[Federal Register Volume 65, Number 130 (Thursday, July 6, 2000)]
[Notices]
[Pages 41724-41726]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-17016]



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DEPARTMENT OF THE INTERIOR

Bureau of Land Management

[WO-620-1430-00-24 1A]


Notice of Policy on Mineral Commodity Pricing and Opportunity for 
Comment

AGENCY: Bureau of Land Management, Interior.

ACTION: Notice of policy and opportunity for comment.

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SUMMARY: The Bureau of Land Management (BLM) is instituting a policy 
for calculating the mineral commodity price to use when determining 
whether a mining claim contains a ``discovery'' of a valuable mineral 
deposit. The policy is necessary to establish a consistent approach in 
determining claim validity.

DATES: The policy statement is effective July 6, 2000, but BLM will 
accept public comments for 60 days. BLM will consider the comments and 
decide whether or not to amend this policy statement. If you wish to 
comment on the policy, you should submit your comments by September 5, 
2000.

ADDRESSES: Mail: Director (630), Bureau of Land Management, 
Administrative Record, Room 401 LS, 1849 C Street, NW, Washington, D.C. 
20240.
    Personal or messenger delivery: Room 501, 1620 L Street, NW, 
Washington, DC 20036.
    Internet e-mail: [email protected]. (Include ``Attn: MINERAL 
PRICING'')

FOR FURTHER INFORMATION CONTACT: Roger Haskins in the Solid Minerals 
Group at (202) 452-0355. For assistance in reaching Mr. Haskins, 
individuals who use a telecommunications device for the deaf (TDD) may 
call the Federal Information Relay Service at 1-(800) 877-8339, 24 
hours a day, 7 days a week.

SUPPLEMENTARY INFORMATION:

I. Public Comment Procedures
II. Background
III. Statement of Policy

I. Public Comment Procedures

How Do I Comment on the Proposed Policy Statement?

    Please submit your comments on issues related to the proposed 
policy statement, in writing, according to the ADDRESSES section above. 
Your comments should explain the need for any changes you recommend 
and, where possible, refer to specific paragraphs in the statement.

Will My Comments Be Available to Others?

    BLM will make your comments, including your name and address, 
available for public review at the ``L Street'' address listed in 
ADDRESSES above during regular business hours (7:45 a.m. to 4:15 p.m., 
Monday through Friday, except Federal holidays).

Can BLM Keep My Identity Confidential?

    Under certain conditions, BLM can keep your personal information 
confidential. You must prominently state your request for 
confidentiality at the beginning of your comment. BLM will consider 
withholding your name, street address, and other identifying 
information on a case-by-case basis to the extent allowed by law. BLM 
will make available to the public all submissions from organizations 
and businesses and from individuals identifying themselves as 
representatives or officials of organizations or businesses.

II. Background

    The General Mining Law of 1872 establishes the terms by which you 
may locate and patent mining claims--transfer them to private 
ownership--on public lands. In order to be valid, your mining claim 
must contain a ``discovery'' of a valuable mineral deposit. This means 
you must have found a mineral deposit and you must have enough evidence 
to show that the mineral deposit is of such a character that a person 
of ordinary prudence would be justified in expending additional labor 
and means, with a reasonable prospect of success, in developing a 
valuable mine. Castle v. Womble, 19 Pub. Lands Dec. 455, 457 (1894). 
You must show that the mineral can be extracted, removed and marketed 
at a profit. United States v. Coleman, 390 U.S. 599, 602-603 (1968). 
When determining the validity of mining claims, Federal land management 
agencies conduct examinations of your asserted discovery to evaluate 
whether the mineral deposit can be removed and marketed at a profit 
given the production costs and the prevailing market on a given date. 
The Bureau of Land Management, the National Park Service, and the U.S. 
Forest Service each employ certified mineral examiners who conduct 
these examinations on behalf of the Secretary of the Interior. Their 
conclusions may later be reviewed by administrative law judges (ALJ) in 
the Department of the Interior's Office of Hearings and Appeals, by the 
Interior Board of Land Appeals (IBLA), and ultimately by the federal 
courts.
    The Secretary must determine the validity of a mining claim when 
you as the claimant seek to patent the claim, and may also determine 
the validity of the claim at any other time for any other reason. In 
any case, you must be able to show that you have discovered a valuable 
mineral deposit on a particular significant date. We refer to this date 
as the marketability date. ``Marketability date'' means the date on 
which we determine if the mineral deposit you discovered can be removed 
and marketed at a profit given the production costs and the prevailing 
market conditions on that date. When we determine the validity of your 
mining claim, we may determine whether you have discovered a valuable 
mineral deposit on one or more marketability dates depending, for 
example, on whether you have filed a patent application or your mining 
claim is in an area subsequently withdrawn from mining claim location.
    An essential element in determining whether a mineral deposit is 
marketable is the market value of the mineral commodity. For the most 
part, the commodities subject to the Mining Law--gold, silver, copper, 
lead, zinc, etc.--have widely reported spot market prices and are 
traded on public exchanges. Many of these minerals, especially those 
with volatile prices, are also the subject of ``futures'' trading based 
on the projected future market price for the mineral. The major 
exchanges for mineral commodities are the London Metals Exchange, the 
New York Commodities Exchange (COMEX) and the Chicago Board of Trade. 
On these exchanges, the historical spot prices are charted on a monthly 
basis. Futures prices are often set on a quarterly basis, but monthly 
futures prices are posted some of the time.
    With these published market prices, determining a market value for 
the mineral to be mined might seem straightforward, but it has not 
proved a simple matter. While the value must be tied to an appropriate 
time period, this does not necessarily mean that the market price of 
the mineral on a specific date must be used to set the mineral's value. 
The market price on one date may be anomalous, or may represent a 
rising or falling market that should be taken into account in 
determining whether a prudent miner may reasonably expect to develop a 
profitable mine. This problem is obviously more severe in the case of 
minerals such as gold or molybdenum that historically have markets that 
may fluctuate substantially, even over a short

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period of time. The IBLA summarized these issues in holding that ``a 
mining claimant must show that, as a present fact, considering historic 
price and cost factors and assuming that they will continue, there is a 
reasonable likelihood of success that a paying mine can be developed.'' 
In re Pacific Coast Molybdenum Co., 90 I.D. 352, 360, 75 IBLA 16 
(1983).
    Neither BLM nor the Department has ever addressed the mineral 
pricing issue in published regulations or established a formal policy 
in handbooks or manuals. Instead, over the years, mineral examiners, 
ALJs and the IBLA have followed an ad hoc approach. The IBLA case law 
has not established a firm pricing rule. Rather, the IBLA has reviewed 
the valuation method used by the mineral examiner or the ALJ to 
determine whether it is reasonably based on the facts of the case 
before it. The methods for establishing a market price that emerge from 
the Department's practice have ranged widely, but fall into two basic 
categories: using the market price on a given date, or averaging the 
market price over several years.
    In several cases, the IBLA has approved using market prices on 
definite dates to set the value of the minerals. For example, in U.S. 
v. Shining Rock Mining Corp., 112 IBLA 326 (1990), the IBLA affirmed a 
mineral examiner's decision to set the price of the mineral as the 
market price on the date of the hearing before the ALJ. In another 
case, U.S. v. Garner, 30 IBLA 42 (1977), the IBLA affirmed the ALJ's 
assessment of marketability based on the market price at the date of 
the hearing and the market price on the date of the withdrawal of the 
lands. In Pacific Coast, the IBLA concluded that the market price on 
the date of withdrawal could also be used to determine the 
profitability of the claim on the date the IBLA decided the appeal, 
despite a wide swing in molybdenum prices over the intervening four 
years. 90 I.D. at 360-361.
    IBLA has also adopted or affirmed marketability determinations 
based on average price calculations. In U.S. v. Crowley, 124 IBLA 374 
(1992), the IBLA used the average price for the five years preceding 
the pertinent date of withdrawal. A longer average period was selected 
in U.S. v. Laczkowski, 111 IBLA 165 (1989), where the IBLA adopted a 
seven-year average price, from the date that the Government first 
sampled the claim to the date of the hearing before the ALJ. Mineral 
examiners report using other averaging methods as well--up to ten-year 
historical averages, or weighted averages that give more weight to more 
recent prices.
    In at least one case, the IBLA ignored both the exact date and the 
average price methods. In U.S. v. Waters, 146 IBLA 172 (1998), the IBLA 
rejected an ALJ's selection of a six-year average price. Instead, the 
IBLA adopted the mineral examiner's slightly higher price as a 
``reasonably projected price,'' noting that the mining claimant had 
used that price as well. Raising even more questions, the IBLA never 
actually stated what price would be used in U.S. v. Gold Placers, Inc., 
25 IBLA 368 (1976). After rejecting the ALJ's decision to use the price 
of gold on a date after the hearing (the ALJ was attempting to reflect 
a surge in the market price following the hearing), the IBLA concluded 
that rising costs for mining had outpaced the increase in the value of 
gold, so the mine would be uneconomic.
    This diversity of approaches to mineral pricing is not good policy. 
It creates uncertainty in the process--for mineral examiners, for 
claimants, and for others. It can give rise to distortions and 
accusations of bias, as a sympathetic or unsympathetic mineral examiner 
may select the method that yields the highest or lowest value for the 
mineral. The range of pricing approaches used also encourages 
speculation before the Office of Hearings and Appeals regarding future 
market prices; the reported cases commonly describe speculative and 
contradictory evidence on the future of minerals markets.
    In order to reduce uncertainty and establish a consistent and 
reasonable basis for analyzing the economic marketability of a mineral 
deposit during a mining claim validity determination, the BLM is 
adopting the following Statement of Policy on the proper method to 
determine the market price of the mineral at issue. This policy relies 
on the prices for minerals set in the free market and avoids the 
speculative approaches that have reduced the reliability and authority 
of claim validity determinations in the past.

III. Statement of Policy

    The BLM will use the following steps to determine the price of 
mineral commodities when analyzing the economic marketability of a 
mineral deposit in determining the validity of a mining claim. This 
policy will apply to validity determinations for all unpatented mining 
claims, including those located on lands administered by the BLM, the 
National Park Service and the U.S. Forest Service. We will use this 
methodology only for minerals that have a commodity market price 
established through trading on a public exchange.
    1. Marketability Dates. The dates described below are the 
significant dates on which we will determine if the mineral deposit the 
claimant discovered can be removed and marketed at a profit given the 
production costs and the prevailing market conditions on that date.
    A. Mining claims on withdrawn lands. For any claim located before 
the withdrawal of the affected lands from mineral entry, BLM will 
determine if it is valid both as of the date of the withdrawal and the 
date of the mineral examination.
    B. Mining claims in patent applications. For any claim included in 
a patent application, BLM will determine the validity of the claim as 
of the date it determines the claimant met all the requirements for 
patenting.
    C. All others. For any mining claim validity determination where 
there is no patent application and no withdrawal, BLM will determine 
the validity of the claim as of the date of the mineral examination.
Except for claims subject to paragraph B above, if a mineral examiner 
concludes that the claim is invalid as of the date of the mineral 
examination, the examiner must be prepared to address any evidence the 
claimant might present at the contest hearing regarding validity of the 
claim on the date of the hearing.
    2. General Policy. BLM will use a six-year average pricing method. 
To determine the mineral commodity price to use on any specific 
marketability date, the mineral examiner will begin with an average of 
the commodity price of the mineral for the month in which the 
marketability date occurred. The examiner will then average that price 
together with: (a) the monthly average commodity prices for each of the 
36 months before the marketability date; and (b) the monthly average 
commodity futures prices for each of the 36 months after the 
marketability date. To obtain monthly figures for futures prices, the 
mineral examiner will use the highest volume quarterly futures prices 
for each of the three months covered by that quarter. For example, if a 
quarterly price is posted as a first-quarter futures price, that price 
would establish monthly prices for January, February, and March. The 
examiner will average a total of 73 monthly averages to arrive at the 
6-year average commodity price to use for the marketability date. See 
paragraphs 3 and 4 for exceptions to the general policy.
    The examiner should never use actual commodity prices when 
determining

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the futures prices for each of the 36 months after the marketability 
date. For example, if the marketability date is February 2, 1996 , the 
mineral examiner will not use prices at which the mineral commodity 
actually sold on the market for the 36 months after the marketability 
date. Instead, the examiner will use the futures data that were 
reported on February 2, 1996 . This policy is designed to reflect the 
futures market that the claimant faced on the marketability date. We 
are using 36 months, or three years, of futures price data because that 
is all that is usually available.
    The monthly average commodity prices can be obtained from the 
London Metals Exchange (LME) at www.lme.co.uk>, the New York 
Commodities Exchange (COMEX) at www.nymex.com> or the Chicago Board of 
Trade at www.cbot.com>. Quarterly futures prices can be obtained at 
goldsheet.simplenet.com>, www.futuresweb.com>, and 
www.futuresguide.com>. Other sources of archival data are the LME and 
www.kitco.com>. The Uniform Resource Locators for these sites may 
change frequently. There are many other sites available which post 
commodity pricing data.
    3. Limited Futures Markets. In instances where a publicly-traded 
mineral has no futures prices available on the market, the mineral 
examiner will average the monthly average commodity price for the month 
in which the significant marketability date occurred with the monthly 
average commodity prices for each of the 36 months before the 
marketability date. The mineral examiner will average a total of 37 
numbers in this instance. If quarterly futures prices are available for 
any of the 36 months following the marketability date, the mineral 
examiner will average the available futures prices on a monthly basis 
with the monthly average commodity price for the month in which the 
significant marketability date occurred and the monthly commodity 
prices for each of the 36 months before the marketability date.
    4. Operating Mines. When determining the validity of mining claims 
that are being developed by an operating mine, the mineral examiner 
will substitute the prices at which the claimant actually sold the 
commodity during any of the 36 months preceding the marketability date, 
and during the month in which the marketability date occurs, for the 
monthly average commodity price that otherwise would be used under 
paragraph 2. Also, the mineral examiner will substitute any of the 
claimant's actual futures sales contract prices for production from the 
mine for any of the 36 months following the marketability date.

Sylvia V. Baca,
Assistant Secretary of the Interior.
[FR Doc. 00-17016 Filed 7-5-00; 8:45 am]
BILLING CODE 4310-84-P