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Mining Policy (12-8-08)

Mining law reform is one of the eternal issues before Congress, with a focus on the reform of the General Mining Law of 1872 that governs many mining activities on public land. The law allows individuals and corporations the right to stake claims on prospected mineral deposits. If the deposit is found to be economically recoverable the holder of a claim can patent the deposit and thus have title of the minerals and land of the claim. This is known as the Claim-Patent System and its provisions are considered outdated by many. Environmentalists feel that the law needs to be updated because public lands are being destroyed by mining activities without fair payment or reclamation compensation from miners. Mining industry representatives agree that some provisions of the law are outdated, but agreement ends there on how the law should be revised to balance mineral development with other land uses. With comprehensive mining law reform seemingly unreachable, efforts have focused on regulatory reform within federal land management agencies and, particularly, on mining safety laws.

Federal Rule Making: Last Minute Environmental Actions
The Bureau of Land Management (BLM) published a final rule regarding emergency withdrawals of public land from energy production and mineral extraction to protect natural resources in the December 5, 2008, Federal Register. The rule retains the power of the Department of the Interior Secretary to make emergency withdrawals but limits congressional authority. This rule is related to Secretary Dirk Kempthorne’s withdrawal of public lands for uranium mining near the Grand Canyon. (11/08)

Previous Action

Update on Mining Reform in Congress
Reform of the Hardrock Mining Act of 1872 has been discussed from as early as 1934 and many expected that long-anticipated changes might finally take place in 2008. Although a number of political issues have delayed action on mining reform this year, it is likely to continue to receive attention in the 111th Congress.

The Hardrock Mining Act has remained unchanged since President Ulysses S. Grant signed it in to law in 1872. The law was originally designed to help attract new settlers to the under populated western United States by allowing private entities to stake claims on public resources for only $2.50-$5.00 per acre. Although Congress has placed a moratorium on such sales since 1994, hardrock mines continue to operate royalty-free.

In late 2007 the House passed a bill (H.R. 2262) which would impose a royalty system on hardrock mining that is similar to royalties for oil, gas, and coal industries. New claims would be subject to an 8 percent royalty on gross returns and existing claims would start to pay a 4 percent royalty. Part of the revenue generated from the new royalties would be dedicated to the cleanup of the estimated 100,000 abandoned mine sites located on national forest and Bureau of Land Management (BLM) lands. The House bill also gives the federal government more authority over where hardrock mining can take place.

The reception of the House bill in the Senate has not been positive. Majority Leader Harry Reid (D-NV) and other senators from western states instead support a net royalty that would only apply to new operations. Their concern is that the royalty structure in the House bill would place such a large burden on mining companies that they would discontinue operations in the United States, destroying local economies dependent on mining and causing an overall loss in revenues to the federal government At the same time, the U.S. would become more dependent on foreign sources to meet our demand for hardrock minerals. Environmentalists counter that the less stringent royalty would generate insufficient funds to address cleanup projects. The mining industry has resigned itself to some type of royalty but is lobbying for legislation to include provisions for long-term security of permits and loans for mine operations.

Senate Energy and Natural Resources Committee members from both parties are reported to be developing drafts of legislation but neither group has released a proposal. Committee Chairman Jeff Bingaman (D-NM) has said the issue will be a priority in the next Congress and both presidential candidates support some form of mining reform. Congressman Nick Rahall (D-WV), Chairman of the House Natural Resources Committee and sponsor of H.R. 2262, has said he is open to the possibility of developing another House bill. So the stage is set for action in the 111th Congress. (10/08)

Hardrock Mining Law Reform Receives a Senate Hearing
Last year the House passed a hardrock mining law reform bill (H.R. 2262) that would impose 8 percent royalties on the gross returns on minerals from new claims and a 4 percent royalty on existing claims with part of these proceeds marked for cleanup of thousands of abandoned mines across the country. The measure would also grant federal and state authorities more control over where hardrock mining can be conducted.

On January 24, 2008 the Senate Energy and Natural Resources Committee held a hearing on hardrock mining reform and asked a bevy of diverse witnesses about the pros and cons of the House bill and what the Senate Committee should consider in any Senate legislation. William Cobb of the National Mining Association called the added controls on mining an undue regulatory burden. Mike Dombeck of Trout Unlimited and a former head of both the U.S. Forest Service and the Bureau of Land Management indicated that land managers have little say over mining sites compared to oil and natural gas developments and this lack of oversight needs to be fixed. James Otto an independent consultant favored a gross royalty over a net-proceeds royalty but noted that an 8 percent royalty would be the highest in the world.

Senator Pete Domenici (R-NM) called for the Senate to consider drafting a completely new bill versus compromising on the House bill. Chairman Jeff Bingaman (D-NM) and Senator Lisa Murkowski (R-AK) thought that more analysis of the royalty structure was needed before deciding on any numbers.

Discussions about hardrock mining reform are likely to continue in both chambers, however, it is unclear whether the Senate will draft their own bill or consider revisions to the House bill. Input from stakeholders to the Senate Energy and Natural Resources Committee and the House Natural Resources Committee would probably be of value throughout the year even if legislation is not finalized. (01/24/08)

Mining Law Reform Clears House
Representative Nick Rahall's (D-WV) Hardrock Mining Reform Act (H.R. 2262) passed the House by a vote of 244-166 on November 1, 2007. The bill would impose an 8 percent royalty on the net smelter return of minerals on new claims and a 4 percent royalty on existing claims. The royalty system would collect an estimated $30 million to $70 million for cleanup of abandoned mines on federal lands. An amendment added to the measure would require 50 percent of the royalties for the Hardrock Reclamation Fund to go to the states in proportion to their royalty generation levels. Other amendments clarified "valid existing rights" and allow river watersheds to receive funding from the Abandoned Locatable Minerals Mine Reclamation Fund.

The bill now moves to the Senate where it faces a very uncertain future. Senators Jeff Bingaman (D-NM) and Pete Domenici (R-NM) indicate their support for the House efforts but would work to put forward their own, but different measure. Senators Russ Feingold (D-WI) and Maria Cantwell (D-WA) introduced a bill that would end the "percentage depletion allowance" that allows hardrock mining operations to take tax deductions beyond the value of investments they have made. Senate Majority Leader Harry Reid (D-NV) said the House bill will not make it in the Senate though he might support a measure that followed Nevada's "net profits" royalty scheme.

President Bush issued a veto threat on the House bill suggesting that it is redundant with laws such as the Clean Water Act and potentially unconstitutional because it does not consider existing property rights before enactment. He raised additional concerns about the royalties threatening domestic mining operations.

The full text of the legislation is available from Thomas. (11-19-07)

Congress Still Digging Away at Mining Law Reform
Congress remains interested in reforming the 1872 Hardrock Mining Law. The law permits privatization or patenting of public resources for $2.50-$5 per acre, which Congress has renewed a temporary moratorium on every year since 1994. The law requires no royalties nor has any mandate for environmental remediation. The House has introduced a bill (H.R. 2262) to reform the law, which would require a reclamation plan before a permit is issued and impose royalties. The Senate has not introduced any legislation, however, both chambers are holding hearings on the hardrock mining law in September and October. Summaries of the hearings will be available on AGI's Government Affairs web page.

In addition to witnesses at hearings and discussions with stakeholders, Congress will soon have additional information related to hardrock mining from two National Research Council reports that are looking at aspects of mineral policy - "Securing Materials for a 21st Century" and "Military Critical Minerals in the U.S. Economy". Both are due to be released in early October.

The full text of the House hardrock mining bill is available from Thomas (10-4-07)

House Natural Resources Committee Chair Introduces Mining Law Reform Bill
On May 10, 2007, Nick Rahall (D-WV) introduced H.R. 2262, the Hardrock Mining and Reclamation Act of 2007. The new bill would completely overhaul the 1872 act, including the identification of categories of federal lands that will not be open to hardrock mining, establishement of an overall environmental standard that requires mineral activities on Federal lands be conducted in a manner "that does not unduly degrade the environment", establishment of a fund to reclaim and restore land and water resources adversely affected by past mineral activities on certain public lands, and expanded enforcement guidelines with civil and criminal penalties for non-compliance. The measure would also change the outdated provision of selling federal land for $2.50 or $5.00 per acre. Congress has annually placed a moratorium on such sales for more than a decade.

Rahall has been trying to pass a new mining law since the 1980s and almost sealed the deal in 1994. Rahall is looking for a co-sponsor of similar legislation in the Senate. According to media reports, Senate Majority Leader Harry Reid (D-NV) has expressed some willingness to work with Rahall on this legislation. In the past, the two have often locked horns on mining reform. Outside of Washington DC, an atypical coalition of groups have bonded together to support the mining bill. The coalition includes Tiffany & Co, taxpayer groups, conservationists and sportsmen. In fact, Tiffany Chairman Michael Kowalski attended the press briefing with Rahall and Congressman Jim Costa (D-CA). Kowalski indicated that Tiffany buys most of its gold and silver from domestic suppliers and customers care about how their jewelry is made. Environmentalists also supported the legislation while the National Mining Association issued a cautious statement saying that it wanted to play a constructive role in developing fair and predictable mining policy.

The bill has been referred to the Subcommittee on Energy and Mineral Resources. (06/18/07)

USGS Reports on Nation's Mineral Production

The U.S. Geological Survey released a report on the value of U.S. non-fuel mine production in 2005. Production rose by 18 percent from $54.6 billion in 2005 to $64.4 billion in 2006. Demand for metals and industrial minerals in the U.S., China and other countries remains high and is keeping prices high.

The estimated total value of domestically processed non-fuel mineral materials was about $542 billion in 2006 compared to $493 billion in 2005. The report includes events, trends and outlooks for about 90 mineral commodities.

"Mineral Commodity Summaries 2007" is available on the USGS Web site at http://minerals.usgs.gov/minerals/pubs/mcs/. (02-16-07)

The General Mining Law, or Hard Rock Mining Act, of 1872 was passed by Congress and signed by President Ulysses S. Grant to protect and encourage mining and settlement in the Western territories. The act is one of the major statutes of federal land management policy. According to law professor Charles Wilkinson, "From its inception, hardrock mining has been the highest and most preferred use of the public lands, and the old law extends to mining companies a 'right to mine.'" In his book, Crossing the Next Meridian, he also states that the hardrock mining system is "still a miner's law -- built on open access, free minerals, unlimited tenure, and rights to land as well as minerals."

In the past 135 years, the law itself has been subjected to minimal change, but its scope has been greatly limited. The most significant change to the 1872 Mining Act was the removal of some federal lands and mineral resources from its jurisdiction. The creation of the National Park system and National Historic Sites established federal lands that are protected from mining. Indian reservations, military reservations, wilderness areas, and water and power projects have also removed land from the purview of the Hardrock Mining Act. The Act originally applied to all minerals except coal. In 1920 the Mineral Leasing Act set new policies for the mining of oil and gas, oil shale, phosphate, and sodium on public lands, removing them from control of the Hardrock Mining Act. Other mineral resources were later added to this list.

According to the Congressional Research Service report Mining on Federal Lands, the 1872 law welcomes individuals and corporations to prospect for minerals in public domain lands. When a deposit is discovered the prospector can stake a claim on that land. Miners can hold as many claims as they wish and are not required to commence mineral production. Each claim requires a $100 annual holding fee -- under legislation enacted in 1992 by the 102nd Congress. If a miner chooses to patent the claim to gain title of the claimed lands and extracted minerals they pay a patent application fee plus $2.50 to $5 per acre after patent approval. A patent is not required to mine a claim.

Both mining industry representatives and environmentalists agree that some provisions of the General Mining Law are outdated. Congress has been working towards comprehensive reform of the law. Currently, there is a moratoria on the issue of new patents, pending the legislative changes. The House Resource Committee Subcommittee on Energy and Mineral Resources General Mining Law brief from the 106th Congress supports many of the provisions of the original law because they promote development of domestic resources, which would otherwise be imported. The Mineral Policy Center say reform is necessary because current mining law "gives away billions of dollars worth of taxpayer-owned minerals every year." One recommendation is for metals mining to switch to a royalty system similar to that used for other natural resources on public lands. While $2.50 to $5 per acre may seem inexpensive, the Energy and Mineral Resources Subcommittee brief contends that "the surface value of most lands presently being patented under the mining law is relatively low, generally in the $100-$150 an acre range -- not the millions or billions of dollars often implied by the opponents of the mining law." Nevertheless, the brief states that, "... the federal government should receive fair market value for a mining claim, and everyone agrees that the current price for a patent has long been below this value."

During the 109th Congress, Representative Thelma D. Drake (R-VA) introduced legislation, cosponsored by seventeen members, to create an independent mineral commodity resource administration within the Department of the Interior. The Resource Origin and Commodity Knowledge (ROCK) Act (H.R. 6080) would establish the Mineral Commodity Information Administration (MCIA), which would be responsible for mineral commodity data development and analysis, mineral industry analysis, and energy supply, demand and prices projections. However, the bill has yet to make it out of the House.

Apart from attempts to craft environmentally-friendly mining legislation and moves to open or close land to mining, mine safety has been one of Congress' biggest concerns. The passage of the 1977 Federal Mine Safety and Health Act (Mine Act) marked a watershed in mining history. Following the passage of the Mine Act, mining-related deaths dropped to below one hundred a year, a stark contrast to the hundreds and thousands of mining-related deaths per year prior to the Act. In 2006, law-makers were again prompted to reform mining safety laws when a methane explosion at Sego Mine in West Virginia took the lives of 12 miners on January 2. In June, the Mine Improvement and New Emergency Response Act of 2006 was signed into law by President Bush.

Mining Policy in the 109th Congress and 108th Congress

Sources: The Chicago Tribune, Congressional Research Service, E & E News, Greenwire, Hearing Testimony, Land Letter, The Los Angeles Times, The New York Times, The Washington Post, Mineral Policy Center, National Mining Association and Department of the Interior, Federal Wildlife and Related Laws Handbook.

Contributed by David R. Millar 2004 AGI/AAPG Fall Semester Intern, Katie Ackerly 2005 AGI/AAPG Spring Semester Intern, Peter Douglas, 2005 AGI/AAPG Government Affairs Intern, Emily Lehr Wallace, AGI Government Affairs Program, Rachel Bleshman, 2006 AGI/AAPG Fall Intern, Erin Gleeson, 2007 AGI/AAPG Spring Intern, and Paul Schramm, 2007 AGI/AIPG Summer Intern.

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

Last revised on June 18, 2007.

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