[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
EFFECT OF FEDERAL MINING FEES AND MINING POLICY CHANGES ON STATE AND
LOCAL REVENUES AND THE MINING INDUSTRY
=======================================================================
OVERSIGHT FIELD HEARING
before the
SUBCOMMITTEE ON ENERGY AND
MINERAL RESOURCES
of the
COMMITTEE ON RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
April 20, 2001, in Reno, Nevada
__________
Serial No. 107-18
__________
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://resourcescommittee.house.gov
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71-816 WASHINGTON : 2002
____________________________________________________________________________
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COMMITTEE ON RESOURCES
JAMES V. HANSEN, Utah, Chairman
NICK J. RAHALL II, West Virginia, Ranking Democrat Member
Don Young, Alaska, George Miller, California
Vice Chairman Edward J. Markey, Massachusetts
W.J. ``Billy'' Tauzin, Louisiana Dale E. Kildee, Michigan
Jim Saxton, New Jersey Peter A. DeFazio, Oregon
Elton Gallegly, California Eni F.H. Faleomavaega, American Samoa
John J. Duncan, Jr., Tennessee Neil Abercrombie, Hawaii
Joel Hefley, Colorado Solomon P. Ortiz, Texas
Wayne T. Gilchrest, Maryland Frank Pallone, Jr., New Jersey
Ken Calvert, California Calvin M. Dooley, California
Scott McInnis, Colorado Robert A. Underwood, Guam
Richard W. Pombo, California Adam Smith, Washington
Barbara Cubin, Wyoming Donna M. Christensen, Virgin Islands
George Radanovich, California Ron Kind, Wisconsin
Walter B. Jones, Jr., North Carolina Jay Inslee, Washington
Mac Thornberry, Texas Grace F. Napolitano, California
Chris Cannon, Utah Tom Udall, New Mexico
John E. Peterson, Pennsylvania Mark Udall, Colorado
Bob Schaffer, Colorado Rush D. Holt, New Jersey
Jim Gibbons, Nevada James P. McGovern, Massachusetts
Mark E. Souder, Indiana Anibal Acevedo-Vila, Puerto Rico
Greg Walden, Oregon Hilda L. Solis, California
Michael K. Simpson, Idaho Brad Carson, Oklahoma
Thomas G. Tancredo, Colorado Betty McCollum, Minnesota
J.D. Hayworth, Arizona
C.L. ``Butch'' Otter, Idaho
Tom Osborne, Nebraska
Jeff Flake, Arizona
Dennis R. Rehberg, Montana
Allen D. Freemyer, Chief of Staff
Lisa Pittman, Chief Counsel
Michael S. Twinchek, Chief Clerk
James H. Zoia, Democrat Staff Director
Jeff Petrich, Democrat Chief Counsel
------
SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES
BARBARA CUBIN, Wyoming, Chairman
RON KIND, Wisconsin, Ranking Democrat Member
W.J. ``Billy'' Tauzin, Louisiana Nick J. Rahall II, West Virginia
Mac Thornberry, Texas Edward J. Markey, Massachusetts
Chris Cannon, Utah Solomon P. Ortiz, Texas
Jim Gibbons, Nevada, Calvin M. Dooley, California
Vice Chairman Jay Inslee, Washington
Thomas G. Tancredo, Colorado Grace F. Napolitano, California
C.L. ``Butch'' Otter, Idaho Brad Carson, Oklahoma
Jeff Flake, Arizona
Dennis R. Rehberg, Montana
------
C O N T E N T S
----------
Page
Hearing held on April 20, 2001................................... 1
Statement of Members:
Gibbons, Hon. Jim, a Representative in Congress from the
State of Nevada............................................ 1
Prepared statement of.................................... 5
Newspaper article ``Clinton Regulations a Threat to
Mining'' submitted for the record...................... 10
Statement of Witnesses:
Coyner, Alan, Administrator, Nevada Division of Minerals..... 11
Gaskin, David, Bureau Chief, Bureau of Mining Regulation and
Reclamation, Nevada Division of Environmental Protection... 50
Prepared statement of.................................... 52
Guinn, Hon. Kenny C., Governor, State of Nevada, Prepared
statement of............................................... 13
Harris, Richard W., Attorney at Law, Harris & Thompson, Reno,
Nevada..................................................... 27
Prepared statement of.................................... 29
Jeannes, Charles A., Senior Vice President Administration and
General Counsel, Glamis Gold Ltd., Reno, Nevada............ 32
Prepared statement of.................................... 34
Jensen, Tony, Mine General Manager, Cortez Gold Mines,
Crescent Valley, Nevada.................................... 24
Prepared statement of.................................... 25
Kohlmoos, Bill, President, Barium Products and Mining Company 84
Prepared statement of.................................... 86
Letter submitted for the record.......................... 104
Laney, Debbie, President, Women's Mining Coalition........... 40
Prepared statement of.................................... 42
Lewis, Frank W., Owner, F.W. Lewis Co., Reno, Nevada......... 81
Prepared statement of.................................... 83
Lloyd, Nolan W., Chairman, County Commissioner, Elko County,
Nevada..................................................... 14
Prepared statement of.................................... 16
Milton, John H., III, County Commissioner, Humboldt County,
Nevada..................................................... 17
Prepared statement of.................................... 18
Myers, Tom, Director, Great Basin Mine Watch................. 53
Prepared statement of.................................... 55
Price, Dr. Jonathan G., Director/State Geologist, Nevada
Bureau of Mines and Geology................................ 68
Prepared statement of.................................... 69
Putnam, Borden R., III, Principal, RS Investment Management,
San Francisco, California.................................. 63
Prepared statement of.................................... 66
Taylor, Thomas Lyle, President and CEO, Geotemps Inc......... 79
Prepared statement of.................................... 80
Additional materials supplied:
Coyle, Courtney Ann, Attorney at Law, on behalf of the
Quechan Indian Nation of Fort Yuma, California, Letter
submitted for the record............................... 99
Rhoads, Hon. Dean, State Senator, State of Nevada,
Testimony submitted for the record..................... 7
EFFECT OF FEDERAL MINING FEES AND MINING POLICY CHANGES ON STATE AND
LOCAL REVENUES AND THE MINING INDUSTRY
----------
Friday, April 20, 2001
U.S. House of Representatives
Subcommittee on Energy and Mineral Resources
Committee on Resources
Reno, Nevada
----------
The Subcommittee met, pursuant to call, at 12:30 p.m., at
the Washoe County Commission Chambers, 1001 East 9th Street,
Building A, Reno, Nevada, Honorable Jim Gibbons presiding.
Chairman Gibbons. First of all, I want to start by
welcoming everybody here to this hearing. It is the
Subcommittee on Energy and Mineral Resources which is a
Subcommittee of the Resource Committee of the United States
House of Representatives.
I am Congressman Jim Gibbons. Most of the Committee members
who were supposed to be here failed to show because of delayed
flights, which I think many of us can understand, or because of
work schedules in their own districts during this period which
prevented them from attending this hearing, so I have the
privilege and the honor to be the only Congressman on the
Committee that is attending this meeting today so that we can
get the hearing going.
The gentleman that you see up here sitting with me to my
left is Jack Victory. He is my Legislative Director. To my far
right is John Rishel and Bill Condit, both staffers from the
Subcommittee on Energy and Mineral Resources. They will be, of
course, here to help us.
We have Margaret Black over here from our Washington office
as well to help usher the witnesses to the table and make sure
their testimony is kept and recorded. Also I want to welcome
our stenographer who has agreed to sit patiently through 3
hours of hearings without taking a break. She guarantees me
that her fingers will last long enough to take 3 hours, and we
are going to put her to the test. Of course, we certainly
appreciate that.
Today's hearing is going to have four separate panels.
Hopefully we will be able to have time at the end for public
comment and we are trying to set up some time constraints now
on the witnesses that are going to be in the panels to testify.
We have given each panel about 20 minutes, hopefully it won't
take that long.
Each person on the panel will have about 5 minutes to
present their testimony, and what we have done to accommodate
that, the technology of our red light, yellow light, green
light, which we use so faithfully, has failed us. For some
reason the technology or the electricity, maybe it is
California taking the energy away from us, for our little
timing lights which give us the hint that your 5 minutes is
about up.
So when we fall back from our high tech electrical side of
this we have fallen back to the good old fashion egg timer
which we will set for 5 minutes, so when the bell goes off you
know that you have reached your limit or we would appreciate
you winding up your testimony.
Also, let me say that everybody who is present here and
anyone who is not present here has an option of submitting
written testimony for the record. We will keep the record open
for ten business days after the date of this hearing. We will
have the address available for you so that you can submit your
written remarks in full to the Committee for the record.
Provided that we get through all four panels, we will open
the mike up for individuals. In this case because there is so
many people in the room and we do not know how many people will
want to testify, we have just two requests. First of all, that
you provide us with your name and address so that we know who
is at the mike testifying and so that the reporter can properly
identify you as well.
And, secondly, we would request that you try to keep your
remarks down to 1 minute so that if we have the time we can get
through as many people who want to submit written testimony as
well.
With that, let me welcome all of you. Those of you that are
here from out of state and those of you that are from within
the state, we welcome you to our hearing today. And what I'm
going to do is give my little opening remarks and then we will
open it up and call the first panel which we will have seated
at the microphones here.
But many of us know and those of you who do not know that
Nevada is the largest gold producing state in the country. It
is the third largest gold producing, or gold producer in the
world, so if Nevada were a nation in terms of gold producing it
would be the third largest nation in the world in terms of its
production of gold.
It is my honor and it is definitely a privilege of mine to
welcome and thank you for taking the time out of your busy day
and especially for the elected officials here as well to share
your thoughts and to come before our Committee and discuss with
us your issues with regard to mining. Hopefully today we will
hear important testimony on the effect of the new 3809
amendments to the regulations on mining and the millsite
opinion that were put in place in the last couple of years
under Solicitor Leshy, the United States Department of the
Interior.
We will also discuss the effect of a proposed Federal
royalty on mining and the effect of mining claim fees on
domestic mineral exploration. Let me also state that Nevada is
the state that is probably the most affected by any of these
changes to the regulations of any state because of the
importance of mining in the State of Nevada to the citizens and
people in this nation.
Our concern is whether or not these administrative changes
to the regulations bypass the intent of Congress. Congress
under the Constitution has the authority to set all laws and
regulations which deal with the various territories and states.
And as you know from your study of civics, Congress passes the
laws and the administration enforces the laws.
Too many times we have found that the administration in an
effort to achieve a goal has bypassed Congress creating its own
``laws.'' As we know, regulations have the force and effect of
law as they are created by agencies, so we want to make sure
that these regulatory changes that were proposed comport with
the intent of Congress and not bypass or sidestep Congress.
We are interested in how these Federal policies and fees
affect our nation's domestic mineral exploration production and
reserves as well as state and local revenues. Mining is a basic
economic activity and it is necessary to all mankind. The
knowledge and the use of metals is exceedingly important to
human civilization.
I think historically, if we all look back, as man
progressed out of the Stone Age mining became one of the
central factors in the evolution of civilization in the world.
And for the next 2,500 years following the Stone Age,
historians characterize the advance of civilization by Man's
increased ability in working with metals. Subsequent periods of
this advance are divided into the Copper Age, Bronze Age and
Iron Age.
Now, let me tell you that as a former mining geologist and
Vice Chairman of this Subcommittee and Co-Chairman of the
Energy & Mineral Resource Mining Caucus in Congress, I have a
deep appreciation and understanding of Nevada's mining
industry. Nevada, the nation's leading gold producer, as I said
earlier, has about 30 operating gold producing companies that
employ around 12,000 people. As you can tell, it is an
important industry in this state.
Nevada alone provides an annual direct and indirect
contribution to the Federal Government of more than 113 million
dollars in revenue and fees. As the second largest employer of
the state let me say that it has an even more dramatic impact.
It provides 1.5 billion dollars in personal business, state and
local government revenues in the State of Nevada.
And I think these numbers make it easy to understand why
mining is such an important part of the State 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 manufacture.
A recent study by the National Research Council concluded
that one of the primary advantages the United States possesses
over its strongest industrial competitors such as Japan and
Western Europe is its domestic resource base, and domestic
mining provides about 50 percent of the metals 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.
Ladies and gentlemen, 12 western states in the United
States contain more than 92 percent of the U.S. public land.
These 12 states account for 75 percent of the U.S. Domestic
metal production. Thus, much of the United States future metal
supply will likely, of course, be found on government owned,
government managed property in the western part of the United
States.
Unfortunately, there are some who have used rhetoric
portraying everything about the mining industry in its worst
possible light while failing to acknowledge that mining
provides any substantial benefits to society. And let me say
that I believe that in the past mining has earned some
criticism. Mining has also earned some accolades for what it
has done and achieved over the last few years in terms of
advancements in its environmental interests. Without mining and
the knowledge of how to use metals we would still be living, of
course, as I said earlier, in the stone age.
As someone who has spent some time in the military, let me
turn now historically to talk about World War II, because World
War II has been termed ``a war of copper mines and steel
mills.'' Using these raw materials produced by miners, American
industry was able to produce enough war material for itself and
the allies during that war, and America became known as ``the
arsenal of democracy'' in large part because the mining
industry was able to produce raw materials in record amounts.
Much of the environmental damage from mining was done
during this time when our ability to produce energy and metals
for the war effort would determine the future of this nation as
a free nation, and I think everyone would agree that that war
was worth winning. Today there are those who seem to think that
it does not matter if we import all of the metals and minerals
used by America, but I am concerned about our nation's
increased reliance on imports for critical and strategic metals
and minerals.
In recent years the United States has changed from a net
exporter to a net importer for copper, lead, magnesium, silver,
and rare earths. The last thing I want to see is for this
nation to become dependent upon foreign sources of minerals and
metals to the same degree it is dependent today on foreign
sources of oil.
That would control our economy. It would control the
strategic balance of power that this country now enjoys. I am
sure everyone here knows this Congressional District, the
Second Congressional District of Nevada encompasses some of the
most important mining areas in the United States. In addition
to the precious metals that we have and know about, mining
constitutes the majority of the economic activity in 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 to 90 percent of the land managed by the Federal
Government and mining accounting for approximately 9 percent of
the State's gross product.
Consequently, any detrimental effect of mining or Federal
mining policy are going to have serious consequences to the
mining industry and to the livelihoods of families all across
this great state. There are those who believe that mining does
not matter in this new age. They think that the future of
mankind can be secured without basic material resources and
they think that if they produce words and ideas in the
``information age,'' then nothing else is necessary.
Well, I'm here to tell you that that is a wrong approach.
Mining matters to everyone. Mining makes our civilization. It
makes the advancements that every one of us enjoy in medical
care and medicines. It makes the standard of living that we
have today possible. Everything and everyone in this room,
everything that you do and use today probably comes from a mine
somewhere.
Today we will examine proposed Federal policies on mining
and government lands and hopefully what we will learn will help
us find out what the consequences of these policies will be and
what consequences these policies will have on those who invest
their capital toward finding mineral deposits and developing
mines.
And there is an old saying out there, I think many of us
who have been in the industry know that if it isn't grown it
has to be mined. Senators Reid and Ensign have been great
champions of the mining industry and have expressed great
interest in the information that will be provided in today's
testimony. Unfortunately, neither of them could be here today
because of their schedule.
[The prepared statement of Mr. Gibbons follows:]
Statement of The Honorable 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 the new
3809 rule and the millsite opinion on mining, the effect of a proposed
Federal royalty on mining and the effect of claim fees on domestic
mineral exploration. We are interested in how these Federal policies
and fees affect our nation's domestic mineral exploration, production
and reserves, as well as state and local revenues.
Mining is a basic economic activity necessary to mankind. The
knowledge and use of metals is exceedingly important to human
civilization. Early man's progress out of the Stone age, his most
primitive period of tool-making, began when man first learned to use
metal. Man's subsequent technological advancement for the next 2500
years is characterized by his increasing ability to work and use
metals.
As a former mining geologist and Co-Chairman of the Subcommittee on
Energy and Mineral Resources and 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 about 30 operating
gold producing companies that employ around 12,000 people. 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 supply will
likely be found on government-owned land in the West.
I have a problem with the rhetoric used by some to portray
everything about the mining industry in the worst light possible while
failing to acknowledge that mining provides substantial benefits to
society. Without mining and the knowledge of how to use metals, we
would still be living in the Stone age.
World War II has been termed a war of ``copper mines and steel
mills.'' Using the raw materials produced by miners, American industry
was able to produce enough war material for itself and our allies.
America became the ``arsenal of democracy'' in large part because the
mining industry was able to produce raw materials in record amounts.
Much of the environmental damage from mining was done during this time
when our ability to produce energy and metals for the war effort would
determine our future as a free nation. I think everyone would agree,
this was a war worth winning.
Today there are those who seem to think that it doesn't matter if
we import all of the metals used by Americans. I am concerned about our
nation's increasing reliance on imports for critical and strategic
metals and minerals. In recent years, the United States has changed
from a net exporter to a net importer of copper, lead, magnesium,
silver and rare earths. The last thing I want to see is this nation
becoming dependent on foreign sources of minerals and metals to the
same degree it has become dependent on foreign sources of oil.
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 to
90 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, it makes
the advancements in medical care and medicine and it makes 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 on
mining on government-owned lands. Hopefully, what we learn today will
help us find out the consequences that some of 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!
Senators Reid and Ensign have also been great champions of the
mining industry and have expressed great interest in the information
that will be provided in today's testimony. Unfortunately neither of
them could be here today, but they will be submitting testimony for the
record.
With that it is time to begin. Will the first panel please be
seated.
______
Chairman Gibbons. I have a letter from State Senator Dean
Rhoads with his testimony. He represents the Northern Nevada
Senatorial District. He is a resident of Tuscarora, which for
those of you who don't know the geography in Nevada, is just
outside of Elko. He has submitted written testimony and without
objection the Committee will accept the testimony of State
Senator Dean Rhoads into the record.
[The prepared statement of State Senator Dean Rhoads and
the newspaper article ``Clinton Regulations a Threat to
Mining'' submitted for the record follow:]
[GRAPHIC] [TIFF OMITTED] T1816.001
[GRAPHIC] [TIFF OMITTED] T1816.002
[GRAPHIC] [TIFF OMITTED] T1816.003
[GRAPHIC] [TIFF OMITTED] T1816.004
Chairman Gibbons. With that it is time for the first panel.
Let me invite the first panel up. It will be Mr. Alan Coyner,
Administrator of the Nevada Division of Minerals testifying on
behalf of Governor Kenny Guinn; Mr. Nolan Lloyd, Chairman of
the Elko County Commissioners; and Mr. John Milton, III,
Humboldt County Commissioner.
While those gentlemen are being seated, let me recognize
Jeremy Shields. Jeremy, if you will stand up, this is Senator
Reid's office staff who has come to attend the hearing. We
appreciate you being here, Jeremy. Thank you very much.
Gentlemen, I don't know who has decided to go first. I
would suggest we just go down the line with Mr. Coyner, then
Mr. Lloyd and Mr. Milton, and let me welcome you to our hearing
today. And of course Margaret has the egg timer going and so
when you start she will start the timer and we would open it
now for your testimony. Welcome and thank you for taking the
time out to be here today. Gentlemen.
STATEMENT OF ALAN COYNER, ADMINISTRATOR, NEVADA DIVISION OF
MINERALS
Mr. Coyner. Thank you, Congressman Gibbons. It is indeed an
honor and a privilege to be here today and give the testimony
of our Governor Kenny C. Guinn. Mr. Chairman, I appreciate the
opportunity to testify today regarding the effect of Federal
mining fees and mining policy changes on state and local
revenues and the mining industry.
It is indeed appropriate and very timely that this hearing
be held in Nevada, the nation's leading producer of hardrock
minerals. We lead the United States in gold and silver
production, as well as barite, magnesite and several other
mineral commodities.
Mining is our second largest industry, providing with
direct and indirect effects from seven to almost 9 percent of
my state's gross product. Nevada was founded on mining with the
discovery of the Comstock Silver Lode near Virginia City in
1859. That discovery began the settlement of Nevada and played
a major role in the admission of Nevada into the Union in 1864.
Many of our communities came into the existence because of
mining, including such towns as Tonopah, Eureka, Ely and
Carlin. And on this point, Mr. Chairman, let me be perfectly
clear, mining has made and continues to make a significant
contribution to the history of economic development of Nevada.
It is for this reason that Nevada is highly concerned about
any proposed changes in Federal mining fees or mining policy
that would negatively impact our state, local communities, and
mining industry. As you might expect, our concern is heightened
by the fact that over 87 percent of the land within our state
is managed by Federal agencies charged with administrating
these fees and policies.
To be completely frank, Mr. Chairman, I am deeply concerned
about the economic future of many of our rural communities
because of their heavy dependence on mining. In the year 2000,
Nevada's mining industry provided approximately 11,000 jobs, an
update to your number, Mr. Chairman, directly related to
mining, mostly in those rural communities.
The average pay for those jobs was nearly $58,000 per year,
the highest average of any employment sector in our state. In
addition, we estimate another 36,000 jobs were generated in
these communities to provide the goods and services needed by
the direct jobs supplied by the mining industry.
However, in the last 4 years nearly 4,000 direct jobs have
been lost. When you consider that only 200,000 of our 1.9
million citizens live in rural Nevada, the magnitude of the
economic impact of this 25 percent reduction in employment
becomes clear.
Our concern also extends to another important segment of
our mining industry, which is the exploration for new mineral
resources. Exploration is the lifeblood that sustains the
mining economy of Nevada. Without exploration the jobs and
economic vitality of rural Nevada are threatened. Nevada is
truly blessed with an incredible mineral endowment, however,
the new wealth represented by this endowment can only be
realized through the efforts of the mineral industry and
private enterprise.
We also recognize a major portion of this resource is
located on public lands, and I believe Nevada can work with our
Federal partners and the mineral industry to responsibly
develop these resources. But in fact Nevada has experienced a
significant reduction in exploration activity as evidenced by
the decrease in the number of active mining claims from nearly
450,000 in 1991 to 105,000 in 2000.
This translates into a 45 million dollar reduction in
exploration activity per year. And other indicators, such as
the closure of mineral exploration offices and decreases in
drilling activity, for example, indicate the total annual loss
is more probably in the hundreds of millions of dollars. For
this reason, we in Nevada can only support any changes in
mining fees or policies which would result in a reversal of
this trend and an increase in exploration activity.
I would like to make some brief remarks about the lawsuit
filed by the State of Nevada against the United States
Department of the Interior and the Bureau of Land Management
concerning the 3809 mining regulations. The State of Nevada has
been, and continues to be, deeply committed to effective,
efficient, environmentally sound mining regulation.
I believe Nevada is one of the most environmentally
responsible mining regions in the world. We closely monitored
BLM's efforts to rewrite the 3809 regulations and commented
extensively during the lengthy development and review process.
Nevada repeatedly questioned the need for extensive reform
of the existing regulations and supported the findings of the
National Research Council of the National Academy of Sciences
that only selective regulatory reform was needed, combined with
enhanced utilization of existing authority. Nevada recognized
the revised regulations published on November 21, 2000
threatened to bring great and undue economic hardship to the
state, along with major disruption of the state-Federal
relationship critical to effective environmental protection.
By the BLM's own estimates, the 3809 regulations would
result in the loss of up to 3,200 jobs and the value of
industry output reduced by $181 million to $543 million, with
Nevada citizens losing between $83 million and $249 million in
total personal income.
When it became clear that the administrative process had
failed, Nevada was forced to resort to legal action. And while
the outcome of the legal process is yet to be determined, we
have recommended that the BLM suspend the new revised
regulations and reinstate the rules that were in place on
January 19th, 2001. Once the previous version is reinstated,
the State of Nevada would be pleased to work with the BLM and
other stakeholders to develop selective modifications to the
3809 regulations to address only the NRC recommendations.
Finally, I have stated in previous hearings of this
Subcommittee, and continue to believe, that reasonable mining
fees and policies would benefit all stakeholders, including the
states, Federal Government, and industry. Changes to the mining
claim fees which would enhance opportunities for the Nevada
prospector will be welcomed.
Selective reform of the 3809 regulations which would put in
place a regulatory system which works in concert with state,
local and other Federal agencies to protect against unnecessary
or undue degradation of the public lands will receive our
support.
Please remember, however, Nevada's past and Nevada's future
are inextricably entwined with mining. Nevada will only support
changes to Federal fees and policies 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.
Chairman Gibbons. Thank you very much, Mr. Coyner.
[The prepared statement of Governor 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 effect of Federal mining
fees and mining policy changes on State and local revenues and the
mining industry. It is indeed entirely appropriate, and very timely,
that this hearing be held in Nevada, the nation's leading producer of
hard rock minerals. We lead the United States in gold and silver
production, as well as barite, magnesite, and several other mineral
commodities. Mining is our second largest industry, providing with
direct and indirect effects nearly 7% of my state's gross product.
Nevada was founded on mining with the discovery of the Comstock Silver
Lode near Virginia City in 1859. That discovery began the settlement of
Nevada, and played a major role in the admission of Nevada to the Union
in 1864. Many of our communities came into existence because of mining,
including such towns as Tonopah, Eureka, Ely, and Carlin. On this
point, Mr. Chairman, let me be perfectly clear. Mining has made, and
continues to make, a significant contribution to the history and
economic development of Nevada.
It is for this reason that Nevada is highly concerned about any
proposed changes in Federal mining fees or mining policy that would
negatively impact our state, local communities, and mining industry. As
you might expect, our concerned is heightened by the fact that over 87%
of the land within our State is managed by Federal agencies charged
with administrating these fees and policies. To be completely frank,
Mr. Chairman, I am deeply concerned about the economic future of many
of our rural communities because of their heavy dependence on mining.
In the year 2000, Nevada's mining industry provided approximately
11,000 jobs directly related to mining, mostly in those rural
communities. The average pay for those jobs was nearly $58,000 per
year, the highest average of any employment sector in our state. In
addition, we estimate another 36,000 jobs were generated in these
communities to provide the goods and services needed by the direct jobs
supplied by the mining industry. However, in the last four years,
nearly 4,000 direct jobs have been lost. When you consider that only
200,000 of our 1.9 million citizens live in rural Nevada, the magnitude
of the economic impact of this 25% reduction in employment becomes
clear.
Our concern also extends to another important segment of our mining
industry which is the exploration for new mineral resources.
Exploration is the lifeblood that sustains the mining economy of
Nevada. Without exploration the jobs and economic vitality of rural
Nevada are threatened. Nevada is blessed with a truly incredible
mineral endowment, however, the new wealth represented by this
endowment can only be realized through the efforts of the mineral
industry and private enterprise. We also recognize a major portion of
this resource is located on public lands, and I believe Nevada can work
with our Federal partners and the mineral industry to responsibly
develop these resources. But in fact, Nevada has experienced a
significant reduction in exploration activity as evidenced by the
decrease in the number of active mining claims from nearly 450,000 in
1991 to 105,000 in 2000. This translates into a $45 million reduction
in exploration activity per year. Other indicators, such as the closure
of mineral exploration offices and decreases in drilling activity,
indicate the total annual loss is more probably in the hundreds of
millions of dollars. For this reason, we in Nevada can only support any
changes in mining fees or policies which would result in a reversal of
this trend and an increase in exploration activity.
I would like to make some brief remarks about the lawsuit filed by
the State of Nevada against the United States Department of the
Interior and the Bureau of Land Management concerning the 3809 mining
regulations. The State of Nevada has been, and continues to be, deeply
committed to effective, efficient, environmentally sound mining
regulation. I believe Nevada is one of the most environmentally
responsible mining regions in the world. We closely monitored BLM's
efforts to rewrite the 3809 regulations and commented extensively
during the lengthy development and review process. Nevada repeatedly
questioned the need for extensive reform of the existing regulations
and supported the findings of the National Research Council (NRC) of
the National Academy of Sciences that only selective regulatory reform
was needed, combined with enhanced utilization of existing authority.
Nevada recognized the revised regulations published on November 21,
2000 threatened to bring great and undue economic hardship to the
State, along with major disruption of the state-Federal relationship
critical to effective environmental protection. By the BLM's own
estimates, the new 3809 regulations would result in the loss of up to
3,220 jobs in Nevada, total industry output in Nevada would be reduced
by $181 million to $543 million, and Nevada citizens would lose between
$83 million and $249 million in total personal income. When it became
clear the administrative process had failed, Nevada was forced to
resort to legal action. While the outcome of the legal process is yet
to be determined, we have recommended that the BLM suspend the new
revised regulations and reinstate the rules that were in place on
January 19, 2001. Once the previous version is reinstated, the State of
Nevada would be pleased to work with BLM and other stakeholders to
develop selective modifications to the 3809 regulations to address the
NRC recommendations.
I have stated in previous hearings of this Subcommittee, and
continue to believe, that reasonable mining fees and policies would
benefit all stakeholders, including the states, Federal Government, and
industry. Changes to the mining claim fees which would enhance
opportunities for the Nevada prospector will be welcomed. Selective
reform of the 3809 regulations which would put in place a regulatory
system which works in concert with state, local and other Federal
agencies to protect against unnecessary or undue degradation of the
public lands will receive our support. Please remember, however,
Nevada's past and Nevada's future are inextricably entwined with
mining. Nevada will only support changes to Federal fees and policies
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.
______
Chairman Gibbons. Mr. Lloyd.
STATEMENT OF NOLAN W. LLOYD, CHAIRMAN, ELKO COUNTY COMMISSION
Mr. Lloyd. Thank you, Congressman Gibbons, it is an honor
to be here, and staff. I appreciate this opportunity of giving
you testimony today on the impact of the new regulations to the
economy of Elko County. I come to you as Chairman of the Elko
County Commission and also as a manager of an exploration
company seriously impacted by these regulations. I have been
employed in the mineral exploration business for the past 35
years.
The numbers I'm using, I see Mr. Coyner has updated them a
little better, so I will change my numbers on the loss of
claims and the effect it has had to our economies. As he
mentioned, in the last several years there has been a drop of
about 300,000 in mining claims in the State of Nevada. Prior to
the implementation of the $100 holding fee, each claim holder
was expected or required to do $100 worth of assessment work to
each of their claims. This meant approximately 30 million
dollars into the economy of Nevada.
These dollars were spent in local communities for drilling
companies, surveying, assay, earthmoving contractors, and so
forth, who did work for the claim holders. Time did not permit
me to get the exact numbers for Elko County, but the numbers
are very significant.
In addition to those dollars that were lost, the remaining
millions of dollars went directly to the Federal Government and
not to the local economy. This loss not only affects us today,
but will continue to hamper future discovery and production by
undiscovered deposits worth potentially millions. Although
production of gold has stayed about the same in our area, it is
known that when exploration is reduced a reduction in
production will follow in about four to 6 years. So if the
trend continues, the worst is yet to come.
The implementation of the new bonding requirements added
another significant blow to the industry. I have personal
knowledge how these regulations caused major impact to the
exploration business.
In our business alone we have had to reduce our operations
because of lack of work. Much of our exploration work was done
for the assessment work. We have reduced from 12 operating rigs
in the years prior to the new regulations to four operating
rigs as of today and they are not operating as yet this year.
There are a number of exploration companies in our area who
likewise have been affected. The direct and indirect impact is
multiplied many times as it is estimated that money circulates
through local communities three to four times.
The new 3809 regulations have further decreased the
exploration dollars spent in Nevada. As we have contacted our
clients this year concerning their drilling programs, the
message we have received is that they do not plan to do much
exploration work. I quote, ``Why drill it if we can't mine it''
is the comment that we have been universally told.
As reported in the Nevada Miner in February of 2001, Nevada
was rated at the top for overall mining investment
attractiveness by the Fraser Institute. This rating and
attractiveness is being negatively impacted by the enormous
amount of Federal regulation that has been imposed. This is
supported by the Nevada Division of Minerals annual exploration
survey, which shows that exploration spending in Nevada
declined from 154 million in 1994 to 87 million dollars in
1999. I'm sure when the numbers are compiled for 2000 they will
continue to decline.
It is no secret that mining companies are spending their
exploration dollars in areas with a more favorable climate to
the industry, i.e. out of the United States.
In conclusion, the full impact of these regulations may be
difficult to delineate. They are real dollars and amount to
billions of dollars lost to local and state economies. The
losses are reflected in Elko County in many other areas such as
fees to counties, housing, sales taxes, and the list goes on.
Just 2 days ago there was a headline in the Elko Daily Free
Press which read, ``County permit fees drop 65 percent.''
Where the rubber meets the road, so to speak, is evidenced
in the dilemma of trying to balance the budget in Elko County.
We are 1.6 million dollars short of balancing. That amounts to
9 percent of our general fund. Now, that doesn't sound like
much money, but it is very significant to us. It will result in
reduction of services and jobs in Elko County, which happens to
be the fifth largest county in the United States with about
17,000 square miles of area.
I'm here today as a County Commissioner asking you to
please consider the negative impact these regulations are
having on local government and industry and to do all that you
can to reverse the trend. Thank you.
Chairman Gibbons. Thank you very much, Commissioner Lloyd.
[The prepared statement of Nolan Lloyd follows:]
Statement of Nolan Lloyd, Chairman, Elko County Commission, Elko
County, Nevada
I appreciate this opportunity to give you my testimony of how the
new regulations have impacted the economy of Elko county. I come to you
as the chairman of the Elko County Commission and also as a manager of
an exploration company seriously impacted by these regulations. I have
been employed in the mineral exploration business for the past 35
years.
In 1994 approximately 400,000 of Nevada's 700,000 mining claims
were dropped or abandoned as a result of the $100 per claim fee imposed
by the Federal Government. Prior to the rental fee implementation, each
unpatented mining claim in Nevada had to have $100 equivalent of
assessment or due diligence work performed on it annually to hold it.
The loss of 400,000 claims created a direct $40 million annual loss to
the economies of Nevada. These dollars were spent in local communities
for drilling companies, surveying, earth moving contractors, etc. who
did work for the claim holders. Time did not permit me to obtain the
exact numbers for Elko County but the numbers are very significant. In
addition, there was $30 million given directly to the Federal
Government in holding fees on the remaining approximately 300,000
claims, money that left the state. This loss not only effects us today,
but will continue to hamper future discovery and production by
undiscovered deposits worth potentially billions. Although production
(of gold) has stayed about the same in our area, it is known that as
exploration is reduced a reduction in production will follow in 4-6
years. So if the trend continues, the worst is yet to come!
The implementation of the new bonding requirements added another
significant blow to the industry. I have personal knowledge how these
regulations caused major impact to the exploration business. In our
business alone we have had to reduce our operations because of the lack
of work. Much of our exploration work was assessment work. We have
reduce from 12 operating rigs in the years prior to the new regulations
to 4 operating rigs as of today, and they are not operating as yet this
year. There are a number of exploration companies in our area who have
likewise been affected. The direct and indirect impact is multiplied
many times as it is estimated the money circulates through the local
economies 3 to 4 times.
The new 3809 regulations have further decreased the exploration
dollars spent in Nevada. As we have contacted our clients this year
concerning their drilling programs the message we have received is they
do not plan on doing much exploration work, ``Why drill it, if we
cannot mine it?'' is the comment we are told.
As reported in the Nevada Miner, February 2001, Nevada was rated at
the top for overall mining investment attractiveness by the Fraser
Institute. This rating and attractiveness is being negatively impacted
by the enormous amount of Federal regulation that has been imposed.
This is supported by the Nevada Division of Minerals annual exploration
survey, which shows exploration spending in Nevada declining from $154
million in 1994 to $87 million in 1999. I am sure when the numbers are
compiled for 2000 they will continue to decline. It is no secret that
mining companies are spending their exploration dollars in areas with a
more favorable climate to the industry, i.e. out of the United States.
In conclusion, the full impact of these regulations may be
difficult to delineate. They are real dollars and amount to millions of
dollars lost to local and state economies. These losses are reflected
in Elko County in many other areas such as fees to counties, housing,
sales taxes and the list goes on. Just two days ago there was a
headline in the Elko Daily Free Press which read, ``County permit fees
drop 65 percent.''
Where the rubber meets the road, so to speak, is evidenced in the
dilemma of trying to balance the budget in Elko county. We are $1.6
million short of balancing. That amounts to about 9% of our general
fund. Now that doesn't sound like a lot of money, but it is very
significant to us. It will result in reduction of services and jobs in
Elko County, which happens to be the 5th largest county in the U.S.
with about 17,000 square miles of area. I am here today a County
Commissioner asking you to please consider the negative impact these
regulations are having on local government and industry and do all that
you can to reverse the trend.
I thank you for the opportunity to present this testimony.
______
Chairman Gibbons. Mr. Milton.
STATEMENT OF JOHN H. MILTON, III, HUMBOLDT COUNTY COMMISSIONER
Mr. Milton. Thank you, Congressman Gibbons. Thank you for
the opportunity to be here today. My name is John Milton. I'm a
member of the Board of County Commissioners from Humboldt
County, Nevada.
Humboldt County is located in the northwest portion of
Nevada and comprises an area of approximately 10,000 square
miles. Of those 10,000 square miles, about 80 percent is public
land managed or controlled by the Bureau of Land Management,
Forest Service or the U.S. Fish and Wildlife Service.
The economy of Humboldt County is primarily dominated by
mining, followed closely by ranching and agriculture. The
majority of the mining and the ranching actually takes place on
the public land, so it is safe to say that the economy of
Humboldt County is tied directly to the way the public land is
regulated or controlled.
I was first elected in November of '92 and took office in
'93. That was the year the Bureau of Land Management instituted
the first major change in the mining law, the annual claim
maintenance fee of $1,000, excuse me, $100 and the one time
filing fee of $25 added to the cost of locating a mining claim.
Prior to that time, the cost of filing a claim with the BLM was
$10.
The claim maintenance fee had three effects on mining
exploration in Nevada. First, it increased the cost to file a
mining claim by 100, excuse me, 1250 percent. Second, it caused
the exploration costs to increase, because prior to the
maintenance fee that is assessed at the time of location and
every year thereafter, it was only necessary to do $100 worth
of exploration work each year in order to maintain the validity
of a mining claim. Now an owner must pay the maintenance fee
and do the exploration work to prove the viability of the
claim.
And last, the maintenance fee has run the small mining
operator out of the exploration business. Sure, there is an
exemption for the holder of 10 claims or less, but the small
independent miner usually had numerous groups of claims that
could number 100 or better. Now it is simply too expensive for
those miners to operate.
To illustrate, in 1992 there were 3,400 claims located in
Humboldt County. The year the regulations went into effect that
number dropped to 1,100 and stayed about that through the year
2000, which there were only 884 claims located last year.
The two-thirds reduction of exploration in Humboldt County
has resulted in a substantial loss of revenue to the county and
loss of income to businesses that benefited from the
exploration activities and in the long run the discovery of new
mining sites has almost come to a halt.
Even more disturbing to Humboldt County would be the
imposition of a Federal royalty on the production of minerals.
A Federal royalty would reduce the amount of profit a mining
company would make which would cause a reduction of the net
proceeds of mine tax as levied against the mining profits and
is shared by the state and county government.
It also could cause marginal mining operations to close
during this period of depressed mineral prices. A great deal of
capital is invested by a mining company to bring on line a mine
that provides jobs for our citizens and taxes for the county
before any income from operations is ever achieved. With the
volatility of mineral prices in the last few years, the
anticipation of payment of yet another fee or royalty could
doom further exploration and close operating mines.
There is yet another problem that has the potential to
destroy the economy of Humboldt County. Over the last few
years, a series of events undertaken by the Bureau of Land
Management, Forest Service, and Congress has caused great
concern. It is the accumulated effort of increased regulation
and the limiting of access to the public land.
As I stated before, Humboldt County's economy is tied
directly to the public land. Through the implementation of
proposed roadless areas in the forest, the new 3809 regulations
on mining, grazing reform, BLM off-road regulations, and just
recently the closure of mining and geothermal development of
approximately a million acres of Humboldt County by the Black
Rock NCA/Wilderness Bill passed in the last days of the
Congress, Humboldt County is being pushed forward toward
economic collapse.
For almost 150 years mining and ranching have been the
primary industries for our county. Without the continued use of
the public land, both of these industries will cease and
Humboldt County will no longer have the growing and viable
economy that we have had in the past. Congressman, I would like
to thank you for the opportunity to be here today.
Chairman Gibbons. Thank you very much, Commissioner Milton.
We appreciate not only your testimony, but the testimony of
your colleagues sitting there with you.
[The prepared statement of John Milton follows:]
Statement of John Milton, Commissioner, Board of County Commissioners,
Humboldt County, Nevada
Chairman Cubin, members of the Committee, my name is John Milton
and I am a member of the Board of County Commissioners from Humboldt
County, Nevada.
Humboldt County is located in the northwest portion of Nevada and
comprises an area of approximately 10,000 square miles which is larger
than the States of Massachusetts and Rhode Island combined. Of those
10,000 square miles, about 80 percent is public land managed or
controlled by the Bureau of Land Management, Forest Service, or the
U.S. Fish and Wildlife Service. The economy of Humboldt County is
primarily dominated by mining, followed closely by ranching and
agriculture. The majority of the mining and ranching actually takes
place on the public land. So it is safe to say that the economy of
Humboldt County is tied directly to the way the public land is
regulated or controlled.
I was first elected in November of 1992 and took office in January
1993. That was the year the Bureau of Land Management instituted the
first major change in the mining law -- the annual claim maintenance
fee of $100 and the one-time filing fee of $25 added to the cost of
locating a mining claim. Prior to that time, the cost of filing a claim
with the BLM was $10. The claim maintenance fee had three effects on
mining exploration in Nevada. First, it increased the cost to file a
mining claim with the BLM by 1250 percent. Second, it caused the
exploration costs to double because prior to the maintenance fee, that
is assessed at the time of location and every year thereafter, it was
only necessary to do $100 worth of exploration work each year in order
to maintain the validity of a mining claim. Now an owner must pay the
maintenance fee and do exploration work to prove the viability of the
claims. And last, the maintenance fee has run the small mining operator
out of the exploration business. Sure, there is an exemption for the
holder of 10 claims or less, but the small independent miner usually
had numerous groups of claims that could number 100 or better. Now it
is simply too expensive for those miners to operate. To illustrate, in
1992 almost 3400 claims were located in Humboldt County. In 1993 only
1100 were located, in 1994 and 1995 about 1200 claims were located, and
in 2000, the last year of complete records, only a total of 884 claims
were located. This 2/3 reduction of exploration in Humboldt County has
resulted in a substantial loss of revenue to the county and loss of
income to business that benefited from the exploration activities and
in the long run the discovery of new mining sites has almost come to a
halt.
Even more disturbing to Humboldt County would be the imposition of
a Federal royalty on the production of minerals. A Federal royalty
would reduce the amount of profit a mining company would make which
would cause a reduction of the net proceeds of mines tax that is levied
against mining company profits and is shared by the state and county
governments. It could also cause marginal mining operations to close
during this period of depressed mineral prices. A great deal of capital
is invested by a mining company to bring on line a mine that provides
jobs for our citizens and taxes for the county before any income from
operations is achieved. With the volatility of mineral prices in the
last few years, the anticipation of payment of yet another fee or
royalty could doom further exploration and close operating mines.
There is yet another problem that has the potential to destroy the
economy of Humboldt County. Over the last few years, a series of events
undertaken by the Bureau of Land Management, the Forest Service, and
Congress has caused great concern. It is the accumulated effect of
increased regulation and the limiting of access to the public land. As
I stated before, Humboldt County's economy is directly tied to the
public land. Through the implementation of proposed roadless areas in
the national forest, new 3809 regulations on mining, grazing reform,
BLM off-road regulations, and just recently the closure to mining and
geothermal development of approximately a million acres of Humboldt
County by the Black Rock NCA/Wilderness Bill passed in the last days of
the last Congress, Humboldt County is being pushed toward economic
collapse.
For almost 150 years mining and ranching have been the primary
industries for our county. Without the continued use of the public
land, both of these industries will cease and Humboldt County will no
longer have the growing and viable economy that we have had in the
past.
Thank you for allowing me this opportunity to address your
Committee.
SUMMARY OF TESTIMONY
The economy of Humboldt County, located in northwest Nevada, is
dominated by mining, ranching, and agriculture, and is directly tied to
the way the public land is regulated and controlled. Changes in the
Federal mining law have significantly increased the cost to file claims
and doubled exploration costs which has forced small independent miners
out of business. Mining exploration in Humboldt County has been reduced
by two thirds since the inception of these changes to the Federal
mining law. This has resulted in a substantial loss of revenue to the
county and business owners and has significantly depressed the local
economy. The imposition of a Federal royalty on the production of
minerals could cause additional closures of mining operations in
Humboldt County.
Recent actions taken by the Bureau of Land Management, the Forest
Service, and Congress have caused great concern because of their
potential to destroy the economy of Humboldt County. Implementation of
proposed roadless areas in the national forest, new 3809 regulations on
mining, grazing reform, BLM off-road regulations, and the closure to
mining and geothermal development of approximately 1 million acres in
Humboldt County by the Black Rock NCA/Wilderness Bill are pushing
Humboldt County toward economic collapse.
______
Chairman Gibbons. What I would like to do is just perhaps
ask a couple of questions of each of you and hopefully get a
little more information for this Committee. Let me start with
Mr. Coyner.
Now, the Bureau of Land Management initiated the revisions
to 3809 and according to the Bureau of Land Management those
regulations were developed in cooperation with the State. Since
Nevada may well be one of the most important mining states in
the union, one would assume they solicited a great deal of
input from the State of Nevada with regard to these proposed
modifications and changes from the State of Nevada.
You have been in this job for a couple of years now, I
would assume. How would you assess their interaction with the
State of Nevada with regard to soliciting your input with
regard to these suggested changes that came out in the last
year?
Mr. Coyner. Congressman Gibbons, speaking as the
Administrator of the Division of Minerals rather than on behalf
of the Governor, I am aware of numerous sessions that took
place, both between the BLM and representatives of the states
through the Western Governor's Association. I think our active
participation was in place; however, again, the position that
we would take both from my perspective as Administrator and I
believe the State perspective is that the comments that were
offered to those revisions were largely ignored or not listened
to by the BLM as part of the process.
I also might state that when the regulations were
ultimately published there were sections within the regulations
that the states had never seen prior to them being published.
In fact, that is one of the key points with regards to the
lawsuit that the State of Nevada has taken against the
Department of the Interior and the BLM, this inconsistency with
the process. NEPA and APA should have put them in a position to
suggest those changes and allow us to interact with them about
them.
Chairman Gibbons. Thank you. Let me ask a general question
to both Commissioners as we begin here. The importance of
mining which both of you have stated, and in fact all three of
you have stated, with regard to not just your county but the
State of Nevada is critical, and I would like you just to
summarize some of the impacts that it would have on Elko County
and Humboldt County. In general if mining were to fall into
decline to the point where we would see a 25 percent reduction
in the mining we have today in your counties, what impact say
would a decline down to that level have on your county, its
infrastructure? Whether it is schools, hospitals, highways,
roads, let me just throw that question out there and see if you
can give us some sort of an estimate of the impacts that would
have on your counties. Mr. Lloyd, start with you.
Mr. Lloyd. We are in a unique situation in Elko County. We
are impacted more so, perhaps. We are right next to Eureka
County and most of the large mines are in Eureka County, so the
revenues from the mines go there, particularly net proceeds are
going to another county and we are impacted because most of the
workers live in Elko County. So we are struggling to start
with, because we don't have a lot of the revenue to compensate
for the number of employees that live in our county.
If there is a 25 percent reduction, I guess our statement
is; as many bills in the state have recently impacted the
county, come and get the courthouse, here are the keys to it.
We would no longer be able to operate.
It is going to be difficult this year and the next. We
predict the future, as we foresee the future in budgeting Elko
County, suggested revenues are going to be down significantly.
We have grave numbers now from the real estate community.
We have about 400 homes on the market in Elko County. We had
the huge boom in the later 80's and up through the middle of
the 90's, and, most of the people that were employed by the
mines came to Elko County and lived in the Elko area.
So now we have the great reduction in employment. I had a
manager from one of the local mines sit in my office here last
week and announced that they are going to cut 2 percent back on
their employees. And we continue to get this. We have had a
decline in assessed value in our county last year of between 60
and 70 million dollars. This is a direct result of the
regulations that have been imposed, so another 25 percent we
would be out of business.
Chairman Gibbons. Thank you. Commissioner Milton.
Mr. Milton. I would echo Commissioner Lloyd's same
statement. We would be out of business, too. In Humboldt County
in the last 5 years the mining employment has dropped almost 50
percent based primarily on the prices of gold. Our net proceeds
have gone from about $800,000 down to $20,000. The school
district is presently laying off 70 employees to help balance
the budget there.
We don't have 400 homes, but we have got over 200 homes
that are vacant and people have walked away from them, and
likewise we have experienced about a 35 million dollar decrease
in net valuation of the county.
A further 25 percent reduction would probably mean that the
two major mining companies would, one or both of the mines
would probably have to close to have that much of a reduction,
so it would be devastating to Humboldt County.
Chairman Gibbons. Mr. Lloyd, you have been in the
exploration business, you own a company.
Mr. Lloyd. I don't own it. I work for it. I'm glad I don't
own it.
Chairman Gibbons. You work for it. I was promoting you. The
bonding regulations that you talked about in your testimony
that you indicated have had a dramatic effect on the business,
the exploration business, and I think you said going from 12
rigs down to four drilling rigs and of course that would mean a
substantial number of employees are no longer working for your
firm.
Those regulations which were put in place, were put in
place by the previous Administration. What happened to those
regulations? Do you recall how they were created, whether they
were created, were they taken to court to determine any
validity of those regulations?
Mr. Lloyd. You know, I'm not sure of the details. They were
strictly imposed by administrative order. There were no
hearings on the issue, and these new regulations imposed huge
bonding requirements on small areas of disturbance. It used to
be a small exploration company could develop a mine site or
exploration site and if it was less than five acres, it didn't
have to go through the big bonding issues for the reclamation
and all that is involved there.
Since that bonding required huge bonds for the smaller
acreages again they quit exploring. People just declined to do
it, they made it impossible for them to do it.
Chairman Gibbons. Did our court system review those
regulations?
Mr. Lloyd. There were some lawsuits imposed and I think
they are still sitting there. I know some that you are familiar
with. There was a bill to compensate some of those who have
been affected by that and it is still out there. I know some
firms who are still trying to anticipate litigation to see if
there is some remuneration.
Chairman Gibbons. Do you believe that the Federal
Government should reimburse those companies for its illegal
act? In other words--.
Mr. Lloyd. Well, actually it was proven in court that it
was illegal, that it was imposed illegally, so by virtue of
that illegal act we certainly believe that some compensation is
due. My employer is one who is pursuing some litigation to get
some remuneration for that.
You know, we are basically hanging on to stay in business
and I think by an illegal act of the government certainly they
ought to be held accountable for a reduction in our business.
We are a relatively small exploration company in Elko. We have
some large ones there, but in our small company we are talking
roughly a million dollars reduction in salaries and that is
turned over three or four times. You have three or four million
dollars in a smaller community that is turned over, and that is
significant dollars.
Chairman Gibbons. Let me ask both Commissioners another
generalized question. I do believe that both Elko and Humboldt
County provide a service to the industry for mining claims, in
other words, recording and title. Are you able to continue that
service with the current revenues that are coming into the
county in decline as the number of mining claims that are
either dropping off the books? Is there sufficient revenue for
you in your counties to continue providing that service to the
public?
Mr. Milton. Well, the answer is that all of the recording
takes place in the Recorder's Office naturally and we have in
the past tried to run that office with the fees that are
generated, and since there is a substantial amount of money
from mining-related fees and it has dropped this year to only
39 mining claims filed since the first of the year, we have to
subsidize the Recorder's Office out of the general fund, so it
is a hardship on the county just in the fees alone.
Mr. Lloyd. We have not been able to support that. As a
matter of fact, we are now reducing the number of hours that
the Recorder's Office can be opened. As you mentioned, because
of the budget shortfall this year we have to make some
significant decisions and one of those is looking at reducing
hours in which the county offices are open and the Recorder's
Office would be one of those.
Chairman Gibbons. So I would take it literally from all
three of you from a state and county effect that you are seeing
some hardship imposed on our government agencies, government
services at the county and the state level because of the
decline in our mining industry within the State of Nevada due
to changes within the regulatory scheme?
Mr. Milton. Most definitely. I would just add, and this
wasn't in my testimony, but I was in the land surveying
business for 25 years. The main thrust of our business up until
5 years ago was mining exploration. It is virtually nonexistent
as part of our business now. We rely just on the domestic work
around the county and there is hardly any mining exploration
business out there at all.
Mr. Lloyd. I would add, it is totally because of the
regulations. We have become totally dependent on mining, no
other industry, and even though we look for other ways to
diversify in Elko County, we have nothing to offer folks.
We have no infrastructure, the energy situation, the
natural gas, we have none, so we have nothing to offer folks to
attract them to Elko County to replace the mining industry. If
it goes away, we become another ghost town.
Chairman Gibbons. Gentlemen, I want to thank you for taking
the time out of your busy schedules. I know all of you are
public servants who have jobs other than just being here today
to testify at this hearing and I do appreciate the time you
have taken and the interest you have shown in this issue.
I commend you highly, all three of you, for your effort to
help this industry survive in the state, and certainly would
again say thank you on behalf of all Nevadans for what you do,
but with that I would excuse all three of you.
And now I would like to call up Panel II, our second panel,
which primarily will deal with the millsite issue and then
tangentially some of the 3809 regulatory issues. Mr. Tony
Jensen, who is the Mine General Manager of Cortez Joint
Venture; Mr. Richard Harris, Attorney at Law, from the law firm
of Harris and Thompson; Mr. Chuck Jeannes, Senior Vice
President and General Counsel of Glamis Gold, Limited, and Ms.
Debbie Laney, President of the Women's Mining Coalition. If we
can get all of you to come up.
Chairman Gibbons. I noticed that our egg timer is working
effectively, but most people are not paying attention to it. It
is not that we are intending to boil eggs here or throw you out
if you go over. All I want to do is let you know that we are
trying to keep this on schedule.
So I will ask Margaret when there is a minute remaining, so
at the 4 minute period if she will just kind of wave her hand
at you to let you know it is coming up. We are not going to
stop you when it comes to 5 minutes. When you get to 10
minutes, yeah, we will say something, but kind of wrap it up to
make sure.
I presume that we are going to see a slide show or
something here coming up, so let me first offer, again, a
welcome to all four of you for being here today. It is our
pleasure to have you and hear your testimony and of course we
will start, I presume, with Mr. Jensen, and welcome, and the
floor is yours. I look forward to your comments.
STATEMENT OF TONY JENSEN, MINE GENERAL MANAGER, CORTEZ JOINT
VENTURE
Mr. Jensen. Thank you, Congressman Gibbons, and thank you
for the opportunity to present here today and present my
testimony. I am Tony Jensen, the Mine General Manager at the
Cortez Gold Mines. I would like to thank the Committee for
holding this hearing in Nevada. As you had mentioned, this is
particularly relevant because of the social and economic
importance of mining in this state.
Cortez Gold Mines is a joint venture between two
internationally respected mining companies, Placer Dome and
Kennecott Minerals. Cortez has a long history in Eureka and
Lander Counties in Nevada. Mining has occurred in the Cortez
District since the late 1800's and Cortez Gold Mines has been
part of that community since the mid 1960's.
Gold mining is an important economic base in many rural
communities. Cortez alone has an annual payroll of over 23
million dollars, contributing 3.4 million dollars in payroll
taxes. It has contributed property taxes of 1.5 million dollars
annually and pays an annual average of ten million dollars
through the Net Proceeds of Mines tax.
Cortez Mines operates almost entirely on public lands and
is therefore very susceptible to any change in public lands
policy. Today I want to focus on the potential impacts of the
Millsite Opinion as well as other actions taken in the final
days of the last Administration.
First let me offer some background. After the discovery of
the Pipeline ore deposit in 1991 the plan of operations was
submitted to the Bureau of Land Management in 1992, and only
after the development of a comprehensive Environmental Impact
Statement, numerous public comments and hearings, technical
revisions, and the posting of reclamation bonds could
construction of the 270 million dollar Pipeline Project
commence in 1996. This culminated in an exhaustive,
comprehensive and costly permitting process spanning nearly 4
years.
Continued exploration outlined additional economic
mineralization, and an amendment to the Pipeline Plan of
Operations was submitted in 1996. This amendment was approved
in 2000, it took almost 4 years after its submittal. Total
costs to develop the amendment, the amendment alone, were in
excess of five million dollars, most of which went to
scientific technical studies to support the Environmental
Impact Statement.
That amendment, and sadly like nearly all permits today,
was immediately appealed by local and national environmental
groups. In addition, the Appellants filed a Petition for Stay
in an immediate attempt to shut down our operation. The
Petition for Stay was denied, but the appeal will linger for
years. Included in the appeal and Petition for Stay was a
challenge to Cortez's claims status relative to the Millsite
Opinion.
Like any prudent mining company, Cortez regularly evaluates
its claim package relative to the existing and projected
operations. The manner in which any responsible mining company
holds claims must change over time to match project
development, geologic knowledge, and other factors which cannot
be predicted at project inception.
The Millsite Opinion, the January 10th, 2001 Instruction
Memorandum and the Yarnell Opinion have been attempts to
administratively reinterpret land tenure rights established by
the mining law. Firstly, these actions have impacted permitting
efforts. The appellants continue to use the Millsite Opinion as
an appeal point, even though it is clear that our claim
maintenance activities did not violate the mining law, or any
aspect of the recent legislation passed by Congress, namely the
Emergency Appropriations Act for 1999 and the Consolidated
Appropriations Act of Fiscal Year 2000.
Secondly, the Instruction Memorandum and the Yarnell
Opinion issued by the former Administration immediately before
leaving office are particularly troubling and in obvious
contradiction with Congress. Citing no authority, the former
Administration took the position that any location or
relocation of claims requires modifications to the Plans of
Operation.
If these legal interpretations are allowed to stand, this
means a rather dangerous marriage of land tenure issues with
the National Environmental Policy Act, in that land tenure
issues are not environmental issues related to NEPA.
These actions are unacceptable. It will impact our ability
to permit and operate on the public lands, as well as maintain
our claims as needed to evolve with project development. And
they will, I contend, lead to increased chaos in permitting,
never-ending appeals, and lengthy legal battles, none of which
will contribute to improved environmental protection or social
progress.
The future ability of Cortez Gold Mines, indeed any mine,
to operate on public land is in jeopardy for a variety of
reasons. I ask you to urge the Department of Interior to review
the legality and purpose of the Millsite Opinion as well as the
Instruction Memorandum and the Yarnell Opinion. I thank you
very much for the opportunity to come.
Chairman Gibbons. Thank you, Mr. Jensen.
[The prepared statement of Tony Jensen follows:]
Statement of Tony Jensen, Mine General Manager, Cortez Gold Mines,
Crescent Valley, Nevada
I. Introduction
Good afternoon, Congressman Gibbons and members of the
Subcommittee. I am Tony Jensen, Mine General Manager at Cortez Gold
Mines. I would like to thank the Committee for holding this field
hearing in Nevada. This is particularly relevant because of the social
and economic importance of mining in this state.
Cortez Gold Mines is a joint venture between Placer Dome and
Kennecott Minerals. Both are internationally respected mining companies
with numerous worldwide operations. In the United States, Placer Dome
also operates the Bald Mountain and Getchell Mines, both in northern
Nevada, and the Golden Sunlight Mine in Montana. We employ
approximately 850 people in the United States, and about 12,000
worldwide.
More importantly, Placer Dome and Cortez Gold Mines have a long
history in Eureka and Lander Counties. Mining has occurred in the
Cortez District since the late 1800s and Placer Dome has been a part of
the fabric of the area since the mid-1960s. For nearly two generations,
we have contributed to the economic vitality of northeastern Nevada
and, with the discovery and subsequent permitting and construction of
our new Pipeline and South Pipeline ore deposits and mill, Cortez Gold
Mines has the potential to continue contributing to the social well
being of Nevada well into the next generation.
Gold mining is an important economic base for many rural
communities, providing thousands of high-quality and high-paying jobs.
Cortez Gold Mines currently employs 385 dedicated men and women who
have produced over one million ounces of gold in each of the last three
years. We have completed this feat without a single lost time accident,
encompassing over three million man-hours; an accomplishment any
business would be proud of.
Cortez Gold Mines' operation in Lander and Eureka Counties has a
total annual payroll of over $23 million, including over $3.4 million
in payroll taxes. Cortez is an extremely important corporate citizen in
rural Lander County, having contributed $1.5 million in annual property
taxes and an annual average of $10 million over the last 3 years to the
state through the Net Proceeds of Mines taxes, approximately half of
which is returned to the county. In addition, Cortez pays approximately
$750,000 per year to the Bureau of Land Management (BLM) in claim
holding fees.
II. Cortez' Pipeline Project Permitting
The past eight years have been a difficult period for mining in the
United States, particularly for those of us operating on public lands
managed by the BLM. Cortez Gold Mines is one of the largest mines in
the United States that operates almost entirely on public lands and is
therefore very susceptible to any change in public lands regulations.
Today I want to focus on the potential future impacts to our operation
of the Millsite Opinion, a subsequent Instruction Memorandum and the
Yarnell Opinion that were issued in the final days of the last
Administration
First, let me offer some background. After the discovery of the
Pipeline ore deposit in 1991, continued drilling outlined sufficient
economic mineralization on which to construct a mine in near proximity
to where we had mined since the 1960's. An initial mine plan of
operations was submitted to the BLM in 1992 and, after the development
of an Environmental Impact Statement, public hearings and comment
opportunities, technical revisions and the posting of financial
guarantees for reclamation and water monitoring, construction on the
$270 million project commenced in March 1996; culminating an
exhaustive, comprehensive, and costly permitting process spanning four
years.
Continued drilling during this period outlined additional economic
mineralization, and an Amendment to the Pipeline Plan of Operations was
submitted in September 1996. This Plan was approved in June 2000,
almost four years after its original submittal. Total costs to develop
this plan of operations from original submittal through approval were
in excess of $5 million, most of which was spent on technical studies
to support the Environmental Impact Statement.
Subsequently, the South Pipeline Amendment has been under appeal
from local and national environmental groups since its approval. In
addition, the Appellants filed a Petition for Stay in an attempt to
immediately shut down the mine. The Petition for Stay was denied on
January 9, 2001 but the appeal will likely continue for years. Included
in the appeal and Petition for Stay was a challenge to Cortez' claims
status relative to the Millsite Opinion issued by the former Solicitor.
III. Cortez Gold Mines Mining Claim Situation
Like any prudent mining company, Cortez regularly evaluates its
claim package relative to the existing and projected operational
situations. Additionally, the extent of the operational facilities
changes following construction, and some claims are relocated to match
the current and reasonably foreseeable development. Cortez must
continue to monitor its claim status and relocate claims as operational
and geologic conditions mandate. The manner in which Cortez or any
other responsible mining company holds claims must change over time to
match the project facilities, geologic inferences, growth, and other
factors, which cannot be predicted during initial stages of the
operation.
IV. Impact to Cortez of the Millsite Opinion and Instruction Memorandum
The Millsite Opinion, the January 10, 2001 Instruction Memorandum,
and Yarnell Opinion have been attempts to administratively reinterpret
land tenure rights established by the Mining Law. I will not go into
details on the politics and legal issues raised by the former
Solicitor's efforts; this Committee has heard abundant testimony by
others on those issues. I will, however, address the past and potential
future impacts to Cortez of the recent administrative actions relative
to the millsite--lode claim question.
First, it has impacted Cortez' permitting efforts. Appellants
continue to use the Millsite Opinion as an appeal point, even though it
is clear upon review that our claim maintenance activities did not
violate the Mining Law, the Millsite Opinion, or any aspect of the
recent legislation passed by Congress; namely, the Emergency
Appropriations Act of 1999 and the Consolidated Appropriations Act for
Fiscal Year 2000 - both of which addressed the Millsite Opinions.
Nonetheless, Appellants use convoluted time frames and unsupported
accusations of ``claim manipulation'', conveniently encouraged by the
former Solicitor's last minute directives, to circumvent Congress as
well as defy common sense, and responsible claim management practices.
It is also important to point out that land tenure issues are not
part of the National Environmental Policy Act (NEPA). However, those
radically opposed to mining will continue to abuse that process by
using the Millsite Opinion to try and shut down mines.
Secondly, and particularly troubling to Cortez and others trying to
develop resources on public land, are the last minute Instruction
Memorandum and opinion issued by the former Solicitor immediately
before leaving office. In a flurry of activity, the former Solicitor
and Interior Secretary issued the Yarnell Opinion and the BLM issued IM
No. 2001-077, contradicting the obvious intent of Congress in enacting
the Fiscal Year 2000 Appropriations Act. Citing no authority, they take
the position that any location or relocation of claims requires that a
modification to the plan of operations be undertaken. If these legal
interpretations are allowed to stand, this means that we have a rather
dangerous marriage of land tenure issues with NEPA. The BLM currently
has the authority to perform claim examinations and these Interior
Department mandates will only further serve to abuse the NEPA process
and render more burden on an already overloaded BLM structure.
This is unacceptable, and will impact our ability to permit and
operate on public lands. It will impact our ability to maintain our
claims as needed to evolve with project development. And it will, I
contend, lead to increased chaos in permitting, never-ending appeals
and lengthy legal battles, none of which will contribute to improved
environmental protection or social progress.
V. Request for Committee Support
The future ability of Cortez Gold Mines, indeed any mine, to
operate on public land is in jeopardy for a variety of reasons,
including the millsite--lode claim issue that I have focused on in this
testimony. I ask you to urge the new Department of Interior Secretary
and Solicitor to review and rethink the legality and purpose of the
original Millsite Opinion as well as the Instruction Memorandum and
Yarnell Opinion both of which were issued days before the end of the
last Administration.
Cortez stands ready to provide you with additional details upon
your request, and I thank you for the opportunity to provide testimony
here today.
______
Chairman Gibbons. Mr. Harris, the floor is yours, welcome.
STATEMENT OF RICHARD W. HARRIS, ATTORNEY AT LAW, HARRIS AND
THOMPSON
Mr. Harris. Thank you, Congressman Gibbons. Good afternoon.
My name is Richard Harris. I work as a mining and environmental
attorney in Reno, have done so for 25 years. My remarks today
will be directed toward the Solicitor's Opinion, so-called One-
to-One Millsite Opinion.
Mr. John Leshy, Solicitor of the Interior Department, on
November 7, 1997 issued an opinion stating that a mining
claimant could hold only one five-acre millsite for each
associated lode or placer claim. This was an extraordinary and
unexpected ruling of law. It is a variance with 120 years of
mining jurisprudence and the practices and procedures of the
Interior Department itself.
Let me say by way of background and introduction that I
hold a second degree in law from Stanford University in the
field of mining law. My Master's thesis entitled ``The Law of
Millsites'' was published in the two national law journals.
In 1992 I updated this paper with my law partner Richard
Thompson in an article entitled ``Millsites: Current Problems
and, Current Issues and Unexplained Problems'' which was
published by the Rocky Mountain Mineral Law Foundation.
I say this because Mr. Leshy in his opinion purported to
survey the entire field of mining and millsite law and yet he
made no mention of either of these opinions of mine, and that
is not surprising because I very strongly stated that a miner
has the right to locate as many millsites as necessary to
support the mineral operation. I am confident that this is the
correct opinion, and let me share with you two of the reasons
why this is so.
First, the current millsite law is part of the Mining Law
of 1872 that was written by Senator William Stewart of Nevada.
Mr. Stewart had been a highly successful mining attorney on the
Comstock. He was very well acquainted with the practices and
procedures of the time.
There was one mine, for example, the Gould and Curry Mine,
that occupied only 600 feet along the Comstock vein, and yet
the same mining company had millsite acreage of 272 acres. This
was the ground necessary to support their mill. They had a
reservoir blasted out of the rock. They had numerous support
facilities, so William Stewart knew very well that you required
a good deal of accessory land to support a land mining
operation.
He came up with the five-acre millsite law for the purpose
of eliminating, excuse me, limiting the abuses that had
occurred under the Lode Law of 1866. People acquired excess
acreage for land speculation and so each miner was allowed to
locate as many five-acre millsites as necessary to support the
mining and milling activities.
I am confident that Senator William Stewart who was the
great proponent and champion of miner's rights in the mineral
industry did not write a provision in the mining law of 1872
that would have the purpose of shackling and limiting the
minerals industry.
My second point has to do with the longstanding practices
of the Department of the Interior itself, and I have a chart up
on the screen. Could you adjust that, Miss, so that the title
is visible? Very good.
With the assistance of the Nevada office of the Bureau of
Land Management I compiled a table of millsite and mining
combinations issued in mineral patents from 1979 through the
year 2000.
It is illustrative of the fact that there are many
millsites associated with each group of mineral patents. To
take one example, Cyprus Northumberland patented nine lode
claims, 180 acres, they had 63 associated millsite patents. And
more recently Goldfields obtained in conjunction with 19
mineral claims, 180 millsites. Interestingly enough that latter
patent was issued by Secretary of the Interior, Bruce Babbitt,
last year.
The ratio of millsites to mining claims is roughly seven to
one. In many cases it is nine and a half to one. Solicitor
Leshy in his opinion said that some BLM field offices
apparently have in recent years ignored the limitations of the
mining law and the BLM's regulations.
That is a misstatement. In fact, the BLM and the Interior
Department have long allowed miners to acclaim and appropriate
and patent as many millsites as are necessary.
These were not the actions of rogue state offices. Every
opinion, excuse me, every patent was ultimately reviewed and
signed by the Secretary of the Interior himself. So I say that
I am confident that Mr. Leshy's opinion was adopted for purely
political reasons. It is meant to hobble and to limit the
mining activities on the public domain. It is a false statement
of law, and I earnestly request that it be withdrawn and
canceled and rendered of no effect. Thank you very much.
Chairman Gibbons. Thank you very much, Mr. Harris.
[The prepared statement of Richard Harris follows:]
Statement of Richard W. Harris, Esq., Attorney at Law, Harris &
Thompson
Introduction
Madam Chairman, Members of the House Committee on Resources, Ladies
and Gentlemen. I appreciate this opportunity to discuss the Solicitor's
Opinion dated November 7, 1997, in which former Solicitor John D. Leshy
ruled that a mining claimant could locate no more than one millsite for
each lode or placer claim. His Opinion has no foundation in law and
repudiates long-established policies of the Interior Department itself.
By way of introduction, I am a Reno attorney specializing in mining
and environmental law. I hold a law degree from Stanford Law School
(J.D. 1975) and a special degree in mining law from Stanford University
(M.S. 1975). My Master's Thesis, entitled ``The Law of Millsites:
History and Application,'' was published in 9 Natural Resources Lawyer
103 (1976) and 14 Public Land and Resources Law Digest 133 (1977). I am
co-author, with my law partner Richard K. Thompson, of ``Millsites:
Current Law and Unanswered Questions,'' 38 Rocky Mountain Mineral Law
Institute (1992). I have been engaged as an expert consultant on
millsite issues by various mining companies, and my published works
have been cited as authoritative references in prior congressional
testimony.
I also hold degrees in Geological Engineering (B.S. 1969,
University of Nevada, Reno) and Environmental Science (M.S. 1995,
University of Nevada, Reno). I am a doctoral candidate in Environmental
Policy at the University of Nevada, Reno, and my dissertation involves
a review of U.S. mineral policy during the period 1992-95.
I wish to critique Mr. Leshy's Opinion on historic, legal, and
practical grounds.
The Leshy Opinion
In his Opinion Mr. Leshy states, ``Since enactment of the Mining
Law, there appears to have been little doubt among miners and mining
lawyers that the law allowed no more than five acres of millsite area
in connection with each mining claim'' (Opinion, p. 12, emphasis
added). Mr. Leshy selectively cites various cases and legal authorities
in support of his Opinion.
In fact, neither the Mining Law of 1872, one-hundred-twenty-five
years of administrative decisions and legal cases, nor the actual
practices of the Interior Department support his position. As noted by
Mr. Patrick Garver in his appearance before the U.S. Senate in 1999:
The Solicitor's millsite opinion is not an objective legal
analysis. It is advocacy. It reflects a selective presentation
of facts and misleading and incomplete characterizations of
legal authorities, offered to support a restrictive new policy
of this Solicitor regarding the use of public lands for mineral
development. (Statement of Patrick Garver to the Senate
Subcommittee on Forests and Public Land Management, June 15,
1999.)
The Millsite Provision
The Mining Law of 1872 allows the proprietor of a vein or lode to
locate a five-acre millsite claim for mining and milling purposes. The
only limitations are that (1) the land must be nonmineral in character;
(2) it must be used for mining or milling purposes, or for a ``quartz
mill or reduction works''; and (3) the millsite claim may not exceed
five acres in size. A 1960 amendment to the Mining Law allowed the
proprietor of a placer claim to locate five-acre millsites as well.
The Mining Law of 1872 was written by Senator William Stewart of
Nevada. Senator Stewart had been a successful mining lawyer during the
great silver boom on the Comstock Lode in Virginia City, Nevada.
Senator Stewart was intimately acquainted with mining practices of the
day, and he knew that a single five-acre millsite was not sufficient to
deal with the waste rock, tailings, and surface structures needed to
support a mining claim on the Comstock. By way of example, the Gould
and Curry Mine occupied a mere 600 feet along the Comstock vein. Its
associated millsite, however, occupied 272 acres at the intersection of
Six and Seven Mile Canyons (the equivalent of 55 modern millsites). The
mill building covered a full acre and graded terraces surrounded the
mill. A large reservoir was blasted out of solid rock to supply water
to the facility. In addition, there were offices, shops, stables, and
laborers' cottages (Elliot Lord, Comstock Mining and Miners (1883, 1959
ed. at pp. 124-125); communication from Comstock Mining Services, April
17, 2001).
It is inconceivable that Senator Stewart, as the champion of
miners' rights and author of the Mining Law, would have agreed to a
millsite provision that precluded or drastically limited mining and
mineral processing.
The purpose of the five-acre millsite provision was to curb
perceived abuses in the Lode Law of 1866, which placed no limit on the
size of lode claims. Lindley, in his famous treatise on mining law,
describes ``broom claims'' consisting of a large circle of land
surrounding the discovery shaft and a narrow strip extending along the
supposed course of the vein. Lindley also provides a diagram taken from
a patent issued under the 1866 law which shows a single claim embracing
215.31 acres (1 Lindley on Mines (3rd ed. 1914) Sec. 59 at pp. 97-99).
Some of this land was used for nonmining purposes, such as townsite
development.
The new mining law therefore sought to restrict the use of
``accessory lands'' to mining-related purposes. This goal was
accomplished by the creation of five-acre millsite claims. The
resulting statute (30 U.S.C. 42(a)) states that:
Where nonmineral land not contiguous to the vein or lode is
used or occupied by the proprietor of such vein or lode for
mining or milling purposes, such nonadjacent surface ground may
be embraced and included in an application for a patent for
such vein or lode, and the same may be patented therewith,
subject to the same preliminary requirements as to survey and
notice as are applicable to veins or lodes; but no location
made of such nonadjacent land shall exceed five acres, and
payment for the same must be made at the same rate as fixed by
. . . this title for the superficies of a lode. The owner of a
quartz mill or reduction works, not owning a mine in connection
therewith, may also receive a patent for his mill site, as
provided in this section.
It is notable that the statute, while limiting a millsite claim to
five acres, does not preclude a mineral claimant from locating multiple
millsite claims. This is consistent with Senator Stewart's experience
and the customs and practices of hundreds of mining camps throughout
the American West.
Mr. Leshy points to several cases that supposedly established the
one-to-one millsite rule. However, these decisions represent the
Interior Department's rejection of attempts to use millsites for land
speculation. In Alaska Copper Co., 32 LD 128 (1903), a mining claimant
with 18 lode claims located 18 millsites in a horseshoe formation which
completely blanketed the waterfront of a small harbor. None of the
millsites was actually used for any mining purpose. In rejecting the
claimant's patent application, the Interior Department stated that each
lode claim was not entitled automatically to a separate millsite. The
Secretary was clearly annoyed by the attempt to use multiple millsites
for large-scale land acquisition unrelated to mining.
In another case, Hard Cash and Other Mill Site Claims, 34 LD 325
(1905), the patent applicant located four millsites in connection with
four lode claims. He justified the multiple millsite locations by
putting ore from each claim on a corresponding millsite. The Secretary
rejected the application, saying that the applicant had failed to show
a sufficient and satisfactory reason for using four millsites for the
storage of ore when it was apparent that one would suffice.
The underlying rationale in Alaska Copper, Hard Cash, and other
decisions is that a claimant must show a mining-related need for each
millsite. This rationale found expression in U.S. v. Swanson, 14 IBLA
158 (1974), the major millsite case of the last 50 years. There the
Interior Board of Land Appeals required a showing of ``present use and
occupancy'' on each 2.5-acre tract of a millsite. ``We believe that in
granting a gratuity of a millsite the Government is entitled to require
efficient usage, so that only the minimum land needed is taken'' (Id.
at 173-174). Again, the emphasis is on need, rather than a strict
limitation on acreage.
There is no administrative or legal decision, to the best of my
knowledge, which states specifically that a mining claimant is limited
to one millsite per mineral claim.
Turning to scholarly writings and treatises, Mr. Leshy purports
to survey the mining literature through 1997. He concludes that there
is no support for multiple millsites. However, Mr. Leshy conveniently
overlooked two of my published articles written exclusively on
millsites. In ``The Law of Millsites,'' I offer the following analysis:
A five-acre tract might be sufficient for a small mine or
mill operator, but it is clearly inadequate for a major mining
company which seeks to develop a large, low-grade ore body. . .
. Since the statute does not limit a millsite locator to a
single claim, the obvious response is to locate several
millsites, thereby acquiring enough land for all present and
future needs (Harris, 1976, p. 121).
In a second article, ``Millsites: Current Law and Unanswered
Questions,'' I stated that ``It is not uncommon for a mining company to
locate 300 millsites to service a core group of 15 or 20 lode claims''
(Harris and Thompson, 1992, p. 12-3). And further in the article I
state ``A millsite claimant [is] not limited as to the number of claims
that he might locate, but he [is] not automatically entitled to one
millsite per lode claim'' (p. 12-4). In reviewing problem areas and
unanswered questions of millsite law, I did not consider or discuss
limitations on the number of millsites available to a claimant simply
because this issue had not been raised in 120 years of mining
jurisprudence.
Industry Needs and Administrative Practice. Today's mining industry
is far different from the pick and shovel practices of the 19th
Century. Large open pit gold mines in Nevada occupy hundreds of acres;
most of this area is required for processing and support activities. As
stated by Stan Dempsey, a noted mining attorney, in a 1968 article:
Many hundreds or thousands of acres may be required for
protection of the title to the mineral deposit, subsidence
areas, pit slopes, concentrator sites, tailing disposal areas,
and the lands needed for other mining and related purposes.
(Dempsey, ``Basic Problems in Locating Claims,'' 14 Rocky
Mountain Mineral Law Institute 573 (1968)).
With the growth of large-scale mining operations in the 1960s,
there was a concurrent evolution in practices of the Department of the
Interior. With respect to millsites, the BLM Handbook for Mineral
Examiners provided that ``Any number of millsites may be located but
each must be used in connection with a mining and milling operation''
(H-3890-1, Ch. III Sec. 8, Rel. 3/17/89). The BLM Manual states:
A millsite cannot exceed five-acres in size. There is no
limit to the number of millsites that can be held by a single
claimant. (BLM Manual Sec. 3864.1.B (1991)).
The Bureau of Land Management, with the consent and approval of the
Interior Department, proceeded to issue multiple-millsite patents in
accordance with this policy. Table 1 describes a series of mineral and
millsite patents issued in Nevada from 1979 through 2000.
TABLE 1.--ASSOCIATED MINERAL AND MILLSITE PATENTS ISSUED IN NEVADA, 1979-2000
----------------------------------------------------------------------------------------------------------------
Number of Number of
Year of patent Patentee mineral claims millsites
----------------------------------------------------------------------------------------------------------------
1979, 1980................................. Placer Amex, Sterling.............. 13 84
Mineral Venture....................
1982....................................... Dresser Industries................. 13 27
1984....................................... Milchem............................ 8 16
1984, 1985................................. Cyprus Mines....................... 9 63
1985....................................... Duval Corp......................... 2 41
1989....................................... Atlas Gold......................... 6 8
1990....................................... FMC Paradise Peak.................. 6 99
1994....................................... Barrick Goldstrike................. 22 151
1996, 2000................................. Gold Fields Mining................. 19 180
-------------------------------
Totals............................... ................................... 98 669
----------------------------------------------------------------------------------------------------------------
The average ratio of millsites to mineral claims for this period is
6.8 to 1--that is, approximately seven millsites for each associated
mineral claim. It is interesting to note that a patent to a group of
millsites in the ratio of 9.5 to 1 was issued by Secretary Babbitt in
2000. It is also interesting to note that Mr. Leshy does not include a
discussion of Nevada millsite patents in his Opinion, even though
Nevada was then the leading gold producer in the United States with a
history of numerous mineral and millsite patents.
The practice of issuing multiple millsite patents has been well
known at the Department of the Interior--it is, after all, the
Secretary of the Interior who authorizes and signs mineral patents. It
is therefore incorrect for Mr. Leshy's Opinion to state that ``Some BLM
field offices apparently have, in recent years, ignored the limitations
of the Mining Law and BLM's regulations'' (p. 7).
Conclusion
Solicitor Leshy, in a 1988 book entitled The Mining Law: A Study in
Perpetual Motion, gave a preview of his activist role as Solicitor for
the Interior Department from 1992 through 2000. In order to force the
mining industry to adopt changes acceptable to an environmentally
oriented administration, he says, it would be appropriate for the
Department of the Interior to ``consciously reach results that make the
statute unworkable'' (p. 282).
The impact of Mr. Leshy's one-to-one millsite rule on the mining
industry has been and will be substantial:
The effect of applying his ``acreage limitation'' to existing
and proposed mines has been to call into question the land
positions of most existing domestic mining operations and
impose an effective moratorium on the expansion of existing
mines and the permitting of new mines. (Patrick Garver,
Statement before the Senate Subcommittee on Forest and Public
Land Management, June 15, 1999).
It is my opinion that Secretary Babbitt and Solicitor Leshy,
frustrated in their efforts to obtain mining law reform through the
``front door'' of congressional enactment, resorted to various
``backdoor'' approaches such as the Opinion of November 7, 1997. 1
respectfully request that the Committee on Resources close this door.
______
Chairman Gibbons. Mr. Jeannes, welcome.
STATEMENT OF CHUCK JEANNES, SENIOR VICE PRESIDENT AND GENERAL
COUNSEL, GLAMIS GOLD, LTD.
Mr. Jeannes. Thank you, Congressman Gibbons. I appreciate
the opportunity to be here today. I'm Chuck Jeannes, Senior
Vice President and General Counsel for Glamis Gold, Limited.
Glamis is a mid-sized gold mining company headquartered here in
Reno. We operate mines in Nevada, California and Honduras.
We had a long history of successful and responsible mining
in the United States, have been in continuous operation for
over 20 years here. Unfortunately, the benefits of Glamis'
success to its shareholders, employees and the communities in
which we operate have been severely threatened by the Federal
policies of the past Administration.
You heard today about the Millsite Opinion. I would like to
speak briefly about another Solicitor's Opinion issued in 1999,
and that is what I call the Undue Impairment Opinion. I would
also like to speak about the closely related mine veto
provision that was included in the 3809 regulations.
The Undue Impairment Opinion was issued by the Solicitor in
December '99 as I mentioned regarding our Imperial Project in
California. The opinion initially received little attention
because it applied only to our project, but I think that it
laid the groundwork for what I'm afraid is the most damaging
initiative of the Clinton Administration, that being the mine
veto provision contained in the 3809 regulations, and I would
point out that this provision was slipped into the regulations
late in the process after the public comment period had ended.
The mine veto provision creates a broad discretionary power
in the BLM to deny a project on a finding of significant
irreparable harm to a scientific, environmental or cultural
resource, and at Imperial the same discretionary standard was
applied to our Plan of Operations.
Briefly, the Imperial project was a simple open pit, heap
leach gold project. We have invested nearly 15 million dollars
toward this project to date. It is environmentally benign with
no environmental issues of note, as noted in the final
Environmental Impact Statement.
The only contentious issue was the impact on alleged Native
American cultural and religious resources. Now, the land of
Imperial is not tribal land, instead the local tribe, the
Quechan, assert that the entire land in this area is of
significant religious and cultural value based on things like
the viewsheds and the setting, feeling, and association of the
area.
Until the Solicitor issued his opinion, the law governing
mining projects in the California desert was very clear. The
BLM would apply the unnecessary or undue degradation standard
from FLPMA.
With the stroke of his pen, the Solicitor revised this law
and 25 years of BLM practice. He created an entirely new
standard to be applied at Imperial, that of undue impairment.
And armed with this Opinion the BLM determined that any
development in this area would irreparably harm spiritual and
religious resources, and on that basis the Imperial Project was
denied and our 15 million dollar investment was lost.
Now, there are three reasons, Mr. Chairman, why I believe
this decision is extremely relevant to Nevada and to the mining
industry as a whole. First, our experience at Imperial must
frighten any mining company considering a new investment on
public lands in the United States. We committed funding toward
this project with a clear understanding of the law and the
longstanding BLM practice, but 5 years after we started the
permitting process the Solicitor radically changed the rules.
With this discretionary standard now embedded in the 3809
regulations any company can enter onto any public lands open to
mineral location, make a discovery, invest in the property, go
through the FLPMA process, meet all of the applicable
environmental laws and still find at the end of the day that
its permit can be denied at the discretion of the BLM.
It is this lack of certainty of investment that I believe
is a major reason for the continuing flight of capital out of
the United States. Secondly, it was not physical sacred sites
that were at issue at Imperial, but instead the spiritual and
religious importance of the area as a whole.
But the area of spiritual importance to this particular
tribe is vast and is said to encompass large parts of the
desert southwest, including parts of Arizona, California, and
Nevada. Given these broad claims, our experience at Imperial I
think sets a dangerous precedent because the land itself is so
important in Native American religion there is likely very
little of the American west that cannot be said to be
culturally significant.
Now, I don't believe that Congress or the BLM have fully
considered the immense impact these new policies may have or
the huge amount of public lands that can be affected. Finally,
the fundamental changes that I talked about in public land
policy have been brought about with no congressional or public
involvement.
The Department of Interior now for the first time possesses
a discretionary ability to deny any mine plan, and any mineral
development on public lands can be halted in favor of Native
American religious beliefs. Both of these fundamental changes
were achieved not by way of legislation following public debate
or by rule making following notice and comment, but instead by
the Solicitor's strategic use of legal opinions in combination
with the last amendment to the 3809 regs.
In conclusion, there indeed has been a movement of
exploration and mining capital out of the United States.
Glamis' experience I think is typical. 100 percent of our
grass-roots exploration budget this year is directed toward
Mexico and Central America. And this business decision was
based on a premise that I think would have been untenable just
a few years ago, and that is that the political risk of
operating in countries like Honduras or Mexico is less than the
permitting risk in the United States.
Now, I don't believe that this unfortunate situation is
irreversible. I think with prompt and decisive action by this
Administration in Congress, the misdeeds that were occasioned
in the past can be undone.
I think we can reverse the flow of investment dollars, tax
revenues and jobs offshore and I think we can sustain the human
social and economic benefits of mining in the United States,
particularly in Nevada's rural communities. Thank you very
much. I appreciate the opportunity to be here.
Chairman Gibbons. Thank you, Mr. Jeannes.
[The prepared statement of Charles Jeannes follows:]
Statement of Charles A. Jeannes, Senior Vice President Administration
and General Counsel, Glamis Gold Ltd.
Introduction
Thank you for the opportunity to present written and oral testimony
regarding the effect of Federal mining policy changes on state and
local revenues and the mining industry. My name is Charles Jeannes. I
am the Senior Vice President Administration and General Counsel of
Glamis Gold Ltd. A synopsis of my background and qualifications are
included in the Disclosure Requirement submitted to the Subcommittee
with my written testimony.
I am speaking to you today on behalf of Glamis Gold Ltd., a mid-
sized gold mining company headquartered here in Reno, Nevada. Glamis is
involved in the exploration for, development and mining of precious
metals--primarily gold--at operations located in the United States and
Central America. We operate the Marigold Mine in Nevada, the Rand Mine
in southeastern California and our newest mine, San Martin in Honduras.
We are also engaged in active closure and reclamation activities for
two mines in Nevada and one in California that have reached the end of
their productive lives.
Although a relatively small company in terms of gold production
compared to some of our peers in Nevada--we will produce approximately
230,000 ounces this year--Glamis has a long history of successful and
responsible operations in the United States, having been in continuous
operation for more than 20 years. Glamis was one of the pioneers of
heap leaching technology so prevalent in the gold industry today, and
we are very proud of our environmentally sound operating mines and our
innovative and award-winning reclamation practices at the closed
operations.
Unfortunately, the benefits of Glamis' success to its shareholders,
employees and the communities in which it operates have been severely
threatened by numerous Federal policies relating to mining enacted by
the past executive administration. The two policies on which I will
focus my remarks today--the Millsite Opinion and the Undue Impairment
Opinion--have had and, if left in place, will continue to have a
dramatic adverse effect on Glamis Gold as well as the domestic mining
industry generally. I will also discuss the effective codification of
the Undue Impairment Opinion in the ``mine veto'' provision contained
in the new 3809 regulations.
Before turning to the substance of my remarks, I want to point out
that Glamis Gold is a public company incorporated in British Columbia.
Opponents of mining will often talk of Glamis and others in our
industry as ``foreign companies,'' stating or implying that the
benefits of U.S. resources that we mine are flowing outside the
country. Nothing could be further from the truth.
Given Canada's rich mining history, Glamis and many other
international mining companies originated there and remain incorporated
in Canada for access to its mining-knowledgeable capital markets.
However, Glamis' head office and all of its executive and
administrative functions are located in Reno, all of our operations are
located in the U.S. or Latin America, the great majority of our shares
are traded on the New York Stock Exchange and the majority of our
shareholders are U. S. citizens. Accordingly, our problems are U. S.
problems; the people who suffer from the policies we are discussing
here today are U.S. citizens.
As stated earlier, I will focus today on the Millsite Opinion
issued by Solicitor Leshy on November 7, 1997, and the Undue Impairment
Opinion issued by the Solicitor on December 27, 1999. You will note
that the discretionary power to deny a mining plan of operations
granted by the Solicitor to the BLM in the Undue Impairment Opinion
later found its way into the new 3809 regulations in the form of the
``mine veto provision.'' The common themes among these two opinions is
that they each represent drastic and fundamental changes in the mining
law as enacted by Congress and administered by the Interior Department
for decades; they each have had or threaten to have profound adverse
impacts on the domestic hardrock mining industry; and yet, each was
issued and given the force of law within the Interior Department
without a shred of public or Congressional involvement. It is hard to
decide which is more detrimental in the long run--the poor policy
choices and failed legal reasoning contained in the opinions, or the
complete disregard for the rule of law that is evident in these
attempts to effect public policy by way of back door legal opinions.
The Millsite Opinion
The Solicitor's Millsite Opinion concludes generally that a miner
is limited to one five-acre millsite for each valid unpatented mining
claim comprising a mining operation. I have reviewed the arguments and
authorities cited in the opinion and I am convinced that the
Solicitor's legal reasoning is simply wrong. However, the same legal
analysis reaching the same conclusion has been presented to this
Subcommittee before,\1\ and I would respectfully incorporate the
statements of Mr. McCrum and Mr. Hubbard rather than restate the
analysis here. I would simply point out the most fundamental failure in
the opinion; namely, the Solicitor's failure to explain or account for
the fact that the Bureau of Land Management has been expressly
interpreting the mining law for decades in exactly the opposite manner
as concluded in his opinion.\2\ As discussed in connection with the
Undue Impairment opinion below, it is critical that industry be able to
rely on consistent agency interpretation and practice, to provide
certainty and predictability in connection with investment decisions.
The lack of such predictability in the legal regime that now permeates
the domestic hardrock mineral industry, as exemplified by the Millsite
Opinion, is precisely why mineral investment is being diverted from the
U.S.
On at least three different occasions since 1997, 1 have heard
Solicitor Leshy speak publicly about the Millsite Opinion. In each
instance, he has argued that the opinion must be correct because no
mining company has sued to overturn it. I would like to take a moment
to point out the fallacy in this statement. First, a company would only
resort to litigation with the government if the millsite to mining
claim ratio limitation of the Millsite Opinion were being applied to it
and it had no reasonable alternatives. I think its fair to say that in
the case of the Crown Jewel decision,\3\ Battle Mountain Gold Company
was surely poised and ready to commence suit at the time that Congress
intervened in its behalf I am aware of no other situations involving a
new mine development in the United States to which the limitations of
the Millsite Opinion have been directly applied. Largely due to this
and other harmful policies directed at the mining industry by the past
administration, there simply have been few new mine development
situations to which the Millsite Opinion would be applicable. So the
lack of litigation is indicative not so much of the propriety of the
opinion as its lack of application to date.
Glamis Gold has had two new development projects to which the
Millsite Opinion ostensibly applies. First, at its Imperial Project in
southeastern California, the BLM discussed application of the Millsite
Opinion, but in the end the project was denied on other grounds--more
about this in a moment. Secondly, our Marigold Mine in Nevada has been
engaged in the approval process for an expansion for the past three
years. The Final Environmental Impact Statement in support of the new
plan of operations was recently completed and a Record of Decision
approving the expansion is expected in due course. Opponents of the
project have raised the ratio limitations of the Millsite Opinion as a
basis for denial of the project. Fortunately, the Marigold Mine is
situated in a ``checkerboard'' area with alternating sections of public
and private lands, and Glamis was able to situate its ancillary
facilities partially on private ground such that it meets the ratio
limitations. This configuration was deemed more expedient than
litigating the applicability of the Millsite Opinion. However, had
marigold not controlled private lands adjacent to its mining
operations, it would have been physically impossible for it to meet the
ratio limitation of the Millsite Opinion. Glamis would have either had
to successfully challenge the Millsite Opinion or shut down the
Marigold Mine for lack of space for additional processing facilities.
Despite Glamis' fortunate situation at Marigold, there is no
question that the Millsite Opinion has caused or will cause tremendous
detriment to the U.S. mining industry. In his last days in office, the
Solicitor issued a follow-up opinion prohibiting the use of lode mining
claims for ancillary purposes.\4\ Read together, these opinions render
it practically impossible for a company to construct the facilities
needed to mine and process minerals on public lands, at least in an
open pit configuration. If the Millsite Opinion is permitted to remain
in force, a company will have no choice but to either engage in costly
and time consuming litigation to challenge the opinion, or forgo the
development of mineral resources on public lands.\5\
The Undue Impairment Opinion
The Undue Impairment Opinion is a Solicitor's Opinion issued
December 27, 1999 regarding Glamis Gold's Imperial Project in Imperial
County, California. Like the Millsite Opinion, this opinion represents
an effort by the Solicitor to reinterpret existing statutes governing
mining and to entirely ignore long-standing BLM interpretation and
practice. While this opinion originally received little attention
because it applied only to Glamis' Imperial Project, it unfortunately
laid the groundwork for what I believe is the Clinton Administration
initiative most damaging to the domestic mining industry--the mine veto
provision contained in the new 3809 regulations.
The mine veto provision is contained at 43 CFR Sec. 3809.415. It
redefines the phrase ``unnecessary or undue degradation'' from the
Federal Land Policy and Management Act (``FLPMA'') as ``substantial
irreparable harm to significant scientific, cultural or environmental
resource values of the public lands that cannot be effectively
mitigated.''
You can see that this language creates a broad discretionary power
in the BLM to deny a project as causing unnecessary or undue
degradation upon a finding of ``substantial irreparable harm.'' Because
the Department of the Interior applied an almost identical
discretionary standard to our Imperial project, by way of the Undue
Impairment Opinion, and then denied the plan of operations for our mine
based on that standard, some of the facts related to Imperial might
give you a better idea of how the new mine veto provision can be
applied generally on all BLM lands. I believe you will also understand
why, if allowed to remain in force, this provision in the new
regulations will do as much or more to move mineral investment out of
the United States as any of the other issues being discussed here
today.
Briefly, the Imperial Project would be an open pit, heap leach gold
mine with three open pits, two of which would be backfilled. Glamis has
invested more than $14 million to date; after another $50 million
capital investment, the mine would produce around 1.5 million ounces of
gold over ten years. The mine would generate substantial local economic
benefit in a county with the highest unemployment rate in all of
California. The project understandably has strong local support.
Most importantly, the project is very benign environmentally--the
Final Environmental Impact Statement identified no environmental issues
of note. The only contentious issue, and the one on which Secretary
Babbitt based his denial of the project, is the impact on alleged
Native American cultural and religious resources.
The physical resources located at the Imperial Project site are
unremarkable. They include pot drops, lithic scatter from chipping
stations and small sections of a large braided system of historic
walking trails that passes through the area on the way to the Colorado
River. This is not Tribal land, it is public land open to mineral
location. There are no burial areas or evidence of historical
habitation. Importantly, the local tribe, the ``Quechan,'' has admitted
that the area has not been used for religious, cultural or other
purposes for at least fifty years. In fact, the only other significant
recent use of this area apart from mineral exploration was that General
Patton's Seventh Army trained there prior to World War II. In short,
the area is far from pristine and there are few physical resources
there. The Quechan instead assert that the land is of significant
religious and cultural significance to their tribe based on the
``vistas'', ``viewsheds'' and the ``setting, feeling and association''
of the area.
The Imperial Project is located within the California Desert
Conservation Area (``CDCA''). Until the Solicitor issued his opinion,
the law governing mining projects in this area was very clear--the BLM
applied the unnecessary or undue degradation standard from FLPMA. For
each of fourteen plan of operation approvals at nine different mines
since the CDCA was created in 1976, the BLM applied the unnecessary or
undue degradation standard. And with respect to cultural or historic
resources, the law was equally clear. The combination of FLPMA and the
National Historic Preservation Act required a company to consult with
local Native Americans, to search for and record any cultural or
historic resources on the affected lands, and to work with the BLM and
the local tribe to attempt to mitigate any impacts to those resources.
But in the end, the applicable law provided that a mining project would
not be denied on the basis of impacts to cultural resources.\6\
With the stroke of his pen, Solicitor Leshy revised twenty-five
years of administrative practice and interpretation. He created an
entirely new legal standard to be applied within the CDCA, that of
``undue impairment.'' The opinion states that this standard is
different from and more stringent than the old unnecessary or undue
degradation standard, and that it gives the BLM discretionary authority
to deny a plan of operations based on impacts to the kinds of non-
physical resources asserted to exist at Imperial.\7\ So, for Glamis,
the Undue Impairment Opinion made a discretionary balancing test
directly applicable to the Imperial Project. For the rest of the
industry, unfortunately, I think the groundwork was laid for what we
now see in the new definition of unnecessary or undue degradation
contained in the 3809 regulations.
Armed with this opinion, the BLM concluded that the Imperial
Project would ``unduly impair'' the religious and cultural resources of
the Quechan Tribe. Because the resources in the area are spiritual
rather than physical, the BLM found that any development of these lands
would impair those resources and that no amount of mitigation by Glamis
could offset the adverse impacts. On that basis, the Imperial Project
plan of operations was denied, and with it, Glamis' $14 million
investment was lost.\8\
Impacts of Undue Impairment Opinion and 3809 Regulations
1. Lack of Predictability. Glamis' experience at the Imperial
Project is one that brings fear to any company considering a material
investment in a new mineral development on U.S. public lands. Glamis
committed millions of dollars towards this project based on a clear
understanding of the applicable law and long-standing BLM practice. Two
draft environmental impact statements were prepared for the Imperial
Project; even in the face of the Quechan allegations about its impacts,
the BLM chose in each draft to propose the Glamis development plan as
its preferred alternative. Then, over five years after Glamis first
submitted its plan of operations, the Solicitor radically changed the
applicable rules with the issuance of the Undue Impairment Opinion and
based on this opinion, the project was denied.
With the codification of the undue impairment standard in the new
3809 regulations, this lack of certainty and predictability necessary
for a company to commit substantial capital to a new project now
applies to all BLM lands. A company can enter upon lands otherwise open
to mineral location and development, make significant expenditures to
discover and develop a mineral resource, apply for a permit and meet
all applicable environmental laws and regulations during the NEPA
process, only to be told in the end that its permit will be denied
based on a discretionary finding of ``significant irreparable harm'' to
some resource. This legal quagmire can certainly be identified as a
substantial reason for the continuing flight of mining capital out of
the United States.
2. Potential Impacts of Undue Impairment/Mine Veto Provision. The
kinds of resources that were cited to justify the denial of the
Imperial Project include non-physical resources such as viewsheds and
the ``setting, feeling and association'' of the area. These resources,
along with the alleged impacts on the ability of the Quechan to conduct
their traditional religious and spiritual practices, formed the basis
for the denial of the plan of operations. Importantly, the Quechan have
specifically stated that the Imperial Project impacts only a small
portion of the 170-mile long ``Trail of Dreams,'' and that the area of
spiritual significance to the Tribe is vast--extending east into
Arizona and west to Santa Catalina Island, north to Las Vegas and south
into Mexico.
Given these broad claims of significance, the Record of Decision
for the Imperial Project sets a tremendous precedent for the denial of
mineral or other development plans on all public lands. As a practical
matter, because of the importance of the land itself to the religious
and spiritual practices of Native Americans, there is likely very
little of the American west that cannot be claimed to be a
``significant'' resource for cultural or spiritual purposes, and non-
Native Americans have a very limited ability to challenge such
assertions. This problem was specifically identified by the BLM in the
Environmental Impact Statement in support of the new 3809 regulations:
Of specific concern are activities that will potentially
affect Native American sacred or religious values. One can
argue that religious significance, substantial irreparable
harm, and effective mitigation are determined by those who hold
those beliefs, not by BLM. Analyzing the implementing and
impact of this provision as it applies to sacred and religious
values is further complicated by the fact that most of the
Native American religions are based on or incorporate the
concept that each individual determines what is significant for
herself/himself. Because of these concerns, we assume that this
provision as it relates to sacred and religious values will be
applied extensively.
Final Environmental Impact Statement, ``Surface Management Regulations
for Locatable Mineral Operations,'' p. 126-27 (October 2000) (emphasis
added).
I can tell you from our experience at Imperial that this concern is
very real. It is practically impossible to test or challenge an
assertion of spiritual significance as to a particular parcel of land.
I do not believe that the BLM, Congress or even most industry observers
have fully considered the immense impact this new provision in the 3809
regulations may well have in the future, or the vast amount of public
lands that could be affected.
In connection with the lawsuit brought by the National Mining
Association challenging the new 3809 regulations, a motion to stay the
implementation of the regulations was sought. I was asked to provide an
affidavit in support of that motion, describing the impact of the 3809
regulations on Glamis Gold. Reciting what is included in that affidavit
is the best way I can describe to this Subcommittee what I believe are
the specific impacts of the adoption of the new 3809 regulations on my
company. I stated that Glamis had recently adopted its exploration
budget for 2001 and that out of a $3 million expenditure, no funds were
budgeted for grass roots exploration in the United States. Our only
exploration expenditures in the United States will be in the immediate
vicinity of our existing Marigold Mine in Nevada, with all grass roots
exploration funding targeted towards Mexico and Central America. I
stated then what I continue to believe today, particularly in light of
the denial of the permit for our Imperial Project: that the political
risk of operating in countries like Honduras, Guatemala or Mexico is
less than the permitting risk in the United States since the enactment
of the 3809 regulations and the issuance of the various Solicitor's
Opinions we have discussed today.
3. Lack of Public/Congressional Involvement in Substantial Public
Policy Changes. The third and final observation flowing from the Undue
Impairment Opinion and the new definition of unnecessary or undue
degradation in the 3809 regulations is how these substantial changes in
public land policy have been brought about with absolutely no public or
Congressional involvement. The Department of the Interior now possesses
a discretionary veto power to deny any mine plan of operations, and
mineral development on public lands can be stopped in favor of Native
American religious practices. All of this was achieved by the
Solicitor's strategic use of legal opinions combined with the last-
minute inclusion of the mine veto provision in the 3809 regulations
after the public comment period had already closed. I would ask this
Subcommittee to consider carefully what appears to be a clear
usurpation of the legislative function by the executive branch.
I fully acknowledge that reasonable people can disagree, and that
there are strong opinions on both sides of these issues. I am sure
there are people in this room today who passionately believe that
Native American cultural or religious concerns should trump mineral
development; those same individuals likely believe that the BLM should
have an absolute right to say no to mineral development in all cases,
even if it means changing the rules after an investment has been made.
I would welcome the opportunity to engage in public debate over those
issues--to use opportunities such as these to comment on specific
legislation under consideration and to discuss the economic and human
impacts of these policies. These are serious public policy issues that
will profoundly impact not only the minerals industry but also the
rural West as a whole, and they deserve our full attention.
Unfortunately, to date, we have been denied that opportunity.
Conclusion
During the Mining Law reform debates early in the Clinton
Administration, Secretary Babbitt made clear his desire for ``a process
. . . for determining that mining activity does not occur on lands that
are unsuitable for it--that have higher values for other uses.'' \9\
This provision in the legislation supported by the administration
became known as the ``suitability'' provision and became central to the
debate over comprehensive reform. Eventually, because of the same
fundamental problems we have discussed today, the Secretary's request
for the discretionary power to declare lands unsuitable for mining was
rejected by Congress.
In the end, however, on the final day of office, Secretary Babbitt
achieved by various machinations within the Interior Department
precisely what he asked for and was denied by Congress. I would ask
this Subcommittee to lend its assistance to efforts to reverse the
unlawful Millsite Opinion and to support the current administration
efforts to reconsider the ill-conceived 3809 regulations and, in
particular, the mine veto provision.
footnotes
\1\ See the Testimony of R. Timothy McCrum before the Energy and
Mineral Resource Subcommittee of the House Resources Committee,
``Hearing on Mining Regulatory Issues and Improving the General Mining
Laws,'' Washington, D.C., August 3, 1999; and the Statement of Randall
E. Hubbard before the Subcommittee on Energy and Mineral Resources of
the House Resources Committee, ``Oversight Hearing on the Effect of
Federal Mining Fees and Proposed Federal Royalties on State and Local
Revenues and the Mining Industry,'' Golden, Colorado, October 23, 1999.
\2\ The BLM Manual states: ``A millsite cannot exceed five acres
in size. There is no limit to the number of millsites that can be held
by a single claimant.'' BLM Manual Sec. 3864.1.B (1991). The BLM
Handbook for Mineral Examiners states: ``Each millsite is limited to a
maximum of five acres in size and must be located on non mineral land.
Millsites may be located by legal subdivision or metes and bounds. Any
number of millsites may be located, but each must be used in connection
with mining or milling operations.'' BLM Handbook for Mineral
Examiners, H. 3890-1, p. 111-8 (1989).
\3\ See March 25, 1999 Decision of the Interior Department
revoking Crown Jewel's Final Environmental Impact Statement in light of
the Millsite Opinion.
\4\ Solicitor's Opinion M-37004, ``Use of Mining Claims for
Purposes Ancillary to Extraction,'' January 18, 2001.
\5\ The alternative of a land exchange to gain the required ground
for ancillary facilities as offered by the Solicitor in his opinion has
been shown to be a severely limited option that is of no practical help
in these circumstances. See the testimony of M. Craig Haase before the
Subcommittee on Energy and Mineral Resources of the House Resources
Committee, ``Oversight Hearing on the Effect of Federal Mining Fees and
Proposed Federal Royalties on State and Local Revenues and the Mining
Industry,'' Golden, Colorado, October 23, 1999.
\6\ See 45 Fed. Reg. 78,902, 78,905 (Nov. 26, 1980): ``If there is
an unavoidable conflict with an endangered species habitat, a plan
could be rejected based not on section 302(b) [of FLPMA], but on
section 7 of the Endangered Species Act. If upon compliance with the
National Historic Preservation Act, the cultural resources cannot be
salvaged, or damage to them mitigated, the plan must be approved.
Essentially, . . . these laws may slow the plan approval process; one
law may stop a plan while the other may only delay it.'' (emphasis
added).
\7\ Solicitor's Opinion re Regulation of Hardrock Mining, p. 17-18
(December 27, 1999).
\8\ ``Record of Decision for the Imperial Project Gold Mine
Proposal'' approved by Bruce Babbitt, Secretary of the Interior,
January 17, 2001, BLM Case File No. CA 670-41027. On March 12, 2001,
Glamis filed suit to overturn this decision in the United States
District Court for the District of Columbia, Case No. I:0ICV00530.
\9\ Hearing on S.775 before Senate Subcommittee on Mineral
Resources, Development and Production of the Committee on Energy &
Natural Resources, 103rd Cong., 1st Sess. at 43 (1993).
______
Chairman Gibbons. We turn now to Ms. Debbie Laney who is
the President of Women's Mining Coalition. Ms. Laney, welcome
to our Committee. We are happy to have you and look forward to
your testimony.
Ms. Laney. Thank you, Congressman Gibbons.
Chairman Gibbons. You may want to pull the mike closer to
you.
Ms. Laney. Can you hear me?
Chairman Gibbons. Yes.
STATEMENT OF DEBBIE LANEY, PRESIDENT, WOMEN'S MINING COALITION
Ms. Laney. My name is Debbie Laney, and I am here today as
President of the Women's Mining Coalition. The Women's Mining
Coalition is a grass roots organization and we came together in
late '92, '93, because of all of the effects of low metal
prices and rules and regulations that were affecting our jobs
and our families' jobs.
The women in the Women's Mining Coalition work in many
facets of mining. Many of the women involved in our group work
for service groups and manufacturing groups that support mining
through the equipment and services they provide.
We have direct day-to-day contact with the mining industry.
We are out at mine sites on a daily basis. Our offices are out
there. We work in the mines and the mills, members drive
trucks, are shovel and drill operators.
I personally work for Barrick Gold Strike. I'm the Chief
Metallurgist for the Process Division there. I started working
for Barrick last fall. I have been in mining in Nevada for 17
years, and throughout my career for over 26 years in the west I
have worked in copper, gold and poly metallic mines. I have
undergraduate and graduate degrees in Metallurgical Engineering
and I'm a licensed Professional Engineer in the State of
Nevada.
I understand this hearing is addressing several issues. I'm
going to focus primarily on 3809 and some of the regulations
that became final on the last day of the Clinton
Administration. We, the Women's Mining Coalition, feel that
much of what is going on is going to be very damaging to our
lifestyles, our industry, and that it could have very negative
impacts on everyone in Nevada as well as multiple other states
throughout the whole nation.
The Women's Mining Coalition has been very active in the
long debate over these changes and has submitted many comments
and documents over the last few years on things. We do not
believe that these final regulations that were adopted in
January 2001 fairly address our concerns or reflect our
comments, and we are very glad that we are having the ability
now to make more comments on things and to maybe change things
where they will more fairly address the issues that are
involved.
The National Academy of Sciences report was issued and it
was put out to study the regulations to make recommendations
based on scientific fact and findings, and they concluded in
1999 with a report that current regulations were generally
effective. They recommended a few specific changes, but that on
the whole the 3809 regulations were effective. They concluded
that implementation of the existing regulations presented the
greatest opportunity for improving environmental protection and
the efficiency of the regulatory process.
The Women's Mining Coalition appeared before the Committee
and as a group we were and remain supportive of the NAS
conclusions and recommendations. A few of the specific
provisions that we would like to talk about is the mine veto
provision which I think Chuck has kind of talked about also.
Mining companies and exploration companies put many, many
millions of dollars into development of areas looking to see if
a mine potential is there. And if we don't have any assurance
and can spend multi-millions of dollars trying to develop
something only to be told at the end, sorry, too bad, tough
luck, you can't do this, then we are in a world of hurt.
We have to have some knowledge and confidence going in that
if we do everything and follow all of the rules and regulations
and do everything and at the end it looks to be a good project
with environmental stewardship at the forefront that, yes, we
will be given the go ahead.
Not having any assurances in those positions can be, why
would we want to spend our money, why would any company want to
spend money and it is a big problem. People won't spend money.
I have many friends working overseas who have gone out of the
industry and that, because companies are going down.
So I think that it is very, very important that we have
rules and regulations in place to know that when the money is
spent and things are done properly that we can be assured that
things will go on and move forward.
Another area that I would like to talk about is the
duplicative standards. We have many, many standards in the
United States, Federal standards, State standards for air and
water quality and different things like that. Much of these,
the new regulations with 3809, want to duplicate those
standards. They are not doing anything better. They are just
adding more paperwork.
We have very large environmental departments at all of the
mine sites anymore. When I first started in mining, the
metallurgist was also the environmental engineer and nowadays
the environmental staffs are oftentimes way larger than the
metallurgical staffs at the mine.
We want these people out there watching and making sure
things are done properly and not sitting in their offices
filing multiple paperwork over and over, you know, the same
thing. We want them out doing things to help keep the
environment clean and safe. And I think that, you know, if we
have all of these duplicative rules they get sidetracked and
they are in being paper pushers and not really doing what we
need for the environment.
I think sensible changes to the 3809 regulations will
enhance environmental stewardship, not hurt it, and I know that
all of the companies I have worked for have always been very
responsible. And I'm a mother, I'm a grandmother. I believe
that without mining the United States will not be as strong as
it should be.
When I moved to Nevada my son was 4 years old. He is now 21
and stationed as a corporal in the Army in Kosovo and has been
in gunfights as recently as a month ago, and I want to know
that his safety is there, and without a strong mining industry
we can't be number one as far as protecting people who are
being taken advantage of.
We can't be the world power that we are today if we lose
the mining industry, and I want to know my son has the best
equipment and bullets and this and that and the other thing and
that he will be safe over there, or as safe as he can be. And I
think that the mining industry and our core industries in the
United States if we lose them and have to depend on outside
countries to get that we are going to be very, very sorry in
the long run and it will be by then too late to do something
about it.
In conclusion, the Women's Mining Coalition asks that
Congress continue to support the conclusions and
recommendations of the National Academy of Science report in
its entirety. We believe that the regulatory program described
in the NAS alternative, and then finally I ask on the 3809
regulations accurately reflect the conclusions and
recommendations of the report and complies with the
Congressional directive that the BLM adopt regulations
consistent with the NAS recommendations.
We believe that the current regulatory system bolstered by
the specific recommendations of the NAS Committee will allow
for environmentally responsible mining on public lands.
If the Federal Government does not adopt policies that are
more supportive of mining, we fear that future opportunities
for women to work in the domestic mining industry will
evaporate, and not only women, but men, families, everyone will
be impacted and I think we are seeing these impacts already.
Thank you.
[The prepared statement of Debbie Laney follows:]
Statement of Debbie Laney, President, Women's Mining Coalition
Introduction
Good afternoon Congressman Gibbons. My name is Debbie Laney and I
am here today as the President of, and on behalf of the Women's Mining
Coalition. The Women's Mining Coalition is a grassroots organization
that supports environmentally responsible mining. Our membership is
comprised of women working (or looking for work) 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 a nationwide membership, with members and
participants from coal, iron ore, and hard rock mining and
manufacturing companies, trade associations, and educational
institutions. Our members have direct, day-to-day experience in the
industry and with Federal and state regulation of mining and
exploration.
I work for Barrick Goldstrike Mines, Inc., near Elko, Nevada where
I am the Chief Metallurgist for the Process Division. I started working
for Barrick last fall, and have worked in the mining industry in Nevada
for seventeen years and have been in the industry for a total of 26
years working for gold and copper mines across the West. I hold
undergraduate and graduate degrees in metallurgical engineering and am
a licensed professional engineer in Nevada.
While I understand that this hearing is addressing several issues,
my testimony will discuss only the new 3809 regulations that became
final on the last day of the Clinton Administration. I will talk about
the impacts from those regulations and some of the changes that need to
be made so that the 3809 regulations are legal and practical.
The Women's Mining Coalition has been an active participant in the
long debate over changes to BLM's 3809 regulations. We submitted
detailed written comments on the proposed regulations in 1999, and
additional comments in February, 2000, after Congress directed the BLM
to reopen the comment period to allow comments on the report from the
National Academy of Sciences. We also submitted detailed scoping
comments to the BLM in 1997. Many individual members attended and made
statements at public hearings in Nevada and other states. We do not
believe that the final regulations that were adopted in January, 2001
fairly addressed our concerns or reflected our comments and we were
pleased that the National Mining Association and the State of Nevada
decided to challenge the final rules in court.
Naturally then, we support the BLM's recent proposal to suspend
portions of the new rules and will be submitting comments on behalf of
the Women's Mining Coalition before the May 7, 2001 comment deadline. A
review of the new 3809 regulations is appropriate for at least two
reasons: first, some of the final rules exceed BLM's legal authority;
and second, some provisions of the rules will have significant adverse
impacts on the mining industry and its employees, in exchange for very
little environmental benefit.
The National Academy of Sciences Report
In reviewing the new 3809 regulations, the most important
information for the Subcommittee and the BLM to consider is the report
of the National Research Council of the National Academy of Sciences.
As you know, in 1998, Congress directed the National Academy of
Sciences to study the effectiveness of the current regulations. The NAS
convened a Committee of independent scientific and technical experts to
conduct the study. The Committee held hearings, toured mines, and
considered a mountain of data and information. The Committee's report,
issued in 1999, concluded that the current regulations were generally
effective, but recommended a few specific changes. The NAS Committee
also concluded that improved implementation of the existing regulations
presents the greatest opportunity for improving environmental
protection and the efficiency of the regulatory process. Members of the
Women's Mining Coalition appeared before the Committee, and as a group
we were--and remain--supportive of its conclusions and recommendations.
In 1999 and again in 2000, Congress enacted a law that limited
BLM's authority to promulgate new 3809 regulations. BLM was allowed to
write regulations that were ``not inconsistent with the
recommendations'' in the NAS Report and BLM's other statutory
authorities. Somehow the Interior Department lawyers read that law to
give BLM unlimited authority to write the final 3809 rules--even if
those rules were in conflict with or went beyond the recommendations of
the NAS Committee. Thus, despite the law passed by Congress, the final
3809 regulations are not consistent with the recommendations contained
in the NAS Report.
I want to address a few specific provisions in the final rules that
are inconsistent with the recommendations of the NAS Report and which
will have a significant impact on mining in Nevada and other public
land states.
The ``Mine Veto'' Provision
Of course, you are familiar with the economic impacts projected
from the new 3809 regulations. Even by BLM's own predictions--which
seriously understate the impacts' the impacts are severe. As a result
of these regulations, up to 3,200 Nevadans are expected to lose their
jobs, industrial output in Nevada will decline by between $180 and $540
million, and Nevadans will lose between $83 and $249 million in
personal income.
The Women's Mining Coalition believes that these impacts are
understated because the BLM never acknowledged the impact that some of
the provisions--particularly the ``mine veto'' provision--will have on
mineral exploration and development. Development of a new mining
property requires significant investment and expenditure before a
single ounce, pound or ton can be mined and sold. That investment is at
risk until the mine is fully permitted and becomes operational.
Under the prior 3809 regulations, mine operators could plan and
design to meet reasonably objective criteria: water quality standards,
air quality standards, revegetation and reclamation requirements. We
were assured that if an operator could meet those standards, as
evidenced by appropriate Federal and state environmental and
reclamation permits, that the plan of operations would be approved.
That assurance is gone. The ``mine veto'' provision injects a
significant new element of risk into mine permitting by allowing BLM to
disapprove a mine plan--even a plan that meets all applicable
environmental requirements--if BLM determines that the impacts may be
too significant. Mine operators have no standards that will assure an
approved plan, and investors have no assurance that BLM or an anti-
mining special interest group will not ``discover'' a new resource or
new impact even after tens of millions of dollars have been invested in
exploration, engineering and permitting. Prudent investors will
redirect their investment dollars into less risky investments and the
flow of money into mineral exploration on public lands in the U.S. will
simply dry up. Even though the ``mine veto'' provision surfaced for the
first time last November when BLM published the final rule, we can
already see the impacts. Mining exploration dollars are moving out of
the United States--drill rigs, geologists, landmen, and suppliers, in
Nevada are idle.
For those of us who live and work in Northern Nevada the impacts
are obvious. Larger companies have slashed exploration budgets and
smaller companies may not be doing any exploration this field season.
Suppliers and businesses that rely on the mining industry are cutting
back and state and local government revenues are down.
Duplicative Environmental Standards
A second concern with the new 3809 regulations is the complex and
lengthy environmental standards that duplicate authority already held
by Federal and state environmental agencies. In the new 3809
regulations, BLM has assumed that its role as land manager also gives
it the authority to second guess or overrule decisions by the Federal
Environmental Protection Agency, Army Corps of Engineers, and the
Nevada Division of Environmental Protection. These duplicative
permitting requirements are wasteful, costly and unnecessary.
The NAS Committee considered the issue of environmental standards
and the allocation of permitting responsibilities and concluded as
follows:
The overall structure of the Federal and state laws and
regulations that provide mining-related environmental
protection is complicated, but generally effective. The
structure reflects regulatory responses to geographic
differences in mineral distribution among the states, as well
as the diversity of site-specific environmental conditions. It
also reflects the unique and overlapping Federal and state
responsibilities.
NAS Report at pages 89-90.
The NAS Report did not recommend that BLM expand its role in
environmental permitting or review environmental permitting by other
Federal and state agencies.
Many of the performance standards in the final regulations are also
in conflict with the NAS Report's recommendation that BLM should
``continue to base . . . permitting decisions on the site-specific
evaluation process provided by NEPA,'' rather than writing
``technically prescriptive standards'' into the regulations. NAS Report
at 108.
Importantly, BLM did not find fault with the current environmental
standards or claim that the new environmental performance standards
will achieve substantial environmental benefits. BLM's Final EIS on the
final rules acknowledges that the existing laws and regulations in
Nevada already incorporate most of the performance standards in the new
regulations. BLM also admits that the new requirements will not result
in environmental improvements. Instead, the predicted environmental
benefits from the new regulations result from the fact that there will
be less mining because of the increased delays and costs of permitting.
Sensible Changes to the 3809 Regulations Will Not Damage the
Environment
I have been disappointed by the response of special interest groups
and the press (even here in Nevada) to the proposal to reconsider some
provisions of the 3809 regulations. It is important that the
Subcommittee understand that sensible changes--changes that will bring
the regulations in line with BLM's legal authority and the NAS Report''
will continue to provide, and even enhance, environmental protection.
Most importantly, I have read claims that the proposal will repeal
bonding requirements and allow mining companies to walk away from their
reclamation responsibilities, leaving Federal and state taxpayers to
pay reclamation costs. That is not true. Bonding to assure that mined
lands are reclaimed is required under the prior BLM rules and under
Nevada law. Those requirements would survive even if the new 3809
regulations were entirely suspended. However, the new 3809 regulations
expanded the current bonding requirements in response to
recommendations of the NAS Committee. The Women's Mining Coalition (and
almost everyone else in the mining industry) supported those changes
and will ask BLM to retain the expanded bonding requirements.
Special interest groups also claim that the proposal could damage
water quality. That is also untrue. The regulations adopted by BLM in
1980 require that mine operators comply with all Federal and state laws
and regulations regarding water quality. That means that all mines are
subject to the requirements of the Federal Clean Water Act, as well as
Nevada's laws, regulations, water quality standards and permitting
requirements. Suspending the new 3809 rules will not change the
substantive water quality standards that apply to mining. Because the
1980 regulations were written to incorporate water quality requirements
by reference, they are constantly and automatically updated when EPA or
the states change their water quality laws or regulations. The claim
that the 3809 regulations are ``outdated'' is untrue.
Conclusion
The Women's Mining Coalition asks that Congress continue to support
the conclusions and recommendations of the NAS Report--in its entirety.
For example, we believe that the regulatory program described in the
``NAS Alternative'' in the Final EIS on the 3809 regulations accurately
reflects the conclusions and recommendations of the report and complies
the Congressional directive that BLM adopt regulations consistent with
the NAS recommendations. We believe that the current regulatory system,
bolstered by the specific recommendations of the NAS Committee will
allow for environmentally responsible mining on public lands. If the
Federal Government does not adopt policies that are more supportive of
mining, we fear that future opportunities for women to work in the
domestic mining industry will evaporate.
______
Chairman Gibbons. Thank you, Ms. Laney. And let me assure
you that your son and his ability to defend this nation is one
of our top priorities, and that is why when I opened this
hearing I indicated that this nation, a great deal of its
ability to not only secure our own national security but others
who are being threatened directly is related to the viability
and the existence of a sound mining industry.
So I hope you will understand and know the heartfelt
compassion for you and your son out there and we will do
everything possible to make sure that both this industry and
the national security and the armed services of this nation are
well cared for.
Let me ask a question of Mr. Jensen. You indicated in your
testimony the Yarnell Opinion of Solicitor Leshy. Can you
elaborate a little more for not only myself and perhaps the
people in the audience what the Yarnell Opinion was?
Mr. Jensen. I would be happy to do that. Yarnell is a mine
in Arizona. There was an opinion issued late last year, early
this year, I'm not exactly certain of that, and it had to do
with the ability to use lode site claims for ancillary
facilities.
And while I don't have a personal objection to that part of
the opinion, what the opinion did say and what I do have a
problem with is that in the event that any lode claims were
converted or any kinds of locations or relocations happened,
then that would trigger a new Plan of Operations to be done.
And the problem in all of that is then if indeed a new Plan of
Operations were required, then you would be subject to the
Millsite Opinion, so it is a very dangerous web of legal
interpretations that certainly need to be addressed.
Chairman Gibbons. Let me ask your question to the other
witnesses as well. The new 3809 regulations and provisions
thereof, as Mr. Harris, Mr. Jeannes talked about, the mine veto
rule, how would that, or how do you think permitting of the
Pipeline and South Pipeline deposits would have been affected
if they were done under the current 3809 regulations and the
mine veto provision that is in this regulation?
Mr. Jensen. I would be happy to start on that conversation
and then I will turn it over to my colleagues who know the 3809
issue very much better than I do. It would be hard for me to
answer very much what might have happened. And what I mean by
that testimony is that certainly the South Pipeline operation
is just an amendment to the Pipeline operation. It is an
extension to the same mineralized body and from that standpoint
it certainly is not in a sensitive or troubling type of
setting.
The Pipeline and South Pipeline deposits are very benign. I
don't think there is any other mining operation that has the
benefit quite like we do in that the environmental aspects of
our property are excellent.
Having said that, once we get to the stage where the Bureau
of Land Management would have ultimate authority, what would
have they said? What would have they found out? I can't answer
what might have happened then. What I would like to say is it
does put a dangerous amount of authority in one set of hands.
Chairman Gibbons. Before I asked that question I was not
intending to have the other colleagues discuss something that
is directly related to your business and your company's
operations, so I apologize for giving the others the impression
I was going to ask them about something that took place in
someone else's mine. That would be a bit unfair.
But let me turn to my old colleague and good friend,
Richard Harris. You are the leading expert on millsites. In
fact, BLM has used your work as the role and the model for
determining and understanding millsite opinions simply because
you literally wrote the book on millsites and the millsite law.
But let me ask, Mr. Harris, if you would be willing to
express an opinion on the provisions in the new 3809
regulations which redefines, let me quote the terms for you so
that you know what I want to ask, and the term is unnecessary
or undue degradation and includes the term substantial
irreparable harm. Let me hear your opinion on the inclusion of
those with regard to case law, defined issues that have already
been looked at with regard to those opinions. Could you give me
your thoughts on that?
Mr. Harris. My concern about the regulations is that they
allow untrammeled administrative discretion, ultimately whether
a mine shall be allowed or not allowed. I recall an experience
earlier on in my career, a client of mine had been successfully
conducting a pumice operation in Northern California for a
number of years. A new district ranger was assigned to that
area, and his first statement was that I don't want mining in
my forest, and that set the stage for very acerbic relations
for a number of years to the point where my client was very
nearly put out of business because this one bureaucrat did not
want mining in his forest.
Here we have even a broader discretion wherein a series of
Federal officials can determine whether they want mining in
their desert or on their property and therein I think lies the
problem and the danger. Mining is heretofore a certain
priority. That is to say if you could find it and you could
permit it, then you could mine it. We no longer have that
assurance.
I will echo Mr. Jeannes' comment. I was speaking with a
president of a mining company the other day. He indicated that
his company, too, was spending all of its money, exploration
monies outside the United States. He said, Richard, we think
that most third world nations offer a greater security of title
than does the United States of America, and that is the present
legacy of the Clinton Administration and it poses a great
threat and hazard. It is a total disincentive to expenditures
of money as Mr. Jeannes has said.
Chairman Gibbons. Thank you. In fact, let me turn to Mr.
Jeannes and ask him a question since he brought up the fact
that your company, Glamis Gold, is both in United States and in
Honduras and now spending a lot of its resources in terms of
its exploration dollars in Central America and Mexico and other
countries there.
Can you compare and contrast, if you would for us, the
differences in permitting in your U.S. Operations versus say
the Honduran operations for us?
Mr. Jeannes. Yes, I would be happy to. Actually, it is easy
to do because we just opened this new mine in Honduras. It only
has been in commercial production since January 1st.
The mine is constructed to North American standards. The
new Honduran mining law essentially requires the same sorts of
environmental protections that are required in the United
States in terms of lined leach pad facilities with leak
detection systems in the ponds and the like.
The difference and the huge difference is that there is a
desire among the bureaucrats, the members of the bureaucracy
that you are working with in Honduras to move this thing along
and get it done, because they realize how important the outside
capital investment is to their country.
Ours is a relatively small mine producing only 120,000
ounces a year, but we represent almost 6 percent of the gross
national product. It is a very poor country and so they were
anxious to work with us and not have things be unnecessarily
delayed.
So at the end of the day the permit, and all of the
necessary approvals, including preparation of a full
Environmental Impact Statement as we do here, took just over a
year, as compared to, well, at Imperial we never did get our
permit. Our latest Marigold expansion Environmental Impact
Statement took a bit over 3 years and it is not done yet.
Chairman Gibbons. So each delay costs your company a
million in terms of not just the investment but the long term
delay in getting a production going from that investment. After
all I'm sure there is millions of dollars required in each one
of those permitting requirements that you have spent.
Let me ask Ms. Laney, and welcome you, and I'm sure the
people in the audience are very pleased as we all are to see
women have a prominent role in mining these days and to realize
the importance that women have contributed to mining. It is a
great pleasure to have the Women's Mining Coalition starting to
take an active role--.
Ms. Laney. Thank you.
Chairman Gibbons. --in the public's perception of mining in
this country. But one of the things I wanted to talk to you
about, of course, is as a Metallurgical Engineer and somebody
who probably has in the past dealt with environmental issues of
a mine, is it your opinion, with the company you work for, that
they change their environmental practices when they step over
the boundary of U.S. Territories into another country?
Ms. Laney. No. Pretty much all of the companies I work for,
and I have worked in South America and Central America also as
a Metallurgical Manager. We always went either to the country's
environmental standards or if we didn't feel they were high
enough to U.S. Standards, because we want to be in a country a
long time. We want to have long term involvement with the
communities and stuff and you can't do that if you are harming
them.
Chairman Gibbons. So many claims that we have all read
about that mining companies are flooding out of the United
States simply to take advantage of lower environmental
standards are not true from the standpoint of U.S. Companies
going there?
Ms. Laney. No, I don't believe they are. I think it is just
because you are allowed to follow the rules and make the
commitments, and then at the end they say yes, go ahead rather
than, well, gee, we are not sure if you can really do this or
not. So I think it is the fact that you can go in knowing if
you do it the right way that ultimately you will get to the end
goal.
Here in the U.S., with some of this you don't know if you
will ever get there even after much money, ample documentation
and that, and so I think it is more the fact that we have
assurances and the countries seem to realize the value that
mining can add to their economies and to their structure and to
their security.
Chairman Gibbons. Would all of the three gentlemen there
agree with her comments or have anything to add with regard to
the direction of operation going overseas?
Let me throw in another variable. Let's take the price of
gold, does the price of gold dictate where you prospect other
than the permitting requirements in terms of cost of getting
those permits achieved or you can even throw in the permitting
costs, does the price of gold add to your decision to go
overseas versus the United States?
Mr. Jensen. Well, I would like to respond to the first part
of your conversation. Having an opportunity to work 4 years in
Chile, I too have had exactly similar experiences to Glamis in
Honduras, and we were a very important contributor to the gross
national product of Chile and it was a very important part of
their culture to continue.
We had a project and we still have a project in northern
Chile by the name of La Copa and there was a new development
that we brought on in the late 1990's called Chimberos, and
this was a greenfields project. It took us about nine to twelve
months to permit, and again full Environmental Impact Statement
as is done here, but we went beyond in a couple of different
areas.
There is a technical thing called acid basis accounting to
determine whether there is any leachants that might leach out
of the waste. That was not part of the Chilean requirement for
the Environmental Impact Statement. We recognize that we
operate internationally. We have to be held accountable for
wherever we operate; therefore, we can't afford to cut corners,
and that is why we did that and other things in the
Environmental Impact Statement to make sure that we were
comfortable with what we were doing.
Frankly, and quite surprisingly, the next time we go to
permit, those issues will be part of the next permitting
process, so while there may be some areas that other countries
are not as completely knowledgeable about, they are learning
quickly and they will be right up to speed with the mining
company's help to get there.
Mr. Jeannes. If I can address the second question,
certainly, no, the price of gold obviously impacts how much we
can afford to spend on exploration generally and how much we
can spend in discretionary spending to try and find new growth
for our business, but where we spend it is entirely dependent
upon the kind of risks and business decisions that we make as
to where is the best way to spend our money.
And as I mentioned, we have an operation in Nevada, we have
an operation in California, and we do have some expansion of
our Marigold Mine in Nevada that is underway, but from a grass
root standpoint trying to find something brand new and take it
from discovery to permit and then construction with the kinds
of policies that we have talked about today, we do not believe
that the U.S. is the best place to do business.
Chairman Gibbons. One final question, and I want to turn to
Ms. Laney for this question. You mentioned in your testimony
the duplication of regulatory requirements, permitting
requirements from both the state and the Federal level. Could
you maybe expand a little bit about that duplication and let us
in the audience and those of us sitting up here be a little
more familiar with what duplications you are talking about, if
you could?
Ms. Laney. Sure. I think what it is, there are already many
standards that the Federal Government has set, many standards
that Nevada has set through air quality and water quality.
Some of the changes that are being talked about in 3809
want to set standards again that are already being taken care
of for air quality and water quality. And if we already have
rules and regulations in place, it is just enforcing those and
making sure that all of those are followed, not putting two
different rules on.
Nothing was said at all about any of the Federal or state
rules already being in place. It was almost like they didn't
know they were there and asking us to do it all over again.
The National Academy of Sciences found that those rules and
regulations from the Federal Government and the State
Government were already comprehensive enough to cover
everything, and so it is on the air quality, water quality, and
those issues that were showing duplicative rules.
Chairman Gibbons. So you are saying that the new 3809
regulations, and I don't mean to take your testimony and change
it, but the 3809 regulations would permit the Bureau of Land
Management or anyone in the Forest Service to add standards to
air quality, water quality, and other environmental issues
which could in fact be different from the National
Environmental Protection Agency, any of the other standards
that are already established by states, so it would be a third
set of standards?
Ms. Laney. Correct. And the other thing, too, is the
comment had been made in there that possibly the old rules and
regulations don't keep up. Well, there is always items being
done for clean air and water. Those standards are updated all
the time through the Federal and State regulations already, so
it is a growing and changing thing.
And as new things are discovered, and new methods of
measurement and analytical detection limits, things change, and
so it is a dynamic thing as far as water quality and air
quality and as we learn more and have better instruments for
detection of things, these are being updated, so it isn't a
stagnant document and there already are rules in place that
should be used.
Chairman Gibbons. Let me thank all of you for your presence
here today. I don't mean to cut anybody off from adding any
comments to this and would say that we may have questions of
any member of the panel after this hearing. We will submit
those questions to you in writing, and if you would respond
appropriately we would greatly appreciate that.
And we would also like to ask that if any of you have
comments with regard to improvements that you feel would be
important to the 3809 regulatory changes that are out there
that are now in open hearing process for those changes, if you
would care to submit them for our review to take a look at, we
would appreciate hearing from you with regard to your comments
on the 3809 regulations that are now open for public comment as
well. With that, ladies and gentlemen, let me thank you and I
appreciate your time and patience for being here.
And we would like to now call up our third panel, Mr. Dave
Gaskin, Chief of Bureau of Mining Regulation and Reclamation,
Nevada Division of Environmental Protection; Mr. Tom Myers,
Director of Great Basin Mine Watch; Mr. Borden Putnam,
Principal of RS Investments Management, and Mr. Jonathan Price,
Director/State Geologist, Nevada Bureau of Mines and Geology.
Gentlemen, while you are getting comfortable, I do not
believe I need to remind you of the egg timer rule in our
Committee and the fact that we try to keep our comments within
a certain time frame, not necessarily to the minute or to the
second.
We certainly would advise you that if you wish to submit
your complete written testimony to the Committee, you may do so
and then take this 5 minute time frame to paraphrase and make
extraneous comments as you may wish that you feel are important
for this Committee to hear as such. We begin now with Mr.
Gaskin, welcome to our Committee. The floor is yours. We look
forward to your testimony.
STATEMENT OF DAVE GASKIN, CHIEF, BUREAU OF MINING REGULATION
AND RECLAMATION, NEVADA DIVISION OF ENVIRONMENTAL PROTECTION
Mr. Gaskin. Thank you, Congressman Gibbons. My name is Dave
Gaskin. I'm Chief of the Bureau of Mining Regulation and
Reclamation with the Nevada Division of Environmental
Protection, NDEP.
The mission of our Bureau is to insure that waters of the
state are not degraded by mining operations, and to ensure that
land disturbed by exploration and mining are properly reclaimed
and returned to a productive post-mining land use. Our
jurisdiction extends to all private and public lands in the
State.
As you are well aware, the majority of mining operations in
Nevada involve public land to some extent. In the course of
regulating mining activities in the State, NDEP must work
closely with the Federal land managers, USDA Forest Service,
and the Bureau of Land Management. We try hard to work together
as fellow regulators and to enhance cooperation and
communication between our agencies. Our reclamation regulations
were crafted to be consistent with BLM's 3809 regulations, and
we strive to avoid duplication and conflict with the Federal
agencies whenever we can.
We have even instituted a Federal liaison position on our
staff. This person works half the time in our office and half
the time in the State office of the BLM. Nevertheless, there
are many challenges posed by this joint regulatory arrangement.
The State of Nevada has closely monitored BLM's efforts to
rewrite the 3809 regulations. We commented extensively
regarding problems we saw with the proposed changes during the
review and revision process. We worked closely with the Western
Governors' Association and the National Academy of Sciences in
an attempt to keep BLM focused on areas that warranted change
and areas that fall clearly under regulatory authority. I'm
sorry to say that we were unsuccessful, and finally the State
of Nevada was forced to resort to legal action when the
administrative process failed to prevent implementation of the
new regulations.
During the 3809 revision process, a great deal of
contention arose over the interpretation of consistency with
the National Research Council recommendations and over the
proper scope and content of revision. The position of the State
of Nevada is that the revised version of the 3809 regulations
is not consistent with the findings and recommendations of the
NRC.
Due to the fundamental and extensive changes made to 3809
to reach the final version, it would be extremely difficult and
impractical to modify the new regulations to achieve
consistency. Even if BLM were to propose new regulations in
accordance with the Alternative 5 in the EIS, there are a
number of critical issues that would cause conflict and would
need to be resolved prior to promulgation of a final rule.
These conflicts are due to differences in interpretation of the
NRC report.
Therefore, the State of Nevada is recommending that BLM
suspend the final regulations published on November 21st, 2000
and reinstate the rules that were in place on January 19th,
2001. Once the previous version is reinstated, the State of
Nevada would work with BLM and the other stakeholders to
develop selective modifications to address the NRC
recommendations.
At the State regulatory level, we are facing many of the
same problems and challenges that BLM is struggling to deal
with. Increasing uncertainty in environmental requirements and
continued low metals prices have led to severe stress on the
security and resources of mining operators.
At the same time, this stress provides an opportunity to
detect weaknesses and correct problems in our regulatory
system. Over the past few years we have made significant
changes at the State level to address recent concerns in mining
regulation.
We revised our regulations to allow us to require financial
assurance for process fluid stabilization, not just physical
reclamation. We established an Interim Fluid Management Trust
Fund to address urgent fluid issues in the event of abandonment
of mining operations. We are currently in the process of
reevaluating and revising our policy on corporate guarantees to
prevent undue financial risk to the State and to the public.
This is not an extremely pleasant time for many of us, but I'm
hopeful that we will emerge from this stressful period with a
much better regulatory system than we had 5 years ago.
The NRC report emphasized that the existing regulatory
system is generally effective, and the best way to improve the
system is to make better use of existing authority while making
selective changes where needed. Through the recent proposal to
suspend the new 3809 regulations, the new Administration in
Washington has sent the message to us that they will listen and
consider seriously our concerns and recommendations.
Working together as fellow stakeholders, with open
communication and cooperation we can develop rules which avoid
duplication, conflict and needless adverse impacts. We will
work with BLM to devise a regulatory system which works in
concert with state, local and other Federal agencies to protect
the environment while allowing responsible development of our
natural resources. Thank you.
[The prepared statement of David Gaskin follows:]
Statement of David Gaskin, Bureau Chief, Bureau of Mining Regulation
and Reclamation, Nevada Division of Environmental Protection
Madam/Mr. Chairman and members of the Subcommittee, my name is
David Gaskin, and I am Chief of the Bureau of Mining Regulation and
Reclamation, with the Nevada Division of Environmental Protection
(NDEP). The mission of my bureau is to ensure that waters of the State
are not degraded by mining operations, and to ensure that land
disturbed by exploration and mining are properly reclaimed and returned
to a productive post-mining land use. Our jurisdiction extends to all
private and public land in the State.
As you are well aware, the majority of mining operations in Nevada
involve public land to some extent. In the course of regulating mining
activities in the State, NDEP must work closely with the Federal land
managers: USDA Forest Service and the Bureau of Land Management. We try
hard to work together as fellow regulators, and we even provide funding
for a Federal liaison position. This person works half the time in our
office and half the time in the State Office of the BLM, and endeavors
to enhance cooperation and communication between our agencies. Our
reclamation regulations were crafted to be consistent with BLM's 3809
regulations, and we strive to avoid duplication and conflict with the
Federal agencies. Nevertheless, there are many challenges posed by this
joint regulatory arrangement.
The State of Nevada has closely monitored BLM's efforts to rewrite
the 3809 regulations. We commented extensively regarding problems we
saw with the proposed changes during the review and revision process.
We worked closely with the Western Governors' Association and the
National Academy of Sciences in an attempt to keep BLM focused on areas
that warranted change, and areas that fall clearly under BLM's
regulatory authority. I'm sorry to say that we were unsuccessful, and
finally the State of Nevada was forced to resort to legal action when
the administrative process to prevent implementation of the new
regulations failed.
Our lawsuit contains three major points: 1) The new 3809
regulations are contrary to law because they violate the statutory
requirement that they be ``not inconsistent with'' the recommendations
of the NRC Report; 2) The new regulations are in excess of BLM's
statutory authority under the Federal Land Policy Management Act,
especially in allowing BLM to disapprove a mining plan of operations if
the agency determines that it would result in ``substantial irreparable
harm,'' even though the operation would comply with all Federal and
state environmental and reclamation requirements; and 3) BLM violated
key procedural requirements under NEPA and other Federal administrative
requirements during the revision process.
Throughout this lengthy process, states including Nevada have
questioned repeatedly the need for sweeping reform of the existing
regulations. Our position has been that selective regulatory reform,
combined with enhanced utilization of existing authority would be a
much more preferable and effective course of action. The National
Research Council (NRC) of the National Academy of Sciences, with the
support of many states and Congress, provided expert and impartial
analysis of the effectiveness of the existing Federal regulatory
framework. The NRC developed specific recommendations for the
coordination of Federal and state regulations to ensure environmental
protection, increase efficiency, avoid duplication and delay, and
identify the most cost-effective manner for implementation.
During the 3809 revision process, a great deal of contention arose
over the interpretation of ``consistency'' with the NRC
recommendations, and over the proper scope and content of revision. The
position of the State of Nevada is that the revised version of the 3809
regulations is not consistent with the findings and recommendations of
the NRC. Due to the fundamental and extensive changes made to 3809 to
reach the final version, it would be extremely difficult and
impractical to modify the new regulations to achieve consistency. Even
if BLM were to propose new regulations in accordance with Alternative 5
in the EIS, there are a number of critical issues that would cause
conflict and would need to be resolved prior to promulgation of a final
rule. These conflicts are due to differences in interpretation of the
NRC Report.
Therefore, the State of Nevada is recommending that BLM suspend the
final regulations published on November 21, 2000, and reinstate the
rules that were in place on January 19, 2001. Once the previous version
is reinstated, the State of Nevada would be pleased to work with BLM
and other stakeholders to develop selective modifications to address
the NRC recommendations.
At the State regulatory level, we are facing many of the same
problems and challenges that BLM is struggling to deal with. Increasing
uncertainty in environmental requirements and continued low metals
prices have led to severe stress on the security and resources of
mining operators. At the same time, this stress provides an opportunity
to detect weaknesses and correct problems in our regulatory system.
Over the past couple of years, we have made significant regulatory
changes at the state level to address recent concerns. We revised our
regulations to allow us to require financial assurance for process
fluid stabilization, not just physical reclamation. We established an
Interim Fluid Management Trust Fund to address urgent fluid issues in
the event of abandonment of mining operations. We are currently in the
process of reevaluating and revising our policy on corporate
guarantees, to prevent undue financial risk to the State and to the
public. This is not an extremely pleasant time for many of us, but I am
hopeful that we will emerge from this stressful period with a much
better regulatory system than we had five years ago.
The NRC Report emphasized that the existing regulatory system is
generally effective, and the best way to improve the system is to make
better use of existing authority while making selective changes where
needed. Through the recent proposal to suspend the new 3809
regulations, the new Administration in Washington has sent us the
message that they will listen and consider seriously our concerns and
recommendations. Working together as fellow stakeholders, with open
communication and cooperation we can develop rules which avoid
duplication, conflict and needless adverse impacts. We will work with
BLM to devise a regulatory system which works in concert with state,
local and other Federal agencies to protect the environment while
allowing responsible development of our natural resources. Thank you.
______
Chairman Gibbons. Thank you very much, Mr. Gaskin.
Mr. Myers, excuse me, I should say Dr. Myers, welcome.
Mr. Myers. It doesn't matter.
Chairman Gibbons. Director of Great Basin Mine Watch. The
floor is yours. We look forward to your testimony.
STATEMENT OF TOM MYERS, PH.D., DIRECTOR, GREAT BASIN MINE WATCH
Mr. Myers. Congressman Gibbons, thank you for the
opportunity to testify before you and the Subcommittee. My name
is Tom Myers and I am the Director of the Reno based mining
conservation advocacy group, Great Basin Mine Watch.
Great Basin Mine Watch is a regional conservation group
operating in six western states. We try to use high quality
science, environmental law and advocacy to preserve water, air,
pristine lands, communities and cultural resources while
supporting a strong, diversified economy that includes a
healthy hardrock mining industry. That industry should be fully
subject to the free market with all of the subsidies from
essentially free use of the public land to pollution
eliminated.
We support the claim maintenance fee because it eliminates
speculation and avoids degradation of the public lands. The fee
basically internalizes the cost of the BLM's administration of
the mining program. Without the fee the program would need to
be funded by Congressional appropriations, and we note that it
is a part of President Bush's budget for 2002 and he recommends
its continuation until the year 2006.
Regarding the fee impact, the State of Nevada concluded it
was by far the least important issue concerning companies with
budgets exceeding 1,000, excuse me, one million dollars and
fourth from the bottom for companies, or for smaller companies.
Regarding the new 3809 regulations we do support them,
perhaps most controversially the regulations would codify the
BLM's current authority to deny a mine that would cause
irreparable harm. The BLM estimated decreased levels of mining
in Nevada ranging up to 350 million dollars. That is a lot of
money.
The only way, however, in our opinion that Nevada would
actually see a decrease in mining is if the BLM actually denies
a mine. It is our opinion that denial would be very rare and
would occur only in the most pristine areas with low value or
where the proponent cannot afford the costs of meeting
performance standards or where the mine would destroy a
significant Native American site.
In fact, of the mines I have reviewed on BLM lands in
Nevada, I can think of no facility where we would have totally
opposed construction of the project and tried to force the BLM
to say no under the irreparable harm standard, and for the
record we would have opposed construction of several Forest
Service mines, and we do oppose the Imperial Project and the
Yarnell Project that we have discussed earlier, but in Nevada
while we have filed some appeals, we would not have, they were
not, the objective of those appeals was never to completely
stop the facility.
We do acknowledge that there is a problem in the current
system whereby a company can spend tens of millions of dollars
in exploration only to be told no. I would commit to working
with anyone in this room to come up with a standard or remedy
to avoid that kind of commitment of funds and then having the
problem of being told no in the future.
However, many of the mines, some of which we have appealed,
should have had much more stringent environmental performance
standards regarding dewatering and water pollution control. My
written testimony mentions a few instances of pollution that in
our opinion could have been prevented or reduced had the new
regulations been in effect.
By emphasizing source control over monitoring and
treatment, the new regulations will ultimately save the
industry millions of dollars. The new regulations would also
change the watering in our opinion by requiring that the impact
be minimized. Discharge to surface water, reinfiltration into
the wrong aquifer, and growing alfalfa in no way minimizes the
impacts. A combination of reinfiltration, reinjection and
grouting does. Minimizing these impacts would cost
approximately $18 an ounce.
The bonding regulations are needed to decrease, to increase
the BLM's authority to improve existing bonds and eliminate
corporate guarantees. According to an independent mining
engineer, current estimates of underbonding in Nevada are
approximately 20 to 100 percent with a potential public
liability of 96 to 480 million dollars. The underbonding is
less in Colorado with a potential public liability of 20 to 50
million dollars. I had that in there because I thought there
was going to be a Congressman from Colorado here, I'm sorry.
In closure I would like to say a few words about President
Bush's proposed budget, because it affects the mining industry
as much as anything in the proposed rules. The U.S. Geological
Survey is going to take a 21 percent hit in the Water Resources
Division with ten million dollars taken from its Toxic
Substances Program.
The BLM and the mining industry use this information every
time they prepare a NEPA document. When the BLM requires data
to assess a Plan of Operations, it can either use the USGS data
or it can ask the industry to go spend two or 3 years
collecting it. They have to have it, so it is, we should have
this funding restored.
I would also note that the Toxic Substances Program is that
which will be used to test the uranium in wells near Fallon.
Thank you for considering my testimony and I see my timing was
perfect. I would be happy to answer any questions when we are
done.
Chairman Gibbons. Thank you very much, Dr. Myers.
[The prepared statement of Tom Myers follows:]
Statement of Tom Myers, Director, Great Basin Mine Watch
Chairwoman Cubin, members of the Subcommittee, my name is Tom
Myers. I am Director of the Nevada based mining advocacy group Great
Basin Mine Watch. Great Basin Mine Watch has several hundred members,
mostly Nevadans, who are concerned about the impacts caused by the
hardrock mining industry on the public's land. We support a strong,
diversified economy in which hardrock mining plays an important part.
We also support regulations and policies which require the mining
industry to internalize their environmental costs.
Thank you for this opportunity to testify on an issue of immediate
concern to all of our members and the citizens of the State of Nevada
and the United States: mining fees and the effects of the new
regulations.
Claim maintenance fees have protected the public's land
As a part of their 1993 appropriations bill, Congress allowed the
BLM to start collecting a $100 per year per claim fee on mining claims
as a part of their appropriations. This was a two-year authorization.
During the 1994 appropriations process, the fee was reauthorized
through September, 1998 and an additional $25.00 location fee was
added. Finally, the 1998 appropriations reauthorized both fees through
September, 2001. These fees are in addition to the $10 recording fee
authorized by the Federal Lands Policy and Management Act in 1976.
President Bush's current budget proposal calls for renewal of the claim
maintenance fee at $100/claim/year.\1\
---------------------------------------------------------------------------
\1\ The Budget for Fiscal Year 2002, page 548.
---------------------------------------------------------------------------
The maintenance fees (originally called a rental fee) replace the
requirement for the claimholder to perform $100 of development on the
claim. Prior to mining, the development was for exploration on the
site. Annually, the claimholder would provide to the BLM a signed
affidavit that they had completed this work. In 1872 when $100 was a
substantial investment, only a serious miner would hold claims. At
today's prices, a claims holder can barely drive his pickup truck to
the site for $100. Doing so just damaged the land through off-road
vehicle traffic.
The fee legislation provided for a small miner exemption: anyone
holding less than ten claims could continue to perform maintenance on
the site. From September, 1998, through August, 1999, 4000 small miner
waivers were issued in Nevada.\2\ Anyone truly impacted by the fee
could get an exemption.
---------------------------------------------------------------------------
\2\ Id., note 6, at 7.
---------------------------------------------------------------------------
The money collected from these fees goes directly to the mining law
administration budget of the BLM. It is deposited in a special account
from which Congress appropriates to the program in the BLM. Any
additional fees go to the Federal Treasury to help balance the budget.
The following table shows the amount of money paid nationally for claim
maintenance and location fees and the appropriation to the BLM from
this fund.\3\
---------------------------------------------------------------------------
\3\ Roger Haskins, BLM Washington Office, 5/13/99, personal
communication.
------------------------------------------------------------------------
Fiscal year Fees collected Appropriations
------------------------------------------------------------------------
1993.............................. $53,200,000 .................
1995.............................. 30,700,000 $28,500,000
1996.............................. 33,800,000 28,500,000
1997.............................. 35,800,000 32,500,000
1998.............................. 30,000,000 32,500,000
------------------------------------------------------------------------
In FY 1998, the claim brought in $13,387,600 in Nevada alone.\4\ As
the table illustrates, the fee provides an important revenue stream
that pays for the administration of the program. As mentioned,
President Bush's current budget proposal calls for renewal of the claim
maintenance fee at $100/claim/year). ``(1) In section 28f(a), by
striking the first sentence and inserting, `The holder of each
unpatented mining claim, mill, or tunnel site, located pursuant to the
mining laws of the United States, whether located before, on or after
the enactment of this Act, shall pay to the Secretary of the Interior,
on or before September 1 of each year for years 2002 through 2006, a
claim maintenance fee of $100 per claim or site.' '' \5\ Interestingly,
the President also expects claims to increase from 216,000 in 2001 to
280,000 in 2002 \6\ with expected revenue to be $32,298,000.\7\
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\4\ Steward, L., BLM NV State Office, 5/12/99, personal
communication.
\5\ The Budget for Fiscal Year 2002, page 548.
\6\ Id., at 536.
\7\ Your Tax Dollars and the Public Lands, a BLM Press Release.
---------------------------------------------------------------------------
The President recognizes the importance of this fee. Great Basin
Mine Watch supports making the fee permanent so that the taxpayer is
never required to pay this program. Without some source of funding, the
public lands will be damaged and the BLM will not be able to fairly
administer the Mining Law which will be a negative deterrent to the
efficient development of the nation's mineral resources.
Who opposes this fee? For large companies, the amount is a mere
blip on their annual budget. According to the State of Nevada, the
Federal claim maintenance was by far the least important issue
concerning companies with budgets exceeding $1,000,000.\8\ For smaller
companies, the maintenance fee is more important, but still ranks in
the bottom four of eleven factors surveyed and on a scale of 1 to 10
was rated less than 5.\9\ Of the three factors rated less important,
one, changes in foreign laws, would be irrelevant to most small
companies. The other two, land exchanges and wilderness study areas,
have little effect because they just delineate areas that may be
explored. In fact, land exchanges have resulted in increased
exploration activity.\10\
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\8\ Driessner, D., 2000. Nevada Exploration Survey 1999. Nevada
Division of Minerals. Carson City. Graph 8, at 18,
\9\ Id., Graph 9, at 19.
\10\ In the Pequop Mountains of northeastern Nevada, once a
completed land exchange was open to activities under the Mining Laws,
an exploration company immediately filed a large plan of operations.
Great Basin Mine Watch argues that the BLM should not have permitted
this exploration because they had never completed required resource
surveys as required by the Federal Lands Policy Management Act.
---------------------------------------------------------------------------
The current maintenance fee primarily affect holders of non-
producing Federal mineral claims. They represent only a tiny part of
the overall costs of an operating mine. For non-producing claims,
rental or maintenance payments can be avoided by simply abandoning
those claims that have little prospect of profitable near term
development. In 1993 in Nevada, the number of registered claims dropped
from 258,000 on February 28 to 125,700 claims on September 1 while
nationally claims dropped from 760,000 to 294,000.\11\ This suggests
that many claims being held prior to the commencement of the fee were
non-producing. Since the burden of these payments does not fall on
operating mines with substantial employment, the employment impacts are
likely small or non-existent. Suggestions that the dropped claims
somehow represents a decrease in exploration are completely specious;
any drop coinciding with the changed claims is likely due to changed
commodity prices.
---------------------------------------------------------------------------
\11\ Haskins, note 1.
---------------------------------------------------------------------------
If mining claims are abandoned because profitable future
development is not imminent, those minerals are not lost. As economic
conditions change and mining of that land becomes viable, claims could
be filed again. The primary impact of these rental charges is to
discourage the indefinite holding of claims to minerals on Federal
lands for speculative (as opposed to production) purposes. No
substantial negative employment or revenue impact can be attributed to
this.
In conclusion, the only people really hurt by this 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 its validity before the Appeals
Board or in the courts. These speculators may not have the money to pay
the annual fees and they probably filed fraudulent maintenance reports
prior to 1993.
New mining regulations are essential for protecting the environment and
State and Federal treasuries
The most obvious recent policy change is the new 3809 regulations,
if they are not repealed. Great Basin Mine Watch strongly supports the
new regulations.\12\ We primarily support the regulations because they
strengthen bonding requirements, institute minimal environmental
performance standards, eliminate notice level mines, and finally allow
the BLM to deny a mine that would cause ``irreparable harm''.
---------------------------------------------------------------------------
\12\ Great Basin Mine Watch has joined with the Mineral Policy
Center and Guardians of the Rural Environment in litigating to improve
the regulations and intervening in the litigation promulgated by the
National Mining Association to protect the regulations' desirable
aspects.
---------------------------------------------------------------------------
The new bonding regulations will help to prevent costs from
accruing to the public. The following is a partial list of mining
companies and the amounts of their secured and unsecured bond that have
recently gone bankrupt on BLM lands in Nevada.\13\
---------------------------------------------------------------------------
\13\ Personal communication, Nevada State Office, Bureau of Land
Management, 3/30/00. Updated information is that no new bankruptcies on
land managed by the BLM in Nevada has occurred.
------------------------------------------------------------------------
Company Secured bond Unsecured bond
------------------------------------------------------------------------
Alta Gold Company................. $3,976,062 .................
Arimetco, Inc..................... 1,414,000 $4,236,831
Atlas Gold Mining, Inc............ 3,192,378 .................
Homestead Minerals Corp........... 124,017 501,121
Jumbo Mining Company.............. 3,700 .................
McNamara Buick-Pontiac, et al..... ................. 8,000
Mineral Ridge Resources, Inc...... 1,640,086 0
Mountain Mines, Inc............... ................. .................
Pruett Ranches.................... 154,364 58,770
------------------------------------------------------------------------
While some of the mines have secured bonds, it is likely that most
of the amounts are insufficient because most of the money goes to
fluids management to prevent heaps from overflowing or tailings
impoundments to leak. Portions of the reclamation bond dedicated to
heap stabilization are insufficient at this point because they are not
designed to both manage and close a heap. For example, we understand
that just pumping the fluids through the heaps at the bankrupt
Olinghouse and Mineral Ridge Mines cost $80,000 and $50,000 per month,
respectively. Because the bonds for these facilities was only 1.8 and
1.6 million, respectively, it is easy to see that several months of
fluids management that does not lead to ultimate detoxification uses
substantial portions of the bond. Too often, the costs for fluids
management decrease the ability of the agency to reclaim other parts of
the mine. The bankruptcy closure fund proposed in Nevada will be
grossly insufficient if more than one mine goes bankrupt at the same
time because of the costs of pumping water through heaps. The new 3809
regulations provide for bonding for interim stabilization in addition
to long-term closure.\14\
---------------------------------------------------------------------------
\14\ 43 CFR Sec. 3809.552. ``The financial guarantee must also
cover any interim stabilization and infrastructure maintenance costs
needed to maintain the area of operations . . . while third-party
contracts are developed and executed.
---------------------------------------------------------------------------
If the BLM requires full bonding, the public will be protected from
substantial liability. One independent study indicated that westwide
the public was potentially liable for up to $1 billion in costs due to
defaults on underfunded bonds and unsecured bonds. The following table
documents the potential costs born by the public due to underestimated
bonds and corporate guarantees:
----------------------------------------------------------------------------------------------------------------
Range of
Range of public Corporate Liability
State underestimate liability bonds due ($
(percent) ($ millions) millions)
----------------------------------------------------------------------------------------------------------------
Arizona.................................................. 50-200 73-292 438 ...........
California............................................... 50-200 17-68 ........... ...........
Colorado................................................. 20-50 20-50 ........... ...........
Idaho.................................................... 50-400 20-160 ........... ...........
Montana.................................................. 10-25 20-50 ........... ...........
Nevada................................................... 20-100 96-480 360 ...........
New Mexico \1\........................................... ............. ............ ........... ...........
Oregon \2\............................................... ............. ............ ........... ...........
South Dakota............................................. 20-50 6.2-15.4 ........... ...........
Utah..................................................... 20-100 10.2-50.0 ........... ...........
Washington............................................... 50-100 5.0-10.0 ........... ...........
Wyoming \2\.............................................. ............. ............ ........... ...........
----------------------------------------------------------------------------------------------------------------
\1\ Unknown due to new bonding regulations.
\2\ No major hardrock mines.
The estimates are based on a report funded by the National Wildlife
Federation.\15\ The estimates are based on case studies using industry
standards compared with actual reclamation cost estimates. The report
found that:
---------------------------------------------------------------------------
\15\ Kuipers, J.R., 2000. Hardrock Reclamation Bonding Practices in
the Western United States. Center for Science in Public Participation,
Boulder, MT. Mr. Kuipers is a mining engineer with over 20 years of
experience in millsite management and reclamation.
The estimated costs for nearly identical tasks can vary
significantly between states. The lowest estimated reclamation
costs exist in those states and on Federal land where the
statues and regulations are general and limited in scope, and
afford the regulators substantial discretion as to their
interpretation and application. This observation becomes even
more dramatic where industry political influence has resulted
in apparent underestimation of reclamation costs.\16\
---------------------------------------------------------------------------
\16\ Id., Summary Report, at 2.
In other words, the report suggests that states where the
regulators have more discretion tend to be underbonded. Regarding
Nevada, the report found that ``[r]eclamation planning . . . fails to
adequately address recontouring, hydrology, water quality and
geochemical--acid mine drainage consideration, and fails to consider
public safety, wildlife habitat, and aesthetic considerations''.\17\ It
also found that the limitation requiring reclamation to be
``economically and technologically practicable'' severely limits the
state's abilities.\18\
---------------------------------------------------------------------------
\17\ Id., Nevada Bonding Program Summary, at 2.
\18\ Id., at 3.
---------------------------------------------------------------------------
The environmental performance standards are the most important of
the new regulations. These regulations will help to protect the
public's resources from mining while not imposing undue costs on the
industry. I will provide just two examples of how the regulations would
affect mining in Nevada and how this will affect industry or
governmental budgets.
Great Basin Mine Watch has documented many currently operating or
closing mines that are currently or have polluted groundwater. For the
purpose of this analysis, we only consider mines with monitoring
reports showing that contaminant concentrations exceed state standards
and where this exceedence is not due to background levels. To be
counted as background, the concentrations must have been high at the
beginning of mine operations and must not have had spikes which would
be due to the mine. The following is a partial list of mines with
exceedences based on data obtained from the Nevada Division of
Environmental Protection:
Battle Mountain Complex *
Marigold *
Pipeline Deposit **
Cortez
Toiyabe
Yerington ***
Rain ****
Twin Creeks
Paradise Peak
Calvada
* The BLM has documented in their NEPA documents for expansion
projects at these facilities the ongoing degradation.
** Some of the degradation at this facility has occurred because
the reinfiltration of dewatering water leaches salts from the
unsaturated zone into the alluvial groundwater.
*** The Yerington Mine is being considered for Superfund
designation by the Environmental Protection Agency. Some of the
contamination at this facility occurred prior to 1980, but there have
been plan changes under which the BLM would have been more aggressive
at cleaning the site.
**** Contamination at the Rain Mine consists of seepage from waste
rock and tailings that may be discharging into a surface water source.
The Nevada Water Pollution Control permit for this facility is
currently under appeal by Great Basin Mine Watch.
Other mines on Forest Service land also have degraded groundwater.
Other mines, including Gold Quarry and Lone Tree, have surface water
discharges that exceed their permit requirements.
An additional very serious problem concerning the public's
resources centers on the tendency for a mine to discharge its' heap
draindown and seepage into the ground near the mine. The State of
Nevada allows this when depth to groundwater is substantial. Often,
mines are discharging millions of gallons of water with contaminant
levels exceeding 100 times the state drinking water standard for
mercury, arsenic, selenium and silver. The Candelaria Mine is the best
example: \19\
---------------------------------------------------------------------------
\19\ The following description comes from the introduction to the
Notice of Appeal for the closure plan filed by Great Basin Mine Watch.
The reference to EA means the environmental assessment written for the
Candelaria Mine Closure Plan. See IBLA No. 2000-366.
The Candelaria Mine is located approximately 55 and 16 miles
southwest of Hawthorne and Mina, NV, totally on public land.
The mine began production during November, 1980. While there
were occasional shutdowns, the mine operated until January,
1997 and final metal recovery from the heaps occurred in
January 1999. During this time, the operator created two leach
pads. LP-I covers 136 acres and contains approximately
25,000,000 tons of ore while LP2 covers 70 acres and contains
approximately 14,000,000 tons of ore. EA at 1. The heaps were
leached with a cyanide solution to remove the gold and silver
from the ore. When formal leaching ended, the heaps contained
cyanide solution and metals that were leached from the ore but
not recovered in the cyanide circuit. After the end of
leaching, the operator began to recirculate the water in the
heaps. The BLM estimates that at the end of this recirculation,
the initial draindown was anticipated ``to consist of about
95.8 million gallons from leach pads LP-1 and LP-2.'' EA at 10.
Draindown is the contaminated fluids remaining in the heap
after rinsing that moves to the bottom of the heap with time.
The majority of these fluids are expected to drain during the
first and will be infiltrated into the soil through ``initial
infiltration fields'' designed to accept high quantities of
water. EA at 14. The amount depends on the time that rinsing
ends and the amount of the heaps that were being rinsed at that
time. Portions of the heaps no longer being rinsed have had
unspecified time periods for water to drain. The rate of
draindown is very uncertain.
Residual draindown from 2000 to 2011 will equal about
44,000,000 gallons while long-term seepage will equal about
2,300,000 gallons per year. EA at 10. This will be infiltrated
in ``residual infiltration fields''. EA at 14.
Water quality of the draindown was very poor during 1999.
Because recirculation has ended, the water quality will remain
the same for the duration of draindown. During 1999, the water
proposed to be infiltrated exceeds State of Nevada primary and
secondary drinking water standards for 13 contaminants as shown
below. The totals are the amount of contaminants proposed to be
stored in the soil for initial, residual, and annual seepage
conditions for both heaps (assuming arithmetic averages of flow
from heaps LPI and LP2).
----------------------------------------------------------------------------------------------------------------
Seepage
Parameter NV MCL (mg/ LPI (mg/1) LP2 (mg/1) Initial Residual mass (tons/
1) mass (tons) mass (tons) year)
----------------------------------------------------------------------------------------------------------------
Antimony........................... 0.006 0.149 0.068 0.043 0.020 0.001
Arsenic............................ 0.05 6.487 2.430 1.782 0.819 0.043
Chloride........................... 250-400 456 522 195.5 89.78 4.693
Manganese.......................... 0.05-0.1 2.5 5.63 1.625 0.746 0.039
Mercury............................ 0.002 0.27 0.07 0.068 0.031 0.002
Nickel............................. 0.1 11.12 15.59 5.339 2.452 0.128
Nitrate-N.......................... 10 42.48 49.43 18.37 8.437 0.441
pH................................. 6.5-8.5 9.47 9.35 ........... ........... ...........
Selenium........................... 0.05 0.411 0.258 0.134 0.061 0.003
Silver............................. 0.1 8.628 6.328 2.989 1.373 0.072
Sulfate............................ 250-500 5471 8721 2836 1302 68.10
TDS................................ 500-1000 10149 13788 4784 2197 114.9
WAD cyanide........................ 0.2 25.2 70.8 19.19 8.813 0.461
----------------------------------------------------------------------------------------------------------------
The mass above represents only the amount expected to drain
from the heaps. Because the fluids were recirculated and not
detoxified, large amounts of contaminants remain in the heaps
to be leached in the future. There are also contaminants in the
ore that have not yet dissolved or been leached into the
solution.
The BLM's new regulations would prevent the industry from
discharging its waste in this way. ``You must conduct operations
affecting ground water, such as dewatering, pumping, and injecting, to
minimize impacts on surface and other natural resources, such as
wetlands, riparian areas, aquatic habitat, and other features that are
dependent on ground water''.\20\ It is unlikely that, even if the
contaminants will likely be attenuated in the unsaturated zone, the BLM
would ever choose to allow this discharge because of the potential
toxicity to soil ecosystems.
---------------------------------------------------------------------------
\20\ 43 CFRSec. 3809.420(b)(2)(ii)(C), emphasis added.
---------------------------------------------------------------------------
The other issue affected by the new regulations would be mine
dewatering. By the end of mining, the excess of dewatering over
reinfiltration plus the pit lake volume within the Humboldt River basin
will be approximately 5,000,000 acre-feet.\21\ Evaporation from pit
lakes will be at least 3 \22\ percent of the average surface water flow
in the Humboldt River. The new regulations cover this by requiring that
dewatering minimize impacts on other surfaces. Only by reinfiltration
can the impacts of dewatering be minimized. We anticipate that the Gold
Quarry, Lone Tree and Betze-Post Mines would be required to reinject
their dewatering water and that the Pipeline Deposit mine would either
have to reinject into bedrock or into the mountains upgradient from the
mine. We indicate that reinjection would be necessary because it is
from bedrock that most of the water is removed. Also, reinfiltration
may, as has occurred at the Pipeline Deposit mine, leach salts from the
alluvium and pollute underlying groundwater.
---------------------------------------------------------------------------
\21\ Myers, T., 1997. Groundwater management implications of open-
pit mine dewatering in northern Nevada. In: Kendall, D.R. (Ed.),
Conjunctive Use of Water Resources: Aquifer Storage and Recover.
Proceedings AWRA Symposium, Long Beach, CA. October 19-23, 1997. This
report documented 4,000,000 acre-feet of deficit. The additional
1,000,000 acre-feet results from the expansion of the pit at the
Pipeline Deposit and increased pumpage at that mine and the Leeville
Project. All other expansions had been accounted for in the original
calculations.
\22\ Id.
---------------------------------------------------------------------------
Considering dewatering, there is an economic and environmental cost
to dewatering. During 2000, we prepared a report for the University of
Nevada, Reno, titled ``Economic and Environmental Impacts of Mining in
Eureka County''. It documents the amount of water pumped per ounce of
gold produced. The following are relevant parts of the executive
summary of that report: \23\
---------------------------------------------------------------------------
\23\ Myers, T., 2000. Economic and Environmental Impacts of Mining
in Eureka County. Prepared for Dept. of Applied Economics and
Statistics, College of Agriculture, University of Nevada, Reno. Center
for Science in Public Participation.
Gold mining in Eureka County provides most of its current
employment and tax dollars. However, mine dewatering may cause
long-term deficits that will offset many of the current mining
benefits. This report summarizes gold production, mining
employment, dewatering rates, and water rights to assist in the
assessment of the economic and environmental impacts of mining
in Eureka County . . . .
Total dewatering at mines in or potentially affecting Eureka
County, including Newmont's Carlin operations, the Barrick
Goldstrike property, and the Pipeline Deposit Mine, since 1990
has been approximately 954,000 af. Most of this is effectively
lost to future use because of the method of disposal and the
need for replenishing the created deficit. During this time,
gold production in the county increased to greater than 3.6
million ounces per year and currently (1999) stands at about
3.1 million ounces. Newmont's Carlin operations and Betze-Post
produced 16,300,000 and 12,500,000 ounces of gold,
respectively. During the same time, Newmont and Barrick pumped
174,110 and 715,353 af of water, respectively. This is 93.6 and
17.5 ounces per af, respectively.
In the future, Gold Quarry will pump 480,000 af to produce
13,716,000 ounces of gold, or about 28.6 af/ounce. At the
Leeville Mine, Newmont will pump 200,000 af to produce
1,796,000 ounces, or 9.0 af/ounce. At the Betze-Post Mine,
Barrick will pump 576,000 af to produce 21,200,000 ounces, or
36.8 af/ounce, over the next 18 years.
After mining ceases, there will be a deficit created by
dewatering which must be made up in the future. Deficits
include the size of the pit lake and the pumpage volume that is
lost to the system. Based on current and proposed projects, the
total deficit in the Carlin Trend will be about 2,363,000 af.
Adding the amount of deficit in the Pipeline Deposit Mine
brings the total to 2,663,000 af. There are several smaller
mines that have created small deficits in the Tuscarora
Mountains which bring the total deficit in mines that may
affect Eureka County to 3,000,000 af. Considering just the
Carlin Trend, the ratio gold production to deficit is 27.6
ounces per af.
The best current estimate of the impacts of filling the long-
term deficit is that river and stream baseflow will decrease by
up to 10.4 cfs. But there are three major issues that policy
makers must consider. Where will the deficit come from? Is it
the same aquifer from which the dewatering was drawn? What is
the rate of pit lake infilling? This is very sensitive to the
hydrogeologic properties of the aquifers near the pit. Finally,
what is the connection of these aquifers and the pit lake to
surface water sources?
The most significant impacts to Eureka County water rights
may be in Maggie Creek or Boulder Valley. However, there are
limited surface water rights on Maggie Creek; in Boulder Flat,
the impacts will mostly a decreased depth to water because of
the infiltration and irrigation that has been occurring in the
valley. The high water table may experience increased
evapotranspiration and seepage to the Humboldt River is
probably increasing. But there appears to be no deficit created
by dewatering that will drain the aquifers in Boulder Valley.
Groundwater rights in Crescent Valley could be affected.
Currently, a mining company owns the bulk of the rights that
could be affected and they propose to replace temporarily the
certificated rights with dewatering water. Substantial impacts
to any of the groundwater rights in Crescent Valley is not
expected.
Eureka County's gold production does not come without costs,
both economic and environmental. To produce a total 66,200,000
ounces of gold, over 2,145,000 af of water will have been
pumped. A total deficit of about 3,200,000 af will have been
created in the Carlin Trend area, most of it in Eureka County.
This deficit will be refilled after mining ceases from
somewhere. The complex hydrogeology of the area renders
estimates of impacts very uncertain. However, it is certain
that river and stream flows will decrease, potentially
impacting Lahontan cutthroat trout and increasing water
pollution levels, and pit lakes will form that may impact
groundwater quality. The biggest problem may be that deficits
are filling, causing their impacts on surface water flows,
after the mines have ceased producing gold. Eureka County will
be suffering most of the impacts at a time the county is not
enjoying many of the benefits.
Not being an economist and because I provided this report to the
Dept. of Applied Economics and Statistics at UNR, I did not perform any
detailed economic analysis. In Las Vegas, recharge costs between $200
and $300 per acre-foot. Because it would be deeper in the Carlin Trend,
costs may be closer to $400 or 500 per acre-foot. It is important to
realize that most of the cost would be for digging the well as opposed
to pumping the water; the height of the well would provide the required
head. At $500 per acre-foot, in the Carlin Trend with 27.6 ounces of
gold per acre-foot produced, the cost would be about $18.00 per ounce.
This includes current pumping rates and project future rates for
existing mines and the proposed Leeville Project.
At $18.00 an ounce, the effect on the industry would depend on gold
prices. Some companies operate close to the margin; this additional
cost might force them to postpone a project. However, most ranchers and
certainly municipalities pay far more than this for an acre-foot of
water. Because water that is pumped into the river or that flows into a
pit lake is not available for future use, a rather small investment
would assure water for the future.
Budget proposals will help and hurt the industry
President Bush proposes many changes in fiscal policy and
administrative direction reflected in his budget that will affect the
industry. Some of the changes are positive; others are negative. Some
of the policies may cost the industry.
We note that regardless of budget levels proposed by the President,
all environmental laws must be followed. Cutting the budget for
enforcing the Endangered Species Act does not repeal the Act; it only
increases the time for Fish and Wildlife Service to complete
consultation. Decreasing the budget to enforce section 404 of the Clean
Water Act will only slow the time for permit issuance. Agencies who
approve projects with faulty permitting will only land themselves and
the project proponent in court. This will lead to more delays and cost
the mining industry much more than had they spent an adequate time in
the first place. To paraphrase one of Murphy's Laws, ``there's never
enough money to get it right the first time, but there's always enough
money to do it over''. Doing it over will likely involve industry
money.
One very specific concern that we have with the President's budget
involves budget decreases for the U.S. Geological Survey. Of four USGS
division, the Water Resources Division takes by far the largest
decrease, 21.6 percent from $203.5 million in FY 2001 to $159.5 million
in FY 2002.\24\ The bulk of the reduction would be accomplished by
eliminating the Toxic Substances Hydrology program (a $10 million
cut)--despite the fact that it has generated significant information
about the sources, fate, and persistence of toxic substances in ground
and surface water--and reducing the National Water-Quality Assessment
(NAWQA) program by $20 million, halting its next phase. These programs
provide essential information to the land management agencies for
decision making purposes. These data include the amount of various
toxic materials in the rivers and streams of the West. Without this
data, the BLM will have no choice but to require the mining industry,
primarily the project proponent, to collect the data. This is because
there is ample appellate rulings that force the BLM to return plans of
operation to a
---------------------------------------------------------------------------
\24\ The Budget for Fiscal Year 2002, at 564. ``A significant
portion ($30.0 million) of the proposed decreases affects two USGS
water quality programs that primarily benefit other Federal agencies
and states. The National Water-Quality Assessment Program (NAWQA) and
the Toxic Substances Hydrology Program provide extensive data and
information to state and Federal regulatory agencies such as the
Environmental Protection Agency (EPA). These entities rely on USGS to
provide information to help them fulfill their own mission-critical
responsibilities. The Department and USGS will work with EPA and other
beneficiaries of both programs in an effort to obtain partnership
funding to maintain current scope and schedule in both programs.'' USGS
Press Release: President's FY 2002 Budget for USGS--Contributions to
Energy Security and America's Environment
---------------------------------------------------------------------------
company for more data.\25\ It would be unfortunate for the project
proponent and the state revenue stream if the BLM required a 2 year
delay in a potentially profitable project while the company collected
data that the USGS would otherwise already have collected if not for
these budget cuts.
---------------------------------------------------------------------------
\25\ First of all, the mere filing of a plan of operations by a
holder of a mining claim invests no rights in the claimant to have any
plan of operations approved. Rights to mine under the general mining
laws are derivative of a discovery of a valuable mineral deposit and,
absent such a discovery, denial of a plan of operations is entirely
appropriate . . . .
Moreover, in determining whether a discovery exists, the costs of
compliance with all applicable Federal and State laws (including
environmental laws) are properly considered in determining whether or
not the mineral deposit is presently marketable at a profit, i.e.
whether the mineral deposit can be deemed to be a valuable mineral
deposit within the meaning of the mining laws . . . If the costs of
compliance render the mineral development of a claim uneconomic, the
claim, itself, is invalid and any plan of operations therefore is
properly rejected. Under no circumstances can compliance be waived
merely because failing to do so would make mining of the claim
unprofitable. Claim validity is determined by the ability of the
claimant to show that a profit can be made after accounting for the
costs of compliance with all applicable laws and, where a claimant is
unable to do so, BLM must, indeed, reject the plan of operations and
take affirmative steps to invalidate the claim by filing a mining
contest.
Finally, insofar as BLM has determined that it lacks adequate
information on any relevant aspect of a plan of operations, BLM not
only has the authority to require the filing of supplemental
information, it has the obligation to do so. We emphatically reject any
suggestion that BLM must limit its consideration of any aspect of a
plan of operations to the information or data which a claimant chooses
to provide. Great Basin Mine Watch, et al., 148 IBLA 248, 256. Bolded
emphases added, italics in original, citations omitted.
---------------------------------------------------------------------------
Interestingly, these USGS programs are being cut because they
primarily benefit entities outside the Department--including other
Federal agencies, state and local government, and foreign governments.
In the future, USGS is expected to seek funding from these partners who
``rely on USGS to provide information to help them fulfill their own
mission-critical responsibilities.'' It is the Environmental Protection
Agency that routinely uses this information.
We are concerned about the decrease in funds available for mining
law administration. With increasing questions about claim validity, it
is essential that the BLM be adequately funded to more fully pursue
questions of validity at each proposed mine. Failure to do so will
cause the industry substantial delays.
We support the budget increases for resource protection. This
should improve the BLM's National Environmental Policy Act
implementation and decrease delays caused by BLM personnel being called
to fight fires or administer fire restoration programs. It will also
hopefully improve the BLM's ability to improve the oversight of NEPA
documents. Over the past several years, we have read various documents
which were poorly edited and contained simple factual errors.\26\
---------------------------------------------------------------------------
\26\ The draft environmental impact statement for Newmont's South
Operations Area expansion is the best example of this. In our letter to
the BLM regarding this DEIS, we documented numerous problems with
technical editing including places where statements in one section did
not match statements in other sections. In just one section of our
letter, we point out the following:
The technical editing of the Groundwater Hydrology section leads
one to question the quality of analysis that went into this EIS. For
example, in the description on six hydrostratigraphic units on page 3-
38, there are sentences out of place. After listing five rock types, a
new paragraph begins to discuss the quartzite that underlies the
primary water bearing units in the basin. The sentence about siltstones
being structurally separated from the carbonates should be in the
preceding paragraph.
Also, why is there a discussion of `ninety four water wells'
currently being monitored by Newmont in the middle of a short section
on floodplains? DEIS at 3-52. It seems substantially out of place.''
---------------------------------------------------------------------------
However, we have concerns over the budget reductions for both
wildlife and fisheries management and threatened and endangered species
management. Because even the old 3809 regulations require the BLM to
comply with the Endangered Species Act, reducing the budget for
consultation will result in unnecessary delays. In Nevada where the
Lahontan cutthroat trout is potentially affected by mine dewatering and
where the goshawk and sage grouse may soon be listed, these cuts are
short sighted and will hurt mine permitting and wildlife management.
Conclusion: Claim maintenance fees and new regulation are needed to
protect the environment
Much of this testimony has dealt with the costs to the industry of
the BLM's claim fees, costs perceived to be caused by new regulations,
and the impacts of the President's budget proposals. The threat is
always that mining and exploration will move overseas; that America
will have to import its minerals because companies cannot afford to do
business here any more.
In recent months, overseas regulatory issues have arisen that
indicate just how unlikely it is for the mining industry to move
overseas soon. The beleaguered and corruption ridden Indonesian
government cannot begin to finalize mining regulations, therefore
Newmont has stopped exploring there because of ``the lack of a clear
legal framework and mining investment policy. \27\ In South Africa,
regulatory reform designed to ``redress a century of white dominance of
the industry'' would ``give mineral resources to the state''.\28\ Along
with Nevada, South Africa is one of the world's largest producers of
gold. Newmont and the rest of the industry probably do not want their
investment to be nationalized or stripped from them in countries that
do not have constitutionally protected property rights as the U.S.
does.
---------------------------------------------------------------------------
\27\ Newmont says Indonesia too unstable for more exploration. Pay
Dirt #741, March, 2001. At 31.
\28\ SA rule could hurt mining. Pay Dirt #741, March, 2001. At 31.
---------------------------------------------------------------------------
While investment and exploration, along with governmental revenues,
will wax and wane, the number one factor will continue to be commodity
prices. Neither maintenance fees nor regulations will have any effect
on prices. In fact, if regulations actually do reduce production, which
in our opinion is a dubious outcome, the supply decrease should
increase prices. If gold ever returns to $400 or $600 an ounce, the
massive increases in exploration and production in Nevada will
eliminate all of the industry's concerns about fees and regulations.
______
Chairman Gibbons. Now we turn to Mr. Putnam. Welcome, the
floor is yours and we look forward to your testimony.
STATEMENT OF BORDEN PUTNAM, PRINCIPAL, RS INVESTMENTS
MANAGEMENT
Mr. Putnam. Thank you very much. I will apologize in
advance. I will depart from my written testimony as is my
option, I believe. I have torn this up three times sitting here
as I don't think you want to hear me recite things that we have
heard here again and again.
I will say that I don't know what more can be said. We have
heard from many qualified people over many years from both
sides of this discussion and we find ourselves here today to
continue this debate. I'm regretfully glad to be here, I guess,
but I have not brought detailed facts or figures.
There are many well known and some much heralded cases that
we have heard about and read about where seemingly unneeded
regulatory delays and interferences to responsible mining
procedures being conducted in a lawful manner are crippling our
industry, me being a mining sympathizer, but I believe I can
come to this hearing with a somewhat unique perspective having
had a legitimate career in mining for 23 years before I went to
the recent career in the financial industry.
I used to work here in Nevada for Newmont, full disclosure,
and for Amax before that, before they were taken over by
whomever took them over.
Currently I'm employed by a group of mutual funds who try
to find investment opportunities in the natural resources
sector. I am there to guide them through the geological risks
as best I can, and over my 6 years tenure in the financial
industry I have witnessed a steady corrosion to the viability
and profitability of the U.S. Mining industry.
In part, this is due to declining metals prices in real
terms or inflation adjustment terms, and this has coincided
with an increasing focus on regulatory permitting and
environmental issues. This is a natural evolution as
demographics of the U.S. shift with increasing population
growth resulting in communities often impinging upon mining
areas once removed from towns.
However, there are now appearing to be so many restrictions
and regulations which can be layered upon in a redundant
manner, as we heard from the Women's Mining Coalition, upon a
once healthy and now struggling industry we still expect to
survive and thrive, and I don't think that is reasonable. I
believe the proposed revisions to the 3809 regulations are not
needed, and will unduly handicap an already struggling mining
industry.
This turns out to be a discussion that is full of emotions,
but it is not an emotional issue. It is an issue of economics.
Mining is quite honestly, and generally, a low return business.
The net operating margins are typically in the low single
digits, making investment and reinvestment decisions very
tough. The risks are high that the investments may never
generate a return.
I'm going to ``free-wheel'' here for a second, because as I
sit here, it occurs to me that we don't need to hear about
mining anymore. What we need to hear about are analogues where
investment has been discouraged, as has reinvestment, and where
the lack of those investments has led to a shortfall in supply.
Because, we are really talking about supply and demand here. If
there wasn't a demand for minerals, we wouldn't be mining them.
We are not doing it for fun. It is because it is a commodity
that is needed for this country to be strong and self
sufficient and to produce products that we all use and cherish.
Let's talk about natural gas. I don't know how much natural
gas you use in your homes in rural Nevada. I presume you have
got pipelines, and that lately the cost of gas is an issue
where it didn't used to be one. It is an issue now because we
discouraged reinvestment in the past and that lack of
reinvestment has caught up with us. We are no longer able to
supply the gas that we have grown into a huge demand for, and
even worse are forecasting the growing demand for as we use it
as the fuel of choice in so-called clean burning electric
generation facilities.
Gas was regulated. When it became deregulated it set its
own prices in a natural market; however, the returns were not
high enough and investments not made and the gas didn't come.
That is in spite of a natural phenomenon of gas wells, whereby
they decline on an annual basis. Right now Gulf of Mexico well
declines are approaching 40 percent annually.
In the mining sense this is called depletion. As we mine a
deposit, we deplete it. Mines don't last forever. I'm going to
need a couple more minutes, thank you. The mines in this
country are getting old and older, and as we discourage
reinvestment in them or investment in new ones, we will no
longer be able, or will be less able, to supply the minerals
that we are consuming. We will face a growing problem.
A very similar analogue is provided by electrical power
which someone spoke about earlier today. The power industry in
this country has long been regulated, is struggling through
deregulation in fitful ways, as has been evidenced by the poor
manner in which California approached it, but the bottom line
is that in all instances, by regulating those industries, we
have discouraged investment.
We are now short of power. This is in spite of a growing
population base and an economy that has growing energy demands
on a per capita basis. We consume more goods and we consume
more power on a per capita basis than most countries abroad,
yet we don't see the benefits of encouraging investment in
those things which we need and consume, which is fine, but just
realize that at the end of the day it will cost us all more.
It will come from elsewhere if we can get it, but we will
pay for it and there will be collateral loss of jobs throughout
other industries in the U.S. This is not a real hard concept to
comprehend, so I wanted to distract you away from mining,
because mining is the issue, but there are other analogues
where we can learn from experience.
Let me try to wrap this up in a timely manner. Let me see
if I can get back into the flow of things here. Mining could be
shuttered in America. We could do that, not intentionally, but
by over indulgence of good intentions of environmental desires,
to be even more restrictive of what is done and reducing the
disturbance on public lands. That is a possibility that
increases which each move, with each move to further restrict
access, slow permitting or unnecessarily hinder development.
But then we as a nation will pay more for raw materials as
transportation costs grow as a proportion of total costs.
Reliance upon foreign sources for raw materials is
unnecessary and in the end will be costly to the economy as a
whole and is risky, much more risky than environmentally
responsible mining. Thank you.
Chairman Gibbons. Mr. Putnam, thank you. That is a
refreshing approach to the discussion that is before us today,
and certainly to those of us who are not as well versed in the
economics of the overall picture appreciate the remarks you
made and certainly can say thank you for your analysis in
helping us better understand that issue.
[The prepared statement of Borden Putnam follows:]
Statement of Borden R. Putnam III, Principal, RS Investment Management
Please note that the opinions expressed here are mine alone, and do
not necessarily reflect the views of RS Investment Management.
Issues presented for my comment:
1) The effect of existing Federal fees, such as claim
maintenance fees, on exploration activity
The annual claim maintenance fee is intended to encourage
continuing work progress to advance the understanding of the economic
potential of the mining claim--to determine if economic returns are
achievable. This fee is intended to discourage idle claims on Federal
lands, as idle claims could preclude beneficial advancement work by
others.
The claim maintenance fee impacts the exploration process in both
positive and negative ways. In a positive sense, I believe the fees
were designed to encourage work to progress on the lands under claim,
such that lands found not prospective would be dropped to avoid the
fee. In a negative sense, beyond the ten-claim exemption, the fee does
nothing to advance the understanding of the economic potential of the
claim, and becomes a prohibitive expense--an expense that actually
could prohibit the orderly examination of mineral potential.
The claim maintenance fee alone adds to excessive, non-work related
costs that could result in the claims being dropped, and work stopped--
only to be restarted by another prospector without the benefit of the
results of the former work. This scenario could lead to unneeded
disturbance. Mineral exploration is a demanding and frustrating effort:
Diligence and persistence is required, and results are slow coming.
Conclusions are slower still. Geology is never straightforward, nor is
it predictable, and results of work must be compiled into a growing
understanding of the prospectiveness of the claims. This could result
in a geologically complex claim(s) being successively re-worked but
never being adequately understood.
The claim maintenance fee can put a prohibitive cost on holding
claims, a cost which might discourage adequate and beneficial work.
Often, the work that is required to validate a prospect is too
difficult and expensive for an individual to mount, requiring the
involvement of a larger corporation. However, there has been a tendency
over the past 5- to 10-years for fewer and fewer companies to be
willing to fund grass-roots, or prospecting-type exploration work,
relying instead on individual prospectors to locate mineral ground. If
mere holding fees become a disproportionate prospecting expense, the
much-needed ``grass roots'' prospecting won't be done. In many
instances, this could kill the incipient stages of mining-related jobs.
So too, might this decline negate the need for much of the staffing of
the oversight agencies (e.g., BLM).
One scenario that reveals this prohibitive expense is provided by
the lengthy delay periods that can and do occur in the process of
applying for and receiving permits for land disturbance work. During
this period, holding costs can be prohibitive while the claimant awaits
needed approval for work plans.
Mining is historically a low-return business. The industry
typically averages low single-digits for return on capital employed
(ROCE), well below their cost of capital--therefore, any increased
burden on the operators will denigrate already poor returns for the
industry, driving investors away and slowly killing the industry in the
U.S. This will drive operators overseas, resulting in loss of jobs and
tax base for communities and state and Federal agencies.
Miners have long faced declining metals prices, and increasing
costs--for equipment, materials and permitting / legal and
environmental reclamation issues. This crimps operating margins,
reducing the economic return. This negatively impacts the perceived
value of and need for exploration, which has seen drastic downturns in
activity throughout the U.S. This, again, will lead to fewer jobs, and
less basic industry in the U.S., leading to increased imports of raw
materials for producing refined products.
2) The potential effect that proposed mining fees, such as a
Federal royalty, would have on state revenues and mining
operations.
The lack of a royalty on minerals mined from Federal lands is a
controversial issue long thrown in the face of mining protagonists, as
purported evidence of the irrationality of the 1872 Mining Law. The
concept of a royalty may seem like a fair participation for the Federal
or state government for mining done on public lands; however, a royalty
can have a profound negative impact upon the internal rate of return
from the series of cash flows a mining operation generates, as follows:
a) LA top-line, or revenue royalty is impacted only by the
selling price of the commodity being recovered, and does not
reflect the profitability (or lack thereof) for the mining
project.
b) LOperating costs, including payroll, payroll taxes,
equipment, energy and project financing costs, can and do vary
over time (they typically escalate), and impact the operator
only. The royalty holder is not impacted by either the fixed,
or the changing variable costs. Thus, the revenue royalty
holder has an unfair financial advantage over the operator, who
has taken on all the financial risk to develop the project, and
is completely burdened by all costs, and taxes.
c) LA revenue royalty has the net affect of reducing the
value of the material recovered to the mining company. That is,
a 5% revenue royalty effectively reduces the revenue from the
material recovered to 95% of the in-ground value. This is the
same affect as a 5% drop in mined grade, or 5% drop in
metallurgical recovery. Thus, a royalty can reduce the life of
a mining project resulting in loss of jobs, and tax base for
the county, and state. A mining project with a revenue royalty
will have a lower rate-of-return which could result in the
project not receiving financing, and not being built.
d) LTypically, the operating margin is quite modest, and not
sufficient to support the added burden of a royalty. Otherwise,
economically viable projects might not be built.
3) The probable effects that the new 3809 regulations would
have on the environment, state revenues and mining operations.
In my opinion, existing 43 CFR 3809 regulations promote
environmentally responsible mining, and require sufficient and
effective oversight by the BLM. Additional regulations will merely
serve to add to the already extensive permitting process facing mine
operators, and would likely dissuade some from pursuing mining in the
U.S. This would obviously have strong negative affect on local
communities and state economies that derive livelihood from mining.
Environmentally, additional regulation is not needed--adequate checks-
and--balances presently exist, and do not need to be improved upon. At
most, better implementation of existing regulations would seem to fill
the perceived regulatory gap, which could be aided by additional
resources at oversight agencies.
4) The millsite opinion (Leshy, 1997) and its effect on the
mining industry.
The millsite opinion issued during 1997 by Department of Interior
Solicitor John Leshy is a very odd, in that it assumes a one-to-one
relationship exists between mining-area disturbance and that area
needed for facilities and mining spoil piles. However, there can be no
assurance that such a relationship might exist. The reasons for this
are many, only a few of which will be commented upon, as follows:
LFirst, by volume, the recovered minerals constitute a
very small percentage, of the earth mined. Thus, the processing and
impoundment areas are necessarily outsized relative to the hardrock
mining footprint. This makes the tying together of the two claim-types
ill advised.
LSecond, the two claim types are of notably different
shapes, and areas, with the hardrock mining claim being elongate for
location over a lode, or vein-type deposit. A mill site claim is
typically equilateral (square), intended for location on the valley
floor adjacent to the lode(s). Mill sites are intended to host mining-
related equipment, facilities and materials contained within
environmentally secured areas. Attempting to tie the two differing
areas to each other, is not logical.
LThird, the need to contain mining-related facilities and
spoils piles, while obvious, may in certain conditions or irregular
terrain, necessitate land of differing area even for like-operations in
more level settings. This variability could certainly hold for
operations of different age, due in-part to changed operating
parameters or even improved environmental requirements. This could not
have been anticipated for, and obviates the call for a one-to-one
relationship existing between the two claim types.
Further, the logic may follow, that if an operator were needing
additional millsite acreage to comply with, for instance, discharge
permit requirements, but the need would cause the operator to exceed
the ``Leshy 1997 millsite opinion'' that operator might be inclined
(perhaps even mandated) to locate additional lode claims merely to
maintain the proposed ``one-for-one'' stipulation. Clearly, this is not
the intent, and could tie-up locatable minerals that might be
prospected by other parties.
Operators plan their facilities for long-term operation, to allow
environmental security, and operational flexibility. The operator must
anticipate the ultimate need, and prepare the necessary ground for the
long-term use by the operation. Tying the millsites acreage to equal
that of the lode claims could limit the flexibility of the operator,
and might introduce unnecessary environmental risk, buy confining
facilities into inadequate areas.
Concluding remarks
The continued attacks upon the mining law of 1872, and corrosion to
the already weakened economics of mining in America, will continue the
already established trend of pushing the industry overseas. The push of
mining offshore is inevitable until such a time as we view mining as a
necessary industry, in the strategic interest of the U.S. An industry
that provides needed raw materials for a healthy and independent
democracy, and as well provides much needed job diversity in an economy
trending evermore toward providing only ``service'' industry. Mining is
being, and can continue to be done in an environmentally responsible
manner. We must look for ways to help, not hinder the industry.
Investors are already few in number, and without a promising outlook
for a healthy, viable industry, the mining industry will not be able to
compete for, or attract capital.
______
Chairman Gibbons. I turn now to Dr. Price for your
comments. Welcome, and the floor is yours.
STATEMENT OF DR. JONATHAN PRICE, DIRECTOR/STATE GEOLOGIST,
NEVADA BUREAU OF MINES AND GEOLOGY
Mr. Price. Thank you. My name is Jon Price. I'm the Nevada
State Geologist and Director of the Nevada Bureau of Mines and
Geology. I thank you, Congressman Gibbons, for this opportunity
to testify.
My written testimony includes a number of facts and figures
that led to some of my opinions with regard to the regulatory
burdens that have been disincentives for exploration in the
U.S., but I would like to use the oral testimony opportunity to
focus on the National Academy of Sciences report.
I served as a member of the National Research Council
Committee on Hardrock Mining on Federal Lands. Please recognize
that I'm testifying today not on behalf of the National
Research Council, but in my capacity as the Nevada State
Geologist.
Congress requested that the National Resource Council
assess the adequacy of the regulatory framework for hardrock
mining on Federal lands. The overarching conclusion of the
Committee was that the existing regulations are generally well
coordinated, although some changes are necessary.
The overall structure of the Federal and State laws and
regulations that provide mining-related environmental
protection is complicated, but generally effective. The
structure reflects regulatory responses to geographical
differences in mineral distribution among the states as well as
the diversity of site-specific environmental conditions.
Improvements in the implementation of existing regulations
present the greatest opportunity for improving environmental
protection and the efficiency of the regulatory process.
In other words, the system that was in place prior to the
changes in January are generally working well to protect the
environment and to allow for development of mineral resources.
In my opinion the only regulatory changes that are necessary
beyond what was in effect on January 19th of this year are
those that are identified in the NRC report.
Chapter 4 of the NRC report contains the significant
conclusions and recommendations, and for clarity those key
recommendations were shortened to one sentence in bold face
text; these are also in the executive summary. And accompanying
each of those recommendations in that Chapter 4 are
explanations of why the Committee felt the recommendation was
justified, a discussion about the implications of the
recommendation, and further statements on how the
recommendation should be implemented. In my opinion, the full
recommendations are this entire chapter, not just the bold face
text.
In its final EIS, BLM offered five alternatives. The fifth
one was to make changes as recommended in the NRC report;
however, I have not looked at that fifth alternative in great
detail and I therefore favor BLM's going back to the status quo
that existed on January 19th and carefully crafting rules that
recognize the overarching conclusion of the NRC report.
Our office here at the Nevada Bureau of Mines and Geology
has noticed some significant downturn in exploration in the
last couple of years and we believe that much of that is due in
part to decreased gold prices, but also in part to some of the
disincentives that are in the regulatory system.
I would like to now focus a little bit on some of the
recommendations in the NRC report that were not specifically
related to BLM's 3809 regs. I wanted in particular to identify
the Forest Service regulations that said they should allow
exploration disturbing less than five acres to be approved or
denied expeditiously similar to those used by BLM.
Currently we are seeing that the exploration companies are
able to get in on BLM land commonly in a period of a few weeks,
whereas on Forest Service land the typical time frame is in a
range of 8 months to maybe as much as 2 years.
There are a number of other regulations that we addressed
in that report and I will draw those to your attention in the
written testimony. One of them had to do with the Good
Samaritan Rules and a need for Congress to take another look at
the Clean Water Act and CERCLA in terms of company liabilities
with regard to abandoned mine lands, recommendations with
regard to the appropriate role of the Federal Government in
terms of mining related environmental research, and several
other recommendations that again are referred to in the written
testimony. I will be more than happy to answer questions again.
Thank you.
Chairman Gibbons. Well, I can tell you, Dr. Price, that
between Dr. Myers and yourself you both have demonstrated a
high degree of timeliness,both of you, in finishing your
testimony. You were right on the bell, so perhaps it is due to
the fact that you both have Ph.D.'s and can beat the clock.
[The prepared statement of Jonathan Price follows:]
Statement of Jonathan G. Price, Director/State Geologist, Nevada Bureau
of Mines and Geology
My name is Jonathan Price. I am the Nevada State Geologist and
Director of the Nevada Bureau of Mines and Geology, which is the state
geological survey and a research and public service unit of the
University and Community College System of Nevada. Thank you for this
opportunity to testify on the effect of Federal mining fees and mining
policy changes on state and local revenues and the mining industry.
Mining on Federal lands is critical to the Nation and to the State
of Nevada. The economic impacts of mining in Nevada are significant.
Gold production in Nevada boosts the overall earth-resource industry in
our state to nearly $3 billion worth of product per year. We are in the
midst of the largest gold boom in U.S. history, and, thanks in part to
mining on Federal lands, the United States is a net exporter of gold,
one of few mineral and energy resources for which we are not a net
importer.
Nevada leads the nation in the production of gold, silver, barite,
lithium, mercury, and the specialty clays, sepiolite and saponite.
Other major commodities produced in Nevada include construction
aggregate (sand, gravel, and crushed stone), geothermal energy, lime,
diatomite, gypsum, cement, silica (industrial sand), and magnesia.
Local economies also benefit from mining. Construction of new homes,
casinos, other businesses, schools, and roads continues the strong
demand for local sources of sand, gravel, crushed stone, gypsum, and
cement, all of which are abundant in Nevada. According to figures
compiled by the Nevada Department of Employment, Training, and
Rehabilitation, the mining industry directly employs approximately
11,000 people, and the industry is responsible for another 36,000 jobs
related to providing the goods and services needed by the industry and
its employees.
I served as a member of the National Academy of Sciences - National
Research Council (NRC) Committee on Hardrock Mining on Federal Lands,
which wrote the 1999 report with the same title. Congress requested
that the NRC assess the adequacy of the regulatory framework for
hardrock mining on Federal lands. The specific charges to the Committee
were to identify Federal and state statutes and regulations applicable
to environmental protection of Federal lands in connection with mining
activities; consider the adequacy of Federal and state environmental,
reclamation and permitting statutes and regulations to prevent
unnecessary or undue degradation; and draw conclusions and make
recommendations regarding how Federal and state environmental,
reclamation and permitting requirements and programs can be coordinated
to ensure environmental protection, increase efficiency, avoid
duplication and delay, and identify the most cost-effective manner for
implementation.
The overarching conclusion of the NRC Committee was that ``Existing
regulations are generally well coordinated, although some changes are
necessary. The overall structure of the Federal and state laws and
regulations that provide mining-related environmental protection is
complicated, but generally effective. The structure reflects regulatory
responses to geographical differences in mineral distribution among the
states, as well as the diversity of site-specific environmental
conditions. . . Improvements in the implementation of existing
regulations present the greatest opportunity for improving
environmental protection and the efficiency of the regulatory
process.''
In other words, the regulatory system that was in place through
January 19, 2001, prior to the new rules that were published on
November 21, 2000, generally works well to protect the environment and
allow for development of mineral resources. In my opinion, the only
regulatory changes that are necessary, beyond what was in effect on
January 19, 2001, are those identified in the NRC report.
Chapter 4 of the NRC report on Hardrock Mining on Federal Lands
contains several significant conclusions and recommendations. For
clarity, the key recommendations were shortened to generally one
sentence of bold-faced text. Accompanying each recommendation are
explanations of why the NRC Committee felt the recommendation was
justified, a discussion about the implications of the recommendation,
and further statements on how recommendations should be implemented. In
my opinion, the full recommendations are this entire chapter, not just
the bold-faced text.
In its final environmental impact statement (EIS) on Surface
Management Regulations for Locatable Mineral Operations (43 CFR 3809),
dated October 2000, the Bureau of Land Management offered five
alternatives. The fifth alternative was to make changes as recommended
in the NRC report. However, this was not the preferred alternative of
the previous administration when it published its final rules on
November 21, 2000. I believe that BLM should follow the full
recommendations in the NRC report. Although I favor BLM's going forward
with implementing those changes that were recommended by the NRC, I
have not fully analyzed the fifth alternative in the EIS to make sure
that it is fully consistent with the NRC report. I therefore favor
BLM's going back to the status quo as it existed on January 19, 2001
and carefully crafting new rules that recognize the overarching
conclusion of the NRC report: ``Existing regulations are generally well
coordinated, although some changes are necessary.''
BLM estimated in the EIS that, with their course of action, there
would be substantial losses of mine production and related jobs, and
that 70% of the losses would be in Nevada.
Our office has noticed a significant downturn in exploration
activity in Nevada, as measured in the last two years by 20 to 40
percent decreases in sales of topographic base maps, geologic maps, and
reports used by exploration geologists. Although some of this can be
attributed to relatively low prices for gold and other metals, results
of a survey (conducted by the Nevada Division of Minerals and published
in September 2000) of companies exploring in Nevada suggest that the
regulatory environment (including such issues as permitting times,
uncertainties about Mining Law reform, Federal claim-maintenance fees,
and land withdrawals) has become a significant disincentive for
exploration.
Another measure of exploration activity is the number of active
claims held on Federal lands. According to the Bureau of Land
Management, the number declined from 1999 to 2000 by approximately 8
percent, to 105,555. This number is substantially lower than the
figures of about 400,000 active claims each year during the period from
1989 to 1992, after which a new claim-holding fee was imposed by the
Federal Government. The numbers dropped to below 150,000 active claims
in each year since 1992.
The decrease in exploration activity is particularly troublesome,
because the deposits found today will become the mines of the future,
and because the expertise needed to find these deposits is leaving the
United States. Quoting from the 2001 NRC report on Evolutionary and
Revolutionary Technologies for Mining, ``The United States is both a
major consumer and a major producer of mineral commodities, and the
U.S. economy could not function without minerals and the products made
from them. In states and regions where mining is concentrated, this
industry plays an important role in the local economy.'' I believe that
is important that the U.S. maintain an environmentally responsible
mining industry and train professionals to find and mine the mineral
deposits that we will need in the future.
The NRC report on Hardrock Mining on Federal Lands made several
recommendations that were not directly relevant to BLM's ``3809'' rules
governing mining operations on public lands, but which can help
encourage environmentally responsible mineral-resource development. I
would like to highlight a few of those by quoting from the report.
``Recommendation 3: Forest Service regulations should allow
exploration disturbing less than five acres to be approved or denied
expeditiously, similar to notice-level exploration activities on BLM
lands.
Under the current system for notice-level exploration
activities affecting five acres of land or less, BLM has 15
days to respond and notify the operator if extraordinary
measures are needed for the planned activities. In contrast,
Forest Service officials reported that essentially identical
exploration activities on Forest Service lands often require
eight months lead time and sometimes as long as two years to
obtain approval, although some approvals for exploration are
obtained more quickly.''
``Recommendation 7: Existing environmental laws and regulations
should be modified to allow and promote the cleanup of abandoned mine
sites in or adjacent to new mine areas without causing mine operators
to incur additional environmental liabilities.
To promote voluntary cleanup programs at abandoned mine sites,
Congress needs to approve changes to the Clean Water Act and
the Comprehensive Environmental Response, Compensation, and
Liability Act to minimize company liabilities.''
``Recommendation 8: Congress should fund an aggressive and
coordinated research program related to environmental impacts of
hardrock mining.''
The 1999 NRC report contains suggestions for implementing this
recommendation and an appendix on research needs. In addition,
a new NRC report, published in 2001 and titled Evolutionary and
Revolutionary Technologies for Mining, further addresses
research needs in mining, including environmental issues.
``Recommendation 10: From the earliest stages of the National
Environmental Policy Act (NEPA) process, all agencies with jurisdiction
over mining operations or affected resources should be required to
cooperate effectively in the scoping, preparation, and review of
environmental impact assessments for new mines. Tribes and
nongovernmental organizations should be encouraged to participate and
should participate from the earliest stages.
The lack of early, consistent cooperation and participation by
all the Federal, state, and local agencies involved in the NEPA
process results in excessive costs, delays, and inefficiencies
in the permitting of mining on Federal lands.''
``Recommendation 13: BLM and the Forest Service should identify,
regularly update, and make available to the public, information
identifying those parts of Federal lands that will require special
consideration in land-use decisions because of natural and cultural
resources or special environmental sensitivities.
BLM and Forest Service should identify natural or cultural
resources or environmental sensitivities on Federal lands that
require special consideration in land use planning, including
that related to hardrock mining. The agencies should use their
land use planning processes to (1) identify these lands that
should be withdrawn from hardrock mining or may require special
considerations in permitting, (2) give specific consideration
to hardrock mining as a potential land use, and (3) establish
guidelines for reclamation and mitigation that apply to mining.
This can be accomplished through the land use plans for Federal
lands required by the Federal Land Policy and Management Act
and the National Forest Management Act.''
``Recommendation 16: BLM and the Forest Service should plan for and
implement a more timely permitting process, while still protecting the
environment.
The permitting process is cumbersome, complex, and
unpredictable because it requires cooperation among many
stakeholders and compliance with dozens of regulations for a
single mine. As a result, there is a tendency for the process
to drag on for years, even a decade or more.''
Some of these recommendations will require congressional action,
and some will require changes in Federal regulations. I would be happy
to attempt to answer any questions you may have about the NRC report or
my personal opinions concerning mining policies. Thank you.
______
Chairman Gibbons. I want to thank all of you for being here
again, too, and certainly appreciate the time you have all
taken to be here for this hearing.
Let me ask Mr. Gaskin a question. As I listened to your
testimony and in talking about the State of Nevada and its
Interim Fluid Management Trust Fund, can you tell us, and I'm
sure you heard Dr. Myers' testimony about his concerns for
reinjection and drainage problems, tell us a little more if you
could or elaborate for us how that came to be under the 3809
regulations and what has been the impact of that trust fund.
Mr. Gaskin. Well, in the past number of years we have
experienced an increase in bankruptcies and other financial
problems in mining, operations in the state resulting in some
site abandonments, often quite sudden, and at a lot of these
mines there are fluid management issues. They have process
solutions that are constantly being recirculated in the
facility, and if the pumps are just turned off and the people
walk away, the ponds will overflow and release often cyanide
solution to the environment. It is a possibility that concerned
us very much, so we have been taking a great number of steps to
prevent that from happening and we have prevented that from
happening in the state to this point.
One of the problems we saw was that when there is a
bankruptcy, we have to act quickly to recover the bond for that
site so we can have funds available to go out and manage those
fluid systems on a site quickly, and that is difficult to do
with a lot of the bonding mechanisms that are currently in
place. So what we wanted to establish was a liquid fund of
financial resources to be able to send people out immediately
as needed, and so we work closely with the industry to come up
with a strategy whereby mining fees would be collected and
placed into a trust fund under the State's control that would
allow us to arrange for a contract. We have a specific
contractor selected who is ready on a moment's notice to go out
to any site that may require urgent fluid management.
Chairman Gibbons. So this is a concept and a program which
was developed at the State level in coordination with the
private industries. Is it funded completely by private industry
fees that are made to it or are general taxpayer monies
contributed?
Mr. Gaskin. We revised our regulations to require fees from
industry, it is totally funded by industry fees.
Chairman Gibbons. And it has been an effective program to
this date?
Mr. Gaskin. We haven't had to use it up to this point and
we hope to never use it, but it is there in case we do need it.
Chairman Gibbons. Dr. Myers, let me first thank you again,
too, for being here today, and I do agree with you about the
studies, the USGS studies and the funding in the budget for
studying toxic minerals, et cetera, and I will work to assure
that funding remains in the USGS budget for that provision, so
I just wanted to thank you for your attention to that issue as
well.
And let me ask just basically a question that perhaps you
can help us, because you obviously take a very personal
interest in what is going on in the mining industry throughout
the State of Nevada and possibly in the California boundary
areas as well since the Great Basin covers more than just the
State of Nevada. In your review tell me and tell us which mines
are doing a good job that you can be proud of today?
Mr. Myers. Boy, let's put me on the spot here. There are,
there is good reclamation at some facilities. Gold Quarry has
some decent reclamation, although I have some problems with
their dewatering, for example. There are good and bad things,
things that I will like and things that I will dislike at many
of the facilities.
Marigold, Mr. Jeannes was sitting here awhile ago, they had
some good reclamation on I think it was tailings impoundment,
but they also have a leak, so we have a little problem with
that.
Let's see, there is good reclamation I think, I think there
is a pretty good reclamation ongoing at Little Bald and the
Bald Mountain Mine, Placer Dome's facility. I just received a
closure plan for it yesterday and I want to reserve judgment on
what I think about the closure plans, what they are doing with
the heaps, something you just asked Dave Gaskin about a minute
ago. I want to reserve judgment on that.
I think the Meikle Mine of Barrick Gold Mines is one of the
best run mines in the state, although in general an underground
mine. The environmental community, one of the attacks of the
environmental community in the future will be to encourage more
underground facilities and fewer above ground because there is
less disturbance, there is less dewatering required, there is
less pit lake created, so those would be the ones that come to
mind.
Chairman Gibbons. Let me ask maybe even a broader
philosophical question you might be able to help us with. As we
look at the process, the political process of identifying lands
and which lands should or should not be available for mining,
how do we, how can we avoid closing lands that contain valuable
mineral deposits to mineral development? How can we avoid that?
Mr. Myers. I know, you know the miners will say, friends of
mine who are miners will say gold is where you find it, but you
have to be able to mine where you find it. There are other
places, there are places where you find gold that the
environmental community would say this is too nice, the values
of the wilderness, open space, biodiversity exceed the value of
the mineral that you would withdraw.
For example, if you found a major gold deposit under the
peak at Arc Dome in the Toiyabe wilderness, there is little
question to most people that we should probably forego that. It
becomes more difficult. One of the mines that I said I would
probably have opposed and I mentioned before on Forest Service
land was Jerritt Canyon and that is not because of anything
they are doing specifically, but because it was such pristine
wilderness and that is a place where had I been around in '82 I
think when it was permitted, that, I mean the broader, in
answer to your broader question it is really hard in setting a
standard as to where that would be.
And I think we do need to have, we are looking at it
through wilderness processes and monument designations and
things like that and it is hard to set a broad standard and I
don't think I'm giving you a very good answer to the broad
philosophical question, but I'm trying.
Chairman Gibbons. Well, let me turn in the time we have
here to some of the other panelists on the questions we have
here today. Maybe Mr. Putnam can help us understand the
political environments and the effect of political
environments, the stable political environments, what would
that have on the prediction or the decision making process to
an investor?
Mr. Putnam. The answer I think would be twofold. First is
ownership rights, which is not what this panel is about to a
large degree, so I won't speak to that, but I will speak to
what is called the risk premium, and that being as I evaluate
or as any investor would evaluate and the company would
evaluate the series of cash flows that are forecast from that
operation, to understand the value of those in present day
dollars you apply a discount rate. The Federal Reserve just
reduced the discount rate to 4 percent. The Fed's funds rate is
presently four and a half percent.
The risk-free premium is sort of treasury bills, excuse me,
treasuries. What I would do in evaluating an investment
opportunity in a foreign country is try to judge first of all
what is the risk free rate in that country, which is generally
larger than 5 percent or higher than 5 percent, and then to
that we would add a risk premium. And that means our
expectation is that for us to put our capital at risk, or our
shareholders' capital at risk, in a foreign investment, we want
to guarantee a rate of return that exceeds what we think is the
risk free rate of that country, with a premium attached to it
to justify the exposure of that capital.
Chairman Gibbons. So what you are saying--.
Mr. Putnam. I hope that is clear.
Chairman Gibbons. Yes. What you are saying is that before
many of these mining companies, which do not usually dip into
their own pockets because they don't have the resources, the
financial capability to invest, they come to a financial market
like yourself and ask for funding of some type to help them
with this investment. You make those decisions and those
predictions before you lend them the money with regard to any
investment they may make or development they may use of those
capital funds they have gotten from the financial industry and
the financial markets.
What then would be your considerations as a financial
analyst on say the effects of royalty when you compare it to a
commodity-based product, the effects of royalty on a mining
operation, and how can a mining operator adjust for royalty in
his, either his profit predictions, et cetera, when that is
there?
Mr. Putnam. There is sort of two themes there, maybe three
questions.
Chairman Gibbons. And all very unclear, I'm sure, but you
will sort them out.
Mr. Putnam. On the first one, let me address you. When a
company would come to us and ask us if we would help them
finance an operation in a foreign country or anywhere, we would
discuss with them what their cost of capital is, which first
you look at the balance sheet on their debt component, that is
a pretty easy number to determine because it is the interest
coupons on their debt instruments, but then we add to that an
equity component which is what we expect to make on a similar
investment.
It is an opportunity cost if you studied finance. If I take
a dollar and put it in this operation, I'm taking that dollar
away from another opportunity and it is that opportunity that
we are judging against this, so that opportunity, or cost
decision, is where we really hammer them, and we want to make
sure their ability to return or exceed their cost of capital as
they judge it is something that will exceed the opportunity
cost that we are passing up to make that investment. Sometimes
that is a high number-like 15 percent, after tax.
Your second question about royalties, I touched on
royalties in my written testimony. Royalties are a very
interesting thing and they can often be thrown out as a
solution to help the Federal Government or the public
participate in the benefits of the mining operation. However,
royalties are a double-edged sword.
While they do allow participation in the revenue line, and
you do need to understand an income statement and be aware they
impact the operating income and the cash flow. The royalty as
is being discussed, is called a revenue royalty. It is right
off the top line, so it has a linear relationship to the value
of the minerals.
If it is say a 5-percent royalty, it means the value of the
minerals being extracted are now only 95 percent what they
originally were to the operator, so he needs to adjust his
model for only recapturing 95 percent of what is called the in
situ value.
The problem with that is, and as I think Dr. Myers touched
upon here, there is a difference between underground mines and
open pit mines and that is not a decision made by engineers,
necessarily. It is a decision that comes out of the style of
the ore deposit.
To understand an ore deposit, an ore reserve is like a
cloud, and clouds are sort of lumpy and diffuse all at the same
time. As you apply a royalty to that cloud you are putting a
higher requirement for return on that decision.
What happens, is the grade or, if you will, the density of
the cloud needs to be more, so the diffuse parts of the cloud
start to disappear from being economically extracted. The other
part of the sword, the other edge, is that mines may not get
built at all because the royalty may take away that very small
profit margin that exists in the first place.
When a royalty is imposed over a deposit that could bear
it, and I'm not sure many can, much of the deposit may fall
away and not be economic at current or reasonably forecast
commodity process. So, a royalty is a very dangerous thing. And
it is sort of unfair, because the royalty holder does not have
any capital at risk, and yet they have full participation at
the revenue line, but share no risks for costs, no risk for
taxes, etc.
Chairman Gibbons. Let me ask a question that was drafted
here by some of the staff that wants to take advantage of your
expertise and wisdom and perhaps you can help us with this, and
I will read this. It says that former Interior Secretary
Babbitt valued some undeveloped land in Arizona that he
patented to Asarco, one of the World's largest mining companies
at the time, at three billion dollars. That is the value he
placed on the land. Yet the stock market valued the entire
company at $750 million.
And Senator Dale Bumpers valued the undeveloped land in
Montana patented to Stillwater Mining Company at $38 billion
and at the time Wall Street valued that company at about $850
million. In fact, I think at the time Wall Street probably
valued the entire hardrock mining industry in North America at
something less than 38 billion dollars.
I guess my question would be what is Wall Street missing
that Senator Bumpers and Secretary Babbitt see, and maybe I
should have asked is Secretary Babbitt another Warren Buffet?
Mr. Putnam. That is an interesting conclusion to the
question. I don't mean to be flip, but I think that Warren
Buffet would pay attention to the balance sheet and to the debt
obligations and to the expenses required to bring those
resources to development.
I can't speak to where those numbers came from. Clearly
there is no development costs or interest expense against the
debt you would raise, or other, existing debts from other
mining enterprises which I would deduct from the valuation that
I'm willing to pay for them or, if you will, I add it to what
is called an enterprise value, and subtract the cash on the
balance sheet.
I can only presume that he used some forward price that
assumes a very optimistic, ever-escalating on a compounding
basis price for the commodity to be extracted. We don't work
that way. I work on a flat, nonescalating price deck as it is
called; however, I escalate costs according to what my view of
inflation is.
Inflation doesn't go away. Commodity prices seem to
decline, so we are always fighting an ever narrowing margin.
But I would say that Warren Buffet looking at those things
first of all, he probably doesn't own mining shares, I don't
believe he owns that silver either, as I think he sold that,
but I also think he would understand the costs that would be
required and the debt that would be burdened on the company to
bring those resources to development for the good of the
taxpayers.
Chairman Gibbons. We will turn to Dr. Price who has been
very patient in listening to all of this and I appreciate the
time that you have dedicated to this. You talked about finding,
the findings of the Hardrock Mining on Federal Lands report
that you were part of.
Tell me or let me hear from you what some of the findings
on the adequacy of the environmental protections were by that
Committee, by that report on the then existing regulations. Did
they find that the, to summarize what I'm trying to say, did
they find the regulations need to vastly change the dimensions
in order to protect the environment?
Mr. Price. Not at all. As a matter of fact, the charge from
Congress was specifically to look at the existing framework. We
didn't actually look at the proposed 3809 regs in any great
detail. We just looked at the way things were at the time and
that overarching conclusion was that things are working pretty
well. We did identify a few areas where some changes seemed
appropriate, but overall the environment is being protected.
Chairman Gibbons. By the then existing 3809 regulations?
Mr. Price. Correct.
Chairman Gibbons. That was prior to the new changes made in
the last Administration as of what, January 20th?
Mr. Price. Correct.
Chairman Gibbons. Of this year. You talked about mine
reclamation, the Good Samaritan issue. Explain for us what that
is about and why that is imperative that we address the Good
Samaritan issue.
Mr. Price. Essentially many mines are being put into
operation in old mining districts and there is an opportunity
for a company that comes in to an old district to clean up some
of the problems of the past. However, if that particular
property is on somebody else's abandoned area, for example, if
it is on a BLM section that is not part of the control of the
mining operation, but the mining company would like to come in
and be a Good Samaritan and clean it up, the current
regulations would make that company liable if they stepped in
and tried to clean up that particular area, so all future
environmental problems that may occur on that land would then
be the liability of that company.
That is part of the way CERCLA, Superfund Legislation,
works and that is an issue that doesn't have anything to do
with the 3809 regs, but would require you folks to go back into
Super Fund Legislation and allow for this Good Samaritan
activity to take place.
Chairman Gibbons. Well, I do believe and I'm sure many
Nevadans believe that as we look at the abandoned mines that
are around this state and other states as well that we have to
pay attention to what has happened with these mines and make
sure that we address the problems that were created in some of
those instances as we talked about earlier. The World War II
effort which had different technology and different viewpoints
about what we know today during the then existing operations.
Addressing the abandoned mine issues I think is a very critical
part of the future of mining, not just for what we have going
today, but I think down the road.
The abandoned mine process then according to your
recommendations and the Good Samaritan provision would permit
companies to use their private resources to go in and address
these environmental problems that were existing prior to their
arrival on the scene, and without accumulating the liability
for the prior existing environmental problems, which therefore
is the Good Samaritan issue that you are talking about there.
What were the recommendations from the National Academy of
Sciences about, well, let me just go back before I, strike
that, and ask the question about what were the National Academy
of Sciences criteria for selecting a panel for this Committee?
Mr. Price. The NRC goes through a fairly rigorous process
of trying to get experts who understand the issues. They try to
get representation from the elite body of the National Academy
of Sciences and National Academy of Engineering, experts that
don't necessarily know the particular subject but are generally
smart people, and they also try to get a good balance of
opinion, so that there is a balance of the bias.
They try not to have any conflict of interest within the
Committees, but they do allow for a balance of bias, so this
particular Committee was viewed, I think in the end, as having
a good balance across the board in having people that had clear
linkages and viewpoints in favor of the mining industry as well
as some people that had clear views opposing some of the mining
activities.
The process allows for coming to a consensus, so in many
cases individuals may want to push a recommendation in one
direction, where other individuals were pushed in another
direction, but every attempt is made to come to the consensus
of opinions and that usually boils down to a little bit more
emphasis on fact and scientific process rather than opinion.
Chairman Gibbons. Congress required you to provide this
report from the National Research Council, this book here that
you have referenced, Hardrock Mining on Federal Lands, as a
study of what was needed to modify and change the 3809
regulations.
Is it your opinion that the Bureau of Land Management or
the Department of Interior, excuse me, the Department of
Interior took the suggestions from this book as the basis or
the guidelines for which they made their 3809 changes?
Mr. Price. I will speak in my own personal opinion here,
no, it is not. I believe the recommendations that they came up
with are not nearly as consistent with the NRC report as they
could have been.
Chairman Gibbons. That is strange, because as I recall what
Secretary Babbitt at that time said, that within 24 hours after
receiving this report the study ratifies everything, and I
quote, ratifies everything I have seen and have been trying to
do for the last 6 years, which makes it questionable why if it
ratified everything that he had proposed and attempted to do
why he didn't follow it with regard to the recommended changes
in the 3809 regulations.
Gentlemen, I see that we have kept you here the requisite
amount of time and I want to thank you as well for your
participation and turn you loose and thank you again for
everything.
And I will call up our Panel IV for this afternoon, Mr.
Lyle Taylor, President and CEO of Geotemps; Mr. Frank Lewis of
F.W. Lewis, Incorporated, and please excuse me if I
mispronounce your name, Bill, Mr. Bill Kohlmoos, President of
Barium Products and Mining Company.
Chairman Gibbons. Gentlemen, welcome. While you are getting
comfortable I will remind you we are trying to keep it in time
limits we have available and remaining. If you wish, your full
and written statement will be entered into the record. You may
summarize in a verbal presentation. With that I will turn to
Mr. Lyle Taylor. Good afternoon and welcome. The floor is
yours. We look forward to your testimony.
STATEMENT OF THOMAS LYLE TAYLOR, PRESIDENT AND CEO, GEOTEMPS,
INC.
Mr. Taylor. Good afternoon, Congressman. Thank you very
much for wanting us to appear and talk to you. Before I start,
my oral statement is in fact a summary of what I gave to you as
a statement, and I would like to preface it just by saying it
is more on the side of an emotional summarization of the heart
of what is going on.
Just before I came in here today, I ran into one of my
former employees who is now working at the County, Washoe
County. He had been working in the mining industry for quite a
number of years, a graduate geologist and finally came into me
and said I'm not going to put up with the layoffs anymore, get
me out of the industry, whereupon we got him a job with the
County. He asked me--
Chairman Gibbons. It may not be a good choice knowing what
we know about the revenues coming into counties today.
Mr. Taylor. He asked me what I was doing here and I
explained to him that I was coming to testify at the hearing
and his comments were, Lyle, give them hell. So if you will
excuse me, I will try and do that.
My brief statement to this hearing reflects my perspective
as an employer of thousands of westerners in the mining
industry over a 30 some odd year career, especially in the last
16 years as President of Geotemps, Incorporated, a Nevada
corporation.
I have become personally associated with my employees and
their families over these years and I have become increasingly
saddened by the unrelenting pressure from the Government to
eliminate U.S. mining as a viable way of earning a living. In
Nevada we used to have three, four and often five generations
of mining families, grandfathers, fathers, wives, cousins,
daughters, sons, granddaughters working around the west, the
northwest, the southwest for prospering companies, silver
companies, gold, lead, mercury, aggregates, molybdenum, you get
the picture.
The pressure on Government comes from the most (it seems to
me) politically correct, a group of people who seem to hate
business and appear to despise capitalism who have made a
religion out of ``Environmental Activism.''
Ladies and gentlemen, the good miners who I have worked
with who have worked in, on, around, under the earth coaxing
from the soil our planet's vital materials are true
environmentalists. They are the conservationists of the natural
resources of the world. No, they won't preserve the world in
the state you see it now. They will mold the minerals of this
nation into the materials that are basic, that are essential to
our American way of life, to the quality of life that exists in
America to the envy of every other country in the world.
The earth is not in stasis. We are in a period of warming
since the last ice age and will probably return to another ice
age or some other state of uninhabited planetary form brought
on by the eternal motions of tectonic plates, vulcanism or
meteors or whatever. That is what happens over geologic time.
There is no global just right. There is only global change.
No matter what some shortsighted true believers acting like
chicken little say, every man-made edifice is going to be
naturally eradicated. We can conserve and wisely use our
resources in multiple ways, but they will not stand forever and
we will be long gone before we conquer mother nature.
As to a problem currently in the news pretty much
everywhere, mining doesn't create arsenic. It exists naturally
in our soil after 65 or so million years of hot springs
percolating through the earth's mantel along with other, every
other type of toxic element you ever heard of.
A baseline study similar to the Natural Uranium Resource
Evaluation, NURE, would show the folly of continually blaming
all toxins on industry pollution. The distribution of naturally
occurring toxic metals and other elements is ignored and/or
misunderstood by the public.
The employees on whose behalf I speak are asking you to see
this time in your governmental oversight as a crossing, perhaps
like a railroad crossing. We would like you to stop trying to
regulate us out of existence because of ignorance and political
pressure. To look at the body of knowledge accumulated on any
mine site, there is no lack of intelligence evident in mining
camps and no desire to kill our children, our families, or our
friends for the sake of a salary.
Listen to the combined wisdom of earth scientists that make
up the management of mining companies and to the common miners
who love the earth, the weight of the rock, the smell of the
ground, the thrill and the sight and taste of discovery.
America cannot maintain a civilized way of life without the
products that result from mining and we are not crazed
polluters. We are hard-working responsible citizens who want to
be treated fairly. We don't mind being the most regulated
industry in the west. We just want fair scientifically based,
thoughtful, evenhanded treatment.
Stop reacting to the politically driven uninformed. Look at
all sides of the issues. Listen to your constituents who resist
being turned into burger flippers. Help us help America. We
will conserve resources. We will protect our communities from
pollution. We want to be productive and we need your help.
Thank you very much, Congressman.
Chairman Gibbons. Thank you very much. I can tell you have
some supporters in the audience, probably some of your
Geotemps.
[The prepared statement of Thomas Lyle Taylor follows:]
Statement of Thomas Lyle Taylor, President & CEO, Geotemps, Inc.
As the largest niche marketed personnel service specializing in the
mining industry, with offices in Reno, Elko, Ely and Winnemucca, Nevada
and Tucson, Arizona we are constantly in touch with mining industry
employees looking for work or looking for people. We have seen the
exploration sector of mining decline disproportionately to the
commodity price since the maintenance fee system was instituted. Work
that required people doing jobs earning money and caring for their
families has been reduced in Nevada alone from estimates of 20 million
dollars per year to about 10 million dollars a year for a loss of +129
million dollars to our economy.
There has been a dramatic change in the nature of our business and
in the demand for labor in the mining industry in the western United
States. A decade ago, GEOTEMPS' labor supply was nearly 100% focused on
mineral exploration-related jobs, i.e., exploration geologists, claim
stakers, geotechnicians, drill helpers, landmen, reclamation crews,
etc. By 1997, labor for exploration work entailed roughly 40% of our
business, but in the past three years, and in particular during this
past year, there has been a near complete collapse. It is my estimate
that in the coming year, 2001, almost none of our clients will be
requesting mineral exploration-related labor. I estimate that the near
total demise of grass roots exploration in 2001 in the western United
States will prevent GEOTEMPS from placing hundreds of individuals in
jobs in the exploration sector in the upcoming year. Over the years
many exploration geologists and other exploration laborers have come to
depend on GEOTEMPS to provide them with steady, long-term work. On a
personal level it is devastating to me that many of those formerly
productive, well-skilled people will have to change industries or
careers altogether and give up the way of life they love.
GEOTEMPS has been forced to adjust to this changing climate, now
focusing almost solely on providing personnel to our clients at
operating existing mines where the initial exploration investments were
already made a decade or more ago. GEOTEMPS recently has been forced to
close four of its offices due to the bottoming out of the exploration
labor market, including our Denver office, which supplied mostly
exploration labor. In Reno, nearly 90% of the exploration offices of
the major mining companies have also closed in the past two years.
I can attest that the cause of this dramatic decline in mining
exploration in the western United States is the increasingly difficult
and burdensome regulatory scheme implemented by our Federal Government.
My clients increasingly perceive regulatory compliance as a moving
target, with the Bureau of Land Management (``BLM'') and other Federal
agencies gradually imposing a nearly never-ending regulatory process
with substantially increased risk to investments. A striking example of
this came in March 1999, when the Interior Department and the
Agriculture Department jointly took an unprecedented action to revoke
the plan of operations for the Crown Jewel Project in the State of
Washington, after the plan of operations had been reviewed over a
period of years and approved by the BLM and the U. S. Forest Service,
and even reviewed and upheld by the Federal district court in Oregon.
That action sent shockwaves throughout the mining industry and served
to substantially reduce the willingness of companies to make new
exploration and mine development investments on Federal public lands in
the United States. The rulemaking to increase the stringency of the 43
C.F.R. Subpart 3809 regulations, which Secretary Babbitt initiated in
January of 1997, acted as a further disincentive to new mineral
exploration and mine development investments.
Based on my discussions with numerous mining industry
professionals, it is nonsense to suggest that lower gold prices are the
dominant cause of the recent declines in U.S. mineral exploration
investment. As stated above, it is my firm view that the increasingly
stringent U.S. regulatory policies and practices are the dominant
cause, and the recently released final revisions to the 43 C.F.R.
Subpart 3809 regulations that were published in the Federal Register on
November 21, 2000 are the latest and most devastating manifestation of
this trend. Essentially, the new final 3809 regulations will spell the
demise of the domestic exploration industry, already crippled by BLM's
and other agencies' recent tightening grip. These final regulations
will essentially kill the remaining limited incentives for the new
mineral exploration and mine development investments.
The near total lack of grass roots exploration, which I expect will
prevail during 2001 and beyond I believe will be caused by the threat
of a Federal royalty scheme, the millsite opinion, the claim
maintenance fees and in large part by the new final 3809 regulations.
These actions by the Government are having an irreversible adverse
impact on future mineral production and mining jobs associated with
operating mines. Without any new grass roots exploration in the western
United States, there can be no future development of new mines. Absent
relief from these regulations production and employment levels will
exist for years to come at substantially lower levels due to the
dramatic decline in grass roots exploration occurring now.
______
Chairman Gibbons. Mr. Lewis, welcome to an old friend and
colleague, glad to have you here. We look forward to your
testimony.
STATEMENT OF FRANK LEWIS, OWNER, F.W. LEWIS, INC.
Mr. Lewis. Thank you, Congressman Gibbons. My name is Frank
Lewis for the record. Thank you very much for allowing the
privilege of testifying before you. I have been a miner and
prospector in Nevada since 1954. At one time we had over a
thousand stake mining claims accumulated over the years, mostly
in eastern Nevada. All of my working life I spent most of the
money I earned exploring in Nevada, and my wife didn't like it
either.
I was one of the more successful individual mine property
developers. My company accumulated patented as well as
unpatented claims. Since the hundred dollar fee went into
effect, we have not staked one mining claim.
When Congress passed the $100 fee and greatly expanded the
bonding and other new regulations removing all or almost all of
the small miners like myself out of the business of exploration
in Nevada on unpatented claims, it does not pay anymore to
explore in Nevada hoping you can find a company to lease your
property after you have made a discovery. We have dropped
almost all of our unpatented claims, keeping only my patented
claims.
About 18 years ago I financed my son, a metallurgical
engineer, in the development of an assay laboratory,
metallurgical testing laboratory and a mine supply business
here in Nevada. We employed between 20 and 25 people here in
Reno on property and a building, which I purchased.
For the last 2 years the lab lost money due to a lack of
customers. He had to lay off most of his employees, close down
our laboratory, and sell off the laboratory equipment. As they
are finding out in California, if a company does not make money
they can't hire people and pay their bills.
There is very little exploration being done in Nevada now
except as expansion of existing good mines. My companies have
all, many companies have already declared bankruptcy in this
state and many more are going to be bankrupt before this is
over.
Most of the mines are going to have to lay off their
employees. Only a handful of the existing mining companies in
Nevada are actually reporting company profits. I have
personally paid hundreds of thousands of dollars to the State
of Nevada in net proceeds of mine taxes over the years.
Nevada's net proceeds income tax is a principal source of
income to the state.
It is true that it is not just the $100 fee that is the
problem. The reasons for pending doom in the mining business
are cumulative. Bonding has hurt, having to spend millions of
dollars and hundreds of millions of dollars to clean up to make
a few acres that a cow can live on a few days or a few jack
rabbits is money spent that should have been left in the
company to reinvest in and find another mine to keep people
working. We need a friendly government to encourage us, one
that believes in private property rights.
To give another example, we spent hundreds of thousands of
dollars a few years ago on a group of unpatented claims near
Battle Mountain, Nevada. We did develop a small fairly high
grade gold deposit. We then spent $50,000 hiring engineers to
do a near feasibility study to accompany our patent
application.
We applied for a patent and the U.S. Government mining
engineer Mineral Examiner approved it after holding it a few
years. The Reno BLM office approved it and sent it to
Washington, which is where it now sits as it has been for years
and it hasn't been signed. There is one claim in my patent.
The least that should be done if you want to help get this
industry on its feet would be to eliminate or lower the fee to
$5. The $5 is about what would pay for the BLM office work,
which is a senseless duplication of the exact same work the
counties already do for one dollar. They have done it for over
100 years. Thank you very much, sir.
Chairman Gibbons. Thank you, Mr. Lewis. I don't think he
was clapping to get you to stop, though.
[The prepared statement of Frank Lewis follows:]
Statement of Frank W. Lewis, Owner, F. W. Lewis, Inc.
Members of the Committee. My Name is Frank W. Lewis. Thank you very
much for allowing me the privilege of testifying before you.
I have been a miner and prospector in Nevada since 1954. My first
mining venture was with my now deceased father in law in Ely, Nevada.
Our equipment consisted of picks and shovels. We hand trammed gold and
silver flux ore to our ore bin. Then with an old 5-ton truck we hauled
our ore to the McGill smelter. For any of you who have been to Ely and
know the large ``WP'' on the mountain behind Ely, that's where our mine
was.
Over the years my little company, F. W. Lewis, Inc. has purchased
many patented mines in Nevada, and Colorado. We also staked literally
thousands of unpatented claims which we explored and sometimes mined.
Mostly we explored developing targets for interested companies.
My first problem with the Federal Government was while I was in the
Army in 1955. In the old days when you owned an unpatented mining claim
you also owned the surface rights. Then environmentalists and Forest
Service influenced Congress to take away surface rights to mining
claims.
I was drafted into the service training at Ford Ord, California
basic training camp. I found myself sitting on my bunk reading a
registered letter from the Forests Service telling me they were taking
my surface rights to my mining claims away from me back in White Pine
County, Nevada.
I hired Jon Collins, an Ely Attorney to represent me sending him
half of the ninety dollars a month I was being paid to serve my
country.
Then it dawned on me I would never make it on just my Army pay
trying to fight the United States Government.
I wrote about my difficult problem to the late house member Walter
Baring. God Bless his soul! He sent a Government Mining Engineer out to
examine my claims. The engineer reported back to Walter Baring that my
claims definitely were legitimate and mineralized. He made the Forest
Service leave me alone, and acknowledged the legitimacy of my property.
At one time we had over a thousand staked mining claims accumulated
over the years, mostly in Eastern Nevada. All my working life I spent
most of the money I earned exploring in Nevada. I was one of the more
successful individual mine property developers. My company accumulated
patented as well as unpatented claims. Since the hundred dollar fee
went into effect we have not staked even one mining claim.
Then Congress passed the hundred-dollar fee and greatly expanded
the bonding and other new regulations removing all or almost all of the
small miners like myself out of the business of exploration in Nevada.
It does not pay any more to explore in Nevada hoping you can find a
company to lease your property to after you have made a discovery.
We have dropped almost all of our unpatented claims keeping only my
patented claims.
About 18 years ago I financed my son a metallurgical engineer in
the development of an assay laboratory, metallurgical testing
laboratory and a mine supply business by the name of Legend, Inc. We
employed between twenty and twenty-five people here in Reno in a
property and building, which I purchased.
For the last two years the lab lost money due to a lack of
customers. We have had to lay off most of our very good and loyal
employees, close down our business and sell off our equipment.
As they are finding out in California if a company does not make
money they can't hire people and pay their bills. It's impossible to
explore for minerals or do and work on a mine if you are not making
money.
There is very little exploration being done in Nevada now except as
expansion of existing good mines.
Many companies have already declared bankruptcy in this state and
many more are going to be bankrupt before this is over. Most of the
mines are going to have to lay off their employees. Only a handful of
the existing mining companies in Nevada are actually reporting company
profits now.
I have myself personally paid hundreds of thousands of dollars to
the State of Nevada in net proceeds of mine taxes over the years.
Nevada's net proceeds income tax is a principal source of income to the
state coffers
It is true that it is not just the hundred-dollar fee. The reasons
for the pending doom in the mining business are cumulative. Bonding has
hurt, having to spend millions of dollars in clean up to make a few
acres that a cow can live on or a few jack rabbits is money spent that
should have been left in the company to reinvest in and find another
mine to keep people working.
We need a friendly government to encourage us, one that believes in
private property rights.
To give another example: We spent hundreds of thousands of dollar a
few years ago on a group of unpatented claims near Battle Mountain,
Nevada. We did develop a small fairly high gold deposit. We then spent
fifty thousand dollars hiring engineers to do a near feasibility study
to accompany our patent application.
We applied for patent and the U.S. Government Mining Engineer
Mineral examiner approved it. The Reno BLM office approved it and sent
it to. Washington where it now sits, or perhaps it has been thrown
away. It has sat now there for years and years with no signature. There
is one claim in my patent pending and at this rate I'll probably be
long dead before it is ever signed. All that money spent and an
uncaring Government doing everything they can to harm the mining
industry. A government that seems to no longer want mineral production
in America. A government that dislikes the notion of private property
ownership.
The least that should be done if you want to get this industry on
its feet would be to eliminate or lower the hundred dollar fee to 5
dollars. The five dollars would be five times as much as the counties
charge for doing exactly the same job. This five dollars would pay for
the BLM office work, which is a senseless duplication of the exact same
work the counties already do, and have done for a hundred years or
more.
Thank you again for listening to me. I would answer any questions
as best I can.
______
Chairman Gibbons. Bill Kohlmoos, welcome. I apologize if I
mispronounced your name, but we are anxious to hear your
testimony.
STATEMENT OF BILL KOHLMOOS, PRESIDENT, BARIUM PRODUCTS AND
MINING COMPANY
Mr. Kohlmoos. You pronounced it correctly and thank you
Honorable Jim Gibbons for having this hearing and inviting us
to present our testimony. I'm representing two entities, the
Nevada Miners & Prospectors Association, which is made up of
the independent miner, not the major companies, but the
independent like Frank Lewis, who was one of the originators of
that, and I'm also representing my mining company, Barium
Products & Mining Company.
I have been in the business for 50 years. For 50 years, or
back up, for 30 years I made a living. The last 20 years I
haven't, and I, as of last week, I was losing claims, dropping
claims, losing leases. Mining companies that had a lease on one
of my properties would drop it and go out of business or go
overseas. I was losing until I had one property left, a good
gold mine leased to a large company.
The reason is many things, but governing mining we have the
market price. We have seen the price of gold go down and it has
hurt. We also have the rules and regulations. Now, when FLPMA
was passed in 1970's, it was policy, and policy is not exact,
precise at all.
A policy says this is what we think and the bureaucrats can
go ahead and make their rules and regulations and say, ``Oh, it
is policy.'' We have come up against that many, many times. It
is policy, if that means anything, so we have the market price,
we have the rules and regulations, and the rules end up as
costs. We have the costs of operating, buying fuel, and paying
our employees, so there are many things to running a mine, but
the rules and regulations now are the more dominant of all of
our costs.
Now, we also have a problem with the people we deal with
that are enforcing these rules and regulations. The report
prepared by the National Academy of Sciences was mentioned. It
was a good report. They said (and I attended their meeting here
in Reno) they said that the laws do not need to be changed.
There are several changes they recommended in the way things
were done, but they didn't have any new laws to propose. It was
a good meeting, well attended.
The next day, the very next day, there was another meeting
(and the National Academy of Sciences as it was pointed out
were prestigious people, professors and knowledgeable people in
the business) and the very next day there was a second meeting
held at the University, and that was held by Solicitor Leshy,
and he started the meeting by standing up in front of the crowd
and saying, ``My name is John Leshy. I'm a lawyer. I'm a
Harvard lawyer. I'm a Harvard lawyer who is a Solicitor of the
Department of Interior. I'm here to tell you what we are
doing.''
He said that the NAS report was an excellent report and we
are going to make every change they recommend. We are going to
change the laws. We are going to do this, we are going to do
that.
And then he said now one of the things we are doing is
stopping the patenting of mining claims. He said, ``We put a
bill before Congress to change the mining law and Congress was
made up of Republicans who couldn't understand and so we went
around them. We passed a moratorium on patenting mining claims,
and this moratorium expired after a year and we renewed it, and
we renewed it again last year, and we are going to renew it
every year.''
And then Leshy bragged, he said, ``That is how we get
around Congress. That is how we bypass the laws. We just put a
moratorium on it.''
Leshy is typical of what is causing a lot of our problems
in mining. It is the people we are dealing with. We have to
have better communications and better people in the jobs.
Two years ago we saw how Gloria Flora was complaining to
the press everyday about how the public hated the Forest
Service and how they couldn't get a motel room, they couldn't
buy gasoline if they were a Forest employee, and she went on
and whined and complained and cried for months and everyday the
newspaper put it on the front page.
She was agitating a situation. She was making it ten times
worse. It wasn't that bad at the beginning. Sure, there might
have been an individual case where somebody got snubbed, but so
what, that is life, but she made a big thing out of it and then
she finally left. But at the same time she was doing that, I
had a Forest Ranger in uniform in a Forest Service truck try to
kill me two times.
That is what was happening. We are dealing with people and
we have to have better communications, get along a little
better and understand each other. We can't have people crying
that everybody is against them. We can't have people like that
ranger. We have to work together and bring things out.
So, anyway, I never mentioned that before and I don't know
that I should have now. We are opposed to the current and/or
proposed new rules and regulations and additional fees. It used
to be you could stake a mining claim, pay a few dollars to
record it, and the annual fee was $100 which you put into the
ground developing the claim, exposing ore, getting the property
ready to mine. That was your annual fee. You did work on the
ground.
Now we have to pay $100 to the BLM. The first year, the
very first year that went into effect, they made it retroactive
for $100 for the year before and $100 for the coming year, so
you had to pay $200. I had 1,100 claims. I would have had to
pay $220,000 out of my pocket to the BLM just to hold those
claims. I couldn't do it. There was no way.
Some of my claims were leased to companies and they paid
for part of the fee, when that started I dropped most of my
properties. Since then I have dropped all of them. I had been
earning a living in mining for 30 years. The last 20 years,
nothing.
Last week I had just one property leased out. Yesterday I
got a certified letter, the company was going out of business.
They dropped the lease. I don't get any payment this year. I
have got the claims back. If I want to keep them, I have to go
pay $100 per claim on 80 claims. I can't do it.
The company is gone. My income is zero. That is the end.
That is all there is for people like us. I heard the fat lady
sing. But please tell us she was wrong, we are going to start
all over again and do it right.
[The prepared statement of Bill Kohlmoos follows:]
Statement of William B. Kohlmoos, President, Nevada Miners &
Prospectors Association, Barium Products & Mining Company
A learned treatise on minerals exploration, mining, milling, and
smelting was written in the year 1556 by a man named Georgius Agricola.
He reviewed mining work done by the Greeks and Romans, and the ancients
before them. He wrote:
The art is one of the most necessary and the most profitable
to mankind. Without doubt, none of the arts is older than
agriculture, but that of metals is not less ancient; in fact
they are at least equal and coexistent, for no mortal man ever
tilled a field without implements. In truth, in all the works
of agriculture, as in the other arts, implements are used which
are made from metals, or which could not be made without the
use of metals; for this reason the metals are of the greatest
necessity to man. When an art is so poor that it lacks metals,
it is not of much importance, for nothing is made without
tools.
In a popular book titled ``Stones of Destiny'', author John Poss
takes the reader from the time of man in prehistory to man on the moon,
and shows how world history has been influenced most dramatically by
man's quest for minerals and metals. It is a book of conquerors--
Caesar, Charlemagne, Cortes, and Pizarro, spurred on by visions of
gold, silver, and base metals. Wars were fought for land which
contained metals. In 490 B.C. the Persians, Greeks, and Asiatic hordes
were constantly at war over the riches of the mines of Laurium, owned
by Athens.
A U.S. Congresswoman from Manhattan, Carolyn Maloney, introduced a
bill in 1993 designating 16.3 million acres of wilderness to be locked
up in Montana, Idaho, Wyoming, Washington, Oregon as ``unoccupied bison
habitat.'' A group of mining supporters visited her office to protest
the bill and were told unsympathetically by the congresswoman's aide,
``I know that mining is important to you out West, but we don't use
much metal in New York. In fact, most of us don't even own a car.''
Several years ago I attended a three-day world-wide symposium on
chromium held at Pullman, Washington. Representatives from all over the
world, including Africa, Turkey, and Russia, attended and presented
papers. It was emphasized in the symposium that very little is known of
the subject here in the United States by industry, by the U.S. Bureau
of Mines, and by the U.S. Geological Survey. It was also pointed out
that the U.S. is totally dependent on South Africa for its chromium,
and should that source be denied there would be grounding of U.S. Air
Force planes and commercial airliners within two weeks. The metal is
essential to the heat resistance of the blades in a jet engine. The
metal is classified both Strategic and Critical. I own a large deposit
of this mineral but have been restricted in its development by Federal
regulations.
During World War II the mining industry in the United States was
active and quite essential to country's survival. After the war, major
mining companies, small mining companies, and individuals were able to
prospect for minerals, stake mining claims on mineralized areas, and
mine for ore if discovered. This continued through the 1950s and 1960s.
In the 1970s the atmosphere began to change.
Starting in the mid 1960s a bill proposing absolute bureaucratic
control of all Federal lands was proposed in Congress. It was defeated.
Each year the bill was re-introduced and defeated. After a while the
ideas being proposed appeared to be neither new nor radical, and
finally in 1976 the bill passed. It is known commonly as FLPMA,
pronounced ``flipma''. The proper name is Federal Lands Policy and
Management Act, 43 U.S.C. 1712.
That bill set policy. Policy is a broad, all-encompassing license
for bureaucrats to do whatever they want and pass rules and regulations
at will. They merely justify their actions by saying, ``It's policy.''
The resulting new rules and regulations have had a severe impact on
the production of the natural resources so vital to the people of the
nation.
Many ridiculous new rules were developed as a result of FLPMA. For
example, I owned a large barite deposit named ANN at Northumberland,
Nevada. Barite is vital to the oil well drilling industry. Dresser
Minerals, a major barite producer, and I had spent a total of $5.5
million dollars in developing the 11 million ton barite ore body. There
were 30 miles of roads and 277 drill holes of six-inch diameter by 400
feet deep. The holes were plugged by large cement cones and covered
smoothly with dirt. A Forest Service Ranger, Don Crompton, said in a
written citation that he wanted all holes plugged solid with cement
from top to bottom. He had found one hole where he could insert a stick
the size of a pencil, between the cement plug and the side of the hole.
He said a mouse could fall down the hole and get killed, and he was
here to protect the environment and that included the mice. He also
wanted a pile of dirt 6 feet high by 20 feet long across the road,
every 50 feet, all along the entire 30 miles of road! That would make
3,168 such piles, for a total of 2 million cubic feet of dirt piled up.
Not only would his demands have obliterated $5.5 million worth of
development work, but it would cost me an estimated $850,000 to
accomplish. I asked him how I could get into the property to mine the
ore if the roads were blocked. He said he didn't want to see me mine
it.
I had to go to my congressmen, the Mountain States Legal
Foundation, and the President of the United States to get the USFS
stopped.
The Forest Service couldn't let me get the upper hand so they
falsely charged me with a bunch of violations of rules on the Spencer
claims near Pete Summit. Included were unauthorized bulldozing of
roads, cutting open trenches, failure to cap drill holes, and wanton
destruction of the environment.
In a meeting in the Austin USFS office, District Ranger Mont E.
Lewis stated that he had driven to my ``Bronco Mine'' the previous
month and inspected the property. I had a tape recorder sitting on the
edge of his desk in plain sight and with his permission. I asked him
how he drove to the mine. He said up the one and only road into the
mine. He said he had driven to the mine and examined the ground before
I started my work. It was on the tape twice. In a meeting with higher
USFS officials in the Reno office several weeks later I played the tape
and then I pointed out to Ranger Lewis that the road to the mine had
been washed out and was impassable for the past two years, and
therefore he was lying. It didn't faze him a bit. This is the kind of
people we were dealing with.
In 1976 the brand new Environmental Protection Agency, wanted to
flex their muscles and show the country how powerful they were. They
needed publicity. The EPA decided to close down Kennecott Copper
Corporation's mine, mill, and smelter near Ely, Nevada. For 70 years
this open pit mine had produced 10% of the nation's copper and it still
had proven reserves for another 50 years of production. The EPA claimed
that the sulfur dioxide in the smelter stack emissions was causing a
high incidence of pulmonary illness among the residents of McGill and
also was destroying vegetation within a 50-mile radius.
Kennecott's lawyers fought a good battle, and Nevada's congressmen
came to their aid, but the EPA had the power of a Congressional act
behind them. They held public hearings in Ely, but their hearing
officers rudely talked, read magazines and newspapers or slept and
snored during the giving of testimony.
The EPA refused to listen to testimony from third generation
residents of McGill that they suffered no unusual pulmonary illnesses,
and that they considered the sulfur to have beneficial medicinal
values. The EPA also refused to accept testimony or physical evidence
that there were lush fields of alfalfa, vegetable gardens, lawns, and
flowers growing within the immediate vicinity of the smelter. They
refused an invitation to drive 10 miles to see the vegetation
themselves. Their response was like the old saying, ``I know what I
want to believe. Don't confuse me with the facts.''
In the formal hearings before the courts the EPA submitted
completely falsified reports, and when challenged as to the validity of
their statements, they merely submitted additional false data. The
Environmental Protection Agency used a voluminous report by a medical
doctor who had studied the people living near smelters in Tooele, Utah,
and McGill, Nevada. The report proved that people living near smelters
suffered increased rates of pulmonary diseases and cancer, and had
shorter life expectancies than people in other areas. The statements in
the report were backed up by detailed medical records and statistics.
During the hearings Kennecott lawyers introduced evidence which
proved that the learned doctor had never left Washington, D.C., had no
field workers, and had gathered no facts. The entire report had been
concocted in his office back East and was nothing but lies. The medical
records had been completely falsified.
The ``Arizona Republic'', Phoenix, Arizona, reported,
The story of Dr. John F. Finklea, a former research official
in the Environmental Protection Agency, reads like a Grade-B
movie about a mad scientist. And it's no less chilling.
It casts doubt on all the research of the EPA and on all the
EPA regulations . . . the monster that Dr. Finklea created is
going to cost the nation $11 billion. . . . A group of
scientists at such prestigious universities as Harvard,
Columbia, and MIT joined in a report which said that many EPA
regulations are not only costly but unrealistic, as well, and
that many will do more harm than good.
If there is one zealot like Dr. Finklea in the EPA, which,
incidentally, has become the largest regulatory agency in the
government, . . . .
The matter was hushed up, but the damage by inference had been
done. The EPA leaders persevered, and in 1978 Kennecott's smelter was
shut down, never to open again. A town of 12,000 people went into
shock, and poverty. Within a couple of years most of the other smelters
and all of the foundries in the U.S. were also shut down by the EPA.
And the United States turned to overseas to buy more of the copper it
needed. But first it had to pay the dictators of the small countries to
produce it. Agreed, we had long bought copper from Chile, but now we
bought more. And then the Chilean government run by President Allende
stole the copper mines from the American owners.
In March of 1989 I attended a public meeting of the Geological
Society of Nevada where the keynote speaker was a prominent attorney
speaking on the injustices being imposed upon us by the courts in the
name of environmental protection. He said that the General Accounting
Office (GAO), which is supposed to be an ``Auditing and reporting
Committee'' of Congress, was actively running, managing, and dictating
to various departments of the government, including the BLM and USFS.
At the same meeting there were many comments voiced that we are
surpassing Soviet Russia in the volume and severity of bureaucratic
injustices.
I have been in the mining business for 48 years. My business has
been to prospect for and discover a mining property and then improve
and develop it for sale to a major company. Over the years I acquired
41 good properties. Millions of dollars have been spent on geologic and
geochemical mapping, drilling, and development work, getting these
properties ready to mine. And now I am being literally taxed out of
business. Mining in the United States is rapidly dying. Many major
companies are moving overseas. The incentive to do business in the U.S.
has been removed.
The ``War For The West'' read the cover of Newsweek magazine,
September 30, 1991. It said of cowboys, ``They've assaulted the entire
system of nature.'' and ranchers are ``--the enemies of the
environment.'' Logging, it said, is guilty of excessive denuding of the
forests, and mining is stripping the gold from the land and not paying
the government anything for it.
The author stated that miners are ``saturating'' the ground with
cyanide and using their mining claims to grow marijuana. The power
companies are killing the salmon on the Columbia River just so they can
send electricity to Disneyland and make a big profit. Even the ski
resorts were criticized for using the land.
The 22 pages of attacks concluded with the comment that the West
must learn to cooperate (with the government and environmentalists),
and ``When that day comes, the West will be won.''
``The Great Gold Scandal'' was emblazoned across the cover of the
U.S. News & World Report October 28, 1991, less than a month after
Newsweek's declaration of war. The magazine's senior editor, Michael
Satchell, wrote that, for a pittance the mining companies can extract
billions of dollars worth of minerals from public land--and that there
are no requirements for environmental protection and reclamation, and
that one can buy all the land he wants for $2.50 per acre. It was all
gross, blatant lies. Nothing he said was correct or true. It was
obvious that Mr. Satchell knows nothing whatsoever about the subject
which he so eloquently lambasted.
It would seem that it is no unrelated coincidence that two major
magazines come out with two major feature stories on the same subject
at the same time and with each presenting the same lies in the same
manner.
The statement that miners can buy land for $2.50 per acre is
repeated frequently by the environmentalists. If that were true why
haven't they bought it all and made a big park? According to a paper
prepared by the U.S. Bureau of Land Management, the truth is that you
must spend approximately $45,000 in preliminary study, mapping,
environmental study, and other paper work over a period of several
years before you can acquire one single acre of land. And there must be
a proven deposit of minerals on the land. It is only the final paper
document which costs $2.50.
Monday, November 8, 1999: In Reno, Nevada, there was a presentation
of a report on a two-year study conducted by the National Academy of
Science, Washington D.C. The report's title was: ``Hard Rock Mining on
Federal Lands.'' Perry Hagenstein was the Chairman of Committee and
also Chairman of this meeting. In summary, the report concluded that
all current mining laws were working satisfactorily and only a few
minor changes in procedure were recommended.
Tuesday, November 9, 1999: A meeting was held at the Orvis School
of Nursing, University of Nevada, Reno. It was conducted by John Leshy,
Solicitor, Dept. of Interior. I sat in the meeting and took notes:
He said, ``Ahhhmmm a lawyer. Ahhhmmm a Harvard graduate. Ahhhmmm a
lawyer, a Harvard graduate. Ahhhmmm a lawyer, a Harvard graduate, summa
cum laude.
``Ahhhh worked with Udall and we tried to defeat the 1872 Mining
Laws but Congress was controlled by the Republicans and they couldn't
understand.
``Ahhhh worked with President Carter and we tried to defeat the
1872 Mining Laws but Congress was controlled by the Republicans and
they couldn't understand.
``Ahhhhm working now with President Clinton and Udall and we tried
to defeat the 1872 Mining Laws but Congress was controlled by the
Republicans and they couldn't understand.
``One thing we did manage was to stop all patenting of mining
claims. Congress wouldn't change the law so we put a moratorium on all
patenting and each year we renew that moratorium and we will continue
to do so into the future. It's not right that a mining company,
especially one from Canada, can patent a mining claim for $2.50 and
then take $10 billion out of the ground and pay us nothing for it.
``That report by Perry Hagenstein, (Hard Rock Mining) was right on.
They suggested a number of changes to be made and we will do that by
passing the necessary rules and regulations.''
It's no coincidence that Solicitor Leshy was going around the
country giving these talks wherever, and one day later than where
Hagenstein presented the National Academy of Science report on Hardrock
Mining which said the 1872 law is OK. Leshy admitted that he was
circumventing Congress and the law. In fact, he bragged about it.
Today, in the year 2001, there are numerous state and Federal
requirements on mining activities. Some are necessary. Some duplicate
each other. Others are excessive or unnecessary. The Federal forms
include:
Purchase, Transport, or Storage of Explosives
Use of BLM-Administered Land
Use of BLM-Administered Land Under Wilderness Review
Temporary Use of BLM-Administered Land
Right of Way for Electric Transmission on BLM-Administered
Land
Road Access (R/W) on BLM-Administered Land
Notification of Commencement of Operation
All Uses of National Forest System Land
Activities in Wetlands and/or Waters of the U.S.
(Includes Dry Washes, Creeks, Lakes, Etc.)
Endangered Species Act Compliance
Building Permit
Business License
General Plan
Special Use Permit
Zoning Change
Special studies must be made before any activity can be started:
Archeology Study
Wildlife Study--and many more.
Today we are told that mining is not necessary. Three branches of
the government, the U.S. Forest Service, the Bureau of Land Management,
and the Environmental Protection Agency, have set so many policies,
rules, and regulations that all but a few of the mining operations
which had been operating in Nevada have been forced to shut down or
have moved overseas.
The General Accounting Office occasionally puts pressure on the
USFS and the BLM and forces them to get tougher on mining. The GAO
ostensibly acts as a watchdog for Congress by overseeing how the
departments handle their budgets. In real life they tell the Forest
Service, BLM, and other departments how to do their job by first
advising the department what it should do. If the response is not
satisfactory, the GAO blasts the department with a barrage of caustic
press releases, criticizing the department for its ``misconduct''.
A collection of several dozen such press releases which appeared
during the one single year of 1989 revealed a strong pattern of
enforcement, usually with immediate results. Several of the directives
of the GAO demanded large increases in fees and stricter rules and
regulations to more tightly control free enterprise.
For example, the Forest Service and BLM were told by the GAO to cut
farther back on grazing allotments, and they did so. The BLM was
ordered to charge the mining industry exorbitant fees for items which
had never before been subject to fees.
During those years, if a property were sold, the fee to file one
single piece of paper which did nothing but transfer title to the
claims would cost $4,000.00, even though the claims may have just been
staked and proof of an economical body of ore had not yet been
established.
The changes which had been wrought were dismaying. The U.S. Forest
Service was ruling with complete unreasonable control, and there had
been a large increase in the number of their employees. Many of the new
people were inexperienced, young college graduates who had been born
and raised in the cities of the East, and had no comprehension of what
the West was like. These young Forest Rangers were now in charge of a
tremendous area of Federal land. There were so many of them around that
when I drove down the highway between Austin and Tonopah every third
vehicle I passed was a government pickup. I would make a written list
as I drove along, and as I'd only pass 25 vehicles in a 100-mile trip,
it was easy to do. On Saturdays and Sundays there was never a single
government truck.
Nevada is 87% Federal land, and only 13% private. Most of the
private ground is around the cities, or is railroad land. That means
that wherever one goes out in the hills, he is most likely on land
controlled by either the BLM or the USFS.
To get around in the back country one must use a four wheel drive
and travel on an extensive system of old dirt roads. Many of these
roads had been constructed and put into use in the 1860's and 1870's.
They have been in use for 130 to 140 years. Now, in order to keep
people off the land, the Forest Service has closed many of the dirt
roads. This was illegal. They denied the use of bulldozers or graders
to repair roads after they washed out. No maintenance, no road. They
required miners to submit a ``Plan of Operations'' to do any work on
their claims, even for that work which was required by law as
assessment work. When a miner submitted a plan and it was approved, the
Forest Service stipulated that when the work was done the miner would
have to dig up and destroy the access road. This was done regardless of
who owned the road, or even though it was a public road which had been
in use for 140 years. By using this method the Forest Service
obliterated many established and useful roads from the public domain.
With the submittal of an Operating Plan was required the posting of a
cash bond, sometimes as much as several hundred thousand dollars. The
USFS put gates and barricades on roads. They declared large areas to be
closed to off-road travel, and then they published maps which did not
show the existing dirt roads. Thus the entire area was closed off. The
rules forbade travel in many areas, even by bicycle. One could not go
to the toilet in some areas, but had to carry his excrement off in a
bag. Even the droppings of your horse had to be picked up and removed.
Grazing of cattle was no longer permitted.
The houses and homes of miners were burned, even though they had
been on the property for several generations and were antiques. The
Forest Service destroyed a beautiful 100 year old cabin on my property
at Topaz. They destroyed my cabin at Belmont, and a third at the
Bellview property near Elko.
The Forest Service now has a large number of Rangers carrying guns,
and they arrest anybody they find violating their rules. In California
there were several cases where a party of miners stood their ground and
had a shooting war with dozens of Forest Rangers across the river.
These incidents were never reported by the press, but were covered in
the trade journals and the California Mining Journal.
At a public meeting in Austin in 1988, Larry Raley, the Forest
Service Ranger, told the people to carry notebooks and write down and
report the names or license numbers of any people whom they saw
violating USFS rules. Raley threatened that if we didn't do this spying
on each other, he would close off more large areas. As he talked to the
group he had two armed guards standing one on each side of him, for
protection from possible violence. The guards stood there wearing two
sixshooters each, with feet spread apart, arms folded, and glaring at
the audience. Raley was fearful for his safety. A week later in a
meeting with the Forest Service in Reno, he lied, denying that he had
any armed guards at the meeting, or that he had threatened us with
additional closures if we didn't snitch on our friends. I had it all on
a video tape, and 40 witnesses saw it happen.
In October of 1992, after I had already done several tens of
thousands of dollars of required and beneficial assessment work on my
mining claims in Nevada, the Bureau of Land Management (BLM) abruptly
changed the rules of the game. They said that in order to keep mining
claims valid for the coming year all claim holders would have to pay a
$200 per claim tax before October 1, 1993. I had more than 1,100 claims
at the time, and would have to pay $220,000 just to keep my claims. I
didn't have that much money, and if I did, some of the claims needed a
lot of exploration work to prove that they were worth that much. This
new tax came with no advance warning for budgeting purposes. It was
discriminatory and it was retroactive. We had been paying the BLM an
annual fee of $5.00 per claim. Now, all of a sudden, we have to pay
$200. That's an increase of 4,000 percent!
Everybody in the business was in shock. Nobody, not even the major
mining companies, could afford to keep all their claims. When the time
to pay arrived, I kept only a few claims plus those that were leased
out. I dropped everything else. Some of the large companies dropped up
to 50% of their claims.
In 1993 the BLM in Tonopah, Nevada, issued a new Management Study/
Environmental Impact Statement (EIS) according to which they would more
strictly control the land. The report states that they would take
private land from the owners, including the Locke family home with
their private cemetery. The BLM would take water rights from the
ranchers, stop grazing, close dirt roads, and strictly control or stop
mining. Much of the plan was to set policy.
Although the date on the first page of the plan was June 4, 1993,
very few people were privileged to see a copy or even be aware of its
existence until September or October.
The BLM held a public hearing in Tonopah on August 26, 1993 to
present the plan. If there were no objections the plan would be
implemented immediately. I heard about the meeting by accident just ten
minutes before it started.
I knew all of the forty-two people who attended the hearing.
Included were ranchers, small miners, major mining companies,
construction companies, equipment operators, sportsmen, hunters,
fishermen, outdoor enthusiasts, off road vehicle operators, and others
from many walks of life. Many were second and third generation Nye
County residents and property owners.
A number of people present said that they had only received a copy
of the report or heard about the meeting the day before, and then by
word of mouth and only by accident. They felt that if proper notice had
been given there would have been 500 people present to oppose the plan.
One mining man in Tonopah whom I knew told me that he was told by a BLM
official the day before the meeting, `` Oh, it's just a small meeting.
It's insignificant. You don't need to bother attending.'' And he
didn't.
The two inch thick, bound report offered four separate alternative
plans. Plan 1 supposedly proposed no changes. Plans 2 and 3 contained
drastic new bureaucratic controls. Plan 4 was presented as a moderate
program offered as a compromise. However, Plan 1 and 4 each contained
fine print and clever wording which made them as dangerous as 2 and 3.
The ranchers present were violently opposed to plans of the BLM to
take away their water rights and land, but they were not allowed enough
time to say all they wanted to say. The BLM only allowed a person to
speak for three and one half minutes and many were cut off in the
middle of a sentence. When the moderator stopped Joe Fallini from
speaking after he called them a ``bunch of damned liars, liars,
liars'', the entire audience stood up and stomped their feet and
yelled, ``Let him talk.'' Many were shouting obscenities and threats of
physical violence. One person yelled, ``If you take my land you'll have
to come shooting.'' Almost the entire group was extremely emotional and
strongly opposed to the plan. There were many complaints that the maps
were of poor quality and concealed many things, and that there were no
maps of land status, water rights, or roads.
Most of the people who took the floor demanded a six month
extension of the deadline of October 1 for submitting comments. Of
those present, every single one who requested the opportunity to speak
was strongly opposed to the plan.
The BLM had deliberately avoided press coverage of the meeting. No
report of the meeting was ever issued, so only those who were present
knew what happened. Except for the few people in attendance, the
general public was never made aware of the plan or the meeting's
comments and emotions.
Prospectors in the field may search for a lifetime and find
nothing. Or, they may find one or two prospects but after years of hard
development work determine that they cannot produce a profit. Only a
very few prospectors have the ability, skills, eye, and luck to
discover a profitable mine. And only one in many thousands of these
mines will subsequently develop into a winner.
Following is a list of mining properties located, mined, or
abandoned by myself since 1952. This list is presented in order to show
that even with luck and skill the profit is elusive.
(Note: In mining circles, the term ``point 0 three'' means that in
one ton of ore there is only 0.03 of an ounce of gold.)
Belleview Gold--Plus one million tons 0.03 oz. gold. Leased for 25
years to a mining company for royalty. Never mined because of
government regulations.
Betty--Large gold anomaly blocked out. Spent $3,000,000 in geochem
and drilling. Leased to major mining company. Dropped lease due to
government regulations.
Delsa Mercury--Large high-grade mercury deposit. Mined by Kohlmoos
1956 to 1962. Invested $30,000. Very small profit.
Ingie Gold--Extensive exploration on property. Drilled by major
international mining company. Large area of high gold values. Dropped
due to government rules and regulations.
Kay Barite--Leased to major company. One million tons barite
drilled and blocked out. Possible 10 million tons, plus unknown gold
values. Never mined due to regulations.
Long Claims--1968: Kohlmoos was the first to originally discover
and stake claims in an area which subsequently developed into the
famous producer, the ``Sleeper'' mine. Extremely rich and large.
Kohlmoos lost the property to a large mining company with a team of
lawyers. Although the assessment work had been performed, a mistake was
made in the county filings.
Northumberland Barite--Ann claims. Major company spent + $5.5
million in drilling over 15 year period. Blocked out 11 million tons
barite Possible 50 million tons reserves. Estimated gross value of ore
in the ground: $1 Billion. Never mined because the U. S. Government
allowed China to ship barite to U.S. duty free.
Northumberland Gold--Rated 7th largest gold mine in U.S. several
years. Sold to major mining company.
Nura Uranium--1952: Mined and shipped 1.3% ore. No profit.
Oil Lease--New oil field, Eagle, Alaska. Sold to Texaco. $10,000
profit.
Summit Canyon Barite--1965: 300,000 tons barite shipped. Small
profit.
Verde Cobalt/Chrome--The Verde claims (Betty et al group) contain a
vein of nickel, cobalt, and chrome. Vein is between 100 and 1,000 feet
wide by 4\1/2\ miles long and more than 300 feet deep. Invested more
than $3,500,000 in drilling. This ore is classified as both Strategic
and Critical. No companies interested due to Federal rules and
regulations.
Various Prospects--Ace, Spencer, Wash, Roy, Gold Thrust, Chip,
Frenchman, PAL, and other gold prospects. No work done because of
Federal rules on permitting, bonds, and studies of archaeology,
wildlife, environment, water, and much more.
In conclusion, the United States of America is dependent on
minerals to provide its people with food, clothing, homes, schools,
transportation, highways, airplanes, military forces, books,
television, and everything else we have beyond our bare skin. The
mining industry provides all of this. Many people are not capable of
understanding the complex system of supply and demand.
The Federal Government has seriously damaged the minerals industry
by passing rules and regulations which:
--Close roads;
--Declare millions and millions of acres of mineralized
ground as wilderness areas thereby preventing human activities;
--Require numerous detailed studies costing millions of
dollars and years of time before a rock can be moved;
--Post bonds amounting to hundreds of thousands to millions
of dollars;
--Submit an excess of plans, programs, maps, and detailed
data; and so on.
And then, after many years of exploration to find a target, develop
it and prove an orebody, and then spending big money to take all of the
above steps, the project can be denied because of a technicality. The
individual prospector can't do all of this, and neither can the small
to medium size mining companies. That is why they are all shut down and
out of business. This leaves it to the few wealthy major companies. And
today, many of them are moving overseas.
In closing, what will happen when the U.S. goes to war again? It's
not ``if'', but ``when'' we do. When that happens we will have no
minerals production to depend upon.
The minerals industry is a large, sleeping giant. It can't be
turned on and off at will. It could take many years to find mines,
build mills and smelters, find experienced people (if there are any
left), and get into production.
A healthy mining industry is essential to the health of the nation.
______
Chairman Gibbons. Thank you. We always save the best for
last, don't we? Let me again thank you and ask a few questions.
We have to be out of here at 3:30 when we only have this
building from 12:30 to 3:30 and we are rapidly approaching that
time, and before I end this I wanted to just make some brief
questions to these three witnesses.
Mr. Taylor, I do not take your testimony to say that we
should abandon the efforts we made so far to minimize
environmental damage with mining. I don't think that was your
direction and I think you made it very clear that mother nature
is going to probably even out everything over the long run
through some geologic occurrence, but I do think that you were
saying that it is sound science that we have today and
evolution of science helps us work within the environment,
helps us work within mother nature for the development of these
mines to keep them active, keep people employed, keep this
country in the financial state that it is in today. Did I
characterize your testimony?
Mr. Taylor. That is correct. I think what we have done is
good and what we will do in the future will be better, but
there is no sense trying to put us completely out of business.
Chairman Gibbons. Right.
Mr. Taylor. Using nonscientific emotions.
Chairman Gibbons. Your job is to provide temporary geologic
or technical help for some of these companies, and tell me what
you see is the opportunity, and if you are providing temporary
technical services to say Latin American countries right now,
and in them would you tell me what the prospects are if you are
for the, in the experience, for say women geologists getting
employed in Latin America.
Mr. Taylor. One of the questions that used to be top on our
list when interviewing people for full-time, short term
assignments, whatever, was where they went to school and what
kind of degree they had, and that has changed to Se Habla
Espanol, you know.
The prospect in the exploration side where we started our
business, we do now mostly mine site work, has essentially gone
away. One of our clients was describing to me that major mining
companies, he felt that about 40 percent of their budget for
exploration had completely evaporated, 40 percent was being
spent in Latin America and the 20 percent left might be spent
in the United States.
That 40 percent opportunity that has evaporated pretty much
wipes out the, any kind of possibility of growth in the
American mining market. The 40 percent that is now being spent
in Latin America and other countries, we as a mining industry
have a responsibility to those countries to hire indigenous
people and to help them. It is their country. That very
drastically curtails the opportunities for the American miner,
so it is caught there.
And the last part, as you heard Bill, if they don't kill
us, we may starve to death, so I would like to say something
was extremely bright and happy, but as you can read from
Borden's testimony I believe we have, we reached a point where
the investor has no real reason to invest in us because we
can't guarantee we will ever make a penny, that we will ever
get there. It is too much of a moving target.
The employees are extremely disheartened. It is very, very
difficult, and the only thing I think we can look forward to is
the natural resiliency of the folks that have always worked in
the mining industry and hope we can weather through what is the
worst thing that happened to us in the last 35 years.
Chairman Gibbons. Mr. Lewis, you and Mr. Kohlmoos are
probably some of the last remaining independent small mining
individuals left in the state. Let me ask because you are a
quote/unquote small miner are you exempted from any of the
environmental regulations on any activities that you do as a
small miner?
Mr. Lewis. Fortunately, some 40 years ago I started
purchasing patented mines and there is a five-acre exemption,
which they are trying to do away with, by the way, that you can
go in and do some exploration on your private patented property
that has been very helpful to me over the years.
I'm not doing any exploration now of any consequence. I
have got some property optioned out where exploration is going
on. But I have got an exit strategy. When I bought these patent
properties, I realized I can always sell them. I can sell them
to people to build cabins on or just to hold a piece of land.
And if I do that what does that do to the mining industry?
How are you going to go back into these areas in the various
places that I own these various properties if somebody builds a
house on it? You are going to ruin the mining business if I do
that, and I'm trying to avoid doing that because I love the
mining business, it has been mine and my wife's life, so--.
Chairman Gibbons. Well, let me ask a question from you with
regard to both you and Bill and this $100 claim maintenance
fee, does the small miner exemption work?
Mr. Lewis. No, it doesn't, because with 10 claims you
don't, you can't have a mine. The only thing you can have is
kind of a toy, and that is what they have become in places
where I have observed them. They are a way for people in
eastern Nevada that wanted to fool with it to keep those.
And I'm not all that much in favor of it, because in order
to have a mine you need nowadays at least 100 claims, that is
what the companies would demand, or 300, and so I don't think
that that does work, and I'm not, I have not become aware of
anybody who held 10 claims that have been able to benefit from
it.
Now, there probably are some, but I don't know who they
are, and it wouldn't help me anyhow, because I have several
properties where I have several hundred claims that are
optioned out to other people, and so they are paying these
fees, but not for long, because I can see the handwriting on
the wall, and I was there, when I first started in this
business years ago, there were no exploration companies at all
in the state. They were all in South America. I reach back that
far.
Now, my father-in-law was an old time prospector, my wife's
father, and I didn't know it wasn't any good, so I got into it
and I loved it ever since until recently.
Chairman Gibbons. Bill, would you recommend repealing or
lowering the mine maintenance fee claim for small miners or
changing it or modifying it in a way that would take into
consideration some of the financial considerations that you
have already expressed?
Mr. Kohlmoos. Absolutely. The claims I just got back from
that company, the letter I got yesterday, it is 86 claims. I
can't afford to pay $100 each on them. I have a barite
property. Now, we produced barite for many years, Barium. It is
used in oil well drilling.
When anybody gets some gasoline or you see a jet plane
flying over burning jet fuel or a diesel truck going down the
highway, that fuel can be traced back to it being helped out of
the well or the well being drilled by barium. Barium is
essential to drilling a deep well.
I have a large barite deposit, possibly the biggest one in
the world. It takes 120 claims to cover it. I can't sell a
pound of barite today because the Government gave China duty
free import privileges. China ships barite into the U.S., so we
don't mine barite anymore. I can't mine it and I can't pay the
$100 fee per claim to keep more than 100 claims.
Fortunately, I have got by with having some lessees who
have paid the fee and done the work, but we are getting to
where that is ending and without any production for years.
But, no, as an individual and a small company, (Barium
Products is a small company) we can't afford that $100 and then
turn around and add another hundred dollars into developing the
ground.
Chairman Gibbons. Let me wrap this up, because we just
passed the time and ask one final question to Mr. Lewis. You
oftentimes hear the $100 claim maintenance fee stops
exploration or development by small miners. Does that in any
way suspend your ability to access your land, to do any
development work if you could afford it?
Mr. Lewis. I think that it is, as far as the smaller person
is concerned the $100 fee prohibits them from even considering
doing any exploration. I mean, it is just a punitive, it is a
punitive thing.
The money we used to get in turning an unpatented property,
the Federal Government now gets it all, because that is it. You
might have got $100 a claim and that is about what you got as a
down payment if you had a good property. And it is about what
you could get per year as a small payment while the exploration
went forward, and so if you pay it all, if you pay that basic
fee to the Federal Government, the individual has no incentive
to go out and try to do it.
Chairman Gibbons. Well, what I was asking was, the $100
does not prevent you from going out upon your claim and driving
your truck out there if you wanted and doing the development
work, drilling it if you had to, if you went through the
permitting process?
Mr. Lewis. That is true, I agree with you.
Chairman Gibbons. It is just an added expense.
Mr. Lewis. If you want to, but it is just an added expense
that takes the incentive out of the whole--we had a system
here. We had a system here where the individual prospectors or
geologists would go out and find a likely spot, looking in the
old holes as I call it, and that is what I did all of my life.
I looked in somebody else's old hole and find a mineralized
area and stake your claims and then you can do your work. But
now it is not logical to do that anymore because of the hundred
dollar fee and these bonding and these other rules and
regulations.
Chairman Gibbons. Let me ask you, gentlemen, all of you,
and, for example, anybody who has testified here earlier if you
wouldn't mind writing to us with your recommended changes that
would be considered or should be considered for making the
changes to these regulations that you think would be helpful to
maintain the small miner and how the small miner exemption
should be amended so that it could work or does work for small
mining, and with that let me again thank you, gentlemen, and
thank you.
I know this hearing has been long and what my concern is,
is for Corrie here, who has spent the last 3 hours diligently
sitting there typing away and making sure that this hearing is
heard. And I know there are some individuals in the audience
that want to have their testimony heard as well, but let me
assure you that if you will submit your testimony to us, we
will incorporate every word of it in our report as having been
given in this hearing and it will be part of our report just as
well.
I know there are a lot of people out there that would have
liked to have the time to do this, unfortunately we are limited
both in our time and our resources and ability to do this, so
if you would like--
Bernice Lalo. Well, I understand, but I don't think that
there has been any Native Americans speak here. I believe that
it has been mostly one sided. I would like to speak at least 2
minutes of your time, just 2 minutes, and I can give you--.
Chairman Gibbons. Let me ask Corrie, do you think you can
endure 2 minutes? We are due out of here at 3:30.
Bernice Lalo. I understand that.
Chairman Gibbons. In great deference to you I will do that
and I appreciate that, and also if you have written testimony
you want to submit, we would be happy to take that as well.
Bernice Lalo. Okay.
Chairman Gibbons. So if, you know, if you want to take the
mike, we will certainly extend this for you and appreciate your
coming and if you will identify yourself for the record so that
we can have it incorporated.
Bernice Lalo. Bernice Lalo, New Western Shoshone. (Native
American language was spoken).
I'm Bernice Lalo. I'm Western Shoshone. We have lived on
this land for thousands of years. I want to address the
Congressman, distinguished audience, and Americans in general.
The Western Shoshone people have a culture that has lasted
thousands, millions of years, and we started and we have lived
through many genocidal Federal acts, such as the Boarding
School Act, the Relocation Act, the Military Act, and we were
finally given citizenship in 1924 in a land where we had and
have had for thousands of years.
And let's talk about the stories that belong to the land.
Let's talk about religion and this has been foo-fooed like it
was not anything to base any kind of decision on, but let's
talk about irreparable damage. Let's talk about genocide,
because this is very hard, very much a part of us.
Let's talk about America the beautiful that everyone puts
their hand over their heart and says purple mountain majesties.
Well, when the mines come and when they go we have reclaimed
hills. We no longer have purple mountain majesties.
So is this the kind of future that you want to leave for
your children where there will be reclaimed hills and not the
purple mountain majesties that is sung in your song of America
the Beautiful? Let's talk about the future and talk about how
will you be responsible. Will you be responsible or part of the
people that are responsible for genocide?
When we, when the Euro, European people stepped on this
land we were a billion in number. Now we are merely a thousand.
Let's talk about the difference in cultures. We do not go to a
religious site, only on Sunday. This is part of who we are, and
our stories and things that we call, things that European
Americans call mythology is part of us. It is our beliefs. We
don't call your Bible mythology, so you should have the same
kind of respect for us.
When the mining people leave, there are holes in the
ground. The mountains are no longer there. We are left with
degradation. We are left with polluted lands. We are left with
nonexistent cultural sites, and we are left with the burials
that have been taken out of the ground and they are shipped to
State Museums where we have to go and claim them as
unaffiliated remains.
This has been Shoshone country for centuries, so I want to
bring your attention to the fact that we are a nation. We would
like to be able to respect other people as nations, but we like
for you as American people to respect the things. We don't
expect you to leave this untouched like we have been, like
people say we do. They say we want to leave it unclaimed.
We want you to be responsible. We want those waters where
we can drink them, where we can swim in them, and that does not
mean just Western Shoshone people. It means American people in
general. That means everyone that is within this room, so when
we are talking about 3809, it is not like some of the people
said in here. It is uninformed people.
We speak your language. We have gone to your schools, but
we still remain native, and those purple mountain majesties
should mean as much to you as it does to us, so I'm leaving you
with that, and I know I didn't take more than 20 seconds, I
didn't take 2 minutes, but I will tell you a story.
A long time ago I was born on a ranch near Bald Mountain
and there was a rancher that came by and my folks were out in
the fields. They probably now would call that child abuse, but
we were independent, and so when this rancher came by and he
probably said, oh, where is your mother and father? When are
they coming home? And I said, oh, they will be back later. And
when my folks came home, I told them you are not (Native
American language was spoken), and you know what that means?
That says I was the only one talking with white man. And you
know I sounded like I really carried on a conversation, but
that is part of who I am.
Right now I'm still the person that says (Native American
language was spoken), but I would like for you to take that
message to heart, and we do, we would like for the 3809 to be,
contrary to everyone in this room probably, but we would like
for it to remain, because you also and you especially have a
commitment to the Native Americans and Euro-Americans and
Mexican Americans and whatever kind of Americans you have, you
have that commitment to keep a responsible mining.
We are not asking that you stop. We are asking for
responsible mining, and we don't have to want to live with our
children or our grandchildren up the road to say that we cannot
swim in that river. We cannot drink from that river. We cannot
go to that spiritual site. We want to be able to have that, but
we also want to have it for the other Americans as well,
because without those it is irresponsible mining. Thank you
very much.
Chairman Gibbons. Thank you. We thank all of you for that.
Clearly we gathered some very important information here today
and it is going to help our Committee do its job better, I
guess better legislators in effect, and to all of you who spent
the time here today this afternoon listening diligently and
contributing to this hearing, I want to thank you and with that
this hearing is at a close.
[Whereupon, at 3:44 p.m., the hearing was adjourned.]
[Additional material supplied for the record follows:]
1. Letter from Courtney Ann Coyle, Attorney at Law, on
behalf of the Quechan Indian Nation of Fort Yuma, California,
submitted for the record.
2. Letter from William Kohlmoos, President, Nevada Miners
and Prospectors Association, submitted for the record.
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Nevada Miners and Prospectors Association
PO Box 50300
Reno NV 89513
April 27, 2001
Congresswoman Barbara Cubin
Subcommittee on Energy and Mineral Resources
1324 Longworth House Office Building
Washington DC 20515
Re: Written comments--April 20, 2001, Reno Field Hearing
Dear Congresswoman Cubin,
I am President of the Nevada Miners and Prospectors Association,
and I would like to provide some additional comments for your
consideration. I attended the Field Hearing on April 20, which was
chaired by our Congressman Jim Gibbons. Our Association had a meeting
on the following Saturday, and we would like to make an additional
statement for your consideration and for the record.
1. L$100 BLM Maintenance Fee-Reduce the fee from $100 to $10 per
claim. This high fee has literally stopped any claim staking and filing
by our members. It is too high for the limited resources that we have
for such activities, so we don't prospect any more.
2. LSmall Miners Exemption-We would like to see this eliminated
because it is very confusing and several of our members have lost their
claims due to misunderstandings with the BLM on appropriate assessment
work. We would rather pay the money than lose our claims.
3. L3809 rules-Continue to review the 3809 rules and take into
account the National Academy of Sciences recommendations. Please hold
field hearings on any new changes recommended. Throw out the January 20
revisions that Clinton instituted.
4. LNational Mineral Policy-We recommend that you pursue a National
Mineral Policy that would assure the country the minerals that will be
needed in the future, secure self-sufficiency, and the well being for
our children.
Thank you for allowing our organization the opportunity to comment
on these very important issues.
Sincerely
/signed/
William Kohlmoos
President
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