    [House Hearing, 115 Congress]
    [From the U.S. Government Publishing Office]

        SEEKING INNOVATIVE SOLUTIONS FOR THE FUTURE OF HARDROCK MINING

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

                               OVERSIGHT HEARING

                                   before the

                           SUBCOMMITTEE ON ENERGY AND
                               MINERAL RESOURCES

                                     of the

                         COMMITTEE ON NATURAL RESOURCES
                         U.S. HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                            Thursday, July 20, 2017

                                   __________

                               Serial No. 115-20

                                   __________

           Printed for the use of the Committee on Natural Resources

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                         COMMITTEE ON NATURAL RESOURCES

                            ROB BISHOP, UT, Chairman
                RAUL M. GRIJALVA, AZ, Ranking Democratic Member

    Don Young, AK                        Grace F. Napolitano, CA
      Chairman Emeritus                  Madeleine Z. Bordallo, GU
    Louie Gohmert, TX                    Jim Costa, CA
      Vice Chairman                      Gregorio Kilili Camacho Sablan,
    Doug Lamborn, CO                         CNMI
    Robert J. Wittman, VA                Niki Tsongas, MA
    Tom McClintock, CA                   Jared Huffman, CA
    Stevan Pearce, NM                      Vice Ranking Member
    Glenn Thompson, PA                   Alan S. Lowenthal, CA
    Paul A. Gosar, AZ                    Donald S. Beyer, Jr., VA
    Raul R. Labrador, ID                 Norma J. Torres, CA
    Scott R. Tipton, CO                  Ruben Gallego, AZ
    Doug LaMalfa, CA                     Colleen Hanabusa, HI
    Jeff Denham, CA                      Nanette Diaz Barragan, CA
    Paul Cook, CA                        Darren Soto, FL
    Bruce Westerman, AR                  A. Donald McEachin, VA
    Garret Graves, LA                    Anthony G. Brown, MD
    Jody B. Hice, GA                     Wm. Lacy Clay, MO
    Aumua Amata Coleman Radewagen, AS    Jimmy Gomez, CA
    Darin LaHood, IL
    Daniel Webster, FL
    Jack Bergman, MI
    Liz Cheney, WY
    Mike Johnson, LA
    Jenniffer Gonzalez-Colon, PR
    Greg Gianforte, MT

                     Todd Ungerecht, Acting Chief of Staff
                          Lisa Pittman, Chief Counsel
                    David Watkins, Democratic Staff Director
                                     ------

                  SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                          PAUL A. GOSAR, AZ, Chairman
                ALAN S. LOWENTHAL, CA, Ranking Democratic Member

    Louie Gohmert, TX                    Anthony G. Brown, MD
    Doug Lamborn, CO                     Jim Costa, CA
    Robert J. Wittman, VA                Niki Tsongas, MA
    Stevan Pearce, NM                    Jared Huffman, CA
    Glenn Thompson, PA                   Donald S. Beyer, Jr., VA
    Scott R. Tipton, CO                  Darren Soto, FL
    Paul Cook, CA                        Nanette Diaz Barragan, CA
      Vice Chairman                      Vacancy
    Garret Graves, LA                    Vacancy
    Jody B. Hice, GA                     Raul M. Grijalva, AZ, ex officio
    Darin LaHood, IL
    Jack Bergman, MI
    Liz Cheney, WY
    Rob Bishop, UT, ex officio
                                     ------

                                    CONTENTS

                                  ----------
                                                                       Page

    Hearing held on Thursday, July 20, 2017..........................     1

    Statement of Members:
        Gosar, Hon. Paul A., a Representative in Congress from the
          State of Arizona...........................................     1
            Prepared statement of....................................     3
        Lowenthal, Hon. Alan S., a Representative in Congress from
          the State of California....................................     4
            Prepared statement of....................................     5

    Statement of Witnesses:
        Cress, James, Counsel, Bryan Cave LLP, Denver, Colorado......    21
            Prepared statement of....................................    22
        Hitzman, Murray, Associate Director for Energy and Minerals,
          United States Geological Survey, Reston, Virginia..........     7
            Prepared statement of....................................     8
        Krebs, Mitchell, President and CEO, Coeur Mining, Chicago,
          Illinois...................................................    30
            Prepared statement of....................................    31
            Questions submitted for the record.......................    34
        Pagel, Lauren, Policy Director, Earthworks, Washington, DC...    15
            Prepared statement of....................................    16
            Questions submitted for the record.......................    20
        Parke, Bret, Deputy Director, Arizona Department of
          Environmental Quality, Phoenix, Arizona....................    11
            Prepared statement of....................................    13

    Additional Materials Submitted for the Record:
        Lower Slate Lake, photographs submitted for the record by
          Rep. Lowenthal.............................................    61
        Mineral Commodity Summaries 2017, by USGS, pages 6-7
          submitted for the record by Rep. Hice......................    54

      OVERSIGHT HEARING ON SEEKING INNOVATIVE SOLUTIONS FOR THE FUTURE OF
                                HARDROCK MINING

                                  ----------

                            Thursday, July 20, 2017

                         U.S. House of Representatives

                  Subcommittee on Energy and Mineral Resources

                         Committee on Natural Resources

                                 Washington, DC

                                  ----------

        The Subcommittee met, pursuant to notice, at 9:07 a.m., in
    room 1324, Longworth House Office Building, Hon. Paul Gosar
    [Chairman of the Subcommittee] presiding.
        Present: Representatives Gosar, Cook, Gohmert, Lamborn,
    Wittman, Pearce, Thompson, Tipton, Hice, LaHood; Lowenthal,
    Beyer, and Soto.
        Dr. Gosar. The Subcommittee on Energy and Mineral Resources
    will come to order. The Subcommittee is meeting today to hear
    testimony on seeking innovative solutions for the future of
    hardrock mining.
        Under Committee Rule 4(f), any oral opening statements at
    the hearings are limited to the Chairman, Ranking Minority
    Member, and the Vice Chair. This will allow us to hear from our
    witnesses sooner, and help Members keep to their schedules.
    Therefore, I ask unanimous consent that all other Members'
    opening statements be made part of the hearing record, if they
    are submitted to the Subcommittee Clerk by 5:00 p.m. today.
        Without objection, so ordered.

       STATEMENT OF THE HON. PAUL A. GOSAR, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF ARIZONA

        Dr. Gosar. Today, the Subcommittee meets to discuss the
    importance of hardrock mining. Hardrock mining on Federal land
    in the United States has a storied past, a challenging present,
    and a multitude of needs for reform. This hearing will focus on
    pressing issues facing the hardrock industry, and provide
    oversight for innovative solutions for the future of hardrock
    mining.
        Back in March, this Subcommittee held an oversight hearing
    highlighting the importance of raw materials in a variety of
    infrastructure projects. From rocks to roads, rare earths to
    green technologies, and iron ore to wind farms, all
    infrastructure projects rely on a mining operation.
        The diversity of the Nation's mineral endowment allows for
    the United States to be self-sufficient, yet domestic
    production of solid mineral resources is hindered by an arduous
    and uncertain regulatory scheme.
        Delays in obtaining the various permits required for mine
    construction and production results in a project's loss in
    value. The NEPA process alone averages over 4\1/2\ years. This
    affects the economics of a given deposit and a company's
    ability to maximize the quantity of the resource they are able
    to recover. In other words, artificial delays in a mining
    project results in the squandering of the Nation's resources.
        Mining begins with exploration. In the early 1990s, the
    United States attracted 20 percent of the worldwide exploration
    budget. Today, it hovers around 7 percent. Without domestic
    exploration, significant declines in U.S. mineral production
    are unavoidable. This has contributed to an increased import
    dependency for minerals.
        In the mid-1980s, the United States was dependent on
    foreign sources for 30 non-fuel minerals. By 2017, the U.S.
    import dependence for non-fuel minerals more than doubled to 64
    commodities, 20 of which are imported entirely. Maybe it is
    time to return the USGS to its mission of geological
    exploration.
        Mining operations can have a significant impact on the
    environment. As such, Federal and state regulations have
    evolved to respond to past deficiencies, and ensure that the
    highest level of environmental protection is achieved,
    including significant and sufficient bonding requirements.
        However, over-regulation has a detrimental effect, as well.
    For instance, the EPA is working on a rule right now that would
    disregard the comprehensive regulations by states and other
    Federal agencies. The Bureau of Land Management, the U.S.
    Forest Service, and the majority of western states continue to
    raise concerns regarding duplication and pre-emption. These
    attempts to impose excessive and duplicative requirements on
    the mining industry will only serve to disincentivize critical
    investments in the United States.
        Abandoned mine lands are also an issue. There are estimates
    as to how many sites exist, and while there is no comprehensive
    inventory of abandoned hardrock mines, the problem is known to
    be extensive. While progress has been made in addressing some
    of the problem sites, there are legal barriers to creating a
    more aggressive and substantial program, and Good Samaritan
    legislation for abandoned hardrock mine site reclamation can be
    a positive force to resolve this legacy issue.
        Additionally, the United States no longer has a Federal
    entity promoting mineral development. The U.S. Bureau of Mines
    (USBM) was a Federal entity in the Department of the Interior
    that operated from 1910 until 1996. The purpose of the Bureau
    was to promote health, safety, and economic viability of the
    mining industry. Many from the mining community have pointed to
    the disbandment of the USBM as the beginning of the decline of
    mining in the United States.
        Today, we will also discuss the topic of royalties on
    minerals produced on Federal land. I encourage us to keep in
    mind the realities of hardrock mining. These economic and
    technical variables lead to different returns on investments
    from operation to operation. A one-size-fits-all gross royalty
    does not take into account the unique feature of every mine. As
    such, any legislative proposal seeking to impose a royalty rate
    must appropriately account for the realities of the hardrock
    mining industry, and be coupled with permitting certainty.
        It is true, we are covering a lot today. I look forward to
    coming up with novel approaches to perceived needed reforms,
    and I hope that we can do so in a bipartisan way. For many
    Congresses, we have been throwing around the same ideas to no
    avail. It is time for some new ideas, and I hope we come
    together to find them.
        Last, this week is ``Made in America'' week, and at this
    timely hearing we are discussing what is ``Mined in America.''
        I want to thank the witnesses for being here, and I look
    forward to hearing from them.

        [The prepared statement of Dr. Gosar follows:]
    Prepared Statement of the Hon. Paul A. Gosar, Chairman, Subcommittee on
                          Energy and Mineral Resources
        Today, the Subcommittee meets to discuss the importance of hardrock
    mining. Hardrock mining on Federal land in the United States has a
    storied past, a challenging present, and multiple needs for reform.
    This hearing will focus on pressing issues facing the hardrock industry
    and provide oversight for innovative solutions for the future of
    hardrock mining.
        Back in March, this Subcommittee held an oversight hearing
    highlighting the importance of raw materials in a variety of
    infrastructure projects. From rocks to roads, rare earths to green
    technologies, and iron ore to wind farms, all infrastructure projects
    rely upon a mining operation. The diversity of the Nation's mineral
    endowment allows for the United States to be self-sufficient, yet
    domestic production of solid mineral resources is hindered by an
    arduous and uncertain regulatory scheme.
        Delays in obtaining the various permits required for mine
    construction and production results in a project's loss in value. The
    NEPA process alone averages over 4\1/2\ years. This affects the
    economics of a given deposit and a company's ability to maximize the
    quantity of the resource they're able to recover. In other words,
    artificial delays in a mining project results in the squandering of the
    Nation's resources.
        Mining begins with exploration. In the early 1990s, the United
    States attracted 20 percent of the worldwide exploration budget; today
    it hovers around 7 percent. Without domestic exploration, significant
    declines in U.S. mineral production are unavoidable. This has
    contributed to an increased import dependency for minerals. In the mid-
    1980s, the United States was dependent on foreign sources for 30 non-
    fuel minerals. By 2017, the U.S. import dependence for non-fuel
    minerals more than doubled to 64 commodities; 20 of which are imported
    entirely. Maybe it's time to return the USGS to its mission of
    geological exploration.
        Mining operations can have a significant impact on the environment.
    As such, Federal and state regulations have evolved to respond to past
    deficiencies and ensure that the highest level of environmental
    protection is achieved, including significant and sufficient bonding
    requirements. However, over-regulation has a detrimental effect. For
    instance, the EPA is working on a rule right now that would disregard
    the comprehensive regulations by states and other Federal agencies. The
    Bureau of Land Management, the U.S. Forest Service, and the majority of
    western states continue to raise concerns regarding duplication and
    pre-emption. These attempts to impose excessive and duplicative
    requirements on the mining industry will only serve to disincentivize
    critical investments in the United States.
        Abandoned mine lands are also an issue. There are estimates as to
    how many sites exist, and while there is no comprehensive inventory of
    abandoned hardrock mines, the problem is known to be extensive. While
    progress has been made in addressing some of the problem sites, there
    are legal barriers to creating a more aggressive and substantial
    program and Good Samaritan legislation for abandoned hardrock mine site
    reclamation can be a positive force to resolve this legacy issue.
        Additionally, the United States no longer has a Federal entity
    promoting mineral development. The U.S. Bureau of Mines (USBM) was a
    Federal entity in the Department of the Interior that operated from
    1910 until 1996. The purpose of the bureau was to promote the health,
    safety, and economic viability of the mining industry. Many from the
    mining community have pointed to the disbandment of the USBM as the
    beginning of the decline of mining in the United States.
        Today, we will also discuss the topic of royalties on minerals
    produced on Federal land. I encourage us to keep in mind the realities
    of hardrock mining. These economic and technical variables lead to
    different return on investments from operation to operation. A one-
    size-fits-all gross royalty does not take into account the unique
    features of every mine. As such, any legislative proposal seeking to
    impose a royalty rate must appropriately account for the realities of
    the hardrock mining industry, and be coupled with permitting certainty.
        It's true that we are covering a lot today. I look forward to
    coming up with novel approaches to perceived needed reforms and I hope
    we can do so in a bipartisan way. For many Congresses, we have been
    throwing around the same ideas to no avail. It's time for some new
    ideas and I hope we can come together to find them.
        Last, this week is ``Made in America'' week, and at this timely
    hearing we will be discussing what is ``Mined in America.'' I want to
    thank the witnesses for being here and look forward to hearing from
    them today.

                                     ______

        Dr. Gosar. And with that, I recognize the Ranking Member
    this morning, Mr. Lowenthal, for his 5 minutes.

     STATEMENT OF THE HON. ALAN S. LOWENTHAL, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Dr. Lowenthal. Thank you, Mr. Chairman, and thank you for
    holding this hearing on a topic that is long overdue for some
    innovations, and thank you to all the witnesses.
        If I had to make one operative statement, one sentence,
    that summarized what I am going to say, it is the West has been
    settled. That is my operative sentence, ``the West has been
    settled,'' because we are going to be talking today about
    Federal law surrounding hardrock mining.
        Innovative solutions? At this point, what we are talking
    about if we look at the last time that we did anything on this,
    we are talking about the horseless carriage, the gramophone,
    light bulbs. We have not really been dealing with hardrock
    mining for a long, long time.
        The Mining Law dates back to 1872, when the West looked
    nothing like it does today. The same could be said for the
    entire country, as well as mining. The incentives placed into
    the 1872 law were supported by President Grant, because he
    wanted the West to be settled. That was the driving force. My
    message is the West has been settled; it is time to move on.
        The population of the entire country in the 1870s was
    smaller than the population of California today. Los Angeles
    was home to about 6,000 people, and thanks to the new
    transcontinental railroad, you could get from coast to coast at
    a blistering pace of just under 1 week. And it was in those
    days that we put into effect what became the local codes and
    the rules that the 49ers developed during the Gold Rush.
        Now, we have over 321 million people in the United States,
    nearly 10 million alone in Los Angeles County. And you can get
    from Los Angeles to Washington, DC, or New York City in about
    5\1/2\ hours. But our mining laws are still effectively the
    local codes and the rules that the 49ers developed during the
    Gold Rush.
        Public land is open for you to freely explore. The gold,
    silver, copper, and other minerals are there for you to take,
    no royalty necessary. And if you find something, you can buy
    the land outright for either $2.50 or $5 an acre. These rules
    may have been appropriate in the mid-19th century, but they are
    completely inappropriate in the modern world. It is long past
    time to seriously reform hardrock mining laws in this country.
        I know some will say, ``Hey, but hardrock mining does
    adhere to our environmental laws, such as NEPA, the Clean Water
    Act, and the Clean Air Act.'' But none of these laws today are
    really equipped to handle at this moment the specific
    environmental challenges that come with hardrock mining, or to
    address the exalted status that mining has managed to maintain
    on our public lands.
        For example, there are over a half-million abandoned
    hardrock mines that litter the country, posing safety threats
    and polluting thousands and thousands of miles of rivers and
    streams with toxic runoff. Congress tackled this issue for coal
    mines almost 40 years ago. Industry was asked to pay a small
    fee for each ton of mined coal, and that money goes to
    remediating the harmful legacy of countless abandoned coal
    mines. There is no similar program for abandoned hardrock
    mines.
        We have discussed Good Samaritan programs in this
    Committee, along with potential support from the newly-created
    Bureau of Land Management Foundation. These are voluntary
    efforts and they are off to a good start. I applaud this
    Committee for dealing with that, but that is not going to be
    enough to seriously put a dent in the problem.
        This can only happen if the mining industry steps up and
    meaningfully begins to deal with this history of pollution,
    just like the coal mining industry has done. There are many
    ways to raise revenue, and one option would be a long-overdue
    royalty on hardrock mining.
        I think it is constructive that we are having this
    discussion today, because it is simply long past time for the
    American people to get their fair share for the sale of
    minerals that actually belong to them.
        For nearly a century, we have received a royalty for oil,
    gas, coal, potash, soda ash, and many other resources that are
    extracted from public lands. It should be no different for
    gold, silver, copper, or any other minerals.
        I look forward to the discussion about the options for
    things such as royalty and other ways to reform the mining law.
    It is long overdue. And, as I say in conclusion, the West has
    been settled. It is time to move forward.
        Thank you, Mr. Chair.

        [The prepared statement of Dr. Lowenthal follows:]
       Prepared Statement of the Hon. Alan S. Lowenthal, Ranking Member,
                  Subcommittee on Energy and Mineral Resources
        Thank you, Mr. Chairman, and thank you for holding this hearing on
    a topic that's really long overdue for some innovations. Because when
    you're talking about Federal laws surrounding hardrock mining,
    innovative solutions could include the horseless carriage, the
    gramophone, or light bulbs.
        The Mining Law dates from a time when the West looked nothing like
    it does today. The same could be said for the entire country, as well
    as mining itself. The population of the entire country in the 1870s was
    smaller than the population of California today. Los Angeles was home
    to about 6,000 people. And thanks to the brand-new transcontinental
    railroad, you could get from coast to coast at a blistering pace of
    just under a week. And it was in these years that Congress put into law
    what were effectively the local codes and rules that the 49ers
    developed during the Gold Rush.
        Today, we have 321 million people in this country, nearly 10
    million in Los Angeles County alone. And you can get from L.A. to New
    York City in about 5\1/2\ hours. But our mining laws are still
    effectively the local codes and rules that the 49ers developed during
    the Gold Rush.
        Public land is open for you to freely explore. The gold, silver,
    copper, and other minerals are there for you to take, no royalty
    necessary. And if you find something, you can buy the land outright for
    either $2.50 or $5 an acre.
        These rules may have been appropriate in the mid-19th century, but
    they are completely inappropriate for the modern world. It is long past
    time to seriously reform hardrock mining laws in this country.
        I know that there are some who point out that hardrock mining in
    America still adheres to all of our environmental laws, such as the
    National Environmental Protection Act, the Clean Water Act, and the
    Clean Air Act. But none of those are equipped to handle the specific
    environmental challenges that come with hardrock mining, or to address
    the exalted status that mining has managed to maintain on our public
    lands.
        Then there are the half-million abandoned hardrock mines that
    litter the country, posing safety threats and polluting thousands and
    thousands of miles of rivers and streams with toxic runoff. Congress
    tackled this issue for coal mines almost exactly 40 years ago. Industry
    was asked to pay a small fee for each ton of mined coal, and that money
    goes to remediating the harmful legacy of countless abandoned coal
    mines. There is no similar program for cleaning up abandoned hardrock
    mines.
        We have discussed Good Samaritan programs in this Committee, along
    with potential support from the newly created Bureau of Land Management
    Foundation. But these are volunteer efforts that are a good start, but
    that will not be nearly enough to put a significant dent into this
    problem.
        That can only happen if the mining industry steps up and
    meaningfully deals with its own long history of pollution, just like
    the coal industry has done. There are many ways to raise that revenue,
    and one option would be the long-overdue royalty on hardrock mining.
        I think it's very constructive that we're having that discussion
    today, because it is simply long past time for the American people to
    get their fair share for the sale of minerals that belong to them. For
    nearly a century, the American people have received a royalty for oil,
    gas, coal, potash, soda ash, and many other resources that are
    extracted from public lands. It should be no different for gold,
    silver, copper, or any other mineral.
        I look forward to the discussion about the options for such a
    royalty, and other ways to reform the Mining Law, but there is no
    question this discussion is long overdue.
        I thank the witnesses for being here, and I yield back the balance
    of my time.

                                     ______

        Dr. Gosar. I thank the gentleman. I will now introduce our
    witnesses.
        First, we have Dr. Murray Hitzman, the Associate Director
    for Energy and Minerals at the United States Geological Survey;
    Mr. Bret Parke, Deputy Director for the Arizona Department of
    Environmental Quality; Ms. Lauren Pagel, Policy Director at
    Earthworks; Mr. James Cress, Counsel at Bryan Cave, LLP; and
    then Mr. Mitchell Krebs, President and CEO of Coeur Mining.
        Let me remind the witnesses that under our Committee Rules,
    they must limit their statements to 5 minutes. Their entire
    written testimony will be placed in the hearing record.
        Our microphones are not automatic, you will have to push
    the microphone button so we can hear you. At that same time,
    you will see the clock start at 5 minutes. It will be green for
    the first 4 minutes, then it will turn yellow for 1 minute.
    When you see the red, please cut it off. We have a busy
    morning, so we want to make sure we give everybody ample time.
        I am going to start now by recognizing Dr. Hitzman for his
    testimony.
        You are recognized.

    STATEMENT OF MURRAY HITZMAN, ASSOCIATE DIRECTOR FOR ENERGY AND
      MINERALS, UNITED STATES GEOLOGICAL SURVEY, RESTON, VIRGINIA

        Dr. Hitzman. Good morning. Thank you, Chairman Gosar,
    Ranking Member Lowenthal, and members of the Subcommittee.
    Thank you for the opportunity to discuss the Nation's mineral
    resources.
        The U.S. Geological Survey is responsible for conducting
    research and collecting data on a wide variety of mineral
    resources. The USGS maintains a workforce of geologists,
    geochemists, geophysicists. and resource specialists with
    expertise in minerals and materials. These geoscientists
    collect, analyze, and disseminate data and information on
    domestic and global rare earth and other mineral reserves and
    resources, production, consumption, and use. These mineral data
    are published annually in the mineral commodities summary.
        Domestic and global demand for mineral commodities
    continues to increase. The United States is a major producer of
    non-fuel minerals that have an estimated total value of $75.6
    billion, and is a net exporter of 16 non-fuel mineral
    commodities.
        But the United States is also increasingly reliant on
    foreign sources for processed mineral materials. In 2016, our
    studies show that imports made up more than one-half of the
    apparent U.S. consumption of 50 non-fuel mineral commodities
    valued at $32.3 billion. The United States was 100 percent
    reliant for 20 of these mineral commodities, including 8 that
    the USGS identified as critical. This is an increase from 47
    non-fuel mineral commodities on which the country was more than
    one-half dependent in 2015, and 19 non-fuel mineral commodities
    for which the country was 100 percent dependent in 2015.
        In addition to providing information on mineral production
    and consumption, the USGS also produces data that aids in
    assessing the mineral potential of a country, and we have done
    so since 1879. The Nation's lands undoubtedly contain
    additional deposits of critical and strategic minerals, but
    mineral exploration by the private sector is hampered by the
    lack of modern geological and geophysical data.
        USGS studies of domestic mineral resources make heavy use
    of geological and regional-scale geophysical maps such as
    aeromagnetic and radiometric maps that help to find areas that
    could be favorable for exploration. Many USGS geological maps
    are produced in conjunction with state geological surveys
    through the National Cooperative Geologic Mapping Program.
        Currently, less than one-third of the United States has
    been mapped at the detailed scales required for mineral
    exploration. For example, Alaska and large portions of the mid-
    continent represent some of the most prospective ground for
    mineral discovery in the world. However, the favorable rocks
    for the deposits are buried, and not visible at the earth's
    surface. Geophysical surveys are required for such areas.
        Other countries, such as Canada and Australia, that have
    undertaken such geological and geophysical surveys report that
    investments of $1 by the government have resulted in further
    investment of over $5 by the private sector.
        An assessment of the Nation's mineral resources must
    include not only the resources available on the ground, but
    also those that become available through recycling. Metal
    supply consists of primary material from a mining operation and
    secondary material, which is composed of old and new scrap.
    Metal recycling rates cluster in the range from 15 to 45
    percent. Although recycling is a major source of some non-fuel
    resources, such as aluminum, technical difficulties with
    recycling for other mineral commodities, such as the rare earth
    elements, can be very challenging.
        The Department, through the USGS, stands ready to fulfill
    its role as the Federal provider of unbiased research on
    mineral resources, as well as information on domestic and
    global production and consumption of mineral resources for use
    in global critical mineral supply chain analysis.
        Thank you for the opportunity to testify, and I look
    forward to any questions you may have.

        [The prepared statement of Mr. Hitzman follows:]
    Prepared Statement of Dr. Murray Hitzman, Associate Director for Energy
     and Minerals, U.S. Geological Survey, U.S. Department of the Interior

        Good morning Chairman Gosar, Ranking Member Lowenthal, and members
    of the Subcommittee. Thank you for the opportunity to discuss the
    Nation's mineral resources.
                                   background
        On behalf of the U.S. Department of the Interior, the U.S.
    Geological Survey (USGS) is responsible for collecting data and
    conducting research on a wide variety of mineral resources. Research is
    conducted to understand the geologic processes that have concentrated
    known mineral resources at specific locations in the Earth's crust; and
    to assess quantities, qualities, and areas of undiscovered mineral
    resources, or potential future supply. The USGS maintains a workforce
    of geoscientists, including geologists, geochemists, geophysicists, and
    resource specialists, with expertise in minerals and materials. These
    geoscientists continuously collect, analyze, and disseminate data and
    information on domestic and global rare earth and other mineral
    reserves and resources, production, consumption, and use.
            current understanding of the nation's mineral endowment
        Domestic and global demand for mineral commodities continues to
    rise. Mineral commodities have ever more applications in both consumer
    and national security products, especially those products involving
    advanced technologies. The United States remains a major mineral
    producer with an estimated total value of non-fuel mineral resources of
    $75.6 billion, and is a net exporter of 16 non-fuel mineral
    commodities. However, the country also is increasingly reliant on
    foreign sources for processed mineral materials. In 2016, imports made
    up more than one-half of the U.S. apparent consumption of 50 non-fuel
    mineral commodities (valued at $32.3 billion), and the United States
    was 100 percent import reliant for 20 of these mineral commodities
    (valued at $1.3 billion), including 8 critical minerals as identified
    by the USGS. This is an increase from 47 non-fuel mineral commodities
    on which the country was more than one-half dependent in 2015 and 19
    non-fuel commodities for which the country was 100 percent import
    reliant in 2015. China, followed by Canada, supplied the largest number
    of non-fuel mineral commodities to the United States in 2016, similar
    to 2015.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

       USGS mineral commodity specialists study current production and
    consumption for 84 mineral commodities, both domestically and
    internationally for 180 countries. These production and consumption
    data include information on domestic production and use, import
    sources, world production capacity, and recycling. The data allow for a
    comprehensive understanding of the complete life cycle of mineral
    resources and materials. This information is published annually in the
    USGS Mineral Commodity Summaries (USGS, 2017) and includes a
    description of current events, trends, and issues related to supply and
    demand. These data inform analyses and policies concerning the Nation's
    dependence on foreign sources of mineral commodities.
        In addition to providing information on mineral production and
    consumption, the USGS also produces data that aids in assessing the
    mineral potential of the country, which we have done since 1879. This
    work continues as different mineral commodities gain importance for the
    economy and as our understanding improves of how mineral deposits form
    and how they can be discovered. Geological maps are a primary source of
    information for mineral exploration. Many USGS geological maps are
    produced in conjunction with state geological surveys through the
    National Cooperative Geologic Mapping Program through cooperative
    agreements.
        The Mineral Resources Program (MRP) conducts research to better
    understand new types of critical mineral deposits. Also critical are
    geological mapping and geophysical data. These USGS research and
    assessment products are crucial to Federal, state, tribal, and industry
    decision making on mineral resources management.
        potential to enhance the nation's mineral resources information
        The United States remains a major mineral producer. The Nation's
    lands undoubtedly contain additional deposits of critical and strategic
    minerals, but mineral exploration by the private sector is hampered by
    the lack of modern geological and geophysical data. USGS studies of
    domestic mineral resources make heavy use of geologic mapping and the
    production of regional scale geophysical maps such as aeromagnetic and
    radiometric maps that help define areas favorable for exploration.
        Currently less than one-third of the United States has complete
    topographic, geologic, and geophysical 3D mapping at fine enough scales
    to support these resource assessments that directly support private
    industry exploration. For example, Alaska and large portions of the
    Midcontinent (IL, IN, IA, KS, MI, MN, MO, NE, OH, OK, and WI) represent
    some of the most prospective ground for mineral discovery in the world.
    However, the favorable rocks for the deposits are buried and not
    visible at the Earth's surface, and have not been more specifically
    identified through modern geological and geophysical mapping. Other
    countries such as Canada and Australia have undertaken such geological
    and geophysical surveys nationwide and have reported that investments
    of $1 by the government have resulted in further investment of over $5
    by the private sector.\1\
    ---------------------------------------------------------------------------
        \1\ For Canada: Duke, J.M., 2010, Government geoscience to support
    mineral exploration: public policy rationale and impact: Prospectors
    and Developers Association of Canada. Toronto, Canada, 64 p.

        For Australia: ACIL Allen Consulting, 2015, Exploration Incentive
    Scheme Economic Impact Study, Geological Survey of Western Australia,
    78 p.
    ---------------------------------------------------------------------------
        In addition to reinvesting in the Nation's fundamental data on
    mineral resources, an accurate assessment of the Nation's mineral
    resources must include not only the resources available in the ground
    but also those that become available through recycling. Metal supply
    consists of primary material from a mining operation and secondary
    material, which is composed of new and old scrap. Metals show a wide
    range of recycling rates, recycling efficiency, and new-to-old-scrap
    ratios. Recycling rates cluster in the range from 15 to 45 percent for
    different resources. Although recycling is a major source of some non-
    fuel mineral resources such as aluminum, technical difficulties with
    recycling mean that for other mineral commodities such as the rare
    earth elements recycling is challenging. USGS compiles information
    about recycling, but research on new methods of metal recycling is
    undertaken mainly by the Department of Energy.
                                   conclusion
        The Department, through the USGS, fulfills its role as the Federal
    provider of unbiased research on known mineral resources, assessment of
    undiscovered mineral resources, and information on domestic and global
    production and consumption of mineral resources for use in global
    mineral supply chain analysis.
        Thank you for the opportunity to present on behalf of the
    Department on the important subject of mineral resources. I will be
    happy to answer any questions.

                                     ______

        Dr. Gosar. I thank you very much. I will now introduce Mr.
    Bret Parke, the Deputy Director of the Arizona Department of
    Environmental Quality.
        Big difference between heat out in Arizona and here, isn't
    it?
        Mr. Parke. Yes, Mr. Chairman. It is a big swampy here.
        [Laughter.]

    STATEMENT OF BRET PARKE, DEPUTY DIRECTOR, ARIZONA DEPARTMENT OF
                ENVIRONMENTAL QUALITY, PHOENIX, ARIZONA

        Mr. Parke. Mr. Chairman, members of the Subcommittee, my
    name is Bret Parke, and I am the Deputy Director at the Arizona
    Department of Environmental Quality (ADEQ). It is a privilege
    for me to be here today, and I appreciate the opportunity to
    offer testimony regarding the U.S. EPA's proposed rule on
    CERCLA financial responsibility.
        Earlier this month, ADEQ, along with many states and
    government associations, including the Interstate Mining
    Compact Commission, requested that EPA withdraw the proposed
    rule, and determined that EPA action is unnecessary and
    inappropriate under CERCLA.
        The modern regulatory permitting programs that ADEQ cited
    in its comments and that I will discuss today are site-specific
    and preventative in nature. In contrast, the 1980 CERCLA law's
    financial responsibility mandate is remedial, and was founded
    on the contingency that an unpermitted release will lead to a
    financial burden on taxpayers. I believe that CERCLA's
    financial responsibility rulemaking mandate and express Federal
    pre-emption of related financial responsibility is antiquated
    and unworkable. And, CERCLA's mandate to apply the history of
    superfund and judgments associated with legacy environmental
    contamination 37 years later, in 2017, is unjustified.
        Modern state, regulatory permitting programs and related
    financial responsibility ameliorate the very risk Congress was
    addressing more than three decades ago, when it passed CERCLA.
    Indeed, in the intervening years, states, including Arizona, as
    well as the Federal Government, filled the gap with
    sophisticated environmental regulatory permitting and land
    management programs to govern hardrock mining.
        Although EPA acknowledges the existence of Arizona's
    aquifer protection program and Mining Lands Reclamation Act,
    EPA overlooked the broad applicability and effectiveness of
    these programs. ADEQ's formal comments on the rule listed seven
    distinct programs currently applicable to mines that prevent
    and mitigate the duration and degree of risk associated with
    hardrock mining. Many of the Federal regulatory permit programs
    are delegated and are administered by states.
        These state-implemented regulatory programs are
    progressive, in that they require modern engineering and
    design, and application of new control technologies. These
    mature and sophisticated state and Federal regulatory programs
    have made the requirement to promulgate the proposed rule
    duplicative and unnecessary. In fact, since the development,
    implementation, and integration of these state and Federal
    regulatory programs, no currently operating mine facility
    release has triggered the financial responsibility call by
    ADEQ.
        In addition to the technical and legal inadequacies of the
    proposed rule, the economic and administrative burden to
    Arizona government and industry significantly outweighs any
    perceived but undemonstrated environmental benefit EPA
    suggests. For context, mining has played a central role in
    Arizona's history, and Arizona remains a top producer of copper
    in the world. In 2014 alone, mining companies in Arizona
    employed more than 12,000 people.
        For that year, including both direct and indirect economic
    impacts, the mining industry is estimated to have provided
    43,800 Arizona jobs, and income of $4.29 billion. ADEQ, based
    on an EPA-provided example and using EPA's model, identified
    that the financial impacts to Arizona mines could be extreme,
    totaling $1.8 billion in additional financial responsibility
    for just the two Arizona mines modeled. This is an
    extraordinarily high financial burden on mine operators, and
    the state and its citizens, that is not warranted.
        Mining is a global competition. Every additional regulation
    adopted in the United States should be carefully considered by
    policy makers. The EPA's own estimated cost under the proposed
    rule to just the mining industry is $7.1 billion. Notably, EPA
    identified the proposed rule will have a significant impact on
    a substantial number of small entities. In fact, EPA identified
    36 percent of hardrock mines subject to the rule are small
    businesses.
        Additionally, EPA's record, including the financial market
    capacity study requested by Congress, demonstrates that the
    financial markets are unsure, unfamiliar, and currently do not
    underwrite this type of third-party, direct-actionable, long-
    tailed financial responsibility. What this means is that the
    market will include a premium to price that unknown risk. This
    is especially important to note, given that mining is only the
    first sector, and EPA has published advance notice of a
    proposed rulemaking for three more nationally strategic
    sectors.
        In closing, I would like to share with you ADEQ's
    philosophy. ADEQ believes, by working closely with our
    stakeholders, and by identifying and expanding the nexus
    between the environment, economy, and the community, ADEQ can
    best protect and enhance public health and the environment,
    creating a win-win for the people that live in the great state
    of Arizona.
        That concludes my testimony; I would be happy to answer any
    questions you might have.

        [The prepared statement of Mr. Parke follows:]
     Prepared Statement of Bret Parke, Deputy Director, Arizona Department
                            of Environmental Quality
       proposed rule--cercla 108(b) financial responsibility requirements
        Mr. Chairman, members of the Subcommittee, my name is Bret Parke,
    and I am the Deputy Director of the Arizona Department of Environmental
    Quality. It is a privilege for me to be here today and I appreciate the
    opportunity to offer testimony regarding the U.S. Environmental
    Protection Agency's (EPA) proposed rule on CERCLA \1\ Section 108(b)
    Financial Responsibility Requirements for hardrock mining (hereafter
    proposed rule).\2\
    ---------------------------------------------------------------------------
        \1\ The Comprehensive Environmental Response, Compensation, and
    Liability Act of 1980.
        \2\ https: / / www.federalregister.gov / documents / 2017/01/11/
    2016-30047 / financial-responsibility-requirements-under-cercla-108b-
    for-classes-of-facilities-in-the-hardrock.
    ---------------------------------------------------------------------------
        As you learned from my bio, I am a career environmental
    professional with deep family roots in public service in the protection
    and enhancement of Arizona's rich and diverse environment.\3\
    ---------------------------------------------------------------------------
        \3\ Incidentally, if you have not seen the original The Lorax book
    or movie from Dr. Seuss, I highly recommend it.
    ---------------------------------------------------------------------------
        I would like to begin by expressing gratitude to EPA for its recent
    efforts to engage with and understand the true impacts the proposed
    rule will have on Arizona and other states for which hardrock mining is
    a significant economic driver. It is through such collaboration that I
    believe EPA will come to understand the significant and robust
    environmental regulatory infrastructure already being effectively
    administered by state and Federal programs that prevent and mitigate
    the very risks EPA seeks to address through the proposed rule.
        Earlier this month, the state of Arizona through ADEQ, along with
    many states and government associations, requested that EPA withdrawal
    the proposed rule and determine that no EPA action is necessary or
    appropriate under CERCLA 108(b).\4\ In making this request, ADEQ
    identified several key elements of the proposed rule that makes it
    untenable for Arizona, and that I would like to share with you today.
    ---------------------------------------------------------------------------
        \4\ As permitted by the Court in its decision in On Petition For
    Writ of Mandamus to the United States Environmental Protection Agency,
    In Re: Idaho Conservation League, et al., Petitioners, No. 14-1149
    (D.C. Cir. Jan. 26, 2016) (available at https: / /
    www.cadc.uscourts.gov/internet/opinions.nsf/
    1F012EA1238D7A3C85257F490054E52E/$file/14-1149-1596081.pdf).
    ---------------------------------------------------------------------------
        The modern regulatory permitting programs that ADEQ cited in its
    comments, and that I will discuss today are site-specific and
    preventative in nature. In contrast, the 1980 CERCLA law's financial
    responsibility mandate is remedial and was founded on the contingency
    that an unpermitted release will lead to a financial burden on
    taxpayers. I believe that CERCLA's 108(b) financial responsibility (FR)
    rulemaking mandate and express Federal pre-emption of related state FR,
    is antiquated and unworkable in the current existing regulatory
    permitting and FR environment.\5\ And, CERCLA's mandate to apply the
    history of Superfund and judgments associated with legacy environmental
    contamination 37 years later, in 2017, is unjustified. Modern state
    regulatory permitting programs and related FR ameliorate the very risk
    Congress was addressing more than three decades ago when it passed
    CERCLA.
    ---------------------------------------------------------------------------
        \5\ https://www.law.cornell.edu/uscode/text/42/9608.
    ---------------------------------------------------------------------------
        Indeed, in the intervening years EPA inexplicably delayed the
    rulemaking process, states, including Arizona, and the Federal
    Government filled the gap with sophisticated environmental regulatory
    permitting and land management programs to govern the hardrock mining
    industry. ADEQ's formal comments on the rule listed seven distinct
    programs currently applicable to mines that prevent and mitigate the
    ``duration and degree of risk'' associated with the hardrock mining
    industry. Many of the Federal regulatory permit programs that were
    developed have now been delegated to and are administered by the
    states. These state implemented regulatory programs are progressive in
    that they require modern engineering and design, and application of new
    control technology.
        These mature and sophisticated state and Federal regulatory
    programs have made the requirement to promulgate the proposed rule
    duplicative and unnecessary.
        This fatal flaw is well documented in Arizona. Although EPA
    acknowledges the existence of Arizona's Aquifer Protection and Mining
    Lands Reclamation Act programs, EPA overlooked the broad applicability
    and effectiveness of these programs.
        In fact, since the development, implementation, and integration of
    these state and Federal regulatory programs, no currently operating
    mine facility release has triggered a call by ADEQ on a financial
    responsibility mechanism in Arizona.
        In addition to the technical and legal inadequacies of the proposed
    rule, the economic and administrative burden to Arizona government and
    industry significantly outweighs any perceived but undemonstrated
    environmental benefit that EPA suggests will occur if the proposed rule
    is enacted. To provide you context for this comment, the hardrock
    mining industry is an integral part of maintaining sustainable, healthy
    and prosperous communities throughout Arizona and other hardrock mining
    states.
        Mining has played a central role in Arizona's history and Arizona
    remains a top producer of copper in the world, as well as a significant
    producer of molybdenum, coal, gold, silver, and uranium. In 2014 alone,
    mining companies in Arizona employed more than 12,000 people, spent
    $2.77 billion purchasing goods and services throughout the state
    generating 6,200 jobs, and provided income of $910 million to just the
    first-tier suppliers working to support mining.\6\ Including both
    direct and indirect economic impacts, the Arizona mining industry in
    2014 is estimated to have provided 43,800 Arizona jobs and income of
    $4.29 billion.
    ---------------------------------------------------------------------------
        \6\ The Economic Impact of the Mining Industry on the State of
    Arizona: for the year 2014. L. William Seidman Research Institute, W.
    P. Carey School of Business, Arizona State University (available at
    http://www.azmining.com/uploads/AMA%20report%202014%20v2%20.pdf).
    ---------------------------------------------------------------------------
        ADEQ recently conducted a financial screening analysis modeled
    under the proposed rule based on an EPA-provided example that suggests
    the financial impacts to Arizona mines could be extreme: totaling $1.8
    billion in additional financial responsibility for just the two Arizona
    mines.
        This is an extraordinarily high financial burden on mine operators,
    and the state and its citizens that is not warranted, given the lack of
    evidence to support EPA's assertion that the proposed rule would yield
    an environmental benefit.
        Mining is a global competition. Every additional regulation upon
    the industry to operate in the United States should be carefully
    considered by policymakers. The EPA's own estimated CERCLA 108(b)
    financial responsibility cost to just the mining industry is $7.1
    billion. Notably, EPA identified 36 percent of hardrock mining
    businesses are small businesses, and EPA estimates that the proposed
    rule will have a significant impact on a substantial number of small
    entities. The record, including the financial market capacity study
    requested by Congress (P.L. 114-113),\7\ demonstrates that the
    financial markets are unsure, unfamiliar and currently do not
    underwrite this type of third-party accessible, direct actionable,
    long-tailed financial responsibility. What this means is that the
    market will include a premium to price the unknown risk.
    ---------------------------------------------------------------------------
        \7\ https://semspub.epa.gov/work/HQ/196705.pdf.
    ---------------------------------------------------------------------------
        In addition, as documented in ADEQ's formal comments, the technical
    and legal documentation supporting EPAs rulemaking process is fatally
    flawed because it was driven by a litigation driven timeline.
        This is especially important to note given that mining is only the
    first sector, and EPA has already published advanced notice of intent
    for a proposed rulemaking for three more nationally strategic sectors;
    manufacturing, petroleum and coal products manufacturing, and the
    electric power generation, transmission, and distribution
    industries.\8\
    ---------------------------------------------------------------------------
        \8\ https://www.epa.gov/superfund/superfund-financial-
    responsibility.
    ---------------------------------------------------------------------------
        In closing, I'd like to share with you one of the cornerstones of
    our philosophy at ADEQ. We believe that a healthy environment can only
    be achieved if we acknowledge and embrace the complex world in which we
    operate. By working closely with our stakeholders, and by identifying
    and expanding the nexus between the environment, the economy and the
    community, we can best achieve our mission to protect and enhance
    public health and the environment, and create a win-win for the people
    that live in the great state of Arizona. The CERLA 108(b) proposed rule
    on which I have provided testimony on today, is largely duplicative and
    fails to recognize the complexities of our existing regulatory and
    environmental ecosystem. If enacted, the proposed rule will yield
    significant negative economic and state program impacts in Arizona. It
    will also have an outsized effect on the limited number states with
    hardrock mining, and the generally rural communities in which they
    exist. As a result, we strongly encourage EPA to withdraw the proposed
    rule.
        That concludes my testimony and I would be happy to answer any
    questions you may have.

                                     ______

        Dr. Gosar. Thank you, Mr. Parke.
        I now recognize Ms. Pagel from Earthworks.

        STATEMENT OF LAUREN PAGEL, POLICY DIRECTOR, EARTHWORKS,
                             WASHINGTON, DC

        Ms. Pagel. Thank you, Chairman Gosar, Ranking Member
    Lowenthal, and members of the Subcommittee, for holding this
    hearing, and for the opportunity to testify before you today.
    My name is Lauren Pagel, Policy Director at Earthworks.
        For nearly 30 years, Earthworks has worked to protect
    communities and the environment from the adverse impacts of
    mining. Innovative solutions exist to bring our mining laws
    into the 21st century and protect mining-impacted communities
    and western water resources.
        The U.S. mining industry currently benefits from open
    access to public lands under an antiquated mining law, large
    subsidies from the American taxpayer, a uniform regulatory
    system, and several mining-specific loopholes in our bedrock
    environmental laws. These factors combine to prioritize
    hardrock mining industry profits over communities' water
    resources and taxpayers.
        Meaningful reform of the outdated 1872 Mining Law is the
    innovative solution we need. Reform will give the mining
    industry the certainty it needs, while providing a fair return
    to the taxpayer, increasing community involvement in mining
    decisions, and adequately balancing mining with other uses of
    public land.
        The mining industry receives public minerals for free under
    a law that was written to govern pick-and-shovel miners, not
    the large-scale industrial mining that exists today. In
    addition to royalty-free mining, mining companies receive
    enormous tax breaks for depleting our resources, due to an
    extremely favorable tax code.
        The mining industry also benefits from a consistent
    regulatory process set by the National Environmental Policy
    Act. In fact, the United States is consistently ranked as one
    of the world's best places for mining investment. According to
    the Fraser Institute, a Canadian think tank who annually
    surveys mining exploration and development companies around the
    world, Nevada, Utah, and Wyoming routinely rank in the top 10
    most attractive jurisdictions for mineral investment.
        According to a 2016 GAO report, the BLM spends an average
    of 2 years permitting a mine. And when lengthy delays do occur,
    the main cause of those delays is often the permit applicants
    themselves.
        The mining industry also benefits from loopholes in major
    environmental laws, and insufficient bonding and reclamation
    requirements. For example, loopholes in the Clean Water Act
    allow mining companies to dump their waste, untreated, directly
    into our lakes, rivers, and streams. A groundbreaking study
    found that 75 percent of mining operations pollute surrounding
    surface or groundwater, despite their robust environmental
    reviews that predict they won't. A new study released today
    finds that 74 percent of the domestic gold mines profiled have
    polluted water with cyanide, arsenic, nitrates, or other
    hazardous materials.
        The innovative solution to many of the challenges I have
    highlighted thus far is meaningful reform of the 1872 Mining
    Law. Earthworks encourages legislation that will provide a fair
    return to the taxpayer, create a robust reclamation fund to
    deal with our Nation's abandoned mine program, require mining
    companies to comply with 21st century operation and reclamation
    standards, and allow mining to be properly balanced with other
    uses of public lands.
        A value-based gross royalty linked directly to the revenue
    mining companies receive from the sale of our minerals will
    help ensure a fair return.
        Nevada's state royalty is a good example of why net
    proceeds royalties do not provide a fair return to the
    taxpayer. Between 1995 and 2016, Nevada mining operations sold
    over $1 billion in gold, yet they only paid royalties to the
    state of $1.7 billion, less than 1.7 percent. Over that time
    span, more than 7 percent of gold production, or over $7
    billion worth, paid no royalty, whatsoever, to the taxpayer.
        A modern mining law also requires we deal with the legacy
    cost mining has passed along to taxpayers. The EPA estimates
    that total cleanup costs for abandoned mines could be as much
    as $50 billion. A reclamation fee similar to the coal abandoned
    mine fee is needed to create a steady stream of long-term
    funding for hardrock AML cleanup.
        Most importantly, any reform of the mining law must include
    the discussion for Federal land managers to balance mining with
    other land uses such as recreation, conservation, hunting, or
    fishing. Land managers should have clear authority to weigh
    these competing land uses, water impacts, and community needs
    before approving or disapproving a mine plan.
        I thank you for the opportunity to present Earthworks' view
    on seeking innovative solutions for the future of hardrock
    mining. We look forward to working with this Subcommittee and
    other stakeholders to reform the Mining Law of 1872 to fully
    protect communities, the environment, and taxpayers.

        [The prepared statement of Ms. Pagel follows:]
        Prepared Statement of Lauren Pagel, Policy Director, Earthworks
        Thank you Chairman Gosar, Ranking Member Lowenthal, and members of
    the Subcommittee for holding this hearing and the opportunity to
    testify before you. I am Lauren Pagel, Policy Director for Earthworks.
    For nearly 30 years, Earthworks has worked to protect communities and
    the environment from the adverse impacts of mineral and energy
    development while seeking sustainable solutions.

        Innovative solutions exist to bring our mining laws into the 21st
    century and protect mining-impacted communities and western water
    resources. The U.S. mining industry currently benefits from open access
    to public lands under an antiquated mining law, large subsidies from
    American taxpayers, a uniform regulatory system that encourages
    investment and several mining-specific loopholes in our bedrock
    environmental laws.

        These factors combine to prioritize hardrock mining industry
    profits over the communities and water resources that are negatively
    impacted by large hardrock mines. Meaningful reform of the outdated
    1872 Mining Law is the innovative solution that will bring our mining
    laws and practices into the 21st century, giving the mining industry
    the certainty it needs, while providing a fair return to the taxpayer,
    maintaining community involvement in mining decisions and adequately
    balancing mining with other uses of public lands.

        The mining industry in this country enjoys unprecedented access to
    hardrock minerals on public lands--minerals they receive for free under
    a law that was written to govern pick and shovel miners of 1872, not
    the large-scale industrial mining that exists today. Federal land
    managers at the Forest Service and Bureau of Land Management interpret
    the Mining Law to give mining precedence over all other uses of public
    lands--prioritizing mining over hunting, recreation, grazing or other
    beneficial uses.

        In addition to royalty-free mining, mining companies receive
    enormous tax breaks for depleting our resources. An extremely favorable
    tax code permits a company to deduct a fixed percentage from their
    gross income according to the mineral extracted, ranging from 22
    percent for uranium to 15 percent for silver and other hardrock
    minerals. In some cases this deduction, over the life of the mine,
    actually exceeds the cost of acquiring the mineral deposit. The result
    is a situation where mining companies not only pay virtually nothing
    for the public's minerals, but also get paid by the government to mine
    public minerals they were freely given. This subsidy, called the
    Percentage Depletion Allowance, costs taxpayers over $500 million every
    year.

        The mining industry also benefits from a consistent regulatory
    process set by the National Environmental Policy Act (NEPA). In fact,
    year after year, the United States is ranked as one of the world's best
    places for mining investment. With stable democratic institutions,
    courts that enforce contracts, favorable tax and environmental policy,
    and an orderly and reliable process for public input in permitting
    decisions, America is the one of the world's best place to mine.

        Just ask the mining companies. According to the Fraser Institute--a
    center-right Canadian think tank who annually survey approximately 700
    mining, exploration, development mining company managers and executives
    around the world--Nevada, Utah, and Wyoming, routinely rank in the top
    10 most attractive jurisdictions for mineral investment surveyed.

        Despite the mining industry's complaints about permit times,
    according to a 2016 Government Accountability Office (GAO) report, the
    Bureau of Land Management spends on average 2 years permitting a mine.
    Two-year permit times is competitive with the other western democracies
    with robust mining industries such as Australia, Canada, Chile, and
    Norway.

        The truth is, mining companies create more permitting delays than
    agencies or regulations. According to the GAO, the main cause of permit
    delays is the permit applicant. Incomplete or poor quality application
    information, market fluctuations, or changes to mining plans lead to
    most delays. Even when the plans are fine, mining companies have
    further delayed by making changes (sometimes for perfectly legitimate
    reasons) to their plans after submission. GAO says this occurred 37
    times over 5 years accounting for delays ranging from just a few weeks
    to 7 years.

        In addition to free minerals, profitable tax breaks, and a
    consistent regulatory process, the mining industry also benefits from
    lax regulation during mine operation and insufficient bonding and
    reclamation requirements after mine closure. Loopholes in the Clean
    Water Act and Resource Conservation and Recovery Act allow mining
    companies to dump their waste directly into our lakes, rivers, and
    streams. Hardrock mines are often some of the most expensive to clean
    up when they all too often find themselves on the Superfund National
    Priorities list. These funding shortfalls leave the public exposed to
    hazardous mining waste, and leave taxpayers to foot the cleanup bill
    because the EPA lacks the funds to perform adequate remediation. The
    hardrock mining industry lacks strong financial assurance regulations,
    despite the fact that the industry is this Nation's top toxic polluter
    according to the Environmental Protection Agency's Toxics Release
    Inventory.
        Several studies have shown that mines pollute ground and surface
    water, even when permit applicants claim they will not. In fact:

         a groundbreaking study found that 75 percent of mining
                operations pollute surrounding surface or groundwater,
                despite their robust environmental reviews that predict
                they won't

         74 percent of domestic gold mines have polluted waters
                with cyanide, arsenic, nitrates or other hazardous
                materials

         100 percent of copper sulfide mines experienced pipeline
                spills and accidental releases and 92 percent failed to
                control water treatment and collection leading to
                contaminated mine seepage

        There are several examples of mines that have polluted nearby
    ground or surface water in a new report Earthworks released today
    titled ``U.S. Gold Mines, Spills & Failures Report.'' The report cites
    27 mines that have accidentally released, spilled, or failed to capture
    and treat mine impacted water, allowing it to pollute nearby waters.
        For example, the Wharf Mine, now owned by Coeur Mining Company,
    violated its surface water discharge permit with the release of biomass
    from its water treatment plant during the summer of 2007. The discharge
    affected fish populations in Annie Creek. Wharf also violated its
    permit limits for certain pollutants. Wharf was issued a civil penalty
    of $214,930. Because of this and other spills and failures, groundwater
    has been polluted with nitrates, arsenic and cyanide. Annie Creek has
    been polluted with selenium, ammonia, cyanide, arsenic. Adverse impacts
    to surface water in Annie Creek resulted in a fish kill, and adverse
    impacts to the fish population.
        Another Coeur Mining Company mine, the Kensington Mine, is a poster
    child for taking advantage of the Clean Water Act loophole to preserve
    mining industry profits at the expense of clean water. Because of the
    loophole, Coeur Alaska Mining Company was allowed to dump 200,000
    gallons per day of a toxic wastewater slurry directly into Lower Slate
    Lake in the Tongass National Forest. The dumping, which will eventually
    deposit 4.5 million tons of solids in the lake, has turned what was
    once a pristine body of water into mine tailings disposal site.
        The innovative solution to many of the challenges highlighted above
    is meaningful reform of the 1872 Mining Law. Earthworks encourages
    legislation that will provide a fair return to the taxpayer, create a
    robust reclamation fund to deal with our Nation's abandoned mines
    problem, require mining companies to comply with 21st century operation
    and reclamation standards to protect clean water and allow mining to be
    properly balanced with other uses of public lands.
                                  fair return
        Since 1872, at least $245 billion worth of public minerals like
    gold, silver, copper, and uranium have been mined with no return to the
    taxpayer. Only a value-based gross royalty will help ensure a fair
    return. Gross royalties link directly to the revenue mining companies
    receive from the sale of our minerals. Most western mining states, 10
    of 13, assess some form of gross royalty.
        A net profits (also known as net proceeds) royalty, by contrast,
    enables a mining company to deduct their cost of doing business from
    their income before the royalty is charged. This royalty scheme allows
    extensive administrative, business and operating deductions, beyond
    those associated with processing mined ore into marketable commodities.
        Two states, Alaska and Nevada, have a net proceeds royalty/fee.
    Between 2000 and 2005, Nevada mining operations sold $16.4 billion of
    minerals (mostly gold), yet they only paid royalties of $158 million,
    less than 1 percent. Half of the Nevada's mining operations paid no
    state royalties at all during that time. Alaska fared even worse.
    Between 1997 and 2007, Alaska collected only $1.2 million in royalties
    despite the gold's value at more than $1.2 billion.
        This experience demonstrates that a net proceeds approach will not
    generate a fair return to the taxpayer, and a gross royalty is what is
    needed.
                                reclamation fee
        Modern mining needs modern rules. This includes dealing with the
    legacy costs mining has passed along to present and future taxpayers.
    Insulating taxpayers from the financial risks of old and abandoned
    mines requires a steady stream of dedicated funding. Otherwise,
    taxpayers will bear more of the cleanup costs.
        Earthworks estimates that there are over 550,000 abandoned hardrock
    mines in the United States, mostly in the West. The Interior Department
    has no comprehensive inventory of abandoned hardrock mines, and funds
    to clean up these sites remain limited. The Environmental Protection
    Agency (EPA) estimates the total cleanup costs could reach a staggering
    $50 billion.
        Western communities face significant burdens associated with these
    old mines. According to the EPA, at least 40 percent of the stream
    reaches in the headwaters of western watersheds are polluted from
    mining. That's because many abandoned mine sites have significant acid
    mine drainage problems, which can persist for thousands of years if
    left untreated.
        The single largest obstacle to the restoration of abandoned
    hardrock mines is the lack of funding. In states like Montana--where
    revenues exist from a state severance tax and the state is authorized
    to restore abandoned mines with revenues from the coal abandoned mine
    land fund--there is a small stream of revenue (on average about $3.5
    million) available to remediate only a few small sites a year, but it
    is not enough to address the serious problems posed by the 6,000
    inventoried abandoned mines across the state, and the estimated 3,700
    miles of rivers and streams polluted by harmful metals, primarily from
    abandoned mines.
        In other states, such as California and New Mexico, there are few
    sources of funds available to correct this pervasive problem in old
    mining districts. As a result, the number of abandoned mine lands that
    cause safety or environmental hazards far outweigh the funding
    available to restore them. A steady stream of long-term funding for
    hardrock abandoned mine lands cleanup, similar to the coal abandoned
    mine fee and program, is essential to dealing with the scope of the
    problems western states face from abandoned mines.
                     environmental and operating standards
        Any meaningful plan for the future of mining should include general
    environmental performance and operational standards. The 1872 Mining
    Law has none. The Bureau of Land Management (BLM) 3809 mining
    regulations have undergone few significant changes since they were
    originally implemented in 1980. Under current law, there are no
    statutory environmental standards written specifically for hardrock
    mining. Neither the Clean Water Act nor Resource Conservation and
    Recovery Act protect groundwater from mining pollution, and there is no
    definition for how to reclaim a mine.
        Environmental standards should be ``performance based'' or
    ``outcome based,'' indicating what the resources affected by mining
    need to look like from the initial dirt moving to the post-mining land
    use. The standards need not dictate how they are met, just lay out
    benchmarks for the industry during exploration, operation, closure, and
    post-closure. These include handling of soils, revegetation, and
    establishing and maintaining fish and wildlife habitat.
        Operations must minimize damage to surface and groundwater
    resources, and result in minimal disturbance to the prevailing
    hydrologic balance. To meet water quality standards, operators must
    minimize the production of polluted water rather than relying on water
    treatment. They must receive specific direction to minimize acid mine
    drainage. Operators must also minimize the loss of water quantity.
        Operational standards help mitigate some of the impacts mining
    activities commonly create during operation. These standards cover
    construction and maintenance of haul roads, impoundments, waste piles,
    and leaching pads. They provide direction for drilling holes, managing
    acid-forming materials, public safety, and other activities.
                   balancing mining with competing land uses
        The Federal Government currently interprets the 1872 Mining Law as
    mandating that mining is the highest and best use for public lands.
    This eliminates any discretion for Federal land managers to balance
    mining with any other land use--recreation, conservation, hunting,
    drilling etc. Land managers should have clear authority to weigh
    competing land uses, especially in Wilderness Study Areas, Areas of
    Critical Environmental Concern, roadless areas, and lands in the Wild
    and Scenic River System.
        In addition, citizens, local, state, and tribal governments should
    have the ability to put lands off limits to mining. Mining reform
    should enable these entities to petition the Secretary of the Interior
    to put lands that are important for other values, such as drinking
    water, off limits to mining.
        I thank you for the opportunity to present Earthworks' view on
    seeking innovative solutions for the future of hardrock mining. We look
    forward to working with this Subcommittee, and other stakeholders, to
    reform the Mining Law of 1872 to fully protect communities, the
    environment and taxpayers.

                                     ______

       Questions Submitted for the Record by Rep. Gosar to Lauren Pagel,
                          Policy Director, Earthworks
        Question 1. Regarding the Kensington Mine, could you please give
    the Subcommittee more detail about the quality and character of Lower
    Slate Lake pre-mining?

        Answer. According to the Environmental Impact Statement for the
    Kensington Mine, several types of aquatic life were found in Lower
    Slate Lake pre-mining:

        ``As Kline (2003b) indicates, fish surveys conducted during June
    2000, August and September 2001, and October 2003 have documented the
    occurrence of Dolly Varden char throughout the Slate Lake and Slate
    Creek system. Two-way fish passage occurs between Lower Slate Lake and
    approximately 1,500 feet of East Fork Slate Creek below the lake. Kline
    (2003b) indicated, however, that Dolly Varden char redds have been
    documented in the littoral zone of Lower Slate Lake. Their spawning
    appears to be quite variable in timing between years and might occur as
    early as July. In addition to Dolly Varden char, three-spine
    stickleback (Gasterosteous aculeatus) have been captured in Lower Slate
    Lake (Kline, 2001).''
        It was clear from the Environmental Impact Statement that the
    choice to use Lower Slate Lake as a tailings dump would harm the lake
    and everything living in it. The mining company had an upland
    alternative for disposal, but chose the more destructive alternative:

        ``Alternatives B, C, and D include tailings disposal in Lower Slate
    Lake through a slurry pipeline from the mill. For the purposes of this
    analysis, it is expected that all fish and most other aquatic life
    (such as macroinvertebrates, periphyton, and zooplankton) in Lower
    Slate Lake would be lost during operations as a result of this
    action.''

        Question 2. Can you explain the specific provisions in Clean Water
    Act regulations that allow for untreated mine waste to be dumped into a
    lake?

        Answer. There are two loopholes in regulations adopted by the EPA
    and Army Corps of Engineers that allow many hardrock mines to dispose
    of mine waste into waterways, destroying fish and other aquatic life.
    The first loophole is a 2002 revision of regulations expanded the
    definition of ``fill material'' under Section 404 of the Clean Water
    Act to include mine waste. Section 404 was intended to regulate the
    placement of rock, soil, clay, sand and other materials normally used
    in construction related activities, not mining waste. The second
    loophole is a regulation defining ``waters,'' allow mine developers to
    designate natural lakes, rivers, streams, and wetlands as ``waste
    treatment systems,'' exempt from the Clean Water Act.

        Question 3. Could you please detail specific references that
    enumerate the water quality issues and water pollution problems
    stemming from hardrock mining in the United States?

        Answer. Please find several studies detailing the water pollution
    issues at hardrock mines in the United States:

        A 2012 peer-reviewed study of the track record of water quality
    impacts from copper sulfide mines found severe impacts to drinking
    water aquifers, contamination of farmland, contamination and loss of
    fish and wildlife and their habitat, and risks to public health. In
    some cases, water quality impacts were so severe that acid mine
    drainage at the mine site will generate water pollution in perpetuity.
    https://www.earthworksaction.org/files/publications/
    Porphyry_Copper_Mines_Track_Record_ -_8-2012.pdf.

        A 2006 study found that faulty water quality predictions,
    mitigation measures and regulatory failures result in the approval of
    mines that create significant water pollution problems. Despite
    assurances from government regulators and mine proponents that mines
    would not pollute clean water, researchers found that 76 percent of
    studied mines exceeded water quality standards, polluting rivers, and
    groundwater with toxic contaminants, such as lead, mercury, arsenic and
    cyanide, and exposing taxpayers to huge cleanup liability. https://
    www.earthworksaction.org/files/publications/ComparisonsReportFinal.pdf.

        A lengthy review of government documents reveals that an estimated
    17 to 27 billion gallons of polluted water will be generated by 40
    mines each year, every year, in perpetuity. This is equivalent to the
    amount of water in 2 trillion water bottles--enough to stretch from the
    earth to the moon and back 54 times. https://www.earthworksaction.org/
    files/publications/PollutingTheFuture-FINAL.pdf.
        A 2017 study of U.S. gold mines' operating records reveals that
    major gold mines surveyed by the U.S. Geological Survey have spilled
    contaminants, and 74 percent polluted water with cyanide, arsenic,
    nitrates or other hazardous materials. https://
    www.earthworksaction.org/files/publications/
    USGoldFailureReport2017.pdf.

                                     ______

        Dr. Gosar. I thank the gentlewoman.
        The gentleman, Mr. James Cress, the Counsel for Bryan Cave,
    is now recognized for 5 minutes.

      STATEMENT OF JAMES CRESS, COUNSEL, BRYAN CAVE LLP, DENVER,
                                COLORADO

        Mr. Cress. Thank you, Mr. Chairman, Mr. Ranking Member, and
    Subcommittee. I appreciate the opportunity to appear today. I
    am a mining lawyer. I have practiced mining law for about 30
    years, and have represented mining companies and landowners in
    royalty negotiations, both in the United States and in other
    countries. I also do a lot of work with indigenous and local
    communities on a pro bono basis, attempting to help them get a
    better deal and more benefits from mining that takes place in
    their communities.
        I would like to ask that my written testimony be included
    in the record, because I, doubtless, will not get through it
    here.
        The first question I think that you have to look at, if you
    are deciding whether to impose a royalty, is what is a royalty
    for, what does it compensate the United States for. A royalty
    is not a way to fund any particular policy objective. It is
    really a payment to the United States for the value of what the
    United States is providing to the industry. And that value is
    raw land with mineralization that needs to be explored,
    processed, and mined in order to have any value.
        That exploration, development, and mining is very
    expensive. And that is why mining royalties are typically lower
    than royalties on coal, oil, and gas, which are a completely
    different structure, where you have a usable commodity that is
    actually produced right out of the ground.
        The total government take is the other thing that you have
    to keep in mind. It is not just a royalty that matters when you
    are looking at a financial return to the government. It is all
    the other taxes, including severance taxes and royalties
    imposed at the state level that companies will compare to
    decide whether to operate in Nevada or Indonesia, and they do
    make that comparison.
        There have been studies on this. In 2000, Professor James
    Otto and others did a comparative study of jurisdictions that
    found that Nevada actually ranked right at the high end of
    competitive jurisdictions for total tax burden: 49.3 percent of
    revenue was taken in the form of taxes, royalties, and other
    burdens. And that is without a Federal royalty. In Arizona,
    that was 49.9 percent for where most of our copper comes from.
        They modeled in this study what would happen if prices
    dropped by 10 percent and Nevada's effective tax rate jumped to
    63 percent, which is in the confiscatory end of the spectrum.
    So, you have to keep in mind the overall burden.
        I would like to talk a little bit about the form of a
    royalty, because we talk a lot about gross royalties and net
    royalties, and it is important to understand that there are two
    components here. One is the rate, and we compare and throw
    around these numbers all the time--8 percent, 5 percent, 2
    percent--but the important factor is what is the royalty base,
    or the definition of what that percentage is applied against.
        A gross royalty is a royalty that does not allow a lot of
    deductions, or any deductions, depending on how it is
    characterized. A net royalty will allow for deductions of
    processing costs, refining costs, and sometimes mining costs,
    so there is kind of a spectrum from net profits to totally
    gross royalties that we are looking at. And you have a lot of
    options. You can innovate here in adopting a royalty. You don't
    have to go with a straight gross or a net profit.
        Hardrock minerals have been subject to severance taxes in
    the western states for a long time. I studied the General
    Accounting Office 2008 report, which gave a listing of all of
    the different taxes and compared which ones were gross and net.
    In analyzing that report and the 2008 statutes that they were
    looking at, I found that 10 of the 13 western states have
    mostly used a net royalty or a small royalty that is called
    gross, but it is a gross royalty based on the ore, which really
    is not a gross. It is not based on the gold that comes out at
    the end of the process, for example.
        Five states use net profits or net proceeds royalties:
    Alaska, Nevada, California, Montana, and Arizona. Seven states
    use a small net or small gross royalty, including Colorado,
    Idaho, Montana, Oregon, South Dakota, Utah, and Wyoming.
        So, I would encourage you to look at the examples in
    deciding whether a royalty is appropriate, and how much is too
    much. Thank you very much.

        [The prepared statement of Mr. Cress follows:]
         Prepared Statement of James F. Cress, Counsel, Bryan Cave LLP
        Mr. Chairman and members of the Subcommittee, my name is Jim Cress.
    I am testifying today on the subject of mining royalties at the request
    of the Subcommittee and not on behalf of any organization. I am a
    mining lawyer in private practice at Bryan Cave LLP in Denver. With
    Bryan Cave and a predecessor firm, Holme Roberts & Owen, I have
    specialized for nearly 30 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, iron, zinc, coal, uranium, barite, oil and gas and other
    minerals, and have advised clients on royalty compliance for private,
    Federal and state royalties and mineral severance taxes. In my
    international practice, I have evaluated mining royalties and taxes and
    negotiated royalty and mining agreements with governments in a number
    of countries. I have also devoted substantial pro bono time to mining
    issues, particularly in developing countries. I worked on the royalty
    provisions in the International Bar Association Mining Law Committee's
    Model Mine Development Agreement, an example template for a mining
    agreement between a developing country government and mining company. I
    have supported local and indigenous communities in obtaining more
    equitable participation in the benefits of mining through the non-
    profits Sustainable Development Strategies Group and RTC Impact Fund.
        Thank you for the opportunity to appear and speak on the important
    issue of hardrock mining royalties. I have previously testified on this
    subject before this Subcommittee and before the Senate Energy & Natural
    Resources Committee, and my comments today will reflect on some of the
    same issues, which are difficult ones. In particular, if Congress
    determines that a royalty on locatable hardrock minerals is needed, how
    can Congress structure a royalty on to promote a fair return to the
    public, while ensuring a viable domestic mining industry that minimizes
    reliance on foreign imports of strategically critical minerals?
             what does a royalty compensate? how much is too much?
        The threshold policy question for evaluating a Federal hardrock
    mining royalty is what is the policy reason for compensating the United
    States with a royalty? Any royalty payment to the United States for
    hardrock minerals should be based on the value of the United States'
    ownership interest in the minerals. That interest is limited to the raw
    minerals in the ground. The purpose of the Federal royalty is to
    encourage exploration and discovery across millions of acres of Federal
    land which are not yet proven to contain mineral deposits. Compared to
    oil & gas and coal and similar bedded deposits like sodium and
    potassium, hardrock deposits are much harder to find and generally
    require much more extensive mining, processing and refining to produce
    salable products. A royalty should not be paid on value added to the
    raw minerals by a mining company spending hundreds of millions of
    dollars to find, process, refine and sell the mineral products. The
    United States makes land available for mineral exploration, but the
    United States contributes nothing to the enormous costs and effort of
    finding, producing and processing the minerals.
        Mining companies pay income and many other taxes in the United
    States. Any discussion of Federal hardrock royalties should focus not
    only on the amount of the royalty, 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 whether to
    invest their exploration and mine development capital in the United
    States or another country.
        The total ``government take'' (royalties, taxes and other fees) for
    mining operations in the United States is already comfortably within
    the range of other competitive mining countries. Professor James Otto
    and others have conducted various studies comparing government take
    from mining in various countries, which included the states of Arizona
    and Nevada (two of the highest mineral producing western states with
    substantial Federal lands). The most recent public 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 in 2008 before the Senate Energy and
    Natural Resources 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 percent. In the Global
    Mining Taxation study, the effective tax rate in 2000 for Nevada was
    49.3 percent for a medium-profitable gold mine, without the imposition
    of any Federal royalty. See Global Mining Taxation, Section 4.5, pp.
    95-96 and Table 27. With a 10 percent drop in the gold price from the
    2000 price, Nevada's effective tax rate jumped to a confiscatory 63
    percent. Id. p. 101 and Table 28. Similarly, the effective tax rate in
    2000 for the hypothetical copper mine in Arizona was 49.9 percent,
    without 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 percent effective
    tax rate range typical for successful mineral producing countries,
    making the United States less competitive for mining investment.
        It would be prudent to update these studies in designing any
    Federal royalty, so the impacts can be modeled and understood.
    Significantly, as discussed below, almost all of the western states
    already impose a severance or extraction tax on mining from private,
    state and 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,
    negatively impacting state tax revenues and driving mining activity off
    of Federal lands.
      form of a hardrock royalty--gross versus net royalties and royalty
                                     rates
        There are many types of royalties used in the mining industry and
    by governments around the world, from simple unit-based royalties (a
    fixed amount per ton produced) to royalties based on net proceeds or
    net profits after deduction of mining and/or processing costs, to gross
    royalties with little or no deductions. The latter two types, often
    referred to loosely as ``net'' and ``gross'' royalties, are most often
    proposed for a potential Federal hardrock royalty.
        There are two issues to consider when evaluating net and gross
    royalties--the royalty rate and the calculation of the amount against
    which that rate is applied (also called the ``royalty base'').
    Differences in the royalty base are what we are discussing when talking
    about ``net'' versus ``gross'' royalties. It is important to look
    closely at the definition of the royalty base when comparing private
    royalties to government royalties or comparing royalties of different
    countries or U.S. states, since what may be called a ``gross'' royalty
    may actually be based on the ``gross value of ore,'' rather than a
    final mineral product, the ``gross value less processing costs,''
    ``gross value at the mine mouth'' or another royalty base definition
    that is functionally equivalent to a net royalty base. ``[T]he
    definition of the royalty base 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'').
        Net royalties and gross royalties have differing impacts on mining
    investment due to the cyclical nature of commodity price cycles.
    Generally, 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. 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. This can have a dramatic
    impact on whether existing mines stay open or new mines are built.
        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:
        A gross royalty can exacerbate industry downturns by causing a
    greater reduction in the cash-flows of mining companies when profits
    are already low. A gross royalty may actually reduce 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, and may shorten 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 a mine is closed and reclaimed, the
    stranded reserves are usually uneconomic to recover on their own in the
    future. When mines shut down prematurely, in addition to lost mineral
    reserves, jobs are lost, Federal state and local tax revenues are lost,
    and business is lost by suppliers of other goods and services that the
    support the mines. These lost economic benefits affect both those
    directly involved in the mining activity and the governmental entities,
    including the United States, and their citizens who rely on taxes paid
    by mining operations.
        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 and
    keep the domestic industry viable and the Nation's mineral supply
    secure.

        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.
    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 royalty
    treatment. 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 most hardrock 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 crude oil a ``gross'' royalty, because the royalty
    is ``net'' of refining 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 that requires little or no processing. In the West, where
    most Federal deposits exist, coal beds are vast, world-class 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. While the 12.5 percent royalty for
    surface mined coal (8 percent for underground) imposed in 1976 was a
    substantial increase over 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 addition,
    the Federal coal royalty regulations permit the deduction of the most
    material post-mining costs, coal washing (where needed) and
    transportation. Thus, the Federal coal royalty is not a gross royalty
    in the strictest sense, and like oil and gas, 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 leasable minerals that are low
    margin industrial and fertilizer minerals, the economics of which
    cannot support a 12.5 percent or even an 8 percent royalty. The
    statutorily established base rate for phosphate is 5 percent and for
    sodium and potassium is 2 percent. 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 percent to hardrock minerals simply because that
    is what is done with coal and oil and gas would be overly simplistic
    and dangerously naive.
      state royalties and severance taxes are generally net royalties or
                             small gross royalties
        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.
        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. State royalties and
    severance taxes were summarized by the General Accounting Office in a
    2008 study. See ``Hardrock Mining: Information on State Royalties and
    Trends in Mineral Imports and Exports,'' GAO-08-849R (GAO July 2008)
    (2008 GAO Report).
        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 like the royalty often proposed in prior
    mining law and budget bills. 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 percent gross royalty
    that has often been proposed in prior mining law and budget bills.
    Rates in the western states tend to be lower for gold, copper and other
    metals.
        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. This summary is based on the 2008 GAO
    Report, the most recent survey of state royalty and severance tax laws,
    and has not been updated, but the variety of state approaches have not
    differed materially since its publication.
    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 3 percent of net income on mining from
    state lands. Alaska Stat. Sec. 38.05.212. Alaska also imposes an
    additional mining license tax (similar to a severance tax) that is
    calculated as a percentage (between 3 and 7 percent) of the net income
    from the property. Producing mines are exempted from the tax for 3\1/2\
    years, in order to allow them first to recover their capital costs.
    Alaska Stat. Tit. 43, Ch. 65.

        Nevada imposes a severance tax of between 2 and 5 percent of net
    proceeds. Nev. Rev. Stat. Ann. Ch. 362. ``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.

        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.

        ``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 5 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 (a
    rationale that would not apply to a Federal royalty). Ariz. Rev. Stat.
    Sec. 27-234 (repealed); see Kadish v. Arizona State Land Department,
    155 Ariz. 484; 747 P.2d 1183 (1987).
    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 percent 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. 3929-102
    to -104. Colorado state land royalties are determined on a case-by-case
    basis, see Colo. Rev. Stat. Sec. 36-1-113 , 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
    percent of the gross value of ore, after deducting all costs of mining
    and processing the ore. Idaho Code Sec. Sec. 47-1201, 47-1202. Idaho,
    like Colorado, imposes state land royalties on a case-by-case basis in
    each lease, see Idaho Code Sec. 47-710 , and has in the past also used
    a royalty of between 2.5 percent (for certain metals) to 10 percent
    (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 percent 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 percent 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.
    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. 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 percent of
    the market value of the minerals recovered. Mont. Code Ann. Sec. 77-3-
    116. 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; 2008 GAO Report, p.18-19, which is similar to the
    ``gross value of ore'' used in the states described above.

        Oregon imposes a royalty of 5 percent on most metallic minerals
    removed from leases of state lands. Or. Admin. R. Sec. Sec. 141-071-
    0410, -0610. The royalty base is calculated on the gross value of
    minerals at the mine mouth. Id. Sec. 141-071-0620; See 2008 GAO Report,
    p.25.
    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 percent of the net smelter returns for precious and base
    metals. The tax is 1.8 percent on mineral concentrates prior to
    shipment to the smelter. Mont. Code Ann. Sec. Sec. 15-23-801, 15-37-
    102, 15-37-103. 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
    percent 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. This is functionally a net smelter
    returns royalty. The royalty percentage is not less than 5 percent for
    uranium and certain other minerals.

        South Dakota imposes a royalty on leases of state lands of not less
    than 2 percent 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.
    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 percent 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.
    Gross with Flat Cost Deduction
        Two states use an innovative ``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
    percent (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 ore for gold)
    less 50 percent to 66 \2/3\ percent 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 percent of the ``taxable value,'' which
    is determined based on the product sold. If the mineral product sold is
    ore, the taxable value is 80 percent of the gross proceeds, with the 20
    percent 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 percent of the gross proceeds, with
    the remaining 70 percent of gross proceeds approximating a deduction
    for mining, processing and transportation costs. Beryllium formerly had
    a taxable value of 20 percent of the gross proceeds, with an 80 percent
    deduction for costs, but taxable value is now equal to 125 percent 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 percent 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 5 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.
     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 or mineral commodities to apply for
    royalty relief, in order to address economic hardships or to maximize
    the economic recovery of minerals from each deposit.
          any royalty should not apply to existing valid mining claims
        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
    John Leshy agreed in his prior testimony before the Senate Environment
    and Natural Resources 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 only a handful of hearing
    examiners 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.
                                   conclusion
        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 appropriately 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.
        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.

                                     ______

        Dr. Gosar. I thank you for your testimony.
        Now Mr. Mitchell Krebs, the President and CEO of Coeur
    Mining.

     STATEMENT OF MITCHELL KREBS, PRESIDENT AND CEO, COEUR MINING,
                           CHICAGO, ILLINOIS

        Mr. Krebs. Chairman Gosar, Ranking Member Lowenthal, and
    members of the Subcommittee, good morning. I appreciate the
    opportunity to appear here today. I hope I can provide you with
    some helpful suggestions as you consider policies related to
    the hardrock mining industry.
        Coeur Mining has been around nearly 90 years. We are
    headquartered in Chicago and operate five mines that produce
    silver and gold. Our U.S. operations are located in northern
    Nevada, southeast Alaska, and in the Black Hills of western
    South Dakota. In total, we employ over 2,100 people. These jobs
    pay about two times the national average and are based in some
    of the more remote areas of the country. In addition to our
    wages and benefits, we are a significant source of tax revenue
    for each city, county, and state where our mines are located
    and our employees reside.
        I have been in this industry since 1995, and I have a good
    sense of the reputation it has had over the years. In some
    cases, that reputation was well deserved. However, our company
    and our employees do not represent that outdated perception of
    mining. We are a forward-thinking company, and we represent
    where mining is going, and not where it has been in the past.
        ``We pursue a higher standard,'' that is our company's
    purpose statement. That purpose and attitude extends into every
    aspect of what we do. We are continually looking for ways to
    make our workers safer, and the communities and the environment
    better off than they were before.
        We all might have a different view about mining, but I
    think it is important for people to not lose sight of the
    connection between the mining activities we carry out and what
    these metals are needed for in our society, especially a metal
    like silver.
        Silver is a metal that is fueling many of the exciting,
    technology-driven trends in the world today. Anything with an
    on/off switch has silver in it. Every mobile device, every
    touch screen relies on some silver. It is used in solar panels
    and in batteries to help generate clean, renewable energy, and
    to propel electric cars. Tomahawk missiles, drones, satellites,
    and GPS devices used to protect our country all rely on silver.
    It is a part of our everyday life, and it is vital that we have
    a competitive and reliable mining sector in this country.
        The area where we see the biggest opportunity for
    improvement is in how permits are obtained for new mines or to
    expand existing mines. The United States is a great place to do
    business as a mining company, but as it functions now, our
    country's permitting system is tied with Papua, New Guinea for
    the title of World's Longest Permitting Process, at
    approximately 7-10 years. In Canada and Australia, a similar
    process takes 2 to 3 years, and in Mexico, the average time to
    permit a new mine is about 18 months.
        I was just up at our Kensington Mine in Alaska earlier this
    week, which I think serves as a poster child for our country's
    inefficient and unpredictable permitting process. It took us
    over 19 years, 1,000 separate studies, and, ultimately, a trip
    here to DC to the U.S. Supreme Court and a 6-3 decision to
    finally secure the 90 separate state, local, and Federal
    permits necessary to place that mine into production.
        By eliminating the duplication that currently takes place,
    and by tackling the lack of coordination among the various
    agencies, the process could be streamlined without sacrificing
    thoroughness or completeness.
        The issue of an efficient mining process is not just a
    mining issue. It applies to any infrastructure project across
    the country. Some specific suggestions include the following:
    adopt a one-project, one-review approach; allow state processes
    to act as substitutes or equivalents to Federal ones, as long
    as they meet certain criteria and requirements; provide
    specific, legally-binding timelines up front, make these
    timelines specific, transparent, and use technology to
    eliminate data paper-based systems for submissions and document
    sharing; and consider re-opening the Office of the U.S. Bureau
    of Mines to act as a coordinator for the permitting process,
    among other important activities.
        As for introducing a royalty on the industry, we strongly
    believe it would need to be carefully crafted, or else it could
    put many mining companies out of business, eliminate thousands
    of good-paying jobs, and leave our economy reliant on foreign
    sources for minerals and metals. If you do choose to revisit
    the idea of a royalty, I would ask the Subcommittee to consider
    the following:

        First, make the permitting process more efficient and
    predictable, and ensure the security of title and tenure before
    introducing any sort of royalty.
        And any royalty should not be based on revenue, but rather
    on profits. As a mining industry we have no control over the
    price we receive for the metals we produce. We are price
    takers. The net profits royalty would at least adjust as prices
    rise and fall over time.
        And finally, we don't think any new royalty should be
    applied to mines already in production.
        With that, I will go ahead and close. I do invite anybody
    here at any time, if they would like to come out and visit one
    of our operations, to please do so. Thanks again for the
    opportunity today.

        [The prepared statement of Mr. Krebs follows:]
     Prepared Statement of Mitch Krebs, President and CEO of Coeur Mining,
                                      Inc.
        Chairman Gosar, Ranking Member Lowenthal, and members of the
    Subcommittee, my name is Mitch Krebs and I'm the President and Chief
    Executive Officer of Coeur Mining. I appreciate the opportunity to
    testify before you today. It's a great honor and privilege. I hope my
    testimony will provide the Subcommittee with a good sense of how our
    company and I think about the future of hardrock mining. Like most
    industries, mining is changing quickly and its approach to how mining
    is done has evolved--for the better (finally)--and we consider
    ourselves a leader in this evolution. I also hope I can provide the
    Subcommittee with some helpful thoughts and suggestions you might
    consider in four specific areas as you look to reform hardrock mining
    laws:

      1.  Our Nation's current permitting process;

      2.  The idea of introducing a royalty on hardrock mines;

      3.  EPA's proposed rule to require additional financial requirements
                on our industry; and

      4.  The risks associated with the thousands of abandoned mines
                throughout our country.

                               company background
        First, I'd like to share a brief background of our company. Coeur
    Mining is a nearly 90-year-old U.S. mining company headquartered in
    Chicago, Illinois. We operate five mines that produce silver and gold.
    Our U.S. operations are in Nevada, Alaska and South Dakota and our
    international operations are in Mexico and Bolivia. In total, we
    directly employ over 2,100 people while the industry in total employs
    approximately 2 million people directly and indirectly. We generate
    about two-thirds of our revenue from our U.S. operations, which is more
    than any other major mining company. We're publicly traded on the NYSE
    and have about 50,000 stockholders worldwide.
        We are proud of the jobs we provide, of the dedicated men and women
    we employ, and of the impact we have in the communities in which we
    have a presence. These jobs we provide pay about two times the national
    average and are based in some of the more remote areas of the country.
    And, as you might imagine given what we do, these are jobs that cannot
    and will not ever be moved overseas. Like most mining companies in the
    United States, Coeur's operations do business with many different local
    suppliers, service providers, and contractors and are a significant
    source of tax revenue for each city, county, and state where the mines
    are located and where our employees reside. As an industry, domestic
    mining generates $46 billion in tax payments to Federal, state and
    local governments.
        I've been in this industry since 1995 and I think I have a good
    sense of the reputation it's had over the years. In some cases that
    reputation was well-earned. However, our company and our people don't
    represent that outdated perception of mining. We are a forward-thinking
    company and we represent where mining is going in the future. ``We
    pursue a higher standard'' is our Company's purpose statement. That
    purpose and attitude extends into every aspect of what we do. We are
    continually striving to find ways to make our workers safer and the
    communities and the environment better off than they were before. In
    fact, I'd say the most ardent environmentalists I know are people who
    work for our company--out at our sites every day making sure we are
    protecting the air, the water, the land and the people themselves so
    that everyone can go home safely from work at night and enjoy the
    environment where they live.
        One last thought from a mining company's perspective: it's
    important that we don't lose sight of the connection between the mining
    activities we carry out and what these metals are needed for--
    especially a metal like silver. Silver is not just used in jewelry and
    silverware. It's a metal that is fueling many of the exciting,
    technology-driven trends in the world today. Anything with an ``on-
    off'' switch has silver in it, every mobile device and touch screen
    relies on silver. It's used in solar panels and in batteries to help
    generate clean, renewable energy and to propel electric cars. It's used
    to purify water and to treat burn victims. Tomahawk missiles, drones,
    and GPS devices used to protect our country and our soldiers all rely
    on silver. It's everywhere around us and it's vital that we have a
    competitive and reliable mining sector in this country.
                    our nation's current permitting process
        The area where we see the biggest opportunity for improvement is in
    how permits are obtained for new mines or to expand existing mines. As
    the process functions now, our country's permitting process is tied
    with Burkina Faso for the title of ``world's longest mining process''
    at approximately 7-10 years. In Canada and Australia, a similar process
    takes 2-3 years. In Mexico, the average time to permit a new mine is
    about 18 months.
        I was just up in southeast Alaska earlier this week at our
    Kensington Gold Mine. Although there are many other examples,
    Kensington is the poster child for the broken permitting process we
    currently have in the United States. It took over 19 years to finally
    obtain the 90 separate local, state and Federal permits for the
    Kensington Mine and put it into production. My background is in finance
    and one thing I understand is the time value of money. If it takes 19
    years to start getting your money back on an investment, you're not
    generating a competitive--let alone a positive--rate of return.
        These delays and uncertainty are most likely key reasons why
    exploration investment to identify new supplies of metals and minerals
    has fallen as much as it has in the United States.
        By eliminating the unnecessary duplication that currently takes
    place at multiple levels of government and by tackling the lack of
    coordination and communication among the various regulatory agencies,
    we could bring certainty and a level of common sense to the process and
    save a tremendous amount of time and expense without sacrificing
    thoroughness or completeness.

        Some specific suggestions include the following:

         Adopt a ``One Project--One Review'' approach: Allow state
                processes to act as substitutes or equivalents to Federal
                ones as long as they meet certain Federal requirements;

         Provide specific, legally-binding timelines up front: Make
                these timelines specific, transparent and use technology to
                eliminate dated paper-based systems for submissions and
                document sharing.

         Consider re-opening the office of the U.S. Bureau of Mines
                to act as a coordinator for the permitting process--help
                connect the dots and bring accountability and structure to
                how permits are obtained. The United States is the only
                developed country in the world without a Federal entity
                promoting responsible mineral development and conducting
                important research. Recently, British Columbia up in
                Western Canada established a Major Mine Permitting Office
                (MMPO), whose purpose is to improve the coordination of
                major mine authorizations across government.

              the idea of introducing a royalty on hardrock mines
        There have been congressional proposals over the years to impose a
    hardrock mining royalty on production from Federal lands. Any new
    financial obligations placed on this industry need to be carefully
    crafted or else they run the risk of running mining companies out of
    business, eliminating hundreds of thousands of jobs, and leaving our
    economy completely reliant on foreign sources of minerals and metals.

        When considering a royalty on this industry, my suggestion to the
    Subcommittee is to consider the following:

         Making the permitting process more efficient and
                predictable ensuring the security of title and tenure would
                need to be the first steps toward implementing a royalty.
                These enhancements would help offset the diminished
                competitiveness a royalty on the domestic hardrock industry
                would create;

         Companies in this industry are price takers--we do not
                have any control over what price we receive for our metals.
                In addition, many of our operating costs--fuel, steel,
                chemicals--are outside of our control. Adding a royalty
                will directly increase our costs and reduce our
                profitability, which isn't that strong to begin with given
                the dynamics of the industry;

         A royalty should be tied to profits (net) rather than
                revenues (gross). A net production payment is a better
                incentive for investment because it takes into
                consideration the costs to mine and process ore and does
                not penalize mining companies during periods of low
                commodity prices;

         A company should be allowed to recoup its investment
                before a royalty is paid. Mining is an extremely capital-
                intensive business and it struggles to earn an attractive
                rate of return. The capital used to fund new mine
                development should be compensated for the commensurate risk
                before a government royalty obligation is required to be
                paid; and

         Any new royalty should not be applied to mines already in
                operation. The rules should not be allowed to be changed in
                the middle of the game.

    epa's proposed rule to require additional financial requirements on our
                                    industry
        Last December, EPA issued a proposed rule to require hardrock
    mining companies to demonstrate and maintain financial responsibility
    ``consistent with the degree and duration of risk associated with their
    mining operations,'' which sounds like a great idea. The only problem
    is, it already exists.
        State and Federal financial responsibility programs have been
    developed and implemented over the past several decades that are more
    than adequate to address environmental risk. These existing programs
    are robust, are required by regulation, and meet the intent of the
    proposed rule that facilities must establish and maintain evidence of
    financial responsibility. At Coeur Mining, our financial assurance
    portfolio already comprehensively addresses environmental risk,
    closure, reclamation, and post-closure liabilities. We have
    approximately $200 million of bonding in place to cover the estimated
    cost of closure and post-closure activities at our U.S. mines. As an
    industry, companies commit tens to hundreds of millions of dollars to
    ensure that money is set aside to properly close sites and in the
    unlikely event of a release, to monitor and remediate any long-term
    environmental issues. For example, the Bureau of Land Management holds
    nearly $3 billion in financial assurance and the Forest Service an
    additional $325 million. These estimates are calculated with the help
    of third parties, are reviewed annually, and are signed off on by state
    and Federal regulators who understand the scope of the required work.
    As part of the new proposed rule, EPA came up with a new ``one-size-
    fits-all'' formula to try to estimate these potential costs. In our
    case, it would increase our bonding requirement fivefold to over a
    billion dollars, which doesn't make any sense. It's not even possible
    to obtain that amount of bonding from providers of those financial
    products.
        While we understand the importance of a company being able to
    demonstrate its ability to secure ``response costs'' to pay for any
    sort of cleanup, this proposed rule is flawed, it's redundant, it's
    unnecessary, it's duplicative, and it's a ``solution in search of a
    problem.''
     the risks associated with the thousands of abandoned mines throughout
                                  our country
        Ironically, while there is great concern about mining companies
    being able to demonstrate financial assurance under CERCLA, nothing is
    being done to address the thousands of historic abandoned mines whose
    owners are now bankrupt and long gone.
        The GAO determined in 2008 that there are at least 161,000
    abandoned hardrock mine sites in the 12 western states and Alaska. At
    least 33,000 of these sites had degraded the environment by
    contaminating surface water and groundwater or leaving arsenic-
    contaminated piles of waste rock from historic mining activities. The
    incident at the Gold King Mine in Colorado 2 years ago where toxic
    wastewater was released into the Animas River is a recent example of
    this problem.
        These old mines represent a real danger--to our safety, to our
    water, to our air, and to the communities where they're located.
    Although Coeur didn't cause the problems at these mines, we have the
    know-how, the people, and the desire to help clean up these abandoned
    mines and to be a part of the solution. However, there are too many
    disincentives and risks of exposure to potential historical liabilities
    under current state and Federal laws that prevent companies like ours
    from getting involved. Good Samaritan legislation has been talked about
    for a long time. Getting something in place could act as a catalyst to
    getting these legacy sites cleaned up--something that everyone wants to
    see happen.
                                   conclusion
        In closing, I want to personally thank the Committee again for
    having me and for looking at ways to improve the hardrock mining
    permitting process. I appreciate you allowing me to share my thoughts
    with you and invite you to come see one of our operations sometime. I'd
    now welcome any questions you may have for me.

                                     ______

    Questions Submitted for the Record by Rep. Gosar to Mitchell J. Krebs,
              President and Chief Executive Officer, Coeur Mining
        Thank you again for the opportunity to testify before you as well
    as to provide additional followup testimony. As I said during my oral
    testimony on July 20, 2017, hardrock mining and the industry have
    evolved over the decades into highly regulated and responsible
    corporations whose management and stockholders see themselves as
    stewards of our public lands. At Coeur Mining, we consider ourselves a
    leader in this evolution.

        Per your request, below are my responses to the Subcommittee's
    additional questions:

        Question 1. Regarding the Kensington Mine, can you please give the
    Subcommittee more detail about the quality and character of Lower Slate
    Lake and explain the actions Coeur will take when reclaiming it?

        Answer. It is important to start with the natural state of Lower
    Slate Lake prior to any mining taking place.
        Prior to the onset of mining, the surface area of Lower Slate Lake
    was relatively small, spanning approximately 20 acres, and in its
    natural state, did not meet state water quality standards due to high
    aluminum levels occurring naturally in the lake's waters. In addition,
    approximately 9 acres of the lake bottom (slightly less than half of
    its size) were classified as unproductive due to its depth, reaching 51
    feet deep.
        Today, the naturally occurring metals in the lake impoundment water
    are being treated. As a result, the treated water discharge from the
    lake impoundment now has a better quality and meets the stringent EPA
    permitting and discharge requirements at the impoundment outlet to
    Slate Creek.
        At the conclusion of tailings deposition, the lake will be
    reclaimed to a self-sustaining aquatic ecosystem. Water treatment will
    continue until water quality standards are met and sustained. The final
    impoundment will significantly expand the size of Lower Slate Lake from
    approximately 20 acres to approximately 60 acres, resulting in a larger
    and more productive lake with enhanced fisheries and wildlife habitat.
    The lake will be shallower, wider and more capable of sustaining
    aquatic life. With a maximum depth of approximately 28 feet, benthic
    habitat for lake bottom productivity will be created, thus eliminating
    the 9 acres of pre-existing unproductive lake bottom. Native fish
    species will re-populate the lake from adjacent surface water bodies
    with productive wetland and open water habitats returned.
        It is important to note the U.S. Forest Service (USFS) conducted an
    ecological risk assessment that concluded the overall productivity of
    the reclaimed lake, after the mine is closed, would be higher than pre-
    existing Lower Slate Lake conditions. The higher productivity will
    provide a better and more sustainable long-term condition with an
    overall net environmental gain.
        For the Subcommittee's benefit as well as in response to
    Congressman Lowenthal's submission of outdated pictures taken of Lower
    Slate Lake from the Internet, I have included photos of Lower Slate
    Lake taken in July 2017 representative of current conditions of the
    Lower Slate Lake tailings facility since mining operations were
    initiated.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

         Question 2. Can you explain the specific provisions in the
    Clean Water Act regulations that allow for mine tailings to be placed
    into the Lower Slate Lake at your Kensington Gold Mine?

        Answer. ``We pursue a higher standard'' is our Company's purpose
    statement, which is our driving purpose into every aspect of what we
    do. We continually strive to find ways to make our workers safer and to
    make the communities we serve and the environment better off than they
    were before. Thus, we follow the regulations of the Clean Water Act. We
    should discuss the specific provision of the Clean Water Act.

        To begin, the joint U.S. Army Corps of Engineers (``Corps'')/
    Environmental Protection Agency (``EPA'') regulations which implement
    Section 404 of the Clean Water Act, found at 40 C.F.R. Sec. 232.2,
    allow the tailings to be placed as fill material into the Lower Slate
    Lake under carefully controlled conditions imposed by the agencies in
    permitting the facility. These regulations specifically define
    ``discharge of fill material'' to include ``placement of . . . slurry,
    or tailings or similar mining-related materials'' in waters of the

    U.S. 40 C.F.R. Sec. 232.2(6)(1).

        Specifically, the EPA regulations known as the ``404(b)(1)
    guidelines'' at 40 C.F.R. Part 230 provide the criteria for the Corps
    to authorize the placement of the tailings in the impoundment as the
    ``least environmentally damaging practicable alternative'' for disposal
    and storage of the tailings. The Corps made this determination in
    issuing the Section 404 permit for the Kensington Project tailings
    facility after an exhaustive environmental impact statement and
    permitting process in which the EPA as well as numerous other Federal,
    state and local agencies, environmental and other organizations, and
    the general public participated.

        Any doubts about the authority for the Corps to permit the
    placement of tailings in the Lower Slate Lake impoundment in accordance
    with these regulations were resolved by the United States Supreme Court
    in Coeur Alaska, Inc. v. Southeast Alaska Conservation Council et al.,
    557 U.S. 261 (2009).
        Question 3. Please explain the permitting requirements under the
    Clean Water Act and state regulatory authority required to secure
    permits and comply with those permits during the entire mining cycle as
    they apply to water quality and discharge issues.

        Answer. Clean Water Act permitting requirements and related state
    regulatory provisions that implement or augment Federal requirements
    are complex and daunting. They vary according to each particular mine
    project and by state. They generally include:

      1.  One or more Clean Water Act Section 404 permits (issued by the
                Corps with oversight by the EPA) for placement of fill
                material during construction or subsequent operations into
                delineated ``jurisdictional'' wetlands or other waters of
                the United States for roads, development rock, tailings, or
                other facilities. The 404(b)(1) regulations contain
                requirements that regard avoiding, minimizing, and
                mitigating to compensate for impacts to these
                jurisdictional wetlands or waters.

      2.  One or more Clean Water Act Section 402 National Pollutant
                Discharge Elimination System (``NPDES'') permits (issued in
                most states by the state environmental quality agency with
                oversight by the EPA) for ``point source'' discharges of
                pollutants to waters of the U.S. (other than placement of
                fill or dredged material under Section 404). Those
                permitted discharges may be from tailings impoundments,
                mine drainage outlets, or other facilities. The effluent
                must be treated as needed to meet stringent standards for
                metals and other constituents in order to protect drinking
                water, swimming, fish habitat, and other designated uses
                for the water body receiving the discharge.

      3.  One or more storm water permits, also a category of Section 402
                NPDES, permit for controlling storm water runoff during
                construction and later mine operations.

      4.  A Clean Water Act Section 401 state certification that point
                source discharges authorized under Federal licenses or
                permits for the project (such as a Section 404 permit) will
                comply with state water quality standards. These standards
                can include, where applicable, nondegradation standards to
                protect desired conditions and designated uses for high
                quality streams and other water bodies and compliance with
                Total Maximum Daily Load (``TMDL'') limitations for bodies
                of water designated as impaired for one or more pollutants
                under the Clean Water Act.

      5.  Additional state law requirements that may apply to groundwater
                and other uses and water quality parameters.

         These requirements apply to varying degrees throughout the life
                cycle of a mine project, from initial exploration that may
                involve temporary road or drilling pad construction and
                operations through later phases of mine development,
                operation, closure/reclamation, and longer-term post-
                closure care and maintenance of the mine site. These
                requirements include long-term water quality monitoring and
                continued treatment of point source discharges if needed.

         The Clean Water Act and related state permitting requirements
                provide a rigorous regulatory framework for protecting
                water quality, from the inception of a mine prospect
                through the end of active operations and including long-
                term care of the reclaimed site. The application of these
                Federal and state requirements to any particular
                substantial mine project requires a site-specific analysis
                which is quite complex and multifaceted.

        Question 4. Will you please provide information regarding the
    safety and environmental performance record of hardrock mining in the
    United States, including trends in recent years and decades?

        Answer. In accordance with our purpose statement of pursuing a
    higher standard, we are a forward thinking hardrock mining company
    dedicated to continuous improvement in all areas, especially worker
    safety. Our team is consistently working to ensure that we operate in
    an environmentally responsible and safe manner daily. In addition, as
    an industry, we have no higher priority than the safety of our workers
    and our responsibility for maintaining a healthy and vibrant
    environment at our mining operations. We all recognize that even one
    injury is one too many.
        Speaking for Coeur, we have worked tirelessly to ensure our mines
    are among the safest in the hardrock mining industry. We achieve this
    through our safety programs which begins on Day One of each employee's
    time at our company.
        The statistics regarding the industry's safety record speak for
    themselves. Statistics from the U.S. Mine Safety & Health
    Administration on all metal/nonmetal mines show that in 2016, there
    were 3,647 total injuries (an injury rate of 1.92 per 200,000 employee
    hours) and there were 17 fatalities (a fatality rate of 0.009 per
    200,000 employee hours.) Historically speaking, injuries and fatalities
    in the hardrock mining industry have never been lower than they are
    today. By comparison, in 1980 there were 15,161 injuries and 103
    fatalities and in 2000, there were 9,600 injuries and 47 fatalities in
    this industry. The drop in injuries and fatalities is significant,
    which the industry attributes to several factors, including better
    technology, improved hazard identification, and an ongoing safety
    education programs at each mine.
        In addition, the environmental record is just as strong. Based on a
    2011 letter to Senator Lisa Murkowski from the U.S. Forest Service, the
    agency confirmed that 2,685 permits had been issued for mines on USFS
    land since 1990, and none of those mines had been placed on Superfund's
    National Priorities List (NPL.) Also in 2011, the Bureau of Land
    Management (BLM) responded to the same question posed by Senator
    Murkowski about permits on BLM lands. Since 1990, BLM's Mining Law
    Administration Program had approved 659 Plans of Operation and none of
    them had been placed on the NPL. Only one mine (on private land in
    South Carolina), which has had a permit approved since 1990, has been
    placed on the NPL. One mine out of thousands of permits simply does not
    indicate a pattern of environmental abuse or negligence for the modern
    mining industry.
        Unfortunately, the temptation by many in the environmental
    movement, however, is to continually advocate to the public through
    scare tactics, incomplete facts or through deliberate ignorance that
    virtually all modern hardrock mining operations are somehow destroying
    our environment and do not operate responsibly. These accusations that
    hardrock mining companies are intentionally skirting environmental laws
    because of callous disregard for the environment or to enhance
    financial margins is entirely inaccurate and misleading. It is
    irresponsible to represent that hardrock mining companies intentionally
    pollute the environment.
        Our commitment to the communities where our hardrock mines are
    located and where our workers and their families live demands that we
    use ongoing safety education, environmental stewardship, and the best
    technology with modern mining practices as part of the social compact
    we have with both.

        Question 5. Can you please provide the Subcommittee with
    information regarding the expected closure and reclamation costs for
    active hardrock mines in the United States and the existing financial
    assurances to cover those costs (including through third party
    bonding).

        Answer. Before going to current costs, we should review history.
    Prior to 1970, hardrock mines were typically designed and built to
    maximize production and minimize cost with little or no regard for
    environmental values. This was no different than other industries.
        However, beginning in the 1980s almost all new hardrock mines have
    been designed, built and operated to integrate long-term environmental
    closure and reclamation as a primary design standard, and this is
    required by current Federal and state law. At the same time, the
    Federal land management agencies (FLMAs) and states have significantly
    evolved their financial assurance (FA) programs with specific emphasis
    on post-closure care and maintenance, thereby minimizing the long-term
    potential for releases of hazardous substances and unbonded agency
    liability.
        Currently, the FLMAs and states have increased their oversight of
    mine permitting and reclamation practices, and they have developed a
    comprehensive regulatory regime covering all aspects of the mine
    permitting, reclamation and FA process. It is unusual that government
    and industry agree on environmental issues. In this case, however,
    industry, states, FLMAs, and the U.S. Small Business Administration
    (SBA) have had the same message to EPA in the CERCLA Sec. 108(b)
    rulemaking that existing FA programs are working at modern mines and
    there is no need for a fundamentally flawed, duplicative, and costly
    EPA program.
        FLMA and state programs tie FA requirements to each mine's
    individual permit stipulations for operations and closure, and these
    requirements are reviewed and updated by the FLMA and/or state on a
    continual basis. EPA's Proposed Rule ignores these existing FLMA and
    state schemes and does not recognize the adverse effect that
    duplicative Federal oversight would have on these states and their
    citizens. Instead of considering the present degree of risk and taking
    into consideration required input from FA providers, EPA's Proposed
    Rule is the result of litigious pressure from anti-mining environmental
    groups and special interests. Without regard to facts, EPA's Proposed
    Rule duplicates FLMA and state agency requirements, creates conflicts
    of law, and bypasses local administrative authorities who have proven
    expertise in reviewing, permitting, and overseeing mining projects.
        Over the past 25 to 30 years, these programs have greatly advanced,
    adapted to new information and responded to fill gaps in both their
    regulatory and FA programs as circumstances have required. These
    programs have proven effective, which the National Academy of Sciences,
    in response to a request from Congress, determined in a comprehensive
    1999 report entitled Hardrock Mining on Federal Lands. The Report
    concluded that the overall structure of Federal and state laws and
    regulations that provide mining related environmental protection is
    complicated but effective.
        In the case of the mines operated by Coeur Mining, the closure,
    reclamation, and post-closure costs of our mines are well understood
    with comprehensive site specific plans established for closure. All
    hardrock mining operations are bonded for closure, reclamation, and
    post closure monitoring and maintenance, all of which is a condition to
    operate. Financial assurance needs to be secured and adjudicated before
    any site disturbance begins. Thus, those liabilities are already
    secured through financial assurance mechanisms such as surety bonds,
    letter of credit, insurance, trusts, and cash collateral, for example.
        Comprehensive closure and reclamation costs and their requisite
    financial assurance for the hardrock mining industry may be best
    illustrated by BLM and USFS estimates. According to these agencies, the
    USFS held over $325 million in reclamation bonds for approximately 530
    projects. Of that $325 million, approximately $304 million is
    identified for eight large operations. The calculations are project-
    specific and financial assurance is calculated based on the type and
    amount of disturbance at each operation. The BLM holds $2.9 billion in
    financial assurances for final reclamation of approximately 1,374
    operations. Mining operations occurring on private or state lands are
    also required to secure financial assurance prior to construction and
    operation. Cost estimates for financial assurance go through a rigorous
    review process through the Federal and state agencies.

        In closing, thank you for allowing me to submit further testimony
    to the Subcommittee and for seeking ways to improve the hardrock mining
    permitting process. I invite you or your staff to come see one of our
    operations.

        Please do not hesitate to reach out if you have additional
    questions.

                                     ______

        Dr. Gosar. I thank the gentleman. I thank the panel for
    their testimony.
        Reminding the members of the Committee that Rule 3(d)
    imposes a 5-minute limit on the questions, and I will recognize
    myself first.
        Mr. Cress, thank you so very much for joining us today,
    especially with the distance that you have traveled. I mean,
    coming all the way from the Philippines, that has to be a
    record, or darn close to a record.
        Your expertise and extensive experience in your field are
    invaluable to this Subcommittee, and your testimony is
    especially helpful for showing how non-binary the prospect of
    gross proceeds versus net proceeds really is. What states and
    countries are really doing in a wide spectrum and then painting
    it simply as one or the other is disingenuous. So, thank you.
        My first question to you, I want to make sure I get this
    correct, because you said it and I want to highlight it. When
    all the different taxes and fees are accounted for in the
    United States, it is pretty close to the global average. Can
    you explain that again?
        Mr. Cress. That is correct. In the global mining taxation
    study that was done by Professor Otto, it was actually on the
    high end of competitive. The competitive range that Professor
    Otto defined was about 40 to 50 percent government take. And
    both Arizona and Nevada came in at 49 and change.
        Dr. Gosar. So, it is really important that we consider the
    whole aspect of implications versus selecting just one aspect
    that we want to nitpick, true?
        Mr. Cress. Yes, that is correct.
        One other thing I might add is that the exploration end of
    the industry actually operates by retaining small royalties,
    and they will discover, explore, and transfer properties to
    larger companies. You need to leave room for those royalties,
    so that that industry can continue to function and find
    deposits.
        Dr. Gosar. You are really pointing a picture to my next
    question, and that is if we are talking about this royalty
    schematic, Congress is going to have to walk a real tightrope
    in regards to this discussion. This is such a complicated issue
    that I cannot see the wisdom in just a flat, gross royalty. Do
    you see the same thing?
        Mr. Cress. I think the advantages of gross royalties are
    that they are supposedly simpler to administer, although that
    is not always true. We have gross royalties in oil and gas, for
    example, that have very complicated deductions for processing.
    And coal, for transportation and washing.
        Complexity does not need to be an impediment to adopting a
    net approach. The states are handling that complexity just
    fine. And many other governments--Canada, Australia--have very
    complex net royalties, and administer them also, just fine.
        Dr. Gosar. My next question to you is, if Congress were to
    craft legislation that would affect mining operations in all
    states with their own economic burden, all commodity types for
    their different markets, and all mining techniques with their
    different capital intensities, in your professional opinion,
    how could we ever possibly craft such legislation?
        And would it be more realistic to grant a governing body
    the ability to determine the appropriateness of those rates on
    a case-by-case basis?
        Mr. Cress. You are correct that this would be an
    unprecedented attempt to define royalties over a number of
    commodities. When Congress has done this before, it has been on
    a single commodity basis. So, I personally believe that that
    would require great study and great care.
        You could specify in the legislation different royalties
    and different royalty bases for different royalty metals, but
    it is going to be a complex undertaking.
        Dr. Gosar. And I think we made the point that, before we
    can actually consider that, we would actually have to look at a
    streamlining of the permitting process, a common-sense
    application there.
        Mr. Cress. Yes. As you have heard in the testimony today,
    the U.S. ranking would be higher, if not for the permitting
    delays. So, adding a royalty will be a discouragement. But if
    you improve permitting, that would encourage.
        Dr. Gosar. Ms. Pagel, I have a couple questions for you.
    Have you visited Twin Metals or the iron ore mine range in
    Minnesota?
        Ms. Pagel. No, I have not.
        Dr. Gosar. How about Resolution Copper?
        Ms. Pagel. I have visited the Oak Flat Campground.
        Dr. Gosar. Have you been in the mine?
        Ms. Pagel. No, I have not been in the mine.
        Dr. Gosar. Well, when we make these ascertations about how
    ineffective and inefficient mining is, I think you need to walk
    a mile in our moccasins out in Arizona and Minnesota. When you
    make the gross accusations about the spills actually polluting,
    let me explain something to you.
        We just actually went out to Minnesota. Do you know that
    the iron ore pits actually clean the water better than what you
    see in the boundary waters? Are you familiar with that?
        Ms. Pagel. I did not know that.
        Dr. Gosar. Once again, I think what we have to do is we
    have to learn, instead of being ignorant and putting out false
    facts. I think we need to start walking and making sure that we
    have our facts right, so that we are not scaring people
    egregiously.
        Ms. Pagel. I will be happy to get you more details about
    the pollution.
        Dr. Gosar. Well, what I would like you to do is come out to
    see us, because you are going to see something much more
    different than what you are proclaiming at the witness stand.
        Ms. Pagel. I would be happy to.
        Dr. Gosar. I recognize the gentleman from California for
    his 5 minutes.
        Dr. Lowenthal. Thank you, Mr. Chair. I want to kind of
    explore this idea about how long it takes to get a mining
    permit, not so much to put people on the spot, but to get a
    better understanding of what is really going on, and what some
    of the issues are.
        So, Mr. Krebs, you mention that we have the world's longest
    mining permitting process of 7-10 years. That is very similar
    to what the Majority's memo on this hearing also mentions, the
    same kind of time frame. And it all comes from a 2014 report on
    ranking of countries for mining investments. That is really
    where it comes from. But there is no actual permitting data in
    the report. It just says that.
        And the other thing that I need to understand is, with this
    problem are tremendous--you mention how much further behind we
    are. The report ultimately ranks nations in terms of conditions
    that promote investment growth in the mining industry, and
    between 2013 and 2014, the United States had the greatest
    investment growth. In conditions that promoted investment
    growth, it really ranks us third out of I think 26 nations, in
    terms of conditions that are right for investment.
        Can you square this? And where are the problems? If this
    would improve us, if we are already moving in the right
    direction, where are the problems?
        Mr. Krebs. It is such a case-by-case situation. I talked
    about the Kensington Mine up in Alaska. I would consider that
    to be an extreme example, 19 years. I could give you another
    example, a mine of ours, the one in Nevada, it has been in
    existence since----
        Dr. Lowenthal. But just take those cases. What has led to
    such, what pushed it so long out there? Is it the agencies not
    coordinating? Is it the local, state, and Federal level, it is
    not any one level of government that is the problem, is it the
    coordination that we are doing? What do you see as the critical
    issue?
        Mr. Krebs. I would say it is two things. It is the
    coordination, and then it is the litigation that we experienced
    throughout the process.
        And on the coordination front, I think, in our experience,
    like Nevada, things go really well to, for example, get
    something put into the Federal Register. But when that finally
    gets to DC, it sort of goes into a black hole. I think there
    are something like 14 separate approvals that are required here
    in DC before that thing can actually get put into the Federal
    Register. And if there is any change made by any 1 of those 14
    approvals, it goes back down to square one and starts over
    again.
        Dr. Lowenthal. Yet, we still do have, as the report
    indicates, the conditions are such, compared to the rest of the
    world--besides, I believe, it is Canada and Australia--we have
    come up much closer to them now, that promote investment growth
    in the mining sector. Why is that so, then, with all of these
    delays? Why are we also looked at as a great place to invest?
        Mr. Krebs. Well, for starters, it is the certainty of
    title. It is the rule of law, contracts. Infrastructure here in
    the United States is great in most cases. Although, in Alaska,
    we have no infrastructure there at our mine. But you tend to
    get into a more litigious loop here in the United States, where
    you will put something, an EIS, out there, there will be
    litigation, which will extend the timeline. And then,
    inevitably, the prices of the commodities change, so then we
    will have to go back and sort of redo the economics.
        Dr. Lowenthal. I agree we can be looking at that, but I
    still come back to we are still looked at as one of the best
    places to invest money.
        Ms. Pagel, what do you see as the issue? What is really
    going on here? They are saying, hey, this permitting, it is
    just taking too long, even though the BLM and the Forest
    Service, when they do mine plans of operation, the average is
    less than 2 years and more than half are done in 18 months. Is
    there a problem here? I mean we are hearing a major problem.
        Ms. Pagel. Yes, I think the GAO report that came out last
    year was very clear that there is a 2-year average for mine
    permitting time, and the delays that occur--it went through
    many different situations where the mining companies actually
    were the issue. They either decide to expand the mine or they
    don't provide the correct information to the agencies.
        I think with the Kensington Mine, that was a mine that is
    outside the norm, in terms of the fact that the mine tailings
    waste dump was going to be placed into a freshwater lake. That
    is outside the norm of mining practices, and I think that is
    likely probably one reason why it took a little bit longer.
        Dr. Lowenthal. Thank you, and I appreciate this discussion
    to understand exactly what the data is.
        I think what I am struck with--and I will yield back--is
    our lack of really understanding the scope of what is going on,
    so I enjoy this discussion. Thank you, and I yield back.
        Dr. Gosar. I thank the gentleman. I recognize the Vice
    Chairman, Mr. Cook, for his 5 minutes.
        Mr. Cook. Thank you very much, Mr. Chair. I want to switch
    gears a little bit. As I was listening to this conversation,
    and, you know, I was a history major. Everybody says that I am
    so old I made a lot of history and what have you. But--I heard
    that.
        [Laughter.]
        Mr. Cook. I want to go back in time, if you will, to World
    War II, when we had certain minerals, certain parts of the
    economy that were extremely important to our national security,
    to our survival in this war. And if you remember right, there
    was an individual who was very obscure at that time. I think he
    was from Independence, Missouri, and no one had ever heard of
    him. He went on later to have the most unexpected victory in
    the 1948 election: Harry S. Truman--cutting through the
    bureaucracy to respond to what was happening, nationally.
        OK, I am going to make the point now. A mine in my
    district, which, ironically enough, a Democratic Congresswoman
    from California asked me about because she had been there, and
    she said, ``What is the status of Molycorp Corporation, the
    rare minerals and rare earth, vital to national security, vital
    to guided missiles, to all kinds of things?''
        I said, ``They have gone bankrupt.'' And then there was a
    news release--I don't know if anybody reads those--that
    Molycorp made the suggestion to nationalize the corporation,
    because this would cut through all the problems of litigation,
    the waits, and everything, and give them a chance to compete
    with the country that is just killing us, internationally, that
    buys companies--in the United States, all over the world--buys
    them, lowers the price once the competition goes out, and then
    they raise the price, and that is China.
        They are conducting economic warfare, and I am speaking far
    too long, but I want anyone's take on whether you think this is
    a real--not problem for jobs, jobs, jobs--and, by the way,
    Molycorp--I am from California. Ninety percent of the jobs were
    from Nevada, and I don't see anybody from Nevada. I just want
    to re-emphasize that you should have a stake in this.
        So, my comments on that, can you respond? Our first
    speaker, perhaps? I haven't heard from you much.
        Dr. Hitzman. Yes, there is no question that Molycorp, the
    Mountain Pass deposit, is the richest known rare earth deposit
    that has been in production in the United States, and it has
    had a troubled history for a variety of reasons, but primarily
    because China has, I think one could say, manipulated the
    market to affect that.
        How we go forward, that is a question, obviously, for
    yourselves. But you are right to point out that during the
    second World War the United States did, in fact, very much
    support several very key mineral commodities here in the United
    States, and does so still to this day with beryllium, as one
    commodity the U.S. Government is still supporting directly.
        Mr. Cook. Thank you. Anybody else in my 1 minute and 22
    seconds?
        [No response.]
        Mr. Cook. Thank you very much. I yield back. Oh, I am
    sorry, you were going to----
        Mr. Cress. I will comment only because I have also watched
    the situation with Molycorp, and I addressed this issue before
    the National Academy of Sciences on the issue of critical and
    strategic minerals.
        If you look in the New York Times, they ran a series on
    mining of rare earths in China, and the environmental
    devastation that allows them to undercut that mine. And the
    Molycorp mine has been put out of business twice by the
    Chinese. And I think it is a problem. I actually think the
    nationalization idea is not a bad one. And I would not normally
    say that. In this case, maybe it is.
        Mr. Cook. I would not go that far, but I am a Republican. I
    yield back.
        Dr. Gosar. Thank you. Thanks to the gentleman. Now the
    gentleman from northern Virginia, Mr. Beyer, is recognized for
    his 5 minutes.
        Mr. Beyer. Thank you, Mr. Chairman. Thank you all very much
    for coming and teaching us all about hardrock mining.
        Ms. Pagel, our Chairman invited you to come and see the
    mines in Minnesota and Arizona. I would encourage you to do
    that. It is always helpful. Let me know when you guys arrange
    it. I would love to come, too. The last time I had a panic
    attack was deep in a coal mine under Kentucky, the darkest I
    have ever seen.
        The Chairman suggested that at least some of your testimony
    was based on alternative facts, and you talked about a
    groundbreaking study that 75 percent of mining operations have
    polluted surrounding surface or groundwater; that 74 percent of
    domestic gold mines have polluted waters with cyanide, arsenic,
    et cetera; 100 percent of copper sulfide mines have had
    pipeline spills and accidental releases. Where do these facts
    come from?
        Ms. Pagel. We work with mining engineers, hydrologists to
    look at EISs and also look at what mining companies said when
    they first built the mine in terms of how much water they might
    pollute, and then, after that mine is in operation for a period
    of time, how much water they actually did pollute. And,
    unfortunately, what happens in reality does not match the
    predictions, and we do know that mines out there are polluting
    both ground and surface water.
        Mr. Beyer. Do any of these end up in scientific studies, in
    peer-reviewed journals?
        Ms. Pagel. They do, and I would be happy to send them to
    the Subcommittee so they can take a look at them.
        Mr. Beyer. And is it also possible that there are mines
    that do clean the water because they are running through rock,
    and other mines that are releasing arsenic and the like into
    the groundwater?
        Ms. Pagel. Yes, often mines have water treatment plants
    that will take the polluted water and treat it so that it is no
    longer as polluting.
        Mr. Beyer. Great, thank you.
        Mr. Krebs, in Ms. Pagel's testimony she talked specifically
    about the Kensington Mine and taking advantage of the Clean
    Water Act loophole: 200,000 gallons per day of toxic wastewater
    in the Lower Slate Lake, eventually, 4\1/2\ million tons of
    solid into the lake, and ``what was once a pristine body of
    water into a mine tailings disposal site.'' How do you react to
    that, or respond to that?
        Mr. Krebs. Well, I would ask you all to come up there and
    look at what we do at Kensington. Lower Slate Lake was a
    dormant, small body of water that was not capable of even
    supporting aquatic life. To call it a mudhole would not be a
    stretch. By the time we are done mining and we reclaim Lower
    Slate Lake, it will become a much larger body of water, capable
    of supporting aquatic life.
        Up there, we treat water as much as we mine ore. We process
    5 million gallons of water a day at a mine like Kensington.
        There is no toxic waste. Half of what we mine that does not
    contain the ore that we ultimately process and ship off-site
    goes back underground, into the mine, as backfill to help
    support the underground infrastructure. That leads to better
    safety conditions in the underground mine.
        So, I would say that the characterization of Kensington is
    off base. The idea that there is some kind of a loophole after
    19 years and 1,000 studies and a trip to the Supreme Court, I
    don't think those guys would let a loophole--if anything, we
    are tied up in knots up there, in terms of how we operate.
        And we are fine doing it. We are the last people that want
    to have any environmental issues. Our workers are there in the
    local community. I think some of the most ardent
    environmentalists I have seen are people that work at our
    company.
        Mr. Beyer. Let me interrupt 1 second, only because the time
    is so limited.
        Mr. Krebs. Yes, sir.
        Mr. Beyer. Mr. Cress, you gave a long and wonderfully
    detailed lawyer description of all the different fees and,
    basically, why we should not have Federal royalties at all. But
    then you go on and cite Alaska, Montana, Nevada, California,
    Arizona, Colorado, Idaho, Utah, South Dakota, Oregon, New
    Mexico, and Washington as all having some kind of royalty
    thing, whether gross or net.
        Why is it OK for the states to have royalty regimes and not
    the Federal Government?
        Mr. Cress. I actually didn't say that the Federal
    Government should not charge a royalty. I said if they decide
    to do that they need to be very careful about how it is done.
        The states are charging those royalties mainly as severance
    taxes. Those taxes generally go to support local communities,
    so it is a way of addressing the impacts of mining on local
    communities. So, it is kind of a different purpose.
        And I think you really have to stick to the purpose of the
    Federal royalty, which would be, again, the raw minerals in the
    ground prior to processing, prior to all the expense of making
    that into a metal. That is what the United States is providing.
        Mr. Beyer. One purpose might be, as we have heard from
    almost all, is the hundreds of thousands of abandoned hardrock
    mines that need cleanup.
        Mr. Chair, I yield back.
        Mr. Cook [presiding]. Thank you.
        Mr. Lamborn.
        Mr. Lamborn. Thank you, Mr. Chairman. Today, there are as
    many as a half-million abandoned mines across the United
    States. And some pose tremendous health and safety hazards, as
    we saw in our state of Colorado, with the Gold King Mine
    disaster. So, it really is something I, and I think everyone on
    this Subcommittee, want to address. I will be introducing a
    bill for the fourth Congress in a row--if I am counting
    correctly--to at least address part of the puzzle.
        There are a lot of different facets to abandoned mine
    lands, but one factor that I think needs to be in there, and my
    bill would address, is the liability issue. If people clean up
    abandoned mine lands voluntarily, they should not have
    unlimited, infinite liability, because no one will ever touch
    it, as a result.
        But we have seen great examples in Pennsylvania coal
    country and other places, where people voluntarily really do
    some great cleanup. So, unless you act grossly negligent or
    willfully, then you would have liability. But if you are acting
    in good faith, I think we need to relieve the current unlimited
    liability, or we will never get some of these cleaned up.
        Mr. Krebs, what issues also should we be looking at as we
    look at Good Samaritan legislation? I addressed part of it, but
    what are the things we should be looking at when we consider a
    package of bills, let's say?
        Mr. Krebs. Yes, I think you are on point there. The biggest
    issue--you know, we are a publicly-traded company, we have
    50,000 shareholders around the world. We need to be very
    careful about what kind of liability we expose our shareholders
    to. As it currently sits, there are just too many risks
    associated with getting involved with any of these historic
    sites, which is unfortunate, because we have the know-how, we
    have the resources. And, frankly, we have the desire to get
    involved in trying to be a part of the solution to address
    these abandoned mines.
        Sure, hopefully, there might be some economic benefit for
    us to do so. But above and beyond that, it is the right thing
    to do. It is a bit of a black eye for the industry, so I think
    trying to be a leader in the industry by attacking and
    addressing that issue is the right thing to do.
        Mr. Lamborn. Mr. Krebs, are mining companies uniquely
    situated to be able to address this problem?
        Mr. Krebs. I would say we are. We have the capital. And
    then, many times, we already are reprocessing old tailings.
        For example, we have a mine in Bolivia, where we are mining
    on the surface of a historic mountain down there called the
    Cerro Rico Mountain that was mined underground for over 500
    years. And our sole mining efforts there are in picking up the
    old tailings that were left behind over all those centuries
    that are just waste rocks sitting on the surface, picking those
    up, reprocessing them, and recovering the silver in those piles
    of waste rock, and returning the mountain to a much more
    environmentally friendly place.
        So, that is kind of an example of how companies like ours
    are already doing this kind of thing.
        Mr. Lamborn. I wish the EPA had been doing that at the Gold
    King Mine back in Colorado.
        Mr. Cress, I am going to ask you a royalty question now.
    Some have called for a gross royalty, and I think you did a
    good job of explaining the difference between gross and net,
    and the difference between retroactive and prospective, or
    future assessment of taxes. Can you also address economic
    cycles? And with the long timelines that we are laboring under
    right now, how that factors in?
        Mr. Cress. Yes, as I am sure you all know, the mining
    industry is very cyclical. Prices go up and down, and the
    swings can be dramatic. In fact, some of the numbers that I
    have seen Earthworks use before on Nevada and Alaska are
    numbers that are taken from downward swings.
        If you look at the Alaska or the Nevada tax, just to use an
    example, I think they brought in about $150, $200 million over
    a 10-year period through 2007. In the last 10 years, it has
    brought in $1.4 billion. That is because the cycle of the
    industry went up, and mines opened, and the state received a
    greater share. That is the beauty of the net approach, is that
    when the industry is already suffering, mines can close if
    there are fixed costs like a gross royalty that do not go down
    when the industry is suffering.
        And that approach allows you to ride out those cycles, and
    I would say sustainable development in mining is using the
    minerals.
        Mr. Lamborn. Thank you.
        Mr. Cook. Mr. Soto.
        Mr. Soto. Thank you, Mr. Chairman. When I looked through
    the royalty rates for other resources, we have 12.5 percent for
    onshore oil and gas royalties, 18.75 percent for offshore oil,
    and Secretary Zinke just recently mentioned possibly even
    looking to raise those. With coal it is $1 per ton, and it is
    split between Federal and the states.
        But here, where we are dealing with hardrock, it looks
    like, in the absence of any Federal revenue, we have had a
    bonanza with the states using this as a revenue source. And
    that appears to be the real issue here.
        Mr. Cress, you had testified that we are already at the
    world average. So, is it the states being greedy? Is that why
    we are at that level, in the absence of any Federal royalties?
        Mr. Cress. No, I don't think so. I think that almost 50
    percent share that government takes, a lot of it would be
    income tax. That includes all taxes assessed against business.
        But mining does bear a very specific tax that other
    industries do not, which is these state severance taxes.
    Sometimes they are called license taxes. In Alaska, they use
    that. Those are percentages of profit or percentages of
    proceeds, unlike a business license, which is a $50 thing, it
    is a percentage of profit.
        Mr. Soto. And that is a state fee, is that right?
        Mr. Cress. That is correct, those are state fees. There are
    really two.
        Mr. Soto. So, for removing the income tax that everybody
    pays, and just talking about fees and royalties, basically
    state-imposed revenue, is that where most of the cost is right
    now?
        Mr. Cress. I am sorry, the cost for industry?
        Mr. Soto. The cost to industry for mining hardrock,
    specifically.
        Mr. Cress. Well, it is part of the cost, yes. What I tried
    to set out in my testimony is that most states are sensitive to
    this gross versus net problem, and impose a net burden on
    severance of minerals.
        Mr. Soto. And, Mr. Parke, what does Arizona charge for
    mining hardrock?
        Mr. Parke. I am not aware. I can get you that information.
    I would mention, though, that mostly that is on state lands, so
    it is applicable to mineral resources that are extracted from
    state lands.
        Mr. Soto. Are there any fees or other licensing
    requirements like Mr. Cress was discussing already, even if it
    is on a Federal land, if they are operating within Arizona?
        Mr. Parke. I can get you that information.
        Mr. Soto. It appears that what we are working with with
    coal seems to be a fair way, where we are looking at revenue
    sharing between the state and the Federal Government. As we are
    looking at a $20 trillion debt and a $600 billion deficit, this
    appears to be an area where there has just been a fix that has
    not happened out there, a loophole that has allowed states to
    really rack up revenue at the expense of the Federal
    Government.
        Going next to Ms. Pagel, we see there has been over $300
    billion in mined hardrock. What are the total cleanup costs
    that are left for all of these mined areas? Do we know that?
        Ms. Pagel. We have an estimate around $50 billion. It could
    be more than that. The fact that there is not real inventory,
    exactly how many abandoned mines we have in this country is an
    issue.
        Regardless of what the number is, the main problem is that
    we have no money, no steady stream of funding to clean up those
    abandoned mines.
        Mr. Soto. So, there were never any royalties charged, there
    was never any fund created to help clean up mines afterwards,
    and we are stuck with $50 billion worth of damage across the
    United States. Is that fair to say?
        Ms. Pagel. Exactly.
        Mr. Soto. What do you think we should be doing, going
    forward?
        Ms. Pagel. It is time to start charging the industry a fair
    return for the Federal minerals that they are taking, including
    a royalty and a reclamation fee, similar to what the coal
    mining has, both a royalty and a reclamation fee. And we hope,
    with that reclamation fee, that we can start to chip away at
    the $50 billion in AML cleanup.
        Mr. Soto. And if we didn't do a royalty fee, but just a
    reclamation fee to help with the cleanup, do you think that
    would get us moving on this $50 billion?
        Ms. Pagel. It would, because of the 1872 Mining Law--and I
    am sure Mr. Krebs can attest to this--many of the ore bodies
    have actually been patented, meaning privatized, under the 1872
    Mining Law for $5 an acre. So, we have actually lost some of
    that revenue by privatizing public minerals.
        Mr. Soto. Thank you, and I yield back.
        Mr. Cook. Mr. Wittman.
        Mr. Wittman. Thank you, Mr. Chairman. I thank our panelists
    for joining us today.
        Mr. Krebs, I want to go to you. You spoke quite eloquently
    about how fixing the hardrock permitting process and making it
    easier would affect our reliance on foreign suppliers of some
    of these critical minerals, and you spoke about compounds like
    silver and its use within a number of different practices, both
    of strategic importance and economic importance to the United
    States.
        Also, rare earth elements, you spoke a little bit about
    rare earth elements, and specifically being able to reprocess
    tailings in many situations where existing tailings have
    significant economically viable amounts of rare earth elements
    in there for us to be able to reprocess.
        But looking at that across the spectrum, if we are looking
    at how changes in the royalties, or additional financial
    requirements for folks that are either mining today or would
    want to get into that to be able to get to some of these
    critical elements that need to be processed for national
    security purposes, if nothing else, how would some of those
    proposals, or what you look at as proposals, how would those
    royalties or financial requirements potentially impact either
    current operations or those companies that may look at getting
    into those operations?
        Mr. Krebs. Yes, it would certainly detract from the
    attractiveness of, from a commercial standpoint, looking at any
    kind of opportunity, if there is an additional cost. That would
    have to be offset, then, with any potential opportunity to move
    forward the cash flow by having a more efficient permitting
    process. So, it would be an economic trade-off that we would
    look at, just like any other opportunity.
        I think there is probably an equilibrium in there
    somewhere, where you could address some of those issues around
    permitting, land, tenure, issues like that, something like
    that, and then putting a profits royalty in there, so that you
    have some reliability and some certainty so that, as a private
    company you can have some ability to predict what the
    investment looks like. And then, ranking that against the
    global market that there is for where you can allocate capital
    and what the relative rates of return are.
        Mr. Wittman. If the wrong policy decisions are made
    concerning royalties and additional financial requirements, and
    we have less production in the United States, for those reasons
    exclusively, or even if other external factors come in as part
    of that, how would you say that affects our national security?
        Mr. Krebs. Well, companies would leave and go elsewhere.
    There would be even less exploration done in this country to
    find new sources of those metals. And we would sort of be left
    dependent on others.
        Keep in mind there are only a handful of U.S.-based--at
    least in our case--precious metals mining companies. You look
    over the border into Canada, there are, I think, 300-plus
    mining companies. The industry here has already shrunk down a
    lot, despite the fact that there are a lot of good things about
    being here in the United States, don't get me wrong.
        But some of these other issues mainly around uncertainty,
    unpredictability of the timeline, and litigation is a reason
    why this industry has shrunk as much as it has here.
        Mr. Wittman. Got it. Very good, thank you.
        Dr. Hitzman, I want to ask you, what would you say are the
    most important factors ensuring a steady stream of domestic
    mineral commodities? And as we look at fluctuations there and
    other countries--i.e. China--getting in, and in many instances
    trying to dominate and displace others in those marketplaces,
    whether it is for compounds like silver, but even more
    importantly, rare earth minerals, give me your estimation about
    what we can do here on the domestic side.
        But also, if we don't do things, how does that affect us,
    strategically?
        Dr. Hitzman. It is complicated, and this hearing is showing
    some of the complications. And it is variable, because
    different metals have very different markets.
        For instance, silver is a relatively large and
    international market. The rare earths, which many people are
    concerned about, is also an international market. But the
    amount of rare earths produced is incredibly small, so very few
    companies actually get into that business because it is a niche
    business. That affects many other things.
        So, moving on to what can we do. One of the things,
    clearly, at least from the USGS side, is provide the
    geological, geophysical data so that companies like Mr. Krebs'
    actually have the information to go out and find the minerals.
    That is, from my point of view, one thing that is incredibly
    important.
        The rest is what you are talking about, which is not what
    the USGS does, we are a non-regulatory agency. But clearly, the
    idea of permitting and how that works is another area that
    needs to be looked at.
        Mr. Wittman. Thank you, Mr. Chairman. I yield back.
        Mr. Cook. Thank you.
        Mr. Pearce.
        Mr. Pearce. Thank you, Mr. Chairman.
        Dr. Hitzman, you were just talking about how we should make
    the information available where Mr. Krebs could go out and find
    the rare earth mineral sites, right? Eleven of them in New
    Mexico they shut down. The jobs are in China now. So, if you
    want to come, Mr. Krebs, we will drive you out there to them.
        [Laughter.]
        Mr. Pearce. The flags are still in the ground, and the jobs
    are gone. And, by the way, the Chinese started charging 35
    percent excise tax on the rare earth minerals, because they
    want to put our manufacturers out of business. Since they have
    the mining in their country, they want to put our manufacturers
    out of business for these strategic resources. And Ms. Pagel
    said they are getting an unfair deal. I don't know, it is just
    hard to rectify that.
        What sort of rate of return do you make on your silver
    mines, Mr. Krebs? Not your gross income, that is----
        Mr. Krebs. Well, yes. It depends on what the price of
    silver is, obviously.
        Mr. Pearce. Today. What are you getting today, roughly?
        Mr. Krebs. Today, a rate of return on a new mine?
        Mr. Pearce. No, just your gross income.
        Mr. Krebs. On a gross income we make cash flow of a couple
    hundred million dollars a year, then we pay----
        Mr. Pearce. What percent is that?
        Mr. Krebs. That is about 15 percent.
        Mr. Pearce. Fifteen percent? And what comes out after you
    get gross income on the tax reforms? What comes out after gross
    income? What do you take out of that?
        Mr. Krebs. After all the capital expenditures that we are
    required to make to continue operating, this year will be----
        Mr. Pearce. Gross income does not include taxes, does it?
        Mr. Cress, you seem to know a little bit about this. So,
    you are going to move from gross income to net income. What are
    the deductions out of that, Mr. Cress?
        Mr. Cress. [No response.]
        Mr. Pearce. Mr. Cress?
        Mr. Cress. I am sorry, I am not sure for his company.
        Mr. Pearce. No, no, I am just talking in general. If you
    are going to move from gross income to net income----
        Mr. Cress. Yes, you are going to have taxes, you are going
    to have depreciation, you are going to have depletion.
        Mr. Pearce. So, really, when Ms. Pagel mentioned the 15
    percent gross income, it is a little bit tricky because taxes
    come out after that.
        Mr. Cress. Yes, that is correct.
        Mr. Pearce. Payroll taxes, any other taxes, any taxes to
    the state, any taxes to other countries come out after that.
    So, this quoting of 15 percent gross income is, I think,
    misleading at best.
        Now, again, reading Ms. Pagel's testimony, she says that
    more than half the delays, a majority of the delays, are up to
    you. So, your 19 years, she would assert that 9\1/2\ years plus
    were due to your actions. Can you document that to be a correct
    statement or an incorrect statement?
        Mr. Krebs. It is a little bit of a chicken and the egg,
    because every time there are lawsuits filed that delay things
    for long enough, inevitably the price, the economics change.
    Then we are forced to go back and re-look at what can actually
    be an economic approach to mining the resource. So, then we
    have to start over and then that gets litigated.
        So, whether that is on us for changing the plan, or if we
    are changing the plan because we are delayed, I think it is the
    latter.
        Mr. Pearce. Again, maybe there is a more complex argument
    to be made than just that you are out there changing plans,
    randomly.
        Mr. Krebs. Yes. We would prefer to not do that, if we
    didn't have to.
        Mr. Pearce. So, again, the assertion was made that you dump
    200,000 tons or gallons or something--200,000 is the number
    that jumps out of the testimony--into Slate Lake, the Lower
    Slate Lake. Do you do that?
        Mr. Krebs. We have a tailings facility there that we
    contain that material. We treat it and release it at standards
    that are set by the state of Alaska, which are among the
    highest in the country.
        Mr. Pearce. So, you are not going to put 4.5 million tons
    of solids into the lake?
        Mr. Krebs. Solids go into the lake, but that is ultimately
    what will form the base of this much larger lake that will be a
    much, much healthier body of water by the end of the mine life.
        Mr. Pearce. All right. Mr. Cress, the potash industry is
    one of the few mining industries still in New Mexico. And we
    have significant potash. What would happen to those jobs if we
    had an 8 to 12 percent royalty increase in potash?
        Mr. Cress. Every mine would close. I have worked in that
    industry with clients in your state. That industry, which has
    royalties that have ranged between 2 and 5 percent, has
    struggled because of foreign competition, cartels in Russia and
    Belarus and in Canada that have affected pricing. And you would
    lose every single job if you had a higher royalty.
        And, in fact, the government has offered royalty relief,
    which is something in my testimony I suggest you include. The
    government allows the companies to come in and ask for a
    reduced rate when the economics or unfair foreign competition
    affects them.
        Mr. Pearce. Thank you, sir.
        Thank you, Mr. Chairman.
        Mr. Cook. Mr. Tipton.
        Mr. Tipton. Thank you, Mr. Chairman, and thank the panel
    for taking the time to be able to be here.
        Mr. Krebs, that was interesting, listening to some of your
    testimony that was going on. And I just want to know and make
    sure that this is the policy of mining not only in the United
    States, but wherever you do operations. You were talking about
    reclaiming a lake which currently, apparently, is not qualified
    to be able to have aquatic life, and that you are going to be
    able to reclaim that lake.
        You were talking about being able to go to Bolivia to be
    able to do it responsibly. That is the method that your company
    works at, no matter where they are at.
        Mr. Krebs. No matter where.
        Mr. Tipton. Environmentally responsible?
        Mr. Krebs. That is correct, sir.
        Mr. Tipton. Great. Can you tell me just a few of the
    environmental laws maybe that you do comply with? Give a little
    bit of background. I am not sure we all understand the extent
    that industry goes to to responsibly develop a resource.
        Mr. Krebs. Well, the number of acronyms are long. NEPA and
    CERCLA you know at the state level, at the Federal level. Like
    I said in my remarks, at Kensington, not only did we have to
    obtain 90 different permits, but now we have to keep track and
    remain in compliance with all 90 of those over the life of the
    asset. That is a huge exercise.
        We are proud to do it, we do a really good job of it. You
    can talk to anybody in Alaska about our performance in
    Kensington, and they would tell you that they love having us
    there, and we do a terrific job on the environment. And all
    communities where we operate would say the same thing.
        But the mish-mash between the state and the Federal
    agencies and the overlap and duplication has really created a
    spider's web of different regulations that we need to try to
    keep up with and follow, as a company.
        Mr. Tipton. I appreciate that. And my colleague from
    Colorado and I both share a passionate concern over some of the
    issues that you addressed in your written testimony in regards
    to the abandoned mine land cleanup that goes on.
        The EPA caused the Gold King Mine spill in the state of
    Colorado. Part of the challenge that we really have, I think,
    is maybe perspective, in terms of being able to move forward to
    be able to address these issues. We both share a passion in
    regards to Good Samaritan legislation. But from the starting
    point, when we talk about the lands to be able to be cleaned
    up, some of these patents, some of the development of the
    projects, these were primary 1800s, early 1900s, would that be
    a reasonable, accurate statement to be able to make?
        Mr. Krebs. Yes, exactly.
        Mr. Tipton. And when those companies were operating, did
    they have the same environmental compliance requirements that
    you just described?
        Mr. Krebs. I would say they had no environmental----
        Mr. Tipton. They had none. And are they still in existence
    today?
        Mr. Krebs. No, they are long gone.
        Mr. Tipton. So, the sensible thing to do is to be able to
    work together, to be able to strive and create legislation to
    actually get in and address the problem.
        You had talked about being able to have some private-public
    partnerships to be able to move forward. What are some of the
    obstacles right now? What is going to stop you? What is going
    to stop Trout Unlimited from being able to work together to
    address mine cleanup?
        Mr. Krebs. Yes. I have mentioned the historic liability,
    stepping into the shoes of all of that. That is what Good Sam
    would address.
        I think the other obstacle, to be honest, you mentioned,
    like a Trout Unlimited. We would love to partner with some
    NGOs, because we see this as being a great intersection between
    industry and groups like that.
        I think, oftentimes, those groups may not want to see those
    mines cleaned up, because it eliminates an issue that is great
    for fundraising. Abandoned mines are great for fundraising for
    NGOs. We would prefer to instead work with them, side by side,
    and be a part of a coalition that could do some great things
    here in this country. It seems like a winner of an idea, no
    matter what your perspectives are.
        Mr. Tipton. So, if we can address the liability issue--the
    people who did it, no longer there. The people who want to be
    able to do the right thing--you, Trout Unlimited, and others
    that are willing to be able to step forward, to have reasonable
    liability going forward, we can actually start to fix the
    problem that we all identify as something that does need to be
    able to be addressed.
        Mr. Krebs. We would love to be a part of that solution.
        Mr. Tipton. Great. Thank you, Mr. Chairman, and I yield
    back.
        Mr. Cook. Thank you.
        Mr. Hice.
        Dr. Hice. Thank you, Mr. Chairman.
        Dr. Hitzman, let me begin with you. You are familiar with
    the 2017 Mineral Commodity Summaries Report?
        Dr. Hitzman. Yes, sir.
        Dr. Hice. By the way, Mr. Chairman, I would ask unanimous
    consent that this portion of that report be submitted to the
    record.
        Mr. Cook. Without objection.

        [The information follows:]
    Rep. Hice Submission

                        MINERAL COMMODITY SUMMARIES 2017
    Page 6

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        Dr. Hice. Thank you.
        According to the report, the United States is currently 100
    percent import-dependent for about 20 minerals, and more than
    50 percent import-dependent on another 30 minerals. I find this
    stunning. A lot of these are very important minerals, and
    minerals that we have here in the United States. Yet, we are
    100 percent dependent on imports from other countries. How do
    you explain this?
        Dr. Hitzman. It is different for different minerals. The
    one that has been the poster child is the rare earths, where,
    clearly, one country has, I think, had a policy of trying to
    actually become the dominant producer in the world.
        There are other minerals, often by the Chinese as well,
    where that is the case. There are some other minerals where, to
    be honest, we may have some in this country, but the most
    economic deposits that we know of in the world are in other
    countries, so it makes the most economic sense to mine them
    there.
        I think it is different for each one of them.
        Dr. Hice. All right. So, we have these minerals in the
    United States, but there are multiple barriers--whatever you
    may define as a barrier--that prevent us from getting to them
    here in our own country, or it is more economical to get them
    elsewhere.
        I certainly believe we have barriers, as well. But one of
    the big barriers that appears to be glaring to me is the fact
    that, as I understand it, it takes 7-10 years, on average, here
    in the United States to go through the permitting process,
    where you look at other countries--Canada and Australia, for
    example--who have the same safeguards at the end of the line
    that we do, and yet it only takes 2 or 3 years for them to get
    through the process.
        So, we are taking three times the amount of time to get to
    the end of the product, whatever it may be, the mineral, as
    other countries. Why is that?
        Dr. Hitzman. From the USGS point of view, we are not
    involved in that discussion, since we have nothing to do with
    it. We are non-regulatory.
        Dr. Hice. Does anyone on the panel, is anyone else involved
    in that discussion? Why does it take so long?
        Mr. Krebs. Lack of coordination between states and DC, and
    litigation. Those would be the two main issues.
        Could I make one other comment about the foreign ownership
    of metals real quick? Obviously, I am not as close to the rare
    earth side of the industry, but around the world, the M&A
    activity for new assets, or for existing assets or companies,
    when you look at the prospective buyers lists that I see, it is
    Chinese companies that are at the top of the list, looking to
    acquire these things around the world. They have the lowest
    cost of capital, they look at the returns on these types of
    things differently than most companies. And, I would say, they
    have a nearly insatiable appetite for looking to acquire these
    assets, no matter where they are, whether they are here,
    Africa, you name it.
        Dr. Hice. Well, sure, and I think a lot of people forget
    the fact that Apple came up with the iPhone 10 years ago right
    now, 2007. And we have quartz crystals in all of our phones. We
    have it right here in the United States. But as long as the
    iPhone has been around, had we started then with the permitting
    process, we would only today be allowed to start getting after
    it. We have 10 years that we have lost time. This is insanity.
    It is absolute insanity to me.
        And I am not even thinking that we ought to be on par with
    countries like Canada or Australia that take 2 years compared
    to our 7-10 years. Why can't we do it in a year? Why can't we
    do it in a year-and-a-half? Why can't we be ahead of them,
    better than them? This is the frustrating thing to me.
        We are so encumbered with regulations, mitigation,
    litigation, and whatever other ``ation'' we want to talk about,
    that we are not able to get done what we have right here in our
    own country. And to me, it is just totally inexcusable. We have
    to find our way through this maze for the sake of our own
    country, our jobs, and what resources we have that are so
    valuable. Thank you, Mr. Chairman.
        Dr. Gosar [presiding]. I thank the gentleman. The gentleman
    from Illinois is now recognized for his 5 minutes.
        Mr. LaHood. Thank you, Mr. Chairman, for having this
    hearing today. I want to thank the witnesses for being here
    today, and I appreciate your testimony.
        Mr. Krebs, welcome here today. My home state of Illinois,
    we are glad that Coeur Mining is headquartered in Illinois, are
    proud to have you there, and appreciate your comments here
    today, and the high standards that Coeur Mining has throughout
    the country, particularly in Alaska and Nevada.
        In a prior life, I spent 5 years as a Federal prosecutor in
    Nevada, and actually spent time in Lovelock, so I have been up
    there a few times. I know that area well, which a lot of people
    don't get to. It is actually getting a lot of publicity today
    because of the prison up there.
        In Ms. Pagel's testimony, her written testimony, she made a
    reference, obviously, to the Kensington Mine as it related to
    Coeur Mining, but also the Wharf Mine. I know you have talked
    about Kensington. I was just wondering if you could comment on
    the Wharf Mine a little bit, and get your perspective.
        Mr. Krebs. Yes, sure, thank you. Nice to see you. The Wharf
    Mine is a gold mine that we bought 2 years ago from a Canadian
    mining company. So, what happened in 2007 was obviously not
    while we have been there.
        I can say, since we have owned that thing, the
    environmental standards, the safety performance have all gone
    in the right direction. If you could ever come out and see that
    mine, you cannot find another mine, I don't think anywhere in
    the world, where--our next-door neighbor is actually a ski
    resort. When you are skiing at Terry Peak in the Black Hills of
    South Dakota, you are skiing down, looking out over the Wharf
    Mine. And the partnership between the ski mountain, and the
    ownership, and the mine is as strong as any partnership I have
    ever seen.
        So, when you think about mining being sometimes like an
    adversary or whatever, to think that our biggest supporter in
    town in that area is a ski resort--usually skiing and mining do
    not go hand in hand--there is not a person out there in western
    South Dakota who is not a fan of the Wharf Mine. And we have
    brought the same standards there, now that we have owned that
    mine, that we have everywhere else.
        Mr. LaHood. Great, thank you. You also talked a little bit
    in your written testimony about what Coeur has been doing with
    renewables and green technology. Can you expound on that a
    little bit?
        Mr. Krebs. Yes. If anybody likes solar energy, then you
    have to like silver. Every new gigawatt of photovoltaic
    capacity that gets installed around the world consumes about
    2\1/2\ million ounces of silver, both on the front side of the
    panel and then on the back side of the panel. And now, I think,
    global PV installations this year are something like 70 million
    gigawatts. It is mostly in China, here, India, and to a lesser
    extent in Japan.
        So, in order for there to be more solar energy, more
    photovoltaic capacity, there has to be silver to go onto those
    panels. We love the idea of being a part of a clean source of
    energy for this country and for everywhere. That is what we are
    all about.
        Mr. LaHood. We have heard a lot today about litigation,
    bureaucracy, the cumbersome process in the United States. In a
    company like yours, when you are looking at new investors or
    shareholders, or looking at new opportunities, tell me how that
    conversation goes when somebody could go elsewhere around the
    world, instead of the United States.
        Mr. Krebs. Yes, most non-U.S. companies--take Canadian
    companies or Mexican companies--they typically do not put the
    United States up at the top of the list because of some of
    these issues around uncertainty, changing rules.
        Like I said, there are a lot of positives about coming to
    the United States, but it is a commodity market, it is around
    the world. We all look at rate of return, and what goes into
    rate of return is how much money do you have to put in, when
    can you start getting cash flow back out, what is the tax rate
    on the cash flow that you do generate, and can you have the
    ability to continue drilling to extend and expand that deposit
    that you are trying to mine to try to generate an appropriate
    rate of return for investors.
        And exploration in this country has gotten a lot harder.
    Permitting to get to just drill and explore has gotten harder.
    That is why you have seen exploration fall off a cliff in this
    country, and U.S. production levels of at least silver and gold
    have peaked and are now declining.
        Mr. LaHood. Thank you for your comments.
        Those are all my questions, Mr. Chairman.
        Dr. Gosar. I thank Mr. LaHood for his comments. We are
    going to quickly just do the Ranking Member and myself, a
    second round.
        Mr. Parke, how many state permits are typically required
    for a mine in Arizona?
        Mr. Parke. Well, Mr. Chairman, it varies, as has been
    discussed today. I do have some examples. The number of permits
    required depends on the facility design. A modern mine, the
    Safford Mine, holds six different permits on various activities
    and locations throughout the footprint of the mine.
        There are also various health, safety, and water quantity
    permits and general regulatory requirements that also may
    apply, depending on specific activity being conducted.
        Dr. Gosar. And what is the average timeline, on average
    there?
        Mr. Parke. I appreciate that question, because there has
    been a lot of discussion on that today. And ADEQ is very proud
    of the results that we have provided, but it does not impact
    the Federal process.
        So, individual permit time frames are longer than general
    permits, but ADEQ has made significant improvements in the
    speed of our permitting process for all industry types. For
    example, ADEQ reduced the average permitting time frames for
    APPs--that is our aquifer protection program--from 351 days in
    2012 to 99 days in 2017. And ADEQ's goal is to issue all
    individual permits within 180 days, regardless of the program.
        For example, also with air quality permits, ADEQ has
    reduced the average permitting time frame from 199 days in 2012
    to 74 days in 2017, all while still remaining protective of the
    environment.
        Dr. Gosar. Yes, and I am very aware, coming from Arizona,
    as well. So, I want to applaud you.
        In your testimony, you mention seven distinct programs
    relevant to mining. Could you briefly go into detail about
    these programs, the environmental assessments required by these
    programs, as well as the coordination amongst the programs--how
    does it happen and who is the lead agency?
        Mr. Parke. Yes. I would like to mention that those seven
    programs are distinct within the state framework. That does not
    include NEPA or the other time frames. We have the state
    aquifer protection program, which protects groundwater; the
    Clean Water Act, which protects surface water but is
    administered by the state; the Clean Air Act protections;
    natural resource damage coverages; RCRA solid and hazardous
    waste programs, including solid waste facility permits for mine
    operations; state land reclamation bonding; and, of course,
    Arizona Mine Land Reclamation Act.
        The coordination of those--Mr. Krebs probably can speak
    more directly, too--but, in fact, we work with the Federal
    Government through the NEPA process. The problem is that the
    individual organizations find themselves--to use Mr. Krebs'
    turn of phrase, a chicken and an egg. Which one do I do first?
    Because I am inevitably going to have to amend, if I cannot get
    through one or the other.
        So, that one review, one permit idea could reduce
    significant waste in the process.
        Dr. Gosar. Let me get this straight. In Arizona, we drink
    whiskey because water is for fighting over, right?
        Mr. Parke. That is correct.
        Dr. Gosar. We don't like dirty water, do we? I don't. You
    don't.
        Mr. Parke. We have many dry counties, and in Arizona that
    doesn't mean whiskey.
        [Laughter.]
        Dr. Gosar. Yes, and I will tell you, we are very astute
    about our water quality.
        You bring up a good point about coordination. It seems like
    a very smart application to be able to have, like, a case
    coordinator. I am a businessman, and it seems like we could do
    things a lot faster if we have somebody kind of coordinating,
    and we are doing things at the same time. Does that make sense
    to you, Mr. Parke?
        Mr. Parke. Absolutely, and in this new era of cooperative
    federalism, the state continues to seek additional authorities
    from the Federal Government.
        The Arizona Department of Environmental Quality is going to
    seek Clean Water Act 404 permit authority, as well as authority
    for the underground injection control program, which intersects
    with our APP, which should streamline that.
        Quickly, the planned Resolution mine, as was testified
    before the Committee in March of 2017, has reported
    expenditures of $1.3 billion for permitting studies and project
    shaping, and still does not have a final permit after almost 10
    years, without producing an ounce of product. That is madness.
        Dr. Gosar. Yes. One quick question. We are going to go real
    quickly. Has there been any forfeiture of financial assurances
    in Arizona?
        Mr. Parke. No. Again, to that point, there has been no
    release that has triggered a FAR. Even when companies struggle,
    the reality is the value of the assets in the ground make that
    ground still valuable. So, while the company may leave, as Mr.
    Krebs alluded to, another company is ready to come in.
        Dr. Gosar. I appreciate your comments, and I am going to
    now turn it over to the Ranking Member, Mr. Lowenthal, for 5
    minutes.
        Dr. Lowenthal. Thank you, Mr. Chair.
        Mr. Cress, I have a follow up on some questions that we
    have been talking about--royalties, and I am going to bring us
    back again.
        The Federal Government already charges a royalty on
    hardrock minerals in a few selected places such as on acquired
    lands. We also do it, I think, in Minnesota. What type of
    royalties are being charged there? And can you tell us how the
    mining industry is faring under these royalties?
        Mr. Cress. I am aware of that. Minnesota is one example. I
    think the royalties are net smelter royalties, I believe, net
    smelter returns. It is not a refining cost. And I guess I can't
    answer the latter question because I don't know----
        Dr. Lowenthal. About how well they are doing. But have they
    been impacted?
        Mr. Cress. I don't know how many of them are on Federal
    land. So, it is hard to answer that question. I could look into
    it, but I don't have that answer at my fingertips.
        Dr. Lowenthal. I am kind of struck with the fact that,
    although I think you are all experts, there is a lack of
    information out there, in many ways, about what the status is,
    how many abandoned mines there are, what is actually being
    charged or not being charged. Even the question about the
    permitting delay. I do not deny that there are issues there,
    but I don't see any data to really understand what the issue
    is.
        And I am not blaming anybody, it is just, whatever we do,
    it would be nice to base it upon information that we kind of
    agree upon, all of us, that this is the most accurate that we
    have at this moment. And I think that is what is so good about
    this hearing, we are beginning to talk about those issues.
        Other things I would like to ask is, Ms. Pagel, one of the
    common complaints about the Mining Law is that land managers at
    BLM or the Forest Service act as if they say they can't say no
    to a proposed mine. Can you talk a little bit about that, and
    why that is so, if in your experience, that really is so?
        Ms. Pagel. It is. The way the 1872 Mining Law has been
    interpreted over the years is to make mining the highest and
    best use of public lands. So, even when there is a potential
    conflict with a wilderness area or a sacred site, the BLM and
    Forest Service have said time and time again that they do not
    feel like they have the authority to say, ``You know what, this
    is probably not a place for mining.''
        Dr. Lowenthal. In following that up, when we are talking
    about special places like wilderness, study areas, national
    monuments, what I hear you saying is that they are not
    currently protected from mining or mining impacts by the 1872
    law.
        Ms. Pagel. Some of them are. National monuments, when each
    monument is created, usually there is some sort of mining
    withdrawal to prevent mining in the monument.
        But there are cases with wilderness areas--for example, in
    Montana, there are two mines that would like to tunnel
    underneath a wilderness area from each side. There are some
    endangered species in the area, both grizzly bear and trout,
    and studies have shown that those mines, tunneling underneath
    those wilderness areas, will have negative impacts on the
    endangered species. Yet, we find ourselves, unfortunately, in
    litigation because the Forest Service really feels like they do
    not have the ability to say no to those mines.
        Dr. Lowenthal. Thank you. And, Mr. Chair, before I yield
    back I would like to enter into the record pictures of Lower
    Slate Lake, which was before and after mining occurred.
        Dr. Gosar. Without objection, so ordered.

        [The information follows:]

    Rep. Lowenthal Submission

                            LOWER SLATE LAKE PHOTOS
    Before

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        Dr. Gosar. Just one real quick question or comment.
        The multiple-use public doctrine for public lands was a
    contract with the Federal Government to states for the maximum
    revenues in lieu of states not reclaiming their lands. That is
    what precludes all aspects, just as an FYI for the last
    comment.
        I thank the witnesses for their valuable testimony and the
    Members for their questions. The members of the Subcommittee
    may have some additional questions--I am sure they will, and I
    know they do. We will ask you to respond to those in writing.
    Under Committee Rule 3(o), members of the Subcommittee must
    submit those questions within 3 business days following the
    hearing, and the hearing record will be held open for 10
    business days for those responses.
        If there is no further business, without objection, the
    Subcommittee stands adjourned.

        [Whereupon, at 10:51 a.m., the Subcommittee was adjourned.]

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