In Search of Certainty: The HardrockMining Industry Presses for National Mining Policy (11/03)

The following column by AGI/AIPG Geoscience & Public Policy Intern Emily Scott is reprinted from the November 2003 issue of The Professional Geologist, a publication of the American Institute of Professional Geologists . It is reprinted with permission.

Concerned about America’s increasing dependence on foreign mineral imports and the implications of that for the survival of the domestic mining industry, the House Energy and Mineral Resources Subcommittee held an oversight hearing this past July on the role of strategic and critical minerals in national security. As the witnesses presented their personal and professional experiences in the hardrock mining industry, the hearing turned into a discussion — and at times a lecture — about the many inconsistencies and uncertainties within the hardrock mining regulation and permitting process. A complex and multi-sided issue, hardrock mining often garners attacks from environmental groups for being careless with natural resources and for harming ecosystems due to acid mine drainage and landscape damage. This July, however, the subcommittee’s focus was on the complaints of the industry. By the end of the hearing, the hardrock mining industry had sent a clear message to the legislators: make up your mind and stick to it.

A background memorandum written by the subcommittee majority staff hinted at the tone of the hearing, stating that the decline in the domestic mining industry since the 1990s is “directly related to the regulatory and administrative changes made during this time period, including revisions to the [Bureau of Land Management’s] 3809 Regulations and the Millsite Opinion.” Ann Carpenter of the Women’s Mining Coalition, and Douglas B. Silver, President of Balfour Holdings, passionately argued for a national mining policy that would streamline and solidify the permitting and regulation process. They argued that U.S. mineral resources have not been depleted and could be mined in an environmentally responsible and economically profitable manner if regulations and the permitting process were streamlined and enforced, even with the higher labor and environmental reclamation costs in the U.S. than overseas.

The existence of abundant remaining domestic hard-rock mineral resources was supported by the testimony of Dr. Charles G. “Chip” Groat, director of the U.S. Geological Survey (USGS), referencing his agency’s 1990 assessment that “there is every reason to believe that, for conventional-type deposits that contain gold, silver, copper, lead, or zinc, about as much is left to be discovered in the United States as has already been discovered.”At the hearing, the viewpoint of mining opponents was noticeably absent from the discussion as everyone – witnesses and Members of Congress alike – seemed to agree that there were problems with the system that were leading to the decline of the domestic mining industry.

Delays and High Costs are Major Concerns

Two key issues were at the forefront of the discussion: that the great uncertainty in the domestic mining industry due to recent changes in regulations and permitting is encouraging business to flow overseas at an alarming rate, and that the amount of time it takes to get a mining operation up and running in the U.S. makes it too expensive to profitably mine in this country. Aggravating the cost and uncertainty is the ability of environmental groups to sue mining companies as a delay tactic.

Witnesses at the hearing traced the recent lack of confidence in the U.S. domestic market to the release of a 1997 Department of the Interior legal opinion limiting the size of millsites and the revisions of the Bureau of Land Management’s (BLM) 3809 regulations, which took place in 2001. The 1997 opinion was issued by Interior Department Solicitor John Leshy, who declared that — based on a narrow interpretation of the 1872 Mining Law — only one five-acre millsite would be allowed per lode claim for uses associated with mining. Heap-leaching, a technique used in gold mining, and the disposal of waste rock require large tracks of land that exceed the five-acre limit allowable under this interpretation. The opinion caught the mining industry off-guard and made investors nervous. It was challenged in 1999 by the Battle Mountain Gold Company over its plan of operation for the Crown Jewel gold mine in Washington state. A provision inserted into the 1999 Emergency Supplemental Appropriations Act by then-Sen. Slade Gorton (R-WA) overturned the plan’s denial, and ordered that the Crown Jewel patent and all other patent applications and plans of operation submitted prior to the opinion be approved. Contention over the opinion surfaced again during deliberation of the FY 2000 Interior appropriations bill, where a two-year exemption from the opinion was enacted. On September 28, 2001, as the exemption was about to expire, the Bush Administration decided not to apply the Millsite Opinion to any plans or patent applications approved or submitted before November 29, 1999, and requested a review by the Interior Department’s current Solicitor.A new opinion has been drafted but not yet approved or released.

Revisions to the BLM’s 3809 regulations in 2001 reflected the recommendations of the National Research Council in its 1999 report, Hardrock Mining on Federal Lands. The report found that existing environmental protection laws were generally sufficient, but great improvements could be made by increasing the consistency of interpretation and implementation of those laws, along with better agency management. Although these recommendations and findings were supported by the industry, the revision process created what Carpenter called a “climate of uncertainty” regarding the regulations. The 1997 opinion and the 3809 revisions together fueled the “exodus” of investment dollars that began in the 1990s and is continuing despite rising gold prices.

According to Carpenter, there has been a 66% decline in U.S. exploration spending from 1997 to 2002, amounting to a loss of approximately $125 million. Mining Engineering magazine reported in May 2003 that the U.S. share of worldwide exploration was 7.2% in 2002, down from 10% of the worldwide total in 2000. The loss in investment is accompanied by job losses at local, state, and national levels, an increasing dependence on foreign minerals and products, and the loss of American mining schools.

At the hearing, subcommittee member Rep. James A. Gibbons (R-NV) gave voice to the industry’s second major complaint by reflecting upon his travels to Chile, which is ranked third on the Fraser Institute’s Annual Survey of investment attractiveness. Gibbons said that retaining a mining permit in Chile takes only two years from the time of discovery, whereas permitting in the U.S. on average takes five to ten years, and possibly longer. Gibbons attributes the delay to the ability
of environmental groups to challenge environmental reviews, or Environmental Impact Statements, in court. Carpenter also stated that the permitting process is also prolonged in the United States because all the groups and agencies that have a say in the permitting process are not included from the very beginning, so a company may not learn of a fatal flaw in its application until the permit has passed through several lengthy and costly stages.

The proliferation of lawsuits brought against mining companies has greatly added to both the uncertainty of the process and its cost. Silver and Carpenter both named the elimination of “frivolous lawsuits” as a top priority in any future national mining policy. Silver estimated that five out of the ten years it generally takes for a mine to get from the discovery of a deposit to mineral production are spent in court.

State and Federal Laws Lack Uniformity

Further complicating the process are the differences between regulations at the state level and those at the national level. States have jurisdiction over state-owned land and privately owned lands, while federal laws cover federally owned lands. Some states, such as South Dakota, allow for challenges to a mine to take place within the permitting process. According to Dr. Charles A. Kliche, professor at the South Dakota School of Mining and Technology, the Department of Environment and Natural Resources (DENR) reviews the permit application for completeness and technical content, and then passes it on to a special, governor-appointed board, the Board of Minerals and Environment (BME).The BME holds a public hearing regarding the permit, at which time any group may challenge the permit. If environmental groups become involved, the hearing often turns into what Dr. Kliche calls a “circus,” with their representatives (not necessarily lawyers) cross-examining witnesses.

Hearing witnesses argued that the reluctance of investors to support the domestic mining industry is understandable when facing such uncertainty. A permit could be technically complete and legally valid, but the period of legal contestation in the United States can drag on for such a long time that the deposit becomes no longer economically profitable to mine. Environmentalists argue that litigation is the last chance they have to protect lands from faulty and problematic regulations that need revision, and some in the mining industry agree that yes,a new law is needed.Greenwire quotes a mining industry official as saying, “Let’s get it over and done with so we can get some certainty and move on with mining.” The sentiment was echoed by Silver, who encouraged the committee to streamline the regulatory and permitting process and just “stick to it.”

According to Carpenter, the permitting process is so complicated and involving that it alone costs $5-10 million, no counting litigation costs that may be incurred. Carpenter estimated at the hearing that the total cost of getting a mine up and running, including all capital costs and permitting, to be $65 million.With such an enormous amount of money at risk, the domestic mining industry in the U.S. will continue to crash if companies continue to flee this country in search of more consistent, stable regulations and procedures overseas. Carpenter testified that states like South Dakota and Wisconsin have fair-to-good mineral potential, but are ranked in the bottom three global mining jurisdictions in the Fraser Institute’s Annual Survey due to their inconsistent and complicated state regulations.Mining regulations will always need to differ from state to state due to the vast differences in each state’s mineral resources, but at the July hearing, the industry seemed to be calling for some type of national guidelines to add certainty to the process.

Witnesses at the hearing were confident that federal lands could be mined in an economic and environmentally friendly way, attaining what David Gerard, Research Associate for the Political Economy Research Center (PERC), has called “the twin goals of fostering development of the mineral resources of the United States and maintaining environmental quality.” Although Gibbons is “very interested in working with the industry” on legislation, no bill has been introduced as of yet. Rep. Barbara Cubin (R-WY), chairwoman of the subcommittee, told Environment & Energy Daily after the hearing that mining law reform is “urgent,” but the industry needs to start the process and build a foundation of support for such reform.

Emily Scott is a senior geology and government double major at Bowdoin College. She would like to thank Dr. Charles A. Kliche and Dr. Michael P. Terry for their input and assistance.

This article is reprinted with permission from The Professional Geologist, published by the American Institute of Professional Geologists. AGI gratefully acknowledges that permission.

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

Posted June 29, 2005

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