Mining on Federal Lands

Order Code IB89130

CRS Issue Brief for Congress

Received through the CRS Web

Mining on Federal Lands

Updated February 28, 2005

Marc Humphries

Resources, Science, and Industry Division

Congressional Research Service ˜ The Library of Congress

CONTENTS

SUMMARY

MOST RECENT DEVELOPMENTS

BACKGROUND AND ANALYSIS

Background

The Claim-Patent System

Major Mining Legislation After the 1872 Mining Law

Analysis

Claim-Patent System: Pros and Cons

Past Amendment Proposals

Proposals to Eliminate Subsidies

Fair Market Value

Environmental Protection

Federal Land Withdrawals

Legislative Activity

The Mill Site Debate

Surface Impacts of Hardrock Mining on Federal Lands

Patent Moratorium

Claim Maintenance and Location Fees

Legislative Proposals

CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS

FOR ADDITIONAL READING

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Mining on Federal Lands

SUMMARY

The General Mining Law of 1872 is one

of the major statutes that direct the federal

government’s land management policy. The

law grants free access to individuals and

corporations to prospect for minerals in public

domain lands, and allows them, upon making

a discovery, to stake (or “locate”) a claim on

that deposit. A claim gives the holder the

right to develop the minerals and may be

“patented” to convey full title to the claimant.

A continuing issue is whether this law should

be reformed, and if so, how to balance mineral

development with competing land uses.

The right to enter the public domain and

freely prospect for and develop minerals is the

feature of the claim-patent system that draws

the most vigorous support from the mining

industry. Critics consider the claim-patent

system a giveaway of publicly owned resources because of the small amounts paid to

maintain a claim and to obtain a patent.

Congress has imposed a moratorium on mining claim patents since FY1995.

In addition to the overall issue of whether

to reform the General Mining Law, two issues

also have been controversial. One involves

mining millsites. At issue is whether the

General Mining Law limits claimants to one

millsite of no more than five acres per mining

claim, or whether multiple millsites are allowed. In 1997, the Solicitor of the Department of the Interior ruled that only one

millsite of no more than five acres was allowed per claim. The 106th Congress provided a two-year exemption from the Solicitor’s opinion for mines with approved plans of

operation, operations with plans submitted

prior to the Solicitor’s opinion, and patent

applications grandfathered as part of the 1995

mining patent moratorium (P.L. 106-113).

Congressional Research Service

However, a 2003 opinion by the Bush Administration overturned the 1997 ruling and allows multiple millsites per mining claim, if

necessary.

A second issue involves the Clinton

Administration’s revisions to the regulations

governing hardrock mining operations on

federal lands (43 CFR 3809), which took

effect January 20, 2001. The revised regulations authorized BLM to deny mining operations if they would result in “substantial irreparable harm” to significant resources that

cannot be mitigated. On October 30, 2001 (66

Fed. Reg. 54834), BLM issued a final rule that

removed many of the controversial aspects of

the Clinton regulations. A November 18,

2003, federal district court decision supported

the Bush Administration’s revision of the

rules (66 Fed. Reg 54834).

Three bills pertaining to hardrock mining

were introduced in the 108th Congress, but

there was no House or Senate action: the

Elimination of Double Subsidies for the Hardrock Mining Industry Act of 2003 (S. 44), the

Abandoned Hardrock Mines Reclamation Act

of 2003 (H.R. 504), and the Mineral Exploration and Development Act of 2003 (H.R.

2141). H.R. 504 would have established a

Reclamation Fund financed by reclamation

fees imposed on hardrock mineral producers.

H.R. 2141 would have imposed an 8% net

smelter royalty, allowed for an unsuitability

review by the Secretary of the Interior or

Agriculture, and established a reclamation

bond or financial guarantee and a reclamation

fund. Also in both sessions of the 108th Congress, the Interior and Related Agencies appropriations bills included a provision to

retain a patent moratorium that has been

imposed annually since 1995.

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MOST RECENT DEVELOPMENTS

Proposals to reform the General Mining Law of 1872 were reintroduced early in the

108 Congress. The Elimination of Double Subsidies for the Hardrock Mining Industry Act

of 2003 (S. 44) was introduced in the Senate on January 7, 2003. A second bill, the

Abandoned Hardrock Mines Reclamation Act (H.R. 504), was introduced in the House on

January 29, 2003. A broad-based third bill, the Mineral Exploration and Development Act

of 2003 (H.R. 2141) was introduced on May 15, 2003, to overhaul the General Mining Law

of 1872. No action was taken on those measures. But because there is some bipartisan

interest in reforming the law, it is likely that similar bills will be introduced and hearings will

be scheduled on mining issues in the 109th Congress.

th

Also in both sessions of the 108th Congress, the Interior and Related Agencies

appropriations bill supported the retention of the patent moratorium, which does not allow

the issuance of new patents on mining claims. New maintenance and location fees were

established at $126 and $32 per claim, respectively, beginning September 1, 2004. The

amount of the increase was determined by the Consumer Price Index (43 CFR 3833.1-5).

Two controversial mineral issues were resolved during the 108th Congress. One

involved the regulations that govern surface management of hardrock mining operations (43

C.F.R. 3809). A November 18, 2003, federal district court decision supported the Bush

Administration’s revision of the rules (66 Fed. Reg. 54834) that removed some of the

controversial changes made by the Clinton Administration.

The second issue involved mining millsites. A legal opinion on millsites released by

the Bush Administration on October 7, 2003, allowed for multiple millsites per mining claim

if necessary. This decision overturned a Clinton Administration decision that allowed only

one millsite per claim.

BACKGROUND AND ANALYSIS

Background

The purposes of the 1872 Mining Law were to promote mineral exploration and

development on federal lands in the western United States, offer an opportunity to obtain a

clear title to mines already being worked, and help settle the West. The Mining Law granted

free access to individuals and corporations to prospect for minerals on open public domain

lands, and allowed them, upon making a discovery, to stake (or “locate”) a claim on the

deposit. A valid claim entitles the holder to develop the minerals. The 1872 Mining Law

originally applied to all valuable mineral deposits except coal (17 Stat. 91, 1872, as

amended).

Public domain lands are those retained under federal ownership since their original

acquisition by treaty, cession, or purchase as part of the general territory of the United States,

including lands that passed out of but reverted back to federal ownership. “Acquired” lands

— those obtained from a state or a private owner through purchase, gift, or condemnation

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for particular federal purposes rather than as general territory of the United States — are

subject to leasing only and are not covered by the 1872 Law. Some public lands may be

“withdrawn” or closed to mineral entry.

The 1872 Mining Law was one of the primary forces behind the development of mineral

resources in the West, along with the industries and services that supported mineral

production. Major hardrock minerals developed in the West include copper, silver, gold,

lead, zinc, molybdenum, and uranium. During the 19th century, major mining districts for

silver and gold were developed under the Mining Law in Colorado, California, Idaho, and

Nevada. Early in the 20th century, there were major developments of porphyry copper in

Arizona. Large molybdenum and tungsten deposits in Colorado were also developed. The

Mining Law continues to provide the structure for much of the Western mineral development

on public domain lands. Western mining, although not as extensive as it once was, is still

a major economic activity, and a high percentage of hardrock mining is on public lands.

The Claim-Patent System

After a prospector has conducted exploration work on public domain land, he or she

may locate a claim to an area believed to contain a valuable mineral. Under legislation

initially enacted by the 102nd Congress (P.L. 102-381), claimants must pay an annual

maintenance fee of $100 to hold a claim on public land. The annual maintenance fee rose

to $126 per claim beginning September 1, 2004. This superseded a previous requirement

that $100 of annual development work be conducted per claim. The Omnibus Consolidated

Appropriations Act for FY1999 (P.L.105-277) extended the maintenance fee through

FY2001 at $100 per claim or site. In FY2002 the maintenance fee was extended for an

additional two years (P.L. 107-63), and it will be adjusted every five years according to 43

CFR 3833.1-5. There is also a $25 fee for a first-time claimant to locate and record a claim,

as initially required by P.L. 103-66 and subsequently extended through FY2008. An increase

in the location fee to $32 per claim began September 1, 2004.

For FY2004, the maintenance and location fees generated an estimated $24.6 million

in revenue, according to the Bureau of Land Management (BLM). This reflects a significant

decrease from $30.7 million for FY1995, the first year that both fees were collected. Fees

peaked in FY1997 at $35.9 million.

Once a claimed mineral deposit is determined to be economically recoverable, and at

least $500 of development work has been performed, the claim holder may file a patent

application to obtain title to surface and mineral rights. Beginning January 3, 1989, a fee of

$250 per patent application plus $50 per claim within each application has been required.

If the patent application is approved, the claimant may purchase surface and mineral rights

at a rate of $2.50 per acre for placer claims and $5 per acre for lode claims. A placer deposit

is an alluvial deposit of valuable minerals usually in sand or gravel; a lode or vein deposit

is of a valuable mineral consisting of quartz or other rock in place with definite boundaries.

(Source: Dictionary of Mining, Mineral and Related Terms, Bureau of Mines, 1968.) A

placer claim is usually limited to 20 acres but a lode claim may be slightly greater than 20

acres. These per-acre fees were substantial when the Mining Law was enacted — claimed

land and minerals now far exceed these amounts in value.

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The following provisions currently apply to claims:

There is no limit on the number of claims a person can locate.

There is no requirement that mineral production ever commence.1

Mineral production can take place without a patent or royalty payments to

the federal government.

! Claims can be held indefinitely with or without mineral production, subject

to challenge if not developed.

!

!

!

Most of the current mining activity and mineral claims under the Mining Law are in

Nevada, Arizona, California, Montana, and Wyoming. As of the end of FY2003,

approximately 45% of mining claims were in Nevada alone and another nearly 35% were in

the other four states. According to the Bureau of Land Management (BLM), the number of

active claims declined from about 1.2 million claims in FY1989 to 294,678 for FY1993.

Many claims were dropped as a result of provisions of law charging a $100-per-claim annual

maintenance fee. The number of active claims subsequently rose to 324,651 in FY1997,

reflecting the relative strength of the gold and copper industries. The number of active

claims fell to a low of 207,757 for FY2001, reflecting a decline in the gold and copper

industries and, according to a BLM official, changes in public land policy that significantly

lengthened the time necessary to get permission to mine. Active claims stood at 219,526 in

FY2003.

Only a small percentage of claims are ever patented, totaling about 3.3 million acres

from 1867 through 2000. This represents approximately 1.5% of all public lands patented;

most public lands have been patented under homestead entries, statehood grants, railroad

grants, and other non-mineral public land laws. It is not required to patent a claim to mine

a deposit, and a great deal of mining activity is currently taking place on unpatented claims.

However, patenting a claim gives the holder legal title to both the surface and the minerals,

and relieves the holder of having to pay the annual fees.

Major Mining Legislation After the 1872 Mining Law

In 1920, the Mineral Leasing Act removed oil, gas, oil shale, phosphates, sodium, and

certain other minerals on federal public domain lands from the claim-patent system of the

1872 Mining Law and set up a system of leasing in which the federal government retains

ownership of the leased lands. Coal, which previously had its own claim-patent law (the

1873 Coal Act), was also included in the 1920 Leasing Act. After 1955, common variety

minerals such as sand, stone, gravel, cinders, and pumice were sold under the Materials Act

of 1947, as amended. A strong push for an all-leasing system developed during the 1930s

and 1940s, but no such legislation was enacted.

As mentioned, acquired federal lands were never subject to the General Mining Law.

The Mineral Leasing Act for Acquired Lands of 1947 authorized the leasing of leasable

minerals in some acquired federal lands. The Reorganization Plan of 1946 (no.3) and earlier

acts authorized the leasing of hardrock minerals on acquired forest lands.

1

However, before the enactment of P.L. 102-381, claimants were required to conduct at least $100

of development work per year.

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During the 1960s and 1970s, the Multiple Use Sustained Yield Act, Wilderness Act,

National Forest Management Act, National Environmental Policy Act (NEPA), and Federal

Land Policy Management Act (FLPMA) addressed environmental protection, multiple use,

and management of federal land generally. By imposing new requirements on agency

actions, and by withdrawing some federal lands from development, these acts have affected

mineral development under both the leasing system and the Mining Law claim-patent system.

The Mining Law contains no direct environmental controls, but mining claims are subject

to all general environmental laws as a precondition for development. The mining industry

must comply with applicable requirements of the Clean Water and Clean Air Acts, state

reclamation standards where they exist, and federal and state statutes relating to the handling

and disposal of certain toxic wastes, among other laws.

The evolving leasing system and later withdrawals of lands from hardrock exploration

and development diminished the amount of lands under the Mining Law authority. For those

hardrock minerals that remain under the Mining Law, however, the claim-patent system is

essentially the same as it was when the law was enacted.

Critics argue that the West is now developed and that the 1872 Mining Law is obsolete

and inconsistent with other federal natural resource policies. Supporters maintain that the

combination of leasing for some resources and a claim-patent system for others works well

and should be maintained. The National Mining Association (NMA) states that the “existing

law more than adequately meets the four criteria essential to any mineral tenure law”: free

and open access to explore for minerals on unappropriated public lands, exclusive

exploration rights, the right to develop the valuable minerals discovered, and security of

tenure.

When oil shale was transferred from the 1872 claim-patent system to the leasing system

in the 1920 Mineral Leasing Act, a large number of existing unpatented oil shale claims were

continued under the terms of the 1872 Mining Law. In a 1986 court case, the U.S. district

court of Colorado reached a controversial finding that these claims were valid and could be

patented if claimants had made $500 worth of improvements on the land, even if the

statutory $100 annual work requirement had not always been fulfilled.

Legislation to resolve oil shale issues was enacted as part of the Energy Policy Act of

1992 (P.L. 102-486). This law offers general and limited patents based on the status of the

application at the time of enactment. Limited patent holders receive title to the oil shale only

and are required to post a reclamation bond or financial guarantee. Patent fees remain $2.50

per acre.

Beginning in FY1995, Congress has enacted (in the Interior appropriations laws) a

series of one-year moratoria on the issuance of mineral patents. For FY2000, the

Consolidated Appropriations Act (P.L. 106-113, §312) essentially retained the mineral

patent moratorium contained in previous appropriations laws. The Interior and Related

Agencies Appropriations Act for FY2002 (P.L. 107-63) also contained a one-year extension

of the moratorium on mining patents. Another one-year patent moratorium is pending in the

FY2003 Interior bill.

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Analysis

Claim-Patent System: Pros and Cons

The right to enter the public domain lands and prospect for and develop minerals is the

feature of the claim-patent system that draws the most vigorous support from the mining

industry. Modern hardrock mineral exploration requires a continuous effort using vast tracts

of land and sophisticated and expensive technology. Industry officials argue that being able

to obtain full and clear title to the land enhances a company’s ability to bring an economic

deposit into production; financing the project, for example, may be more feasible. They

contend that restrictions on free access and security of tenure would curtail exploration

efforts among large and small mining firms. In their view, the incentive to develop would

be lost, long-run costs would increase, and the industry and the country would suffer.

Mining Law critics consider the claim-patent system a giveaway of publicly owned

resources because of the absence of royalties and the small charges associated with keeping

a claim active and obtaining a patent. They maintain that although such generous terms may

have been effective ways to help settle the West and develop minerals, there is no solid

evidence that under a different system minerals would not be developed today. They also

believe the current system, by conveying title and allowing other uses of patented lands,

creates difficult land management problems through the creation of private inholdings on

public land, and that current law does not provide for adequate protection of the

environment.

In the claim-patent system, mineral claims may be held indefinitely without any mineral

production. In some instances, claimed or patented land has been used for purposes other

than mineral development. Once lands are patented to convey full title to the claimant, the

owner can use the lands for a variety of purposes, including non-mineral ones. However,

using land under an unpatented mining claim for anything but mineral and associated

purposes violates the Mining Law. Critics believe that many claims are held for speculative

purposes. However, industry officials argue that a claim may lie idle until market conditions

make it profitable to develop the mineral deposit.

Another issue surrounds “discovery” and “prediscovery” protection. The law requires

that “no location of a mining claim shall be made until the discovery of the mineral within

the limits of the claim.” If a discovery is made and a valid location established, the claimant

has a valid possessory right against all other parties. One purpose of the discovery

requirement was to help reduce speculation. However, demonstrating discovery of a

valuable mineral deposit may require considerable time and effort on the part of a prospector.

The prospector may find indications of a deposit, but demonstrating its value may involve

exploration over a large area and drilling and analyses of core samples to define the quality

and extent of the mineral. The Supreme Court has ruled that all claims located are deemed

valid until proven otherwise. Typically, in practice, the federal government has allowed

claims based on general indications that a mineral deposit exists, and required proof of

discovery only upon application for a patent unless circumstances warrant full proof sooner,

for example, mineral claims in sensitive areas.

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The industry has indicated it wishes to avoid major challenges to the principle of free

access and the right to obtain a patent. The industry generally opposes placing hardrock

minerals under a leasing system because this would give the federal government

discretionary control over development, impose royalty payments, and retain government

ownership of surface and/or mineral rights.

Past Amendment Proposals

Proposals to amend the 1872 Mining Law have fallen under the following broad

categories:

!

Modify the claim-patent system to retain the patent feature, but require

payment of fair market value for all or part of the value of the land. The

Government also would collect some percent of the value of mineral

production as royalties.

!

Convert the claim-patent system to a permitting system, and prohibit further

patenting. Advocates of this proposal argue that a permitting system would

be effective in achieving a fair market value return to the federal Treasury

for public lands. This system would collect royalties and add new

environmental standards to mining operations. Mineral industry supporters,

on the other hand, contend that the Department of the Interior is already

overburdened with the current leasing system and that comprehensive

hardrock mining reform would only add to its inefficiency and ultimately

increase costs through royalty and rents.

!

Continue the current claim-patent system, but with some amendments.

Proposed changes have included eliminating the distinction between lode

and placer claims, imposing a time limit within which claims must be

developed, expanding the size of a claim, providing better prediscovery

protection, and opening more public lands to mineral exploration.

Proposals to Eliminate Subsidies

The Mining Law currently allows a claimant to produce minerals without a patent and

without paying royalties or rents to the federal Treasury. This is considered a subsidy by

many because the miner does not pay for a factor of production (i.e., land and mineral

resources). By contrast, royalties are paid to the federal government for oil and gas leasing

on federal lands, and non-federal land owners (e.g., private and state owners) typically

receive a royalty from those who produce minerals on their lands. Also, if the claimant

patents the surface and mineral estate for the $2.50 or $5.00 per acre, this too can be

considered a subsidy because the claimant is paying less than fair market value for the

surface and mineral estates. Various tax incentives, such as the percentage depletion

allowance (a tax deduction for the depletion of a mineral resource) and “expensing” (writing

off in the year of expenditure) the costs of exploration and development, have been

characterized as subsidies to the industry as well.

Eliminating some of the natural resource subsidies, in the Clinton Administration’s

view, would have been one way to increase revenues to the Treasury and help ensure a fair

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return to the taxpayer for the development of public lands. In its FY2001 budget request, the

Clinton Administration proposed charging mining companies a 5% fee on net smelter

production from hardrock mining on federal lands. The Bush Administration did not make

a similar proposal any of its budget requests.

As has been previously noted, the original intention of the Mining Law was to develop

the nation’s minerals and to develop the West. Proponents of retaining the current system

contend that an incentive still is necessary for those who take substantial financial risk to

develop a mineral deposit. Mining is a capital-intensive process that often takes years of

development before minerals are produced.

Imposing royalties, increasing holding fees, and repealing the percentage depletion

allowance would have some impact on domestic hardrock mineral production, but the level

of any production decline attributable solely to new fees is difficult to estimate. The mining

industry generally has opposed legislation to repeal the percentage depletion allowance. The

elimination of some incentives to the industry would come at a time when the West is

already developed (an original goal of the law) and mineral/metal demand is relatively good.

However, prices are fluctuating, and the mining industry is looking outside the United States

for lower-cost deposits. Also, several mineral-producing nations are rewriting their mining

laws to attract more U.S. and western investment. Some U.S. deposits are becoming much

less competitive with foreign deposits. Any new cost increases in one area, without cost

reductions in others, may make U.S. mineral deposits less competitive or uneconomic.

Fair Market Value

Many believe that the federal government does not receive fair market value for land

and resources transfers under the Mining Law. It receives no royalties or rents from mining

activities conducted under the law. In addition, the $2.50 and $5.00 per-acre price for clear

title to the surface and mineral rights has not changed since the law was enacted. The

per-acre price appears to be based on the value of Western farmland and grazing land before

the enactment of the law in 1872.

Determination of fair market value of mineral-bearing lands is complex because many

geologic, engineering, and economic factors must be considered, and fair market value

determinations typically are controversial. According to a 1989 report by the General

Accounting Office (GAO), the fair market value of mineral-bearing lands is substantially

more than the $2.50 and $5.00 per acre that a claimant pays for patenting a claim. GAO

estimated that, for 20 patents it reviewed, the federal government had received less than

$4,500 since 1970 for lands valued between $13.8 million and $47.9 million.2

The GAO appraisal method, however, was criticized by the Bureau of Land

Management (BLM) in a May 1989 Report to the Secretary of the Interior. The GAO report

obtained information on land values from BLM, Forest Service officials, and local real estate

brokers. GAO’s estimates were based on recent sales of comparable land, not the value of

the land at the time claims were patented; much of the land may have had very little value

2

The Mining Law of 1872 Needs Revision, United States General Accounting Office, GAO/RCED89-72, March 1989, p. 24.

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at the time it was claimed or patented. BLM argues that sales of adjacent tracts that either

have no mineral development potential or are sold for mineral rights alone cannot be used

to establish fair market value of the surface of patented mining claims and that data on

comparable sales are rare.

The Department of the Interior (DOI) estimates the value of hardrock mineral

production on federal land at $1.0 billion for FY2000, a decrease from an estimated $1.8

billion in FY1993. The decline can be attributed in part to a reduction in the value of mineral

production from the federal lands because of acreage conveyed out of federal ownership

through patenting, according to a BLM official.

Environmental Protection

The lack of direct statutory authority for environmental protection under the Mining

Law of 1872 is another major issue that has spurred reform proposals. Many Mining Law

supporters contend that other current laws, as noted above, provide adequate environmental

protection. Critics, however, argue that these general environmental requirements are not

adequate to assure reclamation of mined areas and that the only effective approach to

protecting lands from the adverse impacts of mining under the current system is to withdraw

them from development under the Mining Law. Further, critics charge that federal land

managers lack regulatory authority over patented mining claims and that clear legal authority

to assure adequate reclamation of mining sites is needed.

Federal Land Withdrawals

BLM is responsible for approximately 700 million acres of federal subsurface minerals,

and supervises the mineral operations on about 56 million acres of Indian trust lands. Some

of these lands have been withdrawn from mineral development; a withdrawal is an action

that restricts the use or disposition of public land. In some cases land is reserved for a

specific use that may preclude locating mining claims and granting leases.

A BLM study determined that of the approximately 700 million acres of federal

subsurface minerals under the agency’s jurisdiction, approximately 165 million acres have

been withdrawn from mineral entry, leasing, and sale, subject to valid existing rights. Lands

in the National Park System (except National Recreation Areas), the Wilderness Preservation

System, and the Arctic National Wildlife Refuge (ANWR) are among those that are

statutorily withdrawn. Also, of the 700 million acres, mineral development on another 182

million acres is subject to the approval of the surface management agency, and must not be

in conflict with land designations and plans, according to a BLM official. Wildlife refuges

(except ANWR), wilderness study areas, and roadless areas, among others, are in this

category.3

FLPMA mandated review of public land withdrawals in 11 Western states to determine

whether, and for how long, existing withdrawals should be continued. BLM continues to

review approximately 70 million withdrawn acres, giving priority to about 26 million acres

3

Public Lands, On-Shore Federal and Indian Minerals in Lands of the U.S., Bureau of Land

Management, U.S. Department of the Interior, December 1, 2000.

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that are expected to be returned by another agency to BLM, or, in the case of BLM

withdrawals, made available for one or more uses. Currently, the BLM has completed

reviewing over 7 million withdrawn acres, mostly BLM and Bureau of Reclamation land; the

withdrawals on more than 6 million of these acres have been revoked. According to the

BLM Manual, retention of a withdrawal requires a compelling show of need, and an agency

manager “recommending that lands not be opened to multiple use, particularly mining and

mineral leasing, must convince the BLM Director, Secretary, and watchful segments of the

public, that there is no reasonable alternative to continued withdrawal or classification.” The

review process is likely to continue over the next several years, in part because the

withdrawals must be considered in BLM’s planning process and be supported by

documentation under NEPA.

Mineral industry representatives maintain that federal withdrawals inhibit mineral

exploration and limit the reserve base even when conditions are favorable for production.

Mineral reserves are not renewable. Thus, they argue that whether minerals are in the public

or private sector, without new reserves or technological advancements, mineral production

costs may rise. As a result, according to the industry, exploration on foreign soil may

increase, raising the risk to investors and boosting import dependence. In this view,

governmental policies that increase costs to the mineral industry may result in increased costs

to society. Mining industry supporters also assert that too much land has been unnecessarily

withdrawn from mining, through administrative actions, to pursue preservation goals.

Critics of the Mining Law believe that in many cases there is no way to protect other

land values and uses short of withdrawal of lands from development under the law. They

point to unreclaimed areas that have been mined for hardrock minerals in the past, Superfund

sites related to past mining and smelting, and instances where development of resources

could spoil scenic, historic, cultural, and other resources on public land.

Legislative Activity

In addition to the General Mining Law, two other mining issues also have been

controversial and the subject of oversight or legislation in the 107th Congress. One relates

to mining millsites, while the other relates to hardrock mining on federal lands. The 107th

Congress extended the moratorium on the issuance of mining patents and extended the claim

maintenance and location fees. These issues are addressed below.

The Mill Site Debate

One of the most controversial issues in the 106th Congress related to a November 7,

1997, legal opinion of the Solicitor of the Department of the Interior that each mining claim

can use no more than 5 acres for activities associated with mining (“millsites”). The decision

affected modern mining operations, such as heap-leach mines for gold and other hardrock

minerals, which typically require large tracts of land beyond that of the mining claim for

mining-related purposes, including disposal of waste rock. Critics of the decision charged

that it constituted a new interpretation of the relevant provisions of the 1872 Mining Law (30

U.S.C. 42), was inconsistent with the practice of the Department of the Interior in granting

operating plans for mining without regard to acreage limitations or the ratio of millsite

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locations to mining claims, and was an indirect way of reforming the 1872 Mining Law. The

Department of the Interior has rebutted these criticisms, asserting that its opinion was based

both in law and practice.

Based on the Solicitor’s 1997 opinion, on March 26, 1999, the Solicitor ruled against

the Battle Mountain Gold Company’s plan of operation for a gold mine (the Crown Jewel

Mine in Washington state) based on noncompliance with the General Mining Law of 1872.

However, the denial of the plan of operations for the Crown Jewel Mine was overturned in

the 1999 Emergency Supplemental Appropriations Act (P.L. 106-31). This law directed that

the number or acreage of millsites for the Crown Jewel mining operation not be limited, and

that its plan of operation be approved. It further directed that other patent applications and

plans of operation submitted prior to the law be given permits.

The issue again became contentious during consideration of the FY2000 Interior

appropriations bill, with the House and Senate passing opposing language on the subject.

The House agreed to support, and the Senate to overturn, the 1997 opinion of the Solicitor.

During initial floor consideration, the House had agreed to language barring funds

“appropriated by this act” from being used to process applications for approvals of patents,

plans of operations, or amendments to plans that conflict with the opinion of the Solicitor.

By contrast, the Senate-passed language would have prohibited the Departments of the

Interior and Agriculture, “in any fiscal year,” from limiting the number or acreage of millsites

based on the ratio between the number or acreage of millsites and the number or acreage of

mining claims. The Senate millsite language sought a permanent prohibition on limiting

acreage or millsites based on the number of mining claims, using the BLM Handbook for

Mineral Examiners (H-3890-1, 1989) and the BLM Manual (Section 3864.1.B, 1991) as its

basis. It apparently would have reversed the Solicitor’s opinion permanently and

comprehensively as well as prospectively. On the floor, the Senate rejected an amendment

to remove the millsite language from the bill, so as to allow the Solicitor’s opinion to stand.

A related amendment, essentially designed to protect ongoing mining operations from the

Solicitor’s opinion, was withdrawn.

The 106th Congress ultimately enacted (P.L. 106-113, §337) a two-year exemption from

the Solicitor’s millsite opinion for: (1) patent applications grandfathered as part of the 1995

mining patent moratorium; (2) any mining operation with an approved plan of operation; and

(3) any operation with a plan of operation submitted to the BLM or the Forest Service before

November 7, 1997 — the date of the Solicitor’s opinion. (An earlier conference report had

excluded plans of operation submitted prior to May 21, 1999, but this was opposed by the

Clinton Administration). The explanatory language accompanying the conference agreement

expressed the view that it would be “inequitable” to apply the opinion “retrospectively” in

these instances. Specifically, the exemption was for FY2000 and FY2001. (For further

information, see CRS Report RL30310, The Mining Law Millsite Debate.)

As the two-year exemption was set to expire, the Interior Department under the Bush

Administration decided on September 28, 2001, not to apply the Millsite Opinion to those

plans of operations submitted before November 7, 1997, or plans approved before November

29, 1999, as well as the grandfathered patent applications. The Millsite Opinion was placed

under review but was recently resolved by the Department of the Interior. On October 7,

2003, the Interior Department’s Solicitor reached a decision that allows for multiple millsites

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per mining claim if necessary for the successful development of mineral resources (68 Fed.

Reg. 61070).

Both industry and the Department of the Interior acknowledged that a 5-acre per claim

millsite limit is outdated and cannot accommodate the modern mining industry. Rather than

increase the number or acreage of millsites, the Clinton Administration favored other options

such as the use of land exchanges (Section 206) or permits and leases (Section 302(b)) under

the Federal Land Policy and Management Act. Recent practice has included the use of more

than 5 acres per mining claim and the use of land exchanges. One of the major policy

questions is whether the millsite debate will open the door for broader Mining Law reform.

Surface Impacts of Hardrock Mining on Federal Lands

A second issue involves the Department of the Interior’s revisions to the regulations

governing the surface impacts of hardrock mining operations on federal lands (43 CFR

3809). The Clinton Administration published a final rule on November 21, 2000, with an

effective date of January 20, 2001. On March 23, 2001, the Bush Administration proposed

suspending the new 3809 regulations and reinstating the ones that existed on January 19,

2001, until a review of the new regulations could be completed and a decision is made

regarding them. The Clinton Administration regulations were in effect until the Bush

Administration published its final rule October 30, 2001. The Clinton Administration

regulations authorized the Bureau of Land Management (BLM) to disapprove a plan of

operations for mining if the mining would result in “substantial irreparable harm” to

significant resources that cannot be effectively mitigated. However, this provision was

removed from the Bush Administration’s new final rule revisions.4 The authority to deny

mining operations was the most controversial aspect of the regulations, referred to by some

in the mining industry as an unnecessary “mine veto” power. Other changes in the

regulations make mining operators more responsible for reclaiming mined lands. New

bonding requirements (retained in the Bush final rule revision) provide for miners to post

bonds to ensure that they will clean up sites when the mines close, and a reclamation bond

must be equal to 100% of the estimated cleanup cost.

In June 2001, the BLM announced that it expected to retain the provisions on bonding

requirements with a modification to extend the deadline for mining operators to meet them.

For mining operations which already have provided a financial guarantee, the deadline for

complying with the requirements would be extended by four months (from July 19, 2001 to

November 20, 2001). Operators who had not provided a financial guarantee would receive

an additional two months (until September 13, 2001). Under the old rules, mines disturbing

5 acres or less per year did not require a cleanup bond and companies could pledge assets

instead.

The ability to obtain bonding has been problematic for some mining firms. Among the

many reasons presented at an oversight hearing (Subcommittee On Energy and Mineral

Resources, July 23, 2002), the major cause for concern, according to the Alaska Mining

Association, is the high risk the surety bonding companies face when complying with the

current or proposed 3809 surface management rule. The major risk factors cited were the

4

Federal Register, 66 FR 54834, October 30, 2001.

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“uncertainty of amount, uncertainty of duration and uncertainty regarding bond release

criteria.” On the other hand, testimony from the Center for Science in Public Participation

describes the high risk facing surety bonding firms as that normally associated with the

capital intensive mining industry, and not necessarily linked directly to the surface

management regulations.

Proponents of the earlier Clinton version (43 U.S.C. 1732) asserted they enhance the

BLM’s authority under law to prevent “unnecessary or undue degradation” of public land

resources from mining operations (43 U.S.C. 1732). However, the mining industry asserted

that the regulations were unlawful, impeded mining operations, and in some ways duplicated

existing federal and state laws.

On October 30, 2001 (66 Fed. Reg. 54834), BLM issued a final rule (effective

December 31, 2001) that removed many of the more controversial aspects of the Clinton

regulations. On the same day (66 Fed. Reg. 54863), BLM proposed making the same

changes. Proposing the changes that were already finalized was intended to allow BLM to

receive additional comments on legal, economic, and environmental issues that were raised

concerning the new regulations. Some of the concerns were expressed in lawsuits

challenging the Clinton Administration’s rules. In some suits, industry plaintiffs and the

State of Nevada assert that BLM improperly issued the rules and violated numerous statutes.

In one such suit, the National Mining Association sought a preliminary injunction on the

grounds that the regulations were unlawful in several respects, but this injunction was denied.

By contrast, environmental plaintiffs charged that the new rules were weak, improperly

allowing mining operations on lands without valid mining claims or mill sites. In a

November 18, 2003 decision by District Judge Henry H. Kennedy, the courts ruled that it had

no authority to bar the Interior Department from carrying out its new regulations because the

regulations were not illegal. However, the Judge recognized that some of the new regulations

may be “unwise and unsustainable” land use policy, a claim that environmental opponents

of the rule continue to make.

During debate on the FY2002 Interior and Related Agencies Appropriations Bill (H.R.

2217), the House agreed to a floor amendment (216-194) that would bar the use of funds in

the bill from being used to suspend or revise the Clinton Administration hard rock mining

regulations that took effect on January 20, 2001. The amendment was advocated as

maintaining necessary environmental protections, but opposed as precluding the Bush

Administration from reviewing regulations that were amended perhaps too extensively by

the Clinton Administration. The bill as reported by the Senate Committee on Appropriations

did not contain language on this subject. The House language was not included in the

conference report (H.Rept. 107-258).

Another significant difference between the Bush and the Clinton rules was on civil

penalties. Instead of BLM discretionary penalties of $5,000 per day and suspensions of

operations for noncompliance, the final rule sticks with language in the 1980 rule that allows

for operators to be subject to enforcement if they do not comply with specified reclamation

standards.

The Clinton Administration regulations that took effect on January 20, 2001, were the

culmination of a decade-long review of hardrock mining regulations. They replaced earlier

regulations that, for the most part, were issued in 1980. Congress had directed BLM as to

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what provisions could be included in the revised rules. In particular, the 106th Congress

enacted provisions in the FY2000 and FY2001 appropriations laws to prohibit the Secretary

of the Interior during the Clinton Administration from using funds to revise the hardrock

mining regulations except to make changes “not inconsistent” with law and the

recommendations contained in a National Research Council (NRC) report entitled “Hardrock

Mining on Federal Lands”5 (P.L. 106-113, §357; and P.L. 106-291, §156). In issuing the

revised regulations, the Department of the Interior, under the Clinton Administration,

interpreted this as allowing the regulations to address subjects other than those included in

the specific recommendations of the NRC report, provided these recommendations were not

directly contradicted. This interpretation has been controversial in Congress.

Patent Moratorium

The FY2005 Interior and Related Agencies spending bill (contained in P.L. 108-447

(H.R. 4818), the Consolidated Appropriations Act of 2005) continues the moratorium on the

issuance of mining patents. The House and Senate-passed versions (included in the

conference report) contained identical language continuing the moratorium on accepting and

processing applications for patents for mining and mill site claims on federal lands. However,

applications meeting certain requirements that were filed on or before September 30, 1994,

would be allowed to proceed, and third-party contractors would be authorized to process the

mineral examinations on those applications.

The annual one-year moratorium on patenting continues the uncertainty over whether

the federal government will continue to try to reform the 1872 Mining Law. The mining

industry would like to end the uncertainty to facilitate its long-term business planning.

Environmentalists, who were hoping for new environmental protection language in a major

mining law reform bill, argue that the patent moratorium does not protect the environment

from current mining practices.

As of January 2001, there were 425 mineral patent applications pending, of which 237

are grandfathered and proceeding forward and 191 are subject to the moratorium and thus

will not be processed. The patent moratorium will not stop the production of valuable

mineral resources from the public lands, but will prevent the further transfer of ownership

of public lands to the private sector (with the exception of the 237 patent applications already

in the pipeline).

Claim Maintenance and Location Fees

To hold a claim on public land, claimants must pay an annual maintenance fee of $100

per claim. There also is a $25 fee for first-time locators to locate and record a claim. These

provisions of law, effective through FY2001, were extended for two years by the FY2002

Interior and Related Agencies Appropriations bill (P.L.107-63). Beginning in September

2004, the annual maintenance fee was increased by $26 (to $126), and the one-time location

fee rose by $7 (to $32).

5

Hardrock Mining on Federal Lands, Committee on Hardrock Mining on Federal Lands, National

Research Council.

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Legislative Proposals

Mining reform legislation did not move forward in the 107th or 108th Congresses, even

though the Bush Administration acknowledged interest in the issue. It is likely that similar

bills will be reintroduced in the 109th Congress.

On January 29, 2003, the Abandoned Hardrock Mines Reclamation Act (H.R. 504) was

introduced in the House as a measure to help finance the cleanup of inactive and abandoned

mine sites in certain eligible states. The proposal would have established an interest-bearing

Abandoned Minerals Mine Reclamation Fund. Its revenues would have come from a

reclamation fee imposed on producers of hardrock minerals that received a claim or patent

under the General Mining Law of 1872. The fee would be a percentage of the net proceeds

from the mine.

A second bill, the Elimination of Double Subsidies for Hardrock Mining Industry Act

of 2003 (S. 44), introduced in the Senate on January 7, 2003, would have disallowed the

percentage depletion allowance for hardrock mines located on lands covered by the general

mining laws or patented under these laws. The measure also would have established an

Abandoned Mine Reclamation Trust Fund in the Treasury for reclamation and restoration

of land and water adversely affected by mining.

A broad-based bill, the Mineral Exploration and Development Act of 2003 (H.R. 2141)

would have established a permanent $100 per claim annual maintenance fee and $25 per

claim location fee. The bill would have limited the issuance of patents to claimants whose

patent applications were filed with the Secretary of the Interior on or before September 30,

1994, and met appropriate statutory requirements by that date. The bill included an

abandoned locatable minerals mine reclamation fund and an 8% royalty on “net smelter

returns.” Lands located under the General Mining Law of 1872 would be subject to an

unsuitability review by the Secretary of the Interior or the Secretary of Agriculture to

determine whether they were unsuitable for mineral activity. A reclamation plan and

reclamation bond or other financial guarantee would be required before exploration and

operation permits are approved. A provision in the bill allowed for civil suits to be filed in

U.S. District Courts should a person feel adversely affected. The bill was introduced on May

15, 2003.

CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS

U.S. Congress. Majority Staff Report of the Subcommittee on Oversight and Investigations

of the Committee on Natural Resources of the U.S. House of Representatives, Taking

From the Taxpayer: Public Subsidies For Natural Resource Development, 103rd

Congress, Committee Print No. 8, August 1994.

U.S. Congress. Testimony to the Subcommittee on Mineral Resources, Committee on

Resources, U.S. House of Representatives, 107th Congress, July 23, 2002. Hearing on

Availability of Bonds to Meet Federal Requirements for Mining, Oil, and Gas Projects.

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FOR ADDITIONAL READING

Gerard, David. 1872 Mining Law: Digging A Little Deeper, PERC Policy Series, PS-11

Bozeman, MT. December 1997.

Gordon, Richard , VanDorn, Peter. Two Cheers for The 1872 Mining Law, CATO Institute,

Washington D.C. April 1998.

Leshy, John D. The Mining Law: A Study in Perpetual Motion, Resources For The Future,

Washington D.C. 1987.

National Research Council. Hardrock Mining on Federal Lands, Committee on Hardrock

Mining on Federal Lands, National Academy Press, Washington D.C. 1999.

U.S. General Accounting Office. The Mining Law of 1872 Needs Revision,RCED-89-72,

Washington D.C., March 1989.

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