[Senate Hearing 110-339]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 110-339
 
                    REFORM OF THE MINING LAW OF 1872 

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                                   TO

         RECEIVE TESTIMONY ON REFORM OF THE MINING LAW OF 1872

                               __________

                            JANUARY 24, 2008


                       Printed for the use of the
               Committee on Energy and Natural Resources

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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

DANIEL K. AKAKA, Hawaii              PETE V. DOMENICI, New Mexico
BYRON L. DORGAN, North Dakota        LARRY E. CRAIG, Idaho
RON WYDEN, Oregon                    LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota            RICHARD BURR, North Carolina
MARY L. LANDRIEU, Louisiana          JIM DeMINT, South Carolina
MARIA CANTWELL, Washington           BOB CORKER, Tennessee
KEN SALAZAR, Colorado                JOHN BARRASSO, Wyoming
ROBERT MENENDEZ, New Jersey          JEFF SESSIONS, Alabama
BLANCHE L. LINCOLN, Arkansas         GORDON H. SMITH, Oregon
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
JON TESTER, Montana                  MEL MARTINEZ, Florida

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
              Frank Macchiarola, Republican Staff Director
             Judith K. Pensabene, Republican Chief Counsel














































                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Alexander, Ryan, President, Taxpayers for Common Sense...........    74
Barrasso, Hon. John, U.S. Senator From Wyoming...................     6
Bernholtz, Alan, Mayor, Crested Butte, CO........................    19
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................     1
Bisson, Henri, Deputy Director, Bureau of Land Management, 
  Department of the Interior.....................................     8
Cantwell, Hon. Maria, U.S. Senator From Washington...............     2
Cobb, William E., Representing the National Mining Association, 
  Phoenix, AZ....................................................    14
Cress, James F., Partner, Holme Roberts & Owen, LLP, Denver, CO..    65
Dombeck, Mike., Ph.D., Representing Trout Unlimited, Stevens 
  Point, WI......................................................    11
Domenici, Hon. Pete V., U.S. Senator From New Mexico.............     2
Murkowski, Hon. Lisa, U.S. Senator From Alaska...................     6
Otto, James M., Independent Consultant, Boulder, CO..............    59
Salazar, Hon. Ken, U.S. Senator From Colorado....................     4
Tschudy, Deborah Gibbs, Deputy Associate Director, Minerals 
  Revenue Management, Minerals Management Service, Department of 
  the Interior...................................................    55
Wanamaker, Randy, Executive Director, BBC Human Resource 
  Development Corporation, Juneau, AK............................    25




























                               APPENDIXES
                               Appendix I

Responses to additional questions................................    91

                              Appendix II

Additional material submitted for the record.....................   117


                    REFORM OF THE MINING LAW OF 1872

                              ----------                              


                       THURSDAY, JANUARY 24, 2008

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:30 a.m., in 
room SD-366, Dirksen Senate Office Building, Hon. Jeff 
Bingaman, chairman, presiding.

OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW 
                             MEXICO

    The Chairman. All Right. Let's go ahead with the hearing. I 
thank everyone for being here. Welcome to the hearing regarding 
reform of the Mining Law of 1872. We're going to hear from two 
panels this morning: One will focus on surface management 
issues associated with hard rock mining. The other will address 
the topic of royalties. Witnesses from the Administration are 
here to provide technical information. Efforts to 
comprehensively reform the mining laws have been ongoing 
literally for decades and have repeatedly failed. When the 
mining law was enacted in 1872 in the aftermath of the 
California gold rush, Congress sought to encourage settlement 
in the West.
    In 1920, Congress enacted the Mineral Leasing Act and 
reformed oil and gas and coal, and certain other minerals, from 
the removed oil and gas and coal and certain other minerals, 
from the operation of the Mining Law. In so doing, Congress 
enacted a management regime for the leasing of these other 
minerals and required payment of a royalty to the United States 
for oil and gas and coal. However, as we all know, the Mining 
Law of 1872 continues to govern the disposition of hard rock 
minerals from Federal lands. While Congress had stepped in and 
prevented the patents of land through annual appropriations 
riders, adding provisions allowing the transfer of mineralized 
Federal lands from $2.50 to $5.00 or $5.00 per acre continue to 
be found in the U.S. Code. In addition, under the mining law, 
billions of dollars of hard rock minerals can be mined from 
Federal lands without the payment of royalty. Federal Land 
Management Environmental Laws apply, but there are no specific 
statutory provisions under the mining law setting surface 
management or environmental standards. There are a growing 
number of people saying this Congress may well be the time to 
achieve the long-awaited reform. The House of Representatives 
passed a comprehensive reform bill in November.
    I look forward to working with Senator Domenici and other 
interested Senators on both sides of the aisle in putting 
together a Senate version of reformed legislation. We will 
continue to work hard on this and see what progress can be made 
and require compromise on all sides. Again, thanks to all the 
witnesses. Let me call on Senator Domenici and briefly any of 
the other Senators who want to make short statements before we 
begin the testimony.
    Senator Domenici.
    [The prepared statement of Senator Cantwell follows:]
Prepared Statement of Hon. Maria Cantwell, U.S. Senator From Washington
    Mr. Chairman, thank you for holding this important hearing on 
updating the 1872 Mining Law. I'd also like to thank each of the 
witnesses for being here.
    135 years ago, President Ulysses S. Grant signed this into law and 
it still governs mining of hardrock minerals on more than 270 million 
acres of public lands in the West. In Washington state, our public 
lands provide enormous economic and conservation benefits that increase 
the quality of life for all our citizens, including clean water, clean 
air, wildlife habitat, and access to mountains and rivers for 
recreational users.
    What is clear to me is that after 135 years the time is now to 
balance environmental stewardship with what's best for our economy. If 
we don't have meaningful reform, many of America's most treasured 
places, including Roadless areas, will continue to be claimed for 
mining. I have fought hard to preserve our nation's Roadless areas that 
provide clean drinking water, essential fish and wildlife habitats, and 
world-class recreational opportunities. These areas are no place for a 
large-scale mining operation. And yet, there are almost 13,000 existing 
mining claims in these areas, including more than 400 in Washington 
State.
    While responsible mineral development is a legitimate use of our 
public lands, this outdated law allows mining in some of America's most 
environmentally sensitive areas.
    The legacy of this archaic law can be seen throughout the West. 
Hundreds of thousands of abandoned mines litter our public lands--
including an estimated 3,800 abandoned mines in Washington. The U.S. 
Environmental Protection Agency estimates a $50 billion price tag to 
clean them up, and also notes that 40 percent of western headwaters are 
contaminated by runoff from abandoned mines. Many mining operations 
continue to leave a legacy of perpetual water pollution and the 1872 
Mining Law contains no environmental or reclamation standards to deal 
with this issue.
    Under certain interpretations, mining is prioritized over all other 
land uses, leaving federal land managers unable to balance mining with 
other important public uses like recreation, wildlife conservation, and 
water quality. This prevents responsible federal land management and 
prevents local communities from providing their input on the impact 
mining may have on their quality of life.
    This issue isn't just about proposals from years past. Just 
recently, it has been proposed to put a hardrock mine near Mount St. 
Helens National Monument. This clearly would put this treasured, and 
historical, place at severe risk. The 110,000-acre National Volcanic 
Monument allows scientists and more than 200,000 visitors per year to 
see the changes in the landscape and the volcano. Hiking trails provide 
breathtaking views of crystal clear lakes, pinnacle studded ridges and 
wildflower laden mountain slopes in the park's backcountry. If 
approved, this mine could jeopardize critical scientific research, 
family recreational opportunities, threatened salmon and steelhead runs 
in the river, and municipal water supplies.
    The time has come to end the preferential treatment that hardrock 
mining receives under the 1872 Mining Law and to craft mining reform 
legislation that responsibly balances mineral development while 
protecting iconic places and western waters. Mr. Chairman, I look 
forward to working with you to pass legislation that manages our 
nation's natural resources in an environmentally and fiscally 
responsible manner.

   STATEMENT OF HON. PETE V. DOMENICI, U.S. SENATOR FROM NEW 
                             MEXICO

    Senator Domenici. Thank you. I apologize for getting here a 
little bit late this morning. I'm ready to proceed as you have 
indicated. We're here to receive testimony on this old law and 
changes to it that maybe will end it. This committee has 
received a biil H.R. 2262 from the House of Representatives. In 
reacting to their work I have been clear about my desire to 
start with a clean slate. The question remains what is 
appropriate for inclusion in the Senate bill to reform the 
Mining Law? I believe the list is a short one, not a long one 
like many, consisting of three things. One, a replacement of 
the patenting with a more modern form of secure tenure; Two, 
imposition of a perspective, profit-based royalties system; and 
three, the establishment of an abandoned locatable mine 
reclamation fund to clean up sites that threaten the 
environment and public safety.
    You must remember that in addition to the House bill the 
committee has much more to consider and rely upon to inform our 
decisionmaking. They include several existing administrative 
and legislative processes for withdrawal of Federal lands from 
mineral activity. They reflect an increasing reliance on 
foreign countries for minerals and information about the danger 
of this trend. Dozens of laws including the Clean Water Act and 
National Environmental Policy Act, Endangered Species Act, 
which are written to protect the environment an do apply to 
hard rock mining. A 1999 report from the National academy of 
science concluded that existing environmental protections work 
together in a way that is ``complicated'', but ``generally 
effective''. Because this knowledge and experience is clear, 
efforts to expand and reform beyond patenting royalty and 
abandoned mine issues are merely solutions in seach of a 
problem.
    I want to reform the mining law in this Congress. I agree 
with Mr. Chairman that this would probably be the appropriate 
time. For those who have mining in their states, I think they 
ought to be thinking also whether this an appropriate time. I 
think any deep thought on the subject would indicate to them 
that this is the right time. Given what is at stake in our 
efforts to reform the Mining Law I have significant 
reservations about supporting legislation that fails to strike 
an appropriate balance. The margin of error here is very thin. 
Extraneous provisions must therefore be regarded with a 
significant level of skepticism. Countries like China and 
Russia have undertaken a 50-year or longer view of the world 
and continue to lock down long-term supply arrangements to 
State mining company investments in places like Africa, 
Australia, and South America. This has created a new form of 
mercantilism that lies in the face of our own country's 
promotion of free trade. Whatever happens with U.S. mining law 
reform, it is going to have a long-term implication for all of 
North America. Absent development of new resources in the 
United States, the Chinese and Russians will have enormous 
pricing power by the next century. Minerals present the very 
basic bedrock of infrastructure technology for Defense and 
industry. The policies that we put in place must encourage some 
degree of self-reliance. It is for this reason that reform 
efforts must maintain or increase the viability of domestic 
minerals production. I look forward to working not only with 
your Mr. Chairman, but certainly under your leadership with 
other senators who together have shown that we can get things 
done in this committee. That will surprise people when we're 
finished. Thank you, very much.
    The Chairman. Thank you, very much. I know some of our 
witnesses are from Colorado and Senator Salazar has indicated a 
desire to make a few statements, so I'll call on him at this 
point.

          STATEMENT OF HON. KEN SALAZAR, U.S. SENATOR 
                         FROM COLORADO

    Senator Salazar. Thank you, very much Chairman Bingaman and 
Senator Domenici for holding this very important hearing. I do 
want to at the outset note on this panel, as well as the second 
panel, we'll have three witnesses from the State of Colorado. 
We have on this panel, Alan Bernholtz, who is the Mayor of the 
Town of Crested Butte, where today they have 150 inches on the 
ground for those of you who are interested in skiing at Crested 
Butte. On the second panel, Jim Cress, who is from the very 
well-known and well-established western law firm of Holme 
Roberts & Owen, and Jim Otto who is a consultant and also a 
Professor at the Colorado School of Mines and the University of 
Denver. I would like to welcome those Colorado witnesses. I 
have a formal, written statement I will submit for the record.
    Mr. Chairman, if I may make this comment, in my view it 
seems to me that the three issues that were laid out by Senator 
Domenici are issues that we can't grapple with, I think they 
are the kind of rifle shots that can help us deal with mining 
law problems that have too long alluded any possibility of 
solution. I think the tenure issues of patent reform are 
important. I think dealing with the royalty on the hard rock 
mineral mining could bring us into the same kind of approach 
we've taken since the 1920 Mineral Leasing Act is important. I 
think dealing with abandoned mines and trying to figure out a 
revenue stream to help us deal with the hundreds and thousands 
of abandoned mines we have across the west in this country is 
very important. Finally I would say, good Samaritan legislation 
is something that will help us get to a point where we clean up 
our watersheds and deal with hundreds of thousands of abandoned 
mines, many of which are located in my State of Colorado. Thank 
you, very much.
    The Chairman. Thank you, very much.
    [The prepared statement of Senator Salazar follows:]
   Prepared Statement of Hon. Ken Salazar, U.S. Senator From Colorado
    Thank you Mr. Chairman and Ranking Member Domenici for holding 
today's hearing on reform of the Mining Law of 1872.
    I would like to begin by acknowledging that three of our nine 
distinguished witnesses this morning are residents of my state of 
Colorado, highlighting the prominence of mining expertise in our state.
    I would like to welcome the Honorable Alan Bernholtz, Mayor of 
Crested Butte, Colorado. Prior to his election as mayor, Alan served on 
the Crested Butte Town Council for six years. He is the owner of 
Crested Butte Mountain Guides, co-founder of the Crested Butte 
Avalanche Center, and has been a tireless organizer of town events 
through the years and knows his corner of the Western Slope inside and 
out. On our second panel, which will focus largely on the question of a 
new federal royalty system, we are fortunate to have two world-class 
experts on mining law and royalty systems from Colorado.
    Mr. Jim Cress is a partner at the law practice of Holme Roberts & 
Owen in Denver. He has extensive experience in U.S. federal mineral 
royalty matters, and has advised clients on the development, 
implementation and interpretation of mining law in the U.S., Asia, the 
former Soviet Union, and Latin America.
    Prof. Jim Otto wears two hats as both the director of graduate 
studies in the Environmental/Natural Resources Law Program at the 
University of Denver and as a professor of mineral economics and 
director of the International Global Resources and Management Institute 
at the Colorado School of Mines. He has worked with the World Bank and 
the United Nations, and is the lead author of a World Bank study of 
mining royalty systems throughout the world. Welcome, Jim, and our 
other witnesses as well.
    There is no denying that hard-rock mining has played a vital role 
in the development of the western States. When Ulysses S. Grant signed 
the Mining Law in 1872, few could have envisioned the growth and 
transformation the West has undergone in the 135 years that have passed 
since that moment.
    In 1872 the West was a different world. The population of the free 
territory of Colorado was only about 50,000 people, but was growing 
rapidly largely due to the growth of the mining industry. Settlement of 
the West was the primary motivation behind the Mining Law and the other 
major federal land-grant laws of that period, and looking back those 
policies largely succeeded. In fact, the gold and silver rush of the 
late 19th century helped put Colorado on the map.
    Today, Colorado and our neighbor states in the west are 
experiencing a new ``mineral rush.'' As global market prices for 
molybdenum, gold, uranium, and copper have climbed rapidly, the pace of 
new mining claims has exploded. Colorado leads the nation in this claim 
surge: the number of active claims rose 240% between 2003 and 2007, 
from about 5,400 to about 18,400.
    This surge in claims also makes many deeply uncomfortable due to 
the proximity of many of these new claims to some of our nation's most 
treasured national parks and natural monuments. Active claims within 
five miles of the Grand Canyon have grown from just five in 2003 to 
more than 800 today. Furthermore, local communities are becoming 
increasingly skeptical about the impacts of new major mining 
operations.
    In some respects it is incredible that the Mining Law of 1872 still 
stands today. In 1872, hard rock mining was considered the ``highest 
and best use'' of mineralized lands. Over the years, mining has more or 
less maintained its position of priority over other land uses. An 
undeniable principle of our discussion today is that our land use 
priorities have evolved. Federal mining policy must acknowledge that 
our public lands are valued not only for their mineral content, but 
also for their water and natural resources, recreational value, and 
wildlife habitats.
    Furthermore, I believe there is consensus that the hard-rock mining 
industry--like the oil, gas, and coal industries--must pay some kind of 
royalty or rent for the right to extract mineral resources from our 
public lands. The lack of a federal revenue stream from mining 
operations on federal lands has particularly hindered efforts to 
address the critical issue of the environmental, health, and safety 
risks posed by abandoned mines. There are of course many questions 
regarding the structure and implementation of a federal royalty system, 
and I look forward to an in-depth discussion of this issue.
    Responsible development of our mineral resources is critical to our 
economy and our environment. Hard rock minerals are vital to the 
production of countless products, and the mining industry employs 
thousands of people across the country. We must find a way to ensure 
that mineral development occurs in a manner consistent with the needs 
of mining communities and the protection of the environment, 
particularly our water resources.
    Finally, I am committed to making cleanup of abandoned and inactive 
mines a priority in this legislation. The EPA estimates that there are 
half a million abandoned mines around the nation, and that the cost of 
cleaning them up could approach $50 billion. Good Samaritans--the 
people and companies who are willing to clean up mine sites in whole or 
in part, even though they are not legally responsible--deserve greater 
certainty and reduced liability for actions they perform in the service 
of their communities. Good Samaritans are critical to addressing the 
less fortunate aspects of the history of the mining industry.
    I believe we are closer than we have ever been in the past to 
moving forward with legislation that will allow Good Samaritan cleanups 
to take place. Toward that end, I plan to reintroduce a bill in this 
session of Congress that builds upon the work of the Western Governors' 
Association, the EPA, and the progress we made on the bill I introduced 
in the last Congress. I look forward to working with my colleagues to 
encourage the clean up of abandoned mine sites.
    I welcome the members of our distinguished panels and look forward 
to discussing these important issues.

    The Chairman. Let me ask if other Senators have some 
comments they want to make before we hear from the witnesses.
    Yes, Senator Murkowski.

        STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR 
                          FROM ALASKA

    Senator Murkowski. Thank you, Mr. Chairman. I want to take 
just a brief moment to welcome one of our witnesses here this 
morning, Mr. Randy Wanamaker from the Community of Juneau, 
Alaska. He has been involved, and has been for some time, in 
the Kensington Gold Mine Project there. He's also a local 
official in Juneau as the Deputy Mayor of the City, and is 
thorough in working very hard to make sure that this project 
works for the local people, encouraging native hire, and doing 
all the right things in the community.
    I am pleased, Mr. Chairman, to hear your comments and those 
echoed by Senator Domenici about how we intend to approach 
mining law reform. I think it is well recognized that it is 
long overdue and is important to be evaluated in assessing how 
we move forward. I had an opportunity in December to speak to 
the Alaskan Miner's Association. I will tell you from an 
industry perspective in my State, they're quite concerned about 
what they have seen come out of the House, and they have asked 
that the Senate review things, as Senator Domenici has said, 
basically from a clean piece of paper, that we truly look at 
this comprehensively, evaluate it very critically. Many of my 
constituents throughout the industry are quite concerned, 
again, as to some of the provisions they are streaming out of 
the House bill. I think we need to recognize not only the 
economic importance that we realize from within the mining 
industry historically in this Nation, but as has been noted, 
just the security aspect of a minerals industry and a 
recognition that with our very necessary and needed minerals, 
we are putting ourselves in the same position that we are 
currently with oil. We are 60 percent reliant on foreign 
sources, foreign nations, some are our friends, some not our 
friends, for this very necessary commodity. It is the same way 
with our minerals, and it allows for a level of vulnerability 
that I think we need to be discussed in this Nation. We need to 
be discussing what our policy is as it relates to hard rock 
minerals, and there are precious minerals rale that we need 
throughout industry. I'm pleased that this committee is moving 
forward with this, and I look forward to working with you and 
all members. Thank you.
    The Chairman. Thank you, very much. Any other statements, 
Senator Barrasso.

         STATEMENT OF HON. JOHN BARRASSO, U.S. SENATOR 
                          FROM WYOMING

    Senator Barrasso. Thank you, very much Mr. Chairman. I 
appreciate your efforts as well as Senator Domenici's and your 
leadership on this issue. I am also I'm troubled, as Senator 
Murkowski is, with some of the things that have come out of the 
House. I'm very happy we're taking a fresh look at this and 
will make some decisions on our own, and I appreciate these 
series of hearings. I think, for the record, that I believe any 
mining reforms should be built on principles of 
competitiveness, certainty, and common sense.
    I think that respect to competition, I understand first-
hand that mining provides essential materials that are vital to 
our economy. I'm concerned from a national security standpoint, 
as we just heard from Senator Murkowski. I spoke in some 
specifics in our meeting in December--alloy metals, that are 
necessary for the development of today's artificial joints, the 
artificial hips that I used in my previous experience as an 
orthopedic surgeon. I think domestic mineral production accrues 
significant benefit--labor, wages, benefits to consumers to 
goods in advanced technology, benefits to states and 
communities through tax revenue, and benefits to investors. For 
a number of reasons, specifically national security issues, I'm 
especially concerned with any provision that will result in 
pushing even more mining operations overseas. To me one of the 
most troubling provisions with respect to competition, includes 
expansive veto authority over mining operations by future 
administrations. I think Congress should be very careful in 
delegating such expansive authority to the administration. I 
believe that this industry must retain security of being able 
to mine long-term. Once commitments are made, they need to be 
able to rely on those decisions. Business plans have been 
predicated upon a well understood legal framework. They make 
decisions; they make contracts long-term based on those 
conditions and plans. Those should remain consistent.
    I don't think we should punish today's operators by 
adversely changing the legal framework in the middle of the 
game. I think the taxpayers deserve certainty, certainty with 
respect to reclamation, and also with respect to community 
jobs, with respect to environmental protections, and certainty 
with respect to any future public compensation. A good dose of 
common sense is critical. Examples of this are liability 
reform, good Samaritan provisions, efficient and effective 
administration of environmental laws, and reclamation and 
revenue collection. Government policies should not stand in the 
way of creative reclamation efforts. We heard about that in 
September. I am also troubled, Mr. Chairman, with issues that 
affect the State of Wyoming with abandoned mine land funds from 
coal. I understand this is very different. The Federal 
Government still owes the State of Wyoming over $580 million 
dollars and we have still not seen one penny. So if we're 
talking about public revenue collection to do reformation in 
the bill, I think we need to make sure those funds are directed 
back to the states and the communities where it will do the 
most good. So again Mr. Chairman, I appreciate the opportunity 
to hear these panels and help work with the members of the 
committee to find good solutions. Thank you, Mr. Chairman.
    The Chairman. Very good. I think that's the end of our 
statements. We'll welcome the witnesses. I will give the list 
of our witnesses on the first panel: Henri Bisson is Deputy 
Director with the Bureau of Land Management. We appreciate you 
being here. William Cobb is the representative from the 
National Mining Association. Thank you, for being here. Mike 
Dombeck, who is well-known to this committee, is here today 
Representing Trout Unlimited and is currently living in 
Wisconsin. Randy Wanamaker, earlier mentioned, is with BBC 
Human Resources Development Corporation in Juneau, Alaska, and 
Alan Bernholtz, who is the Mayor of Crested Butte is here. We 
appreciate all the witnesses being here. Why don't we start 
with you, Mr. Bisson, then go right across the table there and 
hear from each of you. If you would summarize your testimony in 
about 5 or 6 minutes for us, tell us the main points that you 
think we need to know about, we will include the full, prepared 
statement in the record. Thank you.

  STATEMENT OF HENRI BISSON, DEPUTY DIRECTOR, BUREAU OF LAND 
             MANAGEMENT, DEPARTMENT OF THE INTERIOR

    Mr. Bisson. Thank you, Mr. Chairman. I appreciate this 
invitation to come up here and participate in the oversight 
hearing this morning. Members of the committee as well I thank 
you on mining Law reform and to share with you on current 
information on the BLM hard rock mining program on Federal 
lands.
    I will summarize my testimony. We often take for granted 
the availability of gold, silver, copper, lead, zinc, and other 
minerals and their contributions to the quality of life we 
enjoy in this country, computers and cell phones tooth paste 
and cosmetics, medicines, cars, and appliances that make our 
home safe, convenient and comfortable, would not exist without 
the types of minerals discovered and developed under the 1872 
mining law. For over 135 years the 1872 mining law has served 
to ensure reliable and affordable domestic supply minerals 
critical to our economy and national security.
    The Federal Land Policy and Management Act, which was 
enacted in 1976, provides that the secretary shall take any 
action necessary to prevent unnecessary or undue degradation of 
lands and sets forth the BLM's multiple use mandate. These 
provisions of FLPMA are implemented alongside the 1872 mining 
law. Other State and Federal laws also play a critical law in 
ensuring that hard rock mining operations on public lands occur 
in an environmentally sound manner. Although, the 1872 Mining 
law itself is over 100 years old, statutory requirements that 
comply with State and Federal law, such as the Clean Water Act, 
Clean Air Act, Endangered Species Act, National Environmental 
Policy Act, Wilderness Act, and National Historic Preservation 
Act ensure that mining operations meet today's cultural and 
environmental needs. BLM service management regulations were 
issued under the authority of FLPMA in 1981, amended in 2000 
and again in 2001. The regulations provide a sound framework to 
prevent unnecessary or undue degradation of public lands during 
hard rock mining reclamation. Under the regulations, all mining 
and milling activities are conducted under a plan of 
operations, approved by the BLM, following environmental 
analysis underneath it. A mining operator must also provide 
financial guarantees, recovering the full cost to reclaim the 
operation.
    Currently, the BLM holds financial guarantees in excess of 
1.1 billion dollars to cover the cost of reclamation of mining 
operations on BLM managed public land. We belive that the 
existing statutes and related regulations provide sufficient 
authority to regulate mining operations when properly monitored 
and enforced by State and Federal regulatory agencies. However, 
we recognize historic mining practices have had adverse 
consequences on natural resources and the environment. The 
current regulations are designed to avoid recurrence of that 
history. Abandoned mine lands, a legacy of past practices, are 
addressed through an active program. Between 2000 and 2007, BLM 
has inventoried 5,500 sites, remediated physical safety hazards 
at more that 3,000 sites, and restored water quality at 
hundreds of sites on thousands of acres. BLM will continue its 
efforts to do this important work.
    In conclusion, the Administration supports the 
environmentally responsible development of hard rock minerals 
on public lands and would like to work with Congress to update 
the mining laws, including the authorization of production 
payments, administrative penalties. The Administration also 
believes that any legislative solution must be accomplished in 
a way that provides a reasonable level of certainty for the 
industry, while pursuing goals to protect our environment. We 
appreciate your expressed interest in taking a fresh look at 
hard rock mining law reform, and we look forward to working 
with Congress, industry, and other interested parties as we 
move forward with this effort. Thank you for the opportunity to 
testify, and I will be happy to answer any questions.
    [The prepared statement of Mr. Bisson follows:]
  Prepared Statement of Henri Bisson, Deputy Director, Bureau of Land 
                 Management, Department of the Interior
    Thank you for the opportunity to participate in this oversight 
hearing on Mining Law reform and to share with you current information 
on the Bureau of Land Management's (BLM) hardrock mining program on 
Federal lands, including the various statutes and regulations that 
govern this program.
   the 1872 mining law, the federal land policy and management act, 
            environmental statutes and other applicable laws
    For over 135 years, the 1872 Mining Law has served to assure a 
reliable and affordable domestic supply of minerals--gold, silver, 
copper, lead, zinc, and uranium--critical to our economy and national 
security. The 1872 Mining Law also promoted the settlement of the 
western United States by providing an opportunity for any citizen of 
the United States to explore the available public domain lands for 
valuable mineral deposits, stake a claim, and, if the mineral deposit 
could be mined, removed, and marketed at a profit, patent the claim. 
Patenting results in the claimant acquiring ownership not only of the 
mineral resources, but also of the lands containing these mineral 
deposits at the statutory price of $2.50 or $5.00 per acre. A 
moratorium has been in place since 1994 on BLM's processing of new 
patent applications.
    By 1976, when the Federal Land Policy and Management Act (FLPMA) 
was enacted, settlement of the West was no longer the primary force 
driving federal land and resource management policies. FLPMA provides 
that the Secretary shall take any action necessary to prevent 
unnecessary or undue degradation of the lands. Today, these provisions 
and the multiple use mandates of FLPMA are implemented alongside the 
1872 Mining Law.
    Other state and Federal laws also play a critical role in ensuring 
that hardrock mining operations on public lands occur in an 
environmentally sound manner. Although the 1872 Mining Law itself is 
over 100 years old, statutory requirements to comply with state and 
Federal Laws, such as the Clean Water Act; Clean Air Act; Endangered 
Species Act; National Environmental Policy Act (NEPA); Wilderness Act; 
and National Historic Preservation Act, ensure that mining operations 
meet today's cultural and environmental needs.
    Mineral withdrawals provide a vital tool to protect special areas. 
Millions of acres of Federal land have been withdrawn from mineral 
entry through either statute or policy. Withdrawn areas include 
Federally-designated wilderness areas, national parks, national 
wildlife refuges, and many other specially-designated areas. In 
addition, through the public NEPA process, and compliance with other 
environmental laws, mining operators review alternatives to their 
processes, providing an opportunity to employ new methods and 
technologies.
               blm's management and regulation of mining
    Consistent with the statutes discussed earlier in this testimony, 
BLM offers the opportunity for responsible development that serves the 
economic, social, and environmental interests of the Nation. The BLM 
has accomplished this through the principles of sustainable 
development, promulgation of surface management regulations, issuance 
of policy guidance, and implementation of an active program to 
remediate abandoned mine lands.
    Sustainable development is the basis for a policy framework that 
ensures that minerals and metals are produced, used, and recycled 
properly. In the context of mining, the United States joined 193 other 
nations in 2002 in signing the Sustainable Development Plan of 
Implementation applicable to mineral resources.
    BLM's surface management regulations were issued under the 
authority of FLPMA in 1981 and amended in 2000 and 2001. The 
regulations provide a sound framework to prevent unnecessary or undue 
degradation of public lands during hardrock mining and reclamation.
    A congressionally-mandated study conducted by the National Research 
Council (NRC) Board on Earth Sciences and Resources examined the 
environmental and reclamation requirements relating to mining of 
locatable minerals on public lands and the adequacy of those 
requirements to prevent unnecessary or undue degradation of public 
lands. The NRC Report, ``Hardrock Mining on Federal Lands (1999)'' 
provided 16 recommendations, including nine recommendations for the 
BLM's surface management regulations. The 2000 and 2001 revisions to 
BLM's surface management regulations incorporated all nine of those 
recommendations.
    Under the regulations, all mining and milling activities are 
conducted under a plan of operations approved by the BLM, and following 
environmental analysis under NEPA. The BLM must disapprove any mining 
operation that would cause unnecessary or undue degradation of the 
public lands. A mining operator, as well as an exploration operator 
(exceeding casual use), must provide financial guarantees covering the 
full cost to reclaim the operation. BLM may require an operator to 
establish a trust fund or other funding mechanism to ensure the 
continuation of long-term treatment to achieve water quality standards 
and for other long-term, post-mining reclamation and maintenance 
requirements after a mine is closed. In response to previous GAO 
recommendations, the BLM has implemented a tracking system under which 
BLM state directors are required to certify each fiscal year that the 
reclamation cost estimates for proposed and operating mines have been 
reviewed and are sufficient to cover the cost of reclamation. 
Currently, the BLM holds financial guarantees in excess of $900 million 
to cover the costs of reclamation of mining operations on BLM-managed 
public lands.
    BLM policy guidance reinforces the surface management regulations. 
Originally set out in 1984, the internal policy was last updated by the 
BLM Director in 2006. This policy guidance emphasizes that mineral 
exploration and development can occur concurrently or sequentially with 
other resource uses. The policy promotes balancing environmental, 
social, and economic needs while practicing environmental stewardship 
and promoting stakeholder participation. These efforts include:

   reviewing and processing notices and plans of operations to 
        prevent unnecessary or undue degradation;
   requiring financial assurances to provide for reclamation of 
        the land; and
   considering alternative forms of reclamation after a mine is 
        closed such as using the land for landfills, wind farms, 
        biomass facilities and other industrial uses, in order to 
        attract partnerships to utilize the existing mine 
        infrastructure for a future economic opportunity.

    We believe that the existing statutes and related regulations 
provide sufficient authority to regulate mining operations when 
properly monitored and enforced by state and Federal regulatory 
agencies. However, we recognize historic mining practices have had 
adverse consequences on natural resources and the environment. The 
current regulations are designed to avoid a recurrence of that history.
    Abandoned Mine Lands, a legacy of past practices, are addressed 
through an active program. This year, the Forest Service and the BLM 
are celebrating 10 years of success with the hardrock abandoned mine 
lands program. The program seeks to mitigate hazards present at 
abandoned mines; restore watersheds for natural resources; and protect 
public health and safety, recreation, fish and wildlife. Between 2000 
and 2007, the BLM has inventoried 5,500 sites and remediated physical 
safety hazards at more than 3,000 sites. The BLM has also restored 
water quality at over 280 sites through 2003 and on more than 3,000 
acres between 2004 and 2007.
    Addressing abandoned mine lands is a challenge and the BLM will 
continue its efforts to do this important work.
                mining's importance to the united states
    We often take for granted the availability of gold, silver, copper, 
lead zinc and other minerals and their contribution to the quality of 
life we enjoy in this country. In 2006, the total value from domestic 
metals production was approximately $23.5 billion. Computers and cell 
phones, toothpaste and cosmetics, medicines, cars, sporting equipment, 
and appliances that make our homes safe, convenient, and comfortable--
none of these would exist without the types of minerals discovered and 
developed under the 1872 Mining Law. These minerals, and the capability 
to produce them domestically, are also vital to the United States' 
economic and domestic security.
    As much as we enjoy these conveniences, it is the mineral products 
used in areas such as agricultural production, communication, 
transportation, technology, and national defense that make a truly 
profound contribution to our way of life. The phenomenal advance of 
culture, science and technology remains dependent on mineral resources. 
In an example that is close to home for Americans, the automobiles most 
of us drive every day contain nearly 50 pounds of copper, and the newly 
popularized hybrid vehicles require even more--about 75 pounds for each 
car, by some estimates. Most vehicle manufacturers specify that the 
copper used be ``new'' copper.
    Metal mining is an international business, with purchasing and 
sales conducted through the London Metals Exchange, the New York 
Commodities Exchange and secondary exchanges. Metal marketing operates 
within a free market system, in which the price is determined by what a 
willing buyer and a willing seller agree upon. The international prices 
for the metals are fixed daily on the exchanges, and costs of 
production control the economics of particular companies. If operating 
and capital costs reach a certain point compared to the prevailing 
market price, the mining company may cease production until costs go 
down or the price goes up.
    Mining companies that are affected by these global markets in turn 
impact small communities throughout the West where employment 
opportunities are often limited. By some estimates, for every direct 
job in mining, three supporting jobs are created. Producers must buy 
fuel, pipes, wire, and other industrial products, and these 
requirements are often contracted out to local fuel distributors, 
hardware suppliers, and related businesses. Producers pay Federal, 
state, and local income and property taxes.
                               conclusion
    The Administration supports the environmentally responsible 
development of hardrock minerals on public lands and would like to work 
with Congress to update the Mining Law, including the authorization of 
production payments and administrative penalties. The Administration 
also believes that any legislative solution must be accomplished in a 
way that provides a reasonable level of certainty to the industry while 
pursuing goals to protect our environment. We appreciate your expressed 
interest in taking a fresh look at hardrock mining law reform and we 
look forward to working with Congress, industry, the environmental 
community, and other interested parties as you move forward with this 
effort. Thank you for the opportunity to testify. I will be glad to 
answer any questions.

    The Chairman. Dr. Dombeck, go right ahead.

   STATEMENT OF MIKE DOMBECK, REPRESENTING TROUT UNLIMITED, 
                       STEVENS POINT, WI

    Mr. Dombeck. Chairman, Senator Domenici, thank you for the 
invitation to testify. It's good to be back. I'm now a 
Professor at the University of Wisconsin at Stevens Point. In 
addition to my years with the Forest Service and the Bureau of 
Land Management, I started out as a fishing guide and am a avid 
hunter and angler. In fact, I think of I have probably either 
fished or hunted in every one of your States, and still not 
enough, however. In fact, I a couple of years ago, I just got 
my first elk in Idaho. I understand that New Mexico has some 
really big ones as well. I haven't made that venture yet. At 
any rate, I'm here testifying on behalf of Trout Unlimited, the 
Theodore Roosevelt Conservation Partnership and the National 
Wildlife Federation and millions of hundreds of anglers and 
sportsmen and women that they represent. I also have a letter 
signed by about 22 of these organizations, including many of 
them businesses that I would like to ask be submitted for the 
record.
    The Chairman. We'll include that in the record.
    Mr. Dombeck. I certainly want to emphasize that mining is a 
legitimate use of public land, and is incredibly important and 
has been for a long, long, time. Under the 1872 Mining Law, 
however, mining really does take precedence over other uses on 
public lands, including hunting and fishing and once claimed a 
mining operation, the public land managers in my view, really 
do not have the discretion as they do to prohibit mining under 
the current framework of the 1872 Mining Law like they have on 
the disposition of many other minerals, as you mentioned in 
your Opening statement, Mr. Chairman. The legacy of the 1872 
Mining Laws from the standpoint of fish and wildlife and 
aquatic resources I think is extensive. For example, EPA 
estimates 40 percent of the western headwater streams are 
degraded by abandoned mines.
    The public lands national forest BLM lands really are a 
treasure, a tremendous resource for hunting, fishing, 
recreation, outdoor activities. More than 50 percent of the 
Nations blue ribbon trout streams are on these lands. Eighty 
percent of some of the most critical habitats for elk are found 
on public lands. Many, many populations of imperiled species 
are also on these public lands. In addition, the national 
forests provide drinking water to about 60 million Americans in 
33 States. Mr. Chairman, in your letter in invitation, you 
asked that I find that on five very important areas on how to 
modernize this law. I'll just very quickly summarize those 
areas. A fair royalty for any minerals taken from public lands, 
and a portion should be invested in abandoned mine clean up. 
Very important. Affirm the values of fish and wildlife habitat, 
water resources, and hunting and fishing on public lands and 
make it clear that they should be on equal par with mining on 
public lands as multiple uses. Agency managers should be given 
the discretion to make logical, science-based, decisions on 
land health and where to mine, as wells where not to mine. 
Funding and common-sense liability relief should be made 
available for those would be Good Samaritans and volunteers who 
want to help clean up abandoned mines on public lands. Finally, 
mining reform legislation should prohibit patenting or sale of 
public lands. I really commend this committee. You have a rare 
opportunity to improve this law, to modernize this law, and the 
sportsmen and women around the country are counting on you to 
help them with that. Thank you, for the opportunity to testify, 
and I'll be happy to answer any questions.
    [The prepared statement of Mr. Dombeck follows:]
   Prepared Statement of Mike Dombeck, Representing Trout Unlimited, 
                           Stevens Point, WI
    Mr. Chairman and Members of the Committee: Thank you for inviting 
me here to testify today. My name is Mike Dombeck. I am a professor at 
the University of Wisconsin-Stevens Point. Formerly, I served as chief 
of the U.S. Forest Service and director of the Bureau of Land 
Management (BLM). I'm a former fishing guide, and still an avid hunter 
and fisherman. I'm pleased to present testimony on the need to reform 
the laws that govern mining of hard rock minerals from public lands on 
behalf of Trout Unlimited (TU), the National Wildlife Federation and 
the Theodore Roosevelt Conservation Partnership, organizations that 
represent millions of sportsmen and women, wildlife and fish 
professionals, and outdoor recreation-related businesses.
    Mining is a legitimate use of public lands, but there are few laws 
more in need of an overhaul than the 1872 Mining Law. The 1872 Mining 
Law, signed into existence 135 years ago by President Ulysses Grant, is 
the most outdated natural resource law in the nation. Under the 1872 
law, mining takes precedence over all other public land uses, including 
hunting and fishing. The Secretary of the Interior must sell public 
land to mining companies, often foreign-owned, for as little as $2.50 
per acre. Furthermore, mining companies pay no royalties for hard rock 
minerals including; gold, copper and zinc that belong to all citizens. 
The price of uranium, gold and other heavy metals continues to drive 
companies to stake claims across the West. Mining claims dot millions 
of acres of public land across the West. Once claimed, it is nearly 
impossible to prohibit mining under the current framework of the 1872 
Mining Law, no matter how serious the impacts might be.
    The legacy of the 1872 Mining Law is extensive, and the damage from 
mining is still ongoing today. For example, the EPA estimates that 40 
percent of western headwater streams are degraded by abandoned mines. 
The following are some examples of impacts to water and fish and 
wildlife habitat caused by specific mines in the recent past as well as 
threats from proposed mines.

   A Canadian mining company is pushing to develop a large, 
        open pit, cyanide leach gold mine at the headwaters of the 
        Boise River. The Boise River is responsible for more than 20 
        percent of the city's municipal water supply, as well as 
        supplying critical wildlife and fish habitat, irrigation for 
        agriculture and recreational opportunities. The Mayor of Boise 
        has opposed the mine.
   One of five known grizzly bear populations in the lower 48 
        states as well as imperiled bull trout may be eliminated due to 
        a proposed silver mine in the Cabinet Mountain Wilderness in 
        northwestern Montana.
   In 1992, the Summitville mine in Colorado released a toxic 
        brew including cyanide and acid mine drainage, killing all fish 
        and wildlife in a 17 mile stretch of the Alamosa River. Cleanup 
        costs at the now-Superfund site exceed $150 million.
   Historic placer mining operations have affected Resurrection 
        Creek in the Chugach National Forest, Alaska, by re-channeling 
        the stream and separating it from its floodplain. These impacts 
        degraded fish rearing and spawning habitat along the river, as 
        well as adjacent wildlife riparian habitat for species like 
        bears and eagles.
   The Beal Mountain Mine, located in the Beaverhead Deerlodge 
        National Forest and operated from 1989 through 1998, has 
        polluted valuable trout waters with cyanide, selenium and 
        copper. Using more recent cyanide heap-leach technologies, the 
        mining company promised that there would be no discharge of 
        pollutants into receiving waters. The technologies failed and 
        waters downstream have been contaminated with selenium and 
        other heavy metals. The Forest Service and the Montana 
        Department of Environmental Quality are working to contain the 
        contamination which may have to be treated in perpetuity. With 
        the mining company bankrupt, the taxpayers must pay the bill.

    Professional resource managers at the Forest Service and BLM need 
to have the ability to make science-based decisions about where and 
when mining on public land should occur. Without this discretion, 
professional land managers cannot maintain their commitments as 
stewards of the public trust.
    Public lands managed by the BLM and the Forest Service harbor some 
of the most important fish and wildlife habitat and provide some of the 
finest hunting and angling opportunities in the country. For example, 
public lands contain well more than 50 percent of the nation's blue-
ribbon trout streams and are strongholds for imperiled trout and salmon 
in the western United States. More than 80 percent of the most critical 
habitat for elk is found on lands managed by the Forest Service and the 
BLM, alone. Pronghorn antelope, sage grouse, mule deer, salmon and 
steelhead, and countless other fish and wildlife species are similarly 
dependent on public lands.
    The national forests are a major source of water and of particular 
importance in the West. Forest Service and EPA scientists have 
determined that the national forests alone provide drinking water to 
more than 60 million people in 33 states.
    Mr. Chairman, in your letter of invitation, you asked that I 
comment on five very important questions about the types of 
environmental reforms that may be needed to modernize this law so that 
its provisions protect fish and wildlife resources, and hunting and 
fishing. I will summarize my responses by providing you with the five 
major ways the law needs to be changed.
    Any reform of the 1872 Mining Law should contain the following 
provisions:

   A fair royalty from any minerals taken from public lands, a 
        portion of which should be invested in an abandoned mine clean 
        up fund. Since 1977, royalties associated with coal mining have 
        generated $7.4 billion to help clean up abandoned mines and 
        recover lands and waters and communities affected by coal 
        mining. We need a similar fund for hard rock mining. And a 
        sensible reform should include all mining operations, present 
        and future. Almost every commodity developed off public lands--
        coal, wood fiber, oil, gas, and forage--has dedicated funding 
        for mitigation of impacts and restoration measures. The only 
        commodity that lacks such a dedicated fund is hard rock 
        minerals. As a result, non-profit organizations such as TU, 
        local communities, and state agencies, are dependent on 
        cobbling funding from an array of private, state, and federal 
        sources to get work done on the ground.
   Affirm the values of fish and wildlife habitat, water 
        resources, and hunting and fishing, on public lands and make it 
        clear that mining should not be the dominant use of our federal 
        lands. Professional land managers that work for the Forest 
        Service and BLM believe the 1872 Mining Law makes hard rock 
        mining a dominant use of public lands. Mining reform 
        legislation needs to reaffirm the doctrine of multiple-use and 
        recognize the inherent value of public lands for other 
        important uses and values, including hunting and fishing 
        opportunities and fish and wildlife habitat. This is a major 
        priority for sportsmen, land management agencies, and other 
        users of public lands.
   Agency managers should be given the discretion to make 
        logical decisions based on land health about where to mine and 
        where not to mine. Special places with important fish and 
        wildlife and water values such as wilderness areas, National 
        Parks, Fish and Wildlife Refuges, and inventoried roadless 
        areas ought to be placed off-limits to mining entirely. 
        Discretion ought to be afforded to managers on other lands to 
        allow for balanced and reasoned decisions about ecological, 
        social, and economic values. And on highly mineralized lands 
        with low fish and wildlife values, and high levels of mining 
        company investment, mining companies ought to have a higher 
        degree of certainty that mining projects can proceed in 
        accordance with other laws and regulations.
   Funding and common-sense liability relief must be made 
        available for would-be Good Samaritans and volunteers to clean 
        up abandoned mines. Abandoned mines are one of the single most 
        important, least addressed environmental challenges in the 
        nation. The geographic scope of the problem is staggering. EPA 
        estimates that abandoned hard rock mines degrade nearly 40 
        percent of all western headwater streams. The enormity and 
        scope of the problem have led to a collective sense of futility 
        that has fostered inactivity in many places. Good Samaritans, 
        who have no connection to the abandoned mine waste or interest 
        in re-mining it for profit, should be provided with reclamation 
        incentives and commonsense liability relief.
   Finally, mining reform legislation should prohibit the 
        patenting or sale of public lands. The U.S. Government has 
        practically given away more than three million acres of our 
        public lands to mining companies through the practice of 
        patenting. It is troublesome that anyone can stake a claim on 
        public lands and then buy the land for as little as $2.50 an 
        acre. With the increase in the price of metals, so have the 
        number of claims staked. For example, in Arizona, the number of 
        claims filed in the state has risen 80 percent since 2003. 
        Thousands of these claims are within five miles of the Grand 
        Canyon National Park, a crown jewel of the American public but 
        also prime wildlife habitat for mule deer.

    This Committee, and the Senate, have a rare opportunity to improve 
this law. The House has passed a strong reform bill. Key Senators have 
expressed their willingness to explore changes to it. We urge you to 
carefully consider our recommendations, draft a good bill, and move it 
through the Senate as quickly as possible next year. Sportsmen and 
women around the nation, especially in the West, are counting on you to 
end the long stalemate and reform the 1872 Mining Law.
    Thanks for the opportunity to testify. I'll be happy to try and 
answer any questions that you may have.

    The Chairman. Thank you, very much.
    Mr. Cobb.

STATEMENT OF WILLIAM E. COBB, REPRESENTING THE NATIONAL MINING 
                    ASSOCIATION, PHOENIX, AZ

    Mr. Cobb. Good morning, Mr. Chairman, and members of the 
committee, my name is William Cobb, and I'm the Vice President 
of Environmental Services, Freeport McMoran Mining Company, 
which is part of Freeport McMoran Copper & Gold. We're the 
world's second largest producer of copper. I'm testifying today 
on behalf of the national mining association. I appreciate the 
opportunity to testify before the committee on this issue of 
great importance for the domestic mining industry. I am a 
member supporting reform of the Mining Law and look forward to 
working with this committee to try and resolve this issue 
during this Congress.
    Let me first start. The current environmental regulations 
demonstrate that the need for restrictive standards are 
unnecessary. Mining on public lands is an extremely regulated 
enterprise. There are a wide variety of Federal, State, and 
local environmental, regulations that govern mineral 
exploration, development, operation, closure and reclamation, 
including specific mining environmental standards administrated 
by the Bureau of Land Management and the Forest Service and 
there are similar standards at the State level. First of all, 
Federal environmental laws such as the National Environmental 
Policy Act, the Clean Air Act, the Clean Water Act, Solid Waste 
Disposal Act, the Resource Conservation and Recovery Act, the 
Drinking Water Act, the Toxic Substances Control Act, and many 
others. While the protection statutes such as the Endangered 
Species Act and comprehensive western State Regulations that 
deal with the long-term protection of drinking water quality 
and quantity, the management of disposal of solid waste, and 
the reclamation of mining sites.
    In addition, the Bureau of Land Management and the Forest 
Service have sufficiently strengthened their financial 
assurance requirements. These agencies require financial 
assurance which is periodically reviewed to cover the full cost 
of reclaiming the operation, assuming that a third party 
conducts the effort. There are similar requirements at the 
State level. There is no one size fits all regulatory approach 
that makes sense for the hard rock mining industry, 
particularly a means of eliminating future Superfund sites. 
Prescriptive standards lack the flexibility needed to address 
the wider array of mine sites and types. In lay terms a copper 
mine in Arizona has different operational life periods, 
different operational enclosure issues than a gold mine in 
Idaho. Even the National Academy of Sciences concluded that the 
establishment of a single Federal regulatory regime for hard 
rock mining is unnecessary and ill advised. Existing Federal 
financial insurance requirements when combined with sustained 
environmental compliance are what it takes to assure that 
public does not ultimately become responsible for reclamation 
of mine sites on Federal lands. We believe that existing 
authorities adequately protect special places and the right to 
deny approval is not necessary. Access to Federal lands for 
mineral exploration and development is critical to maintain a 
strong domestic mining industry. Efforts to amend to amend the 
Mining Law must recognize existing authorities to close certain 
special places to mining activity. Congress has already closed 
land to mining, to wilderness, national parks, national 
wildlife refuges, recreational ares, and wild and scenic 
rivers.
    Congress has also granted additional authority to the 
executive branch to close Federal lands to mining. New closures 
of Federal land based on vague and subjective criteria would 
arbitrarily impair domestic mineral and economic development. 
Because there are existing tools available to protect special 
resources in environmental sensitive areas, it is not necessary 
to give the Secretary of Interior the right to stop the mining 
project if it meets all environmental and other legal 
requirements. Mine projects that are capital-intensive 
undertakings and require years of exploration and development 
before projects realize positive cash-flows. Recently announced 
mining projects are being contemplated both within and outside 
the United States, including Freeport McMoran's restart of its 
Climax mine in Colorado, that range from hundreds of millions 
of dollars to multi-billion dollars. As witnessed in other 
countries, legal and regulatory uncertainties can chill the 
climate for large capital investments. We can see the same 
thing in the United States resulting in serious consequences 
for our economic and national security.
    There is a growing reliance on foreign sources of minerals 
as the committee has kindly identified. Despite reserves of 78 
important mine materials, the United States attracts only 8 
percent of worldwide domestic dollars. Even with adequate 
domestic resources, our Nation is becoming more dependent on 
foreign sources to meet our country's strategic and critical 
minerals requirements. In conclusion, the U.S. mining industry 
is committed to conducting its operations in an environmentally 
and fiscally sound manner. For many companies, we have 
demonstrated this commitment, through the implementation of 
environmental management systems, which are a method of 
improving overall environmental performance, improving 
environmental compliance, achieving closure and reclamation 
success. The industry hopes and expects that mining law 
legislation will recognize and honor our commitments to 
continue this improvement in environmental performance, and the 
industry's contribution to our national well-being. NMA 
appreciates the opportunity to provide this testimony this 
morning and I am ready to address the questions when 
appropriate. Thank you.
    [The prepared statement of Mr. Cobb follows:]
Prepared Statement of William E. Cobb, Representing the National Mining 
                        Association, Phoenix, AZ
    Good morning, Mr. Chairman and members of the Committee. My name is 
William Cobb, and I am the Vice President of Environmental Services for 
Freeport McMoran Mining Company, part of Freeport McMoran Copper & 
Gold. I am testifying today on behalf of the National Mining 
Association (NMA). NMA appreciates the opportunity to testify before 
the Committee on this issue of great importance to the domestic mining 
industry. NMA members support reform of the Mining Law and look forward 
to working with the Committee to try to resolve this issue during this 
Congress.
    NMA is the principal representative of the producers of most of 
America's coal, metals, industrial and agricultural minerals; the 
manufacturers of mining and mineral processing machinery, equipment and 
supplies; and the engineering and consulting firms, financial 
institutions and other firms that serve our nation's mining industry. 
Our association and our members, which employ or support 170,000 high-
wage jobs, have a significant interest in the exploration for, and 
development of, minerals on federal lands. The public lands in the 
Western states are an important source of minerals, metal production 
and reserves for the nation's security and well-being. Mining on 
federal lands provides for high-wage employment, vitality of 
communities, and for the future of this critical industry.
                      current environmental scheme
    Mining on public lands is a pervasively regulated enterprise with a 
vast range of federal, state, and local environmental laws and 
regulations governing mineral exploration, development, operation, 
closure and reclamation. Under current law, companies that engage in 
hardrock mining and related activities on the public lands are subject 
to a comprehensive framework of federal and State environmental, 
ecological, and reclamation laws and regulations to ensure that 
operations are fully protective of public health and safety, the 
environment, and wildlife including:

   Specific mining environmental standards administered by the 
        Bureau of Land Management and the Forest Service, the federal 
        surface land management agencies, and supplemented by state 
        laws;
   All major applicable federal environmental laws such as the 
        National Environmental Policy Act, the Clean Air Act, the Clean 
        Water Act, the Solid Waste Disposal Act, the Resource 
        Conservation and Recovery Act, Superfund, the Safe Drinking 
        Water Act, the Toxic Substances Control Act and many others;
   Wildlife protection statutes administered by the Department 
        of the Interior and/or States such as the Endangered Species 
        Act.
   Comprehensive Western State laws and regulations dealing 
        with the protection of groundwater quality and quantity, both 
        for operations and closure, the management and disposal of 
        solid waste, and the reclamation of mining sites, which 
        typically focus on the establishment of post-mining habitat for 
        wildlife.

    As seen by the number of approvals and permits the typical mining 
operation on federal lands must obtain before commencing construction, 
mining is heavily and thoroughly regulated. Depending on a project's 
complexity, the environmental assessment and permitting process can 
take upwards of a decade to complete. Typical environmental permits and 
approvals include:

   A plan of operations from the BLM or Forest Service, 
        requiring a reclamation plan, closure plan, and cultural 
        resources plan. The plan of operations is scrutinized under the 
        National Environmental Policy Act (NEPA), usually requiring the 
        preparation of an environmental impact statement (EIS), which 
        evaluates potential environmental impacts of the mining 
        operation, assesses alternatives and requires the 
        identification of mitigation measures to reduce potentially 
        significant environmental impacts. The EIS process has evolved 
        to address broader issues and many times it is known as the 
        ESIA or Environmental and Social Impact Assessment.
   Air quality permits from EPA or state agencies with 
        delegated programs under the Clean Air Act. The complexity of 
        the air quality permits increases if there are substantial 
        onsite processing facilities. All sites must have an approved 
        fugitive dust control program. Water quality permits from EPA 
        or state agencies with delegated programs under the Clean Water 
        Act.
   Water quality permits can include discharge permits, 
        stormwater management permits and section 404 permits. States 
        also require permits to address potential impacts to ground 
        water, both during operations and closure to protect the 
        reasonably foreseeable beneficial uses of groundwater 
        resources.
   Rights to use or consume water from appropriate state 
        authorities
   Hazardous waste permits that govern storage, transportation 
        and disposal of laboratory or processing wastes.
   Authorization under the National Historic Preservation Act 
        if cultural or historic resources are present.
   Permits to construct tailings ponds or other impoundments.

    These laws and regulations that govern mining on federal lands are 
``cradle to grave,'' covering virtually every aspect of mining from 
exploration through mine reclamation and closure. The National Academy 
of Sciences (NAS) reviewed the existing federal and state regulatory 
framework for hardrock mining and concluded that the existing laws were 
``generally effective'' in ensuring environmental protection. Hardrock 
Mining on Federal Lands, National Academy of Sciences, National Academy 
Press, 1999, p. 89.
    Since the NAS study was published, the federal land management 
agencies have acted to make this effective regulatory program even 
stronger. For example, BLM and the Forest Service have significantly 
strengthened their financial guarantee requirements. BLM's regulations 
now require financial guarantees for all mining and exploration 
disturbances, no matter how small, before activities can proceed. Both 
agencies require the financial guarantee to cover the full cost to 
reclaim the operation, as if the agencies were to contract with a third 
party to conduct reclamation. In addition, the agencies can now require 
the establishment of a trust fund or other funding mechanism to ensure 
the continuation of long-term treatment to achieve water quality 
standards and for other long-term, post-mining reclamation and 
maintenance requirements. State-specific regulations require the 
establishment of financial assurance using a variety of specified 
forms.
    Furthermore, the agencies require periodic review of reclamation 
funding. BLM has implemented a tracking system under which BLM state 
directors are required to certify each fiscal year that the reclamation 
cost estimates for proposed and operating mines have been reviewed and 
are sufficient to cover the cost of reclamation. Similarly, the Forest 
Service requires annual review of financial assurances. The 
improvements in financial assurance requirements, combined with 
sustained environmental compliance, will ensure that the public will 
not ultimately become responsible for reclamation of mine sites on 
federal lands.
      new prescriptive standards are unnecessary and inappropriate
    The existing comprehensive framework of federal and state 
environmental and cultural resources laws already regulates all aspects 
of mining from exploration through mine reclamation and closure. 
Additional federal regulation is unnecessary, duplicative and 
unreasonable.
    Critics of the current regulatory framework often cite the lack of 
a single set of prescriptive standards for all mines as the impetus for 
new environmental regulations. Prescriptive standards lack the 
flexibility needed to address the wide array of site specific 
circumstances and mining sectors; in lay terms, a copper mine in 
Arizona has different operational and closure issues than a gold mine 
in Idaho. At least two studies conducted by the National Academy of 
Sciences have concluded that the establishment of a single federal 
regulatory regime for hardrock mining is unnecessary and ill-advised. 
See Surface Coal Mining of Non-Coal Minerals (1979); Hardrock Mining on 
Federal Lands (1999). Both studies cautioned against applying 
inflexible, technically prescriptive environmental standards because 
``simple `one-size-fits-all' solutions are impractical as mining 
confronts too great an assortment of site-specific technical, 
environmental, and social conditions.'' Id.
         existing authorities adequately protect special places
    Access to federal lands for mineral exploration and development is 
critical to maintain a strong domestic mining industry. Federal lands 
account for as much as 86 percent of the land area in certain Western 
states. These same states, rich in minerals, account for 75 percent of 
our nation's metals production and will continue to provide a large 
share of the future metals and hardrock minerals produced in this 
country.
    Efforts to amend the Mining Law must recognize existing authorities 
to close certain ``special places'' to mining activity. Congress has 
closed lands to mining for wilderness, national parks, wildlife 
refuges, recreation areas, and wild and scenic rivers. Congress also 
has granted additional authority to the Executive Branch to close 
federal lands to mining. The Antiquities Act authorizes the president 
to create national monuments to protect landmarks and objects of 
historic and scientific interest. Finally, Congress authorized the 
Secretary of the Interior to close federal lands to mining pursuant to 
the land withdrawal authority of the Federal Land Policy and Management 
Act. As a result of these laws and practices, new mining operations are 
either restricted or banned on more than half of all federally owned 
public lands. These existing laws and authorities are adequate to 
protect special areas. New closures of public land, based on vague and 
subjective criteria without congressional oversight, would arbitrarily 
impair domestic mineral and economic development.
    In addition, the federal land management agencies have land use 
planning processes to identify natural or cultural resources or 
environmental and social sensitivities that require special 
consideration. These planning processes are used to identify areas that 
need to be withdrawn as well as any terms, conditions, or other special 
considerations needed to protect other resource values while conducting 
activities under the operation of the mining laws. Other mechanisms 
available to federal land management agencies for protecting valuable 
resources and sensitive areas include use of advisory guidelines to 
identify categories of resources or lands that deserve special 
consideration and the adoption of sitespecific mitigation measures in a 
plan of operations to protect cultural values, riparian habitat, 
springs, seeps, and ephemeral streams that are not otherwise protected 
by specific laws.
                         right to deny approval
    With the existing tools available to protect special resources and 
environmentally sensitive areas, there is no need to provide additional 
federal authority to address where mining claims should be denied on 
federal lands due to environmental or other concerns. In particular, it 
is not necessary to give the Secretary of Interior the right to stop a 
mining project when all environmental and other legal requirements are 
met. Such authority is simply not needed to protect against unnecessary 
or undue degradation as the federal land management agencies have other 
statutory and regulatory means of preventing irreparable harm to 
significant scientific, cultural, or environmental resource values. The 
Department of the Interior exercises case-by-case discretion to protect 
the environment from any unnecessary or undue degradation through the 
process of approving or rejecting individual mining plans of 
operations.
    Not only is such federal authority unnecessary to protect the 
environment or special resources, providing such authority creates 
significant uncertainty regarding ultimate mining project approval. 
Mining projects will not be able to attract investments if there is no 
certainty that the project can obtain approval even when the operator 
complies with all relevant laws and regulations. Investors need to know 
that a mining project in the United States can obtain approval and 
proceed unimpeded as long as the operator complies with all relevant 
laws and regulations. Mining projects--from exploration to extraction 
to reclamation and closure--are time- and capital-intensive 
undertakings, requiring years of development before investors realize 
positive cash flows. Recently announced mining projects being 
contemplated both within and outside the United States, including 
Freeport McMoran's restart of its Climax Mine in Colorado, have ranged 
from hundreds of millions of dollars to multi-billion dollars. 
Uncertainty in the legal regime applicable to mining projects can chill 
the climate for capital investments in domestic mining projects and 
have serious consequences for our economic and national security. If 
the investments critical for bringing a mine to fruition tend to 
migrate toward projects planned in other countries, the United States 
will become even more reliant on foreign sources of minerals.
            growing reliance on foreign sources of minerals
    Despite reserves of 78 important mined minerals, the United States 
currently attracts only eight percent of worldwide exploration dollars 
and Freeport McMoran's greenfield exploration budget is the same. As a 
result, our nation is becoming more dependent upon foreign sources to 
meet our country's strategic and critical metals and minerals 
requirements, even for minerals with adequate domestic resources. The 
2007 U.S. Geological Survey Minerals Commodity Summaries reported that 
America now depends on imports from other countries for 100 percent of 
17 mineral commodities and for more than 50 percent of 45 mineral 
commodities. This increased import dependency is not in our national 
interest particularly for commodities critical to pending strategic 
programs such as reducing greenhouse gas emissions or undertaking 
energy efficiency efforts. Increased import dependency causes a 
multitude of negative consequences, including aggravation of the U.S. 
balance of payments, unpredictable price fluctuations, and 
vulnerability to possible supply disruptions due to political or 
military instability.
    Our over-reliance on foreign supplies is exacerbated by competition 
from the surging economies of countries such as China and India. As 
these countries continue to evolve and emerge into the global economy, 
their consumption rates for mineral resources are ever-increasing; they 
are growing their economies by employing the same mineral resources 
that we used to build and maintain our 6 economy. As a result, there 
exists a much more competitive market for global mineral resources. 
Even now, some mineral resources that we need in our daily lives are no 
longer as readily available to the United States.
                               conclusion
    The U.S. mining industry has fully embraced the responsibility to 
conduct its operations in an environmentally and fiscally sound manner. 
For many mining companies, we have demonstrated this commitment through 
the implementation of environmental management systems, which are a 
method of improving overall environmental performance, environmental 
compliance, and closure and reclamation success. The industry hopes and 
expects that Mining Law legislation will recognize and honor both its 
commitments to continuous improvement in our environmental performance 
and the industry's contribution to our national wellbeing.
    NMA appreciates the opportunity to provide this testimony.

    The Chairman. Thank you, very much. Next is Alan Bernholtz, 
the Mayor of Crested Butte. Go right ahead.

              STATEMENT OF ALAN BERNHOLTZ, MAYOR, 
                       CRESTED BUTTE, CO

    Mr. Bernholtz. Good morning. I want to start by thanking 
our humble Chairman and distinguished members of the committee 
for the opportunity to testify regarding the reform of the 1872 
Mining Law. I am the Mayor of the Town of Crested Butte, 
Colorado, and Crested Butte is a nationally registered historic 
district and world class ski and recreation community, with a 
resident population of 1,600 people. We are located 230 miles 
southwest of Denver, and Crested Butte is surrounded by 
federally designated wilderness areas. Crested Butte is 
concerned over a number of issues raised in the debate over 
reform of the 1872 Mining Law. Some of these issues paramount 
concerns for our community.
    We respectfully submit that any reform must take into the 
critical importance of municipal watersheds in western 
communities. Watershed protection must take precedence over 
industrial mining development. Local governments must be given 
a much larger role of designation of where mining development 
can happen and be undertaken. The ability of local governments 
in certain critical areas withdrawn from entry and development, 
must be an essential tenet of any reform legislation. We 
believe Crested Butte offers plenty of examples of the problems 
with application of the 1872 Mining Law in modern times. At 
Crested Butte, it is our clean environment and our recreational 
opportunities on public land that allowed us to thrive as a 
prominent, international recreation destination. These values 
are threatened by a large-scale industrial mining project 
proposed on U.S. Forest Service Land on Mt. Emmons a/k/a as Red 
Lady, just one mile from our town boundary. This project is 
also known as the Lucky Jack Project proposed in the town's 
municipal watershed. The map you have in front of you this 
mornings depicts the location of the town's watershed overlaid 
by the projects proponents claims. We submit this map to the 
honorable chairman and the committee for the record.
    Based on an initial understanding of the Lucky Jack 
Project, the mine will dump hundreds and thousands of tons of 
mine wastes and mine tailings into our watershed, disturb 
thousands of acres of prime wildlife habitat, and eliminate 
critical recreational areas from public use and essentially 
turn pristine National Forest lands outside of our town into a 
permanent industrial dump site. At present, the Lucky Jack 
Project will be regulated by the provisions of an antiquated 
1872 Mining Law. Although we are just now beginning to 
understand, is clear to us the current law fails to protect the 
interests of our community. The residents of Crested Butte have 
been staunchly unified in any mine development since the late 
1970s. We have businesses, reeves, and even ski lifts named 
after Red Lady. Red Lady is a a primary source of the town's 
water and popular recreational area, and an important part of 
the fabric of our community.
    Crested Butte actually has a rich history in mining and we 
are not opposed to responsible mining. We are proud of our 
heritage. As a former miner community, we recognize the 
importance of a strong and stable mining industry. Times have 
changed. Today our community depends on a healthy, intact 
watershed and long-term and sustainable economic prospects 
based on recreation and tourism. Mining will not better our 
community; it would actually destroy it. Under the Government's 
interpretation of the 1872 Mining Law, the Forest Service is 
powerless to deny the Lucky Jack Project. At best, the Forest 
Service can only ''minimize adverse impacts``. In light of 
this, we ask the following: Why if the Lucky Jack Project would 
so negatively affect or communities water supply and the local 
recreation-based community, of course, powerless to deny this 
project. The form of the 1872 Mining Law must at its course, 
contain a new environmental standards to protect public 
resources from adverse impacts. At a minimum, Congress must 
grant the BLM and the Forest Service the authority to balance 
other public needs, uses, and values on public land in 
evaluating a mining proposal. The Federal agency with public 
input must then decide that the mining is appropriate use of 
and suitable for those public lands in question.
    In situations like ours, mining is not the preferred use of 
Federal land. The protection of our municipal watershed and the 
maintenance of our vital recreation-based economy must be the 
deciding factor. Each mine project and public resources 
impacted there must be only approved on a case-by-case basis. 
Certain lands must not be open for location or entry. At a a 
minimum, municipal water sheds and lands critical to local 
recreation-based economies must be withdrawn from entry because 
local communities are best able to ascertain the importance 
surrounding public lands. These communities deserve the right 
to have a direct say in withdrawal decisions. It is also 
important to recognize the critical need for local and State 
regulation of hard rock mineral development. It is imperative 
that Congress recognize State and local laws that regulate 
mineral development and its impacts. On behalf our community, 
we thank you, very much for the opportunity to come forward 
this morning. The future of Crested Butte is dependent on the 
protection of our water, our land, and our economy, which all 
are at risk without your comprehensive reform of antiquated 
1872 Mining Law.
    Accordingly, we request that Congress as expeditiously as 
possible to bring mining regulations into the 21st century. 
Thank you.
    [The prepared statement of Mr. Bernholtz follows:]
     Prepared Statement of Alan Bernholtz, Mayor, Crested Butte, CO
    Honorable Chairman and Members of the Committee: Thank you for the 
opportunity to submit our comments and respond to the Committee's 
questions regarding reform to the 1872 Mining Law. As the Mayor of a 
small community in western Colorado surrounded by federal land, I 
understand the importance of sensible and effective public lands 
management that meets the needs of small communities like ours and all 
Americans.
    Crested Butte is keenly interested in a number of issues related to 
the reform of the 1872 Mining Law, but several are of paramount 
concern. At the outset, any reform must consider the essential 
importance of municipal watersheds to the health and vitality of 
western communities. Watershed protection must take precedence over 
industrial mining development. Relatedly, state, local and tribal 
governments must be given a much larger role in the determination as to 
whether and where mining development can proceed. The ability of these 
governments to have certain critical areas withdrawn from entry and 
development must be a central tenet of any reform legislation.
                        crested butte, colorado
    Crested Butte is a world-class ski town and National Historic 
District with a resident population of approximately 1,600 persons. We 
are located 230 miles southwest of Denver. Crested Butte is sandwiched 
between the Raggeds, Maroon Bells and West Elk Wilderness areas--50 
miles directly upstream from the Black Canyon of the Gunnison National 
Park.
    Crested Butte has a rich mining history and we are proud of our 
heritage. Times have changed though and our residents and economy no 
longer depend on mining. In our community, skiing, fishing, hiking and 
mountain-biking, to name a few, are the life-bloods of our economy. It 
is our clean environment and recreational opportunities, enhanced 
greatly by our abundant public lands that have allowed us to thrive.
    As a former mining town, we recognize the importance of a strong 
and stable mining industry. We are cognizant, however, that the future 
of our community depends on a healthy, intact watershed and long-term 
and sustainable economic prospects not subject to the boom-and-bust 
cycle of mineral development. We believe that comprehensive reform can 
achieve these goals.
                         the lucky jack project
    Of all the issues facing Crested Butte, like those of most 
communities across America, none are more important than protecting our 
quality of life, the health of our citizens, our environmental values 
and the economic vitality of the community. Today, as we prepare to 
testify before the Committee, all of these values are threatened by a 
large-scale industrial mining project proposed on United States Forest 
Service (Forest Service) lands just one mile outside our Town boundary. 
This project, a/k/a the ``Lucky Jack Project'' is proposed in our 
watershed where the Town obtains its domestic water. A map depicting 
the location of the Town's municipal watershed is attached hereto. 
Currently, the Lucky Jack Project will be regulated by the antiquated 
provisions of the 1872 Mining Law. Although we have just begun our 
review of this proposed molybdenum mine, it is clear to us that current 
federal law materially fails to protect the interests of our community, 
local residents and businesses and the tourists that visit and sustain 
Crested Butte.
    Based on our initial understanding of the Lucky Jack Project, the 
mine will dump hundreds of thousands of tons of mine wastes and mine 
tailings into Crested Butte's watershed, disturb thousands of acres of 
prime wildlife habitat, eliminate critical recreational areas from 
public use and essentially turn pristine National Forest lands outside 
of our Town--all of which are surrounded by federally designated 
wilderness--into a permanent industrial dump site.
    As depicted in red on the attached map,* the project proponents 
(U.S. Energy Corp. and Kobex Resources, Ltd. (collectively, ``U.S. 
Energy/Kobex'')) have filed mining and millsite claims on large areas 
of the Gunnison National Forest right above the Town. We obtained the 
red highlighted portion of the map from U.S. Energy/Kobex's website on 
the date of this correspondence. These claims are slated for U.S. 
Energy/Kobex's network of waste dumps, pipelines, roads and related 
facilities.
---------------------------------------------------------------------------
    * Map has been retained in committee files.
---------------------------------------------------------------------------
                            1872 mining law
    Under the federal government's interpretation of the 1872 Mining 
Law, the Forest Service is powerless to deny the Lucky Jack Project. At 
best, under the agency's mining regulations located at 36 CFR Part 
228A, the Forest Service can only ``minimize adverse impacts'', but 
cannot deny the proposed project to protect public resources and local 
interests.
    Public resources and local interests are vital to Crested Butte. In 
addition to the need to protect our watershed, the Town relies heavily 
on various forms of tax revenues from tourists, local residents and 
businesses, second homeowners and other recreational users of public 
lands--the same lands that will be impacted by the Lucky Jack Project. 
None of these values are considered by the Forest Service in its 
perfunctory duties under the 1872 Mining Law. Due to the vital 
importance of reform of the 1872 Mining Law to this community, both the 
Town and Gunnison County passed unanimous resolutions urging the 
immediate and comprehensive reform of this antiquated law. We have 
attached the Town's August 7, 2007 resolution and the September 18, 
2007 County resolution for your reference.**
---------------------------------------------------------------------------
    ** Documents have been retained in committee files.
---------------------------------------------------------------------------
                  specific reform issues and responses
    The resolutions cited above outline, in our view, the minimum 
conditions for reform--The Town's specific answers to the questions 
posed by the Committee in its January 7, 2008 correspondence are as 
follows:

          (1) Should legislation provide for new environmental 
        standards for hardrock mineral activities? If so, what should 
        those standards be and what transition rules would be 
        appropriate for their implementation?

    Reform of the 1872 Mining Law, must, at its core, contain new 
environmental standards to protect public resources from adverse 
impacts. The current regulatory standards, especially the completely 
ineffective ``minimize adverse impacts'' requirement in the Forest 
Service regulations, must be substantially strengthened. At a minimum, 
Congress must establish the principle that proposed mining operations, 
in certain situations, be denied as a matter of sound public policy and 
law. Both the Bureau of Land Management (BLM) and the Forest Service 
must be given the authority to balance other public uses and values on 
public lands in determining whether a specific mining proposal can be 
approved.
    For example, under the current mining law and regulations, mining 
in Crested Butte's watershed is considered by the Forest Service as 
``the highest and best use'' of the public lands above our Town--
regardless of the impacts to our watershed and other values. This is 
directly contrary to the health and vitality of our community. The 
decision whether mining can occur must be balanced with the needs of 
the community, especially regarding the protection of watershed 
integrity and the economic values inherent in high-quality waters and 
lands.
    The federal land agencies must have the authority to consider and 
protect the non-mining values that are so important to towns like 
Crested Butte. Each mining proposal must be judged on its own merits. 
In some situations, such as ours, mining is not the preferred use of 
federal land. In this case, watershed protection, the maintenance of a 
vital recreation-based economy and similar values are paramount to the 
residents of this area. In other areas of the western United States, 
however, mineral development may be considered the best use of federal 
land and mining should proceed accordingly. Each situation is different 
and the federal land agencies must have the authority and discretion, 
with substantial input from the local communities affected thereby, to 
recognize that mining may not be the most beneficial use of public 
land.
    Regarding the implementation of the much-needed authority to 
protect other valued public resources from mining development, any 
reform to the 1872 Mining Law must apply, at a minimum, to all projects 
that have not received required federal, state and local approvals and 
have not undergone thorough and comprehensive environmental reviews. 
Existing operations may be conducted under their current approvals, but 
any revision or expansion to existing operations must be subject to any 
new requirements.

          (2) Should legislation designate categories of lands as not 
        available for-location and entry? If so, what categories should 
        be designated?

    Yes. Certain lands should not be available for location and entry. 
At a minimum, municipal watersheds must be withdrawn from location and 
entry. Other values, such as roadless areas, wild and scenic rivers, 
prime wildlife habitat, Native American sacred grounds, and lands 
important to local recreation-based economies, such as Crested Butte's, 
also deserve withdrawal. Because local residents, businesses and 
elected officials are best able to ascertain the importance of local 
public lands for these values, it is critical that states, counties and 
municipal governments (as well as tribal governments) have a direct say 
in these withdrawal decisions. Thus, H.R. 2262's provision enabling 
these governments to petition for withdrawal must be enacted. It is 
important that the standard for approving such a petition be reasonable 
and that such petitions be granted as a matter of course except in 
cases of a vital national interest that requires that lands be kept 
open for mineral entry.

          (3) Should the legislation address situations where mining 
        claims should not be developed due to environmental or other 
        concerns? If so, how should this he addressed?

    Yes. As with the withdrawal of lands from mineral entry, certain 
lands, as a general matter, must be protected from mineral development. 
Each mine project, and the public resources to be impacted thereby, 
must be viewed on a case-by-case basis. This must occur at the outset 
of the permitting process. If existing claims are proposed for mineral 
development, the federal land agency, with the invited and 
comprehensive input from local communities and the affected public, 
must then decide if mining is the appropriate use of that public land. 
Some mining operations, due either to their significant impacts or due 
to the location of the proposed development, must be deemed unsuitable 
for those lands. Other projects, due to proposed environmental 
safeguards and the lack of important resources or public concern, 
should be permitted to go forward.
    In the case of Crested Butte, it is clear that industrial mineral 
development of the public lands on Mt. Emmons and within the Town's 
statutorily established municipal watershed would result in significant 
adverse environmental impacts that are not addressed under the 1872 
Mining Law. The Town's watershed represents a prime example of an area 
that is clearly unsuitable for mineral development.
    It is also important to recognize the critical need for local and 
state regulation of hardrock mineral development. Some mining companies 
have argued that such close-tothe-ground regulations are pre-empted by 
federal mining policies and laws. That is wrong and frankly makes no 
sense as it is the local communities that are directly affected 
thereby. It is imperative that local and state statutes and regulations 
that limit or prohibit mineral development and its impacts under 
certain circumstances be recognized by Congress as an integral part of 
natural resource development and regulation in the western United 
States.

          (4) What additional financial assurances, if any, should be 
        required for mining operations?

    Although the BLM and Forest Service regulations regarding financial 
assurances have improved in recent years, significant improvements are 
still necessary. For example, under current BLM and Forest Service 
regulations and policies, the agency and the mining company determine 
the amount of the financial assurance with little or no public input 
(i.e., the financial assurance amount is determined after the mine is 
approved and the National Environmental Protection Act (NEPA) process 
concluded). Further, the financial assurances only cover what the 
company is proposing to do as part of its initial plan of operations. 
These warranties never account for the potential for spills, leaks and 
other problems. Mining companies must be required to establish, in 
addition to the basic ``reclamation'' financial assurances, a trust 
fund or other mechanism to account for potential failures. The western 
United States, even in the ``state-of-the-art'' era of modern mining, 
is riddled with examples of such problems that were not predicted by 
the company or the regulator. The Summitville Mine disaster in Colorado 
is one of the most egregious examples, with cleanup costs exceeding 
$200 million and counting. In that case, the State of Colorado required 
only a bond for less than $5 million. The result of this disaster is 
that the taxpayer has been forced to largely foot the bill. This is 
unacceptable. Closer to home, Crested Butte residents live with the 
threats posed by a defunct silver/lead/zinc mine that continues (and 
has for the last 30 years) to discharge contaminated water directly 
into our watershed. While at the same time the Environmental Protection 
Agency (EPA) is in the process of re-mediating the Standard Mine 
Superfund less than one mile away. This Superfund site is also in the 
Town's municipal watershed. Yearly treatment costs for the water 
running out of the defunct mine exceed $1 million with no end in sight. 
State and federal reclamation laws failed to protect against this 
situation. We should not make the same mistake twice. Any reform of the 
1872 Mining Law must account for such contingencies and should contain 
comprehensive provisions ensuring that in the future local communities 
do not have to deal with the mess left behind by inadequate financial 
assurances.

          (5) What type of additional enforcement and compliance 
        provisions, if any, are needed?

    The current system of lax enforcement and compliance must be 
substantially strengthened. For example, under current regulations the 
agencies have little authority to issue cease and desist orders without 
complicated and lengthy legal proceedings, even in the face of clear 
environmental harm. The agencies must have the authority to curtail, or 
halt if necessary, any activity not in compliance with the applicable 
plan of operations.
    Further, under current law, there are no citizen inspection or 
enforcement provisions, even on the public's land. At a minimum, a 
citizen suit provision similar to those contained in the Clean Water 
Act and the Surface Mining Control and Reclamation Act (for coal mines) 
is needed. Such provisions have been part of these laws since the 1970s 
and have worked well in the past. Communities such as Crested Butte 
must be able to seek legal redress for violations of federal mining and 
public land laws.
                               conclusion
    On behalf of the people of Crested Butte and all those that visit 
and enjoy our special place, thank you very much for the opportunity to 
bring our concerns to your attention. The future of Crested Butte is 
dependent on your protection of our water, our land and our economy. 
All of this is at risk without real, comprehensive reform of the 
antiquated 1872 Mining Law. We request that Congress act as 
expeditiously as possible to bring mining regulation into the 21st 
Century.

    The Chairman. Thank you, very much. Our final witness on 
this panel is Mr. Wanamaker, from Juneau, Alaska, go right 
ahead.

  STATEMENT OF RANDY WANAMAKER, EXECUTIVE DIRECTOR, BBC HUMAN 
          RESOURCE DEVELOPMENT CORPORATION, JUNEAU, AK

    Mr. Wanamaker. Good morning Mr. Chairman and members of the 
committee. Thank you for this opportunity to comment with 
regards to mining law reform. I am an Tlingit Indian from 
general Alaska. I'm a Registered Environmental Assessor and 
Certified Professional Geologist with over 30 years of 
experience in State, Federal, and private service. I have 
served as the Executive Director for the BBC Human Resource 
Development Corporation for the past two-and-a-half years.
    The BBC provides preemployment separation and preparation 
services to Alaska residents with an emphasis on helping 
Alaskan natives and other minority groups. Our tribe has 26,000 
members and a 62 percent unemployment rate among young adult 
males. I also served as the Deputy Mayor of the City and 
Borough of Juneau, the capital of Alaska. Juneau is a community 
with a mining history. Mining is located in the heart of my 
tribe's ancestral lands, hard rock mining that operates to this 
day. As a tribal member and an as an elected official and as a 
science professional, I know both the challenges and the 
benefits of mining. With the help of my colleagues, we have 
prepared and submitted written answers to the important 
questions you are considering. I will not repeat those 
technical answers because they are available for later review. 
I will summarize my other issue that highlight three important 
points. The first point is the description of the social 
economic benefits responsible mining can bring to a town with 
tax revenues, social and economic stability. As a minority 
group member, keeping social economic parity to stimulate jobs 
with benefits. The second point is a short descriptions of how 
cities and county can effectively participate in the Federal 
State permit process.
    It is possible for local governments to work closely with 
other agencies and with mining for the benefit of their 
community relative to due process and without compromising 
their governmental powers. Everyone wins when Government and 
industry forms strategic partnerships. The third point is a 
brief description of the value of simplifying, streamlining and 
rationalizing the overly-complex permit study and review 
process. This would benefit the public, the economy, the 
regulatory process, and the court system by helping to avoid 
the need for unnecessary appeals and litigation. The solutions 
to environmental management and reclamation issues can be 
achieved through the simplification and streamlining of the 
current Federal system so that a rational, easy to follow 
process is the result. To help illustrate my three points, I 
have provided you with supplemental information for your later 
review. That information tells me how the historic mine 
operators work with the Tlingit Indians when they encountered 
them.
    Mr. Wanamaker. This was a peaceful process in which both 
sides benefited. There were no wars, no bloodshed and there 
were no lingering environmental problems for our town. 
Different mines in our town are benefiting Juneau in many ways. 
Kensington operated by Coeur Alaska is the most successful 
Affirmative Action project in Alaska's history. The story of 
Kensington includes more than the expense of the Affirmative 
Action project. According to a scientific pole conducted on 
behalf of the City and Borough of Juneau, 76 percent of the 
citizens of Juneau have answered from important to very 
important. The high level of acceptance is not as the result of 
trading solutions for jobs, but is the result of a public 
collaboration of Juneau citizens to ensure responsible projects 
that go beyond simply getting the permit. Coeur Alaska has 
earned this social likeness. In summary, I have provided you 
with another way to look at mining law reform, and the and 
social economic views describing how responsible mining can 
benefit a town and it's minority members, minority members who 
are usually a majority of the unemployed an the underemployed. 
Thank you for this opportunity to comment.
    [The prepared statement of Mr. Wanamaker follows:]
 Prepared Statement of Randy Wanamaker, Executive Director, BBC Human 
              Resource Development Corporation, Juneau, AK
    Here is my input by question, as requested.
    Question 1. Should this legislation provide for new environmental 
standards for hardrock mineral activities? If so, what should those 
standards be and what transition rules would be appropriate for their 
implementation?
    Answer. The Reform Bill should not contain environmental standards 
for hardrock mineral activities. There already exists a myriad of 
federal, state and local statutes, rules and regulations and required 
authorizations which place strict environmental criteria on mining 
activities. For example, the Clean Water Act regulates stormwater and 
discharges from mines and related facilities as well as dredge and fill 
activities. The Resource Conservation and Recovery Act, Clean Air Act 
and Superfund to mention a few regulate mining and protect the 
environment. Moreover, each state has its own set of statutes and 
regulations which ``mirror'' these federal requirements.
    Kensington, for example, has over 50 individual state and federal 
permits. This does not include the local City and Borough Allowable Use 
Permit, grading and building permits, communications and transport 
authorizations. The project has a Plan of Operations, Monitoring and 
Mitigation Plans, a Reclamation Plan, a Spill Contingency Plan and a 
Transportation Mitigation Plan. All of these incorporate environmental 
best management practices. They are required by existing laws and 
regulations, which are often already duplicative and overlapping. No 
new regulations are needed in any Mining Law Reform Act.
    Question 2. Should the legislation designate categories of land not 
available for location and entry? If so, what categories should be 
designated?
    Answer. Legislation already exists that accomplishes this 
objective. The legislation includes the Alaska Native Claims Settlement 
Act and Alaska National Interest Lands Conservation Act legislation 
which establish Wilderness and Wild & Scenic Rivers, National 
Monuments, National Wildlife Refuges and others. These existing laws 
are more than adequate to accomplish such an objectives.
    Question 3. Should the legislation address situations where mining 
claims should not be developed due to environmental or other concerns? 
If so, how should this be addressed?
    Answer. The National Environmental Policy Act already accomplishes 
this objective. NEPA requires that mining claims located on federal 
lands must be evaluated for environmental and socio-economic impacts of 
developing that land prior to authorization of use by the administering 
agency. These evaluations are thorough and exhaustive. They address 
both adverse and beneficial impacts, as well as cumulative effects. In 
the case of Kensington, three of these studies were conducted at a 
combined costs of over $30 million. These required over 20 years of 
investigation and analysis, utilized highly qualified an even world 
renown scientists and engineers, and also involved separate risk 
analyses prepared by third-party (outside) experts. These NEPA-required 
evaluations further require that the applicant avoid, minimize and/or 
mitigate environmental impacts especially for sensitive areas. Examples 
include wetlands, streamside areas, wetlands, historic sites and 
others.
    Question 4. What additional financial assurances, if any, should be 
required for mining operations?
    Answer. There should be no additional financial assurances required 
by this legislation. Federal agencies like the Bureau of Land 
Management and US Forest Service already require ``full cost'' bonding. 
These costs are typically prepared by qualified third-party 
consultants. They address the costs of reclamation, plus 
administration, plus regular updating, plus escalation factors. The 
agencies presume that a third-party will also conduct the reclamation 
activities. Any additional financial assurances would be duplicative 
and unnecessary, as most states also require full cost bonding, which 
already duplicates federal requirements for state, private and Native-
owned land. Examples include: Alaska (ADNR), Nevada (NDEP) and Idaho 
(IDL and IDEQ).
    Question 5. What type of additional enforcement and compliance 
provisions, if any, are needed?
    Answer. No additional enforcement and compliance provisions are 
needed in any Mining Law Reform. Current enforcement is by USFS, BLM, 
EPA and Corps of Engineers. State enforcement in Alaska, as an example, 
is also provided by Alaska Department of Natural Resources, Alaska 
Department of Environmental Conservation and Alaska Department of Fish 
& Game. Further, most other states have similar oversight roles of 
enforcement. MSHA also administers the Mine Safety and Health Act.
                             other comments
    I am going to suggest an alternate way to conduct mining reform but 
first I am going to outline the benefits of mining to the Juneau 
Community along with a description of the problems experienced by one 
of the most studied and responsible mining development projects in 
North America, the Kensington Gold Mine.
    The mining industry has brought a great many benefits to the Juneau 
municipality and our citizens. This is especially true of the good 
paying jobs mining has provided for our aboriginal population of Alaska 
Natives. In addition to the Alaska Natives, Samoans, Filipinos, 
Vietnamese, Black Americans and returning veterans have all enjoyed 
recent employment as a result of our local mining industry. This is 
significant when you consider that adult Alaska Natives currently 
experience a 62% unemployment rate in Southeast Alaska.\1\ The mining 
industry pays an average wage of $70,000 per year plus health and 
retirement benefits. By contrast, in spite of Juneau being the home of 
state government, the average Juneau salary is $41,000 per year.
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    \1\ These December 31, 2007 unemployment figures are provided by 
the Central Council of Tlingit and Haida Indian Tribes of Alaska TANF 
Program. The Tlingit and Haida Tribe has 26,000 members.
---------------------------------------------------------------------------
    Juneau has two mines, Greens Creek and the Kensington Gold Mine.
    Greens Creek is an operating silver lead zinc copper mine located 
on nearby Admiralty Island. It has been operating in this Wilderness 
and National Monument since 1988. It employs 260 people with a payroll 
and benefits worth 23 million dollars per year to the Juneau economy. 
It pays an average of $900,000 per year in property taxes and is a 
consistent contributor to local non-profit organizations and community 
activities. Greens Creek employees and family members volunteer for 
many community activities including the arts, youth activities and 
local government such as the Planning Commission or ad hoc City 
Commissions. In short they are the types of citizens every municipality 
wants.
    The Kensington, owned and operated by Coeur Alaska, is a nearly 
fully constructed gold mine located 45 miles northwest of Juneau. It is 
awaiting a final round of permit review for a new tailings facility as 
a result of 11th hour litigation brought by environmental groups. It is 
in heart of the ancestral grounds of the Tlingit Tribes of Northern 
Lynn Canal and the Tlingit People are among its most staunch 
supporters. It has been in permitting and development since 1987 and it 
employed up to 410 people during construction from 2005 to 2007 at a 
cost to date of $238 million. It is expected to operate for about ten 
years with a work force of 200 people and payroll and benefits worth 18 
million dollars per year. It will pay an estimated $1,450,000 per year 
in property taxes. Approximately 170 direct and indirect support jobs 
are expected. The mine will purchase an estimated 9.3 million per year 
in local goods and services and generate approximately $450,000 in 
sales taxes. Kensington will become Juneau's second largest private 
industry employer and Juneau's largest taxpayer.
    The Kensington Gold Mine is also a consistent contributor to local 
non-profit organizations and a supporter of community activities. 
Kensington employees, family members and contractors also volunteer for 
many community activities including the arts, youth activities and ad 
hoc City Commissions. They also are the types of citizens every 
municipality wants. The Kensington enjoys broad based local support 
from the City Government, local minority populations, civil rights 
groups, non-profits, state and federal employees and many other 
citizens and organizations of Juneau and Southeast Alaska. This support 
was earned through comprehensive community outreach and affirmative 
action programs to ``Build Relationships of Trust'' with the 
stakeholders of the Kensington Gold Mine area. The outreach and 
affirmative action programs are described in the attached document 
entitled ``Community and Alaska Native Outreach''. A partial list of 
Kensington supporters is attached entitled ``Kensington Gold Mine 
Supporters''.
    Also attached are two official Economic Surveys conducted on behalf 
of the City and Borough of Juneau.* The first is entitled ``2006 
Economic Indicators'' the second is ``2007 Economic Indicators''. Both 
surveys were conducted by the Juneau Economic Development Council 
through a contract with a professional socioeconomic survey firm, The 
McDowell Group. They are scientific and representative of the 
community.
---------------------------------------------------------------------------
    * Surveys and additional material have been retained in committee 
files.
---------------------------------------------------------------------------
    The surveys show the economic value of the wages and taxes to the 
City and Borough of Juneau. The surveys also show the high level of 
citizen support the Kensington Gold Mine has in the Juneau Community. 
The 2006 survey shows that 76% of the households in Juneau think the 
Kensington is important to very important to Juneau's economy.
    The Kensington is viewed as important to very important for a 
variety of reasons. But it is not a case of trading pollution for jobs. 
The overwhelming majority of Citizens of the community think that the 
Kensington has received rigorous review by the state, federal and local 
agencies and that the Kensington Operator, Coeur Alaska, has used the 
community input to more than meet the criteria for simply permitting 
the mine. In short the community and the City and Borough Assembly 
believe that Coeur Alaska has more than adequate safeguards for 
protecting the environment while operating and beyond.
    Part of the reason the Kensington is viewed as so important is that 
a large part of Southeast Alaska is in economic and population decline. 
The loss of timber industry jobs, changes to the commercial fishing 
industry and the high cost of fossil fuel energy in rural Alaska have 
all contributed to the economic stagnation, severe unemployment and 
underemployment that affect rural Alaskans, primarily Alaska Natives. 
These Alaska Natives come to Juneau seeking employment but lack the 
vocational training skills needed for most employment. Coeur Alaska, 
through partnerships with the BBC Human Resource Development 
Corporation and the State of Alaska Department of Labor, University of 
Alaska Southeast, Central Council of Tlingit and Haida Indian Tribes of 
Alaska and local labor organizations has successfully recruited and 
trained a large number of Alaska Natives, other minority group members 
and other Alaska residents for the jobs at the Kensington Gold Mine. It 
is the most successful private industry, completely voluntary, 
affirmative action project in Alaska history.
    The opening of the mine is jeopardized by an 11th hour litigation 
brought by Lynn Canal Conservation, Sierra Club Juneau Chapter and 
Southeast Alaska Conservation Council. To summarize, the environmental 
groups filed litigation over a regulatory definition of waste and lost 
in Alaska's Federal District Court. They promptly appealed and were 
successful in having the case removed from the Alaska District Court to 
the Ninth Circuit Court of Appeals where they obtained an opinion that 
the operating plan was flawed due to the definition of waste used by 
the Ninth Circuit Court of Appeals three judge panel. (Ironically, a 
different three judge panel of the Ninth Circuit Court of Appeals 
recently reached a different opinion in a similar case upholding the 
Rock Creek Mine also located in Alaska.)
    The immediate result of this litigation by the environmental groups 
was that hundreds of Alaska Natives and other Alaska residents already 
employed or waiting for the job training and the opening of the 
Kensington lost their jobs or the opportunity for job training and jobs 
when the mine opens.
    A severe public reaction and loss of popular support forced the 
environmental groups to offer to work with Coeur Alaska to develop a 
tailings disposal plan and an amended operating plan that they would 
support and help to permit. The amended operating plan has been 
developed by Coeur Alaska but it remains to be seen if the 
environmental groups will honor their public commitments to help 
facilitate the review and permitting of the amended mine plan. In the 
meantime the hundreds of unemployed people seeking job training for the 
Kensington jobs now face an uncertain future. There is simply no other 
long term family wage job available in the region and the permitting 
for an amended operation plan could take up to two years if the 
environmental groups try to obstruct the project further.
    The negative public reaction was a surprise to the environmental 
groups but it should not have been. They did not pay heed to the public 
surveys showing overwhelming support for the Kensington, nor did they 
pay attention to the amicus briefs or intervenor status motions filed 
by numerous parties such as the City and Borough of Juneau, the State 
of Alaska and non-profit groups such as the Southeast Conference, a 
regional economic development organization representing legislators, 
tribes, cities, non-profits and private industry. All of these 
organizations or individuals believe in the integrity of the federal, 
state and local agency reviews used for the Kensington permits. They 
also overwhelmingly believe that the environmental groups true purpose 
was simply to prevent mining, not to protect the environment.
    It is this type of activity by environmental extremists without 
regard for the integrity of the federal, state and local permitting 
process or the needs and rights of their neighbors that prompts my 
suggestion for meaningful mining reform. To best serve the public, the 
environment, the judicial system and the economy, mining reform should 
be to streamline, rationalize and simplify what has become a Byzantine 
and unnecessarily complex process.
    Federal laws for clean water and clean air and reclamation are more 
than adequate to protect the environment. State laws mirror the federal 
laws and processes. In my experience municipal governments feel 
overwhelmed by the complexity and poorly understood mining permit 
process and they think they need to duplicate the entire Environmental 
Impact Statement process. That is not necessary.
    What municipal governments can do is to participate fully in the 
federal-state study and mine permit review processes. They should 
provide the input they know best such as local socio-economic concerns. 
In mine permitting, municipalities should focus on traditional 
municipal responsibilities such as lights, dust, traffic, noise control 
and zoning requirements. In addition the municipalities can form 
strategic partnerships with the mining industry, labor, non-profit, 
state and university job training programs to identify, recruit, train 
and dispatch local citizens interested in good paying jobs so that 
their citizens can obtain those jobs if the mine is approved.
    If the Senate Committee on Energy and Natural Resources is 
interested in detailed information as to how to simply, rationalize and 
streamline the current mine permitting process, my colleagues in the 
environmental and mining industries will gladly assist a prompt and 
comprehensive review in the interests of the common good.
    Thank you for this opportunity to comment.
         attachment 1.--supporters of the kensington gold mine
    The State of Alaska; The State of Alaska, Office of the Governor; 
Alaska State Legislature; Alaska State Chamber of Commerce; Alaska 
State District Council of Laborers; Alaska State Troopers; Alaska 
Department of Fish and Game; Alaska Department of Commerce, Community, 
and Economic Development; Alaska Department of Commerce; Alaska 
Department of Environmental Conservation; Alaska Department of Natural 
Resources; Alaska Department of Revenue; Alaska Department of 
Transportation; Alaska Brewing Company; Alaska Coastal Aggregates; 
Alaska Coastal Homes; Alaska Employment Group; Alaska Industrial 
Hardware; Alaska Marine Lines; Alaska Miners Association; Alaska Native 
Brotherhood Grand Camp; Alaska Pacific Bank; Alaska Public Entity 
Insurance; Alaska Travel Adventures; Alaska Department Of Labor; Alaska 
Electric Light & Power; AIH--Outside Sales; Allen Marine Alaska Marine; 
Lines; Alaska Native Brotherhood Grand President; Baxter Bruce & 
Sullivan, Attorneys at Law; BBC Human Resource Development Corporation; 
BEP Toner Recycling; Berners Bay Working Group; Bikin--Economic 
Development; Bureau of Land Management; Capital Office; Carlton Smith 
Co.; Carpenters Local 2247--Alaska Regional Council of Carpenters; 
Catholic Community Services; Central Council of Tlingit & Haida Indian 
Tribes of Alaska; City and Borough of Juneau; City and Borough of 
Juneau Assembly; City of Hoonah; Coastal Helicopters; Coldwell Banker 
Race Realty; Copy Express; Cycle Alaska; Department of Commerce and 
Community Economic Development; Delta Sigma Phi; Department of 
Education and Early Development; DeWitt & DeWitt, lobbyist; Don Abel 
Building Supply; Duran Construction; Extended Stay; Filipino Community 
Association; Gastineau Contractors; Goldbelt, Inc.; Greater Ketchikan 
Chamber of Commerce; Greens Creek; Gruening & Spitzfaden APC; Haines 
Borough; Haines Chamber of Commerce; Hangar on the Wharf; Holland 
America Westours; Huna Totem Corporation; Hyak Mining; IBEW Local 1547; 
ICMA; Inland Boatman's Union; Juneau Brass; Juneau Chamber of Commerce; 
Juneau Economic Development Council; Juneau Gold Rush Commission; 
Juneau Job Center; Juneau Board of Education; Juneau Urgent Care; Kake 
Tribal Corp.; KeyBank; Klukwan, Inc.; Kootznoowoo Corp.; Laborers Local 
942; Legend Charters; Metcalfe Communications; Nature Conservancy; 
Northland Services; PacWest; Petro Marine; Princess Cruises & Tours, 
Alaska Region; R&M Engineering; Resource Development Council; Sealaska 
Corporation; Smith Barney; Southeast Alaska Fishermens Alliance; 
Southeast Alaska Gillnetters; Southeast Alaska Native Economic Futures 
Coalition; Southeast Conference; Spickler/Egan Financial Services; SE 
Coordinator Knowles Campaign; Territorial Sportsmen; Tlingit Haida 
Central Council Job Development; Trucano Construction; Tyler Rental; 
University of Alaska Southeast; United Fishermen of Alaska; Wings of 
Alaska.
attachment 2.--community and alaska native outreach for the kensington 
                               gold mine
Juneau, Alaska
    Juneau is the Capital City of Alaska and is a unified city-borough 
government with a population of 32,000 people. Juneau, originally the 
fishing grounds of numerous Tlingit clans, is located I northern 
Southeast Alaska in Gastineau Channel. The presence of gold in Juneau 
was made known in the late 1800's when Kowee, an Auk Tlingit leader, 
brought gold to the attention of prospectors. Following prospecting 
work with the help of local Natives, Juneau was established as a gold 
mining town and numerous mines were built and operated. These mines 
paved the way for timber, fishing, and eventually government being 
located in Juneau as the population increased and it became a regional 
hub.
Coeur d'Alene Mines
    Corporation Coeur d'Alene Mines Corporation is the world's largest 
primary silver producer, as well as a significant, low-cost producer of 
gold. The company has mining interests in Nevada, Idaho, Alaska, 
Argentina, Chile, Bolivia and Australia.
Coeur Alaska, Inc.
    In 1987, Coeur Alaska, a wholly-owned subsidiary of Coeur d'Alene 
Mines Corporation, acquired an interest in the Kensington Gold Mine 
located 45 miles north of Juneau--in 1995 Coeur acquired a full 
interest in the mine. For over 20 years, Coeur has worked and invested 
over $238 million in the exploration, development and construction of 
the Kensington Gold Mine. Coeur has conducted a community outreach 
process best described as sound science coupled with an open dialogue 
with the affected community resulting in a project that goes beyond 
good engineering and permitting requirements.
    The Kensington is located on Northern Lynn Canal, near Berners Bay, 
an estuary deemed an Aquatic Resource of National Importance by the 
U.S. Environmental Protection Agency. This area is also part of the 
ancestral land of the Tlingit People of Southeast Alaska. In addition 
the area has important fishery and recreation values enjoyed by many 
user groups. Coeur quickly realized the project would face unique 
challenges.
    In order to meet the multiple challenges faced by the Kensington, 
Coeur initiated an ongoing community outreach program. This 
multifaceted program addressed the challenges through communications 
designed to identify the circumstances, problems or activities needing 
attention; working to find solutions and determine mutual benefits; 
and, seeking effective solutions. This approach resulted in solutions 
to community and user group concerns that are transferable and 
sustainable. A brief summary of the history, approach, solutions, 
effectiveness and transferability for some of the many challenges 
follow.
    A hallmark of Coeur Alaska's exploration and development processes 
is the ongoing solicitation of comments from all segments of the local 
communities as well as from local, state and federal government 
agencies. The process of seeking comments goes beyond meeting permit 
requirements, the process is used to fully understand the many user 
groups and stakeholder interests in order to ``Build Relationships of 
Trust'' with the community.
    Early on it became evident to Coeur that the user groups of the 
land in and around the Kensington Mine have this in common: While they 
would like to benefit from jobs and economic opportunity, they also 
have intimate ties to the land. These ties to the land are all 
different, each has sub-components and each requires working with 
different parties in order to understand and meet their concerns. In 
addition, the ties are sometimes competing interests so that solutions 
to meet the concerns of one group may not meet the concerns of another.
    Coeur acknowledged these complex relationships by working with ALL 
of the user groups in order to understand their concerns and address 
them, rather than just follow the letter of the law in order to obtain 
our permits. By outreach and understanding, Coeur sought to ``Build 
Relationships of Trust'' and become part of the community. The ties to 
the land near the Kensington are based on the following interests;

   Environment
   Economic
   Recreation
   Historic
   Ancestral
   Subsistence

                              Environment
    From the outset, Coeur recognized the area in and around the 
Kensington Mine is regarded as special to numerous environmental 
advocacy groups. From the beginning Coeur has met with the many 
interest groups to determine their concerns and to obtain their input 
for mitigation and project planning they could endorse, not just 
accept.
    As part of the environmental community outreach, Coeur, in 
association with the Southeast Alaska Presidents Association, a non-
profit Alaska Native Business Alliance, helped to organize and sponsor 
a successful two day regional environmental compliance conference. This 
conference, held in Juneau in 1995, featured environmental compliance 
obligations, problems and successes experienced by regional industries, 
non-profit and environmental organizations, municipalities, state and 
federal agencies. Conference speakers and participants included 
personnel from all levels of non-profit and agency organizations and 
private industry.
    The goal of the conference was to bring together the public, the 
regulated community and the regulators in an effort to identify and 
better understand the obligations, practices, problems, successes and 
solutions for environmental compliance. It is thought that a better 
understanding of the needs and roles of the public, the regulated and 
the regulators will lead to improvements in the permitting and 
compliance process and increased community acceptance.
    Topics of the conference included;

   Permitting Process and Environment
   Human Health
   Clean Air Act Amendments
   Fuel handling and Marine Oil Spill Response
   Water Quality
   Forest Practices Act
   Spill Response and Environmental Compliance Obligations
   Hazardous and Solid Waste

    Participants included;

   Lt. Governor Fran Ulmer
   Alaska Department of Law
   Sierra Club Legal Defense Fund
   Alaska Department of Fish and Game
   Alaska Department of Natural Resources
   City and Borough of Juneau
   Southeast Alaska Conservation Council
   U.S. Coast Guard
   U.S. Army Corps of Engineers
   U.S. Environmental Protection Agency
   Southeast Alaska Presidents Association
   Douglas Island Pink and Chum Hatchery
   Health Sea, Inc.
   Alaska Department of Environmental Conservation
   Alaska Division of Governmental Coordination
   Echo Bay Mines
   Coeur d'Alene Mines
   Klukwan Forest Products
   Goldbelt, Incorporated
   White Pass Fuel
   Southeast Alaska Petroleum Response Organization
   Anchorage Municipal Power and Light
   First Bank Alaska
   Bayliss Environmental Services
   Easton Environmental

    The Environmental Compliance Conference was a definite success. 
People traveled from across the state to attend and participate while 
the public gained a better understanding of environmental compliance 
issues. The goal of improved outreach was met when the regulated 
community and the regulators identified key areas where they should 
form working groups to improve regulatory programs and requirements.
    The increased understanding, communications and cooperation 
resulting from the Environmental Compliance Conference were key in 
helping to ``Build Relationships of Trust'' with the community.
    The working group concept is effective, transferable and 
sustainable. It has since been used by the City and Borough of Juneau 
to address community needs and solutions for a wetlands mitigation 
banking program. Coeur Alaska was pleased to be part of the working 
group to help develop the Juneau Wetlands Mitigation Banking Program.
    As a part of the outreach effort to environmental advocacy groups, 
over a period of several years, Coeur negotiated a mitigation and 
litigation avoidance agreement to address their concerns. The groups 
involved included local chapters of the Audubon Society, Sierra Club 
and local groups such as the Friends of Berners Bay. Although most of 
the environmental organizations were satisfied, two organizations 
declined ratification of the agreement. In spite of this, the benefits 
from this outreach were that the identified mitigation issues were 
adopted by Coeur anyway and the great majority of the people of the 
community and region appreciated and respected the reasonable approach 
Coeur had taken. The outreach was acknowledged by the general public 
for going beyond what was required, for doing more than meeting permit 
conditions.
    As a part of the Kensington operations plan, Coeur and the public 
have formed the Berners Bay Working Group, a group of stakeholders, 
organized to monitor and advise Coeur as to the possible effect of mine 
operations on the Bay.
                                Economic
    Economic interests are based on commercial fisheries, future access 
and utility corridors and a desire to expand the employment and 
economic base of the community. All of these modern economic interests 
began in the late 1880s' when gold, fish and timber drew explorers and 
developers to the Southeast Alaska Region.
    Outreach efforts to commercial fishermen began at the outset of 
Coeur's involvement with the community. Meetings, focus groups and 
surveys were initiated with fishermen and fishermen organizations. 
These outreach efforts were held in order to properly understand the 
types, needs, seasons, practices and locations of the various 
fisheries. Through many one on one meetings and group meetings, Coeur 
and the fishermen discussed and planned for the mitigation for water 
quality, tailings disposal, facility locations and potential fishing 
and gear losses due to mining activities. As a result of this sustained 
outreach, fishermen and fishermen organizations are among the most 
consistent supporters of the Kensington Project. Supporting 
organizations include the United Fishermen of Alaska and United 
Southeast Alaska Gillnetters.
    In other economic focus meetings, Coeur met with agencies, groups 
and individuals working on long term plans for road and utility 
corridors and ferry terminal sites in and around the Kensington area. 
These corridors and sites are considered key to long term economic 
development through improved access to Juneau, the State Capital. Due 
to the cooperative planning efforts, road and utility corridors and 
ferry terminals were designated that are not disruptive to the 
Kensington while meeting the needs of the transportation planning 
authorities.
    The National Environmental Policy Act process for the Juneau Access 
Road is complete and it is proceeding towards construction.
    Economic and employment interests includes the desire of the 
community to benefit from the jobs and economic opportunities once the 
environmental and land use concerns were satisfactorily addressed. 
These interests are of utmost importance as the region has entered a 
period of population loss and economic stagnation due to the loss of 
thousands of high paying jobs in the timber industry and major changes 
in the commercial fishing industry and markets. Other employment needs 
included the long term chronic problem of Alaska Native unemployment 
and under-employment and a lack of opportunity for high school 
graduates which results in the migration of youth out of the state.
    To help realize the economic and employment needs of the community 
and region, and to help Coeur meet its manpower needs at the 
Kensington, a region wide employment and training project was 
established. This project was established with the support and in 
partnership with various Native Corporations, state agencies, non-
profit manpower training and labor organizations. This project is the 
BBC Human Resource Development Corporation.
    In 1993 Coeur began working with local Tlingit leaders willing to 
help develop a cooperative relationship to address cultural and 
environmental concerns while ensuring the responsible development of 
the Kensington Project. After expressions of mutual interest, Coeur 
began working very closely with leaders from three of the Alaska Native 
Corporations based in Juneau. These corporations, formed pursuant to 
the Alaska Native Claims Settlement Act were Klukwan, Inc., Kake Tribal 
Corporation and Goldbelt, Incorporated. All of these corporation's 
Tlingit shareholders have ancestral ties to the land around the 
Kensington Gold Mine.
    The Berners Bay Consortium (BBC) was organized in October 1994 by 
Goldbelt, Inc., Klukwan, Inc., and Kake Tribal, Corporation. Their goal 
is to increase business and Tlingit employment opportunities by working 
with Coeur, while protecting the cultural, subsistence and 
environmental values of an area long important to the Tlingit People of 
Southeast Alaska. All three Native Corporations realized it would be 
hard to offer their services to a major project such as the Kensington 
individually, but by cooperating and combining their resources and by 
partnering with local non-Native firms and other local organizations, 
they could offer much more.
    Coeur d'Alene Mines and it's subsidiary Coeur Alaska the owner/
operator of the Kensington Project, were seeking a partnership to 
accomplish important operational, environmental and public involvement 
goals. Their agreement with the three Native Corporations is not just 
for the purpose of business development, it includes the wise use of 
human, natural and business resources of all of the parties.
    As part of the implementation of the agreement for business and 
employment preference, the BBC members and Coeur entered into an 
agreement in January 1996. This agreement led to the organization of 
the BBC-Human Resource Development Corporation in July of 1996. The 
BBC-HRDC members are Coeur Alaska, Inc., Klukwan, Inc., Kake Tribal, 
Corporation, and Goldbelt, Inc.
    The BBC-HRDC is the organization that is responsible for 
identifying, recruiting, screening, training, and dispatching of 
qualified Alaska Natives and Alaska residents to the Kensington 
Project. It is important to note that the employment preference is 
binding on all contractors and subcontractors not just Coeur Alaska, 
Inc. and that it is the responsibility of all four members of the BBC-
HRDC to assist all Kensington contractors and subcontractors to become 
aware of, and honor, this obligation.
    The target of the 1996 agreement and business plan is resources. 
The concept was and is to capitalize on the companies' developmental 
capabilities to achieve commercial successes, and environmental 
opportunities. The resources used to achieve these goals are: human, 
natural and business.
    The 1996 agreement provides general areas of business preference 
for the Consortium and each consortium member with an opportunity to 
preferentially bid on previously identified services.
    The State of Alaska has provided grants for training employees 
because of the effectiveness of the BBC-HRDC approach. In addition, 
numerous organizations including the University of Alaska, Department 
of Labor and the Department of Community and Regional Affairs and the 
Central council of Tlingit and Haida Indian Tribes of Alaska have all 
cooperated with the BBC-HRDC in order to utilize each other's strengths 
and to avoid duplication of services in training new employees for the 
project.
    The sustainability, effectiveness and transferability of this 
employment and economic agreement have been proven. In the 10+ years 
since the agreement began, the BBCHRDC has been successfully 
identifying, recruiting, training and dispatching qualified employees 
to the Kensington and other projects. Coeur Alaska has consistently 
been able to exceed the Alaska Native employment goals established by 
the BBC Agreements.
    Following the establishment of the BBC-HRDC, and as the innovative 
approach became known, invitations have flowed in for presentations to 
describe it's goals and accomplishments. Among others, the Executive 
Director of the BBC-HRDC has made presentations to the Alaska Miners 
Association, National Tribal Employment Rights Officers Convention, 
Alaska Tribal Employment Officers Rights Convention and the Yukon First 
Nations Economic Conference and Summit. In addition, presentation 
papers were prepared for the BC-Yukon Chamber of Mines Mineral Round Up 
and for Indigenous Peoples in New Zealand seeking information on 
working with mining interests.
                               Recreation
    The recreational users became known and familiar to Coeur 
immediately. The recreational users of Berners Bay, near the 
Kensington, are a varied group with different uses of the Bay. These 
uses include:

   Wildlife Watching
   Small boat family recreation
   Recreational fishing, crabbing and clamming
   Airboats
   Kayaking

    Berners Bay, near the Kensington Mine is an estuary deemed an 
Aquatic Resource of National Importance by the U.S. Environmental 
Protection Agency. The estuary is rich in wildlife, marine mammals, 
fish and, it is an important recreation area for the community of 
Juneau.
    In order to identify the needs and use patterns of the various 
Berners Bay recreation groups, Coeur reviewed agency recreational 
studies and management plans and met with the responsible agency 
personnel. In addition, Coeur conducted public meetings and an 
independent survey of recreational users and commercial recreational 
interests, in order to determine their reaction to Kensington plans and 
to obtain mitigation suggestions.
    As a result of the input and understanding reached through the 
outreach, Coeur, the agencies and public have developed an operational 
plan that avoids negative effects to the various user groups. This 
avoidance was made possible by the survey and outreach work which 
identified Kensington facility sites and transportation routes that 
avoid the great majority of existing recreational user routes and sites 
in Berners Bay.
    Wildlife watching, small boat family recreation, recreational 
fisheries, airboats and kayaking are all successfully avoided. These 
recreation activities, times and places have been clearly identified 
and will be avoided. In addition, Coeur and the public have formed the 
Berners Bay Working Group, a group of stakeholders, in order to monitor 
and advise Coeur as to the possible effect of mine operations on the 
Bay.
                                Historic
    Historic uses of Berners Bay include using the area for hunting, 
camping, hiking, exploring, logging and mining. At present, hunting, 
camping, hiking and exploring are the current uses of the area and they 
will not be affected by mine operations. Logging is not a viable use 
for most of the area while mining is relatively restricted in area due 
to current land use designations. The successful outreach to the 
historic user interests was largely accomplished through the 
recreational user group forums and processes.
                               Ancestral
    The area of the Kensington Project, on Lynn Canal and near Berners 
Bay, is part of the ancestral homelands of the Tlingit People of 
Southeast Alaska. Berners Bay is very important to the Tlingit People 
because of cultural values including village sites, numerous 
petroglyphs and burial sites. In addition, it is an important 
traditional subsistence resource area. The east side of Lynn Canal and 
the Berners Bay area are part of the Great Migration Route of the 
Tlingit Kaagwaantaan Clan. Berners Bay proper is a traditional trading 
and subsistence harvest area. Berners Bay was also an important 
gathering area where Coastal Tlingit Clans met to trade and renew 
social and economic ties with each other and with Interior Tlingit of 
Canada who came down routes along the icefields leading to Berners Bay.
    In recognition of the ancestral ties to the lands in and around the 
Kensington, Coeur initiated and maintained contact with the leaders of 
the Tlingit People of the Juneau Region. The purpose of the contact was 
to determine any Tlingit concerns regarding the Kensington Project and 
to determine how to address those concerns. The outreach has been 
successfully maintained as Coeur is developing the mine with the 
participation of the Tlingit People through a combination of employment 
training, jobs, cultural awareness, mitigation, operations monitoring 
and business support programs.
    The success of the cultural outreach effort to the Tlingit 
Community can be found in the letters from Mr. Austin H. Brown, an 
Elder of the Tlingit Dakl'aweidi Clan who actively supported the 
Kensington Project (Mr. Brown is recently deceased). According to 
traditional Tlingit Custom, Mr. Brown's family owns the Kensington land 
at Sherman Creek and his support for the Kensington and the ancillary 
Goldbelt Project was expressed through his letters to Tribal 
Governments, Native Organizations and Native Leaders as well as state, 
federal and municipal agencies. This outreach success is duplicated in 
the oral and written records of public testimony expressed by Tribal 
Governments, Elders and traditional leaders of other Principal Clans in 
the Kensington Gold Mine--Berners Bay area.
                              Subsistence
    Subsistence is a integral component of the Tlingit Identity. It is 
more than the gathering of food, it is an essential part of Tlingit 
heritage. Subsistence activities feed, clothe and define key aspects of 
Tlingit Culture. The gathering and use of food and other natural 
resources are part of specific Tlingit Clan traditions and subsistence 
areas are often considered territorial clan or family areas with 
enforceable rights. Subsistence has been a part of the traditions in 
and around the Kensington and Berners Bay area for thousands of years 
and is practiced even today.
    Due to the importance of subsistence and due to the legal 
protections for subsistence that exist in federal law, Coeur worked to 
ensure that Coeur understands and respects the subsistence tradition. 
This was deemed a critical issue by Coeur in view of the important ties 
to Berners Bay for the more than 5,000 Tlingits within the Berners Bay 
Region.
    The Coeur outreach for subsistence understanding began with a 
review of the existing information available through federal, state and 
tribal governments. It was quickly learned that the most comprehensive 
understanding of the subsistence use patterns would come from meeting 
with the actual subsistence users.
    Coeur went beyond the requirements of the National Environmental 
Policy Act and the National Historic Preservation Act by reaching out 
to the traditional cultural bearers and subsistence users of the 
Berners Bay area through personal interviews facilitated by the BBC 
leadership. Through the facilitated interviews, Coeur learned cultural 
aspects of clan history for the Kensington and Berners Bay area that 
did not come out through the usual permit process. Coeur was able to 
acknowledge and respect this history satisfactorily as evidenced by the 
letters of support from Mr. Brown and numerous Traditional Cultural 
Bearers, Clan Elders and federally recognized tribal organizations.
                                Summary
    Coeur identified and addressed many challenges in meeting community 
concerns regarding the Kensington Gold Mine. The success of the 
community outreach effort can be attributed to seeking an in depth 
understanding of the basis for the concerns and doing more than meeting 
permit conditions. Coeur set out to become a part of the community now 
and for the future by ``Building Relationships of Trust''.
                Attachment 3.--Kensington Social License
                              introduction
    ``Earning a Social License'' is a term for a community outreach 
program used by progressive mining companies. This program uses 
positive, informed communications and outreach to establish a mutually 
supportive relationship with all segments of a community near a mining 
project.
    Three things form the basis for the success of Coeur d'Alene Mines 
Corporation in developing Alaska Native support for Coeur's 
reintroduction of mining in Southeast Alaska. These are, understanding 
the history of mining and its early relationship with the Tlingit 
People, the Alaska Native Claims Settlement Act, and a patient, open 
and cooperative approach on the part of Coeur to develop a positive and 
mutually supportive relationship with local Tlingit People near the 
Kensington Gold Project.
    The cooperative outreach effort by Coeur included discussions with 
commercial fisherman, recreational users, municipal leaders and other 
local people of the Lynn Canal region of Southeast Alaska. Coeur 
recognized early on that an informed discussion with the local resource 
users, based on sound science and openness, would be necessary to 
ensure project success.
    The Kensington Gold Project is located on the mainland 
approximately 45 miles north of Juneau and 38 miles south of Haines, 
along the east side of Lynn Canal. Coeur Alaska, Inc. is a wholly owned 
subsidiary of Coeur d'Alene Mines Corporation. Coeur Alaska is the 
project owner and operator of the Kensington, a completely constructed 
underground gold mine with a mill and numerous support facilities. The 
project is constructed and ready to operate but is currently engaged in 
operating plan revisions in order to meet environmental groups demands 
to end further litigation. Coeur Alaska hopes to begin recruitment and 
training for the final phase of construction in the summer of 2008, if 
a permitting schedule can be maintained.
    The area of the Kensington project, on Lynn Canal and near Berners 
Bay, is part of the ancestral homelands of the Tlingit People of 
Southeast Alaska. Berners Bay is very important to the Tlingit People 
because of cultural values including village sites, numerous 
petroglyphs and burial sites. In addition, it is an important 
traditional subsistence resource area. The east side of Lynn Canal and 
the Berners Bay area are part of the Great Migration Route of the 
Tlingit Kaagwaantaan Clan while Berners Bay proper is a traditional 
trading and subsistence harvest area. Berners Bay was also an important 
gathering area where Coastal Tlingit Clans met to trade and renew 
social and economic ties with each other and Tlingits from the interior 
of Canada who came down routes along the icefields to Berners Bay.
    During the late part of the 19th century and the early 20th century 
the mountainous areas of Juneau, Lynn Canal and Berners Bay were 
extensively explored and numerous mines, both small and large, were 
developed. Among these was the Kensington Mine.
    According to family and clan oral history, as taught to the author, 
and based on interviews with descendants of Tlingits who lived through 
the development and the closure of mining in the early part of the 20th 
century, mining and mining companies were generally not disruptive to 
the traditional Tlingit way of life. The early mining companies 
employed Tlingits in all phases of mining and provided work schedules 
to accommodate the subsistence lifestyle of the Tlingit People and the 
seasonal lifestyle of the local commercial fishermen who worked in the 
mines. Tlingits were paid and treated the same as non-Tlingit 
employees. In fact, mining companies often hired local Tlingits for 
their knowledge of the region to help guide exploration parties and to 
build in difficult terrain and they often paid for the land when the 
land belonged to a Tlingit family or clan while other industries and 
the government did not.
    Modern Tlingit Elders remember the fairness and benefits of past 
mining employment and many actively support the current efforts of 
Coeur to reopen the Kensington. They also believe the Kensington will 
provide good paying jobs and provide a path and encouragement for young 
Tlingits to pursue careers in technical fields and allow them to remain 
in our ancestral region with their families and culture. This is 
especially important because Southeast Alaska Natives suffer from a 62% 
adult unemployment rate. (* from Central Council Tlingit and Haida 
Indian Tribes of Alaska TANF figures for 2007)
    In 1993 Coeur began looking for local Tlingits willing to help 
develop a cooperative working relationship to address cultural and 
environmental concerns while ensuring the responsible development of 
the Kensington Project. After expressions of mutual interest, Coeur 
began working with leaders from three of the Alaska Native Corporations 
based in Juneau. These corporations, formed pursuant to the Alaska 
Native Claims Settlement Act (ANCSA), were Klukwan, Inc., Kake Tribal 
Corporation and Goldbelt, Incorporated.
                             history, goals
   The Berners Bay Consortium was organized in October 1994 by 
        Goldbelt, Inc., Klukwan, Inc., and Kake Tribal, Corporation in 
        order to increase business and Tlingit employment opportunities 
        in Southeast Alaska, while protecting the cultural, subsistence 
        and environmental values of an area long important to the 
        Tlingit People of Southeast Alaska.
   All three companies realized it would be hard to offer their 
        services to a major project such as the Kensington 
        individually, but by cooperating and combining their resources 
        and by partnering with local non-Native firms and other local 
        organizations, they could offer much more.
   Coeur d'Alene Mines Corporation, and its wholly owned 
        subsidiary Coeur Alaska, Incorporated the owner/operator of the 
        Kensington Project, were seeking a partnership to accomplish 
        important operational, environmental and community relations 
        goals. Their agreement with the three Native Corporations is 
        not just for the purpose of business development, it includes 
        the wise use of human, natural and business resources of all of 
        the parties.
                            the participants
   ``Coeur the Precious Metals Company'' is the largest primary 
        silver producer in the U.S. and is the recipient of over 12 
        major national and international environmental awards since 
        1987. Their motto, and their corporate way of conducting 
        business, is ``producing and protecting''.
   Kake Tribal Corporation is an ANCSA village corporation, 
        headquartered near Juneau in Kake Alaska. It has approximately 
        600 Shareholders, 22,000 acres of land, operations in seafood, 
        fueling, construction, timber and environmental remediation.
   Klukwan, Incorporated is an ANCSA village corporation 
        headquartered in Haines Alaska near the Kensington Mine site. 
        It has approximately 300 Shareholders, 23,000 acres of land, 
        operations in mining, construction, timber, barging, explosive 
        sales and stevedoring.
   Goldbelt, Inc. is an ANCSA urban corporation headquartered 
        in Juneau. It has over 3000 Shareholders, 33,000 acres of land, 
        operations in tourism, passenger 8A government service 
        operation companies, and Goldbelt owns a hotel and the Mount 
        Roberts Tram.
   Together the corporations represent approximately 9,000 
        Shareholders, Shareholder spouses and other family members. 
        More than half of all Shareholders and their families live and 
        vote in the northern Southeast region near the Kensington Mine.
   The purpose of the Consortium is to provide environmental, 
        cultural resource, and subsistence guidance, permitting and 
        political support, and to promote community acceptance for 
        Coeur Alaska's resource project, the Kensington.
   The Consortium members chose to work with Coeur because of 
        Coeur's strong environmental record in its mining operations.
   In return for their guidance and support, Coeur Alaska 
        negotiated and entered into an agreement to provide business 
        and employment preference to the Consortium membership.
   Early on, the partnership was coined ``The beginning of the 
        future.'' by all of the parties.
   As part of the implementation of the agreement for business 
        and employment preference, the BBC members and Coeur d'Alene 
        Mines Corporation entered into an agreement in January 1996. 
        This agreement led to the organization of the BBC-Human 
        Resource Development Corporation in July of 1996. The BBCHRDC 
        members are Coeur Alaska, Inc., Klukwan, Inc., Kake Tribal, 
        Corporation, and Goldbelt, Inc.
   The BBC-HRDC is the organization that is responsible for 
        identifying, recruiting, screening, training, and dispatching 
        of qualified Alaska Natives and other Alaskans to the 
        Kensington Project. It is important to note that the employment 
        preference is binding on all contractors and subcontractors not 
        just Coeur Alaska, Inc. and that it is the responsibility of 
        all four members of the BBC-HRDC to assist all Kensington 
        contractors and subcontractors to become aware of, and honor, 
        this obligation.
   The target of the 1996 agreement and business plan is 
        resources. The concept was and is to capitalize on the 
        companies' developmental capabilities to achieve commercial 
        successes, and environmental opportunities. The resources used 
        to achieve these goals are: human, natural and business.
   The 1996 agreement provides general areas of business 
        preference for the Consortium and each consortium member with 
        an opportunity to preferentially bid on previously identified 
        services.
   The contracting preference applies to any affiliation the 
        BBC members may form but it does not preclude non-BBC companies 
        from bidding for work.
   Affiliation means any person, corporation, partnership joint 
        venture or other entity in which the BBC member(s) control at 
        least 25% of the voting power.
          general areas of interest for coeur alaska projects
   During mine exploration and development; drilling, camp 
        construction, camp services and expediting;
   Construction of mine infrastructure including secondary 
        development facilities, including but not limited to power, 
        water, sewer, transportation of supplies and production, 
        warehousing, housing, community facilities, and various 
        business establishments;
   Land Exchanges;
   Road construction;
   Assistance in permits; and
   Employment recruitment, training, orientation, and referral 
        and labor dispatch services.
                   kake tribal corporation interests
   Construction and rehabilitation of fuel tanks-fuel supplies 
        and fuel management services-surface rehabilitation-timber 
        debris cleanup; Camp catering and camp operations;
   Environmental monitoring, and remediation;
   Operation of a fish buying station; and
   General construction contracts.
                        klukwan, inc. interests
   Drilling contracting;
   Electrical work;
   Underground rehabilitation and construction;
   Barging services;
   Transportation of ore and concentrates;
   Camp and dock construction;
   Provision of explosives and mine supplies; and
   Provision of housing in the Haines community.
                        goldbelt, inc. interests
   Land use master planning and State access planning;
   Construction of and operation of fish buying stations;
   Marine terminal and related facilities;
   Construction of mining housing in Juneau;
   Terminal and camp construction and camp operations; and
   Waterborne transportation of workers either by high speed 
        catamaran or other means.
                  employment preference opportunities
   Applies to prime contractors, subcontractors and Coeur;
   Preference applies to qualified shareholders, spouses, 
        descendants, other Native Shareholders, Native Americans in 
        Alaska, and Alaska residents;
   Preference does not apply to members of these groups that 
        are not qualified for good reasons such as health;
   Preference applies to a goal of 13.5% of all employees 
        during mine construction;
   Preference applies to a goal of 25% of all employees during 
        mine operations;
   Preference is a goal and not a limitation because all 
        shareholders are Alaska residents;
   Preference is for all levels and types of employment, not 
        just entry level and blue collar positions;
                          employment training
   The BBC-HRDC was established to provide an employment 
        training and dispatch organization to meet the needs of the 
        Kensington Project.
   The employment organization will and has recruited, 
        screened, trained and dispatched employees from all over 
        Southeast Alaska.
   The employment project chose to partner with existing Alaska 
        organizations such as the Alaska Department of Community and 
        Regional Affairs, the University of Alaska Southeast, the 
        Tlingit and Haida Central Council and the Southeast Regional 
        Resource Center rather than duplicate existing services.
   The employment project includes non-Natives in its 
        recruitment, training and dispatch efforts, especially those 
        Alaska residents displaced from their jobs in the fishing or 
        timber industry.
   This open, non-discriminatory effort, helps to employ the 
        maximum possible number of Alaskans on the project without 
        regard to ethnic origin.
   One effort of the employment project is focused towards 
        those residents seeking a career development path, especially 
        high school graduates and women and other individuals facing 
        barriers to employment.
   Coeur Alaska supports this employment concept and is helping 
        by providing the employment project with its labor needs 
        information, and has affirmed its support by financial 
        contributions for funding of the employment project.
   Through a combination of all of these efforts, all residents 
        of Alaska will benefit from the 1996 BBC and Coeur agreement.
   The BBC-HRDC conducted an employment training program for 
        Natives and Southeast Alaska residents. This program is 
        conducted in cooperation with organized labor, the Alaska 
        Department of Labor, the Tlingit and Haida Central Council, the 
        University of Alaska Southeast, and Coeur Alaska.
   Most students successfully complete the courses and most of 
        the students are successfully placed with Coeur and 
        subcontractors after the course. The remaining students gain 
        employment as new openings occur or with other mining 
        companies. Coeur achieved a 49% employment rate for Alaska 
        Natives, spouses, descendents or affiliated employees during 
        construction from 2005 to 2007 making this the most successful 
        affirmative action project in Alaska history.
   The project continues to identify and enter new people into 
        the employment skills database for future evaluation, training 
        and referral. These new employees will be trained for new 
        construction and actual mine operations.
   The database has over 500 Alaska residents in it. These 
        people have low to high skill levels and, the database includes 
        everything from the completely inexperienced, to geologists, 
        biologists, water treatment plant operators, engineers and 
        equipment operators.
   The mission of the BBC-HRDC is to provide employment ready 
        people, capable of providing the highest level of consistent 
        service, to the client, Coeur Alaska. The BBC-HRDC works to 
        identify its strengths, weaknesses, opportunities and threats 
        in an effort to improve how it implements the employment 
        service.
                joint accomplishments and opportunities
   Joint Sponsorship of an Environmental Compliance Conference 
        for Southeast Alaska
   Improved Access for Coeur to the Alaska Congressional 
        Delegation, the State Legislature the State Executive 
        Administration, and the Alaska workforce
   Implementation of a concurrent reclamation program at the 
        Jualin and Kensington Mines, through contracts with Klukwan, 
        Inc.
   Cooperative spill contingency training program at the 
        Kensington with SEAPRO, a Southeast Alaska spill prevention and 
        response organization.
   Implementation of a proactive environmental cleanup program 
        at the Kensington-Jualin Property with Kake Tribal Corporation.
   Initial work activities with BBC members to implement a 
        federal land exchange at the Kensington-Jualin Property to 
        improve transportation and facilities access and management.
   Involvement in the development of the Goldbelt Cascade Point 
        Master Plan including alternative planning and design for 
        water-based transportation to the Kensington Mine property.
   Completion of a Phase One Commercial Fishermen's Acceptance 
        for a Water Quality Plan for the Kensington.
   Successful Implementation of a Native Involvement Program 
        for acceptance of the Kensington Mine Plan (enlisting BBC, 
        Tlingit and Haida Central Council, Sitka Tribes of Alaska, 
        Kootznoowoo, Inc., Juneau Alaska Native Brotherhood, et al 
        support).
   Successful Approval of the Site Specific Criteria for the 
        Kensington Mine National Pollutant Discharge Elimination System 
        Permit (BBC, Tlingit and Haida Central Council, Sitka Tribes of 
        Alaska, Kootznoowoo, Inc., Juneau and Haines Alaska Native 
        Brotherhood, et al support).
   Initiation of discussions with two regional corporations to 
        evaluate and explore Native subsurface mineral interests (Some 
        delay has been experienced due to the recent market turmoil but 
        Coeur's interest remains high).

    The following is a partial list of positions that Tlingits and 
other Alaska residents successfully trained for and/or were placed in 
since the BBC-HRDC training programs began in March 1997:

   Coeur Alaska--Equipment Operator VI
   Coeur Alaska--Core Sampler
   Coeur Alaska--Lead Equipment Operator
   Coeur Alaska--Environmental Technician
   Connors Drilling--Drillers Helpers
   Coeur Alaska--Kitchen Helpers
   Redpath, Alaska Industrial Company, The Industrial Company--
        Laborers
   Connors Drilling, Kensington, Greens Creek--drillers helpers
   Coeur Alaska--Equipment Operator VI--Kensington
   Coeur Alaska--Water and Waste Water Treatment Plant Operator
   Coeur Alaska--Mining Engineering Assistants and Interns--
        Kensington
   Coeur Alaska--Core Sampler--Kensington-fourteen people

    Initiation of project development activities at Kensington include:

   Contracting with Kake Tribal for the exploration program 
        food catering and camp services.
   Contracting with Klukwan, Inc. to provide exploration 
        drilling services Land Use Agreement with Goldbelt for 
        transportation access and support
                      coeur commitment to the bbc
          The management philosophy at Coeur is focused and resolute. 
        We know our business, and we understand the opportunities and 
        challenges we must deal with in order to achieve our goal of 
        enhancing the Companys value to our Shareholders.
          We also recognize the individual Native Corporations' 
        responsibilities to their Shareholders, namely--increased 
        shareholder employment and the ability to offer fundamentally 
        sound business opportunities.
          Coeur is committed to environmentally sound mineral resource 
        development in Southeast Alaska. Like land, water and minerals, 
        employment and business opportunities are resources, ``sources 
        of wealth or revenue.'' We believe all these resources can best 
        be developed through alliances or partnerships, and that the 
        Native Corporations involved in or considering the Berners Bay 
        Consortium must also protect and wisely manage the resources if 
        they are to achieve economic and social self sufficiency.
          For its part in the formation of a long-term business 
        alliance, Coeur has attempted to open a constructive dialogue 
        with Goldbelt, Kake Tribal and Klukwan. Coeur has identified 
        (we believe) the foundation for what could evolve into an even 
        stronger, mutually beneficial business arrangement.

Quotation above from a memorandum dated 11-2-98 to Randy Wanamaker from 
Rick Richins, Vice President Environment and Government Affairs, Coeur 
d'Alene Mines Corporation.
                        letter of coeur support
Positioned for Future Growth in Southeast Alaska
          Coeur d'Alene Mines Corporation through our wholly owned 
        subsidiary, Coeur Alaska, Inc., is firmly committed to 
        developing mineral resources in Southeast Alaska. With the 
        ongoing activities at Kensington and our exciting new 
        opportunities at the Jualin Mine Project, Coeur is convinced of 
        its ability to adapt to local conditions and needs, and develop 
        in an environmentally responsible manner.
          While we have become an international producer of precious 
        metals, much of Coeur's long term growth ambition lies in our 
        desire to ``produce and protect'' locally. To do this will 
        require not only a local presence, but also local partnerships 
        which can in turn maximize the use of local resources. Those 
        resources are the people, their capabilities and their services 
        they provide.
          Coeur knows our business, the mining business. We understand 
        the combined resources of Berners Bay Consortium are needed to 
        achieve our goal of project development. We (Coeur and the 
        Consortium) also share a common goal--enhancing the economic 
        well being of our Shareholder. With your support, I am 
        confident we can achieve both our goals through the successful 
        implementation of this ``Business Plan.''
                                         Dennis E. Wheeler,
                   Chairman, President and Chief Executive Officer.

Above contained in a memorandum from Rick Richins dated 11-2-98 to 
Randy Wanamaker. 
                     current status--future outlook
    For its efforts, Coeur achieved its goal of successfully permitting 
and constructing the Kensington, through community involvement, 
community acceptance, and local hire by using the services of the 
Alaska Native Partners of the Berners Bay Consortium. However due to 
recent last minute litigation by environmental groups, Coeur has 
conducted additional economic and engineering feasibility studies and 
will re-permit the tailings disposal option with Alaska Native and 
Juneau Community support in order to begin operations. The only 
uncertainty is the end of new demands by the environmental groups.
    The overall outlook for the Kensington re-permitting is good and 
the Consortium of Alaska Natives and the people of Juneau are ready and 
willing to assist Coeur with all of their resources once a final 
tailings plan is approved. For its part, Coeur has expressly stated its 
intent to fully implement the Alaska Native Social License in the form 
of its business and employment agreements with the Berners Bay 
Consortium.
    The commitments to the Consortium were honored in the preference 
for contracts and subcontracts for mine construction valued at 
$238,000,000 (USD). In addition Coeur Alaska achieved approximately 49% 
hire of Alaska Natives, Native Spouses, descendents or BBC company 
affiliated employees during construction. This is the most successful 
private industry affirmative action project in Alaska history.
    Once operations begin there will approximately 225 permanent jobs 
with an annual estimated payroll of $18,000,000 (USD) plus retirement 
and benefits, 150 to 190 indirect and contract positions and annual 
mine support contracts. Alaska Natives and other locals are eagerly 
awaiting the beginning of operations in this economically distressed 
region.
    In recognition of its community outreach and economic importance, 
Coeur Alaska received the Bureau of Land Management ``2006 Hardrock 
Mineral Community Outreach and Economic Sustainability Award''.
    The support of the City and Borough of Juneau is demonstrated in 
the amicus briefs filed in support of the Kensington during the 
litigation brought by the environmental advocacy groups.

    The Chairman. Thank you, very much. We will start with a 
few questions. It seems to me we have a disagreement about the 
extent of current authority in Federal agencies to deal with 
potential degradation of public lands. Mr. Bisson, you make it 
clear in your testimony, I believe; you say the statutes and 
regulations provide sufficient authority to regulate mining 
operations when properly monitored and enforced by State and 
Federal regulatory agencies and current regulations are 
designed to avoid recurrence of what problems have existed in 
the past. What's your view of the claims that Mr. Bernholtz is 
making about the lack of authority of the Forest Service to do 
anything other than go ahead and approve the mining operation. 
As he states in his testimony current law does not give the 
Forest Service authority to do anything to deny the proposed 
project. It can take action to minimize adverse impacts, but it 
cannot deny the project. What is your thought on that?
    Mr. Bisson. Senator, I'm not aware of the specific facts 
regarding the Mr. Emmons project at this point. I know that the 
Forest Service, like the BLM, has to make undue, unnecessary 
degradation standards and they must comply with that standard. 
The company through a plan of operations must comply with it. 
I'm frankly not aware of that specific case.
    The Chairman. Now, is it your thought in order to comply 
with that standard, you can deny them the right to mine?
    Mr. Bisson. If, in fact, based on information that I've 
been provided, if in fact the company cannot meet that 
standard, then a mining plan of operation can be denied. What 
normally happens is through mitigation, through the NEPA 
process, sufficient mitigation is included in the package, that 
most frequently those mining operations are permitted with 
significant mitigation, but there are situations such as, you 
know, if there's an impact on an endangered species that would 
lead to a jeopardy opinion that, in fact, there are situations 
where a point of operations had been denied.
    The Chairman. Are there examples where a plan of operation 
has been denied on the basis of the type of concerns that the 
Mayor of Crested Butte has raised about endangerment of the 
water supply?
    Mr. Bisson. I'm not aware of one.
    The Chairman. Dr. Dombeck, what is your take on this 
difference of opinion as to what authority? You've been a head 
of both the Forest Service and the BLM. Do you believe those 
agencies currently have authority to deny mining operations if 
they think there's undue degradation of the environment?
    Mr. Dombeck. I would refer to authority on that.
    I think what we have is, we have the 1872 Mining Law 
perceived and operationally viewed by most employees as under a 
different umbrella than the disposition of other minerals. I'm 
certainly not the expert in this, but these other authorities, 
the other minerals sort of the law lays out a sequence of 
things that we don't see in the 1872 Mining Law. So my 
understanding is when a claim is invalidated, then it becomes 
much more difficult to prohibit that if there's a serious 
problem as the Mayor of Crested Butte indicated.
    The Chairman. Any of the rest of you have views on that we 
ought to hear? I don't remember hearing anybody volunteer. Mr. 
Cobb, did you want to make a statement?
    Mr. Cobb. I just would like to add to that. As we have 
heard about concerns about protecting watersheds, again 
recognize we have the Clean Water Act. That is the fundamental 
mechanism in terms of taking a look at discharges from the 
mining operation and the potential impacts associated with 
those. Again, there is a lot of public involvement in the Clean 
Water Act process. As we take a look at permits that might be 
issued underneath that Act. Again, that is a fundamental 
mechanism in terms of regulating those impacts. Of course, you 
can either get amendments to a plan of operation or a denial of 
a permit out of the Clean Water Act as it pertains to 
protecting watershed.
    The Chairman. So, it's your view that there are 
circumstances where the ability of a mining company to proceed 
with the development of a mine have been prohibited, but under 
the Clean Water Act more likely than under other statutes; is 
that what I understood you to say?
    Mr. Cobb. The Clean Water Act is one mechanism. That 
mechanism would also been be considered through NEPA in terms 
of the types of issues that would be evaluate in the EIS, for 
example.
    The Chairman. OK. Yes, Mr. Bernholtz.
    Mr. Bernholtz. Let me make a comment on that. The NEPA 
process is a factual-based information that is done and studied 
and paid for by the proponents of the mining operation. Are 
don't have an unbiased or balanced view of what impacts are 
really happening. As far as the Clean Water Act, the Clean 
Water Act really goes in effect once something has actually 
gone wrong. If we see a problem with the water the Clean Water 
Act goes into effect but it doesn't actually stop actions from 
happening. The mining company operations are going to come in 
and say, well, we are going to have a problem, so the Clean 
Water Act will take into effect. The Clean Water Act needs to 
go into effect after there is some kind of leakage or problem 
with the water.
    The Chairman. Let me ask just one final question, Mr. 
Bisson, is it your testimony that there are circumstances where 
the head of BLM has denied the ability of a mining project to 
go forward because of some determination the BLM director has 
made?
    Mr. Bisson. That determination was probably not made at the 
directors level. It was probably made by a field manager or by 
a district manager or by a State director in the process of 
revealing a plan of operations.
    The Chairman. But there are cases where in reviewing the 
plan of operations, the BLM says, we're not going to let you 
mine here?
    Mr. Bisson. Yes, sir.
    The Chairman. Could you give us some examples?
    Mr. Bisson. I would be happy to follow up in writing but I 
can tell you when I was district manager of the California 
Desert District, my recollection is that I made the decision to 
deny some mining plans of operations because of conflicts of 
with the desert tortoise, which was a listed species.
    The Chairman. OK. So, in case there is a conflict with the 
Endangered Species Act, you personally are aware of that. If 
you could give us a list of those circumstances, that would be 
very useful.
    The Chairman. Senator Domenici.
    Senator Domenici. Thank you, Senator Bingaman. Thanks to 
all your witnesses. Dr. Dombeck, I just wanted to share with 
everyone here that you and I had the occasion to meet each 
other on a very, very, wonderful day. You were celebrating with 
some of your friends at a local, small hotel, and I came in 
there to see if the room you were in would be big enough for us 
to celebrate our golden wedding anniversary. You saw me looking 
around and you generously got up and introduced yourself, and I 
felt very comfortable, and I had almost forgotten about you.
    Those years past, I now remember you quite well, and I 
thank you for recommending that we use that room because we had 
a marvelous occasion just a day later, and it was good to see 
you. Let me start my questioning by quoting from what I stated 
in my opening remarks, I said a 1999 report from the National 
Academy of Science which concluded that existing environmental 
protections work together in a way that is ''complicated but 
generally effective``. Now, I think what we have is a series of 
environmental laws that have been adopted after the mining law, 
obviously, and that have been held to apply, but it's not as 
clear cut and as clean as if you had a bunch, a group of laws 
that just applied to mining. That people are somewhat scared 
about these laws and whether they're going to apply to the 
satisfaction of the opponent. I'm satisfied that the 
environmental laws of the United States apply to mining. Now, 
Dr. Dombeck, you were in both the Forest Service and the BLM. I 
don't know if you remember, but is it not true that the Clean 
Water Act and all these other acts that we have applied in your 
day to mining operations and application for mining operations 
or do you not remember?
    Mr. Dombeck. I would say that it's view differently.
    Senator Domenici. What is?
    Mr. Dombeck. The mining and the hard rock mining under the 
1872 Mining Law as viewed as under somewhat of a different 
umbrella. I think the professionals in the agencies, and there 
are lots of really, really good employees that applied the 
thing that Henri had indicated and continually tried to do 
better, but it seems as though we still lack the force of law 
or the level of putting hard rock mining on the same plane, as 
say, oil and gas and all other multiple uses, whether it be 
grazing, hunting, fishing and so and the water quality issue, 
well the Clean Water Act I assume is an after the fact. I think 
an example might be the Montana example of the Beal Mountain 
Mine, an apparently modern mine which touted some of the best 
technologies, and yet both the State of Montana and the agency 
they're stuck with a really, a major, major problem as a result 
of things not working, so something isn't working.
    Senator Domenici. You can't tell by looking at all mines 
when they were started with reference to the new laws we're 
talking about. If you go back far enough, we didn't have a 
Clean Water Act, right? We didn't have a Clean Air Act. We 
didn't have any. I wonder if these words, ``undue and 
unnecessary degradation'' where do they apply? You used those 
words, I think, or somebody did.
    Mr. Bisson. I did. They come right out of our regulations. 
I can't define it right off top of my head, a definition that 
describes what it means. It is a standard that must be met 
before we approve a plan of operations.
    Senator Domenici. Doesn't a mine have to apply for a Clean 
Water Act application before it proceeds?
    Mr. Bisson. To do any mining on Federal lands, they have to 
submit a plan of operations, and they have to submit a plan for 
how they will address the requirements of other laws like Clean 
Water, like Endangered species. We don't do a NEPA process. We 
look at the projected impacts. We require certain mitigation to 
mitigate those impacts. It's a very extended process.
    Senator Domenici. I want to state for myself and then I 
will yield, and I thank you again, Mr. Chairman, for the 
hearing. From my standpoint, I'm fully aware that we have many 
mines that were started in an era when we did not have 
appropriate regulations of defining them. We even had laws that 
were far too generous in terms of patented land when the 
government gave up much too much land to mining operations. 
Those all have to be fixed. Many of them already have, but I'm 
not interested in writing a new mining law that intentionally 
makes it so difficult to mine, that you don't mine. If there 
are people who want that kind of law written, then I'm not 
their brother. I'm not going to be helping them. I think we 
need to write the right kind of law to assure that the right 
kind of environmental laws will apply, but not so excessive and 
so multiple that you won't be able to mine. That's what I'm 
looking for. I say to the young Mayor, I was a mayor in not 
such a small town, I was in Albuquerque, so we didn't have any 
miners coming in and mining in our town. I respect your 
enthusiasm and your forthrightness and I think you must be 
protected. But I also think you have to understand we have to 
have laws, it can't be just your wishes, there have to be some 
rules that apply to everybody, including those who are working 
in your area. I note you want to say something to me, so go 
right ahead.
    Mr. Bernholtz. I understand what you said, Senator 
Domenici, and I agree with you there should be regulations to 
allow mines to happen. We are not opposed to mining. But you 
had mentioned that those Beal mines were really old and we 
didn't have laws in effect then, but there are examples of 
mines approved under the Clean Water Act, such as the 
Summitville Mine, that was a huge disaster with leakage, and it 
destroyed the watershed in that area after the Clean Water Act 
was enacted. So it does still happen. We need to protect our 
water, especially in the western States where water is still 
important to us, we have to be extra careful. We're following a 
law that is over 100 years old right now that just should be 
updated to current regulations just like we did with oil and 
gas coal, we did it with coal, we did it with ranching, we did 
it with logging. We're just asking that those laws be updated 
and take into account the watersheds of local communities.
    Senator Domenici. You didn't hear what I said. I said that 
the Clean Water Act that applies was not written in 1892. It 
was written to apply today, and it's modern, and if it applies 
it ought to work. The NEPA is a new law. It's not a law after 
the fact. If it didn't work in some cases it doesn't mean we 
didn't have a law. It means that perhaps it wasn't properly 
executed. But we're not too far apart--you and I in our 
thinking. I just don't want to write whole new code for every 
single item if you already have two rules of law for 
everything.
    Mr. Bernholtz. I agree. I may look young but I understand 
how laws work, too.
    Senator Domenici. You are great. You are terrific.
    The Chairman. Senator Tester.
    Senator Tester. Thank you, Mr. Chairman. I have not met Dr. 
Dombeck like you have. Thank you, Senator Domenici, but I will 
tell you that the Beal Mine started in 1989, and it went 
through 1998. The upshot of all of it is that ultimately now 
the taxpayers are going to be paying for part of it. So, the 
Clean Water Act didn't work. I agree with you, though. We need 
to make sure it does work. I don't think there's a person on 
this panel who doesn't understand that water is pretty damn 
important for everybody and also understand that there's room 
for everybody to make a living here.
    We need to make sure the regulations are streamlined and 
work as well as possible. I've got a few questions that deal 
with the priority for clean up. We've got a lot of mines in 
Montana, a lot of abandoned mines. This could be directed to 
Mr. Bisson, but it can be to anybody on the panel, does the 
Federal Government currently have a priority list on mine clean 
up?
    Mr. Bisson. Senator, I have a document which was prepared 
in late 2006. It identifies the priorities for every western 
State. So, this is really not abandoned mine lands.
    Senator Tester. So it is a pretty complete inventory?
    Mr. Bisson. It is as complete as we have currently.
    Senator Tester. It is complete like the States have?
    Mr. Bisson. Yes, sir.
    Senator Tester. OK. Is there a clean up cost associated 
with that priority?
    Mr. Bisson. The estimates are in there.
    Senator Tester. All right. Right now we can continue with 
you if you want, Henri, since patenting was put on a hold in 
1994, what mechanisms does the industry use at this point to 
ensure the security of tenure they desire?
    Mr. Bisson. I'm trying to understand the question.
    Senator Tester. The patenting is put on hold.
    Mr. Bisson. Yes, sir.
    Senator Tester. What do you do to give the company some 
solace that they're able to mine to recap their investment, 
recoup their investment.
    Mr. Bisson. A patent is irrelevant in terms of whether they 
can proceed with mining or not. The only patents issued are the 
ones that were grandfathered in 1994.
    Senator Tester. OK.
    Mr. Bisson. All but 38 of those have either been issued or 
contested because we didn't feel they had a valid existing 
right.
    Senator Tester. How do you transfer the mineral? Have the 
claims gone up or down since 1994?
    Mr. Bisson. I can tell you last year we had an increase of 
92,000 mining claims on BLM lands.
    Senator Tester. So the claim is all you need? You don't 
have to have a transfer of minerals?
    Mr. Bisson. If you have a mining claim, in a valid 
discovery you can submit a plan of operations to develop that 
mineral. You don't need a patent to be able to develop that 
mineral.
    Senator Tester. OK. Which agencies are involved in clean up 
of mines and things like that?
    Mr. Bisson. You know, I think it depends on the State where 
the mine may be. In some cases it maybe be BLM, the Forest 
Service, E.P.A., other agencies.
    Senator Tester. Are there jurisdictional boundaries clearly 
delineated?
    Mr. Bisson. I think there's probably a lot of overlapping 
jurisdiction.
    Senator Tester. How about communication?
    Mr. Bisson. I know there are examples of excellent 
communication involved in clean ups, and I don't know, but I 
would expect there are samples of bad communications in terms 
of these efforts to clean sites up.
    Senator Tester. All right. One of the things that Dr. 
Dombeck alluded to, and then the Mayor alluded to it, but one 
of the things that came out of State legislature panel is we 
spend at the State level a lot of money on mining clean up. 
What happens in the end is the mining company goes broke and 
the bonding was either insufficient or something else happened, 
and you end up with technologies that failed and you have got a 
mess. With the Clean Water Act being recently changed by Court 
decision to imply only to navigable waters, does this have an 
impact? Mr. Cobb, I would like you to respond to this and 
anybody else. Does this have an impacted on how now the clean 
up is treated and how the claims are granted and how the 
reclamation process moves forward?
    Mr. Cobb. Let me just start with the reclamation and the 
clean up part of the question.
    Senator Tester. Sure.
    Mr. Cobb. The issue is really, and we see this at the State 
level and the State of New Mexico is on my mind because we're 
doing $100 million worth of reclamation in the State of New 
Mexico right now. You're trying to protect both surface water 
and ground water.
    Senator Tester. Right.
    Mr. Cobb. Those standards have not changed relative to the 
definition. We are still trying to achieve the perfection of 
downstream usage. The usage includes fisheries, recreational 
use, drinking water purposes, a whole range of things goes into 
what we are trying to achieve from a reclamation perspective. 
That will come to bear in terms of what we're trying to do with 
abandoned mine lands. I think one of the issues that we have to 
deal with is this because of the number of abandoned mine 
lands. Were are in essence going to be addressing watersheds on 
a piece-by-piece basis. We are going to make incremental 
improvements, and one of the issues we will have to wrestle 
with going forward is, you can't necessarily try and overlay a 
Superfund clean up mentality on abandoned land mines and try to 
swallow the whole whale. We have do this one bite at a time. Of 
course that is the vision on that, how you get a public/private 
partnership and incrementally improve watersheds in the United 
States.
    Senator Tester. My time has run out. Just real quickly, Mr. 
Chairman, if I might. The issues in this industry are around 
any industry that is out there. Whether it is wildlife or 
impacts on our highways or whatever; the main issue from my 
prospective is indeed water. I guess because of mines like Beal 
and Zortman-Landusky in terms of water, there's been some 
failures, let's put it that way. I would be interested in 
talking with any of the members of this panel on how we can 
streamline the regulation and make it effective so that we 
don't have taxpayers paying for clean up for perpetuity on 
waters that quite honestly more closely resemble battery acid 
than they do drinking water. That's all. Thank you.
    The Chairman. Senator Barrasso.
    Senator Barrasso. Thank you, very much, Mr. Chairman. Mr. 
Bisson, you refer to the list of the priority, the list of the 
clean ups that I think Senator Tester asked about. As I was 
looking through one of the documents we had in preparation for 
this meeting, they talked about abandoned mind land issues. The 
number seemed to be staggering to me. I was visiting with 
Senator Martinez about it. It said some estimates placed 
abandoned mine sites at over half a million nationwide, with 65 
thousand abandoned mine sites on BLM lands alone, and I guess 
testimony from the EPA and the House Committee on Energy and 
Minerals. Do those numbers seem accurate to you, sir?
    Mr. Bisson. I can't speak to abandon mines, other than on 
BLM lands. Our current inventory is in the vicinity of 12 to 15 
thousand. We believe there are substantially more. We had a 
team assembled in the mid-90s that estimated it was somewhere 
between 70 and 90 thousand sites. Some of those are in a mine 
shaft that is unprotected. There are different kinds of sites 
that are left out there.
    Senator Barrasso. This is from Tony Ferguson, U.S. Forest 
Service October 2 hearing in 2007. Sixty-five thousand there, 
another 38.5 on Forest Service land. I was curious. The numbers 
just seemed large. I didn't know if there was any national 
inventory. It didn't sound like there really was.
    Mr. Bisson. There is a Web site the committee staff can go 
and take a look. I think the best information is probably on 
the BLM Forest Service communicator website and we're trying to 
get tribes and states and others to put sites up there as well 
so the public can learn where these sites are and be aware of 
them.
    Senator Barrasso. Mr. Cobb, in my opening statement I 
referred to a section that has to do with the ability to reject 
or veto a mining claim by the Secretary of the Interior. I 
don't think you would specifically addressed that in your 
statement. I don't know if you have thoughts on that. Even if 
all other environmental and legal requirements are met, should 
the Secretary have the right to accept or veto a mining claim?
    Mr. Cobb. I thought I had gotten to that, but we believe 
that is not necessarily, and given the multitude of 
environmental regulations out there in terms of protecting 
public health and environment, we don't think you necessarily 
need special veto authority for that to be accomplished.
    Senator Barrasso. It just seems if everything else is met 
it would be inappropriate that you would want to give the 
Administration the opportunity to make those decisions.
    Mr. Cobb. Right.
    Senator Barrasso. Mr. Bernholtz, I don't question any of 
your community's concern for protecting the watershed. It just 
seems very appropriate. I just want to follow up a little bit 
on the exchange with Senator Domenici and with what we have 
heard here today. Are your concerns, do they fall under 
enforcement issues rather that authority issues? I note from 
your written testimony I think you said you kind of suggest a 
system of lax enforcement and compliance. Could you give some 
examples of that, obvious State or Federal regulations where 
this is lax?
    Mr. Bernholtz. Currently in our watershed, we have a 
Superfund site that is actually ongoing right now in the same 
area on the same mountain, Mt. Emmons, that was just abandoned, 
like Senator Tester said, the company went belly up and went 
broke and the left the taxpayers to pick up the burden. It's 
right in our watershed. That's one example.
    Senator Barrasso. Thank you, Mr. Chairman.
    The Chairman. I want to thank you, very much.
    Senator Corker.
    Senator Corker. Thank you, Mr. Chairman. We were discussing 
earlier we didn't know whether Dr. Dombeck exists in all our 
states. The Mayor from Crested Butte had the best deal. We 
thank all of you for being here. I'm very interested in this 
balance that needs to exist, and having been a mayor I can 
understand your concern especially about the water issue that 
you were talking about. I know it has been discussed by Mr. 
Bisson that those things have to be done in advance. Mr. 
Wanamaker said that local government was able to be involved. I 
would love for any of you all again to respond. I know we 
talked a great deal about the quality of water issue, but is it 
easily done in advance or is it usually done after there's a 
problem? I think that's something that's very key to what we 
would be looking at down the road.
    Mr. Bisson. If I could respond to that, Senator, and 
certainly if somebody else wants to go first, that's fine. When 
a mining company wants to mine on Federal lands, they have to 
submit a plan of operations. They go through a process to look 
at what impacts could be projected from it. We attempt to 
include mitigation. We require them to submit data, frequently 
require significant amounts of data to determine what the 
baseline is and what the impacts might be from various actions. 
The other thing that I really feel I need to say is that we 
have a financial assurance requirement. We require these 
companies to put down sufficient financial assurance to allow 
us to reclaim any of the damage that they may do throughout the 
life of the mine, and at the end of the mine. We have 1.1 
billion right now. We have the ability to require companies to 
set up trust funds to take care of these problems should we 
anticipate some problems in the future. I'm not aware of any 
mining that we permitted since 2001, when we put the new 
regulations in place where a company has simply gone belly up 
is what I have heard expressed and left a mess for us. I'm just 
not aware of any. Everything were are dealing with abandoned 
mines preexist those 2001 regulations.
    Senator Corker. Mr. Mayor, do you feel like on the local 
level, you all have the ability to be involved in that in a way 
that keeps any water, if the water issues occur and they're 
bonded that's fine, except you already have the damage to your 
community. So, do you feel like there are proper assurances on 
the front end to deal with this?
    Mr. Bernholtz. No, sir, Senator Corker, we don't believe 
that's actually true. We currently have a water treatment plant 
that is operating in the mine that we talked about, the Red 
Lady Mine. We have a 48-hour notification process, so if the 
water plant were to stop operating at current level, then we 
wouldn't know for 48, hours, and we're talking about our 
watershed and our drinking water and the creek that runs 
through the center of our town that we have events in, people 
plan, people have picnics by. We would know that the water is 
contaminate. We wouldn't be alerted for 48 hours, and I don't 
believe that's sufficient.
    Senator Corker. Mr. Cobb, you obviously feel like a number 
of laws that we have in place already deal with this issue. I 
think there's going to be some focus on this down the road. Are 
you saying in essence we do not need to in any way focus on 
regulations relating to the new mining law?
    Mr. Cobb. That would be correct. There are no other 
industry specifics other than environmental laws that I can 
think of. Environmental laws we have in the United States apply 
to everybody. I want to echo prior statements about NEPA and 
what needs to be done during the environmental review process 
and taking a look holistically at all the issues and addressing 
those issues. Again, I come back to if there are environmental 
issues associated with watersheds and water quality, those 
issues have to be addressed prior to a permit being issued. You 
cannot go to construction without directing those issues. 
Again, my point is, we've learned a lot since those Summitville 
mines in the 90s and in discussions in which the EPA is one of 
the receivers of clean up of abandoned mines in this country, 
sustained environmental compliance is what is necessary to make 
sure we don't have those issues, and from a personal 
perspective, our company in the Climax mine in Colorado, we 
have three watersheds that come off that mine, one of which 
goes to Don reservoir which represents 7 percent of the city of 
Denver's water supply. We have operated that facility for 
decades. There's not been an issue. We maintain sustained 
environmental compliance because we understand what the 
downstream issues are associated with that watershed. Again, 
there are no needs to go back and create a new environmental 
set of regulations associated with development of the mine 
projects.
    Mr. Bernholtz. Senator, as a former mayor of a town, if 
were to tell the townspeople that the water has been 
contaminated but don't worry, we have sufficient money to clean 
that up, how do you think your constituents would feel about 
that? They wouldn't be very appreciative of that fact. The 
Climax Mine is a great example in the State of Colorado where 
there are many acres of acid leech fields that there is no fish 
living in and there is no aquatic wildlife, and there are no 
people playing there. You don't even have any kind of 
recreational opportunity for anyone. I believe that the 
regulations should be to a higher standard, and that we should 
have regulations to prevent mines from actually happening if 
they are not appropriate for the use of public lands, if they 
are not suitable.
    Senator Corker. Thank you.
    Mr. Bisson. I would like to add if I could, I think most of 
the laws at least it is my understanding regulate impact except 
for maybe the Endangered Species Act, and I think what is 
missing is of the discretion for field manager to balance the 
multiple uses. Again that for some reason under the 1872 mining 
law the perception is that hard rock mining is sort of under a 
different roof. Obviously, none of us need more of the things 
we have to comply with that aren't necessary. The thing we 
really have to do is avoid the impact up front and avoid the 
problems we need to fix things like the Beal mine and the 
problems you have perhaps, Mr. Mayor.
    Senator Corker. Thank you for your testimony. Thank you, 
Mr. Chairman.
    The Chairman. Thank you, very much.
    Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman and thank you 
gentlemen for you testimony this morning. It is interesting to 
hear the back-to-back comments from the Mayor from Crested 
Butte and the Deputy Mayor from Juneau. I have never been to 
Crested Butte and really want to go. It sounds like you rely on 
recreation and tourism for a good part of your economic base. 
Certainly the community of Juneau is also a tourism-based town. 
Juneau is also surrounded by wilderness area I see here on your 
map that you've got wilderness on two sides of your community 
here, and yet Mr. Wanamaker, you have indicated in your 
testimony that through whether it is efforts at Affirmative 
Action to make sure that local people in the community enjoy 
the economic benefits of the mining operation or whether it is 
the balance that has been achieved one way or another.
    You have used the terminology, the social license to mine. 
Go into that a little bit more in detail because I think this 
is where ultimately we find this balance that Senator Corker is 
talking about. It is a balance with the laws, the regulations, 
the permits that put in place, the an then a level of 
commitment by the local people that this is an industry that we 
welcome. This is an economic opportunity that we want to have. 
In a community like Juneau that is perhaps as politically 
diverse as any in the State of Alaska and many would say it 
braces a very green approach to economic livelihood to have 76 
percent of the people there to say this is very important to 
our community. It is significant. Can you just speak to how you 
get to this social license to mine?
    Mr. Wanamaker. Thank you, Senator. The process that would 
be used, when the Coeur Mining Company came to Juneau, they 
reopened the old Kensington Mine. They looked at the community 
and saw a well educated government town, 30,000 people that 
were not automatic acceptors of an industry like this. So what 
they looked at, they identified all the different user groups 
that would be affected by their operations, commercial 
fishermen, recreational fishermen, sports fishermen, guided 
tours, kayakers, subsistence users, native people who use the 
land to live on according to traditional ways and resources. 
All of these groups should be affected and the area of the mine 
is surrounded by land that subsides for nondevelopment purpose, 
not wilderness, not noticing the classification. Too, they 
looked at it, and they said, well, we have to work with the 
people and find out what it is we need to do to be accepted and 
to become part of the community because we're going to affect 
the stakeholders.
    So they met with the different stakeholders and they 
explained to them what they want to do, the kind of mine they 
thought think would build, and they asked for their input 
continuously, how can they avoid impact issues, what could they 
do to mitigate fishery concerns? What could they do for 
subsistence concerns? What could they do to avoid impact in 
identifying, potential impacts on cultural and historical 
resources from native villages and the burial sites that were 
in the area. We went through all these groups and met with them 
continuously and brought them at together public meetings and 
went beyond what is required in the permitting process.
    They engaged the community and different stakeholders 
continuously, and because they genuinely adopted the ideas and 
concerns and explained how they could meet them from the 
different user groups, they were able to gain acceptance, and 
they put them into their operating plan they submitted to the 
Forest Service. They showed the community how they would meet 
those concerns, how they would be addressed, and the agency of 
the community agreed that these were appropriate solutions, and 
they were beyond what the permit environments would have 
demanded of them. So in the end, they have a community that is 
united with them. They're in an important watershed for 
fisheries, for recreation, for guided tours and cultural and 
historical resources, they're in ancestral lands with burial 
sites, and the tribes, the commercial fishermen, the 
recreationalists, the city assembly itself, and the various 
recreational user groups have all accepted and endorsed the 
project. That's because they took their concerns to heart and 
made them part of their mine operating plan.
    Senator Murkowski. Again, it sounds like they went above 
and beyond what was actually required by law. Mr. Chairman, I 
know that I am over my limit. I have one very quick question to 
Mr. Cobb if I may. I mentioned in my comments, along with 
several others here this morning, about the national security 
aspect of mining and the resources, and in your written 
testimony you speak to the fact that we are competing with 
China and India for the minerals on which we depend. You state 
that right now our country is dependent on imports from other 
countries for more than half of 45 mineral commodities and all 
of 17 other mineral commodities. You also stated that we only 
attract 8 percent of worldwide development dollars into this 
country for mineral exploration and activity. Is this because 
of what is viewed as a more cumbersome permitting process? In 
your opinion, why do we see that imbalance there?
    Mr. Cobb. You have the statistics correct. It's a variety 
of factors. As I said before in the testimony, there are 
certainty elements and whether that is legal, regulatory or 
political, those all come to bear in terms of attracting 
exploration investments around the world. The United States 
competes for those dollars. We are a worldwide mining company. 
Those statistics apply to us as well. It is a balancing amongst 
all those things. We have a great resource in the United 
States. What we need is certainty around access, certainty for 
tenure to be able to develop these projects because, again, as 
I indicated in my oral testimony, recently it was asked from 
major mining projects around the world, hundreds of millions of 
dollars to multi-billion dollars. For companies to put that 
kind of money into a project, you need to understand that for 
the socializing to operate and community acceptance, the 
ability to get permits, the ability to maintain permits, and of 
course, if you're demonstrating sustained compliance, do you 
have the longevity to recoup the money. All those factors come 
together to play out today in terms o where exploration dollars 
go.
    Senator Murkowski. Thank you, Mr. Chairman. I appreciate 
the extra time.
    The Chairman. Senator Craig.
    Senator Craig. Thank you, very much Mr. Chairman. Mike, 
it's great to have you back before the committee in a different 
capacity. I've not lost track of you, but I'm glad you're 
enjoying your new professional involvement. Mr. Wanamaker, I 
also want to say, I watched it very closely over the last 
decade the development of the Kensington Mine because that is 
owned by a parent company out of Idaho, the Coeur d'Alene 
Mining Operation, which is a very responsible citizen, as you 
reflected, in their efforts to develop properties across the 
country that are in compliance with all the laws.
    Mr. Chairman, what I thought I might do instead of asking 
question is offer a little reflection because since 1981 I have 
been involved in efforts to change the 1872 Mining Law, and 
I've changed along with the effort a little bit over time. 
First of all, I think it is important to say, that the 1872 
Mining Law, and Mike, you don't need to hedge around it, it has 
a bias in it. Its bias is development. That's why it was put in 
place. Its biased was the right to discover, the right to 
develop a property right and the right to develop. That's what 
the intent of the law was. That bias still exists today. 
There's no question about that. The problem that the Mayor 
expresses, we, some, I don't want to change the bias. We want 
to give a Federal agency the right to deny discovery, or should 
I say valid, existing right and claim based on the discovery 
because it's incompatible with the surrounding area or a 
watershed or something like that. That right does not exist 
today. What does exist are the changes that I've watched happen 
since I've been here. I'm in my 28th year here, NEPA passed in 
1969, was signed in 1970 and started getting regulated into law 
in the 1970s. When I got here in the 1980s, the National 
Environmental Policy Act was in place. What was rapidly coming 
behind it was FLPMA. That's the undue and unnecessary language 
that Mr. Bisson speaks about. That became a new part of it. 
What is left of 1872 Mining Law today? When I first entered the 
debate and looked at it, the only thing that's left is the 
right to discovery, the right to develop a valid and existing 
right.
    We're denying patents, basically, anymore except for the 
bias, what we put into the law, except for the 38 patents that 
were grandfathered in; so, patents don't exist anymore largely 
speaks in new discovery. The reason, in part, they don't exist 
is the multi-billions of dollars it takes to develop a mine. A 
patent existed in 1872 so that if a discovery was found, a 
discoverer could take it to the bank, and say, I have a 
property right and I want to borrow money against the property 
to develop the sub service. That's largely why patents existed. 
Of course, a lot of people from mega homes in the west now 
exist on old patents and for some environment interests that is 
a disturbing fact that it is a reality of private property that 
a patent ultimately becomes. What is significant today, the 
National Academy spoke to it in 1999, is there are now some 30-
plus laws across the board that entered the arena of the 1872 
mining law, to move a claim, and a valid right and a discovery 
to a permitting process and ultimate operation, and that's why 
the millions and billions exist today. It costs a lot of money 
to get into compliance. I disagree with you, Mayor, only in the 
way you praised the concern about the EISs.
    The reason mining companies pay for them today is because 
they would wait a century for the government to pay for them 
and they can't. So they go out and hire a professional company 
that does EISs quite often, overviewed by the government, 
overviewed by the BLM, monitored very closely by them to 
complete the process for them, and to submit that to the 
Government. Is there a bias because they paid for it? You might 
argue that; I disagree with that. I disagree with that because 
the Federal Government has the right to say, no, it's wrong and 
you ought to change, this, and this, and this, and it goes to 
public process and it goes to public theory. I see that as the 
environment in which mining operates today on public lands in 
the continental United States. It has become a very 
complicated, very expensive process. What's lacking is what has 
changed in Crested Butte. Crested Butte is no longer an old 
mining town. It is a modern, sophisticated, recreational 
community. You love it; it is beautiful; and you don't see 
mining as compatible to the current Crested Butte environment. 
I am not going to dispute that. If I were a Crested Butte 
resident, I may agree. I have to argue with you though property 
rights are property rights. That still exists within the bias 
of the Federal Law based on the development concept of 1872. 
Here is how I have changed.
    I no longer insist on patents, and I think land ought to 
revert back to the Federal Government. I think we ought to be 
much stricter on bonding so we don't have walkaways and we 
don't have legacies. I think we ought to develop a royalty 
system on our part, and I think it ought to be part applied to 
abandoned mine lands so we can clean them up. I also think 
there would be partnerships on clean up. You know, in the 
residue and tailings of old mines that were operated very 
inefficiently 100 years ago or 80 years ago or 60 years ago or 
70 years ago, there may be valid mineral today. A partnership 
between the Federal Government and a mining company to go in 
and clean up a property and glean from it residue that's 
valuable ought to exist. I've run out of my time. I really 
believe for the sake of our country, we're talking about energy 
today. Are we're talking about new technologies. We're talking 
about filtering systems and dynamics to make a cleaner world 
exist and it all takes metals and minerals. I don't want to be 
dependent on China or them, especially if in China they're 
mined in an environmentally unsound way and that often is the 
case. But let's simply give the right of denial because we 
don't like the color of the cloth.
    Let's make sure that all laws are in compliance, let's 
expand the bonding process, let's protect our environment, 
let's make sure reclamation after the fact is there and a 
reversion is involved to return that property to the Federal 
Government and the citizens of the country. That's the kind of 
mining law I will support. I will not support arbitrary and 
capricious denials that are based simply on the color of the 
cloth. I don't think that is fair. I don't think it can work in 
our country today effectively if we are to sustain a mineral 
industry which is underlying our ability to become a cleaner 
world and it clearly is. Thank you all, very much for your 
testimony. We'll work you and your interest as we try to 
resolve this. I want to be right straightforward with you, 
there are conditions that can be expected. There are changes 
that can be made, but the bill that came over from the house 
has phenomenally unacceptable things to this Senator, and I'll 
fight it and oppose it. Thank you, Mr. Chairman.
    The Chairman. Thank you, very much. We have another panel 
waiting to testify. Let me just clarify one thing. Mr. Cobb, 
you said earlier that it is inappropriate to write in 
environmental requirements in this legislation because whether 
industry has that kind of specific standards if I understood 
your testimony. The Surface Mining Act that applies only to 
coal does contain quite a few requirements, as I understand it 
that don't apply to hard rock minerals. So it's not 
unprecedented for the Congress to consider those types of 
issues in determining how to regulate a permit, development of 
a mineral; Would you agree with that or not?
    Mr. Cobb. I would agree with that.
    The Chairman. I guess what I was trying to explain was that 
in a broad context, take a look at the application of the whole 
ranges of regulations that identified my oral testimony, that 
was quite everybody. Unless there's some other burning 
question, let me thank this panel very much for your testimony 
and we will call forth the second panel. On this second panel, 
we have four witnesses. First is Deborah Gibbs Tschudy, who is 
the Deputy Associate Director of Minerals Review Management in 
the Minerals Management Service; James Cress, who is with Holme 
Roberts & Owen, a law firm in Denver, Colorado. James Otto, who 
is an independent consultant from Boulder, Colorado, and Ryan 
Alexander who is for Taxpayers for Common Sense here in 
Washington, DC. The main focus of this panel is to talk about 
the royalty issue, so we very much welcome all of you here. If 
you could each summarize your statement, and then we will 
undoubtedly ask some questions. Ms. Tschudy, why don't you 
start? Is that the correct pronunciation?
    Ms. Tschudy. Yes, sir it is.
    The Chairman. If you could go ahead, please.

STATEMENT OF DEBORAH GIBBS TSCHUDY, DEPUTY ASSOCIATE DIRECTOR, 
   MINERALS REVENUE MANAGEMENT, MINERALS MANAGEMENT SERVICE, 
                   DEPARTMENT OF THE INTERIOR

    Ms. Tschudy. Mr. Chairman and members of the committee 
thank you for the opportunity to appear here today to provide 
technical information regarding the possible reform for the 
Mining Law of 1872. Through its Minerals Revenue Manage 
program, the Minerals Management Service collects, accounts for 
disbursements being verified, royalty payments from all 
leasable minerals, which includes oil, natural gas, coal, oil 
shale, sodium, potash, phosphates, and all minerals on acquired 
land. The Bureau of Land Management administers these leases. 
The revenues collected MMS are one the largest sources of non-
tax revenue for the Federal Government. In physical year 2007 
MMS collected over $11.4 billion in mineral revenue, including 
nearly $1 billion from Federal and Indian coal leases and over 
$59 million from Federal and Indian non-coal solid mineral 
leases.
    My written testimony provides a description of the 
statutory basis for the current mineral royalty program on 
Federal leases, as well as the description of the key 
components for oil, gas, and coal, non-coal solid minerals, and 
hard rock minerals on acquired land. In general, royalty 
payments in the context of oil, gas, and coal are based on the 
production volume, the lease royalty rates and the value of the 
product. The royalty rate is the percentage of the value of the 
production removed or sold from the lease and is generally 12.5 
percent for oil, gas, and surface coal mines, and 8 percent for 
underground coal mines. Federal and Indian oil, gas, and lease 
terms provide for the Secretary of Interior to determine the 
value of production. The Secretary does so through the 
promulgation of regulations. Having the value determined by 
regulations, allows the flexibility to change the valuation 
methodology in response to changes in either market conditions 
or operations.
    Valuation regulations for oil, gas, and coal allow 
deductions for the cost of processing natural gas or washing 
coal and transporting production to the point-of-sale. The 
costs that are not deductible include one production-related 
costs, for example, the costs of exploration, drilling or 
mining; two, marketing costs; and three, placing oil gas or 
coal in marketable conditions. Those are the costs associated 
with field processes that take place on or near the lease such 
as separation, heating, cooling, dehydration, compression for 
natural gas and crushing and sizing for coal. Royalties for 
non-coal solid minerals such as the sedimentary minerals of the 
sodium and potassium are based on the growth value of primary 
products. Royalty rates for sodium and potassium are generally 
five to 6 percent of the gross value, and the minimum royalty 
rage of 2 percent is set by statute. Unlike oil, gas, coal or 
sedimentary minerals, hard rock minerals such as gold, silver, 
uranium and the base metals like lead, zinc, and copper, must 
generally undergo physical processing and intensive chemical 
processing to produce salable products. The MMS currently 
collects royalties from a large lead, zinc, and copper 
operation on Federal Land in Missouri. The lessee sells the 
zinc and copper concentrates at arms-length prior to smelting. 
In this case, the lease document, itself, actually defines 
gross value as the price paid in an arms-length sale of the 
zinc and copper mineral concentrate without deduction for 
processing and mining costs.
    The lease terms allow for deductions for transportation 
from the mine to the mill. The lead concentration on the other 
hand, is smelted by the lessee prior to sale of the final lead 
product. In this case the lease term states that gross value is 
based on the net smelter return methodology. You take prices 
received for the metals, less the cost to ship, smelt, and 
refine the mineral concentrate. MMS verifies the first value 
calculation by auditing the lessee's sales records and the 
costs of transportation. Verifying the net smelter return 
calculation requires an audit of the sales records, the 
transportation costs and the smelting costs. If a royalty 
program is to be established for hard rock minerals, we offer 
five basic principles that should be considered. First is 
simplicity. Based on our experience, a successful royalty 
program must be clear and well defined in the statute, assure 
care contemporaneous compliance, minimize administrative costs 
and litigation both to the Federal Government and to the 
industry by reducing the complexity of the royalty calculations 
and associated deductions. It must be applied prospectively, 
and it must provide a fair return to taxpayers.
    Second, a successful program must have adequate audit and 
compliance resources. Today we ensure compliance for about 150 
coal mines and other solid mineral mines with approximately 35 
audit and compliance staff. Third, a successful program must be 
effective and efficient and have an automated reporting system. 
We have in place a flexible and easy-to-use web-based system 
for companies to report royalties and production for solid 
mineral leases today. However, implementing a royalty for hard 
rock minerals on Federal leases, would require system 
modification. Fourth is audit and investigative authority. The 
MMS currently has authority under the Federal Oil and Gas 
Royalty Management Act to conduct audits and inspections, 
demand records, require record keeping, conduct hearings and 
investigations, issue subpoenas, and assess interest on late 
payments. This authority would be necessary to carryout an 
effective audit and investigative program for hard rock 
minerals. Finally, a strong and effective enforcement program 
is a key component of a successful royalty program for any 
mineral. The civil and criminal penalty authority covered under 
sections 109A and B of the Federal Oil and Gas Royalty 
Management Act is sufficient to carry out an effective 
enforcement program.
    In summary, the Administration would like to work with 
Congress to update the Mining Law, including authorization for 
a clear and effective royalty program that is easily 
verifiable. The Administration also believes that any 
legislative solution must be accomplished in a way that 
provides a reasonable level of certainty to the industry while 
pursuing goals to protect or environment. Finally, the 
Administration believes that royalty provisions should be set 
at a level that does not threaten the continued, reliable 
domestic mineral production upon which this Nation relies. 
Thank you.
    [The prepared statement of Ms. Tschudy follows:]
Prepared Statement of Deborah Gibbs Tschudy, Deputy Associate Director, 
Minerals Revenue Management, Minerals Management Service, Department of 
                              the Interior
    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to appear here today to provide technical information 
regarding possible reform of the Mining Law of 1872.
    Through its Minerals Revenue Management (MRM) Program, the Minerals 
Management Service (MMS) collects, accounts for, substantiates, and 
disburses revenues associated with leasing and mineral production from 
Federal onshore and offshore lands and Indian lands. In Fiscal Year 
2007, MMS collected over $11.4 billion in mineral revenues.
                  statutory basis for current program
    The Mineral Leasing Act of 1920 (MLA), (30 U.S.C. Sec. Sec.  181 et 
seq.) established a type of mineral category called ``leasable'' 
minerals. Under the MLA, deposits of coal, potassium, sodium, 
phosphate, oil shale, native asphalt, tar sands, oil, and gas were made 
subject to disposition through a leasing process. This leasing process 
allowed the United States to maintain title to the land and establish 
the type of lease, the duration of the lease, acreage limitations, and 
royalty and rental terms. MMS collects and disburses revenues from 
these leases including royalties on these types of minerals.
    The Materials Act of 1947 established another type of mineral 
category called ``salable'' minerals for which minerals commodities are 
sold by the Bureau of Land Management (BLM). Under this Act, deposits 
of common varieties of sand, stone, gravel, pumice, pumicite, cinders, 
clay, and petrified wood were made subject to disposition through a 
sales process. The Bureau of Land Management collects revenues from 
sales of this type.
    The Mineral Leasing Act for Acquired Lands of 1947 (30 U.S.C. 
Sec. Sec.  351 et seq.) extended the mineral leasing laws (the Mineral 
Leasing Act, etc.) to all lands acquired by the United States. The Act 
allowed the United States to maintain title to the land and establish 
lease terms for all minerals found on acquired land. MMS collects and 
disburses royalties on these types of minerals.
    All minerals found on Indian tribal and allotted lands are 
administered using a leasing process under the Tribal Lands Leasing 
Act, Indian Mineral Leasing Act, and other statutes. Solid mineral 
leases on Indian lands are negotiated between the mine operator and the 
tribe or an allottee on a case-by-base basis. Neither the general 
mining laws nor the Federal leasing laws are applicable to Indian 
lands; however, MMS accounts for these mineral royalties on behalf of 
Indian tribes and allottees.
    The Federal Oil and Gas Royalty Management Act of 1982 (FOGRMA) (30 
U.S.C. Sec. Sec.  1701 et seq.) required the development of 
comprehensive fiscal and production accounting and auditing systems to 
accurately determine oil and gas royalties, interest on late payments, 
fines, penalties, and other payments owed, and to collect and account 
for such revenues in a timely manner.
               description of the current royalty program
    The MMS collects, accounts for, disburses, and verifies royalty 
payments from all leasable minerals, which include oil, natural gas, 
coal, oil shale, sodium potash, phosphate, and all minerals on acquired 
lands. The term ``hardrock mineral'' is often used as a synonym for 
locatable minerals and includes the base and precious ores, ferrous 
metal ores, and certain classes of industrial minerals. Examples 
include gold, silver, platinum, copper, lead, zinc, magnesium, 
tungsten, bentonite, barite, feldspar, fluorspar, uranium, and uncommon 
varieties of sand, gravel, and dimension stone.
    Following is a summary of the key components of the current royalty 
program for 1) oil, natural gas, and coal, 2) non-coal solid minerals, 
and 3) hardrock minerals on acquired lands.
Oil, Natural Gas, and Coal
    Royalty payments in the context of oil, gas, and coal are based on 
the production amounts, the lease royalty rate, and the value of the 
product. In general, all production is subject to royalty payments, 
except in limited cases where royalty payments are statutorily or 
administratively waived for policy reasons, for unavoidably lost 
production, or for production used on or for the benefit of the lease. 
Royalty is computed on the basis of the quantity and quality of 
production at the point of royalty determination.
    The BLM establishes the royalty rate for oil, gas and coal produced 
from Federal onshore leases. The royalty rate is a percentage of the 
value of the production removed or sold from the leased lands and there 
is a statutory minimum of 12.5 percent for oil, gas, and surface coal 
mines, and 8 percent for underground coal mines. The MMS establishes 
royalty rates for Federal offshore resources.
    Federal and Indian oil, gas, and coal lease terms provide for the 
Secretary to determine the value of production. The Secretary does so 
through the promulgation of regulations. Having the value determined by 
regulations allows flexibility to change the valuation methodology in 
response to changes in the market conditions and operations.
    In general, the royalty value of production from Federal leases is 
based upon the gross proceeds accruing to the lessee from its arm's-
length sale of oil, gas, or coal. An arm's-length sale is a bona fide 
transaction between independent parties. If production is not sold at 
arm's-length, then the value is determined by other market indicators 
such as comparable sales, publicly available prices, etc. Valuation 
regulations allow deductions for the costs of processing natural gas or 
washing coal and transporting production to the point of sale. The 
costs of that are not deductible include: 1) production related costs, 
2) placing oil, gas, or coal into marketable condition, and 3) 
marketing (i.e., finding or maintaining a market for the oil, gas, or 
coal production). The costs of placing production in marketable 
condition are generally field processes that take place on or near the 
lease such as mechanical separation, heating, cooling, dehydration, and 
compression for natural gas; and crushing and sizing for coal. These 
activities are distinguishable for 1)natural gas processing in which 
elements or compounds (e.g.: natural gas liquids) are removed from the 
natural gas stream and sold or otherwise disposed of, and 2) coal 
washing in which the value of the coal is enhanced.
Non-Coal Solid Minerals
    Royalties for non-coal solid minerals, in this case the sedimentary 
minerals sodium and potassium, are based on the gross value of primary 
products, defined as naturally occurring components of ores or brines 
and the first marketable products produced from the processing of raw 
ore or brine. The royalty value of an arm's-length sale is the actual 
selling price, less deductions. Royalties on products sold under non-
arm's-length conditions, are generally based on the weighted average 
sales price of the lessee's arm's-length sales of the same product, 
sold in bulk at the mine. Secretarial guidelines for sodium and 
potassium allow three types of deductions:

   When the sales price includes delivery to a destination 
        remote from the mine, the lessee may deduct transportation 
        costs from sales price.
   When the sales price includes the cost of packaging, the 
        lessee may deduct packaging costs from sales price.
   When the product sold contains material not derived from the 
        Federal lease, the lessee may deduct the cost of purchasing 
        those non-lease materials from the sales price.

    The BLM establishes royalty rates for sodium/potassium leases--
generally 5 or 6 percent of gross value. The minimum royalty rate set 
by statute is 2 percent.
Hardrock Minerals on Acquired Lands
    Unlike oil, natural gas, coal, or sedimentary minerals, hardrock 
mineral deposits must generally undergo physical processing and 
intensive chemical processing to produce salable products, such as 
gold, silver, uranium, or copper. Final products are the purified base 
or precious metals.
    MMS has no role in the oversight of hardrock mining operations for 
mining claims on original public domain lands because companies are not 
currently required to pay royalties on production from these lands. 
However, MMS does collect royalties from hardrock operations on certain 
acquired lands authorized under the Reorganization Plan No. 3 of 1946 
(5 U.S.C. Appendix). For example, the MMS currently collects royalties 
from a large lead, zinc, and copper operation on Federal acquired lands 
in Missouri. The royalty rate established in the lease is 5 percent of 
gross value of the lead, zinc, or copper mineral concentrates processed 
from the ore. The lessee sells the zinc and copper concentrates at 
arm's-length prior to smelting. In this case, the lease defines gross 
value as the price paid in an arm's-length sale of the zinc and copper 
mineral concentrates without reduction for processing or mining costs. 
The lease terms allow for deductions for transportation from the mine 
to the mill.
    The lead concentrate is smelted by the lessee prior to sale of the 
final lead product. In this case, the lease term states that gross 
value is based on the net smelter return methodology using prices 
received for metals less the costs to ship, smelt, and refine all 
mineral concentrates.
    MMS verifies the gross value calculation by auditing the lessee's 
sales records and costs of transportation. Verifying the net smelter 
return calculation requires an audit of sales records, transportation 
costs, and smelting costs.
   challenges associated with implementing a royalty program for all 
                           hardrock minerals
    If a royalty program is to be established for all hardrock 
minerals, we offer five basic financial management principles that need 
to be considered.

          1. Simplicity. Based on our experience, a successful Federal 
        royalty program should:

   be clear and well defined in statute,
   minimize litigation,
   minimize the complexity of royalty calculations and 
        associated deductions,
   assure contemporaneous compliance,
   minimize administrative costs to the Federal Government and 
        lessees,
   be applied prospectively, and
   provide a fair return to taxpayers.

          2. Adequate audit and compliance resources. Today, MMS, 
        State, and Tribal auditors ensure compliance for about 150 coal 
        and other solid mineral mines with approximately 35 audit and 
        compliance staff. BLM inspectors also inspect mines and verify 
        the production reported to MMS. The BLM currently administers 
        approximately 350,000 hardrock mining claims and estimates that 
        there are 620 active plans of operations; these are claims or 
        mines that are either producing or have development drilling 
        occurring on the claim. Additional audit and compliance 
        resources would be needed to implement a royalty program for 
        all hardrock minerals.
          3. Efficient and effective automated reporting system. The 
        MMS has in place a flexible and easy-to-use web-based system 
        for companies to report royalties and production for solid 
        mineral leases. Both large mining operations and small hardrock 
        reporters use this system. Implementing a royalty program for 
        all hardrock minerals would require modifications to MMS's 
        system including establishing an interface with BLM's systems.
          4. Audit and investigative authority. The MMS currently has 
        authority under FOGRMA to conduct audits and inspections, 
        demand records, require record keeping, conduct hearings and 
        investigations, issue subpoenas, assess interest on late 
        payments, etc. (30 U.S.C. 1701 et seq.). This authority would 
        be necessary to carryout an effective audit and investigative 
        program for hardrock minerals.
          5. A strong and effective enforcement program is a key 
        component of a successful royalty program for any mineral. For 
        example, the enforcement provisions in FOGRMA, at 30 U.S.C. 
        Sec. Sec.  1719 and 1720, provide a starting point for creating 
        an effective enforcement program.
                               conclusion
    The Administration would like to work with Congress on any update 
of the Mining Law and believes that any legislative solution must be 
accomplished in a way that provides a reasonable level of certainty to 
the industry while pursuing goals to protect our environment. The 
Administration believes that if Congress chooses to apply royalties to 
hardrock minerals, the royalty provisions should be set at a level that 
does not threaten the continued, reliable domestic mineral production 
on which this Nation relies.

    The Chairman. Thank you, very much. Professor Otto, go 
right ahead.

  STATEMENT OF JAMES OTTO, INDEPENDENT CONSULTANT, BOULDER, CO

    Mr. Otto. Thank you for the opportunity to present my views 
concerning the issue of royalties. I appear here today as a 
private citizen, expressing my own views, not representing any 
group. I have worked on mining law and fiscal issues in about 
40 nations, and have assisted many of the world's largest 
mining countries in the development of mining, laws 
regulations, and fiscal systems. In some cases, my mining 
taxation works only by the consumed Government, other times by 
the United Nations, the World Bank, and occasionally by the 
private sector. My most recent book is entitled, Mining 
Royalties and distributed by the World Bank to the ministries 
of finance and mining in different countries.
    You have invited me here today to give my opinion on 
several very specific questions, and I'll go through those now. 
How should a royalty on hardrock minerals be structured, should 
they be net or gross or a combination of the two. In my 
experience, I highly recommend that a gross proceeds-type of 
royalty be considered. It is transparent, easy to administer, 
and avoids most tax minimization strategies. Should the rate be 
variable depending on the commodity? There are many types of 
minerals and the profit margins differ quite substantially. 
Many nations do discriminate the clean mineral types. Some 
nations have long lists of minerals with a different royalty 
rate and a different royalty basis defined for each, and in 
other nations they classify minerals into groups and have a 
uniform approach to each group of minerals. In other nations, 
they have a uniform system to all minerals. My recommendation 
is to have a uniform system for all hardrock minerals. What 
should the royalty rate be? The key to deciding an appropriate 
royalty is to set it at a rate most minds can bear and still 
make reasonable profit.
    In most countries, that royalty is about 2 to 5 percent, 
based on its proceeds. Rates higher than 5 percent are 
exceptionally rare. The House has the rate around 8 percent. 
That would be the highest in the world and across the board for 
those proceeds from royalty. I'm unable to offer a third 
opinion as to whether that's an appropriate rate for the United 
States because the United States has depletion allowance. In 
fact, this is a negative royalty, and I haven't done the models 
to determine what the different royalty rate would be. My 
recommendation is that if the gross proceeds basis is used, the 
royalty rate should be no higher than 5 percent. If you use a 
form of net back or profits-based royalty, the rate should be 
greatly in excess of 5 percent. How should the royalty be 
administered? The royalty can be based on a system of self-
assessment on paper. A standard reporting form should be 
developed and an agency of Government familiar with mining and 
royalty payments, such as the Minerals Management Service, 
should be assigned the responsibility and provided funding to 
put in place support and resources be required. What types of 
enforcement and compliance provisions are needed? Law should 
cover at least the basic topics as the requirement for the 
royalty payer to keep and hold certain types of sales records; 
empowerment of the Government to inspect records, audit 
returns, and adjust returns; the ability of the royalty payers 
to challenge adjusted returns, or the penalty for false returns 
or no returns.
    Of key importance, as said today, is the necessity to 
control transfer of pricing practices where the minerals are 
sold at less than that an open market value to affiliated 
companies. What should the transition rules for new royalty be? 
In almost all nations where I have assisted in fiscal reforms, 
there are rarely any special transition provisions provided. I 
would recommended that royalty be applied equally to all 
hardrock mines as of an effective date. Would a royalty put 
U.S. producers at a disadvantage to producers in other 
countries? The impact of the overall tax system is going to 
decide the competitiveness of the U.S. industry. In taking a 
look at what is competitive, generally a total effective tax 
rate, the combined effect of all the income taxes, State taxes 
and so forth should be in range of 40 to 60 percent. If the 
effective tax rate is in excess of about 60 percent, over the 
long-term industry will dwindle and the revenues will decline. 
My concluding remarks, the current mining law is out of date 
and it suffers from a host of problems and among these there is 
does not lay the groundwork for social license to operate. By 
this I mean the acceptance by our society that the mining 
industry can play a positive role. The public perceives the 
industry as a polluter and creator of ugly scars on the 
landscape, and is inherently unsafe.
    Today many communities view proposed mines as not an engine 
of economic growth, but an industry that must be kept out of 
their back yard. The imposition of a royalty, especially one 
where revenues are earmarked for reclamation and local 
investment, may help the industry to regain a social license to 
operate. Finally, I recommend that royalty based on gross 
proceeds or net smelter returns and be applied to all minerals 
at a uniform rate and that the rate not exceed 5 percent. Thank 
you.
    [The prepared statement of Mr. Otto follows:]
 Prepared Statement of James Otto, Independent Consultant, Boulder, CO
    Thank you for the opportunity to present my views concerning the 
issue of royalty considerations to be taken into account with regard to 
reform of the Mining Law of 1872.
    I appear here today as a private citizen, expressing my own views, 
and not representing any group. I have worked on mining policy, law and 
fiscal issues for twenty five years. I have assisted many governments 
in the development of their mining policies, laws, agreements and 
fiscal systems including many of the world's most important mining 
nations. Examples of my recent mining taxation related work includes: 
lead consultant to the Treasury on the bill to introduce royalties in 
South Africa, mining sector fiscal analysis for the Peruvian government 
prior to the introduction of royalty, analysis of the mining fiscal 
systems including royalty in Australia, Bolivia, Egypt, Guinea, 
Indonesia, Mali, Mongolia, Mozambique, Papua New Guinea, Philippines, 
Saudi Arabia, Yemen, Zambia, and others. In some cases my mining 
taxation work is funded directly by the concerned government, other 
times by multi-lateral agencies like the World Bank, IFC or United 
Nations, and occasionally by the private sector. My books on the 
subject of mining laws and mine taxation are considered by some as 
standard references worldwide. My most recent co-authored book is 
titled Mining Royalties and it has been distributed by the World Bank 
to most mining and finance ministries and departments worldwide.
    In my work for governments who are undertaking mineral sector 
fiscal reform, I advise that when designing a tax system, law-makers 
should be aware of the integrated impact that all taxes, royalties and 
fees can have on mine economics and potential levels of future 
investment. When determining which types and levels of taxes to apply 
to the mining sector, policymakers should consider not only ways to 
achieve individual tax objectives, but also take into account the 
cumulative impact of all taxes. Such awareness should recognize the 
importance of each tax type in achieving specific objectives. The 
overall tax system should be equitable to both the nation and the 
investor and be globally competitive.

          (1) How should a royalty on hardrock minerals produced on 
        Federal lands be structured?

                  --Should it be net or gross or a combination of the 
                two?

    In its simplest forms, a royalty tax liability is calculated based 
either on a set amount per unit volume ($/cubic foot) or per unit 
weight ($/ton), or is based on a percentage of the value of the mineral 
commodity being extracted or sold (% x value). In the first instance, 
unit based royalties, the determination of the royalty liability is 
straight forward being solely dependent on the physical quantity or 
volume of the material produced but in the second case, value-based 
royalties, the assessment is more difficult because a value must be 
assigned to the commodity being sold. A third and more complex method 
relies on some measure of net profit or net back. For a net profit 
royalty, a measure of sales revenue is reduced by the deduction of 
certain allowable production and other costs to determine a net profit, 
and in a net back scheme some costs are allowed as deductions but 
usually not primary mining costs. Net profit and net back royalties are 
calculated as a % times net profit or net back.
    The advantage to government of unit and value based royalties is 
that they are fairly straight forward to calculate and pose fewer 
opportunities for tax minimization strategies. Their weakness is that 
low profit mines will have the same royalty basis as high profit mines, 
and this may impact them with regard to decisions about mine life, ore 
cut-off grade, and whether to continue operations when prices are low. 
Most Canadian provinces levy a form of net profits royalty, as do a few 
other jurisdictions including Nevada. In my experience, when a country 
is considering royalty reform, companies will argue strongly for a net 
profits type of royalty. However, most governments apply royalties 
based on units and/or on gross value (or net smelter return). Unit 
based royalties are in common use mainly for construction minerals and 
sometimes coal but are less often applied to most other minerals.
    Determining the value of the commodity for a value based royalty is 
not always straight forward. Different commodities each pose their own 
special problems and a nation may use several different valuation 
methods. Not only will different commodities often be valued by 
different methods but even a single commodity may pose assessment 
challenges depending on the condition to which it has been processed. 
For example, take the following situation. A copper deposit is located 
which contains some ore suitable for recovery by smelting and some 
which is recoverable by leaching. The mine management determines that 
three products will be produced for sale: raw ore, a copper 
concentrate, and from an electro-winning plant, copper metal. The three 
copper products will obviously command very different sales values in 
the market. How should the three sales products be valued for royalty 
purposes? I usually advise nations that when devising a value based 
royalty to use a sales invoice (gross proceeds or net smelter return) 
based system for most minerals. A net smelter return (NSR) reflects the 
value of the mineral after deducting certain restricted costs not 
related to mining operations (such as the transport costs of the 
mineral to a third party facility that processes the mineral to a 
higher valued state and the charges associated with that processing).

    Recommendation: I suggest that a gross proceeds type royalty be 
considered. It is transparent, is simpler to administer than other 
royalty types, and avoids most taxpayer tax minimization practices. The 
approach could be stated as an election by the taxpayer to pay based on 
either a pure gross proceeds basis or a net smelter return basis, with 
net smelter return carefully defined in the law.

                  --Should the rate be variable depending on commodity?

    There are many different types of minerals and their extraction 
costs, prices received and profit margins may differ substantially. For 
example, the average gold mine probably has a higher profit potential 
over the long run than an average copper mine. Should not the royalty 
for gold thus be higher than for copper? Many nations do discriminate 
between mineral types. In some nations like India and Indonesia, long 
lists of minerals appear in their laws along with separate rates or 
amounts for each mineral type. Other nations classify minerals into 
groups and apply a different royalty to each mineral group. Still 
others apply a uniform system regardless of the mineral type. In my 
visits with tax authorities in many nations, those responsible for tax 
collection almost invariably prefer a uniform system, with the one 
exception being construction minerals. There are a variety of reasons 
for preferring a uniform system, and I will illustrate two reasons. 
Many mines produce one or more multi-metal concentrates. For example, a 
zinc concentrate may contain recoverable amounts of zinc, lead, silver, 
and gold. If different royalties apply to each mineral, how can the 
amount of royalty be calculated? A second reason to avoid royalty 
discrimination between mineral types is that it invariably leads to 
sustained efforts by producers of one mineral type to lobby for a 
reduction in their rate to the lowest rate on any other mineral so that 
there is a ``level playing field.'' My advice to most governments is to 
have a uniform royalty approach to all minerals, with the exception of 
construction type minerals and coal.

    Recommendation: a uniform royalty rate should apply to all hardrock 
minerals.

          (2) What should the royalty rate be?

    This is a difficult question. For marginally economic mines, any 
royalty may result in them becoming sub-economic leading to closure. 
For highly profitable mines, a low rate may see the government 
needlessly forgoing revenue. The key is to achieve a royalty that most 
mines can bear and still make reasonable profits. The experience of 
many nations with substantial mining industries has been that for most 
minerals a royalty rate of between 2 and 5% of mineral value (gross 
proceeds or net smelter return) works well. Rates higher than this may 
over the long run result in lower income tax and royalty yields because 
fewer new mines will meet minimum rate of return decision criteria in 
times of average prices and some will not be built (the income tax base 
will be smaller). Additionally, capital may flow to lower taxing 
jurisdictions. Almost all companies would view a gross proceeds royalty 
of greater than 5% as punitive. A draft bill considered by the House of 
Representatives (H.R. 2262) would impose an NSR of 8%, one of the 
highest value based royalty rates that I have encountered in my work. 
Is this rate too high? I am unable to offer a firm opinion on that 
without further study, and the main reason is another feature of the US 
tax system--the depletion allowance. Very few nations have a depletion 
allowance for mineral production. Such an allowance is viewed by most 
nations as a form of negative/reverse royalty and most nations have 
rejected this concept. In most nations, the concept of a royalty is 
that payments should be made to government as non-renewable minerals 
are mined. Conversely, a depletion allowance allows an income tax 
deduction as non-renewable minerals are mined. Thus, over the life of a 
mine the impact of a high royalty is offset to some extent by lowering 
income tax through a depletion allowance (assuming that most mines pay 
income tax). Even given the depletion allowance there is a strong 
argument in favor of a royalty rate much less than 8%. While taxpayers 
with multiple operations may be able to take advantage of depletion 
allowances in most years because they are taxed on income from all 
operations, the taxpayer with a single mine will not enjoy the benefits 
of depletion during the early years of the project when it already has 
substantial other deductions or when its taxable income falls to zero 
because of low commodity prices. An 8% gross value type royalty will 
have a major impact on independent mines. If the U.S.A. did not offer a 
depletion allowance, I would certainly counsel that a net smelter 
royalty should be set in the 3 to 5 percent range.

    Recommendation: if a gross proceeds/net smelter return royalty 
basis is used the royalty rate should be no higher than 5%. If a form 
of net back or net profits tax is used, the rate should be 
substantially higher than 5% and the optimal rate would depend on what 
types of costs are allowed in calculating the royalty basis.

          (3) How should the royalty be administered by the Federal 
        Government?

                  --How can administration be simplified?

    The royalty can be based on a system of self-assessment and 
standard reporting forms should be developed. An agency of government 
familiar with mining and royalty payments, such as the Minerals 
Management Service, should be assigned responsibility and provided 
funding to put into place requisite administrative support. Royalty can 
be paid annually.

                  --What types of enforcement and compliance provisions 
                are needed?

    The basic provisions should cover at least basic topics such as: 
the requirement for the royalty payer to keep and hold sales records; 
the empowerment of government to inspect records, audit returns, and 
adjust returns; the ability of the royalty payer to challenge an 
adjusted return; penalties for false returns or no returns. 
Consideration could be given to incorporating by reference relevant 
provisions in the income tax law. Of key importance is the necessity to 
control transfer pricing practices.
    Transfer pricing is a major and growing concern with regard to 
royalty in many nations. The term transfer pricing refers to a practice 
where the mine product is sold to an affiliated company at a price less 
than the product would have been sold to an unaffiliated party. It in 
effect transfers profit from one tax entity to another. If a royalty is 
based on some measure of sales value (such as a gross proceeds/net 
smelter return) this is a concern. The industry is consolidating, and 
sale of minerals between affiliated companies is common. In mining laws 
and model agreements that I have recently drafted I strive to reduce 
the potential for transfer pricing with regard to royalty. For example, 
I may require special reporting of any sale to an affiliate, with 
affiliate being defined very aggressively (for example a 5% ownership 
interest test, rather than a just a control test).

          (4) What should the transition rules for a new royalty be?

    In nations where I have assisted in mineral sector fiscal reform 
efforts, there are rarely any special transition rules. The one 
exception is where a special agreement has been negotiated between a 
company and the government and the agreement contains fiscal 
stabilization provisions. If the agreement has gone to their Congress 
(parliament) and been ratified as a law, the usual practice is to 
grandfather that agreement, often with the intent to avoid future 
litigation. The Congress has substantial experience with the 
introduction of new features in other aspects of the national tax 
system and could follow its usual practice.

    Recommendation: The tax should be equally applied as of an 
effective date.

          (5) Should the U.S.A. impose a royalty on locatable minerals?

    Most nations impose some form of royalty on minerals when the 
nation is the owner of the mineral. There are very few exceptions and 
over the past few years some countries that previously had no royalty 
now either have one or are planning to introduce one. Almost all new or 
recently amended mining laws include a royalty provision. The rationale 
for a royalty varies from country to country. In some, it is perceived 
as a form of ownership transfer tax, where the nation is provided a 
fiscal payment as the mineral moves from national ownership into 
private ownership. In other nations, it is justified as a form of usage 
fee--the royalty is considered as the regulatory fee paid in exchange 
for the ``right to mine'' in much the same way as a driver pays an 
annual registration fee to register and use a car on public roads. In 
this later case, questions about minerals ownership are mute which may 
be an important factor in the U.S.A. where for perfected claims 
minerals may no longer belong to the government. Regardless of the 
rationale, the primary reason behind imposing a royalty in most nations 
is to increase the amount of money flowing to the government, either to 
the general budget or for earmarked purposes. Most nations impose 
royalty and it is time for the U.S.A. to do so also.

          (6) Will a royalty put U.S.A. producers at a disadvantage to 
        producers in other nations?

    Any increased cost, such as a royalty, puts a U.S.A. producer in a 
worse off position to compete. Increased costs may discourage 
investment into the sector both by US and foreign firms. However, 
almost all nations have royalty. In my advice to governments, I urge 
policy makers to take into account the complete tax system when 
considering a change in any part of it. It is the impact of the tax 
system as a whole that will determine whether most mines are able to 
operate profitably, and with sufficient profits to reinvest in new 
exploration to replace reserves. In extensive studies by myself and by 
the International Monetary Fund it has been determined that many 
mineral producing nations impose a fiscal system on mines that results 
in a total effective tax rate (ETR) in the range of 40 to 50%. ETR is 
simply the amount of all taxes and fees paid to government divided by 
before tax profit, calculated over the life of the mine. In my mining 
fiscal studies for other nations, I typically use a cashflow 
spreadsheet for one or more model mines and build in all the various 
taxes and fees and incentives. The model then calculates the ETR and 
the investor's rate of return. Such models are very useful to assist 
lawmakers in understanding the impact on a typical mine of various 
royalty rates in times of high and low commodity prices. They also 
allow a better understanding of the ways that the tax system works in a 
holistic way. For example, to what extent does the depletion allowance 
offset the impacts of a high royalty? To what extent does the ability 
to deduct a royalty from income subject to income tax affect profits? I 
don't know if such modeling has been done to assist in setting a 
proposed royalty method and rate in your reform effort. If the method 
and rate is contentious, I suggest that such modeling may be a useful 
tool for lawmakers to have so as to understand whether the rate is 
reasonable. Taken alone without reference to the rest of the tax 
system, a gross proceeds or net smelter return royalty applied to all 
minerals at rate of 8% will perhaps be the world's highest (rates on 
individual minerals are sometimes higher than 8%). Lawmakers should 
take care to create a royalty system that provides a real and fair 
return to the government but that allows the industry to make adequate 
profits to invest in new tax paying mines.
                           concluding remarks
    The current mining law is badly out of date. It suffers from a host 
of problems and among these is that it does not lay the groundwork for 
``a social licence to operate.'' By this I mean the acceptance by our 
society that the mining industry plays a positive role in our well-
being. The public perceives the industry as highly polluting, causing a 
proliferation of abandoned eye-sores, putting workers at high risk, and 
contributing little to the national or local economy. Today, many 
communities view a proposed mine not as an engine for economic growth, 
but an industry that must be kept out of their back yard. The 
imposition of a royalty, especially one where revenues are earmarked 
for reclamation and local investment, may help to regain the industry's 
social licence to operate. Since 1990, over 100 nations have replaced 
or made major amendments to their mining laws. It is time for the 
U.S.A. to do the same.

    The Chairman. Thank you, very much.
    Mr. Cress.

STATEMENT OF JAMES F. CRESS, PARTNER, HOLME ROBERTS & OWEN, LLP

    Mr. Cress. Thank you, Mr. Chairman, and members of the 
committee. I appreciate the opportunity to speak to you today 
on the issue of hardrock mining royalties. I am a lawyer. I 
have been in private practice for about 20 years. I have during 
that time represented landowners and mining companies in their 
negotiations both with the U.S. and governments in other 
countries. I would like to start by talking about the 
difference between a gross royalty and a net royalty, and then 
talk a little bit about some of the comparisons we did with 
oil, and gas, and coal, even though it is not the best 
comparison. A gross royalty, I believe, is a blunt instrument. 
It's not the best or fairest measure of the value for minerals 
contained in Federal lands. That Government brings to the table 
millions of acres of Federal lands of generally unknown mineral 
potential.
    There's some knowledge, but to some extent it is really 
unknown. The way the hardrock industry works, you have got to 
discover those minerals. You have to expend millions of dollars 
to discover a mineral body. They tend to be very small, and 
then to determine whether that mineral body is recoverable, you 
have to look at the metallurgy. I brought a sample that almost 
didn't get through security of what comes out of these mines. 
Which is ore. It is a chunk of rock that has to be processed, 
as Ms. Tschudy said, considerably from the point at which it 
comes out of the ground. If you are lucky, it looks like this. 
This is an sample of molybdenite, and you can actually see the 
higher concentration of molybdenite on the surface of this side 
of the rock. But often these days it looks like this. So the 
amount of processing that goes into hardrock minerals is just a 
quantum, absolutely different that what you have with oil and 
gas and coal.
    The other thing to consider is, how are minerals found? 
There's an entire segment of the industry that finds mineral 
deposits. These tend to be individual geologists or people 
working in small groups together and small businesses. The 
Northwest Mining Association consists of a lot of these folks, 
and they find mineral deposits that are promising and then 
interest from a larger company or a company with mining ability 
to develop those. They can't mine them themselves. How do they 
get paid for that activity? They get paid through a royalty, in 
an overriding royalty. So, you have got to leave room for that 
system to continue to work, and it relates also to why you 
can't just impose the transition rules. Those agreements are in 
place on existing claims on many of them. The gross royalty 
will also take a larger percentage of profit when prices are 
low, and commodities are notoriously volatile in terms of their 
up and down prices. Even at $900 gold today, we haven't seen 
the heights of the 1980s when gold was over 2 thousand in 
current dollars. Gross royalty discriminates more among types 
of minerals and among high and low cost operations. For this 
reason, I would recommend that you look at a net royalty system 
similar to what Nevada has in their net proceeds of mine tax. 
That doesn't take care of the all inequities of the gross. If 
you apply a uniform rate, that allows each operation to deduct 
a particular cost structure.
    For a molybdenum mine, that structure is one complete set 
of processing streams, and for a gold mine it is a completely 
different set, and for a copper mine it completely different. 
Then so, a net royalty that allows these cost deductions is 
probably the best way to go. The reason that oil, and gas, and 
coal pay this amount, and I have added to my package today a 
small picture that depicts this, is that those products are 
valued essentially at the mine mouth. The oil comes out of the 
ground and there is a market for in its true form when it comes 
out of the ground and there is a market for it when it comes 
out of the ground and the royalty is assessed at that point. 
Similarly, coal typically comes out of the grown and it is 
crushed and there is a market for the coal at that point. Some 
coal has to be washed because it contains a lot of ash. That 
cost is deductible. As Ms. Tschudy has indicated, gas can 
sometimes be put directly in the pipeline to the point 
intended. If it needs to be processed, that cost is deductible 
under the current law.
    So, what you really have is a valuation of coal and oil and 
gas at right here about the mine mouth. What is proposed in 
H.R. 2262 using gross income for mining a definition not really 
designed for royalty at all, is considerably in excess of that. 
It really is an unfair burden to put on the royalty producers 
or mining companies. Finally, I think that if you're looking 
for comparisons, private royalty negotiations and individual 
examples that have been made as I listed in some of my written 
testimony, are really an unfair comparison. I think they need 
to look at what the states have been doing. You should look at 
successful regimes and one that has collected revenue over 
decades like Nevada's and look at what it's been doing there. 
Finally, for administration, I believe that although a net 
royalty is complex, our MMS is capable of handling it I 
believe. In Canada, they tried the net smelt return royalty, 
and it was a disaster in British Columbia, and they adopted 
developed a profits-based approach. We have the luxury of the 
administrative capacity to administer those. In developing 
countries they often do not. I understand that recommendation 
of Professor Otto as to this. I would be happy to answer any 
questions. Thank you.
    [The prepared statement of Mr. Cress follows:]
 Prepared Statement of James F. Cress, Partner, Holme Roberts & Owen, 
                            LLP, Denver, CO
    Mr. Chairman and members of the committee, my name is Jim Cress, 
and I am testifying today as a mining lawyer in private practice on the 
subject of mining royalties. I am a partner at Holme Roberts & Owen, a 
109-year old law firm that represented miners in Colorado in the late 
1800's and today represents mining companies around the globe. I have 
specialized for nearly 20 years in U.S. and international mining law, 
as well as oil and gas and coal law. I have represented mining 
companies and landowners in negotiating royalties for gold, silver, 
copper, coal, uranium, oil and gas and other minerals, and have advised 
clients on royalty compliance for private, federal and state royalties 
and severance taxes. In my international practice, I have negotiated 
royalty and tax sharing agreements with governments from Asia to the 
Americas. I have taught in the Graduate Studies program in Natural 
Resources and Environmental law at the University of Denver Sturm 
College of Law, am a contributing author to the Rocky Mountain Mineral 
Law Foundation's American Law of Mining treatise, and am the former 
Chair of the Mineral Law Section of the Colorado Bar Association. Thank 
you for the opportunity to appear and speak on the important issue of 
hardrock mining royalties.
    A royalty on hardrock minerals can and should be structured to 
promote a fair return to the public and a viable domestic mining 
industry. Fairness and continued viability of hardrock mining on 
federal lands should be the cornerstone of any royalty regime.
               significant problems with a gross royalty
A gross royalty will adversely impact investment in mining projects 
        compared to a net royalty
    A royalty assessed on gross income increases the economic risk of a 
given mining investment, and acts as a disincentive to investment. As a 
consequence, a company looking to develop a project will require a 
higher required pretax and after-tax rate of return to accommodate the 
increased risk. Because a royalty assessed on net income has a smaller 
effect on the variability of after-tax rates of return, it is a better 
basis for assessing a royalty.
    The difference between these two royalty methodologies becomes even 
more evident when volatility in commodity prices are taken into 
consideration. Simply put, as commodity prices decrease, the rate of 
return required to justify a mining investment increases more 
dramatically under a gross royalty than under a net royalty. Because 
the other costs of the mining operation are relatively fixed, the gross 
royalty takes a bigger bite out of the shrinking income pie as prices 
decrease.
    Because the royalty assessed on gross income will cause a larger 
reduction in after-tax income when profits are low (or negative) than a 
royalty assessed on net income, the royalty on gross income can 
exacerbate industry downturns by causing a greater reduction in the 
cash flows of mining companies when profits are low. In this way, gross 
royalties are inconsistent with the principle of sustainable 
development. A gross royalty reduces the volume of an ore deposit that 
can be recovered. Each deposit of metallic minerals will have varying 
grades of mineral, generally requiring extensive concentration and 
refining to be marketable. The portion of the deposit with grades too 
low to be recovered economically is either removed as waste or left 
undisturbed in the ground. A gross royalty raises the ``cutoff point'' 
between recoverable ore and waste, shortening the life of a mine by 
causing what otherwise would be valuable minerals below the cutoff 
point to be lost. These lost reserves generally can never be recovered, 
because once the mine is closed and reclaimed, the stranded reserves 
are usually uneconomic to recover on their own.
A gross royalty is not a fair measure of the value of hardrock minerals 
        in federal lands
    Any royalty payment to the United States for hardrock minerals 
should be based on the value of the United States' ownership interest 
in the land. That interest is limited to the minerals in the ground, 
and it cannot justifiably be extended to require a royalty to be paid 
on values added by the mining company after mining, through processing, 
refining and selling the mineral products. The United States makes 
available raw land, and any minerals in the land for development, but 
the United States contributes nothing to the costs and effort of 
discovering, mining, processing and transporting the minerals to 
market. In addition, the mineral potential of the millions of acres of 
federal land is not uniform, and a royalty needs to be set low enough 
to provide an incentive for mineral exploration across a broad range of 
lands with differing mineral potential.
A gross royalty is punitive in periods of low commodity prices
    Since a gross royalty approach generally does not allow deductions 
for mining costs, a mining company would have to pay the royalty 
regardless of how high those costs may be for difficult mining 
situations or for low grade ores. This would require a mining company 
to continue paying a royalty even when it is operating at a loss, and 
that royalty could even cause the loss. No mine can be operated long at 
a loss. The result would be that some mines would shut down 
prematurely, creating loss of jobs, federal state and local taxes not 
paid, and suppliers of goods and services suffer. The result is lost 
economic benefits affecting both those directly involved in the mining 
activity and the governmental entities, including the United States, 
that are sustained by those activities.
    Moreover, the premature loss of a mine before maximum economic 
recovery of the mineral deposit is achieved is a blow to the 
sustainable development of our natural resources, since some of the 
impacts of the operation will be felt without maximizing the benefits 
to society and affected communities. In times of high prices, mining 
operations can be expanded to recover lower grade or harder to process 
minerals, because the higher prices support the additional costs of 
recovering these minerals. A gross royalty can erode this ability to 
maximize recovery of the entire deposit.
    A net proceeds or net income royalty, in contrast, does not cause a 
mining operation to operate at a loss. A net royalty automatically 
reduces during periods of low prices and increases again when prices 
are higher, permitting mining operations to weather periods of low 
commodity prices and maximize the recovery of marginal ore during 
periods of high prices.
    Due to the cyclical nature of demand for mineral commodities, there 
have been and will always be periods of lower commodity prices. A net 
royalty provides the best incentive to explore for minerals on federal 
lands throughout economic cycles.
A gross royalty unfairly imposes a different levy on different 
        minerals, while a net royalty is generally more equitable among 
        minerals
    Gross income is closer to net income for some minerals than for 
other minerals, resulting in a distortion between minerals if the 
royalty is based on gross income. For example, the end of the on-site 
mining process for a gold mine is typically a ``dore'' of 90% gold 
mixed with silver and other metals, which is then refined into 99.5% 
pure gold at an offsite refiner. The end of the on-site mining process 
for a copper mine is a typically a concentrate that is much further 
from the final refined copper product. A gross royalty applied at the 
end of the on-site mining process thus has a disproportionate impact on 
these two very different mineral products.
    A net proceeds or net income royalty cannot overcome the fact that 
income for royalty purposes will be determined at different points for 
different minerals, but it promotes more equal treatment of minerals by 
allowing deductions for the differing cost structures of various 
minerals, mining methods and scales of operation. If one mineral 
requires more extensive processing than another, this will 
automatically be taken into account by permitting a deduction of the 
higher costs of the more processing-intensive mineral.
                              royalty rate
    Determining what rate is appropriate to apply across dozens of 
commodities and millions of acres of federal land with differing 
mineral potential should not be a matter of opinion or guesswork. 
Congress should look closely at the type and rate of hardrock mineral 
royalty that has worked in states and countries that have maintained 
vibrant mining industries. Nevada's net proceeds approach is 
particularly worth studying, as an example of a regime that has been in 
place for decades during which time mining has remained a critical part 
of the state's economy.
                      administration of a royalty
Complexities exist in any royalty approach, so the goal should be a 
        fair return
    The gross royalties currently imposed on oil and gas, coal, and 
trona, potassium and other bedded deposits are not simple to 
administer. Detailed regulations of the Department of the Interior 
contain complex processing deductions for gas, coal washing allowances, 
and transportation deductions. Any royalty regime for hardrock minerals 
is likely to be even more complex, because the Department will be faced 
with a greater number of mineral commodities, disparate mining and 
processing methods, and differing scales of operation. Complexity is 
thus unavoidable, and the priority of Congress in fashioning a hardrock 
royalty should be achieving a fair return rather than chasing the 
illusory goal of simplicity of administration.
    Even the gross royalty proposed in H.R. 2262 will not avoid 
controversies in administration. H.R. 2262 contains a gross income 
royalty based on the definition of ``gross income from mining'' for 
depletion purposes under Section 613(c) of the Internal Revenue Code. 
Currently, the Federal courts are split on exactly where the ``mining'' 
process ends under Section 613(c) for the solvent extraction/
electrowinning (SX/EW) method of recovering metals from solution. One 
federal circuit has held that the end of the mining process occurs 
after solutions are extracted and concentrated (the end of the solvent 
extraction phase). Sunshine Mining Company v. United States, 827 F.2d 
1404 (9th Cir. 1987). Another circuit has held that ``mining'' 
concludes only after the metal is deposited onto cathodes from solution 
using an electrolytic procedure (the end of the electrowinning phase). 
Ranchers Exploration & Dev. Corp. v. United States, 634 F.2d 487 (10th 
Cir. 1980). H.R. 2262 incorporates all of these complexities into the 
federal royalty system, along with the potential for different 
interpretations by the Department of the Interior and the Internal 
Revenue Service on the same issues. H.R. 2262's approach is not a 
recipe for either fairness or simplicity of administration.
A net proceeds royalty can more fairly be applied uniformly across 
        different minerals and mining methods
    The ``fairest'' royalty regime would be tailored to the individual 
characteristics of each mineral deposit after the characteristics of 
the deposit were known, but such a system would be difficult if not 
impossible to administer and the uncertainty regarding the amount of 
the royalty would act as a disincentive to mining investment. A royalty 
based on net income or net proceeds can be applied to many different 
minerals, mining methods and sizes of mining operation without the need 
to differentiate between the types of minerals being produced. Because 
it is based on revenues less allowable costs, the net calculation can 
be applied across different minerals, mine methods and scales of 
operation.
A net proceeds royalty can be structured to ameliorate concerns about 
        administration of the royalty
    Specifying the definition of ``income'' for royalty purposes and 
permissible types of deductions in the statute itself can help provide 
an appropriate balance between ease of administration and maintaining a 
strong, viable domestic mining industry. For example, the Nevada net 
proceeds of mine tax is based on a list of permissible deductions 
contained in the statute itself, with some of the details of those 
deductions elaborated in the Nevada regulations. A federal hardrock 
royalty should also specify the definition of income and permissible 
deductions.
Hardrock royalty enforcement provisions should not slavishly follow oil 
        & 
        gas precedent
    Royalty enforcement and compliance provisions should be simple and 
designed to give the Department of the Interior adequate enforcement 
authority. They should not be slavishly modeled on existing enforcement 
statutes, or some royalty enforcer's ``wish list'' of enforcement 
authority as H.R. 2262's provisions appear to be. Many of the 
enforcement provisions of H.R. 2262 appear to be closely modeled on the 
provisions of the Federal Oil & Gas Royalty Management Act of 1982 
(``FOGRMA''), 30 U.S.C. Sec. Sec.  1701 et seq., Pub. L. No. 97-451, 
Sec.  2, 96 Stat. 2448 (1983). FOGRMA was enacted to address the 
historical problem of theft of ``hot oil'' from federal lands as 
documented by the Linowes Commission. See Report of the Commission on 
Fiscal Accountability of the Nation's Energy Resources, U.S. GPO 1982-
0366-617/523 (1982). No such historical abuses exist for hardrock 
mining operations, and some of the provisions of FOGRMA (duties imposed 
on third party transporters, for example) make little sense in the 
hardrock context.
    Other royalty enforcement provisions of H.R. 2262 go well beyond 
FOGRMA's requirements, for no apparent reason. These include the 
requirement that any ``person paying royalties'' essentially assume all 
liability for correct payment on behalf of the claim owners. H.R. 2262 
also exceeds the requirements of any other federal royalty statute by 
requiring retention of royalty records for seven years after bond 
release for a hardrock mining operation, which may mean decades of 
record retention for any mine that operates for 10 or 20 years, a back-
door attempt to avoid any meaningful statute of limitations for royalty 
audits. The Department's audit authority is also inexplicably broader 
than under FOGRMA, extending to all third parties that are directly or 
indirectly involved with production or sale of minerals. The Department 
is authorized to impose penalties for underpayment that far exceed the 
penalties provided under FOGRMA, again without any legislative history 
or basis for these more onerous requirements. Penalties are provided 
for without FOGRMA's six year statute of limitations on enforcement of 
those penalties. H.R. 2262 imposes joint and several liability on all 
owners of any interest in a claim for royalties on ``lost or wasted'' 
minerals from a claim, which will inject both the Department and every 
owner of an interest in a claim into second-guessing the mining and 
processing methods for development of the claim. This provision in 
FOGRMA addressed a documented issue with unauthorized flaring or 
venting of gas from oil and gas wells, which has no parallel in 
hardrock mining operations. These provisions appear to be solutions to 
problems not shown to exist in the hardrock context.
    Enforcement provisions for a hardrock royalty should include a 
reasonable statute of limitations, not exceeding six years, for record 
retention and government claims for underpayment of royalties. The 
enforcement provisions should also allow for a hearing on the record in 
the event that penalties are imposed for underpayment. Interest should 
be chargeable for both underpayments and overpayments of royalties, at 
the same rate. Congress should not incorporate wholesale provisions 
from oil & gas statutes that were designed to redress problems that 
have not been shown to exist for hardrock operations.
Any hardrock royalty legislation should allow for royalty reductions 
        and waivers on a case by case basis
    All current federal royalty statutes for oil and gas, coal and 
other minerals permit the Department of the Interior to grant royalty 
waivers and reductions on a case by case basis. The same flexibility 
should be provided in any hardrock mining statute. In order to avoid 
administrative complexity, any hardrock royalty will probably have to 
be applied in a fairly uniform manner across a large number of 
commodities and mining and processing methods. Any inequities created 
by this broad brush approach can be partially addressed by providing a 
mechanism for specific operations to apply for royalty relief, in order 
to address economic hardships or to maximize the economic recovery of 
minerals from each deposit.
  transition rules for a new royalty should be legally defensible and 
    fair to avoid potential takings litigation and promote certainty
    A grandfathering of at least some existing unpatented mining claims 
from the new royalty is both required by law and required to treat 
fairly parties that have made significant investments in federal lands 
prior to the enactment of the royalty. Moreover, it may be advisable to 
grandfather some claims that may not constitute fully vested property 
rights, in order to have a simple, bright-line test for which claims 
are subject to the new royalty, which will reduce uncertainty, reduce 
administration and litigation costs for the government and promote 
mining investment.
    It is settled law that unpatented mining claims supported by a 
``discovery'' of a ``valuable mineral deposit'' create 
Constitutionally-protected property rights in the owner of the claim. 
Imposition of a royalty on such claims is likely to trigger significant 
``takings'' litigation against the government. A royalty is in no way 
comparable to the imposition of simple federal filing requirements on 
unpatented mining claims, which was upheld by the Supreme Court in 
United States v. Locke, 471 U.S. 84 (1985). Grandfathering claims with 
a valid discovery as of the date of enactment from the royalty is thus 
the minimum transition approach that is legally defensible, as 
Professor Leshy agreed in his prior testimony before this Committee.
    The problem with protecting only claims with a valid discovery is 
that determining which of the hundreds of thousands of mining claims 
has a discovery would be an unprecedented administrative challenge for 
the Department of the Interior. Under a long line of court cases and 
administrative decisions, a mining claim does not have to be currently 
producing to support a ``discovery''; a reasonable prospect that the 
claim could be profitably mined is sufficient. Currently, the 
Department requires an administrative hearing in order to contest 
claims for lack of a discovery. Due process requires a hearing for 
claimants on this issue. The Department has limited staff trained in 
the specialized rules applicable to determining whether a ``discovery'' 
exists. It would be unworkable for the Department to adjudicate 
hundreds or thousands of these mining claim validity cases to determine 
which claims can be legally subjected to a new federal royalty.
    To avoid the royalty transition becoming an administrative 
gridlock, Congress should apply the royalty only to claims located 
after the enactment of the law or to claims that are not included in a 
plan of operations approved by the Department prior to the date of 
enactment (without a requirement for commencement of commercial 
production). Having a ``bright line'' test will save administrative 
costs and will also promote certainty about the application of the new 
royalty, which will encourage investment.
 it is inherently unfair to apply approaches from coal, oil and gas or 
                     privately negotiated royalties
Hardrock minerals are different, and should be treated differently than 
        coal and oil and gas
    Why should hardrock minerals not be subject to the 8 percent or 
greater royalty imposed on oil & gas and coal? The dramatically 
different characteristics of the minerals themselves and the ways in 
which they are explored for and developed justifies different 
treatment.
    Oil and gas are fluid and usually collect in sedimentary basins. 
Exploration for oil and gas usually consists of seismic studies to 
detect the type of structures where oil and gas are found. These 
studies are conducted at relatively low cost and usually without the 
need to acquire more than an easement over the property to be explored. 
When a promising prospect is identified leases are acquired, a well is 
drilled and core samples, drill stem tests and logs are taken to 
determine whether the well is successful. The costs of drilling can 
sometimes be quite high, but a single well can also drain a large area 
because of the fluid characteristics of oil and gas. Development of a 
field is usually accomplished through initial exploratory wells 
followed by development wells that are drilled in locations reasonably 
expected, as a result of the information gathered from seismic studies 
and the initial wells, to maximize production from the same reservoir. 
Once one or more exploratory wells have discovered an oil and gas pool, 
identification of the size and shape of the reservoir can be conducted 
with relatively low risk and expense.
    After extraction, oil must be processed and refined before it is 
ultimately consumed as vehicle fuel or other product. The royalty on 
oil produced under federal leases is not based upon the value of these 
refined products, however; it is measured by the value of the crude oil 
at the lease or wellhead, prior to such processing and refining. Unlike 
many other minerals, there is a market for oil in its crude, unrefined 
state and therefore a ready value for royalty purposes before the value 
added by refining and processing. Most oil is sold at the wellhead into 
this crude oil market and that wellhead sales price establishes the 
value of the oil for federal royalty purposes. Thus, it is somewhat 
misleading to call the federal royalty on oil a ``gross'' royalty. 
Because the royalty is typically based on the value of the crude oil 
prior to processing and refining, the royalty is, in essence, ``net'' 
of those costs, equivalent to a net or mine mouth royalty on the value 
of raw ore in a hardrock operation.
    Similarly, federal royalty on gas is also based upon the value of 
the gas at the lease. After gas is extracted, often the only thing 
required for consumption by the ultimate end-user is transportation 
(the cost of which, if paid by the producer, is deducted before 
royalties are calculated). Sometimes further processing is required to 
remove sulfur and separate gasoline, butane and other constituents from 
the gas. The royalty, however, remains payable on the value of the gas 
at the lease or wellhead and the processing costs incurred by the 
producer downstream of the lease are deducted under the federal rules 
before calculating royalty, to arrive at essentially a ``net'' value at 
the lease.
    Coal is a solid mineral of generally uniform quality and 
composition. In the West, where most federal deposits exist, coal beds 
often consist of vast deposits of great thickness, in Wyoming averaging 
80 feet and up to 200 feet. Little exploration for coal is required, 
and it is relatively easy to determine the quality of the coal and the 
thickness of a seam prior to mining with drilling and sampling. The 
western coal miner thus knows much about the characteristics of the 
mineral he has to sell prior to actual mining. At the same time, coal 
mining is an extremely labor and capital-intensive enterprise. Because 
of the need to construct facilities, obtain equipment, employ workers, 
and comply with substantial permitting requirements, it can take years 
to design, permit and construct a mine. For these reasons, coal from 
federal lands in the West has often been sold under fixed, long-term 
contracts entered into prior to construction of a mine. Based on the 
certainty of a market provided by these contracts, the coal miner can 
lease sufficient reserves to mine over the life of these long-term 
contracts and make the considerable capital investments required to 
construct the mine. Additionally, many long term coal contracts and 
state utility laws allow for the pass through of the royalty burden to 
the consumer, while no such pass-through is available for many hardrock 
minerals, which are sold and priced in global markets.
    While the 12.5% royalty imposed on coal in 1976 was a considerable 
increase over the coal royalties typical at the time, the royalty did 
not take effect for many federal coal leases until they were 
readjusted, which occurred over a period of 20 years. In the meantime, 
the demand for low-sulfur western coal boomed due to the increasingly 
stringent requirements of the Clean Air Act, and transportation costs 
out of the Powder River Basin decreased, which permitted the large 
surface coal mines developed in Wyoming during this period to bear the 
increased royalty burden, which in any event was generally passed on to 
utilities (and consumers) under long term coal contracts. The higher-
cost coal production in Colorado and North Dakota did not fare as well 
as Wyoming. Colorado's production initially plummeted, and North 
Dakota's fared little better, and only because North Dakota mines are 
associated with mine mouth power plants and because the state made 
efforts to prop up the industry by lowering taxes and discouraging 
import of coal from Wyoming. The higher BTU or heating value and low 
sulfur content of Colorado coal has allowed the market to rebound since 
that time, and to bear the 8% royalty applicable to Colorado's 
underground coal deposits (although some Colorado mines have operated 
under royalty reductions during economic downturns).
    In addition, the federal coal royalty regulations permit the 
deduction of the most material processing cost, coal washing, and 
transportation. Thus, the federal coal royalty is not a gross royalty 
in the strictest sense, and is more akin to a net or mine mouth royalty 
on the value of raw ore in a hardrock operation.
    Oil and gas and coal are not the only leasable minerals on federal 
lands. Sodium, potash, and phosphate are also leasable minerals. These 
minerals are commonly occurring, low margin industrial and fertilizer 
minerals the economics of which cannot support a 12.5% or even an 8% 
royalty. The statutorily established base rate for phosphate is 5% and 
for sodium and potassium is 2%. That is because the nature of these 
commodities and the economics around their extracting and marketing 
differ from oil and gas and coal. In practice, these mines have 
operated under government-sanctioned reduced royalties during periods 
when economic conditions and foreign competition threatened to close 
the mines.
    These examples demonstrate clearly why prevailing royalties differ 
from mineral to mineral. Specific analyses can be made for many other 
types of minerals. It is clear, however, that application of a gross 
royalty at a rate of 8% to hardrock minerals simply because that is 
what is done with coal and oil and gas would be overly simplistic and 
dangerously naive.
    Hardrock minerals are, by comparison, scarce and hard to find. 
Unlike oil and gas and coal, the size and shape of a hard rock ore 
deposit, the quality of the ore, the mineral composition, the value of 
the mineral products, the metallurgical processes required, the mining 
methods, the commodity prices and the capital costs all vary for each 
operation. Commercial ore bodies may be found under as little as a few 
acres of land. Exploration is conducted through exploratory drilling 
which gives initial clues regarding the deposit, followed by many 
expensive development drill holes to define a deposit for development 
and expensive feasibility studies of the metallurgical and other 
processes that will maximize production of the target mineral. Once a 
prospect is identified, development commences at considerable cost, 
with the capital and labor intensiveness of large coal mines, but 
without the geologic or metallurgical certainty of coal mines nor the 
economic certainty and incentive of long-term coal sales contracts, 
which are not customary for most hard rock minerals. The prices of hard 
rock minerals have historically been subject to great fluctuation. 
Because hardrock deposits were often concentrated by ancient subsurface 
magma flows which have been altered by subsequent faulting, the 
concentration of metals and their location can vary considerably over 
relatively small distances, unlike the relatively constant quality of 
western coal deposits. As a result, portions of a hardrock deposit may 
be economic while other portions may contain near- or sub-economic ore 
that is extremely sensitive to the addition of royalty and other 
burdens. The combination of price volatility and the variations in the 
concentration and the chemical and geological characteristics of the 
minerals within an ore body can turn a profitable mine into valueless 
rock with a sudden downturn in the market.
    Hard rock minerals, therefore, require considerably different 
approaches to exploration and extraction than do oil and gas and coal. 
Oil and gas and coal are relatively plentiful, and occur over 
relatively large areas where found. Hardrock minerals are scarce and 
occur in small concentrations, and must be discovered by expending 
considerable money pursuing elusive geological clues. The period 
between exploration and extraction for hard minerals is much more 
lengthy than with oil and gas or coal, and since hard minerals prices 
are not stable, the risk of the project becoming uneconomic before 
production begins is substantial. These factors are some of the reasons 
that hard rock mining transactions and agreements are considerably 
different from each other and from those dealing with oil and gas and 
coal. These factors also weigh in favor of a royalty reduction 
provision in the bill, so that site-specific determinations can be made 
to reduce costs and achieve the maximum economic recovery from federal 
mineral deposits.
    While individual royalties for specific commodities would 
theoretically be the best approach, such a system might be too 
difficult to administer. The most reasonable approach given the large 
number of commodities to be covered would be a uniform net royalty that 
permits deduction of mining and processing costs. The Nevada net 
proceeds tax provides a model that has been tested in practice, and you 
should consider a similar approach for federal lands.
Gross or net smelter return approaches used in private negotiations are 

        inappropriate comparisons
    A negotiated royalty between private parties is not analogous to 
the federal government's imposition of a royalty on millions of acres 
of unexplored federal lands. Private royalties are negotiated on a case 
by case basis for each property. Usually, the royalty negotiated 
depends on what information is known about the property at the time of 
the negotiation. The less that is known, generally the lower the 
royalty.
    An 8% gross royalty, such as contained in the H.R. 2262, for lands 
not proven to contain a mineral deposit is unheard of. I am aware of 
only one royalty of this magnitude in 20 years of practice. At the time 
Newmont's Gold Quarry royalty was negotiated, there was a known ore 
body containing eight million ounces of gold on the property, Newmont 
had existing mine facilities already built on adjacent land, and the 
owner conveyed the mineral rights to the surrounding area (measuring 
roughly 25 miles by 15 miles), free from any royalty. That royalty-free 
land has since proven to contain millions of ounces of additional gold. 
Clearly, this is not the typical case on unexplored federal land.
    Other examples of large ``gross royalties'' cited by mining 
opponents (see, for example, Earthworks ``Fact Sheet,'' H.R. 2262's 
Royalty: Industry Charges Itself Higher Rates (10-29-07)) turn out on 
closer examination not to be gross royalties at all, or are explained 
by the circumstances of the individual negotiation. They are in no way 
``typical'' private royalties.
    For example, the AU Mining Inc. royalty cited by Earthworks was on 
a small underground mine (producing only 133,000 ounces in the last 10 
years) that has average grades of more than 16 ounces per ton of ore, 
considerably higher than most operations. Moreover, the royalty burden 
apparently could not be sustained even with these ultra-high grades, 
forcing AU Mining to give the property back to the owner, LKA 
International, in a transaction providing for a much lower royalty 
capped at a maximum of $12 million.
    The Barrick Pipeline royalty cited by Earthworks is actually a 
highly-negotiated series of royalties covering different areas in the 
mine, consisting of sliding-scale gross smelter return royalties (GSR1 
ranging from 0.40% to 5.0% and GSR2 ranging from 0.72% to 9.0%), a 
0.71% fixed gross royalty (GSR3), and a 0.39% net value royalty (NVR1). 
The 9% royalty was granted on lands adjacent to an existing mine, known 
to contain millions of ounces of gold, in exchange for other royalty 
interests in an adjacent mine that was going into production at a later 
date. The Pipeline royalties resulted from an exchange of royalties in 
proven reserves with determinable values, and are in no way comparable 
to a royalty negotiated when the mineral value of the property is 
unknown.
    The ``gross royalty'' paid by High River Gold on its Taparko-Boroum 
mine in Burkina-Faso is not a royalty at all, but a form of financing 
known as a ``production payment'' (an arrangement similar to a loan, 
with larger repayments of the ``principal'' in the form of gold at the 
beginning of the operation, decreasing to a much smaller royalty 
``tail'' after recovery of the principal). The company receiving the 
royalty provided $35 million to High River Gold to construct the mine. 
High River Gold will repay this with $35 million in gold through a 
temporary gross smelter royalty, which will then terminate and be 
replaced by a 2% royalty.
    These atypical royalty arrangements in fact prove the point that a 
royalty on specific mining properties is negotiated based on what is 
known about the mineral value at the time of the negotiation (unlike 
the federal royalty, which must be designed to encourage exploration on 
millions of acres of land with unknown mineral potential). Private 
royalties are generally negotiated based on existing information about 
the particular property, including drill hole data and studies or 
analyses of the target mineral body. The purpose of the federal royalty 
is to encourage exploration and discovery across millions of acres 
which are not yet proven to contain mineral deposits.
    In privately-negotiated royalties, there are almost as many royalty 
rates and calculations as there are minerals. Each is dependent upon 
the nature of the product that is produced and sold, customs and 
practices in the industry, the strength of the market for the 
particular mineral, the mining cost/processing cost ratio, the 
specifics of the property for which the royalty is being negotiated, 
and many other factors. Use of a net royalty for federal lands avoids 
the need for extensive, mineral-specific legislation. All mines measure 
net revenues, or profits, and bear determinable operating costs. 
Therefore, a reasonable percentage net proceeds royalty can be applied 
and achieve a reasonable return for the use of federal lands, without 
disproportionate impacts on any particular mineral industry.
    In my experience, other countries are paying considerable attention 
to the appropriate royalty and tax burden to encourage mineral 
exploration and development. The United States has relatively low grade 
deposits of many hardrock minerals, relatively high labor and 
production costs, and stringent environmental and operating 
requirements. These costs must also be balanced in determining whether 
a royalty is necessary on federal lands and if so, how much royalty 
should be charged. Congress should not impose a royalty without careful 
consideration of the economic and competitive impacts.
States have not generally adopted gross royalties, and states that have 
        gross royalties use much lower rates than H.R. 2262
    Another ``fact'' cited by opponents of mining is that a 
``majority'' of states have adopted gross royalties. See, for example, 
Earthworks ``White Paper,'' ``A Hardrock Mining Royalty: Case Studies 
and Industry Norms'' (102-07). In most cases where ``gross royalties'' 
are allegedly imposed by states, the royalty percentage is a fraction 
of the 8% royalty in H.R. 2262 or the royalty is imposed on ore or an 
earlier stage product, in some cases after deduction of mining and 
processing costs. See, e.g., Ariz. Rev. Stat. Sec.  425201--5202 (2 \1/
2\% royalty on 50% of net proceeds); Colo. Rev. Stat. Sec.  3929-101 et 
seq. (2.25% of gross value of ore, excluding any value added subsequent 
to mining, subject to an exemption of first $19 million in in come and 
credits for property taxes paid); Idaho Code Sec.  47-1201 et seq. (1% 
of the gross value of the ore, after deducting costs of mining and 
processing); Mont. Code Ann. Sec. Sec.  15-6-131, 15-23-503, (1.6% net 
smelter return royalty on gold dore and bullion); New Mexico Code, 
Chapter 7, Art. 26 Sec.  7-26-4 and 7-26-5 (0.5% for copper, 0.2% for 
gold and silver, and 0.125% for lead, zinc and other metals, on 50% of 
the value of the minerals). These state royalties are considerably 
lower than the 8% gross income royalty in H.R. 2262 and in some cases 
are essentially the equivalent of a net proceeds royalty.
  british columbia's failed experiment with a ``net smelter returns'' 
                                royalty 
                             is instructive
    In 1974, British Columbia enacted the Mineral Royalties Act, which 
imposed royalties on mines located on Crown Lands and the Mineral Land 
Tax Act and subjected owners of private mineral rights to royalties 
equivalent to those applied to Crown Lands. The government imposed a 
net smelter royalty of at 2.5% in 1974, and 5% thereafter.
    The results were devastating for British Columbia mineral 
development. During the period the royalty was in effect, no new mines 
were developed, several marginal mines ceased operations, and non-fuel 
mineral output fell, despite increased prices. As a result, revenue 
collected from royalties on metal mines declined from $28.4 million in 
1974 to $15 million in 1975. During the two year period the royalties 
were in effect, nearly 6,000 mining-related jobs were lost. In 1972, 
$38 million Canadian was spent on exploration expenditures. In 1975, 
exploration expenditures fell to $15.3 million Canadian (a 60% decline) 
while exploration expenditures in the Pacific Northwest--outside 
British Columbia--increased. New mine exploration and development 
spending (excluding coal) decreased from an annual average of $131 
million in the years 1970-1973 to an estimated $20 million in 1975 (an 
85% decline). In 1972, 78,901 new claims were staked. In 1975 the 
number of new claims staked fell to 11,791 (an 85% decline).
    The royalty was repealed in 1976. After the royalty was repealed, 
BC Mine Minister Tom Waterland said that ``[t]he Government's decision 
to introduce royalties in 1974 was the result of inadequate 
understanding of the realities of mineral resource development and the 
economic characteristic of that development.''
    I thank the Committee for the opportunity to address this important 
public lands issue, and I am happy to answer any questions you may 
have.

    The Chairman. Thank you, very much.
    Ms. Alexander.

 STATEMENT OF RYAN ALEXANDER, PRESIDENT, TAXPAYERS FOR COMMON 
                             SENSE

    Ms. Alexander. Thank you, Chairman Bingaman. As you know, 
my name is Ryan Alexander and I am President of Taxpayers for 
Common Sense, were a national, non-partisan, budget watchdog 
group. I'm going to address just a few taxpayer concerns about 
the existing law. Public lands are taxpayer assets, and we 
believe they should be managed in a way that preserves their 
value, ensures a fair return from private interests using them 
for profit, and avoids future liability. The 1872 Mining Law 
has failed on all these counts. Three are primary ongoing 
injuries to taxpayers under the current law, the giveaway of 
Federal lands; the extraction of Federal mineral assets without 
taxpayer compensation; and the creation of taxpayer liability 
by allowing for abandonment of contaminated mine lands.
    Under the Mining Law of 1872, as I think you all know, a 
claimant can patent or purchase mining claims for either $2.50 
or $5.00 an acre. The public is prohibited from charging market 
value and put that into perspective, the 2006 purchasing power 
of $2.50 from 1872 is just 15 cents, $5.00 is 31 cents. The 
transfer of public funds to the private sector and affect and 
bargain basement prices needs to be stopped permanently. The 
one-year patent moratorium is not a good solution for either 
the mining industry or for taxpayers. In the current system, 
the United States retains title to minimal land as a result of 
several land. The taxpayers receive no compensation. Since 
enactment of the 1872 law, the total value of minerals systems 
taken without compensation is estimated at $245 billion 
dollars. Continuing the practice of simply giving these away is 
irresponsible stewardship of some of our most valuable assets. 
The oil and gas industry generally pays 12.5 percent in 
royalties on what they extract from onshore Federal lands.
    Private landowners and states routinely require payments 
for mining on Federal lands. Taxpayers for common sense would 
like to see Congress pass a royalty income, 12.5 percent income 
royalty for hardrock minerals commensurate with other 
extractive industries. A gross income royalty is value-based 
and ensures the royalty will automatically adjust to changes in 
the marketplace. TCS is not aware of other proposals such as 
net revenue or net profits royalty, because we believe these 
offer too much opportunity for gamesmanship on what deductible 
costs will be. As one expert said, the distinguishing feature 
of a net profits royalty is that, depending on the exact 
definition in the mining lease and the actual calculations, it 
will very often be zero. The royalty based on gross income will 
be easiest system to administer for the Government and will 
require the least complex enforcement systems. Finally, failure 
to reform the Mining Law today, will leave taxpayers with a 
huge and growing liability for toxic waste and water 
contamination left behind by abandoned mines. The potential 
unfunded liability for remediation of hardrock mining ranges 
from 20 to 54 billion. Senator Barrasso said that people don't 
have a great number on this, but those numbers are also cited 
as low numbers, although regulations for bonding were tightened 
with the section 3809 rules, we believe they are still too weak 
to adequately protect taxpayers.
    To address these unfunded liabilities, we ask the Senate to 
require financial assurance and operations plans, and restrict 
mining in areas where the risk of extensive clean-up is too 
great. We urge the Senate to consider legislation that would 
enable a portion of revenue to be generated by mining fees and 
royalties to be deposited in the General Treasury, once 
liabilities at the time of enactment have been discharged. 
Mining fees and royalties collected should also be directed 
toward the highest priority clean-up sites: ones with the 
greatest public safety concerns or highest risks for further 
environmental damage, rather than directed to States with the 
largest current production. In closing, no private landowner 
would set a price for land and stick with it for 135 years, no 
private landowner would simply give away the minerals on their 
land for nothing. No private landowner would give away land for 
nothing. No private land owner would allow it, especially 
without paying for clean-up. Taxpayers deserve better and the 
time for reform is now. Thank you.
    [The prepared statement of Ms. Alexander follows:]
    Prepared Statement of Ryan Alexander, President, Taxpayers for 
                              Common Sense
    Good morning Chairman Bingaman, Ranking Member Domenici, members of 
the Subcommittee. Thank you for the opportunity to testify before you 
this morning on reform of the Mining Law of 1872. My name is Ryan 
Alexander and I am President of Taxpayers for Common Sense, a national 
non-partisan budget watchdog group.
    Since its inception in 1995, TCS has advocated reform of the 
General Mining Law of 1872 for one simple reason: this anachronistic 
law is a clear example of taxpayer injustice. Public lands are taxpayer 
assets, and should be managed in a way that preserves their value, 
ensures a fair return from private interests using them for profit, and 
avoids future liability.
    Unfortunately, the system of ``management'' set out in the 1872 law 
has allowed public lands and valuable public assets to be exploited for 
private profit at the expense of taxpayers. There are three primary 
ongoing injuries to taxpayers under the 1872 law that must be addressed 
by any meaningful reform effort: the giveaway of federal lands; the 
extraction of federal mineral assets without taxpayer compensation; and 
the creation of taxpayer liability by allowing the abandonment of 
contaminated mine lands.
    Under the 1872 Mining law billions of dollars of gold, uranium, 
silver, and copper are taken from public lands by mining interests each 
year. Unlike other extractive industries, companies that mine for gold, 
silver, copper, uranium and other precious metals do not have to pay a 
fee when operating on federal land, essentially allowing these valuable 
minerals to be given away for free. In contrast, the oil, gas and coal 
industries pay more than a 12% royalty, and they and the hardrock 
mining companies may pay even more when mining on private, state or 
tribal lands.
    The law also allows the sale of federal lands at 19th century 
prices. Under the law, federal lands are sold for no more than $5 an 
acre--considerably below today's market value. Not only have mining 
companies been able to gain title to land valued at tens of millions of 
dollars for as little as tens of thousands of dollars, but the land can 
be developed for other purposes, including commercial enterprises, such 
as condominiums, ski resorts and casinos.
    The 1872 law also saddles taxpayers with the hefty clean-up costs 
of the toxic aftermath of mining operations. Not only do American 
taxpayers underwrite the profits, but they are also forced to pay for 
the damages left behind. These damages have been estimated to cost 
upwards of $50 billion.
                        giveaway of federal land
    Under the Mining Law of 1872, a claimant can ``patent'' or purchase 
a mining claim for either $2.50 or $5.00 per acre--the public is 
prohibited from charging market value for land subject to a claim. Just 
to put that in perspective, the 2006 purchasing power of $2.50 from 
1872 is just 15 cents, $5.00 is 31 cents. That's how little we are 
valuing taxpayer's property. Staking a claim on federal land simply 
requires an annual maintenance fee of $125 per acre plus an additional 
$30 location fee and $15 new mining claim service fee for first timers.
    A couple examples of taxpayers getting soaked by patenting:

   In Crested Butte, Colorado the federal government sold 155 
        acres to the Phelps Dodge mining company for approximately 
        $790, despite a company estimate that the land could produce up 
        to $158 million in after-tax profits over 11 years. This is in 
        an area where land prices range as high as $1 million per acre.
   In Nevada, in 1994, American Barrick paid $9,765 for 1,950 
        acres that contained an estimated $10 billion in gold.

    In some cases, it appears that mining patents have been little more 
than a ruse for developers to get their hands on valuable federal 
property before flipping it for other, more lucrative uses. A few 
examples:

   In 1983, the Forest Service sold 160 acres near the 
        Keystone, CO ski resort for $400. Six years later the land sold 
        for $1 million.
   In 1970, a businessman bought 61 acres in Arizona for $153. 
        Just ten years later he sold it to a developer for $400,000, 
        plus a share of future profits

    In FY1995, Congress began enacting one-year patent moratoriums. 
Patent applications that were in the pipeline have been grandfathered, 
but new patents have not been issued since then. However, continuing 
the decade-long practice of one-year extensions makes little sense for 
the mining industry or taxpayers.
    We urge the Senate to permanently end the patenting of federal 
land. The Congressional Research Service points out a critical fact: 
ending the practice of patenting ``will not stop the production of 
valuable mineral resources from the public lands, but will prevent the 
further transfer of ownership of public lands to the private sector.'' 
Transfer of public lands to the private sector at bargain basement 
prices should be stopped permanently.
               gold and other valuable minerals for free
    After charging a pittance for the land, the Mining Law of 1872 
gives private interests valuable minerals for free. Despite the private 
sector extracting public assets from the ground, taxpayers receive no 
compensation whatsoever. Since enactment of the 1872 law, the total 
value of minerals that have been taken without compensation is an 
estimated $245 billion.
    By comparison, the oil and gas industry generally pays 12.5 percent 
in royalties on what they extract from onshore federal lands. Private 
landowners and states also routinely require payment for mining on 
their lands. Taxpayers for Common Sense would like to see Congress pass 
a 12.5% gross income royalty, commensurate with other extractive 
industries.
    A gross income or net smelter return is essentially the gross 
income for the mineral product that the mine receives from a refinery 
or smelter. This ensures that the royalty automatically adjusts to 
changes in the market and does not over -or undercharge. TCS is aware 
of other proposals such as net revenue or net profits royalty, but we 
believe these offer too much opportunity for gamesmanship on what the 
deductible costs will be. A royalty based on net smelter or gross 
income will be the easiest system to administer for the federal 
government and will require the least complex enforcement systems. In a 
recent report the World Bank recently found more than 68% of the 
countries imposing a royalty use the gross income or net-smelter 
system.
    Mineral Business Appraisal, geologic and mining experts in the 
appraisal of all types of mineral property, describe net profits 
royalty, noting ``[t]here are virtually no buyers for this type of 
royalty because of the creative accounting that the mining operator can 
use to depress the royalty payment amount. The distinguishing feature 
of a net profits royalty is that, depending upon the exact definitions 
in the mining lease and the actual calculations, it will very often be 
zero.''
    The state of Alaska provides a glaring example of how big a loss a 
net-proceeds royalty would be for US taxpayers. The state imposes a 3% 
net-proceeds royalty on mining operations on state lands. Over the last 
ten years Alaska has collected only $1.2 million in royalties despite 
the extraction of more than $1.2 billion worth of gold from state 
lands. According to these figures provided by the Alaska Department of 
Natural Resources, Alaska has imposed a less than one/tenth of one 
percent royalty on mining operations. Clearly, this type of royalty 
would continue the federal government's massive giveaway.
    According to Mineral Business Appraisal, net smelter ``royalty 
payments are also fairly simple to calculate and administer in that 
only the selling price and quantity of mineral product produced or sold 
are required for their determination.'' In addition, ``this type of 
royalty will usually have the highest market value of all the royalty 
types.'' Simple, predictable, and valuable--that is the way to 
calculate royalties in the best interest of the taxpayer.
                         high costs of clean-up
    Finally, failure to reform the General Mining Law of 1872 will 
leave taxpayers with a huge and growing liability for toxic waste and 
water contamination left behind by abandoned mines. Too often, after 
all the minerals have been removed, mining operations cease, move their 
jobs out of town to another--often related--mining operator, and leave 
communities with a mess and taxpayers holding the bag to pay for clean 
up. A 2004 report by the U.S. Environmental Protection Agency (EPA) 
Inspector General indicated that the Superfund National Priority List 
contained 63 hardrock mining sites and another nearly 100 sites could 
be added in the future. The price tag for cleaning up all of these 
sites was $7--$24 billion, with more than half of that amount likely to 
be stuck on taxpayers. Because clean-up takes such a long time, it is 
likely that some of the businesses currently on the hook will no longer 
remain viable and the taxpayer's share of clean-up will increase.
    The potential unfunded liability from hardrock mining sites is even 
larger. A 2004 report by the EPA put the cost of remediation of hard 
rock mines at $20--$54 billion. Although regulations for bonding were 
tightened with Section 3809 rules, they are still too weak to 
adequately protect taxpayers. According to a June 2005 report by the 
Government Accountability Office (GAO), the Bureau of Land Management 
(BLM) indicated that 48 hardrock operations on BLM land had ceased 
without reclamation since the agency began requesting some form of 
financial assurances in 1981. BLM estimated the costs of reclaiming 43 
sites at $136 million, which the GAO says is a low-ball estimate.
    To address these unfunded liabilities, TCS asks the Senate to 
require financial assurance and operation plans, and restrict mining in 
areas where the risk of an expensive clean-up is too great. Moreover, 
we urge the Senate to consider legislation that would enable a portion 
of the revenue generated by mining fees and royalties to be deposited 
in the General Treasury, once liabilities at the time of enactment have 
been discharged. Mining fees and royalties collected should also be 
directed towards the highest priority clean-up sites: ones with the 
greatest public safety concerns or highest risks for further 
environmental damage, rather than directed to states with the largest 
current production.
    Over the years, the Department of Interior has had to be prodded 
repeatedly to require adequate financial assurances in the form of 
surety bonds and other tangible assets. Clearly, further legislation to 
ensure taxpayers are not stuck with the tab for cleaning up mining 
messes is required.
                          other considerations
    In addition to not paying a royalty for the valuable resources they 
extract from public lands, hardrock mining companies enjoy preferential 
tax treatment that other industries do not receive. They are allowed to 
expense certain costs for exploration and development; they receive a 
depletion allowance, which is a fixed percentage deduction against 
gross income; and, they are allowed to deduct the costs of closing a 
mine and the associated reclamation costs before a mine is actually 
closed.
    Because of the way the depletion allowance is applied, mining 
companies may actually receive more in deduction credits than their 
investment in the mine. And the combination of tax preferences and 
other more standard deductions available to them means that mining 
companies often pay an effective tax rate much lower than the statutory 
corporate rate of 30 percent.
    Taxpayers for Common Sense also supports the end of the percentage 
depletion allowance tax break for the mining industry. We support the 
Elimination of Double Subsidies for Hardrock Mining Industry Act of 
2007 introduced by Senators Feingold and Cantwell and urge the 
committee to include this in their larger mining reform legislation.
                        progress towards reform
    Taxpayers for Common Sense believes there are many lessons to be 
learned from the recent efforts towards reform of the 1872 General 
Mining Law. We were pleased to see the inclusion of a royalty on all 
mines in the recently passed reform bill in the House of 
Representatives. As a means to ease the transition, H.R. 2262 
implements a 4% royalty on existing mines--half of the royalty payment 
required of new mines. We do not believe this is the most appropriate 
way to address the concerns of ongoing operations concerned with an 
adjustment to a royalty payment for the extraction of taxpayer-owned 
minerals. Rather, this approach deprives taxpayers of compensation from 
operations that have long been exploiting our assets while at the same 
time failing to address the underlying transition concern of a sudden 
change in the cost of doing business. Instead, we would support a three 
year graduated phase in of a royalty for existing mines. While this may 
present a short term increase in administrative costs, we believe it is 
a more fair approach for both the taxpayer and the mining industry.
    The House passed bill establishes two trust funds which absorb all 
of the revenue generated by the royalties and other fees associated 
with the legislation. As the Senate considers this legislation TCS 
urges Congress to direct a portion of the revenue generated by mining 
reform legislation to be deposited in the General Treasury. The 
minerals are extracted from land owned by all taxpayers, and all 
taxpayers should reap the financial benefits.
    Finally, two arguments that were offered by those fighting reform 
in the House of Representatives are worthy of a brief mention in order 
to save the Senate from lengthy consideration of these specious 
arguments. First, many advocates of the status quo argued that mining 
operations in the United States would be dramatically undercut by the 
implementation of a royalty for minerals extracted from public lands. 
The evidence simply does not support this claim: mining companies 
continue to mine state lands where royalties are required and routinely 
pay royalties to owners as a part of structured agreements to mine 
private lands. Moreover, the mining industry is hardly an industry on 
the margins of profitability. To quote PriceWaterhouseCoopers' 2007 
annual report on the mining industry, which covers over 80 percent of 
the industry, ``net profits increased by 64% compared to 2005, and are 
now 1,423% higher than their 2002 level.''
    In addition, the contention has been made that the imposition of a 
royalty on future revenues from mining operations on public lands would 
give rise to legitimate claims under the Takings Clause under the Fifth 
Amendment of the U.S. Constitution. This contention is frivolous and it 
should be rejected. Property rights in general, but in particular when 
it is based on a grant of rights in public lands, do not create 
immunity from reasonable regulation to protect the public interest. 
Moreover, the imposition of fees, royalties, and other similar monetary 
assessments, including taxes, has generally been viewed as outside the 
scope of the Takings Clause. A royalty on minerals extracted from 
public lands is especially appropriate given the fact that the claims 
at issue are based on a grant from the federal government. Actual title 
to the minerals and the lands on which they are located remain with the 
United States, and the exploitation of these interests has significant 
effects on other publicly owned lands.
                               conclusion
    Taxpayers have waited far too long for real reform of the Mining 
Law of 1872. Taxpayers for Common Sense forward to working with the 
committee to ensure key taxpayer reforms to the General Mining law of 
1872 are enacted into law.

    The Chairman. Thank you, very much. Let me start with a few 
questions. Professor Otto, one of the suggestions that I think 
I understand you have been making is that if we adopt a law 
that imposes a royalty as it applies from the effective date of 
the law to all mining operations, so that existing mines that 
were put in operation without any royalty applied would still 
have to pay that royalty. That's something which I understand 
many of the mining companies would object to strenuously 
claiming that they have some kind of a legal basis for 
objecting. Have you looked into that? Is there any legal basis 
for objecting to the enactment of a royalty on existing mining 
operations that are in place for some time?
    Mr. Otto. I have not looked into it.
    The Chairman. You have not looked into it. Mr. Cress, is 
this an issue that you have looked into?
    Mr. Cress. Yes, sir it is, Senator. You're absolutely 
right, and I believe Professor Lesche spoke to this committee 
about the same issue. Do mining claims, unfounded mining claims 
that have a discovery of valuable minerals are protected 
property rights under well settled law. The problem is that 
it's difficult to determine which claims have a discovery and 
which claims don't, but a producing mine, I would tell you, I 
have to be very careful about trying to impose a royalty on a 
producing mine because I think It clearly is claimed to be 
under discovery, but there are also operations so far along in 
development with reserves so large that they would qualify as 
well under the law. The legal minimum, I think, to exempt, we 
have to exempt existing claims that have a discovery. That, 
however, would be administratively very difficult. Currently 
the Department of the Interior has a process requiring an 
administrative law judge in a hearing to challenge whether a 
particular claim has a discovery. They have even done so in a 
number of cases, generally high profile claims in wilderness 
areas and recreation areas. It is an expensive, time-consuming 
process that requires experts to understand economics, the 
metallurgy and all the things that go into determining whether 
you have a discovery. I don't think that's workable for the 
number of claims we have out there. That is one reason for my 
recommendation that we either start, propose the royalty on new 
claims that are located after the date of the Act. That would 
be a very bright line test for claims that are subject to an 
approved plan of operations as of the date of enactment because 
that would also be evidence that they were pretty far along in 
discovery, but wouldn't require you to go to the administrative 
hearing on each and every one of those claims.
    The Chairman. Mr. Cress, you testified that one of the 
problems with the gross royalty on gross value is that it would 
take a higher percentage of profits when commodity prices are 
low.
    That's what we have today in the case of oil and gas. We 
have 12.5 percent royalty on oil and gas production in the 
continental United States, even a higher royalty now in 
offshore production. When the price of oil comes down, it does 
represent a higher percentage of profits, that's correct, but 
no one has ever, I guess some have complained that is unfair 
but at the same time others have thought it's not unreasonable 
for the Government to get some reasonable return for the 
resource regardless of the price of the commodity.
    Mr. Cress. I agree with that. I think the real question is 
what is reasonable. That's the most difficult question. For oil 
and gas the cost structure is just completely different and in 
deep waters there are different provisions that would apply 
there, and there have been some relief provisions to encourage 
additional exploration there. I think that's one reason that I 
also recommend in my written testimony that there be in the 
bill a discretionary royalty relief provision, exactly what is 
in the Mineral Leasing Act of 1920. That has been quite 
important for a number of industries. One, in fact, is the 
potash industry in New Mexico. That industry mines about 90 
percent or more of the potash mine in the United States. It's 
used for fertilizer. They worked for many, many years subject 
to dumping and competition from mainly Canadian exporters into 
the United States. They went through some hard times. The way 
that was administered by the BLM and the MMS was to allow for 
some reductions in the royalty there to keep the industry 
going. That's succeeded and today the industry is thriving and 
is now paying royalties of 5 percent. I think royalty relief 
got them down to 2 percent for a period, but those operations 
have stayed open. I think that safety valve is very important.
    The Chairman. Senator Barrasso would be next.
    Senator Barrasso. Thank you, very much, Mr. Chairman, Ms. 
Tschudy, Senator Domenici left a question if I could ask--
mining companies annually submit corporate income tax forms to 
the Internal Revenue Service. Could that administration help 
simplify the administration of profits-based royalty?
    Ms. Tschudy. As far as I know, the I.R.S. corporate income 
taxes are on a corporate basis based on their income. Royalties 
by definition are a percentage of the value or the amount of 
production extracted from the lease or their mine or property 
specific so those I.R.S. corporate income tax forms may not be 
of significant benefit in a royalty program.
    Senator Barrasso. There is a situation in Wyoming where 
Congress has imposed an administrative fee of 1 percent of the 
total, which should be split 50/50 on $2 billion, which has 
cost the State of Wyoming about $20 million to figure out how 
you divide the money. I know our State does it a lot cheaper 
than what the Federal Government is imposing. I am looking for 
any way that we minimize the overhead and minimize the expense 
to the States and certainly minimize what is happening in the 
State of Wyoming. I know Senator Tester from Montana is in a 
similar situation trying to deal with some of these significant 
costs that the Federal Government is imposing on the State. We 
are going to try to fight those sorts of things.
    If I can ask Mr. Cress and Mr. Otto, Mr. Otto, you had 
talked about the royalty, the gross royalty, and Mr. Cress 
handed out a nice sheet as to bentonite which is a big product 
in Wyoming, where they are almost manufacturing the bentonite. 
They dig it out and then process it. Where do you draw that 
line. Are you further down the line than Mr. Cress is in terms 
of the added expense that goes into a production of a product 
this is like gold or silver? It has value out there.
    Mr. Otto. Virtually all minerals require some processing 
before they can be sold, so the question with regard to royalty 
is at what point in that value change do you make the 
assessment, and in keeping with one of the objectives that was 
brought out here in terms of simplification of administration, 
usually the first point of sale is often used as that 
benchmark, with no deductions for various costs, unless they're 
associated with the next smelter return. So, mine mouth value 
is used by many, many countries. It works very well. It's 
simple to administer, tax avoidance is quite minimal because 
there's no reduction or costs. If any costs are aloud as a 
deduction, they should be on the next smelter return basis not 
dealing with the cost of production.
    Senator Barrasso. OK. We talked about the first point of 
sale, wouldn't there then be an incentive to mine at one 
location sell there, and then conduct the value added process 
elsewhere?
    Mr. Otto. Could be.
    Senator Barrasso. Might be there. You talked about trying 
to look at the total taxes that are on something. You made some 
comment about 5 percent--shouldn't be more than 5 percent of 
gross. Is that on top of the taxes already being paid? When I 
look at local taxes, State taxes, ad valorem property taxes, 
State corporate income taxes, sales taxes, is it 5 percent on 
top of all of those other taxes or do you take that all into 
consideration?
    Mr. Otto. I would recommend that the 5-percent royalty or 
whatever royalty would be assessed would be allowed as a tax 
deduction when computing income tax, which is the standard 
practice in all countries. In terms of being competitive 
worldwide, if you want the U.S. industry to flourish, one of 
considerations companies look at is the tax load. Do we invest 
here, to do it in Chile? Do we make more profit here. Does it 
make more sense to mine it here versus copper mines in Chile. 
Take a look at what the overall tax load is. There are not so 
concerned about is it royalty or income tax or export duty but 
what is the total impact on my project. Now, in the studies I 
do, I do comparative studies worldwide, most countries are 
taxing, the total effective tax rate is between 40 to 60 
percent on the mining industry; so, too much above that, 
industry is not going to flourish. It's not going to develop in 
mines. If it is lower than that, the political pressures drop 
there, to raise the tax rate into that range.
    The last time I included U.S. in my studies is the year 
2000 we did a global study for the mines. It showed that for 
the State of Nevada for a typical gold mine they're right 
around 50 percent of the effective tax rate. Arizona in copper 
is around 50 percent also and that's without royalties. It is 
right in the middle of the 40 to 60 percent range. I have not 
run those models for Arizona and Nevada since 2000. Things 
changed. I have not taken a look at what the impact of the 
royalty would be. I think if we were to take a look at an 8 
percent royalty, 10 percent royalty, certainly when prices are 
low you have a lot of mines closing down. You also have fewer 
mines being developed because they wouldn't be able to meet 
their minimum rates of return required for investment. An 8-
percent royalty would be the highest in the world, of general 
gross proceeds.
    Senator Barrasso. My time is up. I'd like to comment that 
you touched on one aspect why a company may make a decision to 
use the taxation and there are also clearly litigation 
liability issues companies may take into consideration, as well 
as regulations that impact all of these companies. So, as we 
look about sending things overseas and the national risks and 
national security risks that we talked about earlier, I think 
it's not just taxation. Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Tester.
    Senator Tester. Thank you, Mr. Chairman. I appreciate the 
testimony of each of the witnesses, even though some are 
diametrically opposed to one another, you all make very good 
points. My first question is for Debra Gibbs Tschudy. It goes 
back to the chairman's comments at the very beginning about the 
applicability to a royalty tax. In the previous panel, I think 
Henri Bisson said that there were 93 thousand additional claims 
this last year for mining. Would those be eligible for this 
royalty if it was implemented now or would that, since the 
process has been already been started, would we end up, from 
your perspective, end up in some sort of court problem if we 
tried to apply it even to the ones that are not started but 
made the point?
    Ms. Tschudy. It depends on how the law is ultimately 
modified. In the statement of Administration policy last 
November, the Administration did say that they strongly opposed 
the H.R. 2262 because the bill would impose a royalty where 
property rights have already been invested. I believe our 
solicitors are concerned that there might be and would 
generally be a takings cross challenges by the industry if we 
were to apply the royalty to existing mining claims.
    Senator Tester. OK. This question is for both Mr. Cress and 
Mr. Otto. It doesn't matter if we're talking about gross or we 
are talking about net on the application of royalty, but there 
are a lot of different minerals out there, many, many, many, 
you guys know that. Some are worth a lot of money, and some not 
that aren't worth much money, and some that are harder to get 
to than others, but do you think that the royalty, if applied, 
whether it's on net or gross basis, should be the same across 
the board whether you're talking about bentonite as Senator 
Barrasso talked about or gold or silver or copper or do you 
think that it should vary and tell me why, no matter what your 
thought is. If it should vary, why if it should be left the 
same. Go ahead, either one Mr. Cress or Mr. Otto.
    Mr. Cress. Senator, I think that in terms of most States 
that have imposed either royalty or severance taxes have 
differentiated to some extent, some have and some haven't, they 
all get to, however, if you look closely at the language I 
spent some time trying to get this out of my written testimony, 
often even when you are talking about a gross, it's gross value 
of ore, which is this stuff that comes out of the ground or 
gross value at the mine mouth that they are trying to get to. I 
think differentiating between minerals theoretically might be a 
good idea. I think in States they do it because they're 
targeting sometimes specific mines and operations because each 
State in Colorado molybdenite, for example, bears it's own tax.
    Senator Tester. Do you think it's good idea to differences 
in the royalty percentage?
    Mr. Cress. If your goal is simplicity, you should set the 
bar at a reasonable rate for everybody and then have single 
rate. That's my recommendation that's why. I came out.
    Senator Tester. Mr. Otto.
    Mr. Otto. I agree. Let me give you just one example of how 
to best simplify things quite dramatically. If you have a mine 
that's operating, a mass of sulphide deposits, oftentimes they 
will be producing a zinc concentrate that will also contain 
silver and lead, and they have a lead concentrate that also has 
zinc and gold and you may have a silver concentrate that has a 
mixture of different minerals. If you have a different royalty 
rate for each mineral, things get complicated in trying to 
determine what the royalty liability would be. This is common 
for many, many, types of mineral deposits. Where I would speak 
to the usefulness of differentiation would be, for example, 
coal versus hardrock minerals or construction minerals versus 
hardrock minerals. They don't have the same source of 
production.
    Senator Tester. Got you. Thank you, very much. Both you 
fellows have both worked in other countries or at least 
monitored what other countries are doing. Can you give me an 
idea whether most other countries go with gross proceeds or net 
proceeds when applying for royalty? What are other countries 
doing?
    Mr. Cress. I think Professor Otto can speak to this because 
this study exhaustingly talks about this. I think many, many 
countries do have small gross royalties. I guess I would look 
at some of the more developed countries for which maybe our 
system is more analogous, they tend to have more complex 
systems; that is in Canada and several of the provinces have 
net profits based royalties which they're able to administer 
apparently just fine. There is a problem in developing 
countries with the lack of administrative capacity.
    Senator Tester. So you are saying most developing countries 
use probably the gross proceeds, most of the countries like the 
United States, Canada, more developed countries are using that 
net profits.
    Mr. Cress. You see more of a net approach.
    The Chairman. Mr. Otto, very briefly.
    Mr. Otto. Very few countries either developing or developed 
use a net profit basis with. The exceptions would be Canada, 
which has very successfully implemented a profit-based 
approached, one state in Australia. It is very, very rare. 
Almost everybody uses some sort of net smelter or gross 
approach with just a few exceptions.
    Senator Tester. I want to thank the panel once more. Ms. 
Alexander, I didn't ask you any questions, but I want to tell 
you that I really appreciate the last comments you made 
comparing private landowners to publicly owned lands.
    Ms. Alexander. Thank you, very much.
    The Chairman. Next is Senator Corker. I think we have a 
vote starting about 12. So, if we can get all the questions 
done before we all leave for the vote, that would be great. 
Senator Corker.
    Senator Corker. Thank you, Mr. Chairman. This has been an 
outstanding panel. I think each of you have been very clear in 
your comments and insights, and I just want to thank you. I 
think it has been excellent testimony. I have a bias toward 
simplicity. Mr. Cress when talking about the royalties and how 
when obviously prices are low for commodities or minerals then 
royalty would be a bigger piece of the profits. That would be 
true of every expense that exists. I mean, that would be true 
of labor; that would be true of insurance; that would be true 
of power. That would be true of every single expense that 
exists. So I would have some so difficulty understanding why it 
need be any different, if you will, as it relates to the 
royalty application.
    Mr. Cress. I think because few of those costs really 
literally can be and they are fixed costs. So, you're turning 
the royalty also into a fixed cost, and the result of that is 
the premature closure mines and the loss of reserves. To me I 
can use sustainable development in the context of hard rock 
mineral development as once you have opened the mine, getting 
every last ounce out the ground you can because you have got 
the impact of that mine there, and royalty, having a net 
royalty, is a way to try and ride out those difficult periods.
    Senator Corker. Just as an observation, I was saying that 5 
percent royalty would be somewhat minimal compared to the other 
costs, and that maybe we're making a bigger thing out of the 
price stage, if you will, and the effect on profits, but I 
would just tend to lean on the side of such, yet, I have 
enjoyed some of your other arguments. I would think that your 
bureau, Ms. Tschudy, would have a difficult time on net profits 
basis in that I assume mining entities own different companies, 
and apply overhead and apply administrative costs unevenly, and 
depending on how they wish, obviously, as a corporation or a 
conglomerate it has to be done appropriately, but it seems to 
me cost shifts could occur to lower profits coming out of the 
mine; is that correct?
    Ms. Tschudy. Yes, sir. In general the more deductions you 
allow, the more resources will be required, and the more 
difficulty in auditing those resources. We look first to an 
arms-length sale of the first marketable product. If you have 
an arms-length sale, that is easy and simple. That's the gross 
value method, but if there is a transfer to an affiliate we may 
have to do a net smelter return calculation. But again as long 
as a product sold at arms-length, we can look to the gross 
value which is relatively simple. If start to you allow a lot 
of deductions, it does get costly and complex. We spend most of 
our time in the courtroom today arguing about what are 
allowable deductions.
    Senator Corker. Speaking about those courtroom costs we all 
have in business, relating to just dealing with issues and the 
complexities and some of the gamesmanship, if you will, to sort 
of drive down the actual profits coming out, would there be 
some benefit to the mining operations, Mr. Cress, if it was 
just simple and you didn't have to deal with the auditing 
issues, the court cases that come from that and also just the 
internal gymnastics that might need to be played to keep the 
profits already coming out of the mine?
    Mr. Cress. There is obviously a benefit to not having 
litigation, but the cost differential between a gross and a net 
depending on what you're talking about can be such a large 
percentage of operating margin, that the complexity from the 
companies perspective is worth it. The other thing I would 
point out, when you talk in terms of a net profit, royalty, the 
type British Columbia has, for example, that's not really what 
I'm proposing. The Nevada model is not a clear net profits 
under which you can deduct all kinds of corporate overhead, 
going all the way up to the mother ship. The net proceeds 
royalty actually limits the deductions and defines then in the 
statute. On a scale of royalties, net profits is at one end and 
the total gross is at the other. Net proceeds is somewhere over 
here to the left.
    Senator Corker. It is sort of semi-gross?
    Mr. Cress. It is semi-net, but it's not an unlimited net as 
Ms. Tschudy says, that defining those deductions carefully in 
the statute, which Nevada did is the key to minimizing that 
litigation that you're talking about.
    Senator Corker. Our time is almost up. I didn't hear 
something that was in the background about the cut-off time 
from when we actually apply this royalty. Would you state that 
one more time as to when that should begin so that there isn't 
litigation based on previous entitlements?
    Ms. Tschudy. The Administration believes that the law 
should be applied perspectively to avoid taking challenges of 
the law, so they should not be applied to existing claims but 
rather to new claims.
    Senator Corker. So the 93 thousand claims would all be 
grandfathered in without royalty?
    Ms. Tschudy. I'm sorry. I'm not familiar with the number of 
claims. I'm not an attorney as well. I know the Administration 
office and the Department of the Interior had been concerned 
about H.R. 2262 and possible takings challenges. Again, the 
Administration supports a royalty system that would be applied 
perspectively. I don't know what affect that has on 93 
thousand, where those stand.
    Mr. Corker. Thank you, and again Ms. Alexander I will say 
the same thing as Senator Tester, thank you.
    The Chairman. Senator Murkowski, I was confused about the 
12 vote; it is at 2. You can take all the time you want.
    Senator Murkowski. I hadn't gotten the message, but I 
appreciate you correcting that, I thank you. Thank you to those 
of you here this morning. I do want to take just a moment and 
correct the record. Ms. Alexander, in you're written testimony 
you didn't indicate, in oral testimony, but in your written 
testimony you refer to how Alaska operates their net proceeds 
royalty and indicate that in your opinion, it is an example of 
something that doesn't work, and you've indicated that the 
State imposes a 3-percent net proceeds royalty on mining, and 
that over the past 10 years we've only collected $1.2 million 
in royalties. You do specifically state this is as to gold from 
the State. It's my understanding in addition to 3-percent net 
royalty from the State land, we also have the 7 percent net 
proceeds tax on all the mining in the State, so essentially the 
State's revenue takes from mining operation is a combination of 
the royalty and the special mining license tax, and eventually 
the income tax, and that total is a total approximately of $420 
million. It does not include payments to municipalities that 
total approximately $110 million. So I did want to make sure it 
was clear in the record that we are in fact receiving more 
through our State royalties there in the State of Alaska.
    Mr. Otto, I wanted to ask you about the whole aspect of 
competition. You've heard my concern that in the area of 
minerals I fear that we're going the same way or that we are 
already in the same direction as we are with oil in being so 
reliant on foreign sources. As we talked about being 
competitive in a world marketplace within the mining industry, 
you've indicated that the gross royalties should be in the area 
of 2 to 5 percent, but we also recognize all of the other costs 
that are associated. In an effort to be competitive, if we had 
a rate such as 8 percent which is what the Rahal Bill is 
advocating, that would put us in the category of being the 
highest royalty, effective royalty rate in the world; am I 
correct in that?
    Mr. Otto. It would be the highest gross proceeds royalty 
across the board. There are a few exceptions here and there of 
individual minerals in other countries. In terms of the total 
effective tax rate, I don't know what it would be because I 
haven't run that model.
    Senator Murkowski. That leads to my question because I have 
looked at your background. It is extremely impressive, 
extremely extensive in so far as the mining taxation work, and 
you have great credibility as you sit before us and offer your 
opinions here most certainly. You've indicated in response to 
Senator Barrasso's questions that you haven't had an 
opportunity since 2000 to look at the U.S. situation in terms 
of how we stack up to other nations, and if you haven't, who 
has? I don't want us here in Congress to be embarking on an 
comprehensive mining law reform where we're basically picking 
numbers out of the air because it is a round number and it 
looks good, but then to find out that effectively we're cutting 
ourselves out of a global marketplace because that number 
wasn't a number that allows us to be competitive. Is there 
anybody out there who is really doing a critical analysis. I 
think mining law reform is going to move. I am hopeful that 
something positive happens. I really don't want us to make a 
mistake in misjudging in what a reasonable and fair royalty 
would be. So, is there anybody else out there that we should be 
talking to?
    Mr. Otto. I have undertaken fiscal reforms in probably 20 
countries now dealing with the mining industry. In every single 
instance they have done some modeling to determine what the 
impact would be on typical mines, how that would effect not 
only that individual mine but how that would look in comparison 
to the fiscal systems in other countries.
    Senator Murkowski. Do you know of anybody?
    Mr. Otto. I don't know of anybody who has done that 
recently and included the United States. The International 
Monetary Fund had some models that I've worked with, the World 
Bank. They do not include the United States in those models.
    Senator Murkowski. Why do they not?
    Mr. Otto. I think it comes down to funding. If you take a 
look at organizations like the World Bank and IMF their and 
clientele does not include the United States. A person like 
myself I release these studies from time-to-time. The last time 
I raised the funding to do a global study was in 2000. I'll 
probably do another one in 2010. In 2000 I included the U.S. I 
don't know of anybody else who is doing international 
comparative tax studies.
    Senator Murkowski. Mr. Chairman, that might be something 
that we would like to look into so again we don't make a 
mistake from a legislative perspective.
    The Chairman. I think it is a very good suggestion. We do 
expect to ask CBO to do an analysis on the royalty models. They 
did that back in the 90s when this issue was seriously debated 
and we are going to ask the do it again.
    Senator Murkowski. Thank you.
    Mr. Otto. I would add if you do want some examples the 
royalty book published by the World Bank last year, in the back 
was a diskette that has the specific royalty legislation from 
about 35 countries, and it has examples of net proceeds, net 
back, profits gross, all the different types of approaches. If 
you're looking for some concrete examples, that might be a very 
good place to look.
    The Chairman. We appreciate that good suggestion.
    Senator Craig.
    Senator Craig. It has been a very fascinating panel. I must 
tell you, over the years in trying to understand net versus 
gross, you all bring a lot of fascinating information to the 
table. I will also say, Ms. Tschudy, I always thought it ought 
to be simple because we don't want it gamed. Clearly, a way of 
enforcing in a clean and simple manner is critical I think 
overall. We just here in this committee in the last few years 
got into an interesting dispute over what we meant and what you 
all meant when we were enforcing deep water royalties. There 
are a lot of nuances that are part of the regulation and what 
was the congressional intent of the time and the implementation 
versus somebody today saying somebody is ripping us off or 
getting too much money out there. That we ought to try to avoid 
it for a lot of reasons, credibility with the taxpayer, Ms. 
Alexander is awfully important here, and that there appears to 
be and is a fair return to the taxpayer for the allowance of 
the use of the resource, for the development of and the 
exploitation of the resource.
    Let me go back to claims versus permits and the issue of 
property and taking. That fascinates me because I'm little bit 
concerned that if we're trying to get our act together and 
attempting to apply a royalty, I've been willing to think 
prospectively, but at the same time, when does a claim become a 
property right, at the moment a stake is driven into the 
ground? When does the taking occur? I guess that's part of what 
the Justice Department is a little worried about. I can 
understand a permitted property because the government gives it 
away for X amount of money, not a lot. So that becomes private 
property, so when the Federal Government reaches in and on top 
of it after the fact places a royalty, I can see that as 
arguably opaque. I see some difference between a patent and a 
claim in my own mind. Now do you know, and maybe I should have 
asked this of Mr. Bisson, of those 90 thousand, were most of 
those uranium? Do we know what they were?
    Ms. Tschudy. I'm sorry. I don't know.
    Senator Craig. I don't know there has been a flurry because 
of what we're doing in nuclear, and the potential of uranium 
and all of that, but none of them have been developed. There's 
been a lot of filings out there, some might be developed in 
time based on all of the proceedings, what we discussed with 
the earlier panel. So that is something that obviously we would 
have to clarify. There's no question about it and I'm not too 
fearful of running some legal challenges when we draw our line. 
That oftentimes happens with what we do here, when public 
policy changes. At the same time, I don't want to see us taking 
property. I think that's wrong. I have always been a defender 
of private property rights, whether it is the owning of the 
mining claim versus fee simple property. So I think that is 
something Mr. Chairman, that obviously, we don't necessarily 
needlessly need to stumble into a hassle of litigation if we 
attempt to bring down a royalty on hardrock.
    The Chairman. Mr. Otto, is your book available? Can I go to 
Yahoo and get it?
    Mr. Otto. Yes.
    The Chairman. Good. How much will it cost me? Let me put it 
this way, is it fine print and multiple pages?
    Mr. Otto. It was written with the intent to be used by 
policymakers. So, it tries to cover all the various issues 
including the one you just brought up dealing with ownership.
    The Chairman. OK.
    Mr. Otto. If I might say a word on that.
    The Chairman. Please do.
    Mr. Otto. When you think about what is a royalty, countries 
take two basic different approaches. Some view it as an 
ownership transfer tax in which case you have all the property 
issues. Others view it merely as an administrative charge, in 
the same the way you would charge for a license plate on a 
privately owned car. It is the right to use or the right to 
mine the mineral, in which case there is no property interest 
whatsoever involved. So if the concern is litigation depending 
on how the legislation is written, you may be able to avoid the 
property issues by not forming it as an ownership transfer type 
of tax, but rather an administrative user's fee type of charge.
    Senator Craig. My staff just handed the book to me. I've 
got some weekend reading. All right.
    That's obviously part of the debate we've got to get 
involved in because I clearly understand, as most on this 
committee understand and as our staff understands, there's a 
world of difference in a variety of resource developments from 
oil to gas to coal obviously to hardrock minerals my interests 
primary have been because of the geologic character of the 
State of Idaho are the mineral costs involved to get them out 
to mine mouth or beyond.
    At the same time, if we're going to do this and do it right 
and develop a revenue stream for the right reasons, we've got 
to show flexibility to the market and the variances in world 
pricing and at the same time a reasonable return to the 
taxpayer for the exploitation of this resource, so, well, I 
thank you all very much for your time in this. Mr. Chairman, I 
think that I'm glad to hear that we're going to look at some 
application. I mean the moment I saw 8 percent gross, I thought 
the game here is to eliminate mining. It is not to allow a 
reasonable return for mining to exist and remain so in a 
competitive world because it is a world market as the Senator 
from Alaska has clearly shown. That remains important for all 
of us. Again, thank you.
    The World Bank book, this is your book and you did this for 
the World Bank and the CDs?
    Mr. Otto. Yes.
    Mr. Chairman. All right. Thank you all very much. Thank 
you, again for being here. I think it's been very useful 
testimony. That will conclude our hearing.
    [Whereupon, at 12:15 p.m. the hearing was adjourned.]
                               APPENDIXES

                              ----------                              


                               Appendix I

                   Responses to Additional Questions

                              ----------                              

     Responses of Ryan Alexander to Questions From Senator Bingaman
    Question 1. You've suggested that mining fees and royalties should 
be directed toward the highest priority clean-up sites. What is your 
view of the provisions included in the House-passed bill on this topic?
    Answer. Taxpayers for Common Sense opposed the inclusion of an 
amendment offered by Representative Heller regarding this issue. Before 
final passage, the amendment was accepted altering the House-passed 
version to direct 50% of the royalty revenue in the abandoned mine 
clean-up fund to the state from which the royalty revenue was 
generated.
    We are gravely concerned that this provision, if passed into law, 
will have detrimental effects on states that have many abandoned mines 
sites but are producing fewer minerals today. This amendment will send 
nearly 50% of all clean-up funds to the state of Nevada. While Nevada 
has abandoned mines, other states like Arizona, Colorado and California 
have more sites, many very close to population centers, and should be 
higher priority clean-up sites. These abandoned mine sites jeopardize 
public watersheds, threaten community safety and create numerous 
taxpayer liabilities. For these reasons, directing 50% of the funds to 
the highest producing states rather than the highest risk sites is not 
in the best interest of federal taxpayers.
    Question 2. Mr. Cress has suggested that mining reform legislation 
should simply grandfather existing mining claims rather than set up a 
process for administratively determining which current claims support a 
valid ``discovery.'' How do you view this suggestion?
    Answer. Taxpayers for Common Sense believes all existing claims on 
federal lands should be subject to a royalty. While we are sensitive to 
the industry concern about certainty and the conditions under which 
their plans were made, we believe grandfathering existing mines in 
perpetuity exacts too great of a cost to taxpayers. While our 
preference would be for a gross royalty imposed on all mines at the 
same time, we would be open to a phase-in for existing mines to allow 
them to adjust their operating plans.
    To address the question about Mr. Cress's suggestion directly: the 
suggestion that grandfathering all existing claims presents the easiest 
administrative option is inaccurate, unfair to taxpayers, and bad 
policy. There is an existing and orderly process for determining 
whether there is a valid claim, which is a well defined term under the 
mining law; no additional administrative process need by created. 
Mining cannot commence on public lands without an approved plan of 
operations, and the vast majority of mining claims are never proposed 
for development. Moreover, to grandfather in all claims expands the 
taxpayer giveaway rather than limits it. Finally, grandfathering all 
existing claims would create a perverse incentive for speculators to 
rush to stake claims prior to final enactment of the law.
    Question 3. Do you agree that transfer pricing may be a greater 
concern given mergers and consolidation within the mining industry? 
What additional safeguards may be necessary to prevent this result? 
What other suggestions do you have for improving the transparency of 
hardrock royalty collections, for purposes of ensuring a fair return to 
U.S. taxpayers?
    Answer. Taxpayers for Common Sense agrees with Professor Otto that 
the trend towards consolidation, and the subsequent increase in 
transactions between related parties poses challenges to using transfer 
pricing as the basis for royalty calculation. To best ensure a fair 
return for the taxpayers, royalty calculation for arms' length 
transactions should be based on the transfer price itself; calculation 
for transfers between related parties could be based on average 
quarterly prices for arms-length transactions for the same mineral.
    In addition, mining operators should report, on an operation by 
operation basis, the quantity of locatable minerals extracted from 
public lands, along with the quantity realized for sale. These figures 
are already calculated by mining companies for the Securities and 
Exchange Commission, but SEC reporting groups public and private 
production together. The disaggregation of these figures would provide 
an added safeguard against gamesmanship. Operators should also report 
the acreage of public lands consumed for mining as well as for other 
ancillary uses, including waste disposal and staging.
      Response of Ryan Alexander to Question From Senator Cantwell
    Question 1. The state of Alaska imposes a 3% net proceeds royalty 
on minerals taken from lands owned by the state. According to the 
Alaska Department of Natural Resources, the State of Alaska has 
received $1.2 million over the last 10 years from the net proceeds 
royalty. Over that time, more than $1.2 billion worth of gold was 
extracted from mines operating on state lands--meaning less than 0.10% 
of the value of gold mined was returned to Alaskan taxpayers. There are 
over a half million abandoned hardrock mines across the west, including 
thousands of mines in my state of Washington. Local communities and 
Native American tribes have to bear the costs of pollution created by 
these mines, but there is no dedicated federal funding source for clean 
up.
    Do you believe a net proceeds royalty could generate enough money 
to clean up the estimated $50 billion in abandoned mine liability?
    Answer. The Congressional Budget Office estimates that the 8 
percent royalty included in H.R. 2262 which is an ad valorem type 
royalty based upon the value of production, not the value of profits, 
will generate $40 million per year in the near term, and would 
gradually increase as new mines are permitted if the law is enacted in 
its current form. A net proceeds royalty however would generate much 
less revenue. As you mentioned, the state of Alaska imposes a 3% net-
proceeds royalty on state lands but has collected a royalty of less 
than one tenth of one percent on mining operations. Although, as 
Senator Murkowski mentioned in the hearing, the mining industry does 
provide other revenue to state and local communities in the form of 
taxes and fees, these are costs all industries incur and do not lessen 
the need for a fair royalty. The case is much the same in Nevada, where 
a net proceeds royalty is also collected and generates little revenue.
    Overall, a net proceeds royalty would provide far too great an 
opportunity for gamesmanship and manipulation leading to abuse, and 
difficulties administering and overseeing its collection. Recognizing 
this, the Minerals Management Service also recommended the committee 
enact a gross income rather than a net proceeds royalty. Furthermore, 
most countries worldwide impose a gross income or net smelter royalty 
instead of the more complex net proceeds royalty.
    For these reasons, it is clear a net proceeds royalty would not 
create enough funds to even begin to address the current $50 billion 
abandoned mine liability taxpayers face. We urge the committee to 
support a gross income royalty similar to the House passed H.R. 2262.
                                 ______
                                 
      Responses of Mike Dombeck to Questions From Senator Domenici
    Question 1. You state in your testimony that the 1872 Mining Law 
allows mining to take precedence over all other public land uses, 
including hunting and fishing.
    Are there not current and existing authorities for the federal 
government to protect special areas and resources from mining?
    Answer. First, federal land managers can withdraw federal lands 
from mineral development. However, in my experience as the chief of two 
agencies, this mechanism is far too cumbersome to work well. There are 
too many administrative hurdles for already strapped agencies to 
overcome. It is a virtually useless mechanism.
    Second, under limited circumstances, the Endangered Species Act 
(ESA) and the Clean Water Act can stop proposed mines. If the FWS or 
NOAA Fisheries determine that a proposed mine on federal lands would 
jeopardize the existence of a listed species, the agencies have the 
authority to stop the proposal. Under the CWA, the EPA could deny CWA 
Section 402, regulating point source discharges, and 404 permits, 
regulating the deposition of dredged and fill material into waters of 
the United States, if the proposed mine is required to obtain the 
permits. Use of these permit denial authorities rarely happens for any 
activity, let alone mine development.
    The overwhelming problem is that these and all other laws protect 
only against a relatively narrow range of impacts. Many other aspects 
of environmental degradation from mines are not covered, such as 
destruction of fish and wildlife habitat of non-listed species 
(including hugely valuable recreational species such as elk, pronghorn 
antelope, wild brown trout), and groundwater resource depletion or 
pollution. Even the CWA has huge hole in it regarding mines because it 
does not regulate nonpoint source pollution, and much of mining 
pollution is nonpoint pollution.
    That is why I so strongly believe, as I stated in my testimony, 
that special places with important fish and wildlife and water values 
such as wilderness areas, National Parks, Fish and Wildlife Refuges, 
and inventoried roadless areas ought to be placed off-limits to mining 
entirely, and that there should be at least one new mechanism in the 
Senate Bill to allow federal land managers to deny mine proposals in 
other situations where the benefits of conserving fish, wildlife and 
water resources clearly outweigh the benefits of the proposed mine.
    Lastly, I would observe that all other federal land resource users 
face up to such a mechanism on a regular basis, including, forestry, 
mining, and grazing, Mining should too.
    Question 2. You state in your testimony that mining reform 
legislation should prohibit the patenting or sale of public lands.
    If patenting is eliminated, how would you propose providing the 
security of tenure necessary to attract the large investments needed to 
make domestic mining projects a reality?
    Answer. I believe that a long term permitting system should be 
adopted to allow for security of tenure, while giving land managers 
leeway to determine the parameters of the mine on a particular piece of 
land. Again, land managers already do permitting on a range of 
activities, from firewood cutting to grazing to recreational use, such 
as float trips on rivers on federal lands. The same kind of mechanism 
could be used, while allowing for the longer term use.
      Responses of Mike Dombeck to Questions From Senator Cantwell
    Question 1a. As you know, our nation's public lands provide 
enormous economic and conservation resources benefits that add to the 
quality of life for all citizens and future generations. Many of our 
public lands are still pristine and undeveloped, providing clean water, 
clean air, wildlife habitat, and proximity to mountains and rivers. 
Roadless areas, for example, provide clean drinking water, essential 
fish and wildlife habitat and world-class recreational opportunities. 
An analysis of Bureau of Land Management data by Environmental Working 
Group shows that mining claims in Forest Service Roadless Areas in 12 
Western states increased almost 50 percent from 9,000 claims in January 
2003 to more than 13,000 as of July 2007. In Washington state, there 
are over 400 mining claims in Roadless areas.
    The 1872 Mining Law has long been interpreted as mandating hardrock 
mining as the ``highest and best'' use of public lands. Federal land 
managers have argued that the 1872 Mining Law forces them to approve 
any mining project proposed on public lands regardless of competing 
resources values.
    What is the effect of mining on these important wilderness lands 
such as Roadless areas and Wild and Scenic River systems?
    Answer. National Park, Wilderness and Wild and Scenic designations 
have fairly strong statutory protections against activities such as 
mines, and generally I have seen few direct threats of mines proposed 
directly in these areas. The law is not clear, though, on whether a 
mine or a protected area would win out of if pitted against each other. 
I believe the Senate bill should include a clear prohibition on mines 
in these areas.
    Question 1b. A greater threat from mining is to inventoried 
roadless areas and from projects that are close by to, or even under, 
these protected areas. Examples include the following: I know of a coal 
mining operation on and under a roadless area in Utah; and a proposed 
silver mine under the Cabinet Mountain wilderness in western Montana 
which threatens that special place. So while the highest levels of land 
protection, such as wilderness designation, have helped prevent 
development of mines in those areas, real threats remain and should be 
addressed in this legislation.
    Under current law, what can land managers do to balance mineral 
activities with other uses of public land when considering whether to 
approve a mining application?
    Answer. That is exactly the problem; there is no such balancing 
now. The Senate bill must give federal land managers authority to 
balance the benefits of fish, wildlife, and water values against mine 
values, and in at least limited cases where the latter values are 
superior to the former, the bill should allow the federal managers to 
deny the proposal.
    Question 1c. Given the significant increase in mining claims within 
Roadless Areas and given that Roadless Areas were designated to be 
protected areas, shouldn't we withdraw Roadless Areas from further 
mining activity?
    Answer. I doubt you can find a person more committed to protecting 
inventoried roadless areas than me. I strongly agree.
    Question 2. In a recent L.A. Times article, Death Valley National 
Park Superintendent James T. Reynolds expressed concern about mining 
activity on the border of the Park's boundaries. He stated: ``I hope 
the public understands the destruction that will occur. Development 
will have far-reaching impacts that our grandchildren will have to 
address. Unfortunately, we don't have the authority to stop [the mining 
activity].'' Under the current law, our land managers appear to be in a 
bind. Mining pollution can--and does--travel vast distances. For 
example, beneath the Bingham Canyon Mine in Utah there is a plume of 
contaminated groundwater that covers 72 square miles. In 1996, the 
federal government paid $65 million to buy out patented claims to a 
gold mine just three miles from Yellowstone National Park. The mine 
would have been located at the headwaters of three streams that flow 
into Yellowstone. While land managers can challenge the validity of 
claims near National Parks and Monuments, but this process is time 
consuming and expensive.
    Given that thousands of mining claims have recently been staked 
within five miles of many National Parks and Monuments including the 
Grand Canyon and Mount St. Helens, shouldn't federal officials have the 
capacity to protect these treasured lands from mining impacts?
    Answer. Please see my answers above to your questions. I strongly 
agree.
    Question 3a. While many environmental statutes like the Clean Water 
Act are applicable to hardrock mining operations, a key issue for us to 
consider is whether the coverage of these environmental laws is 
sufficient. In September, University of California Hastings 
Environmental Law Professor John D. Leshy told this committee that 
these other laws do not comprehensively address the myriad of 
environmental threats posed by hardrock mining, such as groundwater 
depletion and pollution and disruption of wildlife habitat. Professor 
Leshy testified that existing environmental statutes do not require the 
government, in making decisions about whether to approve proposed 
mines, to weigh the value of mining against other values and uses of 
the public lands.
    Why isn't the Clean Water Act sufficient to protect water resources 
from mining development in Washington or elsewhere in the West?
    Answer. Please note my detailed answer to Senator Domenici's 
similar question above. In short, I strongly agree with Mr. Leshy's 
assessment. In the CWA in particular, neither nonpoint pollution nor 
groundwater pollution is regulated, which are precisely some of the 
biggest threats posed by hardrock mines.
    Question 3b. What environmental safeguards would sufficiently 
protect water resources from mining development in Washington or 
elsewhere in the West?
    Answer. As I stated above, prohibiting hardrock mines in special 
places, such as wilderness areas, National Parks, Fish and Wildlife 
Refuges, and inventoried roadless areas would be a critically important 
step. Further, as I said above, there should be at least one new 
mechanism in the Senate Bill to allow federal land managers to deny 
mine proposals in other situations where the benefits of conserving 
fish, wildlife and water resources clearly outweigh the benefits of the 
proposed mine.
    Question 4. My state of Washington has experienced significant 
damage from mining and is, in fact, home to some of the nation's 
largest Superfund sites. When it comes to combating the damage 
inflicted by mining, I understand that the Superfund program is good 
for addressing high contaminant concentrations but that it still 
neglects the majority of mined areas.
    Can you tell us whether you believe Superfund is sufficient to 
address the impacts of mining in Washington and elsewhere?
    Answer. I am not an expert on Superfund policy, but my years of 
experience tell me that that Superfund is most certainly not sufficient 
to address the impacts of mining in Washington or elsewhere. First, 
Superfund generally is designed to clean up large messes that have 
already occurred, not prevent new ones from occurring. Second, only a 
small fraction of old, polluted mines qualify for Superfund clean up, 
so there are literally thousands of polluted abandoned mine sites in 
Washington and the West which do not qualify. To be clear, Superfund is 
helping clean up mining pollution on the ground, and we are thankful 
for that, but it is occurring in a limited fashion.
    Therefore, as I said in my testimony, a new abandoned mine 
restoration funding and program, similar to the eastern coal abandoned 
mine restoration program, should be a key part of the Senate bill.
    Question 5. A growing number of mine sites in this country now 
require water treatment in perpetuity to prevent further contamination 
of important water resources. Due to the severity of water quality 
impacts from acid mine drainage, many hardrock mines across the West 
require water treatment in perpetuity. For example, acid drainage into 
the Columbia River in Washington state from a Canadian mine will 
continue for thousands of years.
    Shouldn't mines be required to prevent this type of damage?
    Answer. Mines absolutely should be required to use all means 
available to prevent this type of costly long term damage, and if a 
mine proponent cannot guarantee that it will not occur, the mine should 
not be developed.
                                 ______
                                 
     Responses of James F. Cress to Questions From Senator Domenici
    Question 1. A gross royalty is typically portrayed as easier to 
calculate and collect than a net, profits-based royalty. Both, however, 
tend to require that some level of deductions be incorporated. Is the 
extent to which a gross is simpler than a net overstated in some 
respects?
    Answer. The differences between ``gross'' and ``net'' royalties are 
sometimes overstated, and there is considerable misunderstanding about 
hardrock royalties when the focus is purely on whether they are 
``gross'' or ``net.'' The two components to a royalty based on the 
value of mineral production are the royalty rate (percentage) and the 
``royalty base,'' or the value of the mineral or mineral product to 
which the royalty rate is applied. The royalty base is what 
differentiates a ``gross'' royalty from a ``net,'' but it is not a 
choice between two alternatives. Rather, it is a continuum which can 
vary from the value of the land prior to exploration on the claim to 
the value of the final salable product (fabricated copper or gold, for 
example), as illustrated in my handout at the hearing titled ``Gross 
vs. Net: What is a Fair Royalty Burden''.*
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    * Graphic has been retained in committee files.
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    As described in my testimony, coal and oil and gas often have a 
readily identifiable royalty base at the point they are extracted from 
the ground, so the federal royalty on those minerals is essentially the 
value of the minerals on the lease in their crude state. Crude oil is 
sold in local and international markets and the price of the product 
that comes out of the ground is generally readily ascertainable at the 
well. Gas is also often sold at the well head, in some cases without 
any processing. It is simple and straightforward to calculate and pay a 
royalty where the minerals have a value without processing, at the 
point they are removed from the ground. The royalty base is the raw 
mineral value and you just apply the royalty rate to that value.
    These simple ``gross royalties'' for federal oil and gas and coal 
become immediately complex, however, where processing and 
transportation is required. For example, the federal royalty 
regulations for gas permit the deduction of the processing costs (see 
30 C.F.R. Part 206, Subpart D) and the costs of transporting gas from 
the lease to the processing plant, which may be many miles away (see 30 
C.F.R. Sec. Sec.  206.156, 206.157). These regulations are quite 
detailed, reflecting the fact that the processed gas and the other 
salable products are sold far from the lease, and the value of the 
unprocessed federal minerals has to be determined by netting back to 
the lease for royalty purposes by deducting the processing and 
transportation costs. To complicate matters, the contractual 
arrangements by which gas is processed and transported often involve 
pipelines and gas processing plants owned by the same company, or an 
affiliate of the company, that holds the oil and gas lease, so the 
value of the gas processing and transportation may need to be 
determined without an arms-length contract. Coal washing and 
transportation allowances can introduce similar complexity (see 30 
C.F.R. Part 206, Subpart F). Ms. Gibbs Tschudy testified that while 
these deductions are the most complex part of the federal oil and gas 
and coal royalty system to administer, the MMS is capable of auditing 
and administering them.
    The value of the minerals in place on the claim is the fairest 
place to determine the royalty base, because it reflects the actual 
contribution of the government to the mining operation. The government 
contributes unexplored land, and does not contribute exploration 
dollars, development costs, construction financing and operational 
expenses, all of which must be contributed by the mining company before 
any minerals are removed from the ground and eventually processed into 
a salable metal or other mineral product. Unfortunately, unlike coal 
and oil and gas, there is rarely a market for raw hardrock minerals at 
the point they are removed from the government's land--they are 
generally still trapped in rock, requiring crushing, transporting, 
milling, smelting, refining and other processing to free the contained 
metals and other minerals and fabricate a metal or other product that 
can be sold in a market and serve as the basis to determine royalty 
value. As discussed below in response to question 3, the states have 
often recognized that fairness requires the use of a severance tax or 
royalty base that is calculated on a net profits or net proceeds basis, 
or on the gross value of the raw minerals such as unprocessed ore, 
which is equivalent to the federal royalty basis for coal and oil and 
gas.
    Question 2. Mining companies annually submit Corporate Income Tax 
forms to the Internal Revenue Service. Could the information contained 
in those documents simplify the administration of a profits-based 
royalty?
    Most information from corporate income tax returns will not be 
directly relevant, because the royalty will be calculated on the 
minerals produced from only certain federal mining claims and tax 
returns are based on company-wide income and cost figures. Many 
companies mine from a combination of private, state and federal lands 
(sometimes at the same operation), and their income tax returns will 
aggregate all of the costs and expenses from the private, state and 
federal lands. Mining companies in calculating the royalty, and the 
government in collecting and auditing the royalty payments, will need 
to allocate the costs of production and the value of the minerals 
produced to only the federal mining claims that bear the royalty. This 
is true regardless of whether the royalty is gross or net. This will 
limit the usefulness of tax return information for federal royalty 
administration.
    Although income tax returns in general will not be useful to 
simplify royalty administration, the depletion provisions of the 
Internal Revenue Code could theoretically be used to design a net 
royalty that might be calculated based primarily on existing 
information from tax returns and thus simpler to administer. In 
calculating depletion under Section 613 of the Code, mining companies 
must calculate their ``taxable income from the property.'' See I.R.C. 
Sec.  613(a); Treas. Reg. Sec.  1.613-5. Taxable income from the 
property is the gross income from mining, less certain defined 
allowable deductions attributable to mining processes. These tax code 
provisions are similar enough to a royalty calculation that they could, 
with certain modifications (such as the addition of deductions for 
depletion, other royalties and severance taxes, and reclamation), be 
used to calculate a fair net royalty for mining claims. The depletion 
provisions of the Code are quite complex, but mining companies have 
been calculating depletion for almost 100 years, and there already 
exists a considerable body of administrative interpretation and case 
law. One of the useful tensions in using the depletion provisions of 
Section 613 as a basis for a federal royalty is that the higher the 
depletion deduction claimed by the taxpayer, the higher the federal 
royalty will be if it is based on the same calculation, thus minimizing 
any temptation to ``game'' the royalty calculation.
    In order to achieve administrative simplification, however, the 
mining royalty statute would have to expressly state that the royalty 
is to be calculated in the same manner as required under the Internal 
Revenue Code and the Treasury Regulations, including judicial decisions 
and administrative decisions and interpretations of the Internal 
Revenue Service. The Department of the Interior should be expressly 
prohibited in the mining royalty statute from adopting any definition 
of ``taxable income'' and should have no separate authority to audit or 
adjust ``taxable income.'' The royalty value should be based on the 
Internal Revenue Service's regulations, and the Service should have the 
exclusive authority to audit or adjust ``taxable income'' in connection 
with tax enforcement, with the Department of the Interior limited to 
using the Service's tax calculations in determining the federal 
royalty. Any duplicative, independent interpretation by the Department 
of the Interior of ``taxable income'' would destroy the administrative 
efficiency of this approach.
    There are a number of other issues that would need to be addressed 
for a royalty based on Section 613 depletion calculations. For example, 
there will need to be a separate calculation of ``taxable income'' 
under Section 613 for federal mining claims subject to the royalty, 
excluding any federal mining claims not subject to the royalty and any 
state or private mineral properties. Also, to achieve the desired 
administrative simplicity and the tension between depletion and royalty 
described above, the person paying the royalty will have to be the same 
as the taxpayer calculating depletion. These issues might make it 
difficult to write a royalty based on ``taxable income'' under Section 
613.
    Note that H.R. 2262 uses the ``gross income'' portion of Section 
613, but ignores the deductions resulting in ``taxable income'' that 
are essential for a fair royalty burden. H.R. 2262 also does not 
require the Department of the Interior to use the taxpayer returns and 
IRS regulations to calculate ``gross income,'' with the result that the 
administrative burden on both government and industry may actually be 
increased by requiring complex calcuations under two different sets of 
rules. H.R. 2262's approach is thus neither administratively simple nor 
fair.
    Question 3. In the United States, what sort of royalty (or tax) 
rates and structures have individual states imposed on mining 
operations?
    Do States tend to impose a gross royalty or is a net approach more 
common?
    Answer. Western states, in which most federal lands are located 
that would be subject to a federal hardrock royalty, tend to impose two 
types of burdens on hardrock mining: royalties on mineral production 
from state lands and severance taxes on private, state and federal 
mineral production. Both are calculated using a percentage of the value 
of the mineral produced, so both can be useful as comparisons for a 
federal royalty. One caveat is that state tax and royalty systems tend 
to have characteristics that are designed for the specific minerals 
that are produced in the state (copper and beryllium in Utah, for 
example, or molybdenum in Colorado) that may not be applicable or 
desirable policy for a nationwide royalty on federal lands.
    The approaches of the western states to royalties and severance 
taxes, including the use of net or gross, vary considerably (with more 
than one approach sometimes used in the same state), but most states 
include a net approach or an approach based on the gross value of ore 
or mine mouth value, which is equivalent to a net. Western states 
apparently do not perceive that net approaches impose undue burdens on 
the state in calculating and collecting royalties and severance taxes. 
No state imposes a flat royalty on gross income without any deductions, 
such as the royalty under H.R. 2262. In addition to their varied 
approaches to the royalty or severance tax base, the states all impose 
significantly lower royalty or severance tax rates than the 8% gross 
royalty proposed in H.R. 2262, even when severance taxes and state 
royalty rates are added together in those states that have both. Rates 
tend to be lower for gold, copper and other metals.
    Significantly, almost all of the western states already impose a 
severance tax on mining from federal lands. Any federal royalty will 
have to be added on top of these existing burdens, making it crucial 
that the royalty not be so high that the combined burden makes future 
mining uneconomic.
    It is important to look closely at the statutes and regulations 
when characterizing the state systems, since what may appear to be a 
``gross'' approach may actually be based on the ``gross value of ore,'' 
``gross value less processing costs,'' ``gross value at the mine 
mouth'' or another royalty base that is functionally equivalent to a 
net approach. ``[T]he definition of the royalty basis is critical to 
understanding the rate. When comparing royalty rates in different 
jurisdictions, care must be taken not to compare rates unless the 
royalty base is identical.'' Otto, et al., ``Mining Royalties: A Global 
Study of Their Impact on Investors, Government, and Civil Society'' p. 
62 (World Bank 2006)(``World Bank Study'').
    The various western state approaches to royalty and severance tax 
base are discussed below in a continuum from the most ``net'' to the 
most ``gross'' approaches.
                      net profits or net proceeds
    A number of states define the royalty base or severance tax base on 
a net profits or net proceeds basis. These state burdens are truly 
``net,'' in the sense that the royalty base is typically determined 
after deduction of all mining and processing costs and transportation.
    Alaska imposes a royalty of three percent of net income on mining 
from state lands. Alaska Stat. Sec.  38.05.212 (elec. 2008). Alaska 
also imposes an additional mining license tax (similar to a severance 
tax) that is calculated as a percentage (between three and seven 
percent) of the net income from the property. (This mining license tax 
was ignored in the numbers cited by Taxpayers for Common Sense, which 
included only the net income royalty, resulting in an inaccurate 
estimate of the actual government take on state lands, as corrected by 
Senator Murkowski.) Producing mines are exempted from the tax for three 
and a half years, in order to allow them first to recover their capital 
costs. Alaska Stat. Tit. 43, Ch. 65. (elec. 2008).
    Nevada imposes a severance tax of between 2 and 5 percent of net 
proceeds. Nev. Rev. Stat. Ann. Ch. 362. (elec. 2008). ``Net proceeds'' 
is defined as the gross value of the mineral product, less deductions 
for extraction costs, processing, refining and sale costs, costs of 
transportation from the mine to the place of processing and sale, 
marketing costs, maintenance and repair costs for machinery, facilities 
and equipment used in mining, processing and transportation, 
depreciation of such facilities and equipment, insurance costs, costs 
of employee benefits, development costs, royalties, and certain 
administrative overhead costs. Id. Sec.  362.120; Nev. Admin. Code Ch. 
362. This tax is phased in as the percentage of net proceeds to gross 
proceeds increases, with the lower rate applying to operations 
generating $4 million or less in annual net proceeds.
    California imposes a royalty on state lands on a lease-by-lease 
basis. One basis used is a percentage of the net profits derived from 
mineral extraction operations. See Cal. Pub. Resources Code Sec.  6895 
(elec. 2008).
    Montana taxes the net proceeds of minerals other than coal, 
bentonite and metal mines (metal mines are taxed on a net smelter 
returns basis as described below). Mont. Code Ann. Sec.  15-6-131(1), 
(2). Id. Sec.  15-23-503. The ``net proceeds'' tax base is defined as 
gross receipts received from the sale of concentrates or metals, less 
allowable deductions. Deductions allowed include royalties paid, costs 
of labor, machinery and supplies used in mining operations and 
development, costs of improvements, repairs or replacements to the 
mine, mill or reduction works, and depreciation of the mill and 
reduction works, transportation from mine to mill or place of sale, 
marketing costs, insurance, environmental, reclamation and mine safety 
compliance costs, sampling and assaying charges, engineering and 
geological service charges.
    South Dakota imposes several types of severance taxes. One tax is a 
10% net profits tax imposed on gold and other precious metals. S.D. 
Cod. Laws Sec.  10-39-45.1 (elec. 2008).
    ``Net profits'' are defined as gross receipts from the sale of 
precious metals, less deductions for the cost of extraction, 
transportation from mine to mill, the costs of reduction, refining and 
sale, marketing costs, costs of maintenance and repairs of mining, 
processing and transportation machinery, equipment and facilities and 
administrative facilities, interest costs, insurance costs, employee 
benefits, depreciation of machinery, equipment and facilities, mine 
exploration and development costs, reclamation costs, royalty payments, 
state and local taxes, and general administrative expenses incurred 
within the state. Id. Sec. Sec.  10-39-44, 10-39-45.2.
    Arizona also had a royalty on state land of five percent of the net 
value of minerals, until a 1989 state supreme court decision overturned 
this method as being inconsistent with the State's enabling act. Ariz. 
Rev. Stat. Sec.  27-234 (repealed); see Kadish v. Arizona State Land 
Department, 155 Ariz. 484; 747 P.2d 1183 (1987). Arizona illustrates an 
important point about the western state royalty systems. The federal 
government generally granted lands to the states under federal enabling 
(statehood) acts, which granted the lands in trust for the benefit of 
public schools and other specified purposes. The limitations of these 
state enabling acts are generally incorporated in the state 
constitutions of the western states, and may impose limits on the type 
of royalty imposed and minimum requirements for the income that must be 
generated and collected by the state from these state trust lands for 
the public school or other beneficiaries of the trust. The federal 
government is not subject to these trust responsibilities on federal 
lands, and Congress is free (within the limits of the Constitution) to 
impose a net royalty, or no royalty at all, on federal lands.
                 gross value of ore or mine mouth value
    A number of western states have imposed royalties or severance 
taxes that are based on the gross value of the unprocessed ore or mine 
mouth value. This is the functional equivalent of a net proceeds or net 
profits approach, with deductions for all processing and transportation 
costs and, in some states, mining costs.
    Colorado's severance tax is 2.25% of the gross value of the ore, 
excluding any value added subsequent to mining, and subject to an 
exclusion for the first $19 million in income and credits for property 
taxes and any state land royalties. Colo. Rev. Stat. Sec. Sec.  39-29-
102 to -104 (elec. 2008). Colorado state land royalties are determined 
on a case by case basis, see Colo. Rev. Stat. Sec. 36-1-113 (elec. 
2008), but gross value of ore has been used for some minerals, and net 
smelter returns for others. See ``Royalties in the Western States and 
in Major Mineral-Producing Countries,'' GAO/RCED-93-109, p.28 (GAO 
1993) (``1993 GAO Report'').
    Idaho imposes a license tax (equivalent to a severance tax) of 1% 
of the gross value of ore, after deducting all costs of mining and 
processing the ore. Idaho Code Sec. Sec.  47-1201, 47-1202 (elec. 
2008). Idaho, like Colorado, imposes state land royalties on a case by 
case basis in each lease, see Idaho Code Sec.  47-710 (elec. 2008), and 
has in the past also used a royalty of between 2.5% (for certain 
metals) to 10% (for certain non-metallic minerals) of the value of the 
unprocessed ore. See 1993 GAO Report, p.30.
    Utah has imposed a royalty on minerals extracted from state lands 
of a specified percentage of the value of the minerals, including a 
royalty of 4% of the gross value of the ore sold for metals other than 
uranium. See 1993 GAO Report, p.43.
    South Dakota imposes a royalty on leases of state lands of not less 
than 2% of the gross returns from the sale of ores and mineral products 
derived therefrom, less smelting and reduction charges and 
transportation and any other ``customary and appropriate charges'' 
determined by the state land commissioner. S.D. Cod. Laws Sec.  5-7-55 
(elec. 2008). If the ore is sold, this constitutes a royalty on the 
``gross value of ore'' without a deduction for mining costs.
    Wyoming's severance tax is based on the fair market value of the 
minerals at the mouth of the mine, after extraction. Wyo. Stat. Sec.  
39-14-703 (elec. 2008). This royalty base is also equivalent to the 
value of ore, like the states above, but without a deduction for mining 
costs.
    Montana imposes a royalty on state lands of at least 5% of the 
market value of the minerals recovered. Mont. Code Ann. Sec.  77-3-116 
(elec. 2008). Montana has in the past defined this royalty as a 
percentage of the value of the raw minerals recovered from the claim, 
See 1993 GAO Report, p.32, which is similar to the ``gross value of 
ore'' used in the states described above.
    Oregon imposes a royalty of 5% on most metallic minerals removed 
from leases of state lands. Or. Admin. R. Sec. Sec.  141-071-0410, -
0610 (elec. 2008). The royalty base is calculated on the gross value of 
minerals at the mine mouth. Id. Sec.  141-071-0620; See 1993 GAO 
Report, p.41.
               net smelter return and similar approaches
    Several states employ net smelter return or similar methodologies 
in their royalties or severance taxes. Net smelter return approaches 
are more common in state land royalties, which may be in part because 
of the trust requirements imposed by state enabling statutes on state 
lands, as discussed above.
    Montana imposes a license tax (similar to a severance tax) on metal 
mines of 1.6% of the net smelter returns for precious and base metals. 
The tax is 1.8% on mineral concentrates prior to shipment to the 
smelter. Mont. Code Ann. Sec. Sec.  15-23-801, 15-37-102, 15-37-103 
(elec. 2008). The tax base is the receipts received from the sale of 
concentrates or metals, less allowable deductions. Deductions allowable 
in calculating the tax include treatment and refinery charges, costs of 
transportation from the mine or mill to the smelter, roaster or other 
processing facility, quantity, price, impurity and penalty charges, and 
interest. Id. Sec.  15-23-801(5). Treatment and refinery charges 
include labor cost, utility and fuel costs, costs of maintenance, 
repairs and supplies, materials, depreciation, rental of equipment, 
pollution control costs, costs of training, freight, engineering, 
insurance and licensing attributable to smelting and refining, 
administrative services and all third party treatment and processing 
costs. Id. Sec.  15-23-801(2).
    New Mexico imposes a royalty on state lands of not less than 2% of 
the gross returns from the smelter or other processing facility, less 
the costs of smelting or reduction and transportation. N.M. Stat. Ann. 
Sec.  19-8-22 (elec. 2008). This is functionally a net smelter returns 
royalty. The royalty percentage is not less than 5% for uranium and 
certain other minerals.
    South Dakota imposes a royalty on leases of state lands of not less 
than 2% of the gross returns from the sale of ores and mineral products 
derived therefrom, less smelting and reduction charges and 
transportation, and any other ``customary and appropriate charges'' 
determined by the state land commissioner. S.D. Cod. Laws Sec.  5-7-55 
(elec. 2008). If concentrates or metals are sold and no other 
deductions are allowed by the commissioner, this is equivalent to a net 
smelter return.
    As an alternative to the net profits royalty base described above, 
California may impose on a case-by-case basis a royalty on state lands 
based on 10% of the gross value of the mineral production less 
processing and transportation charges, which is similar to a net 
smelter return calculation. See Cal. Pub. Resources Code Sec.  6895 
(elec. 2008).
                     gross with flat cost deduction
    Two states use a ``gross with flat cost deduction'' severance tax 
system. This approach attempts to approximate the economic burden of a 
net profits or net proceeds tax, while minimizing the administrative 
burden by eliminating the need to audit mine-specific cost deductions, 
by allowing a flat deduction of a percentage of gross proceeds to 
approximate the deduction of mining and processing costs. These states 
apply different tax rates to different minerals, and permit different 
flat cost deductions for different types of mineral products. This is 
not a ``net'' approach, however, because the flat cost deduction treats 
all mining operations the same regardless of their actual costs; this 
system is effectively a small gross burden that varies for different 
minerals. The administrative simplicity of the flat deduction has been 
somewhat offset by the need to amend the statute more frequently to 
ensure that the size of the flat cost deduction reflects actual costs 
to the extent possible, and to address concerns of particular mineral 
producers with higher processing costs, such as beryllium miners in 
Utah.
    New Mexico imposes a severance tax of between 1/8 and 1/2 of 1% 
(depending on the metal or mineral) of the ``taxable value'' Taxable 
value is the value of a specific mineral product (concentrates for 
molybdenum, copper, lead and zinc, concentrate or dore for gold) less 
50% to 66-2/3% of that value to approximate the costs of mining and 
processing. The tax rate and cost deductions differ for various 
minerals.
    Utah's severance tax is 2.6% of the ``taxable value,'' which is 
determined based on the product sold. If the mineral product sold is 
ore, the taxable value is 80% of the gross proceeds, with the 20% of 
the value excluded approximating a deduction for mining and 
transportation costs. If the product sold is metal (other than 
beryllium), the taxable value is 30% of the gross proceeds, with the 
remaining 70% of gross proceeds approximating a deduction for mining, 
processing and transportation costs. Beryllium formerly had a taxable 
value of 20% of the gross proceeds, with an 80% deduction for costs, 
but taxable value is now equal to 125% of the mining costs. For 
intermediate mineral products such as copper concentrate, the taxable 
value is based on the amount of contained metal in the product if the 
intermediate product is further processed rather than being sold at the 
point of taxation.
              gross receipts from first marketable product
    Washington imposes a royalty on minerals extracted from state lands 
of 5% of the gross receipts. ``Gross receipts'' are based on the value 
of the first marketable product, subject to the deduction of 
transportation costs. Wash. Admin. Code Sec. Sec.  332-16-035, 332-16-
155. This royalty appears to be either a gross or net burden depending 
on the mineral product sold, whether ore, concentrates or finished 
metals. Washington has no severance tax, which may help offset the 
impact of this potentially more gross royalty calculation.
            unit-based severance taxes on specific minerals
    Several states impose an additional, unit based severance tax on 
particular minerals. A unit-based tax is not based on a percentage of 
the value of the mineral, such as the net and gross ad valorum 
approaches described above, but is a flat dollar amount per unit of 
mineral produced. These taxes tend to be aimed at large producers or 
particular minerals in these states, presumably because the states have 
determined they are able to bear a higher tax burden. Unit-based 
royalties are not a good basis for designing a federal royalty, which 
must apply to many commodities and many types of mining operations.
    Colorado imposes an additional severance tax of five cents per ton 
of molybdenum ore for all tons over 625,000 produced in a calendar 
quarter. The quantity limitation limits the tax primarily to two of the 
largest molybdenum mines in the world that have operated in Colorado 
for decades.
    South Dakota imposes a severance tax on gold of $4 per ounce, plus 
an additional $1 to $4 dollars per ounce depending on the gold price. 
Id. Sec.  10-39-43.
    Question 4. Can you discuss the importance of allowing discretion 
for some form of royalty relief for mining operations?
    Under what circumstances might royalty relief be appropriate, and 
what are the costs and benefits associated with a decision to provide 
relief?
    Answer. The Mineral Leasing Act of 1920 permits the Secretary of 
the Interior to reduce royalties for oil and gas, coal, potassium and 
other leasable minerals ``whenever in his judgment it is necessary to 
do so in order to promote development, or whenever in his judgment the 
leases cannot be successfully operated under the terms provided 
therein''. 30 U.S.C. Sec.  209 (elec. 2008). Discretionary royalty 
relief has provided significant flexibility to the United States to 
maximize the economic recovery of mineral deposits and to assist 
mineral industries with difficult operating or economic challenges. 
Royalty reductions have aided the development of underground coal in 
Colorado and strategic potash deposits in New Mexico and Utah and have 
maximized production from marginal ``stripper'' oil wells and heavy oil 
recovery throughout the west.
    Discretionary royalty relief would be just as important in the 
imposition of a hardrock royalty system. The proposed federal hardrock 
royalty will apply to dozens of minerals that are produced by many 
different mining and processing methods. The desire for administrative 
simplicity will probably result in a single royalty rate and 
calculation applying to many different minerals and types of 
operations, something that has never been attempted in federal royalty 
laws. A discretionary royalty relief provision will enable the 
Department of the Interior to address some of the inequities between 
commodities and operations that may be created by this ``one size fits 
all'' approach.
    A discretionary royalty relief provision should at a minimum permit 
royalty reductions under the same circumstances as are currently 
provided by the Bureau of Land Management for royalties on other solid 
minerals. Those five categories are: (1) for expanded recovery, where 
adverse geological or engineering conditions exist, or where the 
federal resources are likely to be bypassed because recovery is higher 
in cost due to the royalty than nearby non-federal resources; (2) for 
extension of mine life, to encourage the greatest ultimate recovery of 
mineral resources; (3) a financial test for unsuccessful operations, 
where operating costs exceed the value of production; (4) a financial 
test in combination with expanded recovery or extension of mine life, 
where financial information supports an even lower rate than would 
otherwise be allowed for either expanded recovery or extension of mine 
life alone; and (5) geographic area royalty rate differentials, where 
the federal royalty is higher than surrounding state or private 
royalties and could cause the federal resources to be bypassed or 
remain undeveloped. See 55 Fed. Reg. 6841, 6844 (Feb. 27, 1990)( 
amendment of Solid Mineral Royalty Reduction Guidelines); ``New Royalty 
Rate Reduction Guidelines for All Federal Solid Leasable Minerals,'' 
BLM Instruction Memorandum No. 87-552 (June 26, 1987)(notice published 
at 52 Fed. Reg. 24347 (June 30, 1987)).
    There are other examples of royalty relief based on royalty 
reduction statutes applicable to oil and gas. Royalty relief for 
marginal production could be provided similar to the ``marginal 
property production incentive program'' established under Section 343 
of the Energy Policy Act of 2005, 42 USC Sec.  15903 (elec. 2008), with 
automatic thresholds that would apply until the Department of the 
Interior adopted rules after study. Discretionary royalty relief could 
also be provided to encourage the mining of new deposits near existing 
operations, similar to the royalty relief under the Outer Continental 
Shelf Deep Water Royalty Relief Act. 43 U.S.C. Sec.  1337; 30 C.F.R. 
Parts 203 & 260 (elec. 2008).
    The benefits of providing royalty relief include maximizing federal 
mineral production from existing operations, consistent with the 
principles of sustainable development, and encouraging new production 
that might not otherwise be developed. Royalty reductions can also 
assist a mineral sector affected by unfair foreign competition or 
temporary market forces from going out of business, thus preserving 
high-paying American jobs.
    For example, underground coal mines in Colorado have been developed 
with royalty reductions. Colorado coal has a high BTU or heating value 
compared to Wyoming surface-mined coal, and is a low sulfur fuel that 
meets Clean Air Act requirements. The royalty reductions have helped to 
offset the difficult geological and engineering challenges that these 
mines encounter, mining up to 2,000 feet or more below the surface 
under difficult roof control conditions.
    Similarly, federal royalty reductions have assisted the development 
and continued operation of strategically important potash deposits in 
southeastern New Mexico. The U.S. imports about 80% of its potash 
requirements, essential for fertilizer and certain industrial 
applications requiring potassium. Approximately 75% of U.S. domestic 
production is in southeastern New Mexico, mostly on federal lands, 
where production commenced in the 1920s. Since 1964, royalty reductions 
have been used periodically to permit the New Mexico producers with 
older, more mature operations, to compete with Canadian and Russian 
producers, who have much higher potash grades and larger deposits. In 
times of higher prices, these operators have paid higher royalties. 
Some of the potash royalty reductions used have been sliding scale 
royalties based on the grade of the potash ore being mined, an 
innovative approach that permits operations to continue to process 
lower grades by automatically adjusting the royalty downward when lower 
grades are encountered in the variable-grade ore, and automatically 
increasing the royalty when higher grades are encountered.
    The cost to a royalty reduction can be measured by the foregone 
royalties, but that must be offset by the royalty value of additional 
mineral production from extended mine life or new deposits, and the 
federal, state and local taxes paid by operations that remain in 
business or are able to expand production (and their employees).
    There really is little downside to including a discretionary 
royalty relief provision in a hardrock royalty. There will be some 
administrative burden for the Bureau of Land Management to consider 
royalty reduction applications, but it has been doing so successfully 
for years for coal, potash, and other solid minerals. The cost of not 
including a royalty reduction provision is potentially great. Without 
this statutory authority, the Department of the Interior will probably 
have no implied authority to reduce royalties for individual operations 
or industry segments, regardless of the policy reasons that may from 
time to time favor a reduction.
    Question 5. What might be the exploration and development 
implications of having claim maintenance fees vary dependent upon 
whether or not there is an approved and operational Plan of Operations?
    For instance, the amount could be set lower for active and higher 
for inactive claims, or vice-versa.
    Answer. Claim maintenance fees should not be made so high as to 
discourage exploration and development. Since they are paid whether or 
not a claim contains an operating mine, they constitute a fixed cost. 
Generally, claim fees that are lower in the initial years of 
exploration and increase over time may provide an incentive to either 
explore claims or relinquish them. Imposing a higher fee on claims that 
are not included in an application for a plan of operations for 
exploration or development within a certain number of years would also 
provide an incentive to explore and develop the claims.
    Question 6. Mill-site claims have proven to be a contentious issue 
in the past. Does the concept of a requirement for payment of a fair 
market rental on lands required for ancillary use activities make 
sense?
    Answer. A reasonable payment for use of lands included in a mining 
plan of operations would be acceptable if the payment was in return for 
the use of the lands for the purposes approved in the plan of 
operations. The controversies over mill sites and the use of federal 
surface within a plan of operations boundary engendered by certain 
solicitors opinions of the Department of the Interior have been 
detrimental to mineral exploration and development in the United 
States. A statutory solution that results in a fair payment and also 
eliminates these uncertainties would be very helpful.
    The payment should not be based on ``fair market value,'' however. 
Congress should provide for a fixed payment, to avoid the 
administrative complexity of having the Department of the Interior 
determine ``fair market value.'' For example, ``fair market value'' 
determinations for federal land exchanges have made exchanges very time 
consuming. The payment should be in lieu of any other payment under the 
Federal Land Policy and Management Act or other statutes such as 
federal cost recovery laws.
    Question 7. Considering the large number of participants in the 
development of a mine (including the operator, owner, co-owners, 
royalty owners and others), who should be liable for payment of a 
federal royalty?
    Answer. Because the royalty is a property interest carved out of an 
unpatented mining claim, the owner or co-owners of the mining claim 
should be liable for the royalty. The royalty will need to be 
calculated and paid by the operator, however. An owner or co-owner of 
the claim is sometimes, but not always, also the mine operator. If the 
operator is not the owner, the owner or co-owners will need to make 
arrangements for the operator to pay the royalty on the owner's behalf, 
since the operator will have access to the mineral production and sales 
information, and the cost information necessary to calculate the 
royalty. This can be done by voluntary contractual arrangements between 
the owners and operators, and the government need not legislate a 
liability scheme for owners and operators.
    Care should be taken not to introduce onerous and unfair burdens on 
royalty owners and others, such as the joint and several liability 
imposed by Subsections 102(b)(2) and 102(h) of H.R. 2262 on owners that 
assign their claims to others, and joint and several liability for the 
``negligent'' loss of minerals by any other owner or co-owner. Such 
provisions have no parallel in existing royalty enforcement in the 
United States, and will be unworkable and spawn considerable 
litigation.
    Question 8. To what extent does the imposition of a royalty on 
operational mines constitute an assertion of a property interest?
    Answer. A mining claim supported by a discovery of a ``valuable 
mineral deposit'' is a vested interest in real property under long-
standing Supreme Court precedent. See Ickes v. Virginia-Colorado 
Development Corp., 295 U.S. 639, 79 L. Ed. 1627, 55 S. Ct. 888 (1935) ; 
Wilbur v. United States ex rel. Krushnic, 280 U.S. 306, 74 L. Ed. 445, 
50 S. Ct. 103 (1930) ; Clipper Mining Co. v. Eli Mining & Land Co., 194 
U.S. 220, 48 L. Ed. 944, 24 S. Ct. 632 (1904) ; St. Louis Mining & 
Milling Co. v. Montana Mining Co., 171 U.S. 650, 43 L. Ed. 320, 19 S. 
Ct. 61 (1898) ; Belk v. Meagher, 104 U.S. (14 Otto.) 279 (1881). A 
mining claim does not have to be part of an operational mine in order 
to constitute a property interest, since the concept of ``discovery'' 
under the mining law has been interpreted for over a century to extend 
to claims that are being explored or developed and for which ``a person 
of ordinary prudence would be justified in the further expenditure of 
his labor and means, with a reasonable prospect of success, in 
developing a valuable mine. . . .'' Castle v. Womble, 19 Pub. Lands 
Dec. 455, 457 (1894); see generally 2 American Law of Mining 2d Ch. 35 
(Rocky Mtn Min. L. Fdn. elec. 2007).
    A royalty interest is generally understood to be a property 
interest, and royalties not limited in term have generally been treated 
as real property interests, rather than personal property. See 3 
American Law of Mining 2d Sec.  85.02 (Rocky Mtn Min. L. Fdn. elec. 
2007)(Royalty as property). As a result, Congress risks takings claims 
by seeking to impose a royalty on existing mines, since the royalty 
takes a portion of the property interest and, at high levels such as 
those proposed in H.R. 2262, could put some operations out of business.
    The recent case of United States v. Locke, 471 U.S. 84 (1985), 
cited by Professor Leshy in response to a similar question by Senator 
Bingaman, did not overturn more than 100 years of precedent stating 
that a mining claim supported by a discovery is a property interest. 
The Locke case involved the imposition of a statutory filing 
requirement for mining claims which provided that the failure to file 
the claims within three years after enactment of the law would 
constitute an abandonment of the claim. The law did not require payment 
of a royalty or fee or otherwise impose a regulatory burden on mining 
claimants so severe that it was found to be a taking. Certainly there 
is no assurance that the Supreme Court would condone under Locke the 
taking of a portion of the minerals mined from an unpatented mining 
claim, which is the essence of the property right. Ms. Gibbs Tschudy 
testified that the Justice Department is concerned enough about the 
potential for takings claims that it has recommended that any royalty 
apply only to claims located after the date of enactment.
    Question 9. We must account for how a royalty will impact the 
United States as a global competitor for hard rock mining investment 
dollars.
    Internationally, what is a typical `government take' from hard rock 
mining operations? How does that compare to existing taxes, fees and 
other costs of doing business here in the United States?
    Answer. There is probably no typical ``government take'' from 
hardrock mining, as government taxation and resource policies range 
from encouraging of mineral development to ruinous depending on the 
policy needs and objectives of the country. However, the Committee is 
absolutely correct to focus not only on the royalty rate and the 
``net'' or ``gross'' royalty base, but on the entire tax and royalty 
burden applicable to mining. Mining companies take the same holistic 
view of the cost of doing business when they are deciding where to 
invest their exploration and mine development capital.
    Professor Otto and others have conducted two studies comparing 
government take in various countries, which included Arizona and Nevada 
(two of the highest mineral producing western states). The most recent 
study was published in 2000. Otto, Batarseh & Cordes, ``Global Mining 
Taxation Comparative Study (Second Edition)'' (Institute for Global 
Resources Policy & Management Mar. 2000) (``Global Mining Taxation''). 
The study evaluated all of the direct and indirect taxes on mining 
(including royalties) in 24 countries, including a range of developed 
and developing countries. The authors then modeled the impact of 
``government take'' in these countries on two hypothetical mineral 
deposits, a gold mine and a copper mine, to evaluate and compare the 
burden imposed by these tax and royalty regimes.
    Professor Otto testified before this Committee that his studies 
have shown that many mineral producing countries impose a total 
effective tax rate (government take) in the range of 40 to 50%. It is 
extremely significant that, at least as of 2000, the effective tax rate 
for Nevada in his study was 49.3% for a medium-profitable gold mine, 
before the imposition of any federal royalty. See Global Mining 
Taxation, Section 4.5, pp. 95-96 and Table 27. With a 10% drop in the 
gold price, Nevada's effective tax rate jumped to a confiscatory 63%. 
Id. p. 101 and Table 28. Similarly, the effective tax rate for the 
hypothetical copper mine in Arizona was 49.9%, before the imposition of 
any federal royalty. Id. Section 4.5, pp. 95-96 and Table 27. These 
studies suggest that even a small federal royalty could take the United 
States out of the 40-50% effective tax rate range typical for 
successful mineral producing countries, making the U.S. less 
competitive for mining investment.
    In the absence of an updated study of current ``government take'' 
in each of the western states compared to other countries, caution 
would dictate that a net profits or net proceeds royalty be considered 
that is more sensitive to profitability and commodity price swings. As 
described by Professor Otto, this has been a trend in countries with 
diverse economies and effective tax systems that incorporate income-and 
profit-based taxes towards the use of such royalties:

          [S]ome nations with competent tax administration structures 
        have been moving toward profit-or income-based mining tax 
        systems. Almost all Canadian provinces have replaced 
        traditional forms of royalty with mining taxes based on 
        adjusted income. Likewise, Nevada, in the United States, and 
        the Northern Territory in Australia use profit-or income-based 
        royalty systems. These jurisdictions enjoy a relatively high 
        level of mineral sector investment and also benefit from 
        significant mineral sector fiscal revenues.

    World Bank Study, p. 37. These jurisdictions are probably better 
models for the United States in fashioning a hardrock mineral royalty 
than developing countries, which may lack the government capacity to 
administer a net royalty and therefore often use a net smelter or other 
form of gross royalty.
    Question 10. What impact does the size of a given `government take' 
have on reserves, mine life, and the amounts of saleable minerals that 
are ultimately produced from mines?
    Answer. As discussed in connection with question 4 on royalty 
relief, a larger government take can result in premature mine closures. 
A lower government take may result in not only greater recovery from 
existing deposits, but more discovery of new mines due to the increased 
exploration activity that is generated by a lower government take.
                                 ______
                                 
     Responses of James M. Otto to Questions From Senator Bingaman
Note: in my answers below, in some cases I cite a country example. This 
refers to the royalty law for the named country as contained in the 
diskette found in the rear sleeve of my book J. Otto et al, ``Mining 
Royalties,'' World Bank, 2006.

    Question 1. In addition to the ``gross proceeds'' and ``net 
profit'' royalties described in hearing testimony, some jurisdictions 
have also implemented hybrid royalties--which incorporate 
characteristics of both models. Could you describe an example, and the 
pros and cons of instituting a hybrid royalty for hardrock minerals?
    Answer. Most nations do not use a hybrid approach, but several do. 
The policy reason for a hybrid is simple: collect at least a minimum 
amount of tax (usually based on a gross proceeds basis) and a higher 
amount if the mine is very profitable or if prices are high. Three 
examples are:

          1) a graduated royalty where the royalty rate applied to 
        gross proceeds goes up or down according to the price of the 
        commodity (premise: as the price of the commodity goes up, a 
        mine will be able to pay more than when the price is low). 
        Example: Bolivia.
          2) a graduated royalty where the royalty rate applied to 
        gross proceeds goes up or down based on a simple ratio of the 
        value of the minerals extracted to working profits (premise: 
        mines with higher profits can pay higher royalty) Example: 
        Ghana
          3) where the taxpayer pays the higher of a gross proceeds 
        royalty or a net profits tax (guarantees some revenue to the 
        treasury even if no profits are made) Example: Dominican 
        Republic.

    Pro: all 3 types capture additional revenue when prices are high 
and at least some revenues are received even when prices are low
    Con: 1 above, this is basically a gross proceeds royalty but the 
taxpayer or tax administrator needs to look up the rate in each tax 
period based on the commodity price during that period.
    Con: 2 above, this is basically a gross proceeds royalty but the 
taxpayer must calculate a measure of market value to a measure of 
profits as defined in the law, during the tax period and then do a 
table look up to determine the rate. This means that the company may 
practice tax minimization strategies to increase working profit so as 
to achieve a lower royalty rate.
    Con 3 above, this is more work for the company with no real 
downside for government.

    Question 2. Your testimony suggests that a net profit-based royalty 
might be more susceptible to ``tax minimization strategies'' than a 
gross income-based model. Are there specific examples of these 
strategies that you can offer? Are there any of which we should be 
particularly mindful at the outset?
    Answer. The complete toolkit of tax minimization strategies that 
can be used to minimize income tax can be used to manipulate profit-
based royalty as well. For example, timing new investment costs so as 
to reduce royalty when prices are high.
    Question 3. Your testimony describes ``transfer pricing'' as a 
growing concern in the area of hardrock royalties--particularly given 
the consolidation that has occurred within the mining industry. Please 
elaborate on this concern, and perhaps detail some of the measures that 
can be taken to avoid this result.
    Answer. I have seen a dramatic increase in transfer pricing over 
the past decade, in some cases resulting in very substantial losses to 
the treasuries of the governments concerned. If there is a profit based 
royalty, there are two edges to the transfer pricing sword--inflated 
prices being paid to affiliates who provide finance, goods and services 
to the mine, and sales of the mineral--a price is paid by the buyer 
that is lower than the market price. There are a number of protections 
that I build into mining laws and agreements that I draft ranging 
beyond simple arms length price requirements, for example the need to 
report any transactions to an affiliate (where there is 5% equity 
cross-holding or other criteria).
     Responses of James M. Otto to Questions From Senator Domenici
    Question 1. Mining companies annually submit Corporate Income Tax 
forms to the Internal Revenue Service. Could the information contained 
in those documents simplify the administration of a profits-based 
royalty?
    Answer. Probably not. Income tax is based on all income earned by a 
corporation not just income earned from mineral sales. Royalty is 
almost always based on a measure linked in some way to mineral sales. 
For this reason, jurisdictions that impose a profits-based royalty 
specially define how to calculate profits and exclude or limit certain 
types of income and costs. Example: see Canadian provincial royalty 
legislation.
    Question 2. We must account for how a royalty will impact the 
United States as a global competitor for hard rock mining investment 
dollars.
    Internationally, what is a typical `government take' from hard rock 
mining operations? How does that compare to existing taxes, fees and 
other costs of doing business here in the United States?
    Answer. A typical government take is an effective tax rate of 
between 40 and 60% percent. The effective tax rate (ETR) is simply the 
amount of all taxes and fees paid to government divided by the before 
tax profit. In almost all nations where I have assisted in the design 
of the mining fiscal system, I have estimated the ETR for several model 
mines based on that nation's fiscal system. This allows policy makers 
to see how the fiscal system (and proposed changes to the system) 
compares to those in other nations and how it would affect the mine's 
economics. Such studies typically cost from USD15,000 to 45,000. The 
last ``public'' study I completed was in 2000, and describes the fiscal 
systems and calculates ETR for two model mines in over 20 jurisdictions 
including 2 US states. On January 29, 2008 a team from the GAO visited 
my office at the request of your Committee and received a copy of that 
study. The studies I do for governments are usually much more detailed 
than the global study, for example, showing the ETR for a wide range of 
prices.
    Question 3. What impact does the size of a given `government take' 
have on reserves, mine life, and the amounts of saleable minerals that 
are ultimately produced from mines?
    Answer. This is a complex issue which is covered in detail in my 
book ``Mining Royalties.'' The simple answer is that if a gross 
proceeds tax is kept low, there will be little impact on most mines but 
if it is high, it will affect mine design and may result in lower 
reserves and a shortened mine life.
    Question 4. You speak of the importance of taxes in making royalty 
policy, but single out a single feature of the entire tax code (the 
depletion allowance) as a justification for higher federal royalties. 
Can you explain how the depletion allowance works and why you chose to 
exclude other state & federal fees, taxes, and other costs in your 
testimony?
    Answer. All taxes and fees are important as are tax incentives. In 
my studies for governments undertaking mining sector fiscal reform I 
always use a holistic approach where every tax and fee and incentive is 
evaluated so that interactions and cumulative effect can be understood 
by policymakers. Most counties have a very similar toolkit of taxes, 
fees and incentives. The US stands apart from almost all other nations 
in that it provides a depletion allowance. In most nations minerals 
belong to the state and one rationale for a royalty is that some sum 
must be paid to the state as its nonrenewable mineral is mined 
(depleted). Most nations have rejected the concept that a company 
should receive a tax incentive to deplete the nation's resources--such 
an allowance is viewed by many economists as a form of ``negative 
royalty.'' There are however positive aspects to a depletion allowance, 
for example, the policy premise is similar to depreciation. As the 
resource is used up, it will need to be replaced through exploration 
and the deletion allowance can be used for this purpose. Most taxes and 
fees levied on the mining industry are similar to those in other 
nations and I singled out depletion allowance because of its 
``negative'' royalty connotations. Obviously, a five minute 
presentation can only cover a few issues. My ``standard'' mining 
taxation presentation for senior government officials is about 90 
minutes long.
    Question 5. Considering the large number of participants in the 
development of a mine (including the operator, owner, co-owners, 
royalty owners and others), who should be liable for payment of a 
federal royalty?
    Answer. The taxpayer holding title to the mined property or if 
there is no title, then the holder of the right granted by government 
to mine the property.
    Question 6. To what extent does the imposition of a royalty on 
operational mines constitute an assertion of a property interest?
    Answer. I am not an expert in US property rights. However, this 
same issue comes up in other nations. In my view, the property rights 
issue can probably be avoided depending on the language used in the 
statute. There are several ways that nations approach the concept of a 
royalty tax. One view is that it is a form of ownership transfer tax 
where the miner is paying the government for the transfer of the 
mineral from public to private ownership. If this approach is taken, 
there is perhaps grounds for a ``takings'' based legal action for mines 
where the mineral has already passed hands before the enactment of the 
new law. However, some nations structure their tax as a usage tax and 
what is taxed is not the transfer of mineral ownership but instead the 
right to undertake the activity (to mine). Take for example, a driver's 
licence. The tax does not involve the automobile, it is levied on the 
grant of permission to drive.
    Question 7. Can you discuss the importance of allowing discretion 
for some form of royalty relief for mining operations?
    Under what circumstances might royalty relief be appropriate, and 
what are the costs and benefits associated with a decision to provide 
relief?
    Answer. The mineral sector is cyclical and price changes are 
greater than in most other industries. Most mines will from time to 
time run at a loss. While some fiscal mechanisms help smooth revenue 
flows, such as income tax loss carry-forward, costs that must be paid 
regardless of profitability, such as some forms of royalty, can 
aggravate a mine's economic situation in a downturn possibly resulting 
in closure. Some nations, but not most, thus allow a mine to apply for 
either relief from royalty or for royalty payments to be deferred until 
a future date. When is exemption or deferral warranted? In some nations 
the decision is left entirely to the discretion of a government 
official. In my opinion, if relief power is given to an official, then 
I suggest that the discretion be bounded. For instance, such 
discretionary power should not allow individual mines to be exempted on 
a case by case basis, but where a class of mines is under duress, 
perhaps allow that class of mines to be exempted but only for up to a 
defined time period that cannot be extended (perhaps 3 years). The 
benefits to be gained are that more mines remain open. If closed, there 
is a negative impact throughout the local economy, costs can be imposed 
on local government, local government will receive lower taxes such as 
property tax, and the state and federal government will probably have 
lower fiscal revenues over the long run (once closed many mines do not 
reopen). Examples are provided in my book ``Mining Royalties.''
      Response of James M. Otto to Question From Senator Cantwell
    Question 1a. In your testimony, you stated that most nations impose 
some form of royalty on minerals when the nation is the owner of the 
mineral. There are very few exceptions and over the past few years some 
countries that previously had no royalty now either have one or are 
planning to introduce one. In addition, mining companies in the United 
States receive a multi-million dollar double subsidy in the form of the 
percentage depletion allowance. The percentage depletion allowance 
allows mining companies to take tax deductions on mineral deposits they 
received from public lands for free and costs the taxpayer an estimated 
$100 million a year.
    Shouldn't mining companies be required to pay a royalty similar to 
what other extractive industries pay in this country, generally 8%--16% 
of the gross value of the mineral?
    Answer. When one considers appropriate rates for royalty there are 
several considerations to take into account and I will mention three. 
One is whether or not the mineral being produced is subject to 
competition from foreign-sourced minerals. Low-valued bulk commodities 
like sand, gravel, aggregates, coal and iron ore have very substantial 
transportation costs and thus foreign mined minerals are at a large 
cost disadvantage. Royalties on these bulk commodities can be 
relatively high and still allow domestic producers a cost advantage 
over foreign minerals. In many nations, the royalties on ``bulk'' 
minerals are high relative to those on hard-rock minerals. Secondly, 
miners have many jurisdictions to choose from when deciding where to 
invest. Most nations tax hard-rock minerals at around a rate of 2 to 5 
percent. Rates above 5% are extremely rare. Companies will look outside 
the US for new investment opportunities. Thirdly, if too high a royalty 
is assessed, there will be fewer companies willing to explore and 
discover new tax paying mines. Companies undertake economic feasibility 
studies to determine whether their minimum rate of return criterion is 
satisfied. A gross proceeds tax of 8 to 16% (a fixed cost) would result 
in many potential mines not being built. If an objective of government 
is to maximize fiscal revenue from the industry over the long run, too 
high a royalty rate may result in lower revenues (see below).*
---------------------------------------------------------------------------
    * Graph has been retained in committee files.
---------------------------------------------------------------------------
    Question 1b. Mining companies are already required to report the 
value of minerals mined to the IRS to calculate taxes. Why should 
reporting to the Interior Department to calculate a royalty be 
different?
    Answer. I am not familiar with the income tax reporting 
requirements for minerals and cannot comment directly on this question. 
However, almost all nations require separate reporting, and 
standardized forms can be used. What is important is that whatever 
agency is responsible for royalty oversight must be familiar with the 
mining industry and minerals value. At the present time, the Minerals 
Management Service is best equipped for this function.
                                 ______
                                 
     Responses of Alan Bernholtz to Questions From Senator Domenici
    Question 1. In discussing Mount Emmons, you have shared your 
opinion that existing environmental protections are insufficient. The 
National Academies of Science disagree with that assertion.
    Since the Lucky Jack property was patented and is now privately 
held, is there something other than altering the environmental 
regulations associated with hard rock mineral activities that you would 
like this Committee to do, in the context of mining law reform, that 
would not likely result in a Federal taking for which we would have to 
compensate the owner?
    Answer. As an initial matter, to be clear, although the ore body 
for the Lucky Jack Project is now on patented private land, the 
remainder of the proposed project would be located largely on 
unpatented mining or millsite claims on lands owned by the federal 
government and managed by the U.S. Forest Service. Attached hereto is 
the map** that we submitted along with our written testimony on January 
17, 2008, reflecting the project proponents' (U.S. Energy/Kobex) mining 
or millsite claims filings highlighted in red. Again, we obtained the 
red highlighted portion of the map from U.S. Energy/Kobex's website on 
that date. The federal courts have uniformly held that government 
regulation of mining on federal lands is not a ``taking.''
---------------------------------------------------------------------------
    ** Map has been retained in committee files.
---------------------------------------------------------------------------
    Regarding the scope of existing federal regulation of mining on 
public lands, the Forest Service's current position is that the agency 
cannot deny or significantly restrict mining and can only ``minimize 
adverse impacts'' to surface resources. In our situation, according to 
the Forest Service, the agency is powerless to consider the impacts to 
the Town, our economy and our quality of life as part of the agency's 
permitting decision.
    As detailed in our written testimony to the Committee, the central 
focus of Mining Law reform must include provisions allowing the federal 
land management agencies to balance the needs of mineral development 
with the needs of the local community, the environment and other uses 
of public lands. We believe that mining should not be afforded a 
preference of use on federal land and should be considered along with 
other equally-important uses of federal land such as watershed 
protection, wildlife preservation, hunting and fishing and the economic 
benefits of recreational use of those lands.
    Question 2. You contend that mining law reform should include an 
opportunity for towns to seek withdrawal of certain federal lands from 
mining.
    Three months ago, this Committee held a hearing on the Surface 
Mining Control and Reclamation Act of 1977. Section 601 of that law 
permits your Governor, who I assume you could approach about your 
concerns, to petition for the withdrawal of land from mining for many 
of the reasons you have shared with us today.
    The Federal Land Policy and Management Act of 1976 also contains 
withdrawal authority, as does the Antiquities Act of 1906. And any 
member of Congress can introduce withdrawal legislation at any time.
    Why are these existing authorities insufficient?
    Answer. Although the ability of the federal government to withdraw 
lands from mineral entry has existed for decades under these 
authorities, it is entirely at the discretion of the Secretary of the 
Interior. These authorities offer no direct pathway to achieve a 
withdrawal to protect water supplies or other resources. As such, there 
is no recourse available to a community if a withdrawal petition is 
denied. The current HR 2262 provides, in contrast, that such a 
withdrawal petition would be approved unless the withdrawal would be 
against the national interest. We believe that this is the proper 
approach.
    Regarding SMCRA Section 601, that provision largely deals with 
split-estate lands and only applies to federal land whose surface use 
is ``of a predominantly urban or suburban character, used primarily for 
residential or related purposes.'' That is not the case on the vast 
majority of western public lands and is not the case for the Forest 
Service lands proposed for the Lucky Jack Project. Accordingly, we 
cannot approach our Governor about a petition for withdrawal pursuant 
to SMCRA as Section 601 does not apply.
     Responses of Alan Bernholtz to Questions From Senator Cantwell
    Question 1. In 12 western states, mining claims have increased more 
than 80 percent since January 2003. Over an eight-month period from 
September 2006 to May 2007, the Bureau of Land Management recorded 
50,000 new mining claims. Many of these new claims are near many of our 
national parks and monuments. In Washington state, there are 204 mining 
claims within five miles of the Mount St. Helens National Monument, 104 
of which were staked just since January 2003 and cover over 1,700 acres 
of public land. This dramatic surge in claims is especially problematic 
because once a claim is staked, the federal government interprets 
mining law as providing virtually no way to stop hard rock mining at 
that site, short of buying out mining claims or other congressional 
intervention, even when mining is in plain view of national parks and 
Monuments such as Mount St. Helens.
    What is the effect of developing mining operations in sensitive 
areas near national parks, monuments, wilderness areas, and in 
watersheds for municipal water supplies?
    Answer. Industrial mineral development in these sensitive areas is 
incompatible with the natural resources of these areas. Although new 
mining claims and new mining operations are not allowed within the 
borders of National Parks, Wilderness Areas and National Monuments, 
current federal law allows such operations to be conducted immediately 
adjacent to these areas. The federal land manager may not consider the 
values of these areas when reviewing the proposed mine and cannot use 
harm to these areas as grounds to deny proposed operations (except in 
limited situations of cross-border pollution under environmental laws).
    For municipal water supplies, there are even less constraints on 
mining. Unless one can show that a mining operation will violate water 
quality standards of the Clean Water Act prior to mine construction 
(which is very difficult to establish prior to mine operation), the 
Forest Service's position is that they cannot deny or restrict mining 
in watersheds and can only ``minimize adverse impacts.''
    Question 2. How much latitude do land managers have to address 
these claims?
    Answer. As noted above, the Forest Service which controls the land 
surrounding Crested Butte believes that they cannot reject mining 
operations to protect these areas, absent proof that the proposed 
operation will violate existing environmental laws such as the 
Endangered Species Act. Contrary to the beliefs of some members of the 
Committee and the views espoused by the mining lobby, the National 
Environmental Protection Act does not allow the Forest Service to 
reject a plan of operations for a mine where the environment or a 
watershed will be damaged. It only allows the Forest Service to make an 
informed approval of the plan of operations.
    Question 3. Do you believe that state, local and tribal governments 
should be able to petition to protect certain areas of local importance 
from mining?
    Answer. Yes. We believe HR 2262 takes the proper, common sense 
approach. That legislation allows state, local and tribal governments 
to petition the Secretary of the Interior for a withdrawal. Such a 
withdrawal petition would be approved in certain circumstances unless 
the withdrawal would be against the national interest.
    Question 4. How has not having this capacity affected our ability 
to protect our national treasures and local communities?
    Answer. Under current law, local communities are in large part 
powerless to protect their watersheds, economies and quality of life in 
the face of proposed industrial mineral development. The threat of such 
industrial development may have negative impacts on critical waters, 
recreation-based economies and the sales and use taxes derived 
therefrom, as well as severe impacts to the overall quality of life in 
rural and recreation-based communities.
                                 ______
                                 
    [Responses to the following questions were not received at 
the time the hearing went to press:]

       Questions for Deborah Gibbs Tschudy From Senator Bingaman
    Question 1. In his testimony, Professor Otto described ``transfer 
pricing'' as a growing concern in the area of hardrock royalties. The 
central concept is that a mine operator may sell its product to an 
affiliated company, for less than it would sell the same product to an 
unaffiliated company. The practical effect is to retain profits under 
the same corporate umbrella, but minimize royalty payment liability for 
the mine operator. As a technical matter, what are some of the 
safeguards that could be instituted to avoid this result?
    Question 2. Your testimony discusses MMS' collection of hardrock 
mining royalties on certain Federal acquired lands (in contrast to 
original public domain lands). In the specific example you cite of a 
mine in Missouri, a royalty of five percent of gross value is applied. 
From about how many of these acquired land/hardrock operations (or 
leases) does MMS collect a royalty? How customized are the lease terms, 
as it relates to royalties?
    Question 3. Your testimony mentions the need for adequate audit and 
compliance resources upon institution of a royalty for hardrock 
minerals. Please describe the kinds of activities that would need to 
occur, to ensure a successful start to the program.
    Question 4. Your testimony mentions the need for an interface with 
BLM's systems (a topic that has also surfaced within the context of 
challenges facing the MMS oil and gas royalties program). Could you 
describe the kinds of information that would need to pass back and 
forth between MMS and BLM, which could help ensure the timely and 
accurate collection of hardrock royalties?
       Questions for Deborah Gibbs Tschudy From Senator Domenici
    Question 1. It is my understanding that the 8 percent gross royalty 
contained in H.R. 2262 would generate between $70 and $80 million per 
year. How much would a 5 percent net proceeds royalty, similar to what 
exists in Nevada likely generate on an annual basis?
    Question 2. Considering the large number of participants in the 
development of a mine (including the operator, owner, co-owners, 
royalty owners and others), who should be liable for payment of a 
federal royalty?
    Question 3. To what extent does the imposition of a royalty on 
operational mines constitute an assertion of a property interest?
    Question 4. In your opinion, what considerations might a court make 
in deciding if a ``fee'' constitutes a tax versus a royalty?
    Question 5. In your testimony, you stated that unlike oil, natural 
gas, coal, or sedimentary minerals, hardrock mineral deposits must 
generally undergo physical processing and intensive chemical processing 
to produce salable products.
    Can you elaborate on that statement and its implications for the 
determining the type and amount of royalty that should be imposed on 
hard rock minerals?
    Question 6. We must account for how a royalty will impact the 
United States as a global competitor for hard rock mining investment 
dollars.
    Internationally, what is a typical `government take' from hard rock 
mining operations? How does that compare to existing taxes, fees and 
other costs of doing business here in the United States?
    Question 7. What impact does the size of a given `government take' 
have on reserves, mine life, and the amounts of saleable minerals that 
are ultimately produced from mines?
         Question for Deborah Gibbs Tschudy From Senator Wyden
    Question 1. Ms. Tschudy, you stated in your testimony that the 
Administration would prefer a royalty program that resembles the 
program established under the Energy Policy Act of 2005. This program 
authorizes the federal government to continue to receive physical 
quantities of oil and gas royalty-in-kind payments provided the 
Secretary of Interior determines that receiving royalties in-kind 
provides benefits to the United States greater than or equal to those 
that it would have received in-value. Furthermore, in this Act there 
are various provisions that grant the Department of Interior the 
authority to reduce royalty payments to maintain or stimulate oil and 
gas development offshore and for marginal wells (Title III Subtitle E).
    Given the serious problems identified by the Department of Interior 
Inspector General with the royalty-in-kind program for oil and gas, why 
should the same approach used by this troubled program be used for 
hardrock minerals? In particular, why should the BLM be given authority 
to reduce royalties on hardrock minerals given the problems that have 
arisen with the royalty relief provisions for oil and gas?
                                 ______
                                 
            Questions for Henri Bisson From Senator Bingaman
    Question 1. How many patent applications are pending that (1) were 
filed with the Secretary not later than September 30, 1994 and (2) had 
fully complied with all requirements applicable to the patent 
application by that date? How many such patent applications have been 
granted since September 30, 1994? How many applications filed on or 
before September 30, 1994 are still pending? What is the status of 
these applications? Please provide a list that includes location, 
identity of applicant and status of the application.
    Question 2. How much was collected in claim maintenance fees over 
each of the past 10 years? How much was collected in claim location 
fees over each of the past 10 years? Of these amounts, how much have 
been dedicated to program administration?
    Question 3a. How many claimants qualified for the small miner 
exemption from the fee requirements (i.e., hold less than 10 claims on 
public land) during each of the past 5 years?
    Question 3b. How many claimants hold less than 25 claims on public 
land?
    Question 4. How many mining claims are there on BLM lands? How many 
on National Forest System lands? Please provide by state.
    Question 5. How many mining claims have been located in each of the 
past 10 years? Please provide by state and type of mineral, if 
available.
    Question 6. What is the value of hardrock minerals produced on 
federal lands during each of the past 20 years? Please provide this 
data by state, if available.
    Question 7. How many acres of federal land have been patented since 
enactment of the Mining Law of 1872? How many acres have been patented 
in each of the past 30 years?
    Question 8. Does BLM currently require a bond for exploration 
activities? What authorization is required prior to exploration 
activities on federal lands?
    Question 9. Does BLM currently approve plans of operation for 
hardrock mining on Forest Service lands?
    Question 10. What is the average life of a hardrock mine?
    Question 11. Can the Secretary require modification of an approved 
plan of operations for a hardrock mine? What standards must be met in 
order for the Secretary to require such a modification? How often has 
the Secretary required such modifications in the past?
    Question 12. Would authority to use bonding pools be useful for 
purposes of posting reclamation bonds? Are bonding pools currently 
used?
    Question 13. Has the Administration taken a position on whether 
patenting should be eliminated?
    Question 14. Does the Administration have a position on whether a 
royalty should be imposed on the production of hardrock minerals from 
federal lands? If so, what structure (net vs. gross)? And what rate?
    Question 15. Your testimony also references the inclusion of 
administrative penalty authority in any update of the law. Why is this 
important?
    Question 16. Is there any reason that there should not be a 
statutory requirement for reclamation bonding, permitting for greater 
than casual use, and approval of plans of operation?
    Question 17a. Your testimony indicates that between 2000 and 2007, 
BLM inventoried 5500 abandoned sites. Does BLM have an inventory of the 
universe of abandoned hardrock sites on federal lands (including BLM 
and Forest Service)? If so, please provide a listing of the sites by 
state.
    Question 17b. How much money does BLM expend annually on abandoned 
hardrock mine sites?
    Question 17c. How much money would be needed to conduct a 
comprehensive inventory and undertake needed reclamation?
    Question 18. Does the Department have data on how many abandoned 
hardrock mines exist on Indian lands? If so, please provide by tribe. 
Does the Department have an estimate of the amount needed to reclaim 
these sites?
    Question 19. Does the Department have data on how many abandoned 
hardrock mines exist on state and private lands? If so, please provide 
by state. Does the Department have an estimate of the amount needed to 
reclaim these sites?
    Question 20. Under current law, does the Secretary have discretion 
to prohibit the development of a mine once a valid mining claim is 
located on federal lands and all environmental laws are complied with? 
If so, under what circumstances and what standards apply?
    Question 21. The NRC Committee in its 1999 Report on Hardrock 
Mining on Federal Lands indicated that it had been ``consistently 
frustrated by the lack of reliable information on mining on federal 
lands.'' The report goes on to state that ``without more and better 
information, it is difficult to manage federal lands properly and 
assure the public that its interests are protected.''
    What has the BLM done to address this problem?
    Question 22. How many plans of operation have been approved by BLM? 
How many plans are pending approval?
    Question 23. Is it the Department's legal position that a royalty 
can be imposed on existing mining claims? On mines with approved plans 
of operation? Please provide any legal opinion or analysis that you 
have undertaken that addresses this issue.
            Questions for Henri Bisson From Senator Domenici
    Question 1. The problem of abandoned mines and mine shafts, located 
on old mining claims, has been a long-standing public safety issue. 
Does the Department have a strategy for addressing this issue? How has 
this work been funded?
    Question 2. BLM currently collects fees for mining claims, part of 
which offsets the BLM's cost of administering the mining laws. Is it 
correct that BLM collects far more from these fees than BLM is given to 
administer the program? If Congress were to ask BLM to use excess 
mining revenues to address the public safety issue associated with 
abandoned mines, what progress could we expect to see?
    Question 3. Can the Secretary of the Interior modify a Plan of 
Operations after it has been approved?
    Question 4. What is a sufficient amount of money, on an annual 
basis, to reclaim abandoned mines? How long would it take with that 
amount of money to clean up our highest priority abandoned hard rock 
mine sites?
    Question 5a. Under what circumstances can an Interior Secretary say 
``no'' to mining? For example, what if an endangered species lives in 
an area where a Plan of Operations has been submitted, could the 
Department say ``no'' to that request for permission to mine?
    Question 5b. Has this ever happened?
    Question 6. In considering changes to the Mining Law of 1872, it is 
important to remember that what we are talking about is a land use 
statute. Can you elaborate upon the legal and practical distinctions 
between federal property laws and federal environmental laws?
    Question 7. How many patent applications are pending after having 
been grandfathered with the annual moratorium that has been enacted 
since 1995? What plan does the Department have in place to resolve the 
fate of these applications?
    Question 8. Among existing land designations available, 
administratively to the Department or legislatively to the Congress, 
which ones are (by definition) inclusive of a withdrawal from location 
and entry under the Mining Law of 1872? Are there other designations 
that tend to result in such a withdrawal, without their definition 
explicitly requiring it?
    Question 9. What might be the exploration and development 
implications of having claim maintenance fees vary dependent upon 
whether or not there is an approved and operational Plan of Operations?
    For instance, the amount could be set lower for active and higher 
for inactive claims, or vice-versa.
    Question 10. Pursuant to Section 601 of the Surface Mining Control 
and Reclamation Act, on how many occasions has the Department been 
contacted by the Governor of a State about the propriety of mining 
operations near areas of urban character?
    Question 11. Through the years, some environmental problems have 
resulted from mining. How do we reconcile these problems with the 1999 
report from the National Academies of Science, which concluded that 
existing environmental protections are ``complicated but generally 
effective''?
    Question 12. Mill-site claims have proven to be a contentious issue 
in the past. Does the concept of a requirement for payment of a fair 
market rental on lands required for ancillary use activities make 
sense?
    Question 13. How often does the Interior Department inspect federal 
lands where mining activities are taking place? What is the nature of 
these inspections?
    Question 14. Please list all fees and financial transactions 
(including the amount or how the amount is calculated) that are 
currently paid by those engaging in mineral activities on federal land, 
from prospecting through reclamation and release of a financial 
assurance.
    Question 15. Does the Interior Department believe that the existing 
legal and regulatory framework for mining is sufficient to protect 
units of the National Conservation System from unnecessary or undue 
degradation of the values for which such units were established in the 
first place?
    Question 16. In implementing the recommendations of the 1999 
National Academies of Science report, the Interior Department did not 
increase civil penalties. Is there a justification, however, for doing 
so? Would that authority strengthen the Department's ability to ensure 
that unnecessary or undue degradation of federal lands does not result 
from mineral activities thereon?
    Question 17a. Is there any expectation that bonds, or other 
financial assurances, posted in the last decade will be insufficient 
for complete reclamation as a result of unforeseen impacts having 
resulted from mineral activities?
    Question 17b. If so, does the Department have existing 
administrative authority to adjust the level of required bonding or 
other financial assurance (up or down), subsequent to a Plan of 
Operations approval, if the original amount is found insufficient or in 
excess of what will ultimately be needed?
    Question 18. How often does the Department review the sufficiency 
of bonds and other financial assurances to fully reclaim mined lands?
    Question 19. How would you respond to Mayor Bernholtz's assertion 
at the hearing that existing financial assurance requirements need to 
be strengthened?
    Question 20a. H.R. 2262, which has been referred to this Committee, 
asserts in its Section 104 that payment of fees and compliance with 
applicable laws provides authority to use and occupy federal land for 
the purpose of prospecting and exploration.
    Understanding that any decision to place a permanent ban patenting 
creates a host of problems for investors' security of tenure, is it 
reasonable or practicable that this approach would be applied to mining 
activities as well?
    Question 20b. Are there any examples of timely fee payment and 
compliance with applicable law vesting an entity with certain property 
rights that could serve as a model for how we fill the vacuum left by 
the absence of patenting?
    Question 21a. Combined, how many acres of land are managed by the 
BLM and Forest Service?
    Question 21b. Of that acreage, how may have been designated as 
Wilderness Study Areas, designated as Areas of Critical Environmental 
Concern, included in the Wild & Scenic Rivers System, designated for 
potential addition to that System, or identified as inventoried 
Roadless in the November 2000 Forest Service Final EIS maps?
    Question 21c. What percentage of the total acreage managed by the 
two agencies do those categories represent?
    Question 22. How does the process for designating Wilderness Study 
Areas, Areas of Critical Environmental Concern, Wild & Scenic Rivers, 
and Roadless areas differ from the FLPMA process of withdrawal from 
location and entry under the Mining Law of 1872?
    Question 23. For everything from fishing boats to oil rigs, there 
are examples of the federal government requiring by law that no-one 
engage in certain activities on federal land without a permit. The 
process by which hard rock minerals are located on and extracted from 
federal lands is different, however.
    Can you elaborate on why this might be warranted?
            Questions for Henri Bisson From Senator Cantwell
    Question 1a. Recently, the Bureau of Land Management released a 
draft Environmental Assessment for issuing a hardrock minerals lease 
near Mount St. Helens in the headwaters of the Green River. The Green 
River is a municipal water supply and home to listed species of salmon 
and steelhead. Mine development activity could significantly harm and 
potentially eliminate these fish populations. Also, acid rock drainage 
from the mine's leaching process could contaminate the municipal water 
supply for nearby communities including Kelso, Castle Rock, and 
Longview. The land in question was purchased by the government under 
the authority of the Weeks Act using Land and Water Conservation Funds, 
which are appropriated by Congress for conservation and recreation 
purposes to ``promote or protect the navigation of streams on whose 
watersheds they lie.''
    Can you explain how leasing this land to a mining company is in the 
public interest or compatible with ``promoting or protecting the 
navigation of streams on whose watersheds they lie?''
    Question 1b. Can you explain how leasing this land to a mining 
company is compatible with the preservation of the integrity of the 
Green River, or whether it aids in the preservation of the scenic 
beauty of such an area?
    Question 1c. Residents of Kelso, Castle Rock, and Longview in my 
state of Washington have expressed concern about the proposed mine near 
Mount St. Helens. Do you believe they should have a right to petition 
for the withdrawal of these lands from mining?
    Question 2a. The 1872 Mining Law has long been interpreted as 
mandating hardrock mining as the ``highest and best'' use of public 
lands. Federal land managers have argued that the 1872 Mining Law 
forces them to approve any mining project proposed on public lands 
regardless of competing resources values. Yet, you stated in your 
testimony that current environmental laws
    Can you please provide a detailed list of examples of when the 
Bureau of Land Management denied a proposed mining operation based on 
the predicted inability of the proposed mine's ability to comply with 
the ``undue and unnecessary degradation'' standard set forth in the 
Federal Land Policy and Management Act?
    Question 2b. Can you please provide a detailed list of examples of 
when the Bureau of Land Management denied a proposed mining operation 
based on the predicted inability of the proposed mine's ability to 
comply with other environmental laws?
    Question 3a. In your testimony, you indicated that the 
Administration believes that the existing statutes and related 
regulations pertaining to hardrock mining provide sufficient authority 
to prevent adverse consequences on natural resources and the 
environment as a result of mining. Some argue that pollution from mines 
results almost entirely from historic operations and that ``modern'' 
mines are governed by numerous statutes and regulations and are 
environmentally responsible, problem-free operations. It is true that 
historic mining polluted and continues to pollute rivers, streams and 
aquifers and that, until 1976, there were no federal regulations 
written specifically to govern hardrock mining operations on publicly 
owned land. But, it is also clear that the patchwork of laws that have 
governed hardrock mining operations since 1976 are not enough to ensure 
that western watersheds and communities are protected. Mines that began 
operations in the past three decades have spilled cyanide, killed 
aquatic life, caused pollution that will require treatment in 
perpetuity, and burdened the taxpayers with enormous liabilities. For 
example, soon after mining began at the Grouse Creek Mine in Idaho in 
1994, the tailings impoundment began to leak cyanide. As a result of 
ongoing violations, the Forest Service posted signs which warned: 
``Caution, do not drink this water.'' In 2003, the Forest Service 
declared the mine site an ``imminent and substantial endangerment.'' 
There are other examples of modern mines that are far from ``problem-
free,'' including the Beal Mountain and Kendall mines in Montana, the 
Formosa mine in Oregon, and the Jerritt Canyon mine in Nevada.
    Can you explain how existing statutes and related regulations 
pertaining to hardrock mining provide sufficient authority to prevent 
adverse consequences on natural resources and the environment in light 
of these examples of pollution and contamination?
    Question 3b. Do you believe additional legal tools could address 
these situations?
              Question for Henri Bisson From Senator Wyden
    Question 1a. Mr. Bisson, you stated that existing regulations which 
are currently in place are already adequate to manage hard rock mining 
activities and any subsequent environmental damage. However, there are 
still cases where existing hardrock mining activities and/or abandoned 
mines continue to negatively impact human health and the environment. 
For instance, in my own State of Oregon, Formosa Mine in Douglas County 
is a copper and zinc mine that operated in the early 1900's, then 
reopened in 1989 and operated until 1993. The primary impact is acid 
mine drainage and metal contamination that has eliminated about 18-
stream miles of prime habitat for the threatened Oregon Coast coho 
salmon and steelhead. The Oregon Department of Environmental Quality's 
(DEQ) 2004 evaluation of cleanup options for the site indicated that 
cleanup could cost more than $10 million dollars. DEQ has spent over 
$1.2 million since 2000 to investigate and undertake interim cleanup 
actions to minimize the environmental damage caused by the mine. DEQ 
has been unable to undertake further cleanup and is instead, working 
closely with the U.S. Environmental Protection Agency, the U.S. Bureau 
of Land Management, and the U.S. Department of Interior to find 
alternative funding to complete the cleanup. It seems to me that BLM 
and other responsible regulatory agencies are failing to enforce the 
existing mining and environmental regulations that you referenced in 
your testimony.
    Mr. Bisson, can you explain which environmental statutes apply to 
mining and how they are applied? Can you also explain to me how the BLM 
and other responsible agencies will proactively ensure the enforcement 
of existing regulations to prevent negative human health and 
environmental impacts instead of reacting to the actual impacts to 
human health and the environment after they have occurred?
    Question 1b. Furthermore, during your testimony, discussions 
occurred regarding the Bureau of Land Management's ability to limit or 
deny hardrock mining operations to prevent the unnecessary or undue 
degradation of public land resources that would result in substantial 
irreparable harm to these resources. You mentioned that BLM had within 
the past few years denied a number of hardrock mining operations and 
that BLM you would supply to the Committee the names and locations of 
the mines that were denied operation. Can the Bureau of Land Management 
also please provide the reasons why (e.g., undue degradation to public 
lands, environmental regulations) these hardrock mining applications 
were denied. Additionally, can the Bureau of Land Management also 
provide the number of hardrock mining operations approved in the same 
year as those operations that were denied?
                                 ______
                                 
          Questions for William E. Cobb From Senator Domenici
    Question 1. For everything from fishing boats to oil rigs, there 
are examples of the federal government requiring by law that no-one 
engage in certain activities on federal land without a permit. The 
process by which hard rock minerals are located on and extracted from 
federal lands is different, however.
    Can you elaborate on why this might be warranted?
    Question 2. Does Freeport-McMoran wait until closure of a mine to 
start reclamation? How are inactive mining sites treated?
    Question 3. Can you elaborate further on the importance of secure 
tenure and regulatory certainty to the maintenance and growth of a 
domestic mining industry?
    Question 4. What role could a ``Good Samaritan'' provision play in 
the clean-up of AML sites?
    Question 5. Is there a risk that eligibility requirements for a 
``Good Samaritan'' could be too stringent to allow those with actual 
mining and reclamation expertise to qualify?
    Question 6. Some mining critics have produced studies, including 
one by Earthworks, claiming that hardrock mines harm water quality. Do 
you have any comments on the Earthworks report?
    Question 7. In considering changes to the Mining Law of 1872, I 
believe that it is important to remember that what we are talking about 
is a land use statute. Can you elaborate upon the legal and practical 
distinctions between federal property laws and federal environmental 
laws?
    Question 8. What might be the exploration and development 
implications of having claim maintenance fees vary dependent upon 
whether or not there is an approved and operational Plan of Operations?
    For instance, the amount could be set lower for active and higher 
for inactive claims, or vice-versa.
    Question 9. Through the years, some environmental problems have 
resulted from mining. How do we reconcile these problems with the 1999 
report from the National Academies of Science, which concluded that 
existing environmental protections are ``complicated but generally 
effective''?
    Question 10. Mill-site claims have proven to be a contentious issue 
in the past. Does the concept of a requirement for payment of a fair 
market rental on lands required for ancillary use activities make 
sense?
    Question 11a. H.R. 2262, which has been referred to this Committee, 
asserts in its Section 104 that payment of fees and compliance with 
applicable laws provides authority to use and occupy federal land for 
the purpose of prospecting and exploration.
    Understanding that any decision to place a permanent ban patenting 
creates a host of problems for investors' security of tenure, is it 
reasonable or practicable that this approach would be applied to mining 
activities as well?
    Question 11b. Are there any examples of timely fee payment and 
compliance with applicable law vesting an entity with certain property 
rights that could serve as a model for how we fill the vacuum left by 
the absence of patenting?
          Questions for William E. Cobb From Senator Cantwell
    Question 1a. Mr. Cobb, residents of Kelso, Castle Rock, and 
Longview in my state of Washington have expressed concern about mining 
operations near where they live, and I understand that residents of 
Boise, Idaho and Crested Butte, Colorado have expressed similar 
concerns. In your testimony, you expressed opposition to extending to 
local and tribal governments the right to petition for the withdrawal 
of certain lands important for clean drinking water, recreation, and 
endangered species habitat. You argued that the National Environmental 
Policy Act's public process is sufficient to enable local and tribal 
governments to work with the federal government to deny a mine. Yet, in 
a recent Environmental Impact Statement scoping document for a proposed 
gold mine, the U.S. Forest Service emphasized that it ``does not have 
the authority to select the no action alternative'' under the 1872 
Mining Law.\1\
---------------------------------------------------------------------------
    \1\ USDA Forest Service, Boise National Forest, ``Atlanta Gold 
Project Environmental Impact Statement Scoping Document,'' February 
2004, http://atlantagoldeis.com/Documents/AtlantaGoldScoping.pdf.
---------------------------------------------------------------------------
    When local communities are struggling to meet their funding needs, 
why would you oppose streamlined legal tools to address these 
situations?
    Question 1b. Are you saying that local communities should 
essentially be at the mercy of global demand for minerals because under 
the current law, because land managers don't feel they have much 
authority to prevent mines from going forward?
    Question 1c. Shouldn't local citizens have a say in the actual 
decision to open mining operations in their community not just the 
chance to submit input through the public environmental scoping 
process?
    Question 2a. Mr. Cobb, in your testimony you expressed opposition 
to protecting special places, including Roadless areas, from mining 
claims. But when the federal government enacted the Roadless Rule in 
2001 to protect our last Roadless areas inside National Forests, the 
Forest Service found that ``maintaining these areas in a relatively 
undisturbed condition saves downstream communities millions of dollars 
in water filtration costs. Careful management of these watersheds is 
crucial in maintaining the flow and affordability of clean water to a 
growing population.'' Metal mining, on the other hand, is the leading 
source of toxic pollution in the United States according to the 
Environmental Protection Agency's Toxics Release Inventory. And, the 
western United States is growing more and more littered with mining 
Superfund sites including a new site designated in Oregon in fall 2007.
    Do you agree that maintaining Roadless areas is a more cost 
effective way to ensure local communities have clean drinking water 
than spending millions to clean up new Superfund sites?
    Question 2b. If no, why not?
    Question 3. Water treatment can be a significant economic burden 
for federal, state, and local government if a mining company files for 
bankruptcy or refuses to cover water treatment costs. For example, acid 
runoff from the Summitville Mine in Colorado killed all biological life 
in a 17-mile stretch of the Alamosa River. The site was designated a 
federal Superfund site, and the EPA is spending $30,000 a day to 
capture and treat acid runoff. In South Dakota, Dakota Mining Co. 
abandoned the Brohm mine in 1998, leaving South Dakota with $40 million 
in reclamation costs - largely due to acid mine drainage. And, at the 
Zortman Landusky Mine in Montana, the State of Montana was left with 
millions in water treatment costs when Pegasus Gold Corp. filed for 
bankruptcy in 1998.
    When perpetual pollution is predicted, as is the case of in the 
Phoenix Project in Nevada, shouldn't an additional burden be put on the 
company to provide an independently-guaranteed reclamation bond to 
cover the full cost of maintaining treatment in perpetuity?
                              Appendix II

              Additional Material Submitted for the Record

                              ----------                              

    Dear Senators Bingaman and Domenici: We the undersigned 
organizations represent millions of hunters and anglers, fish and 
wildlife professionals and businesses, and others who recreate on and 
enjoy our public lands. For many years, Congress has considered reform 
of the General Mining Law of 1872.
    On November 1, 2007, the House of Representatives passed HR 2262, 
the Hardrock Mining Reform and Restoration Act, by a strong bipartisan 
vote of 244 to 166. Now is the time for the Senate to take up a 
hardrock mining bill that will provide sensible reform and protect fish 
and wildlife resources on America's public lands.
    We urge you to take action on modernizing the 135-year-old mining 
law this Congress, and we offer our assistance and support.
    Public lands managed by the Bureau of Land Management (BLM) and the 
Forest Service harbor some of the most important fish and wildlife 
habitat and provide some of the finest hunting and angling 
opportunities in the country. For example, public lands contain well 
more than 50 percent of the nation's blue-ribbon trout streams and are 
strongholds for imperiled trout and salmon in the western United 
States. More than 80 percent of the most critical habitat for elk is 
found on lands managed by the Forest Service and the BLM, alone. 
Pronghorn antelope, sage grouse, mule deer, salmon and steelhead, and 
countless other fish and wildlife species are similarly dependent on 
public lands.
    Mining is a legitimate use of public lands, but there are few laws 
more in need of an overhaul than the 1872 Mining Law. The 1872 Mining 
Law, signed into existence 135 years ago by President Ulysses Grant, is 
the most outdated natural resource law in the nation. Under the 1872 
law, mining takes precedence over all other public land uses, including 
hunting and fishing. The Secretary of the Interior must sell public 
land to mining companies, often foreign-owned, for as little as $2.50 
per acre. Furthermore, mining companies pay no royalties for hard rock 
minerals, gold, copper and zinc that belong to all citizens. It is 
estimated that since the 1872 Mining Law was enacted, the U.S. 
government has given away more than $245 billion of minerals through 
royalty-free mining and patenting.
    As you consider legislative reform of the 1872 Mining Law, 
America's sportsmen urge you to consider the following recommendations:

   Recover a fair royalty from all minerals, present and 
        future, taken from public lands and establish a fund for fish 
        and wildlife habitat improvement projects associated with past 
        mining.
   End mining's priority status on public lands.
   Ensure that resource professionals have full discretion in 
        the planning and permitting processes to protect public lands 
        where high fish, water and wildlife values exist.
   Allow ``Good Samaritans'' reclamation incentives and common-
        sense liability relief.
   Prohibit the patenting or sale of public lands under this 
        law; keep public land in public hands.
   Provide for harmonious integration of state and federal 
        wildlife habitat and population objectives in permit operating 
        plans.

    Thank you for considering our recommendations, and we look forward 
to working with you to ensure that mining on public lands is modernized 
to the benefit of fish, wildlife and water resources.
            Sincerely,
                    Archery Trade Association; American Sportfishing 
                            Association; B.A.S.S.; Backcountry Hunters 
                            and Anglers; Bowhunting Preservation 
                            Alliance; Berkley Conservation Institute; 
                            Conservation Force; Catch-A-Dream 
                            Foundation; Federation of Fly Fishers; 
                            Dallas Safari Club; Izaak Walton League of 
                            America; International Hunter Education 
                            Association; National Wildlife Federation; 
                            North American Bear Foundation; North 
                            American Grouse Partnership; Pope and Young 
                            Club; Orion--The Hunters Institute; Quality 
                            Deer Management Association; Trout 
                            Unlimited; Pure Fishing; Theodore Roosevelt 
                            Conservation Partnership; Wildlife 
                            Management Institute.
                                 ______
                                 
    Dear Gina,

    I request that the 1872 mining law and act not be changed in any 
way from it's original intent. Please let me know you reviewed this e-
mail.
            Thank You,
                                            James Scheller.
                                 ______
                                 
                      ECO Star Energy SystemsTM,
                                       Athol, ID, January 24, 2008.
    Honorable Committee Chairman, Distinguished Committee Members: My 
message truly needs to be heard (get out) and if, it remains buried in 
a dusty archive for one day, a historian to find, and behold, ``this is 
the way it could have been'' not what the sordid historical result 
actually was: First, there is nothing wrong with our so-called 
``outdated'' 1872 Mining Law. What is wrong is that our law-makers see 
a new source of revenue and control, and can't stand to leave well 
enough alone till eventually affecting the demise of our great 
nation.--I would personally consider it an offense, even an act of 
treason to change the Mining Law of 1872, or tamper with it. We don't 
use its power now, our ignorance. The USA is good at: (A) Stimulating 
investment--trade (B) then killing the goose that laid the golden eggs.

          1. We need to know just when ``enough is enough'' in 
        protecting our environment and the eco-system, and to look at 
        the substance beyond the veil when making policy decisions, or 
        ``judicial incursion.''
          2. We need to recognize that mining concerns are using 
        reclamation as a ``toe in the door'' to create mischief and we 
        are not fully assured as to whether or not the reclamation 
        issues can be dealt with.
          3. We need to know that there is a new breed of mining 
        companies that ``mine the people'' instead of mining the 
        resource.--Do people really care whether or not any ore is 
        truly processed in the end?
          4. We need to know that U.S. Department of the Interior (DOI) 
        Bureau of Land Management (BLM) is not doing its job according 
        to charter, but ``just collects your money'' when dealing with 
        filing fees for mining claims.--And the BLM has created a 
        ``lawyer's dream'' as result of faulted due diligence.
          5. We need to know that U.S. Fish and Wildlife Service 
        (USFWS) is an advisory agency to the Forest Service (via 
        consultation doc.) and do not enforce protection of so-called 
        ``endangered species.''
          6. We need to know that the U.S. Department of Agriculture 
        (USDA) Forest Service (FS) like the BLM does not get involved 
        in property disputes (mining claims) allegedly, but when 
        issuing permits, or not issuing permits, it becomes apparent 
        that a de facto decision of ownership has been rendered.
          7. We need to know that Mining Companies issuing stock put a 
        percentage towards actual mining, and much goes toward 
        ``covering your flanks (both of them)''--known as ``CYA'' in 
        government circles--and raising more money . . .  the Security 
        and Exchange Commission (SEC) ``pulp mill'' respectfully is a 
        great deal of the incumbent cost, and however necessary, it is 
        impossible to deter the ``determined.''
          8. We need to know that federal government agencies, and 
        state environmental protection agencies, do not work seamlessly 
        as would be desired on the mining laws.--Memorandums of 
        Understanding (MOU)s between the agencies such as the USDA FS 
        and the State Department of Lands, or now, the respective state 
        Department of Environmental Quality (DEQ) and mining project 
        MOU's try, but fail.
          9. We need to know that the individual State has its unique 
        resources, history, peoples, cultures, and economic drivers, 
        and a state's mining laws are tailored for that reason, 
        including the State's other laws--Constitution, and though 
        agreeable with federal mining law, its law is unique to that 
        State!

    My father, my namesake, opened the full Senate with prayer on April 
16, 1953. Of a different and more innocent era (when everyone was 
present--accounted for), he asked: Divine Guidance for leaders of our 
nation, and that we do the right thing personally and for our 
constituency. The U.S. Constitution, in my opinion, was more revered 
then, and laws were believed not tampered with or ``legislated from the 
bench.''
    The 1872 Mining Law, Title 30 USC, ``Mineral Lands and Mining'' not 
unlike the U.S. Constitution was sacred and not ``tampered with'' for 
the most part as the general populace then believed. Today, nothing is 
sacred. Everything under the sun, except the questionable federal tax 
system, is subject to sunset, abolishment, or revision and 
modification. The drivers for this are ``special interest'' motivated, 
and generally do not uphold or strengthen our system of laws and 
government. We are not a ``nation of law'' but a nation of lawyers . . 
. .
    It is heartening to see case law (of the Mining Act) setting 
precedence dating back early the last Century. Changing the 1872 Mining 
Law, under color of law, as a reform is nothing more than ``clearing 
the slate'' of affirmative law and rewriting ``Mineral Law and Mining'' 
subjectively, a ``knee jerk'' attempt at undermining the mining act to 
satisfy international pressures, activists' shrill, questionable 
science, political expedience.
    All we need is another legislative reform screw-up. Any changes 
needs to be suspect. Take the Tax Reform Act of the 1980's. What a 
joke, and what a mockery on the American public. To quote ``As Good As 
It Gets'' All Congress needs to do is ``get its hot sweaty hands'' on 
the 1872 Mining Law and its virtue is lost forever. Now Congress wants 
to assess royalties in their lust for money, for control. They will 
need to create a new bureaucracy to collect the ``windfall'' for a 
time, and then it becomes another albatross on the U.S. taxpayer.
    Inherent with our democratic form of government is that overriding 
mass ignorance and self-serving political expediency prevails instead 
of true, self-sacrificing, visionary leadership.--What Congress needs 
to do is get smart and be brave and quit being myopic--effectively 
stupid, thus being political giants instead of cowards:

          A. Enact a tariff or head fee on any ``off shore'' entity 
        directly-indirectly mining American resources.
          B. Due to the volatile nature of mining stocks, movements of 
        ownership's values need to be limited.
          C. Have new classes taught at all levels of school as 
        mandatory (like American History, should be):

                  (1) Geology, in a real sense, focusing on the 
                evidence and not someone's social agenda!
                  (2) Why is it that ``Minerals are the Foundation of 
                Civilization?''--focus on this always:
                  (3) What happens to society (our civilization, the 
                USA) when we can not harvest minerals?
                  (4) What happens when adversaries can harvest 
                strategic base metals expediently, cheaply?
                  (5) What happens to our natural resources when our 
                adversaries have their boot on our neck due to our 
                leaderships' continued foolishness and myopia and 
                avarice . . .  what will happen?
                  (6) Have Capital Hill classes taught on ``Mines And 
                Madness'' Copyright 2007 by Jim Ebish:

    Back Page: ``Learn how wealth is created by mining entrepreneurs 
and how to profit from the coming economic boondoggle brought on by the 
ignorance of politics where history, science, and logic are trumped by 
big hair, junk science and fabricated war stories. The folly of our 
generation is the irrational protection of the environment through the 
ill-conceived National Environmental Policy Act (NEPA) and other 
similar laws. Enacted in 1970 as a result of the 1969 Santa Barbara oil 
spill, NEPA halted virtually all progress in America. Many businesses 
now have denationalized their operations, sending a high standard of 
living to foreign shores. The loss of domestic mining and manufacturing 
will negatively impact all Americans, although the idle rich will feel 
less pain than the rest of us normal folks. Environmental shills and 
hucksters, using airhead celebrities to promote their cause, have been 
empowered by NEPA to deter any development which is not part of their 
trendy lifestyle . . . .''
    What Congress needs to do is get smart  . . .  brave  . . .  quit 
being stupid  . . .  political giants . . . cowards (continued):

          Ultimately, there will be a heavy price to pay. Get ready for 
        higher taxes, more swaggering government goons wielding lively 
        truncheons, increased regulation, and a lower standard of 
        living. If you think that the zombies and fatties of the 
        Transportation Security Administration who hassle hapless 
        codgers at the airport are ridiculous, you ain't seen nothing 
        yet. Get ready for a turd-world existence. At the dawn of the 
        21st Century, the sun may set on America unless significant 
        changes are made to NEPA and similar government gobbledygook. 
        Wise up!
                  --The Author (6), Jim Ebish MSc. 
                ([email protected]) is a Registered Professional 
                Geologist (RPG) Stratabound Metals Expert consultant in 
                the Pacific Northwest based in Spokane, WA.--Order his 
                book for more specifics.

                  (7) Knowledge is power! This effort to reform the 
                1872 Mining Law is flawed, but to reform the 
                associated, probably outdated, environmental process 
                (NEPA) and educate practical care of our environment by 
                emerging populace will prove many-times rewarded in the 
                near term.

          D. We need to have a resurgence of mining mill operations and 
        smelter operations and assay offices. Just like in the ``old 
        days'' when one could make a strike, ``prove it'' then process 
        the ore for value.
          E. Today, what good is it to get the ore out of the ground, 
        prove its worth, and not be allowed to mill and crush the 
        (hard-rock) ore, then ``float the ore'' to clarify the 
        metallurgical components, yielding a ``high-grade'' 
        concentrate, and then smelter the ore to produce the final 
        enriched, purified metal.
          F. That ``off shore'' facilities in processing the ore, 
        whether raw ore or concentrated ore, the bottom line is that 
        foreign countries have the U.S. at a distinct advantage: If you 
        as a Senator a/k/a U.S. Congressman do care enough to not screw 
        with the 1872 Mining Law, but rather make sure:

                  (1) That needed new refineries for oil and gas 
                (liquids and gases) are immediately underway.
                  (2) Those new smelters for hard-rock refinements 
                (solids) are constructed in critical locations.
                  (3) That personnel is trained appropriately to man 
                the smelters and refineries, and
                  (4) That state assay offices exist not unlike a 
                library for training and lab work in proving up metal 
                ore as it is being exposed, working in conjunction with 
                professional assay firms . . . 
                  (5) Rather than tamper with the 1872 Mining Law, we 
                need to have better and more power generation 
                facilities, nuclear, wind, solar, hydro and geothermal, 
                celesta-magnetic, etc.

          G. In the next few years or decades, the author will no 
        longer walk this earth, and thank God for that. If what is 
        reasonably presented has not been expediently dealt with, the 
        United States of America will become (as it already is) a sub-
        standard, second-rate country. In the past, the USA has gone 
        down to its roots and demonstrated new worth and a new future 
        and a new destiny, but no more.

    Even since its founding, the United States has had incumbent in its 
government the seeds of its eventual demise. These seeds were found in 
secret societies, like cancer throughout all civilization, composed of 
people who actually believed they were smarter and were privileged 
characters. The truth is they were advantaged. This has not changed. 
The so-called ``New World Order'' is a ruse to bind up the sovereignty 
of the U.S. citizen into subservience. Those in power do not seem to 
care and rightfully so, for they are the privileged characters, and 
want to keep it that way and the nation's future be damned.
    I am testifying before this committee not because I expect my 
recommendations and comments to bear any fruit, but to bear witness 
that what was stated would happen actually did happen, and the 
leadership of our nation had the golden opportunity do the right thing 
and did their usual, the exact opposite of reason, logic. I will rest 
easy knowing that my integrity is intact and not unlike the hatred of 
history at purity of thought, expect ``all they can do is dig up my 
bones, if they can find them, and burn them at the stake.''

    1. Should this legislation provide for new environmental standards 
for hard-rock mineral activities? If so, what should those standards be 
and what transition rules would be appropriate for their 
implementation?
    We do not need any more environmental standards for hard-rock 
mineral activities. The miner is inundated with federal, state and 
local statutes, rules and regulations even before required 
authorizations which place strict environmental criteria on mining 
activities. Federal: The Clean Water Act regulates storm-water and 
discharges from mines and attendant facilities. The Clean Air Act and 
Superfund and Resource Conservation and Recovery Act regulate mining 
and protect the environment. States: each has companion statutes and 
regulations that correspond with federal requirements. Permits are 
needed from the property claim holder (especially if a lease), for 
ingress/egress, for power transmission, mill siting areas, ventilation 
and material process facilities, etc. requiring soil engineering, civil 
and survey engineering, building permits, road use permits, and even to 
snow plow and transportation impact permits on national forests. Also 
permitted and controlled and (hopefully oversights) are plan of 
operations (POO), mitigation and exit strategies, monitoring and 
quality control measures, spill recovery and containment, reclamation 
of the habitat, etc. and a host of best management plans for timber 
removal, road development, site development, etc.--Flora and fauna and 
endangered species and natural habitat eco-systems are consistently at 
the forefront of any decision.
    2. Should the legislation designate categories of land not 
available for location and entry? If so, what categories should be 
designated?
    NO! What we need is less government and more freedom! Wilderness 
Acts, Wild and Scenic Rivers, Parks and National Monuments, National 
Wildlife Refuges, and so on are encroaching on rights of our citizens 
to exploit their legacy. The only entities that benefit are federal 
employees paid to supervise the closed lands.
    3. Should the legislation address situations where mining claims 
should not be developed due to [alleged] environmental or other 
concerns? If so, how should [these hosts of perceived concerns] be 
addressed?
    This question is covered in part in No. 1. (supra) From Mines and 
Madness, ``The folly of our generation is the irrational protection of 
the environment through the ill-conceived National Environmental Policy 
Act (NEPA) and other similar laws.  . . .  NEPA halted virtually all 
progress in America. Many businesses now have denationalized their 
operations, sending a high standard of living to foreign shores.  . . . 
loss of domestic mining and manufacturing will negatively impact all 
Americans . . .  Environmental shills and hucksters  . . . have been 
empowered by NEPA to deter any development . . .  American business, 
under a relentless siege by the big guns of the environmental cult for 
nearly four decades, is all but defeated.''--The NEPA requires that 
mining claims located on federal lands must be evaluated for 
environmental and socio-economic impacts of developing that land prior 
to authorization of use by the administering agency. NEPA evaluations 
are thorough, exhaustive, and even questionable: They address adverse--
beneficial impacts, and cumulative effects on wetlands, streamside 
areas, historic sites and archaeological sites. NEPA studies cost in 
the tens of millions and require over 20 years of investigation and 
analysis, and have utilized highly qualified and even world renowned 
scientists and engineers, and also involved separate risk analyses 
prepared by third-party (outside) experts. These NEPA-required 
evaluations further require that the applicant avoid, minimize and/or 
mitigate environmental impacts especially alleged as so-called 
sensitive areas, and are generally cost-prohibitive, ``killing the 
mining venture in its infancy.''
    4. What additional financial assurances, if any, should be required 
for mining operations?
    NONE, except to assure dollars reside in the U.S. as opposed to 
``off-shore.'' Federal agencies like Bureau of Land Management (BLM) 
and U.S. Forest Service already require ``full cost'' bonding, and 
memorandums of understanding (MOU) such as between the FS and Montana 
DEQ are created to ensure agency coordination: if only they would (due 
diligent) do their jobs. These costs are typically prepared by 
qualified third-party consultants. Consultants address associated costs 
of reclamation, plus administration, plus regular updating, plus 
escalation factors. The agencies presume that a third-party will also 
conduct the reclamation activities. Any additional financial assurances 
would be duplicative and unnecessary, as per MOU, states also require 
full-cost bonding, which already duplicates federal requirements for 
state, private and Native-owned land. States: Alaska (ADNR), Montana 
(MT DEQ), Nevada (NDEP) and Idaho (IDL, IDWR and IDEQ).
    5. What type of additional enforcement and compliance provisions, 
if any are needed?--Term Limits for Congress would be a great start: 
holding Congress members to the same rules as the rest of the nation!
    NONE! As restated, the prevailing DC mindset is: ``change is needed 
for change sake'' and has no bearing in fact or law as to reality, ``if 
it works, don't fix it.''--What we need is less government and more 
freedom!--
    No additional enforcement and compliance provisions are needed in 
any present Mining Law, or in the much touted Mining Law Reform, as if 
it already exists. What is seriously needed is fundamental tax reform, 
not mining reform! Current enforcement is by the alphabet soup of 
entities: USFS, BLM, USFWS, EPA and Corps of Engineers, and the myriad 
counterparts of local and states' regulatory and enforcement 
agencies.--State enforcement in Alaska, as an example, is also provided 
by Alaska Department of Natural Resources, Alaska Department of 
Environmental Conservation and Alaska Department of Fish & Game.--
Further, most other states have similar oversight roles of enforcement. 
MSHA also administers the Mine Safety and Health Act.
    There needs to be a moratorium on 11th hour litigation brought by 
environmental groups, or legislating from the bench by activist judges 
without a stake in the issues or the outcome. It should be obvious by 
now that activist groups with a ``green'' agenda have a true purpose to 
prevent mining, at any cost, not protect the environment.
    The only meaningful mining reform would be to place a moratorium on 
just how much a group can interfere with progress of hardrock mineral 
mining, so vital to our nation. If slated to be put up for a local or 
state-wide vote, and the initiative passes, then the environmental guys 
are ``out `a here'' for good on that project and its location.
    The 1872 Mining Law, signed by President Ulysses Grant, is a model 
natural resource law, and has roots not unlike the United States 
Constitution. Under the 1872 law, mining takes precedence over many 
other public land uses, including hunting and fishing, and rightfully 
so... Mining is a legitimate use of public lands, and there are few 
laws that have fueled the wheels of progress more than the 1872 Mining 
Law. That the Secretary of the Interior ``must'' sell public land to 
mining companies, often foreign-owned, for as little as $2.50 per acre 
escapes me, or I would be ``standing in line'' to buy this land. Mining 
companies pay royalties by virtue of their high-risk venture that in 
this day and age is fraught with pitfalls such as activist judges and 
militant environmentalists or wildlife groupies.
    To say, ``hard rock minerals including; gold, copper and zinc that 
belong to all citizens'' is a little like communism. The opportunity 
for harvesting these minerals is available to all, not necessarily the 
mineral itself, or it would never make it out of the ground. The legacy 
of the 1872 Mining Law has been two-fold, and though the damage from 
early mining activities is alleged to be still ongoing today, policy-
makers need to offset the benefits to the nation over its tenure. Are 
EPA estimates valid that 40 percent of western headwater streams are 
degraded by abandoned mines? This could be an incredible exaggeration 
of fact--an unscientific collation of empirical data.
    I represent a mining consortium of pioneer miners and loggers who 
have done nothing detrimental to the land. We are in one of five known 
grizzly bear populations in the contiguous states.--A Canadian mining 
firm in the 1990's, according to the Forest Service, imperiled the bull 
trout population in the Libby Creek drainage basin due to toxic 
discharges. This was/is after an alleged temporary hiatus when that 
mining was shut down, a proposed vital copper-silver mine adjacent to 
(and under) the Cabinet Mountains' Wilderness in remote northwest 
Montana.
    Professional resource managers at the Forest Service and BLM need 
oversight to ensure science-based decisions in lieu of political-based 
decisions, not about where and when mining on public land should occur. 
With this oversight professional land managers will appropriately 
maintain their commitments as fair stewards serving our public trust.
    The BLM and the Forest Service manage public land with some of the 
most important fish and wildlife habitats that provide some of the 
finest hunting and fishing in the nation. Revett Minerals, in Troy, 
Montana, also in the Cabinet Mountains, Rock Creek Mine is one good 
example of mining stewardship where they recently provided the Kootenai 
National Forest Service with a safe harbor for endangered wildlife. It 
has been noted that more than 80 percent of the most critical habitat 
for elk is found on lands managed by the Forest Service and the BLM. 
Pronghorn antelope, sage grouse, mule deer, salmon and steelhead, and 
other species of fish and wildlife species are on public lands . . . . 
Mining companies, not unlike true wildlife supporters (hunters and 
fishers), can and will enhance the eco-system.
    The national forests are a major source of water and of particular 
importance in the West integral with overall headwaters, streams, lakes 
and rivers. It is alleged that the Forest Service and EPA scientists 
have determined that the national forests alone provide drinking water 
to more than 60 million people in 33 states. Truly domestic mining 
companies, under existing law, are fully capable and willing to enhance 
water sources, aquifers and natural reservoirs, and under contract and 
reclamation bond will leave our waterways and drainage basins in a much 
better state in the future. All that is needed is delegating the 
existing oversight to the appropriate government agencies.
    Existing--new mining companies and hard-rock mining ventures should 
not be burdened with so-called ``fair royalties'' from any minerals 
taken from public lands. The general public that has benefited from 
abandoned mines, or the dynamics of exploration, should fund the 
cleanup. Congress might as well fund the cleanup with their retirements 
and so on and live like the rest of the nation. Since 1977, royalties 
associated with coal mining have generated $7.4 billion to help clean 
up abandoned mines and recover lands and waters and communities 
affected by coal mining. That is coal mining, not hard-rock mining.--We 
do not need a fund for hard rock mining.--What is alleged to be a 
sensible reform to include all mining operations, present and future 
will chase away investment dollars, and break the backs of exploration. 
Commodities developed off public lands such as coal, wood fiber, oil, 
gas, etc. need to be reassessed as to mitigation of impacts and 
restoration measures. Hard-rock mining, the foundation of our 
civilization as we know it, needs to be left alone and not tampered 
with.
    Mining should be the dominant use of our federal lands for the 
preservation of our economy.--We do need to reassess values of fish and 
wildlife habitat, water resources, and hunting and fishing, on public 
lands aside from activists' shrill, and legal and political 
manipulation. The Forest Service and BLM believe the 1872 Mining Law 
makes hard rock mining a dominant use of public lands which is the 
correct course to follow. Mining reform legislation will compromise the 
balance of shared use in our volatile time of questionable eminent 
domain and questionable ``road closures.'' There is inherent value in 
public lands for family sabbaticals, hunting and fishing opportunities 
and fish and wildlife, flora and fauna eco-systems and habitats. Our 
utmost priority as a hopefully to remain a sovereign nation is to 
preserve our heritage, and ensure our economic and national security by 
the proper use, management and care of natural resources while 
exploiting the benefits of our bountiful land.
    Under the 1872 Mining Law, mining companies and ventures can have 
``round-table'' discussions with agency managers and jointly make 
visionary and logical decisions based on protecting our land and/or 
natural resources. Being told when or where to (not) mine is an 
incursion of Constitutional freedom. Well-meaning but misguided 
activists would like to dictate by court order or law to influence what 
they allege is important for fish and wildlife and fresh water. We are 
not dealing with band-aide policies. Our Congressionally designated 
wilderness areas, the sanctuaries and estuaries of Fish and Wildlife 
Refuges, our National Parks are our heritage as are our hard-rock 
mineral deposits, and not the emotional or political agenda of 
misguided souls. The encroaching areas designated ``road-less'' ought 
to be placed off-limits, not to mining, but to recreation such as snow-
mobiles and ``busting through the woods'' use of all-terrain-vehicles 
(ATV) entirely, to restate, not to mining. So-called professional land 
managers have too much discretion. Round-table discussions with all 
truly responsible will afford to managers with guidelines on all 
incumbent lands to allow for balanced and reasoned decisions about 
ecological, social, and economic values. On highly mineralized lands 
with low fish and wildlife values, and high levels of mining company 
investment, mining companies ought to have a higher degree of certainty 
that mining projects can proceed in accordance with existing federal/
state policies--laws, statutes, codes and regulations.
    Funding and practical reclamation provisions can be made available 
to those who want to ``clean up the forests'' including systematically 
un-polluting abandoned mines and watersheds.--Abandoned mines are or 
have been one of the paramount issues facing the nation. Those who 
quote questionable EPA estimates, ``That abandoned hard rock mines 
degrade nearly 40 percent of all western headwater streams'' might take 
a proactive stance and better utilize monies wasted on frivolous 
litigation and use their funding to promote ``pristine cleanups!'' The 
scope and magnitude of reclamation alleged gives environmental 
activists opportunity to prove their sincerity.
    Mining legislation should be reinstated, not ``reformed,'' again 
allowing patenting/sale of public lands. The U.S. Government has, like 
homesteading, opened up million acres of our public lands to mining 
companies and individual, small miners through the practice of 
patenting. Those without a ``stake'' in the sacrifices of exploratory 
mining, whine about resourceful people who claim on public lands and 
then allegedly ``buy the land'' for as little as $2.50 an acre. True, 
there have been abuses without jurisdictional oversight. It should be 
heartening that with the increase in the price of metals, so have the 
number of claims being staked.--Mining is risky and expensive!--
Congress should abolish the edict of former Secretary of Interior and 
re-open public lands to mineral patenting.
    This Committee on Energy and Natural Resources has a high calling, 
and with the full United States Senate, have the timely opportunity to 
reinstate the 1872 Mining Law in its full measure, with comprehensive, 
complete revisions for agency oversights, reviewed by Congress as 
needed. The House reform bill needs to be ``set back'' to justify its 
cause and effect ramifications over the next Century.--Our great 
nation's posterity will not prevail in national and economic security 
if influenced by unfound diatribes of ``a long stalemate calling for 
reforming:'' 1872 Mining Law.
    It is broadcast that watershed protection must take precedence over 
industrial mining development which is true for all types of 
development, including the sprawl of cities in arid or coastal regions 
or where water resources are a premium. Mining concerns have a unique 
situation to classify, nurture and protect our precious water for 
permits.
    Our pre-eminent economic and military security is past vulnerable 
with a growing reliance on foreign sources for important minerals and 
processing or our own ore. As stated, ``Despite reserves of 78 
strategic mined minerals, the United States currently attracts only 
eight percent of worldwide exploration dollars . . . '' ``As a result, 
our nation [has and] is becoming more dependent upon foreign sources to 
meet our country's strategic and critical metals and minerals 
requirements, even for minerals with adequate domestic resources.--The 
2007 U.S. Geological Survey Minerals Commodity Summaries reported that 
America now depends on imports from other countries for 100 percent of 
17 mineral commodities and for more than 50 percent of 45 mineral 
commodities.'' This is unconscionable and needs to be changed. 
Reforming the 1872 Mining Law, with increased burdens on mining 
ventures is the absolute wrong course. ``This increased import 
dependency is not in our national interest particularly for commodities 
critical to pending strategic programs such as reducing greenhouse gas 
emissions or undertaking energy efficiency efforts. Increased import 
dependency causes a multitude of negative consequences, including 
aggravation of the U.S. balance of payments, unpredictable price 
fluctuations, and vulnerability [as] to possible supply disruptions due 
to political or military instability. [Over the last several decades,] 
our over-reliance on foreign supplies is exacerbated by competition 
from the surging economies of [aggressive] countries such as China and 
India. As these countries continue to evolve and emerge into the global 
economy, their consumption rates for mineral resources are ever-
increasing; they are growing their economies by employing the same 
mineral resources that we used to build and maintain our economy. As a 
result, there exists a much more competitive market for global mineral 
resources. Even now, some mineral resources that we need in our daily 
lives are no longer as readily available to the United States.'' This 
has been well stated and portends our eventual demise.
    Conclusive reports: ``The U.S. mining industry has fully embraced 
the responsibility to conduct its operations in an environmentally and 
fiscally sound manner . . . .'' Reuters, on January 28, 2008, reported 
``Zambia will introduce a windfall tax on base metals at a minimum rate 
of 25 percent and increase mineral royalties to 3 percent from 0.6 
percent . . . '' New increased royalties and reintroduction of 
withholding taxes in the base metals sector ``will make the country 
less attractive for future mining investment.'' New taxes in copper-
rich Zambia are effective April 1, 2008. Killing the goose that laid 
the golden eggs (copper and cobalt), the country's economic lifeblood, 
is foolish at best. That the U.S. Senate has taken the ``high road'' in 
deliberating a ``rewrite'' (reform) of the 1872 Mining Law, as has been 
``corrupted'' by ancillary legislation, is commendable! When ``making 
sausage,'' let us not forget our heritage.
    National Security issues of domestic mining production ``built on 
competitiveness, certainty and common sense.'' The Bush Administration, 
in the latest round of talks on possible changes to the US Mining Law 
intimated a possible imposition of royalties on hardrock minerals on 
public lands, according to Mineweb, Jan. 25, 2008. (1) Replacing the 
current system of mine and mill patenting with a more modern form of 
``secure tenure'' is open to question; (2) Imposing prospective and 
profits-based royalties is inadvisable at best; (3) Establishing 
abandoned locatable mine reclamation funding to clean up sites that 
allegedly threaten the environment and public safety can come out of 
the General Fund, just like Social Security. A ``clean sheet'' approach 
would encompass the 1872 Mining Law as mote. Environmental--other laws 
have all but smothered the climate of investment and development in 
mineral mining. We need ``to also recognize the economic performance of 
mines and the security of tenure issues vital to mining investment. My 
mining concerns are best documented ``where the rubber meets the road'' 
in the attached letters.
    Attached are two (2) letters of note, and import, to the 
deliberations concerning the 1872 Mining Law: Simplicity can not happen 
in our government with imposition of a ``royalty program'' for hardrock 
mining. As evident by a Mining Lease apparently ignored by a U.S. 
mining company, with foreign and ``domestic'' handlers, litigation will 
be the norm instead of the exception: ``It's all about money, and 
`follow the money.''' Providing a ``fair return'' to taxpayers is 
translated to ``putting another albatross around taxpayers' neck, along 
with the boots of our adversaries.'' The federal bureaucracy to manage 
adequate audit and compliance, above and beyond the present, will go 
asymptotic and ``break the backs'' of new and existing mining 
enterprises.--An efficient and automated reporting system can be 
managed by the individual states that have a stake in the production of 
mineral mining.

          1. Letter to PAUL BRADFORD, Forest Supervisor USDA Forest 
        Service--Kootenai National Forest of 1/31/08
          2. Letter to Bradford and MARK WILSON, Montana State 
        Supervisor--U.S. Fish & Wildlife Service of 1/31/08

    State and federal environmental agencies and public lands 
regulatory agencies already have an efficient, effective automated 
reporting system that is becoming more automated. For example is the 
BLM LR2000 database, and the county and state Bureau of Land Management 
location/date, owner, type and recordation of mineral mining claims. 
The audit and investigative authorities are already in place. All that 
is needed, as evidenced by attached letters is Congressional, 
Department of Interior, Inspector Generals' simplified oversight of 
Forest Service, et al decisions. What is seriously lacking, not a fault 
of the 1872 Mining Law, is enforcement of ownership, policy and 
permitting.
    That some Senators rightfully--strongly oppose the 8% gross royalty 
shows some gravity in Congress. Even considering a ``modest'' 2% to 5% 
gross royalty is fearful as to its import and implications. William E. 
Cobb rightfully stated, ``the existing comprehensive framework of 
federal and state environmental and cultural resources already 
regulates all aspects of mining... Additional federal regulation is 
unnecessary, duplicative . . . unreasonable.'' He opposes giving the 
Secretary of Interior the right ``to stop a mining project when all 
environmental and other legal requirements are met.'' His astute 
observation could not be stated any better. The doctrine of ``multiple 
use'' needs to recognize the demerits of so-called ``recreation'' vs. 
our meritorious capability for ``national survival.''
    There is absolutely nothing wrong with the current demand of 
commodities driving companies and individuals to ``stake their claims'' 
for strategic metals and as the price of uranium, gold and other heavy 
metals continues to drive companies to stake claims across the West.--
Mining claims dot millions of acres of public land across the West.--
Righteously, once a mineral stake is claimed, it is nearly impossible 
to prohibit mining under the current framework of the 1872 Mining Law, 
no matter how [alleged to be] serious the impacts might be!--Enough 
Said . . . .
            Respectfully Submitted,
                                                Frank Wall,
          National Resource Specialist, Forensic Engineer & Mining 
                                                        Consultant.
                         attachment.--letter #1
                                                   31 January 2008.
Paul Bradford,
KNF Forest Supervisor, USDA Forest Service, Kootenai National Forest, 
        1101 Highway 2 West / Libby, MT.
Regional Forester, Policy Oversights, USDA FS Northern Regional Office, 
        P.O. Box 7669 / Missoula, MT.
    Dear Mr. Bradford:

Re: Trespass by Mines Management--Montanore Minerals on FS lands--LCV 
claims . . . 

    Per FOIA request, I possess a copy of a letter you wrote to Eric 
Klepfer, V.P. Operations of Montanore Minerals Corporation dated August 
7, 2007, that has been grossly ignored.
    Your letter is ``very specific'' on MMC's ``proposed mining 
activities associated with the Libby Creek adit within [and adjacent 
to] the Cabinet Mountains' Wilderness on the Kootenai National Forest 
(KNF). Based on [your] review of this information [submitted by MMC 
June 5 & July 3, 2007] and analyses by Forest Service experts, I have 
[you] determined that MMC must [first] obtain Forest Service approval 
of a plan of operations [(POO)] as required by Forest Service Locatable 
Mineral Regulations at 36 CFR 228 Subpart A prior to dewatering and 
continuing excavation, drilling, and development work at the Libby 
Creek adit. Previously, we issued a temporary snowplowing permit for 
the road to the Libby Creek adit which has now expired. In lieu of a 
new permit for future snowplowing and annual road use, we are 
requesting that you include this request in a proposed plan of 
operations. Please file a plan of operations which includes all of the 
proposed Libby Creek adit activities including future snowplowing and 
annual road use authorizations for our review and approval.''--The 
following flies in the face of reason:
    Mines Management Inc. announcement on third quarter earnings 
states, ``Advanced Exploration and Delineation Drilling Program''--
``During the third quarter of 2007, the Company [(MMI as MMC)] 
continued preparations for the exploration and delineation drilling 
activities at the Libby adit site. The water treatment plant components 
were delivered during the quarter [July--Sept. 2007] and installation 
of the plant was completed October 31, 2007, with testing and startup 
activities beginning on November 1, 2007. Other activities included the 
delivery of major mine equipment, pump stations, power load centers and 
other key equipment necessary for the delineation drilling program. 
Installation of the ventilation duct work was completed for the first 
several hundred feet of the adit. [That is: on Libby Creek 
VenturesTM mining claims on Forest Service lands.]
    On January 25, 2008, your executive assistant Barbara Edgmond 
confirmed via email, ``Mr. Bradford has been advised of your phone call 
today and the concerns you have that MMI's third quarter report stated 
they have moved equipment to the adit and are working on the 
ventilation system.'' This, combined with receipt of your response to 
my FOIA request dated November 29, 2007, for documents dated from 
November 2, 2007 to January 16, 2008 is rather inconsistent. Please 
note the: (a.) Letter from MMC dated 12/19/07 requesting temporary FS 
approval to plow the Libby Creek Road; (b.) FS letter to MMC dated 12/
27/07 approving this request as of the date of this letter  . . .  
mitigation measures (as outlined last year) will apply, including the 
gate management locations; (c.) Email from MMC dated 12/27/07 stating, 
``Thank you for your timely  . . .  approval.''
    Mr. Bradford, you further stated in your reply to my FOIA request 
noted above, that my wanting to know the disposition (of MMC within the 
adit) was not within the purview of the FOIA. Fair enough, but two 
months later? Let me restate, ``Not within the context of an FOIA 
request.''--Let's cut to the chase. Please affirm or deny whether or 
not MMC is in the Libby Creek adit on national forest lands. And if so, 
where is their approved plan of operations, plan of action, or permit 
of authority (POO, POA, POA2)? I believe the answer is MMI 
a/k/a MMC does not have one, did not have, and will not have one . . . 

    My reasoning is that for Libby Creek VenturesTM to 
demonstrate under the doctrine of pedis possessio in the 1872 Mining 
Law, occupancy of its rightful mining claims, and to continue to 
demonstrate ``boots on the ground,'' that Mines Management Inc., under 
any alias or operational subsidiary/entity, needs to ``get off LCV 
property'' which is also on the national forest lands. And the USDA 
Kootenai National Forest needs to enforce the law and quit playing 
``footsie'' with alleged outlaws as is evident as shown and noted 
above.
    Dating back to on or before September 11th, 2006, when MMI first 
interfered with LCV's rightful exercise of exploration drilling on its 
mining claims, the Montana DEQ and the USDA Forest Service have 
enjoined with each other to support MMI and undermine the rightful 
exercise of LCV's mining heritage, even to the point of quitting. Why 
is this so? Today, MMI had the audacity to file a civil action against 
LCV and its components, to include the undersigned, and one claim is 
that LCV did not exercise pedis possessio.
    USDA KNF FS and Montana DEQ have been/are denying LCV its rightful 
exercise of its small miner initiatives to explore and to hold under 
the doctrine of pedis possessio; full unequivocal use of its senior 
mining claims duly registered with DOI BLM; that's why! MMC is 
allegedly operating under color of law with permissiveness of the FS 
and DEQ.
    Note: http://www.fs.fed.us/r1/kootenai/projects/projects/adit-plan/
index.shtml (pdf l 20mb)
    Getting back to basics, last year I sent you an email January 15, 
2007, which states in its beginning, ``As we discussed on Wednesday, 
January 10th, 2007 at Noon (MST), please accept the following: All of 
the Libby adit is on FS and FS Wilderness lands . . .  I allege was a 
long-range dispossessory plan . . .  the fact MMI is encroaching on LCV 
permitting or permitted rights . . .  a USDA KNF `fairness' review 
covering all permits issued and all permits [was] required for the 
Montanore Project. `IT IS ONLY FAIR!'''--did this happen?
    LCV, et al (claim holders and Wall) are being sued by MMI, MMC and 
Newhi: stating in their lawsuit that there is a controversy as to who 
owns the mining claims and the adit, which according to the suit needs 
to be adjudicated. Shouldn't the Forest Service hold off on permits? 
Meanwhile, MMI needs to stay out of the Libby Creek adit and all of the 
mining claims in contention until this is resolved in court and the FS 
and DEQ needs to quit interfering with LCV's mandatory exercise of its 
ownership under pedis possessio.
    Thank you for attending to this matter.
                                       Frank Reginald Wall.
                         attachment.--letter #2
                                                   31 January 2008.
Paul Bradford,
KNF Forest Supervisor, USDA Forest Service, Kootenai National Forest, 
        1101 Highway 2 West / Libby, MT.
R. Mark Wilson,
Field Supervisor (via email), U.S. Fish and Wildlife Service (USFWS), 
        Division of Ecological Services, 585 Shepard Way / Helena, MT.
    Dear Mr. Bradford and Mr. Wilson:

Re: Trespass by Mines Management--Montanore Minerals on FS lands--LCV 
claims . . . 

    On Wednesday, December 19, 2007, I sent an email to Mark Wilson 
that reads--

          Re: Grizzly Bear and Bull Trout concerns on Cabinet 
        Mountains' drainage basins...

          I was talking to people at Revett Minerals about the grizzly 
        bear (Usus arctos horribilis) habitat issue. In the discussion, 
        I was alerted that (our--LCV) having an approved POO in the 
        grizzly (and/or bull trout) habitat is a significant issue! 
        However, in that you did not know of our being in the same 
        habitat/environ eco-system as Mines Management, possibly the 
        Kalispell office USFWS, we at Libby Creek Ventures were 
        wondering just how many other mining concerns have, or would/
        could have, an approved POO in our specific area of operations.
          Libby Creek Ventures holds 58 lode mining claims, one being a 
        placer claim, along with three tunnel sites, as overlaid, on 
        Libby and Ramsey Creek drainage basins up to the CMW east 
        boundary and on the forest roads.--Sec.  It is felt that you 
        could get a more prompt, qualified response from the Forest 
        Service than if we [meaning Libby Creek VenturesTM] 
        asked them.
          Would you please tell us how many mining concerns can operate 
        in this region, meaning adjacent or under the Cabinet 
        Mountains' Wilderness? You asking and collaborating with the 
        Forest Service on this and giving us an official 
        ``reading''.per same would be most helpful. Our concern is that 
        approved POO's might be viewed by the federal government kind 
        of like water rights with the state: First in place, is first 
        right to limited or vulnerable resource(s). For example, let's 
        say that ten or more mining firms applied for a plan of 
        operations in this area.
          Is there an ascendancy of ``first come''--``first-in-line, or 
        first right'' as far as impacting the Grizzly Bear? If you 
        wrote a letter on this to Paul Bradford, KNF FS supervisor, and 
        qualified this critical situation it would be of great help. 
        This would alleviate our concerns in that: If Mines Management 
        a/k/a Montanore Minerals (Newhi) received an approved POO from 
        the USDA KNF Forest Service, then we might find ourselves ``out 
        on a limb'' literally, and having spent a lot of time, 
        resource--money, to no avail, in pursuing our long-term mining 
        venture.
          As I discussed with you today, we received an approved POO 
        (which is currently valid--to be expanded) from the FS and DEQ 
        early this year, but have been held up in executing our Phase I 
        and Phase II POO due to a noted lack of cooperation by USDA FS, 
        and Mines Management. As mentioned, this involves our concerns 
        of safety issues and our potential liability of harming 
        personnel or equipment in the adit (that shouldn't be in the 
        adit) while we are commencing our initial ``hammer in-the-
        hole'' drilling efforts: of our targets in close proximity! 
        [last year]
          The scenario that could play out, is like having ``too many 
        cooks'' in the kitchen. What's the limit? Who's first?--Sec.  
        The bottom line: is there a ``pecking order'' of ascendancy in 
        ``rights'' of POO, and is there a ``saturation element'' or 
        point of ``diminishing returns'' with respect to having an 
        approved POO in the grizzly bear habitat--environ? And, if this 
        is the case, what is, or will be, the federal government's 
        position or policy with respect to the same?--Sec.  Mark, any 
        feedback or help with respect to this, in writing, would be 
        most appreciated. Thank you . . . .

    On 12/20/07--Re: FS & DEQ Approved Plan of Operations Concerns . . 
.  (subject of email): Mark Wilson replied via email, ``We understand 
your question(s) and my staff and I will be discussing it in the near 
future, and will get back with you shortly after the first of the 
year.''
    On or around January 24, 2008, the undersigned had a conference 
call with Mark Wilson and Ann Vandehey, USFWS Section 7 Coordinator of 
the Endangered Species Act. We discussed a ``consultation document'' as 
being the means by which the USFWS interacted with the USDA FS on 
decision-making criterion. We also discussed ``nexus'' being a buzzword 
for ingress and egress to private or patented property using federal 
roads for access and using federal lands for infrastructure impact such 
as power lines, tailings, mill sites, tunnel/adit portals, etc. For 
example, ``displacement'' by creating new roads, etc. is undesirable in 
Grizzly Bear habitats. Excessive (any) ground water disturbances are 
extreme concerns in Bull Trout watersheds.
    As subsequent follow up to the conference call, there was no USFWS 
(Kalispell, MT) notation available which contradicts the FS record of 
an August 2006 Decision Memo to LCV signed by KNF FS Ranger Malcolm 
Edwards on 9/12/06, and specifies all categories of review/analysis:
    IN PART--``Water, Riparian areas and Fish: The proposed action 
would not occur within the riparian habitat conservation area (RHCS) of 
Libby Creek.  . . .  Sec.  Wildlife and Threatened and Endangered 
Species: Sec.  Effects to threatened and endangered wildlife species 
were analyzed for this project. No effect is expected to any TE 
wildlife species within the project area. Effects to sensitive species 
were also analyzed for this project. The project is not likely to 
impact individuals [?] or their habitat and would not contribute to a 
trend toward federal listing or loss of species viability. Sec.  The 
wildlife analysis is available in the project file.''--Please make 
copies of the wildlife analysis, and species list so noted, to all 
affected parties.
    ALSO IN PART--``V. JUSTIFICATION FOR CATEGORICAL EXCLUSION--Sec.  
This project is being categorically excluded from documentation in an 
EA [(Environmental Assessment)] or EIS under category 32.1 (3).  . . .  
Sec.  Federally listed species proposed for Federal listing, or 
proposed critical habitat, or Forest Service sensitive species: There 
will be no effect to threatened and endangered species within the 
projected area. Consultation with the U.S. Fish and Wildlife service 
was not necessary. Sec.  The project is not likely to impact 
individuals or their habitat and would not contribute to a trend toward 
federal listing or loss of species viability. Sec.  Species list and 
analysis is available in the project file at the district.--[Excerpts 
of page 2 & 3]
    IN PART--``VI. PUBLIC INVOLVEMENT--Sec.   . . .  Comments were 
solicited from the District Wildlife Biologist, Archaeologist, 
Botanist, Weed Specialist, Hydrologist, Fisheries Biologist . . . '' 
``VII. FINDINGS REQUIRED BY OTHER LAWS--Sec.   . . .  The Endangered 
Species Act  . . .  Sec.  Under provisions of this Act, federal 
agencies are directed to seek to conserve endangered and threatened 
species and to ensure that actions are not likely to jeopardize the 
continued existence of these species. Since affects to threatened and 
endangered species have all been determined to be ``no effect'', 
consultation with the U.S. Fish and Wildlife Service was not necessary. 
The biological assessments for the Libby Creek Ventures Drilling 
Project are located in the Project Record. I have determined that my 
decision is in compliance with the Endangered Species Act.--[Excerpts 
from page 4 & 6 of 8 pages--Comprehensive vetting process]
    ``APPENDIX A--Response to Comments [alleged public comments one of 
two received]--Comment: Concern was expressed regarding the location of 
the drillholes with respect to the Montanore Minerals Corporation Libby 
Creek Evaluation Adit. Interception of the adit by a drillhole could 
potentially cause impacts to water quality or quantity in the Montanore 
adit. Response: A letter from the Libby District Ranger specifying 
these concerns will be submitted to Arnold Bakie of Libby Creek 
Ventures.''--[Excerpt from page 8 of 8--This is not their property!]
    It should be evident, as events before and since 9/11/2006, 
questionable choices were made.
    On 01/10/07--One year ago, LCV and the KNF FS entered into an 
agreement entitled RPOOA (Revised Plan Of Operations Addendum), the 
purpose of which was to--``resolve appeal issues as outlined in Libby 
Creek Ventures (LCV) appeal of October 26, 2006 per 36 CFR 251.93 .'' A 
review of the content of the RPOOA with respect to the Decision Memo 
is: this is an addendum to the plan which was submitted on May 26, 
2006: an extension (FS) for cause was granted.
    Quid pro quo: Provision ``10. Claim Ownership Sec.  Approval of 
this Plan of Operations does not constitute certification or 
recognition of ownership to any person named herein. If another party 
[such as MMI a/k/a MMC] proposes a conflicting plan that would prevent 
the FS from administering the mining regulations (6 CFR 228 Subpart A) 
it would be the sole responsibility of the concerned parties to resolve 
such conflict. In some situations the FS may require resolution prior 
to authorizing surface disturbing activities.'' And provision ``11. 
Claim Validity Sec.  Approval of the Plan of Operations does not 
constitute recognition of the validity of any mining claim named 
herein, or of any mining claims now hereafter covered by this plan.''
    On December 18, 2007, Arnold Bakie and I received your Libby Creek 
Ventures Drilling Project Appeal Decision which in effect (if not 
appealed to a second level of review) reverts to RPOOA and any effort 
to perform expert hydrology--structural evaluation studies are thereby 
stymied. Access to the Libby Creek Ventures AditTM is also 
effectively denied even though on FS lands.
    Under any reasonable observation, by a prudent man, a jury of peers 
or a judicial review, will conclude, ``beyond a reasonable doubt'' that 
USDA KNF Forest Service and Montana DEQ have effectively and 
consistently ``taken sides'' and denied Libby Creek 
VenturesTM their rights under the 1872 Mining Law of 
occupancy--exploration--mining under the doctrine of pedis possessio.
    There is only one solution at the present, and that is for the USDA 
Forest Service and Montana DEQ under their Memorandum of Understanding 
to deny all permits and licenses to Montanore Minerals and Mines 
Management until such time as ``claim ownership'' and ``claim 
validity'' has been adjudicated. Furthermore, LCV has an approved even 
a tour de force RPOOA of its POO.
    The LCV POO (as revised and amended) was approved by FS and DEQ 
jointly before Revett's Rock Creek approval and before Mines 
Management's Montanore project which has yet to be approved even though 
MMI allegedly acts as if it has all the needed permits and licenses. 
The approvals give LCV ``first come, first right'' with respect to its 
present--expanded POO for exploration mining under the Small Miner 
Excursion Statement (SMES) and need for buffers for environmental air 
quality, water quality and impacts under the Endangered Species Act. 
Any consideration for any permits or licenses to MMI, MMC, et al would 
have to consider that LCV has first right in pursuing its long-range 
objectives in SMES hard-rock exploration and mining in the Libby Creek 
and Ramsey Creek watersheds and attendant forest service lands.
    Any speculation or comments as to LCV minimal exposure to mining 
has to take into account that LCV first submitted a plan almost two 
years ago for four (4) simple drillholes on the side of the national 
forest road and in front of any gates (before MMI's interference). 
Notice: One hole will be drilled in situ of the three (3) approved, and 
the other three (of the four original holes that were bonded) will be 
moved closer to the Cabinet Mountains' Wilderness eastern boundary line 
and in similar close proximity to FS trails, with minimal or no 
disturbances!
    Under the 1872 Mining Law and federal and Montana mining codes, 
regulations and statutes, LCV is required to perform annual assessment 
work, maintenance work and diligently work its mining claims: lode and 
placer, and tunnel sites! To not perform with due diligence is to lose, 
by abandonment, as Noranda has done, all rights in perpetuity to any 
undiscovered minerals. The FS and MT DEQ have a fiduciary obligation to 
not interfere with LCV exercising its rights. Under the doctrine of 
pedis possessio, LCV demands that the FS rescind any/all MMI permits. 
If MMI (or the Montana DEQ for MMI) wants to do mining, then they need 
to speak with LCV.
    After seeing a bundle of bailing wire on the south shoulder of FS 
#2316 at the entrance to the Johnstone Placer Patent, that could injure 
life or limb, human or animals, and after seeing steel rebar on the top 
of a stump sticking sideways in the forest, that could injure life or 
limb, human or animals, and after seeing the shoddy snow-plowing job 
performed by MMI last year, and after seeing all the dust generated by 
MMI and MMC along the forest service roads, it is my contention 
(photos) that MMI has or had good intentions, but does not necessarily 
deliver.
    Libby Creek VenturesTM demands that its sign be posted 
on the seasonal gate closure and that Montanore Minerals Corp. (MMC) 
sign be removed. It is an affront to LCV that MMC not only has keys to 
those gates, but has a common sign with the USDA Forest Service and FS 
logos This is unquestionably illegal at worst and poor judgment at 
best. LCV was castigated in its ``48 Hour Notice'' for safety reasons 
September, 2006, being alleged to be using FS stationery.
    It is and has been from day one, and as can be proven empirically, 
that LCV has performed using ``best management practices'' in the 
forests and on the forest roads and trails and forest watersheds. LCV, 
in studying how to best explore for minerals, has determined to access 
ore targets from existing forest roads and trails, and take every 
effort to minimize or eliminate all-together any discharge of water. 
LCV will create and maintain very clean and functional man and mining 
operations' facilities and tunnel sites, and will not impact the 
feeding and nocturnal habits of animal species including endangered 
fish, fowl and mammals. LCV intends to leave the forest in a more 
natural and desirable condition than when first encountered! This is 
the Code of the West, and that is to leave minimal or no traces of 
occupation or habitation. It is true that these are goals which, in 
reality, might require minor changes for practical reasons.
    This letter and its counterpart ``Demand for Quid Pro Quo Under 
Doctrine of Pedis Possessio'' will be entered as exhibits to U.S. 
Senate testimony pursuant to [not] reforming the 1872 Mining Law as a 
demonstration that there is nothing wrong with this law, just 
enforcement thereof being rather deficit when it comes to heading off 
litigation when such can be avoided.
    I am inviting the Senate Committee on Energy and Natural Resources 
to review the de facto background from a Forest Service perspective 
which leads one to believe that all is legitimate:

          1. ``Vested interest?'' http://www.fs.fed.us/r1/kootenai/
        projects/projects/montanore/index.shtml
          2. Adit LCV's Property: http://www.fs.fed.us/r1/kootenai/
        projects/projects/adit-plan/index.shtml
          3. Stale data: http://www.fs.fed.us/r1/kootenai/projects/
        projects/montanore/involvement.shtml
          4. 6/05? http://www.fs.fed.us/r1/kootenai/projects/projects/
        montanore/final--scoping--letter.pdf
          5. ??? http://www.fs.fed.us/r1/kootenai/projects/projects/
        montanore/permits--lic--app--table.pdf

    All is not legitimate as the Forest Service has ignored Libby Creek 
VenturesTM senior position and ownership of its mining 
claims. The FS acts as if there is not a breach between Noranda's 
termination of a valid lease and Noranda's junior partner Mines 
Management Inc.'s attempts at ``acquiring possession'' of LCV's 
property by trespassing on it with Montana DEQ and USDA FS ``looking 
the other way'' over LCV's oral, official and written protests. LCV is 
not even afforded ``equal time'' or consideration: (1) Where does LCV 
show up on ``seasonal road closure'' signs accessing LCV's mining 
claims? (2) Where does LCV show up on the ``permits, licenses, etc.'' 
website noted above, as being the first and foremost permission (the 
owner) required, and (3) Where does LCV show up on the adit plan or the 
project website noted above? It DOES NOT!
    The adit-plan (see link) states ``Notification to resume suspended 
. . . '' and should be ``Notification to resume terminated . . . '' as 
Noranda terminated its operations thus voiding Permit #00150 as to `` . 
. . resume suspended'' implies that there was intent to defraud the 
Mining Lease holder LCV.
    And as any prudent person can observe, a 20 MB pdf document hardly 
qualifies as a ``minor revision'' to the ``Hard Rock Operating Permit 
#00150'' regardless of how this is glossed over! To say, ``Minor 
Revision'' is akin to saying, ``minor surgery'' about a heart 
transplant operation: Who is kidding who? Two-hundred and twenty-four 
pages (224 of revision 2) October, 2006, has obviously been in work for 
some time, and with the Forest Service's cooperation all along.
    Now, since May of 2006, when ``called on board'' to sort out this 
mess of valid ownership and prior possession by LCV as successor-in-
interest to the Mining Lease holder of a thirteen-year lease and 
``Grant of Easement'' which should not have been in question, I have 
very diligently reviewed the record for any shortfalls; and there were 
and are none!--I have worked with the USDA Forest Service (FS) and the 
Montana Department of Environmental Quality (DEQ), the two ``governing 
agencies'' and have gotten virtually nowhere with respect to 
appropriately and reasonably and systematically exploring LCV mineral 
targets. The FS and DEQ have supported the trespassers at virtually 
every critical occasion, taking the side of Mines Management, Inc.
    If the Forest Service refuses to ``step up to the plate'' and 
suspend Mines Management, Inc. a/k/a Montanore Minerals Corp. 
operations within the adit on national forest lands, which are also 
valid mineral mining claims of LCV and thus maintain a neutral posture 
until ownership is adjudicated within the Lincoln County District 
Court, Cause No. DV-07-248, then a prompt and comprehensive 
Congressional Investigation is called for.--A USDA Inspector General 
Oversight review is also warranted, and also, right soon!--The FS and 
DEQ need to do their jobs of fairly enforcing their respective federal 
and state mining law, codes and regulations!
    I have had to do Internet searches using search engines to get to 
the bottom of this as the Forest Service has not timely notified the 
LCV mining claim holders, who the FS ``should have known, and would 
have had to have known'' were principally affected by Mines 
Managements' exploits and efforts. I have noted that ``after the fact'' 
public notices and public meetings on the decision-making process were 
evident to LCV principals, and no notification was properly given 
except what was published in local news and/or discretely posted on FS 
project website.
    It's hard for me to believe otherwise that there was not a policy 
to keep LCV ``in the dark'' on this and not let LCV know ``what was 
happening'' until such time that inertial forces were in place to make 
it virtually impossible to correct-the-record and assert occupancy 
under the doctrine of pedis possessio. Mines Management was using the 
Johnstone Placer Patent as a means of ``toe in the door'' and allegedly 
subverting any means of LCV to protect its rights.
    My accompanying letter to you, Mr. Bradford and the Regional 
Forester pertaining to oversights is an unequivocal--``DEMAND FOR QUID 
PRO QUO UNDER DOCTRINE OF PEDIS POSSESSIO''--It should be 
unquestionable in its message and mission . . .  As you are fully 
aware, I have made it a point to establish a ``chain of evidence'' on 
this alleged illicit activity and alleged conspiracy if none other than 
History.--Being a defendant in a lawsuit of which I have NO mineral 
interest shows the extent Mines Management is stretching to suppress my 
message and silence my voice of injustice.
    As I'm sure you are aware, sooner or later, the Good Lord willing, 
justice will prevail!
    As noted on this letter to you, Mr. Bradford and also to Mr. 
Wilson, this DEMAND FOR ``FIRST COME--FIRST RIGHT'' UNDER DOCTRINE OF 
PEDIS POSSESSIO--As of the date of RPOOA approval by the FS, now a year 
ago, is asking the two of you to come to a ``meeting of the minds'' 
with respect to Libby Creek Ventures'TM posture in the 
Cabinet Mountains' Wilderness. Please expedite, officiate--clarify your 
position and bring this controversy to a conclusive end result.--
Anything less is a miscarriage . . . .
    Why is it that when policy making comes about, the small miner gets 
excluded? Small miners are where many discoveries of valuable ore have 
been brought to the ``light of day.'' Note the following excluded LCV 
holding ``first position'' in: http://www.missoula.com/news/node/925 
... ``Mining companies at odds over Cabinet Mountains drilling'' 
(meaning Revett and MMI).
    Please act on my request so that LCV does not ``have the rug jerked 
out from under it'' more than has already occurred. And as you know, 
this has been due to ``not knowing'' of adversity stalking its 
property, while at the same time LCV was complying with the mining 
regulations.
    Libby Creek VenturesTM is required by the 1872 Mining 
Law to fully demonstrate, under the doctrine of pedis possessio, 
diligent occupancy of its rightful mining claims, and to consistently 
demonstrate ``boots on the ground!''--Mines Management Inc., under any 
alias or operational subsidiary/entity, needs to ``get off LCV 
property'' which is also on national forest lands.--The USDA Kootenai 
National Forest needs to enforce the laws involving LCV!
    To Recap my assertions: Dating back to on or before September 11th, 
2006, when MMI first interfered with LCV's rightful exercise of 
exploration drilling on its mining claims, the Montana DEQ and the USDA 
Forest Service have enjoined with each other to support MMI and 
undermine the rightful exercise of LCV's mining heritage, even to the 
point of forcing LCV to give up: Today, MMI had the audacity to file a 
civil action against LCV and its components, to include the 
undersigned, and one claim is that LCV did not exercise pedis 
possessio.
    LCV, et al (claim holders and Wall) are being sued by MMI, MMC and 
Newhi: stating in their lawsuit that there is a controversy as to who 
owns the mining claims and the adit, which according to the suit needs 
to be adjudicated. Shouldn't the Forest Service hold off on permits? 
Meanwhile, MMI needs to stay out of the Libby Creek adit and all of the 
mining claims in contention until this is resolved in court and the FS 
and DEQ needs to quit interfering with LCV's mandatory exercise of its 
ownership and diligent occupancy under pedis possessio.
    USDA KNF FS and Montana DEQ have been/are denying LCV its rightful 
exercise of its small miner initiatives to explore and to hold under 
the doctrine of pedis possessio; full unequivocal use of its senior 
mining claims duly registered with Lincoln County Office of Recorder, 
Libby, Montana and the U.S. Department of Interior (DOI) Montana BLM. 
LCV is the rightful claim holder and expects a written ruling of 
``first come--first right'' respecting its POO and select endangered 
species.
            Respectfully submitted for your prompt execution,
                                             Frank R. Wall.
                                 ______
                                 
                                     Waldo Mining District,
                               Cave Junction, OR, January 23, 2008.
Hon. Jeff Bingaman,
Chairman.
Hon. Pete V. Domenici,
Ranking Minority Member.
    Dear Energy & Natural Resources Committee Members; I am writing you 
today as President of the Waldo Mining District, which was established 
in May of 1851 (in what is now SW Oregon); and as an individual Miner & 
Prospector for the last 28 years. I, and thousands of other individual 
citizens like me, beg you to hear our plea, and remember us in your 
important deliberations; the outcome of which could destroy the living 
American Heritage of the ``Individual Miner/Prospector''.
    One hundred thirty-six years ago a Bill was passed by Congress 
unique to all the world and history. This Bill, the U.S. Mining Law of 
1872, was promulgated from a blend of earlier mining laws, traditions, 
and most importantly from the methods and customs practiced by the 
miners themselves throughout the American west. For the first (and 
only) time in human history, individual citizens, without any prior 
approval from a government, and acting solely on their own initiative 
and at their own expense; were granted the right to enter the Public 
Lands to search for, locate, and extract the valuable minerals needed 
to supply this country's needs and build a sound economy.
    Was the 1872 Mining Law a success? For the answer to that question, 
all one has to do is look to history. At virtually no cost to the 
Nation and for well over one hundred years, most or nearly all of this 
country's mineral requirements have been met by domestic mining. All 
the iron for all the steel to build the railroads, bridges, buildings, 
all the weaponry and ships to fight two World Wars (and then some), the 
automobile industry, etc.; all the copper needed to light the world; 
etc.; and enough gold to pay for it all came from mining under the 1872 
Mining Law . . .  and along the way, the United States became the 
richest and most powerful nation on Earth.
    Last year, the House of Representatives passed H.R. 2262, the 
``Hardrock Mining and Reclamation Act of 2007'', which if enacted, 
would utterly destroy what little remains of this Nations once great 
mineral industry. This Committee now contemplates its own possible 
revision of the 1872 Mining Law. Because of the seriousness of these 
matters, and for the sake of this Nations continued wealth, security, 
and for the protection of a truly unique American heritage, I urge you 
to consider the following Testimony in your deliberations.
            part i: in response to those proposing revision
    Although the 1872 Mining Law has been attacked and amended many 
times since enactment, a more recent series of attacks in the last 
twenty or so years has brought us to today, where over-whelming and 
complete revision is being proposed. Those proposing the revision of 
the 1872 Mining Law seem to be driven by the extremist environmental 
community, and a handful of Congressional members that ought to know 
better. In response to at least some of the ``propaganda'', I submit 
the following:

    A. CLAIM: Mining in the United States is destroying the 
environment.

    RESPONSE: 99+% of all serious environmental harm from mining 
occurred before the 1960's & 1970's. Since the passage of tough federal 
and state environmental protection laws (e.g.; ESA, CWA, NEPA, etc.), 
no legally operating mine in this country poses a serious risk to the 
environment. Long gone are the days of unregulated environmental 
destruction. Amending the 1872 Mining Law will not undue the 
environmental damage of the past . . .  and the laws are already in 
place to keep any such damage from occurring in the future.
    The Committee is urged to keep in mind that ``some'' level of 
environmental disturbance will occur from mining (i.e.; you can't dig a 
hole without moving some dirt). Due to the site-specific nature of 
mineral operations, the best way to minimize the effects from mining is 
to control it at the local level. Bureau of Land Management and 
National Forest Service mining regulations already require NEPA 
analysis approved Plans of Operation for all mining operations likely 
to cause a significant surface disturbance. This approval process can 
take anywhere from a year or two to well over ten years. If anything, 
this process is already too burdensome and prohibitive for all but a 
simple pick & shovel operation (which even then may require permitting 
at the state level).
    Amending the 1872 Mining Law to place even tighter environmental 
protection restrictions and control on mining will bring nearly all 
mining to a screeching halt, destroying the industry along with 
hundreds of communities and thousands of families and individuals 
dependent on the mining industry.

    B. CLAIM: All mining operations should be bonded to guarantee 
reclamation.

    RESPONSE: Current Bureau of Land Management and National Forest 
Service mining regulations already require 100% reclamation bonding for 
all mineral operations that create a significant surface disturbance. 
This generally includes all but the smallest levels of mining, from 1-
man with a bulldozer or backhoe to the largest of mines. Amending the 
1872 Mining Law with tighter bonding requirements will only work to 
make a bad situation worse, as especially for the smaller operations, 
no one will issue a bond on mining operations forcing the operator to 
post a 100% cash bond, bankrupting many operations before they even 
stick a shovel in the ground.

    C. CLAIM: Mining operations are getting the minerals for ``free''; 
there should be a royalty.

    RESPONSE: Mining, as with almost all other business, is all about 
spending money in the hope of making even more money. The big 
difference with mining is that small fortunes can be spent just to 
determine if a deposit is worth developing. For every successful mine 
there are dozens of unsuccessful prospects. To place a further economic 
burden on the successful mining operation by imposing a royalty (i.e.; 
``tax'') will do nothing but put that many more mines in the 
``unsuccessful'' list.
    No mining operation is getting something for nothing . . .  larger 
operations expend millions of dollars in exploration and development 
work before any mineral comes out of the ground. That's millions of 
dollars of investment money spent into local communities as wages, 
supplies, lodging, etc. and to equipment supplies worldwide . . .  plus 
all the continued expenses if the mine is successful. Even the smallest 
of operations, such as the 1-man with a small underwater vacuum 
(``suction dredge'') may invest $3-10,000 in equipment.
    No miner is getting anything for free . . . 
    Another problem with the royalty issue is the potential ``takings'' 
issues, in that the owners of existing mining claims already own the 
minerals as granted and guaranteed by the existing law.

    D. CLAIM: Miners are patenting land for $2.50--$5.00 per acre.

    RESPONSE: No one is patenting land for $2.50--$5.00 per acre. The 
proof is that if land could be patented for that amount, there would be 
no land left to patent! In reality, since the early 1990's, Congress 
has placed a moratorium on the patenting of mining claims. Furthermore, 
even when patents were still being issued, most claimants expended $20-
30,000 (in 1980's dollars) per acre before and during the patenting 
process.
    Considering the incentive value of the patenting of mining claims, 
it would seem wiser to find a way to continue the practice rather than 
totally abolish it. I respectfully suggest that the problem with 
patenting is the fault of Congress, who in over 100 years never revised 
the payment amounts of $2.50--$5.00 per acre. At the time of enactment, 
even $2.50 was a lot of money to pay for an acre of land, let alone 
mountainous wilderness. If based on the value of an ounce of gold in 
the late 1800's (i.e.; $20/oz), $2.50 was equal to 1/8th of an ounce. 
At today's price (nearly $900/oz), that same 1/8th of an ounce is now 
worth $112.50.

    E. CLAIM: The Mining Law needs revision because it's 
``antiquated''.

    RESPONSE: One of the more popular battle cries, opponents to the 
Mining Law argue that the Law needs massive revision just because it's 
an old law. If that were the case, then maybe Congress should consider 
the creation of the Natl. Park Service and Yellowstone Natl. Park . . . 
as they too were enacted in 1872. Or how about the U.S. Constitution 
and the Bill or Rights . . .  they are even older than the Mining Law 
and following this logic (old must be bad) suggests the oldest needs to 
be revised first. Maybe we should revise the Declaration of 
Independence . . .  as it's oldest of all.
    Revising the Mining Law just because its 136 years old is nothing 
but bad news for this nation. ``If it ain't broke, don't fix it'' seems 
to aptly apply . . .  and it ain't broke, at least not in the sense 
proclaimed by those seeking reform. (It is broke in the sense that the 
environmental protection pendulum has swung way too far into the realm 
of needlessly restrictive to the point of prohibitive, causing untold 
economic hardship throughout the West.
          part ii: protecting the individual miner/prospector
    I beg the Committee's indulgence to bring up a special issue in 
regards to any reform of the 1872 Mining Law, which is the plight of 
the Individual Miner/ Prospector. Yes, we are still out there, 
searching for our own version of the American Dream. Every summer the 
gold regions of the West are visited by thousands of individuals and 
families usually in pursuit of placer gold using methods used 150 years 
ago. The most popular form of this ``small-scale'' mining is with a 
``surface suction dredge''.
    Contrary to what the extremist environmentalist community claims, 
suction dredge mining is the most environmentally friendly method yet 
devised for the recovery of heavy minerals, such as gold, from active 
streambed gravels. For the most part, all signs of the operations are 
reclaimed naturally with one winter flow; and, as numerous studies have 
shown, suction dredge mining, as currently regulated by the individual 
states, has a net beneficial affect on the environment.
    The largest of the common suction dredges is the 8'' dredge. It 
might have a floating barge 8 ft. wide X 16 ft. long, and be powered by 
a 40 hp Volkswagon engine. These dredges are used in larger rivers, and 
might move 1-3 cu/yrds/hr. For the most part, suction dredge and lessor 
mining/prospecting operations do not require an approved Plan of 
Operations under current BLM or FS regulations, but do require state 
permits which regulate for the protection of fish and fish habitat, 
etc..
    By far, this level of small-scale mining is the most popular . . .  
and the most like the gold rush days 150 years ago. By the thousands, 
individuals spend their summer vacations or retirement out in the great 
outdoors, practicing the methods developed over 5,000 years ago. And 
just like during the gold rush days, some go away empty-handed, most 
find at least something, many pay their expenses, and a certain few 
actually do pretty good. For the most part, nobody is getting rich. All 
however are continuously pumping their own money into the operation, on 
average of $2-3,000 per person per year.
    Next up the scale of operations involves mechanized earthmoving, 
typically a small 1-2 man (or husband & wife) seasonal bulldozer-
backhoe trommel & sluice operation. Even the smallest of these 
operations usually requires an approved Plan of Operations and 
reclamation bond. This level of operations is not as popular as the 
smaller levels of operations due to the considerably higher costs 
involved (a medium sized dozer or backhoe along with pumps, and some 
type of wash plant will cost $50,000 on up), the tremendous burden of 
getting an approved Plan of Operations and posting a bond, along with 
the plethora of state permits that may be required. Currently, this 
level of mining is nearly impossible due to the complexity of the 
regulations and the undue delays in the approval process. There are 
literally thousands of small-scale mineral deposits throughout the West 
well worth working at this level (but are far too small to work at the 
large scale) . . .  but aren't being developed due to the burden of 
obtaining approval. Any more restriction placed on this level of mining 
will stop the few hundred operations still in existence.
                  part iii: requests to the committee
    In order to preserve and protect the small-scale miners and 
prospectors, and along with them the hundreds of small communities and 
businesses dependent on the economic boost brought by mining, I 
respectfully urge the Committee to incorporate the following items in 
any proposed revision to the 1872 Mining Law:

    A. GRANDFATHERED RIGHTS: All existing claims at the time of any 
revision must have grandfathered rights back to the rights granted on 
the date of location.
    B. RETAIN THE 10-CLAIM SMALL-SCALE MINERS EXEMPTION: In order to 
maintain the small-scale mining industry (which pumps well over $20-
30,000,000 into the economy annually), the exemption on the $125 per 
claim per year maintenance fee and the performing of assessment work 
must be retained.
    C. OCCUPANCY: Small-scale miners & prospectors must be able to 
occupy the areas they are working for several reasons:

          1. Remoteness of the area, lack of or poor roads makes daily 
        commute expensive and time consuming.
          2. Many travel hundreds of miles in pursuit of a prospect, 
        and must be able to freely come and go (and stay) to have any 
        chance of success.
          3. Valuable equipment must be guarded at all times from 
        threats of all sorts, natural and human. This usually requires 
        occupancy on or near the claim. In sight of the equipment.
          4. Valuable minerals must be guarded from theft. An open 
        deposit is a tempting target when the claim owner is not 
        around.

    D. NO APPROVAL NEEDED FOR INSIGNIFICANT DISTURBANCE: Current BLM 
and FS regulations are sufficient to protect the Public Lands from any 
unnecessary disturbances. Any revision to the Mining Law should not 
contain any pre-set arbitrary conditions, as each mining operation is 
site-specific and needs the management of local authorities to be 
affective. Operations deemed not likely to cause a significant surface 
disturbance, at least up to an including most suction dredge mining 
operations, should not require an approved Plan of Operations. Simple 
exploration with a dozer or backhoe should also not necessarily require 
Plan approval. It really needs the local man on the ground to determine 
the possible extent of the disturbance, and the possible protection 
measures reasonably needed.
    Low thresholds for needing an approved Plan of Operations will 
cause the extinction of the smaller levels of mining, and will bury the 
BLM and FS in endless and needless tons of paperwork. It is currently 
estimated that the average ``simple'' FS Plan of Operations takes over 
$20,000 to approve, and most Natl. Forests are budgeted to approve 1-2 
Plans per year. Simply requiring all suction dredge miners to obtain an 
approved Plan would cause the submittal of thousands of Plans to the 
FS, which would destroy the suction dredge industry (due to delays), 
and take all the efforts of the whole FS staff to even make a dent in 
the pile of Plans to be approved. And all for no good reason.
    E. NO ROYALTY ON SMALL-SCALE MINING: Even if the Committee proposes 
a royalty, all small-scale operations producing less than $100,000 
annual net profit should be exempted to avoid placing undue economic 
hardship on the small miner, and to save the collection agency 
thousands of hours of paperwork attempting to collect trivial amounts 
of money (i.e.; the govt. would probably spend way more in the 
collection and any amount collected).
    And although I believe a royalty is wrong, and harmful to the 
industry on the whole, if there must be a royalty, then it should be on 
``net'' returns, not on the ``gross'' as proposed by the House. A 
royalty on the ``gross'' will work to make way too many mining 
prospects uneconomical.
    F. NO SPECIAL STATUS FOR THIRD PARTY APPEALS & SUITS: Already one 
of the main reasons for lengthy undue delays in obtaining approval on 
Plans of Operation is the constant harassing interference usually by 
non-profit tax-exempt environmental organizations (NGOs) out to save 
the planet. The laws, rules and regulations already give all interested 
parties ample opportunity to raise issues of concern and object to any 
proposed mining operation requiring an approved Plan.
    Just by following the FS appeal process (and without going to 
court), NGOs can and do tie up and delay approval of almost any Plan 
for proposed mining for easily a year or more based on the flimsiest 
excuse or slightest technicality in preparation of the required NEPA 
analysis and document. What's worse, even after forcing the FS into 
spending on average over $30,000 preparing the required NEPA documents, 
and after causing the total waste of years of the miners life waiting 
for approval (and as many individual small-scale miners get involved in 
mining in their later years, many fall into ill health or even die 
while waiting 2, 3, 4, all the way up to 10 or more years for approval; 
even when the NGOs that caused all this are found to be wrong, they 
loose nothing.
    Even if they loose the appeals (of which there are at least two 
levels available), there is always the option of suing in court to stop 
or just delay the proposed mining operation. (Sometimes the window of 
opportunity for the miner is less than the time it takes to fight his 
way to approval, and he either goes broke from legal fees, or grows too 
old or dies. The NGOs know that with the right arguments and a 
determined effort, they can easily delay the approval of any Plan of 
Operations for at least ten years. Even though they can cost the FS and 
the miner thousands of dollars in defense, even when they are found 
wrong and loose in court, in many instances, they (the NGOs) somehow 
receive legal fees paid by the taxpayers. (NOTE: The whole 
environmental protection industry has grown by leaps and bounds beyond 
the realm of simply over-protective. A whole ``environmental law'' 
industry has formed milking the taxpayers of hundreds of millions of 
dollars. They actually get paid for destroying this Nation's natural 
resource industries . . .  in part by the very taxes paid by those same 
industries.
    Please do not give the future of the United States Mineral Industry 
over to the hands of the NGOs by giving them or other third parties 
special status, they already have far too much influence and is costing 
this Nation dearly.
                       part iv: closing statement
    The basic premise of our whole system of government is that the 
least amount of government governs best, and the closer we get to 
individual freedom and capitalism the better off we all are. Mining of 
minerals is a prerequisite for all civilization. So is a clean and 
healthy environment. The two are not necessarily incompatible, but 
rather can go hand-in-hand so that they both thrive.
    Under the current levels of regulation (and contrary to what some 
might say), no legally operating mining operation is seriously harming 
the environment. On the other-hand, many overly and unnecessarily 
restrictive regulations and policies are unnecessarily harming the 
mineral industry.
    Considering that everything humankind needs ultimately comes from 
one of two sources (i.e.; agriculture or mining), there can be no doubt 
that a strong nation requires a strong domestic mineral industry. I 
respectfully submit to this Committee that due to the over-whelming 
success of the 1872 Mining Law, any reform of the 1872 Mining Law 
should work to strengthen the mineral industry, not act to further 
destroy it.
           republican democracy & the americn dream in action
    I can think of no other law still on the books today that practices 
the tenants of pure republican democracy and the ``American Dream'' 
like the 1872 Mining Law. In the tradition of a Horatio Alger ``rags to 
riches'' story (whereby the poor hero achieves success and wealth 
solely through honest hard work), the rights granted in the 1872 Mining 
Law alone allow nearly anyone to pursue the American Dream of Self-
Sufficiency and Happiness. Without the 1872 Mining Law, none of the 
tremendous benefits to the Nation (e.g.; national economic wealth, 
mineral self-sufficiency, the taming and settling of the West, 
technology, millions of jobs, etc.), would have occurred, and this 
Nations history would be quite different.
    I, Tom Kitchar, do herby swear that the above is true and correct 
to the best of my knowledge and understanding, and I humbly thank the 
Committee for considering my Testimony.
            Respectfully submitted by,
                                               Tom Kitchar,
                                                         President.
                                 ______
                                 
                                              Orion Mining,
                                                      Richland, OR.
Hon. Jeff Bingaman,
Chairman, Senate Energy and Natural Resources Committee.
Hon. Pete V. Domenici,
Ranking Minority Member, Senate Energy and Natural Resources Committee.
    Dear Committee Members: There are great concerns here in the West 
if the 1872 mining law were materially changed in any way. Ever since 
the Sierra Clubs ``Mine Free by '93'' campaign failed to end mining in 
this country, a tremendous campaign of misinformation has been waged 
about the Mining Law of 1872 in general and small scale mining in 
particular. Yet contrary to activist's propaganda, The Mining Law is as 
current as any law on the books, and is as important to our sustainable 
economic and National security as our founding principles of the US 
Constitution.
    Environmental mythology holds that Congress passed the Mining Law 
to accelerate development of the west. Simply not true. The nation's 
first mining laws followed the first discovery of gold in North 
Carolina in 1803. When California was admitted to the Union in 1850, 
they already had 250,000 people. The diverse mining laws of 1849, 1865, 
and 1870 were consolidated into one Mining Law, in 1872. And almost 
every major community in the west was already a settlement. Even 
Yellowstone Park was created in 1872.
    It is hard to understand this ongoing dispute about the area of the 
1872 Mining law without reference to history. The California gold rush 
in 1849 took place without much law to guide it so the miners developed 
their own rules and customs. They evolved in the miners' meetings, 
which were used to govern mining camps before any official government 
existed at these remote locations. Among the earliest successful 
prospectors in the 1849 California gold rush were experienced miners 
from Cornwall, England, Chile, participants in the Dahlonega, Georgia 
gold rush of 1829, and other experienced prospectors and miners, who 
already knew something about what practical rules were needed. That the 
rules were so successful may reflect this combination of practical 
experience with considerable learning, for in 1849 hardly a camp 
existed on the great Sierra slope that did not contain miners who were 
graduates of colleges and law-schools or were lawyers of considerable 
experience. The miners' meetings operated as might be expected of a 
highly democratic process. They favored the interests of those who were 
there--mostly individuals and small firms without much capital. A much 
more centralized governmental process in Washington might have favored 
those with influence in the national government--perhaps those who 
might want to protect large firms from having to pay huge amounts to 
buy claims from small scale Miners or prospectors who discovered 
minerals but lacked the capital to extract them or preserve the true 
wealth for the political elite at the expense of the working man. It 
has never relay been a fight over protecting the environment but who is 
in control of local economic and social resources.
    The Law defined who could claim mineral rights and how they were to 
be administered. That's all. Other approaches were possible, and might 
have commended themselves to people with different interests. Justice 
Field took the position, to the great displeasure of the miners; that 
under the common law after Alta California became American, minerals 
passed to the owner of the land, so that the miner could not invade 
land privately held. Another alternative might have been the Mexican, 
based on the Spanish custom, whereby the sovereign was entitled to a 
royal share, or royalty, of one fifth of the gold. Yet another approach 
might be the English, where unlike the Spanish quinto, if any gold or 
silver was found in a mine the king was entitled to the whole, at least 
if the precious metals were worth more than the base metals (though by 
two statutes of William and Mary, the king allowed the owner to keep 
the mine provided that the gold and silver must be sold to the king for 
the value of the tin in the ore). In the American gold rushes in the 
West, as in our revolution from the crown the miners made the rules, so 
the miners made the money, not the king, sovereign or their politically 
elite governmental equivalent but the common man, the one doing the 
hard highly risky laborious work. This stimulated a great deal of 
successful mining, both large and small scale.
    The nations' tax, environmental, and corporate laws cover 
governance of all these raised issues. Today, activists ridiculously 
proclaim that mining is exempt from these laws because of the 1872 
Mining Law. Since 1872 though, the Mining Law has been continuously 
updated, most recently in 1993. The Mining Law has been severely 
narrowed through amendments, and restricted through hundreds of court 
cases and a plethora of environmental laws. In actuality, the only 
portion of the Mining Law that remains as originally written, is the 
title.
    Mining played an integral role in America's development and growth, 
especially in the West. In fact, the history of the American West is 
tied directly to mining and the mines that gave birth to small, rural 
communities. Cities such as Park City, UT and Denver, CO got their 
start as mining towns and prosper today. Even though most of the gold 
in the California and other western gold rushes was found on federal 
land, the federal government adopted a mining law scheme late, long 
after the customs of ownership by discovery and extraction had been 
established. The California gold rush of 1849, Colorado in 1859, the 
Comstock Lode and other strikes in Nevada in 1859-60, Idaho in 1862-63, 
Montana in 1863, and quite a few others, all preceded the federal 
mining laws. As in the software industry in the 1990s, the industry 
developed, many vast individual fortunes were made, and the national 
wealth was greatly increased, all by a new kind of property, before 
much of the legal framework for the industry developed.
    However, some communities have turned into ghost towns when mines 
closed their doors, jobs disappeared and no economic center remained. 
This is still a threat to thousands of American families and 
communities throughout the rural West. Though it is not due to the 
threat of closing of mines but of over regulation of the Western rural 
landscape.
    The present 1872 mining law solves this crisis by allowing small 
and artisanal miners as well as mining companies to work 
collaboratively with communities to provide a continued source of 
economic development after the mineral resource has been depleted. When 
it came, in skeletal form in 1866, and in substantially its current 
form in the Mining Law of 1872, the federal statutory law of mining 
``received'' customary law in much the same way that the states had 
received the common law. The statute, still in force, says ``all 
valuable mineral deposits'' in federal lands ``shall be free and open 
to exploration and purchase'' under prescribed regulations ``and 
according to the local customs or rules of miners in the several mining 
districts, so far as the same are applicable and not inconsistent with 
the laws of the United States.'' Thus, instead of following any of the 
alternative schemes, which might have preserved more government 
authority or revenue, Congress expressly adopted the ``local customs or 
rules of the miners.'' The most important of those customs created the 
property right based on discovery and extraction of valuable minerals, 
in the absence of any title. Thus, the history of mining customs has 
unusual relevance because in this area, as Faulkner said, ``the past 
isn't dead--it isn't even past.'' Despite much contemporary hostility 
to the Mining Law of 1872 and high level political pressure by 
influential individuals and organizations for its repeal, all repeal 
efforts have so far failed, and it remains the guiding law. The miners' 
custom, that the finder of valuable minerals on government land is 
entitled to exclusive possession of the land for purposes of mining and 
to all the minerals he extracts, has been a powerful engine driving 
exploration and extraction of valuable minerals, the very foundation of 
our economy, and has been the law of the United States since 1872. The 
provision specifically allows miners and companies to purchase, or 
``patent,'' their mining lands and work with other businesses to 
provide sustainable private income to rural communities. Without making 
these lands private, reclamation laws require companies to remove 
everything as they leave, including roads, buildings, power plants and 
power lines, water and sewer lines, and more to the determent of the 
local communities.
    Unfortunately, several special interest groups have dishonestly 
portrayed the 1872 Mining Law as a giant land sale and giveaway to 
developers. Not only is this rhetorically false, it is an affront to 
the rural American families and communities whose livelihoods depend on 
sustained economic development. A mineral claim is a parcel of land 
containing precious metal in its soil or rock.'' Under the Mining Law 
of 1872, there are three stages in patenting a mining claim.
    The first stage is ``location'' of a claim. ``A location is the act 
of appropriating such a parcel,'' generally by posting notice on the 
ground. ``The locators of all mining locations . . . so long as they 
comply with the laws . . . shall have the exclusive right of possession 
and enjoyment of all the surface located within the lines of their 
locations, and of all veins, [and] lodes.
    At the second stage, the prospector is required to perform 
improvements or assessment work. Until a patent has been issued 
therefore, not less than $100 worth of labor shall be performed or 
improvements made during each year. However the prospector spends many 
times this amount today in trying to comply with multitude of 
governmental agency rules.
    The third stage, the prospector may apply for a patent (though at 
present this is temperately suspended). A person who has ``located'' a 
mining or millsite claim can apply for a patent (the term for a 
government conveyance of title to an individual of public land) with 
the Bureau of Land Management, show compliance with the laws regarding 
location, post notice of application, and file proof of notice. After 
further publication of notice, the applicant files papers showing that 
the requisite labor has been expended on the claim and that the 
description is correct, and further proof of the requisite publication 
of notice.
    At This point, if no adverse claim has been filed, ``it shall be 
assumed that the applicant is entitled to a patent'' upon payment of a 
nominal fee, unless it is shown that the applicant has failed to comply 
with the mining laws.
    I find it appalling that the Washington DC establishment has 
allowed the Mining Law to be so misrepresented. We as a nation cannot 
allow the scare tactics of a few anti-energy, anti-development, anti-
private property, and anti-people special interests to threaten 
American families, our national security and the vary foundation for 
our form of self governess.
    We've heard a great deal about the outsourcing of American industry 
in recent years. One aspect of this problem that doesn't get the 
attention it deserves is the outsourcing of strategic mineral mining to 
foreign countries to the determent of the US manufacturing, balance of 
trade, economy and national security.
    For more than a decade, a moratorium has been in place on patenting 
any mining claims in the United States under the 1872 Mining Law. That 
has resulted in the loss of investments in mining and our nation is 
forced to look overseas for some desperately needed minerals.
    To bring some of these mining jobs back home it's time to lift the 
moratorium on patenting in the 1872 law.
    Contrary to activist's mythology, tax laws require mining companies 
to pay royalties. Royalties are paid directly to the states, and not 
the black-hole of the federal government. All mining states have 
royalties paid under different scenarios. Two royalties are paid on 
metals in Montana, the Metals Mine License Tax and the Resource 
Indemnity Tax. Montanans irresponsibly banned gold mining in 1998, and 
the royalty lost to Montana schools alone, is $200 million dollars!
    Environmentalists claim mining is allowed to operate without regard 
to other public land interests. This is so untrue; the reality is that 
65% of our lands are closed to mineral entry. Wilderness consumes 35% 
of the public lands and supports only 10% of total recreation use. The 
0.5% of our lands employed by mining though, has benefited mankind by a 
40:1 multiple, that tourism will never equal, and the industry 
continues to strongly support the multiple-use concept and reclamation 
after the minerals are depleted.
    Consider that our roads, bridges, railroads, transmission, and 
energy facilities are in shambles in this country. Hybrid electric 
vehicles consume 30% more copper and new CAFE standards will require 
new metal alloys.
    Considering existing royalties, and the highest corporate and 
property taxes in the industrialized world, the question begs; where 
are the metals going to come from when mining is banned by our tort-
driven, ``taxaholic'', NIMBLY attitudes towards our land?
    The GAO and independent studies have demonstrated that the Mining 
Law allows the maximum benefit to the public in terms of taxation, 
production, and revenue; so leave it alone. The nation's environmental 
laws continue to fail because they are court-driven and are 
obstructionist, not protectionist. Environmental NGO's continue to 
lobby for single-use designation for our public lands. The public 
beware. The threat to our land is not from the Mining Law of 1872!
    To alter or change the 1872 Mining Law in the present political 
climate would really be a violation of the public trust, since the 
citizens in each State have elected to Congress members of the Senate, 
in part, to protect the sovereignty and the property of not only the 
States but to protect the rights of the individual as stated in the 
constitution and the US Codes of law.
    I expect Congress to protect these rights of the people as well as 
our National Security both economic and social.
    Thank you for taking this testimony.
                                         Arthur Sappington,
                                                    Owner/Operator.
                                 ______
                                 
                     Southeast Alaska Conservation Council,
                                      Juneau, AK, February 5, 2008.
Hon. Jeff Bingaman,
Chair, Senate Committee on Energy and Natural Resources, Washington DC.
Re: Comments for the Hearing Record on Reform of the Mining Law of 1872

    Dear Senator Bingaman: Like most Americans, the Southeast Alaska 
Conservation Council (SEACC) supports strong and healthy communities 
and appreciates the jobs associated with mining. Mining must be done in 
a way that protects our clean water and way of life. SEACC works to 
ensure that mining in Southeast Alaska is done responsibly. We support 
reforming the Mining Law of 1872 to hold the mining industry fully 
accountable for protecting our public resources and providing a fair 
return to U.S. taxpayers for the use of public lands.
    Mr. Randy Wanamaker, with the Berners Bay Consortium Human Resource 
Development Corporation, testified on January 24, 2008, before the 
Senate Committee on Energy and Natural Resources. Mr. Wannamaker used 
examples from the Kensington Mine project, near Juneau Alaska, as the 
basis for his opposition to reform of the Mining Law of 1872. With our 
testimony, SEACC hopes to provide the Committee with a balanced 
perspective of mining law reform and the Kensington Mine project. We 
respectfully request that this letter and accompanying attachments be 
included in the official record for the January 24, 2008 hearing.
    Founded in 1970, SEACC is a grassroots coalition of 15 volunteer, 
non-profit conservation groups made up of local citizens in 13 
Southeast Alaska communities and is dedicated to preserving the 
integrity of Southeast Alaska's unsurpassed natural environment while 
providing for balanced, sustainable uses of our region's resources.
    protecting resources, water and communities is good for business
    The Mining Law of 1872 was enacted over 135 years ago, and the 
federal government interprets it as a mandate that mining is the 
highest and best use for public lands. This approach fails to address 
issues that are critical for today, such as mining royalties, abandoned 
mine cleanup, and protecting special places and clean water. Mining law 
reform, such as the provisions outlined in H.R. 2262, would help ensure 
that mining stays a part of our economic future in a responsible way.
    Mining proponents claim that reform to the Mining Law of 1872 would 
damage the industry. The truth is that responsible development that 
protects clean water, wildlife and special places is good for business. 
That is especially true in Southeast Alaska, where some of our 
strongest industries, such as commercial fishing and tourism, rely on 
these resources.
              better water quality protections are needed
    Unfortunately, federal law does not sufficiently protect surface 
and groundwater quality from the impacts of hardrock mining. The Mining 
Law of 1872 contains no environmental provisions. The Clean Water Act 
does not address impacts to groundwater. And, the Resource Conservation 
and Recovery Act (RCRA) provides exemptions for mining waste. A 2006 
scientific, peer-reviewed study found that more than 75% of the major 
hardrock mines surveyed exceeded water quality standards.\1\ Of the 
mines surveyed, 84% were modern mines that began operating after the 
advent of modern environmental laws. Coeur d'Alene Mines Corporation's 
Rochester Mine in Nevada illustrates this very issue. Despite the 
company's assertions that existing laws would protect water resources, 
the mine has resulted in numerous groundwater quality exceedances for 
pollutants such as cyanide.\2\
---------------------------------------------------------------------------
    \1\ Kuipers and Maest, ``Comparisons of Predicated and Actual Water 
Quality at Hardrock Mines,'' 2006.
    \2\ Ibid.
---------------------------------------------------------------------------
  mining law reform should ensure that mining is balanced with other 
                               land uses
    Mr. Wannamaker asserts that the National Environmental Policy Act 
(NEPA) provides sufficient protection for special places, and provides 
federal land managers sufficient authority to balance mining with other 
important land uses. This is not true. NEPA requires only that the 
environmental impacts of a mining proposal be considered by federal 
decisionmakers; it does not require federal agencies to choose the most 
protective option. Furthermore, the 1872 Mining Law prioritizes mining 
over all other land uses, precluding federal land managers from 
effectively protecting areas of special value (e.g., spawning habitat, 
municipal water supplies, or important cultural resources) even if 
identified through the NEPA process.
 mining law reform should require full cost, independently guaranteed, 
                          reclamation bonding
    Mining law reform should ensure that there is sufficient, 
independently guaranteed, financial assurance to cover the full cost of 
reclamation and closure. Too often, taxpayers are left bearing the 
burden when reclamation bonds are inadequate.\3\ To date, the EPA 
estimates the full cost of abandoned mine cleanup at $50 billion.\4\
---------------------------------------------------------------------------
    \3\ Government Accountability Office, ``Hardrock Mining: BLM Needs 
to Better Manage Financial Assurances to Guarantee Coverage of 
Reclamation Costs,'' June 2005, GAO-05-377.
    \4\ US EPA, Office of Solid Waste and Emergency Response, 
``Cleaning Up the Nation's Waste Sites: Markets and Technology 
Trends,'' September 2004.
---------------------------------------------------------------------------
    The State of Alaska's reclamation bonding does not adequately 
protect the taxpayer or ensure reclamation because it authorizes 
corporate guarantees. As a form of financial assurance, corporate 
guarantees provide no guarantee at all. A corporate guarantee is simply 
a written promise, or ``IOU,'' by the corporation that it will fulfill 
its reclamation obligation. There are no hard assets, cash, or cash-
equivalents behind it.
    Circumstances such as mergers, hostile takeovers or dramatic 
fluctuations in metal prices often occur very rapidly, leaving what 
might appear to be a healthy corporation in difficult financial 
circumstances. Many companies using corporate guarantees have failed or 
declared bankruptcy.\5\
---------------------------------------------------------------------------
    \5\ Government Accountability Office, ``Environmental Liabilities: 
EPA Should Do More to Ensure that Liable Parties Meet Their Cleanup 
Obligations,'' August 2005, GAO-05-658.
---------------------------------------------------------------------------
 existing laws did not cause unnecessary delays at the kensington mine
    Mr. Wannamaker asserts that existing federal environmental laws and 
conservation groups caused unnecessary delay in permitting the 
Kensington Mine, In truth, it was Coeur d'Alene Mine Corporation's push 
to permit a mine using an illegal waste disposal method that delayed 
the process. The Kensington Mine had received the necessary permits for 
dry-land mine waste disposal in 1998. But the company chose not to 
proceed with mine operations and instead, it redesigned the mine to 
ensure a maximum profit. This new plan called for dumping chemically 
processed waste (tailings) into a lake. These toxic tailings would have 
killed all fish and most other aquatic life. If it had proceeded, the 
Kensington Mine would have been the first mine in over 30 years to be 
permitted to dump chemically processed tailings into a lake. Not 
surprisingly, the 9th Circuit Court of Appeals ruled that this lake 
dumping plan violated the Clean Water Act.\6\ The Kensington Mine could 
have been in operation now for a number of years, if Coeur d'Alene Mine 
Corporation had not abandoned its initial design in favor of a legally 
risky one--one that ultimately proved illegal.
---------------------------------------------------------------------------
    \6\ United States Court of Appeals for the Ninth Circuit, ``SEACC 
v. Corps,'' May 22, 2007, No. 06-35679.
---------------------------------------------------------------------------
    Before passage of the Clean Water Act in 1972, mining companies 
frequently dumped their tailings in the nearest lake or river, often 
with catastrophic consequences for those water bodies, for fish, and 
for human health. What the Kensington Mine proposed to do with their 
tailings has been illegal for decades. In fact, in 1982 the 
Environmental Protection Agency (EPA) adopted regulations specifically 
prohibiting this practice for all new gold mines. The EPA studied the 
mining industry nationwide and concluded that the discharge of mine 
tailings into navigable waters was unnecessary because feasible 
alternatives existed and were already in use at most mines. More 
recently, and for the Kensington Mine specifically, the EPA determined 
that disposal of tailings on dry land would be the environmentally 
preferable alternative.
    Mr. Wanamaker was correct in stating that most people in Southeast 
Alaska want the Kensington Mine to go forward, but many Alaskans also 
want development at the Kensington to be done right and to have 
Alaska's clean water protected. Most recently, SEACC worked one-on-one 
with Coeur d'Alene Mines, to develop a mining plan that would dispose 
of the mine's waste in a way that protects water quality and moves the 
project forward. SEACC and other conservation groups have described 
this new plan as promising.\7\
---------------------------------------------------------------------------
    \7\ Alan Suderman and Kate Golden, Juneau Empire, ``Coeur submits 
Kensington proposal,'' January 27, 2008.
---------------------------------------------------------------------------
    SEACC has long encouraged the approach to responsible development 
that is embodied in the House's mining reform bill. We encourage the 
Senate to use this bill as the basis for Mining Law reform and to 
include these important principles in any reform bill that is 
introduced in the Senate:
            allow mining to be balanced with other land uses
    The federal government currently interprets the 1872 Mining Law to 
mandate that mining is the highest and best use for public lands. 
Federal land managers give preference to mining over all other land 
uses--from recreation to clean water to hunting. Land managers should 
have the authority to deny mine proposals and balance mining with other 
valuable land uses.
           establish environmental and reclamation standards
    Strong standards are needed to make sure damage to land and water 
is prevented. Perpetual pollution should be banned and mines should be 
required to reclaim public lands to sustain post-mining uses.
         gives local communities a voice in land use decisions
    State, local, and tribal governments should be able to put lands 
important to their community off-limits to mining.
                        implement fiscal reforms
    The sale of public lands to corporate interest should be 
permanently ended, and mining companies should be required to pay for 
the minerals they extract from taxpayer's lands. Mining companies 
should pay a gross royalty similar to what other extractive industries 
pay for what they extract from public lands.
                create funds to clean up abandoned mines
    Money generated by this new royalty should go to clean-up the more 
than 500,000 abandoned mines that litter western landscapes.
                   protect special places from mining
    Treasured areas like Wild and Scenic Rivers, Roadless Areas, Areas 
of Critical Environmental Concern and Wilderness Study Areas are not 
appropriate places for a mine. These areas should be put off limits to 
new claims.
    I would be pleased to answer any additional questions you may have 
on mining reform or the Kensington Mine.
            Sincerely,
                                                Rob Cadmus,
                                Water Quality and Mining Organizer.
                                 ______
                                 
    Statement of John E. Antonio, Governor of the Pueblo of Laguna, 
                               Laguna, NM
                            i. introduction
    This statement is submitted by the Pueblo of Laguna (``Pueblo'' or 
``Laguna'') to apprise the Committee of the Pueblo's concerns over 
mining and to assist the Committee in developing language to reform the 
Mining Law of 1872.
    The Pueblo of Laguna is a federally recognized Indian tribe located 
45 miles west of Albuquerque, New Mexico, and has approximately 8,000 
members who are affiliated with six (6) different villages. The 
Pueblo's lands consist of 560,000 acres in Cibola, Sandoval, Bernalillo 
and Valencia Counties, and contain the site of what was once the 
world's largest open pit uranium strip mine: the Jackpile-Paguate Mine. 
The Jackpile-Paguate Mine, which began operating in 1953, was finally 
shut down in 1982 but then laid dormant for 7 years before reclamation 
activities began. During that time, stockpiled waste was blown into 
surrounding areas, including the Paguate village, located just 30 feet 
from the mine. In addition, rain caused waste from the mine to flow 
into surface water tributaries. After years of negotiating with the 
company who conducted the mining, reclamation began in 1989 and was 
completed in 1995.
    Despite efforts to reclaim the mine after it closed, the mine 
continues to have a tremendous impact on the long-term health and 
environmental landscape at the Pueblo. Many Pueblo members who worked 
in the mine or lived near the mine suffer from cancer-related illnesses 
and other health conditions. Two surface water tributaries near the 
mine, the Rio Paguate and the Rio Moquino, and the Rio San Jose have 
since tested positive for radiation contamination. Groundwater is also 
at risk for radiation contamination. Because water is scarce in our 
arid part of New Mexico, the contamination of our water resources is 
devastating to our people and the entire region. Although no official 
studies have been conducted to establish a direct correlation between 
the mining activities and the increase in cancer among individuals who 
live near or worked at the mine, significant statistical information is 
being compiled on former mine workers applying for benefits under the 
Radiation Exposure Compensation Act (``RECA''). Many of these 
applicants have been diagnosed with cancer-related illnesses. In 
addition, other studies that are now being conducted may show a direct 
correlation between uranium mining activities and various respiratory 
and kidney problems, and may even extend to problems related to 
diabetes. Testimony on these and related issues was recently presented 
in Grants, New Mexico, at a New Mexico legislative hearing on the 
impacts of uranium mining.
    As a result of our experiences with mining, the Pueblo is opposed 
to any mining on or near Pueblo lands. In 2007, our Tribal Council 
passed a resolution to establish a moratorium on any uranium mining and 
development. However, in the event that mining is permitted near our 
lands, the Pueblo seeks to be included in the process and have adequate 
protections in place.
                          ii. mining at laguna
A. Uranium Mining, Generally
    Uranium, a silvery-white, radioactive metal similar in appearance 
to a piece of silver or steel, is never found in its pure form in 
nature. It is always found combined with other elements into different 
chemical compounds, which are highly poisonous. Uranium has been used 
to make material for nuclear weapons and to make fuel for nuclear power 
plants. Deposits of minerals that include large amounts of uranium, 
large enough to make mining worthwhile are rare. However, the ``Four 
Corners'' area of Arizona, Colorado, New Mexico and Utah contains some 
of the richest deposits of uranium ores in the world.
    Open pit mining is used when the ore is close to the surface and 
involves removing the ``overburden'', or top layers of soil and rock 
that cover the ore. The overburden is hauled off and often stored in 
huge piles. Underground mining requires drilling, blasting and digging 
into the earth and the ore is obtained by the use of elevators. Holes 
are drilled to provide ventilation because the decay of uranium results 
in a radioactive gas called radon. Radon can build up in underground 
mines causing serious health problems for miners. In addition, 
underground water can cause problems.
    Once the uranium is obtained, the next process is ``milling'', or 
removing the valuable mineral from the mined ore. The ore is crushed 
and then mixed with water to form slurry. The slurry is mixed with 
chemicals to separate out the uranium ore from the rest of the rock, 
referred to as ``leaching''. The liquid containing the uranium ore, or 
``leachate'', is then filtered from the rest of the slurry and further 
concentrated by a precipitation process. Water is then removed and the 
precipitate is dried to produce ``yellowcake'', which is then packaged 
and shipped to an enrichment plant. Material left over from the milling 
process is referred to as ``tailings'', which are still dangerous 
because of the radioactive elements they contain.
B. Uranium Mining at Laguna
    The Grants Mineral Belt, which stretches from east of Gallup, New 
Mexico to Laguna, New Mexico and includes Laguna Pueblo lands, has 
especially rich uranium deposits. In May 1952, the Anaconda Mining 
Company (later Atlantic Richfield or ARCO) entered into a lease with 
the Pueblo to mine uranium on 4,988 acres of Laguna land near Paguate 
Village. Additional leases were signed in 1963 and 1976 for 2,560 and 
320 acres, respectively, for a total of 8,000 acres. As a result, 
Anaconda operated one of the world's largest open pit uranium mines at 
the Pueblo from 1953 until 1982. Before the first lease was signed with 
the Pueblo, Anaconda had signed an agreement with the U.S. Atomic 
Energy Commission (``Commission''), which made Anaconda the sole ore-
buying agent for the Commission. In fact, a majority of uranium 
produced on Indian land between 1950 and 1968 went to the Commission.
    Anaconda utilized 3 open pit mines and 9 underground mines at 
Laguna to produce 24 million tons of uranium-bearing ore. More than 400 
million tons of earth had to be moved to obtain the ore. Mining 
conducted from the 9 underground mines primarily began in the 1970s. 
The Jackpile-Paguate Mine, located in the Village of Paguate, was the 
deepest open pit mine at 625 feet. It operated 24 hours a day, 7 days a 
week, 365 days a year for 30 years and employed as many as 800 members. 
At its peak, the mine employed the majority of the workforce at Laguna 
and neighboring communities.
    ARCO closed the mine on March 31, 1982, after which it laid dormant 
for 7 years before any efforts to reclaim the mine began. More than 
2,000 acres of land and several pits needed to be reclaimed. One pit 
measured over 600 feet deep, and a few pits were filled with 
contaminated water that had seeped up over the years. A draft 
environmental impact statement found ARCO primarily responsible and 
recommended reclaiming the mine because the site was a public health 
and safety hazard, noting that more serious hazards would develop if 
the site was left unreclaimed. Reclamation began in 1989 after ARCO and 
the Pueblo reached an agreement by which the Pueblo would perform the 
reclamation. However, the $43 million provided by ARCO was well below 
the $400 million required to fully reclaim the mine. The Pueblo tried 
to reclaim the mine as best as possible, despite the lack of funding 
and the fact that there were standards for reclaiming a uranium mine in 
place at the time.
    In reclaiming the mine, the Laguna Construction Company used the 
overburden to partially backfill some of the pits. It was specially 
sloped and terraced to keep it in place and prevent wind and rain from 
washing it away. Next, a layer of rock, or shale, of up to 12 feet 
thick was put into the pits to keep radiation from coming up into the 
air. An additional foot and a half of topsoil was placed over the top 
and then seeded with grasses and other native plants. High grade ore 
piles that were still on the surface were covered with layers of top 
soil and reseeded with native vegetation. The Pueblo's reclamation 
process, the first attempt in the world to reclaim an open pit uranium 
mine, was completed in 1995 but the Pueblo continue to monitor the mine 
and its ongoing impacts. And, because the $43 million provided by ARCO 
only enabled the Pueblo to conduct minimal reclamation, much work still 
remains to be done to fully reclaim the mine and reduce the health and 
environmental impacts.
                     iii. mining impacts on laguna
    The Village of Paguate, whose outer village boundaries lie only 30 
feet from the edge of the largest open pit in the mining area, was 
significantly affected by the mine. In this village of approximately 
1500 residents, blasting caused old stone houses to crack apart, and 
dust from the mine coated homes, crops and clothes. Paguate residents 
on the south and eastern sides of the village, closest to the mine, 
recall dust that seemed to linger for hours after a blast and cracks on 
the walls of homes.
    Despite the reclamation efforts, former mining employees as well as 
Pueblo members living in Paguate and downwind continue to report 
growing numbers of cancer-related illnesses. Contaminated surfaces and 
groundwater sources still exist. Of the 24 million tons of ore mined 
from the Jackpile-Paguate Mine, approximately 23.7 million tons were 
left as tailings, which are still dangerous because of radioactive 
elements they contain. Water contaminated from the milling and 
precipitation process was pumped into big ponds to evaporate away. In 
addition, water that flows through the old mine, including the Rio 
Moquino and the Rio Paguate, is contaminated from radioactive elements. 
Many Laguna members have died, and others suffer from high incidences 
of diabetes, reportedly linked to radiation exposure attributed to 
uranium mining. In addition, radiation exposure can cause damage that 
may not show up for 10-40 years.
    Currently, little is known about the stability of the radioactive 
pollutants and additional risks, which may involve migration into local 
groundwater supplies or into the atmosphere. Meanwhile, the mine 
continues to have a tremendous impact on the long-term health and 
environmental landscape at the Pueblo, where many residents and former 
mine employees continue to experience deleterious health effects. The 
mine contaminated parts of the reservation with toxic, radioactive 
materials and miners who worked at the Jackpile Mine were not warned of 
the exposure to radiation, including radon gas and radioactive dust.
  iv. the pueblo urges the committee to reform the mining law of 1872
    Based on the Pueblo's experience with the Jackpile Mine, the Pueblo 
is opposed to any further mining on or near Pueblo lands. The Pueblo 
fears that the State of New Mexico, the U.S. Department of Agriculture, 
and the U.S. Forest Service will permit additional uranium exploration 
and mining because of the current high demand for uranium, fueled by 
dwindling uranium stockpiles from existing sources and new orders for a 
large number of nuclear-fueled power plants worldwide.
    The Pueblo has spent over 50 years dealing with the impact of 
uranium mining and knows first-hand the hardships suffered by 
communities in the proximity of such hardrock mines. It is for this 
reason that the Pueblo urges the Committee to support legislation 
reforming the Mining Law of 1872. At a minimum, such legislation should 
include provisions for funding legislative objectives through royalties 
paid by hardrock mining operations. In addition, the bill should 
include four provisions that the Pueblo considers to be particularly 
prudent, useful, and of great importance, as follows:
A. Establish New Environmental Standards for Hardrock Mining on Federal 
        Lands
    Many federal lands adjoin Indian Country and share water resources 
essential to the health and welfare of tribes. Therefore, it is 
imperative that any new legislation include adequate environmental 
standards to protect the health and welfare of the adjoining tribal 
communities. Although some witnesses who testified at the Committee 
hearing on January 24 indicated that the statutes currently in place 
are sufficient to assure that hardrock mining is conducted 
appropriately, the Pueblo knows first-hand that additional 
environmental standards are necessary. The Pueblo respectfully requests 
to Committee to provide input into the development of new environmental 
standards.
B. Establish a Hardrock Reclamation Account for the Clean-Up of 
        Hardrock Mines
    Many hardrock mines leach dangerous pollutants from pits, tunnels, 
and tailing piles into surface and ground water on tribal lands. New 
legislation should include a Reclamation Account and authorization for 
the Secretary to use that account for reclamation and restoration of 
land and water resources adversely affected by past mining activities 
on federal and tribal lands. In addition, the funds should be available 
directly to the tribes to undertake reclamation activities. For 
example, Anaconda, the original operator of the Jackpile Mine, agreed 
to pay $43 million for the reclamation of the land at the Pueblo caused 
as a result of the mining operations at the Jackpile-Paguate Mine. 
However, an environmental impact statement estimated that it would cost 
$400 million to successfully reclaim the Jackpile Mine. The Pueblo did 
its best to reclaim the site of the Jackpile mine, which was the first 
attempt in the world to reclaim an open pit uranium mine, but 
additional reclamation work still needs to be done at the mine. 
Adequate funding is necessary to ensure reclamation successfully 
remediates environmental damage and addresses other consequences from 
mining.
C. Establish a Hardrock Community Impact Assistance Account Fund
    New legislation should also include the establishment of a Hardrock 
Community Impact Assistance Account Fund (``Account'') to help 
communities, including tribal communities, that have been adversely 
impacted by pollution from hardrock mining. The Account should provide 
assistance for the planning, construction, and maintenance of public 
facilities and the provision of public services to Indian tribes that 
are socially or economically impacted by mineral activities conducted 
under the general mining laws.
D. Enable Tribes to Participate Meaningfully in the Permitting Decision
    Tribes should be permitted to take an active role throughout the 
hardrock mining permitting process. Often, tribes are not included in 
the process at all or are included at the tail end of the process. The 
Pueblo encourages the Committee to include language in the bill that 
would provide tribes a seat at the table from the beginning of the 
permitting process. In addition, tribes should be permitted to petition 
for withdrawal of federal land from the general mining laws, including 
petitions based on value of a watershed to supply drinking water, 
wildlife habitat value, and cultural, religious, or historic resources 
that are important to the Indian tribe. For example, Mount Taylor is 
sacred to the Pueblo of Laguna and other tribes. It is also the site of 
the world's deepest uranium mine shaft and some of the largest 
unreclaimed mill tailings piles in the United States. Current mining 
proposals seek to obtain access to Mount Taylor for mining. However, 
the Pueblo is strongly opposed to such proposals because of the 
cultural and religious significance it has for the Pueblo. If the 
Pueblo is engaged in the permitting process from the beginning, our 
concerns can be addressed and potential solutions or alternatives may 
be identified before the interested parties invest in the idea of 
mining at such an important site.
                             v. conclusion
    In closing, thank you for allowing the Pueblo to present this 
statement to the Committee. We respectfully request the Committee's 
favorable consideration of our requests.
                                 ______
                                 
                                        Lucky Jack Project,
                                    Gunnison, CO, February 6, 2008.
Hon. Jeff Bingaman,
Chairman, Committee on Energy and Natural Resources, United States 
        Senate, Washington, DC.
Hon. Pete Domenici,
Ranking Member, Committee on Energy and Natural Resources, United 
        States Senate, Washington, DC.
RE: Comments for the Record--Senate Energy and Natural Resources 
Committee January 24, 2008 Oversight Hearing on Reform of the Mining 
Law of 1872

    Dear Chairman Bingaman and Ranking Member Domenici: The Lucky Jack 
Project is submitting these comments to supplement the hearing record 
for the January 24, 2008 Oversight Hearing on Reform of the Mining Law 
of 1872 to provide the Senate Energy and Natural Resources Committee 
(the Committee) with accurate information about the proposed Lucky Jack 
Project in Gunnison County, Colorado. Our comments also discuss several 
of the Mining Law issues debated during the hearing.
    As you will recall, the testimony from the Mayor of Crested Butte, 
Colorado, the Honorable Alan Bernholtz, focused on the Lucky Jack 
Project. Unfortunately, many of Mayor Bernholtz's remarks contained 
inaccurate and misleading information about the project, the regulatory 
requirements for the project and the applicable federal permitting 
process. Because we are concerned that Mayor Bernholtz's testimony may 
have confused the Committee, we respectfully ask that you consider our 
comments as you deliberate the important issue of how to update the 
1872 Mining Law.
    We believe that an accurate assessment of the regulatory 
requirements and permitting process that apply to mineral projects on 
public lands will clearly reveal that the existing comprehensive 
environmental regulatory framework and the associated and extensive 
public involvement process are working well. Therefore, the sweeping 
Mining Law changes that Mr. Bernholtz recommended in his testimony are 
unnecessary. These changes are also harmful because they would thwart 
development of important projects like the Lucky Jack Project (and any 
similarly situated projects elsewhere in the country) and deprive 
Colorado and the Nation of the substantial benefits that will result 
from the responsible development of this world-class, domestic 
molybdenum deposit.
    Because molybdenum is an essential alloying element in many types 
of steel, including stainless steel, it is indispensable to America's 
industry, infrastructure and national defense. It is also a crucial 
environmental metal used as a catalyst to reduce the sulfur content of 
fuels. Given these important uses for molybdenum, and the ever-
increasing competition for molybdenum on world markets, Mayor 
Bernholtz's position that Congress should amend the Mining Law to give 
his community veto power to categorically reject this mine proposal 
without regard to, and despite, the existing, robust environmental 
review and permitting process is not in the best interest of the Nation 
or the State of Colorado.
    we attempted to alert the mayor's to the errors in his written 
                               testimony
    It is indeed regrettable that Mayor Bernholtz's testimony contains 
so many factual errors because we had provided many months earlier--and 
had continued to provide in meetings, conversations and on our website 
accurate information related to the project. Moreover, upon seeing a 
copy of the Mayor's written testimony, we went to great lengths to try 
to warn him about the errors it contained. We contacted Crested Butte 
Town Manager, Ms. Susan Parker, on January 22, 2008, to voice our 
concerns about the testimony's mistakes and inaccuracies and to offer 
our help in making corrections. Following up our conversation with Ms. 
Parker, we provided her and Mayor Bernholtz with the attached letter 
prior to the hearing.
    As you can see, our January 23, 2008 letter to Mayor Bernholtz 
presents specific and detailed corrections for the inaccuracies in the 
written testimony he submitted to the Committee. We were hoping that 
the Mayor would use our letter to correct his remarks and to avoid 
repeating these errors in his oral testimony.
    Unfortunately, the Mayor chose to ignore our letter. At the 
hearing, he repeated the same misleading and inaccurate statements 
about the project that he included in his written testimony. He also 
made a number of incorrect and misleading comments about the regulatory 
requirements for the project and the permitting process that will 
evaluate the Lucky Jack Project. We respectfully request that you 
review our January 23''. letter to gain an accurate understanding of 
the Lucky Jack Project, our commitment to develop an environmentally 
responsible mine and our ongoing efforts to engage the Mayor and the 
Town of Crested Butte in a meaningful dialogue about our project. Table 
1 summarizes our January 23rd letter.
------------------------------------------------------------------------
 Table 1  Summary of Kobex's January 23, 2008 Letter to Mayor Bernholtz
-------------------------------------------------------------------------
                                               Correction Supplied in
      False/Misleading Claim in Mayor         Kobex's Letter  to Mayor
           Bernholtz's Testimony                      Bernholtz
------------------------------------------------------------------------
Mining is an historic artifact that is no   The West Elk and Elk Creek
 longer important to Crested Butte and       coal mines are the County's
 Gunnison County.                            largest individual tax
                                             payers, contributing
                                             approximately 30% to the
                                             County's general fund.
------------------------------------------------------------------------
Mining is incompatible with tourism.        Tourism and mining co-exist
                                             in many places in Colorado
                                             such as Steamboat Springs,
                                             Winter Park, Vail, Glenwood
                                             Springs, and Cripple Creek,
                                             as well as in other places
                                             like Salt Lake City, Utah.
------------------------------------------------------------------------
The mine will dump hundreds of thousands    Nothing will be dumped into
 of tons of mine wastes and mine tailings    the watershed. Mine
 into Crested Butte's watershed.             tailings will be stored and
                                             will undergo ongoing
                                             reclamation outside of the
                                             watershed. Approximately
                                             half of the tailings will
                                             be placed back inside the
                                             mine using advanced paste-
                                             and-fill tailings
                                             management technology.
------------------------------------------------------------------------
The mine will disturb thousands of acres    As currently planned, the
 of prime wildlife habitat.                  Lucky Jack Project will
                                             disturb about 350 acres,
                                             part of which is land
                                             previously disturbed by
                                             former mining activities.
------------------------------------------------------------------------
The mine will eliminate critical            The 350 acres of planned
 recreational areas from public use.         disturbance will be
                                             reclaimed in compliance
                                             with stringent state laws.
------------------------------------------------------------------------
The mine will turn pristine National        The 350-acre estimated
 Forest lands into a permanent industrial    project footprint will
 waste dump site.                            affect previously disturbed
                                             land on unpatented and
                                             patented mining claims--not
                                             pristine National Forest
                                             lands. This disturbance
                                             will comply will all
                                             applicable regulations and
                                             will be reclaimed.
------------------------------------------------------------------------
The mining claims and millsites are slated  This will be a modern
 for U.S. Energy/Kobex's network of waste    underground mining project
 dumps, pipelines, roads and related         specifically designed to
 facilities.                                 avoid subsidence or other
                                             impacts to the overlying
                                             surface. The above-ground
                                             facilities will be confined
                                             to a small area that
                                             includes previously
                                             disturbed land.
------------------------------------------------------------------------
Industrial mineral development of the       The project must meet many
 public lands on Mount Emmons and within     stringent State and federal
 the Town's statutorily established          legal requirements designed
 municipal watershed would result in         to avoid or mitigate any
 significant adverse environmental impacts.  possible significant
                                             environmental impacts.
------------------------------------------------------------------------
An historic silver/lead/zinc mine           Contaminated water is not
 discharges contaminated water directly      discharged into the
 into the Crested Butte watershed. Annual    watershed. U.S. Energy and
 water treatment costs exceed $1 million.    Kobex operate and pay for a
                                             water treatment facility
                                             that uses proven and
                                             reliable, state-of-the-art
                                             water treatment technology.
                                             Treated water is discharged
                                             into Coal Creek below the
                                             Town's water intake. This
                                             water treatment facility
                                             has operated for over 25
                                             years in compliance with
                                             permit regulations which
                                             have been in place. The
                                             proposed Lucky Jack Project
                                             will reduce--if not
                                             eliminate--the future need
                                             for this water treatment
                                             facility.
------------------------------------------------------------------------

the nepa process will give the town of crested butte many opportunities 
 to participate in the environmental review for the lucky jack project
    We believe the concerns the Mayor and the Town of Crested Butte 
have about the Lucky Jack Project can and would be best addressed by 
participating in the National Environmental Policy Act (NEPA) process 
that the U.S. Department of Agriculture's Forest Service will conduct 
to evaluate the Lucky Jack Project. Public participation is at the 
heart of the NEPA process which is designed to give interested 
parties--like the Town of Crested Butte--an important and effective 
opportunity to influence agency decisions about project proposals.
    The NEPA process requires federal agencies like the Forest Service 
to prepare an environmental analysis in the form of an Environmental 
Assessment (EA) and/or an Environmental Impact Statement (EIS). 
Although no final decision has been made in the case of the Lucky Jack 
Project, the Grand Mesa, Uncompahgre and Gunnison National Forests may 
choose to prepare an EIS.
    Federal agencies typically require project proponents to reimburse 
the agency for the costs of preparing NEPA documents. Because 
developing NEPA documents is a time consuming and substantial task, it 
is common for agencies to hire third-party contractors to prepare the 
documents. These contractors write NEPA documents under the direct 
supervision of the agency to reflect the agency's findings regarding 
the proposed project.
    During the hearing, Mayor Bernholtz voiced his opinion that NEPA 
documents are biased because project proponents pay for them. As 
Senator Craig explained to the Mayor, this simply is not true. Federal 
agencies carefully review internal drafts of NEPA documents to ensure 
they properly express the agency's viewpoints and conclusions. In this 
way, federal agencies exert complete control over the content and 
findings presented in NEPA documents. Thus, such documents are 
decision-making tools in which federal agencies are the sole decision 
makers.
    The analysis of project alternatives is the cornerstone of the NEPA 
process as agencies consider ways to reduce environmental impacts and 
improve project proposals. NEPA environmental analyses provide a 
detailed comparison of the impacts associated with the project 
proponent's proposed action and one or more project alternatives. 
Agencies select a preferred alternative on the basis of this analysis 
and disclose the reasons for selecting the preferred alternative. 
Typically, public comments help shape the alternatives evaluated in 
NEPA documents. It is very common for the public involvement and 
alternatives analysis processes to have a significant effect on 
projects because agencies often select a preferred alternative that 
incorporates suggestions and comments from the public.
    A recent Northwest Mining Association (NWMA) white paper, attached 
hereto, documents how public comments gathered during the NEPA process 
influence agency decisions about project proposals. Section V of this 
white paper presents case histories for 27 mineral projects and 
documents the changes made to these projects as a result of the NEPA 
process and the existing environmental regulations governing milling on 
public lands:

          The case histories show a consistent pattern of thorough 
        environmental reviews during which both BLM and the USFS 
        identified and imposed environmental controls, project 
        modifications, and mitigation requirements to The Honorable 
        Jeff Bingaman The Honorable Pete Domenici February 6, 2008 Page 
        6 eliminate or minimize environmental impacts. It is also 
        evident from the case histories that the NEPA process gives the 
        public ample opportunities to participate in these 
        environmental reviews and influence regulators' decisions about 
        project proposals. (NWMA white paper, Page 1.)

    Table 3 in this white paper (Pages 17--18) shows the changes that 
were made to 11 mineral projects on National Forest System lands as a 
result of public comment and agency requirements to modify the proposed 
projects in order to avoid, minimize or mitigate environmental impacts. 
These case histories stand in direct contrast to the following 
assertion in Mayor Bernholtz's testimony:

          Under the federal government's interpretation of the 1872 
        Mining Law, the Forest Service is powerless to deny the Lucky 
        Jack Project. At best, under the agency's mining regulations 
        located at 36 CFR Part 228A, the Forest Service can only 
        'minimize adverse impacts,' but cannot deny the proposed 
        project to protect public resources and local interests. 
        (Testimony, Page 3).

    The white paper illustrates how the Mayor's statement is incorrect 
and misleading. As shown on Table 3, the Grand Mesa, Uncompahgre and 
Gunnison National Forests recently rejected the Robin Redbreast Plan of 
Operations as explained in the following excerpt from the Forest 
Supervisor's May 11, 2007 Record of Decision:

          It is my decision that the `plan of operations' as submitted 
        cannot be approved, and that changes or additions to the plan 
        of operations are necessary to minimize or eliminate adverse 
        environmental impacts from mineral activities on National 
        Forest System (NFS) lands, as required by Forest Service 
        Regulations (36 CFR 228A). (Record of Decision, Page 3).

    The Lucky Jack Project, which is located in the same National 
Forest as the Robin Redbreast Project, will be subjected to an 
identical level of scrutiny and will be evaluated with a similarly 
critical eye. We will bear the burden of proof to demonstrate that the 
Lucky Jack Project will comply with the Forest Service requirement at 
36 CFR Sec.  228.8A to minimize adverse environmental impacts and 
comply with all other federal laws and regulations.
    Mayor Bernholtz's testimony also demands that ``...the Forest 
Service must be given the authority to balance other public uses and 
values on public lands in determining whether a specific mining 
proposal can be approved.'' (Testimony, Page 3). What Mayor Bernholtz 
fails to recognize is that the NEPA process already requires the Forest 
Service to achieve this balance by evaluating how mineral activities 
may impact other land uses and developing project alternatives and 
mitigation measures to avoid or minimize these impacts.
    A 1999 National Research Council report entitled ``Hardrock Mining 
on Federal Lands'' characterizes NEPA as the backbone of the 
environmental and regulatory program for evaluating proposed mining 
projects:

          The NEPA process is the key to establishing an effective 
        balance between mineral development and environmental 
        protection. (NRC Report, page 6).

    The case histories presented in the NWMA white paper clearly 
demonstrate how the NEPA process and the Forest Service's Section 228A 
surface management regulations work together to achieve land management 
objectives--including balancing multiple uses of public lands, 
protecting the environment, and responding to public comments.
      the clean water act will fully protect the town of crested 
                           butte's watershed
    In his response to questions during the hearing, Mayor Bernholtz 
also incorrectly described how the Clean Water Act will govern the 
Lucky Jack Project, arguing that the law would not proactively regulate 
and protect water quality. To the contrary, that is the primary purpose 
of this law--not, as the Mayor stated, to respond only after-the-fact 
if pollution occurs.
    We are certain that the Committee is well aware of the scope of the 
Clean Water Act and how the Section 402 Clean Water Act National 
Pollutant Discharge Elimination System (NPDES) permit program imposes 
stringent requirements on discharges to surface water resources. In 
Colorado, where the Clean Water Act program has been delegated to the 
State, a Colorado Discharge Permit System (CDPS) permit is required and 
ensures similar protections. However, the Committee may not be aware 
that the Forest Service issued a policy in March 2007 that specifically 
requires project proponents to obtain a Clean Water Act Section 401 
Water Quality Certification from either the U.S. Environmental 
Protection Agency or the state agency with primacy for the NPDES permit 
program before the Forest Service can approve a Plan of Operations. 
This new policy, in Section 2817.23a of the Forest Service Manual 2800 
on Minerals and Geology, Chapter 2810--Mining Claims, establishes the 
following requirement:

          1. CWA Sec.  401--Water Quality Certification: Pursuant to 
        CWA Sec.  401, both the Forest Service and the mining operator 
        have CWA requirements to meet. If the mining activity ``may 
        result in any discharge into the navigable waters,'' (CWA, 
        Title IV, Sec.  401(a) (1), 33 U.S.C. 1341(a), 1972) the mining 
        operator must obtain a 401 certification from the designated 
        CWA federal, state or tribal entity, typically the state. This 
        401 certification from the designated entity certifies that the 
        operator's mining activities and associated best management 
        practices (BMPs), mitigation and/or reclamation is in 
        compliance with applicable provisions of state, federal and/or 
        tribal water quality requirements of the CWA. The mining 
        operator must give a copy of this 401 certification to the 
        Forest Service prior to the Agency approving the Plan of 
        Operations. Pursuant to CWA, the Forest Service cannot 
        authorize a Plan of Operations until the 401 certification has 
        been obtained or waived by the designated entity. Finally, the 
        Forest Service may not authorize a Plan of Operations if the 
        designated entity denies the certification. (Italics emphasis 
        added.)

    Therefore, in the case of the Lucky Jack Project, the Grand Mesa, 
Uncompahgre and Gunnison National Forests cannot approve the Lucky Jack 
Project Plan of Operation until the Colorado Department of Public 
Health and Environment issues the Clean Water Act Section 401 Water 
Quality Certification. This new certification mandate provides the Town 
of Crested Butte with ample assurance that the Forest Service and the 
State of Colorado will not approve the Lucky Jack Project until we 
provide rigorous proof that the project will comply with all applicable 
federal and state water quality protection requirements.
                    where should mining be allowed?
    Mayor Bernholtz's testimony states that the Mining Law should give 
local communities the power to place areas off-limits to mining. In 
response to his remarks, there was considerable discussion during the 
hearing about where mining should be allowed to occur and the question 
of whether local communities should be allowed to preclude mining on 
public lands.
    In considering this question, we respectfully ask the Committee to 
give due consideration to the fundamental geologic fact that mineral 
deposits only occur in specific and limited places as the result of 
special geologic conditions. Mineral deposits are therefore rare and 
hard to find. They cannot be moved and must be developed where they are 
located. Laws, regulations, and policies governing mining must 
recognize and accommodate this unique aspect of mining--miners do not 
get to choose where mines are located.
    This geologic constraint makes mineral projects very different from 
other industrial endeavors in which project developers can pick a 
location to minimize public concerns about their project. The Lucky 
Jack Project does not have that option--we cannot develop this project 
somewhere else--it must be mined where the minerals are located inside 
of Mount Emmons.
    The current Mining Law and extensive regulatory regime governing 
mining on public lands recognizes this fact about mineral deposits. Any 
changes to the Mining Law must continue to acknowledge the geological 
restrictions that dictate where mineral deposits are located.
    Additionally, we wish to point out to the Committee that many 
communities throughout the West originated as mining towns. This is 
especially true in Colorado where towns like Aspen, Breckenridge, 
Durango, Telluride, Cripple Creek, Central City--and Crested Butte--all 
started out as communities to support adjacent mines. Today, these 
popular tourist destinations thrive in the midst of some of Colorado's 
most important and famous historic mining districts, refuting Mayor 
Bernholtz's claim that mining and tourism are incompatible.
the lucky jack project is committed to working closely with the town of 
                             crested butte
    As explained in our January 23rd letter to Mayor Bernholtz, we have 
reached out to the Town of Crested Butte on numerous occasions to 
provide information about the Lucky Jack Project, to learn more about 
their concerns, and to seek their input with the hope of finding common 
ground. We have made a number of presentations to various community 
groups and held open houses in Crested Butte and in Gunnison in 
September 2007. This process will continue, and expand, in 2008 and 
beyond.
    We are currently planning to create the Lucky Jack Community 
Advisory Board that will include representatives from the Town of 
Crested Butte, the other nearby communities, the conservation 
community, area chambers of commerce and several citizens at large. 
This advisory group will serve as a formalized means of access to 
company officials. Advisory Group meetings will be open forums designed 
to foster communication with the objective of disseminating 
information, developing collaborative solutions to problems, 
identifying synergies and capitalizing upon opportunities.
    We are hopeful that after listening to Mr. Randy Wanamaker's 
testimony that Mayor Bernholtz and the Town of Crested Butte will 
resolve to work closely with us. As Mr. Wanamaker stated:

          Everyone wins when government and industry form strategic 
        partnerships.

    Mr. Wanamaker described a template for community and company 
interaction that we believe would be ideal for the Lucky Jack Project, 
the Town of Crested Butte, and other nearby communities.
    We are confident that if the Town of Crested Butte will work with 
us, together we will find common ground that will lead to a strategic 
partnership between the Lucky Jack Project and the Town--just like the 
strategic partnership that Mr. Wanamaker described between Coeur Alaska 
and the City of Juneau, Alaska.
                               conclusion
    We very much appreciate this opportunity to add these comments to 
the hearing record. Please do not hesitate to contact us if you have 
questions about these comments or the Lucky Jack Project. Additionally, 
we would like to extend an open invitation to you, members of the 
Committee and to congressional staff to tour the Lucky Jack Project. 
Please come see for yourselves that the Lucky Jack Project is an 
exceptional opportunity to develop an environmentally responsible, 
world-class molybdenum mine that will become an important domestic 
source of this essential metal.
            Sincerely yours,
                                           Roman Sliklanka,
                                    Chairman, Kobex Resources, LTD.
                                           Keith G. Larsen,
                                    Chairman--CEO U.S. Energy Corp.
    Attachment 1.--Letter to Mayor Bernholtz From Lucky Jack Project
                                                  January 23, 2008.
Hon. Alan Bernholtz,
Mayor of the Town of Crested Butte, P.O. Box 39, Crested Butte, CO.
Re: Written testimony of Town of Crested Butte for oversight hearing of 
U.S. Senate Committee on Energy and Natural Resources concerning 1872 
Mining Law

    Dear Mayor Bernholtz: Kobex Resources Ltd. (``Kobex'') has reviewed 
a copy of the written testimony (``Testimony'') prepared by the Town of 
Crested Butte (``Town'') and delivered in a letter dated January 17, 
2007, to Senator Jeff Bingaman for an oversight hearing of the U.S. 
Senate Committee on Energy and Natural Resources concerning proposed 
changes to the General Mining Act of 1872 (the ``Mining Law''). In its 
Testimony, the Town is urging the Committee to pursue comprehensive 
changes to the Mining Law that the Town believes are necessary to 
protect the local economy, environment and public interest. In 
particular, the Town wants federal legislation to stop the development 
of a world-class molybdenum mining project by Kobex and U.S. Energy 
Corp. on nearby Mt. Emmons (the ``Lucky Jack Project'' or ``Project'').
    In preparing its Testimony, the Town unfortunately has relied on a 
set of profoundly inaccurate, unsupported and misleading factual claims 
about the Lucky Jack Project and related matters. In addition, the Town 
has made a series of wholly inaccurate and misleading statements and 
conclusions regarding applicable law. We are discouraged by this, 
because time and again--for example, at a presentation to Town 
officials and residents on September 25, 2007--we have endeavored to 
provide accurate and factual information about the Project and the 
strict legal process it will follow. Yet little to none of that 
information seems to be represented in what you are offering in 
Testimony to a Committee of the United States Senate.
    We discussed our concerns regarding the Testimony in a conversation 
with the Town Manager, Susan Parker, on the evening of January 22, 
2008, prior to her departure for Washington, D.C., to attend the Senate 
hearing. Based on this conversation, we understand that Ms. Parker is 
now in the process of revising portions of the Testimony. This letter 
is written to assist the Town in that revision process and to correct 
certain errors and misstatements in the Testimony. We are providing it 
to you now to give you an opportunity to properly amend the Testimony 
before the hearing commences.
    The inaccurate, unsupported and misleading factual information 
cited in your Testimony includes the following:

   False/misleading claim: ``Times have changed though and our 
        residents and economy no longer depend on mining. In our 
        community, skiing, fishing, hiking and mountain-biking, to name 
        a few, are the life-bloods of our economy.'' Testimony, p. 1.

    --Correction needed: Times have changed, but it is inaccurate to 
            suggest that mining has been relegated to history. In fact, 
            mining continues to play a very active and important role 
            in the lives of the residents of Gunnison County, of which 
            the Town is a part. For example, the West Elk and Elk Creek 
            coal mines are the County's largest individual tax payers, 
            contributing approximately 30% towards the County's general 
            fund. Along with the rest of Gunnison County, the Town of 
            Crested Butte and its residents benefit significantly from 
            this economic support. In this respect, it is also a 
            mistake to presume and inaccurate to state that the Town 
            relies (or, for that matter, should even attempt to rely) 
            solely on tourism to support itself. To be sure, tourism is 
            an important source of revenue for the Town, but it is 
            hardly the only source of revenue--and that is a good 
            thing. Economic diversification helps ensure that the 
            Town's economy is not hitched to only one engine that, when 
            it stalls, will bring everything behind it to a screeching 
            halt. Indeed, where tourism produces low-wage, service-
            sector jobs, mining creates opportunities for careers in 
            highly-paid, skilled positions. Finally, mining and tourism 
            are by no means mutually exclusive, and it is highly 
            disingenuous to say otherwise. Consider, for example, the 
            robust tourism industries of Salt Lake City, Utah, and 
            Steamboat Springs, Winter Park, Vail, Glenwood Springs and 
            Cripple Creek, Colorado, all of which have active mining 
            and/or oil and gas operations in their vicinities.

   False/misleading claim: ``... the mine will dump hundreds of 
        thousands of tons of mine wastes and mine tailings into Crested 
        Butte's watershed....'' Testimony, p. 2.

    --Correction needed: As an initial matter, it must be emphasized 
            that the plan of operations for the Lucky Jack Project is 
            still under development. Therefore, the Town has no basis 
            to say one way or another what any future mine will or will 
            not do. In any event, however, the mine will under no 
            circumstances be ``dumping'' anything into the Town's 
            watershed. Mine tailings will be temporarily stored outside 
            of the Town's watershed and later placed back into the mine 
            itself utilizing advanced paste and fill technology. 
            Throughout this process, the project site will be 
            reelamated in accordance with State laws.

   False/misleading claim: ``... the mine will... disturb 
        thousands of acres of prime wildlife habitat....'' Testimony, 
        p. 2.

    --Correction needed: The total surface footprint of the Lucky Jack 
            Project is currently estimated to be approximately 350 
            acres, part of which constitutes land that was previously 
            disturbed from former mining activities. This represents a 
            substantially reduced environmental footprint and is an 
            order of magnitude smaller than what was proposed by Amax 
            previously.

   False/misleading claim: ``... the mineeliminate critical 
        recreational areas from public use....'' Testimony, p. 2.

    --Correction needed: As noted above, the total surface footprint of 
            the Lucky Jack Project is currently estimated to be 
            approximately 350 acres, part of which constitutes land 
            that was previously disturbed from former mining 
            activities. In any event, the small amount of land on which 
            the Project is planned will be reclaimed as required under 
            stringent State laws.

   False/misleading claim: ``... the mineessentially turn 
        pristine National Forest lands outside of our Town--all of 
        which are surrounded by federally designated wilderness--into a 
        permanent industrial dump site.'' Testimony, p. 2.

    --Correction needed: Again, the current estimated footprint of the 
            Lucky Jack Project is 350 acres, portions of which include 
            previously disturbed land and patented mining claims which 
            cannot be accurately described as ``pristine National 
            Forest lands.'' In accordance with State and federal law, 
            mine tailings will be processed and disposed of in an 
            environmentally sound manner using modem mining technology 
            and the project site will be reclaimed in accordance with 
            State laws.

   False/misleading claim: ``These claims [mining and millsite 
        claims associated with the Lucky Jack Project] are slated for 
        U.S. Energy/Kobex's network of waste dumps, pipelines, roads 
        and related facilities.'' Testimony, p. 2.

    --Correction needed: The mining phase of the Lucky Jack Project is 
            planned to be underground, using modern mining methods 
            designed to avoid subsidence or any other impact to the 
            surface above. Above-ground activities will be limited to a 
            relatively small area comprising in part previously 
            disturbed land.

   False/misleading claim: ``... it is clear that industrial 
        mineral development of the public lands on Mt. Emmons and 
        within the Town's statutorily established municipal watershed 
        would result in significant adverse environmental impacts....'' 
        Testimony, p. 5

    --Correction needed: As noted above, the plan of operations for the 
            Lucky Jack Project is still under development. Therefore, 
            the Town has no rational basis for concluding whether the 
            project will have adverse environmental impacts at all, let 
            alone significant adverse environmental impacts. Moreover, 
            portions of the Project's anticipated footprint fall on 
            previously disturbed land and on patented mining claims. 
            What can be said, even at this early planning stage, is 
            that, in order to proceed at all, the Lucky Jack Project 
            will be required to meet a host of stringent State and 
            federal legal requirements specifically designed to 
            mitigate any possible significant environmental impacts or 
            avoid them altogether.

   False/misleading claim: ``... Crested Butte residents live 
        with the threats posed by a defunct silver/lead/zinc mine that 
        continues (and has for the last 30 years) to discharge 
        contaminated water directly into our watershed. ... Yearly 
        treatment costs for the water running out of the defunct mine 
        exceed $1 million with no end in sight.'' Testimony, p. 6.

    --Correction needed: Contaminated water from historic mining 
            operations is not being discharged into the Town's 
            watershed. In fact, water emanating from historic mining 
            operations at the project site is being collected and 
            transported to a water treatment plant operated and paid 
            for by U.S. Energy and Kobex. Only after undergoing state-
            of-the-art treatment is the water discharged into Coal 
            Creek at a point below the Town's water intake, all of 
            which is done in accordance with federal and State law. 
            Additionally, part of the plan of operations for the 
            Project will involve measures designed to significantly 
            reduce, if not eliminate, the need for a water treatment 
            plant to treat water from mine workings on the Project 
            site.

    It is imperative that the Town correct these factual errors in its 
Testimony to avoid the danger of providing false and misleading 
information to a Committee of the United States Senate and leaving its 
members with an inaccurate picture and understanding of the nature of 
the Lucky Jack Project and related matters.
    In addition to factual errors, the Town's Testimony relies on a 
series of inaccurate and misleading statements and conclusions of law. 
Most notably, the Testimony mischaractefizes the basic purpose and 
scope of the Mining Law and suggests that, but for the Mining Law's 
``antiquated provisions,'' the mining industry in the United States 
operates in a legal vacuum, unimpeded by any laws, regulations or other 
restrictions on its activities. This is evident, for instance, in your 
assertion that ``industrial mineral development of the public lands on 
Mt. Emmons and within the Town's statutorily established municipal 
watershed would result in significant adverse environmental impacts 
that are not addressed under the 1872 Mining Law.'' Testimony, p. 5 
(emphasis added).
    The Mining Law establishes a process for acquiring and protecting 
mining claims on federal lands. It represents an undeniably important 
part of the regulation of the mining industry in the United States. 
However, it is only one part of a much larger picture. By focusing only 
on the Mining Law, the Town's Testimony gives the patently false 
impression that nothing else exists to regulate mining activities in 
the United States when, in fact, nothing could be further from the 
truth.
    In reality, any mining operation in the United States, including 
the Lucky Jack Project, is subject to a comprehensive set of federal 
laws and regulations involving multiple agencies of government. Without 
limitation, this includes the National Environmental Policy Act of 
1969, 42 U.S.C. Sec. Sec.  4321-4370c; the Clean Water Act, 33 U.S.C. 
Sec. Sec.  1251-1387; the Clean Air Act, 42 U.S.C. Sec. Sec.  7401-
7671q; the Resource Conservation and Recovery Act, 42 U.S.C. Sec. Sec.  
6901-6992k; the Federal Mines Safety and Health Act of 1977, 30 U.S.C. 
Sec. Sec.  801-962; and the implementing regulations for each. Colorado 
adds its own level of oversight and regulation under the Colorado Mined 
Land Reclamation Act, C.R.S. Sec. Sec.  34-32-101 et seq., and various 
statutory and regulatory counterparts to the federal programs described 
above. In short, the Lucky Jack Project will have to go through a 
lengthy and thorough review and approval process to demonstrate 
compliance with a series of strict legal requirements and standards 
before it can proceed.
    Through its Testimony, the Town is demanding that the entire legal 
process described above should be subverted and made subject to 
perceived ``public interest'' of Crested Butte's residents. Obviously, 
this raises an issue of regulatory takings, where the Town would 
essentially be depriving Kobex and U.S. Energy of their property 
rights. Additionally, however, it ignores the fact that, according to a 
scientific poll conducted in September 2007, two-thirds of Gunnison 
County residents polled believe that mining in the County ``can be done 
in an environmentally responsible way'' and that ``the community should 
work with the partners of the Lucky Jack Project, Kobex Resources and 
U.S. Energy, instead of working against them.'' It also ignores the 
compelling national public interest in pursuing responsible development 
of strategic minerals (including molybdenum) within the United States. 
Global demand for these strategic minerals is only going to rise, 
subjecting the United States to an ever-increasing amount of 
competition with China, India, Europe and other countries and regions. 
One only has to look to the Middle East, on which the United States is 
dependent for energy, to begin to understand the enormous problems that 
ensue when we fail to achieve a measurable level of self-sufficiency at 
home.
    The molybdenum resource inside Mt. Emmons is one of the richest 
deposits known anywhere in the world. Using modern mining technologies 
and methods, the resource can be extracted in an environmentally and 
socially responsible manner, benefiting the people of the United 
States, the State of Colorado and the Town of Crested Butte.
    We strongly urge the Town to correct both the factual and legal 
errors and misstatements in its Testimony and provide the Committee 
with accurate information on which to base its decisions and formulate 
policy. As always, if you have any questions or need any further 
clarification or information regarding anything discussed in this 
letter, we are ready, willing and able to assist.
            Respectfully,
                                            Perry Anderson.
       Attachment 2.--Northwest Mining Association (white paper)
 The Environmental Provisions in the House Mining Law Bill (Hr. 2262) 
                  Are Solutions in Search of a Problem
27 mineral project case histories demonstrate why the sweeping changes 
        in this bill are unnecessary to protect the environment
Prepared by: Debra W. Struhsacker, Environmental Permitting & 
Government Relations Consultant, Reno, NV and Jeffrey W. Todd, 
Environmental Consultant Boerne, TX
                          I. Executive Summary
    The House Mining Law bill, H.R. 2262, contains sweeping changes to 
the public participation process and environmental standards for 
hardrock exploration and mining projects on federal lands. Written as 
if starting with a blank slate, H.R. 2262 ignores the fact that a 
public participation process and comprehensive and effective 
environmental standards already exist. As such, H.R. 2262 reinvents the 
wheel--but adds some corners to that wheel to slow it down and 
ultimately stop hardrock exploration and mining on federal lands.
    This Northwest Mining Association white paper presents 
environmental permitting case histories for 27 hardrock exploration and 
mining projects on U.S. Bureau of Land Management (BLM) and U.S. Forest 
Service (USFS) lands to document how the existing public participation 
process and the environmental laws and regulations governing hardrock 
minerals on federal lands effectively protect the environment. These 
case histories clearly demonstrate that the existing BLM and USFS 
standards and regulations for mining and the National Environmental 
Policy Act (NEPA) environmental review process work seamlessly together 
to provide the agencies with sufficient regulatory authority to 
regulate mineral projects.
    The case histories show a consistent pattern of thorough 
environmental reviews during which both BLM and the USFS identified and 
imposed environmental controls, project modifications, and mitigation 
requirements to eliminate or minimize environmental impacts. It is also 
evident from the case histories that the NEPA process gives the public 
ample opportunities to participate in these environmental reviews and 
influence regulators' decisions about project proposals. The following 
is a summary of key findings:

   The case histories document that the existing land 
        management regulations governing mineral activities on federal 
        lands satisfy Congressionally-mandated land management 
        objectives to prevent unnecessary or undue degradation of BLM 
        lands and to minimize adverse impacts on National Forest System 
        lands.

    --BLM and the USFS already have clear and effective authority with 
            which to regulate mineral projects. The case histories show 
            how the agencies use these authorities to require project 
            modifications or to demand specific environmental controls 
            or mitigation measures to eliminate or minimize impacts. 
            Agency-imposed changes span the gamut from adding 
            environmental protection, mitigation, or monitoring 
            measures, to selecting a project alternative that differs 
            from the applicant's project proposal, to denying proposed 
            projects that the agencies believe would violate federal 
            laws and regulations.
    --The case histories do not reveal any inadequacies or gaps in the 
            current regulations or suggest that the environmental 
            provisions in H.R. 2262 would be useful or desirable.
    --The case histories show that both BLM and the USFS have 
            verifiable track records of effectively tailoring the on-
            the-ground application of their environmental performance 
            standards to provide optimal environmental protection and 
            reclamation success at a given site. The case histories 
            provide examples of agency requirements for site-specific 
            measures to protect cultural resources, wildlife and 
            fisheries habitat, scenic values, water quality, air 
            quality, wetlands, public safety, species of concern, 
            special mine waste management measures, and protocols 
            addressing noxious and invasive species controls.
    --The case histories also demonstrate how the NEPA process and the 
            agencies' surface management regulations work together to 
            achieve the agencies' land management objectives. Agency 
            mandated changes to proposed projects typically respond to 
            public comments received in conjunction with the NEPA 
            process.

   The H.R. 2262 definition, ``undue degradation,'' is 
        unrealistic and unworkable because it changes the current FLPMA 
        standard of ``unnecessary or undue degradation,'' which 
        recognizes that some degradation may be necessary (i.e., 
        unavoidable) in order to mine.

    --The undue degradation definition in H.R. 2262 singles out 
            hardrock mining compared to all other activities on public 
            lands by imposing a higher, impractical, and unfair 
            standard that precludes unavoidable degradation due to 
            mining.
    --The case histories do not identify any real-life, on-the-ground 
            problems with the unnecessary or undue degradation standard 
            or suggest any need to change this standard.

   All of the environmental provisions in H.R. 2262 are at odds 
        with the 1999 National Research Council (NRC) report entitled 
        ``Hardrock Mining on Federal Lands.''

    --This prestigious and unbiased report found that the then existing 
            regulations provided adequate environmental protection at 
            mines on public lands. BLM's regulations were updated in 
            2001 to fill the five regulatory gaps identified in the NRC 
            Report. H.R. 2262 treats these same gaps as if they remain 
            unfilled.
    --The NRC Report places special emphasis on the effectiveness of 
            the NEPA process for gathering public input, evaluating 
            environmental impacts, and identifying any unnecessary or 
            unacceptable impacts associated with proposed mineral 
            projects. The H.R. 2262 parallel public participation 
            process for mining projects will not improve public 
            participation. It will only add redundant bureaucratic 
            hurdles to an already time-consuming mine permitting 
            process and create additional burdens on the agencies, the 
            public, and mining companies.
    --The NRC Report also stressed the importance of using site-
            specific, environmental performance standards to achieve 
            optimal environmental and reclamation results at the 
            diverse geographic and ecological settings in which mining 
            occurs. The prescriptive technology-based standards 
            included in H.R. 2262 are inappropriate and will produce 
            second-rate environmental results.

   The environmental provisions in H.R. 2262 are solutions in 
        search of a problem.

    --The new public participation process is not needed to give the 
            public more opportunities to comment on proposed mining 
            projects.
    --The new definition of undue degradation and the new environmental 
            standards are not needed to protect the environment.
    --BLM's October 2000 EIS for the 3809 rulemaking predicted that the 
            alternative containing a Significant Irreparable Harm 
            standard and environmental standards similar to those in 
            H.R. 2262 would result in ``significant adverse effect to 
            mining-dependent communities, including declines in social 
            well-being due to potential for up to 75% decrease in some 
            types of mining.''
    --The real purpose of H.R. 2262 is to create intolerable delays in 
            the permitting process, to eliminate all impacts from 
            mining, and ultimately to stop exploration and mining on 
            federal lands.
                             II. Background
    The U.S. House of Representatives passed H.R. 2262, the Hardrock 
Mining and Reclamation Act of 2007, on November 1, 2007. H.R. 2262 is a 
disastrously bad bill for the mining industry--and, more importantly, 
for the country. It eliminates security of land tenure, creates 
insurmountable regulatory hurdles, empowers third-parties to petition 
to withdraw lands from mining--even after valuable minerals have been 
discovered, and creates new unrealistic and impractical standards for 
mining. Two outcomes are certain if H.R. 2262 becomes law:

          1. H.R. 2262 will severely curtail mineral production on 
        America's public lands; and
          2. H.R. 2262 will dramatically increase the Nation's already 
        extensive reliance on foreign minerals due to the significant 
        reduction in domestic mineral production.

    The unfair and burdensome gross royalty in H.R. 2262 will certainly 
cause economic hardships and will contribute substantially to the two 
negative outcomes listed above. However, the environmental components 
of H.R. 2262 will be equally responsible for reducing domestic mineral 
production and increasing the country's dependence on foreign minerals.
    The environmental and regulatory problems in H.R. 2262 are two 
fold. First, Title I, Sec. 2(a)(19) of H.R. 2262 creates a new 
unrealistic and unfair environmental performance standard, ``undue 
degradation,'' for mineral activities. This undue degradation standard 
imposes what is essentially a ``zero-impact'' mandate on hardrock 
mining--in marked contrast to other sanctioned activities on federal 
lands. Second, the new and duplicative public participation process and 
the problematic environmental standards in Title III, ``Environmental 
Considerations of Mineral Exploration and Development,'' will cause 
intolerable uncertainties and delays and create insurmountable 
roadblocks. Taken together, the undue degradation standard and Title 
III reflect an underlying philosophy that mineral activities must not 
affect the environment and are clearly intended to thwart exploration 
and mining on federal lands.
    As each of the case histories proves, current regulations and 
policies are effectively minimizing impacts from mineral activities and 
mitigating those impacts that cannot be avoided. But H.R. 2262 chooses 
to ignore this successful track record. Instead, this bill proposes 
radical changes in an apparent attempt to fix a system that clearly is 
not broken.
    If the goal of H.R. 2262 were to address the well recognized 
shortcomings in the current Mining Law--the lack of a royalty or a fund 
to reclaim historic abandoned mined lands (AML)--the bill would not 
include the undue degradation standard or Title III. Unfortunately, 
H.R. 2262 has a much different goal. Rather than making the surgical 
changes needed to require royalty payments and to create an AML fund, 
H.R. 2262 takes a very different approach that proposes far-reaching 
changes that are specifically designed to stop hardrock exploration and 
mining on federal lands.
 III. Comparing Flpma's Unnecessary or Undue Degradation Mandate With 
                the H.R. 2262 Undue Degradation Standard
    a. the flpma mandate to prevent unnecessary or undue degradation
    The term ``undue degradation'' originates in the Federal Land 
Policy and Management Act of 1976 (FLPMA), 43 U.S. C. 1701 et seq. 
Section 302(b) of FLPMA requires the Secretary of the Interior to 
manage the public lands to prevent ``unnecessary or undue 
degradation.'' The FLPMA unnecessary or undue degradation standard, 
often described in shorthand as ``U&UD,'' applies to all activities on 
BLM-administered public lands. As such, it is not a standard that is 
unique to mining.
    Fundamental to FLPMA's U&UD standard is the plainly-stated concept 
that human activities cause degradation--and some degradation is 
necessary to achieve FLPMA's stated public land management goals at 43 
C.F.R. Sec. 1701. In the case of mineral production, FLPMA establishes 
the following Congressional declaration of policy at 43 U.S.C. 
Sec. 1701(a)(12):

          Congress declares that it is the policy of the United States 
        that--the public lands be managed in a manner which recognizes 
        the Nation's need for domestic sources of minerals, food, 
        timber, and fiber from the public lands including 
        implementation of the Milling and Minerals Policy Act of 1970 
        (84 Stat. 1876, 30 U.S.C. 21a) as it pertains to the public 
        lands.

    The Minerals Policy Act of 1970 states:

          The Congress declares that it is the continuing policy of the 
        Federal Government in the national interest to foster and 
        encourage private enterprise in (1) the development of 
        economically sound and stable domestic mining, minerals, metal 
        and mineral reclamation industries, (2) the orderly and 
        economic development of domestic mineral resources, reserves, 
        and reclamation of metals and minerals to help assure 
        satisfaction of industrial, security and environmental needs...

    Practical, on-the-ground standards to implement the FLPMA U&UD 
mandate must consider two fundamental geologic realities: 1) mineral 
deposits can only be found in geologically favorable places; and 2) 
mines can only be developed where mineral deposits are found. The 
current BLM and USFS regulations for hardrock minerals reflect this 
reality by being responsive to the wide range of geographic settings 
and environments in which hardrock minerals are located and developed. 
The environmental impacts associated with mining are always site 
specific and dependent upon site topography, climate, hydrology, 
mineralogy, mining method, and other factors that may be unique to a 
particular project.
BLM Regulations to Prevent U&UD
    BLM's surface management rules for hardrock minerals at 43 C.F.R. 
Subpart 3809 (hereinafter called ``the 3809 regulations'') implement 
the FLPMA mandate to prevent U&UD. BLM's environmental performance 
standards at Sec.  3809.420 include a comprehensive list of site-
specific, outcome-based performance standards for mineral activities 
that define how mineral projects must be designed, operated, and 
reclaimed in order to comply with the FLPMA U&UD requirement. These 
environmental performance standards also consider the diversity of 
settings in which hardrock exploration and mining occur.
    The case histories discussed in Section V demonstrate BLM's track 
record of effectively tailoring the on-the-ground application of the 
Sec.  3809.420 environmental performance standards to provide optimal 
environmental protection and reclamation success at a given site, and 
the agency's commitment to prevent U&UD. These case histories provide 
ample proof that BLM's interpretation and management of the 3809 
regulations prevents U&UD and show that the existing regulations are 
working as intended to protect the environment and achieve BLM's land 
management objectives. As described in Section V, BLM consistently 
exercises its authority to require project proponents to modify their 
project proposals to address site-specific concerns in order to comply 
with the U&UD mandate. The case histories show absolutely no need for 
the far-reaching environmental changes in H.R. 2262.
The USFS Regulations Use a Minimize Adverse Impacts Standard
    The USFS regulations at 36 C.F. R. Part 228, Subpart A (hereinafter 
called ``the 228A regulations) for locatable minerals take a similarly 
practical approach that recognizes mining creates some necessary and 
unavoidable impacts and that miners must avoid and minimize impacts 
whenever and wherever feasible:

          Sec. 228.8 Requirements for environmental protection: All 
        operations shall be conducted so as, where feasible, to 
        minimize adverse environmental impacts on National Forest 
        surface resources...

    The USFS regulations at Sec.  228.8 provide detailed requirements 
for air quality, water quality, federal solid waste disposal and 
management, scenic values, fisheries and wildlife habitat, roads, and 
reclamation. This section of the regulations mandate compliance with 
federal environmental protection laws and establish the concept that 
impacts must be minimized ``to the extent practicable.'' For example, 
the paragraph dealing with solid wastes says:

          All garbage, refuse, or waste, shall either be removed from 
        National Forest lands or disposed of or treated so as to 
        minimize, so far as is practicable, its impact on the 
        environment and the forest surface resources. All tailings, 
        dumpage, deleterious materials, or substances and other waste 
        produced by operations shall be deployed, arranged, disposed of 
        or treated so as to minimize adverse impact upon the 
        environment and forest surface resources. (36 C.F.R. 
        Sec. 228.8(c))

    Similarly, the paragraph on solid wastes states:

    In addition to compliance with water quality and solid waste 
disposal standards required by this section, operator shall take all 
practicable measures to maintain and protect fisheries and wildlife 
habitat which may be affected by the operations. (36 C.F.R. 
Sec. 228.8(e))

    The requirements for protecting scenic values and road building 
also contain requirements to minimize impacts to the extent 
``practicable.''
    The USFS requirement to ``minimize adverse impacts'' is 
functionally similar to the FLPMA mandate to prevent U&UD. The USFS's 
standard requires miners to take appropriate steps to avoid, minimize, 
or mitigate impacts. Like FLPMA and BLM's 3809 regulations, the USFS 
regulations for mining recognize that some impacts are unavoidable. The 
use of the word ``practicable'' in the USFS regulations adds the 
concept of economic feasibility based upon a consideration of site-
specific factors.
    The case histories described in Section V for exploration and 
mining projects on National Forest System lands demonstrate that the 
USFS requirement in the 228A regulations to minimize adverse impacts 
requirement is successfully protecting the environment. These case 
histories also show that the USFS regularly exercises its regulatory 
authority to require changes to project proposals in order to comply 
with the minimize adverse impacts standard. Just like the case 
histories for projects on BLM-administered lands, the USFS case 
histories document a consistent agency commitment to enforce all 
environmental protection standards and requirements.
    The case histories include two projects that the USFS approved 
using a NEPA Categorical Exclusion (CE). Yet in spite of the 
streamlined NEPA process used for these projects, the USFS placed 
numerous environmental protection requirements and conditions on both 
projects, documenting the broad scope of the USFS's 228A regulatory 
authority. The case histories also include one project where the USFS 
used the 228A regulations to reject a project proposal.
The Case Histories Show No Need for the H.R. 2262 Undue Degradation 
        Standard
    Taken together, the case histories for projects on both ELM and 
USFS lands present compelling evidence that the existing environmental 
regulations and performance standards are working well and should not 
be changed. Even if the undue degradation standard in H.R. 2262 were 
practical or achievable--which it most certainly is not--there is 
absolutely no on-the-ground need or justification for this new 
standard. The only reason to include the undue degradation standard in 
H.R. 2262 is to eliminate all exploration and mining on federal lands.
 b. the h.r. 2262 undue degradation standard creates a higher standard 
         for mining compared to other activities on public land
    Title I, Sec. 2(a)(19) of H. R. 2262 defines undue degradation as 
``irreparable harm to significant scientific, cultural, or 
environmental resources on public lands that cannot be mitigated.'' 
This ``undue degradation'' standard is radically different from the 
FLPMA U&UD standard and the USFS ``minimize adverse environmental 
impacts'' standard because it fails to recognize that some degradation 
is unavoidable in order to mine. The practical meaning of the H.R. 2262 
undue degradation standard is that it empowers BLM and the USFS to deny 
plans of operation for proposed mineral projects even if the project 
complies with federal environmental laws and regulations and can 
satisfy all other environmental standards and requirements.
    H.R. 2262 singles out hardrock mining by placing a higher standard 
of environmental performance on mining activities while preserving the 
U&UD standard for all other activities on public lands. Thus, the world 
according to H.R. 2262 recognizes and accepts the necessary (i.e., 
unavoidable) degradation associated with hiking, fishing, camping, 
hunting, ORV use, developed recreation, logging, extracting coal or oil 
and gas, film making, livestock grazing, and all other activities that 
impact public lands. However, it does not acknowledge or accommodate 
the necessary degradation associated with hardrock mining. In this 
manner, the definition of undue degradation imposes an impractical, 
unrealistic, and unfair standard hardrock mining.
Irreparable Harm is Not a New Concept
    H.R. 2262 is not the first mining proposal to introduce the concept 
of irreparable harm or to create an irreparable harm-based standard. In 
1997, then Secretary of the Interior Bruce Babbitt announced he 
intended to use the rulemaking process to change the 3809 regulations 
as a surrogate for Congressional action to amend the Mining Law. In 
November 2000, after a four-year long rulemaking process, BLM published 
new 3809 regulations. This version of the rule, hereinafter referred to 
as the ``2000 Sec.  3809 rule,'' included a new and controversial 
standard--Substantial Irreparable Harm (SIH). BLM added SIH to the 
definition of unnecessary or undue degradation in the final rule, 
without giving the public an opportunity to comment.
    It should be noted that BLM analyzed an alternative (Alternative 4) 
in the EIS for the 3809 rulemaking that included an SIH concept. 
However, BLM did not select this as the Agency Preferred Alternative in 
the EIS due in part to the severe economic hardships associated with 
this alternative. The following excerpt from the EIS describes the 
dramatic impact Alternative 4 would have on mining communities:

          Potential for significant adverse effect to mining-dependent 
        communities, including declines in social well-being due to 
        potential for up to 75% decrease in some types of mining. 
        (October 2000 EIS, Surface Management Regulations for Locatable 
        Minerals, page 121.)

    The undue degradation standard in H.R. 2262 is clearly modeled 
after Alternative 4 and the SIH standard in the 2000 Sec.  3809 rule.
    In fact, most of the H.R. 2262 Title III environmental provisions 
are modeled after the prescriptive environmental performance standards 
included in Alternative 4 in the EIS prepared for the 3809 rulemaking. 
It should be abundantly clear from the environmental consequences 
described in the 3809 EIS that this approach--whether in regulations or 
in statute--will be disastrous for western mining communities. It will 
also be disastrous for the Nation as we become even more reliant on 
imported foreign minerals to replace what used to be produced from U.S. 
mines.
    The SIH standard is not currently in the Sec.  3809 rules because 
in 2001, then Secretary of the Interior Gale Norton reopened the Sec.  
3809 rulemaking. Secretary Norton issued a final rule in October 2001 
which does not contain the SIH standard. The 2001 final Sec.  3809 rule 
(hereinafter referred to as the ``2001 Sec.  3809 rule'') preserved 
many aspects of the 2000 Sec.  3809 rule, but eliminated SIR from the 
definition of undue or unnecessary degradation and from Sec.  3809.415. 
Secretary Norton's decision to remove SIH from the 2001 Sec.  3809 
regulations was based in part upon an October 2001 Department of the 
Interior Solicitor's Opinion (M-37007) which found that the SIH 
provision is not consistent with FLPMA. Additionally, the way in which 
SIR was added to the 2000 Sec.  3809 rule violated the Administrative 
Procedures Act and NEPA.
   c. a recent nrc study demonstrates there is no justification for 
                             changing u&ud
    In 1998, Congress appropriated $800,000 in the FY 1999 Omnibus 
Appropriations Bill (Department of the Interior and Related Agencies 
Appropriations Act, 1999 P.L. 105-277, Division A, Title I, Sec. 120) 
for a National Research Council (NRC) study of hardrock mining on 
federal lands. The purpose of this study was to ``identify and consider 
the adequacy of federal and state environmental, reclamation and 
permitting statutes and regulations applicable in any state or states 
where mining or exploration of locatable minerals on federal lands is 
occurring, to prevent unnecessary or undue degradation.''
    The NRC published its findings in a 1999 report entitled Hardrock 
Mining on Federal Lands (hereinafter called ``the NRC Report.'') This 
carefully researched and impartial study contains significant useful 
information regarding the scope and effectiveness of the state and 
federal regulations for hardrock mining. In the context of H.R. 2262, 
the NRC Report provides an appropriate framework for evaluating the 
environmental components of the bill including the substitution of 
undue degradation for U&UD, and the many far-reaching provisions in 
Title III that are discussed in Section IV.
    The NRC Report does not suggest any environmental problems or 
regulatory deficiencies stemming from the FLPMA mandate to prevent 
U&UD. Because Congress specifically directed the NRC to examine the 
adequacy of the environmental regulations to prevent U&UD, it is highly 
unlikely that this report would overlook any environmental problems due 
to the U&UD standard itself. Therefore, the NRC report's finding that 
the existing regulations are protecting the environment strongly 
supports the conclusion that the U&UD standard is resulting in 
environmental protection at exploration and mining projects on BLM 
lands and that the ``minimize adverse impacts'' standard in the USFS's 
228A regulations is providing similarly satisfactory environmental 
protection on National Forest System lands.
    Because the NRC Report was thoroughly researched, unbiased, and 
independently reviewed, its findings are considered authoritative. 
Based on the NRC Report, it is clear that there is no justification for 
changing the environmental performance standard for mining from U&UD to 
the undue degradation standard in H.R. 2262. The NRC Report 
demonstrates that the current FLPMA U&UD standard for projects on BLM 
lands and the USES standard to minimize adverse impacts for projects on 
National Forest System lands are working well and consistently achieve 
their stated goals.
    IV. The New Procedures and Standards in Title III Seek To Solve 
                Problems and Fill Gaps That Do Not Exist
    Title III includes a new and duplicative public participation 
procedure and impractical environmental standards. H.R. 2262 creates 
both the public participation procedure and the new environmental 
standards out of whole cloth--as if there are no existing public review 
processes or environmental standards.
    The 1999 NRC Report provides useful information for assessing the 
need for the new public participation process and the environmental 
standards in H.R. 2262 Title III. As discussed below, it is clear from 
the NRC Report that these elements of Title III are both unnecessary 
and undesirable and seek to fix problems and fill gaps where none 
exist.
a. title iii creates a new public participation process for mining that 
                            duplicates nepa
    The new public review requirement in Section 304(i) is one of the 
most troublesome aspects of Title III. This section requires the 
Secretary of the Interior and the Secretary of Agriculture to:

          . . . jointly promulgate regulations to ensure transparency 
        and public participation in permit decisions required under 
        this Act, consistent with any requirements that apply to such 
        decisions under section 102 of the National Environmental 
        Policy Act of 1969.

    It is clear from Section 302(a) that H.R. 2262 intends to layer the 
new mining-specific public participation process described in Section 
304(i) onto the existing NEPA process. The H.R. 2262 public 
participation process is not a substitute for NEPA--rather it is a 
parallel process:

          To the extent practicable, the Secretary and the Secretary of 
        Agriculture shall conduct the permit processes under this Act 
        in coordination with the timing and other requirements under 
        section 102 of the National Environmental Policy Act of 1969 
        (42 U.S.C. 4332).

The NEPA Process Provides Ample Public Participation Opportunities
    There is no demonstrated need whatsoever for creating a new and 
duplicative public participation process unique to mining projects on 
federal lands. The NEPA process already affords the public ample 
opportunities to provide comments on proposed mining projects on 
federal land. For example, the Battle Mountain Field Office of BLM has 
received over 6,000 comments on the July 2007 Draft Environmental 
Impact Statement (EIS) for the Cortez Hills Expansion Project. For the 
Buckhorn Access Project in Washington, the Okanogan and Wenatchee 
National Forests received over 100 letters during project scoping, 116 
letters on the Draft Environmental Assessment (EA), and 42 letters on 
the subsequent Draft EIS. The Idaho Falls District Office and the USFS/
Caribou-Targhee National Forest received 1,055 original comment letters 
and a staggering 37,561 identical form letters on the October 2007 
Draft EIS the agencies jointly prepared for the Smoky Canyon Mine. 
(Although Smoky Canyon is a phosphate mine which is governed by the 
regulations for leasable minerals rather than hardrock minerals, the 
NEPA statistics dramatically illustrate that the NEPA process already 
gives the public unfettered ability to comment on proposed mineral 
projects.)
    Given the robust nature of public response to NEPA documents for 
mining projects, there is simply no evidence that the public is being 
deprived of an opportunity to provide comments or would benefit from a 
mining-specific public participation process like that proposed in H.R. 
2262. BLM's and the USFS's administration of the NEPA process is 
clearly complying with the NEPA requirement to seek public comment and 
the volume of responses being received more than satisfies NEPA's 
objectives to obtain public comment.
    It should be evident from the sheer number of public comments 
submitted in response to recent draft NEPA documents that BLM and USFS 
are already burdened with an enormous administrative task of 
cataloguing and responding to comments. Adding a mining-specific public 
participation process that would run in parallel to the NEPA process 
would be an administrative nightmare for all parties--BLM, the USFS, 
and the interested public. The current NEPA process is more than 
adequate.
    In addition to soliciting public comments on proposed projects 
through the NEPA process, both the BLM and USFS permitting processes 
includes administrative appeal procedures that give the public a formal 
opportunity to challenge the adequacy of the agency's NEPA analysis and 
its decisions to approve or deny a proposed project. Interest groups 
frequently use these administrative procedures to try to overturn 
agency decisions.
    Once again, H.R. 2262 is a solution in search of a problem. The 
proposed mining-specific public participation process in Title III sets 
out to fill a gap that simply does not exist. There is absolutely no 
need to duplicate the well-established, highly-structured NEPA public 
review process that federal agencies have used to make decisions about 
significant federal actions since 1970.
The NRC Report Concludes that the NEPA Process is Protecting the 
        Environment
    The 1999 NRC Report mentioned in Section III characterizes NEPA as 
the backbone of the environmental and regulatory program for evaluating 
proposed mining projects: ``The NEPA process is the key to establishing 
an effective balance between mineral development and environmental 
protection.'' (NRC Report, page 6). H.R. 2262 destroys this balance.
    The NRC Report found the NEPA process to be a meaningful 
opportunity to evaluate ways to make a proposed mine the best possible 
project for the community and the environment and confirms that the 
NEPA process is adequate in scope to accommodate all potential issues. 
In summary, the NRC Report presents the following findings regarding 
the efficacy of the NEPA process for hardrock mineral projects (NRC 
report pages 108--110):

   The NEPA process and its various state equivalents provide 
        the most useful and efficient framework for evaluating proposed 
        mining activities;
   NEPA provides the most comprehensive and integrated 
        framework for undertaking an environmental evaluation that 
        includes the full range of environmental concerns, whether or 
        not they are specifically addressed by some other regulatory 
        program, as well as cultural and other concerns.
   NEPA environmental reviews examine tradeoffs between 
        different and sometimes competing values, and promote a better 
        understanding of the implications of the many decisions 
        involved in the preparation and approval of a mine's operating 
        plan....No other regulatory program provides such a 
        comprehensive, integrated mechanism for decision making.
   The NEPA process ensures that the decisions are based on 
        careful analyses of site-specific conditions. An operating plan 
        for mining activities must adapt and respond to site-specific 
        conditions and sensitivities. The NEPA process allows this 
        responsiveness; regulatory programs relying on inflexible, 
        technically prescriptive standards often do not.
   The NEPA process allows the agencies to be responsive to 
        changes in technology and site-specific conditions. Less 
        flexible regulatory approaches do not allow this flexibility 
        and, as a result, can cause technologies to be ``frozen,'' 
        often with adverse impacts for both the mining operators and 
        the environment.

    The inescapable conclusion from these NRC Report findings is there 
is absolutely no need to create the new public participation process in 
H.R. 2262. According to the NRC Report, the NEPA process is not only 
adequate--it is ideal for gathering public input, evaluating 
environmental impacts, and identifying any unnecessary or unacceptable 
impacts associated with proposed mining projects.
    There is no demonstrated need for the new public participation 
process mandated in Section 304(i). It is unnecessary and is completely 
at odds with the findings in the NRC Report.
The Case Histories Also Document That NEPA Is Effective and that 
        Another Public Participation Process is Not Necessary
    The case histories presented in Section V for projects on both BLM 
and USFS lands provide compelling and specific evidence of the pivotal 
role that NEPA plays in the environmental review and permitting process 
for mineral projects on federal lands. These case histories 
consistently document that issues and concerns are raised during public 
scoping for NEPA documents and in public comments on draft NEPA 
documents.
    More importantly, the case histories provide a verifiable track 
record of how BLM and the USFS consider public comments when making 
decisions about proposed projects. It is clear from the case histories 
that public comments frequently influence agency decisions. Both BLM 
and the USFS routinely require changes to a proposed project in 
response to public comments or select one of the alternatives analyzed 
in the NEPA document rather than the project proponent's Proposed 
Action. The case histories also show how the NEPA process and the 3809 
and 228A regulations work smoothly together to evaluate and refine a 
project proposal to prevent U&UD on BLM lands or to minimize adverse 
impacts on National Forest System lands.
    b. title hi contains impractical and unattainable standards and 
                        duplicative requirements
    Title III contains impractical and unattainable standards and 
requirements as well as numerous requirements that duplicate existing 
BLM and USFS regulations and policies. The problematic standards are 
designed to make securing permits for new exploration, mining, and 
ancillary activities very difficult--and in some cases impossible.
    The duplicative requirements are another example of the way in 
which H.R. 2262 provides a solution to an imaginary problem. The 
regulatory agencies have already developed comprehensive and effective 
programs that provide environmental protection at mines on federal 
lands.
------------------------------------------------------------------------
Table 1  Examples of Impractical or Unattainable Environmental Standards
          and Duplicative  Requirements in Title III, H.R. 2262
-------------------------------------------------------------------------
   H.R. 2262 Impractical or Unattainable
                 Standard                            Discussion
------------------------------------------------------------------------
Limits exploration permits to 10 years      It typically takes more than
 Sec. 304(e)                                 10 years to discover,
                                             explore and define a
                                             mineral deposit. The
                                             exploration case histories
                                             do not demonstrate a need
                                             for this limit.
------------------------------------------------------------------------
Limits life of mine permits to 20 years--   Some deposit types take
 with one possible 20-year renewal Sec.      longer to mine than 20
 304(d)(1)(A--B)                             years. Some mines have
                                             operated for over 100
                                             years. The possibility (but
                                             no guarantee) of a 20-year
                                             one-time permit renewal
                                             creates too much
                                             uncertainty to make the
                                             necessary investment
                                             decisions to develop the
                                             mine. The mining case
                                             histories do not
                                             demonstrate a need for this
                                             limit.
------------------------------------------------------------------------
                                            This arbitrary time limit
                                             will cause premature mine
                                             closures, leaving minerals
                                             in the ground, and wasting
                                             mineral resources. This
                                             will hurt local and state
                                             economies that depend on
                                             mining.
------------------------------------------------------------------------
Restricts Plans of Operations to claims     Most surface mines use more
 with valid discoveries and requires         claims without a discovery
 discretionary permits to use federal        than valid claims. Limiting
 lands for processing facilities, roads,     Plans to valid claims and
 mine waste storage areas, etc. Sec.         the requirement to obtain
 304(a)(1)(A--B)                             discretionary approvals to
                                             use non-mineralized ground
                                             creates too much
                                             uncertainty to make the
                                             necessary investment
                                             decisions to develop the
                                             mine.
                                            Additionally, this creates a
                                             new onerous requirement to
                                             establish the validity
                                             status of each claim and
                                             distinguish it in the
                                             permitting process.
                                             Inserting claim validity
                                             into the permitting process
                                             will create an enormous
                                             administrative burden for
                                             the agencies and further
                                             delays for permit
                                             applicants. The mining case
                                             histories do not
                                             demonstrate a need for this
                                             limit and requirement.
------------------------------------------------------------------------
Limits water treatment to 10 years after    This will make mining of
 mine closure Sec. 304(c)(H)                 many sites that use water
                                             treatment during mining
                                             difficult or even
                                             impossible. There should be
                                             no prohibition against long-
                                             term water treatment so
                                             long as the applicant
                                             provides adequate financial
                                             assurance and/or a long-
                                             term funding mechanism to
                                             operate the treatment
                                             facility. From a practical
                                             perspective, it is unclear
                                             how applicants will be able
                                             to demonstrate this during
                                             the permitting process
                                             before the water treatment
                                             system is built.
------------------------------------------------------------------------
Only claim holders may apply for an         Mine operators are commonly
 operations permit Sec. 304(a)(1)            different entities than the
                                             claim owners. It is fairly
                                             unusual for a claim owner
                                             to operate the mine. This
                                             restriction reflects a lack
                                             of understanding of typical
                                             mining industry business
                                             relationships.
------------------------------------------------------------------------
Operations must prevent ``material damage   This may prohibit the
 to the hydrologic balance outside the       development of both surface
 permit area''Sec. 304(c)(E)                 and underground mines that
                                             require significant
                                             dewatering, a common need
                                             in many mines
------------------------------------------------------------------------
Preserving cultural, paleontological and    It may be impossible to
 cave resources                              preserve these resources at
                                             sites where the orebody and
                                             these features are co-
                                             located. (See
                                             3809.420(b)(8)(i)). Current
                                             mitigation policies are
                                             appropriate.
------------------------------------------------------------------------

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
                                             
Title III Proposes Using Inappropriate Technology-Based Standards
    Although duplicating requirements that are in existing regulations 
is not necessarily problematic, the fact that H.R. 2262 Sec. 307(b) 
gives the Secretaries the discretionary authority to require the use of 
technology-based design standards versus outcome-based performance 
standards creates a serious problem. The NRC Report clearly establishes 
that one-size-fits-all, technology-based standards are inappropriate 
for mineral projects given the need to accommodate site-specific 
conditions. For example, Recommendation No. 9 in the NRC Report states:

          BLM and the Forest Service should continue to base their 
        permitting decisions on the site-specific evaluation process 
        provided by NEPA. The two land management agencies should 
        continue to use comprehensive performance-based standards 
        rather than using rigid, technically prescriptive standards. 
        (NRC Report, page 108).

    The NRC Report explains that technology-based standards are 
especially unsuitable for mineral projects in light of the rapidly 
changing nature of mining methods and environmental protection 
technology. Federal land managers need to have the authority to require 
the newest and best technology rather than having to adhere to specific 
technologies that may be outmoded or not optimal for a certain site.
    Many of the case histories described in Section V describe how BLM 
and the USFS have required site-specific environmental controls to 
respond to unique ecological conditions at project sites. It is clear 
from these case histories that imposing cookie-cutter-type, technology-
based standards would not have been ideal at these sites.
    The technology-based standards sanctioned in Sec. 307(b) are likely 
to result in inferior environmental protection and reclamation compared 
to the performance-based standards currently in place. Thus, in the 
case of Sec. 307(b), H.R. 2262 does not solve any identified 
environmental problem. Instead, it promotes second-rate environmental 
results.
c. blm has already taken care of all of the gaps identified in the nrc 
            study--the title iii measures are not necessary
    Although the NRC Report clearly states that the regulations in 
place during the 1998--1999 timeframe were adequate to protect the 
environment, the Report also identified five regulatory gaps. The NRC 
Report contains specific recommendations for how BLM should modify its 
regulations to fill these gaps. The 2001 3809 regulations contain a 
number of specific changes to eliminate the gaps discussed in the NRC 
Report. Table 2 lists the gaps identified in the NRC Report and the 
2001 gap-filling measures.
    A number of the requirements in Title III mimic the gap-filling 
measures contained in the 2001 Sec.  3809 rules. Because BLM's rules 
already respond to all of the shortcomings identified in the NRC 
Report, these Title III provisions are unnecessary, Once again, there 
are no remaining gaps that need to be filled; Title III seeks to fill 
gaps that have already been filled.
------------------------------------------------------------------------
 Table 2  Changes Made in 2001 to the 3809 Rules in Response to the NRC
                                 Report
-------------------------------------------------------------------------
          NRC Report Issue or Gap                   Changes Made
------------------------------------------------------------------------
Require financial assurance for all mining  3809.500, 3809.503
 and exploration activities that are not
 classified as casual use
------------------------------------------------------------------------
Mandate Plans of Operation for any mining   3809.5, 3809.11(b)
 or milling operation regardless of size
------------------------------------------------------------------------
Develop criteria and procedures for         3809.430--434
 modifying Plans of Operation
------------------------------------------------------------------------
Adopt regulations that define temporary     3809.401(5)
 closure and require interim management
 plan;
------------------------------------------------------------------------
Plan for and assure long-term, post-        3809.401(3)(ix)
 closure management of closed and
 reclaimed mines
------------------------------------------------------------------------

V. Case Histories Demonstrate the Environmental Provisions in H.R. 2262 
               Are Unnecessary to Protect the Environment
    a. blm and usfs use nepa and the surface management regulations 
  effectively to achieve environmental protection and land management 
                               objectives
    The case histories listed in Table 3 and discussed below 
demonstrate that BLM and the USFS consistently--in fact on almost all 
projects--require companies to modify proposed Plans of Operation for 
exploration and mining projects. The agencies imposed these changes to 
eliminate, minimize, or mitigate impacts to one or more environmental 
resource and/or to respond to issues raised during public scoping and 
in public comments submitted on draft NEPA documents.
    All of the examined case histories underscore the effective 
relationship between the NEPA process and the 3809 and 228A surface 
management regulations. The NEPA process provides BLM and the USFS with 
an analysis tool to identify and quantify potential environmental 
impacts, to analyze project alternatives, and to develop appropriate 
mitigation and monitoring measures to minimize impacts. Once the NEPA 
process has identified project alternatives, analyzed impacts 
(including those associated with the No Action alternative), and 
specified mitigation measures, BLM and the USFS then use their 
respective authorities in the 3809 and 228A regulations to require 
project applicants to modify the project proposal to enhance 
environmental protection, and to eliminate or minimize impacts whenever 
and wherever possible. The case histories show that NEPA and the 
surface management regulations work seamlessly together to achieve the 
agencies' land management mandates--to prevent unnecessary or undue 
degradation from mining on BLM lands and to minimize adverse 
environmental impacts from mining on National Forest System lands.
    The changes made to projects as a result of the NEPA process 
include agency-required mitigation and other measures and stipulations 
that go beyond those offered by the project proponent. In fact, it is 
highly unusual for BLM and the USFS to NOT mandate additional 
requirements for a project. The case histories include many examples of 
BLM and USFS invoking their respective 3809 and 228A authority to 
select an ``Agency Preferred Alternative'' that differs (sometimes 
substantially) from the project proponent's ``Proposed Action.'' 
Additionally, even some projects approved under a NEPA Categorical 
Exclusion (CE) may have extensive environmental protection requirements 
attached.
    Alternatively, project proponents sometimes chose to modify their 
project proposals in response to the issues and concerns identified 
during NEPA public scoping and in public comments submitted on draft 
NEPA documents. It is not uncommon for companies to take the lead in 
changing their Proposed Action by adding new mitigation, monitoring, 
and environmental protection measures, or by changing some aspect of 
the project proposal based on public input and agency suggestions. This 
is often preferable to waiting for the agency to impose these changes 
in the form of agency-required measures or as an Agency-Preferred 
Alternative that differs from the Proposed Action. Project proponents 
typically make these changes in close coordination with BLM and the 
USFS. Either way, whether a company initiates the changes or whether 
the agencies require the changes, the process results in a project with 
enhanced environmental protection and mitigation measures that ensure 
compliance with the mandate to prevent unnecessary or undue degradation 
on BLM lands and to minimize adverse impacts on National Forest System 
lands.
    It is thus readily apparent from the case histories that the 
existing regulations for mineral activities on both BLM and National 
Forest System lands, coupled with the NEPA environmental review 
process, are working well. There is nothing in the case histories to 
suggest that an additional public review process or different 
environmental standards are warranted. The agency track records and the 
environmental measures described in the case histories provide 
compelling substantiation that the environmental provisions in H.R. 
2262 seek to reinvent the wheel, to solve imaginary problems, and to 
fill gaps that do not exist.
      b. case histories for mineral projects on blm and usfs lands
    The 27 case histories summarized in Table 3 and discussed below 
were developed from NEPA EIS and EA documents for proposed exploration, 
mining, and mining-related projects on BLM and National Forest System 
lands in Nevada, Arizona, California, New Mexico, Idaho, Washington, 
Oregon, and Colorado. Each project described below presents a clear 
example of how the agencies' surface management regulations authorize 
BLM and the USFS to require additional or modified environmental 
protection, mitigation, and monitoring measures, and other project 
changes that differ from the applicant's Proposed Action.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                           BLM Case Histories
Cortez Gold Mines. Cortez Pipeline Gold Deposit. Final EIS. January 
        1996. Battle Mountain District Shoshone--Eureka Resource Area, 
        Battle Mountain, Nevada
    This EIS demonstrates how the project proponent, Cortez Gold Mines 
(Cortez), responded to public concerns and potential environmental 
impacts identified during the NEPA process by amending the Proposed 
Action to address these issues. Cortez modified its original project 
proposal by adding a number of ``Applicant-Committed Design Measures'' 
to mitigate public concerns and potential impacts. Additionally, BLM 
stipulated agency-required mitigation measures ``to reduce potential 
significant impacts that may occur despite the applicant-committed 
design measures.'' BLM designated Cortez's Proposed Action modified 
with the ``Applicant-Committed Design Measures'' and the agency-
required mitigation measures as the Agency-Preferred Alternative.
    One of the Applicant-Committed Measures added to the proposed 
project was a long-term $1,000,000 interest-bearing contingency fund to 
provide for long-term monitoring and corrective action, if required, 
for pit lake water quality and/or dewatering-related impacts. BLM State 
Director, Ms. Ann Morgan, describes this fund in a January 12, 1996 
``Dear Interested Party'' letter as a fund established ``in the 
interest of protecting the environment.'' Ms. Morgan's letter also 
describes changes made to the Proposed Action as a result of the NEPA 
evaluation as follows:

          A number of refinements to the proposed action have resulted 
        from public comments on the Draft Environmental Impact 
        Statement. These refinements have been incorporated into the 
        proposed action and the Pipeline Project Plan of Operations.
Santa Fe Pacific Gold Corporation. Lone Tree Mine Expansion Project. 
        Final EIS. September 1996. Winnemucca District Office, 
        Winnemucca, Nevada
    BLM selected Santa Fe Pacific Gold Corporation's (SFPG's) Proposed 
Action, modified with mitigation and monitoring measures, as the 
Agency-Preferred Alternative. BLM's Record of Decision (ROD) approves 
the Lone Tree Mine Expansion Project Plan of Operations subject to ten 
stipulations and numerous mitigation and monitoring requirements for 
water resources; soils; avian, terrestrial, and aquatic wildlife; 
livestock; recreation; air resources; geology; visual resources; 
vegetation; and cultural resources.
Homestake Mining Company. Ruby Hill Project. Final EIS. January 1997. 
        Battle Mountain District, Battle Mountain, Nevada
    As a result of the NEPA analysis conducted for the Ruby Hill 
Project, BLM selected a Preferred Alternative that consisted of 
Homestake Mining Company's (Homestake's) Proposed Action, plus a 
Partial Backfill Alternative that was one of the alternatives 
considered in detail in the EIS. This backfilling alternative would 
result in a slightly larger (approximately 6 acres) area that could be 
reclaimed. Additionally, BLM stipulated several agency-required 
mitigation measures to address community concerns about visual impacts, 
noise and vibration from blasting, and air quality due to dust 
generated by mining activities. These mitigation measures are described 
as being developed by BLM in collaboration with Homestake and included 
the development of an advisory group in Eureka County. The advisory 
group was established to identify areas where monitoring for dust, 
noise, or blasting vibration may be needed, and to develop additional 
mitigation to address impacts that could not be fully identified in the 
EIS (i.e., before mining started). The BLM also required a visual 
resources mitigation measure to reduce the height of a waste rock dump 
visible from town.
Newmont Mining Company. Trenton Canyon Project. Final EIS. August 1998. 
        Winnemucca District Office, Winnemucca, Nevada
    For the Trenton Canyon Project, BLM selected an Agency Preferred 
Alternative comprised of Newmont Mining Company's Proposed Action, 
modified with the Partial Sequential Backfill Alternative evaluated in 
the EIS. As described in the EIS, the Agency-Preferred Alternative 
would reduce the total area of mine disturbance, reduce or eliminate 
some overburden disposal areas, reduce the reclamation effort for the 
overburden disposal areas, maximize the total amount of land reclaimed 
to beneficial use, and reduce potential sedimentation to a nearby 
creek.
Glamis Marigold Mining Company. Marigold Mine Expansion Project. Final 
        EIS. March 2001. Winnemucca Field Office, Winnemucca, Nevada
    BLM selected a partial backfill alternative as the Agency-Preferred 
Alternative for the Marigold Mine Expansion Project. This alternative 
requires the project proponent, Glamis Marigold Mining Company (GMMC), 
to add partial backfilling of the 8-South Pit to the Proposed Action. 
BLM required this backfilling alternative to eliminate the potential 
for a pit lake to form in this pit. This alternative also reduces 
surface disturbance associated with the project, thereby lessening 
impacts to soils, vegetation resources, wildlife habitat, range 
resources, and recreation. BLM also required GMMC to perform water 
resources, air quality, and cultural resource mitigation and monitoring 
measures in addition to those included in the Proposed Action.
Oil-Dri Corporation. Reno Clay Plant Project. Final EIS. September 
        2001. Carson City Field Office, Carson City, Nevada
    BLM selected an alternative project access route as the Agency-
Preferred Alternative. This alternative required the project proponent, 
Oil-Dri Corporation of Nevada (Oil-Dri), to change the access route to 
the project in response to public concerns about traffic safety and 
social concerns related to transporting the clay product from the 
processing facility. The Proposed Action involved constructing 
approximately 0.8 mile of new access road on public land. At the Final 
EIS stage, BLM rejected this aspect of Oil-Dri's Proposed Action. The 
Agency-Preferred Alternative required Oil-Dri to construct a new access 
road on private land.
    BLM also stipulated the following agency-required mitigation 
measures beyond those included in the Proposed Actions:

          1. Restricting the hours of nighttime operation and 
        prohibiting backfill operations in the North Mine areas on 
        weekends and holidays to address public concerns about noise;
          2. Enforcing a 25-miles per hour speed limit on all haul, 
        access, and transport routes to reduce traffic impacts; and
          3. Potential temporary changes to Oil-Dri's operating 
        schedule to accommodate planned recreational events on public 
        land.

    It is interesting to note that the Draft EIS selected the Proposed 
Action as the Agency Preferred Alternative. At that time, the private 
land needed for Alternative C was not available. However, during the 
interim between the Draft and Final EIS documents, Oil-Dri was able to 
obtain the private land. BLM responded by changing the agency's 
Preferred Alternative. This is a good example of how BLM used their 
authority to prevent unnecessary or undue degradation to public land. 
The BLM-required changes to this project demonstrate that BLM has ample 
authority to prevent unnecessary or undue degradation.
Newmont Mining Company. Leeville Project. Final EIS. ROD September 
        2002. Elko Field Office, Elko, Nevada
    In the Draft EIS for the Leeville Project, BLM selected an Agency-
Preferred Alternative that added the three alternatives analyzed in 
detail in the Draft EIS to Newmont Mining Company's (Newmont's) 
Proposed Action, These alternatives included eliminating the canal 
portion of the water discharge pipeline system, backfilling the 
production and ventilation shafts with waste rock rather than with 
reinforced concrete as proposed by Newmont, and relocating the waste 
rock disposal facility and refractory ore stockpile to eliminate 118 
acres of new surface disturbance. In addition, BLM required Newmont to 
prepare and add a comprehensive, longterm Mitigation and Monitoring 
Plan to the Final EIS.
Battle Mountain Gold. Phoenix Project. Final EIS. ROD November 2003. 
        Battle Mountain Field Office, Battle Mountain, Nevada
    Battle Mountain Gold (BMG) conducted gold, exploration, mining and 
recovery operations in the Copper Canyon area (Lander County, Nevada) 
since the 1980s under various Plans of Operations and EAs. A Plan of 
Operations submitted in 1994 was updated four times to incorporate 
additional information developed in the interim. The Phoenix Project, 
an expansion of open pit gold operations in four pits, Was determined 
by the BLM to be significant enough in size, scope and impact to 
warrant preparation of a full EIS. The BLM Battle Mountain Field Office 
selected BMG's proposed alternative analyzed in the Phoenix Project 
Final EIS as modified by the BLM with mitigation and monitoring 
requirements, as the BLM's preferred alternative.
    Prior to construction, the BLM required BMG to: 1) Submit an 
approved long-term funding mechanism to satisfy all costs to implement 
the Contingent Long-Term Groundwater Management Plan; 2) Submit 
financial guarantee for reclamation; 3) Implement the monitoring and 
mitigation measures developed with the BLM and discussed in the ROD; 
and 4) Secure all required federal, state, and local permits. Approval 
of the BMG Plan of Operations and the FEIS was contingent upon 37 wide-
ranging additional requirements as set forth in the ROD. These very 
specific requirements again illustrate the latitude and flexibility 
allowed the BLM under the 3809 rules to alter mining proposals to 
manage and protect public lands at the site-specific level.
Phelps Dodge Tyrone Inc. Copper Mountain South Pit Expansion. Final EA. 
        January 2005. ROD March 2005. Las Cruces Field Office, Las 
        Cruces, New Mexico
    Phelps Dodge Tyrone Inc. proposed to expand the existing Copper 
Mountain Pit at the Tyrone Mine by 31 acres in order to mine and 
recover approximately 72 million pounds of copper. The BLM determined 
that an EIS was not necessary and conducted an EA instead. The BLM's 
preferred alternative consisted of the Phelps Dodge proposed action and 
a FONSI was issued with additional BLM requirements relative to noxious 
weed monitoring and control, special status plant and wildlife species, 
dust control, and acid producing material monitoring. This project was 
conducted under existing 3809 rules.
Geodesy Resources, Inc. Nick Claims Mining Project. Final EA. January 
        2005. ROD September 2007. Winnemucca Field Office, Winnemucca, 
        Nevada
    Geodesy Resources, Inc. proposed a gold placer mining operation at 
the Nick Claims in Pershing County, Nevada. Geodesy's initial proposal 
was modified during the public comment period. The BLM Winnemucca Field 
Office preferred alternative consisted of the proponent's alternative 
as modified with seven stipulations added by the BLM during the 
Environmental Assessment process. These stipulations pertained to 
cultural resource protection and data recovery, weedy and invasive 
species control, wildlife mitigation and monitoring relative to the 
Migratory bird Treaty Act with provisions relative to nesting birds, 
development of a detailed reclamation plan, spill response and control, 
permits and Rights of Way, and a fire prevention plan. This project was 
conducted under the 3809 rules presently in effect.
Matcon Corporation, Inc. Jawbone Canyon Project. Final EA and ROD. 
        2006. Ridgecrest Field Office, Ridgecrest, California
    Matcon Corporation, Inc. submitted a Plan of Operations under the 
3809 rules to excavate and commercially develop a deposit of zeolite on 
claims administered by the BLM Ridgecrest Field Office in California. 
The BLM determined that an Environmental Assessment would suffice given 
the nature of the disturbances described in the Plan of Operations. 
Following an in-depth review and assessment of the Plan of Operations, 
the BLM required of the proponent six additional mitigation measures 
and four additional reclamation requirements in addition to those 
measures and stipulations discussed in CFR Title 43, Subpart 3809.420.
Quaterra Resources, Inc. Uranium Exploration, Rock Mining Claims. Final 
        EA and ROD. September 2006. Arizona Strip Field Office, St. 
        George, Utah
    In 2006, Quaterra Resources submitted a Plan of Operations to the 
BLM for uranium exploration on BLM administered claims on the Kanab 
Plateau. The BLM required that an Environmental Assessment (EA) be 
conducted. The EA detailed 11 mitigation measures required of the 
proponent by the BLM. These measures involved cultural and 
archaeological resources, noxious weeds, reclamation, drill-hole 
abandonment, waste management, wildlife, and water quality and usage.
MGC Resources, Inc. Spring Valley Exploration Project. Final EA April 
        2007. ROD May 3007. Winnemucca Field Office. Winnemucca Nevada
    In September 2005, MGC Resources, Inc. submitted a Plan of 
Operations (upgraded from the Notice level) to the BLM for mineral 
exploration activities that would cause disturbances on approximately 
76 acres of public and private lands in Pershing County, Nevada with 
various drill pads, sumps, new roads, and ancillary activities that 
accompany intensive mineral exploration. The BLM, Winnemucca Field 
Office determined that an Environmental Assessment would suffice to 
assess the impact of the proposed project. Following completion of the 
EA and a 30-day comment period, the BLM selected MGC's proposed 
alternative, but added significant mitigation and monitoring 
requirements in approving the project in the ROD. Monitoring and 
mitigation requirements involved prevention of noxious and invasive 
weeds, surveys or and monitoring for breeding birds and bird nests and 
their protection under the Migratory Bird Treaty Act. Compliance 
monitoring was very specific and detailed. This exploration project was 
conducted under existing 3809 rules.
Cortez Gold Mines. Cortez Hills Expansion Project. Draft EIS. July 
        2007. No ROD. Battle Mountain Field Office, Battle Mountain, 
        Nevada
    Cortez Gold Mines (CGM) proposed a Plan of Operations for a 
significant expansion of its gold mining and processing operations in 
the BLM Battle Mountain Field Office jurisdictional area. The Draft EIS 
was submitted in July 2007. While the Record of Decision has not been 
released at the time of this document, the final two paragraphs in the 
Executive Summary are emblematic of BLM's approach to selecting an 
alternative that differs from the Proposed Action in order to minimize 
environmental impacts and enforce the land management directive to 
prevent unnecessary or undue degradation:

          Chapter V, Section B.2.b. of the BLM's National Environmental 
        Policy Act Handbook directs that ``the Manager responsible for 
        preparing the EIS should select the BLM's preferred 
        alternative. ... For externally initiated proposals, ... the 
        BLM selects its preferred alternative unless another law 
        prohibits such an expression. ... The selection of the 
        preferred alternative should be based on the environmental 
        analysis as well as consideration of other factors that 
        influence the decision or are required under another statutory 
        authority.
          The BLM has selected a preferred alternative based on the 
        analysis in this EIS. This preferred alternative is the 
        alternative that best fulfills the agency's statutory mission 
        and responsibilities, considering economic, environmental, 
        technical, and other factors. The BLM has determined that the 
        preferred alternative is the Proposed Action as outlined in 
        Chapter 2.0 with mitigation measures specified in Chapter 3.0 
        of this EIS.
Spirit Minerals LP. Big Ledge Project Mining and Processing. Final EA, 
        November 2007. ROD December 3, 2007. Elko Field Office, Elko, 
        Nevada
    Spirit Minerals proposed to incorporate an approved Plan of 
Operations for the Big Ledge barite mine exploration into a mine plan 
that would allow the company to expand and renew mining for barite on 
fee lands and federal lands. The BLM determined that an EIS was not 
necessary and conducted an EA instead. The BLM's preferred alternative 
consisted of Spirit Minerals proposed action and a FONSI was Issued 
with additional BLM requirements relative to protection of cultural 
resources, establishment of buffer strips, fencing, and monitoring and 
inspection plan.
Tonkin Springs LLC. Tonkin Springs Exploration Project, Draft EA. 
        December 2007. No ROD. Battle Mountain Field Office, Battle 
        Mountain, Nevada
    Tonkin Springs LLC submitted a Plan of Operations to upgrade its 
long-time mineral exploration project from the Notice level. The BLM, 
Battle Mountain Field Office, determined that an Environmental 
Assessment would suffice to assess the impact of the proposed project. 
While no ROD has been issued at the date of this document, it is worth 
noting that Tonkin Springs LLC committed to 31 specific conditions 
regarding environmental protection. These conditions were developed 
with specific input from the BLM and included air quality, cultural 
resources, waste, water quality, wetlands, public safety, fire 
management, wildlife, invasive and weedy species control, and 
protection of wild horses and burros.
                          USFS Case Histories
American Independence Mines and Minerals, Inc. Golden Hand Mine 
        Project. EIS. 1988, 1996, 2003. Krassel Ranger District, 
        Payette National Forest, Idaho
    American Independence Mines and Minerals, Inc. first submitted a 
Plan of Operations to mine on patented claims within the Frank Church-
River of No Return Wilderness as authorized under the 1872 Mining Laws. 
The USFS did not deny the right of the proponent to mine their claims 
within the wilderness area. However, through a long and disputed 
process, the USFS required the proponent to make numerous changes to 
their plan in order to protect the environment and address the many 
environmental issues that arose relative to access, water quality, 
development methods, etc. The proponent's proposed plan, Alternative B 
was not accepted by the USFS during the EIS process. Rather, the USFS's 
Agency Preferred Alternative was Alternative C which contained 
significant agency-directed protective changes as allowed under the 
USFS rules.
Utility Block Co. Cerro Del Pino Pumice Mine. EA and ROD. 2006. Jemez 
        Ranger District, Santa Fe National Forest. Sandoval County, New 
        Mexico
    Utility Block Co. submitted a Plan of Operations to mine pumice 
from an approximate 6 acre open pit on USFS-administered lands. The 
USFS determined that an EA would suffice for NEPA analysis of the 
project. Following analysis of the EA, the USFS issued a FONSI for the 
project that selected the proponent's alternative but added 19 specific 
conditions for approval plus a monitoring stipulation. These conditions 
included safety, threatened and endangered species, visual aesthetics, 
erosion control, waste management, and others.
Mt. Moriah Stone Quarry. Mount Moriah Stone Quarry Phase II. EA and 
        ROD. December 2006. Ely Ranger District, Humboldt-Toivabe 
        National Forest. White Pine County, Nevada
    Mt. Moriah Stone Quarry submitted a Plan of Operations to the USFS 
to mine quartzite building stone materials from a 50-acre site on USFS-
administered lands. The USFS determined that an EA would suffice for 
NEPA analysis of the project. Following analysis of the EA, the USFS 
issued a FONSI for the project that selected the proponent's 
alternative but added 34 specific conditions for approval plus a 
monitoring stipulation. These conditions included safety, waste rock, 
weeds, wildlife, wildfires, erosion control, and reclamation.
Oregon Department of Transportation. Star Rock Pit Project. EA and ROD. 
        2006. Blue Mountain Ranger District, Malheur National Forest. 
        Grant County, Oregon
    The Oregon Department of Transportation submitted a Plan of 
Operations to the USFS to expand the existing Star Quarry on USFS 
administered lands to continue to provide high quality aggregate 
materials, some of which would be used by the USFS. The USFS determined 
that an EA would suffice for NEPA analysis of the project. Following 
analysis of the EA, the USFS issued a FONSI for the project that 
selected the proponent's alternative but added 11 multi-component 
additional environmental protection and design elements, mitigation 
measures, best management practices and monitoring for approval. This 
project is a good example of the interaction of the USFS and its rules 
when the project proponent is another agency (in this case a state 
agency), and illustrates that the USFS can and generally does add 
additional conditions to project approval.
Oregon Department of Transportation. Tamarack QuarryExpansion. EA and 
        ROD. 2006. Zig Zag Ranger District, Mt. Hood National Forest. 
        Clackamas County, Oregon
    The Oregon Department of Transportation submitted a Plan of 
Operations to the USFS to expand the existing Tamarack Quarry on USFS 
administered lands to continue to provide high quality aggregate 
materials, some of which would be used by the USFS. The USFS determined 
that an EA would suffice for NEPA analysis of the project. Following 
analysis of the EA, the USFS issued a FONSI for the project that 
selected the proponent's alternative but added a number of multi-
component additional environmental protection and design elements, 
mitigation measures, best management practices and monitoring for 
approval. This project is another good example of the interaction of 
the USFS and its rules when the project proponent is another agency (in 
this case a state agency), and illustrates that the USFS can and 
generally does add additional conditions to project approval.
Mr. Joe Vines. Black Diamond Star Milling Claim. Categorical Exclusion. 
        2006. Three Rivers Ranger District, Colville National Forest. 
        Ferry County, Washington
    Mr. Joe Vines submitted a Plan of Operations to the USFS seeking 
approval to continue removal of decorative stone materials from his 
existing claim. Following USFS review and public scoping and 
notification, the USFS determined to grant a categorical exclusion to 
NEPA under its rules. However, as conditions of approval under the CE, 
the USFS required the proponent to adhere to 16 specific conditions 
pertaining to access, blasting, threatened and endangered species, 
invasive weeds, reclamation, cultural resources, safety, and others. 
Even though this project was approved using a CE, it illustrates the 
ability of the USFS to apply specific environmental protection 
conditions under the existing rules to any project on USFS administered 
lands.
Teck Cominco American Inc. 2007 Exploration Drilling. Categorical 
        Exclusion. 2007. Sullivan Ranger District, Colville National 
        Forest. Pend Oreille County, Washington
    Teck Cominco American submitted a Plan of Operations to the USFS 
seeking approval for mineral exploration and drilling 8 drill holes at 
different locations on USFS administered lands. Following USFS review 
and public scoping and notification, the USFS determined to grant a 
categorical exclusion to NEPA under its rules. However, as conditions 
of approval under the CE, the USFS required the proponent to adhere to 
13 specific conditions pertaining to drilling and abandonment of drill 
holes, access, threatened and endangered species, invasive weeds, 
reclamation, cultural resources, safety, waste handling, and others. 
Even though this project was approved using a CE, it is another 
excellent example of the ability of the USFS toa 1 specific 
environmental protection conditions under the existing rules to any 
project on USFS administered lands.
Crown Resources/Kinross Gold. Bockhorn Access Project. January 2007. 
        FEIS and ROD. Tonasket Ranger District, Okanogan and Wenatchee 
        National Forests. Tonasket, Washington
    Crown Resources submitted a Plan of Operations to access their 
patented claims and fee lands for the purpose of developing an 
underground mine on private land and hauling the ore to an existing 
milling facility which also is on private land. The USFS prepared an 
Environmental Assessment but then determined that an EIS would be 
required to approve the project. During the EIS process, the USFS 
developed and ultimately selected an Agency Preferred Alternative, 
Alternative BI, which made a number of modifications to the Proposed 
Action. In addition to selecting this alternative, the USFS added 15 
terms and conditions including a $967,000 reclamation bond for access 
area reclamation.
Formation Capital Corporation. Idaho Cobalt Project. EIS. February 
        2007. Salmon-Cobalt Ranger District. Salmon-Challis National 
        Forest, Lemhi County, Idaho
    In 2001, Formation Capital submitted a Plan of Operations to mine 
and process polymetallic ore on USFS unpatented mining claims in the 
Salmon-Challis National Forest. Over the intervening years, the USFS 
and Formation negotiated a series of agency-required and requested 
changes under the USFS 's land management rules. The proponent's 
proposal was detailed in the DEIS as Alternative II. However, using its 
authority to select an Agency Preferred Alternative, the USFS selected 
Alternative IV. Under this alternative, tailings backfill and any waste 
rock left underground as backfill will be amended with limestone or 
equivalent material to limit metals mobility and potential impacts to 
groundwater. The remainder would be disposed of in the disposal 
facility using a dry stacking method, and thus, eliminating the need 
for a tailings dam.
USFS Yampa Ranger District. Red Dirt Pit Expansion. EA and ROD. January 
        2007. Yampa Ranger District, Yampa, Colorado
    The USFS proposed to expand the Red Dirt aggregate pit in order to 
produce additional rock materials for various projects within the 
Medicine Bow-Routt National Forest. As with any project proponent, once 
a Plan of Operations was submitted, the NEPA process was triggered. The 
USFS determined that an EA would suffice given the size and scope of 
the project. Through internal review of the project and input from 
several members of the public, the USFS imposed 16 specific conditions 
on the project, including stipulations regarding timing of operations, 
wildlife, dust control, traffic control, and others.
Robert and Marjorie Miller. Robin Redbreast Unpatented Lode Claim 
        Mining Plan of Operations.-id ROD. May 2007. Ouray Ranger 
        District, Grand Mesa, Uncompahgre, and Gunnison National 
        Forests, Hinsdale County Colorado
    In this highly contentious case that in a previous variation went 
before the IBLA, the Millers submitted a Plan of Operations to extract 
minerals under the 1872 Mining Law on USFS unpatented claims located 
entirely within the Uncompahgre Wilderness Area. The Plan of Operations 
included access to the claims, mining plans, and plans for on-site 
housing. The USFS made this statement in the EIS and in the ROD:

          The Millers have established a statutory right to develop the 
        Robin Redbreast lode claim. This is accepted as a premise on 
        which all analysis in the FEIS, and this Decision, is based.

    The ROD denies approval of the Plan of Operations. The USFS stated 
their denial as follows:

          It is my decision that the ``plan of operations'' as 
        submitted cannot be approved, and that changes or additions to 
        the plan of operations are necessary to minimize or eliminate 
        adverse environmental impacts from mineral activities on 
        National Forest System (NFS) lands, as required by Forest 
        Service Regulations (36 CFR 228A). (See ``Legal Framework'' 
        FEIS).

    The USFS ROD goes on to say:

          I wish to address potential criticism that environmental 
        protection measures required through this decision are imposed 
        either unfairly, or as a purposeful means to prevent mining. I 
        am fully cognizant of the long history of dispute between the 
        agency and the Millers, culminating in decisions by OHA and 
        then IBLA. I have read these decisions and I fully acknowledge 
        the Millers right to mine and develop the mineral deposits on 
        the Robin Redbreast mining claim. This is made clear in the 
        ``Legal Framework'' section of this ROD, and is a foundation 
        for the EIS (See Chapter I, FEIS).
          At the same time, I have a positive duty to ensure that, 
        considering the environmental effects identified in the FEIS, 
        all reasonable and feasible environmental protection measures 
        are in place and are enforced. The fact that this mining claim 
        lays within the Uncompahgre Wilderness at 11,500 feet in 
        elevation calls for protection measures and requirements 
        appropriate for this setting. With the assistance of my 
        Interdisciplinary (ID) Team, I have exercised every possible 
        diligence to ascertain that those measures or alternatives that 
        are required are necessary and reasonable when considering the 
        location and nature of the proposed mining activity and cost 
        and effectiveness of required measures. I have made these 
        decisions specifically in accordance with the requirements at 
        36 CFR, Part 228, Subpart A, as cited in the Legal Framework 
        section of the FEIS.

    The USFS as stated that the Millers are free to resubmit a modified 
Plan of Operations. However, this case is an example of the agency 
exercising its ability under the rules to deny approval of a project as 
submitted because it did not, in the agency's view, comply with all 
federal laws and regulations.

                                    

      
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