down.
    And you have fluctuations in the mining industry, and 
that's the problem with the Federal laws, there is no 
flexibility. It used to be you could work on a project, spend 
your money, and in hard times, sometimes you wouldn't have any 
money to spend other than just assessment work, but you could 
hang on. There is a longevity to it, and in some places I've 
worked over 40 years trying to develop a mine. Some of them 
have been leased out at times during good times, and then you 
get them back.
    Another comment that you have talked about extensively 
that's not in my notes, it's about these various kinds of 
royalties. The mine finder, which is sometimes people like me, 
the land owner, which is people sometimes like me, when we 
lease a mine, the operator gets to deduct some of his expenses.
    It might be of interest to you to know that on every nickel 
I get by way of a royalty on the mine, I pay a gross tax and 
there is no compensation or deduction for any of the 
exploration costs or expenses that I had and the ongoing 
monitoring fees, and so, when the Federal Government puts an 8 
percent net smelter, that means there will be 13 percent coming 
from the fellow that had to go find it, if he gets anything, 
because he probably won't get anything because the Federal 
Government will be getting the royalty he might have gotten, 
and that's a very great discouragement to exploration people.
    I will give you another specific example. My son went to 
the Mackay School of Mines; he got a degree in metallurgical 
engineering, and he opened up an assay lab in Reno, and I 
helped finance him. And he had a very nice business going, had 
22 employees and made a profit every year for a long time.
    He now has 12 employees and the reason is because the 
companies are going elsewhere where they are more friendly 
received. And he's going to have to go there, too, if the 
mining exploration stops in Nevada.
    I see I have a yellow light, so thank you very much.
    [The prepared statement of Mr. Lewis follows:]

       Statement of F. W. Lewis, F. W. Lewis, Inc., Reno, Nevada

    Mr. Chairman Congressman Gibbons and Members of the 
Subcommittee:
    I am writing my comments about the annual claim fees, 
proposed royalties to be collected from BLM and Forest Service 
lands, other laws and regulations, and the 3809 revisions which 
are being placed on mining in the United States.
    My company owns the Lewis Mine in Humboldt County Nevada. 
It is leased to a small Canadian company that has produced on 
it periodically for the last fifteen years. The payments from 
that operation have been of major impact to keep my own company 
going. They had two hundred eleven employees at one time. They 
ceased production last year and there are about fifty employees 
left slowly shutting down the operation. It might be of 
interest to this Committee while they are shutting down here 
they have acquired several South American projects which they 
are opening up. The jobs here are being transferred there to 
more friendly countries that want to expand the development of 
their natural resources.
    I had a small operating mine in Mineral County, Nevada. I 
had two miners working, and a working supervisor. I had to hire 
one other professional to manage the environmental regulations. 
He produced absolutely nothing, and therefor the operation lost 
money. I had to shut the mine down, tear out all of the 
equipment, drop a hundred and fifty unpatented claims and give 
up. I had spent over a million dollars on the operation of my 
own savings. I had been working on this property since 1962 
forced out of business by the added costs of the Federal 
Government rules regulations and fees.
    My son Mark went to School at the Mackay School of Mines 
earning a degree in Metallurgical Engineering. Fifteen years 
ago he opened an assay laboratory, and I financed him. Last 
year the operation was down fifty percent in gross sales with 
the exodus of mining to foreign soils. No one in the Federal 
Government seems to care what is happening in the Industry and 
no one is trying to do anything about it, except perhaps some 
few in the Congress. On the other hand the Bureaucrats have 
done everything in their power to make matters worse. Trying to 
figure out why or who is trying to kill the Mining Industry 
would be a good exercise of this Committee. What's the sense of 
it? My son's employees have dropped from twenty-two to twelve. 
If exploration ceases he will have to close, perhaps moving to 
South America if he wants to continue his profession.
    Forty-five years ago I moved to Ely Nevada. I worked for a 
contractor who worked for the Consolidated Copper Mines 
Company, which was later bought out by Kennecott.
    I met my wife's father and we went into the mining business 
in Ely shipping gold and silver flux ore to Kennecott. This was 
pick and shovel, hand tramming, and a 5-ton old 1939 truck to 
haul our ore off the hill. I did not even have a thermos 
bottle. My wife, Sharon used to walk the mile up the side of 
the mountain at noon in the winter time to bring us a quart 
mason jar full of hot coffee. One time I figured it out and we 
were making a little over five dollars an hour, after paying 
our expenses.
    Those were of course the ``good old days.'' Those were the 
days when the American government believed in private property, 
instead of so much in Federal property. The government's job 
was to protect our shores and our property for the people. Now 
they perceive their job is to protect the land from the people.
    I remember then how helpful the Federal Government used to 
try to be to encourage mining and private investment. They had 
Federal 0.M.E. loans, which they offered prospectors and small 
miners to encourage them to drill and explore. Although I never 
obtained any such loan I know several people who did, and mines 
were developed because of it.
    The United States Bureau of Mines itself would go 
prospecting in promising mining districts even drilling on 
lands that were owned by private individuals. Such holes were 
drilled on some patented claims, which my company owns in 
Silverton, Colorado.
    Some of this encouragement of the mineral production was 
because a certain Senator or Congressman from Oklahoma mapped 
where all the ships were sunk during the Second World War 
trying to bring essential raw minerals to our war industries. 
If my memory serves me I think his name might have been 
something like Ed Edmonds (?). There were thousands of ships 
sunk, and thousands of Americans killed because many of our 
mines had shut down due to the depression.
    Batan fell because our soldiers were out of materials to 
fight with, not because a superior force beat our men. The 
Federal Government itself was negligent in failing to supply 
sufficient ammunition and other supplies so our men could 
continue fighting. I was told that much of the ammunition they 
did have was surplus left over from World War One. The Federal 
Government knew War was likely, but they did little to see that 
our overseas bases were properly supplied with what they needed 
to fight with.
    A person even now can purchase a private parcel of land in 
Nevada for as little as $50 per acre, some for a $100 and some 
for $200. Some prime property, of course, is worth more.
    The hundred dollar annual fee, and threat of the existing 
Federal regulations for rehabilitation of lands used in mining 
now require one to spend tens of thousands of dollars, hundreds 
of thousands of dollars, occasionally even a million dollars 
per acre rehabilitating land. Rehabilitation means covering 
over a valuable future mining site when the country may some 
day need the low-grade minerals left in the ground. The best 
value to our nation for these lands should be left exposed so 
we can enjoy those beautiful veins, dips, angles, spurs, 
beddings, rocks and minerals. Then present day prospectors can 
see, explore, and enjoy them, and future generations can start 
there when they need more of the minerals.
    What an economic wasteful attitude the Federal Government 
has adopted. They have decided what is the best way for them, 
not us to enjoy the Federal lands.
    Somehow or other the Federal Government with the 
environmental community has decided that the only thing that 
has beauty is the top of the last sagebrush leaf which has 
fallen off the bush.
    What about the Grand Canyon? It is but a big beautiful hole 
in the ground. If it were man made the Federal Government and 
environmentalist would want to cover it up spending billions on 
the non-productivity activity, which removes capital from our 
society that could produce factories, jobs, and wealth for our 
nation.
    The Federal Government used to think private property was 
one of the sources of wealth and happiness of our nation's 
citizens. At some point in time many in the Federal bureaucracy 
and environmental organizations have become convinced that the 
Federal Government should own and control property.
    The big change started I noticed around 1955.
    I was drafted into the army in 1955. I remember sitting on 
the edge of my cot in Fort Ord California basic training camp 
sending twenty five of the ninety dollars per month I was 
earning to Jon Collins, my then attorney, trying to fight the 
Forest Service who was condemning the surface rights to my 
mining claims. They had passed the Surface Management Act.
    Ever since then it has been a fight for survival against 
the Federal Government and their overstaffed non-producing 
employees.
    These hundred dollar annual fees, regulations, new 3809 
regulations are just another impediment to explore and mine for 
those of us who make our living, and who enjoy the mining 
industry.
    The rules extend permitting time, require the BLM to expand 
its presence by hiring many new non-productive people, cost a 
lot of money-wasted, for no economic benefit to our society. 
All together the anti mining acts will also cost the State of 
Nevada good paying jobs and loose the State and counties tax 
money, and net proceeds of mine taxes they now receive from 
mines.
    I have slowly been going out of the Mining Business. With 
the hundred dollar claim fees I dropped over three-quarters of 
my unpatented claims. Every new law and every new fee will 
force more of us to stop trying to find minerals. But, then 
isn't that the purpose?
    I have stopped staking claims.
    I have stopped my drilling programs because I now have to 
give the Federal Government annual fees using the money I would 
normally spend on exploration to pay them rather than to try to 
find something. Then too the new permitting requirements 
already on the books are so time consuming and so discouraging, 
that it no longer seems a wise investment.
    The unfriendly Government has convinced me that I should 
not spend my savings on mining any more as I have done for the 
last forty-five years.
    It is not just the laws they have already passed but they 
have demonstrated that they are going to continue passing new 
regulations, charge more for everything, hire more government 
employees, and have ever-stricter regulations. Some mines have 
spent as many as fifteen years in the permitting process trying 
to open up.
    In my view it is now impossible for a small individual to 
mine anything. A few may still be trying, but not many. An 
unfriendly Government has killed us dead.
    It is still possible for an individual to prospect, and try 
to find a financed company to deal his properties to. More fees 
and more regulations, and especially if Royalties are assessed 
by the Federal Government will kill that window, because the 
Federal Government will get the share the person doing the hard 
work and making the investment might have gotten.
    Every year we are threatened with more and ever more 
regulations not passed by Congress but by the Interior 
Department and Bureau of Land Management. The newest set of 
regulations are known as the 3809 Revisions. They will delay 
all forms of exploration, and mining, and make costs greater. 
They are unneeded, and by me unwanted and do not help me or any 
of my friends, but instead harm us.
    If the new 3809 Regulations, Alternative Three, being 
proposed by the BLM are passed rest assured more companies will 
go into bankruptcy, and nowhere in their assessment have they 
accounted for that.
    Many mines in Nevada are now loosing money. The Robinson 
mine in Ely will have to shut down and Ely will once again be 
shrinking in population. Several Mines are now in bankruptcy 
partially due to Federal Government Regulations and of course 
because of low metal prices. Sometimes I wonder if anyone left 
alive in Washington DC has a lick of economic common sense. 
Does no one care? We offer money to Honduras because of a 
devastating storm. We send food to North Korea because their 
people are hungry. NOT ONE RED CENT NOR HELP OF ANY KIND IS 
BEING OFFERED TO THE PEOPLE IN ELY TO KEEP THEIR ONE MAIN 
INDUSTRY GOING FOR THE SAKE OF EVERY ONE THERE.
    Chairman Gibbons, Members of the Subcommittee I thank you 
very much for allowing me this opportunity to express myself

    Mr. Gibbons. It's proof that the system works. Thank all of 
you for your insightful and very helpful testimony.
    Let me jump back to Mr. Ingle. You indicated that on 
average, it takes 33 permits to open a mine.
    Mr. Ingle. Yes.
    Mr. Gibbons. Do you have any rough estimate as to how long 
that process is from the time you begin working on the 
permitting process until the end of the permitting process 
enabling you to stick the first shovel in the ground to recover 
your investment?
    Mr. Ingle. It's pretty hard to say because you have a 
public comment period on these permits, and sometimes there is 
no opposition and sometimes there is a lot of opposition. So it 
can go from--I would think that the minimum for a small 
operation would be one year, but some things take 4 or 5 years.
    So I can't give you a good figure. I think some of the 
bigger companies have experienced long, drawn out affairs, and 
so they would be better able to tell you what we do, or have 
done is, go to the Division of Environmental Protection; the 
Division of Minerals, and the Division of Wildlife.
    The State agencies and we have tried to work with them, and 
that has been a kind of a fast track with us. We are pretty 
small, and we try to make as little noise as possible, as 
little dust as possible, and so we're able to avoid a lot of 
problems that the big companies have.
    Mr. Gibbons. Mr. Dempsey, you talked about shifting your 
focus on some of your ongoing mines away from average ore grade 
to shifting it to high grade, in other words, to make the 
payment on that capital expense. Will you ever be able to go 
back and recover the low grade that's left in there without the 
presence of some of those high grade pockets? Is there some 
economic consideration to doing that when you do it?
    Mr. Dempsey. I'm really talking about our exploration 
targets, and the type of deposits we're looking at. I'm not 
talking about existing mines. With the price decrease, when you 
run numbers for a model or hypothetical mine based on the type 
of deposits you might find, when you project that you couldn't 
make money if you found it, it's not a very good investment.
    We look for the same types of things that the majors do, 
and they are changing their focus, too. And all of us are 
looking for higher grade material, hopefully at the surface, 
not necessarily at the surface, but with this type of price 
environment, a lot of the things have been the stock and trade 
of Nevada, the smaller deposits are not going to be--people 
aren't going to look for them.
    Mr. Gibbons. Mr. Dempsey, let me ask a question I think a 
lot of the people in this audience are curious about. We hear a 
lot of times about companies going overseas, going to Mexico.
    Do you use the same method of operation, environmental 
concerns and considerations in those countries that you use in 
this country?
    Mr. Dempsey. Absolutely. Everybody in this industry has 
gotten the word, that health, safety and environment are major 
issues, and all of us are adhering to the highest possible 
standards.
    Community acceptance is our biggest issue. We're having a 
hard time getting permitted anywhere in the world, and the idea 
of a pollution haven is nuts. We can't finance a mine overseas 
if we don't adhere to the highest standards. The EBRD, the 
World Bank, IMF group, all require that we submit impact 
statements there, too. So that's one hoary canard that ought to 
be put aside.
    Mr. Gibbons. Ms. Carpenter, I was interested to hear you 
testify as the President of the Nevada Women in Mining 
Coalition. Could you tell us a little about what the purpose of 
that coalition is and maybe help us understand a little more 
about what it does.
    Ms. Carpenter. Well, the Women's Mining Coalition was 
developed back in 1994 when a couple of key women that are 
still involved in the organization thought that they should 
take a great idea to the CEOs, that it would be a great idea to 
go back to Washington and educate the Congressmen, Senators and 
Representatives, on what the mining industry is and put a 
different face on it in the sense of women as opposed to men or 
just the CEOs going back east and delivering a status quo, if 
you will.
    What it did is it humanized it--not to say that CEOs are 
inhuman, but it provided a different face for people to be able 
to relate to the industry, and it showed that women in the 
industry span many jobs, from mining engineers to environmental 
engineers to geologists to mine geologists, to explorationists, 
to environmental coordinators, governmental affairs, the whole 
gamut that the men have jobs in, but it just provided a 
different relationship for Congress to relate to.
    Part of the objective of our coalition is to educate 
congressional folks on what the industry is, the fact that we 
are an environmentally conscious industry. We're evolving with 
the needs, as we discover more and more issues that come up.
    We try to be as interactive as possible and meet the 
objectives that are raised.
    Mr. Gibbons. Do you have any specific examples of women or 
people in your coalition that, over the last year, have lost a 
job?
    Ms. Carpenter. Oh, yes.
    Mr. Gibbons. Put a face on that for us, would you, and what 
that means to them, what it means to Nevada.
    Ms. Carpenter. It's not just Nevada. There is a woman that 
I was doing some work with up in Montana. There was a small 
mine there we were trying to advance forward and couldn't get 
funding on it because, gosh, it's Montana, and they just 
outlawed cyanide, and shut the door on a lot of different 
issues, and it's been completely politicized up there.
    And here is a woman in Montana who used to drive a hog 
pack, and she's a single mom raising three kids--and there are 
two issues here I might try to a address--but she's trying to 
raise a family, and she's in a pretty low rent area, beautiful, 
beautiful place to live and the cost of living is not all that 
high, but she can't raise a family.
    She's lost her job and she's had to go turn to waitressing 
to try to support a family, and she can't do it.
    This addresses the recreational question I think you had 
earlier, where we can replace mining or other technology, say, 
with the recreational industry, and she was one testament that 
that just doesn't work. She said, ``I don't know about you, but 
I don't want to make beds for living and I don't want to make 
minimum wage. I can't raise a family on it.''
    So she took a job down at Magnum BHP's operation. It could 
have been San Miguel or one of the operations down in Arizona, 
but she had to leave her home State in order to do that, and 
that's just one example. There are many.
    Mr. Gibbons. You have been involved in the permitting 
process of mines before. Maybe the question I should ask Mr. 
Ingle is, is there an average time frame in there? But more 
importantly, is there a cost associated with this permitting?
    Ms. Carpenter. Yes, time is money. The longer it takes, the 
more money it costs. The bigger the project, the more money it 
costs because there are a lot more environmental issues that 
need to be addressed and greater concerns that need to be 
addressed, and that costs money.
    And the money that it takes for baseline studies to--in my 
case we had a pretty advanced pit lake study that had to be 
done which included pit computer modeling and water quality and 
quantity issues, and that actually took the longest time. We 
realized the greatest delay with that. But there were some big 
issues that were raised and needed to be addressed, and 
mitigation standards that needed to be drafted up, and then 
implemented within the EIS process.
    It can be anywhere from a year and a half, now--it used to 
be a year. If you had a decent sized project and not too many 
issues, if you'd done a baseline study and you realized you 
don't have pit lake issues and you don't have any threatened 
and endangered species issues, then maybe you could get it done 
in a year.
    I think it would take that time now. It's at least a year 
and a half, and I'd agree with Mr. Ingle here that it would 
probably be upwards of 5 years for some of the larger 
operations, and I was surprised to hear him say that it's at 
least a year for him on a small mine aspect, but even the EAs 
that people are having to do now, Environmental Assessments, 
versus an Environmental Impact Statement, they are so broad and 
complete evaluations that they cost almost--they're pretty 
comparable in time and cost from an industry standpoint, the 
bearer of the cost, it takes about the same time and money, and 
are you better off doing the EIS in that case.
    Mr. Gibbons. Thank you.
    Mr. Lewis, what, in your professional opinion, can a miner 
do to reduce the cost of producing a metal?
    Mr. Lewis. What many companies are trying to do now is to 
leave the country.
    Mr. Gibbons. That's a bit draconian.
    Mr. Lewis. But what many people would like to see happen in 
Washington, as I might be so bold as to suggest----
    Mr. Gibbons. Could you pull the mike closer so everyone can 
hear? Thank you.
    Mr. Lewis. What we would like to see is Congress take back 
the prerogative of passing the laws. We would like to see the 
people that we talk with and that we can deal with and can 
associate with be responsible for the laws that are passed.
    To have a Federal bureaucracy that we have never even seen 
any of the people that are proposing these laws, that we have 
no impact on whatsoever when we go to their meetings and we 
talk, talk to Mr. Tom Leshendock, and try to make a point with 
him, and he's a wonderful fellow, and a good man to talk to, 
but he doesn't pass any rules.
    He has--I wish he did have a lot of influence, but I don't 
think they listen to him either. I mean they're passing laws 
that have nothing to do with the reality of here, and that's 
really hurt us, hurt us bad, killed us dead in many instances.
    Mr. Gibbons. Do you have any specifics, other than the fact 
that you go to a heap leaching? What I'm trying to get at is 
maybe some specifics other than perhaps reducing the cost of 
the delays as Ms. Carpenter has talked about in terms of the 
permitting process.
    Is there anything you can do to reduce the costs? I mean 
you have wages, you have materials that you purchased, you have 
capital costs, what can you do today? Let's say tomorrow it's 
going to be less.
    Mr. Lewis. I think the Crown Jewel mine has been 15 years 
in the permitting process. You could pass a law that the BLM 
and the Forest Service couldn't take longer than a year. That 
would be a reasonable thing that would reduce our costs some.
    They are now getting ready to require very onerous and 
difficult bonding for smaller companies on less than a 5-acre 
parcel. We used to have a 5-acre rule that you could go in and 
get a fairly quick permit to go in there and drill your holes, 
but if you have to go through an extensive and expensive time-
consuming evaluation, environmental evaluation, that would be a 
way to, by keeping those laws out, that would be a way to 
reduce your costs.
    I've pretty well given up. I hate to admit this, but I've 
pretty well given in up trying to drill or explore on 
unpatented claims.
    I happen to be fortunate in having some patented mines that 
I bought forty years ago, so I am still able to operate under 
the State regulations, and if you stay under 5 acres 
disturbance, why, you can get an exploration program through. 
But they are making it so difficult that's not worth the risk 
of the investment here.
    And another thing that is very, very troublesome is that 
they don't just pass a set of laws and then that's it. We have 
the 1872 Mining Law up until 1955. That's when they really 
started changing it. They changed it then and I can remember 
sitting on my bunk at Fort Ord, California. I had been drafted 
into the Army. I was getting $90 a month and I was sending $25 
a month of that to my attorney in Ely trying to protect my 
mining claims from the Forest Service. And that was a difficult 
thing to do. I was very fortunate that I wrote a letter to our 
then Congressman, and he helped me. And he had to look at the 
mineralization and they let me alone then for a while until 
they started passing some more laws.
    And even with the laws that have just recently been passed, 
we have a whole new group of laws coming in, not from Congress, 
but from the Federal agencies.
    That's a very discouraging thing, because no matter what 
law they pass today, you know they're going to want a whole 
bunch more tomorrow.
    Mr. Ingle. Might I add something to that?
    Mr. Gibbons. Yes, Mr. Ingle.
    Mr. Ingle. On these other minerals, what does Congress 
propose to do, or do they propose to do anything to open those 
minerals up economically, because they are a security need for 
this country?
    We pass these things off as insignificant, but those 
minerals, for instance, there were 222 tungsten mines operating 
in 1950 or 1952, and there is no way of shouldering the cost 
with these other minerals. We have gold and it's kind of on a 
pedestal by itself. But these other minerals, we may find out 
are essential some day, and we wouldn't have made any 
preparations, any more than we did before World War II or 
before the Korean War or any other war. We never get ready.
    And I would like to know if there is any way to do that, to 
make some kind of a law that will require the government to 
take notice of these things, and during the war, we had DMEA 
and we had all sorts of subsidies to produce these minerals. 
Then we have the strategic stockpile, and we sold that off even 
when the market was down for mercury and silver and maybe some 
other minerals, and we closed other domestic mines. And I don't 
see any logic to it, and maybe I'm stupid or something, but I 
just can't see it.
    Mr. Gibbons. Let me say that I appreciate your insight to 
all this, and it is an issue that I haven't an answer for you 
at this time, but it's an issue that I will take back with me. 
I will do some research on it, and I will get back to you 
personally as to your question on this issue, because I think 
it's very important that we look down the road in a projection 
of what we're going to need and how much will we need it, and 
where is it and how long will it take us to get there.
    Because we don't have a strategy to get there, we will do 
what you started your comments off with: We will fail to learn 
from history what history has taught us.
    Mr. Lewis?
    Mr. Lewis. Along that line, I'd like to make the note that 
Bataan fell because the soldiers were out of the materials to 
fight with, not because of superior forces forcing our men out 
of their bunkers.
    The Federal Government itself was negligent in failing to 
supply ammunition and other supplies so our men could continue 
fighting. Had they had sufficient supplies, they would probably 
still be fighting today.
    I was told that much of the ammunition on the Bataan 
Peninsula was surplus ammunition that was left over from World 
War I. And our government knew war was coming, but they didn't 
do anything about it.
    Mr. Gibbons. We have the very same issue facing this 
country today with regard to our military: The overextension of 
our military with operations that have seriously depleted the 
munitions stores, the munitions reserves, depleted our ability 
to repair engines because we can't get the parts and we can't 
get the materials to repair these needed items, and yet we keep 
sending our young men and women over there to do a job, and 
we're asking them to do a mission that they can't physically do 
because we haven't given them the resources to do the mission 
with.
    And so the questions you have raised and the issues you 
have raised are the exact reason why this hearing is necessary 
and why it is so very important to hear the testimony and to 
take this information back and give it to the Department of 
Interior when it comes to their decision about this 3809 
proposed regulatory change.
    Mr. Ingle. I was one, among one of the first Navy air 
squadrons called back to duty for the Korean War, and in the 
first month, we had one old airplane and no tools to keep it 
flying. It took us 6 months to get one air group supplied, and 
when we went to Korea, paint was peeling off the ship, we 
couldn't get many of the aircraft off the deck.
    The pilots went into the ocean right in front of the 
carrier. Bombs went off under our own aircraft, and then they 
didn't go off when we wanted them to go on the enemy. I had 
13--or 11 guns, .50-caliber guns between two airplanes, and 
only one of them fired.
    And I had another time when I had six .50-calibers and this 
anti-aircraft battery wasn't firing, but when I fired, they 
started firing, and I had one gun. And these things are 
rockets, we couldn't tell where they were going. It was pretty 
rough. And I don't want to see that again--I don't want my--my 
son's too old now, maybe my grandson will have to go, but I 
think he deserves better than that.
    Mr. Gibbons. Well, ladies and gentlemen, this is exactly 
the purpose of this hearing, and this is why it's so critically 
important to understand the significance of mining not just to 
Nevada, but to this Nation, to the national security.
    I did want to give some time for those people that haven't 
been on one of these panels to get a chance to have the 
microphone and talk about their issues, but I do want to, 
again, thank each of you for your contribution here today.
    Thank you for your time and your patience, and any point 
that you wish to submit additional information, please feel 
free to submit it to the Committee. We will be happy to 
assimilate it into the hearing today.
    [The information follows:]
    Mr. Gibbons. With that I want to thank all of you for your 
patience today. Thank you. Ladies and gentlemen, before we call 
on those individuals who want to come down and have an 
opportunity to speak, I would ask that you come to the desk 
over here to see Daniel, Daniel Grimmer with our office, if 
you'd raise your hand.
    We need to have your name and address for the record so 
that we can respond. If you will just give it to him, and then 
one at a time or two at a time, remember, we need to keep this 
within a reasonable length of time or we will be here all 
night. Everything that needs to be said will have been said by 
everybody by the time we're finished here, so I appreciate 
that.
    And also Madam Reporter, for the record, Senator Reid and 
Senator Bryan have submitted statements, and we'll incorporate 
their statements at the beginning of the record for purposes of 
our hearing today.
    What we will do to in order to maximize the time here, 
we'll have to set some ground rules, because we only have the 
room until 5 p.m.
    What I'd like to do is, if you can, use the mike here. 
We'll put one person there and one or two here, and after each 
person has testified--and please try to limit it to one or two 
minutes. I know that sounds like a short time, but again, it 
ought to give you an idea to be very succinct and try to wrap 
things up and put your statement into the record, so just pick 
a microphone, and when you start, give your name and address 
for the record, and we'll go from there.
    Gentlemen, you're the first up, so please.
    Mr. French. My name is Gregory French, Reno.
    I want to talk about the effect of Federal fees and State 
taxes on the mining industry as well is the rural economies.
    Many here have already talked on the effects of the fees on 
the mining industry. I am going talk a little bit on the effect 
it has on small towns. We need to know the importance of--I'm 
sorry--we all know the importance of the net proceeds tax on 
rural counties and school districts. Senator Rhoads gave a good 
example of that.
    In times of a mineral price depression, the bottom has 
dropped out for the mining companies right now, and the taxes 
they produce.
    While the added fees that are going in, that are proposed, 
the added regulations are just the piece de resistance for 
Interior Secretary Babbitt. His war cry has been modified after 
the countercultural philosopher Cheech Marin: We don't need no 
stinking mines.
    Rural school districts are seeing the pinch now. Many 
require State funds, instead of--require more State funds and 
less if the trend continues, less State money for new 
initiatives, and more money will be taken from the general fund 
and given to the school districts. In many cases, reduced money 
will require school districts to cut teachers and become non-
compliant with State standards.
    In addition, additional royalties and fees will make mining 
unprofitable and therefore reduce taxes and tax structures for 
the counties and small communities. The intense lobbying 
against the rural counties for higher Federal taxes, fees, 
duplicate regulations by the environmental groups like the no 
mineral policy center are all targeted toward rural counties in 
effect.
    These environmental corporations do not care about the 
people in rural Nevada. As Dr. Myers said, we're just a small 
sliver. They are pushing their agendas to stop mining, lock up 
Federal ground from the public, and raise more money for their 
funds instead of caring for the rural counties. Thank you very 
much.
    Mr. Gibbons. Thank you. Very timely. Thank you very much.
    Gentlemen, you may choose which one goes first.
    Please identify yourself. The floor is yours.
    Mr. McLane. My name is David McLane, and I am what the 
State of Nevada terms a displaced miner. I'm here today to put 
a face on what happens when an industry reacts to external 
pressures to lower their cost of doing business.
    Twenty years ago, I graduated with a bachelor's degree in 
geology. Twice in the last 18 months, I have been laid off from 
companies that have been forced to cut their costs in the face 
of an ever lowering price in the commodity they produce.
    I was unemployed for five months after the first layoff. 
For the last nine years I have lived in Winnemucca. Prior to 
1998, Winnemucca's growth rate was approximately 15 percent and 
we were truly a boom town. In 1996 we made it on the list as 
the ninth best small town to live in in America.
    Today Winnemucca is a much different place to live. In a 
community whose population totals approximately 12,000, there 
are over 160 homes on the market. Many of them have been for 
sale for over a year. Our unemployment rate since December of 
1997 has almost doubled, and our community today is desperately 
trying to reinvent itself in regards to economic 
diversification.
    I myself have been forced to leave behind a career that I 
truly love, and at age 43 I'm trying to embark on a totally new 
one. Yesterday, the stock market dropped over 200 points in 
reaction to the CPI going up the highest it's been in the last 
9 years. The price of gold dropped almost $2. Clearly the risk 
of inflation and increased interest rates is not affecting our 
commodity.
    I ask you to please consider the effect that additional 
fees and royalties will have on the thousands of people who 
live in northern Nevada whose lives are so closely linked to 
the health of the gold mining industry.
    Thank you Congressman Gibbons, for holding this hearing and 
giving me the opportunity to talk.
    Mr. Gibbons. Thank you very much.
    Mr. Wilsey. Good afternoon, Congressman Gibbons. My name is 
Cy Wilsey. I am the U.S. Land Manager for Homestake Mining 
Company. I am also the Public Lands Committee Chairman for the 
Nevada Mining Association.
    I'd like to make just a couple of quick points. As you 
heard earlier, there are plus or minus 150,000 active mining 
claims in Nevada today. As Mr. Parratt spoke, that takes 
approximately $15 million per year out of the exploration 
budget for the companies that are active here.
    To put that in a little clearer perspective, that would be 
probably about 300 geologists per year for the sixth month 
field season. It could be equated to 1,500 to 2,000 drill 
holes, and for the benefit of Dr. Miller and Dr. Myers, that 
doesn't include reclamation.
    To the 8 percent gross royalty that Dr. Myers spoke about, 
that would be probably, if not certainly, one of the highest 
mineral production royalties of any country in the world that 
has an appreciable mineral production record. With that, 
existing mines today probably would continue to produce. It 
most certainly would force them to raise their cut-off grade.
    That would be mean that they would leave lower grade 
materials in the pit walls or they could not recover some 
materials, and without the higher grade materials, they 
probably could not, probably, go back and get that.
    Most certainly 8 percent royalty is going to kill 
exploration. You know, we are the research and development arm 
for the mining industry, and that's going to be gone when the 
existing mines are mined out, as they will be. Every one is a 
finite resource.
    Those jobs and this country's expertise will be going 
somewhere else in the world.
    Thank you.
    Mr. Gibbons. Thank you, Cy.
    Yes, sir.
    Mr. Piquet. Thank you, Congressman. For the record, my name 
is Tibeau Piquet. For the record, I'm the past Humboldt County 
Commissioner and the present State chairman for the People for 
the USA, and a point of clarification: We used to be People of 
the West, but with government regulatory oversight encroaching 
on our private lives and private property, we have people in 
Rhode Island and now Maine. So we really are People for the 
U.S.
    This is not about ranching or mining alone. It's about 
access. In a State like Nevada where more than 83 percent of 
the land is owned by the government, access is critical.
    Recreation has long been a great alternative to economic 
activities such as mining and logging, but now you the 
recreators, and the American public are in the same boat 
because environmentalists are rapidly getting disillusioned 
with recreating. It attracts crowds; it requires infrastructure 
ski lifts, accessible campgrounds.
    Encouraged beautiful landscapes rather than authenticity or 
biodiversity are the ecological goals. It brings sprawl. 
Throughout the years, green groups and Federal agencies held 
tourism out as a replacement for western communities where 
mining, logging and other natural resource industries have been 
eliminated.
    Now that those industries are disappearing, they have 
changed their minds about tourism. Chief Don Beck of the U.S. 
Forest Service gave a speech recently stating there was 70 
percent less timber harvested now and that the recreation 
industry could be next. The side boards are set up.
    So, we can't cut on it, can't dig on it, can't graze on it; 
and now we can't even play on it. The new U.S. Forest Service 
road policy will close thousands of miles of road and turn 
approximately 31 million acres into de facto wilderness.
    Our public lands policy needs common sense and balance. 
Access is for everyone, not the few, and it's being lost 
incrementally so no one is taking notice. Access is the 
foundation of mineral exploration and quality of lives in rural 
Nevada. It's part of our freedom.
    I appreciate the chance to talk. Thank you.
    Mr. Gibbons. Thank you very much.
    Yes, ma'am.
    Ms. Struhsacker. Mr. Chairman, thank you for this 
opportunity to chat with you this afternoon. My name is Debra 
Struhsacker. I am an independent environmental consultant here 
in Reno, and also a member of the Women's Mining Coalition. I 
would like to share with you some information today on the 
abandoned mines issue with the thought that it might be useful 
to you.
    About a year go the National Mining Association retained me 
to do a study on successfully reclaiming abandoned hard rock 
mines. The findings of the study suggests that there can be 
enormous synergism between a vibrant and active mining 
operation and reclamation of nearby abandoned mines.
    I'd like to suggest that that study--one of the 
implications from that study is that fees are not the only way 
to a achieve reclamation of abandoned mines. That if we could 
improve the atmosphere for mining in this country and remove 
some of the institutional barriers that the Clean Water Act, 
CIRCA, and other liability considerations and some of these 
other existing laws create, that there could be ways to 
incentivize the industry to actually achieve an even greater 
level of synergism.
    So that although it may be necessary to create an abandoned 
mine fee or royalty, that there could be other ways of using a 
very active mining operation to reclaim adjacent lands.
    We found from this study that the types of improvement that 
mining companies have realized include water quality 
improvement, cultural resource preservation, wetlands 
enhancement, and if you think it would be useful to you, I'll 
make sure you get a copy of the study.
    Mr. Gibbons. Would you, please.
    Ms. Struhsacker. Yes, sir. Thank you very much.
    Mr. Snow. I am Charles D. Snow. I'm a consulting geologist, 
a graduate from the University of Utah, 1952, and registered 
professional geologist in Wyoming. And I certainly appreciate 
the chance, Representative Gibbons, to testify here today.
    After I was retired, I did quite a bit of poking around, 
did a little consulting, and a lot of prospecting. To cover a 
decent-sized prospect for, say, a gold anomaly takes about 100 
claims. I was expending about $10,000 a year taking ground 
samples, soil samples, or trace minerals to identify a possible 
drilling target.
    My samples were encouraging and it was going forward quite 
well, but then $10,000 a year doesn't sound like very much, but 
that's all my budget could afford. The government then put on 
this $100 per claim, or $5 an acre for those claims that I had. 
Well, I could cut back to 10 claims, but that certainly didn't 
cover the prospective area that I was looking at. So I dropped 
out, and in doing so, there are now about a month or month and 
a half of time taking samples, living in motels, paying for 
also the assay work, only a few hundred samples, but the 
assayers don't get to assay them now. These are now gone.
    Regulatory agencies have increased the time that it takes 
to get permitted on mines, and this cost and the time value as 
money is one thing that really needs to be addressed. Thank 
you.
    Mr. Gibbons. Thank you, Mr. Snow.
    Yes, sir.
    Mr. Prenn. My name is Neil Prenn. I'm president of Mine 
Development Associates, a small consulting company that employs 
12 people here in Reno.
    I believe that we all want to be fat and happy and not have 
to worry about disturbing the earth or causing any kind of 
disturbance in our own back yard. We would like to have our 
cake and eat it. The mining industry is, by its nature, a dirty 
industry. It disturbs the earth. It produces everything we 
need.
    I believe that this country is doing everything it can to 
not have this industry. I believe that the purpose of the BLM 
was to promote multiple use of our public lands. I don't see 
that multiple use is being thought about anymore. I just wanted 
to clear up one thing in that the Fury was mentioned here, that 
it was a bankrupt company.
    We worked on the reclamation there. We got partial release 
of the bond for physical things like dozing, but we couldn't 
agree with the BLM, or excuse me, the Forest Service to get 
partial release of the bond while the heap was being cleansed.
    So as a contractor, we could not take the risk of getting 
no money for doing the work, and that's what the Forest Service 
would have enforced on us. And we believe that we had test work 
to show that we could have cleansed the heap with the bond 
money that was there.
    Mr. Gibbons. That was a very important point you made, so 
in essence, what you're saying is the Forest Service stopped 
you from reclaiming the mine.
    Mr. Prenn. They stopped us from reclaiming because they 
made us, a contractor, take the risk.
    Mr. Gibbons. Okay, thank you very much.
    Yes, ma'am.
    Ms. Mason. Congressman Gibbons, my name is Susie Mason, and 
I am the vice president and manager of land and administration 
for Pittston Nevada Gold Company. It's a joint venture between 
an Australian company and a U.S.-based coal company. We're 
doing only exploration work and acquisitions work in the United 
States so we have no operating mines. The capital to support my 
company is coming from Australia.
    I can say without any reservation at all that the 
imposition of additional fees and royalties, and making the 
environment less friendly in this country is a disincentive to 
exploration in the United States. And I can say that without 
any hesitation whatsoever. I am a member of the Women's Mining 
Coalition as well, and one of the things that we tried to tell 
the Congressmen and the Senators when we went back to 
Washington was that mining has changed. We use the best of 
technology now. We have the highest standards in the world, and 
the world has turned to us and adopted our standards, and we 
have done everything that we could to take this industry from a 
pick and shovel--although that's a great origin and a great 
history, to a very environmentally responsible industry, and I 
don't know how much more that we can take in terms of pressures 
on this industry and continue to function.
    It seems as though every concession that we make, every 
improvement that we make; every efficiency that we put in to 
place gets undermined by yet another level of bureaucracy, 
another layer of regulations, another pile of things to go 
through, another hearing to come and testify to, which I'm 
grateful for, but that takes time away, in a small group.
    My company only employees about five people, and that takes 
time away from the job we're trying to do, which is to find 
more mineralization. We are responding to laws that are being 
proposed, we're responding to regulations that are being 
proposed. Everywhere we turn there is another emergency that 
takes us away from the real job that we have, which is to try 
to find mineralization and to keep this country going.
    If it's not grown, it's mined, and that's true; and I 
really believe that the war that is going on is not just 
Kosovo, it's been going on for quite some time and it involves 
the natural resources sector of this United States economy.
    Mr. Gibbons. Thank you very much.
    Yes, sir.
    Mr. Shaw. Thank you, Congressman Gibbons, for this 
opportunity to speak to you.
    My name is Chris Shaw. I'm a geologist working in the 
mining industry in Winnemucca, Nevada. I'm also State chairman 
of the wilderness committee for the People for the USA.
    My job has been directly affected by the high price of 
governmental regulation in addition to the low gold price. I 
formerly worked at a low grade open pit gold and silver mine as 
an exploration geologist. As a result of the low gold price, 
now I'm working as a production geologist at a high grade 
underground gold and silver mine.
    The additional cost of production such as implementation of 
the revised 43 CFR 3809 BLM Surface Management Regulations will 
cause more layoffs in heavily mining-dependent rural northern 
Nevada. Our community is already burdened with many people out 
of work from the downturn in the gold mining industry. Any 
further increase in cost to our industry in northern Nevada and 
small towns in Nevada heavily dependent on gold mining places 
undue and unfair burdens on our citizens and employers, causing 
more layoffs than would otherwise occur.
    The current 43 CFR 3809 regulations are sufficient to both 
protect the environment and still provide the highest paying 
wages in rural and small town Nevada.
    Thank you.
    Mr. Gibbons. Thank you, Chris.
    Yes, sir.
    Mr. Hinkel. My name is Randy Hinkel, Congressman Gibbons. 
I'm a consulting geologist from Carson City and also an 
environmental manager.
    Several people have alluded to the liability issues and 
things like that, with cleaning up old mines. I think that--and 
I am going to be very short--I think that if the government 
would give the people a tax credit to go after these things, 
they could produce both minerals from them and clean up some 
environmental eyesores that people won't touch right now 
because they are totally afraid of the liability issues 
involved with them.
    And I think you could apply that to chemical Superfund 
sites and all kinds of things in the current environmental 
scheme of things. I think it's more command-driven instead of 
offering people incentives to take care of these problems.
    Thank you.
    Mr. Gibbons. Randy, that was an excellent statement for 
it's brevity and what you went after, because it's an 
interesting proposal and one which is very interesting to hear.
    Yes, sir.
    Mr. Kennedy. Thank you, Mr. Chairman.
    I'm Larry Kennedy. I'm exploration manager with Battle 
Mountain Gold based here out of Reno, and I just want to 
address my comments mainly toward the royalties and some 
proposals that have been discussed, mainly to point out that 
hard rock mining of gold, copper, and other minerals is much 
different and can support a much smaller royalty provisions 
than we see with, for example, oil, gas, coal, and industrial 
minerals.
    I'm concerned when we hear some of the proposals that may 
be proposed, that they may be based on different models, for 
example, other than net proceeds.
    And just to bring up another point along this line, the 
mining business, especially in a rural environment, part of the 
capital costs set up infrastructure that is very important for 
the economic development in these areas. Comments, for example, 
of subsidies from the mining industry I find especially 
ludicrous with respect to these industries.
    In our industry, we don't have the option of moving a mine. 
A mine is where you find it. It's dictated by the geology, and 
this is where we need to put the process and the facilities.
    If I could make one other comment: One of the reasons that 
we see this flux of exploration money and development money 
going overseas is the uncertainty in permitting, and the 
uncertainty in being able to develop deposits; and certainly to 
that end I want to applaud your efforts, Congressman Gibbons, 
and those of some of our other legislators in helping us in 
overcoming some of those uncertainties.
    Thanks.
    Mr. Gibbons. Thank you very much, Larry.
    Well, did we save the best for last?
    Mr. Collord. Maybe, maybe not. My name is Jim Collord, and 
I've sat through this hearing and haven't heard much about an 
issue that is of extreme importance. I'm the environmental 
superintendent of Cortez Gold Mine. I've been a third-
generation miner, and there is an issue that is on the radar 
screen about that far away and that is the Crown Jewel issue. 
And it relates to the mill site issue that was alluded to 
earlier. It's such a severe issue for the mining industry that 
basically you could shut this industry down in this State on 
public lands. Even some of the mines that have a lot of 
operations on private land also have waste rock dumps on 
unpatented lode claims. It could shut them down.
    This issue is so severe, so critical, and it's in 
Congress's hands right now. And my recommendation to you, 
Congressman, is to go back and monitor closely and take care of 
this industry. Do not let this issue kill it.
    Mr. Gibbons. Jim, let me say that Slade Gorton is trying to 
put language into the supplemental appropriation bill that will 
deal with this very issue that you're talking about because 
many of us see it as a very critical issue.
    I mean it is a bomb with a short fuse, and so we need to 
work quickly on that, and we're hoping that we'll be able to 
keep it in the supplemental appropriation as well.
    Mr. Collord. Okay. My only comment on that is just make 
sure the language covers the entire mining industry, that it's 
not project-specific. It is critical to Barrick, it's critical 
to Cortez, it's critical to every mine.
    Mr. Gibbons. Jim, if you have suggested language----
    Mr. Collord. I've not seen the language that is in there, 
but I understand it is specific to Crown Jewel, which is great, 
they deserve that decision to carry forward, but be aware of 
the impact that it could have on the rest of us.
    Mr. Gibbons. Would you send our office a letter expressing 
your concerns so we can forward that on?
    Mr. Collord. Hopefully the Kosovo spending bill will be 
done and the language is proper.
    Have you seen the language?
    Mr. Gibbons. Not yet. I've heard about it, but I haven't 
seen----
    Mr. Collord. Nobody seems to know what it says.
    Mr. Gibbons. Well, they're still in their conference 
committee. I've watched it until I turned blue.
    Mr. Collord. But understand, this is not the way to 
regulate an industry, and it has to be monitored.
    Thanks.
    Mr. Gibbons. Absolutely, thank you very much.
    Ladies and gentlemen, the record for this hearing tonight 
will be open for a period of 2 weeks within which anyone can 
submit a comment. You want to send them to Cherie Sexton, U.S. 
House of Representatives, Room 1626, that's the Longworth House 
Office Building, Washington, DC 20515, and we'll give you that 
address if you didn't have a chance to write it down. Not many 
of you are stenographers. I spoke a little fast. But we have 
that address up here, and we will be happy to provide it for 
you at the end of this hearing.
    Let me wrap this up and bring it to an end because we're 15 
minutes beyond our IOU for the county here in this building.
    I want to assure you that everyone's presence here today is 
significant. Today is a Saturday, and you came out of your 
houses. You could have gone fishing, you could have gone to do 
a number of other things with a whole lot more fun than sitting 
through a 3-hour hearing on this issue, but it's so significant 
that you took the time to come here, and I want to applaud each 
and every one of you for your dedication and your contributions 
here today.
    And because of today's hearing and the importance of the 
testimony and the facts that were brought before this 
Committee, I am going to go back to Washington and ask the 
House Resource Committee and the chairman of the Committee, 
Representative Young from Alaska, to hold similar hearings 
across America in this country on these issues to educate not 
just Congress, but to educate the American people as well, 
because of the 435 Members of Congress, directly or indirectly 
395 of them have some relationship to the mining industry.
    It is pathetic to go to Congress and not have them better 
educated in the importance of this industry to their own home 
districts. So if we had 395 supporters out of 435, believe you 
me, we could make some strong headway in doing what's right for 
the industry, doing what's right for Nevada, doing what's right 
for America.
    With that, ladies and gentlemen, if there is no other 
testimony, I will close the hearing, and again, thank you very 
much.
    [Whereupon, at 5:20 p.m., the Subcommittee was adjourned.]
    [Additional material submitted for the record follows.]
                         BACKGROUND MEMORANDUM

John Rishel, Legislative Staff
Date: May 13, 1999
Subject: Subcommittee Oversight Hearing on ``Effect of Federal 
Mining Fees and Proposed Federal Royalties and Fees on State 
and Local Revenues and the Mining Industry''
    The Subcommittee on Energy and Mineral Resources is 
scheduled to meet on Saturday, May 15, 1999 at 2 P.M. in the 
Washoe County Commission Chambers at 1001 East 9th Street, 
Building A, Reno, Nevada to hold a hearing on ``Effect of 
Existing Federal Mining Fees and Proposed Federal Royalties and 
Fees on State and Local Revenues and the Mining Industry.''

BACKGROUND

    The Subcommittee on Energy and Mineral Resources is holding 
this oversight hearing to gather factual information on the 
effect of existing Federal fees, such as the $100 per claim 
holding fee and proposed Federal fees, such as royalties, on 
the mining industry, state and local economic activity and 
revenues. The Committee also wishes to gather information on 
the probable effect of various existing and proposed Federal 
fees on trends in our nation's domestic mineral exploration, 
production and reserves.
    Mining is a basic economic activity which supplies 
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.
    The Committee selected Reno for this hearing because Nevada 
is an important public lands mining state, with 87 percent of 
Nevada's lands owned by the Federal Government and mining 
accounting for approximately 9 percent of the Gross State 
Product. Precious metals mining constitutes the majority of 
economic activity in the north central and northeastern parts 
of Nevada. Consequently, any detrimental effects of Federal 
mining policy are definitely going to impact this important 
mining state.
    A major public lands mining issue is what constitutes a 
fair share of revenue for the Federal Government from a mineral 
deposit on public land. Presently, the Federal Government does 
not levy a royalty or other fee on minerals extracted from 
public land. Many critics of the general mining law say that it 
is only fair that the Federal Government charge a royalty or 
other fee on minerals mined on public lands. Some have even 
advocated that a fee be levied on minerals taken from former 
public lands which have been privatized over the years through 
the mining law. Suggested mining royalties or fees range from 3 
percent of net proceeds to 12.5 percent of gross proceeds.
    A Federal royalty on hardrock mineral deposits is more 
complex than it seems at first glance. About 80 locatable (i.e, 
claimed under the mining law) mineral commodities and a wide 
diversity of mineral deposit types occur on public lands. 
Unless care is exercised in determining a royalty, mining of 
some commodities and many lower-quality mineral deposits will 
be uneconomic. For example, a high gross royalty penalizes 
producers in high cost regions. Also, costs of production are 
not equal for all commodities. For example, smelting, refining 
and ore transportation costs at some gold mines consume less 
than ten percent of the metal's selling price, whereas for zinc 
mines these costs account for about 65 percent of the metal's 
selling price. A high gross royalty based solely on the 
economics of mining the nation's richest gold deposits makes 
zinc mining uneconomic.
    The Federal Government profits from the existence of a 
mineral deposit somewhere beneath public lands only when that 
deposit is found and developed. For a royalty to generate the 
maximum return on the ``public's assets,'' it must not reduce 
exploration or mining activity.
    A royalty must be based on the ability of most mines to 
pay--not the ability of one or two of our country's most 
profitable mines to pay. Unlike private landowners, the Federal 
Government receives income in the form of taxes from mining on 
public lands. If a Federal royalty is imposed which causes many 
mines to close and others never to be developed, the government 
will lose hundreds of millions in personal and corporate income 
tax revenues--a loss greatly exceeding any revenue gains from 
the royalty.
    State and local tax revenues can also be severely impacted 
by a Federal mining royalty. Federal royalties are deductible 
from the base on which many State and local taxes are levied, 
and State and local governments also share in tax losses caused 
by reduced mining activity. A state like Nevada could lose 
millions in tax revenues due to the negative impact of a high 
Federal royalty.
    The experience of the British Columbia provincial 
government with mining royalties provides an excellent 
practical example of the severe impact of a high, government-
levied gross royalty. British Columbia imposed a 5 percent 
gross mining royalty in the early 1970's. Grassroots 
exploration ceased, mines closed and new mines were not 
developed. More than 5,000 jobs were lost. This ill-conceived 
gross royalty was quickly repealed once its devastating effect 
became obvious.
    Evidence is mounting that the Federal $100 per claim 
maintenance fee is a prime culprit in a protracted downward 
trend in U.S. mineral exploration. The $100 maintenance fee was 
first authorized via a ``rider'' on the FY 93 Interior 
appropriations bill. The fee was then slightly modified and 
extended through FY 98 in the 1993 Omnibus Reconciliation Act. 
This fee was again extended through FY 2001 in another 
appropriations rider on the FY 99 Interior appropriations bill.
    The current $100 fee is not competitive with similar fees 
on Federal acquired lands, state-owned lands or private land. 
At current rates the fees discourage mineral exploration on 
public lands, particularly during the early stages. The early 
stages of exploration require large land positions (typically 
around 30,000 acres or 1,500 claims) to reduce risk to 
acceptable levels. Historically, initial exploration is often 
conducted by those least able to bear the cost of this fee, 
small companies, often called junior exploration companies, who 
raise high risk money from investors hoping for the big strike. 
Obviously, long term imposition of a high fee discourages 
initial mineral exploration and significantly escalates the 
cost of early stage high-risk exploration which has serious 
ramifications on this country's ability to replace critical 
domestic reserves of metals as current reserves are mined out.
    A company can avoid the maintenance fee by simply shifting 
exploration, primarily at the grassroots or early stage, from 
high cost U.S. public lands to countries like Canada, Mexico or 
Chile which seek to attract exploration rather than levy high 
tolls on this activity. Continuation of these trends in mineral 
exploration raises serious concerns that as known domestic 
reserves are exhausted, significant declines in U.S. mineral 
production will occur.
    Thirteen witnesses are scheduled to testify, including 
three elected officials or their representatives, three state 
officials, the President of the Nevada Mining Association, two 
representatives from environmental groups and four 
representatives from the mining industry. For further 
information, please contact Bill Condit at x59297 or John 
Rishel at x60242.
                                ------                                


              Statement of Greg D. Loptien, Sparks, Nevada

    Dear Representative Gibbons:
    I am writing this letter in the hope that my views, 
concerning issues discussed or touched upon at the Oversight 
Hearing in Reno come to your attention. I am uncertain whether 
or not you can accept letters concerning these issues as part 
of the hearing process; regardless I will attempt to briefly 
state my views.
    Before I begin allow me to express my appreciation for your 
efforts to fully understand the issues that face the mining 
industry in this country, for the opportunity to allow members 
of the mining community to express their views and for your 
past and continuing support of our and the nations industry. 
Too often the views of the industry are not relayed to the 
public or are misrepresented.
    The current depressed world market for metals and 
industrial minerals has been devastating to this nation's 
mining industry. Over the last seven years the mining industry 
has been fighting an uphill battle against the Democratic-
controlled administration, in particular Secretary Babbitt. 
Anti-mining environmental extremist, both within and outside of 
the government, are engaged in an all out assault on the mining 
industry not to make it a better, cleaner, more environmentally 
friendly industry but to kill it. The mining industry has, 
albeit sometimes reluctantly, worked diligently to become a 
more environmentally sensitive and responsible industry. So 
much so that most of the time the environmentalists can only 
point at problems that exist as a result of mining practices 
that occurred 30, 40 or 100 years ago.
    About four years ago I attended a lecture at UNR given by 
an author who had written a book on the changing attitudes in 
the west. The positive and negative aspects of mining were 
touched upon and following the lecture I happened to find 
myself standing near the wife of a locally prominent 
environmentalist. She was discussing the horrors of mining with 
another lady. The other lady stated that she thought that the 
mining industry was making strides to ``clean up their act.'' 
The wife stated ``Deary, you don't understand. We just don't 
like them.'' In a nutshell, this summarizes what the 
environmentalists are after. They do not care how much the 
industry does to ``clean up their act'' they don't want mining! 
This is obvious when one considers the contorted logic that was 
used by the Interior's Solicitor Leshy and the efforts enacted 
to stop the New World project in Montana from ``destroying 
Yellowstone.''
    With regards to your concerns about existing Federal fees 
and proposed fees (royalties) on the mining industry in the 
U.S. I would like to provide the following comments. The 
current BLM management fees are essentially a rental and have 
placed a burden on the mining industry that in recent years has 
become almost a hardship. The mining industry gets nothing for 
this management fee and the monies collected, while it is my 
understanding, have not gone to rehabilitation of abandoned 
mine lands. One positive aspect of the ``rental fee'' has been 
that many bogus and fraudulently held claims disappeared from 
the books opening up more land for legitimate exploration. 
Mining companies would prefer to put this ``rental'' money into 
the property (and this generally means into the pockets of 
local/rural contractors who perform tasks such as drilling, 
road building etc.) and thus progress their evaluation of the 
lands mineral potential. I believe a more equitable and 
workable solution to the management fee situation would be to 
allow the companies/individuals to select either ``rental'' 
payment in whole or part for the land claimed. Should the claim 
holder choose to invest the money into the ``ground'' then they 
must demonstrate, through documentation, a dollar value of work 
performed on all or a portion of the claims.
    The issue of proposed royalties from revenues from mineral 
ventures is one of extreme sensitivity in the mining community. 
And well it should be as it stinks of Medieval times and the 
royalty claimed by the Kings from work done by peasants. The 
Federal Government gets its share of the profits from taxes 
levied against the mining companies and since the government 
did not participate in any of the risk taking to find, develop, 
mine and refine the minerals it should not get any royalty. One 
of the biggest proponents of a mining royalty in the Senate was 
Senator Bumpers who, if my memory is correct, pushed 
legislation that allows the Oil industry (a big industry in his 
state) to pass on the cost of their royalty fees to the 
consumer. Rather a two-faced stance if you ask me. I find it 
interesting that in the past decade the explosion of mining 
ventures worldwide was largely due to the removal of onerous 
royalties required by many nations and the adoption of a United 
States-style mining laws. Royalties, such as those proposed (8-
12 percent gross revenue to 2-8 percent net revenue) would have 
a devastating effect on the U.S. mining industry and only the 
most profitable deposits could hope to survive. The loss of tax 
revenue to the Federal Goverment from mines put out of business 
by a royalty would, in my opinion, far exceed the revenues 
taken in by the royalty. Again, it is my belief that proponents 
of a royalty do not wish to generate additional income for the 
Federal coffers as much as they desire to adversely impact the 
mining industry.
    Of particular concern to me regarding any changes to the 
mining laws and regulations is the impacts that these changes 
will have on rural communities. While I live in Sparks I do 
spend the vast majority of my working days in the small rural 
communities of Nevada. I see how important mining jobs are to 
rural Nevadans and I see the benefits that these folks get from 
the mines in more ways than a pay check or revenue for the 
county. Spouses of mine employees are doctors, nurses, 
teachers, coaches, child care providers, tutors, school board 
members, scoutmasters, firemen, ambulance drivers, EMT's, 
county commissioners, sheriffs, etc. These people provide vital 
infrastructure support in these communities that are taken for 
granted in the larger cities. Mines not only supply jobs to the 
people in these small towns but they also routinely provide 
scholarships to students to further their education, provide 
necessary and expensive engineering and environmental 
assistance for such things as waste water treatment. Some time 
the mines are the only nearby source for emergency healthcare 
(EMT's) or ambulances. Mining companies also routinely 
participate and fund development or rehabilitation of riparian 
areas working in cooperation with organizations such as Ducks 
Unlimited and the Rocky Mountain Elk Foundation. Barrick Gold 
(in Elko) and Magma, now BHP, (in Ely) fronted substantial cash 
to ensure the construction of High Schools in both of those 
towns. None of these services, activities or gifts have ever 
been provided by an environmental group and if mines are run 
out of business the burden of providing these services win fall 
on the taxpayers of the state.
    Comments concerning the development of recreational and or 
tourist attractions/destinations in rural areas that might 
offset the loss of mine jobs was of interest to me. I grew up 
in Colorado and as you are aware that state spends a great deal 
of time and money to promote tourism. Tourists flock to 
Colorado to see the beautiful scenery and to ski at the large 
resorts. The locals who do not own shops or restaurants in 
these resort areas work for minimum wage as clerks, cooks, 
waitresses, maids, busboys etc. and can not afford to live in 
the resort communities. For example, people who work at Vail, 
Colorado can not afford to live there and must commute from the 
towns of Eagle, Wolcott, Avon and Gilman. The small community 
of Dillon, where I used to live is largely a community of 
apartments that house the people who work at Breckenridge, 
Keystone, Arapahoe Basin and Copper Mountain ski resorts. 
Tourism may be more environmentally friendly but it does not 
provide for much unless you own a business marketed to the 
tourist. Tourism is a fickle sort of industry and not every 
rural area fits the criteria to make it a thriving resort or 
destination. Tourism is no more reliable than mining for 
longevity and does not pay anything near mining wages.
    Several other issues, not touched upon at the Hearing, that 
I believe negatively impact on the mining industry or could be 
implemented to both bolster the industry and reduce 
environmental impacts are:

         Equalize the cost of production from foreign-owned 
        overseas mining companies with those of the U.S. that have to 
        bear the cost of regulatory and environmental laws. While many 
        U.S. firms implement U.S. level environmental standards at 
        their overseas operations many other foreign companies do not. 
        Just as the U.S. does not import agricultural products that do 
        not meet U.S. standards then also the U.S. should not allow the 
        importation of metals from mines that do not follow U.S. 
        environmental standards.
         Current U.S. laws allow small, but vocal activist-
        groups to stall large multi-million/billion dollar projects for 
        years with trivial lawsuits. This practice is even used against 
        the Federal Government, as evidenced by a Reno Gazette-Journal 
        article on June 9, 1999. In this article a small activist 
        group, the Southwest Center for Biological Diversity, had filed 
        a lawsuit against the U.S. Fish and Wildlife Service to force 
        the listing of the Rio Grande Cutthroat as an endangered 
        species. The article states that this group ``has filed about 
        100 lawsuits'' in the last four years. A similar situation 
        occurred with the Crown Jewel mine in Washington and is on-
        going with the Carlotta Copper project in Arizona (a new mine 
        proposed between two exiting mines). Changes that would allow 
        companies to obtain lost revenue, from the activists and their 
        organizations, for delayed projects would alleviate unfounded 
        nuisance lawsuits from groups and individuals who know that 
        such delaying tactics are on their side.
         Perhaps a trade of dollars spent by mining companies 
        to clean up historic environmental mine problems for management 
        fees and or taxes could be considered. There would have to be 
        the acknowledgment that once the company touched the 
        contaminated site that they would not be permanently liable for 
        it provided they actually improved the site.
         Under the Canadian mining law companies that acquire 
        claims on Federal ground must turn over all data (maps, 
        geophysical surveys, geochemical surveys and drill hole logs/
        assays etc.) to a central agency (Bureau of Mines ?) once the 
        claims are abandoned. This does not occur in the U.S. but if 
        companies where required to release this sort of data to the 
        U.S. Bureau of Mines/BLM/USGS then less disturbances to the 
        Federal lands may occur. For example, currently, once a company 
        has walked away from a property for whatever reason (change of 
        emphasis by the company, results not encouraging, results do 
        not indicate a large enough deposit for a particular company, 
        etc.) then the data acquired from those efforts is archived and 
        lost to the rest of the mining community. Should that data 
        become available to the public then subsequent companies that 
        claim the property do not have to conduct additional drilling, 
        trenching, road building or other surface disturbing actions 
        but can build on past efforts. Also properties that appear very 
        promising on the surface but reveal less promise underground 
        will be easily identified and passed over by simply reviewing 
        the agency-held data. A small fee to access the data or small 
        tax to provide for, maintain and store the data would not be a 
        burden to companies since they would realize significant 
        benefit from such information.
    I hope that this letter will be of interest and possible use to you 
on the subcommittee. I apologize for the length as I did intend to be 
as brief as possible. Once again, I am very thankful for all of the 
interest in the industry that you have expressed and the support you 
have provided for all the years that you have been my representative.
[GRAPHIC] [TIFF OMITTED] T8947.031

[GRAPHIC] [TIFF OMITTED] T8947.032

[GRAPHIC] [TIFF OMITTED] T8947.033

[GRAPHIC] [TIFF OMITTED] T8947.034

[GRAPHIC] [TIFF OMITTED] T8947.035

[GRAPHIC] [TIFF OMITTED] T8947.036

[GRAPHIC] [TIFF OMITTED] T8947.037

[GRAPHIC] [TIFF OMITTED] T8947.038

[GRAPHIC] [TIFF OMITTED] T8947.041

[GRAPHIC] [TIFF OMITTED] T8947.040

[GRAPHIC] [TIFF OMITTED] T8947.039

[GRAPHIC] [TIFF OMITTED] T8947.042

[GRAPHIC] [TIFF OMITTED] T8947.043

[GRAPHIC] [TIFF OMITTED] T8947.044

[GRAPHIC] [TIFF OMITTED] T8947.045

[GRAPHIC] [TIFF OMITTED] T8947.046

[GRAPHIC] [TIFF OMITTED] T8947.047

[GRAPHIC] [TIFF OMITTED] T8947.048

[GRAPHIC] [TIFF OMITTED] T8947.049

[GRAPHIC] [TIFF OMITTED] T8947.050

[GRAPHIC] [TIFF OMITTED] T8947.051

[GRAPHIC] [TIFF OMITTED] T8947.052

[GRAPHIC] [TIFF OMITTED] T8947.053

[GRAPHIC] [TIFF OMITTED] T8947.054

[GRAPHIC] [TIFF OMITTED] T8947.055

[GRAPHIC] [TIFF OMITTED] T8947.056

[GRAPHIC] [TIFF OMITTED] T8947.057

[GRAPHIC] [TIFF OMITTED] T8947.058

[GRAPHIC] [TIFF OMITTED] T8947.059

[GRAPHIC] [TIFF OMITTED] T8947.060

[GRAPHIC] [TIFF OMITTED] T8947.061

[GRAPHIC] [TIFF OMITTED] T8947.062

[GRAPHIC] [TIFF OMITTED] T8947.063

[GRAPHIC] [TIFF OMITTED] T8947.064

[GRAPHIC] [TIFF OMITTED] T8947.065

[GRAPHIC] [TIFF OMITTED] T8947.066

[GRAPHIC] [TIFF OMITTED] T8947.067

[GRAPHIC] [TIFF OMITTED] T8947.068

[GRAPHIC] [TIFF OMITTED] T8947.069

[GRAPHIC] [TIFF OMITTED] T8947.070

[GRAPHIC] [TIFF OMITTED] T8947.071

[GRAPHIC] [TIFF OMITTED] T8947.072

[GRAPHIC] [TIFF OMITTED] T8947.073

[GRAPHIC] [TIFF OMITTED] T8947.074

[GRAPHIC] [TIFF OMITTED] T8947.075

[GRAPHIC] [TIFF OMITTED] T8947.076

[GRAPHIC] [TIFF OMITTED] T8947.077

[GRAPHIC] [TIFF OMITTED] T8947.078

          Statement of Women's Mining Coalition, Reno, Nevada
RE: Comments on the Draft Environmental Impact Statement--43 C.F.R. 
3809 Surface Management Regulations for Locatable Mineral Operations

INTRODUCTION

    The Women's Mining Coalition (WMC) is a grassroots organization of 
women involved with the hard rock mining industry. Our membership is 
comprised of women working in many facets of the mining industry 
including geology and exploration, engineering, business and 
management, mining and heavy equipment operation, equipment 
manufacturing, and sales of goods and services to the mining industry. 
We have members located from coast to coast in many different states.
    The WMC is keenly interested in the Department of Interior, Bureau 
of Land Management's (BLM's) current efforts to revise the 43 C.F.R. 
Subpart 3809 regulations (``the 3809 regulations'') because many of our 
members work at mines located on BLM-administered lands, and a number 
of our members work for companies that provide equipment, goods and 
services to mines on BLM lands. Based on first-hand experience, many 
WMC members can attest to the success which the 3809 regulations have 
had in promoting environmentally responsible mining and effective 
reclamation of mines on BLM-administered lands.
    In a letter dated June 18, 1997 to Mr. Paul McNutt, 3809 EIS Team 
Leader, (copy attached and incorporated by reference as though fully 
set forth herein) the WMC provided comments to the BLM regarding the 
agency's proposal to revise the 3809 regulations. Specifically, we 
responded to the issues raised in the March 1997 materials from the 
BLM's 3809 Task Force that outlined issues to be considered during the 
proposed scoping and revision of the 3809 regulations, and to comments 
made by Secretary Babbitt in his January 6, 1997 memorandum to the 
Assistant Secretary, Land & Minerals and the Acting Director, BLM. As 
discussed throughout this letter, the WMC finds that the BLM's Draft 
Environmental Impact Statement (Draft EIS) and the accompanying 
proposed rule have failed to acknowledge or consider a number of the 
issues, concerns, and questions raised in our June 18, 1997 letter to 
Mr. McNutt.
    In developing our comments on the Draft EIS, we have relied on our 
members' experience in working on mining and mineral exploration 
projects on BLM-administered lands, and have given special 
consideration to the following:
         The strength, comprehensive nature, and proven track 
        record of the 3809 regulations;
         The level of environmental protection and the 
        reclamation achieved under the current regulatory framework 
        applicable to mining, including the 3809 regulations;
         The lack of any compelling justification or need 
        identified by the BLM that would warrant modification of the 
        3809 regulations;
         The failure of the Draft EIS to give any consideration 
        to a number of issues, concerns and alternatives that the WMC 
        raised during BLM scoping meetings and in our June 1997 written 
        comments, and the alternatives and issues we feel need to be 
        evaluated in the Draft EIS but, regrettably, are not; and
         Our concerns that the BLM's effort to revise the 3809 
        regulations not be misused as a political process.

    The comments in this letter focus principally on the Draft EIS. The 
WMC is submitting a separate letter outlining our comments on the 
proposed regulation at 43 CFR Sec. 3809 Rules; 64 Fed. Reg. 6422 
(February 9, 1999). In addition to the specific issues and comments 
raised in this letter, the WMC fully supports and adopts the comments 
filed by the National Mining Association, the Northwest Mining 
Association, and the Nevada Mining Association as though fully set 
forth herein.

COMMENTS ON THE SCOPE OF THE DRAFT EIS DEVELOPED IN CONJUNCTION 
WITH THE REVISED 3809 REGULATIONS

The Draft EIS Fails to Consider Issues and Alternatives Raised 
by the WMC During Scoping
    The WMC submitted detailed written comments to the BLM in a 
June 18, 1997 letter addressed to Mr. Paul McNutt, 3809 EIS 
Team Leader. The WMC finds that the BLM's Draft EIS and the 
accompanying proposed rule have failed to acknowledge or 
consider a number of the issues, concerns, and questions raised 
in our June 1997 letter to Mr. McNutt. This is just one of many 
reasons why the WMC deems the Draft EIS to be substantively 
flawed and procedurally inadequate.
    The National Environmental Policy Act (NEPA) and the 
Council on Environmental Quality (CEQ) regulations for 
implementing NEPA (40 C.F.R. Sec. 1500) and for preparing 
documents, such as this Draft EIS, requires the BLM to 
acknowledge, track, and respond to issues raised during project 
scoping. In preparing this Draft EIS, it appears that the BLM 
has ignored its own internal guidance considering comments 
received during public scoping. For example, page V-2 of the 
BLM's NEPA Handbook (H-1790-1) includes the following 
statements regarding scoping:

         Scoping the EIS (40 CFR 1501.7, 1506.6 and 1508.25). 
        The purpose of scoping, generally, is to focus the analysis on 
        significant issues and reasonable alternatives in order to 
        eliminate extraneous discussion and limit the length of the 
        EIS. Among other things, scoping helps: involve the public and 
        affected agencies early in the process; identify significant 
        issues to be analyzed as well as alternatives and potential 
        impacts to be addressed; and allocate assignments for preparing 
        the document among lead and cooperating agencies . . .:
    Page V-3 directs the BLM to consider public input in identifying 
the proposed action:

         S``l. d. Define Proposed Action. Defining the proposed 
        action plan is key to subsequent analysis. It is an ongoing 
        process which usually begins prior to the issuance of the NOI. 
        In the case of a BLM-initiated proposal, the proposed action 
        will usually evolve and change based on the results of public 
        input during scoping and subsequent analysis. (Emphasis added). 
        Thus, for internal proposals, the identification and definition 
        of the proposed action is generally more tentative in the early 
        stages. . .''
    The Draft EIS sections entitled ``Alternatives Considered by 
Eliminated'' (page 9), and ``Issues and Concerns Not Addressed'' (page 
22) make absolutely no mention of the following issues and suggested 
alternatives presented in our June 18, 1997 letter to Mr. McNutt and 
repeated verbatim below:
         ``The DEIS Must Include a Detailed Discussion of the 
        No Action Alternative--The DEIS must include a substantive and 
        thorough analysis of the No Action Alternative to evaluate the 
        level of environmental and reclamation regulatory requirements 
        that would be applicable to future mining projects on BLM lands 
        with no changes to the 3809 regulations. The No Action 
        Alternative must consider existing state and Federal regulatory 
        programs and the BLM's existing authority and recent use of 
        this authority to modify the 3809 Regulations through policy 
        guidelines and rulemaking on selected topics (e.g., the 
        development of BLM policy guidance on acid rock drainage and 
        cyanide, and new occupancy and bonding rules).''
         Comments on the Draft EIS: The Draft EIS is woefully 
        inadequate in this respect because it does not accurately 
        describe or consider existing state environmental and 
        reclamation laws and regulations affecting mining. The Draft 
        EIS fails to acknowledge and analyze the comprehensive nature 
        of these existing state regulatory programs, the significant 
        level of oversight and control authorized by these regulations, 
        the large number of environmentally responsible mines that have 
        been developed under these regulations, and current 
        satisfactory coordination of the state regulatory programs with 
        the BLM's 3809 regulations.
         ``The DEIS Must Analyze the Wide Range of Sites and 
        Mines Regulated Under the 3809 Program. There is an enormous 
        diversity of climate, terrain, geology, mineral deposit types, 
        and mining methods represented by mine sites on BLM lands. Both 
        the Affected Environment and Environmental Consequences 
        chapters of the DEIS must give full and equal weight to the 
        many different types of environmental settings and mines, and 
        provide a separate analysis of the impacts that would occur at 
        these different settings and mines if the various alternatives 
        considered in the DEIS were implemented.''
        GT3 Comments on the Draft EIS: The Draft EIS describes the 
        affected environment and environmental consequences in terms of 
        various environmental resources (e.g., wildlife, vegetation, 
        wetlands, etc.) on BLM-managed lands throughout the western 
        U.S. However, it focuses mainly on the gold industry 
        (principally in Nevada) and largely ignores important base 
        metal and industrial mineral production on BLM-managed lands 
        elsewhere in the west. The Draft EIS and economic analyses on 
        which it is based fail to adequately consider impacts to 
        different sectors of the mining industry and have thus severely 
        underestimated the consequences associated with Alternatives 3 
        and 4.
         ``The DEIS Must Include a Detailed Analysis of State 
        and Other Federal Environmental Laws and Regulations Affecting, 
        Mining--The Affected Environment chapter of the DEIS should 
        also include a detailed discussion of the many state 
        environmental and reclamation regulatory programs and Federal 
        laws and regulations affecting mining. The Environmental 
        Consequences chapter should assess how these programs would be 
        affected due to implementation of the DEIS alternatives. In 
        particular, this analysis should quantify impacts to state mine 
        land reclamation programs and Federal environmental regulatory 
        programs for which the states have primacy. Because many of 
        these state regulatory programs were developed after enactment 
        of FLPMA and development of the 3809 regulations, the DEIS 
        should acknowledge the evolution of these programs and the 
        coordination that has developed between the BLM and state mine 
        land reclamation and environmental regulatory agencies.''
         Comments on the Draft EIS: As noted above, the Draft EIS does 
        not adequately consider existing state environmental and 
        reclamation regulations.
         ``The DEIS Must Include a Detailed Analysis of 
        Socioeconomic Impact--Any changes to the 3809 regulations that 
        could result in significant delays in approving future mineral 
        exploration and mining PLANS could cause adverse economic and 
        social impacts to mining communities, state economies, and 
        other stakeholder groups including geologists, consultants, 
        drilling contractors, analytical laboratories, and restaurant 
        owners and motel/hotel operators in mining and exploration 
        areas who derive a substantial portion of their income working 
        for or providing goods and services to the hard rock mining 
        industry. The Affected Environment chapter of the DEIS must 
        acknowledge and quantify the positive social and economic 
        impacts associated with mining. The Environmental Consequences 
        chapter must disclose any positive or adverse social and 
        economic impacts that would result from implementation of the 
        DEIS alternatives. This analysis must be site specific; a 
        generic or national evaluation will not adequately assess the 
        impacts to local communities and regional economies.''
         ``Additionally, the DEIS must evaluate the economic impacts 
        that proposed changes in the 3809 regulations would have on 
        mining equipment manufacturers and companies that provide goods 
        and services to the mining industry. Many of these companies 
        are located in parts of the country not typically considered 
        mining states such as Wisconsin (P & H Mining Equipment and 
        Nordberg), Illinois (Caterpillar), New Jersey and Texas 
        (Ingersoll Rand), etc. The continued existence of thousands of 
        jobs in these states relies on a strong mining industry in the 
        western U.S. The DEIS must thoroughly evaluate the economic 
        consequences to these workers and to their state economies 
        caused by changes to the 3809 regulations.''
        Comments on the Draft EIS: As described in more detail below, 
        the national and generic evaluation presented in the Draft EIS 
        (especially Appendix E) and the accompanying ``Initial Small 
        Business and Regulatory Flexibility Act Analysis'' 
        significantly underestimate the adverse economic impacts to 
        specific communities and regions.
         ``The DEIS Must Consider Specific Impacts to Notice-
        Level Operators--The Secretary's directive to repeal, narrow, 
        or otherwise modify the 5 acre NOI process will have a direct 
        and focused impact upon individuals, small operators, and 
        companies who perform most of their mineral exploration and/or 
        mine development work under an NOI. The DEIS should include a 
        separate socioeconomic analysis of the impacts of the proposed 
        changes upon this groups of stakeholders. Because most mineral 
        discoveries start as NOI-level exploration projects, the DEIS 
        must also evaluate the impact that elimination of the NOI 
        process or delays in the NOI approval process would have on the 
        rate of discovery, and the impact to local, regional and 
        national economies as a result of diminished levels of 
        exploration, discovery, and mine development.''
         Comments on the Draft EIS: As described in more detail below, 
        the economic analyses presented in the Draft EIS (especially 
        Appendix E) and the accompanying ``Initial Small Business and 
        Regulatory Flexibility Act Analysis'' are grossly dismissive of 
        the economic hardships that many Notice-level operators (i.e., 
        individuals and small businesses engaged in exploration and 
        providing goods and services to the mineral exploration and 
        mining industries) will experience if the BLM's proposed action 
        (Alternative 3: Preferred Alternative) is implemented. 
        Additionally, the Draft EIS fails to disclose the adverse 
        impacts to the rate of discovery and the concomitant increased 
        reliance on foreign minerals that would be associated with 
        Alternative 3.
        ``The DEIS Must Consider Cumulative Impacts--The DEIS 
        must evaluate the cumulative impacts of any proposed changes to 
        the 3809 regulations with respect to other connected actions 
        including but not limited to the EPA's proposed National Hard 
        Rock Mining Framework, the BLM's recent use and occupancy 
        regulations, the BLM's new bonding regulations, other EPA 
        initiatives such as the recent addition of the hard rock mining 
        sector to the Toxic Release Inventory (TRI) reporting 
        requirements and potential changes to the RCRA Bevill exclusion 
        for certain mining wastes, and changes to the Mining Law of 
        1872 being contemplated by Congress. This analysis should 
        evaluate the cumulative impacts of changes in the 3809 
        regulations in conjunction with potential changes in royalties, 
        fees, taxes, reporting requirements, and a plausible range of 
        future regulatory developments.'' (Note: the new bonding 
        regulations referenced above were remanded in May 1998).
         Comments on the Draft EIS: The Draft EIS fails to consider 
        cumulative impacts associated with other Federal rulemaking 
        affecting mining. In addition to the issues listed in our June 
        1997 letter, the following new Federal actions are examples of 
        the regulatory proposals that should be included in a 
        cumulative impacts analysis: Clean Water Act proposals 
        regarding Total Maximum Daily Load (TMDL), the Advanced Notice 
        of Proposed Rule Making to change water quality standards, and 
        the Department's recent (and inappropriate) decision regarding 
        the use of mill sites in connection with mining claims.
         ``The DEIS Must Consider Impacts to Minerals 
        Availability-- Changes to the 3809 regulations that result in 
        significant delays in the PLAN and NOI approval processes may 
        have an adverse impact on the supply of domestic hard rock 
        minerals. The DEIS should evaluate the impact that revisions to 
        the 3809 regulation would have upon minerals availability, and 
        the potential for increased reliance on foreign mineral 
        supplies. This analysis should consider the balance of foreign 
        trade payments as a result of decreases in domestic mineral 
        production. Similarly, the DEIS should consider how the 3809 
        regulations could be modified to encourage and facilitate 
        mining on BLM lands and the resulting positive economic effects 
        of increased mineral exports and decreased mineral imports.''
         Comments on the Draft EIS: The Draft EIS fails to consider any 
        of these issues. In addition to being unresponsive to the WMC, 
        the BLM's omission of these issues is in direct conflict with 
        Sec. 102(a) (12) of the Federal Land Policy and Management Act 
        of 1976 (FLPMA) in which Congress declares that it is the 
        policy of the United States that:

        the public lands be managed in a manner which is recognizes the 
        Nation's need for domestic sources of minerals, food, timber, 
        and fiber from the public lands including the implementation of 
        the Mining and Minerals Policy Act of 1970 (84 Stat. 1876, 30 
        U.S.C. 21a) as it pertains to the public lands''
         The Draft EIS should disclose how the BLM's Preferred 
        Alternative and Proposed Regulations comply with U.S. laws that 
        recognize the need for mining, including Sec. 102(a)(12) of 
        FLPMA and the Mining and Minerals Policy Act of 1970 as enacted 
        by Congress. The rulemaking process does not grant the BLM the 
        authority to ignore, repeal, or amend these Congressional 
        mandates.
         The DEIS Should Consider Alternatives to Facilitate 
        Mining and to Create Reclamation and Environmental Incentives--
        Although the Secretary's January 6, 1997 memorandum does not 
        contemplate changes to the 3809 regulations to facilitate 
        mineral exploration and mine development or to create 
        incentives for reclamation and remediation of abandoned mines, 
        a number of beneficial social and economic impacts on the 
        local, regional, and national levels could accrue from selected 
        changes. The WMC believes that regulatory changes to streamline 
        the review process and stimulate clean-up of abandoned mines 
        would significantly

         enhance mineral exploration levels without compromising the 
        high level of environmental protection and reclamation success 
        realized under the present regulatory system. The WMC strongly 
        urges the BLM to expand the scope of the DEIS to evaluate 
        revisions to the 3809 regulations to encourage and facilitate 
        environmentally responsible mining and reclamation of abandoned 
        mines.''
        Comments on the Draft EIS: Alternatives to facilitate 
        environmentally responsible mineral exploration and mining 
        would be consistent with Sec. 102(a)(12) of FLPMA and the 
        Mining and Minerals Policy Act of 1970 as enacted by Congress. 
        These laws require the BLM to manage the public lands in a 
        manner that encourages responsible development of the nation's 
        mineral resources. Neither the Draft EIS nor the proposed 
        regulations fulfill this responsibility. Additionally, the 
        WMC's June 1997 comments regarding reclamation of abandoned 
        mines remain unanswered.
    As demonstrated in the discussion above, the BLM has not fulfilled 
its obligations under NEPA and the CEQ regulations to respond to our 
comments and suggested alternatives. At the very least, the Draft EIS 
should explain why many of the WMC's issues and suggested alternatives 
were eliminated from further consideration. The Draft EIS violates NEPA 
through its failure to assess the many reasonable alternatives that the 
WMC and other mining interests proposed during the 1997 scoping effort. 
The omission of any mention of these alternatives in the Draft EIS is 
such a serious and fundamental flaw that a new Draft EIS and further 
public comment is needed to comply with NEPA.

COMMENTS ON THE CONTENT OF THE DRAFT EIS DEVELOPED IN 
CONJUNCTION WITH THE REVISED 3809 REGULATIONS

The Proposed Regulations Described in Alternative 3 are a 
Solution in Search of a Problem
    As stated in the WMC's June 18, 1997 letter to Mr. McNutt, 
the BLM must develop a Statement of Purpose and Need. The WMC 
recognizes that the Draft EIS includes a statement of ``Purpose 
of and Need for Action.'' However, the data presented in the 
Draft EIS do not support this statement--especially with 
respect to problems described for Notices of Intent (NOIs).
    The BLM must justify the proposed revisions to the 3809 
regulations. The Draft EIS and other BLM materials furnished to 
date provide no compelling reasons to change the regulations. 
In fact, an April 1992 BLM study of the 3809 regulations showed 
no need for any changes to the environmental or reclamation 
provisions of these regulations. The BLM policies and 
guidelines developed since 1992 including the cyanide, acid 
rock drainage, and surface occupancy guidelines are substantive 
contributions to the 3809 program, suggesting the conclusions 
reached in April 1992 remain valid. In fact, as discussed 
below, the data presented in the Draft EIS do not support the 
conclusion that the regulations need substantial revision.
    The WMC questions the appropriateness of the BLM's proposal 
to revise these long-standing regulations that have been 
working well in light of the following: the large number of 
environmentally responsible mines developed under the 3809 
regulations, the industry's good track record in complying with 
these regulations, the requirement at 43 C.F.R. Sec. 3809.0-
5(k) that mining operations comply with all applicable state 
and Federal environmental and reclamation laws, and the 
complete absence of any actual evidence that the existing 
regulations are inadequate.
    The Draft EIS Mischaracterizes "Problems" Associated with 
Notices of Intent. Throughout the rulemaking process, the BLM 
has asserted that one of the principal reasons the 3809 
regulations need to be rewritten is due to environmental 
problems associated with NOIs. However, the data in the Draft 
EIS do not support this contention. To the contrary, the data 
presented suggest that problems associated with NOls are 
limited in scope and nature.
    In describing the environmental consequences of the No 
Action Alternative (i.e., no changes to the NOI process), the 
Draft EIS states the following:

        ``Notice provisions could be difficult to enforce 
        because no reclamation bond is required for Notice-
        level activity. The lack of a bond and enforcement 
        process could result in areas not being reclaimed when 
        operators leave, although this is not a common 
        practice. BLM issued about 500 notices of noncompliance 
        (out of about 29,400 Notices filed for failure to 
        reclaim, representing 2 percent of all Notices 
        submitted. (Draft EIS, page 89, emphasis added).
    Although the WMC would like to see the mining industry 
strive for a 100 percent compliance record, a 98 percent 
compliance track record (i.e., a two percent noncompliance 
history) hardly constitutes a serious problem. In fact, this 
high level of compliance impresses us as a significant 
achievement. The BLM should evaluate other alternatives like 
better implementation (see the discussion below recommending an 
NOI Alternative), to evaluate ways to correct the 2 percent 
noncompliance problem. There is no justification for the BLM's 
Proposed Action (Alternative 3) for a wholesale rewrite of the 
regulations.

Congress Has Already Solved the N0I ``Problem''

    To the extent to which a problem existed with the NOI 
process, it appears that Congress solved this problem in August 
1993 with the vote to eliminate assessment work. In August 
1993, Congress changed the requirement for mining claimants to 
perform $100 of annual assessment work on each unpatented 
claim, and substituted the current requirement to pay an annual 
claim maintenance fee. Although many claim owners performed 
sound geologic work (i.e., drilling, sampling, geophysical 
surveys, etc.) to satisfy the assessment work requirement, some 
claim holders did not. Some claimants would fulfill the 
assessment work requirement mainly through trenching and other 
surface disturbing activities. Mining claimants' need to 
perform physical, on-the-ground work to meet the assessment 
work requirement (and to create visible proof that the work had 
been done) was thus the driving force behind much of the NOI-
level surface disturbance created prior to 1993.
    Data compiled by the BLM in Nevada proves that the number 
of problematic NOIs has dramatically declined following the 
elimination of the assessment work requirement in 1993. In 
August 1997, the Nevada State Office of the BLM provided 
information to Nevada Assemblywoman Marcia de Braga (chair of 
the Assembly Committee on Natural Resources, Agriculture and 
Mining) with a table entitled ``BLM-Nevada State Record of 
Environmental Problems Associated with Notice-Level Mining or 
Exploration.'' This table lists 156 problematic NOI sites in 
Nevada. A review of this table reveals that only 10 of the 156 
problem NOls were filed in 1993 or later. Five of the problem 
NOIs were filed after 1993. The remaining five problematic NOIs 
were filed in 1993. An examination of the 1993 NOls would 
reveal whether the surface disturbance occurred prior to 
August, 1993 when the assessment work requirement was 
eliminated.
    At the very least, the Draft EIS should be revised to 
evaluate the extent to which there are problems with NOIs filed 
since 1993.

Inaccurate and Inflammatory Statements in the Draft EIS Should 
be Eliminated

    The WMC is very concerned about the following inaccurate 
and inflammatory statement on page 89 of the Draft EIS:

        ``Under the existing regulations, if the area occupied by an 
        operation increases by no more than 5 acres a year, the 
        operation could remain a Notice-level mine and bypass the Plan 
        of Operations process. Some operations could become fully 
        operational mines exceeding 200 acres, be regulated only by a 
        Notice, and still not have to undergo environmental review.''
    Many of our members have worked with BLM offices throughout the 
western U.S., and have extensive experience with both the NOI and the 
Plan of Operations processes. None of us have encountered this scenario 
with any NOI, or in any BLM office. Our collective experience is that 
the BLM fully enforces the 5-acre limit on NOIs in compliance with the 
current regulations which state the following at Sec. 3809.1-4: ``An 
approved Plan of Operations is required prior to commencing:

        (a) operations which exceed the disturbance level (5 acres) 
        described in Sec. 3809.1-3 of this title.''
    The scenario on page 89 cited above strays so far from our 
collective experience that we are forced to conclude that it has been 
created from whole cloth. This apparent excursion from reality 
significantly diminishes the credibility of the entire Draft EIS and 
calls into question the BLM's intentions and ability to perform an 
objective environmental analysis based on fact and sound science
    There is simply no evidence to suggest that mines exceeding 
200 acres have been or can be permitted with an NOI in the 
unlikely event that this scenario accurately describes a 
project somewhere on BLM-administered land, it would clearly be 
an example of improper implementation of the existing 
regulations. If such a project exists, it is inappropriate to 
recommend comprehensive changes to the 3809 regulations when 
proper administration of the existing regulatory program would 
solve the problem. It is equally improper to justify the need 
for new regulations based on one, extreme example.

    The Draft EIS Should Evaluate a Specific Alternative 
Devoted to Changes to the Notice of Intent Process

    The Draft EIS describes a concern that NOI-level activities 
are occurring in environmentally sensitive areas without 
adequate BLM involvement. However, it is the collective 
experience of our members that the BLM commonly places 
restrictions and requirements on NOI-level activities to 
protect cultural resources, riparian areas, wetlands, wildlife, 
and other environmental resources. Based on this experience, 
the BLM has demonstrated that the agency already has 
appropriate regulatory tools and policies for controlling 
impacts associated with NOI-level operations. If problems are 
occurring, they are most likely due to poor administration and 
implementation of the existing regulations--not due to 
inadequate regulations. These administrative problems and 
implementation inconsistencies probably result from budget and 
staffing constraints.
    With this in mind, the WMC requests that the BLM evaluate a 
fifth alternative--``The NOI Alternative.'' This alternative 
should focus on the NOI process and how to use the existing 
regulations to address any remaining problems (i.e., non-
assessment work issues) associated with failure to reclaim NOI 
sites, or NOI activities in sensitive areas. The NOI 
Alternative should determine how increased staffing and budget 
levels could achieve more consistent and improved oversight of 
NOI activities. We also recommend that this alternative 
consider adding a bonding requirement for NOI-level operations.
    The WMC finds no justification whatsoever for the BLM's 
current proposal for a complete revision of the 3809 
regulations. We feel that proper analysis of an NOI Alternative 
would show that any real problems with the existing regulations 
could be solved with focused, surgical changes to the rule, and 
more consistent and complete implementation of the existing 
3809 regulations.

    Comments on the BLM's Small Business and Regulatory 
Flexibility Act Analysis with Respect to Exploration and Nevada

The BLM's Economic Analysis is Seriously Flawed

    Many WMC members work as independent consultants, contract 
exploration geologists, or are employed by small businesses. 
The Draft EIS is grossly dismissive of the adverse economic 
impact that the proposed regulations (i.e., Alternative 3) 
would have on for small businesses. The WMC finds the BLM's 
economic analysis as presented in the ``Initial Small Business 
and Regulatory Flexibility Act Analysis'' and the Draft EIS 
wholly inadequate. The shortcomings in the BLM's economic 
analysis as presented in the Draft EIS would be laughable if it 
were not for the importance of this issue and the severe 
economic and lifestyle consequences that many of our members 
would experience if Alternative 3--The Proposed Action is 
enacted. Additionally, many of our members live and work in 
Nevada. The Draft EIS and the Regulatory Flexibility Act (RFA) 
analysis conclude that the adverse economic impact on Nevada 
would be insignificant. This conclusion is wrong. The flaws and 
inadequacies contained in the BLM's economic analysis are 
described below.

1992 Data Are Not Representative of Today's Industry.

    The BLM's Regulatory Flexibility Act (RFA) analysis is 
based on 1992 data. The industry has significantly changed and 
contracted since 1992 due an increasingly hostile regulatory 
and political climate for mining in the U.S., corporate 
downsizing and mergers, and reduced metals prices. The dramatic 
decline in the number of NOls and Plans of Operation since 1992 
shown in Figure I (RFA, page 92) should be sufficient 
indication that it is inappropriate to use 1992 information to 
model the impact of the proposed regulations on today's 
industry.

The RFA Mischaracterizes; Impacts on Exploration

    The BLM's analysis fails to consider mineral exploration 
and mining as distinctly different industry sectors, and 
focuses most of the evaluation on its impact on mining 
companies (e.g., companies with operating mining properties). 
Moreover, the RFA analysis completely ignores the impact upon 
independent exploration geologists who earn their living 
working as consultants and contractors to mining companies. 
Some of these individuals also own mining claims and pursue 
exploration activities on their own behalf with the hope of 
leasing their claims to mining companies. These individuals 
comprise a significant portion of the exploration industry 
sector. As one measure of the importance of this group to the 
exploration industry, roughly one-third of the 925 members 
listed in the Geological Society of Nevada's recently published 
1998-1999 membership directory are described as individual 
geologists, geologic consultants, and independent consultants.
    Although the RFA analysis acknowledges that exploration is 
typically performed by small companies, the underlying 
assumption is that most exploration is conducted by companies 
rather than individuals:
        ``Exploration activities are often considered higher risk 
        activities and may be conducted by relatively less well 
        capitalized firms. However, a substantial portion of 
        exploration activities are conducted by major mining companies 
        which would not be expected to be impacted by changes to the 
        bonding requirements. Available data does not allow the BLM to 
        readily distinguish between the employment and financial 
        characteristics of existing Notices.'' RFA, page 93).
    It should be noted that while larger companies may perform a 
significant portion of the Notice and Plan level exploration work, many 
retain contract geologists to conduct this work.

The RFA Analysis Fails to Recognize Impacts to Individual Geologists as 
an Industry Group

    The RFA analysis concludes that the proposed regulations 
would have an insignificant impact upon the mining industry, 
but fails to consider the impacts on the exploration sector as 
a whole and on the independent exploration geologist segment of 
the exploration sector. The impact of the proposed regulations 
is described as ranging from $17,300 to $127,000 on an annual 
basis, or $72,140-$533,857 over the period of analysis on each 
affected entity (RFA, page 95). According to the RFA, analysis 
this impact equates roughly to 1 percent of the 1997 total U.S. 
value of locatable mineral production of $17.7 billion, and 
about 5 percent of the $1.62 billion estimated value of 
locatable minerals production in the western U.S.
    This analysis is wholly inappropriate for the exploration 
sector of the industry which should be evaluated as a Research 
and Development arm of the industry--not a revenue producer. 
Moreover, this characterization ignores the impact to the group 
of independent geologists that form a significant element of 
the exploration sector. WMC members do not look forward to a 
reduction in annual income of $17,300 to $127,000, and find the 
BLM's characterization of this impact as ``insignificant'' to 
be insensitive and offensive. It is highly likely that our male 
colleagues who are individual geologists and consultants have a 
similar perspective. In fact, it is hard to imagine that anyone 
(except perhaps Bill Gates and others in his income group) 
would consider such a reduction in income to be without 
significance.

The RFA Analysis Ignores the Real Costs Associated with the 
Plan of Operations--EA Process

    The RFA analysis further characterizes the impact on 
exploration activities as an annual cost increase ranging from 
0-38 percent, depending upon whether a validity exam and a Plan 
of Operations are required. For most exploration projects, the 
RFA analysis (page 101) assumes that in most cases, only a Plan 
of Operations will be required and that the costs associated 
with a Plan of Operations are on the order of $25,000. 
Presumably, this cost increase includes preparation of a third-
party Environmental Assessment (EA), although the RFA analysis 
is vague on this point. The RFA analysis does not provide any 
data to substantiate this cost estimate. Based on our members's 
experience, average costs for a Plan of Operations and third-
party EA for an exploration project are substantially more than 
$25,000.
    Moreover, the RFA analysis completely ignores the time 
value of money issue, seasonal constraints associated with 
exploration, and the substantial delays typical for the Plan of 
Operation/EA process. (The WMC incorporates by reference 
herein, information that the industry has recently provided 
comments to the Office of Management and Budget that 
substantiates that securing approval of a Plan of Operations is 
significantly higher than $25,000. See, for example, the March 
25, 1999 letter from R. Timothy McCrum to Mr. David Rostker, 
Policy Analyst with the Office of Information and Regulatory 
Affairs, OMB).
    Even if the average cost increase of $25,000 in the RFA 
analysis were a valid estimate, it is inappropriate to 
characterize this increase as inconsequential. Once again the 
RFA analysis has assumed that exploration is being performed by 
larger mining companies that are capable of absorbing this cost 
increase. The analysis completely fails to consider the 
significance of this impact on the individual geologist sector, 
both in the context of time and money.
    The draft regulations would give the BLM considerable 
discretionary authority to require a Plan of Operations for 
exploration proposals that would disturb fewer than five acres 
(i.e., work that can currently be undertaken by filing a Notice 
of Intent). However, the RFA analysis inappropriately downplays 
the circumstances in which a Plan of Operations rather than a 
Notice of Intent would be required:

        ``. . . For the most part, exploration activities would not 
        require an extensive or detailed Plan of Operations due to the 
        nature of the activities. The infrequent need for validity 
        exams and the limited need to prepare detailed Plans of 
        Operation suggests that the cost increases associated with the 
        proposed regulation are likely to be quite low, perhaps 5 
        percent, or less.'' (RFA, page 102).
    It is unclear what the BLM means by ``an extensive or detailed Plan 
of Operations'' because the data requirements for a Plan of Operations 
are established in the 3809 regulations. Perhaps the reference to 
``extensive or detailed'' pertains to the scope of the EA that is 
required to evaluate and approve a Plan of Operations. In any event, 
the RFA analysis completely misses the point. The increased costs, both 
in time and money, are associated with the NEPA process and the 
associated Federal consultation requirements (e.g., for cultural 
resources, Native American issues, threatened and endangered species, 
etc.)--not with preparation of the Plan of Operations. The RFA's 
characterization of the increased exploration costs associated with the 
proposed regulations is inaccurate and disingenuous at best.

The RFA Ignores Impacts to Nevada

    Another significant flaw in the RFA analysis is its failure 
to analyze impacts on a regional basis. The RFA evaluates 
impacts nationwide rather than looking at specific geographic 
regions that are likely to bear the brunt of the adverse 
impacts associated with the proposed regulations. This allows 
the impacts to be homogenized and smoothed out across the 
country, thereby masking the significantly adverse consequences 
that the proposed regulations will have on areas in which 
exploration and mining are a major portion of a region's 
economy. This is a significant shortcoming in the RFA in light 
of the fact that the Draft EIS includes a number of statements 
that disclose that Nevada will be more adversely affected by 
the proposed regulations than other states. For example, in 
discussing the decrease in the value of mine production from 
public lands that would result due to the draft regulations 
(the Proposed Action and Preferred Alternative--Alternative 3), 
the Draft EIS states:
        ``Most states would see decreased levels of mining on public 
        lands, ranging from $55,000 in Oregon to $93 million in Nevada. 
        Nevada's share of the loss would be more than half of the loss 
        for the study area as a whole.'' (Draft EIS, page 214).

Substantial Revisions are Needed for the Economic Analysis and the 
Draft EIS

    The RFA analysis and the Draft EIS improperly characterize the 
exploration component of the mining industry and fail to analyze and 
disclose impacts to individuals and small businesses involved with 
exploration. As the Research and Development (R&D) arm of the mining 
industry, exploration is critically important to the long-term future 
of mining in the U.S. A regulatory climate that restricts exploration 
will ultimately cause a significant down-turn in future mining 
activities. Thus, the adverse economic impacts associated with the 
proposed alternative are substantially underestimated.
    The RFA analysis and Draft EIS should be revised to correct 
the significantly flawed analysis of the impact of the proposed 
regulation on the exploration sector. The revised documents 
should analyze the severe impacts that the proposed regulations 
would have on individual geologists and consultants, and 
disclose the long-term adverse effect that reduced exploration 
would have on mining.

CONCLUSION

    In our June 1997 letter to Mr. McNutt, the WMC expressed 
concerns that the Secretary was using the 3809 rulemaking 
process to advance a political agenda. We have ongoing concerns 
that this is the case--especially in light of recent Department 
actions such as the Solicitor's opinion regarding millsite and 
lode claim ratio requirements. We believe the 3809 rulemaking 
process should be an opportunity for collaboration and 
constructive dialogue based on facts, science, and an honest 
assessment of the level of environmental protection and 
reclamation successes achieved under the status quo.
    Political rhetoric will only detract from the outcome of 
this process. The Secretary's ongoing politicization of mining 
issues is unfortunate and inappropriate, and we hope in the 
future the Secretary and others can put aside politics to 
decide this important issue. One immediate action that the 
Secretary should take to reduce the political invective would 
be to extend the comment period on the Draft EIS until after 
the Natural Research Council/National Academy of Sciences (NRC/
NAS) Committee on Hardrock Mining on Federal Lands has 
completed their Congressionally mandated study. The Secretary's 
current schedule ignores Congress' desire that the results of 
the NRC/NAS study be incorporated into the final rule, and 
wastes the $800,000 of taxpayers' money earmarked for the 
study.
    Due to the unreasonably rushed public comment period, the 
WMC has not had sufficient time to complete our review of the 
significant volume of materials furnished with this rulemaking. 
Therefore, the absence of specific comments in this letter 
should not be construed as agreement with any of the issues or 
concepts presented in the Draft EIS, the Initial Regulatory 
Flexibility Act, the proposed rule or any other BLM materials 
associated with this rulemaking.
    Sincerely,

    Ann Carpenter
    President

Barbara Sullivan
Secretary

Dominique Cone
Vice President

Debra Struhsacker
Author of Letter

Laurabelle Minser
Treasurer
Attachment: WMC June 18, 1997 letter to Mr. Paul McNutt, 3809 
EIS Team Leader
Mr. Paul McNutt, 3809 EIS Team Leader
Bureau of Land Management, Nevada State Office
850 Harvard Way
Reno, NV 89502-2055

Dear Mr. McNutt:

INTRODUCTION

    The Womens Mining Coalition (WMC) is a grassroots 
organization of women involved with the hard rock mining 
industry. Our membership is comprised of women working in many 
facets of the mining industry including geology and 
exploration, engineering, business and management, mining and 
heavy equipment operation, equipment manufacturing, and sales 
of goods and services to the mining industry. We have over 437 
members located from coast to coast in 36 different states.
    The WMC is keenly interested in the Department of Interior, 
Bureau of Land Management's (BLM's) current efforts to revise 
the 43 C.F.R. Subpart 3809 regulations (``the 3809 
regulations'') because many of our members work at mines 
located on BLM-administered lands, and a number of our members 
work for companies that provide equipment, goods and services 
to mines on BLM lands. Based on first-hand experience, many WMC 
members can attest to the success which the 3809 regulations 
have had in promoting environmentally responsible mining and 
effective reclamation of mines on BLM-administered lands.
    The WMC welcomes this opportunity to provide comments to 
the BLM regarding the agency's proposal to revise the 3809 
regulations. We are responding to the issues raised in the 
March 1997 materials from the BLM's 3809 Task Force that 
outline issues to be considered during the proposed scoping and 
revision of the 3809 regulations, and to comments made by 
Secretary Babbitt in his January 6, 1997 memorandum to the 
Assistant Secretary, Land & Minerals and the Acting Director, 
BLM.
    In developing our comments, we have relied on our members' 
experience in working on mining and mineral exploration 
projects on BLM lands, and have given special consideration to 
the following:
         The strength, comprehensive nature, and proven track 
        record of the 3809 regulations;
         The level of environmental protection and the 
        reclamation achieved under the current regulatory framework 
        applicable to mining, including the 3809 regulations;
         The lack of any compelling justification or need 
        identified by the BLM that would warrant modification of the 
        3809 regulations;
         The shortcomings of the BLM's scoping efforts and the 
        inappropriateness of the BLM's plans for concurrent development 
        of both the Draft Environmental Impact Statement (DEIS) and the 
        revised 3809 regulations;
         The alternatives and issues we feel need to be 
        evaluated in the DEIS; and
         Our concerns that the effort to revise the 3809 
        regulations not be misused as a political process.

COMMENTS ON THE ISSUES RAISED BY SECRETARY BABBITT AND THE 3809 TASK 
FORCE SCOPING MATERIALS

Definition of Unnecessary or Undue Degradation

    Many WMC members have direct experience in working under the 3809 
regulations and implementing measures at the mine sites at which they 
work to prevent unnecessary or undue degradation. It is our collective 
experience that the unnecessary or undue degradation clause of the 3809 
regulations has proven to be a comprehensive mechanism that effectively 
mandates environmental protection. Given the level of environmental 
protection required by this clause, the impressive track record of the 
industry's compliance with this standard, and the numerous examples of 
environmentally responsible mining and outstanding reclamation at mines 
developed since 1981 under the jurisdiction of the 3809 regulations, we 
find no justification whatsoever to modify the definition of 
unnecessary and undue degradation.
    Our members find that the unnecessary and undue degradation 
definition specified in 43 C.F.R. Sec. 3809.0-5(k) requires stringent, 
comprehensive, and appropriate levels of environmental protection for 
the following reasons:

         The definition states ``Failure to comply with 
        applicable environmental protection statutes and regulations 
        thereunder will constitute unnecessary or undue degradation.'' 
        This requirement to comply with other state and Federal 
        environmental regulations is an effective built-in mechanism 
        for continually updating the 3809 regulations by incorporating 
        all other relevant environmental laws and regulations 
        simultaneously with their enactment.
         The requirement to comply with ``applicable 
        environmental protection statutes and regulations'' 
        automatically encompasses all environmental performance 
        standards, including technology-based standards from other 
        environmental and reclamation laws, as well as financial 
        assurance requirements mandated in state and Federal laws and 
        regulations.
         The current definition appropriately implies a site-
        specific environmental performance standard. Retention of this 
        site-specific concept is critically important to ensure that 
        environmental and reclamation measures employed at mines on 
        BLM-administered land are responsive to site environmental 
        conditions. The enormous diversity of climate, terrain, 
        geology, and the biologic and social environments at mines on 
        BLM-administered lands throughout the country demands a site-
        specific performance standard that gives the BLM the necessary 
        regulatory flexibility and discretion to make custom-tailored 
        decisions appropriate for the site under consideration.
         The current definition is a rigorous standard that 
        demands comprehensive environmental protection and reclamation 
        at mines on BLM-administered land. The BLM's ability to make 
        site-specific decisions about mines in no way lessens the 
        mining industry's burden of compliance compared to other 
        industries. Like all industries, the mining industry must 
        comply with all applicable state and Federal environmental 
        protection laws and regulations because all mines operate under 
        the umbrella of these provisions in addition to the 3809 
        regulations.
         Secretary Babbitt's January 6, 1997 memorandum on the 
        3809 regulations advocates modifying the 3809 regulations to 
        include a new standard mandating the use of ``best available 
        technology and practices.'' Any modification of the 3809 
        regulations to include a best available technology and 
        practices standard would be inappropriate because it would not 
        improve environmental performance, add any extra measure of 
        environmental protection, or achieve better reclamation at 
        mines on BLM-administered land. To the contrary, the one-size-
        fits all approach implicit in the best available technology 
        standard would result in inferior reclamation because there is 
        no best universal approach to reclamation. Superior reclamation 
        can only be achieved if the BLM and mine operators retain the 
        ability to custom-tailor reclamation measures to fit site-
        specific environmental conditions. The wide range of 
        environmental conditions on BLM-administered lands throughout 
        the country demand the flexibility currently provided by the 
        unnecessary and undue degradation definition.

The 5-Acre Threshold for Notice Level Activities

    The BLM must retain a process that allows for rapid review and 
authorization of mineral exploration activities in order to remain in 
compliance with the provisions of Sec. 2 of the Mining and Mineral 
Policy Act of 1970, Sec.  102(a)(7),(8), and (12) of the Federal Land 
Policy and Management Act of 1976 (FLPMA), and the 3809 regulations 
that direct the Department of Interior to encourage the development of 
Federal mineral resources and reclamation of disturbed lands. For 
example, 43 U.S.C. Sec. 3809.0-1(a) states that one of the objectives 
of the 3809 regulations is to:

        ``Provide for mineral entry, exploration, location, operations, 
        and purchase pursuant to the mining laws in a manner that will 
        not unduly hinder such activities but will assure that these 
        activities are conducted in a manner that will prevent 
        unnecessary and undue degradation and provide protection of 
        non-mineral resources of the Federal lands;''
    Many WMC members are exploration geologists actively engaged in 
mineral exploration efforts on BLM-administered land and thus have 
direct and extensive experience working under the Notice of Intent 
(NOI) 5-acre process. Based on this experience, we are unaware of 
environmental problems associated with exploration activities performed 
under NOIs.
    The unnecessary and undue degradation performance standard 
mandated in the 3809 regulations applies to mineral exploration 
activities pursued under either an NOI or a Plan of Operations 
(PLAN). Thus compliance with all applicable environmental laws 
and regulations, and appropriate reclamation are requirements 
for both NOI and PLAN sites. Those WMC members who are 
exploration geologists, environmental coordinators, and 
reclamation specialists have been personally responsible for 
implementing reclamation measures and ensuring compliance with 
the unnecessary and undue degradation performance standard at 
numerous NOI sites throughout the country, and can attest to 
the environmental protection measures, standard of care, and 
reclamation efforts typically performed at NOI sites.
    The BLM's scoping materials do not reveal any identified 
problems with the 5-acre NOI threshold. Absent any clearly 
stated problem with the 5-acre NOI threshold, and in light of 
the stringent environmental protection and reclamation 
requirements applicable to NOI sites, the WMC sees no 
justification whatsoever for changing the 5-acre NOI process 
for mineral exploration sites. Should the BLM have concerns 
regarding the limited number of mining operations that may be 
authorized under an NOI, the WMC recommends the BLM make 
specific comments regarding any issues or concerns affecting 
these operations, and confine the analysis of changes to the 5-
acre NOI process to these types of sites.
    It is critically important that the BLM retain a process to 
expedite the review and authorization of exploration-level 
activities. Weather constraints at exploration sites in a 
number of settings throughout the country severely limit the 
practical exploration season. Moreover, a number of 
stakeholders including but not limited to geologists, 
consultants, drilling contractors, analytical laboratories, and 
restaurant owners and motel/hotel operators in exploration 
areas earn a significant portion of their livelihood during 
this exploration season. Any changes to the review and 
authorization process for small and initial (i.e., under 5 
acres) exploration efforts that result in significant delays in 
the approval process will adversely affect these stakeholders. 
With this in mind, a thorough analysis of the socioeconomic 
ramifications to these stakeholders of any proposed changes to 
the NOI review process must be included in the DEIS prepared to 
evaluate revisions to the 3809 regulations.
    In evaluating any potential changes to the 5-acre NOI 
threshold, the BLM must consider its newly established 
(February, 1997) bonding requirements for NOI sites. It should 
be noted that the WMC strongly supports reclamation and 
appropriate financial assurance requirements at all mine and 
mineral exploration sites, regardless of their size. However, 
we strenuously object to the process--or in this case the lack 
of process, used by the Secretary to promulgate these new 
bonding requirements.

Time Frames for BLM Action on Plans of Operations

    The WMC encourages the BLM to establish and comply with 
mandatory time frames for reviewing and approving PLANS. The 
mining industry is currently experiencing problematic delays in 
the BLM's PLAN approval process. For the most part, the delays 
are related to the time it takes the BLM to prepare an 
Environmental Assessment (EA) or an Environmental Impact 
Statement (EIS) as required by the National Environmental 
Policy Act (NEPA). At least some delays appear to be due to 
insufficient BLM staffing levels. Establishing clear regulatory 
deadlines should help define BLM staffing requirements.
    The DEIS should evaluate the potential for further delays 
in the BLM's PLAN approval process if substantial changes are 
made to the 3809 regulations. This evaluation should assess the 
expanded BLM staffing levels that would be required to (1) 
avoid additional delays, and (2) to decrease the time required 
for BLM PLAN approval.

Coordination with the States

    Coordination with state regulatory agencies is one of the 
stated objectives of the 3809 regulations and directives in the 
Secretary's January 6, 1997 memorandum. Specifically, 43 C.F.R. 
Sec. 3809.0-1(c) states the following:

      ``Coordinate, to the greatest extent possible, with 
appropriate state agencies, procedures for prevention of 
unnecessary or undue degradation with respect to mineral 
operations.''
    To satisfy this objective, and to minimize duplication 
among regulators as directed by the Secretary, the BLM must 
continue to work closely with state agencies because all of the 
western mining states have comprehensive environmental and 
reclamation regulations applicable to hard rock mining.
    The WMC strongly encourages the BLM to continue to 
coordinate and cooperate with western state regulatory 
agencies, many of whom have significant and valuable experience 
in regulating the environmental aspects of hard rock mining. 
Many WMC members, having worked in a number of western states, 
have first-hand experience with the states' expertise and the 
current level of coordination between the BLM and the states. 
It is the WMC's opinion that the states and the BLM are working 
well together and that the mining operations under this joint 
state-Federal regulatory jurisdiction are complying with 
applicable environmental requirements and implementing 
successful reclamation measures. The WMC sees no reason to 
change these cooperative efforts.

Performance Standards

    Because the unnecessary and undue degradation standard in 
the 3809 regulations mandates compliance with all applicable 
state and Federal environmental laws and regulations, hard rock 
mining operations on BLM land must already comply with a number 
of environmental performance standards. Mining operations 
developed under these regulations expend considerable resources 
complying with these requirements. The 3809 regulations also 
establish another performance standard--the mandate to 
``Provide for reclamation of disturbed areas'' [see 43 C.F.R. 
Sec. 3809.0-2(b)], but wisely and appropriately do not include 
prescriptive, one-size-fits-all reclamation performance 
standards.
    Given the diversity of climate, terrain, geology, mineral 
deposit types and mining methods regulated under the 
jurisdiction of the 3809 regulations, uniform Federal 
reclamation performance standards would be completely 
inappropriate and would significantly diminish the quality of 
reclamation currently being achieved at hard rock mines on BLM 
lands. In 1979, the National Academy of Sciences performed an 
independent review of the hard rock mining industry and 
evaluated whether uniform, Federal environmental or reclamation 
standards would be appropriate. This study, known as the COSMAR 
Report, concluded that hard rock mining standards must be 
tailored to site-specific conditions in order to be responsive 
to the diversity of the environmental settings in which hard 
rock mining occurs in the U.S.

COMMENTS ON THE SCOPE OF THE ENVIRONMENTAL IMPACT STATEMENT 
DEVELOPED IN CONJUNCTION WITH THE REVISED 3809 REGULATIONS

Irregularities in the Public Scoping Process

    In conjunction with revising the 3809 regulations, the BLM 
will be developing a programmatic EIS to evaluate the impacts 
associated with the proposed regulatory changes. The WMC feels 
it is imperative for the BLM to conduct a comprehensive and 
detailed analysis of the impacts of any proposed revision, and 
consider stakeholder issues, concerns, and comments. With this 
in mind, we support preparation of a programmatic EIS. However, 
the WMC has significant concerns regarding the BLM's public 
scoping efforts and plans for developing the EIS, and question 
whether these efforts and plans satisfy the spirit and 
obligations of NEPA.
    A number of WMC members have considerable experience 
working with the BLM during preparation of NEPA documents for 
proposed mining projects on BLM land. This experience runs the 
gamut from project proponent to third-party consultant selected 
to prepare the NEPA document. The BLM's public scoping process 
and plans for developing the programmatic EIS do not conform 
with the public scoping process typically used by the BLM for 
mining projects, and in our opinion, may not fully comply with 
NEPA requirements for the following reasons:

         The BLM Must State a Proposed Action Prior to Public 
        Scoping--The BLM's scoping documents do not include a 
        definitive and specific Proposed Action statement. The absence 
        of a specific Proposed Action statement makes it impossible for 
        the public to provide substantive comments regarding the BLM's 
        proposal. Thus, the scoping performed to date is generic in 
        nature and does not satisfy NEPA requirements to allow the 
        public to comment on the agency's proposal because none has 
        been set forth.
      The BLM Must Develop a Statement of Purpose and Need--In addition 
to lacking a Proposed Action, the BLM's scoping notice also does not 
provide a statement of Purpose and Need. The absence of a statement of 
Purpose and Need is another shortcoming with respect to NEPA and the 
Council on Environmental Quality (CEQ) regulations for implementing 
NEPA (40 C.F.R. Sec. 1502.13) which state that every EIS must ``briefly 
specify the underlying purpose and need to which the agency is 
responding in proposing the alternatives including the proposed 
action.''
      The BLM must justify their proposal to revise the 3809 
regulations. To date, the BLM has offered no compelling reason 
to change the regulations. In fact, the April 1992 BLM study of 
the 3809 regulations showed no need for any changes to the 
environmental or reclamation provisions of these regulations. 
Thus it appears there are no tangible or substantive reasons to 
modify the regulations. If the BLM is relying on any new 
information which might justify changing the 3809 regulations, 
this new information should be made available to the public.
      The WMC questions the appropriateness of the BLM's 
proposal to revise these long-standing regulations that have 
been working well in light of the following: the large number 
of environmentally responsible mines developed under the 3809 
regulations, the industry's good track record in complying with 
these regulations, the requirement at 43 C.F.R. Sec. 3809.0-
5(k) that mining operations comply with all applicable state 
and Federal environmental and reclamation laws, and the 
complete absence of any stated need to modify the 3809 
regulations.
         The BLM Should Provide Additional Scoping--To comply 
        with NEPA, the BLM should hold additional scoping sessions 
        following development of a draft proposal to revise the 3809 
        regulations to allow the public to comment on the specifics of 
        the proposed changes to the regulations. As stated above, the 
        scoping effort performed to date is generic in nature and 
        insufficient to allow public input on the proposed regulatory 
        changes.
         The BLM Should Prepare the DEIS After Public Scoping 
        on the Draft Revisions to the 3809 Regulations
    As stated in the March 12, 1997 memorandum from Sylvia Baca, Acting 
BLM Director, to Bob Armstrong, Assistant Secretary, Lands and Minerals 
Management, the BLM plans to develop the Draft EIS (DEIS) concurrently 
with developing the proposed revisions to the 3809 regulations. The WMC 
feels this is a completely inappropriate aberration of the NEPA 
process. NEPA provides the public both a right and an orderly process 
for commenting upon major Federal actions. The simultaneous preparation 
of the DEIS and the revised regulations puts the cart before the horse, 
denies the public the right to comment on a specific proposed action, 
and is a significant departure from the typical public NEPA review 
process.
      The DEIS should evaluate the impacts of the proposed 
revisions to the 3809 regulations and should consider and 
respond to public issues, comments, and concerns about the 
proposed revisions. Therefore, the DEIS should not be prepared 
until after the public has had an opportunity to review and 
comment upon the BLM's draft proposal for revising the 3809 
regulations.

Alternatives and Issues to be Evaluated in the DEIS

    The WMC supports preparation of a DEIS that comprehensively 
evaluates the range of alternatives to revising the 3809 
regulations, and thoroughly analyzes the impacts associated 
with each alternative. With this in mind, we offer the 
following comments and suggestions:

The DEIS Must Include a Detailed Discussion of the No Action 
Alternative--The DEIS must include a substantive and thorough 
analysis of the No Action Alternative to evaluate the level of 
environmental and reclamation regulatory requirements that 
would be applicable to future mining projects on BLM lands with 
no changes to the 3809 regulations. The No Action Alternative 
must consider existing state and Federal regulatory programs 
and the BLM's existing authority and recent use of this 
authority to modify the 3809 Regulations through policy 
guidelines and rulemaking on selected topics (e.g., the 
development of BLM policy guidance on acid rock drainage and 
cyanide, and new occupancy and bonding rules).
         The DEIS Must Analyze the Wide Range of Sites and 
        Mines Regulated Under the 3809 Program There is an enormous 
        diversity of climate, terrain, geology, mineral deposit types, 
        and mining methods represented by mine sites on BLM lands. Both 
        the Affected Environment and Environmental Consequences 
        chapters of the DEIS must give full and equal weight to the 
        many different types of environmental settings and mines, and 
        provide a separate analysis of the impacts that would occur at 
        these different settings and mines if the various alternatives 
        considered in the DEIS were implemented.
         The DEIS Must Include a Detailed Analysis of State and 
        Other Federal Environmental Laws and Regulations Affecting 
        Mining--The Affected Environment chapter of the DEIS should 
        also include a detailed discussion of the many state 
        environmental and reclamation regulatory programs and Federal 
        laws and regulations affecting mining. The Environmental 
        Consequences chapter should assess how these programs would be 
        affected due to implementation of the DEIS alternatives. In 
        particular, this analysis should quantify impacts to state mine 
        land reclamation programs and Federal environmental regulatory 
        programs for which the states have primacy. Because many of 
        these state regulatory programs were developed after enactment 
        of FLPMA and development of the 3809 regulations, the DEIS 
        should acknowledge the evolution of these programs and the 
        coordination that has developed between the BLM and state mine 
        land reclamation and environmental regulatory agencies.
    Based on information provided to date, the BLM has not identified 
any gaps between the 3809 regulations and state mine land reclamation 
and environmental programs. The DEIS should assess whether any such 
gaps exist. If gaps are identified, proposed changes to the 3809 
regulations should evaluate ways to fill the gaps. If this analysis 
reveals no gaps between state programs and the 3809 regulations, few if 
any revisions to the 3809 program are warranted--otherwise, the 
Secretary's directive to minimize duplicative regulations will not be 
satisfied.
         The DEIS Must Include a Detailed Analysis of 
        Socioeconomic Impacts--Any changes to the 3809 regulations that 
        could result in significant delays in approving future mineral 
        exploration and mining PLANS could cause adverse economic and 
        social impacts to mining communities, state economies, and 
        other stakeholder groups including geologists, consultants, 
        drilling contractors, analytical laboratories, and restaurant 
        owners and motel/hotel operators in mining and exploration 
        areas who derive a substantial portion of their income working 
        for or providing goods and services to the hard rock mining 
        industry. The Affected Environment chapter of the DEIS must 
        acknowledge and quantify the positive social and economic 
        impacts associated with mining. The Environmental Consequences 
        chapter must disclose any positive or adverse social and 
        economic impacts that would result from implementation of the 
        DEIS alternatives. This analysis must be site specific; a 
        generic or national evaluation will not adequately assess the 
        impacts to local communities and regional economies.
      Additionally, the DEIS must evaluate the economic impacts that 
proposed changes in the 3809 regulations would have on mining equipment 
manufacturers and companies that provide goods and services to the 
mining industry. Many of these companies are located in parts of the 
country not typically considered mining states such as Wisconsin (P & H 
Mining Equipment and Nordberg), Illinois (Caterpillar), New Jersey and 
Texas (Ingersoll Rand), etc. The continued existence of thousands of 
jobs in these states relies on a strong mining industry in the western 
U.S. The DEIS must thoroughly evaluate the economic consequences to 
these workers and to their state economies caused by changes to the 
3809 regulations.
         The DEIS Must Consider Specific Impacts to Notice-
        Level Qperators--The Secretary's directive to repeal, narrow, 
        or otherwise modify the 5 acre NOI process will have a direct 
        and focused impact upon individuals, small operators, and 
        companies who perform most of their mineral exploration and/or 
        mine development work under an NOI. The DEIS should include a 
        separate socioeconomic analysis of the impacts of the proposed 
        changes upon this groups of stakeholders. Because most mineral 
        discoveries start as NOI-level exploration projects, the DEIS 
        must also evaluate the impact that elimination of the NOI 
        process or delays in the NOI approval process would have on the 
        rate of discovery, and the impact to local, regional and 
        national economies as a result of diminished levels of 
        exploration, discovery, and mine development.
         The DEIS Must Consider Cumulative Impacts--The DEIS 
        must evaluate the cumulative impacts of any proposed changes to 
        the 3809 regulations with respect to other connected actions 
        including but not limited to the EPA's proposed National Hard 
        Rock Mining Framework, the BLM's recent use and occupancy 
        regulations, the BLM's new bonding regulations, other EPA 
        initiatives such as the recent addition of the hard rock mining 
        sector to the Toxic Release Inventory (TRI) reporting 
        requirements and potential changes to the RCRA Bevill exclusion 
        for certain mining wastes, and changes to the Mining Law of 
        1872 being contemplated by Congress. This analysis should 
        evaluate the cumulative impacts of changes in the 3809 
        regulations in conjunction with potential changes in royalties, 
        fees, taxes, reporting requirements, and a plausible range of 
        future regulatory developments.
         The DEIS Must Consider Impacts to Minerals 
        Availability--Changes to the 3809 regulations that result in 
        significant delays in the PLAN and NOI approval processes may 
        have an adverse impact on the supply of domestic hard rock 
        minerals. The DEIS should evaluate the impact that revisions to 
        the 3809 regulation would have upon minerals availability, and 
        the potential for increased reliance on foreign mineral 
        supplies. This analysis should consider the balance of foreign 
        trade payments as a result of decreases in domestic mineral 
        production. Similarly, the DEIS should consider how the 3809 
        regulations could be modified to encourage and facilitate 
        mining on BLM lands and the resulting positive economic effects 
        of increased mineral exports and decreased mineral imports.
         The DEIS Must Consider Impacts to Existing 
        Operations--The DEIS must evaluate how existing operations 
        would be affected by proposed changes to the 3809 regulations. 
        The WMC encourages the BLM to develop a grandfathering 
        alternative applicable to all existing operations. In the 
        unfortunate event that the revised 3809 regulations mandate 
        prescriptive performance standards, some element of 
        grandfathering is necessary for both existing sites and sites 
        at which a PLAN modification is filed in the future because it 
        may be impossible or impractical to retrofit existing 
        operations to comply with new standards.
         The DEIS Should Consider Alternatives to Facilitate 
        Mining and to Create Reclamation and Environmental Incentives--
        Although the Secretary's January 6, 1997 memorandum does not 
        contemplate changes to the 3809 regulations to facilitate 
        mineral exploration and mine development or to create 
        incentives for reclamation and remediation of abandoned mines, 
        a number of beneficial social and economic impacts on the 
        local, regional, and nation levels could accrue from selected 
        changes. The WMC believes that regulatory changes to streamline 
        the review process and stimulate clean-up of abandoned mines 
        would significantly enhance mineral exploration levels without 
        compromising the high level of environmental protection and 
        reclamation success realized under the present regulatory 
        system. The WMC strongly urges the BLM to expand the scope of 
        the DEIS to evaluate revisions to the 3809 regulations to 
        encourage and facilitate environmentally responsible mining and 
        reclamation of abandoned mines.
CONCLUSION

    The WMC appreciates this opportunity to provide comments to 
the BLM, and we look forward to what we hope will be a 
cooperative EIS process that includes additional opportunities 
to comment on proposed changes to the 3809 regulations. We are 
also hopeful that this process not become a political forum. We 
believe this should be an opportunity for collaboration and 
constructive dialogue based on facts, science, and an honest 
assessment of the level of environmental protection and 
reclamation successes achieved under the status quo. Political 
rhetoric can only detract from the outcome of this process. 
With this in mind, we are concerned that the Secretary's 
statement in his January 6, 1997 memorandum regarding Congress' 
failure to enact legislation reflects a political agenda. This 
politicization is unfortunate and inappropriate, and we hope in 
the future the Secretary and others can put aside politics to 
decide this important issue.
    Sincerely,

Ruth Carraher
President

Susie Patton
Treasurer

Teresa Conner
Secretary

Debra Struhsacker
Author of Letter
