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Mining Law of 1872 Reform Hearing Summary (7-27-00)

The House Resources Subcommittee on Energy and Mineral Resources
July 20, 2000

Hearing on  H.R. 4297, the Powder River Basin Resource Development Act of 2000, Attempts to Resolve Coal and Coalbed Methane Disputes

The Bottom Line
H.R. 4297 attempts to address a relatively new aspect of mining laws: how to solve conflicts arising from the Bureau of Land Management's (BLM) practice of handing out development leases for two different resources on the same piece of land.  Coal and coalbed methane (CBM) lessees are disputing their joint rights to produce an area where the development of one resource could lead to the physical or economic loss of the other.  The hearing allowed for coal and CBM operators to register their opposition to government regulations interfering with "first in time, first in right" precedents.  The bill was supported by Witnesses from Wyoming state government supported the bill, although BLM felt that H.R. 4297 would usurp its authority over resource development leases.  More information on mining laws is available on the AGI website.

Members Present
Barbara Cubin (R-WY), Chairwoman
Thomas Tancredo (R-CO)
Robert Underwood (D/GU)

Opening Statements
Rep. Barbara Cubin, the only representative from Wyoming, briefed everyone on how coal mining vents the natural gas coalbed methane (CBM) into the atmosphere if not extracted first.  Often an area is held by two lesees: one for oil and gas and one for coal.  It might not be economically viable for a coal mining company to wait five years for CBM to be extracted, wasting the coal resource.  Since the energy contained in a ton of Powder River Basin coal is nearly 100 times more than that of CBM, a method must be developed to calculate the compensation owed to the CBM owner for the loss of the resource due to mining. H.R. 4297 is the House companion bill to Sen. Michael Enzi's S.1950 that attempts to address these issues.  The Chairwoman stressed that American needs both resources to be developed, and that means that production of CBM must begin now so as not to waste the resource.

Panel I
Honorable Michael B. Enzi, U.S. Senate (R-WY)

Senator Enzi outlined the salient methods H.R. 4297 uses to expedite agreements between coal and CBM operators:

He stated that many of the conflicts are created by the federal government selling leases for one piece of land to two different producers.

Panel II
Pete Culp, Assistant Director, Minerals, Realty & Resource Protection Bureau of Land Management, U.S. Department of the Interior
Robert Ugland, Director of Minerals, Energy and Transportation Wyoming Business Council, on behalf of Wyoming Governor Jim Geringer
Vernon A. Isaacs, Jr., President, Rim Operating, Inc. The Independent Petroleum Association of Mountain States (IPAMS)
Terry O'Connor, V.P. External Affairs, Arch Coal, Inc. The National Mining Association

Peter Culp stated that competing oil and gas leases are less of a problem than coalbeed methane because oil and gas are found deeper than coal and can be developed without interfering with each other. However, the Department of Interior (DOI) cannot support H.R. 4297 for several reasons.  Firstly, the Bureau of Land Management (BLM) has existing authority under the Mineral Leasing Act, federal regulations and lease provisions to resolve claim conflicts by first encouraging a private settlement.  When that is unsuccessful, BLM has regulatory authority to enforce its decision on which lease prevails.  DOI feels that the bill does not support the agency's sanctioning power.  The witness also objected to:

Robert Ugland contradicted Culp's testimony, complaining that BLM was at fault for issuing licenses for multiple resources, and then standing back and seeing what happens.  He cited some rules suggested by the Wyoming Governor's Board of Land Commissioners for ways BLM could resolve lease conflicts and suggested that the bill give BLM the authority to do so. Overall, the witness supported H.R. 4297, but expressed some concerns about the affect of government regulations on state-owned land whose mineral royalties support Wyoming schools.

Vernon Isaacs objected to H.R. 4297 on the grounds that it will eventually favor the coal industry over CBM producers.  The first most significant problem with the bill is that it too easily condemns CBM lands, allowing the gas to escape into the atmosphere, losing it forever and polluting the environment.  This creates a precedent for ignoring the "first in time, first in right" principle of leasing. Secondly, Isaacs feels that the estimates of  the conflicted areas are too high and this favors the coal industry as well.  Thirdly, he argued that the bill insufficiently compensates the CBM operator for his losses.  Finally, the witness expressed concern that the bill, by amending the Mineral Leasing Act, changes the value of a federal resource development lease and "unleashes a devil we cannot control."   He argued that settlements BLM's current policies are sufficient motivation for private companies to reach settlements without government intervention.  Isaacs cited the example of his company, Rim Operating Inc.'s long-running disagreement with Arch Coal, Inc. that has been recently solved along with all conflicts under currently existing leases in Wyoming.  He suggested that CBM development be increased to provide a CBM depleted buffer zone between gas production and coal mining.

Terry O'Connor agreed with Isaacs's condemnation of H.R. 4297.  He stated that he did not want this legislation to be a precedent for any other states.  The legislation is irrelevant when coal companies like Arch always end up ignoring senior and junior lease rights and having to pay to bypass a CBM well.  It is usually worth the expense to buyout a well rather than lose the coal.  O'Connor did acknowledge that there were fewer laws establishing firm coal and CBM conflict resolution procedures than there are addressing oil and gas rights.


House Subcommittee on Energy and Mineral Resources
August 3, 1999

Oversight Hearing on Mining Regulatory Issues
and Improving the General Mining Laws

The Bottom Line
This oversight hearing focused on two major issues both relating to legal opinions written by Department of the Interior Solicitor John Leshy.  The hearing continued several months of debate on Capitol Hill about the Crown Jewel Mine decision and the solicitor's mill site opinion, and brought attention to another controversial decision regarding mineral exploration in the Mark Twain National Forest in Missouri, 15 miles from Ozark National Scenic Riverways.  Fiscal and environmental Mining Law reforms were also discussed.

Members Present
Barbara Cubin (R-WY), chair Robert Underwood (D-GU), ranking member
Jim Gibbons (R-NV) Nick Rahall (D-WV)
Jay Inslee (D-WA)

Opening Statements
In a strongly worded statement, Rep. Barbara Cubin (R-WY), subcommittee chair, criticized the Department of the Interior for Solicitor John Leshy's interpretations of laws concerning the Crown Jewel mine and Mark Twain National Forest. "These recent decisions - in which the public had no opportunity to comment, of course - appear to be pronouncements that Secretary Babbitt is frustrated by this Congress because we have been unwilling to cede our authority over public land policy-making, at least with respect to mining," she said.  Cubin accused the administration of "'making law' by handing down novel interpretations of statutes."

Cubin criticized Leshy for interpreting the Organic Act of the National Park Service, as amended, "to preclude the Secretary from exercising his discretion to issue prospecting permits to protect a unit of the Ozark National Scenic Riverways 15 miles away" in the Mark Twain National Forest.  She asked "Is there scientific data to suggest metals can migrate that far in this terrain?  Not that I am aware of."  She noted that the administration objected to a provision in the Fiscal Year 2000 appropriations bill ordering study of the "mobility of lead in [these] rocks and waters."  She added: "So much for using the expertise of the U.S. Geological Survey to do 'integrated science' on behalf of federal land management agencies, as the Secretary has touted.  I guess this integrated science is reserved for the Everglades."   Cubin said that in Missouri "the Solicitor's result is the same [as with Crown Jewel]: In effect, no further exploration or mining will be allowed on the very federal mineral estate from which 90% of the Nation's primary lead production comes!"

Finally, Cubin reminded witnesses and fellow committee members that "if it isn't grown, it has to be mined."  She said "a philosophy we all need to be reminded of occasionally as we make public policy."  She added, "If we lose sight of that fact we will continue to export our mining jobs and the capital that goes with it, because society isn't going to stop using metals and minerals anytime soon."

Rep. Robert Underwood (D-GU) also commented on the Crown Jewel controversy, expressing support for Leshy's mill site legal opinion.  He stated, "Perhaps the industry has a valid argument regarding the need for additional waste repository acreage.  However, the policy -- if it is to be changed -- is not the purview of the appropriators.  Instead we, the authorizing committee -- should be considering the issue within the broader concept of improving the law.  We should take advantage of the industry's discomfort with the mill site policy and pass a comprehensive mining law reform bill."

Underwood urged consideration of fiscal and environmental reform measures currently before Congress.  He said that in the past 27 years the federal government has "given away" $240 billion worth of minerals by not collecting royalties.  He noted that all western states impose royalties on minerals collected on state lands and that these royalties total "between 2% and 10% on the gross income from mineral production."  Arguing in favor of environmental reforms, Underwood said the Environmental Protection Agency estimates that "mine wastes have polluted more than 12,000 miles of our nation's waterways and 180,000 acres of lakes and reservoirs" at a cost of $32-$72 billion to taxpayers.

Underwood said reform "has enjoyed vigorous, bipartisan support in the House of Representatives for the last decade. [But], hopes for reform have diminished over the past five years as the Congress and industry have shown little interest in changing the 1872 law."

Rep. Jim Gibbons (R-NV) emphasized the importance of mining to the nation and its economy during his opening statement.  He quoted Dr. George Leaming who concluded: "If mining were to cease within the United States, nearly five million people and their families would lose that income, but the nation would still require those minerals for making automobiles and other consumer products, for housing, highway and bridge construction, for farming, for electricity generation and for countless other uses."

Gibbons observed that "the mining industry is under attack."  He said, "It sounds like the lyrics of an old country song -- "The Federal Government gets the gold, and the miners get the shaft."  He noted that "a common misconception... is that the mining industry is destroying our environment and must be snuffed out" and added that the industry has "touched less than one quarter of 1% of all the land in the United States."

Rep. Nick Rahall (D-WV) said this was "probably the 100th hearing I have attended on this issue."  He told committee members and witnesses "This is not about whether you are for or against mining....  What we are for is fair play."  He applauded President Clinton for vetoing Republican mining law reform proposals.  In response to remarks by chairwoman Cubin that mining law reform is not important to his state because it does not contain vast federal lands, Rahall said all federal lands belong to his state's citizens also.

Rep. Jay Inslee (D-WA) said the "sentiment on the streets" favors reform of the 1872 Mining Law.  He said "what I want to hear [from the witnesses] is how to reform" the law.

Panel I
Gerald Shaheen, Group President, Caterpillar Inc.
Jeffrey Zelms, President and CEO, The Doe Run Company
Stephen D'Esposito, President, Mineral Policy Center
Jill Lancelot, Legislative Director, Taxpayers for Common Sense
Richard Gordon, Professor Emeritus, Pennsylvania State University, CATO Institute

Mr. Shaheen's testimony addressed the economic importance of the mining industry.  He said hardrock mining contributes $27 billion a year to local and state governments in the form of taxes, $57 billion to the federal government, $144 in personal income, and $296 billion in income to mining-dependent businesses.   Shaheen said Caterpillar is "concerned that recent decisions by several U.S. government agencies will jeopardize the future of hardrock mining in this country."  He supported the Craig FY2000 amendment which reverses a DOI mill site opinion.  "Caterpillar believes that mining activities and environmental protection are not mutually exclusive," he said.

Mr. Zelms told the subcommittee that his company, Doe Run, "is well-acquainted with the effort of the Department of the Interior to foreclose mining opportunities on public lands."  The company and its predecessor have engaged in mineral exploration and development in the Mark Twain National Forest in Missouri for over 40 year.  Zelms said future and existing operations are "at risk of termination based on the single-minded goal of an agency with no role in the Mark Twain -- the National Park Service (NPS).  NPS has done this on the basis of hypothetical, if not illusory, threats to the Ozark National Scenic Riverways miles away from mining activities inside the National Forest."

He told members that "DOI forged ahead with its goal of shutting down future mining in the Mark Twain without any consultation with Congress."  He stated that Doe Run was forced to withdraw all of its prospecting permits, or "concede for all time the NPS right to veto a lease or mine plan."  Zelms asserted that "Secretary Bruce Babbitt is only going to be Secretary of the Interior for another year and a half.  He is not willing to go through the legislative process.  What he wants to do is legislate at the Department of Interior, down at 16th Street or 14th Street, wherever it is.  He is legislating down there, and he has admitted it."

Zelms requested that Congress step in and reverse the DOI Solicitor's opinion.  "I would ask this Committee to draw a bright line and say that without Congressional consultation the executive branch should not attempt to usurp Congressional powers," he said.

Mr. D'Esposito testified in support of fiscal and environmental mining law reforms.  "The 1872 Mining Law sends the wrong signal to mining companies," D'Esposito said.  "It rewards irresponsible behavior.  Until it is reformed it will serve as a haven for bad actors and fail to reward those who act responsibly."  He added, "Successful... reform will balance the interest of mining companies with those of taxpayers, citizens who seek to protect land and water resources, and future generations who will benefit from well managed public lands."

"It has been six years since the last significant attempt was made to reform the mining law," D'Esposito said.  He told subcommittee members that taxpayers deserve royalties, and environmental safe guards must be created to protect taxpayers from the burden of cleaning up old mining sites.  He also said mining should have to compete with other economic and recreational land uses instead of receiving "preferential treatment."  He also expressed support for the Crown Jewel decision.  "The problem is not the mill site decision," he said.  "It is the Mining Law of 1872."

Ms. Lancelot appeared before the subcommittee on behalf of "an independent budget watchdog group... that works to cut government waste by reaching out to taxpayers from all political perspectives."  She testified that "while the coal, oil and gas industries pay taxpayers for the use of public land, the [hardrock] mining industry gets away with paying nothing."  She said "only one provision in the 1872 Mining Law provides protection for tax payers -- the mill site provision."  She urged Congress that "reform must be comprehensive, not piece-by-piece."  Lancelot called for a 12.5% royalty on minerals mined on federal lands.

Mr. Gordon told the committee "The 1872 Mining Law [is] one of the better federal resource statutes on the books."  He said "The debate is really about the distribution of wealth....  [T]he quest to transfer natural resource rents from mining companies to taxpayers is not worth the populist attention given the issue by the media.  The mining profits generated from that land to the extent that they exist are absolutely trivial."  He added that "little economic reason exists to control how mineral lands are used."  Gordon also testified that "Fraudulent uses of patented land are simply the result of unwise restrictions on uses of land that are more profitable than mining.  Why should the government 'decide' that land should be used for mining rather than for hotels or ski resorts?"  Gordon outlined the pros and cons of a number of different reform methods including mineral leasing.  Gordon's full testimony is not available on the subcommittee website, but is available from the CATO institute which he represented at the hearing.

During a question and answer period, Rep. Cubin said she felt mineral value estimates are "greatly exaggerated."  Gordon agreed and suggested relying on the testimony of bidders without "second guessing."  Rep. Underwood asked each witness what they thought would be a reasonable royalty.  D'Esposito suggested 8%.  Gordon said society benefits when resources are "used in the best possible way" and that the "general tax system is far superior to a royalty system."  Lancelot told Underwood "We have no problem with the mining industry buying minerals, that is not the issue."  She favored a 12.5% royalty.  Zelms said his company, mining in an area not regulated under the 1872 Mining Law, has paid $75 million in 25-years of mining in the Mark Twain National Forest.

Rep. Gibbons firmly reminded D'Esposito that when a witness testifies before a congressional committee they are expected to tell the truth.  He pointed to several statements in the witness' testimony concerning specific abandoned mine sites and said "There are some things in here that don't appear to be true."  D'Esposito said he got that specific information from a report by the Western Governors Association and indicated both the text references to that organization and a footnote.  Gibbons did not seem satisfied with this response.  D'Esposito said he would look into the matter and report back to the congressman.

Gibbons also questioned Lancelot about her proposal for a 12.5% royalty.  She said that is the percentage paid by the oil and gas industries and some coal companies.  "It's a good place to start," she said, adding, "We want to sit down at the table."  Gibbons asked if she would be satisfied with an 8% royalty.  She said she would.  Gibbons then suggested that companies give the federal government a percentage of the ore itself and the government pay the industry for use of its smelters to process it.  Lancelot responded that deducting processing expenses would be fair, but business costs should not be deducted.

Panel II & III
John Leshy, Solicitor, U.S. Department of the Interior
R. Timothy McCrum, Esq., Crowell & Moring, LLP
John Hill, Senior Analyst, Mining & Metals, Salomon Smith Barney Inc.
Lexi Shultz, Staff Attorney, U.S. Public Interest Research Group

Solicitor Leshy addressed both the Crown Jewel controversy that stemmed from his 1997 mill site decision and the Mark Twain National Forest issue that concerned Mr. Zelms.  He said the mill site provision "had always been a well understood part of the mining law."  He said it had always been a problem, that the industry recognized this, and that the American Mining Congress suggested a remedy "years ago."  Leshy said that contrary to industry claims, the mill site opinion affects relatively few mines.

Leshy said the Mark Twain National Forest is not under the Mining Law of 1872.  He said Doe Run wanted an exploration permit for an area upstream of a national park.  Leshy said DOI "wanted to be sure they could say no" after controversy surrounded a proposed mine site near Yellowstone National Park in Wyoming.

Leshy defended Clinton's veto of the Republican supported Mining Law reforms saying the bill was "riddled with exceptions and deductions" and included provisions for a royalty of only 5%.

Mr. McCrum, a former DOI attorney with the Office of the Solicitor, Energy and Minerals Division, Onshore Minerals Branch, disagreed with Leshy's testimony concerning Crown Jewel.  He told the committee that "The Interior Department cases from the late 1900s and early 1900s upon which Mr. Leshy heavily relies [in his opinion] simply did not present the issue and thus are not dispositive."  He said Leshy's opinion "relies on a 'plain language' reading of the mill site provisions of the Mining Law... and it grants virtually no weight to the BLM's [Bureau of Land Management] past construction of the Mining Law and administrative practice "  He supported his claims with references to a number of BLM documents and court cases.  McCrum said "The Solicitor's opinion unreasonably frustrates the legitimate expectations associated with... massive investments... made by the mining industry in reliance upon BLM's construction and administration of the law."

Mr. Hill testified as to the economic importance of the mining opinion and the significance of Leshy's 1997 mill site opinion on the market value and future of mining investments.  "I view this issue from the perspectives of the investment community, the affected operating companies, and comparative international policy," he said.  He told the subcommittee that he believes the mill site opinion "represents a new standard that has not previously been applied to the permitting or patenting of mining projects, and poses a threat to the viability of the U.S. mining industry....  I urge the committee to reject it."  Hill concluded by saying that "High profile examples of politics prevailing over science, and a fear that 'the rules will change' to thwart mine development have helped accelerate the industry's exodus to Central and South America....  Should the 'Mill Site Opinion' be allowed to stand, we believe investors will interpret it as an effort to ban mining, and will take a pessimistic view of U.S.-based production or development assets in the debt and equity markets."

Ms. Shultz said her role at the U.S. Public Interest Research Group (USPIRG) is to "end what we call 'Polluter Pork' - federal programs and policies which subsidize environmentally destructive activities."  She called the 1872 Mining Act a "prime example of polluter pork policy."  She said $240 billion in minerals have been given away for free, and tax payers will pay $32-$72 billion to clean up abandoned mines.  She called for comprehensive reforms that include a "fair return to tax payers," environmental standards, and "polluter pays" measures.  She said clean up of old abandoned mines should be paid for by the industry, not taxpayers.  Finally, she emphasized USPIRG's support for Leshy's mill site opinion.

During questioning, Rep. Gibbons emphasized that abandoned mines that are now the responsibility of taxpayers date back at least 100 years and were unregulated until the 1970's.  He noted that these mines were "critical to the development of the country" and to its success during World War I and World War II.  He made it clear that he does not believe current mining practices will leave expensive abandoned mine clean up to the tax payers in the future.

Rep. Underwood said again that change should go through the appropriate committees, not the appropriations process.  In response to McCrum's testimony he said he thought a "plain reading" is the best the way to read a law, and asked why the matter was not raised in the courts.  He said he felt Leshy was being "cast as Darth Vader."  Leshy responded that he released his mill site opinion 18 months ago, and no effort has been made to bring it before the courts.  "Frankly, we welcome a law suit," he said.  Other witnesses told Underwood that no law suits have been filed because Sen. Gorton's rider on the emergency spending bill earlier this year, blocks the opinion's enforcement.

Rep. Gibbons reminded his colleague again that in 1995 a Republican Congress passed mining law reform, not through the appropriations process but through the appropriate committees, and President Clinton vetoed it.  He also noted that a National Academy of Science mining regulation report will be released in September.  (The NAS report entitled "Hardrock Mining on Federal Lands" is available at the NAS publications website.)


House Committee on Resources
Subcommittee on Energy & Mineral Resources
February 23, 1999

House Oversight Hearing on Mining, the American Economy and National Security - The Role of Public Lands in Maintaining a National Asset.


Panel 1
Richard L. Lawson, Pres. - National Mining Association
Michael J. McKinley, Mineral Information Team, U.S. Geological Survey
Mr. Steve d'Esposito, President, Mineral Policy Center

Panel 2
Mr. Doug Silver, Balfour Holdings, Inc.
Dr. W. David Menzie, Minerals Information Team, U.S. Geological Survey
Dr. Donald A. Brobst, Society of Economic Geologists

Representatives Present:
Ms. Barbara Cubin (R-WY)
Mr. Robert Underwood (D-GU)
Mr. James A. Gibbons (R-NV)
Mr. Jay Inslee (D-WA)
Mr. Eni F. H. Faleomavaega(D-AS)
Mr. Thomas Tancredo (R-CO)

Chairwoman Barbara Cubin (R-WY) called this hearing to gain information on the status of the hardrock mining industry within the continental United States, more specifically, on the use of public lands for mining exploration in the US. There is concern that, as foreign countries have experienced an increase in mineral production and output, the United States has experienced a decrease in mining exploration and production. This decrease could be seen as a potential threat to national security if the United States were to become dependant on foreign countries for its mineral resources. This concern parallels that held by many members of congress over the United States' dependency on foreign oil as a result of decline in domestic production.

A Mining Law Brief can be found on the House Resources Committee Website
Panel 1
Mr. Richard Lawson, President of the National Mining Association, had the most adamant testimony concerning the effect mineral resource production has on national security. He emphasizes that America's preeminence as a major mineral producer could be severely affected by the limited access to public lands in the future. In the questioning and answer session after verbal testimonies, Mr. Lawson expressed his intense concern that a loss of mining production capabilities could put the United States at a potentially high national security risk.

Mr. McKinley, with the U.S. Geological Survey, commented on the assessment of unexplored mineral potential within the United States. The latest National Assessment estimates that about as much metal resources remains to be discovered as has already been discovered. He acknowledged that public lands may contain useful mineral deposits, but that it is difficult to make an assessment of those resources due to the "dynamic nature of land status." He emphasized the ultimate role that geology plays in the potential for undiscovered mineral resources stating that, "For some commodities...there is very little likelihood of ever identifying significant resources in the United States," acknowledging the US's forced dependency on foreign producers of some ores.

Mr. D'Esposito, with the Mineral Policy Center, doesn't think "mineral scarcity is today a significant national security issue." Mr. D'Esposito believes that not imposing royalty on those mines that operate on public lands is a form of corporate welfare. He wants to end public land giveaway, impose royalties, and create a cleanup program of mine remediation that would employ former mining workers. He emphasized a "crust full of minerals" approach that assumes we won't be running out of minerals anytime soon, and advocated a temporary increased dependency on foreign production of minerals as a way to stockpile those reserves that are found in the US, like "money in the bank."

Panel 2
Mr. Douglas Silver of Balfour Holdings, Inc., felt it important to emphasize the loss of mining exploration in the United States, stating that US companies were down 40 to 50 percent in exploration. This is due, in Mr. Silver's opinion, to the current administration's "anti-mining attitude." His frustration targeted the hassle and delays that mining companies may face when trying to get permits for exploration within the United States. In written testimony, he cited examples of mining companies that have been bankrupted by government run environmental studies that go far over budget.

Mr. Menzie's testimony focused on import statistics for the United States, showing an increased consumption of and reliance upon many import metals. Mr. Donald Brobst, with the Society of Economic Geologists, concluded the second panel's testimonies with a call to always keep in mind the finite aspect of our mineral resources. He reminded the committee and the assembled audience that we exhaustively depend on the mining of minerals for our own personal as well as our country's wellbeing. The limitations of public land designation, imposed without a complete geologic picture, may hinder the production of essential minerals on an already limited budget of resources.

C. S.

Sources: Library of Congress, Mining Engineering (1998), CRS Issue Brief for Congress (1999), Committee on Resources General Mining Law Brief, Charles Wilkinson's Crossing the Next Meridian (1992), hearing testimonies.

Submitted by AGI/AIPG Geoscience Policy Interns Christi Snedegar, Althea Cawely-Murphree, and Audrey Slesinger.

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

Posted: August 10, 1999; Last Updated: July 27, 2000

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