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Government Affairs Program


Update on Mining Law of 1872 Reform (5-5-98)

Most Recent Action
Efforts to reform the Mining Law of 1872 have picked up steam recently. The Senate Energy and Natural Resources Subcommittee on Forests and Public Land Management held a hearing on April 28 on several of the bills aimed at reforming the law, including S. 326, S. 327, and S. 1102. Committee sources indicate that S. 1102 is likely to be marked up in the near future. The full written testimony of the witnesses is available on th e subcommittee website.

Legislation Introduced
Comprehensive reform legislation was introduced by Senators Frank Murkowski (R-AK), Larry Craig (R-ID), Harry Reid (D-NV), and Richard Bryan (D-NV) on July 31, 1997, in the form of S. 1102 , the Mining Law Reform Act of 1997. The bill would set a royalty of five percent of net proceeds on production, exempting miners with annual net proceeds of $50,000 or less. The legislation would also make permanent the current claim-maintenance fee of $100 per claim and a location fee of $25 per claim. The maintenance fee would be waived for miners holding 25 claims or fewer. In addition, the bill is intended to reform permitting and bonding guidelines and establish a reclamation fund, according to in formation from the Senate Energy and Natural Resources Committee.

According to a Bumpers aide, however, S.1102 is a "rehash" of reform language attached to a budget bill in the 104th Congress that was thwarted by a Presidential veto. "Basically it does nothing," to address existing low royalty rates, fails to deal wi th permitting by continuing the sale of federal land for next to nothing and provides inadequate environmental safeguards, the Bumpers aide said. The Administration echoed Bumpers' views, criticizing the bill for allowing patenting to continue and its "br oad exemptions" for royalty payment.

Six bills addressing the Mining Law of 1872 have been introduced this Congress as three sets of companion bills, all introduced by Senator Dale Bumpers (D-AR) and Representative George Miller (D-CA). The bills seek to address the extremely low costs of mining on public lands, originally meant to spur development out West. Interior Secretary Bruce Babbitt has voiced his support for these bills, calling them "excellent starting points."

H.R. 778 and its companion bill, S. 327, were introduced as the Hardrock Mining Royalty Act of 1997. The bills' purpos e is to "ensure that federal taxpayers receive a fair return for the extraction of locatable minerals on public domains." It establishes a royalty fee of 5% of the net smelter return from the production of such locatable minerals or concentrates, which is estimated to net the government $175 million over 5 years. These royalties will be placed in a newly created fund entitled "The Abandoned Minerals Mine Reclamation Fund" which will work to restore land and water resources adversely affected by past minin g activities. In addition, this legislation would permanently extend the holding fee and raise it to $125 per claim for new claims.

H.R. 779 and S. 325, The Elimination of Double Subsidies for the Hard Rock Mining Industry Act of 1997, amend the Int ernal Revenue Code of 1986 to repeal the percentage depletion allowance for certain hard-rock mines. When mineral extraction companies buy private land, they pay a premium for minerals they believe to be located under the land. The depletion allowance, wh ich varies from mineral to mineral, is used to depreciate the premium. Mining companies on public lands, however, do not pay a premium, and this bill would prevent them from taking a depletion.

Finally, H.R. 780 and S. 326, the Abandoned Hardrock Mines Reclamation Act of 1997, aim to reclaim abandoned hardrock mines. The bills create a reclamation fee for any person producing hardrock minerals from a mine that was within a mining claim that has subsequently been patented under the general mining law. This fee shall be based on the net proceeds as a percentage of the gross proceeds from the mine. The money collected will be placed in the newly created Abandoned Minerals Mine Reclamation Fund to reclaim and restore land and water resources adversely affected by past mining.

Representative Nick Joe Rahall (D-WV), a long time supporter of mining law reform, introduced H.R. 253, the Mineral Exploration and Development Act of 1997 to "modify the requirements applicable to locatable minerals on public domain lands, consistent with the principles of self-initiation of mining claims." The bill was referred to the Committee on Resources, Subcommittee on Energy and Mineral Resources in early February; however, no further action has occurred. The bill sets forth guidelines for mineral exploration on public domain lands and creates a certain annual claim maintenance fee. The revenues from this fee will be deposited into the Abandoned Locatable Mineral Mine Reclamati on Fund, which will be administered by the Secretary of the Interior acting through the Director of the Office of Surface Mining Reclamation and Enforcement. The bill also requires that activities be performed in a manner that minimizes adverse effects to the environment.

A bill that would establish a royalty on hardrock minerals was introduced in the House just before the holiday recess, joining the 8 previously proposed reform bills in Congress. H.R. 281 8, introduced by Rep. Peter DeFazio (D-OR), would establish a royalty of 5% of the net smelter return from the production of minerals produced from mining claims. The royalties would be divided among the Forest Service, Park Service, Fish and Wildlife Service, and Bureau of Land Management "to increase the quality of the visitor experience at public recreational sites."

In addition to the bills introduced, mining law was also addressed in the FY98 Interior Appropriations bill. An amendment offered by Senator Harry Reid (D-NV) would have mandated a consensus among the governors of the twelve western states that operate under the 1872 mining law for new provisions. Reid claimed that the governors have been ignored in the past. Some Democrats, however, including Senate Energy and Natural Resources Committee Ranking Member Dale Bumpers (D-AR), argued that requiring a cons ensus from the Western states would block Interior Secretary Bruce Babbitt's mining reform efforts. A compromise was finally reached when Bumpers came up with a compromise. The amendment, passed by the committee by voice vote, would allow mining rules to proceed when the Department of the Interior certified that all western governors had been consulted.

Administrative Action
Interior Secretary Bruce Babbitt announced a controversial bonding requirement that will force all mining companies operating on Bureau of Land Management land to guarantee an environmental cleanup of their mines if they go out of business. They must post a bond for 100% of the clean-up costs before beginning operations. This regulation applies to all hardrock mining operations greater than casual use, including those less than 5 acres. The regulation defers to states that have equally or more stringent r egulations already in place. It was enacted on March 30, 1997. The House Mineral and Energy Resources Subcommittee held a hearing on March 20, 1997 to examine "the integrity of the process" used to make the rule, as some members believe the process used b y the Department of Interior violated the Administrative Procedures Act requirement for meaningful public input. To learn more about the regulation and hearing, read the testimony from the House Mineral and Energy Resources Subcommittee hearing on the rule. The Resources Committee held a second hearing on June 19, 1997. To learn more about the issues addressed, visit the Bonding Rule Hearing Summary on this site. House Resources Committee Chairman Don Young (R-AK) recently gained the authority to subpoena documents from the Department of the Interior on the rule, which is currently the subject of a lawsuit. Interio r officials expect to release final comprehensive mining law reforms in 1999, department sources have said.

Additional information is available from the Committee for the National Institute for the Environment site, which has on-line reports from the Congressional Research Service on this and other environmen tal issues. CRS reports are also available by calling your local representative or senator.


Background from the 104th Congress
The following article by Heidi Mohlman (AGI Summer Intern) has been reprinted from The Professional Geologist

Efforts in the 104th Congress to reform existing mining laws have fallen prey to the same prohibitive forces encountered in previous Congresses. Once again, federal agencies are pitted against state agencies, representatives from industry are in op position to representatives from environmental groups, easterners conflict with westerners, and the revolution begun by the first Republican-led House of Representatives in over 40 years has lost the momentum necessary to produce significant and lasting c hange. An examination of the debate over mining law reform provides insight into the larger forces affecting the progress of the 104th Congress.

The General Mining Law of 1872 was enacted to spur interest in the lands of the West and help economic growth, allowing individuals and private companies to stake mining claims on public lands and charging a nominal fee for the property title. The Mine ral Lands Leasing Act of 1920 turned over coal, oil, and natural gas rights to the federal government and developed a leasing system that required royalties from the leases be shared between the federal government and the state in which the lease existed. Hard-rock minerals such as gold, silver, copper, lead, iron ore and zinc were exempted from the 1920 law, and even today remain under jurisdiction of the Mining Law of 1872.

The most recent effort to reform the mining laws began in 1989 after a General Accounting Office (GAO) report advised repealing the law's patenting provisions, which allowed hard rock claims and the surrounding land to be converted from public to priva te ownership for $2.50 or $5.00 an acre, prices established by the 1872 law. The GAO claimed that the law was being abused by individuals and companies who were patenting the land for a fraction of its fair market value and then selling the land to develo pers at an enormous profit. Reform supporters suggested placing royalty requirements on hard-rock mines, similar to those placed on energy producers, and advised instituting tough reclamation standards.

In the Democratically controlled 103rd Congress, the House passed a bill introduced by Rep. Nick Joe Rahall (D-WV) instituting sweeping reforms to the 1872 law. The bill's provisions included the elimination of the patenting process, establishment of a n 8 % royalty based on the gross value of produced minerals for existing and future claimants, and substantially increased reclamation standards that allowed the federal government to declare certain lands "unsuitable" if they were in danger of irreparabl e damage from mining.

The Senate passed a much more moderate, industry-supported bill, sponsored by Sen. Larry Craig (R-ID) as a "ticket to conference" (and compromise) with the House. The bill required patents to be purchased at fair market value of the surface land involv ed and required that all subsequent claims pay a 2% royalty on net proceeds after companies deducted production costs, such as separating the mineral from the rock, transportation, maintaining equipment, complying with environmental laws, and other expens es. After months of negotiations, the House/Senate conference failed to reach a compromise. Issues contributing to the stalemate included the relationship between the federal government and the states, water quality, and the economic impact on the mining industry.

These issues remained at the center of mining law reform in the first session of the 104th Congress with the Republicans now in charge. Sen. Craig and new House Resources Committee Chairman Don Young (R-AK) introduced bills (H.R. 1580 and S. 506) nearl y identical to Craig's earlier bill, and it looked as if the 104th Congress would pass moderate, industry supported reform. A more radical reform bill, S. 504, introduced by Sen. Dale Bumpers (D-AR) was virtually ignored, as was S. 639, introduced by Sena tors Ben Nighthorse Campbell (R-CO) and J. Bennett Johnston (D-LA). The latter contains language from the last compromise reached in the 103rd Congress that was agreeable to western Democrats, including a 3% gross royalty on gold and a 2% gross royalty on all other minerals. Just like the Democrats in the previous Congress, however, the Republicans did not have a filibuster-proof majority and the reform effort began to lose momentum toward the end of the first session with all four bills stuck in committe e. A moderate proposal was included in the Omnibus Budget Reconciliation Bill of 1995 that was vetoed by President Clinton on December 6, 1995. The reconciliation proposal called for a 5% net proceeds royalty that would be waived for net proceeds of less than $50,000 and patenting at fair market value but not including the value of the minerals below ground.

With the 104th Congress drawing to a close, a staffer from the House Resources Committee predicted that the bills will remain in committee, as both sides of the issue lack the 60 votes needed in the Senate to cut off a filibuster. Hard-rock mining law reform remains a sensitive issue, as industry and state representatives push for more autonomy, and environmentalists and federal agencies fight to retain control over ultimate regulatory power. Without progress on mining law reform, the current appropria tions bill is expected to continue the moratorium on granting patents, leaving the system in limbo. Substantial change to the 1872 laws remains as far away at the end of the 104th Congress as it was when the current debate began in 1989.

Note: The Political Scene column from the September 1995 issue of Geotimes magazine provides some additional background on this issue.

Background article contributed by Heidi Mohlman, AGI Government Affairs Program Intern


Sources: Library of Congress, Environment and Energy Weekly, Mining Engineering

Please send any comments or requests for information to the AGI Government Affairs Program.

Contributed by Kasey Shewey, AGI Government Affairs, and Jenna Minicucci, AGI Government Affairs Intern.
Last updated May 5, 1998


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