Summary of Hearings on Mining Policy (3-12-08)
Committee Members Present
Chairman Jeff Bingaman (D-NM)
On March 12, the Senate Energy and Natural Resources Committee held their third hearing in a series of oversight hearings this session on the 1872 Mining Law with the intent of reviewing two issues that likely will be addressed in any reform effort, abandoned mine lands (AML) and uranium mines.
Chairman Jeff Bingaman (D-NM) said, “As we discuss the size and shape of legislation to reform the 1872 law, there appears to be consensus that we should enact a robust hardrock abandoned mine land program.” This sentiment was reiterated by ranking member Pete Domenici (R-NM) who stated that “in the context of mining law reform, abandoned mine land reclamation is our most significant opportunity to improve the environment.”
Robin Nazzaro, Director of Natural Resources and Environment at the Government Accountability Office (GAO), testified that the estimate of hardrock mining sites varies widely due to inconsistencies in definition, but under a standard definition GAO found that the 12 Western states and Alaska contain 161,000 abandoned hardrock mining sites and that 33,000 sites have degraded the environment. GAO also found that over the last ten years the Bureau of Land Management (BLM), the Forest Service (FS), the Environmental Protection Agency (EPA) and the Office of Surface Mining (OSM) together, have spent at least $2.6 billion to reclaim abandoned mine lands and the majority of cleanup spending has been done through EPA’s Superfund program.
Mr. Bisson, Deputy Director, BLM, stated that the Bureau recognizes the problems associated with abandoned mine sites and is committed to recovering those lands. BLM estimates there are 12,035 sites on the lands they manage and that the “new stringent controls on mine operations today have helped eliminate the burden of future abandoned mine lands.” In 2001 BLM established regulations requiring financial assurances prior to exploration or mining operations and as of now BLM holds over $1.1 billion in financial guarantees for reclamation activities.
There are about 27,000-39,000 abandoned mine sites on FS land according to Tony Ferguson, Director of Minerals & Geology Management. The FS like BLM has an abandoned mine land program from which they conduct site cleanup, but in response to a question by Senator Jon Tester (D-MT), Mr. Ferguson acknowledged the amount appropriated to the FS, about $14 million annually, is small when compared to the agency’s total liability of about $2.2 billion.
The united message of the witnesses was the need for increased funding to fully address the reclamation of AML. According to Debra Struhsacker from the Northwest Mining Association “the combined effect of a federal AML reclamation fund and Good Samaritan liability relief is the best way to accelerate the pace of AML reclamation.”
Senator Ken Salazar (D-CO) introduced Good Samaritan legislation (S.1848), which would have provided liability relief for companies that choose to cleanup abandoned mine in 2005 and is planning on reintroducing similar legislation this year with other members of the committee.
The second half of the hearing focused on uranium mining and the concerns many have regarding security and safety with the current and future boom in uranium mining associated with renewed interest in nuclear energy. “As we fashion a hardrock AML program, I think it is important that we understand what authorities currently exist for the clean-up of abandoned uranium mines and processing facilities,” said Bingaman.
Mr. Bisson stated that “it has been two decades since the BLM has dealt with this level of interest in uranium mining; experts have retired, and new processing techniques have also emerged.” This summer BLM will hold a workshop to determine the role of various agencies in processing applications for uranium operations. Dr. Charles Miller, Director of the Office of Federal and State Materials and Environmental Management Programs for the Nuclear Regulatory Commission (NRC), indicated that the NRC only has regulatory authority over the processing of uranium ore and that the exploration and mining operations are regulated by other Federal agencies. (3-12-08)
Hardrock Mining Law Reform Receives a Senate Hearing
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)
Panel I (Royalty Assessment)
Panel II (Abandoned Mine Reclamation)
Committee Members Present
Subcommittee Chairman Jim Costa (D-CA)
The hearing was organized into two sessions, the first to discuss royalties for mining on federal lands, and the second to discuss the hazards and possibilities for restoration of abandoned mines. Chairman Jim Costa (D-CA) said there has been excellent cooperation on all of these issues, and there is a "broad consensus" that reform is necessary, but committee members still need to agree on the details of a royalty. Costa then addressed the issue of abandoned mines in his home state of California. He said California has 47,000 abandoned hard rock mines, mostly on federal land. Over 20,000 of these have safety hazards, and 11% create environmental impacts. Only about 65 of these mines are cleaned up each year. Chairman Costa hoped the second panel, on abandoned mine reclamation, would offer insights on how to fund the major abandoned mine cleanup necessary in California and other states.
Ranking Member Steve Pearce (R-NM) focused his statement on the necessity of a federal royalty program. According to a World Bank report on mining, three separate economic analyses from the 1990s all showed decreasing revenues from mining. In 1993, the U.S. had 21% of the world mining market, compared to 8% in 2007. The U.S. is also 100% dependent on many key non-fuel minerals. Pearce emphasized that we should not "import" our mining industry, and that we need to look to existing programs that could be streamlined rather than implementing new ones.
Full Committee Chairman Nick J. Rahall, II (D-WV) cited a National Science Foundation report on the importance of minerals in key U.S. sectors such as economy, defense, and energy. He believes that we must make corrections to the outdated mining laws to keep mining economic, efficient, and safe in the future. We must find a way to protect both the environment and jobs within the industry for the public interest of all Americans.
Representative Don Young (R-AK) is also concerned with the way American mining has changed recently. The U.S. now imports 100% of 20 different minerals used in industry. He believes that the nation has been "weakened" by reform based not on benefiting people, but on "punishing" the mining industry. He believes that "resources are on this earth to be utilized by man", and he is concerned that the mining law reform bill, H.R. 2262, will discourage new mines from opening.
The first witness was Mr. Salvatore Lazarri, a specialist in natural resource economics and policy from the Congressional Research Service, who supports a royalty based on the market value of the mineral produced, to be paid in installments. He cited the average range of private royalties to be 2-8%, with an average of 5% (the royalty suggested in H.R. 2262 is 8%). This data is from the early 1990s, the most recent available. Mr. Lazarri also reminded committee members that mining companies do pay income taxes like other industries.
Mr. James Otto, an independent consultant on mining law, policy, and economics, testified based on his experience with mining tax reform from around the world. He believes international practices can be used in the U.S. to create a "win-win" situation for the industry and the public. Internationally, it is standard practice to have a royalty for mining on public lands. This royalty is a payment for the transfer of resources from the public to private ownership. From his experience, Mr. Otto listed three types of royalties that are often used; (1) a fee per unit volume or weight, (2) a fee based on value of the mineral, or (3) a fee based on profit. Mr. Otto believes that a royalty should be based on market value for most minerals, but not for construction minerals or coal. He also noted that other countries often group minerals into categories, with a separate royalty calculated for each category. He concluded by saying that paying a royalty is giving back to the public, and that using these funds to clean up abandoned mines may improve societal views of mining.
Mr. James F. Cress, an attorney who negotiates mining royalties, has worked with hard rock, coal, and gas mining. He believes that hard rock mining needs to be treated differently from the others because minerals require extra processing for extraction. He says that a gross royalty would have extreme impacts on the development of mines, and if the commodity price drops, mines may close. This concerns Mr. Cress because he believes the royalty written into H.R. 2262 is a gross royalty. He also noted that the 8% royalty in the bill is unusually high. If implemented as written, this royalty will discourage exploration for hard rock minerals in the U.S.
Ranking Member Pearce questioned how the committee could reform the law without causing a competitive disadvantage to the U.S., and asked Mr. Cress to give an example using recent decisions by Canada. Mr. Cress said that Canada had imposed a 5% net royalty on some hard rock minerals, which was changed to 2.5% after only a few years because it had a detrimental affect on the industry. He also noted that any federal royalty system must take into account state taxes mining companies may already be paying. Mr. Otto agreed that any tax greater than 5% would likely lessen exploration, but that any royalty amount will hurt some mining companies. He noted that for most countries, a value-based royalty works better because it is easier to administer and it takes into account that mineral values are cyclical.
Representative Louie Gohmert (R-TX) asked the panel if there was any nation where it is more difficult to go through the process of applications and environmental requirements than the U.S. Mr. Cress replied that permitting times in the U.S. were among the highest in the world due to environmental laws. But Mr. Otto replied that while the perception is that it takes longer in this country, and thus many European or other international mining companies do not attempt to mine here, permitting is often shorter in the U.S. than in other countries. Congressman Gohmert then asked what was, in each witness's opinion, the best way for the government to increase its revenue in mining. Mr. Lazarri said a royalty based on value, Mr. Cress said a net royalty with deduction of processing costs, and Mr. Otto said providing incentives for exploration, such as tax deductions for exploration expenses.
Mr. Jim Hanlon, Director of the Office of Wastewater Management at the EPA, began the second panel on abandoned mine reclamation. He testified that abandoned mine sites cause significant environmental hazards and are a major pollution source in U.S. waters, which can even affect local economies. Often the companies responsible for the abandoned mines no longer exist. The current legislation does not encourage cleanups because the company taking on the responsibility to clean the site can be held responsible for any environmental problems. Congress must remove this liability threat to ensure the clean-up of abandoned mines. Mr. Hanlon asked the committee not to lower environmental standards to try and encourage mine cleanups, and to punish polluting parties whenever possible. He argued that the "Good Samaritan Act" (H.R. 5404) from last year is the best strategy for the environment and asked the committee to push that legislation forward.
Mr. Tony L. Ferguson, Director of Minerals and Geology Management at the U.S. Forest Service, also argued that the Good Samaritan Act would be the best way to help remediate water and land polluted by mining. Currently, any party attempting to take over an abandoned mine site for remediation is required to improve water quality levels to meet specific standards, even if those waters are already polluted. It is possible that the "Good Samaritan" company will be unable to raise the standards to high enough levels, and they will be held responsible for violation of environmental standards, even if they do improve water quality considerably. Thus, current legislation "has resulted in the perfect being the enemy of the good". A large percent of the 38,500 abandoned mines on federal lands and 65,000 sites on Bureau of Land Management (BLM) lands may be polluting. Mr. Ferguson asserted that legislation such as the Good Samaritan Act, technological improvements, and financial aid are necessary for cleaning up abandoned mines.
Montana State Senator Greg Lind testified on the status of abandoned mine sites in Montana. He has seen first-hand that abandoned mines do not stop polluting if they are not cleaned. In Montana alone there are over 6,000 abandoned mines, which have polluted over 3,700 miles of streams and rivers. The financial burdens to the state have been immense. Montana spends $3.5 billion each year to clean up these sites, and total projected costs are over $91 million. For public safety, the environment, and financial security, Senator Lind asked that Congress "close the doors that allow perpetuity".
Ms. Laura Skaer, Executive Director of the Northwest Mining Association, stated that about 90% of abandoned mine sites are either landscape deterrents or open hole dangers, not a source of major pollution. She cited three reports that show most sites were abandoned before "modern" environmental mining regulations, and that these newer mining requirements ensure funding will be enough to cover land reclamation after mining ends. The "vast majority" of abandoned sites are not safety hazards and will be "cheap" to address. She suggests these sites should be cleaned first, and then more problematic sites can be cleaned. Ms. Skaer agrees that the Good Samaritan Act is necessary to clean many polluted areas, and cited the National Academy of Sciences National Research Council's 1999 report to Congress as supporting the legislation as well. She also supports an abandoned mine fund which will add federal contributions to existing state funds.
After testimony, Chairman Costa asked if others agreed with the figure Ms. Skaer cited, that about 90% of abandoned sites are not hazards. Mr. Ferguson said there is a lack of consistency between reporting agencies regarding hazards of abandoned mines, making the real figure hard to track. Costa then asked Ms. Skaer if all new mines are required to have the finances for cleanup once the site is inactive. She replied that all new mine sites must pay for a bond to cover the costs of cleanup at termination of the site. Costa stated that more hearings would be held on the subject, and he hoped collaborative efforts would produce effective bipartisan legislation.
Witnesses disagreed on the current state of abandoned mine sites in the U.S., but all agreed that the Good Samaritan Act would improve water quality and the public image of mining in the country. There are many opinions on the type of royalty the federal government should impose on hard rock mining on public lands, although all witnesses do believe a royalty should be collected. Many concessions may be needed from both parties to modify H.R. 2262 so it can move on to a vote.
A link to the bill text can be found here.
Committee Members Present
Chairman Jeff Bingaman (D-NM)
Mining has repeatedly faced criticism for environmental, safety, and financial issues. Chairman Jeff Bingaman (D-NM) stated that many of these problems are caused by the outdated Mining Law of 1872, which regulates all mining in the U.S. Comprehensive reform is necessary to update the legislation. The purpose of this hearing is to learn about the major issues impacting hard rock mining on federal lands. Some of the main concerns include compensation for hard rock mining on federal lands, environmental protection, and abandoned mine clean-up. Witnesses testified on the state of the U.S. mining industry and suggested changes to the current law.
Senator Larry E. Craig (R-ID) voiced his concern that the U.S. has "grown increasingly dependent on minerals we no longer produce" and thus must import. He stressed the importance of minerals to our economy, and the need to update legislation to ensure the continued capability of hard rock mining in this country. Senator Craig believes miners should pay a royalty to mine on federal lands and the primary question in his opinion is when and where to apply that royalty. This additional fee for hard rock mining companies must not discourage new mining operations and must allow for a "stable, long-lasting environment" in which to invest. The senator also lauded the "picture perfect" hard rock mining industry in the U.S. today, restating the need for updated legislation that will support continued industry.
The first witness, Mr. Jim Butler, an environmental regulation attorney, supported a gross royalty for hard rock mining on federal lands. A gross royalty is based on the total revenue from the sale of minerals. Mr. Butler prefers this type of royalty because its cost will fluctuate with the minerals market, costing mining companies less when the market is down and they are making less revenue. He warned that the committee must understand how any royalty changes will affect new and existing mining.
Mr. Butler also discussed the changes and success of environmental regulations as outlined in multiple studies. A 1999 report by the National Academy of Sciences identified seven problems with environmental regulation of hard rock mining, and now he believes only one problem is still unresolved. The one problem is the delay of passage of the "Good Samaritan" act, which would enable any mining company to clean up an abandoned mine site (left by a different, typically bankrupt company) without being held liable for damages caused by hazardous material leftover from another company. Companies would be more likely to clean up others abandoned mine sites if they did not have to assume full responsibility for any environmental problems from that site.
Mr. John Leshy, a professor of law at the University of California, argued that the current mining law is severely outdated, and presented three major shortcomings. First, companies can very easily and inexpensively privatize federal land for mining, but much of the land that is privatized is never actually used for mining. Second, no royalties are paid for mining on federal lands. Mr. Leshy argued that the public should be compensated for use of their land using a model for payment developed after that of the oil and gas industry, with part of the funds from royalties going to cleaning up abandoned mines. The third shortcoming he addressed was the problem of environmental protection, which is not sufficiently addressed in the current law. Taking care of these shortcomings will bring the archaic hard rock mining law into the 21st century and allow American mining to remain competitive in the world market.
Mr. Timothy Snider testified on behalf of the National Mining Association (NMA), stating that hard rock mining is a "key to driving our economy and national security". The NMA supports a net profit royalty for hard rock mining on federal lands, which Mr. Snider says is more flexible and will be less detrimental to mining during industry lows. They also support the establishment of an abandoned mines cleanup fund with profits from the net royalties, and encourage a "Good Samaritan" environmental provision as discussed by other witnesses and senators. Mr. Snider supported privatization as a matter of security when mining on federal lands, stating that a company must know they will have access to the mine for the duration of activity before they begin a new site. The U.S. needs a "robust" mining industry for its economic security, but under current laws our industry is decreasing as others are flourishing. Mr. Snider also noted that current environmental laws are considered "sufficient and appropriate" by the NMA.
The next witness, Mr. Dusty Horwitt from Environmental Working Group, strongly disagreed with Mr. Snider. He stated that a "dramatic surge in claims" has occurred since 2003 and contributed to an increase of mining in important public places. Currently it is legal to mine next to important landmarks, parks, and bodies of water. The pollution caused by hard rock mining, and especially by uranium mining, is detrimental to all living things near the site, and can even cause damage tens of miles away from the mining site, with cleanups costing taxpayers tens of millions to over one billion dollars in rare cases. The U.S. needs more protection for public lands, and more stringent laws to protect the important landmarks of this country. He closed by saying that "with our most treasured places at risk, the time is now" to act for preservation of these important lands.
After witness statements, Chairman Bingaman questioned the conflicting data the committee had received. According to a 1999 National Research Council report, 80-90% of public land is open to mining. Yet Mr. Snider had testified that over 50% of public land is not open to mining. The witnesses agreed to get their data to the committee as soon as possible for comparison. Ranking member Pete V. Domenici (R-NM) reminded the witnesses that the number of claims staked were not equal to the number of active mines, and asked for data on the percent of claims staked that become active mines. Mr. Horwitt replied that while he agreed on this fact, the risk exists that claims near national treasures may be developed. Senator John Barrasso (R-WY) asked if a fund created to clean up abandoned mines would actually be used for that purpose. Mr. Horwitt responded that because a large percent of mines that are developed damage water quality, we must ensure that this funding goes to cleanup. Mr. Snider replied that to ensure the money is used appropriately, it should go to the individual states. He admitted that in the past these types of funds have not always been properly disbursed.
The committee generally agreed that thoughtful, bipartisan reform of the Mining Law of 1872 is needed. One of the major issues is the clean-up of abandoned mines, which many witnesses agreed would be expedited by passing the "Good Samaritan" provision and establishing a fund from royalties paid for mining on public lands. There was general agreement that a royalty should be flexible enough not to deter mining during periods of low mineral prices, but there was not agreement on the best type of royalty that would meet the need. Environmental laws were the biggest debate of the hearing, and will likely continue to be a contentious issue as the Mining Law of 1872 is reformed.
A link to witness testimony can be found here.
Sources: Hearing testimony.
Contributed by Elizabeth Landau, AGI/AAPG Fall Intern.
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Last updated on October 16, 2007.