American Geological Institute

Government Affairs Program

Political Scene: Mining Law Reform in the 104th Congress (9/95)

One of the most important natural resource issues facing the 104th Congress this year is reform of The Mining Law of 1872 and related statutes concerning hard-rock minerals. The law was enacted to assist in the orderly settlement and development of the West, but it is now a target for environmental and taxpayer groups such as the Sierra Club and National Taxpayers Union. They see the law as a giveaway of national assets to mining companies, many of which are foreign-owned. Under the law, miners pay no royalty on the minerals extracted and can buy, or "patent", land for $2.50 to $5.00 per acre. Opponents also point to the inadequacy of reclamation requirements and the need for more stringent environmental safeguards.

Supporters of the mining industry, however, argue that while some reform is in order, the cost of additional environmental control would further cripple an industry that is already being forced to Asia and South America by high overhead and strict environmental laws. Despite the industry's recent decline, mining remains an important part of the economy in several Western states --Nevada is the fourth-largest gold producer in the world. Mining law reform has become a critical issue for many Westerners, who see it as part of a broader assault of their rights by the federal government. Because the issue elicits strong emotions on both sides, middle ground has been a scarce commodity.

Last year, the Democratically controlled House of Representatives passed far-reaching mining law reform and resisted compromises offered by the Senate, where Democrats lacked the 60 votes needed to prevent a Republican filibuster of the reform bill. Final efforts to reach consensus failed when Republicans decided that they were likely to take control of the Senate and possibly the House after the November elections. Having done that, the Republican-controlled 104th Congress is once again taking up mining law reform with a different arrangement of players. Perhaps the most striking change is in the position of chair of the House Resources (formerly Natural Resources) Committee, where George Miller (D-Calif.) has been replaced by Don Young (R-Alaska), a long-time supporter of mining interests. Another Alaskan mining proponent, Sen. Frank Murkowski (R-Alaska), is now chairman of the Senate Energy and Natural Resources Committee. Young is waiting to see what compromise emerges from the Senate, where the new majority lacks the votes to stop a minority-led filibuster. Furthermore, the threat of a Presidential veto hangs over House and Senate alike. Both sides agree that if reform is not enacted during the first session of this Congress, it is not likely to happen until after the next election cycle, as Republicans seek further electoral success and Democrats fear making an issue of such a political hot potato.

Three bills have been introduced in the Senate and referred to the Energy and Natural Resources Committee. The first two were introduced on successive days: S. 504 by Sen. Dale Bumpers (D-Ark.) and S. 506 by Sen. Larry Craig (R-Idaho). The third, S. 639, was introduced by Sen. Ben Nighthorse Campbell (R-Colo.) and former committee chair Sen. J. Bennett Johnston (D-La.).

Depending on your perspective, the Craig bill is responsible reform or sham reform, and the Bumpers bill is meaningful reform or part of the war on the West.

The Secretary of the Interior's authority to declare certain areas off-limits, or "unsuitable", for mineral development is a key obstacle to a bipartisan solution. Other major stumbling blocks are royalties, patenting, and reclamation. The royalty debate is between the use of a net income royalty or a form of gross royalty. Net income royalty allows deductions for all operating costs associated with mining, processing, refining, and transportation, as well as depreciation and other expenses; gross royalty applies to the gross income from the first marketable product. To further complicate matters, a variant of a gross royalty is a "net smelter" royalty, which allows deductions for smelter costs for minerals other than gold.

The Craig bill calls for a 3 percent net income royalty with generous deductions and exemptions for small mines. The Bumpers bill supports an 8 percent gross royalty, and the Campbell-Johnston bill seeks a 3 percent gross royalty on gold and 2 percent gross royalty on all other minerals.

The patenting system for hard-rock minerals is unique among natural resources on public lands, most of which are developed under a leasing system. Patenting allows miners to buy outright the land above economically developable claims, removing it from the public domain. The Craig bill retains patenting but requires that fair market value be paid for the land. The Bumpers bill would eliminate patenting in favor of a permitting system. The Campbell-Johnston bill would grant ownership through patenting only to the locatable minerals, not the land.

Reclamation is the third major sticking point between the two sides. Critics of the mining law argue the need for minimum federal reclamation standards to ensure environmental protection, whereas others believe that current state and federal statutes provide the necessary protection. Such provisions are included in the Bumpers bill, and to a much lesser extent in the Campbell-Johnston bill, which defers to state laws. The Craig bill defers entirely to state regulations, requiring only substantive compliance with state laws except where it is not economically practicable to do so. All three bills require prospective miners to demonstrate adequate financial assurance to undertake reclamation.

Despite the major differences between the two sides, small reform steps have already been taken. In 1992, Congress used the appropriations process to increase claim maintenance fees to discourage speculation, and a broad consensus recognizes that certain abuses must be curtailed, such as the use of mining claims for non-mining purposes. Nevertheless, Democrats in the Senate are unlikely to agree to incremental reform this time, because once a reform measure passes Congress, politicians on both sides will be reluctant to reopen the issue for the next increment.

-- David Applegate, Director of Government Affairs, American Geological Institute,

Reprinted with permission from Geotimes.

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Last updated August 7, 1996

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