[Audit Report on Issuance of Mineral Patents, Bureau of Land Management and Office of the Solicitor]
[From the U.S. Government Printing Office, www.gpo.gov]
Report No. 97-I-1300
Title: Audit Report on Issuance of Mineral Patents, Bureau of Land
Management and Office of the Solicitor
Date: September 30, 1997
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A printed copy of this report may be obtained by referring to the PDF file or by calling the Office
of Inspector General, Division of Acquisition and Management Operations at (202) 208-4599.
******************************
OFFICE OF INSPECTOR GENERAL
Washington, D.C. 20240
MEMORANDUM
SUBJECT SUMMARY: Final dud&Report for Your Information - "Issuance of Mineral
Patents, Bureau of Land Management and Office of the
Solicitor" (No. 97-I-1300)
Attached for your information is a copy of the subject final audit report. The objective of our
audit was to determine whether the Department of the Interior was processing mineral patent
applications in accordance with applicable laws and regulations.
We concluded that the Department complied with the requirements of the Mining Law of
1872 and with restrictions on issuing mineral patents contained in the Interior and Related
Agencies Appropriation Act of 1995. During our audit, however, we noted that recent
reviews conducted by the Solicitor's Office and the Bureau of Land Management had
identified deficiencies in the mineral validity examination process which we believe need to
be corrected to ensure that mineral patents are not granted improperly. We also noted that
the Bureau was not recovering the costs of conducting mineral validity examinations, which
the Bureau estimated to average about $80,000 per application. In a related matter, we
found that the Bureau had not completed its initial reviews of patent applications within the
lo-month time frame established in the Bureau Manual.
We made seven recommendations to the Bureau. In its response to the draft report, the
Office of the Solicitor did not directly address the recommendations but made suggested
changes, which we incorporated into the report as appropriate. However, based on the
Bureau's response, we considered three recommendations resolved but not implemented;
requested additional information for one recommendation; and requested the Bureau to
reconsider the remaining three recommendations, which are unresolved.
If you have questions concerning this matter, please contact me at (202) 2085745 or
Mr. Robert J. Williams, Assistant Inspector General for Audits, at (202) 208-4252.
Attachment
C-IN-BLM-001-96
United States Department of the Interior
OFFICE OF INSPECTOR GENERAL
Washington, D.C. 20240
Memorandum
Subject: Audit Report on Issuance of Mineral Patents, Bureau of Land Management
and Office of the Solicitor (No. 97-I-1300)
This report presents the results of our review of the mineral patent issuance processes used
by the Bureau of Land Management and the Office of the Solicitor. The objective of the
audit was to determine whether the Department of the Interior was processing patent
applications in accordance with applicable laws and regulations.
We conc.luded that the Department complied with the requirements of the Mining Law of
1872 and with restrictions on issuing mineral patents contained in the Interior and Related
Agencies Appropriation Act of 1995. During our audit, however, we noted that recent
reviews conducted by the Solicitor's Office and Bureau Headquarters had identified
defic,iencies in the mineral validity examination process which we believe need to be
corrected to ensure that mineral patents are not granted improperly. We also noted that
the Bureau was not recovering the costs of conducting mineral validity examinations,
which the Bureau estimated to average about $SO,O per application. In a related
matter, we found that the Bureau had not completed its initial reviews of patent
applications within the lo-month time frame established in the Bureau Manual.
In its March 10, 1997, response (Appendix 2), the Office of the Solicitor did not directly
address the recommendations in the audit report but made suggested changes, which we
have incorporated into the report as appropriate. In the April 1, 1997, response
(Appendix 3) from the Director, Bureau of Land Management, the Bureau disagreed that
there were quality control weaknesses in its mineral report review process, stating that
since the Secretary of the Interior had instituted a more stringent mineral report review
process which included a review by the Bureau's Headquarters and the Solicitor's Office,
no mineral patents had been granted improperly. In its response, the Bureau disagreed
with Recommendations A.1 and A.2; concurred completely or partially with
Recommendations A.3, A.4, A.5, and A.6; and indicated concurrence with
Recommendation B.1. Based on the response, we consider Recommendations A.3, A.4,
and A.5 resolved but not implemented. Accordingly, the unimplemented
recommendations will be referred to the Assistant Secretary for Policy, Management and
Budget for tracking of implementation Also based on the response, we request that the
Bureau reconsider its responses to Recommendations A.1, _ A.2, and A.6 and provide
additional information for Recommendation B.1 (see Appendix 4).
The legislation, as amended, creating the Office of Inspector General requires semiannual
reporting to the Congress on all audit reports issued, actions taken to implement audit
recommendations, and identification of each significant recommendation on which
corrective action has not been taken.
In accordance with the Departmental Manual (360 DM 5.3), we are requesting a written
response to this report by October 31, 1997. The response should provide the information
requested in Appendix 4.
We appreciate the assistance of the Bureau of Land Management and Office of the
Solicitor personnel in the conduct of our audit.
CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
BACKGROUND ..................................... 1
OBJECTIVE AND SCOPE .............................. 4
PRIOR REVIEWS .................................... 4
FINDINGS AND RECOMMENDATIONS o . . . . . . . . . . . . . . . . . . . . . . . . 6
A. MINERAL VALIDITY EXAMINATIONS ................. 6
B. COST RECOVERY ................................ 20
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
APPENDICES
1. OFFICES AND SITES VISITED OR CONTACTED .......... 24
2. OFFICE OF THE SOLICITOR RESPONSE ................ 25
3. BUREAU OF LAND MANAGEMENT RESPONSE .......... 34
4. STATUS OF AUDIT REPORT RECOMMENDATIONS ........ 44
INTRODUCTION
BACKGROUND
The Bureau of Land Management is responsible for administering the General Mining Law
of 1872, as amended, which opened public lands to the exploration and extraction of
valuable minerals, such as gold, silver, and copper. Approximately 400 million acres of
public land are available for mining, including Bureau of Land Management, Forest
The Bureau administers the mineral rights
under the General Mining Law on all of these lands.
The General Mining Law allows miners to prospect for minerals and file mining claims
for the right to use public land for mineral development and extraction. The Mining Law
limits claims to certain acreage depending on the type of claim involved.2 However,
mineral deposits often exceed these acreage limitations. Therefore, miners file multiple
claims to ensure that they can mine an entire mineralized area. Furthermore, a mining
claimant may apply for a mineral patent, which conveys a fee simple title to the claim
when a valuable mineral deposit exists. A mineral patent application can cover from a
single claim to more than 100 claims. At the time a patent application is filed, the
applicant has to pay a $250 service charge, which covers an application with one claim.
The charge is increased by $50 for each additional claim included in the application. In
addition, the Government charges a statutory purchase price for patented land of $2.50 or
$5 per acre depending on the type of claim.
The Secretary of the Interior makes the final determination as to whether a valuable
mineral deposit exists. If the Secretary determines that the miner can economically extract
a mineral deposit and that a mining operation can be potentially profitable, the claimant
has a "discovery," which is a critical element for obtaining a patent. Processing a patent
application involves two significant procedures: (1) reviewing the patent application to
ensure that it is complete and is in compliance with administrative requirements of the
Mining Law and (2) performing a mineral validity examination to ensure that the geologic
The Bureau keeps records of preexisting
mining claims but does not administer operations on those claims.
3ll.r ee types of claims can be patented. A lode claim is established for minerals in a generally
well-defined zone
of mineral-bearing rock confined between nonmineralized rock and can be patented for $5.00 an
acre. A lode
claim is limited to 1,500 linear feet by 600 feet along the course of the mineral vein. A placer claim
is
established for minerals that are sedimentary in nature and can be patented for $2.50 an acre. Placer
claims are
limited to 20 acres unless an associated placer claim is filed, in which case eight parties can file a
claim for 160
acres. A mill site claim can be established to process minerals. Independent mill sites and mill sites
associated
with lode claims may be patented for $5 .OO per acre. Mill sites associated with placer claims may
be patented
for $2.50 per acre. Mill site claims are limited to 5 acres.
1
and economic evidence supports the discovery. The Bureau is responsible for conducting
an initial review to determine the completeness of the patent application and for conducting
a mineral validity examination. The Park Service and the Forest Service also have the
capability to perform mineral validity examinations; however, the Bureau is ultimately
responsible for the adequacy of the required mineral reports. Bureau Certified Review
Mineral Examiners review the work of Bureau, Park Service, and Forest Service Certified
Mineral Examiners.
The initial review of mineral patent applications is accomplished at the state office level
by land law examiners, with assistance from the Regional Solicitor's Office. The Regional
Solicitor ensures that the title is in good order, adverse claims have been addressed, and
the application is complete. If the application contains the required documents under the
General Mining Law and is sufficient to begin a mineral validity examination, a First Half
Final Certificate is signed by the Secretary. After receiving the First Half Final
Certificate, the Bureau schedules the patent application for a mineral validity examination
to be performed by a Certified Mineral Examiner.3 Responsibility for performing the
mineral validity examination is assigned to the Bureau field office that has jurisdiction over
the area where the claim is located, regardless of whether the office has a Certified
Mineral Examiner. However, when a Certified Mineral Examiner is not available at the
local office, the local office coordinates with the state office to obtain a Certified Mineral
Examiner.
A mineral validity examination is a complex procedure that involves an extensive technical
review and evaluation of the geology, mineralization, mining history (including related
case law), and economics of the mineral commodities being examined. At the completion
of a validity examination, the Certified Mineral Examiner prepares a mineral report using
information obtained from the mineral validity examination. The mineral report
recommends either patent approval or initiation of contest proceedings.4 The mineral
31n fiscal year 1991, the Bureau instituted a Mineral Examiner certification process. Certification
as a Certified
Mineral Examiner requires a minimum level of experience in performing mineral validity
examinations and
completion of 11 weeks of required training. The certification is in addition to the Office of
Personnel
Management's requirements for qualification as a geologist or a mining engineer.
4A contest is a hearing before an Administrative Law Judge to decide the validity of a mining claim.
If the
Administrative Law Judge upholds the Bureau's decision to contest the mining claim, the claimant
can then
appeal to the Department of the Interior Board of Land Appeals, the U.S. District Court, the U.S.
Court of
Appeals, and the U.S. Supreme Court. If the Administrative Law Judge holds in the claimant's favor,
the
Bureau may appeal the decision only to the Interior Board of Land Appeals.
plus additional experience in performing mineral validity examinations.
2
office, who either returns the report to the local office for additional work or clears the
report for further processing.
Prior to March 1993, Bureau State Directors were authorized to approve issuance of First
Half Final Certificates and mineral patents. However, this authority was revoked by
Secretarial Order 3 163, dated March 2, 1993. The revocation enabled the Secretary to
retain all authority for signing First Half Final Certificates and the subsequent review and
approval of mineral reports and patent applications. To implement the order, the
Department established procedures that included an additional review by a Bureau
Headquarters Certified Review Mineral Examiner of the mineral reports that recommend
that a patent be issued. If the Headquarters Certified Review Mineral Examiner clears a
mineral report, it is then transmitted through the Bureau Director to the Solicitor's Office
for a legal review before it is transmitted through the Assistant Secretary for Land and
Minerals Management to the Secretary for signing the second half of the final certificate
and for issuing a patent. Nevertheless, responsibility for reviewing patent applications and
conducting and reviewing mineral validity examinations was retained by the Bureau's state
office where the applications were filed.
The Interior and Related Agencies Appropriations Act of 1995 imposed a moratorium on
processing and issuing mineral patents. Section 113 of the Act limited the issuance of
mineral patents to only: (1) those patent applications for which a First Half Final
Certificate was granted before October 1, 1994, or (2) those patent applications for which
a First Half Final Certificate was pending in Washington, DC. ) as of September 30,
1994. When the moratorium took effect, 626 patent applications had been filed with the
Secretary. These applications consisted of 386 patent applications that were not impacted
by the moratorium and 240 applications that did not meet the criteria for continued
processing. As of July 1, 1996, the Bureau reported that, of the 386 patent applications
that were grandfathered, it had 362 applications remaining to be processed.
Of the original 386 grandfathered patent applications, 27 were being reviewed by the
Solicitor's Office, 9 were being reviewed by Bureau Headquarters, 20 resulted in issued
patents (one, in part only, with the remaining part under contest--this application counted
as both an issued patent and as a contest action), 15 were under contest action (including
the application that was also counted as an issued patent), 5 had been withdrawn by the
applicants, 35 were in state offices for review and/or revision before submission for
Secretarial review, and 276 were in the Bureau's field offices pending completion of the
mineral validity examination. The Interior and Related Agencies Appropriation Act of
1996, dated April 26, 1996, requires the Department to make a determination on patent
entitlement on at least 90 percent of the grandfathered applications within 5 years of the
Act. This requirement was continued in the Interior and Related Appropriations Act for
1997, dated September 30, 1996.
OBJECTIVE AND SCOPE
The audit objective was to determine whether the Department of the Interior was
processing mineral patent applications in accordance with applicable laws and regulations.
The scope of the review included all mineral patent applications in process or patents
issued between January 1, 1993, and June 3, 1996. Our audit was conducted at the
locations identified in Appendix 1 to this report.
We made this review in accordance with the "Government Auditing Standards," issued by
the Comptroller General of the United States. Accordingly, we included such tests of
records and other auditing procedures that were considered necessary under the
circumstances. As part of this audit, we evaluated the Bureau's system of internal controls
related to the mineral patent process to the extent we considered necessary to accomplish
the audit objective. We also reviewed the Secretary of the Interior's Annual Statements
and Reports for fiscal years 1994 and 1995, which is required by the Federal Managers'
Financial Integrity Act, regarding Mining Law administration and mineral patent
processing. The Secretary did not report any material weaknesses related to our audit
objective. However, because compliance with laws and regulations was significant to our
audit objective, we assessed the risk that fraud or illegal acts could occur. Based on the
risk assessment, we concluded that weaknesses existed in the Bureau's processes for
ensuring that mineral patents were issued only to those
the law to receive them. Our recommendations, if
weaknesses.
applicants who were entitled under
implemented, should correct these
PRIOR REVIEWS
Neither the General Accounting Office nor the Office of Inspector General has issued any
audit reports in the past 5 years that addressed the issuance of mineral patents. However,
at the Bureau's request, a team of geologists, mining engineers, university educators, field
managers, and Headquarters mineral policy personnel conducted a review of mineral
reports and issued a draft of the report entitled "Final Report on Special Evaluation of
Mineral Reports for Validity Determinations" in 1991 o The scope of the review included
mineral reports that were prepared before the Mineral Examiner certification program was
implemented and that recommended and resulted in the issuance of mineral patents. The
report stated, "The overall quality of most reports reviewed was poor, and presentation of
the data in the mineral reports did not satisfactorily support the conclusions and
recommendations. " Specifically, the report stated that 27 (79 percent) of the 34 mineral
reports reviewed "had significant enough flaws" that they should have been rejected during
the technical review and that the recommendation to issue patents "was not supported by
the data presented" in 4 (11 percent) of the reports reviewed. The report stated that quality
control during the review process and detailed guidance on conducting validity
examinations and preparing mineral reports were inadequate. The report recommended
that a new handbook be issued to correct these deficiencies and that the mineral validity
examination process be subjected to a management control review. Bureau officials said
that the draft report was not issued in final form because of the "sensitive nature" of the
report but that the Bureau did intend to act on the report's recommendations. However,
as of April 1996, the Bureau had not issued the recommended handbook or performed the
management control review o ?
5
bY . . . [the claimant]" and the Mineral Examiner's failure to "independently verify, by
appropriate Bureau procedures, the operating and cost data supplied by . . . [the
claimant]. "
We believe that the number of reports rejected and the nature of the deficiencies identified
by the Bureau Headquarters Certified Review Mineral Examiner indicate that
improvements are needed in the conduct of mineral validity examinations and mineral
report reviews. However, the additional review performed by the Headquarters Certified
Review Mineral Examiner had not identified all deficient mineral validity examinations
and reports or other issues affecting qualifications for a patent. Specifically, the Solicitor's
Office returned six reports reviewed by Bureau Headquarters and approved for patent. For
example:
- The Solicitor's Office returned a mineral report because documentation in the
mineral report did not adequately show that the applicant was seeking the patent in good
faith. The Solicitor's Office concluded, "The existing information in the mineral report
for this application suggests that the application was not filed in good faith for mining
purposes but was filed to attempt to procure public land for a residence. " At our request,
the Chairperson of the Bureau's Mineral Examiner Certification Panel reviewed the
mineral report, concluding that the report's recommendation to issue a patent was "not
supported by the data presented in the report." In addition, the Panel Chairperson
concluded that the samples taken during the mineral examination may be "suspect" because
the report did not describe the sample methodology in such a way to ensure that salting
(secretly placing minerals to artificially enrich the site) had not occurred. The Solicitor's
Office sought and obtained additional information that was adequate evidence of good
faith. A patent was ultimately issued, but not until after the Solicitor's Office obtained
information that should have been included in the original mineral report.
- The Solicitor's Off& returned a mineral report because the applicant may have
improperly located mining claims in an effort to circumvent the requirements of the
Mining Law. A Forest Service Certified Mineral Examiner first assigned to perform the
validity examination appropriately identified the apparent misrepresentation by the
applicant during the validity examination and recommended that the Government contest
the patent. According to records of the Solicitor's Office review, the Forest Service
subsequently assigned a second Certified Mineral Examiner to prepare the mineral report,
and the patent was recommended for approval. The records maintained by the Solicitor's
Office did not indicate why a second Mineral Examiner was assigned to this examination.
The Bureau's state office and Headquarters Certified Review Mineral Examiners reviewed
the report and recommended that the patent be issued. However, the Solicitor's Office
returned the mineral report based on the improper location issue, and the application was
being contested at the time of our review.
oMineral Report Reviews. Certified Review Mineral Examiners did not
sufficiently document work performed or the results of their reviews in mineral reports.
The Bureau Manual, Section 3060, provides that mineral reports should be reviewed by
a Certified Review Mineral Examiner and that the results of the reviews should be
documented. However, in two of the three state offices we reviewed, the Certified Review
Mineral Examiners did not document mineral report reviews. In the remaining state
office, the Review Mineral Examiner documented four reviews on the required Bureau
Form 3060-2, "Mineral Report Evaluation. " None of the four completed review sheets
indicated that the Review Examiner had found any deficiencies in the reports. However,
we noted that the four reviews were sent back to the Mineral Examiner for additional
work. Accordingly, in our opinion, the form is essentially a checklist and is not designed
to solicit substantive comments related to mineral report deficiencies. Consequently, we
concluded that completed Forms 3060-2 were not useful for analyzing the results of
reviews and identifying necessary corrective actions. This lack of documentation hindered
our review of the mineral report review process and our assessment of the overall quality
of mineral reports in that we had to rely on the smtements provided by the Mineral
Examiners in state offices and at the Headquarters and on the limited number of
Headquarters, Solicitor's Office, and a Panel member's reviews in identifying the specific
weaknesses in the mineral report review process.
We believe that the complex nature and diversity of patent applications, coupled with the
work load imbalance between the number of examinations and the number of Review
Mineral Examiners among the state offices, have limited the effectiveness of the mineral
report reviews. Specifically, patents can be issued for three significantly different and
complex claim types (lode, placer, and mill site) and for more than 25 different mineral
commodities, each with different mining and processing technology requirements, legal
precedents, and economics. However, according to senior Bureau Mineral Examiners,
Certified Mineral Examiners may have the expertise to conduct examinations only on
specific types of claims or mineral deposits, and Certified Review Mineral Examiners may
not have sufficient experience in all the various types of mineral deposits. Bureau officials
said that the many complex examinations would require close supervision or a team
approach to ensure that sufficient expertise is available and to reduce the time to complete
the examinations. According to Bureau officials, the current estimate to complete a
mineral examination is from 1 to 5 years.
Efficient processing of mineral reports is further hindered because the mineral validity
examination work load is disproportionate to the number of Certified Review Mineral
Examiners available to perform the reviews in any one state. For example, the number of
pending mineral examinations and the number of available Certified Review Mineral
Examiners by state in 1995 were as follows:
APPENDIX 3
Page 8 of10
opinion states that mineral patent applications are subject to full cost recovery procedures under
the authority of the Federal Land Policy and Management Act of 1976, QS mer&d. Proposed
rules have been drafted for cost recovery of various mineral related documents and actions, which
include mineral patent applications. The Assistant Secretary for Land and Minerals Management
has not yet set a target date for publication of the proposed cost recovery rules.
Conciusions
In summary, the BLM disagrees with the finding that its mineral reports still suffer from serious
deficiencies.
As stated on pages 2 and 3 above, a mineral patent application and mineral report pass through
many hands and are reviewed and scrutinized both within the BLM and at the Departmental
level. The BLM has made many improvements in the process since 1986 to ensure that patent
applications are ethically, professionally, and independently reviewed. In addition, most
examiners subscribe to or are members of professional organizations and/or State registration or
licensing bodies which prescribe strict standards of professional ethics and the avoidance of
potential conflicts of interest. Violation of these professional ethics removes any possibility of
post-Government employment.
The OIG audit record shows that the current checks and balances of the new procedures under
Secretarial Order 3 163 (now 209 DM 7.2, issued 12/16/96) successfully monitor the patenting
process. Instead of deftig a flawed process, the auditors' own data on patent rejections
demonstrate just the opposite--that the independent review of pateat documents by the several
parties under the Secretarial review process safeguards the process from any potential abuse due
to a perceived lack of mineral examiner training, unprofessional conduct, or differences in legal
interpretations of the mining law.
Thank you for the opportunity to review and comment on the draft report. If you have any
questions about our response, piease contact Roger Ha-skins, Senior Specialist, Mining Law
Adjudication, at (202) 452-0355 or Gwen Midgette, BLM Audit Liasion Officer, at (202)
452-7739.
Attachments
~:~OTE: ATTACl5.24ENTS 7 ANil 3 NOT INCLUDED BY OFFICE OF INSPECT03 GENEUL.]
L
APPENDIX 3
Page 9 of 10
Attachment 1
Background
Page 1 1st line: change athe Mining Law of 1872," to "the Gerreml Mining Law of 1872, as
amended,"
5th I& chaqe to read: `The Bureau administers the mineral rights under the Gmeml Mining
Law on all of these lands."
A&x tie above Sentence, add a new sentence to read: "Emh Federal agency tzdinKssers
expZo~4ztion and minir2g ucriviries on mining claims pursuanf to individual ugemy swfiie
management regulutims."
6th line (o@inai) change `The Mining Law dbw... " to `The General Mining Law allows..."
Page 2 ??? ?? ???*?? o . "purchase price for patented land of..." to read: "..purchase price .wr by
the Gemmzl Mining Law for the land applied for of. .."
2nd pamgrqll 5th line change . ..( 1) reviewing the patent application..." to "...( 1) 4Xfjudicatian of
the patent application..."
9th line change ".. Initial review..." TO "...ititid adjudication..."
12th l& change "...adequacy of the related mineral reports."' CO read "...adequ~~y of the ~eqtimd
mineral reports."
13th line change "... Forest Sew& Mineral hminers." to read "...Forest Service Cemied
Mineral Examjners."
3rd paragraph 1st line replace the word `c~eview" with the word "adjudicmion.qb
Page 3 2nd line change "=.. documents under the Mining Law..." to "... documents under the
General Mining law..."
Page 4 2nd paragraph lioe 12 change ?. responsibility for reviewi% patent applications..." to read
"...cesponsibility for inirial m!`!`~&ation of patent applications..."
Page 5 last line of page; add a new sen~nce to read "77z.i~ requirement wus continwd in rhe
In&ritw and Related Agencies Appropriation Act fol 1997 of Sepretier 30, 1996 (Section 3L74
of Public Lbw 104-208). "
10
42
APPENDIX 3
Page 10 of 10
Findings and RecOmmmendationr
Page 15 line 7 of the text, insert the word "Review" in fkont of the word "Mined."
Pay 17 2nd pwraph line 8, the proper statistic is 46 students over the last 11 years would
&we f&d the test, NOT 4-6 students would have fail& each courx!. ,
Other titters
page 24 Ihe 5 cbge "...initi~ review of..." to read "...initial adjudication of... `
11
43
APPENDIX 4
STATUS OF AUDIT REPORT RECOMMENDATIONS
Finding/Recommendation
Reference
Status Action Reauired
A.l, A.2, and A.6
Unresolved.
Reconsider each recommendation,
and provide action plans that include
target dates and titles of officials
responsible for implementation.
A.3, A.4, and A.5
Resolved; not
implemented.
No further response to the Office of
Inspector General is required. The
recommendations will be referred to
the Assistant Secretary for Policy,
Management and Budget for tracking
of implementation.
Bl
Management concurs; Provide target dates and titles of the
additional officials responsible for publishing
information needed. the regulations.
44
ILLEGAL OR WASTEFUL ACTIVITIES
SHOULD BE REPORTED TO
THE OFFICE OF INSPECTOR GENE- BYr
Sending written documents to: Calling:
Within the Continentai'United States
U.S. Department of the interior
Office of Inspector General
1849 C Street, N.W.
Mail Stop 5341
Washington, D.C. 20240
Our 24-hour
Telephone HOTLINE
l-800-424-5081 or
(202) 208-5300
TDD for hearing impaired
(202)208-2420 or
l-800-354-0996
Outside the Continental United States
Caribbean Redon
U.S. Department of the interior
Office of Inspector General
Eastern Division - Investigations
1550 Wilson Boulevard
Suite 410
Arlington, Virginia 22209
(703) 235-9221
North Pacific Retzion
U.S. Department of the interior
Office of Inspector General
North Pacific Region
238 Archbishop F.C. Flares Street
Suite 807, PDN Building
Agana, Guam 96910
(700)550-7428 or
COMM. 9-011-671-472-7279
Toll Free Numbers:
1-800-424-5081 b
w
TDD l-800-354-0996 5
w
FIS/Commerciai Numbers:
(202) 208-5300 E
TDD (202) 208-2420 L,
w
w
1849 C Street, N.W.
Mail stop 5341
W `ashing
ton, D.C. 20240 t --
State Examinations Certified Review Examiners
Alaska
20 3
Arizona 20 1
California
51 2
Colorado 6 2
Idaho 24 3
Montana 29 1
Nevada 76 2
Wyoming 34 2
Based on these statistics, we believe that, in order to improve the efficiency of the review
process while ensuring a quality review, the Bureau should centralize its mineral report
review process. More specifically, we believe that the mineral report review process
should be managed on a Bureauwide, and not a statewide, basis. In that regard, we
believe that the Bureau's Mineral Examiner Certification Panel, a group of senior-level
Certified Review Mineral Examiners responsible for recommending certification approval,
should be required to review all mineral reports or assign the reports for review by Review
Mineral Examiners who have the appropriate level of experience. This would provide
greater assurance that the necessary expertise was used in conducting the review, would
preclude the need for state office reviews, and could be used to supplant the Bureau
Headquarters review. The other benefits of centralizing the review process under the
Certification Panel include fostering consistent quality in mineral reports, providing a
central point of technical expertise for Mineral Examiners, and providing for a team
approach on technical reviews of complex mineral examinations.
Since the Panel is already an officially recognized entity within the Bureau, redelegation
of authority and responsibility would not require that a new functional office be
established. The Panel meets at least semiannually to review and make recommendations
on certification and to make recommendations regarding policies related to mineral
examinations and mineral reports to Bureau management. We believe that the additional
responsibility for technical reviews is within the purview of the Panel's current charter.
Procedures. The Bureau's procedures for conducting mineral examinations and
for preparing and reviewing mineral reports did not ensure that the mineral reports'
recommendations were adequately supported. Deficiencies related to conducting mineral
examinations and preparing and reviewing mineral reports were identified in the Bureau's
1991 internal draft report. For example, the report stated, "The overall quality of most
reports was poor and presentation of the data in the mineral reports did not satisfactorily
9
support the conclusions and recommendations. " Specifically, the report said that more
detailed guidance should be provided for less experienced Mineral Examiners and that
improvements should be made to the technical review process so that the quality of the
mineral reports would be improved. The draft report recommended that the Bureau
prepare a new handbook, which would update the existing handbook, to provide adequate
technical guidance for conducting mineral validity examinations and reviewing mineral
reports. Based on our review of the current handbook and the deficiencies identified in
mineral reports by the Bureau, a Certification Panel Member, and the Solicitor, we
concluded that additional guidance was needed, particularly with respect to sampling
techniques and mining reclamation costs. However, at the time of our review, the Bureau
had not issued the new handbook in draft. In our opinion, the Bureau should promptly
issue the draft handbook and solicit comments from individuals who have the expertise in
these areas.
Certification and Training. The Bureau's current procedures for certifying
Mineral Examiners and Review Mineral Examiners do not ensure that the individuals are
sufficiently qualified to conduct mineral validity examinations and prepare mineral reports.
The present certification process includes 11 weeks of training. However, the training
does not include a pass/fail requirement, in which the proficiency of the student would be
shown. The Bureau's Certification Panel identified this deficiency in 1991, when it
recommended that required certification classes be on a pass/fail system. At that time, the
Certification Panel estimated that four to six of the students who completed the course
between 1989 and 1991 would have failed such a test. However, the Bureau did not carry
out the Panel ' s recommendation. We believe that requiring the course to be on the
pass/fail system would improve the qualifications of the Mineral Examiners and therefore
provide more assurance that the mineral examinations are performed properly.
The Bureau requires that Certified Review Mineral Examiners complete, at least once
every 3 years, technical courses related to their line of work and participate in at least one
validity examination. However, the Bureau did not monitor the Certified Review Mineral
Examiners for compliance with the continuing education requirements and did not
establish continuing education requirements for Certified Mineral Examiners. According
to Bureau officials responsible for the mineral examination training program, these
elements are "crucial" for maintaining an adequately trained professional workforce.
However, the Bureau had not established a procedure or determined responsibility for
monitoring the continuing education requirements and had not identified continuing
education for Mineral Examiners as a need.
Conclusion
The deficiencies related to mineral report quality are long standing and were identified
previously in the Bureau's 1991 draft report. The report, however, was not issued in final
form. While we believe that improvements have been made, we found that the quality of
10
mineral reports continues to be deficient and that mineral patent applications continue to
be recommended for approval by the Bureau without sufficient support for the
recommendations.
We believe that the potential for fraud, abuse, or mismanagement in the mineral patent
process is significant because of the value of the lands and minerals involved. In some
instances, these values are measured in millions of dollars for surface land and billions of
dollars for subsurface minerals. The potential for fraud, abuse, or mismanagement exists
with respect to both the mineral patent applicants and the Government officials responsible
for processing mineral patent applications. The potential improprieties could include an
applicant's tampering with (salting) mineral claim samples to falsify discovery and
colluding with the Mineral Examiner to gain patent approval falsely. For example, the
Solicitor returned an application because of possible improprieties, and during our review,
we noted a separate instance in which a Certified Mineral Examiner was investigated by
Bureau law enforcement officers and was found to have improperly accepted a gratuity
from a mining company. Consequently, we believe that the mineral validity examination
and review processes should be recognized as a high risk component in the Departmental
Management Control Program in accordance with the guidance contained in Office of
Management and Budget Circular A-123.
Recommendations
We recommend that the Director, Bureau of Land Management:
1. Centralize the mineral report review process under the Bureau's Certification
Panel and require the Panel to review or cause to be reviewed all mineral reports. As part
of the centralization, elimination of the state office and/or Bureau Headquarters reviews
of the reports should be considered.
2. Identify the mineral patent process as a discrete process with a material risk
factor and subject it to the requirements of Circular A-123.
3. Issue the new Bureau handbook in draft for comment and identify and develop
improvements needed for final issuance of the handbook.
4 Develop standardized procedures for documenting reviews of mineral
examinations which allow for independent review and verification of the sufficiency of the
mineral validity examination and the mineral report.
5. Develop pass/fail testing procedures for Mineral Examiner training to provide
greater assurance that Mineral Examiners are sufficiently qualified to conduct mineral
validity examinations.
11
6. Develop continuing education requirements for Certified Mineral Examiners
and a compliance monitoring system for continuing education for both Certified Mineral
Examiners and Certified Review Mineral Examiners.
Office of the Solicitor Response and Office of Inspector General Reply
In the March 10, 1997, response (Appendix 2) to the draft report from the Assistant
Solicitor, Branch of Onshore Minerals, Office of the Solicitor, the Solicitor's Office stated
that it was "pleased" that we had concluded that the Bureau's Headquarters review and the
Solicitor's review had strengthened the mineral patent process. The Solicitor's Offke did
not directly address the recommendations in the audit report, but it suggested changes to
the report, which we have incorporated into the report as appropriate.
Bureau of Land Management Response and Office of Inspector
General Reply
In the April 1, 1997, response (Appendix 3) to the draft report from the Director, Bureau
of Land Management, the Bureau disagreed with Recommendations 1 and 2; concurred
with Recommendations 3,4, and 5; and concurred in part with Recommendation 6. Based
on the response, we consider Recommendations 3, 4, and 5 resolved but not implemented
and Recommendations 1, 2, and 6 unresolved (see Appendix 4).
Recommendation 1. Nonconcurrence stated.
Bureau of Land Management Response. The Bureau disagreed with the
recommendation, stating that: (1) we had not "demonstrated a case for which this
recommendation is necessary" ; (2) establishment of a centralized review function would
"destroy the internal workings of each State's mineral examiner peer review and
management control process " ; and (3) Certification Panel members had other jobs and
therefore had "little time . . . for other matters. "
Office of Inspector General Reply. We believe that our audit report presents
sufficient evidence for us to recommend that the review process be strengthened.
Specifically, we believe that the statistics, 10 of 22 reports rejected overall and 6 of the
10 rejections occurring at the Solicitor's Office level, demonstrate that the Bureau's
procedures for conducting mineral examinations and reviewing mineral reports were not
sufficient to prevent deficient products from reaching Bureau Headquarters and the
Solicitor's Office.
The current decentralized state office procedures produced the 10 inadequate reports.
Accordingly, protecting state office "internal workings" should not take precedence over
program performance, given the nature and extent of the mineral report deficiencies and
12
the potential for abuse in the patent program. In addition, the Bureau's comments on work
load and Mineral Examiner distribution (page 3 of Appendix 3) indicate that the Bureau
has authorized State Directors to detail examiners to "assist in case load reduction. " For
example, the Bureau stated that the Certification Panel members did not have the time to
be involved in reviewing mineral reports but further stated that Bureau Headquarters had
"requested the services of two additional Panel members as HQ CRMEs [Headquarters
Certified Review Mineral Examiners] to ease the HQ meadquarters] backlog of pending
reviews. " This appears to contradict the Bureau's stated position that using resources in
one state from another office would disrupt the internal workings of the state office.
We believe that a centralized review would ensure that the reports are reviewed by an
independent organizational unit which is fully experienced in all aspects of mineral
examinations and that reports would be presented consistently and in accordance with the
requirements for mineral reports. Thus, the process of having Headquarters and
Solicitor's Office reviewers return inadequate reports to the field, which involves
additional time and effort by Mineral Examiners and Review Mineral Examiners, would
be minimized. We request that the Bureau reconsider its response to this recommendation.
Recommendation 2. Nonconcurrence stated.
Bureau of Land Management Response. The Bureau disagreed with the
recommendation, stating that: (1) we had not "demonstrated that the . . . current . . .
system . . . resulted in any lands being conveyed contrary to law"; (2) it had evaluated the
mineral patent program in 1988 and had changed the program as a result of that review;
and (3) the program was "directly under Secretarial control" and "would seem to function"
as a "[Circular] A-123 process."
Office of Inspector General Reply. Circular A-123 provides for internal controls
to be implemented over separate programs and functions of the Department relative to the
risk for fraud, waste, and mismangement. We believe that the issuance of mineral patents
has a high risk potential for fraud, waste, and mismanagement because it conveys Federal
land to private landowners. Although the audit did not identify any land being conveyed
contrary to law and the process is under Secretarial review, the Bureau has a responsibility
to subject the program to the Circular A-123 process to determine whether sufficient
internal controls have been developed and implemented and are working properly to ensure
the efficient and effective processing of mineral patents.
Our audit report clearly shows that the control procedures for mineral report preparation
and review did not prevent inadequate mineral reports from being recommended for patent
and being sent to the Solicitor's Office. Because of the quality of the reports, the
Headquarters reviewer and the Solictor's Office spent more resources than necessary to
review the Bureau's work. This inefficiency was compounded by having the Headquarters
Review Examiners and/or the Solicitor's Office return the inadequate reports to the field
13
for rework and resubmission to the Headquarters and the Solicitor's Office for another
review. Further, we do not believe that the Bureau should rely on the Solicitor's Office
to ensure that its mineral reports are properly completed, given the highly complex and
technical nature of mineral examinations. We believe that the Bureau should be
accountable and responsible for the quality and efficiency of its program performance and
that such accountability and responsibility are established through the Circular A-123
process, which implements requirements of the Federal Managers' Financial Integrity Act
of 1982, as codified in 31 USC. 3512. In its response, the Bureau noted program
improvements as a result of its 1988 management control review, which was conducted
to meet the requirements of Circular A-123. Thus, the Bureau appears to be taking issue
,
with placing its mineral patent program under a process that it cites as a source of program
improvements. We request that the Bureau reconsider its response to this recommendation.
Recommendation 6. Partial concurrence stated.
Bureau of Land Management Response. The Bureau concurred with the part of
the recommendation to develop continuing education requirements for Certified Mineral
Examiners. However, the Bureau disagreed that formal requirements should be developed
for Mineral Examiners, and it outlined its informal process for ensuring that Mineral
Examiners are provided with the training necessary for professional development.
Office of Inspector General Reply. Our report demonstrates that the Bureau's
informal process has not ensured that mineral reports are prepared adequately. We believe
that a formal training program, including lessons learned from Review Examiners and
Solicitor's Office officials, would be an invaluable step toward improving the efficiency
and effectiveness of the mineral examination process. We request that the Bureau
reconsider the recommendation.
Bureau of Reclamation Additional Comments on Audit Report
In its response, the Bureau provided additional comments on the report as follows:
- General Comments. The Bureau stated that our report would benefit by the
following: (1) providing additional information regarding Bureau improvements made to
the Mineral Examiner process since 1988; (2) revisiting the Bureau's position on
centralizing the review of mineral reports "in light" of the Congressional 5-year plan;
(3) reviewing the need for Circular A-123 procedures, given that the Congress may pass
legislation discontinuing mineral patents; and (4) recognizing the Bureau's commitment
to the 5-year plan established by the Congress.
However, we believe that our report (page 6) sufficiently identified recent improvements
in the Mineral Examiner process and that such processes have reduced the risk of a mineral
patent being issued improperly. We also believe that the Congressional requirement to
14
process 90 percent of the mineral patent applications within 5 years cannot be
accomplished because of the noted inefficiencies in the current process. To achieve the
5year requirement, the Bureau will need a more efficient and effective process than the
current decentralized, state office-controlled process. Accordingly, we believe that the
review process should be centralized to aid in meeting this Congressional requirement.
Further, we believe that the Bureau should comply with the Circular A-123 process to
ensure that the mineral reports are prepared accurately and timely during the initial review.
- The 1991 Mineral Report Evaluation. The Bureau noted that the 1991 mineral
report evaluation "examined processes and reports in place prior to initiation" of the
Bureau's Mineral Examiner's certification program and that the mineral report evaluation
did "not represent post-1990 policies. " (Emphasis in original.) The Bureau further stated
that, of the mineral reports reviewed, "the best quality reports were written by recent
graduates of the revised training program" and that the report evaluation noted that the
"worst offenders did not pass the subsequent certification program or declined to apply for
certification. "
In our report, we acknowledged that the mineral report evaluation included mineral reports
that were prepared before the Mineral Examiner certification program was initiated.
However, the evaluation report also included reports that were prepared after the initiation
of the Mineral Examiner's certification program. In that regard, the 1991 evaluation states
that "most" but not all of the reports examined were completed before the program was
completed. That notwithstanding, our primary purpose in citing the evaluation was to
acknowledge the Bureau's review and to note that two recommendations were made to
correct deficiencies within the mineral examination process but were not implemented.
The 1991 evaluation noted deficiencies in the performance of mineral examinations and
the preparation and review of mineral reports. For example, the 1991 evaluation stated
that "about 80 percent of the mineral reports reviewed did not meet the standards of the
guidelines for validity determinations" and recommended that the Bureau prepare a new
handbook to provide adequate technical guidance for conducting mineral examinations and
preparing and reviewing mineral reports. However, the handbook has not been issued.
Regarding the quality of mineral reports, the 1991 evaluation states that only "2 of the 7
high quality reports were written by post 1985 (training) attendees." The 1991 evaluation
concluded that 20 percent of the mineral report reviewers who approved inadequate reports
were still able to do so.
- Prior Reviews of the Mineral Patent Program. The Bureau identified several
reviews of the mining law administration program conducted before 1991 and cited
numerous improvements that it had made to its manual and its training programs.
Although we recognized in our report that program improvements had been made, our
report included, in the Prior Review section, only those program evaluations conducted
15
in the past 5 years that had an impact on our audit objective. It is our standard practice to
include reviews and audits conducted only within the past 5 years.
- Adequacy of Mineral Examiner Training. The Bureau disagreed with the
statements in our report that it "does not have adequate training and technical standards"
for Mineral Examiners and that its procedures for conducting mineral examinations and
mineral reports reviews "are not adequate." In addition, the Bureau stated that the audit
report identified an estimated prior failure rate on Certified Mineral Examiner training of
4-6 individuals for each course. It further stated that the National Training Center has
advised that "5-6 individuals would have failed the course over the last 11 years."
(Emphasis in original.)
We believe that our report supports our conclusion and earlier conclusions reached in the
1991 evaluation by the Bureau that improvements to the training process and the technical
standards are needed. Our recommendation that a pass/fail process should be established
is consistent with preliminary recommendations made by Bureau field offices in the 1991
evaluation.* Furthermore, senior staff at the National Training Center told us during our
review that they fully supported a pass/fail process. Also, our recommendation that the
Bureau should issue a new handbook for Mineral Examiners is consistent with a
recommendation that the Bureau made in its 1991 evaluation but did not implement.
Furthermore, we believe that the rejection rate (45 percent) of mineral reports at the time
of our audit by either the Headquarters or the Solicitor's reviews and that, according to the
Bureau, one of the reports rejected was "woefully inadequate, procedurally deficient, and
in total non-conformance [to Bureau standards]" justify the need for further actions to
improve the Bureau's training processes and technical standards to produce better reports.
Regarding the student pass/fail statistics, we have changed our report to clarify that the
Certification Panel in 1991 estimated that a total of 4-6 individuals would not have passed
the certification course from 1989 to 1991 o Specifically, a September 27, 1991,
memorandum from the Chairman, Mineral Examiner's Certification Panel, to the Assistant
Director for Energy and Minerals, states:
The Panel recommends that the courses required for certification at PTC
[Phoenix Training Center] be placed on a pass/fail system. Although
experience has shown that in the last three years only 4-6 individuals would
have failed the courses, those 4-6 individuals are now in the "system."
Pass/fail standards would eliminate marginal or unresponsive individuals
from the program.
We were not provided documentation regarding the Bureau's statement that the National
Training Center advised that "5-6 individuals would have failed the course over the last
11 years."
16
- Work Load and Mineral Examin er Distribution. The Bureau said that it has
"been aware" that a problem exists with regard to mineral examination cases and Certified
Mineral Examiners not always being in the same location. The Bureau also stated that in
implementing its Five-Year Mineral Patent Plan, it authorized State Directors to detail, on
a temporary basis, Certified Mineral Examiners between states "to assist in case load
reduction of mineral examinations. " Conversely, the Bureau, in its response to
Recommendation 1, indicated that it did not want to centralize the mineral report review
process because "removal of the State's review function will destroy the internal workings
of each State's mineral examiner peer review and management control. "
We agree that detailing Certified Mineral Examiners to locations that have high work loads
could help reduce the case load of mineral examinations- However, this detailing does not
necessarily provide for examiners to be assigned to conduct mineral examinations that are
commensurate with their experience. In that regard, senior-level Bureau Mineral
Examiners said that Certified Mineral Examiners may have experience to conduct only
certain types of mineral validity examinations Accordingly, we believe that unless the
Bureau assigns Mineral Examiners on the basis of their knowledge and ability, there is
little assurance that mineral reports will be prepared more efficiently and effectively.
- Mineral Report Review Work Load. Regarding review of the mineral reports,
the Bureau stated:
These [mineral] examinations will filter in over the next 4 years, and with
the exception of California and Nevada, can be handled with existing staff.
Pursuant to the BLM Manual and Five-Year Plan guidance, outside review
assistance can be requested through the Certification Panel if backlogs
develop locally. This obviates the need for a centralized review group, as
backlogs can be planned for and managed by the existing system.
The disparity between pending work load and review examiners was presented in our
report to emphasize the benefits of having a centrally controlled review staff. The Bureau
disagreed with centralizing its review process and stated that it does not need a central
review staff. However, the Bureau stated that it would use the Certification Panel, the
same centralized staff which we recommended that it use, to assist if any backlog
developed. The Bureau also stated that "existing staff' can handle the examination work
load except in Nevada and California, which have 49 percent of the work load. The issue
involves not just the work load but, more importantly, the matching of expertise to
properly and effectively accomplish the review. Therefore, we believe that managing the
work load through the centralized assignment of individuals who have the necessary
expertise to complete the review would preclude the excess rejections of mineral reports
and significantly improve the efficiency and effectiveness of the process.
17
- The Bureau's Headquarters Review Process. The Bureau stated that the
statistics in our report for rejection of mineral reports were "accurate" but that the "sources
or causes of the problems" were not identified. The Bureau further stated that three of the
reports that were rejected by the Solicitor's Office were not reviewed by a Certified
Review Mineral Examiner because the Bureau did not have a Certified Review Mineral
Examiner on the staff at the time. The Bureau also stated that one of the other reports
rejected was rejected for "title defects that should have been caught during the adjudication
of the application prior to issuance of the First Half Mineral Entry Final Certificate. "
Although we changed the report to more accurately reflect the level at which the rejections
occurred, we still believe that mineral reports sent to the Headquarters from state offices
were not sufficiently reviewed. Specifically, two of the six reports rejected by the
Solicitor's Office, which were reviewed by the Bureau Headquarters Certified Review
Mineral Examiner, were rejected for technical, not legal, reasons. The Bureau's Chairman
of the Mineral Examiner Certification Panel reviewed one of these reports at our request
and concluded that the Bureau Headquarters Certified Review Mineral Examiner's
"recommendation to issue patent was not supported by the data presented in the report. "
Centralization of the report review process under the Bureau's Certification Panel would
help ensure that qualified Review Examiners are appointed to each of the complex and
varied mineral reports submitted by the state offices.
- Bureau Conclusions. The Bureau stated that "there have been no instances"
under the current process in which the Government "has mistakenly or fraudulently
conveyed mineral patents to mining claimants" and that therefore the current system
"safeguards the process from abuse due to a variety of circumstances. "
Our report does not suggest that the Government has conveyed mineral patents improperly
under the current process However, our report does demonstrate the need for the Bureau
to improve its processes for completing and reviewing mineral reports to reduce the risk
of a patent being issued improperly. We believe that the Bureau should correct weaknesses
in its process instead of relying on a review in the Headquarters or in the Solicitor's Office
to identify deficiencies in the reports.
The Bureau further stated that it "disagrees with the finding that its mineral reports still
suffer from serious deficiencies. " The Bureau stated that the new Headquarters and
Solicitor's review processes and subsequent rejections of Bureau-produced
were sufficient to prevent patents from being issued improperly.
mineral reports
We believe that the Headquarters and the Solicitor's reviews demonstrate
needs to improve its processes for preparing mineral reports. Specifical 1
that the Bureau
y, the rejection
of 10 of 22 mineral reports indicates deficiencies within the Bureau's mineral report
process. Furthermore, we disagree with the Bureau's statement that it sees no need to
improve the products it sends forward to the Solicitor because the Secretarial review
18
process "safeguards the process from any potential abuse due to a perceived lack of
mineral examiner training, unprofessional conduct, or differences in legal interpretations
of the mining law. " It is our opinion that the mineral patent process is a significant and
highly sensitive process which requires the utmost care and diligence to ensure that Federal
lands are not transferred improperly. While we agree that the Solicitor's reviews provide
an added control, this control has demonstrated weaknesses in the preparation of mineral
reports which the Bureau should address.
19
B. COST RECOVERY
The Bureau did not recover its costs for conducting mineral validity examinations.
Authority for Federal agencies to recover costs of providing services to beneficiaries is
contained in the Independent Offices Appropriations Act of 1952. In addition, the
Department of the Interior Manual and Office of Management and Budget Circular A-25,
"User Charges," provide guidance on carrying out the authority contained in the Act.
However, the Bureau said that it believed it was not authorized to charge for conducting
mineral validity examinations o The Bureau estimated that it cost an average of $10,700
to process a patent application which involved only a single mining claim and that the
application cost increased by $5,000 for each additional claim involved. Based on these
estimates, the total cost to process the 362 pending applications would be approximately
$29 million.
Title V of the Independent Offices Appropriations Act of 1952 (the User Charge Statute)
authorizes Federal agencies to charge a fee for services or benefits provided to
beneficiaries. Circular A-25 establishes guidance for Federal agencies to carry out this
Act. The Department of the Interior Manual (Part 346, "Cost Recovery") states that
unless otherwise directed by statute or authority, a fee that recovers bureau costs should
be imposed for services that provide special benefits or privileges to a non-Federal
recipient. Circular A-25 requires that a user charge be "assessed against each identifiable
recipient for special benefits derived from Federal activities beyond those that accrue to
the general public. " The Circular further states that a special benefit will be considered
to accrue and a user charge will be imposed when a Government service "enables the
beneficiary to obtain more immediate or substantial gains or values than those that accrue
to the general public, for example, receiving a patent. "
According to a Headquarters Certified Review Mineral Examiner, the Bureau believed that
specific legislative authority was needed to charge for its efforts in conducting mineral
validity examinations. In that regard, Section 304 of the Federal Land Policy and
Management Act of 1976 provides specific authority to the Secretary to establish
reasonable fees for document processing. This issue was clarified by Solicitor's Opinion
M-36987, which was issued on December 5, 1996. In that opinion, the Solicitor informed
the Bureau that it had "the authority and the policy mandate as articulated by the Secretary
in the Departmental Manual to recover the costs of conducting various mineral processing
transactions, including mineral examinations" and reports Furthermore, we could not
identify any statute in the Mining Law that prohibited charging for processing patent
applications, nor could the Bureau provide any documentation to support its position.
The Bureau estimated its cost to process a patent application involving a single mining
claim at $10,700, including the mineral examination. For each additional mining claim
involved, the application cost increased by $5,000. The Bureau's 362 pending patent
20
applications contained about 5,500 claims. Based on an average of 15 claims per
application, we estimated that it cost approximately $80,000 for the Bureau to process a
patent application. Overall, we estimated the total cost to process the 362 pending
applications to be approximately $29 million. Furthermore, if the Bureau recovers its cost
of processing mineral patents, it may have the authority to retain those funds for Mining
Law administration under the authority contained in Title 43, Section 1474, of the United
States Code. An additional benefit to imposing fees for mineral validity examinations
would be to discourage those individuals who have no actual intention of mining from
filing applications, which, in turn, would reduce the Bureau's processing work load.
Recommendation
We recommend that the Director, Bureau of Land Management, obtain a Solicitor's
opinion to determine whether the Bureau has authority to recover its costs of conducting
mineral examinations from applicants for patents. If it is determined that the Bureau can
recover such costs, the costs of conducting mineral examinations should be recovered in
accordance with Office of Management and Budget Circular A-25.
Office of the Solicitor Response and Office of Inspector General Reply
In the March 10, 1997, response (Appendix 2) from the Assistant Solicitor, Branch of
Onshore Minerals, Division of Mineral Resources, the Solicitor's Office stated that it
had, as a result of our recommendation, issued an opinion (No. M-36987) on
December 5, 1996, which "informed" the Bureau that it has the "authority and the policy
mandate" to recover the costs associated with conducting mineral examinations and
preparing mineral reports. Based on this comment, we have referenced the opinion in the
report accordingly.'
Bureau of Land Management Response and Office of Inspector General
Reply
In the April 1, 1997, response (Appendix 3) to the draft report from the Director, Bureau
of Land Management, the Bureau stated that "proposed rules have been drafted for cost
recovery of various mineral related documents and actions, which include mineral patent
applications. " Based on the response, we request that the Bureau provide additional
information for the recommendation (see Appendix 4).
21
OTHER MATTERS
The Interior and Related Agencies Appropriations Act of 1996, dated April 26, 1996,
required the Department of the Interior, within 5 years of the date of enactment, to make
a determination on patent entitlement on at least 90 percent of the 386 applications that had
First Half Final Certificates. Before the Act, no statutory time frame existed for
completing the initial review of a patent application before the First Half Final Certificate
was issued. Although there was no statutory time frame, the Bureau established, as a
matter of policy, 10 months as the time frame for review of applications that the Bureau
receives in "good order" and that do not have major defects. The time frame was
incorporated into the Bureau Manual (Section 3860) in February 1989.
We found that the Bureau was not always conducting its initial review of patent
applications within its recommended time frame. Specifically, the Bureau took an average
of 20 months to process the 208 First Half Final Certificates it issued from March 1, 1991,
to March 1, 1993. We reviewed 65 of the 150 applications that did not receive First Half
Final Certificates and that were filed at least 10 months before the moratorium went into
effect (that is, those that were filed before December 1, 1993). Our review noted, for 54
applications, that there was no indication that the Bureau had found any deficiencies in the
applications and that the files appeared to contain the information required by the Bureau
Manual, such as title opinion, claim location, land status, and discovery for issuance of
First Half Final Certificates. Therefore, we concluded that the documentation in the files
did not justify the Bureau's taking in excess of 10 months to complete the review. For the
other 11 applications, there was sufficient justification for the Bureau not to process the
applications within 10 months. Overall, we found that the review process for 139 of the
150 applications was not completed within the lo-month time frame.
According to state office officials, certain patent applications were not processed within
the lo-month time frame because other aspects of the mining law program received higher
priority and sufficient resources were not available to comply with the time standard. Our
review of Bureau budgetary documents confirmed that patent issuance was not the highest
priority within the Bureau's mining law program. We are not making any
recommendations regarding the Bureau's initial review process for determining whether
an application qualifies for a First Half Final Certificate because the Congressional
moratorium prohibits the Bureau from expending any funds for processing applications that
were not already granted a Certificate. However, if the moratorium is lifted, we suggest
that the Bureau examine its process for granting First Half Final Certificates to determine
whether the process is efficient and effective and whether the lo-month time frame is
appropriate.
22
Office of the Solicitor Response and Offxce of Inspector General Reply
In its March 10, 1997, response (Appendix 2) to the draft report from the Assistant
Solicitor, Bureau of Land Management, Office of the Solicitor, the Solicitor's Office
requested that we delete the Other Matters section from the report because the moratorium
on mineral patents prevents the Bureau from acting on the suggestion made. The
Solicitor's Office further stated that the Bureau was not statutorily bound to meet its
self-imposed lo-month time frame for reviewing patent applications and issuing a First
Half Final Certificate. The Solicitor's Office also questioned whether our evaluation of
the Bureau's compliance with the time frame considered other competing work loads that
Bureau personnel had that might have prevented them from meeting the established time
frames. The Solicitor's Office also requested that we delete the section because it is
defending against litigation from applicants subject to the moratorium. According to the
Solicitor's Office, the litigation was filed based on the applicants' claim that the length of
time for the Bureau's review of their application was unreasonable. The Solicitor's Office
also included suggested changes to the wording of our audit report.
We agree that the moratorium on mineral patents prevents the Bureau from taking action
at this time. We also agree that the Bureau's lo-month time frame, which was established
as a matter of policy, is not legally binding on the Bureau. However, we believe that the
Bureau needs to reevaluate its own performance standards for issuing First Half Final
Certificates should the moratorium be lifted because of the large number of applications
that were not processed within the standard time frame. Regarding competing work loads,
we acknowledged that the Bureau did not always meet its standards because of other
priorities. We believe that the Bureau should have considered all relevant factors,
including the duties of the individuals involved in the process, when it established the lo-
month performance standard. However, we suggested that the Bureau examine its process
and determine whether the lo-month time frame is appropriate. Regarding the litigation,
although we appreciate the sensitivity of the matter for the Solicitior's Office, the existence
of litigation has no bearing on the conduct or results of our audit report. Therefore, we
have not deleted information from our audit report that may be the subject of litigation
against the Department.
23
APPENDIX 1
OFFICES AND SITES VISITED OR CONTACTED
Offices and Sites Location
Departme nt of the Interior
Office of the Solicitor
Office of Financial Management*
Bureau of Land Management
Denver Service Center
National Human Resources
Management Center
National Law Enforcement Security
and Investigations Team*
National Training Center
Solid Minerals Group
California State Office
Colorado State Office
Oregon State Office*
Medford District Office*
Nevada State Office
Winnemucca District Office
Wyoming State Office
Department of Agriculture
U.S. Forest Service
Minerals and Geology Management*
Region 2, Physical Resources Department
Industry Contacts
Santa Fe Gold Co.
i
Twin Creeks Mine
Royal Gold
Pincock, Allen and Holt
Mining Engineers*
American Geological Services
Minerals Policy Center*
Bar-rick, Goldstrike Mines, Inc.*
Parson, Behle, & Latimer,
Attorneys at Law
Newmont Mining*
Washington, D.C.
Washington, D.C.
Lakewood, Colorado
Washington, D.C.
Phoenix, Arizona
Washington, D.C.
Sacramento, California
Lakewood, Colorado
Portland, Oregon
Medford, Oregon
Reno, Nevada
Winnemucca, Nevada
Cheyenne, Wyoming
Washington, D.C.
Lakewoud, Colorado
Goldconda, Nevada
Denver, Colorado
Lakewood, Colorado
Lakewood, Colorado
Washington, D. C.
Salt Lake City, Utah
Elko, Nevada
*Contacted only
24
APPENDIX 2
Page 2 of 9
1. On Gage 1, line 3, the report states that approximately
400 million acres of public land are available for mining,
including Bureau of Land Management, Forest Service, and
National Park Service lands. We do not want to lead anyone
to believe that National Parks are still open to new
locations. Consequently, we strongly recommend, as we did
for the preliminary draft, that the Inspector General's
Office add a footnote at the end of that sentence which
states, "National Park Service lands are closed to new
mining locations. BLM keeps records of pre-existing mining
claims but does not administer operations on those claims/
2. On page 1, in footnote 1, line four, the report states,
"Placer claims are limited to 160 acres? In fact, only
association placer claims are allowed to be 160 acres in
size. 30 U.S.C. _ 36. Individual non-association placer
claims are limited to 20 acres. 30 U.S.C. _ 35. The
sentence should be amended to state, "Placer claims are
limited to 20 acres." In addition, the last line in
footnote 1 seems to confuse mill sites with lode and placer
claims. To be more clear, we suggest the following
language, Yndependent mill sites and mill sites associated
with lode claims may be patented for $5.00 per acre. Mill
sites associated with placer claims may be patented for
$2.50 per acre."
3 On page 2, line 3, the report states that the government
charges a purchase price for patented lands of $2.50 or $5
per acre depending on the type of claim. Please add the
word, %tatutory" before the words, "purchase price" so as
to make clear that the government's purchase price is set by
law and is not discretionary.
4. On page 3, line 2 through 4, the report states that a
first half final certificate is ?ssued" if the application
contains required documentation and is sufficient to
%ndertakeV1 a mineral validity examination. In most cases,
mineral examiners must request additional documentation from
the applicant during the course of a mineral examination in
order to obtain enough information to draw a conclusion
regarding the existence of a valuable discovery. Because
the documentation in a patent application may be adequate to
begin the examination but inadequate to complete the
examination, please change the word, %ndertake" to tfbeginft.
In addition, since first half final certificates are not
*'issuedtt to the applicant, please change the word, %ssuedY*
to "signed by the Secretary?
5 On page 4,
words, second paragraph, line 4, please change the
"the issuance" to "signing. lt
6 . On page 5, line 7, please add a comma after the phrase,
2
26
APPENDIX 2
Page 3 of 9
"the Bureau reported that.**
7. On page 5, the last line, it is important to state that
the s-year action plan applies only to grandfathered
applications. Please add the word, **grandfathered" before
the word lfapplications.ff
8 On page 9, line 4, it seems to us -that the conclusion
should be stated in the present tense. If you agree, please
change the word, **concluded** to **conclude** and the word,
**existed** to ttexists.ft
9 On page 9, line 15,
the word, for editorial purposes, please add
**whichft after **Bureauft and change the word,
"Temainingft to ttremain.ft
10. On page 11, the second full paragraph discusses the
Teresa Raines patent application. The first quote
attributed to the Solicitor was taken from a draft
background form written by a staff attorney which was never
made final. It should not be quoted in this report. At the
time the statement was made, the documentation in the
mineral report which had been prepared by a Forest Service
mineral examiner was incomplete and documented a mineral
discovery of only marginal value. Nevertheless, further
research by us indicated that existing case law seems to
support patent issuance even for marginally profitable
mineral deposits. The Solicitor's Office also initially
questioned the good faith of the applicant because there was
no evidence in the mineral report of mineral development or
even an intent to develop. The Solicitor's Office has
found, in its review of patent applications, that mineral
reports, especially those prepared by Forest Service mineral
examiners, sometimes lack complete documentation and do not
adequately support recommendations for patenting. When the
Solicitor's Office returns a patent application for further
examination work or for additional information, BLM mineral
examiners are usually willing to engage in the additional
examination work or provide additional information which may
ultimately lead to patent issuance. The mineral report for
the Teresa Raines application was conducted by a Forest
Service mineral examiner. The Solicitor's Office found the
mineral report to be deficient. After failed attempts to
obtain additional documentation from the Forest Service and
BLM, the Solicitor's Office sought additional documentation
from the applicant directly. The Solicitor's Office review
was not complete when the OIG audit was conducted. As a
result of the additional information provided by the
applicant, the Solicitor's Office determined that the
applicant was acting in good faith and had a discovery of a
marginally valuable mineral deposit. Consequently, a patent
has been issued by the Secretary for this application.
3
27
APPENDIX 2
Page 4 of 9
Therefore, we strongly suggest that the second full
paragraph on page 11 be amended as follows:
e
the Chairperson 0; In addition, and at our request,
the Bureau's Mineral Examiner
Certification Panel reviewed the mineral report,
concluding that the report's recommendation to issue a
patent was Wet supported by the data presented in the
report? In.addition, the Panel Chairperson concluded
that the samples taken during the mineral examination
mq+couIld be %uspectrr because the report did not
describ.e the sample methodology in such a way to ensure
11. On page 12, the last line, because the BLM Manual is
not legally binding on the Department or BLM, we suggest you
change the word, Vequire" to "provides."
12. On page 18, in the second paragraph, line 5, to clarify
your meaning we suggest you add the words, 'Iby the Bureau"
after the word, Wapproval.*V
13. On page 19, in the first recommendation, line 1, we
suggest you add the word, llminerallt before the word,
Yeport."
4
28
APPENDIX 2
Page 5 of 9
Cost Recovery
On December 5, 1996, the Solicitor issued an M-Opinion which
informed BLM that it has the authority and the policy mandate as
articulated by the Secretary in the Departmental Manual to
recover the costs of conducting various mineral processing
transactions, including mineral examinations. Consequently,
section B of the audit report must be amended to reference the
M-Opinion and to delete incomplete and legally insufficient
discussions of the authority for cost recovery. We suggest that
section B be amended as follows:
The Bureau did not recover its costs for conducting mineral
validity examinations. The .Bureau- .&ix% that. i.t- be.1 &wed it
.' _-
. .
was atit. ',a~.tho-rized::to::..eharge..:-for:.:.,c~~.~~cting.. &&faf vafidity
e.gga'mi, na.c..&Q& 9:. ,. : ~~&&a~& ~ __,
gen&z&authority for Federal
,..
agencies to recover costs of providing services to
beneficiaries is contained in the Independent Offices
Appropriations Act of 1952. S:pc `ts: i-&j: :. 3 04:. ..: -0 f:.i:; the. F:&eraf bnd
r
:_
Pof.cy .&ad J@nageti&st. Ac.c 0.f ) lCJ.7E.e ( $&&'J::'I.. p~nvides -specific
authority to the-Secretary of the... Int.e.rioX to establish
reia.s.ondil~ f&s f.02. document. proCesskIg2 Inaddition, the
Department of the Interior Manual and'Of.fice of Management
and Budget Circular A-25, Vser Charges," provide
I
gufd&~p+~;rl;ct~~ on carrying out &Z+ Z+X&Zm%e
: ._ :
. .
9 8
authority L~tz=d :n tk Z&e-& w 4-l-n
* L I LAAL
The Bureau estimated from data obtaitie-d. :frbm-the Nevada
. .
S~:&t&Off~~:e that it costs.. an avekage %f .$lO, 700 to process
.
a patent application that involved only a single mining
claim and that the application cost increased by $5,000 for
.
each additional claim involved. m GI the4e c3t1_~maCc~" I
29
APPENDIX 2
Page 6 of 9
Based on an average of 15
claims per application, we estimated that it cost@
approximately $80,000 for the Bureau to process an..3ve.rage
patent application. Overall, we estimated the total cost to
process the 362 pending applications to be approximately $29
million. Furthermore, if the Bureau recovers its cost of
the authority to
ral validity examinations would be to
discourage those individuals who have no actual intention of
mining from filing applications, which, in turn, would
reduce the Bureau's processing work load.
Recommendation
We recommend that the Director, Bureau of Land Management
6
30
APPENDIX 2
Page 7 of 9
Timinq of BLM's Initial Review
Under the heading "Other Matters," the audit report focuses on
the timing of BLM's review of patent applications prior to the
signing of a first half final certificate. This discussion is
unnecessary at this time. We continue to urge you to delete this
section of the report.
First, BLM cannot engage in the initial review of non-
grandfathered patent applications because of the ongoing patent
funding moratorium. Because the moratorium may go on
indefinitely, BLM will not be able to act on the suggestion made.
The report acknowledges the moratorium and refrains from making
any recommendations. Without the need for recommendations, the
section should be deleted.
Second, the report focuses on BLM's failure to meet a IO-month
time frame recommended by the BLM Manual for the initial review.
Internal administrative manuals are not legally binding on the
agency. While the report acknowledges that the lo-month time
frame is a policy, that it is recommended, and that there was no
statutory time frame for completing the review of a patent
application, the report, nevertheless, seems to hold BLM
responsible for meeting that time frame. The report concludes
that, for 54 applications, the case files "did not justify the
Bureau's taking in excess of 10 months to complete the review."
However, the report does not discuss the basis on which this
conclusion is drawn. The report does not describe what sort of
justification is necessary. Did the auditor review the
application case filesto determine they were complete and,
therefore, required little review by BLM? The conclusion also
seems to rest entirely on the contents of the case file rather
than any consideration of the competing workload demands on BLM
personnel. The underlying problem with the analysis in this
section is that it hints at the possibility that the time frames
for BLM's review might have been unjustified or unreasonable. In
light of BINS competing workload demands and the lack of any
statutorily imposed deadlines at that time, the time frames were
not unjustified nor unreasonable. We are currently defending
against litigation in which applicants who have applications
subject to the moratorium are contending that the length of time
for BLM's review of their applications was unreasonable in an
effort to get their applications grandfathered by court action.
Without a more thorough examination of all the facts surrounding
each review, it seems to us that these statements are imprudent.
If this section is, nevertheless, retained in the report, I
strongly suggest that the section be amended as follows:
The Interior and Related Agencies Appropriations Act of
7
31
APPENDIX 2
Page 8 of 9
1996, dated April 26, 1996, required the Department of the
Interior, within 5 years of the date of enactment, to make a
a
final;, determination on wont ont3,eLlW on at least 90 1
percent of the 386 grandfathered applications t&t h4 Furs-&
. , ,
li= n-ml f-b-04-7Gm
AL &A A LLLLAL Prior to this Act,Ge-~~cr, no
statutory time frame & existed for completbg the dti&
. .
review of a patent application 5efGrC tk2 Fc3t fiztlf I%aaA
-
L
s a matter of policy,
the time frame for
the- in&i& ?eview of applications '(i,e,:, leading up to the
sjg@ng.. &f:~~:~.~.he- f i.r&.. Iiax-E final.,.. certiELcat&. that the Bureau
receives in .+'good order" and that do not have major defects.
We found that the Bureau took an average of 20 months to
LAAAAA J-w
for 139 of the &X&G applications was not completed within
. :
the lO-month timeframe. I
Aeeerdley h Pl
I 'Wt L=A l%&+& tt,at t*
LA L LA
I
According to state office officials, ecrtxn patent
aDDlications were not
op~r~ltj_ons or inspect
we~e....~6t....avail.able .to
. .
f32UlEstz;W . Our r
processed within. t&:.10-month: time
other asDecL.k .%f %h&' *&iinti law Drosram
comply with 'the &eom&&&&..time
eview of Bureau b~.~cretar;v.:::..~ocument s
c&&~~ed that patent
mag:~I~:;`::`: :.' : ::.::: :.: .: `, :`., .
:.:i -:,. he.av&$/ ;`f'$$&j@~:: ::.&
. , :_ :_ _. .- `. : . .. -' `.
. :::
Burea.~`, s mining `1 a.w ...pr
. . . . . . . . .._.
th~ll:ili:~.~~~~~,~~~~:: ;;:,j&j::: @i$;.;~: g
_`_.`. :.:. :
p r io-i-.::;t' -&,:; .`:t &..' : mo.rayo;-rf .
pro @q.p:::+.q& 1 i Ga,t k.~nQ- ;.
. . . . We are not making.any recotietidations
. .
___...,_. _..'.l.__.: ._._I : __.;, ..... 1.:. .,._ ,.,_. by... - : -..:-
reg.~.~~ing the Bureau, s initial review process -
A L.LLLALA e because the Congressional moratorium
prohibits the Bureau from expending any funds for processing
8
APPENDIX 2
Page 9 of 9
non-grandfather& applications t&t Kr2 r)8t zlrc* grzrm
. However, if the moratorium is lifted, we
suggest that the Bureau examine its initial review process
*
F -1 I 4
P-vt-3 C-n
A LLLLAL Lo to determine
whether the process is efficient and effective and whether
the lo-month time frame is appropriate.
We appreciate the opportunity to comment on-the draft report. If
you have any questions regarding our comments or amendments,
please do not hesitate to contact me at (202) 208-4803.
cc: Assistant Director
Minerals, Realty, and Resource Protection
Bureau of Land Management
9
33
APPENDIX 3
Page 1 of 1G
To .
.
Through:
United States Department of the Interior
BUREAU OF LAND MANAGEMENT
Washington. D.C. 20240
PlAR 31 w7
MEMORANDUM
Assistant Inspector General for Audits
IN REPLY REFER TO:
3860 (WO-320)
From:
Subject:
Director, Bureau of Land Management
\
Review of Draft OIG Report C-IN-BLM-001-96; Issuance of Mineral Patents,
Bureau of Land Management and Office of the Solicitor; December 1996
We have reviewed the subject draft report and have the following comments and responses to
the recommendations. We have also included specific comments in Attachment 1 that are
editorial and intended to improve the clarity of the draft report.
Specifically, we believe the draft report would benefit by:
Recognizing the improvements made in the mineral examiner's training, review, and
certification process since 1988.
0
Reviewing/revisiting the Bureau of Land Management's (BLM) position on the concept
of centralizing the review of mineral reports for mineral patent applications in light of the
mandated Congressional Five-Year Mineral Patent Plan.
o
Reviewing the need to institute procedures under the Office of Management and Budget
Circular A-123 for continual monitoring ( the program is now subject to strict Secretarial
review) as the Congress may pass legislation discontinuing mineral patenting in the near
future.
Recognizing the BLM's and the Department of the Interior's commitment to the Five-
Year Plan established by Act of Congress (Public Laws 104-134 and 104-208) to reach
final decision on 90 percent of the mineral patent applications grandfathered during the
current moratorium. This issue may have significant impact on several other sections
of the report.
34
APPENDIX 3
Page 2 of 16
Issues:
The 1991 mineral report evaluation. The Office of Inspector General's (OIG) draft report refers
to the BLM's 199 1 draft "Final Report on Special Evaluation of Mineral Reports for Validity
Determination and the deficiencies that were identified. The evaluation report accompanies this
memorandum as Attachment 2. The evaluation report examined processes and reports in place
prior to initiation of the BLM's mineral examiner's certification program which commenced in
October 1990, and after revised and upgraded training was implemented at the National Training
Center (NTC) in 1988. Therefore, this internal evaluation report was useful only as a "snapshot
in time" and does not represent post-1990 policies or acceptabie practices. The evaluation report
also pointed out that, of the mineral reports reviewed, the best quality reports were written by
recent graduates of the revised training program The evaluation report also notes that the worst
offenders did not pass the subsequent certification program or declined to apply for certification
altogether. These factors are clearly stated in the conclusions of the evaluation report and should
be included in the OIG draft report.
Prior BLM Program Reviews of the Mineral Patent Program. The BLM has conducted several
internal program reviews in the Aklinin~ Law Administration Program that affect mineral patent
applications which are not mentioned& the OIG draft report. The initial review was done in
1986 for Alaska upon request of the BLM Alaska State Director. A number of substantial
changes were made to the adjudication and mineral examination procedures in Alaska in 1987
and i988 due to the review. Some of these changes were also carried over into Bureauwide
policy and procedural changes as applied to mineral patent adjudication and mineral report
analvses.
d
The BLM then undertook a major program review in 1988 of the entire Mining Law
Administration (MLA) Program (see Attachment 3). The Mineral Patent Program was reviewed,
as was the cost recovery issue for mineral patents. Pursuant to that review, BLlM:
1 . Formed a task group to revise and update the formal guidance for mineral patent
application processing and mineral contest actions. The BLM Manual Section 3860, Wineral
Patent Applications"; 386 1, "Surveys and Plats"; 3862, "Lode Mining Claim Patent Applications";
3863, "Placer Mining Claim Patent Applications"; and 3864, Will Site Patent Applications" were
issued in July 1991. Handbook, H-3860-1 "Mineral Patent Application Processing" was
issued in April 1991. The BLM Manual Section 3870 "Adverse Claims, Protests, Contests and
Appeals" and Handbook H-3870-1 "Protests, Contests, Appeals, and Adverse Claims" were
issued in November 1994.
2 Instituted a new training course at the NTC specific to Mineral Patent Adjudication
in FiscalYear (Fy) 1990 (Course 300044, 1 week).
35
APPENDIX 3
Page 3 of10
3 . Continued to revise and upgrade the three formal mineral examination training
courses at the NTC to meet changing needs and conditions. These are 3000-13, "Nlining Claim
Validitv Examination" (the beginning course of 7 weeks); 3000-09, "Placer claim Examinations"
(2 weeks); and 3000-l 11 "Zvfine Cost Estimation" (2 weeks). A fourth course 300056, "Industrial
&Mineral Evaluations" (2 weeks); has been added for FY 1997. Course 300046 may be
substituted for course jOOO-09 in the required certification course work.
4 Established the "super-tech" classification schedule for its senior mineral examiners
in State bffices. (The "supertechs" are now all Certified iMineral Examiners (C&Es) pursuant to
the BLLM Mineral Examiners Certification Program - &Manual Section 3895 "Certification of
Mineral Examiners," many of them are also Certified Review Mineral Examiners).
Adequacy of Mineral Examiner Training. The BLM disa_erees with the general finding that BLM
does not have adequate training and technical standards in place for mineral examinations. The
auditors opine that the BLM's procedures for conducting mineral examinations and mineral report
reviews are not adequate. We disagree with the mineral examination portion of the statement.
The new training regime instituted in 1988 and after has dramatically improved the quality of the
work coming back through the Secretarial review from BLI'M CMEs. In discussing the pass/fail
requirement for mineral examiner training, the draft report states on page 17 that 4-6 individuals
would have failed each course (out of a normal enrollment of 15-20 per course). The NTC has
advised that the fact is that 5-6 individuals would have failed the course over the Last 1 I years
of the course offerings. This puts an entirelv different light and focus on the matter; therefore,
the draft report should be modified to refleit the accurate data.
Workload and Mineral E.raminer Distribution. The auditors point out that mineral examination
cases and CMEs are not always in the same location. The BLM has been aware of this problem
and has attempted to address it in instructions to the field for implementation of the
Congressional Five-Year Mineral Patent Plan contained in Public Laws 104434 and 104-208.
The Five-Year Plan requirements and detailing of CMEs was announced to the State Directors
through Instruction Memorandum (IM) No. 96444 dated July 17, 1996. This Ih4 requires the
State Directors to assipn, on a temporarv detail basis, CMEs from one District or State to another
District or State to a&St in case load reduction of mineral examinations.
A4ineral Repoti Review Workload. The auditors attempt to show (page 15) that review workload
exceeds capacity of assigned reviewers in the field and, therefore, a centralized review function
is required. The table presented on page 15 is misleading, as it shows total pending mineral
examinations in each State versus the number of available Certified Reviewers Of Mineral
Examination (CRMEs) and then seems to assume that all these examinations will land on the
CRNlE's desk simultaneously, which is not the case. These examinations will filter in over the
next 4 years, and with the exception of California and Nevada, can be handled with e,xisting staff.
Pursuant to the BLM Manual and Five-Year Plan guidance, outside review assistance can be
requested through the Certification Panel if backlogs develop locally. This obviates the need for
a centralized review group, as backlogs can be planned for and managed by the existing system.
3
36
APPENDIX 3
Page 4 of 10
Headquarters (HQ) Review Process by the BLM. The raw data from the mineral report cited
in the OIG draft report are accurate, but neglect to identify the source or causes of the problems.
The draft report (page 10) states that 10 of"22 reports were rejected by BLM HQ or the Office
of the Solicitor (SOL). While this is true, the reasons provided in the draft report are not on
point. Three of the 6 reports rejected by the SOL (page 1 I) were not reviewed by a CRhE at
the HQ level, as we did not have a CRIME on staff at the time. One of the remaining three
reports was rejected for title defects that should have been caught during the adjudication of the
application prior to issuance of the First Half Mineral Entry Final Certificate (FHFC), which is
a Regional SOL review function if BLM forwards the application to the Regional Solicitor for
review. The case files sent to this office for Secretarial review of a final patent application do
not normally contain title documents (not required for patent final review under Secretarial
procedures) unless they are requested in the course of that review. The problem, therefore, was
undetected by the BLiM HQ CRME. The title defects were discovered after the SOL became
concerned over other issues and communicated directly with the State Office involved.
Bureau of Land Management Conclusion. In looking at mineral patent processing overall, the
record shows that with the current checks and balances under Secretarial Order 3163 (now 209
DM 7.2, issued K/16/96) and under the existing BLM Manual system, there have been no
instances where the Government has mistakenly or fraudulently conveyed mineral patents to
mining claimants. Instead of reflecting a flawed process, the auditors' own data on patent
rejections demonstrate just the opposite--that the independent review of patent documents by the
several parties under the Secretarial review procedures safeguards the process from abuse due
to a variety of circumstances, such as a perceived lack of mineral examiner training, potential
unprofessional conduct, or differences in legal interpretation.
Recommendation No. 1:
"Centralize the report review process under the Bureau's Certification Panel and require
the Panel to review or cause to be reviewed all mineral reports. As part of centralization,
elimination of the state office and/or Bureau Headquarters reviews of the reports should
be considered."
Comment: The BLM does not agree with this recommendation for several reasons. Fmt of all,
pursuant to our general conclusion stated above, the OIG has not demonstrated a case for which
this recommendation is necessary. Second, the removal of the State's review function will destroy
the internal workings of each State's mineral examiner peer review and management control
process. Under this arrangement, Deputy State Directors will lose the ability to monitor ~kih
4
37
APPENDIX 3
Page 5 of 10
and training needs for their examiners. Professional and peer relationships will be dislocated and
cornprom&. This will only damage the BLlM's Certification and Review Program, not enhance
it. Third, it should also be noted that the Certification Panel members (5 BLM and 1 NPS) serve
on the Panel as a co-lateral duty. Each Panel member has a full time BLM or NPS job to
perform, and little time is left for other matters. The BLIM HQ has requested the services of two
additional Panel members as HQ CRMEs to ease the HQ backlog of pending reviews. Reviews
are taking 8-12 weeks, as these individuals have their State priorities to complete. The other
three Panel members are fully committed to the Congressional Five-Year Plan or State Annual
Work Plan responsibilities. With current staffing levels and workload Bureauwide, this proposal
is impractical to implement.
Recommendation No. 2:
"Identify the mineral patent process as a discrete process with a material risk factor and
subject it to the requirements of Circular A-123."
Comment: The BLM disagrees with this recommendation for the following reasons. First, it
is our opinion, that the Ok auditors have not demonstrated that the BLM's current lManual
system for the Mineral Patent Program and the Secretarial review process performed by the
Offke of the Solicitor for mineral patent applications have resulted in any lands being conveyed
contrarv to law. Second, the BLM in 1988 evaluated the Mineral Patent Program and
implemknted wide raqine revisions and updates to the adjudication process (the 1991 and 1994
BLM ~&fanua.l Section id Handbook releases). The BLi&l has also revised and upgraded its
mineral examination process to conform to modem practice and theory (the 1988 implementation
of the new training program and the 1990 implementation of the Certification program). Third,
the Secretary has made permanent (on December 16, 1996: 209 DM 7) the removal of the BLM's
authority to sign the first and second half of the mineral entry final certificates and the revocation
of the BLM's authority to sign any mineral patent; such authority is reserved to the Secretary.
Lastly, the Mineral Patent Pro&m is now under a Congressional moratorium (Public Laws
104434 and 104-208). Yew applications cannot be accepted and the processing of non-
,
arandfathered applications is prohibited. The Mineral Patent Program is restricted to those cases
`grandf'atherecY under the terms of the moratoria. Pursuant to those Acts, the Department of the
Interior has until September 30, - 7002 to complete all final actions (issue patent or to decide
,
to initiate a mineral contest proceeding) on the 359 grandfathered applications. It is also possible
that the Congress may extend the existing mineral patent moratorium past the year 2002 limit of
the current legislation. Placing this program, which is directly under Secretarial control and
would seem to function as an A-123 audit process, under the provisions of OMB Circular A-123
would serve no useful purpose.
38
APPENDIX 3
Page 6 of*.10
Recommendation No. 3:
"Issue the new BLIM. handbook in draft for comment and identify and develop
improvements needed for final issuance of the handbook."
Comment: The BLM concurs with this recommendation. This guidance, in the form of a
comprehensive Handbook for writers and reviewers of mineral reports, is in the final editing
stages at the NTC. Its arrival in HQ for issuance as Interim Guidance pending full field review
is anticipated in April 1997. Only one chapter remains in the editorial process. Concurrent
field review will occur using the Interim Guidance as a "living document" to work with and
comment upon at the same time. The BLM anticipates issuing a final edition by the end of
N 1998.
Recommendation No. 4:
"Develop standardized procedures for documenting reviews of mineral ex aminations that
allow for independent review and verification of the sufficiency of the mineral validity
examination and the mineral report."
Comment: The BLM concurs with this recommendation. It will be implemented via an IM
and then incorporated into the final edition of the interim Handbook. The IM will be issued by
the end of N 1997. The final Handbook will be issued by the end of FY 1998.
Recommendation No. 5:
"Develop pass/fail test procedures for Mineral Examiner training to provide greater
assurance that Mineral Examiners are sufficiently qualified to conduct mineral validity
examinations."
Comment: The BLM concurs with this recommendation. The BLM has already instituted
pass/fail testing in a number of its required programs, including HazMat and Petroleum Technical
Inspectors' Programs. Pass/fail testing was instituted for the Industrial Minerals Evaluation
(course 300046) in January 1997. Pass/fail testing has been instituted for the beginning mineral
examiners course (300043) in April 1997 and will be instituted in all other requ;ed cetication
courses as they next arise.
6
39
APPENDIX 3
Page 7 of 10
Recommendation No. 6:
"Develop continuing education requirements for Certified Mineral Examiners and
implement a compliance monitoring system for continuing education for both Certified
Mineral Examiners and Certified Review iMineral Examiners. "
Comment: The BLM concurs with this recommendation as to- CRMEs. The BLlM does not feel
that this is necessary for Comes for reasons discussed below.
The current BLM Manual Section 3895 requires continuinz education and continuing involvement
in the validity examination process for CRMEs (either by performing examinations or by
involvement with the formal training of CM& through the NTC), but it has never been
implemented. Implementation will require an annual reporting by CRMEs to the Panel and the
creation of an automated tracking system to record and track the requirement. The Panel
Secretary maintains a Dbase IV hosted application and status tracking system at present. The
program can be modified to include the two or three additional data fields needed for CRME
continuing education and trainingIwork enhancements. This will be implemented via IM by the
end of June 1997 and the appropriate BLM Manual Sections will be revised accordingly by the
end of FY 1997.
For CMEs, the BLM believes that on-the-job activity coupled with occasional "refresher courses"
at NTC or professional society "short courses" will suffice for professional enhancement and
development of appropriate expertise. A Bureauwide resource base exists through the minerals'
staff at the NTC, through the Panel, and through each State Office CRNE for examiners
confronted with a new or&challenging situation. This informal referral system has worked very
weil in the past and continues to io so. To aid in this referral and communications process, the
BLIM HQ has established an internal bulletin board (list server) dedicated to the mineral
examiners. The HQ CRME is the administrator of the list server and ensures that all interested
parties in BLM have access to it.
Cost Recovery.
Recommendation No. 1:
"We recommend that the Director, Bureau of Land Management, obtain a Solicitor's
opinion to determine whether the Bureau has authority to recover its costs of conducting
mineral examinations from applicants for patents. If it is determined that the Bureau can
recover such costs, the costs of conducting mineral ex aminations should be recovered in
accordance with Offke of Management and Budget Circular A-25."
Comment: On December 5, 1996, the Solicitor issued serialized opinion M-36987, "BLM's
Authority to Recover Costs of Minerals Document Processing." The opinion was signed by the
Secretary, making the opinion a formal Secretarial statement of Departmental p&cy. The
7
APPENDIX 3
Page 8 of10
opinion states that mineral patent applications are subject to full cost recovery procedures under
the authority of the Federal Land Policy and Management Act of 1976, QS omen&d. Proposed
rules have been drafted for cost recovery of various mineral related documents and actions, wfiich
include mineral patent applications. The Assistant Secretary for Land and Minerals Management
has not yet set a target date for publication of the proposed cost recovery rules.
Conclusions
In summary, the BLM disagrees with the finding that its mineral reports still suffer from serious
deficiencies.
As stated on pages 2 and 3 above, a mineral patent application and mineral report pass through
many hands and are reviewed and scrutinized both within the BLM and at the Departmental
level. The BLM has made many improvements in the process since 1986 to ensure that patent
applications are ethically, professionally, and independently reviewed. In addition, most
examiners subscribe to or are members of professional organizations and/or State registration or
licensing bodies which prescribe strict standards of professionai ethics and the avoidance of
potential conflicts of interest. Violation of these professional ethics removes any possibility of
post-Government employment.
The OIG audit record shows that the current checks and balances of the new procedures under
Secretarial Order 3 163 (now 209 DM 7.2, issued 12/16/96) successfully monitor the patenting
process. Instead of deftig a flawed process, the auditors' own data on patent rejections
demonstrate just the opposite--that the independent review of pateat documents by the several
parties under the Secretarial review process safeguards the process from any potential abuse due
to a perceived lack of mineral examiner training, unprofessional conduct, or differences in legal
interpretations of the mining law.
Thank you for the opportunity to review and comment on the draft report. If you have any
questions about our response, please contact Roger Haskins, Senior Specialist, iMining Law
Adjudication, at (202) 452-0355 or Gwen Midgette, BLM Audit Liasion Officer, at (202)
452-7739.
Attachments
INOTE: ATTACZ?IE>ZTS 2 ;i:D 3 NOT INCLUDED BY OFFICE OF TWPECTOR GENEUL.]
APPENDIX 3
Page 9 of 10
Attachment 1
Background
Page 1 1st line: change "the Mining Law of 1872," to "the Gemmd Mining Law of 1872, as
amended,"
5& I& c-e to read: `The Bureau administers the mineral n'ghtr under the Geneml Mining
Law on all of these lands."
After the above senknce, add a new sentence to read: "Each Fe&ml agency admihi.srers
ex@mti~tt and mintig acrivities on mining clabns pursuanf to individual agency su@ue
manqement regutins."
6th line (ori;ginti) change `The Mining Law allow. o m " to "The General Mining L*aw allows..."
Page 2 3rd line change .."pwchase price for patented land of..." tu read: "..pu~hase price .rez by
the General Mining Lnw for the land applied for of..."
2od paragraph 5th line change . ..( 1) reviewing the patent application..." to "...( 1) ac@udication of
the paceot application..."
9th line change ".. Initial review..." To "...initial m!!udicotim..."
12rh liuc change `Ladequacy of the x1-d mineral rcpom." Co read ".,.adequacy of the required
mineral reports."
13th line change "... Forest Service Mineral bminers." to read "Jorest Service Cemiied
Miner al Examiners."
3rd paragraph 1st line replace the word "review" with the word "adjudictuion."
Page 3 2nd line change "... documents under the Mining Law..." to ".,. documents under the
General Mining Law..."
Page 4 2nd paragraph iine 12 change ?. responsibility for review& patent applications..." 10 read
"...~esponsibility for inirial adjudication of patent applications..."
Page 5 last line of page; add a aeul sentence to read Y7iis requirement was continued in rhe
Intetior and Related Agencies Appropriation Acf for 1997 of September 30, 1996 (Section 3I4
of Public Law 104208). "
10
42
APPENDIX 3
Page 10 of 10
Findings and Recommendations
A,
ih4her;r-l Validity Examinations
Page 15 line 7 of the text, insert the word "Review" in fkont of the word `Wbma,l."
page 17 2nd par~mg91 line 8, the proper statistic is 46 students over the iast 11 years would
bye fgled the test, NOT 4-6 students would have failed each COUBC!. ,
Other bddters
Page 24 Ihe 5 change "...titial review of..." to read "...initial @dictztion of... `
11
43
APPENDIX 4
STATUS OF AUDIT REPORT RECOMMENDATIONS
Finding/Recommendation
Reference
Status
A.1, A.2, and A.6 Unresolved.
A.3, A.4, and A.5
Resolved; not
implemented.
Bl
Management concurs;
additional
information needed.
Action Required
Reconsider each recommendation,
and provide action plans that include
target dates and titles of officials
responsible for implementation.
No further response to the Office of
Inspector General is required. The
recommendations will be referred to
the Assistant Secretary for Policy,
Management and Budget for tracking
of implementation.
Provide target dates and titles of the
officials responsible for publishing
the regulations.
44
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